<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 13, 1999.
REGISTRATION NO. 333-________
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------
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)
<TABLE>
Ohio 6021 34-1903890
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<S> <C> <C>
(State or other Jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Incorporation or Organization) Classification Code Number) Identification No.)
</TABLE>
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
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<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
- --------------------------------------------- ----------------- -------------------- ----------------------- ------------------
</TABLE>
Estimated solely for the purpose of computing the amount of the registration fee
in accordance with Rule 457(c) under the Securities Act of 1933.
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, Ohio Legacy Bank. Ohio Legacy Corp
will be the holding company and sole shareholder of the Bank. The 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
______________, 1999, 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
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<CAPTION>
Minimum Offering Maximum Offering
---------------- ----------------
Per Share Total Per Share Total
--------- ----- --------- -----
<S> <C> <C> <C> <C>
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
</TABLE>
THIS INVESTMENT INVOLVES A HIGH DEGREE OF RISK. SEE "RISK FACTORS"
BEGINNING ON PAGE 7.
These securities are not deposits or accounts and are not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these securities or determined if this
prospectus is accurate or complete. Any representation to the contrary is a
criminal offense.
This prospectus is not an offer to sell these securities and it is not
soliciting an offer to buy these securities in any state where the offer or sale
is not permitted.
This prospectus is dated __________ __, 1999.
CHARLES WEBB & COMPANY,
A DIVISION OF
KEEFE, BRUYETTE & WOODS, INC.
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
QUESTIONS AND ANSWERS.............................................................................................1
SUMMARY...........................................................................................................3
RISK FACTORS......................................................................................................7
FORWARD-LOOKING STATEMENTS.......................................................................................14
USE OF PROCEEDS..................................................................................................15
DETERMINATION OF OFFERING PRICE..................................................................................15
PLAN OF DISTRIBUTION.............................................................................................16
DIVIDEND POLICY..................................................................................................18
CAPITALIZATION...................................................................................................19
BUSINESS.........................................................................................................20
DESCRIPTION OF PROPERTY..........................................................................................25
PLAN OF OPERATION................................................................................................25
SUPERVISION AND REGULATION.......................................................................................27
MANAGEMENT.......................................................................................................37
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS.............................................................43
PRINCIPAL SHAREHOLDERS...........................................................................................44
DESCRIPTION OF SECURITIES........................................................................................45
SALES AGENT......................................................................................................48
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION
FOR SECURITIES ACT LIABILITIES...................................................................................49
SHARES ELIGIBLE FOR FUTURE SALE..................................................................................49
LEGAL MATTERS....................................................................................................50
EXPERTS..........................................................................................................50
WHERE YOU CAN FIND MORE INFORMATION..............................................................................50
FINANCIAL STATEMENTS............................................................................................F-1
APPENDIX A - STOCK ORDER FORM...................................................................................A-1
APPENDIX B - ESCROW AGREEMENT...................................................................................B-1
</TABLE>
Until _____________, 1999, 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 dealer's obligation to
deliver a prospectus when acting as underwriters and with respect to their
unsold allotments or subscriptions.
<PAGE> 4
QUESTIONS AND ANSWERS
Q. WHY IS OHIO LEGACY OFFERING THESE SECURITIES AND WHY HAS IT CHOSEN THIS
TIME FOR THE OFFERING?
A. We are offering these shares to fund the start-up of a community bank
with banking operations initially located in Wayne and Stark County,
Ohio. We believe that an opportunity exists in these markets because of
recent consolidation in the banking industry.
Q. ONCE I HAVE READ THIS PROSPECTUS AND DETERMINED THAT I WOULD LIKE TO
BUY SOME SHARES, HOW DO I SUBSCRIBE?
A. You must complete and return the Stock Order Form attached as Appendix
A to this prospectus and enclose a check or money order payable to
"Champaign National Bank & Trust, Trust No. OLCB80N01" for your entire
subscription in the enclosed reply envelope.
Q. WHEN WILL THE OFFERING EXPIRE AND HOW SOON SHOULD I SEND IN MY
SUBSCRIPTION?
A. Send in your subscription as soon as possible. This offering expires at
5:00 p.m. Eastern Time on _____________, 1999, 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, New York,
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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<PAGE> 6
SUMMARY
This summary highlights information contained in other parts of this
prospectus. This summary is not complete and does 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. The 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 the new Bank with the Office of the Comptroller of
the Currency and for deposit insurance for the Bank 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. 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%.
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. 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
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$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 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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<PAGE> 8
OUR BUSINESS STRATEGY
We will implement our strategy by:
- targeting small and medium-sized business customers who demand
high levels of personalized attention and customer service;
- staffing banking centers with community-minded and responsive
management teams that will have significant local
decision-making authority;
- operating with two strategically located offices supported by
outsourced core processing and back room operations to
increase efficiencies;
- enhancing private banking relationships by offering a broad
spectrum of products and services; and
- providing access to our products and services via the
internet, including cash management services for our retail
and commercial customers.
TERMS OF THE OFFERING
<TABLE>
<S> <C>
Common shares offered.................................................. 900,000 to 1,200,000
Warrants to organizers................................................. 155,000
Common shares outstanding after the offering........................... 900,000 to 1,200,000
Common shares outstanding after the offering if all
of the warrants are exercised.......................................... 1,055,000 to 1,355,000
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 capital for the Bank,
which will be placed in short-term
investments and available for
loans to Bank customers.
</TABLE>
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<TABLE>
<S> <C>
$1.0 million retained as working
capital for Ohio Legacy.
Expiration date........................................................ ________, 1999, 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 the 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.
</TABLE>
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<PAGE> 10
RISK FACTORS
Before you invest in our common shares, you should be aware that there
are various risks which we will encounter in starting and operating the new
bank, including those described below. We may face other risks as well, which we
have not anticipated. 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 have no operating history upon which to base any estimate of our
future performance. We incorporated Ohio Legacy in July, 1999 and have not yet
engaged in any banking operations. 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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<PAGE> 11
WE WILL BE COMPETING WITH MANY LARGER FINANCIAL INSTITUTIONS THAT HAVE FAR
GREATER FINANCIAL RESOURCES THAN WE HAVE, WHICH COULD PREVENT US FROM ATTRACTING
CUSTOMERS AND MAY CAUSE US TO HAVE TO PAY HIGHER INTEREST RATES TO ATTRACT AND
MAINTAIN CUSTOMERS.
We will encounter strong competition from existing banks and other
types of financial institutions operating in the Wayne and Stark County areas
and elsewhere. We will compete with other bank holding companies, state and
national commercial banks, savings and loan associations, consumer finance
companies, credit unions, securities brokerages, insurance companies, mortgage
banking companies, money market mutual funds, asset-based non-bank lenders and
other financial institutions. Some of these competitors have been in business
for a long time and have already established their customer base and name
recognition. Most are larger than we will be and have greater financial and
personnel resources than we will have. Some are large super-regional and
regional banks, like KeyBank, National City Bank and First Merit Bank. These
institutions offer services, such as extensive and established branch networks
and trust services, that we either do not expect to provide or will not provide
for some time. Due to this competition, we may have to pay higher rates of
interest to attract deposits. In addition, competitors that are not depository
institutions are generally not subject to the extensive regulations that will
apply to our bank.
OUR SUCCESS LARGELY DEPENDS UPON THE SKILL AND EXPERIENCE OF OUR SENIOR
MANAGEMENT TEAM.
The success of our business will depend upon the services of L. Dwight
Douce, our President and Chief Executive Officer, and Steven G. Pettit, Senior
Vice President of Lending and President of the Stark County Division. The loss
of either of these individuals could adversely affect our profitability, service
quality and growth. 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 the Bank's capital. The legal lending limit is 15% of the 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 the Bank of 50% of this amount, or approximately
$525,000. Until the 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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<PAGE> 12
WE WILL HAVE BROAD DISCRETION IN USING THE PROCEEDS OF THE OFFERING.
We will have broad discretion in using the net proceeds of this
offering. The timing and specific application of the net proceeds will remain in
the sole discretion of our board and management. Upon completion of the offering
and after payment of the sales agent's commissions, 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.
A DELAY IN OBTAINING REGULATORY APPROVALS WILL HAVE AN ADVERSE AFFECT ON OUR
BUSINESS.
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 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. See "Plan of Operation" beginning on page 25.
WE COULD BE ADVERSELY AFFECTED BY CHANGES IN THE LAW, ESPECIALLY CHANGES
DEREGULATING THE BANKING INDUSTRY.
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. The effects of these changes could
adversely affect our future operations. See "Supervision and Regulation"
beginning on page 27.
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 DEPRESS THE PRICE OF OUR COMMON 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
adversely affect the market price for our common shares. After the offering, we
will have at least 900,000 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 155,000 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 hold an aggregate of
156,000 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 the
common shares could be materially adversely affected by 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.
OUR RESULTS OF OPERATIONS WILL BE SIGNIFICANTLY AFFECTED BY THE ABILITY OF OUR
BORROWERS TO REPAY THEIR LOANS.
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.
OUR FINANCIAL CONDITION WILL BE ADVERSELY AFFECTED IF OUR ALLOWANCE FOR LOAN
LOSSES IS NOT 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 could have a material adverse effect on our financial
condition and results of operations. We will attempt to maintain an appropriate
allowance for loan losses to provide for probable losses in our loan portfolio.
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<PAGE> 14
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
the 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.
WE MAY NOT BE ABLE TO ATTRACT SUFFICIENT DEPOSITS TO FUND OUR ANTICIPATED LOAN
GROWTH.
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.
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.
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,
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<PAGE> 15
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.
IF A MARKET FOR OUR COMMON SHARES DOES NOT DEVELOP, YOU MAY NOT BE ABLE TO SELL
YOUR SHARES AS QUICKLY AS YOU MAY LIKE.
There is no established public market for our common shares. We cannot
guarantee:
- that any market for our common shares will develop;
- 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.
Although we expect to have our common shares approved for quotation on
the OTC Bulletin Board, an active trade market may not develop or continue after
this offering.
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.
Our organizers and directors have indicated that they intend to
purchase approximately 156,000 common shares, which will equal approximately
13.0% 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 23% of the outstanding common shares. The ownership of
approximately 23% 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.
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<PAGE> 16
THE EXERCISE OF WARRANTS AND STOCK OPTIONS WILL CAUSE DILUTION AND MAY ADVERSELY
AFFECT THE VALUE OF OUR COMMON SHARES.
Our organizers may exercise warrants to purchase common shares, which
will result in the dilution of your proportionate interest in Ohio Legacy. Upon
completion of this offering, we will issue to the organizers warrants to
purchase one common share at $10 per share for every share they purchase in this
offering. We expect that after this offering the organizers will own 155,000
warrants. If all of these warrants were exercised, your proportionate interest
in Ohio Legacy would decrease by 11.4% per share, assuming that we sell the
maximum number of shares in this offering. See "Captialization-Impact of
Warrants and Dilution" beginning on page 19.
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
7.7% per share. See "Capitalization-Impact of Stock Options and Dilution"
beginning on page 20.
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 WILL BE DEPENDENT ON THE OPERATIONS OF THE BANK.
We are organized as a bank holding company and will own all of the
capital stock of the Bank. We will be substantially dependent upon dividends
from the Bank to pay our expenses, including debt repayment, and to pay cash
dividends to shareholders. The 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 the Bank during
our initial years of operations.
WE MAY NOT BE ABLE 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 the 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.
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<PAGE> 17
WE WILL BE DEPENDENT ON THIRD-PARTY PROVIDERS.
We will be dependent on third-parties to provide a number of our core
processing functions. If these third-parties that we depend on for outsourcing
our back office operations, data processing and other products and services
either increase the cost of their services or fail to maintain the operational
integrity of their networks, our business may be adversely affected.
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 45.
THE SALES AGENT MAY NOT BE ABLE TO SELL THE MINIMUM OR MAXIMUM NUMBER OF SHARES
OFFERED IN THIS OFFERING.
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 ___________, 1999 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.
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<PAGE> 18
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.
USE OF PROCEEDS
The following table shows our anticipated use of the proceeds of this
offering based on the sale of the minimum number and maximum number of shares.
After we pay sales commissions, the first $125,000 of the proceeds will be used
to pay offering expenses and $300,000 will be used to pay start-up expenses. We
will also contribute between $7.05 million and $9.84 million to the capital of
the Bank, depending on the size of the offering, which will be placed in
short-term investments and available for loans to Bank customers. We plan to
retain the remaining $1.0 million to use as working capital.
<TABLE>
<CAPTION>
Minimum Offering Maximum Offering
---------------- ----------------
900,000 Shares Percent 1,200,000 Shares Percent
-------------- ------- ---------------- -------
<S> <C> <C> <C> <C>
Sales agent commissions..................... $ 525,000 5.8% $ 735,000 6.1%
Offering expenses........................... 125,000 1.4 125,000 1.0
Start-up expenses........................... 300,000 3.3 300,000 2.5
Investment in capital stock
of Bank................................... 7,050,000 78.4 9,840,000 82.0
Working capital of Ohio Legacy.............. 1,000,000 11.1 1,000,000 8.4
----------- ----- ----------- ----
Total....................................... $9,000,000 100% $12,000,000 100%
</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 the Bank;
- expenses related to the simultaneous opening of two separate
banking centers; and
- general market conditions for the sale of securities.
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<PAGE> 19
PLAN OF DISTRIBUTION
GENERAL
We will offer the shares to the public for a period of sixty days
ending on _____________, 1999. 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.
Shares will be offered primarily to persons who reside in the State of
Ohio. We also plan to register this offering in Florida, Texas, New York,
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 ________________,
1999 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
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
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<PAGE> 20
manner after breaking escrow and prior to the time that it infuses capital into
the 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 income, if any,
earned on the investment of the escrow account. The latest date to which the
subscription funds might be held in escrow prior to their return in the event
the minimum 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 and we may cancel all
accepted subscriptions 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, but we reserve the right to accept subscriptions for less or more
than these amounts.
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 the 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.
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<PAGE> 21
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.
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 the 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 the
Bank's ability to pay dividends to Ohio Legacy, which depends on the
profitability of the Bank. In order to pay dividends, the Bank must comply with
the requirements of all applicable laws and regulations. See "Supervision and
Regulation - The Bank - Dividends" on page 32 and "Supervision and Regulation -
The Bank - Capital Regulations" on page 33. In addition to the availability of
funds from the 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> 22
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.
<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;
900,000 shares issued and outstanding
as adjusted (minimum); 1,200,000
shares issued and outstanding
(maximum) $135,000 $8,350,000 $11,140,000
Stock subscription receivable (30,000)
Deficit accumulated during the
development stage (77,854) (77,854) (77,854)
--------- ------------ ------------
Total stockholders' equity $ 27,146 $ 8,272,146 $11,062,146
========= =========== ===========
</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).
(2) Does not include potential dilution for exercise of stock options or
warrants.
As part of our initial organization and in connection with this
offering, each organizer and director will receive one warrant for each common
share they purchase. A warrant is a freely transferable certificate, which
entitles the holder to purchase a share of common stock at the price of $10 per
share. These warrants expire 10 years from the date of issuance. After this
offering, we expect that our organizers and directors will own approximately
155,000 warrants.
IMPACT OF WARRANTS AND DILUTION.
If all existing warrants were exercised, we would receive approximately
$1.5 million in new capital and would issue 155,000 shares. This would reduce
your proportionate interest in Ohio Legacy by 11.4% per share, assuming that we
sell the maximum number of shares in this offering.
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<PAGE> 23
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 Bank. Stock options differ from warrants in several ways, which we
have listed below.
- Options are not transferable, they are exercisable only by the
employee or director originally granted the option.
- 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.
- Currently, options granted have a three year vesting schedule
until they can be exercised.
If all existing dilutive options were exercised at a price of $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 7.7% 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
market consolidation in the Wayne and Stark County, Ohio areas. The Bank will
provide a community based banking alternative to the large institutions for the
small businesses in the 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
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<PAGE> 24
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, the Bank's
product and service line will consist of all traditional banking activities,
including the following:
- LENDING: The 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 the 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.
- 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: The Bank will offer ATM services, and will
seek to offer direct dial-up cash management services to
commercial accounts. The Bank also intends to offer internet
banking services to both retail and commercial customers.
Further, while it is our opinion
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<PAGE> 25
that both markets would support trust services, the 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 the Bank's complete line of
services.
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,
- 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.
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<PAGE> 26
COMPETITION
WAYNE COUNTY AND WOOSTER. According to published data, 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.
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 the 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
-23-
<PAGE> 27
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:
- 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 the Bank opens for business, it will employ
approximately fifteen full-time employees and five part-time employees.
Initially, the executive officers of the 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 the 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
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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 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 the 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 the
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 the Bank. We expect to receive all regulatory approvals by the first quarter
of 2000.
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Our profitability will be dependent upon the successful operations of
the 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 the 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
the Bank will begin to be profitable in the third quarter of the second year of
operations. We cannot assure you, however, that the Bank will be profitable, or
if profitable, that its earnings will equal those of similar banking
institutions.
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 the 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 the
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 $500,000 in the first year of operation. Our largest
expenditure items will be for bank equipment
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such as vaults, safe deposit boxes, ATMs, personal comuters, teller equipment
and leasehold improvements. These expenditures are expected to meet our needs
for the next few years.
