<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 2, 1999.
REGISTRATION NO. 333-88863
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------
AMENDMENT 1 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............ 1,200,000 $10 $12,000,000 $3,336.00(1)
- ------------------------------------------------ ----------------- -------------------- ------------------------ -----------------
</TABLE>
(1) We previously paid the $3,336 with our initial filing on October 13, 1999.
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
$10 PER SHARE
We are offering for sale a minimum of 900,000 common shares and a
maximum of 1,200,000 shares 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".
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.
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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.
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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, Texas, 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.
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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.
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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
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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.
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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
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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.
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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.
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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
expect to enter 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.
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WE MAY NOT ALLOCATE ALL OF THE NET 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. 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.
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<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.
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<PAGE> 14
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;
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<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%
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<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.
We are organized as a bank holding company and will own all of the capital stock
of Ohio Legacy Bank. We will be substantially dependent upon dividends from Ohio
Legacy Bank to pay our expenses, including debt repayment, and to pay cash
dividends to shareholders. Ohio Legacy Bank is subject to regulatory limits on
the payment of dividends, which may limit our ability to receive these
dividends. Moreover, we do not anticipate receiving any cash dividends from Ohio
Legacy Bank during our initial years of operations.
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.
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<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.
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<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
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<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 was 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.
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<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, Texas, 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
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<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.
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<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.
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<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. As part of our initial
organization and prior to the closing of this offering, we expect to grant
150,000 warrants to our organizers. No organizer will receive more than 25,000
warrants. 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. However, we will not grant warrants and
options in excess of 15% of the outstanding common shares to officers,
directors, 5% shareholders, promoters and employees for a period of one year
following the offering.
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<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
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<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.
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<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
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<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
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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
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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,
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- 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.
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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:
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- 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
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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.
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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.
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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.
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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
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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;
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- 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
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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
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- 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:
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- 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.
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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;
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- 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
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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.
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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,
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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
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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 1983, 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.
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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, 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.
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EXECUTIVE COMPENSATION
Ohio Legacy Corp and Ohio Legacy Bank expect to enter 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 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. Mr.
Douce's employment agreement will commence on the date that Ohio Legacy Bank
begins operations. Mr. Pettit's employment agreement will commence 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.
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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 and consultants.
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 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.
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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.
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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)(3)
- ----- ------------- ---------------- --------- ---------
<S> <C> <C> <C> <C>
Directors and executive
officers:
L. Dwight Douce............... 50,000 25,000 4.70 3.67
Gregory Long.................. 30,000 15,000 2.82 2.20
Michael Meenan................ 20,000 10,000 1.88 1.47
Daniel Plumly................. 30,000 15,000 2.82 2.20
D. William Allen.............. 20,000 10,000 1.88 1.47
Robert Belden................. 20,000 10,000 1.88 1.47
J. Edward Diamond............. 50,000 25,000 4.70 3.67
Thomas Schervish.............. 55,000 25,000 5.18 4.02
Scott Fitzpatrick............. 30,000 15,000 2.82 2.20
Steve Pettit.................. 1,000 .09 .07
------- ------- ----- -----
Directors and executive
officers as a group (10):..... 306,000 150,000 28.77% 22.44%
</TABLE>
(1) Reflects common shares purchased prior to this offering (as adjusted
for the stock split), common shares purchased in this offering and
warrants granted to the organizers.
(2) Reflects warrants granted in connection with Ohio Legacy's initial
capitalization and this offering. For a description of the distribution
and terms of the warrants please see "Capitalization." Please note that
we will not grant warrants and options in excess of 15% of the
outstanding common shares to officers, directors, 5% shareholders,
promoters and employees for one year following the offering.
(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.
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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.
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.
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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 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
OHIO LEGACY CORP
(A Development Stage Company)
BALANCE SHEET
August 31, 1999
- --------------------------------------------------------------------------------
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, 875 shares authorized;
135 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
=========
- --------------------------------------------------------------------------------
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)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
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 15 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.
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.
Prior to the closing of this offering, we expect to grant our
organizers warrants to purchase 150,000 common shares. Each warrant will have an
exercise price of $10 and expire 10 years from the date of issuance. We believe
this offering will be exempt from registration under Section 4(2) of the
Securities Act. No underwriters will be involved with the distribution of the
warrants and no underwriting discounts or commissions will be 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 2, 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 Form of Articles of Incorporation.
3.2 Form of 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 *Form of Employment Agreement by and between Ohio Legacy Bank and L.
Dwight Douce.
10.3 *Form of Employment Agreement by and between 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 *Form of Lease Agreement 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.)
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 1
OHIO LEGACY CORP
up to 1,200,000 Shares
COMMON SHARES
(no par value)
Subscription Price $10.00 Per Share
AGENCY AGREEMENT
_______________ __, 1999
Charles Webb & Company, a Division of
Keefe, Bruyette & Woods, Inc.
211 Bradenton Drive
Dublin, Ohio 43017-5034
Ladies and Gentlemen:
Ohio Legacy Corp, an Ohio corporation (the "Company" or "Holding
Company"), and Ohio Legacy Bank, Wooster, Ohio, a national banking association
in organization (the "Bank") (references to the "Bank" include both the Bank in
organization and after its articles of association have been granted, as
indicated by the context), with its deposit accounts insured by the Bank
Insurance Fund ("BIF") administered by the Federal Deposit Insurance Corporation
("FDIC"), hereby confirm their agreement with Charles Webb & Company, a Division
of Keefe, Bruyette & Woods, Inc. ("Webb", "KBW" or "the Agent"), as follows:
SECTION 1. THE OFFERING. The Holding Company is offering a minimum of
900,000 shares and up to a maximum of 1,200,000 shares of common shares, no par
value (the "Shares" or "Common Shares"), in a community offering (the "Community
Offering" or "Offering") in connection with the Company's initial public
offering and capitalization of the Bank, a de novo, FDIC insured national bank.
The Company is offering all shares of Common Shares through approved
broker-dealer firms which are members of the National Association of Securities
Dealers, Inc. ("NASD")("Assisting Brokers").
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form SB-2 (File No. ___-_____) (the
"Registration Statement")
<PAGE> 2
containing a prospectus relating to the Offering for the registration of the
Shares under the Securities Act of 1933 (the "1933 Act"), and has filed such
amendments thereof and such amended prospectuses as may have been required to
the date hereof. The term "Registration Statement" shall include any documents
incorporated by reference therein and all financial schedules and exhibits
thereto, as amended, including post-effective amendments. The prospectus, as
amended, on file with the Commission at the time the Registration Statement
initially became effective is hereinafter called the "Prospectus," except that
if any Prospectus is filed by the Company pursuant to Rule 424(b) or (c) of the
rules and regulations of the Commission under the 1933 Act (the "1933 Act
Regulations") differing from the prospectus on file at the time the Registration
Statement initially becomes effective, the term "Prospectus" shall refer to the
prospectus filed pursuant to Rule 424(b) or (c) from and after the time said
prospectus is filed with the Commission.
The Bank has filed with the Office of the Comptroller of the Currency
("OCC") for approval to form a de novo national banking association, and with
the FDIC for insurance of accounts, and has filed amendments thereto as required
by the OCC and the FDIC (as so amended, the "Applications"). The Applications
have been approved by the OCC and the FDIC. The Company has filed with the Board
of Governors of the Federal Reserve System (the "FRB") its application (the
"Holding Company Application") to acquire the Bank under the Bank Holding
Company Act, as amended, and the regulations promulgated thereunder ("BHCA")
(the OCC, FDIC and Federal Reserve being hereafter referred to collectively as
the "Regulatory Agencies").
SECTION 2. RETENTION OF AGENT; COMPENSATION; SALE AND DELIVERY OF THE
SHARES. Subject to the terms and conditions herein set forth, the Company and
the Bank hereby appoint the Agent as their exclusive financial advisor and
marketing agent (i) to utilize its best efforts to solicit subscriptions for
Common Shares and to advise and assist the Company and the Bank with respect to
the Company's sale of the Shares in the Offering and (ii) to manage the sale of
Shares through a group of selected broker dealers if necessary.
On the basis of the representations and warranties and subject to the
terms and conditions of this Agreement, the Agent accepts such appointment and
agrees to consult with and advise the Company and the Bank as to matters set
forth in the letter agreement ("Letter Agreement"), dated September 7, 1999,
between the Bank, the Company and Webb (a copy of which is attached hereto as
Exhibit A). It is acknowledged by the Company and the Bank that the Agent shall
not be obligated to purchase any Shares and shall not be obligated to take any
action which is inconsistent with any applicable law, regulation, decision or
order. Subscriptions will be offered by means of Order Forms as described in the
Prospectus. Except as provided in the paragraph below, the appointment of the
Agent hereunder shall terminate upon completion of the Offering.
Webb agrees to provide financial advisory assistance to the Bank and
the Company at no charge for a period of one year following the completion of
the Offering including general advice on the market for bank stocks and the
stock of the Company, shareholder enhancement methods and other related matters.
Thereafter, if the parties wish to continue the relationship, a fee will be
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<PAGE> 3
negotiated and an agreement with respect to specific advisory services will be
entered into at that time.
In the event the Company is unable to sell a minimum of 900,000 Shares
within the period herein provided, this Agreement shall terminate and the
Company shall refund to any persons who have subscribed for any of the Shares
the full amount which it may have received from them as set forth in the
Prospectus; and none of the parties to this Agreement shall have any obligation
to the other parties hereunder, except as set forth in this Section 2 and in
Sections 6, 8 and 9 hereof.
In the event the Offering is terminated for any reason not attributable
to the action or inaction of the Agent, the Agent shall be paid the fees due to
the date of such termination pursuant to subparagraphs (a) and (b) below.
If all conditions precedent to the consummation of the Offering are
satisfied, the Company agrees to issue, or have issued, the Shares sold in the
Offering and to release for delivery certificates for such Shares on the Closing
Date (as hereinafter defined) against payment to the Company by any means
authorized pursuant hereto; provided, however, that no funds shall be released
to the Company until the conditions specified in Section 7A hereof shall have
been complied with to the reasonable satisfaction of the Agent and their
counsel. The release of Shares against payment therefor shall be made on a date
and at a place acceptable to the Company, the Bank and the Agent. Certificates
for shares shall be delivered directly to the purchasers in accordance with
their directions. The date upon which the Company shall release or deliver the
Shares sold in the Offering, in accordance with the terms herein, is called the
"Closing Date."
The Agent shall receive the following compensation for its services
hereunder:
(a) An advisory fee of $10,000. Such fees shall be deemed to have been
earned and shall be applied against the fees pursuant to subsection (b), below.
(b) (i) 0% of the aggregate actual purchase price of the stock sold
to officers, directors and employees of the Bank;
(ii) 4.0% of the aggregate actual purchase price of the stock sold
to investors who are included on the lists provided by the directors in
conjunction with the Community Offering and who placed their orders with Webb;
and
(iii) 7.0% of the aggregate actual purchase price of the stock sold
to investors in conjunction with the Community Offering; and
(iv) In the event that a syndicate of selected broker-dealers are
used to assist in the Community Offering, the fee for such shares be 7.0% of the
aggregate actual purchase price of the securities sold through such syndicate.
Webb will pass on to such selected broker-dealers who assist in the Community
Offering an amount competitive with gross underwriting discounts charged at
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<PAGE> 4
such time for comparable amounts of stock sold at a comparable price per share
in a similar market environment. Fees with respect to purchases effected through
selected broker-dealers other than Webb shall be transmitted by Webb to such
selected broker-dealer. The decision to utilize selected broker-dealers will be
made by the Company upon consultation with the Underwriter with due diligence
regard to the Company's stock distribution strategy.
(v) In the event that the Company utilizes a syndicate of selected
broker-dealers to sell Shares to institutional investors in the institutional
offering, which may include KBW, the fee for such shares shall be 7.0% of the
aggregate actual purchase price of the securities sold through such syndicate.
Webb will pass on to such selected broker-dealers who assist in the
institutional offering an amount competitive with gross underwriting discounts
charged at such time for comparable amounts of stock sold at a comparable price
per share in a similar market environment. Fees with respect to purchases
effected through selected institutional broker-dealers other than Webb shall be
transmitted by Webb to such selected broker-dealer. The decision to utilize
selected broker-dealers to offer and sell shares to institutional investors will
be made by the Company upon consultation with Webb with due regard to the
Company's stock distribution strategy.
Full payment of Agent's actual and accountable expenses, advisory fees
and compensation shall be made in next day funds on the earlier of the Closing
Date or a determination by the Company to terminate or abandon the offering.
SECTION 3. PROSPECTUS; OFFERING. The Shares are to be offered in the
Offering at $10.00 per share.
SECTION 4. REPRESENTATIONS AND WARRANTIES. The Company and the Bank
jointly and severally represent and warrant to and agree with the Agent as
follows:
(a) The Holding Company and the Bank have all such power, authority,
authorizations, approvals and orders as may be required to enter into this
Agreement, to carry out the provisions and conditions hereof and to issue and
sell the capital stock of the Bank to the Holding Company and the Shares to be
sold by the Holding Company as provided herein and as described in the
Prospectus. The consummation of the Offering, the execution, delivery and
performance of this Agreement and the consummation of the transactions herein
contemplated have been duly and validly authorized by all necessary corporate
action on the part of the Holding Company and the Bank and this Agreement has
been validly executed and delivered by the Holding Company and the Bank and is
the valid, legal and binding agreement of the Holding Company and the Bank
enforceable in accordance with its terms, except to the extent, if any, that the
provisions of Sections 8 and 9 hereof may be unenforceable as against public
policy, and except to the extent that such enforceability may be limited by
bankruptcy laws, insolvency laws, or other laws affecting the enforcement of
creditors' rights generally, or the rights of creditors of financial
institutions insured by the FDIC (including the laws relating to the rights of
the contracting parties to equitable remedies).
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<PAGE> 5
(b) As of the Closing Date, the Bank shall have completed all
conditions precedent to the Offering in accordance with the Prospectus and shall
have complied in all material respects with applicable laws, regulations (except
as modified or waived in writing by Regulatory Agencies), decisions and orders,
including all terms, conditions, requirements and provisions precedent to the
Offering imposed upon it by the Regulatory Agencies as set forth in the
correspondence received from the Regulatory Agencies.
(c) The Registration Statement was declared effective by the Commission
on _________ __, 1999; and no stop order has been issued with respect thereto
and no proceedings therefore have been initiated or to the best knowledge of the
Bank threatened by the Commission. At the time the Registration Statement,
including the Prospectus contained therein (including any amendment or
supplement thereto), became effective, the Registration Statement complied as to
form in all material respects with the requirements of the 1933 Act and the
regulations promulgated thereunder and the Registration Statement including the
Prospectus contained therein (including any amendment or supplement thereto),
any Blue Sky Application or any Sales Information (as such terms are defined in
Section 8 hereof) authorized by the Holding Company or the Bank for use in
connection with the Offering did not contain an untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading, and at the time any Rule 424(b) or (c) Prospectus was
filed with or mailed to the Commission for filing and at the Closing Date, the
Registration Statement including the Prospectus contained therein (including any
amendment or supplement thereto) and any Blue Sky Application or any Sales
Information authorized by the Holding Company or the Bank for use in connection
with the Offering will not contain an untrue statement of a material fact or
omit to state a material fact necessary in order to make the statements therein,
in light of the circumstances under which they were made, not misleading;
provided, however, that the representations and warranties in this Section 4A
shall not apply to statements or omissions made in reliance upon and in
conformity with written information furnished to the Holding Company or the Bank
by the Agent expressly regarding the Agent for use under the caption "Sales
Agent" or written statements or omissions from any sales information or
information filed pursuant to state securities or blue sky laws or regulations
regarding the Agent.
(d) The OCC application, including the Prospectus, was approved by the
OCC on ________ __, 1999. At the time of the approval of the Application,
including the Prospectus, by the OCC (including any amendment or supplement
thereto) and at all times subsequent thereto until the Closing Date, the
Application, including the Prospectus, will comply as to form in all material
respects with all applicable rules and regulations of the OCC (except as
modified or waived in writing by the OCC). The Application, including the
Prospectus (including any amendment or supplement thereto), does not include any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading; provided, however,
that representations or warranties in this subsection (d) shall not apply to
statements or omissions made in reliance upon and in conformity with written
information furnished to the Holding Company by the Agent expressly regarding
the Agent for use in the Prospectus contained in the Application under the
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<PAGE> 6
caption ("Sales Agent") or written statements or omissions from any sales
information filed pursuant to state securities or blue sky laws or regulations
regarding the Agent.
(e) No order has been issued by the Commission, the OCC, the FRB or the
FDIC (and hereinafter reference to the FDIC shall include the BIF), or any state
regulatory authority, preventing or suspending the use of the Prospectus and no
action by or before any such government entity to revoke any approval,
authorization or order of effectiveness related to the Offering or the
Application is, to the best knowledge of the Bank or the Holding Company,
pending or threatened.
(f) At the Closing Date, the Offering will have been adopted by the
Boards of Directors of both the Holding Company and the Bank, and the Holding
Company and the Bank will have completed all conditions precedent to the
Offering specified in the Applications and approvals from the Regulatory
Agencies, and the offer and sale of the Shares will have been conducted in all
material respects in compliance with all applicable laws, regulations, decisions
and orders, including all terms, conditions, requirements and provisions
precedent to the Offering imposed upon the Holding Company or the Bank by the
Regulatory Agencies, the Commission or any regulatory authority, and in the
manner described in the Prospectus. At the Closing Date, to the best knowledge
of the Holding Company and the Bank, no person will have sought to obtain review
of the final action of the Regulatory Agencies in approving the Applications
pursuant to any applicable state or federal statute or regulation.
(g) The Holding Company has filed with the FRB the Holding Company
Application and has received, as of the Closing Date, approval of its
acquisition of the Bank from the FRB.
