<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 6, 2000.
REGISTRATION NO. 333-38328
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------
Post-Effective Amendment 1
To
FORM SB-2
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
--------------------
OHIO LEGACY CORP
(EXACT NAME OF SMALL BUSINESS ISSUER AS SPECIFIED IN ITS CHARTER)
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<S> <C> <C>
Ohio 6021 34-1903890
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(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) 263-1955
(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) 263-1955
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
--------------------
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Copies to:
M. PATRICIA OLIVER, ESQ. KEVIN C. O'NEIL
SQUIRE, SANDERS & DEMPSEY L.L.P. BROUSE MCDOWELL, L.P.A.
4900 KEY TOWER, 127 PUBLIC SQUARE 500 FIRST NATIONAL TOWER
CLEVELAND, OHIO 44114-1304 AKRON, OHIO 44308
(216) 479-8500 (330) 535-5711
</TABLE>
-----------------------
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.|X|
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>
==================================================================================================================================
DOLLAR 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
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Common Shares, without par value (1)........ 1,200,000 $10.00 $12,000,000 $3,336.00(5)
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Warrants (2)................................ 150,000
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Warrants (3)................................ 240,000
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Common Shares, without par value (4)........ 390,000 $10.00 $ 3,900,000 $1,030.00(5)
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</TABLE>
(1) The existing 1,200,000 shares represent the shares offered to the public in
the offering.
(2) Warrants will be awarded to the organizers and each warrant may be used to
purchase common stock in the future at $10.00 per share.
(3) Each purchaser of common stock in this offering will receive one warrant
for every five common shares purchased.
(4) The 390,000 shares represent the shares underlying the warrants granted to
the organizers and warrants which will be issued to the public.
(5) We previously paid the $4,366 registration fee with our initial filing on
June 1, 2000.
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
OHIO LEGACY CORP
900,000 TO 1,200,000 COMMON SHARES TO THE PUBLIC AT $10.00 PER SHARE
180,000 TO 240,000 WARRANTS TO THE PUBLIC EXERCISABLE AT $10.00 PER SHARE
UP TO 150,000 WARRANTS TO THE ORGANIZERS EXERCISABLE AT $10.00 PER SHARE
[OHIO LEGACY BANK LOGO]
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We are offering for sale a minimum of 900,000 common shares and a maximum
of 1,200,000 shares to the public at a price of $10.00 per share with this
prospectus to fund the start-up of a new community bank to be named Ohio Legacy
Bank, National Association. Each purchaser of our common stock will receive one
warrant for every five shares purchased. Subject to our earlier call, each
warrant will represent the right of the holder to purchase one common share at a
price of $10.00 at any time within seven years following the opening of the
bank. Ohio Legacy Corp will be the holding company and sole shareholder of Ohio
Legacy Bank. Ohio Legacy Bank will initially have banking centers located in
Wayne and Stark County, Ohio and we expect to open for business in the third
quarter of 2000. The minimum subscription is 500 shares or $5,000. This is our
initial public offering and there is no existing market for our shares. We have
no current plans to list our common shares on any market. After this offering,
there will be no public market for our shares.
Our organizers have invested significant time and effort to form Ohio
Legacy and have already invested $135,000 by purchasing 135 shares at $1,000 per
share, prior to this offering. Immediately prior to the closing of this
offering, there will be to a 100 to 1 stock split regarding the 135 shares. We
expect our organizers and executive officers to purchase approximately 272,000
shares, including the 13,500 shares purchased prior to this offering, for a
total investment of $2,720,000. In recognition of the financial risk and efforts
taken in organizing Ohio Legacy, we expect to grant the organizers up to an
aggregate of 150,000 warrants which will vest in approximately equal percentages
each year over the initial three years of operations. These warrants will be in
addition to any other warrants received in connection with the purchase of
shares in this offering. Organizers will receive warrants based upon their
contribution to Ohio Legacy, subject, however, to an individual limit of 18,000
warrants and an overall limit of 150,000 warrants. See "Capitalization" on page
20.