SUPERVISION AND REGULATION
Both Ohio Legacy and the 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. 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 Bank, we will be
deemed a bank holding company under the federal Bank Holding Company Act of
1956. Our activities will also be governed by the Glass-Steagall Act of 1933.
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;
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<PAGE> 31
- 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.
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 Bank, and these loans may be
repaid from dividends paid from Bank to Ohio Legacy. Our ability to pay
dividends will be subject to regulatory restrictions as described below in "The
Bank - Dividends." Ohio Legacy is also able to raise capital for contribution
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<PAGE> 32
to 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 Bank and to commit resources to support 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 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.
GLASS-STEAGALL ACT. We will also be restricted by the provisions of the
Glass-Steagall Act, which prohibits Ohio Legacy from owning subsidiaries that
are engaged principally in the issue, flotation, underwriting, public sale, or
distribution of securities. The interpretation, scope, and application of the
provisions of the Glass-Steagall Act currently are being considered and reviewed
by regulators and legislators, and the interpretation and application of those
provisions have been challenged in the federal courts.
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
The 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 the 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 the Bank's operations, including:
- security devices and procedures;
- adequacy of capitalization and loss reserves;
- loans;
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- investments;
- borrowings;
- deposits;
- mergers;
- issuances of securities;
- payment of dividends;
- interest rates payable on deposits;
- 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 the Bank to maintain specified capital ratios and
imposes limitations on the Bank's aggregate investment in real estate, bank
premises, and furniture and fixtures. The OCC will also require the Bank to
prepare quarterly reports on the 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:
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<PAGE> 34
- 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 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 the 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 the Bank's cost of funds, and we
may not be able to pass these costs on to our customers.
TRANSACTIONS WITH AFFILIATES AND INSIDERS. The 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 the Bank's capital and surplus and, as to all affiliates
combined, to 20% of the Bank's capital and surplus. Furthermore,
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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.
The 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. The 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
- 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, the Bank may establish banking
offices in Ohio with the prior approval of the superintendent of financial
institutions. In addition, with prior regulatory approval, the 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 the Bank.
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OTHER REGULATIONS. Interest and other charges collected or contracted
for by the Bank are subject to state usury laws and federal laws concerning
interest rates. The Bank's loan operations are also subject to federal laws
applicable to credit transactions, such as the:
- 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 the 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 the 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
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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.
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
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;
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- restrict their growth, deposit interest rates, and other
activities;
- improve their management;
- 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
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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. From time to time, various bills are
introduced in the United States Congress with respect to the regulation of
financial institutions. Some of these proposals, if adopted, could significantly
change the regulation of banks and the financial services industry. We cannot
predict whether any of these proposals will be adopted or, if adopted, what
effect these would have.
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 the 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 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 II Director Director
Michael Meenan 45 III Director Director
Steven G. 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 involved in
commercial real estate sales and management for George N. Swallow, Inc. Prior 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). Mr. Belden is President of the Belden Brick
Company, a Canton based company since 1885. 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, Canton
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Regional Chamber of Commerce, Junior Achievement of Stark County, Stark County
Foundation and others.
J. Edward Diamond (Director). Mr. Diamond, currently a private investor
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. Most
recently, Mr. Douce was President-Chief Operating Officer of Signal Bank, a $1.8
billion commercial bank headquartered in Wooster, which operated more than 25
branches. Prior to that, Mr. Douce served as Senior Vice President and Chief
Financial Officer of Signal Bank. 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). Mr. Fitzpatrick is 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 is currently 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). Mr. Meenan is 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. Most
recently, Mr. Pettit held the position of Senior Vice President, Senior Loan
Officer for two regions of FirstMerit Bank, N.A. Prior to this assignment, Mr.
Pettit held the same position at Signal Bank, N.A., a $1.8 billion financial
institution. 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 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.
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Daniel Plumly (Director and Secretary). Mr. Plumly is an attorney 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 and as a member of the Board of Trustees of
the United Methodist Church.
Thomas Schervish (Director). Mr. Schervish is 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. 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 the Bank are elected annually by the board of directors following the
annual meeting of shareholders and serve at the pleasure of the board.
COMMITTEES OF THE BOARD OF DIRECTORS.
The Bank's board of directors has established four committees. These
committees meet with management on a regularly scheduled basis to review the
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 the Bank,
which may be changed from time to time by a majority vote of the Bank.
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The Loan Committee is comprised of five directors, one of whom is an
officer of the Bank. The primary responsibilities of the Loan Committee are to
review and approve loans over particular limits and review and approve changes
to the 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 the 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,
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.
EXECUTIVE COMPENSATION
The Bank expects 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 commences on the date
that the Bank begins operations. Mr. Pettit's employment agreement commences on
the date of its execution. If we do not open the Bank, we must continue paying
Mr. Pettit under his employment agreement for a period of one year from the
commencement date of his agreement.
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<PAGE> 44
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.
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;
- restricted stock;
- stock appreciation rights; and
- performance units.
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.
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<PAGE> 45
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 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.
STOCK APPRECIATION RIGHTS. The plan allows us to grant stock
appreciation rights to employees or directors, with a base value equal to the
fair market value of the stock at the time of grant.
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.
PERFORMANCE UNITS. We may award our directors and employees performance
units that give them the right to receive a combination of cash and common
stock. The percentage of the units awarded that will become distributable to the
recipients will depend on Ohio Legacy's performance in achieving financial or
other performance objectives during the relevant time period.
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<PAGE> 46
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 31. 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 the
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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<PAGE> 47
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>
Name Amount and Nature of Percent of Class Percent of Class
- ---- -------------------- ---------------- ----------------
Beneficial Ownership(1) (Minimum)(2) (Maximum)(2)
----------------------- ------------ ------------
<S> <C> <C> <C>
Directors and executive
officers:
L. Dwight Douce............... 50,000 4.74 3.69
Gregory Long.................. 30,000 2.84 2.21
Michael Meenan................ 20,000 1.90 1.48
Daniel Plumly................. 30,000 2.84 2.21
D. William Allen.............. 20,000 1.90 1.48
Robert Belden................. 20,000 1.90 1.48
J. Edward Diamond............. 50,000 4.74 3.69
Thomas Schervish.............. 60,000 5.69 4.43
Scott Fitzpatrick............. 30,000 2.84 2.21
Steven G. Pettit.............. 1,000 .09 .07
------- ----- -----
Directors and executive 311,000 29.48% 22.95%
officers as a group (10):.....
</TABLE>
(1) Reflects all common shares, including warrants received in connection
with Ohio Legacy's initial capitalization and this offering, which we
anticipate will be "beneficially owned" by each named individual and
group at the closing of this offering. Each of the directors will
receive one warrant for each common share purchased. We have calculated
these numbers in accordance with the definition of "beneficial
ownership" set forth by the SEC under Section 13(d) of the Securities
Act of 1934. For a description of the distribution and terms of the
warrants please see "Capitalization - Impact of Warrants and Dilution."
(2) We calculated the minimum and maximum percentages based on the exercise
of 155,000 warrants, which would increase the total number of
outstanding shares by 155,000.
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<PAGE> 48
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 1,200,000 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 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
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<PAGE> 50
other than a "disinterested director" merely because he would no longer be a
director if the proposed control share acquisition were approved and
consummated.
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. 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
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<PAGE> 51
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.
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<PAGE> 52
Webb will pass on to mutually selected broker-dealers who participate
in the offering an amount of stock sold at a comparable price per share in a
similar market environment. Fees with respect to purchases made with the
assistance of broker-dealers other than Webb will be transmitted by Webb to such
broker-dealers.
We have agreed to indemnify Webb against certain liability arising out
of its engagement or, in the event indemnification is unavailable, to contribute
payments that Webb may be required to make in respect thereof.
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. Upon completion of this offering, we will
have a minimum of 900,000 and a maximum of 1,200,000 common shares outstanding.
All of these shares will be freely transferable without restriction of future
registration, except for the approximately 155,000 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.
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.
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<PAGE> 53
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.
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<PAGE> 54
OHIO LEGACY CORP
(A Development Stage Company)
Wooster, Ohio
FINANCIAL STATEMENTS
August 31, 1999
<PAGE> 55
OHIO LEGACY CORP
(A Development Stage Company)
Wooster, Ohio
FINANCIAL STATEMENTS
August 31, 1999
CONTENTS
<TABLE>
<S> <C>
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
</TABLE>
<PAGE> 56
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
F-1
<PAGE> 57
OHIO LEGACY CORP
(A Development Stage Company)
BALANCE SHEET
August 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ASSETS
<S> <C>
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
============
</TABLE>
- --------------------------------------------------------------------------------
See accompanying notes to financial statements
F-2
<PAGE> 58
OHIO LEGACY CORP
(A Development Stage Company)
STATEMENT OF OPERATIONS
For the Period from July 1, 1999 (Date of Inception) to August 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
EXPENSES
<S> <C>
Professional fees $ 56,725
OCC application fee 15,000
Occupancy expense 5,000
Telephone, supplies and other 1,129
-----------
Net loss $ 77,854
===========
</TABLE>
- --------------------------------------------------------------------------------
See accompanying notes to financial statements
F-3
<PAGE> 59
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> 60
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>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
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> 61
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 Bank). The
Corporation is expected, upon completion of a public stock offering, to purchase
100% of the common stock of the 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 intend to purchase approximately 155,000 shares of common stock at
$10.00 per share for a total of approximately $1,550,000. Upon the purchase of
these shares, the Corporation will issue one warrant for each share of common
stock purchased by the Board of Directors and Executive Officers.
NATURE OF BUSINESS: The Corporation, through its subsidiary 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> 62
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 the 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, restricted stock, stock
appreciation rights and performance units. Under the plan, each nonemployee
Director will be granted 2,500 nonqualified options at the time that person
first becomes a Director. 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.
- --------------------------------------------------------------------------------
Continued
F-7
<PAGE> 63
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 - COMMITMENTS AND CONTINGENCIES
The 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 the 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 the 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 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-8
<PAGE> 64
OHIO LEGACY CORP
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
August 31, 1999
NOTE 3 - 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 the Bank. Once the 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:
<TABLE>
<CAPTION>
Year ending December 31,
<S> <C>
2000 $ 184,104
2001 161,364
2002 161,364
2003 161,364
2004 161,364
</TABLE>
NOTE 4 - 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-9
<PAGE> 65
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>
<PAGE> 66
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 which
discloses the nature of the Common Stock being offered thereby and describes the
following risks involved in an investment in the Common Stock under the heading
"Risk Factors" beginning on page 6 of the Prospectus:
1. We have no operating history upon which to base an estimate of our
future performance.
2. We expect losses in our first 18 to 24 months of operations.
3. 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.
4. Our success largely depends upon the skill and experience of our senior
management team.
5. We may not be able to compete with our larger competitors for larger
customers because our lending limits are lower than theirs.
6. We will have broad discretion in using the proceeds of the offering.
7. A delay in obtaining regulatory approvals will have an adverse affect on
our business.
8. We could be adversely affected by changes in the law, especially changes
deregulating the banking industry.
9. Interest rate volatility could significantly harm our business.
10. Future sales of our common shares could depress the price of our common
shares.
11. Our results of operations will be significantly affected by the ability
of our borrowers to repay their loans.
12. Our financial condition will be adversely affected if our allowance for
loan losses is not sufficient to absorb actual losses.
13. No assurance of ability to raise additional capital.
14. We may not be able to attract sufficient deposits to fund our
anticipated loan growth.
15. 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.
16. If a market for our common shares does not develop, you may not be able
to sell you shares as quickly as you may like.
17. The offering price was determined arbitrarily and may not reflect the
market price of our shares.
18. 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.
19. The exercise of warrants and stock options will cause dilution and may
adversely affect the value of our common shares.
20. You will not receive dividends in the foreseeable future.
21. We are dependent on the operations of the Bank.
22. We may not be able to effectively provide, implement and market
technology-driven products and services.
23. We will be dependent on third-party providers.
24. Our Articles and Regulations contain provisions that could deter
takeover attempts, even at a price attractive to shareholders.
25. The sales agent may not be able to sell the minimum or maximum number of
shares offered in this offering.
- ---------------------------------- ----------------------------------
Signature Signature
- ---------------------------------- ----------------------------------
(NOTE: IF SHARES ARE TO BE HELD JOINTLY, BOTH PARTIES MUST SIGN)
Date: _____________________
<PAGE> 67
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.
<PAGE> 68
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 (the "Underwriter"), 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 Underwriter 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 Underwriter 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 Underwriter and
other co-underwriters and/or 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
1 of 5
<PAGE> 69
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 Underwriter 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
Underwriter 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
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<PAGE> 70
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
3 of 5
<PAGE> 71
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 Underwriter 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.
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<PAGE> 72
OHIO LEGACY CORP
305 West Liberty Street
Wooster, OH 44691
------------------------------------
By: H. Dwight Douce, President and Chief Executive Officer
CHARLES WEBB & COMPANY
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
5 of 5
<PAGE> 73
PART II TO FORM SB-2
INFORMATION NOT REQUIRED IN THE PROSPECTUS
INDEMNIFICATION OF DIRECTORS AND OFFICERS
As authorized by Section 1701.13(E) of the Ohio Revised Code, Section
29 of Ohio Legacy's Code of Regulations provides that directors and officers of
Ohio Legacy may, under certain circumstances, be indemnified against expenses,
including attorneys' fees, and from other liabilities actually and reasonably
incurred by them as a result of any suit brought against them in their capacity
as a director or officer, if they acted in good faith and in a manner they
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, if they had
no reasonable cause to believe their conduct was unlawful. Section 29 also
provides that directors and officers may also be indemnified against expenses,
including attorneys' fees, incurred by them in connection with a derivative suit
if they acted in good faith and in a manner they reasonably believed to be in or
not opposed to the best interests of the corporation, except that no
indemnification may be made without court approval if such person was adjudged
liable to the corporation.
RECENT SALES OF UNREGISTERED SECURITIES
In August 1999, as part of its initial capitalization Ohio Legacy sold
135 common shares at a price of $1,000 per share to its nine (9) organizing
directors, totaling $135,000, in an offering exempt from registration under
Section 4(2) of the Securities Act. No underwriters were involved in the sale
and no underwriting discounts or commissions were paid.
OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the estimated costs and expenses of Ohio
Legacy in connection with the offering other than underwriting discounts or
commissions.
<TABLE>
<CAPTION>
<S> <C>
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
</TABLE>
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(A) EXHIBITS
The information required by this Item 21(a) is set forth in the Index
to Exhibits accompanying this Registration Statement and is incorporated herein
by reference.
(B) FINANCIAL STATEMENT SCHEDULES
The financial statement schedules listed below follow:
II-1
<PAGE> 74
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
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<PAGE> 75
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.
6. The undersigned Registrant hereby undertakes that:
(a) For purposes of determining any liability under the Securities
Act of 1933, the information omitted from the form of
prospectus filed as part of this registration statement in
reliance upon Rule 430A and contained in a form of prospectus
filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
Rule 497(h) under the Securities Act shall be deemed to be
part of this registration statement as of the time it was
declared effective.
(b) For the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that
contains a form of prospectus 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.
II-3
<PAGE> 76
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 October 13, 1999.
OHIO LEGACY CORP
By: /s/ L. Dwight Douce
----------------------------------
L. Dwight Douce,
Chief Executive Officer and
President
(Principal Executive and
Accounting Officer)
<TABLE>
<CAPTION>
SIGNATURE TITLE
- --------- -----
<S> <C>
/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
</TABLE>
* By L. Dwight Douce pursuant to a power of attorney dated September 30, 1999.
II-4
<PAGE> 77
EXHIBIT INDEX
Exhibit
No. Description
- -------- -----------
1 *Sales Agency Agreement.
3.1 Form of Articles of Incorporation.
3.2 Form of Code of Regulations.
4 *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 for Canton property.
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.
24 Power of Attorney.
27 Financial Data Schedule.
* To be filed by amendment.
<PAGE> 1
Exhibit 3.1
AMENDED AND RESTATED
ARTICLES OF INCORPORATION OF
OHIO LEGACY CORP
FIRST: The name of the Corporation shall be OHIO LEGACY CORP.
SECOND: The place in the State of Ohio where the principal office of the
Corporation will be located is Wooster, in Wayne County, or such other location
as the Board of Directors shall from time to time determine.
THIRD: The purposes for which the Corporation is formed is to be a bank holding
company and to engage in any other lawful act or activity for which corporations
may be formed under Sections 1701.01 to 1701.98, inclusive, of the Revised Code
of Ohio, as now in effect or hereinafter amended.
FOURTH: The total number of shares of stock which the Corporation shall have
authority to issue is Two Million Five Hundred Thousand (2,500,000) shares of
Common Stock, without par value, and Five Hundred Thousand (500,000) shares of
Serial Preferred Stock, without par value.