(h) Crowe Chizek & Company, LLP, which certified the financial
statements filed as part of the Registration Statement and the Applications,
have advised the Holding Company and the Bank in writing that they are, with
respect to the Holding Company and the Bank, independent certified public
accountants within the meaning of the Code of Professional Ethics of the
American Institute of Certified Public Accountants and under the 1933 Act and
the regulations promulgated thereunder.
(i) The financial statements and the schedules and notes thereto which
are included in the Registration Statement and which are a part of the
Prospectus present fairly the financial position and retained earnings of the
Holding Company as of the dates indicated and the results of operations and cash
flows for the periods specified. The financial statements comply in all material
respects with generally accepted accounting principles ("GAAP") applied on a
consistent basis during the periods presented except as otherwise noted therein
and present fairly in all material respects the information required to be
stated therein and are consistent with the most recent financial statements and
other reports filed by the Bank with the Regulatory Agencies except that
accounting principles employed in such filings conform to requirements of such
authorities and not necessarily to GAAP. The other financial statistical and
pro forma information and related notes included in the Prospectus fairly
present the information shown therein on a basis consistent with the audited
and unaudited financial statements included in the Prospectus, and as to the
pro forma adjustments, the adjustments made therein have been properly applied
on the basis described therein.
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<PAGE> 7
(j) Since the respective dates as of which information is given in the
Registration Statement, including the Prospectus: (i) there has not been any
material adverse change in the financial condition or in the management,
earnings, capital, properties or business affairs of the Holding Company or the
Bank considered as one enterprise, whether or not arising in the ordinary course
of business, (ii) there has not been any material change in total assets,
liabilities or equity from the amount set forth in the Prospectus; nor has the
Holding Company issued any securities or incurred any liability or obligation
for borrowings other than set forth in the Prospectus; (iii) there has not been
any material transactions entered into by the Holding Company or the Bank, other
than those set forth in the Prospectus; and (iv) the capitalization,
liabilities, assets, properties and business of the Holding Company and the Bank
conform in all material respects to the descriptions thereof contained in the
Prospectus and, neither the Bank nor the Holding Company has any material
liabilities of any kind, contingent or otherwise, except as set forth in or
contemplated by the Registration Statement and the Prospectus.
(k) The Holding Company is a corporation duly organized and in good
standing under the laws of the State of Ohio, with corporate power and authority
to own its properties and to conduct its business as described in the
Prospectus, and is duly qualified to transact business and is in good standing
in each jurisdiction in which the conduct of its business requires such
qualification unless the failure to qualify in one or more of such jurisdictions
would not have a material adverse effect on the financial condition, earnings,
capital, properties or business affairs of the Holding Company and the Bank
considered as a whole.
(l) The Bank is a bank in organization and has all conditional
approvals to transact its business. At the closing, the Bank will be a duly
organized and validly existing national banking association, with FDIC insurance
of accounts and duly authorized to conduct its business as described in the
Prospectus; the activities of the Bank are permitted by the rules, regulations
and practices of the OCC and the FDIC; the Bank has or will obtain all licenses,
permits and other governmental authorizations required for the conduct of its
business except those that individually or in the aggregate would not materially
adversely affect the financial condition of the Holding Company and the Bank
taken as a whole; all such licenses, permits and other governmental
authorizations are in full force and effect and the Bank is in good standing
under the laws of the United States and is or will be duly qualified as a
foreign corporation to transact business in each jurisdiction in which failure
to so qualify would have a material adverse effect upon the financial condition,
earnings, capital, properties or business affairs of the Bank; all of the issued
and outstanding capital stock of the Bank after the Offering will be duly and
validly issued and fully paid and nonassessable; and the Holding Company will
directly own all of such capital stock free and clear of any mortgage, pledge,
lien, encumbrance, claim or restriction. The Bank does not own equity securities
or any equity interest in any other business enterprise except as described in
the Prospectus.
(m) The Bank is a member of the Federal Reserve Bank; the deposit
accounts of the Bank are insured by the FDIC up to applicable limits.
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<PAGE> 8
(n) Upon the completion of the Offering, the authorized, issued and
outstanding equity capital of the Holding Company will be as described in the
Prospectus under the caption "Capitalization," and no shares of Common Shares
have been or will be issued and outstanding prior to the Closing Date; the
shares of Common Shares to be subscribed for in the Offering have been duly and
validly authorized for issuance, and when issued and delivered by the Holding
Company against payment of the consideration calculated as set forth in the
Prospectus, will be duly and validly issued and fully paid and nonassessable;
the issuance of the shares of Common Shares is not subject to preemptive rights;
and the terms and provisions of the shares of Common Shares will conform in all
material respects to the description thereof contained in the Prospectus. Upon
issuance of the Shares, good title to the Shares will be transferred from the
Holding Company to the purchaser thereof against payment therefore, subject to
such claims as may be asserted against the purchasers thereof by third party
claimants.
(o) As of the date hereof and as of the Closing Date, neither the
Holding Company nor the Bank is in violation of its certificate of incorporation
or articles of association, respectively, or its bylaws or in material default
in the performance or observance of any obligation, agreement, covenant, or
condition contained in any contract, lease, loan agreement, indenture or other
instrument to which it is a party or by which it, or any of its property, may be
bound which would result in a material adverse change in the condition
(financial or otherwise), earnings, capital, properties or business affairs of
the Holding Company or Bank considered as one enterprise or which would
materially affect their properties or assets. The consummation of the
transactions herein contemplated will not (i) conflict with or constitute a
breach of, or default under, the certificate of incorporation and bylaws of the
Holding Company, the articles of association and bylaws of the Bank, or
materially conflict with or constitute a material breach of, or default under
any material contract, lease or other instrument to which the Holding Company or
the Bank has a beneficial interest, or any applicable law, rule, regulation or
order that is material to the financial condition of the Holding Company and the
Bank on a consolidated basis; (ii) violate any authorization, approval,
judgment, decree, order, statute, rule or regulation applicable to the Holding
Company or the Bank except for such violations which would not have a material
adverse effect on the financial condition and results of operations of the
Holding Company and the Bank on a consolidated basis; or (iii) result in the
creation of any material lien, charge or encumbrance upon any property of the
Holding Company or the Bank.
(p) No material default exists, and no event has occurred which with
notice or lapse of time, or both, would constitute a material default on the
part of the Holding Company or the Bank, in the due performance and observance
of any term, covenant or condition of any indenture, mortgage, deed of trust,
note, bank loan or credit agreement or any other material instrument or
agreement to which the Holding Company or the Bank is a party or by which any of
them or any of their property is bound or affected in any respect which, in any
such case, is material to the Holding Company or the Bank considered as one
enterprise, and such agreements are in full force and effect; and no other party
to any such agreements has instituted or, to the best knowledge of the Holding
Company or the Bank, threatened any action or proceeding wherein the Holding
Company or the Bank is alleged to be in default thereunder under circumstances
where such action or proceeding,
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<PAGE> 9
if determined adversely to the Holding Company or the Bank, as the case may be,
would have a material adverse effect upon the Holding Company and the Bank
considered as one enterprise.
(q) The Holding Company and the Bank have good and marketable title to
all assets which are material to the business of the Holding Company and the
Bank and to those assets described in the Prospectus as owned by them free and
clear of all material liens, charges, encumbrances, restrictions or other
claims, except such as are described in the Prospectus or which do not have a
material adverse effect on the business of the Holding Company and the Bank
taken as a whole; and all of the leases and subleases which are material to the
business of the Holding Company and the Bank, as described in the Registration
Statement or Prospectus, are in full force and effect.
(r) Except as, described in the Prospectus, the Holding Company and the
Bank are not in material violation of any directive from the OCC, the FRB, the
FDIC, the Commission or any other agency to make any material change in the
method of conducting their respective businesses; the Holding Company and the
Bank have conducted and are conducting their respective businesses so as to
comply in all material respects with all applicable statutes and regulations
(including, without limitation, regulations, decisions, directives and orders of
the OCC, the FRB, the Commission and the FDIC) and except as set forth in the
Prospectus, there is no charge, investigation, action, suit or proceeding before
or by any court, regulatory authority or governmental agency or body pending or,
to the best knowledge of either the Holding Company or the Bank, threatened,
which would reasonably be expected to materially and adversely affect the
Offering, the performance of this Agreement, or the consummation of the
transactions contemplated as described in the Registration Statement, or which
would reasonably be expected to result in any material adverse change in the
financial condition or in the earnings, capital, properties or business affairs
of the Holding Company and the Bank considered as one enterprise.
(s) Neither the Bank nor the Holding Company has relied on the Agent or
the Agent's counsel with respect to any legal, tax, or accounting advice in
connection with the Offering.
(t) The Holding Company and the Bank have timely filed all required
federal and state tax returns, have paid all taxes that have become due and
payable in respect of such returns, except where permitted to be extended, have
made adequate reserves for similar future tax liabilities and no deficiency has
been asserted with respect thereto by any taxing authority.
(u) No approval, authorization, consent or order of any regulatory or
supervisory or other public authority is required for the execution and delivery
by the Holding Company and the Bank of this Agreement, or the issuance of the
Shares, except for the approval of the Regulatory Agencies and the Commission
(which have been received) and any necessary qualification, notification, or
registration or exemption under the securities or blue sky laws of the various
states in which the shares are to be offered and except as may be required under
the rules and regulations of The Nasdaq Stock Market, Inc. ("NASDAQ") or the
NASD.
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<PAGE> 10
(v) The Holding Company and the Bank have made appropriate arrangements
for placing the funds received from subscriptions for Shares in the designated
subscription account at the Champaign National Bank & Trust (the "Escrow Agent")
until the minimum number of Shares are sold and paid for, with provision for
refund to the purchasers in the event that the Offering is not completed for
whatever reason or for delivery to the Holding Company if all Shares are sold.
(w) Prior to the Offering, neither the Holding Company nor the Bank
has: (i) issued any securities (except as disclosed in the Prospectus); (ii) had
any material dealings with respect to sales of securities with any member of the
NASD, or any person related to or associated with such member, other than
discussions and meetings relating to the proposed Offering and routine purchases
and sales of U.S. government and agency and other securities; (iii) entered into
a financial or management consulting agreement except as contemplated hereunder
(except as disclosed in the Prospectus); or (iv) engaged any intermediary
between the Agent and the Holding Company and the Bank in connection with the
offering of Shares and no person is being compensated in any manner for such
service.
(x) To the best knowledge of the Holding Company and the Bank, neither
the Holding Company, the Bank nor the employees of the Holding Company or the
Bank have made any payment of funds of the Holding Company or the Bank as a loan
to any person for the purchase of the Shares.
Any certificates signed by an officer of the Holding Company or the
Bank and delivered to the Agent or its counsel that refer to this Agreement
shall be deemed to be a representation and warranty by the Holding Company or
the Bank to the Agent as to the matters covered thereby with the same effect as
if such representation and warranty were set forth herein.
SECTION 5. REPRESENTATIONS AND WARRANTIES.
Webb represents and warrants to the Company and the Bank that:
(a) it is a corporation and is validly existing in good standing under
the laws of the State of New York and licensed to conduct business in the State
of Ohio and that Webb is an unincorporated division thereof with full power and
authority to provide the services to be furnished to the Bank and the Company
hereunder.
(b) The execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby have been duly and validly authorized by
all necessary action on the part of the Agent, and this Agreement has been duly
and validly executed and delivered by the Agent and is a legal, valid and
binding agreement of the Agent, enforceable in accordance with its terms.
(c) Each of the Agent and its employees, agents and representatives who
shall perform any of the services hereunder shall be duly authorized and
empowered, and shall have all licenses, approvals and permits necessary to
perform such services; and the Agent is a registered selling agent
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<PAGE> 11
in each of the jurisdictions in which the Shares are to be offered by the
Company in reliance upon the Agent as a registered selling agent as set forth in
the blue sky memorandum prepared with respect to the Offering.
(d) The execution and delivery of this Agreement by the Agent, the
consummation of the transactions contemplated hereby and compliance with the
terms and provisions hereof will not conflict with, or result in a breach of,
any of the terms, provisions or conditions of, or constitute a default (or an
event which with notice or lapse of time or both would constitute a default)
under, the articles of incorporation or bylaws of the Agent or any agreement,
indenture or other instrument to which the Agent is a party or by which it or
its property is bound.
(e) No approval of any regulatory or supervisory or other public
authority is required in connection with the Agent's execution and delivery of
this Agreement, except as may have been received.
(f) There is no suit or proceeding or charge or action before or by any
court, regulatory authority or government agency or body or, to the knowledge of
the Agent, pending or threatened, which might materially adversely affect the
Agent's performance of this Agreement.
SECTION 5.L COVENANTS OF THE COMPANY AND THE BANK. The Company and the
Bank hereby jointly and severally covenant with KBW as follows:
(a) The Holding Company has filed the Registration Statement with the
Commission. The Holding Company will not, at any time after the date the
Registration Statement is declared effective, file any amendment or supplement
to the Registration Statement without providing the Agent and its counsel an
opportunity to review such amendment or file any amendment or supplement to
which amendment the Agent or its counsel shall reasonably object.
(b) The Bank has filed the Applications with the Regulatory Agencies.
The Bank will not, at any time after the date an Application is approved, file
any amendment or supplement to an Application without providing the Agent and
its counsel an opportunity to review such amendment or supplement or file any
amendment or supplement to which amendment or supplement the Agent or its
counsel shall reasonably object.
(c) The Holding Company and the Bank will use their best efforts to
cause any post-effective amendment to the Registration Statement to be declared
effective by the Commission and any post-effective amendment to an Application
to be approved by the Regulatory Agencies, and will immediately upon receipt of
any information concerning the events listed below notify the Agent (i) when the
Registration Statement, as amended, has become effective; (ii) when an
Application, as amended, has been approved by the Regulatory Agencies; (iii) of
the receipt of any comments from the Commission, a Regulatory Agency or any
other governmental entity with respect to the Offering or the transactions
contemplated by this Agreement; (iv) of any request by the Commission, a
Regulatory Agency or any other governmental entity for any amendment or
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<PAGE> 12
supplement to the Registration Statement or an Application or for additional
information; (v) of the issuance by the Commission, a Regulatory Agency or any
other governmental agency of any order or other action suspending the Offering
or the use of the Registration Statement or the Prospectus or any other filing
of the Holding Company and the Bank under applicable regulations or other
applicable law, or the threat of any such action; (vi) of the issuance by the
Commission, any Regulatory Agency or any state authority of any stop order
suspending the effectiveness of the Registration Statement or of the initiation
or threat of initiation or threat of any proceedings for that purpose; or (vii)
of the occurrence of any event mentioned in paragraph (g) below. The Holding
Company and the Bank will make every reasonable effort to prevent the issuance
by the Commission, any Regulatory Agency or any state authority of any such
order and, if any such order shall at any time be issued, to obtain the lifting
thereof at the earliest possible time.
(d) The Holding Company and the Bank will provide the Agent and its
counsel with notice of its intention to file, and reasonable time to review
prior to filing, any amendment or supplement to the any Application and will not
file any such amendment or supplement to which the Agent shall reasonably object
or which shall be reasonably disapproved by its counsel.
(e) The Holding Company and the Bank will deliver to the Agent and to
its counsel conformed copies of each of the following documents, with all
exhibits: the Applications, as originally filed and of each amendment or
supplement thereto, and the Registration Statement, as originally filed and each
amendment thereto. Further, the Holding Company and the Bank will deliver such
additional copies of the foregoing documents to counsel to the Agent as may be
required for any NASD filings. In addition, the Holding Company and the Bank
will also deliver to the Agent such number of copies of the Prospectus, as
amended or supplemented, as the Agent may reasonably request.
(f) The Holding Company and the Bank will comply in all material
respects with any and all terms, conditions, requirements and provisions with
respect to the Offering and the transactions contemplated thereby imposed by the
Commission, by applicable state law and regulations, and by the 1933 Act, the
Securities Exchange Act of 1934 (the "1934 Act") and the rules and regulations
of the Commission promulgated under such statutes, to be complied with prior to
or subsequent to the Closing Date; and when the Prospectus is required to be
delivered, the Holding Company and the Bank will comply in all material
respects, at their own expense, with all material requirements imposed upon them
by the Regulatory Agencies, the Commission, by applicable state law and
regulations and by the 1933 Act, the 1934 Act and the rules and regulations of
the Commission promulgated under such statutes, in each case as from time to
time in force, so far as necessary to permit the continuance of sales or dealing
in shares of Common Shares during such period in accordance with the provisions
hereof and the Prospectus.
(g) If any event relating to or affecting the Holding Company or the
Bank shall occur, as a result of which it is necessary, in the reasonable
opinion of counsel for the Holding Company or the Bank or for the Agent, to
amend or supplement the Registration Statement or the Prospectus in order to
make them not misleading in light of the circumstances existing at the time of
its use, the
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<PAGE> 13
Holding Company and the Bank will, at their expense, forthwith prepare, file
with the Commission and the Regulatory Agencies, and furnish to the Agent, a
reasonable number of copies of an amendment or amendments of, or a supplement or
supplements to, the Registration Statement and the Prospectus (in form and
substance satisfactory to counsel for the Agent after a reasonable time for
review) which will amend or supplement the Registration Statement and/or the
Prospectus so that as amended or supplemented it will not contain an untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements therein, in light of the circumstances existing at the
time, not misleading. For the purpose of this subsection, the Holding Company
and the Bank each will furnish such information with respect to itself as the
Agent may from time to time reasonably request.
(h) The Holding Company will endeavor in good faith, in cooperation
with the Agent, to register or to qualify the Shares for offering and sale under
the applicable securities laws of the jurisdictions in which the Offering will
be conducted; provided, however, that the Holding Company shall not be obligated
to file any general consent to service of process or to qualify to do business
in any jurisdiction in which it is not so qualified. In each jurisdiction where
any of the Shares shall have been registered or qualified as above provided, the
Holding Company will make and file such statements and reports in each year as
are or may be required by the laws of such jurisdictions.