McDonald Investments Inc. and Trident Securities, a division of McDonald
Investments Inc., have agreed to serve as our sales agents and use their best
efforts to solicit subscriptions for our shares. The offering is scheduled to
end on August 8, 2000, but we may extend the offering by up to an additional
thirty days. All of the money which we receive will be placed with our escrow
agent, Key Trust Company, 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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MINIMUM OFFERING MAXIMUM OFFERING
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PER SHARE TOTAL PER SHARE TOTAL
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<S> <C> <C> <C> <C>
Public offering price............ $10.00 $9,000,000 $10.00 $12,000,000
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Sales agent fees and
commissions.................... .29 260,000 .57 683,000
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Offering expenses................ .18 165,000 .14 165,000
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Net proceeds..................... $ 9.53 $8,575,000 $ 9.29 $11,152,000
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</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.
MCDONALD INVESTMENTS INC. TRIDENT SECURITIES
A DIVISION OF MCDONALD INVESTMENTS INC.
This prospectus is dated June 30, 2000.
<PAGE> 3
[MAP OF STATE OF OHIO, INCLUDING PLANNED BANKING CENTER LOCATIONS]
TABLE OF CONTENTS
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PAGE
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QUESTIONS AND ANSWERS.............................................................................................1
SUMMARY...........................................................................................................3
RISK FACTORS......................................................................................................7
FORWARD-LOOKING STATEMENTS.......................................................................................14
USE OF PROCEEDS..................................................................................................15
DETERMINATION OF OFFERING PRICE..................................................................................16
PLAN OF DISTRIBUTION.............................................................................................16
DIVIDEND POLICY..................................................................................................19
CAPITALIZATION...................................................................................................20
BUSINESS.........................................................................................................22
DESCRIPTION OF PROPERTY..........................................................................................29
PLAN OF OPERATION................................................................................................30
SUPERVISION AND REGULATION.......................................................................................32
MANAGEMENT.......................................................................................................42
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS.............................................................48
PRINCIPAL SHAREHOLDERS...........................................................................................49
DESCRIPTION OF SECURITIES........................................................................................51
SALES AGENTS.....................................................................................................55
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION
FOR SECURITIES ACT LIABILITIES...................................................................................56
SHARES ELIGIBLE FOR FUTURE SALE..................................................................................56
LEGAL MATTERS....................................................................................................56
EXPERTS..........................................................................................................56
WHERE YOU CAN FIND MORE INFORMATION..............................................................................57
FINANCIAL STATEMENTS............................................................................................F-1
APPENDIX A - STOCK ORDER FORM...................................................................................A-1
APPENDIX B - ESCROW AGREEMENT...................................................................................B-1
</TABLE>
Ohio Legacy Corp's Articles of Incorporation and Code of
Regulations and Ohio Law may delay, defer or prevent a change in control of Ohio
Legacy Corp that a shareholder might consider to be in its best interest,
including a change in control that might result in a premium over the market
price for the shares. These provisions may make removal of management more
difficult. See page 13 for a more detailed discussion of these provisions.
<PAGE> 4
QUESTIONS AND ANSWERS
Q. WHY IS OHIO LEGACY OFFERING THESE SECURITIES AND WHY HAS IT CHOSEN THIS
TIME FOR THE OFFERING?
A. We 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 our office locations in
Wooster and Canton, Ohio because of our management team's extensive
experience in the Wayne and Stark County areas, local customer
relationships, and each area's favorable economic and demographic
environment.
Q. ONCE I HAVE READ THIS PROSPECTUS AND DETERMINED THAT I WOULD LIKE TO
BUY SOME SHARES, HOW DO I SUBSCRIBE?