No holder of shares of stock of any class of the Corporation shall, as such
holder, have any rights to subscribe for or purchase (a) any shares of stock of
any class, any warrants, options or other instruments that shall confer upon the
holder thereof the right to subscribe for or purchase or receive from the
Corporation any shares of stock of any class which the Corporation may issue or
sell, whether or not such shares shall be exchangeable for any shares of stock
of the Corporation of any class or classes and whether or not such shares shall
be unissued shares, now or hereafter authorized, or shares acquired by the
Corporation after the issue thereof, and whether or not such shares of stock,
warrants, options or other instruments are issued for cash or services or
property or by way of dividend or otherwise, or (b) any other security of the
Corporation which shall be convertible into, or exchangeable for, any shares of
stock of the Corporation or any class or classes, or to which shall be attached
or appurtenant to any warrant, option or other instrument that shall confer upon
the holder of such security the right to subscribe for or purchase or receive
from the Corporation any shares of its stock or any class or classes, whether or
not such shares shall be unissued shares, now or hereafter authorized, or shares
acquired by the Corporation after the issue thereof, and whether or not such
securities are issued for cash or services or property or by way of dividend or
otherwise, other than such right, if any, as the Board of Directors, in its sole
discretion, may from time to time determine. If the Board of Directors shall
offer to the holders of shares of stock of any class of the Corporation, or any
of them, any such shares of stock, options, warrants, instruments or other
securities of the Corporation, such offer shall not, in any way, constitute a
waiver or release of the right of the Board of Directors subsequently to dispose
of other securities of the Corporation without offering the same to said
holders.
<PAGE> 2
The shares of such classes shall have the following express terms:
DIVISION A
EXPRESS TERMS OF THE PREFERRED STOCK
(1) The Preferred Stock may be issued from time to time in one or more
series. All shares of Preferred Stock shall be of equal rank and shall be
identical with all other shares except in respect of the matters that may be
fixed by the Board of Directors as hereinafter provided, and each share of each
series shall be identical with all other shares of such series, except, if
dividends are to be cumulative, as to the date from which dividends are
cumulative. Subject to the provisions of Sections 2 and 3 of this Division,
which provisions shall apply to all Preferred Stock, the Board of Directors
hereby is authorized to cause such shares to be issued in one or more series and
with respect to each such series prior to the issuance thereof to fix:
a) The number of shares constituting such series, including
the authority to increase or decrease such number, and the distinctive
designation of such series.
b) The dividend rate of the shares of such series, whether the
dividends shall be cumulative and, if so, the date from which they
shall be cumulative, and the relative rights of priority, if any, of
payment of dividends on shares of such series.
c) The right, if any, of the Corporation to redeem shares of
such series and the terms and conditions of such redemption including
the redemption price.
d) The rights of the shares in case of a voluntary or
involuntary liquidation, dissolution, or winding up of the Corporation,
and the relative rights of priority, if any, of payment of shares of
such series.
e) The obligation, if any, of the Corporation to retire shares
of such series pursuant to a retirement or sinking fund or fund of a
similar nature and the terms and conditions of such obligation.
f) The terms and conditions, if any, upon which shares of such
series shall be convertible into or exchangeable for shares of stock of
any other class or classes of stock of the Corporation or other entity
or of any other series of Preferred Stock, including the price or
prices or the rate or rates of conversion or exchange and the terms of
adjustment, if any.
g) Any other rights, preferences or limitations of the shares
of such series as may be permitted by law.
The Board of Directors is authorized to adopt from time to time amendments to
the Articles of Incorporation fixing, with respect to each such series, the
matters described in clauses (a) through (g), inclusive, of this Section 1.
2
<PAGE> 3
(2) The Preferred Stock shall be senior to the Common Stock in payment
of dividends and payment in respect of liquidation or dissolution.
(3) The holders of Preferred Stock shall be entitled to one vote for
each share of such stock upon all matters presented to the shareholders; and,
except as otherwise required by law, the holders of Preferred Stock and the
holders of Common Stock shall vote together as one class on all matters.
DIVISION B
EXPRESS TERMS OF THE COMMON STOCK
The Common Stock shall be subject to the express terms of the Preferred Stock
and any series thereof and to the terms of Article EIGHTH. Each share of Common
Stock shall be equal to every other share of Common Stock and the holders
thereof shall be entitled to one vote for each share of such stock on all
questions presented to the shareholders.
FIFTH: Except as otherwise provided in these Articles of Incorporation or in the
Regulations, the holders of a majority of the outstanding shares are authorized
to take any action which, but for this provision, would require the vote or
other action of the holders of more than a majority of such shares; provided, no
action of shareholders can be taken except at a meeting called for that purpose.
SIXTH: Except as otherwise provided in these Articles of Incorporation, to the
extent permitted by law, the Corporation, by its Board of Directors, may deal in
its own shares (including the purchase or redemption of any issued shares) and
may issue options, rights or warrants, including any rights issued under a plan
that prohibits the holder of a specified number or percentage of the outstanding
shares from exercising rights or that requires certain directors to consent to
the redemption of such rights.
SEVENTH: No holder of shares of the Corporation shall be entitled to vote
cumulatively in the election of Directors of the Corporation.
EIGHTH: No person shall make a Control Share Acquisition without first obtaining
the prior authorization of the Corporation's shareholders at a special meeting
of shareholders called by the Board of Directors in accordance with this Article
EIGHTH.
(1) PROCEDURE. Any Person who proposes to make a Control Share
Acquisition shall deliver a notice ("Notice") to the Corporation at its
principal place of business that sets forth all of the following information:
a) The identity of the Person who is giving the Notice;
b) A statement that the Notice is given pursuant to this
Article EIGHTH;
3
<PAGE> 4
c) The number and class of shares of the Corporation owned,
directly or indirectly, by the Person who gives the Notice;
d) The range of voting power (as specified in Section
(6)(b)(1) of this Article EIGHTH) under which the proposed Control
Share Acquisition would, if consummated, fall;
e) A description in reasonable detail of the terms of the
proposed Control Share Acquisition; and
f) Representations, supported by reasonable information, that
the proposed Control Share Acquisition would be consummated if
shareholder approval is obtained and, if consummated, would not be
contrary to law and that the Person who is giving the Notice has the
financial capacity to make the proposed Control Share Acquisition.
(2) CALL OF SPECIAL MEETING OF SHAREHOLDERS. The Board of Directors of
the Corporation shall, within ten (10) days after receipt by the Corporation of
a Notice that complies with Section (1), call a special meeting of shareholders
to be held not later than fifty (50) days after receipt of the Notice by the
Corporation, unless the Person who delivered the Notice agrees to a later date,
to consider the proposed Control Share Acquisition; provided that the Board of
Directors shall have no obligation to call such a meeting if they make a
determination within ten (10) days after receipt of the Notice that (i) the
Notice was not given in good faith; (ii) the proposed Control Share Acquisition
would not be in the best interests of the Corporation and its shareholders or
(iii) the proposed Control Share Acquisition could not be consummated for
financial or legal reasons.
The Board of Directors may adjourn such special meeting of shareholders
if prior to such meeting the Corporation has received a Notice from any other
Person and the Board of Directors has determined that the Control Share
Acquisition proposed by such other Person, or a merger, consolidation or sale of
assets of the Corporation, should be presented to shareholders at an adjourned
meeting or at a special meeting held at a later date.
For purposes of making a determination that a special meeting of
shareholders should not be called pursuant to this Section (2), no such
determination shall be deemed void or voidable with respect to the Corporation
merely because one or more of its directors or officers who participated in
deliberations regarding such determination may be deemed to be other than
disinterested, if in any such case the material facts of the relationship giving
rise to a basis for self-interest are known to the directors and the directors,
in good faith reasonably justified by the facts, make such determination by the
affirmative vote of a majority of the disinterested directors, even though the
disinterested directors constitute less than a quorum. For purposes of this
paragraph, "disinterested directors" shall mean directors whose material
contacts with the Corporation are limited principally to activities as a
director or shareholder. Persons who have material and
4
<PAGE> 5
recurring business or professional contacts with the Corporation shall not be
deemed to be "disinterested directors" for purposes of this provision. A
director shall not be deemed to be other than a "disinterested director" merely
because he would no longer be a director if the proposed Control Share
Acquisition were approved and consummated.
(3) NOTICE OF SPECIAL MEETING. The Corporation shall, as promptly as
practicable, give notice of the special meeting of shareholders called pursuant
to Section (2) to all shareholders of record as of the record date set for such
meeting. Such notice shall include or be accompanied by a copy of the Notice and
by a statement of the Corporation, authorized by the Board of Directors, of its
position or recommendation, or that it is taking no position or making no
recommendation, with respect to the proposed Control Share Acquisition.
(4) REQUIREMENTS FOR APPROVAL. The Person who delivered the Notice may
make the proposed Control Share Acquisition if both of the following occur:
a) The shareholders of the Corporation authorize such
acquisition at the special meeting of shareholders called pursuant to
Section (2), at which meeting a quorum is present, by the affirmative
vote of a majority of the Voting Stock represented at such meeting in
person or by proxy and by a majority of the portion of such Voting
Stock represented at such meeting in person or by proxy excluding the
votes of Interested Shares. A quorum shall be deemed to be present at
such special meeting if at least a majority of the issued and
outstanding Voting Stock, and a majority of such Voting Stock excluding
Interested Shares, are represented at such meeting in person or by
proxy.
b) Such acquisition is consummated, in accordance with the
terms so authorized, not later than three hundred sixty (360) days
following shareholder authorization of the Control Share Acquisition.
(5) VIOLATIONS OF RESTRICTION. Any Voting Stock issued or transferred
to any Person in violation of this Article EIGHTH shall hereinafter be called
"Excess Shares." In the event that any Person acquires Excess Shares, then, in
addition to any other remedies which the Corporation may have at law or in
equity as a result of such acquisition, the Corporation shall have the right to
treat the issuance or transfer of any such Excess Shares as null and void. In
the event the Corporation is not permitted to treat an issuance or transfer of
Excess Shares as null and void, such Excess Shares will be treated as the
equivalent of treasury shares of the Corporation and, as such, holders of Excess
Shares will hold such Excess Shares as agent of the Corporation and shall have
no right to exercise or receive the benefits of shareholder rights appurtenant
to such Excess Shares. In such event, the Corporation may redeem any or all
Excess Shares, arrange a sale to one or more purchasers who could acquire such
Excess Shares without violating this Article EIGHTH, or seek other appropriate
remedies. In addition, any Person who receives dividends, interest or any other
distribution with respect to Excess Shares shall hold the same as agent for the
Corporation and, following a permitted transfer, for the transferee thereof.
Notwithstanding the foregoing, any person who holds Excess Shares may
5
<PAGE> 6
transfer the same (together with any distributions thereon) to any Person who,
following such transfer, would not own shares in violation of this Article
EIGHTH. Upon such permitted transfer, the Corporation shall pay or distribute to
the transferee any distributions on the Excess Shares not previously paid or
distributed.
(6) DEFINITIONS. As used in this Article EIGHTH:
a) "Person" includes, without limitation, an individual, a
corporation (whether nonprofit or for profit), a partnership, an
unincorporated society or association, and two or more persons having a
joint or common interest.
b)(1) "Control Share Acquisition" means the acquisition,
directly or indirectly, by any Person, of shares of the Corporation
that, when added to all other shares of the corporation in respect of
which such Person, directly or indirectly, may exercise or direct the
exercise of voting power as provided in this paragraph, would entitle
such Person, immediately after such acquisition, directly or
indirectly, to exercise or direct the exercise of voting power of the
Corporation in the election of directors within any of the following
ranges of such voting power:
(i) One-fifth or more but less than one-third of such
voting power;
(ii) One-third or more but less than a majority of
such voting power; or
(iii) A majority of such voting power.
A bank, broker, nominee, trustee, or other Person who acquires shares
in the ordinary course of business for the benefit of others in good
faith and not for the purpose of circumventing this Article EIGHTH
shall, however, be deemed to have voting power only of shares in
respect of which such Person would be able to exercise or direct the
exercise of votes at a special meeting of shareholders called pursuant
to Section (2) of this Article EIGHTH without further instruction from
others. For purposes of this Article EIGHTH, the acquisition of
securities immediately convertible into shares of the Corporation with
voting power in the election of directors shall be treated as an
acquisition of such shares.
b)(2) The acquisition of any shares of the Corporation does
not constitute a Control Share Acquisition for the purposes of this
Article EIGHTH if the acquisition is consummated in any of the
following circumstances:
(i) By underwriters in good faith and not for the
purpose of circumventing this Article EIGHTH in connection
with any offering to the public of securities of the
Corporation;
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(ii) By bequest or inheritance, by operation of law
upon the death of any individual, or by any other transfer
without valuable consideration, including a gift, that is made
in good faith and not for the purpose of circumventing this
Article EIGHTH;
(iii) Pursuant to the satisfaction of a pledge or
other security interest created in good faith and not for the
purpose of circumventing this Article EIGHTH;
(iv) Pursuant to a merger, consolidation, combination
or majority share acquisition adopted or authorized by
shareholder vote in compliance with the provisions of Article
SEVENTH of these Articles of Incorporation and Sections
1701.78, 1701.79 or 1701.83 and Chapter 1704. of the Ohio
Revised Code if the Corporation is a party to the agreement of
merger, consolidation or acquisition, as the case may be; or
(v) Under such circumstances that the acquisition
does not result in the Person acquiring shares of the
Corporation being entitled, immediately thereafter and for the
first time, directly or indirectly, to exercise or direct the
exercise of voting power of the Corporation in the election of
directors within the range of one-fifth or more but less than
one-third of such voting power, or within any of the ranges of
voting power specified in Section (6)(b)(1)(i), (ii) or (iii)
which is higher than the range of voting power applicable to
such Person immediately prior to such acquisition.
The acquisition by any Person of shares of the Corporation in
a manner described under this Section (6)(b)(2) shall be deemed to be a
Control Share Acquisition authorized pursuant to this Article EIGHTH
within the range of voting power specified in Section (6)(b)(1)(i),
(ii) or (iii) that such Person is entitled to exercise after such
acquisition, provided that, in the case of an acquisition in a manner
described under Section (6)(b)(1)(i), (ii) or (iii), the transferor of
shares to such Person had previously obtained any authorization of
shareholders required under this Article EIGHTH in connection with such
transferor's acquisition of shares of the Corporation.
b)(3) The acquisition of shares of the Corporation in good
faith and not for the purpose of circumventing this Article EIGHTH from
any Person whose Control Share Acquisition had previously been
authorized by shareholders in compliance with this Article EIGHTH, or
from any Person whose previous acquisition of shares would have
constituted a Control Share Acquisition but for Section (6)(b)(2), does
not constitute a Control Share Acquisition for the purpose of this
Article EIGHTH unless such acquisition entitles any Person, directly or
indirectly, alone or with others, to exercise or direct the exercise of
voting power of the Corporation in the election of directors in excess
of the range of such voting power authorized pursuant to this Article
EIGHTH, or deemed to be so authorized under Section (6)(b)(2).
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c) "Interested Shares" means Voting Stock with respect to
which any of the following persons may exercise or direct the exercise
of the voting power:
(1) any Person whose Notice prompted the calling of a special
meeting of shareholders pursuant to Section (2);
(2) any officer of the Corporation elected or appointed by the
directors of the Corporation;
(3) any employee of the Corporation who is also a director of
the Corporation;
(4) any person that acquires such shares for valuable
consideration during the period beginning with the date of the
first public disclosure of a proposed Control Share
Acquisition of the Corporation or any proposed merger,
consolidation, or other transaction that would result in a
change in control of the Corporation or a transfer of all or
substantially all of its assets, and ending on the record date
established by the directors pursuant to this Article EIGHTH,
if either of the following applies: (i) The aggregate
consideration paid or given by the person who acquired the
shares, and any other persons acting in concert with the
person, for all such shares exceeds two hundred fifty thousand
dollars; (ii) The number of shares acquired by the person who
acquired the shares, and any other persons acting in concert
with the person, exceeds one-half of one per cent of the
outstanding shares of the corporation entitled to vote in the
election of directors; and
(5) any person that transfers such shares for valuable
consideration after the record date established pursuant to
this Article EIGHTH as to shares so transferred, if
accompanied by the voting power in the form of a blank proxy,
an agreement to vote as instructed by the transferee, or
otherwise.
(d) "Voting Stock" means all securities of the Corporation
entitled to vote generally in the election of directors, and, for
purposes of Sections (5) and (10) of this Article EIGHTH, shall mean
securities of the Corporation immediately convertible into securities
entitled to vote generally in the election of the directors.
(7) PROXIES. No proxy appointed for or in connection with the
shareholder authorization of a Control Share Acquisition pursuant to this
Article EIGHTH is valid if it provides that it is irrevocable. No such proxy is
valid unless it is sought, appointed, and received both (a) in accordance with
all applicable requirements of law and (b) separate and apart from the sale or
purchase, contract or tender for sale or purchase, or request or invitation for
tender for sale or purchase, of shares of the Corporation.
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(8) REVOCABILITY OF PROXIES. Proxies appointed for or in connection
with the shareholder authorization of a Control Share Acquisition pursuant to
this Article EIGHTH shall be revocable at all times prior to the obtaining of
such shareholder authorization, whether or not coupled with an interest.