The Holding Company and the Bank and each of the directors and officers
of the Holding Company and the Bank will not sell or issue, contract to sell or
otherwise dispose of, for a period of 180 days after the date hereof, without
the Agent's prior written consent, which consent shall not be unreasonably
withheld, any shares of Common Shares other than in connection with any plan or
arrangement described in the Prospectus.
(i) For the period of three years from the date of this Agreement, the
Holding Company will furnish to the Agent upon request (i) a copy of each report
of the Holding Company furnished to or filed with the Commission under the 1934
Act or any national securities exchange or system on which any class of
securities of the Holding Company is listed or quoted, (ii) a copy of each
report of the Holding Company mailed to holders of Common Shares or
nonconfidential report filed with the Commission or a Regulatory Agency or any
other supervisory or regulatory authority or any national securities exchange or
system on which any class of the securities of the Holding Company is listed or
quoted, and (iii) from time to time, such other publicly available information
concerning the Holding Company and the Bank as the Agent may reasonably request.
(j) The Holding Company and the Bank will use the net proceeds from the
sale of the Common Shares in the manner set forth in the Prospectus under the
caption "Use of Proceeds."
(k) Prior to the Closing Date, the Holding Company and the Bank will
inform the Agent of any event or circumstances of which it is aware as a result
of which the Registration Statement and/or Prospectus, or the Applications as
then supplemented or amended, would include an untrue statement of a material
fact or omit to state a material fact necessary in order to make the statements
therein not misleading.
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(l) The Holding Company and the Bank will distribute the Prospectus or
other offering materials in connection with the offering and sale of the Common
Shares only as set forth in the Prospectus, and only in accordance with the 1933
Act and the 1934 Act and the rules and regulations promulgated under such
statutes, and the laws of any state in which the shares are qualified for sale.
(m) The Holding Company shall register its Common Shares under Section
12(g) of the 1934 Act, concurrent with the effective date of the Registration
Statement. The Holding Company shall maintain the effectiveness of such
registration for not less than three years.
(n) For so long as the Holding Company's Common Shares is registered
under the 1934 Act, the Holding Company will furnish to its stockholders as soon
as practicable after the end of each fiscal year such reports and other
information as are required to be furnished to its stockholders under the 1934
Act (including consolidated financial statements of the Holding Company and its
subsidiaries, certified by independent public accountants).
(o) The Holding Company will comply with the provisions of Rule 158 of
the 1933 Act.
(p) The Holding Company will use its best efforts to obtain approval
for and maintain quotation of the Common Shares on the Nasdaq Bulletin Board
effective on or prior to the Closing Date.
(q) The Bank will maintain appropriate arrangements with the Escrow
Agent for depositing all funds received from persons mailing subscriptions for
or orders to purchase Shares in the Offering as described in the Prospectus
until the Closing Date and satisfaction of all conditions precedent to the
release of the Bank's obligation to refund payments received from persons
subscribing for or ordering Shares in the Offering as described in the
Prospectus.
(r) The Holding Company will promptly register as a bank holding
company under the BHCA.
(s) The Holding Company and the Bank will take such actions and furnish
such information as are reasonably requested by the Agent in order for the Agent
to ensure compliance with the "Interpretation of the Board of Governors of the
NASD on Free Riding and Withholding."
(t) The Holding Company and the Bank will conduct their businesses in
compliance in all material respects with all applicable federal and state laws,
rules, regulations, decisions, directives and orders including, all decisions,
directives and orders of the Commission, the OCC, the FRB and the FDIC.
(u) The Bank will not amend the Offering without notifying the Agent
prior thereto.
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<PAGE> 15
(v) The Holding Company will not deliver the Shares until the Holding
Company and the Bank have satisfied or caused to be satisfied each condition set
forth in Section 7A hereof, unless such condition is waived in writing by the
Agent.
SECTION 6. PAYMENT OF EXPENSES. Whether or not the Offering is
completed or the sale of the Shares by the Holding Company is consummated, the
Holding Company and the Bank will pay for all expenses incident to the
performance of this Agreement, including without limitation: (a) the preparation
and filing of the Applications; (b) the preparation, printing, filing, delivery
and shipment of the Registration Statement, including the Prospectus, and all
amendments and supplements thereto; (c) all filing fees and expenses in
connection with the qualification or registration of the Shares for offer and
sale by the Holding Company under the securities or "blue sky" laws, including
without limitation filing fees, reasonable legal fees and disbursements of
counsel in connection therewith, and in connection with the preparation of a
blue sky law survey; (d) the filing fees of the NASD; (e) all expenses related
to "road shows" and (f) the actual out-of-pocket expenses of the Agent up to a
maximum of $7,000. Subject to such maximum limitation, any such expense incurred
by the Agent shall be reimbursed by the Holding Company and the Bank, except for
its legal fees and expenses.
SECTION 7A. CONDITIONS TO THE AGENT'S OBLIGATIONS. The obligations of
the Agent hereunder and the occurrence of the Closing and the Offering are
subject to the condition that all representations and warranties and other
statements of the Holding Company and the Bank herein contained are at and as of
the commencement of the Offering and at and as of the Closing Date, true and
correct in all material respects, the condition that the Holding Company and the
Bank shall have performed in all material respects all of their obligations
hereunder to be performed on or before such dates and to the following further
conditions:
(a) The Registration Statement shall have been declared effective by
the Commission and the Applications approved by the Regulatory Agencies not
later than 5:30 p.m. on the date of this Agreement, and no stop order or other
action suspending the effectiveness of the Registration Statement shall have
been issued under the 1933 Act or proceedings therefore initiated or, to the
Company's or Bank's best knowledge, threatened by the Commission or any state
authority and no order or other action suspending the authorization for use of
the Prospectus or the consummation of the Offering shall have been issued or
proceedings therefore initiated or, to the Company's or Bank's best knowledge,
threatened by the Regulatory Agencies, the Commission, or any other governmental
body.
(b) At the Closing Date, the Agent shall have received:
(1) The favorable opinion, dated as of the Closing Date, of Squire,
Sanders & Dempsey, L.L.P., special counsel for the Holding Company and the Bank,
in form and substance satisfactory to counsel for the Agent to the effect that:
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(i) The Holding Company is a corporation duly organized and
validly existing and in good standing under the laws of the United States, with
corporate power and authority to own its properties and to conduct its business
as described in the Prospectus, and to such counsel"s knowledge is duly
qualified to transact business and is in good standing in each jurisdiction in
which the conduct of its business requires such qualification and in which the
failure to qualify would have a material adverse effect on the financial
condition, earnings, capital, properties or business affairs of the Holding
Company.
(ii) The Bank is a duly organized and validly existing national
banking association with full power and authority to own its properties and to
conduct its business as described in the Prospectus and to enter into this
Agreement and perform its obligations hereunder; the activities of the Bank as
described in the Prospectus are permitted by the rules, regulations and
practices of the Regulatory Agencies; the issuance and sale of the capital stock
of the Bank to the Holding Company has been duly and validly authorized by all
necessary corporate action on the part of the Holding Company and the Bank and,
upon payment therefore as described in the Prospectus, will be validly issued,
fully paid and nonassessable; and will be owned of record and beneficially by
the Holding Company, free and clear of any mortgage, pledge, lien, encumbrance,
claim or restriction.
(iii) The Bank is a member of the Federal Reserve and the
deposit accounts of the Bank are insured by the FDIC up to the maximum amount
allowed by law and to such counsel's knowledge no proceedings for the
termination or revocation of such insurance are pending or threatened.
(iv) Upon the completion of the Offering, the authorized,
issued and outstanding capital stock of the Holding Company and the Bank will be
as set forth in the Prospectus under the caption "Capitalization," and no shares
of Common Shares have been or will be issued and outstanding prior to the
Closing Date; the shares of Common Shares of the Holding Company to be
subscribed for in the Offering have been duly and validly authorized for
issuance, and when issued and delivered by the Holding Company pursuant to the
Plan against payment of the consideration calculated as set forth in the Plan,
will be fully paid and nonassessable; and the issuance of the shares of Common
Shares is not subject to preemptive rights.
(v) The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary action on the part of the Holding Company and the Bank; and
this Agreement constitutes a valid, legal and binding obligation of each of the
Holding Company and the Bank, enforceable in accordance with its terms, except
to the extent that the provisions of Sections 8 and 9 hereof may be
unenforceable as against public policy, and except to the extent that such
enforceability may be limited by bankruptcy laws, insolvency laws, or other laws
affecting the enforcement of creditors' rights generally, or the rights of
creditors of financial institutions insured by the FDIC (including the laws
relating to the rights of the contracting parties to equitable remedies).
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<PAGE> 17
(vi) Subject to the satisfaction of the conditions to the
Regulatory Agencies' approval of the Applications, no further approval,
registration, authorization, consent or other order of any federal regulatory
agency, public board or body is required in connection with the execution and
delivery of this Agreement, the offer, sale and issuance of the Shares and the
consummation of the Offering.
(vii) The Applications, including the Prospectus as filed with
the Regulatory Agencies, has been approved by the Regulatory Agencies. The FRB
has issued its order of approval under the BHCA, and the purchase by the Holding
Company of all of the issued and outstanding capital stock of the Bank has been
authorized by the FRB and no action has been taken, or to such counsel's
knowledge is pending or threatened, to revoke any such authorization or
approval.
(viii) The Registration Statement has become effective under
the 1933 Act, no stop order suspending the effectiveness of the Registration
Statement has been issued, and to the best of such counsel's knowledge no
proceedings for that purpose have been instituted or threatened.
(ix) The consummation of the Offering and the transactions
contemplated thereunder will have no material tax consequences to the Holding
Company, the Bank or any person subscribing for shares in the Offering.
(x) The terms and provisions of the shares of Common Shares
conform to the description thereof contained in the Registration Statement and
the Prospectus and such description describes in all material respects the
rights of the holders thereof, the information in the Prospectus under the
caption "Articles of Incorporation" to the extent that it constitutes matters of
law or legal conclusions has been prepared by such counsel and is accurate in
all material respects; and the forms of certificates proposed to be used to
evidence the shares of Common Shares are in due and proper form.
(xi) At the time the Application, including the Prospectus
contained therein, was approved, the Application (as amended or supplemented)
complied as to form in all material respects with the requirements of the
Regulatory Agencies and all applicable laws, rules and regulations and decisions
and orders of the Regulatory Agencies, except as modified or waived in writing
by the Regulatory Agencies, (other than the financial statements, notes to
financial statements, financial tables and other financial and statistical data
included therein as to which counsel need express no opinion and other than
compliance with state securities or Blue Sky laws as to which such counsel need
express no opinion). To such counsel's knowledge, no person has sought to obtain
regulatory or judicial review of the final action of the Regulatory Agencies
approving the Applications.
(xii) At the time that the Registration Statement became
effective (i) the Registration Statement (as amended or supplemented) (other
than the financial statements, notes to financial statements, financial tables
or other financial and statistical data included therein as to
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<PAGE> 18
which counsel need express no opinion), complied as to form in all material
respects with the requirements of the 1933 Act and the rules and regulations
promulgated thereunder; and (ii) the Prospectus (other than the financial
statements, notes to financial statements, financial tables and other financial
and statistical data included therein, as to which counsel need express no
opinion) complied as to form in all material respects with the requirements of
the 1933 Act and the rules and regulations promulgated thereunder, and the
rules, regulations and decisions and orders of the Regulatory Agencies, except
as modified or waived in writing by the Regulatory Agencies.
(xiii) To the best of such counsel's knowledge, there are no
legal or governmental proceedings pending, or threatened (i) asserting the
invalidity of this Agreement or, (ii) seeking to prevent the Offering.
(xiv) The information in the Prospectus under the caption
"Supervision and Regulation", to the extent that it constitutes matters of law,
summaries and supervision of legal matters, documents or proceedings, or legal
conclusions, has been prepared by such counsel and is accurate in all material
respects (except as to the financial statements and other financial data
included therein as to which such counsel need express no opinion).
(xv) To the best of counsel's knowledge, the Holding Company
and the Bank have obtained all material licenses, permits and other governmental
authorizations required for the conduct of their respective businesses as
described in the Registration Statement and the Prospectus, except where the
failure to obtain such licenses, permits and other governmental authorizations
would not have a material adverse effect on the financial condition of the
Holding Company or the Bank considered as one enterprise, or on the earnings,
capital, properties or business affairs of the Holding Company or the Bank
considered as one enterprise, and all such licenses, permits and other
governmental authorizations are in full force and effect and the Holding Company
and the Bank are in all material respects complying therewith.
(xvi) Neither the Holding Company nor the Bank is in violation
of its certificate of incorporation or its articles of association,
respectively, or its bylaws or to the best of such counsel's knowledge, in
violation of any material obligation, agreement, covenant or condition contained
in any material contract, indenture, mortgage, loan agreement, note, lease or
other instrument to which it is a party or by which it or its property may be
bound, which violation would have a material adverse effect on the financial
condition of the Holding Company or the Bank considered as one enterprise, or on
the earnings, capital, properties or business affairs of the Holding Company and
the Bank considered as one enterprise; the execution and delivery of this
Agreement by the Holding Company and the Bank, the incurrence of the obligations
herein set forth and the consummation of the transactions contemplated herein,
will not materially conflict with, constitute a material breach of, or default
under, or result in the creation or imposition of any material lien, charge or
encumbrance upon any property or assets of the Holding Company or the Bank which
are material to their business considered as one enterprise, pursuant to any
contract, indenture, mortgage, loan agreement, note, lease or other instrument
to which the Holding Company or the Bank is a party or by which any of them may
be bound, or to which any of the property or assets of the Holding
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<PAGE> 19
Company or the Bank is subject. In addition, such action will not result in any
material violation of the provisions of the certificate of incorporation or
bylaws of the Holding Company or the Bank or any material violation of any
applicable law, act, regulation or to such counsel's knowledge, order or court
order, writ, injunction or decree.
(xvii) To the best of counsel's knowledge, the Holding Company
and the Bank are not in violation in any material respect of any directive from
any Regulatory Agency to make any material change in the method of conducting
their business.
(2) The letter of Squire, Sanders & Dempsey, L.L.P., special
counsel for the Holding Company and the Bank, in form and substance to the
effect that:
In addition, during the preparation of the Registration Statement and
the Prospectus, Squire, Sanders & Dempsey, L.L.P. participated in conferences
with certain officers of and other representatives of the Bank and the Holding
Company, counsel to the Agent, representatives of the independent public
accountants for the Bank and the Holding Company and representatives of the
Agent at which the contents of the Registration Statement and the Prospectus and
related matters were discussed and, although Squire, Sanders & Dempsey, L.L.P.
is not passing upon and does not assume the accuracy of the statements contained
in the Registration Statement and Prospectus, on the basis of the foregoing
without independent verification (relying as to materiality as to factual
matters on certificates of officers and other factual representations by the
Bank and the Holding Company), nothing has come to the attention of Squire,
Sanders & Dempsey, L.L.P. that caused Squire, Sanders & Dempsey, L.L.P. to
believe that the Registration Statement at the time it was declared effective by
the SEC or the Prospectus as of its date, contained or contains any untrue
statement of a material fact or omitted to state any material fact required to
be stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading (it being understood
that counsel need express no comment or opinion with respect to the financial
statements, schedules and other financial and statistical data included, or
statistical or appraisal methodology employed, in the Registration Statement or
Prospectus).
The opinion shall be limited to matters governed by the laws of the
United States or the State of Ohio. In rendering such opinion, such counsel may
rely (A) as to matters involving the application of laws of any jurisdiction
other than the United States or Ohio, to the extent such counsel deems proper
and specified in such opinion, upon the opinion of other counsel of good
standing, as long as such other opinion indicates that the Agent may rely on the
opinion, and (B) as to matters of fact, to the extent such counsel deems proper,
on certificates of responsible officers of the Company and the Bank and public
officials; provided copies of any such opinion(s) or certificates of public
officials are delivered to you together with the opinion to be rendered
hereunder by special counsel to the Company and the Bank. The opinion of such
counsel for the Company shall state that it has no reason to believe that you
are not justified in relying thereon.
(3) The favorable opinion, dated as of the Closing Date, of counsel
for the Agent, with respect to such matters as the Agent may reasonably require,
such opinion may rely as to
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<PAGE> 20
matters of fact, upon certificates of officers and directors of the Holding
Company and the Bank delivered pursuant hereto or as such counsel may reasonably
request.
(c) Concurrently with the execution of this Agreement, the Agent shall
receive a letter from Crowe Chizek and Company LLP dated the date hereof and
addressed to the Agent, (i) such letter confirming that Crowe Chizek and Company
LLP is a firm of independent public accountants within the meaning of the Code
of Professional Ethics of the American Institute of Certified Public
Accountants, the 1933 Act and the regulations promulgated thereunder, and no
information concerning its relationship with or interests in the Holding Company
or the Bank is required by the Application or Item 10 of the Registration
Statement, and stating in effect that in Crowe Chizek and Company LLP's opinion
the financial statements of the Holding Company included in the Prospectus
comply as to form in all material respects with the applicable accounting
requirements of the 1933 Act, the 1934 Act and the related published rules and
regulations of the Commission thereunder and generally accepted accounting
principles; (ii) stating in effect that, on the basis of certain agreed upon
procedures (but not an audit examination in accordance with generally accepted
auditing standards) consisting of a reading of the latest available unaudited
interim financial statements of the Holding Company and the Bank prepared by the
Holding Company and the Bank, a reading of the minutes of the meetings of the
Board of Directors of the Holding Company and the Bank, a review of interim
financial information in accordance with Statement on Auditing Standards No. 71,
and consultations with officers of the Holding Company and the Bank responsible
for financial and accounting matters, nothing came to their attention which
caused them to believe that: (A) such unaudited financial statements, including
Recent Developments, if any, are not in conformity with generally accepted
accounting principles applied on a basis substantially consistent with that of
the audited financial statements included in the Prospectus; or (B) during the
period from the date of the latest unaudited consolidated financial statements
included in the Prospectus to a specified date not more than five business days
prior to the date hereof, there was any material increase in borrowings (defined
as securities sold under agreements to repurchase and any other form of debt
other than deposits) of the Holding Company or the Bank (other than as disclosed
in the Prospectus); or (C) there was any decrease in retained earnings of the
Bank at the date of such letter as compared with amounts shown in the latest
unaudited statement of condition included in the Prospectus or there was any
decrease in net income or net interest income of the Bank for the number of full
months commencing immediately after the period covered by the latest unaudited
income statement included in the Prospectus and ended on the latest month ending
prior to the date of the Prospectus or in such letter as compared to the
corresponding period in the preceding year; and (iii) stating that, in addition
to the audit examination referred to in its opinion included in the Prospectus
and the performance of the procedures referred to in clause (ii) of this
subsection (D), they have compared with the general accounting records of the
Holding Company and/or the Bank, as applicable, which are subject to the
internal controls of the Holding Company and/or the Bank, as applicable,
accounting system and other data prepared by the Holding Company and/or the
Bank, as applicable, directly from such accounting records, to the extent
specified in such letter, such amounts and/or percentages set forth in the
Prospectus as the Agent may reasonably request, and they have found such amounts
and percentages to be in agreement therewith (subject to rounding).