A. You may complete and return the Stock Order Form attached as Appendix A
to this prospectus and enclose a check or money order payable to "Key
Trust Company, Trust No. 2020200-0605820" for your entire subscription
in the enclosed reply envelope. If you are a McDonald brokerage
customer, in lieu of returning the Stock Order Form to Key Trust
Company, you may return the Stock Order Form to your McDonald
Investment Consultant, along with your payment.
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 Daylight Time on August 8, 2000, unless we decide to
extend it by up to an additional thirty days. 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, without
Ohio Legacy board approval, 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. If you wish to use funds in an Individual Retirement Account (IRA) to
purchase shares of stock, please call our Stock Information Center at
(330) 263-1955 for assistance. If you already have a self-directed IRA
with McDonald Investments, please see your Investment Consultant for
assistance in purchasing the stock. If you do not have a self-directed
IRA with a brokerage firm, a representative from the Stock Information
Center will be glad to assist you in determining the best procedure to
direct your IRA funds. There will be no early withdrawal or IRS
penalties incurred by these transactions if the funds are transferred
directly from your IRA to the Escrow Agent.
Q. IS THIS OFFERING REGISTERED IN ALL 50 STATES?
A. No. At this time we plan to register in Ohio, Florida, Indiana, and
Michigan. We may register in additional states depending on interest in
the offering. If you are not a resident
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<PAGE> 5
of any of these states, please call the Stock Information Center at
(330) 263-1955 before subscribing.
Q. IF MY SUBSCRIPTION IS ACCEPTED, WHEN WILL I RECEIVE MY SHARES?
A. We will mail to you, or your McDonald Investment Consultant, 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.
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 the Stock
Information Center at (330) 263-1955 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. Because this is a summary, it may not contain all of the information
you should consider before investing in our common shares. You should carefully
read this entire prospectus.
OHIO LEGACY CORP AND OHIO LEGACY BANK
We incorporated Ohio Legacy Corp in July of 1999 to serve as the
holding company for Ohio Legacy Bank, a new national bank, which will initially
operate from two offices in Wooster and Canton, Ohio. Our principal executive
office will be located at 305 West Liberty Street, Wooster, Ohio 44691, (330)
263-1955. Ohio Legacy Bank will focus on the local community, emphasizing
personal service to individuals and businesses in the Wayne and Stark County,
Ohio markets and contiguous counties. We have received preliminary regulatory
approval to open Ohio Legacy Bank with the Office of the Comptroller of the
Currency and for deposit insurance with the FDIC. We have also received
preliminary approval of the Federal Reserve Board (which approval has been
extended to August 29, 2000) 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 third quarter of 2000.
OUR MARKET OPPORTUNITIES
We believe an opportunity exists as a result of the consolidation in
the banking industry. We believe this consolidation has created an attractive
market segment between the national and super-regional banks, on the one hand,
and community banks on the other hand. Larger financial institutions do not
generally provide the personalized service expected or demanded by many small to
medium-sized businesses and their principals. Members of our executive
management team have had established careers in the financial services industry
and recognize this market opportunity. We have selected Wayne and Stark County,
Ohio for our initial activities because of our management team's extensive
experience in these markets, local customer relationships, and each area's
favorable economic and demographic environment.
OUR ORGANIZERS AND MANAGEMENT TEAM
Our organizers consist of nine businessmen who reside and work in Wayne
and Stark County, Ohio. As a group, they have significant banking and business
experience and many close personal ties to our planned market area. The
organizers have already invested a total of $135,000 in Ohio Legacy common
shares and have loaned Ohio Legacy an additional $425,000 as of June 30, 2000.
If we do not successfully complete this offering, our organizers will lose some,
if not all of their investment. We expect our organizers and executive officers
to purchase approximately 272,000 shares, including the 13,500 shares purchased
by the organizers prior to this offering, at the same $10.00 offering price as
the other shareholders, for a total investment in the company of $2.72 million.