(9) AMENDMENTS. Notwithstanding any other provisions of these Articles
of Incorporation or the Regulations of the Corporation or any provision of law
that might otherwise permit a lesser vote, but in addition to any affirmative
vote of the holders of any particular class or series of stock required by law,
the Articles of Incorporation or the Regulations of the Corporation, the
affirmative vote of the holders of at least eighty percent (80%) of the Voting
Stock, voting as a single class, shall be required to alter, amend or repeal
this Article EIGHTH or adopt any provisions in these Articles of Incorporation
or the Regulations of the Corporation which are inconsistent with the provisions
of this Article EIGHTH.
(10) LEGEND ON SHARE CERTIFICATES. Each certificate representing Voting
Stock of the Corporation shall contain the following legend:
"Transfer of the securities represented by this Certificate is
subject to the provisions of Article EIGHTH of the Corporation's
Articles of Incorporation as the same may be in effect from time to
time. Upon written request delivered to the Secretary of the
Corporation at its principal place of business, the Corporation will
mail to the holder of this Certificate a copy of such provisions
without charge within five (5) days after receipt of written request
therefor. By accepting this Certificate the holder hereof acknowledges
that it is accepting same subject to the provisions of said Article
EIGHTH as the same may be in effect from time to time and covenants
with the Corporation and each holder thereof from time to time to
comply with the provisions of said Article EIGHTH as the same may be in
effect from time to time."
NINTH: The provisions of Section 1701.831 of the Ohio Revised Code, as amended
from time to time, or any successor provision or provisions to said Section,
shall not apply with respect to any particular Control Share Acquisition, as
such is defined in said Section, regarding this Corporation so long as Article
EIGHTH of these Articles of Incorporation, as such Articles of Incorporation may
be amended from time to time, remains an Article of these Articles of
Incorporation and remains substantially in full force and effect, disregarding
any renumbering of such Article EIGHTH resulting from any amendment of these
Articles of Incorporation.
TENTH: The Corporation reserves the right to amend, alter, change or repeal any
provision contained in these Articles of Incorporation which may be contained in
these articles of incorporation of a corporation organized under the laws of the
State of Ohio, in the manner now or hereafter prescribed by statute or these
Articles of Incorporation, and all rights conferred upon shareholders herein are
granted subject to this reservation.
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Exhibit 3.2
CODE OF REGULATIONS
OF
OHIO LEGACY CORP
MEETINGS OF SHAREHOLDERS
SECTION 1. PLACE OF MEETING.
All meetings of the shareholders shall be held at the offices of the Corporation
in [City], Ohio, or elsewhere, within or without the State of Ohio, as may be
decided from time to time by the Board of Directors and indicated in the notice
of the meeting.
SECTION 2. ANNUAL MEETING.
The annual meeting of shareholders of the Corporation shall be held at 10:00
a.m., on the second Tuesday after the fifteenth day of April in each year, if
not a legal holiday, but if a legal holiday, then on the next succeeding
business day, or such other time and date as may be determined by the Board of
Directors. Directors shall be elected thereat to succeed the directors whose
terms are expiring that year, and such other business transacted as may be
specified in the notice of the meeting, or as may properly be brought before the
meeting. In the event that the annual meeting is not held or if directors are
not elected thereat, a special meeting may be called and held for that purpose.
SECTION 3. SPECIAL MEETINGS.
Special meetings of the shareholders may be held on any business day when called
by the Chairman of the Board, the President, the Board of Directors at a
meeting, a majority of the directors acting without a meeting, or by holders of
not less than fifty percent (50%) of the outstanding voting stock of the
Corporation.
SECTION 4. NOTICE OF MEETINGS.
A written or printed notice of every annual or special meeting of the
shareholders stating the time, place and purposes thereof shall be given to each
shareholder entitled to vote thereat and to each shareholder entitled to notice
as provided by law, which notice unless served upon a shareholder in person
shall be mailed to his last address appearing on the records of the Corporation,
not less than seven (7) days nor more than sixty (60) days prior to the date of
the meeting. It shall be the duty of the Secretary to give written notice of the
annual meeting, and of each special meeting when requested to do so by the
officer, directors or shareholders calling such meeting. Any shareholder may
waive in writing any notice of any meeting required to be given by law or under
these Regulations and, by attendance or voting at any meeting without protesting
the lack of proper notice, shall be deemed to have waived notice thereof. Any
person who, by operation of law transfer, or any other means whatsoever, shall
become entitled to any shares, shall be
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bound by every notice in respect of such share or shares that was duly given to
the person from whom he derives his title to such shares prior to the entering
of his name and address on the records of the Corporation.
SECTION 5. BUSINESS TO BE CONDUCTED AT MEETINGS.
At any meeting of shareholders, only such business shall be conducted as shall
have been properly brought before the meeting. To be properly brought before a
meeting of shareholders, business must be specified in the notice of meeting (or
any supplement thereto) given by or at the direction of the Directors, otherwise
properly brought before the meeting by or at the direction of the directors or
otherwise properly brought before the meeting by a shareholder. For business to
be properly brought before a meeting of shareholders by a shareholder, the
shareholder must have given timely notice thereof in writing to the Secretary of
the Corporation. To be timely, a shareholder's notice must be delivered to or
mailed and received at the principal executive offices of the Corporation not
less than sixty (60) days nor more than ninety (90) days prior to the meeting;
provided, however, that in the event that less than seventy-five (75) days'
notice or prior public disclosure of the date of the meeting is given or made to
the shareholders, notice by the shareholder to be timely must be so received not
later than the close of business on the fifteenth (15th) day following the
earlier of the day on which such notice of the date of the meeting was mailed or
such public disclosure was made. A shareholder's notice to the Secretary shall
set forth as to each matter the shareholder proposes to bring before the meeting
(i) a brief description of the business desired to be brought before the meeting
and the reasons for conducting such business at the meeting; (ii) the name and
record address of the shareholder proposing such business; (iii) the class and
number of shares of the Corporation which are beneficially owned by such
shareholder; and (iv) any material interest of such shareholder in such
business. Notwithstanding anything in the Regulations of the Corporation to the
contrary, no business shall be conducted at a meeting of shareholders except in
accordance with the procedures set forth in this Section 5. The Chairman of the
meeting of shareholders may, if the facts warrant determine and declare to the
meeting that business was not properly brought before the meeting in accordance
with the provisions of this Section 5, and if he should so determine, any such
business shall not be transacted
SECTION 6. VOTING AND PROXIES.
At all meetings of shareholders, only such shareholders shall be entitled to
vote, in person or by proxy, who appear upon the records of the Corporation as
the holders of stock at the time possessing voting power, or if a record date be
fixed as hereinafter provided, those appearing as such on such record date.
Except as otherwise provided in the Corporation's Articles of Incorporation, at
each meeting of the shareholders, every shareholder having the right to vote
shall be entitled to vote in person or by proxy appointed by an instrument in
writing, subscribed by such shareholder and bearing a date not more than eleven
(11) months prior to said meeting unless such instrument specifies the date on
which it is to expire or the length of time it is to continue in force.
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SECTION 7. QUORUM AND ADJOURNMENTS.
Except as may be otherwise required by law or by the Articles of Incorporation
or by these Regulations, the holders of a majority of the then outstanding
shares entitled to vote at a shareholders' meeting shall constitute a quorum to
hold such meeting; provided, however, that any meeting duly called, whether a
quorum is present or otherwise may, by vote of the holders of a majority of the
voting stock represented thereat, adjourn from time to time and from place to
place without notice other than by announcement at such meeting.
DIRECTORS
SECTION 8. NUMBER; NOMINATION.
The number of directors of the Corporation may be determined by the vote of the
holders of a majority of the shares represented at any annual meeting or special
meeting called for the purpose of electing directors or by resolution adopted by
affirmative vote of a majority of the directors then in office, provided that
the number of directors shall in no event be fewer than seven (7) nor more than
twelve (12). When so fixed, such number shall continue to be the authorized
number of directors until changed by the shareholders or directors by vote as
aforesaid. No decrease in the number of directors shall have the effect of
removing any director prior to the expiration of the term for which he was
elected.
Only persons who are nominated in accordance with the following procedures
shall be eligible for election as directors. Nominations of persons for election
as directors of the Company may be made at a meeting of shareholders by or at
the direction of the directors, by any nominating committee or person appointed
by the directors, or by any shareholder of the Company entitled to vote for the
election of directors who complies with the notice procedures set forth in this
Section 8. Nominations by shareholders shall be made pursuant to timely notice
in writing to the Secretary of the Company. To be timely, a shareholder's notice
shall be delivered to or mailed and received at the principal executive offices
of the Company not less than sixty (60) days nor more than ninety (90) days
prior to the meeting; provided, however, that in the event that less than
seventy-five (75) days' notice or prior public disclosure of the date of the
meeting is given or made to shareholders, notice by the shareholder to be timely
must be so received not later than the close of business on the fifteenth (15th)
day following the earlier of the day on which such notice of the date of the
meeting was mailed or such public disclosure was made. Such shareholder's notice
shall set forth: (a) as to each person who is not an incumbent director whom the
shareholder proposes to nominate for election as a director, (i) the name, age,
business address and residence address of such person, (ii) the principal
occupation or employment of such person, (iii) the class and number of shares of
the Company which are beneficially owned by such person, and (iv) any other
information relating to such person that is required to be disclosed in
solicitations for proxies for election of directors pursuant to Regulation 14A
under the Securities Exchange Act of
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1934 (or any comparable successor rule or regulation under such Act); and (b) as
to the shareholder giving the notice (i) the name and record address of such
shareholder, and (ii) the class and number of shares of the Company which are
beneficially owned by such shareholder. Such notice shall be accompanied by the
written consent of each proposed nominee to serve as a director of the Company,
if elected. No person shall be eligible for election as a director of the
Company unless nominated in accordance with the procedures set forth in this
Section 8. The Chairman of the meeting may, if the facts warrant, determine and
declare to the meeting that a nomination was not made in accordance with the
provisions of this Section 8, and if he should so determine the defective
nomination shall be disregarded.
SECTION 9. CLASSIFICATION, ELECTION AND TERM OF OFFICE.
Unless there shall be less than nine (9) directors, the directors shall be
divided into three (3) classes, designated Class 1, Class II and Class III, as
nearly equal in size as possible, and one of the classes shall be elected for a
three-year term of office at each annual shareholders meeting. If there shall be
less than nine (9) directors, the directors shall be divided into as many
classes as permitted by applicable law and the number of directors shall be
divided among the classes as nearly equal as possible. If the number of
directors is changed, any increase or decrease shall be apportioned among the
classes so as to maintain the number of directors in each class as nearly equal
as possible, and any additional director of any class elected to fill a vacancy
resulting from an increase in such class shall hold office for a term that shall
coincide with the remaining term of such class, but in no case will a decrease
in the number of directors in a particular class shorten the term of any
incumbent director. A director shall hold office until the annual meeting for
the year in which his term expires and his successor shall be elected and shall
qualify, subject, however, to prior death, resignation, or removal from office.
SECTION 10. REMOVAL.
Except as otherwise provided by law, all the Directors or all the Directors of a
particular class, or any individual Director, may be removed from office with or
without assigning any cause, by the affirmative vote of at least eighty percent
(80%) of the outstanding voting stock present in person or represented by proxy,
entitled to vote in respect thereof, at an annual meeting or at any special
meeting duly called.
SECTION 11. VACANCIES.
Whenever any vacancy shall occur among the directors, the remaining Directors
shall constitute the directors of the Corporation until such vacancy is filled
or until the number of Directors is changed pursuant to Section 8 hereof. Except
in cases where a Director is removed as provided by law and these Regulations
and his successor is elected by the shareholders, the remaining directors may;
by a vote of a majority of their number, fill any vacancy for the unexpired
term. A majority of the Directors then in office may also fill any vacancy that
results from an increase in the number of Directors.
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SECTION 12. ORGANIZATION MEETING.
Immediately after each annual meeting of the shareholders, or each special
meeting held in lieu thereof, the Board of Directors, including the newly
elected members, if a quorum thereof is present, shall hold an organization
meeting at the same place or at such other place within a 10 mile radius as may
have been fixed by the Chairman of the Board or the President prior to such
meeting of the shareholders, provided that the Directors and nominees present
are advised of the different location, for the purpose of electing officers and
transacting any other business. Notice of such meeting need not be given. If for
any reason such organization meeting is not held at such time, a special meeting
for such purpose shall be held as soon thereafter as practicable.
SECTION 13. REGULAR MEETINGS.
Regular meetings of the Board of Directors for the transaction of any business
may be held at such times and places as may be determined by the Board of
Directors. The Secretary shall give to each director at least five (5) days
written notice of each such meeting.
SECTION 14. SPECIAL MEETINGS.
Special meetings of the Board of Directors may be held at any time or place upon
call by the Chairman of the Board, the President, or any five directors. Notice
of each such meeting shall be given to each director by letter, telegram or
telephone or in person not less than forty-eight (48) hours prior to such
meeting; provided, however, that such notice shall be deemed to have been waived
by the Directors attending or voting at any such meeting, without protesting the
lack of proper notice, and may be waived in writing or by telegram by any
Director either before or after such meeting. Unless otherwise limited in the
notice thereof, any business may be transacted at any organization, regular or
special meeting.
SECTION 15. QUORUM.
At all meetings of the Board of Directors a majority of the Directors in office
at the time shall constitute a quorum for the transaction of business.
SECTION 16. COMPENSATION.
If so determined by the Board of Directors, all or any members of the Board of
Directors or of any committee of the Board shall be paid for their services and
given such benefits as may be determined from time to time by the Board of
Directors; and such compensation may be in addition to that received by any
director or any member of a committee as an officer or employee of the
Corporation. Non-resident members may be reimbursed for expenses reasonably
incurred by them in attending such meetings.
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SECTION 17. APPOINTMENT.
The Board of Directors may from time to time, by resolution passed by a majority
of the whole Board, appoint certain of its members, but not less than three (3)
in any case, to act as a committee or committees in the intervals between
meetings of the Board and may delegate to such committee or committees any of
the authority of the Board, however conferred (subject to the control and
direction of the Board) other than the power to fill any vacancy among the
Directors or in any committee of the Directors. The authority of any committee
of the directors shall be subject to any limitations and conditions set by the
Board. Any act or authorization of an act by any such committee within the
authority delegated to it shall be as effective for all purposes, as the act or
authorized action of the Directors. All action or authorization of action by any
committee shall be reported to the Board of Directors at its first meeting
thereafter, and, if the rights of third parties have not intervened, shall be
subject to revision or rescission by the Board. In every case, the affirmative
vote of a majority or the consent of all of the members of a committee shall be
necessary for the approval of any action, but action may be taken by a committee
without a formal meeting or written consent.
SECTION 18. EXECUTIVE COMMITTEE.
In particular, the Board of Directors may create from its membership and define
the powers and duties of an Executive Committee. During the intervals between
meetings of the Board of Directors, the Executive Committee shall possess and
may exercise under the control and direction of the Board all of the powers of
the Board of Directors in the management and control of the business of the
Corporation. All action taken by the Executive Committee shall be reported to
the Board of Directors at its first meeting thereafter, and, if the rights of
third parties have not intervened, shall be subject to revision or rescission by
the Board. In every case, the affirmative vote of a majority or the consent of
all of the members of the Executive Committee shall be necessary for the
approval of any action, but action may be taken by the Executive Committee
without a formal meeting or written consent. The Executive Committee shall meet
at the call of any member thereof.
OFFICERS
SECTION 19. OFFICERS DESIGNATED.
The officers of the Corporation shall be elected by the Board of Directors at
their organization meeting or at a special meeting held in lieu thereof. The
officers of the Corporation shall consist of the President, a Secretary and a
Treasurer, and, if so determined by the Board of Directors, a Chairman of the
Board, one or more Vice Presidents, a Controller and such other officers and
assistant officers as the Board may determine. The Chairman of the Board shall
be elected from among the directors. The other officers may, but need not be,
elected from among the Directors. Any two offices
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may be held by the same person, but in any case where the action of more than
one officer is required no one person shall act in more than one capacity.
SECTION 20. TENURE OF OFFICE.
The officers of the Corporation shall hold office until the next organization
meeting of the Board of Directors and until their respective successors are
chosen and qualified, except in case of resignation, death or removal. The Board
of Directors may remove any officer at any time with or without cause by a
majority vote of the directors in office at the time. A vacancy, however
created, in any office may be filled by the Board of Directors.
SECTION 21. POWERS AND DUTIES OF OFFICERS IN GENERAL.
The powers and duties of the officers shall be exercised in all cases subject to
such directions as the Board of Directors may see fit to give. The respective
powers and duties hereinafter set forth are subject to alteration by the Board
of Directors. The Board of Directors is also authorized to delegate the duties
of any officer to any other officer, employee or committee and to require the
performance of duties in addition to those provided for herein.
SECTION 22. CHAIRMAN OF THE BOARD.
The Chairman of the Board shall preside at meetings of the Board of Directors
and, if the Chairman of the Board is the chief executive officer of the
Corporation, at meetings of the shareholders.
SECTION 23. PRESIDENT.
The President shall preside at all meetings of the shareholders and directors
where the Chairman of the Board does not preside.
SECTION 24. VICE PRESIDENTS.