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(d) At the Closing Date, the Agent shall receive letters from Crowe
Chizek and Company LLP dated the Closing Date, addressed to the Agent,
confirming the statements made by its letter delivered by it pursuant to
subsection (f) of this Section 9A, the "specified date" referred to in clause
(ii)(B) thereof to be a date specified in such letter, which shall not be more
than five business days prior to the Closing Date.
(e) At the Closing Date counsel to the Agent shall have been furnished
with such documents and opinions as counsel for the Agent may require for the
purpose of enabling them to advise the Agent with respect to the issuance and
sale of the Common Shares as herein contemplated and related proceedings, or in
order to evidence the accuracy of any of the representations and warranties, or
the fulfillment of any of the conditions herein contained.
(f) At the Closing Date, the Agent shall receive a certificate of the
Chief Executive Officer and Chief Financial Officer of each of the Holding
Company and the Bank, dated the Closing Date, to the effect that (i) they have
carefully examined the Prospectus and at the time the Prospectus became
authorized for final use, the Prospectus did not contain any untrue statement of
a material fact or omit to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; (ii) there has not been, since the respective dates as of
which information is given in the Prospectus, any material adverse change in the
financial condition or in the management, earnings, capital, properties,
business prospects or business affairs of the Holding Company or the Bank,
considered as one enterprise, whether or not arising in the ordinary course of
business; (iii) the representations and warranties contained in Section 4 of
this Agreement are true and correct with the same force and effect as though
made at and as of the Closing Date; (iv) the Holding Company and the Bank have
complied in all material respects with all material agreements and satisfied all
conditions on its part to be performed or satisfied at or prior to the Closing
Date including the conditions contained in this Section 7A; (v) no stop order
has been issued or, to the best of their knowledge, is threatened, by the
Commission, a Regulatory Agency or any other governmental body; (vi) no order
suspending the Offering, the acquisition of all of the shares of the Bank by the
Holding Company or the effectiveness of the Prospectus has been issued and to
the best of their knowledge, no proceedings for any such purpose have been
initiated or threatened by any Regulatory Agency or any other federal or state
authority; (vii) to the best of their knowledge, no person has sought to obtain
regulatory or judicial review of the action of the OCC, FRB or FDIC in approving
the Applications.
(g) The Holding Company or the Bank shall not have sustained since the
date of the latest audited financial statements included in the Registration
Statement and Prospectus, any material loss or interference with its business
from fire, explosion, flood or other calamity, whether or not covered by
insurance, or from any labor dispute or court or governmental action, order or
decree, otherwise than as set forth in the Registration Statement and the
Prospectus, and since the respective dates as of which information are given in
the Registration Statement and the Prospectus, there shall not have been any
material change in the long-term debt of the Holding Company or the Bank or any
material change, or any development, involving a prospective material change in
or affecting the general affairs of the management, financial position,
stockholders' equity or results of operations of the
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<PAGE> 22
Holding Company or the Bank, otherwise than as set forth or contemplated in the
Registration Statement and the Prospectus, the effect of which, in any such case
described above, is in the Agent's reasonable judgment sufficiently material and
adverse as to make it impracticable or inadvisable to proceed with the Offering
or the delivery of the Shares on the terms and in the manner contemplated in the
Prospectus.
(h) Prior to and at the Closing Date: (1) in the reasonable opinion of
the Agent, there shall have been no material adverse change in the management,
financial condition or in the earnings, capital, properties or business affairs
of the Holding Company or the Bank independently, or of the Holding Company and
the Bank, considered as one enterprise, from that as of the latest dates as of
which such condition is set forth in the Prospectus, except as referred to
therein; (ii) there shall have been no material transaction entered into by the
Holding Company and the Bank, considered as one enterprise, from the latest date
as of which the financial condition of the Holding Company or the Bank is set
forth in the Prospectus other than transactions referred to or contemplated
therein; (iii) the Holding Company or the Bank shall not have received from the
OCC, FRB or the FDIC any direction (oral or written) to make any material change
in the method of conducting their business with which it has not complied in all
material respects (which direction, if any, shall have been disclosed to the
Agent) and which would reasonably be expected to have a material and adverse
effect on the management, condition (financial or otherwise) or on the earnings,
capital, properties or business affairs of the Holding Company or the Bank
considered as one enterprise; (iv) neither the Holding Company nor the Bank
shall have been in default (nor shall an event have occurred which, with notice
or lapse of time or both, would constitute a default) under any provision of any
agreement or instrument relating to any material outstanding indebtedness; (v)
no action, suit or proceedings, at law or in equity or before or by any federal
or state commission, board or other administrative agency, shall be pending or,
to the knowledge of the Holding Company or the Bank, threatened against the
Holding Company or the Bank or affecting any of their properties wherein an
unfavorable decision, ruling or finding would reasonably be expected to have a
material and adverse effect on the management, financial condition or on the
earnings, capital, properties or business affairs of the Holding Company or the
Bank, considered as one enterprise; and (vi) the Shares have been qualified or
registered for offering and sale under the securities or blue sky laws of the
jurisdictions as to which the Holding Company and the Agent shall have agreed.
(i) At or prior to the Closing Date, the Agent shall receive (i) a copy
of the letters from the OCC and FDIC approving the Applications, (ii) a copy of
the order from the Commission declaring the Registration Statement effective,
(iii) a copy of certificate of corporate existence for the Bank from the OCC,
(iv) a certificate of good standing from the State of Ohio evidencing the good
standing of the Holding Company and (v) a copy of the letter from the FRB
approving the Holding Company Application.
(j) Subsequent to the date hereof, there shall not have occurred any of
the following: (i) a suspension or limitation in trading in securities generally
on the New York Stock Exchange or American Stock Exchange or in the
over-the-counter market, or quotations halted generally on the Nasdaq Stock
Market, or minimum or maximum prices for trading have been fixed, or maximum
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<PAGE> 23
ranges for prices for securities have been required by either of such exchanges
or the NASD or by order of the Commission or any other governmental authority;
(ii) a general moratorium on the operations of commercial banks or other
federally-insured financial institutions or general moratorium on the withdrawal
of deposits from commercial banks or other federally-insured financial
institutions declared by either federal or state authorities; (iii) the
engagement by the United States in hostilities which have resulted in the
declaration, on or after the date hereof, of a national emergency or war; or
(iv) a material decline in the price of equity or debt securities if the effect
of any of (i) through (iv) herein, in the Agent's reasonable judgment, makes it
impracticable or inadvisable to proceed with the Offering or the delivery of the
Shares on the terms and in the manner contemplated in the Registration Statement
and the Prospectus.
SECTION 7B. CONDITIONS TO THE HOLDING COMPANY AND THE BANK'S
OBLIGATIONS.
The obligations of the Holding Company and the Bank hereunder are
subject to the accuracy of the representations and warranties of the Agent, to
the performance by the Agent of its obligations hereunder, and to the
satisfaction of the conditions contained in Paragraph (a) of Section 7A
hereunder.
SECTION 8. INDEMNIFICATION.
(a) The Company and the Bank jointly and severally agree to indemnify
and hold harmless the Agent, its respective officers and directors, employees
and agents, and each person, if any, who controls the Agent within the meaning
of Section 15 of the 1933 Act or Section 20(a) of the 1934 Act, against any and
all loss, liability, claim, damage or expense whatsoever (including, but not
limited to, settlement expenses and the establishment of the Foundation and the
contribution of the Foundation Shares thereto by the Company), joint or several,
that the Agent or any of them may suffer or to which the Agent and any such
persons may become subject under all applicable federal or state laws or
otherwise, and to promptly reimburse the Agent and any such persons upon written
demand for any expense (including reasonable fees and disbursements of counsel)
incurred by the Agent or any of them in connection with investigating, preparing
or defending any actions, proceedings or claims (whether commenced or
threatened) to the extent such losses, claims, damages, liabilities or actions:
(i) arise out of or are based upon any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement (or any
amendment or supplement thereto), preliminary or final Prospectus (or any
amendment or supplement thereto), the Application (or any amendment or
supplement thereto), the Holding Company Application or any instrument or
document executed by the Company or the Bank or based upon written information
supplied by the Company or the Bank filed in any state or jurisdiction to
register or qualify any or all of the Shares or to claim an exemption therefrom
or provided to any state or jurisdiction to exempt the Company as a
broker-dealer or its officers, directors and employees as broker-dealers or
agent, under the securities laws thereof (collectively, the "Blue Sky
Application"), or any document, advertisement, oral statement or communication
("Sales Information") prepared, made or executed by or on behalf of the Company
or the Bank with their consent or based upon written or oral information
furnished by or on behalf of the Company or the Bank, whether or not filed in
any
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<PAGE> 24
jurisdiction, in order to qualify or register the Shares or to claim an
exemption therefrom under the securities laws thereof; (ii) arise out of or are
based upon the omission or alleged omission to state in any of the foregoing
documents or information a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading; or (iii) arise from any theory of
liability whatsoever relating to or arising from or based upon the Registration
Statement (or any amendment or supplement thereto), preliminary or final
Prospectus (or any amendment or supplement thereto), the Application (or any
amendment or supplement thereto), any Blue Sky Application or Sales Information
or other documentation distributed in connection with the Offering; provided,
however, that no indemnification is required under this paragraph (a) to the
extent such losses, claims, damages, liabilities or actions arise out of or are
based upon any untrue material statement or alleged untrue material statement
in, or material omission or alleged material omission from, the Registration
Statement (or any amendment or supplement thereto), preliminary or final
Prospectus (or any amendment or supplement thereto), the Application, any Blue
Sky Application or Sales Information made in reliance upon and in conformity
with information furnished in writing to the Company or the Bank by the Agent or
its counsel regarding the Agent, provided, that it is agreed and understood that
the only information furnished in writing to the Company or the Bank by the
Agent regarding the Agent is set forth in the Prospectus under the caption
"Sales Agent"; and, PROVIDED FURTHER, that neither the Company nor the Bank
should be liable under this Section 8 in respect of any losses, claims, damages,
liabilities, actions or expenses to the extent same is determined, in a final
judgment by a court of competent jurisdiction, to have resulted from the gross
negligence or bad faith of Webb.
(b) The Agent agrees to indemnify and hold harmless the Company and the
Bank, their directors and officers and each person, if any, who controls the
Company or the Bank within the meaning of Section 15 of the 1933 Act or Section
20(a) of the 1934 Act against any and all loss, liability, claim, damage or
expense whatsoever (including but not limited to settlement expenses), joint or
several, which they, or any of them, may suffer or to which they, or any of them
may become subject under all applicable federal and state laws or otherwise, and
to promptly reimburse the Company, the Bank, and any such persons upon written
demand for any expenses (including reasonable fees and disbursements of counsel)
incurred by them, or any of them, in connection with investigating, preparing or
defending any actions, proceedings or claims (whether commenced or threatened)
to the extent such losses, claims, damages, liabilities or actions: (i) arise
out of or are based upon any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement (or any amendment or
supplement thereto), the Application (or any amendment or supplement thereto),
the preliminary or final Prospectus (or any amendment or supplement thereto),
any Blue Sky Application or Sales Information, (ii) are based upon the omission
or alleged omission to state in any of the foregoing documents a material fact
required to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading, or
(iii) arise from any theory of liability whatsoever relating to or arising from
or based upon the Registration Statement (or any amendment or supplement
thereto), preliminary or final Prospectus (or any amendment or supplement
thereto), the Application (or any amendment or supplement thereto), or any Blue
Sky Application or Sales Information or other documentation distributed in
connection with the Offering; provided, however, that the Agent's
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<PAGE> 25
obligations under this Section 8(b) shall exist only if and only to the extent
that such untrue statement or alleged untrue statement was made in, or such
material fact or alleged material fact was omitted from, the Registration
Statement (or any amendment or supplement thereto), the preliminary or final
Prospectus (or any amendment or supplement thereto), the Application (or any
amendment or supplement thereto), any Blue Sky Application or Sales Information
in reliance upon and in conformity with information furnished in writing to the
Company or the Bank by the Agent or its counsel regarding the Agent, provided,
that it is agreed and understood that the only information furnished in writing
to the Company or the Bank by the Agent regarding the Agent is set forth in the
Prospectus under the caption "Sales Agent," provided further that the Company
and the Bank also agree that neither Webb, nor any of its affiliates, nor
officer, director, employee or agent of Webb or any of its affiliates, nor any
person controlling Webb or any of its affiliates, shall have any liability to
the Company or the Bank for or in connection with such engagement except for any
such liability for losses, claims, damages, liabilities or expenses incurred by
the Company that is finally judicially determined to have resulted from gross
negligence or bad faith of Webb. Notwithstanding the foregoing, Webb shall not
be required to indemnify or reimburse the Company for expenses hereunder in an
amount, in the aggregate, in excess of any fees actually paid pursuant to
Section 2 above. The foregoing shall be in addition to any rights that Webb or
any Agent thereof may have at common law or otherwise.
(c) Each indemnified party shall give prompt written notice to each
indemnifying party of any action, proceeding, claim (whether commenced or
threatened), or suit instituted against it in respect of which indemnity may be
sought hereunder, but failure to so notify an indemnifying party shall not
relieve it from any liability which it may have on account of this Section 8 or
otherwise. An indemnifying party may participate at its own expense in the
defense of such action. In addition, if it so elects within a reasonable time
after receipt of such notice, an indemnifying party, jointly with any other
indemnifying parties receiving such notice, may assume defense of such action
with counsel chosen by it and approved by the indemnified parties that are
defendants in such action, unless such indemnified parties reasonably object to
such assumption on the ground that there may be legal defenses available to them
that are different from or in addition to those available to such indemnifying
party. If an indemnifying party assumes the defense of such action, the
indemnifying parties shall not be liable for any fees and expenses of counsel
for the indemnified parties incurred thereafter in connection with such action,
proceeding or claim, other than reasonable costs of investigation. In no event
shall the indemnifying parties be liable for the fees and expenses of more than
one separate firm of attorneys (and any special counsel that said firm may
retain) for all indemnified parties in connection with any one action,
proceeding or claim or separate but similar or related actions, proceedings or
claims in the same jurisdiction arising out of the same general allegations or
circumstances.
(d) The agreements contained in this Section 8 and in Section 9 hereof
and the representations and warranties of the Company and the Bank set forth in
this Agreement shall remain operative and in full force and effect regardless
of: (i) any investigation made by or on behalf of the Agent or its officers,
directors or controlling persons, agent or employees or by or on behalf of the
Company or the Bank or any officers, directors or controlling persons, agent or
employees of the
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<PAGE> 26
Company or the Bank; (ii) delivery of and payment hereunder for the Shares; or
(iii) any termination of this Agreement.
SECTION 9. CONTRIBUTION. In order to provide for just and equitable
contribution in circumstances in which the indemnification provided for in
Section 8 is due in accordance with its terms but is for any reason held by a
court to be unavailable from the Company, the Bank or the Agent, the Company,
the Bank and the Agent shall contribute to the aggregate losses, claims, damages
and liabilities (including any investigation, legal and other expenses incurred
in connection with, and any amount paid in settlement of, any action, suit or
proceeding, but after deducting any contribution received by the Company, the
Bank or the Agent from persons other than the other parties thereto, who may
also be liable for contribution) in such proportion so that the Agent is
responsible for that portion represented by the percentage that the fees paid to
the Agent pursuant to Section 2 of this Agreement (not including expenses) bears
to the gross proceeds received by the Company from the sale of the Shares in the
Offering, and the Company and the Bank shall be responsible for the balance. If,
however, the allocation provided above is not permitted by applicable law, then
each indemnifying party shall contribute to such amount paid or payable by such
indemnified party in such proportion as is appropriate to reflect not only such
relative fault of the Company and the Bank on the one hand and the Agent on the
other in connection with the statements or omissions which resulted in such
losses, claims, damages or liabilities (or actions, proceedings or claims in
respect thereto), but also the relative benefits received by the Company and the
Bank on the one hand and the Agent on the other from the Offering (before
deducting expenses). The relative fault shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a material
fact or the omission or alleged omission to state a material fact relates to
information supplied by the Company and/or the Bank on the one hand or the Agent
on the other and the parties' relative intent, good faith, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Company, the Bank and the Agent agree that it would not be just and
equitable if contribution pursuant to this Section 9 were determined by pro-rata
allocation or by any other method of allocation which does not take into account
the equitable considerations referred to above in this Section 9. The amount
paid or payable by an indemnified party as a result of the losses, claims,
damages or liabilities (or actions, proceedings or claims in respect thereof)
referred to above in this Section 9 shall be deemed to include any legal or
other expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action, proceeding or claim. It is expressly
agreed that the Agent shall not be liable for any loss, liability, claim, damage
or expense or be required to contribute any amount pursuant to Section 8(b) or
this Section 9 which in the aggregate exceeds the amount paid (excluding
reimbursable expenses) to the Agent under this Agreement. It is understood that
the above stated limitation on the Agent's liability is essential to the Agent
and that the Agent would not have entered into this Agreement if such limitation
had not been agreed to by the parties to this Agreement. No person found guilty
of any fraudulent misrepresentation (within the meaning of Section 11(f) of the
1933 Act) shall be entitled to contribution from any person who was not found
guilty of such fraudulent misrepresentation. The obligations of the Company, the
Bank and the Agent under this Section 9 and under Section 8 shall be in addition
to any liability which the Company, the Bank and the Agent may otherwise have.