Our executive management team includes three individuals who have
significant experience serving our target markets. L. Dwight Douce, the
President and Chief Executive Officer of Ohio
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<PAGE> 7
Legacy has over 26 years of banking experience, including 16 years in the
Wooster market. Prior to founding Ohio Legacy, Mr. Douce served as
President-Chief Operating Officer of Signal Bank, a $1.8 billion commercial bank
headquartered in Wooster, which operated more than 25 branches. Steven G.
Pettit, the Senior Loan Officer and President of the Stark County Division, has
over fifteen years experience with several large regional banks and has
established a positive reputation with numerous customers in both Stark and
Wayne counties. Robert E. Boss, Senior Vice President of Commercial Lending, has
over 20 years of experience in a variety of lending positions. 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.
-4-
<PAGE> 8
- 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.
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.
<TABLE>
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TERMS OF THE OFFERING
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Common shares offered.................................................. 900,000 to 1,200,000
Warrants to the public................................................. 180,000 to 240,000 (one warrant
for every five common shares
purchased)
Warrants to organizers................................................. Up to 150,000 (a maximum number
equal to 15.0% of common shares
outstanding after the offering)
Common shares outstanding after the offering........................... 913,500 to 1,213,500. This
includes the shares offered with
this prospectus and 13,500 shares
(as adjusted to give effect to a
100 to 1 stock split that will
occur prior to the closing of this
offering)
</TABLE>
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<PAGE> 9
<TABLE>
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purchased by the organizers prior
to this offering.
Common shares outstanding after the offering if all
of the warrants are exercised.......................................... 1,243,500 to 1,603,500
Price per share........................................................ $10.00
Use of net proceeds after the payment of sales
commissions and offering expenses...................................... $540,000 to cover start-up
expenses.
$8.04 million to $10.61 million,
depending on the size of the
offering, to provide initial
working capital for Ohio Legacy
Bank, which will be placed in
short-term investments and
available for loans to Ohio Legacy
Bank customers.
Expiration date........................................................ August 8, 2000, but may be
extended up to an additional thirty days.
Purchase limitations................................................... The minimum purchase is 500 shares
and the maximum purchase, without
Ohio Legacy board approval, is
50,000 shares. However, we
reserve the right to reject all or
any part of any subscription. In
determining which subscriptions to
accept, we may take into account
any factors we believe may be
relevant, including the order in
which subscriptions are received,
a subscriber's potential to do
business with Ohio Legacy Bank and
factors that may cause an
aggregation of ownership under
federal banking regulations.
Further information.................................................... Please call the Stock Information
Center at (330) 263-1955.
</TABLE>
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<PAGE> 10
RISK FACTORS
An investment in our common shares and warrants 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 and warrants.
WE HAVE NO OPERATING HISTORY UPON WHICH TO BASE AN ESTIMATE OF OUR FUTURE
PERFORMANCE.
We incorporated Ohio Legacy in July, 1999 and have not yet engaged in
any banking operations. Because Ohio Legacy Bank has not yet opened, we do not
have historical financial data and similar information which would be available
for a financial institution that has been operating for several years. Our
prospects must be evaluated in light of the risks, expenses and difficulties
frequently encountered by companies in their early stages of development. We may
not successfully address the following:
- building our customer base;
- developing and retaining customer loyalty;
- responding to competitive developments;
- attracting, retaining and motivating qualified management and
employees;
- upgrading our technologies, products and services;
- penetrating our identified markets; and
- providing quality and personal service.
WE EXPECT LOSSES IN OUR FIRST 18 TO 24 MONTHS OF OPERATIONS.
As a result of start-up expenditures and the time it will take to
develop a deposit base and loan portfolio, we expect to operate at a loss during
our start-up period. We do not expect to be profitable for at least the first 18
to 24 months of operations. We anticipate cumulative losses during the first two
years of operations to exceed $1.2 million. We cannot guarantee that we will
ever operate profitably. If we do not reach profitability and recover our
accumulated operating losses, you will likely suffer a significant decline in,
or total loss of, the value of your common shares. Shareholders will not be
liable for any losses, however, beyond their investment.