In the absence or disability of the President, the Vice Presidents, in the order
designated by the Board of Directors, shall perform the duties of the President.
If so determined by the Board of Directors, a Vice President may be designated
as being in charge of a specified function or of a specified division.
SECTION 25. SECRETARY, TREASURER AND CONTROLLER.
The Secretary, the Treasurer and the Controller (if any) shall perform such
duties as are indicated by their respective titles, subject to the provisions of
Section 21 above. The Secretary shall have custody of the corporate seal, and
shall have the duty to record the proceedings of the shareholders and directors
in a book to be kept for that purpose.
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SECTION 26. OTHER OFFICERS.
All other officers shall have such powers and duties as may be prescribed by the
Board of Directors or, in the absence of their action, by the respective
officers having supervision over them.
SECTION 27. COMPENSATION.
The Board of Directors is authorized to determine, or to provide the method of
determining, or to empower a special committee of its members to determine, the
compensation of all officers.
SECTION 28. SIGNING CHECKS AND OTHER INSTRUMENTS.
The Board of Directors is authorized to determine, or to provide the method of
determining, the manner in which deeds, contracts and other obligations and
instruments of the Corporation shall be signed. However, persons doing business
with the Corporation shall be entitled to rely upon the action of the Chairman
of the Board, the President, any Vice President, the Secretary, the Treasurer or
the Controller in executing deeds, contracts and other obligations and
instruments in the name of the Corporation as having been duly authorized. The
Board of Directors of the Corporation is authorized to designate depositories of
the funds of the Corporation and to determine, or provide the method of
determining, the manner in which checks, notes, bills of exchange and similar
instruments shall be signed, countersigned or endorsed.
INDEMNIFICATION
SECTION 29. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Corporation shall indemnify Directors or former Directors, and may indemnify
any officer or former officer of the Corporation and any person who is or has
served at the request of the Corporation as director, officer or trustee of
another corporation, partnership, joint venture, trust or other enterprise (and
his heirs, executors and administrators), against expenses, including attorneys'
fees, judgments, fines and amounts paid in settlement, actually and reasonably
incurred by him by reason of the fact that he is or was such director, officer
or trustee in connection with any threatened, pending or completed action, suit
or proceeding, whether civil, criminal, administrative or investigative to the
fullest extent permitted by, and according to the procedures and requirements
set forth in, the Ohio General Corporation Law as the same may be in effect from
time to time. The indemnification provided for herein shall not be deemed to
restrict the right of the Corporation to (i) indemnify employees, agents and
others as permitted by such Law, (ii) purchase and maintain insurance or provide
similar protection on behalf of directors, officers or such other persons
against liabilities asserted against them or expenses incurred by them arising
out of their service to the Corporation as contemplated herein, and (iii) enter
into agreements with such directors, officers, employees, agents or others
indemnifying them against any and all liabilities (or such lesser
indemnification as
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may be provided in such agreements) asserted against them or incurred by them
arising out of their service to the Corporation as contemplated herein.
The Corporation shall pay Directors or former directors, and may pay any officer
or former officer of the Corporation and any person who is or has served at the
request of the Corporation as director, officer or trustee of another
corporation, partnership, joint venture, trust or other enterprise (and his
heirs, executors and administrators) expenses in defending the action, suit, or
proceeding as they are incurred, in advance of the final disposition of the
action, suit, or proceeding, upon receipt of an undertaking by or on behalf of
such person in which he agrees (a) to repay such amount if it is proved by clear
and convincing evidence in a court of competent jurisdiction that his action or
failure to act involved an act or omission undertaken with deliberate intent to
cause injury to the corporation or undertaken with reckless disregard for the
best interests of the corporation and (b) Reasonably cooperate with the
corporation concerning the action, suit, or proceeding.
CORPORATE SEAL
SECTION 30. CORPORATE SEAL
The corporate seal of the Corporation shall be circular in form and shall have
inscribed thereon the name of the Corporation.
PROVISIONS IN ARTICLES OF INCORPORATION
SECTION 31. PROVISIONS IN ARTICLES OF INCORPORATION.
These Regulations are at all times subject to the provisions of the Articles of
Incorporation of the Corporation as the same may be in effect from time to time.
LOST CERTIFICATES
SECTION 32. LOST CERTIFICATES.
The Directors may direct, or establish procedures for, the issuance of a new
certificate in place of any certificate theretofore issued by the Corporation
alleged to have been lost, stolen or destroyed, upon such terms and conditions
as they may deem advisable.
RECORD DATES
SECTION 33. RECORD DATES.
For any lawful purpose, including, without limitation, the determination of the
shareholders who are entitled to: (i) receive notice of or to vote at a meeting
of shareholders; (ii) receive payment of any dividend or distribution; (iii)
receive or exercise rights or purchase of or subscription for, or exchange or
conversion of, shares or other securities, subject to contract rights with
respect thereto; or (iv) participate in the
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execution of written consents, waivers, or releases, the directors may fix a
record date which shall not be a date earlier than the date on which the record
date is fixed and, in the cases provided for in clauses (i), (ii) and (iii)
above, shall not be more than sixty (60) nor fewer than ten (10) days, unless
the Articles of Incorporation specify a shorter or a longer period for such
purpose, preceding the date of the meeting of the shareholders, or the date
fixed for the payment of any dividend or distribution, or the date fixed for the
receipt or the exercise of rights, as the case may be.
FISCAL YEAR
SECTION 34. FISCAL YEAR
The fiscal year of the Corporation shall end on December 31each year unless and
until the Board of Directors shall otherwise determine.
AMENDMENTS
SECTION 35. AMENDMENTS.
These Regulations may be altered, changed or amended in any respect or
superseded by new Regulations in whole or in part, by the affirmative vote of
the holders of a majority of the voting stock of the Corporation present in
person or by proxy at an annual or special meeting called for such purpose.
Notwithstanding and notwithstanding the fact that a lesser percentage may be
specified by law or in any agreement with any national securities exchange or
any other provision of these Regulations, the amendment, alteration, change or
repeal of, or adoption of any provisions inconsistent with, Section 8, 9, or 10
of these Regulations shall require the affirmative vote of at least eighty
percent (80%) of the outstanding voting stock of the Corporation, present in
person or by proxy, at any annual meeting or special meeting duly called for the
purpose of acting on any such amendment, alteration, change, repeal or adoption,
unless such amendment, alteration, change, repeal or adoption has been
recommended by at least two-thirds of the Board of Directors of the Corporation
then in office.
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EXHIBIT 5.1
SQUIRE, SANDERS & DEMPSEY L.L.P.
4900 KEY TOWER
127 PUBLIC SQUARE
CLEVELAND, OHIO 44114-1304
Ohio Legacy Corp
305 West Liberty Street
Wooster, Ohio 44691
Ladies and Gentlemen:
Reference is made to the Registration Statement on Form SB-2
("Registration Statement") to be filed by Ohio Legacy Corp with the Securities
and Exchange Commission on ______, 1999 with respect to the issuance of up to
1,200,000 of its common shares, no par value ("Common Shares"). We are familiar
with the Registration Statement, and we have examined such documents and
certificates and considered such matters of law as we deemed necessary for the
purpose of rendering this opinion.
Based upon the foregoing, we are of the opinion that the Common Shares
to be offered pursuant to the Registration Statement, when issued in accordance
with the provisions thereof, will be legally issued, fully paid and
nonassessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement.
Respectfully submitted,
Squire, Sanders & Dempsey L.L.P.
<PAGE> 1
EXHIBIT 10.1
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, Restricted Stock, Stock Appreciation
Rights, and/or Units may be granted from time to time to Eligible Persons of the
Corporation and of any of its subsidiaries (collectively, the "Subsidiaries"),
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 VII.
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DIRECTOR OPTION AGREEMENT. The agreement entered into with respect to a
Director Option pursuant to Article VII.
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, (ii) Non-Employee Director of the Company or a Subsidiary,
including a Non-Employee Director serving on the Committee, or (iii) consultant
to the Company or a Subsidiary, 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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(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 VII.
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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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, Restricted Stock, Units and SARs described herein.
RIGHTS AGREEMENT. Any of an Option Agreement, a Restricted Stock Grant
Agreement, a Unit Agreement, an SAR Agreement, or a Director Option Agreement.
SAR. The Right of an SAR recipient to receive cash when, as and in the
amounts described in Article VI.
SAR AGREEMENT. The agreement between the Corporation and an SAR
recipient with respect to the SAR awarded to the SAR recipient, including such
terms and conditions as are necessary or appropriate under Article VI.
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.
UNITS. The Right of a Unit recipient to receive a combination of cash
and Stock when, as and in the amounts described in Article V.
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UNIT AGREEMENT. The agreement between the Corporation and a Unit
recipient with respect to the award of Units to the Unit recipient, including
such terms and conditions as are necessary or appropriate under Article V.
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.
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;
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(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
(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.
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(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.
(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, Restricted Stock, SARs and Units under this Plan.
The total number of shares of Stock for which, or with respect
to which, Rights may be granted (including the number of
shares of Stock in respect of which SARs and Units 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 8.3, 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
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(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.
(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, V, VI and VII, in each case together with Articles I, II and VIII, 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
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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 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.
(b) Subject to the approval of the Board and the provisions of
Section 3.2(a) (as to the establishment of the Exercise Price
of an Option on the date of grant), the Committee may
establish that the Exercise Price of an Option shall be
adjusted upward or downward, on a quarterly basis based upon
the market value performance of the Common Stock in comparison
with the aggregate market value performance of one or more
indices composed of publicly-traded financial institutions and
financial institution holding companies deemed by the
Committee to be similar (in terms of asset size,
capitalization, trading volumes and other factors deemed
relevant by the Committee) to the Company (an "Index" and the
"Indices"); provided, however, that the Exercise Price of an
ISO shall not be adjustable if, under the Code, such
adjustable Exercise Price would disqualify the ISO as an ISO.
The Committee may utilize Indices published by third parties
and/or may construct one or more Indices meeting the
characteristics described above. The Indices utilized will be
recalculated quarterly, including in such quarterly
recalculation such adjustments for stock splits, reverse stock
splits and stock dividends of the companies in the indices and
of the Company as are appropriate. Each such Index shall
include no fewer than fifteen (15) publicly-traded financial
institutions and financial institution holding companies. If
more than one Index is utilized by the Committee, it may give
such weighting to each Index utilized as the Committee may
determine in its sole discretion, consistent with the
provisions of this Article III.
SECTION 3.3. TERMS AND CONDITIONS OF OPTIONS.
(a) All Options must be granted within ten (10) years of the
Effective Date.
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(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 one year (1) 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 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
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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 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 Optionee
(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, or (iv) 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
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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 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.
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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.
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
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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 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
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<PAGE> 15
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.
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
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<PAGE> 16
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.
SECTION 4.7. 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.
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<PAGE> 17
ARTICLE V
DISCRETIONARY GRANT OF LONG-TERM
INCENTIVE COMPENSATION UNITS
SECTION 5.1. AWARDS OF UNITS.
(a) The Company may grant awards of Units to Eligible Persons as
provided in this Article V. Units will be deemed granted only
upon (i) authorization by the Committee, (ii) approval by the
Board, and (iii) the execution and delivery of a Unit
Agreement by the Eligible Person to whom Units are to be
granted (a "Unit recipient") and an authorized officer of the
Company. Units will not be deemed granted merely upon
authorization by the Committee. Units may be granted at such
times, in such amounts and to such Unit recipients as the
Committee may determine, subject to approval by the Board and
to the limitations and the terms and conditions in Sections
5.2 and 5.3 below.
(b) Each grant of Units pursuant to this Article V will be
evidenced by a Unit Award Agreement between the Company and
the Unit recipient in form and substance satisfactory to the
Committee in its sole discretion, consistent with this Article
V.
(c) Except as otherwise provided herein, Units will be distributed
only after the end of a performance period of ____ or more
years ("Performance Period") beginning with the year in which
such Units were awarded. The Performance Period shall be set
by the Committee and the Board for each year's awards.
(d) The percentage of the Units awarded under this Section 5.1 or
credited pursuant to Section 5.5 that will be distributed to
Unit recipients shall depend on the levels of financial
performance and other performance objectives achieved during
each year of the Performance Period; provided, however, that
the Committee may, subject to approval of the Board, adopt one
or more performance categories or eliminate all performance
categories other than financial performance. Financial
performance shall be based on the consolidated results of the
Company and its Subsidiaries prepared on the same basis as the
financial statements published for financial reporting
purposes and determined in accordance with Section 5.1(e)
below. Other performance categories adopted by the Committee
shall be based on measurements of performance as the Committee
shall deem appropriate.
(e) Distributions of Units awarded will be based on the Company's
financial performance with results from other performance
categories applied as a factor, not exceeding one (1), against
financial results. The annual financial and other performance
results will be averaged over the Performance Period and
translated into percentage factors according to granted
criteria established by the Committee, subject to approval of
the Board, for the entire Performance Period. The resulting
percentage factors shall determine the percentage of Units to
be distributed. No distributions of Units, based on financial
performance and other performance, shall be made if a minimum
average percentage of the applicable
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<PAGE> 18
measurement of performance, to be established by the Committee
and approved by the Board, is not achieved for the Performance
Period. The performance levels achieved for each Performance
Period and percentage of Units to be distributed shall be
conclusively determined by the Committee, subject to approval
by the Board.
(f) The percentage of Units awarded which Unit recipients become
entitled to receive based on the levels of performance
(including those units credited under Section 5.5) will be
determined as soon as practicable after each Performance
Period and are called "Retained Units."
(g) As soon as practical after determination of the number of
Retained Units, such Retained Units shall be distributed in
the form of a combination of shares and cash in the relative
percentages as between the two as determined by the Committee,
subject to approval by the Board. The Units awarded, but which
Unit recipients do not become entitled to receive shall be
canceled.
(h) Notwithstanding any other provision in this Article V, the
Committee, if it determines that it is necessary or advisable
under the circumstances, may, subject to approval by the
Board, adopt rules pursuant to which Eligible Persons by
virtue of hire, or promotion or special individual
circumstances, may be granted the total award of Units or any
portion thereof, with respect to one or more Performance
Periods that began in prior years and at the time of the
awards have not yet been completed.
SECTION 5.2. LIMITATIONS.
The aggregate number of shares of Stock potentially distributable under
all Units granted, including those Units credited pursuant to Section 5.5, shall
not exceed the total number of Stock remaining in the Plan Pool, less all shares
of Stock potentially acquirable under, or underlying, all other Rights
outstanding under this Plan.
SECTION 5.3. TERMS AND CONDITIONS.
(a) All awards of Units must be made within ten (10) years of the
Effective Date.
(b) The award of Units shall be evidenced by a Unit Award
Agreement in form and substance satisfactory to the Committee
in its discretion, consistent with the provisions of this
Article V.
(c) At the discretion of the Committee and the Board, a Unit
recipient, as a condition to the award of Units, may be
required to execute and deliver to the Company a
confidentiality agreement approved by the Committee.
(d) Nothing contained in this Article V, any Unit Award Agreement
or in any other agreement executed in connection with the
award of Units under this Article V
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will confer upon any Unit recipient any right with respect to
the continuation of his or her status as an employee of the
Company or any of its Subsidiaries.
(e) A Unit recipient shall have no rights as a shareholder of the
Company with respect to any Units until the distribution of
shares of Stock in connection therewith. No adjustment shall
be made in the number of Units 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, except as
provided in Sections 2.3(b) and 5.6(a).
SECTION 5.4. SPECIAL DISTRIBUTION RULES.
(a) Except as otherwise provided in this Section 5.4, a Unit
recipient must be an Eligible Person from the date a Unit is
awarded to him or her continuously through and including the
date of distribution of such Unit.
(b) In case of the Death or Disability of a Unit recipient prior
to the end of any Performance Period, the number of Units
awarded to the Unit recipient for such Performance Period
shall be reduced pro rata based on the number of months
remaining in the Performance Period after the month of Death
or Disability. The remaining Units, reduced in the discretion
of the Committee and the Board to the percentage indicated by
the levels of performance achieved prior to the date of Death
or Disability, if any, shall be distributed within a
reasonable time after Death or Disability. All other Units
awarded to the Unit recipient for such Performance Period
shall be canceled.
(c) If Unit recipient enters into Retirement prior to the end of
any Performance Period, the Units awarded to such Unit
recipient under this Article V and not yet distributed shall
be prorated to the end of the year in which such Retirement
occurs and distributed at the end of the Performance Period
based upon the Company's performance for such period.
(d) In the event of the termination of the Unit recipient's status
as an Eligible Person prior to the end of any Performance
Period for any reason other than Death, Disability or
Retirement, all Units awarded to the Unit recipient with
respect to any such Performance Period shall be immediately
forfeited and canceled.
SECTION 5.5. DIVIDEND EQUIVALENT UNITS.
On each record date for dividends on the Common Stock, an amount equal
to the dividend payable on one share of Common Stock will be determined and
credited (the "Dividend Equivalent Credit") on the payment date to each Unit
recipient's account for each Unit which has been awarded to the Unit recipient
and not distributed or canceled. Such amount will be converted within the
account to an additional number of Units equal to the number of shares of Common
Stock that could be purchased at Fair Market Value on such dividend payment
date.