For purposes of this Section 9, each of the Agent's, the Company's
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<PAGE> 27
or the Bank's officers and directors and agents and each person, if any, who
controls the Agent or the Company or the Bank within the meaning of the 1933 Act
and the 1934 Act shall have the same rights to contribution as the Agent, the
Company or the Bank. Any party entitled to contribution, promptly after receipt
of notice of commencement of any action, suit, claim or proceeding against such
party in respect of which a claim for contribution may be made against another
party under this Section 9, will notify such party from whom contribution may be
sought, but the omission to so notify such party shall not relieve the party
from whom contribution may be sought from any other obligation it may have
hereunder or otherwise than under this Section 9.
SECTION 10. SURVIVAL OF AGREEMENTS, REPRESENTATIONS AND INDEMNITIES.
The respective indemnities of the Company, the Bank and the Agent and the
representations and warranties and other statements of the Company, the Bank and
the Agent set forth in or made pursuant to this Agreement shall remain in full
force and effect, regardless of any termination or cancellation of this
Agreement or any investigation made by or on behalf of the Agent, the Company,
the Bank or any controlling person referred to in Section 8 hereof, and shall
survive the issuance of the Shares, and any successor or assign of the Agent,
the Company, the Bank, and any such controlling person shall be entitled to the
benefit of the respective agreements, indemnities, warranties and
representations.
SECTION 11. TERMINATION. The Agent may terminate this Agreement by
giving the notice indicated below in this Section 11 at any time after this
Agreement becomes effective as follows:
(a) In the event the Company fails to sell the required minimum number
of the Shares within the period specified by the Prospectus or as required by
applicable law, this Agreement shall terminate upon refund by the Company to
each person who has subscribed for or ordered any of the Shares the full amount
which it may have received from such person as provided in the Prospectus, and
no party to this Agreement shall have any obligation to the other hereunder,
except as set forth in Sections 2, 6, 8 and 9 hereof.
(b) If any of the conditions specified in Section 7A shall not have
been fulfilled when and as required by this Agreement, unless waived in writing,
or by the Closing Date, this Agreement and all of the Agent's obligations
hereunder may be canceled by the Agent by notifying the Company and the Bank of
such cancellation in writing or by telegram at any time at or prior to the
Closing Date, and any such cancellation shall be without liability of any party
to any other party except as otherwise provided in Sections 2, 6, 8 and 9
hereof.
(c) If the Agent elects to terminate this Agreement as provided in this
Section, the Company and the Bank shall be notified promptly by telephone or
telegram, confirmed by letter.
(d) The Company and the Bank may terminate this Agreement in the event
the Agent is in material breach of the representations and warranties or
covenants contained in Section 5 and such breach has not been cured in a timely
fashion after the Company and the Bank have provided the Agent with notice of
such breach. The Agent may terminate this Agreement in the event the Holding
Company or the Bank, or either of them, is in material breach of the
representations and warranties
-27-
<PAGE> 28
and covenants in Sections 4 and 5.1 and such breach has not been cured in a
timely fashion after the Agent has provided the Holding Company or the Bank with
notice of such breach.
(e) This Agreement may also be terminated by mutual written consent of
the parties hereto.
SECTION 12. NOTICES. All communications hereunder, except as herein
otherwise specifically provided, shall be mailed in writing and if sent to the
Agent shall be mailed, delivered or telegraphed and confirmed to Charles Webb &
Company, 211 Bradenton Drive, Dublin, Ohio 43017-5034, Attention: Harold T.
Hanley, III (with a copy to Silver, Freedman & Taff, L.L.P., Attention: Jeffrey
M. Werthan, P.C.) and, if sent to the Company and the Bank, shall be mailed,
delivered or telegraphed and confirmed to the Company and the Bank at 305 West
Liberty Street, Wooster, Ohio 44691, Attention: L. Dwight Douce, President and
Chief Executive Officer (with a copy to Squire, Sanders & Dempsey, L.L.P.,
Attention: M. Patricia Oliver, Esq.).
SECTION 13. PARTIES. The Company and the Bank shall be entitled to act
and rely on any request, notice, consent, waiver or agreement purportedly given
on behalf of the Agent when the same shall have been given by the undersigned.
The Agent shall be entitled to act and rely on any request, notice, consent,
waiver or agreement purportedly given on behalf of the Company or the Bank, when
the same shall have been given by the undersigned or any other officer of the
Company or the Bank. This Agreement shall inure solely to the benefit of, and
shall be binding upon, the Agent, the Company, the Bank, and their respective
successors and assigns, and no other person shall have or be construed to have
any legal or equitable right, remedy or claim under or in respect of or by
virtue of this Agreement or any provision herein contained. It is understood and
agreed that this Agreement is the exclusive agreement among the parties hereto,
and supersedes any prior agreement among the parties and may not be varied
except in writing signed by all the parties.
SECTION 14. CLOSING. The closing for the sale of the Shares shall take
place on the Closing Date at such location as mutually agreed upon by the Agent
and the Company and the Bank. At the closing, the Company and the Bank shall
deliver to the Agent in next day funds the commissions, fees and expenses due
and owing to the Agent as set forth in Sections 2 and 6 hereof and the opinions
and certificates required hereby and other documents deemed reasonably necessary
by the Agent shall be executed and delivered to effect the sale of the Shares as
contemplated hereby and pursuant to the terms of the Prospectus.
SECTION 15. PARTIAL INVALIDITY. In the event that any term, provision
or covenant herein or the application thereof to any circumstance or situation
shall be invalid or unenforceable, in whole or in part, the remainder hereof and
the application of said term, provision or covenant to any other circumstances
or situation shall not be affected thereby, and each term, provision or covenant
herein shall be valid and enforceable to the full extent permitted by law.
SECTION 16. CONSTRUCTION. This Agreement shall be construed in
accordance with the laws of the State of Ohio.
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<PAGE> 29
SECTION 17. COUNTERPARTS. This Agreement may be executed in separate
counterparts, each of which so executed and delivered shall be an original, but
all of which together shall constitute but one and the same instrument.
If the foregoing correctly sets forth the arrangement among the
Company, the Bank and the Agent, please indicate acceptance thereof in the space
provided below for that purpose, whereupon this letter and the Agent's
acceptance shall constitute a binding agreement.
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<PAGE> 30
SECTION 18. ENTIRE AGREEMENT. This Agreement, including schedules and
exhibits hereto, which are integral parts hereof and incorporated as though set
forth in full, constitutes the entire agreement between the parties pertaining
to the subject matter hereof superseding any and all prior or contemporaneous
oral or prior written agreements, proposals, letters of intent and
understandings, and cannot be modified, changed, waived or terminated except by
a writing which expressly states that it is an amendment, modification or
waiver, refers to this Agreement and is signed by the party to be charged. No
course of conduct or dealing shall be construed to modify, amend or otherwise
affect any of the provisions hereof.
Very truly yours,
OHIO LEGACY CORP OHIO LEGACY BANK (IN ORGANIZATION)
By Its Authorized By Its Authorized
Representative: Representative:
- ------------------------------- ------------------------------
L. Dwight Douce L. Dwight Douce
President and Chief Executive Officer President and Chief Executive Officer
Accepted as of the date first above written
CHARLES WEBB & COMPANY, A DIVISION OF
KEEFE, BRUYETTE & WOODS, INC.
By Its Authorized
Representative:
- -------------------------------
Harold T. Hanley III
Senior Vice President
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<PAGE> 31
EXHIBIT A
LETTER AGREEMENT
<PAGE> 32
[CHARLES WEBB & COMPANY LETTERHEAD]
September 7, 1999
Mr. L. Dwight Douce
Ohio Legacy Corp
President & CEO
225 N. Market Street
Wooster, OH 44691
Dear Mr. Douce:
We understand that it is the intention of Ohio Legacy Corp (the "Company"), to
conduct an offering to sell Common Stock in an amount anticipated to be a
minimum of $9,000,000 and a maximum of $12,000,000, in connection with the
formation of a de novo bank. Of this amount, we understand that insiders intend
to purchase approximately $1,500,000 and the remaining amount will be sold in a
direct community offering (the "Direct Community Offering"). Shares may also be
sold in the Community Offering by a syndicate of broker dealers (the "Syndicated
Offering") and if necessary to institutional investors in an Institutional
Offering (the "Institutional Offering" and together with the Direct Community
Offering, and the Syndicated Offering, the "Offering"). This proposal relates
solely to the Direct Community Offering.
This letter hereby confirms the interest of Charles Webb & Company ("Webb"), A
Division of Keefe, Bruyette and Woods, Inc., and its parent company Keefe,
Bruyette and Woods, Inc. ("KBW") (for purposes of this letter, Webb and KBW are
collectively referred to herein as the "Underwriter") in acting as the Company's
exclusive underwriter/stock marketing agent in connection with the Direct
Community Offering. For purposes of this letter, it is understood that employees
of Webb/KBW will be actively involved in the Offering and that references to the
Underwriter shall include employees of Webb and KBW. This letter sets forth
selected terms of our engagement.
1. OFFERING SERVICES. The Underwriter will act as lead manager in the Direct
Community Offering to be conducted on a best efforts basis. The Direct Community
Offering will be conducted through a direct solicitation of persons located in
North Central Ohio. If necessitated by market and other conditions, the
Underwriter may form a syndicate of selected broker-dealers to assist in the
offering of the Common Stock. The decision to utilize selected broker-dealers
will be made by the Company upon consultation with the Underwriter.
<PAGE> 33
Mr. L. Dwight Douce
August 20, 1999
Page 2 of 7
As the Company's underwriter/stock marketing agent, the Underwriter will provide
the Company with a comprehensive program of services designed to promote an
orderly, efficient and cost-effective distribution. The Underwriter will provide
financial and logistical advice to the Company concerning the Offering and
related issues.
The Underwriter further agrees to provide at no charge to the Company financial
advisory assistance for a period of one year following completion of the
Offering, including general advice on the market for bank stocks and the stock
of the Company, shareholder enhancement methods and other related matters.
Following this initial one-year term, if both parties wish to continue the
relationship, a fee will be negotiated and an agreement entered into at that
time.
2. PREPARATION OF OFFERING DOCUMENTS. The Company and its counsel will draft the
Registration Statement and other materials to be used in connection with the
Offering. The Underwriter will attend meetings to review these documents and
assist your counsel with their preparation. The Registration Statement will be
in a form reasonably satisfactory to each of us and our counsel.
3. DUE DILIGENCE REVIEW. Prior to the filing of the Registration Statement or
any other documents naming the Underwriter as the Company's underwriter/stock
marketing agent, the Underwriter and its representatives will undertake
substantial investigations to learn about the Company's proposed business and
operations ("due diligence review") in order to confirm information provided to
us and to evaluate information to be contained in the Company's Registration
Statement. The Company agrees that it will make available to the Underwriter all
relevant information, whether or not publicly available, which the Underwriter
reasonably requests, and will permit the Underwriter to discuss personnel and
the operations and prospects of the Company with management. The Underwriter
will treat all material non-public information as confidential. The Company
acknowledges that the Underwriter will rely upon the accuracy and completeness
of all information received from the Company, its officers, directors,
employees, agents and representatives, accountants and counsel.
The Underwriter shall furnish, as soon as practicable, to the Company such
information regarding the Underwriter as the Company may reasonably request in
writing and as shall be reasonably required in connection with any registration,
qualification or compliance with state and federal securities laws.
4. REGULATORY FILINGS. Upon satisfactory completion of the Underwriter's due
diligence review, the Company will cause a Registration Statement with respect
to the Offering to be filed with the Securities and Exchange Commission ("SEC")
and such state securities commissioners as may be determined by the Company. No
filings naming the Underwriter will be made without the prior consent of the
Underwriter, which consent shall not be unreasonably withheld.
5. AGENCY OR UNDERWRITING AGREEMENT. The specific terms of the Offering and any
broker-assisted sales services contemplated in this letter shall be set forth in
an Agency or Underwriting
<PAGE> 34
Mr. L. Dwight Douce
August 20, 1999
Page 3 of 7
Agreement between the Underwriter and the Company to be executed prior to
commencement of the Offering. Sales of Common Stock in the Offering will be
contingent upon, among other things, the absence of material adverse
developments and the completion of the Offering. The Agency or Underwriting
Agreement and any Selected Dealer Agreement shall be prepared by counsel for the
Underwriter. The Company, its officers and directors will agree not to offer,
sell, contract to sell or grant any option to purchase or otherwise dispose of
any Common Stock for at least 180 days after the public offering without first
obtaining the Underwriter's written consent, other than pursuant to the Omnibus
Stock Option, Ownership and Long Term Incentive Plan.
6. REPRESENTATIONS, WARRANTIES AND COVENANTS. The Underwriting Agreement will
provide for customary representations, warranties and covenants by the Company,
including, without limitation, with respect to indemnification and contribution
by the Company. This will be consistent with the indemnification set forth in
paragraph 9 herein.
7. FEES. For the services hereunder, the Company shall pay the following fees to
the Underwriter at closing unless stated otherwise:
(a) For advising the Company in connection with the Offering an
initial advisory fee of $10,000 payable upon execution of this
letter agreement. Such fee shall be applied against the fees paid
pursuant to paragraph 7(b).
(b) (i) 0% of the aggregate Actual Purchase Price of the stock sold to
officers, directors and employees of the Bank;
(ii) 4.0% of the aggregate Actual Purchase Price of the stock sold
to investors who are included on the lists provided by the
directors in conjunction with the Direct Community Offering; and
(iii) 7.0% of the aggregate Actual Purchase Price of the stock
sold to investors, who were not included on the lists provided by
the directors, in conjunction with the Direct Community Offering;
and
(iv). In the event that a syndicate of selected broker-dealers are
used to assist in the Community Offering, the fee for such shares
shall be 7.0% of the aggregate Actual Purchase Price of the
securities sold through such syndicate. The Underwriter will pass
onto such selected broker-dealers who assist in the Community
Offering an amount competitive with gross underwriting discounts
charged at such time for comparable amounts of stock sold at a
comparable price per share in a similar market environment. Fees
with respect to purchases effected through selected broker-dealers
other than the Underwriter shall be transmitted by the Underwriter
to such selected broker-dealer. The decision to utilize selected
broker-dealers will be made by the
<PAGE> 35
Mr. L. Dwight Douce
August 20, 1999
Page 4 of 7
Company upon consultation with the Underwriter with due regards to
the Company's stock distribution strategy.
(v). In the event that the Company utilizes a syndicate of selected
broker-dealers to sell Shares to institutional investors in the
Institutional Offering, which may include KBW, the fee for such
shares shall be 7.0% of the aggregate Actual Purchase Price of the
securities sold through such syndicate. The Underwriter will pass
onto such selected broker-dealers who assist in the Institutional
Offering an amount competitive with gross underwriting discounts
charged at such time for comparable amounts of stock sold at a
comparable price per share in a similar market environment. Fees
with respect to purchases effected through selected institutional
broker-dealers other than the Underwriter shall be transmitted by
the Underwriter to such selected broker-dealer. The decision to
utilize selected broker-dealers to offer and sell shares to
institutional investors will be made by the Company upon
consultation with the Underwriter with the Underwriter with due
regards to the Company's stock distribution strategy.
8. EXPENSES. The Company will bear those expenses of the proposed offering
customarily borne by issuers, including, without limitation, SEC, "Blue Sky" and
NASD filing and registration fees; the fees of the Company's accountants,
attorneys, transfer agent and registrar, printing, mailing and marketing
expenses associated with the Offering; the expenses of any "road shows" and
community meetings conducted in connection with the Offering; the fees and
expenses relating to the offering and sale of shares to the officers, directors
and employees of the Bank and to the private investors; the fees set forth in
Section 7; and fees for "Blue Sky" legal work. The Company shall reimburse the
underwriter for its actual out-of-pocket expenses up to a maximum of $7,000. The
Underwriter shall pay the fees and expenses of its legal counsel.
9. INDEMNIFICATION.
(a) In connection with the Underwriter's engagement (which engagement
may have commenced prior to the date hereof), the Company agrees to indemnify
and hold harmless the Underwriter and its affiliates and the respective
directors, officers, employees, agents and partners of the Underwriter and its
affiliates, and each other person controlling the Underwriter or any of its
affiliates within the meaning of either Section 15 of the Securities Act of 1933
or Section 20 of the Securities Exchange Act of 1934 (collectively, "Underwriter
Indemnified Parties") to the full extent lawful, from and against all losses,
claims, damages or liabilities resulting from any legal action, investigation or
other proceeding to which any Underwriter Indemnified Party may become subject
as a result of or arising out of this engagement and will reimburse any
Underwriter Indemnified Party for all reasonable expenses (including reasonable
counsel fees) incurred by such Underwriter Indemnified Party in connection with
investigating, defending or settling any such matter or enforcing any rights
hereunder. Notwithstanding the foregoing, the Company shall not be liable to an
Underwriter Indemnified Party in respect of any
<PAGE> 36
Mr. L. Dwight Douce
August 20, 1999
Page 5 of 7
loss, claim, damage, liability or expense to the extent the same is determined,
in a final judgment by a court of competent jurisdiction, to have resulted from
the gross negligence or bad faith of such Underwriter Indemnified Party. The
Company also agrees that neither the Underwriter, nor any of its affiliates, nor
officer, director, employee or agent of the Underwriter or any of its
affiliates, nor any person controlling the Underwriter or any of its affiliates,
shall have any liability to the Company for or in connection with such
engagement except for any such liability for losses, claims, damages,
liabilities or expenses incurred by the Company that is finally judicially
determined to have resulted from the Underwriter's gross negligence or bad
faith. Notwithstanding the foregoing, the Underwriter shall not be required to
indemnify or reimburse the Company for expenses hereunder in an amount, in the
aggregate, in excess of any fees paid pursuant to Section 7 above. The foregoing
shall be in addition to any rights that the Underwriter or any Underwriter
Indemnified Party may have at common law or otherwise.