-7-
<PAGE> 11
WE WILL BE COMPETING WITH MANY LARGER FINANCIAL INSTITUTIONS THAT HAVE FAR
GREATER FINANCIAL RESOURCES THAN WE HAVE, WHICH COULD PREVENT US FROM ATTRACTING
CUSTOMERS AND MAY CAUSE US TO HAVE TO PAY HIGHER INTEREST RATES TO ATTRACT AND
MAINTAIN CUSTOMERS.
We will encounter strong competition from existing banks and other
types of financial institutions operating in the Wayne and Stark County areas
and elsewhere. We will compete with other bank holding companies, state and
national commercial banks, savings and loan associations, consumer finance
companies, credit unions, securities brokerages, insurance companies, mortgage
banking companies, money market mutual funds, asset-based non-bank lenders and
other financial institutions. Some of these competitors have been in business
for a long time and have already established their customer base and name
recognition. Most are larger than we will be and have greater financial and
personnel resources than we will have. Some are large super-regional and
regional banks, like KeyBank, National City Bank and FirstMerit 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.
THERE WILL BE NO ACTIVE TRADING MARKET FOR OUR COMMON SHARES, WHICH MAY LIMIT
YOUR ABILITY TO SELL YOUR SHARES.
Our common shares will not be listed for trading on any national
securities exchange, quoted in any automated quotation system of a registered
securities association, or be eligible to be traded in the over-the-counter
market. We do not intend to take any actions at this time to create a liquid
trading market for the common shares. As a result, you may find it difficult to
sell your common shares and you may have to bear the financial risks of your
investment in the common shares for an indefinite period of time.
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, Steven G. Pettit, Senior Loan
Officer and President of the Stark County Division, and Robert E. Boss, Senior
Vice President of Commercial Lending. Our business would suffer if we lost the
services of any of these individuals. We have entered into one year employment
agreements, with automatic one year renewals, with both Mr. Douce and Mr. Pettit
but cannot assure their continued service. We do not have key man life insurance
with respect to any of our officers. Our future success also depends on our
ability to identify, attract and retain qualified senior officers and other
employees in our identified markets.
WE MAY NOT BE ABLE TO COMPETE WITH OUR LARGER COMPETITORS FOR LARGER CUSTOMERS
BECAUSE OUR LENDING LIMITS WILL BE LOWER THAN THEIRS.
We will be limited in the amount we can loan a single borrower by the
amount of Ohio Legacy Bank's capital. The legal lending limit is 15.0% of Ohio
Legacy Bank's capital and surplus. We expect
-8-
<PAGE> 12
that our initial lending limit will be approximately $1.21 million immediately
following the offering, assuming the minimum number of shares are sold, but we
intend to impose an internal limit on Ohio Legacy Bank of 50.0% of this amount.
Initially, this self-imposed lending limit will be $605,000. Until Ohio Legacy
Bank is profitable, our capital level will decline and therefore so will our
lending limit. Our lending limit will be significantly less than the limit for
most of our competitors and may affect our ability to seek relationships with
larger businesses in our market area. We intend to accommodate larger loans by
selling participations in those loans to other financial institutions. We cannot
guarantee, however, that we will succeed in attracting or maintaining customers
seeking larger loans or that we will be able to engage in participation of these
loans on favorable terms.
OUR BOARD AND MANAGEMENT WILL HAVE BROAD DISCRETION IN USING THE NET PROCEEDS OF
THE OFFERING AND MAY NOT ALLOCATE ALL OF THESE PROCEEDS IN THE MOST PROFITABLE
MANNER.
Upon completion of the offering and after payment of the sales agent's
commission, we intend to pay the estimated offering expenses of $165,000 and
start-up expenses of $540,000. We expect to contribute between $8.04 million
and $10.61 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.
CHANGES IN THE LAW, ESPECIALLY CHANGES DEREGULATING THE BANKING INDUSTRY, MAY
HARM OUR CURRENT BUSINESS AND IMPACT OUR FUTURE OPPORTUNITIES.