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<PAGE> 20
These Units will be treated for purposes of this Article V in the same
manner as those Units granted pursuant to Section 5.1.
SECTION 5.6. ADJUSTMENTS.
(a) In addition to the provisions of Section 2.3(b), if an
extraordinary change occurs during a Performance Period which
significantly alters the basis upon which the performance
levels were established under Section 5.1 for that Performance
Period, to avoid distortion in the operation of this Article
V, but subject to Section 5.2, the Committee may, subject to
approval by the Board, make adjustments in such performance
levels to preserve the incentive features of this Article V,
whether before or after the end of the Performance Period, to
the extent it deems appropriate in its sole discretion, which
adjustments shall be conclusive and binding upon all parties
concerned. Such changes may include, without limitation,
adoption of, or changes in, accounting practices, tax laws and
regulatory or other laws or regulations; economic changes not
in the ordinary course of business cycles; or compliance with
judicial decrees or other legal authorities.
(b) At any time prior to the date of consummation of a Change in
Control Transaction, the Committee may, subject to approval by
the Board, determine that all or any part of the Units
theretofore awarded under this Article V shall become
immediately distributable (reduced pro rata based on the
number of months remaining in the Performance Period after the
consummation of the Change in Control Transaction) and may
thereafter be distributed 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 distribution would result in
an "excess parachute payment" within the meaning of Section
280G of the Code). Any Units that have not been distributed
before the date of consummation of Use 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 awards of Units theretofore made, or
the substitution for such units of awards of compensation
units having comparable characteristics under a long term
incentive award plan of a successor employer corporation, or a
parent or a subsidiary thereof, with appropriate adjustments,
in which event the awards of Units theretofore made shall
continue in the manner and under the terms so provided.
SECTION 5.7. OTHER CONDITIONS.
(a) No person shall have any claim to be granted an award of Units
under this Article V and there is no obligation for uniformity
of treatment of Eligible Persons or Unit recipients under this
Article IV.
(b) The Company shall have the right to deduct from any
distribution or payment in cash under this Article V, and the
Unit recipient or other person receiving shares
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<PAGE> 21
of Stock under this Article V shall be required to pay to the
Company, any Tax Withholding Liability. The number of shares
of Stock to be distributed to any individual Unit recipient
may be reduced by the number of shares of Stock, the Fair
Market Value of which on the Distribution Date (as defined in
Section 5.7(d) below) is equivalent to the cash necessary to
pay any Tax Withholding Liability, where the cash to be
distributed is not sufficient to pay such Tax Withholding
Liability, or the Unit recipient may deliver to the Company
cash sufficient to pay such Tax Withholding Liability.
(c) Any distribution of shares of Stock under this Article V may
be delayed until the requirements of any applicable laws or
regulations, and any stock exchange or NASDAQ-NMS
requirements, are satisfied. The shares of Stock distributed
under this Article V shall be subject to such restrictions and
conditions on disposition as counsel for the Company shall
determine to be desirable or necessary under applicable law.
(d) For the purpose of distribution of Units in cash, the value of
a Unit shall be the Fair Market Value on the Distribution
Date. Except as otherwise determined by the Committee, the
"Distribution Date" shall be the date upon which the Unit
recipient or other person is entitled to receive such
distribution.
(e) Notwithstanding any other provision of this Article V, no
Dividend Equivalent Credits shall be made and no distributions
of Units shall be made if at the time a Dividend Equivalent
Credit or distribution would otherwise have been made:
(i) The regular quarterly dividend on the Common Stock
has been omitted and not subsequently paid or there
exists any default in payment of dividends on any
such outstanding shares of capital stock of the
Corporation:
(ii) The rate of dividends on the Common Stock is lower
than at the time the Units to which the Dividend
Equivalent Credit relates were awarded, adjusted for
any change of the type referred to in Section 2.3(b).
(iii) Estimated consolidated net income of the Corporation
for the twelve month period preceding the month the
Dividend Equivalent Credit or distribution would
otherwise have been made is less than the sum of the
amount of the Dividend Equivalent Credits and Units
eligible for distribution under this Article V in
that month plus all dividends applicable to such
period on an accrual basis, either paid, declared or
accrued at the most recently paid rate, on all
outstanding shares of Common Stock; or
(iv) The Dividend Equivalent Credit or distribution would
result in a default in any agreement by which the
Corporation is bound.
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(f) In the event net income available under Section 5.7(e) above
for Dividend Equivalent Credits and awards eligible for
distribution under this Article V is sufficient to cover part
but not all of such amounts, the following order shall be
applied in making payments: (i) Dividend Equivalent Credits,
and then (ii) Units eligible for distribution under this
Article V.
SECTION 5.8. DESIGNATION OF BENEFICIARIES.
A Unit recipient may designate a beneficiary or beneficiaries to
receive all or part of the Stock and/or cash to be distributed to the Unit
recipient under this Article V in case of Death. A designation of beneficiary
may be replaced by a new designation or may be revoked by the Unit recipient at
any time. A designation or revocation shall be on a form to be provided for that
purpose and shall be signed by the Unit recipient and delivered to the
Corporation prior to the Unit recipient's Death. In case of the Unit recipient's
Death, any amounts to be distributed to the Unit recipient under this Article V
with respect to which a designation of beneficiary has been made (to the extent
it is valid and enforceable under applicable law) shall be distributed in
accordance with this Article V to the designated beneficiary or beneficiaries.
The amount distributable to a Unit recipient upon Death and not subject to such
a designation shall be distributed to the Unit recipient's estate. If there
shall be any question as to the legal right of any beneficiary to receive a
distribution under this Article V, the amount in question may be paid to the
estate of the Unit recipient, in which event the Corporation shall have no
further liability to anyone with respect to such amount.
SECTION 5.9. RESTRICTIONS ON TRANSFER.
Units granted under Article V may not be Transferred, except as
provided in Section 5.8, and, during the lifetime of the Unit recipient to whom
it was awarded, cash and stock receivable with respect to Units may be received
only by such Unit recipient.
SECTION 5.10. AMENDMENT AND DISCONTINUANCE.
No award of Units may be granted under this Article V more than ten
(10) years after the Effective Date. 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
Corporation, materially increase (other than by reason of an adjustment pursuant
to Section 2.3(b) hereof) the maximum number of shares of Stock in the Plan
Pool, materially increase the benefits accruing to Eligible Person under this
Article V or materially modify the eligibility requirements for participation
under this Article V.
SECTION 5.11. 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.
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ARTICLE VI
DISCRETIONARY GRANT OF STOCK
APPRECIATION RIGHTS
SECTION 6.1. GRANTS OF SARS.
(a) The Corporation may grant SARs under this Article VI. SARs
will be deemed granted only upon (i) authorization by the
Committee, (ii) approval by the Board, and (iii) the execution
and delivery of a SAR Agreement by the Eligible Person to whom
the SARs are to be granted (the "SAR recipient") and a duly
authorized officer of the Corporation. SARs will not be deemed
granted merely upon authorization by the Committee. The
aggregate number of shares of Stock which shall underlie SARs
granted hereunder shall not exceed the total number of shares
of Stock remaining in the Plan Pool, less all shares of Stock
potentially acquirable under or underlying all other Rights
outstanding under this Plan.
(b) Each grant of SARs pursuant to this Article VI shall be
evidenced by a SAR Agreement between the Corporation and the
SAR recipient, in form and substance satisfactory to the
Committee in its sole discretion, consistent with this Article
VI.
SECTION 6.2. TERMS AND CONDITIONS OF SARS.
(a) All SARs must be granted within ten (10) years of the
Effective Date.
(b) Each SAR issued pursuant to this Article VI shall have an
initial base value (the "Base Value") equal to the Fair Market
Value of a share of Common Stock on the date of issuance of
the SAR.
(c) Subject to the approval of the Board and the provisions of
Section 6.2(b) (as to the establishment of the initial Base
Value of a SAR), the Committee may establish that the Base
Value of a SAR shall be adjusted, upward or downward, on a
quarterly basis, based upon the market value performance of
the Common Stock in comparison with the aggregate market value
performance of the Index or Indices utilized under Section
3.2(b).
(d) At the discretion of the Committee and the Board, a SAR
recipient, as a condition to the granting of a SAR, must
execute and deliver to the Corporation a confidential
information agreement approved by the Committee.
(e) Nothing contained in this Article VI, any SAR Agreement or in
any other agreement executed in connection with the granting
of a SAR under this Article VI will confer upon any SAR
recipient any right with respect to the continuation of his or
her status as an employee of the Corporation or any of its
Subsidiaries.
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<PAGE> 24
(f) Except as otherwise provided herein, each SAR Agreement may
specify the period or periods of time within which each SAR or
portion thereof will first become exercisable (the "SAR
Vesting Period"). Such SAR Vesting Periods will be fixed by
the Committee, subject to approval by the Board, and may be
accelerated or shortened by the Committee, subject to approval
by the Board.
(g) SARs relating to no less than one hundred (100) shares of
Stock may be exercised at any one time unless the number
exercised is the total number at that time exercisable under
all SARs granted to the SAR recipient.
(h) A SAR recipient shall have no rights as a shareholder of the
Corporation with respect to any shares of Stock underlying
such SAR. 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,
except as provided in Sections 2.3(b) and 6.2(c).
SECTION 6.3. RESTRICTIONS ON TRANSFER OF SARS.
SARs granted under this Article VI may not be Transferred, except as
provided in Section 6.7, and during the lifetime of the SAR recipient to whom it
was granted, may be exercised only by such SAR recipient.
SECTION 6.4. EXERCISE OF SARS.
(a) A SAR recipient (or his or her executors or administrators, or
heirs or legatees) shall exercise a SAR by giving written
notice of such exercise to the Corporation. SARs may be
exercised only upon the completion of the SAR Vesting Period,
if any, applicable to such SAR (the date such notice is
received by the Corporation being referred to herein as the
"SAR Exercise Date").
(b) Within ten (10) business days of the SAR Exercise Date
applicable to a SAR exercised in accordance with Section
6.4(a), the SAR recipient shall be paid in cash the difference
between the Base Value of such SAR (as adjusted, if applicable
under Section 6.2(c), as of the most recently preceding
quarterly period) and the Fair Market Value of the Common
Stock as of the SAR Exercise Date, as such difference is
reduced by the Company's Tax Withholding Liability arising
from such exercise.
SECTION 6.5. TERMINATION OF SARS.
Subject to approval by the Board, the Committee shall determine, and
each SAR Agreement shall state, the expiration date or dates of each SAR, but
such expiration date shall be not later than ten (10) years after the date such
SAR is granted (the "SAR Period"). Subject to approval by the Board, the
Committee may extend the expiration date or dates of a SAR Period
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<PAGE> 25
after such date was originally set; provided, however, such expiration date may
not exceed the maximum expiration date described in this Section 6.5(a).
SECTION 6.6. CHANGE IN CONTROL TRANSACTION.
At any time prior to the date or consummation of a Change in Control
Transaction, the Committee may, in its absolute discretion, determine that all
or any part of the SARs theretofore granted under this Article VI 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 SAR 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 SARs theretofore
granted, or the substitution for such SARs of grants of stock appreciation
rights having comparable characteristics under a stock appreciation rights plan
of a successor employer corporation or bank, or a parent or a subsidiary
thereof, with appropriate adjustments, in which event the SARs theretofore
granted shall continue in the manner and under the terms so provided.
SECTION 6.7. DESIGNATION OF BENEFICIARIES.
A SAR recipient may designate a beneficiary or beneficiaries to receive
all or part of the cash to be paid to the SAR recipient under this Article VI in
case of Death. A designation of beneficiary may be replaced by a new designation
or may be revoked by the SAR recipient at any time. A designation or revocation
shall be on a form to be provided for that purpose and shall be signed by the
SAR recipient and delivered to the Corporation prior to the SAR recipient's
Death. In case of the SAR recipient's Death, the amounts to be distributed to
the SAR recipient under this Article VI with respect to which a designation of
beneficiary has been made (to the extent it is valid and enforceable under
applicable law) shall be distributed in accordance with this Article VI to the
designated beneficiary or beneficiaries. The amount distributable to a SAR
recipient upon Death and not subject to such a designation shall be distributed
to the SAQ recipient's estate. If there shall be any question as to the legal
right of any beneficiary to receive a distribution under this Article VI, the
amount in question may be paid to the estate of the SAR recipient in which event
the Corporation shall have no further liability to anyone with respect to such
amount.
SECTION 6.8. AMENDMENT AND DISCONTINUANCE.
The Board may amend, suspend or discontinue the provisions of this
Article VI at any time or from time to time provided that no action of the Board
may, without the approval of the shareholders of the Corporation materially
increase (other than by reason of an 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 or materially
modify eligibility requirements for participation under this Article VI.
Moreover, no such action may alter or
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<PAGE> 26
impair any SAR previously granted under this Article VI without the consent of
the applicable SAR recipient.
SECTION 6.9. COMPLIANCE WITH RULE 16b-3.
With respect to persons subject to Section 16 of the 1934 Act,
transactions under this Article VI are intended to comply with all applicable
conditions of Rule l6b-3 or its successors under the 1934 Act. To the extent any
provision of this Article VI 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 VII
AUTOMATIC GRANT OF OPTIONS TO NON-EMPLOYEE DIRECTORS
SECTION 7.1. 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 7.2. 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.
(b) Subject to the approval of the Board and the provisions of
Section 7.2(a) (as to the establishment of the Exercise Price
of a Director Option on the date of grant), the Committee may
establish that the Exercise Price of a Director Option shall
be adjusted upward or downward, on a quarterly basis based
upon the market value performance of the Common Stock in
comparison with the aggregate market value performance of one
or more indices composed of publicly-traded financial
institutions and financial institution holding companies
deemed by the Committee
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<PAGE> 27
to be similar (in terms of asset size, capitalization, trading
volumes and other factors deemed relevant by the Committee) to
the Company (an "Index" and the "Indices"). The Committee may
utilize Indices published by third parties and/or may
construct one or more Indices meeting the characteristics
described above. The Indices utilized will be recalculated
quarterly, including in such quarterly recalculation such
adjustments for stock splits, reverse stock splits and stock
dividends of the companies in the indices and of the Company
as are appropriate. Each such Index shall include no fewer
than fifteen (15) publicly-traded financial institutions and
financial institution holding companies. If more than one
Index is utilized by the Committee, it may give such weighting
to each Index utilized as the Committee may determine in its
sole discretion, consistent with the provisions of this
Article VII.
SECTION 7.3 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 VII.
(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.
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<PAGE> 28
(g) Additionally and notwithstanding any other provisions of this
Article VII, 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 7.4. 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 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 7.5. 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
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<PAGE> 29
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 7.6. 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 VII
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.
SECTION 7.7. 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 VII.
SECTION 7.8. 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 VII, the applicable Director Option Agreement, and in the legends
referred to in this Section 7.8 have been complied with.
SECTION 7.9. AMENDMENT AND DISCONTINUANCE.
The Board may amend, suspend or discontinue the provisions of this
Article VII 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 VII.
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<PAGE> 30
SECTION 7.10. COMPLIANCE WITH RULE 16b-3.
With respect to persons subject to Section 16 of the 1934 Act,
transactions under this Article VII 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 VII 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 VIII
MISCELLANEOUS
SECTION 8.1. 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 8.2. NO OBLIGATION TO EXERCISE RIGHT.
The granting of a Right shall impose no obligation upon the recipient
to exercise such Right.
SECTION 8.3. 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.
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Exhibit 10.4
LEASE AGREEMENT
---------------
THIS AGREEMENT OF LEASE is made and executed at Wooster, Ohio,
effective as of August 24, 1999, by and between JACK K. and HEIDI M. GANT, their
successors and assigns (hereinafter referred to as the "Lessors"), and OHIO
LEGACY CORP., an Ohio corporation (hereinafter referred to as the "Lessee").
Subject to Section 1, Lessors lease to Lessee and Lessee leases from
Lessors, the premises described in Section 2 upon the terms, covenants and
conditions hereinafter set forth below:
1. GRACE PERIOD. The enforceability of this Lease by either party
(other than the provisions of this Section) shall be subject to the satisfaction
of the following conditions subsequent:
1. The issuance of a national bank charter to Lessee's wholly
owned subsidiary by the Office of the Comptroller of the Currency
("OCC") for a bank to be located in Wooster;
2. Completion of Lessee's initial public offering of common
stock in an amount required by the OCC (collectively "Conditions
Subsequent");
3. Obtaining all required or necessary building permits,
variances or other governmental approvals relating to the use of the
real estate.
As consideration for Lessors not seeking to enforce the provisions of
this Lease until the earlier of: (i) October 31, 1999, or (ii) the satisfaction
of the Conditions Subsequent ("Grace Period"), Lessee shall pay Lessors Five
Thousand Dollars ($5,000) upon execution of this Lease, which amount shall be
non-refundable to Lessee and shall not apply against the Rent set forth in
Section 8. Rent shall not accrue during the Grace Period. In the event the
Conditions Subsequent have not been satisfied on or before October 31, 1999,
Lessee shall have the option to extend the Grace Period until January 31, 2000
("Extended Grace Period") by delivering written notice to Lessors of such
extension along with a non-refundable payment of Twenty-five Thousand Dollars
($25,000) ("Extension Payment") on or before October 31, 1999.