(b) Upon receipt of notice of any claim or the commencement of any such
action with respect to which indemnity is to be sought, an Indemnified Party
shall notify the indemnifying party of such claim or the commencement of such
action. Such Indemnified Party shall have the right to employ counsel reasonably
acceptable to the Company to defend such claim or action.
(c) If for any reason the foregoing indemnification is unavailable to
any Indemnified Party or insufficient to hold it harmless as contemplated herein
then the Company shall contribute to the amount payable by the Indemnified Party
as a result of such loss, claim, damage, liability or expense in such proportion
as is appropriate to reflect not only the relative benefits received by the
Company and its affiliates, on the one hand, and the Underwriter and the
Indemnified Party, on the other hand, but also the relative fault of the Company
and its affiliates and the Underwriter or any Indemnified Party, as the case may
be, as well as any other relevant equitable considerations, provided, however,
that in no event shall the Underwriter be required to contribute any amount in
excess of any fees paid to it pursuant to Section 7 above.
(d) The reimbursement, indemnity and contribution by the Company or
Underwriter hereunder shall be in addition to any liability which any party may
otherwise have, and shall be binding upon and accrue to the benefit of any
successors, assigns, heirs and personal representatives of the Company, and any
Indemnified Party. The foregoing provisions relating to reimbursement,
indemnification and contribution shall survive any termination of the
Underwriter's engagement under this letter.
10. CONDITIONS. The Underwriter's willingness and obligation to proceed
hereunder shall be subject to, among other things, satisfaction of the following
conditions in the Underwriter's opinion, which opinion shall have been formed in
good faith by the Underwriter after reasonable determination and consideration
of all relevant factors: (a) full and satisfactory disclosure of all relevant
material, financial and other information in the disclosure documents; (b) no
material adverse change in the condition or operations of the Company subsequent
to the Underwriter due diligence review; and (c) no market conditions at the
time of the Offering which in the
<PAGE> 37
Mr. L. Dwight Douce
August 20, 1999
Page 6 of 7
Underwriter's opinion make the sale of the Common Stock by the Company
inadvisable and (d) the agreement between the Company and the Underwriter as to
the offering terms.
11. BENEFIT. No party to this letter agreement may assign its duties and
obligations hereunder without the prior written consent of the other parties.
This Agreement shall inure to the benefit of the parties hereto and their
respective successors and assigns and to the parties indemnified hereunder and
their successors and assigns, and the obligations and liabilities assumed
hereunder by the parties hereto shall be binding upon their respective
successors and assigns.
12. TERMINATION. This Agreement may be terminated in writing by either party
hereto without any obligation other than for the payment of any fees
specifically set forth herein. If terminated, all fees paid previously will be
deemed to have been earned when paid.
This letter reflects the Underwriter's present intention of proceeding to work
with the Company on its proposed Offering. It does not constitute an agreement
to underwrite securities or to serve as sales or marketing agent to the Company
or the Company, or to perform any other service, nor is it an agreement to enter
into any such agreement or a representation that market conditions will support
an offering of the Company's securities. It also does not constitute a
commitment on the part of the Company or the Underwriter except as to the
payment of certain fees as set forth in Section 7, the assumption of expenses as
set forth in Section 8 and indemnification as set forth in Section 9, all of
which shall constitute the binding obligations of the parties hereto and which
shall survive the termination of this Agreement or the completion of the
services furnished hereunder and shall remain operative and in full force and
effect. You further acknowledge that any report or analysis rendered by the
Underwriter pursuant to this engagement is rendered for use solely by the
management of the Company and its agents in connection with the Offering.
Accordingly, you agree that you will not provide any such information to any
other person without our prior written consent. The Underwriter acknowledges
that in offering the Company's securities, no person will be authorized to give
any information or to make any representation not contained in the Prospectus
and related offering materials filed as part of the Registration Statement to be
declared effective in connection with the Offering. Accordingly, the Underwriter
agrees that in connection with the Offerings it will not give any unauthorized
information or make any unauthorized representation. We will be pleased to
elaborate on any of the matters discussed in this letter at your convenience.
<PAGE> 38
Mr. L. Dwight Douce
August 20, 1999
Page 7 of 7
13. In case of a dispute under this agreement, it shall be governed by the law
of the State of Ohio. Any claims or disputes, arising out of this agreement,
shall be heard by a court of competent jurisdiction within the State of Ohio.
If the foregoing correctly sets forth our mutual understanding, please so
indicate by signing and returning the original copy of this letter to the
undersigned with a check in the amount of $10,000 payable to Charles Webb &
Company.
Sincerely,
CHARLES WEBB & COMPANY
A Division of Keefe, Bruyette and Woods, Inc.
By: /s/ Harold T. Hanley III Date: 9/7/99
-------------------------- ---------------------
Harold T. Hanley III
Senior Vice President
Agreed to:
OHIO LEGACY CORP
By: /s/ L. Dwight Douce Date: 9/22/99
-------------------------- ---------------------
L. Dwight Douce
President and Chief Executive Officer
<PAGE> 1
Exhibit 4.2
-----------------------------------
SEE RESTRICTIONS ON REVERSE SIDE
-----------------------------------
OHIO LEGACY
NUMBER SHARES
AS CORPORATION
incorporated under the laws of the State of Ohio
----------------
CUSIP:
This Certifies that ----------------
is the owner of
SEE REVERSE FOR
CERTAIN DEFINITIONS
FULLY PAID AND NON-ASSESSABLE COMMON SHARES WITHOUT PAR VALUE, OF
OHIO LEGACY CORPORATION
(hereinafter called the "Corporation"), transferable on the books of
the Corporation by the holder hereof, in person or by duly authorized
attorney, upon the surrender of this certificate properly endorsed. By
the acceptance of this certificate and the shares represented hereby,
the holder hereof assents to and agrees to be bound by all of the
provisions of the Articles of Incorporation and Regulations of the
Corporation, copies of which are on file with the Transfer Agent.
This certificate is not valid until countersigned by the
Transfer Agent and registered by the Registrar.
WITNESS, the facsimile seal of the Corporation and the
facsimile signatures of its duly authorized officers.
Dated,
SECRETARY PRESIDENT
COUNTERSIGNED AND REGISTERED- TRANSFER AGENT
AND REGISTRAR
AUTHORIZED SIGNATURE
<PAGE> 2
The following abbreviations, when used in the inscription on the
face of this certificate, shall be construed as though they were
written out in full according to applicable laws or regulations:
TEN COM - as tenants in common UNIF GIFT MIN ACT______Custodian_______
(Cust) (Minor)
TEN ENT-as tenants by the entireties under Uniform Gifts to Minors
JTTEN -as joint tenants with right of Act______________________
survivorship and not as tenants in (State)
common
Additional abbreviations may also be used though not in the above list.
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.
For Value Received, HEREBY SELL, ASSIGN AND TRANSFER UNTO
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
_______________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
__________________________________________________________________ OF THE SHARES
REPRESENTED BY THE WITHIN CERTIFICATE AND DO HEREBY IRREVOCABLY CONSTITUTE
AND APPOINT_____________________________________________________________ATTORNEY
TO TRANSFER THE SAID SHARES ON THE BOOKS OF THE WITHIN-NAMED CORPORATION
WITH FULL POWER OF SUBSTITUTION IN THE PREMISES.
DATED_______________________________
______________________________________
______________________________________
NOTICE: THE SIGNATURE TO THIS
ASSIGNMENT MUST CORRESPOND WITH THE
NAME AS WRITTEN UPON THE FACE OF THE
CERTIFICATE IN EVERY PARTICULAR,
WITHOUT ALTERATION OR ENLARGEMENT, OR
ANY CHANGE WHATEVER.
SIGNATURE(S) GUARANTEED:
By
_______________________________________________________
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE
GUARANTOR INSTITUTION (BANKS, STOCKBROKERS, SAVINGS AND
LOAN ASSOCIATIONS AND CREDIT UNIONS WITH MEMBERSHIP IN
AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM),
PURSUANT TO S.E.C. RULE 17 Ad-15.
- --------------------------------------------------------------------------------
THIS SPACE MUST NOT BE COVERED IN ANY WAY
- --------------------------------------------------------------------------------
<PAGE> 1
EXHIBIT 10.1
OHIO LEGACY CORP
OMNIBUS STOCK OPTION, STOCK OWNERSHIP
AND LONG TERM INCENTIVE PLAN
THIS IS THE OMNIBUS STOCK OPTION, STOCK OWNERSHIP AND LONG TERM
INCENTIVE PLAN ("Plan") of Ohio Legacy Corp (the "Corporation" or "Company"), an
Ohio corporation, under which (1) Incentive Stock Options and Non-Qualified
Options to acquire shares of the Stock and/or Restricted Stock may be granted
from time to time to Eligible Persons of the Corporation and of any of its
subsidiaries (collectively, the "Subsidiaries", and, individually, a
Subsidiary), and (2) Non-Qualified Options to acquire shares of the Stock may be
granted to Non-Employee Directors of the Corporation or any of its Subsidiaries,
subject to the following provisions:
ARTICLE I
DEFINITIONS
The following terms shall have the meanings set forth below. Additional
terms defined in this Plan shall have the meanings ascribed to them when first
used herein.
BOARD. The Board of Directors of Ohio Legacy Corp.
CHANGE IN CONTROL TRANSACTION. The dissolution or liquidation of the
Corporation; a reorganization, merger or consolidation of the Corporation as a
result of which the outstanding securities of the class then subject to Rights
hereunder are changed into or exchanged for cash or property or securities
(other than securities issued by the Corporation); or a sale of all or
substantially all of the assets of the Corporation to, or the acquisition of
stock representing more than ten percent (10%) of the voting power of he capital
stock of the Corporation then outstanding by, another corporation, bank, other
entity or person.
CODE. The Internal Revenue Code of 1986, as amended, together with the
rules and regulations promulgated thereunder.
COMMITTEE. The Compensation Committee of the Board.
COMMON STOCK. The common stock, without par value, of the Corporation.
DEATH. The date of death (as established by the relevant death
certificate) of an Eligible Person or a Non-Employee Director who has received
Rights.
DIRECTOR OPTION. The award of a Nonqualified Option to a Non-Employee
Director pursuant to Article V.
<PAGE> 2
DIRECTOR OPTION AGREEMENT. The agreement entered into with respect to a
Director Option pursuant to Article V.
DISABILITY. The date on which an Eligible Person or Non-Employee
Director who has received Rights becomes permanently and totally disabled within
the meaning of Section 22 (e) (3) of the Code, which shall be determined by the
Committee on the basis of such medical or other evidence as it may reasonably
require or deem appropriate.
EFFECTIVE DATE. The date as of which this Plan is effective, which
shall be the date it is approved by the Company's shareholders.
ELIGIBLE PERSONS. Any (i) Employee regularly employed by the Company,
or a Subsidiary, or (ii) Non-Employee Director of the Company or a Subsidiary,
including a Non-Employee Director serving on the Committee, who meets the
following conditions:
(1) If no Registration shall have occurred with respect to the Rights
or Stock underlying the Rights granted, such individual must have such
knowledge and experience in financial and business matters that he or
she is capable of evaluating the merits and risks of the investment
involved in the receipt and/or exercise of a Right.
(2) Such individual, being otherwise an Eligible Person under the
foregoing items, shall have been selected by the Committee as a person
to whom a Right or Rights shall be granted under the Plan.
EMPLOYEE. An individual with whom the Corporation or a Subsidiary has
the legal and bona fide relationship of employer and employee. In determining
whether such relationship exists, the regulations of the United States Treasury
Department relating to the determination of such relationship for the purpose of
collection of income tax at the source on wages shall be applied.
FAIR MARKET VALUE. With respect to the Corporation's Common Stock, the
market price per share of such Common Stock determined by the Committee,
consistent with the requirements of Section 422 of the Code and to the extent
consistent therewith, as follows, as of the date specified in the context within
which such term is used:
(i) if the Common Stock was traded on a stock exchange on the date
in question, then the Fair Market Value will be equal to the
closing price reported by the applicable
composite-transactions report for such date;
(ii) if the Common Stock was traded over-the-counter on the date in
question, and was classified as a national market issue, then
the Fair Market Value will be equal to the last transaction
price quoted by the National Association of Securities Dealers
Automated Quotation System ("NASDAQ"), National Market System
("NMS");
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<PAGE> 3
(iii) if the Common Stock was traded over-the-counter on the date in
question but was not classified as a national market issue,
then the Fair Market Value will be equal to the average of the
last reported representative bid and asked prices quoted by
the NASDAQ for such date; and
(iv) if none of the foregoing provisions is applicable, then the
Fair Market Value will be determined by the Committee in good
faith on such basis as it deems appropriate, subject to the
approval of the Board. In such case, the Committee shall
maintain a written record of its method of determining Fair
Market Value.
ISO. An "incentive stock option" as defined in Section 422 of the Code.
JUST CAUSE TERMINATION. A termination by the Corporation or a
Subsidiary of an Eligible Person's employment by the Corporation or the
Subsidiary in connection with the good faith determination of the Board or the
Board of Directors of the Subsidiary, as applicable, that the Eligible Person is
incompetent or otherwise has engaged in any acts involving dishonesty or moral
turpitude or in any acts that materially and adversely affect the business,
affairs or reputation of the Corporation or the Subsidiary.
NON-EMPLOYEE DIRECTOR. A director of the Company who is not also an
Employee.
NON-QUALIFIED OPTION. Any Option granted under Article III whether
designated by the Committee as a Non-Qualified Option or otherwise, (other than
an Option designated by the Committee as an ISO) or any Option designated as an
ISO but which, for any reason, fails to qualify as an ISO pursuant to Section
422 of the Code and the rules and regulations thereunder, and any Option granted
under Article V.
OPTION AGREEMENT. The agreement between the Corporation and an Optionee
with respect to Options granted to such Optionee under Article III.
OPTIONS. ISOs and Non-Qualified Options are collectively referred to
herein as "Options"; provided, however, whenever reference is specifically made
only to ISOs or Non-Qualified Options, such reference shall be deemed to be made
to the exclusion of the other.
PLAN POOL. A total of one hundred thousand (100,000) shares of
authorized, but unissued, Common Stock, as adjusted pursuant to Section 2.3(b),
which shall be available as Stock under this Plan.
REGISTRATION. The registration by the Corporation under the 1933 Act
and applicable state "Blue Sky" and securities laws of this Plan, the offering
of Rights under this Plan, the offering of Stock under this Plan, and/or the
Stock acquirable under this Plan.
RESTRICTED STOCK. The Stock which a holder shall be awarded with
restrictions when, as, in the amounts and with the restrictions described in
Article IV.
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<PAGE> 4
RESTRICTED STOCK GRANT AGREEMENT. The agreement between the Corporation
and a holder with respect to Rights to Restricted Stock, including such terms
and provisions as are necessary or appropriate under Article IV.
RETIREMENT. "Retirement" shall mean
(i) the termination of an Eligible Person's employment under
conditions which would constitute "normal retirement" or
"early retirement" under any tax qualified retirement plan
maintained by the Corporation or a Subsidiary, or
(ii) termination of employment after attaining age 65 (except in
the case of a Just Cause Termination).
RIGHTS. The rights to exercise, purchase or receive any one or more of
the Options and Restricted Stock described herein.
RIGHTS AGREEMENT. Any of an Option Agreement, a Restricted Stock Grant
Agreement or a Director Option Agreement.
SEC. The Securities and Exchange Commission.
STOCK. The shares of Common Stock in the Plan Pool available for
issuance pursuant to the valid exercise of a Right or on which the cash value of
a Right is to be based.
TAX WITHHOLDING LIABILITY. All federal and state income taxes, social
security tax, and any other taxes applicable to the compensation income arising
from the transaction required by applicable law to be withheld by the
Corporation or any Subsidiary.
TRANSFER. The sale, assignment, transfer, conveyance, pledge,
hypothecation, encumbrance, loan, gift, attachment, levy upon, assignment for
the benefit of creditors, by operation of law (by will or descent and
distribution), transfer by a qualified domestic relations order, a property
settlement or maintenance agreement, transfer by result of the bankruptcy laws
or otherwise of a share of Stock or of a Right.
1933 ACT. The Securities Act of 1933, as amended, together with the
rules and regulations promulgated thereunder.
1934 ACT. The Securities Exchange Act of 1934 as amended, together with
the rules and regulations promulgated thereunder.
-4-
<PAGE> 5
ARTICLE II
GENERAL
SECTION 2.1. PURPOSE.
The purpose of this Plan is to attract directors and qualified
employees in the employ of the Corporation and its Subsidiaries and motivate
them to contribute to the successful performance of the Corporation and its
Subsidiaries and the growth of the market value of the Corporation's Common
Stock. The Plan aims to unify the interests of such directors and employees with
those of shareholders in achieving the Corporation's and Subsidiaries' long-term
performance objectives by providing the former with ownership opportunities, and
to retain such directors and employees by rewarding them with potentially
tax-advantageous future compensation. These objectives will be promoted through
the granting of Rights to designated Eligible Persons and Non-employee Directors
pursuant to the terms of this Plan.
SECTION 2.2. ADMINISTRATION.
(a) The Plan shall be administered by the Committee. Subject to
the provisions of SEC Rule 16b-3(d), the Committee may
designate any officers or employees of the Corporation or any
Subsidiary to assist in the administration of the Plan, to
execute documents on behalf of the Committee and to perform
such other ministerial duties as may be delegated to them by
the Committee.