We will operate in a highly regulated environment and will be subject
to supervision and regulation by several governmental regulatory agencies,
including the Federal Reserve Board, the FDIC, and the OCC. These regulations
are generally intended to provide protection for depositors and customers rather
than for the benefit of investors. We will also be subject to changes in federal
and state law, regulations, governmental policies, income tax laws and
accounting principles. Deregulation could adversely affect the banking industry
as a whole, including our operations. See "Supervision and Regulation" beginning
on page 32.
INTEREST RATE VOLATILITY COULD SIGNIFICANTLY HARM OUR BUSINESS.
Our results of operations will be materially affected by the monetary
and fiscal policies of the federal government and the regulatory policies of
governmental authorities. Our profitability will be dependent to a large extent
on our net interest income, which is the difference between our income on
interest-earning assets, such as loans, and our expense on interest-bearing
liabilities, such as deposits. A change in market interest rates could adversely
affect our earnings. Consequently, we will be particularly sensitive to interest
rate fluctuations. As we plan to hold most of the commercial and consumer loans
we originate internally, we will face a greater risk of rapid changes in
interest rates than banks that sell their loans in secondary markets.
-9-
<PAGE> 13
FUTURE SALES OF OUR COMMON SHARES COULD DECREASE THE MARKET VALUE OF YOUR
SHARES.
Although there will be no market for the common shares following the
offering, sales of a substantial number of common shares following this
offering, or the perception that such sales could occur, could decrease the
market value of your common shares. After the offering, we will have at least
913,500 common shares outstanding. In addition, we have a stock option plan
under which we have reserved options to purchase 100,000 common shares. We will
also have outstanding warrants to purchase up to at least 330,000 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 executive officers,
directors and some of our existing shareholders, who are expected to purchase an
aggregate of 272,000 common shares, including shares purchased prior to this
offering, 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, if such a market develops, subject to
compliance with volume limitations and other conditions of Rule 144. The market
price of your shares could decline based on the sale or availability for sale of
shares now held by our existing shareholders or of shares that may be issued
under our stock option plan or warrants.
IF OUR BORROWERS CANNOT REPAY THEIR LOANS, OUR BUSINESS WILL BE HARMED.
Lending money is an essential part of the banking business. However,
borrowers do not always repay their loans. The risk of non-payment is affected
by:
- credit risks of a particular borrower;
- changes in economic and industry conditions;
- the duration of the loan; and
- in the case of a collateralized loan, uncertainties as to the
future value of the collateral.
Generally, commercial/industrial, construction and commercial real
estate loans present a greater risk of non-payment by a borrower than other
types of loans. Initially, our portfolio will only contain young loans, which
may increase the risk of non-payment because most defaults occur early in the
term of a loan.
OUR COMMERCIAL LOAN CONCENTRATION INCREASES THE RISK OF DEFAULTS BY OUR
BORROWERS.
We will make various types of loans, including commercial, consumer,
residential mortgage and construction loans. We anticipate that approximately
50.0% of Ohio Legacy Bank's loans will be commercial loans, and 30.0% will be
consumer/personal loans, although the actual percentage may vary. Commercial
lending is more risky than residential mortgage lending because loan balances
are greater and the borrower's ability to repay is contingent on the success of
the borrower's operation. The risk of loan defaults by borrowers is unavoidable
in the banking industry. We will try to limit our exposure
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<PAGE> 14
to this risk by carefully monitoring the amount of loans we make within specific
industries and through prudent lending practices, but we will not be able to
eliminate this risk. Substantial credit losses could result in our insolvency,
which could cause you to lose your entire investment.
OUR ALLOWANCE FOR LOAN LOSSES MAY NOT BE SUFFICIENT TO ABSORB ACTUAL LOSSES.