In the event the Conditions Subsequent have not been satisfied on or
before January 31, 2000, Lessee shall have the option to extend the Extended
Grace Period until March 31, 2000 ("Extended Grace Period") by delivering
written notice to Lessors of such extension, along with a non-refundable payment
of Thirty Thousand Dollars ($30,000) ("Extension Payment") on or before January
31, 2000.
In the event the Conditions Subsequent have not been satisfied on or
before March 31, 2000, Lessee shall have the option to extend the Extended Grace
Period until May 31, 2000 ("Extended
<PAGE> 2
Grace Period") by delivering written notice to Lessors of such extension, along
with a non-refundable payment of Thirty Thousand Dollars ($30,000) ("Extension
Payment") on or before March 31, 2000.
In the event the Conditions Subsequent have not been satisfied on or
before May 31, 2000, Lessee shall have the option to extend the Extended Grace
Period until June 15, 2000 ("Extended Grace Period") by delivering written
notice to Lessors of such extension, along with a non-refundable payment of
Fifteen Thousand Dollars ($15,000) ("Extension Payment") on or before May 31,
2000. Lessee shall not have the right to extend the Extended Grace Period after
June 15, 2000.
The Extension Payment, if any, shall be a credit against monthly
installments of the Rent on a dollar-for-dollar basis. Lessee hereby covenants
and agrees that Lessee, and its officers, directors, and shareholders, shall
utilize their best efforts to obtain the satisfaction of the Conditions
Subsequent. In the event Lessee obtains its charter from the Office of
Comptroller of the Currency, and commences to accept deposits and make loans,
the Conditions Subsequent shall be deemed satisfied.
Upon the satisfaction of the Conditions Subsequent during
the Grace Period or Extended Grace Period, if any; or, subject to the next
subparagraph, the Lessee's failure to effectively extend the applicable Grace
Period, this Lease shall automatically become valid, binding, and fully
enforceable upon and by the parties.
During the Grace Period and Extended Grace Period, if any, Lessee may
terminate this Lease by written notice to Lessors, and neither party shall have
further rights or responsibilities hereunder, under the following circumstances:
(i) Lessee, and all it officers, directors, and shareholders,
abandon all efforts to establish a financial institution, and Lessee's
directors and officers deliver a certificate to such effect to Lessors;
or
(ii) The Conditions Subsequent have not been satisfied on or
before June 15, 2000, and Lessee has effectively extended the Grace
Period through June 15, 2000.
In the event Lessee terminates the Lease pursuant to this subsection,
Lessee shall have no claim on any payment made to Lessors hereunder, including
but not limited to the Extension Payments.
2. DESCRIPTION, CONSTRUCTION OF IMPROVEMENTS AND USE OF PREMISES.
Lessors are parties to a contract to acquire certain real estate located at 305
W. Liberty Street, Wooster, Ohio, and more particularly described in Exhibit A,
attached hereto and made a part hereof. Lessors further agree to build a
building on the real property described on Exhibit A, which building shall
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<PAGE> 3
be approximately ___________ square feet inside, together with all necessary and
related appurtenances and improvements thereto, other than as set forth below,
all which shall be built in accordance with requirements set forth in Section 3
below, and as otherwise set forth herein ("the Improvements"). The real property
described on Exhibit A and the Improvements shall hereinafter be referred to as
the "Premises." Upon completion of the Improvements, Lessee hereby agrees that
it shall use the Premises for the sole purpose of operating a full service bank
branch and Lessee's bank headquarters. Lessee shall not use the Premises for any
other purpose without first obtaining a written consent from Lessors. Lessee
shall be responsible for the construction and all related costs of those
leasehold improvements described in Exhibit B attached.
3. CONSTRUCTION OF IMPROVEMENTS.
(a) Lessors shall retain a contractor acceptable to Lessee to act as
the general contractor and shall construct or cause to be constructed upon the
Premises the above-referenced Improvements in accordance with certain plans and
specifications (the "Plans") to be prepared by Lessee's architect which shall be
approved and initialed by Lessors and Lessee upon completion of the Plans. Upon
completion of the Plans, Lessee's architect shall also prepare a detailed
construction budget which estimates all the development costs associated with
constructing the Improvements on the Premises (the "Construction Budget"), which
shall be approved and initialed by Lessors and Lessee upon completion of the
budget. The Construction Budget shall not exceed $550,000. Any amounts in excess
of $550,000 necessary to complete construction of the Premises shall be paid by
Lessee, provided that any change orders requested by Lessor shall be paid by
Lessor. Construction of the Improvements shall be subject to the following
conditions:
(i) The cost of constructing the Improvements shall be the
sole expense of Lessors except as set forth above; and
(ii) The Improvements being constructed on the Premises shall
be completed by Lessors and Lessors' contractors in a good and
workmanlike manner, pursuant to the terms of a construction contract
which has been reviewed and approved by Lessors and Lessee and which
shall be duly and properly executed by Lessors and Lessors'
contractors. As noted below, Lessors shall assign to Lessee any
warranties obtained by Lessors from any third party contractors,
covering all or part of the Premises, the maintenance and repair of
which may be the obligation of Lessee hereunder.
(b) Upon the satisfaction of the Conditions Subsequent, Lessors shall
diligently attempt to obtain a building permit and shall cause construction of
the Improvements (hereinafter being defined as the date that digging commences
for footer locations) to be commenced as soon as possible after such building
permit has been obtained, and Lessors shall proceed with reasonable diligence to
complete the construction of said Improvements within an eight month
construction period thereafter. Once construction has been commenced, Lessors
shall diligently and conscientiously pursue the construction of the Improvements
to completion. Lessee shall
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<PAGE> 4
cooperate fully in the construction process to assure the timely completion of
the Improvements. Further, Lessee agrees that Lessors shall not be held
responsible for any delay in completion of the Improvements when such delay
results from any act or omission of Lessee, or its employees or agents, strikes,
lockouts, fires, riots, unusual delay in transportation, failure of supply of
construction materials, labor, machinery or equipment, other than such failure
which results from an act or omission on the part of Lessors, natural
occurrences resulting in damage or delay or any other cause beyond the control
of Lessors, including but not limited to Y2K issues.
(c) Upon completion Lessors hereby agree that Lessors shall assign all
of its rights and options under its separate construction contracts with third
party contractors, to Lessee and that Lessee shall be a third party beneficiary
under each such contract and shall be authorized to enforce the terms thereof
and be entitled to exercise all rights of Lessors thereunder. In addition,
Lessee shall have the right to inspect the Premises and the Improvements during
construction, the right to receive notice, schedules and test results, the right
to make a checklist upon substantial completion of the Improvements, the right
to make a final inspection thereof, and the right to enforce any warranty rights
or claims in connection with the Improvements. The above rights granted to
Lessee are for the express purpose of permitting Lessee to monitor construction
of the Improvements and thereafter, during the term of this Lease, to permit
Lessee to enforce any representations and warranties and/or to cause the
applicable contractor to make any repairs required under the construction
contract.
(d) Lessors and Lessee hereby agree that no changes shall be made to
the Plans for construction of the Improvements without in each case Lessors and
Lessee agreeing in writing upon such changes and any impact which the same shall
have upon the cost of construction.
(e) Lessee acknowledges and agrees that Lessors may alter the Plans by
constructing the Building with a basement at Lessors' sole cost. Such cost shall
not be part of the Construction Budget and shall not count against the $550,000
cap. Notwithstanding anything to the contrary, the basement shall not be
considered part of the Premises and Lessors shall retain the right of exclusive
access to such basement. The basement shall not be accessed through the Lessee's
bank lobby or offices. In the event Lessors rent such basement or use it other
than for storage, the parties will agree upon a division of maintenance costs.
All utilities to the basement shall be separately metered. In the event Lessee
utilizes the basement for other than a mechanical room, Lessee shall pay rent to
Lessor in an amount the parties shall agree upon prior to Lessee's use of the
basement.
4. CONSTRUCTION FINANCING. Upon the satisfaction of the Conditions
Subsequent, Lessee shall provide Lessors with non-recourse financing for the
construction and permanent financing of the Improvements (the "Financing") in an
amount up to the Construction Budget secured by a first mortgage on the
Premises. Lessors and Lessee further agree that the amount of the Financing may
change upon completion of the Construction Budget, provided that both Lessors
and Lessee agree upon the amount of such adjustment in writing. The funds
disbursed under the
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<PAGE> 5
Financing shall accrue interest at a rate equal to the Prime Rate plus one-half
(1/2) percent per annum. The Financing loan documents shall provide that Lessors
shall make equal monthly payments of accrued interest and principal in an amount
necessary to fully amortize the loan over 180 months at the interest rate set
forth above. During the Initial Rent Period as defined in Section 8, Lessee
shall make interest only payments under the Financing Loan Documents. For
purposes of this Lease, Prime Rate shall mean the interest rate per annum
commonly known as the "New York Prime Rate," or any successor interest rate
thereto which is calculated in the same or a substantially similar manner, and
which is published from time to time in The Wall Street Journal determined at
the time of the commencement of construction.
5. TERM. The term of this Lease shall be fifteen years. The term will
be measured as commencing upon the earlier of (i) Lessee's actual occupancy of
the Premises, or (ii) the substantial completion of the Improvements. Unless
extended as hereinafter provided, the Lease shall terminate on the fifteenth
anniversary date of such commencement date. Notwithstanding, the commencement
date of the term of this Lease, the parties shall be entitled to enforce the
provisions of this Lease prior to such commencement date in accordance herewith.
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, receivership, reorganization, composition, readjustment,
liquidation, dissolution, winding-up or other proceeding affecting Lessors or
any assignee of Lessors. 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 Lessors or of any assignee of Lessors in any proceeding
or by any court in any proceeding.
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
Lessors 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
Section 13.
If not sooner terminated, this 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 Lessors 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 Lessors for
any and all damages which Lessors shall suffer by reason thereof, and Lessee
will indemnify Lessors against all claims and demands made by any succeeding
Lessee against Lessors founded upon delay by Lessors in delivering possession of
the Premises to such succeeding Lessee.
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<PAGE> 6
For the period of six months prior to the expiration of the term
hereof, including any extension or renewal hereof, Lessors shall have the right
to display on the exterior of the Premises the customary sign "For Rent",
provided that in any event such sign shall not exceed 2' by 1 1/2'; and during
such period Lessors 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.
6. 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 Lessors 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.
7. SECURITY DEPOSIT. No security deposit shall be required.
8. RENT. For the period commencing upon the earlier of (i) termination
of the Grace Period or applicable Extended Grace Period, or (ii) the
satisfaction of the Conditions Subsequent and expiring upon the earlier of (i)
the completion of the building to be located on the Premises ("Building") or
(ii) four (4) months following the commencement date set forth above ("Initial
Rent Period"), the monthly rent shall be equal to the Prime Rate plus one-half
(1/2) percent times the amount paid by Lessors to contractors under the
Construction Budget. In the event Lessor obtains construction financing from a
financial institution other than Lessee or its affiliate, the monthly rent
during the Initial Rent Period shall be zero unless the parties otherwise agree.
Following the Initial Rent Period, Lessee agrees to pay to Lessors as the
minimum base rental for the initial term of this Lease the total sum equal to
the product of 180 times the sum of Four Thousand Two Hundred Dollars ($4,200)
and an amount equal to the monthly payment necessary to fully amortize over 180
months the Construction Budget bearing interest at the Prime Rate plus one-half
percent (1/2%), plus any sales, use or rent tax or any other similar tax
assessed against rent or charges specified in this Lease, which total sum
("Rent") shall be due and payable upon the execution of this Lease, provided,
however, so long as this Lease is not in default Lessors agree to accept
payments on a monthly basis each in the amount of one-one hundred eightieth
(1/180) of the Rent. The parties acknowledge that the Rent shall not be affected
by any partial or full prepayment of the Promissory Note. All monthly
installments of the 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 246 West Liberty Street, Wooster, Ohio 44691, or such other place as Lessors
may designate from 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 last day of
a calendar month, respectively, then Lessee shall pay the rent hereunder for the
fractional first or last month, as applicable, prorated on the basis of a thirty
(30) day month.
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9. ADDITIONAL RENT. In addition to the 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 such, and shall be due and payable on demand or in 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 Lessors shall have the same rights and remedies upon Lessee's
failure to pay the same as for the nonpayment of the Rent. Lessors, at their
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 Lessors, upon demand, all of such sums, which sums shall be deemed, for the
purpose of securing the collection thereof, additional Rent hereunder.
10. RENT DURING ADJUSTMENT PERIOD. The Rent from the period commencing
on the fifth anniversary date of the Lease through the tenth anniversary date
("First Adjustment Period") shall be determined as follows: the increase in the
Rent, if any, for the First Adjustment Period shall be determined by first
multiplying the then current annual Rent times a fraction, the numerator of
which shall be the amount by which the Consumer Price Index for all Urban
Consumers, United States, all Items (1982-1984=100) published by the Bureau of
Labor Statistics of the United States Department of Labor (the "CPI Index") for
the penultimate month immediately preceding the fifth anniversary date of this
Lease exceeds the CPI Index for the penultimate month immediately preceding the
first month of the Lease, and the denominator of which shall be the CPI Index
for the penultimate month immediately preceding the first month of the Lease.
Any such increase shall then be added to the Rent and shall become the Rent for
the First Adjustment Period.
The Rent from the period commencing on the tenth anniversary date of
the Lease through the fifteenth anniversary date ("Second Adjustment Period")
shall be determined as follows: the increase in the Rent, if any, for the Second
Adjustment Period shall be determined by first multiplying the then current
annual Rent times a fraction, the numerator of which shall be the amount by
which the Consumer Price Index for all Urban Consumers, United States, all Items
(1982-1984=100) published by the Bureau of Labor Statistics of the United States
Department of Labor (the "CPI Index") for the penultimate month immediately
preceding the tenth anniversary date of this Lease exceeds the CPI Index for the
penultimate month immediately preceding the first month of the First Adjustment
Period, and the denominator of which shall be the CPI Index for the penultimate
month immediately preceding the first month of the First Adjustment Period. Any
such increase shall then be added to the Rent and shall become the Rent for the
remainder of the lease term.
In the event Lessee exercises its first option to renew the term of
this Lease for an additional five (5) years, the Rent during such first renewal
term ("Third Adjustment Period") shall be determined as follows: the increase in
the Rent, if any, for the first renewal term shall be determined by first
multiplying the then current annual Rent times a fraction, the numerator of
which shall be the amount by which the CPI Index for the penultimate month
immediately
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<PAGE> 8
preceding the fifteenth anniversary date of this Lease exceeds the CPI Index for
the penultimate month immediately preceding the first month of the Second
Adjustment Period, and the denominator of which shall be the CPI Index for the
penultimate month immediately preceding the first month of the Second Adjustment
Period. Any such increase shall be added to the Rent and shall become the Rent
for the first renewal term.
In the event Lessee exercises its second option to renew the term of
this Lease for a second five-year renewal term, the Rent during such second
renewal term shall be determined by first multiplying the then current annual
Rent times a fraction, the numerator of which shall be the amount by which the
CPI Index for the penultimate month immediately preceding the twentieth
anniversary date of this Lease exceeds the CPI Index for the penultimate month
immediately preceding the first month of the Third Adjustment Period, and the
denominator of which shall be the CPI Index for the penultimate month
immediately preceding the first month of the Third Adjustment Period. Any such
increase shall be added to the Rent and shall become the Rent for the second
renewal term.
In the event that the CPI Index ceases to be published at any time
during the terms of this Lease, or if a substantial change is made in the method
of establishing the CPI Index, then the determination of the adjustment in the
Rent shall be made with the use of such comparable statistics on the cost of
living in the United States as shall be selected by Lessors. Notwithstanding any
term to the contrary, in no event shall the Rent decrease.
11. COVENANTS OF LESSEE. Lessee hereby covenants with Lessors that
during the term of this Lease:
(A) PAYMENT OF RENT. As provided in Section 8 above, Lessee
will promptly pay the Rent when due at the office of Lessors at 246 W.
Liberty Street, Wooster, Ohio 44691, or at such other place as Lessors
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.
Other than all necessary wiring, conduits, and other fixtures
which are necessary to provide basic telephone and other data
transmission services to the building, and the conduit capacity for
Lessee to expand such capabilities which are included in the Plans,
Lessee shall be responsible for providing any telephones, and telephone
or data transmission equipment necessary for supplying telephone or
data processing services to the Premises. However, Lessors shall be
responsible for bringing all of the utilities to the Premises and for
installing the same to the Building thereon as required by the Plans.
(C) REAL ESTATE TAXES. Lessee shall pay, at least five
business days prior, when due, all real estate taxes and assessments,
general and special assessments, fees or late
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<PAGE> 9
charges, or any other tax imposed or levied against the Premises and
the buildings and improvements thereon ("Taxes") relating to each
calendar year during the term of this Lease. Lessor shall be
responsible for Taxes due and payable during the first year of this
Lease relating to the period prior to the term of the Lease. Five days
prior to the applicable due date, Lessee shall provide proof of payment
of the Taxes to Lessors. 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 Lessors 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 and the number of days which the Premises
are unimproved.