(b) Subject to the provisions of the Plan, the determinations and
the interpretation and construction of any provision of the
Plan by the Committee shall be recommended to the Board for
approval, and when so approved by the Board shall be final and
conclusive upon persons affected thereby. By way of
illustration and not of limitation, the Committee shall have
the discretion, subject to the approval by the Board:
(i) to construe and interpret the Plan and all Rights
granted hereunder and to determine the terms and
provisions (and amendments thereof) of the Rights
granted under the Plan (which need not be identical);
(ii) to define the terms used in the Plan and in the
Rights granted hereunder;
(iii) to prescribe, amend and rescind the rules and
regulations relating to the Plan;
(iv) to determine the Eligible Persons to whom and the
time or times at which such Rights shall be granted,
the number of shares of Stock, as and when
applicable, to be subject to each Right, the exercise
price or other relevant purchase price or value
pertaining to a Right, and the determination of
leaves of absence which may be granted to Eligible
Persons without constituting a termination of their
employment for the purposes of the Plan; and
-5-
<PAGE> 6
(v) to make all other determinations and interpretations
necessary or advisable for the administration of the
Plan.
(c) Notwithstanding the foregoing, or any other provision of this
Plan, the Committee will have no authority to determine any
matters, or exercise any discretion, to the extent that the
power to make such determinations or to exercise such
discretion would cause the loss of the exemption under SEC
Rule 16b-3 of any grant or award hereunder.
(d) It shall be in the discretion of the Committee, subject to
approval by the Board, to grant Options to purchase shares of
Stock which qualify as ISOs under the Code or which will be
given tax treatment as Non-Qualified Options. Any Options
granted which fail to satisfy the requirements for ISOs shall
become Non-Qualified Options.
(e) The intent of the Corporation is to effect the Registration.
In such event, the Corporation shall make available to
Eligible Persons and Non-Employee Directors receiving Rights
and/or shares of Stock in connection therewith all disclosure
documents required under such federal and state laws. If such
Registration shall not occur, the Committee shall be
responsible for supplying the recipient of a Right and/or
shares of Stock in connection therewith with such information
about the Corporation as is contemplated by the federal and
state securities laws in connection with exemptions from the
registration requirements of such laws, as well as providing
the recipient of a Right with the opportunity to ask questions
and receive answers concerning the Corporation and the terms
and conditions of the Rights granted under this Plan.
In addition, if such Registration shall not occur, the
Committee shall be responsible, subject to approval by the
Board, for determining the maximum number of Eligible Persons
and Non-Employee Directors and the suitability of particular
persons to be Eligible Persons in order to comply with
applicable federal and state securities statutes and
regulations governing such exemptions.
(f) In determining the Eligible Persons to whom Rights may be
granted and the number of shares of Stock to be covered by
each Right, the Committee and the Board shall take into
account the nature of the services rendered by such Eligible
Persons, their present and potential contributions to the
success of the Corporation and/or a Subsidiary and such other
factors as the Committee and the Board shall deem relevant. An
Eligible Person who has been granted a Right under this Plan
may be granted an additional Right or Rights under this Plan
if the Committee and the Board shall so determine. If,
pursuant to the terms of this Plan, or otherwise in connection
with this Plan, it is necessary that the percentage of stock
ownership of an Eligible Person be determined, the ownership
attribution provisions set forth in Section 424(d) of the Code
shall be controlling.
-6-
<PAGE> 7
(g) With the exception of Director Options, the granting of Rights
pursuant to this Plan is in the exclusive discretion of the
Board, and until the Board acts, no individual other than a
Non-Employee Director shall have any rights under this Plan.
The terms of this Plan shall be interpreted in accordance with
this intent.
SECTION 2.3. STOCK AVAILABLE FOR RIGHTS.
(a) Shares of the Stock shall be subject to, or underlying, grants
of Options and Restricted Stock under this Plan. The total
number of shares of Stock for which, or with respect to which,
Rights may be granted under this Plan shall be those
designated in the Plan Pool. In the event that a Right granted
under this Plan to any Eligible Person or Non-Employee
Director expires or is terminated unexercised as to any shares
of Stock covered thereby, such shares thereafter shall be
deemed available in the Plan Pool for the granting of Rights
under this Plan; provided, however, if the expiration or
termination date of a Right is beyond the term of existence of
this Plan as described in Section 6.3, then any shares of
Stock covered by unexercised or terminated Rights shall not
reactivate the existence of this Plan.
(b) In the event the outstanding shares of Common Stock are
increased, decreased, changed into or exchanged for a
different number or kind of securities as a result of a stock
split, reverse stock split, stock dividend, recapitalization,
merger, share exchange acquisition, combination or
reclassification, appropriate proportionate adjustments will
be made in: (i) the aggregate number and/or kind of shares of
Stock in the Plan Pool that may be issued pursuant to the
exercise of, or that are underlying, Rights granted hereunder;
(ii) the exercise or other purchase price or value pertaining
to, and the number and/or kind of shares of Stock called for
with respect to, or underlying, each outstanding Right granted
hereunder; and (iii) other rights and matters determined on a
per share basis under this Plan or any Rights Agreement. Any
such adjustments will be made only by the Committee, subject
to approval by the Board, and when so approved will be
effective, conclusive and binding for all purposes with
respect to this Plan and all Rights then outstanding. No such
adjustments will be required by reason of (i) the issuance or
sale by the Corporation for cash of additional shares of its
Common Stock or securities convertible into or exchangeable
for shares of its Common Stock, or (ii) the issuance of shares
of Common Stock in exchange for shares of the capital stock of
any corporation, financial institution or other organization
acquired by the Corporation or any Subsidiary in connection
therewith.
(c) The grant of a Right pursuant to this Plan shall not affect in
any way the right or power of the Corporation to make
adjustments, reclassifications, reorganizations or changes of
its capital or business structure or to merge or to
consolidate or to dissolve, liquidate, or sell, or transfer
all or any part of its business or assets.
-7-
<PAGE> 8
(d) No fractional shares of Stock shall be issued under this Plan
for any adjustment under Section 2.3(b).
SECTION 2.4. SEVERABLE PROVISIONS.
The Corporation intends that the provisions of each of Articles III, IV
and V, in each case together with Articles I and II, shall each be deemed to be
effective on an independent basis, and that if one or more of such Articles, or
the operative provisions thereof, shall be deemed invalid, void or voidable, the
remainder of such Articles shall continue in full force and effect.
ARTICLE III
DISCRETIONARY GRANT OF OPTIONS
SECTION 3.1. GRANT OF OPTIONS.
(a) The Company may grant Options to Eligible Persons as provided
in this Article III. Options will be deemed granted pursuant
to this Article III only upon (i) authorization by the
Committee, (ii) the approval of such grant by the Board, and
(iii) the execution and delivery of an Option Agreement by the
Eligible Person optionee (the "Optionee") and a duly
authorized officer of the Company. Options will not be deemed
granted hereunder merely upon authorization of such grant by
the Committee. The aggregate number of shares of Stock
potentially acquirable under all Options granted shall not
exceed the total number of shares of Stock remaining in the
Plan Pool, less all shares of Stock potentially acquired
under, or underlying, all other Rights outstanding under this
Plan.
(b) Subject to approval by the Board, the Committee shall
designate Options at the time a grant is authorized as either
ISOs or Non-Qualified Options, provided that only those
Eligible Persons who are Employees of the Corporation or a
Subsidiary are eligible to receive ISOs. In accordance with
Section 422(d) of the Code, the aggregate Fair Market Value
(determined as of the date an ISO is granted) of the shares of
Stock as to which an ISO may first become exercisable by an
Optionee in a particular calendar year (pursuant to Article
III and all other plans of the Company and/or its
Subsidiaries) may not exceed $100,000 (the "$100,000
Limitation"). If an Optionee is granted Options in excess of
the $100,000 Limitation, or if such Options otherwise become
exercisable with respect to a number of shares of Stock which
would exceed the $100,000 Limitation, such excess Options
shall be Non-Qualified Options.
SECTION 3.2. EXERCISE PRICE.
(a) Subject to approval by the Board, the initial exercise price
of each Option granted under this Plan (the "Exercise Price")
shall be determined by the Committee in its sole discretion;
provided, however, that the Exercise Price of an ISO shall not
be
-8-
<PAGE> 9
less than (i) the Fair Market Value of the Common Stock on the
date of grant of the Option, in the case of any Eligible
Person who does not own stock possessing more than ten percent
(10%) of the total combined voting power of all classes of the
capital stock of the Company (within the meaning of Section
422(b)(6) of the Code), or (ii) one hundred ten percent (110%)
of such Fair Market Value in the case of any Eligible Person
who owns stock in excess of such amount.
SECTION 3.3. TERMS AND CONDITIONS OF OPTIONS.
(a) All Options must be granted within ten (10) years of the
Effective Date.
(b) The Committee, subject to approval by the Board, may grant
ISOs and Non-Qualified Options, either separately or jointly,
to an Eligible Person.
(c) Each grant of Options shall be evidenced by an Option
Agreement in form and substance satisfactory to the Committee
in its discretion, consistent with the provisions of this
Article III.
(d) At the discretion of the Committee, an Optionee, as a
condition to the granting of an Option, must execute and
deliver to the Company a confidentiality agreement approved by
the Committee.
(e) Nothing contained in Article III, any Option Agreement or in
any other agreement executed in connection with the granting
of an Option under this Article III will confer upon any
Optionee any right with respect to the continuation of his or
her status as an Employee of the Company or any of its
Subsidiaries.
(f) Except as otherwise provided herein, each Option Agreement may
specify the period or periods of time within which each Option
or portion thereof will first become exercisable (the "Vesting
Period") with respect to the total number of shares of Stock
acquirable thereunder. Such Vesting Periods will be fixed by
the Committee in its sole discretion, and may be accelerated
or shortened by the Committee in its sole discretion;
provided, however, that the Vesting Period for any portion of
each ISO shall be at least three (3) years from the date such
Option was granted.
(g) Not less than one hundred (100) shares of Stock may be
purchased at any one time through the exercise of an Option
unless the number purchased is the total number at that time
purchasable under all Options granted to the Optionee.
(h) An Optionee shall have no rights as a shareholder of the
Company with respect to any shares of Stock covered by Options
granted to the Optionee until payment in full of the Exercise
Price by such Optionee for the shares being purchased. No
adjustment shall be made for dividends (ordinary or
extraordinary, whether in cash, securities or other property)
or distributions or other rights for which the
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<PAGE> 10
record date is prior to the date such Stock is fully paid for,
except as provided in Sections 2.3(b) and 3.2(b).
(i) In the sole discretion of the Committee, all shares of Stock
obtained pursuant to an Option which qualifies as an ISO shall
be held in escrow for a period which ends on the later of (i)
two (2) years from the date of the granting of the ISO or (ii)
one (1) year after the issuance of such shares pursuant to the
exercise of the ISO. Such shares of Stock shall be held by the
Company or its designee. The Optionee who has exercised the
ISO shall have all rights of a shareholder, including, but not
limited to, the rights to vote, receive dividends and sell
such shares. The sole purpose of the escrow is to inform the
Company of a disqualifying disposition of the shares of Stock
acquired within the meaning of Section 422 of the Code, and it
shall be administered solely for this purpose.
(j) Additionally and notwithstanding any other provisions of this
Article III, no shares of Stock obtained pursuant to an Option
may be Transferred until at least six (6) months and one (1)
day shall have elapsed since the date such Option was granted.
SECTION 3.4. EXERCISE OF OPTIONS.
(a) An Optionee must be an Eligible Person at all times from the
date of grant until the exercise of the Options granted,
except as provided in Section 3.5(b).
(b) An Option may be exercised to the extent exercisable (i) by
giving written notice of exercise to the Company, specifying
the number of full shares of Stock to be purchased and, if
applicable, accompanied by full payment of the Exercise Price
thereof and the amount of the Tax Withholding Liability
pursuant to Section 3.4(c) below; and (ii) by giving
assurances satisfactory to the Company that the shares of
Stock to be purchased upon such exercise are being purchased
for investment and not with a view to resale in connection
with any distribution of such shares in violation of the 1933
Act; provided, however, that in the event the prior occurrence
of the Registration or in the event resale of such Stock
without such Registration would otherwise be permissible, this
second condition will be inoperative if, in the opinion of
counsel for the Company, such condition is not required under
the 1933 Act or any other applicable law, regulation or rule
of any governmental agency.
(c) As a condition to the issuance of the shares of Stock upon
full or partial exercise of a Non-Qualified Option, the
Optionee will pay to the Company in cash, or in such other
form as the Committee may determine in its discretion, the
amount of the Company's Tax Withholding Liability required in
connection with such exercise.
(d) The Exercise Price of an Option shall be payable to the
Company in United States dollars, in cash or by check, or
money order payable to the order of the Company,
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or (ii) at the discretion of the Committee and the Board, by
the delivery (on a form approved by the Committee) of an
irrevocable direction to a securities broker approved by the
Committee to sell the shares of Stock as to which the Option
is then being exercised and to deliver such portion of the
sales proceeds to the Company as is necessary in payment of
all of the Exercise Price and all withholding taxes required
to be withheld by the Company by reason of such exercise. No
shares of Stock shall be delivered until full payment has been
made.
SECTION 3.5. TERM AND TERMINATION OF OPTION.
(a) Subject to approval by the Board, the Committee shall
determine, and each Option Agreement shall state, the
expiration date or dates of each Option, but such expiration
date shall be not later than ten (10) years after the date
such Option was granted (the "Option Period"). In the event an
ISO is granted to a 10% Shareholder, the expiration date or
dates of each Option Period shall be not later than five (5)
years after the date such Option is granted. Subject to
approval by the Board, the Committee may extend the expiration
date or dates of an Option Period of any Non-Qualified Option
after such date was originally set; provided, however such
expiration date may not exceed the maximum expiration date
described in this Section 3.5(a).
(b) To the extent not previously exercised, each Option will
terminate upon the expiration of the Option Period specified
in the Option Agreement; provided, however, that, subject to
the provisions of Section 3.5(a), each ISO will terminate upon
the earlier of: (i) ninety (90) days after the date that the
Optionee ceases to be an Eligible Person for any reason, other
than by reason of Death, Disability, or a Just Cause
Termination; (ii) twelve (12) months after the date that the
Optionee ceases to be an Eligible Person by reason of
Disability; or (iii) immediately as of the date that the
Optionee ceases to be an Eligible Person by reason of a Just
Cause Termination. The Committee may, subject to approval by
the Board, specify other events that will result in the
termination of an ISO (including, without limitation,
termination of employment by reason of Death). In the case of
Non-Qualified Options, the Committee shall have discretion,
subject to approval by the Board, to specify what, if any,
events will terminate the Option prior to the expiration of
the Option Period.
SECTION 3.6. CHANGE IN CONTROL TRANSACTION.
At any time prior to the date of consummation of a Change in Control
Transaction, the Committee may, in its absolute discretion, determine that all
or any part of the Options theretofore granted under this Article III shall
become immediately exercisable in full and may thereafter be exercised at any
time before the date of consummation of the Change in Control Transaction
(except as otherwise provided in Article II hereof, and except to the extent
that such acceleration of exercisability would result in an "excess parachute
payment" within the meaning of Section 280G of the Code). Any Option that has
not been fully exercised before the date of consummation of the Change in
Control Transaction shall terminate on such date, unless a
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provision has been made in writing in connection with such transaction for the
assumption of all Options theretofore granted, or the substitution for such
Options of options to acquire the voting stock of a successor employer
corporation, or a parent or a subsidiary thereof, with appropriate adjustments
as to the number and kind of shares and prices, in which event the Options
theretofore granted shall continue in the manner and under the terms so
provided.
SECTION 3.7. RESTRICTIONS ON TRANSFER.
An Option granted under Article III may not be Transferred except by
last will and testament or the laws of descent and distribution and, during the
lifetime of the Optionee to whom it was granted, may be exercised only by such
Optionee.
SECTION 3.8. STOCK CERTIFICATES.
Certificates representing the Stock issued pursuant to the exercise of
options will bear all legends required by law and necessary to effectuate the
provisions hereof. The Company may place a "stop transfer" order against such
shares of Stock until all restrictions and conditions set forth in this Article
III, the applicable Option Agreement, and in the legends referred to in this
Section 3.8 have been complied with.
SECTION 3.9. AMENDMENT AND DISCONTINUANCE.
The Board may amend, suspend or discontinue the provisions of this
Article III at any time or from time to time; provided that no action of the
Board will cause ISOs granted under this Plan not to comply with Section 422 of
the Code unless the Board specifically declares such action to be made for that
purpose; and, provided, further, that no such action may, without the approval
of the shareholders of the Company, materially increase (other than by reason of
an adjustment pursuant to Section 2.3(b) hereof) the aggregate number of shares
of Stock in the Plan Pool, materially increase the benefits accruing to Eligible
Persons or materially modify eligibility requirements for participation under
this Article III. Moreover, no such action may alter or impair any Option
previously granted under this Article III without the consent of the applicable
Optionee.
SECTION 3.10. COMPLIANCE WITH RULE 16b-3.
With respect to persons subject to Section 16 of the 1934 Act,
transactions under this Article III are intended to comply with all applicable
conditions of Rule 16b-3 or its successors under the 1934 Act. To the extent any
provision of this Article III or action by the Board or the Committee fails so
to comply, it shall be deemed null and void, to the extent permitted by law and
deemed advisable by the Committee and the Board.
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<PAGE> 13
ARTICLE IV
DISCRETIONARY GRANT OF RESTRICTED STOCK
SECTION 4.1. GRANTS OF RESTRICTED STOCK.
(a) The Company may issue Restricted Stock to Eligible Persons as
provided in this Article IV. Restricted Stock will be deemed
issued only upon (i) authorization by the Committee, (ii)
approval by the Board, and (iii) the execution and delivery of
a Restricted Stock Grant Agreement by the Eligible Person to
whom such Restricted Stock is to be issued (the "holder") and
a duly authorized officer of the Company. Restricted Stock
will not be deemed to have been issued merely upon
authorization by the Committee.