There is no precise method of predicting loan losses. We cannot assure
you that our allowance for loan losses will be sufficient to absorb actual loan
losses. Excess loan losses will harm our business. We will attempt to maintain
an appropriate allowance for loan losses to provide for probable losses in our
loan portfolio. We will periodically determine the amount of the allowance for
loan losses based upon consideration of several factors, including:
- an ongoing review of the quality, mix and size of the overall
loan portfolio;
- historical loan loss experience;
- evaluation of non-performing loans;
- assessment of economic conditions and their effects on the
existing portfolio; and
- the amount and quality of collateral, including guarantees,
securing loans.
The following factors, however, make our evaluation of our allowance
for loan losses more subjective than that of other banks with an established
history:
- our lack of an operating history may prevent management from
accurately predicting loan losses based on historical
experience;
- the local economy has not experienced any significant
recessionary periods over the past five (5) years; and
- because of our small business focus, the principals of the
small businesses may have many different types of loans with
Ohio Legacy Bank and a default on one of these loans may have
an adverse effect on the other loans.
Because of these factors, we may have a higher risk that our loan
allowance will not be adequate to absorb future loan losses.
TO THE EXTENT WE CANNOT ATTRACT SUFFICIENT DEPOSITS TO FUND OUR ANTICIPATED LOAN
GROWTH, WE MAY NEED TO INCUR BORROWINGS WHICH COULD DECREASE OUR NET INTEREST
INCOME.
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
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<PAGE> 15
fund our loan growth, we may need to incur borrowings which could lead to a
decrease in our net interest income. We cannot assure you that we would be able
to obtain these funds on terms that are favorable to us.
THE OFFERING PRICE WAS DETERMINED ARBITRARILY AND MAY NOT REFLECT THE FUTURE
PRICE OF OUR SHARES.
The offering price of $10.00 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. We do not intend to take
any actions at this time to create a liquid trading market for the common
shares.
UPON EXERCISE OF THEIR WARRANTS, OUR ORGANIZERS, DIRECTORS AND EXECUTIVE
OFFICERS WILL OWN A SIGNIFICANT NUMBER OF COMMON SHARES, WHICH WILL ALLOW THEM
TO CONTROL THE MANAGEMENT OF THE COMPANY.
We expect that our organizers, directors and executive officers will
own approximately 272,000 common shares after this offering, which will equal
approximately 22.4% of the total number of shares, assuming the offering is
fully subscribed. If our organizers, directors and executive officers exercise
all of their warrants, they will, as a group, own approximately 33.5% of the
outstanding common shares. The ownership of approximately 33.5% of our shares
will likely assure control of the election of our directors in future years. To
the extent that organizers, directors and executive officers vote together, they
will have the ability to exert significant influence over the election of our
board of directors, as well as our policies and business affairs, and their
interests may not be the same as yours.
THE EXERCISE OF ORGANIZER WARRANTS AND STOCK OPTIONS WILL CAUSE DILUTION AND MAY
DECREASE THE VALUE OF YOUR SHARES.
The exercise of organizer warrants to purchase common shares will
result in the dilution of your proportionate interest in Ohio Legacy. Prior to
the completion of this offering, we expect to grant the organizers warrants to
purchase up to 150,000 common shares at $10.00 per share. If these warrants were
exercised, your proportionate interest in Ohio Legacy would decrease by 11.0%,
assuming that we sell the maximum number of shares in this offering. See
"Capitalization - Impact of Warrants and Dilution" beginning on page 21.
In addition, we have reserved 100,000 common shares for issuance under
our stock option plan. If all available options are granted under this plan, the
exercise of these options at an assumed exercise price of $10.00 per share will
reduce your proportionate interest in Ohio Legacy by 7.6%. See "Capitalization -
Impact of Stock Options and Dilution" beginning on page 21.
YOU WILL NOT RECEIVE DIVIDENDS IN THE FORESEEABLE FUTURE.
We do not intend to pay dividends on our common shares for the
foreseeable future. Instead, we intend to reinvest our earnings in our business.