(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, at its sole expense, shall
keep and maintain all portions of 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, at 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 excepted). At its sole expense, Lessee
shall maintain the exterior of the Premises (including all signs,
parking lot, and abutting landscape and sidewalks) in good order and
repair, keeping them clear of all rubbish, debris, dirt, ice, snow and
other obstacles. In the event a single item of repair or maintenance to
the Premises exceeds $5,000, Lessee shall not commence such work
(unless an emergency or required to prevent additional damage to the
Premises) without Lessors' prior consent, which consent shall not be
unreasonably withheld.
(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
Section 2 and for no other purpose whatsoever. Lessee will use and
occupy the Premises in a careful, safe, and proper 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.
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<PAGE> 10
(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, involve 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) LESSORS' ENTRY. Lessee will permit Lessors or their 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 Lessors.
(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 Lessors 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
Lessors against the lien within the thirty (30) day period, Lessors, in
their sole discretion, may pay and discharge the lien and relieve the
Premises. Lessee agrees to repay and reimburse Lessors upon demand, as
additional Rent, for any amount paid by Lessors to discharge a lien
with interest, at a rate equal to ten percent (10%) per annum.
Lessee shall be responsible for preparing and filing, subject
to Lessors' review and approval, all notices of commencement and other
documents required of property 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
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<PAGE> 11
unsatisfied during the period of the contest and any appeal therefrom,
unless the nonpayment of any of the items would materially endanger the
interest of the Lessors or the Premises or any portion would be subject
to loss or forfeiture. If nonpayment would impair the Lessors' 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 Lessors; provided, however,
that Lessee shall first notify the Lessors of their intention to
contest the lien. Lessors will cooperate fully with the Lessee in any
such contest. Lessee shall defend and hold harmless the Lessors from
any loss, cost or expenses Lessors 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 Lessors upon a showing of Lessee's reasonable need
for such leasehold improvements. All leasehold improvements including
business fixtures 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 Lessors. At the expiration of
this Lease (either upon the Termination Date or upon such earlier
termination as provided in this Lease) all such business fixtures and
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 Lessors without payment of any kind to
Lessee.
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. In the event the removal causes damage to the
Premises, Lessee shall restore the Premises to the same condition as
existed prior to the removal.
(L) INSURANCE. At its sole cost and expense, Lessee will
procure and maintain in force during the term of this Lease (including
construction) policies of: (i) commercial (general liability)
insurance, covering both Lessee and Lessors (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; and (ii) fire and extended coverage casualty
insurance on the Premises, including all additions and leasehold
improvements thereto in an amount equal to the replacement value of the
Premises. The amount of insurance shall be reviewed from time to time
by the parties to assure such amounts remain reasonable in light of
inflation and the general business environment. Any change shall be
made promptly. 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 Lessors as an
additional named insured, and each such policy shall contain an
agreement or endorsement
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that such policy will not be canceled by the insurer without at least
ten days prior notice to Lessors and Lessee.
(M) PERSONAL PROPERTY 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, stock in trade,
equipment, and fixtures).
(N) INDEMNITY BY LESSEE. Lessee shall indemnify, hold harmless
and defend Lessors 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 Section 11(g);
(ii) any loss of life, personal injury and/or damage
to property arising from or 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 part
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.
(O) 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 prior written
consent of the Lessors, which consent shall not be
unreasonably withheld. An assignment for the benefit of
creditors of Lessee or by operation of law, or by the order or
action of any governmental agency, shall not be effective to
transfer or assign the Lessee's interest without and unless
the Lessors first consent in writing. If a sublease or
assignment is made as provided in this Section, Lessee shall
pay Lessors a charge of Five Hundred Dollars ($500) to
reimburse Lessors for all of the necessary legal and
accounting services required.
(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 Lessors' 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) Lessors consent to any assignment, encumbrance,
subletting, occupation, lien or other transfer shall not
release Lessee from any of Lessee's obligations under
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<PAGE> 13
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 Section 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.
(v) Notwithstanding anything to the contrary, Lessors
acknowledge that Lessee intends to assign this Lease to its
subsidiary, a federally chartered national bank, upon the
completion of such subsidiary's formation.
(P) LATE CHARGES. If payment due to Lessors from Lessee is not
received by Lessors within ten (10) days after the due date, a "late
charge" of $25.00 may be charged by Lessors 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 Lessors upon demand.
(Q) 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 Lessors 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 tendered, plus the late
charges provided in this Lease, plus the One Hundred Dollar ($100.00)
charge required by this Section.
(R) MORTGAGE SUBORDINATION.
(i) Lessors shall have the right to demand and obtain from
Lessee a subordination of Lessee's lien arising by virtue of this
lease, thereby subordinating Lessee's lien in favor of a mortgage
arising from a mortgage loan, or in favor of any mortgage lien of any
refinancing or replacing mortgage loan that may become necessary or
desirable to Lessors from time to time in the future, and Lessee upon
demand by Lessors for same, agrees to execute at any and all times such
instruments that may be required by any lending institution or
prospective mortgagee in order to effectuate such subordination of
Lessee's lien, provided that such documents or agreements are
reasonably acceptable to Lessee and Lessee's legal counsel.
(ii) It is a condition, however, of the subordination of lien
provisions herein provided, that Lessors shall procure from any such
mortgagee an agreement, in writing,
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<PAGE> 14
which shall be delivered to Lessee, providing in substance that so long
as Lessee shall faithfully discharge the obligations on its part to be
kept and performed under the terms of this lease, Lessee's tenancy will
not be disturbed and this lease will not be affected by any default
under such mortgage.
(S) CONSTRUCTION PLANS. Lessee shall be responsible for
providing Lessors with all necessary information with respect to
Lessee's specifications for and requirements to be included within the
Improvements such that Lessors shall then be able to obtain the
preparation of necessary plans and specifications for the construction
of the Improvements on the Premises pursuant to this lease and shall
cause them to comply with all applicable laws and building regulations.
As noted above, upon completion of the Plans, Lessors and Lessee shall
review and approve of the same and shall evidence such approval by
initialing the same.
12. COVENANTS OF LESSORS. Lessors hereby covenant 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 Lessors or any person or
persons lawfully claiming under Lessors.
(B) WARRANTIES AS TO TITLE AND FITNESS FOR USE. Prior to
accepting Rent, Lessors warrant that:
(i) it shall be 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 Lessors imposed
hereunder have been fully performed.
(C) INDEMNITY BY LESSORS. Lessors shall indemnify, hold
harmless and defend Lessee from and against any and all claims,
actions, damages, liability and expense
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<PAGE> 15
(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
Lessors of the Premises or any part thereof, occasioned wholly
or in part by any act or omission of the Lessors, their
officers, employees, contractors, agents or invitees; or
(ii) by any failure of Lessors to abide by or perform
any other term, covenant or condition of this Lease.
13. MUTUAL COVENANTS OF LESSORS AND LESSEE. Both Lessors 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, Lessors 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 Section 11(m) of this Lease, payable as a
result of any damage or destruction, shall be payable jointly to
Lessors and Lessee and used only for the purpose of such repair or
rebuilding. Lessors shall 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 Lessors have received the insurance
funds on the Premises pursuant to Section 11(m) above and Lessee is
unable to recommence its operations within 90 days of the casualty or
such destruction occurs within 18 months of the end of the term, as
extended, in which event, Lessee may terminate the Lease by written
notice to Lessors. If Lessee exercises Lessee's right to terminate the
Lease, Lessors shall refund all Rent paid after the casualty and any
insurance proceeds belonging to Lessee paid to Lessors. 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 90 days of
the date of casualty and Lessee elects not to terminate the Lease,
Lessee's Rental obligation shall abate six months from the date of
casualty to recommencement of operations.
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<PAGE> 16
(C) DEMAND FOR RENT AND LESSORS' REMEDIES ON LESSEE'S BREACH.
(i) The occurrence of any one or more of the following shall
constitute an event of 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 trustee of
Lessee's property; any receivership proceedings under any
provisions of federal law; any assignment by Lessee for the
benefit of creditors; or the taking possession of the property
of Lessee by any governmental office or agency pursuant to the
statutory authority for the receivership, dissolution, or
liquidation of Lessee; or any other action by any governmental
agency or department which has the effect of divesting Lessee
of its interest or control over the Premises.
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 Lessors 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 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 Lessors, 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 Lessors or their 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 Lessors or, within the sole discretion of
Lessors, to retake possession of the
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<PAGE> 17
Premises without terminating the Lease and to re-let them for
the account of Lessee. In the event that Lessors re-let the
Premises for the account of Lessee, then Lessors 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 Lessors may deem advisable and receive the Rent.
Upon each re-letting for the account of Lessee, all Rentals
received by Lessors shall be applied, first to the payment of
any indebtedness other than Rent under the Lease from Lessee
to Lessors; 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 Lessors due
and unpaid under the Lease; and the residue, if any, shall be
held by Lessors and applied in payment of future Rent and
other charges payable on behalf of Lessors as it may become
due and payable under the Lease. Lessee agrees to pay to
Lessors on demand any deficiency that may arise by reason of
re-letting, Notwithstanding any re-letting without
termination, Lessors 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 attorney's
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
Lessors' attorney(s), Lessee shall pay Lessors' reasonable
attorney's fees plus costs, where deemed necessary or
appropriate by Lessors, whether suit is instituted or not.
Lessee shall not be required to reimburse Lessors for
attorneys' fees and related costs in excess of $5,000.
(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 Lessors' 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 Lessors 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.
-17-
<PAGE> 18
Lessors shall be entitled to retain any 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 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 and any claims against the
condemning authority for loss of Lessee's fixtures and equipment (other
than leasehold improvements made by Lessee to the Premises).
Lessors 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 and 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
Lessors or their agents or employees for any loss, cost or damage to
the Premises caused by or resulting from fire, the elements, or any
other cause, of whatsoever origin. Lessors likewise agree that no
claims shall be made and that no suit or action, either at law or in
equity, shall be brought by Lessors or by any person, firm or
corporation claiming by, through, or under Lessors, 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 Lessors shall become the
owners of all leasehold improvements and business fixtures without the
necessity of payment of any kind from Lessors 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
Section 13(c); or
(iii) any governmental condemnation of the Premises.
-18-
<PAGE> 19
(G) EFFECT OF LESSORS' WAIVER. Lessors' 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. Lessors'
acceptance of Rent installments after breach is not a waiver of any
breach. Any failure of Lessors 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
Lessors in the event of any subsequent default of Lessee.
14. SIGNAGE. Any signage on the exterior of the building on the
Premises shall be in accordance with the plans and specifications approved by
Lessors as set forth in Section 3.
15. NOTICES. All notices and other communications provided for under
this Lease shall be in writing and will be deemed to have been duly given only
if delivered personally or mailed certified return receipt requested to the
parties at the following addresses:
if to the Lessors:
Jack K. Gant
Heidi M. Gant
246 West Liberty Street
Wooster, OH 44691
if to the Lessee:
Ohio Legacy Corp.
305 West Liberty Street
Wooster, OH 44691
Attention: L. Dwight Douce
All such notices and other communications will: (i) if delivered personally to
the addresses provided in this Section, be deemed given upon delivery; and (ii)
if delivered by mail in the manner described above to the address provided in
this Section, be deemed given within three days following the mailing thereof.
Any party from time to time may change its address by giving notice specifying
such change to the other party hereto.
16. 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 Lessors, 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) RECORDING. If either party shall desire to record this
Lease, the parties will execute and record a short Memorandum of Lease.
-19-
<PAGE> 20
(C) HEADINGS. The section 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.
(D) GOVERNING LAW. This Lease shall be governed in accordance with Ohio
law.
(E) SECTION 1031 EXCHANGE. Lessee acknowledges that Lessors are
acquiring the Premises and constructing the Improvements as part of a tax-free
exchange. Lessee shall fully cooperate with Lessors to assure that such exchange
complies with applicable Internal Revenue Service's regulations.
(F) PREVIOUS USE OF PREMISES. The parties acknowledge that the Premises
had previously been a site of a gas station.
(G) CONDITION SUBSEQUENT TO LESSER'S PERFORMANCE. Lessors obligations
under this Lease are expressly conditioned upon Lessors' acquisition of the
Premises. In the event Lessors do not acquire the Premises on or before December
31, 1999, all amounts paid under Section 1 shall be returned to Lessee by
Lessors and Lessors shall have no further liability hereunder.
IN WITNESS WHEREOF, the parties hereto have signed this Lease Agreement
the day and year first above written.
LESSORS:
/s/ Robert C. Berry /s/ Jack K. Gant
- --------------------------- ----------------------------------
Jack K. Gant
/s/ Brenda K. Blackburn
- ---------------------------
/s/ Robert C. Berry /s/ Heidi M. Gant
- --------------------------- ----------------------------------
Heidi M. Gant
/s/ Brenda K. Blackburn
- ---------------------------
LESSEE:
OHIO LEGACY CORP.
/s/ illegible By: /s/ L. Dwight Douce
- --------------------------- ----------------------------------
L. Dwight Douce, President
/s/ Julie Reese
- ---------------------------
-20-
<PAGE> 21
STATE OF OHIO )
) ss:
COUNTY OF WAYNE )
Before me, a Notary Public in and for said State, personally
appeared the above named Jack K. Gant and Heidi M. Gant, husband and wife, who
acknowledged that they did sign the foregoing instrument and that the same is
their free act and deed.
In Testimony Whereof, I have hereunto set my hand and
official seal at Wooster, Ohio, this 20th day of August, 1999.
/s/ Brenda K. Blackburn
--------------------------
Notary Public
Brenda K. Blackburn
Notary Public, State Of Ohio
My Commission Expires Dec. 14, 2000
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., an Ohio corporation, by L. Dwight
Douce, its President, who acknowledged that he did sign the foregoing instrument
and that the same is the free act and deed of said corporation, 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 24th day of August, 1999.
/s/ Julie Reese
--------------------------
Notary Public
This Instrument Prepared By:
Robert C. Berry Julie Reese
Attorney at Law Notary Public, State Of Ohio
Wooster, Ohio My Commission Expires Oct. 4, 1999
-21-
<PAGE> 1
EXHIBIT 21
List of Subsidiaries of Ohio Legacy Corp
----------------------------------------
Ohio Legacy Bank
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We consent to the incorporation into this Registration Statement of Ohio Legacy
Corp on 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
October 12, 1999
<PAGE> 1
EXHIBIT 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, constitutes and
appoints L. DWIGHT DOUCE and DANIEL H. PLUMLY, and each of them, his true and
lawful attorney-in-fact and agent with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to execute the Registration Statement on Form SB-2 of Ohio Legacy
Corp including any and all amendments (including post-effective amendments)
thereto, and to file the same with all exhibits thereto, and all documents in
connection therewith, with the Securities and Exchange Commission, granting such
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully and to all intents and purposes as he might or
could do in person, hereby ratifying and confirming that all such
attorneys-in-fact and agents, or each of them, may lawfully do or cause to be
done by virtue hereof.
This power of attorney has been signed by the following persons in the
capacities and on the dates indicated below.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------- ----- ----
<S> <C> <C>
/s/ L. Dwight Douce President, Chief Executive Officer September 30, 1999
- ------------------------------- and Director
L. Dwight Douce
/s/ Gregory Long Director September 30, 1999
- -------------------------------
Gregory Long
/s/ Michael Meenan Director September 30, 1999
- -------------------------------
Michael Meenan
/s/ Daniel H. Plumly Director September 30, 1999
- -------------------------------
Daniel H. Plumly
/s/ D. William Allen Director September 30, 1999
- -------------------------------
D. William Allen
/s/ Robert Belden Director September 30, 1999
- -------------------------------
Robert Belden
/s/ J. Edward Diamond Director September 30, 1999
- -------------------------------
J. Edward Diamond
/s/ Thomas Schervish Director September 30, 1999
- -------------------------------
Thomas Schervish
/s/ Scott Fitzpatrick Director September 30, 1999
- -------------------------------
Scott Fitzpatrick
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AND THE CONSOLIDATED STATEMENT OF INCOME FILED AS
PART OF THE QUARTERLY REPORT ON FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 2-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JUN-30-1999
<PERIOD-END> AUG-31-1999
<CASH> 90
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 0
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 0
<ALLOWANCE> 0
<TOTAL-ASSETS> 122
<DEPOSITS> 0
<SHORT-TERM> 0
<LIABILITIES-OTHER> 95
<LONG-TERM> 0
0
0
<COMMON> 105
<OTHER-SE> (78)
<TOTAL-LIABILITIES-AND-EQUITY> 122
<INTEREST-LOAN> 0
<INTEREST-INVEST> 0
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 0
<INTEREST-DEPOSIT> 0
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<EXPENSE-OTHER> 78
<INCOME-PRETAX> (78)
<INCOME-PRE-EXTRAORDINARY> (78)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (78)
<EPS-BASIC> (576.70)
<EPS-DILUTED> (576.70)
<YIELD-ACTUAL> 0
<LOANS-NON> 0
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 0
<CHARGE-OFFS> 0
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</TABLE>