(b) Each issuance of Restricted Stock pursuant to this Article IV
will be evidenced by a Restricted Stock Grant Agreement
between the Company and the holder in form and substance
satisfactory to the Committee in its sole discretion,
consistent with this Article IV. Each Restricted Stock Grant
Agreement will specify the purchase price per share, if any,
paid by the holder for the Restricted Stock, such amount to be
fixed by the Committee and the Board.
(c) Without limiting the foregoing, each Restricted Stock Grant
Agreement shall set forth the terms and conditions of any
forfeiture provisions regarding the Restricted Stock,
(including any provisions for accelerated vesting in the event
of a Change in Control Transaction) as determined by the
Committee and the Board.
(d) At the discretion of the Committee, the holder, as a condition
to such issuance, may be required (i) to execute and deliver
to the Company a confidentiality agreement approved by the
Committee, and/or (ii) to pay to the Corporation in cash, or
in such other form as the Committee may determine in its
discretion, the amount of the Corporation's Tax Withholding
Liability required in connection with such issuance.
(e) Nothing contained in this Article IV, any Restricted Stock
Grant Agreement or in any other agreement executed in
connection with the issuance of Restricted Stock under this
Article IV will confer upon any holder any right with respect
to the continuation of his or her status as an employee of the
Company or any of its Subsidiaries.
SECTION 4.2. RESTRICTIONS ON TRANSFER OF RESTRICTED STOCK.
(a) Shares of Restricted Stock acquired by a holder may be
Transferred only in accordance with the specific limitations
on the Transfer of Restricted Stock imposed by applicable
state or federal securities laws or as set forth below, and
subject to certain undertakings of the transferee set forth in
Section 4.2(c). All Transfers of Restricted Stock not meeting
the conditions set forth in this
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<PAGE> 14
Section 4.2(a) are expressly prohibited. Certificates for
shares of Restricted Stock shall bear the following legend:
The shares of Common Stock represented by this
certificate are subject to restrictions set out in an
agreement between the registered owner and the
Company which is on file with the Secretary of the
Company. No sale, transfer, assignment, pledge or
other encumbrance or disposition of the shares
represented by this certificate is authorized or
shall be recognized by the Company except
specifically in accordance with said agreement.
(b) Any prohibited Transfer of Restricted Stock is void and of no
effect. Should such a Transfer purport to occur, the Company
may refuse to carry out the Transfer on its books, attempt to
set aside the Transfer, enforce any undertaking or right under
this Section 4.2(b), and/or exercise any other legal or
equitable remedy.
(c) Any Transfer of Restricted Stock that would otherwise be
permitted under the terms of this Plan is prohibited unless
the transferee executes such documents as the Company may
reasonably require to ensure that the Company's rights under a
Restricted Stock Grant Agreement and this Article IV are
adequately protected with respect to the Restricted Stock so
Transferred. Such documents may include, without limitation,
an agreement by the transferee to be bound by all of the terms
of this Plan applicable to Restricted Stock and of the
applicable Restricted Stock Grant Agreement, as if the
transferee were the original holder of such Restricted Stock.
(d) To facilitate the enforcement of the restrictions on Transfer
set forth in this Article IV, the Committee may, at its
discretion, require the holder of shares of Restricted Stock
to deliver the certificate(s) for such shares with a stock
power executed in blank by the holder and the holder's spouse,
to the Secretary of the Company or his or her designee, and
the Company may hold said certificate(s) and stock power(s) in
escrow and take all such actions as are necessary to insure
that all Transfers and/or releases are made in accordance with
the terms of this Plan. The certificates may be held in escrow
so long as the shares of Restricted Stock whose ownership they
evidence are subject to any restriction on Transfer under this
Article IV or under a Restricted Stock Grant Agreement. Each
holder acknowledges that the Secretary of the Company (or his
or her designee) is so appointed as the escrow holder with the
foregoing authorities as a material inducement to the issuance
of shares of Restricted Stock under this Article IV, that the
appointment is coupled with an interest, and that it
accordingly will be irrevocable. The escrow holder will not be
liable to any party to a Restricted Stock Grant Agreement (or
to any other party) for any actions or omissions unless the
escrow holder is grossly negligent relative thereto. The
escrow holder may rely upon any letter, notice or other
document executed by any signature purported to be genuine.
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<PAGE> 15
SECTION 4.3. COMPLIANCE WITH LAW.
Notwithstanding any other provision of this Article IV, Restricted
Stock may be issued pursuant to this Article IV only after there has been
compliance with all applicable federal and state securities laws, and such
issuance will be subject to this overriding condition. The Company may include
shares of Restricted Stock in a Registration, but will not be required to
register or qualify Restricted Stock with the SEC or any state agency, except
that the Company will register with, or as required by local law, file for and
secure an exemption from such registration requirements from, the applicable
securities administrator and other officials of each jurisdiction in which an
Eligible Person would be issued Restricted Stock hereunder prior to such
issuance.
SECTION 4.4. STOCK CERTIFICATES.
Certificates representing the Restricted Stock issued pursuant to this
Article IV will bear all legends required by law and necessary to effectuate the
provisions hereof. The Company may place a "stop transfer" order against shares
of Restricted Stock until all restrictions and conditions set forth in this
Article IV, the applicable Restricted Stock Grant Agreement and the legends
referred to in this Section 4.4 have been complied with.
SECTION 4.5. MARKET STANDOFF.
To the extent requested by the Company and any underwriter of
securities of the Company in connection with a firm commitment underwriting, no
holder of any shares of Restricted Stock will Transfer any such shares not
included in such underwriting, or not previously registered in a Registration,
during the one hundred twenty (120) day period following the effective date of
the registration statement filed with the SEC under the 1933 Act in connection
with such offering.
SECTION 4.6. AMENDMENT AND DISCONTINUANCE.
The Board may amend, suspend or discontinue this Article IV at any time
or from time to time; provided, that no such action of the Board shall alter or
impair any rights previously granted to holders under this Article IV without
the consent of such affected holders; and provided, further, that no such action
may, without the approval of the Company's shareholders, materially increase
(other than by reason of all adjustment pursuant to Section 2.3(b) hereof) the
maximum aggregate number of shares of Stock in the Plan Pool, materially
increase the benefits accruing to Eligible Persons under this Article IV or
materially modify the requirements as to eligibility for participation under
this Article IV. Moreover, no such action may alter or impair any Restricted
Stock previously granted under this Article IV with the consent of the
applicable holder.
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<PAGE> 16
SECTION 4.5. COMPLIANCE WITH RULE 16b-3.
With respect to persons subject to Section 16 of the 1934 Act,
transactions under this Article IV are intended to comply with all applicable
conditions of Rule 16b-3 and/or its successor Rules under the 1934 Act. To the
extent any provision of this Article IV or action by the Board or the Committee
fails so to comply, it shall be deemed null and void, to the extent permitted by
law and deemed advisable by the Committee and the Board.
ARTICLE V
AUTOMATIC GRANT OF OPTIONS TO NON-EMPLOYEE DIRECTORS
SECTION 5.1. AUTOMATIC GRANT OF DIRECTOR OPTIONS.
A Non-Employee Director shall be automatically granted a Nonqualified
Option to purchase two thousand five hundred (2,500) shares of Stock (the
"Initial Option") on the date the Non-Employee Director begins service as a
Non-Employee Director on the Board (even if previously an employee director).
Thereafter, for the remainder of the term of the Plan and provided he or she
remains a Non-Employee Director of the Company, on the date of the Company's
Annual Meeting of Stockholders, each Non-Employee Director shall be
automatically granted without further action by the Board or the Committee a
Nonqualified Option to purchase one thousand (1,000) shares of Stock (the
"Annual Option"). All such Options granted to Non-Employee Directors shall
collectively hereinafter be referred as Director Options. The aggregate number
of shares of Stock potentially acquirable under all Director Options granted
shall not exceed the total number of shares of Stock remaining in the Plan Pool,
less all shares of Stock potentially acquired under, or underlying, all other
Rights outstanding under this Plan.
SECTION 5.2. EXERCISE PRICE.
(a) Subject to approval by the Board, the initial exercise price
of each Director Option granted under this Plan (the "Exercise
Price") shall be determined by the Committee in its
discretion; provided, however, that the Exercise Price of such
Director Option shall not be less than the Fair Market Value
of the Common Stock on the date of grant of the Director
Option.
SECTION 5.3 TERMS AND CONDITIONS OF DIRECTOR OPTIONS.
(a) All grants of Director Options must be made within ten (10)
years of the Effective Date.
(b) Each Director Option shall be evidenced by a Director Option
Agreement, which shall contain such provisions as may be
determined by the Committee, consistent with this Article V.
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<PAGE> 17
(c) At the discretion of the Committee, a Non-Employee Director
may be required to execute and deliver to the Company a
confidentiality agreement approved by the Committee.
(d) The Initial Option shall vest and become exercisable over a
period of five years at the rate of 20% of each grant annually
on each of the five consecutive anniversaries of the date of
grant directly following the date of grant provided the
Non-Employee Director's services as a director continue
through each such anniversary. Each Annual Option shall vest
and become exercisable upon the date of grant.
(e) Not less than one hundred (100) shares of Stock may be
purchased at any one time through the exercise of the Initial
or Annual Option unless the number purchased is the total
number at that time purchasable under all Options granted to
the Non-Employee Director.
(f) A Non-Employee Director shall have no rights as a shareholder
of the Company with respect to any shares of Stock covered by
Director Options granted to the Director until payment in full
of the Exercise Price by such Director for the shares being
purchased. No adjustment shall be made for dividends (ordinary
or extraordinary, whether in cash, securities or other
property) or distributions or other rights for which the
record date is prior to the date such Stock is fully paid for.
(g) Additionally and notwithstanding any other provisions of this
Article V, no shares of Stock obtained pursuant to a Director
Option may be Transferred until at least six (6) months and
one (1) day shall have elapsed since the date such Director
Option was granted.
SECTION 5.4. EXERCISE OF DIRECTOR OPTIONS.
(a) A Director Option may be exercised to the extent exercisable
(i) by giving written notice of exercise to the Company,
specifying the number of full shares of Stock to be purchased
and, if applicable, accompanied by full payment of the
Exercise Price thereof and the amount of the Tax Withholding;
and (ii) by giving assurances satisfactory to the Company that
the shares of Stock to be purchased upon such exercise are
being purchased for investment and not with a view to resale
in connection with any distribution of such shares in
violation of the 1933 Act; provided, however, that in the
event the prior occurrence of the Registration or in the event
resale of such Stock without such Registration would otherwise
be permissible this second condition will be inoperative if,
in the opinion of counsel for the Company, such condition is
not required under the 1933 Act or any other applicable law,
regulation or rule of any governmental agency.
(b) As a condition to the issuance of the shares of Stock upon
full or partial exercise of a Director Option, the
Non-Employee Director will pay to the Company in
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<PAGE> 18
cash, or in such other form as the Committee may determine in
its discretion, the amount of the Company's Tax Withholding
Liability required in connection with such exercise.
(c) The Exercise Price of a Director Option shall be payable to
the Company either (i) in United States dollars, in cash or by
check, or money order payable to the order of the Company, or
(ii) at the discretion of the Committee and the Board, through
the delivery of shares of Stock owned by the Non-Employee
Director (including, if the Committee so permits, a portion of
the shares of Stock as to which the Option is then being
exercised) having a Fair Market Value as of the date of
delivery equal to the Exercise Price, or (iii) at the
discretion of the Committee and the Board, by a combination of
(i) and (ii) above. No shares of Stock shall be delivered
until full payment has been made.
SECTION 5.5. TERM AND TERMINATION OF DIRECTOR OPTION.
(a) The term of each Director Option ("Term"), after which each
such Director Option shall expire, shall be ten years from the
date of grant.
(b) If prior to the expiration of the Term of a Director Option,
the Non-Employee Director shall cease to be a member of the
Board for any reason other than his Death or Disability, the
Director Option shall expire on the earlier of the expiration
of the Term or the date that is 90 days after the date of such
cessation. If prior to the expiration of the Term of a
Director Option, a Non-Employee Director shall cease to be a
member of the Board by reason of Death, the Director Option
shall expire on the earlier of the expiration of the Term or
one year after the date of such cessation. In the event a
Non-Employee Director ceases to be a member of the Board for
any reason, any unexpired Director Options shall thereafter be
exercisable until their expiration only to the extent that
such Director Options were exercisable at the time of such
cessation.
SECTION 5.6. CHANGE IN CONTROL TRANSACTION.
At any time prior to the date of consummation of a Change in Control
Transaction, the Committee may, in its absolute discretion, determine that all
or any part of the Director Options theretofore granted under this Article V
shall become immediately exercisable in full and may thereafter be exercised at
any time before the date of consummation of the Change in Control Transaction
(except as otherwise provided in Article II hereof). Any Director Option that
has not been fully exercised before the date of consummation of the Change in
Control Transaction shall terminate on such date, unless a provision has been
made in writing in connection with such transaction for the assumption of all
Director Options theretofore granted, or the substitution for such Director
Options of options to acquire the voting stock of a successor employer
corporation, or a parent or a subsidiary thereof, with appropriate adjustments
as to the number and kind of shares and prices, in which event the Director
Options theretofore granted shall continue in the manner and under the terms so
provided.
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<PAGE> 19
SECTION 5.7. RESTRICTIONS ON TRANSFER.
Director Options shall not be transferable except by last will and
testament or the laws of descent and distribution and shall be exercisable
during the Non-Employee Director's lifetime only by him. Non-Employee Directors
are eligible to receive awards under this Plan in addition to (and not in lieu
of) any awards pursuant to this Article V.
SECTION 5.8. STOCK CERTIFICATES.
Certificates representing the Stock issued pursuant to the exercise of
Director Options will bear all legends required by law and necessary to
effectuate the provisions hereof. The Company may place a "stop transfer" order
against such shares of Stock until all restrictions and conditions set forth in
this Article V, the applicable Director Option Agreement, and in the legends
referred to in this Section 5.8 have been complied with.
SECTION 5.9. AMENDMENT AND DISCONTINUANCE.
The Board may amend, suspend or discontinue the provisions of this
Article V at any time or from time to time; provided, that no such action may,
without the approval of the shareholders of the Company, materially increase
(other than by reason of an adjustment pursuant to Section 2.3(b) hereof) the
aggregate number of shares of Stock in the Plan Pool, materially increase the
benefits accruing to Non-Employee Directors or materially modify eligibility
requirements for participation under this Article V.
SECTION 5.10. COMPLIANCE WITH RULE 16b-3.
With respect to persons subject to Section 16 of the 1934 Act,
transactions under this Article V are intended to comply with all applicable
conditions of Rule 16b-3 or its successors under the 1934 Act. To the extent any
provision of this Article V or action by the Board or the Committee fails so to
comply, it shall be deemed null and void, to the extent permitted by law and
deemed advisable by the Committee and the Board.
ARTICLE VI
MISCELLANEOUS
SECTION 6.1. APPLICATION OF FUNDS.
The proceeds received by the Corporation from the sale of Stock
pursuant to the exercise of Rights will be used for general corporate purposes.
SECTION 6.2. NO OBLIGATION TO EXERCISE RIGHT.
The granting of a Right shall impose no obligation upon the recipient
to exercise such Right.
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<PAGE> 20
SECTION 6.3. TERM OF PLAN.
Except as otherwise specifically provide herein, Rights may be granted
pursuant to this Plan from time to time within ten (10) years from the Effective
Date.
SECTION 6.4 SPECIAL RULE RELATING TO CAPITAL,
Notwithstanding anything contained in this Plan to the contrary, in the
event the Company's Subsidiary's capital falls below minimum statutory
requirements, as determined by the Company state or primary federal regulator,
the Company's primary federal regulator may direct the Company to require
participants in this Plan to either immediately exercise or forfeit their rights
under this Plan.
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<PAGE> 1
Exhibit 10.2
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made as of this ___ 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.
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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
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<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.
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<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
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<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:
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<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.
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<PAGE> 8
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the date first written above.
OHIO LEGACY CORP
______________________________ By:_______________________________
L. DWIGHT DOUCE
Title:____________________________
OHIO LEGACY BANK
By:_______________________________
Title:____________________________
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<PAGE> 1
Exhibit 10.3
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made as of this ___ 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.
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.
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<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
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<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.
(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
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<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
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<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
___________________________ By:______________________________
STEVEN G. PETTIT
Title:___________________________
OHIO LEGACY BANK
By:______________________________
Title:___________________________
-8-
<PAGE> 1
Exhibit 10.5
LEASE AGREEMENT
---------------
THIS AGREEMENT OF LEASE is made and executed at Canton, Ohio, as of
_____________, 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,
An Ohio Partnership
- ------------------------
By:
----------------------------
Walter T. Schoeppner,
- ------------------------ General Partner
LESSEE:
- ------------------------
OHIO LEGACY CORP.
By:
- ------------------------ ----------------------------
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
___________, Ohio, this ___day of ___________, 1999.
-----------------------
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 _______________, 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
Wooster, Ohio, this ___ day of _____________, 1999.
--------------------
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 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We consent to the incorporation into this Registration Statement of Ohio Legacy
Corp on Amendment 1 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 1, 1999
<PAGE> 1
Exhibit 23.3
[YOUNG & ASSOCIATES, INC. LETTERHEAD]
November 11, 1999
Mr. Dwight Douce
225 N. Market Street
Wooster, OH 44691
RE: CONSENT LETTER
Dear Dwight:
This letter is in response to the comments received by Ohio Legacy Corp.
regarding the SB-2 Registration Statement filed with the Securities and
Exchange Commission on October 13, 1999.
Page 22 of that document (under the "Marketing Strategy" heading)
includes a statement in reference to several recent studies conducted by
Young & Associates regarding the growth performance of community banks
relative to larger regional banks.
With this letter Young & Associates hereby gives consent to Ohio Legacy
Corp. to include the reference and related discussion of community bank
strategic advantages as currently presented in the Registration
Statement.
If you have any further needs regarding comments related to this section,
or if I can be of further assistance, please do not hesitate to call.
Sincerely,
/s/ Larry Stahl
Larry Stahl
Consultant