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<PAGE> 16
OUR SUCCESS WILL DEPEND ON OUR ABILITY TO EFFECTIVELY PROVIDE, IMPLEMENT AND
MARKET TECHNOLOGY-DRIVEN PRODUCTS AND SERVICES.
The banking industry is undergoing rapid technological changes with
frequent introductions of new technology-driven products and services. In
addition to improving customer service, technology can increase efficiency and
reduce costs. Our success will depend in part on our ability to use technology
to provide products and services that will satisfy customer demands for
convenience, as well as to create operating efficiencies within Ohio Legacy
Bank. Many of our competitors have substantially greater resources to invest in
technology, which may permit them to operate at a lower cost than us. We believe
that we may currently have an advantage over our competitors by being able to
invest in the latest technologies without having to incur the additional
operational and financial costs associated with converting and upgrading
existing systems. We, however, cannot assure you that we will be able to
effectively implement new technology-driven products and services or that we
will be able to effectively market these products and services to our customers.
TO THE EXTENT OUR THIRD-PARTY SERVICE PROVIDERS FAIL TO PERFORM, OUR ABILITY TO
PROCESS BANKING TRANSACTIONS WILL SUFFER.
We will be dependent on third-parties to provide a number of our core
processing functions, including our back office operations, data processing and
other products and services. If these third-parties either increase the cost of
their services or fail to maintain the operational integrity of their networks,
our internal operations will be harmed.
WE DID NOT SELL THE MINIMUM NUMBER OF SHARES IN OUR PRIOR OFFERING AND MAY NOT
BE ABLE TO SELL THE MINIMUM IN THIS OFFERING.
We previously offered our common shares to the public pursuant to a
Registration Statement filed on Form SB-2 on December 14, 1999. Although we
received subscriptions for approximately 750,000 shares, this prior offering was
terminated on April 14, 2000 when we failed to reach the minimum offering of
900,000 shares. Because of this, we did not close the offering and returned all
subscription funds with interest. We cannot assure you that we will be able to
sell the minimum of 900,000 shares in this offering. If we do not sell the
minimum offering, you will have lost the use of your subscription funds while
they were held in escrow.
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<PAGE> 17
OUR ARTICLES AND REGULATIONS CONTAIN PROVISIONS THAT COULD DETER TAKEOVER
ATTEMPTS, EVEN AT A PRICE ATTRACTIVE TO SHAREHOLDERS.
Our articles of incorporation and code of regulations, along with
Ohio and federal law, may make it difficult to change or gain control of Ohio
Legacy, even at an attractive price to shareholders. As a result, shareholders
who might desire to participate in such a transaction may not have an
opportunity to do so. These provisions may reduce the market price of our
shares. Some of these provisions may also make the removal of the current board
of directors or management more difficult. These provisions include:
- restrictions on the acquisition of Ohio Legacy's equity
securities;
- the classification of the terms of the members of the board of
directors;
- shareholder 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 51.
IF WE DO NOT SELL THE MINIMUM OFFERING, YOU WILL HAVE LOST THE USE OF YOUR
SUBSCRIPTION FUNDS WHILE THEY ARE HELD IN ESCROW.
McDonald and Trident have agreed to sell our shares on a best
efforts basis. We cannot assure you that McDonald and Trident 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 August 8, 2000 (or up to thirty days later if we
elect to extend the offering) we will not close the offering. In that case, we
will return all subscription funds, with interest. See "Plan of Distribution"
beginning on page 16.
FORWARD-LOOKING STATEMENTS
Some of the information in this prospectus, including the summary,
contains "forward-looking statements" concerning Ohio Legacy Corp and Ohio
Legacy Bank and their operations, performance, financial condition and
likelihood of success.
You can identify these statements by use of terms such as "expect,"
"believe," "goal," "plan," "intend," "estimate," "may," and "will" or similar
words. These forward-looking statements involve known and unknown risks,
uncertainties and other factors, including those described in the "Risk Factors"
section and other parts of this prospectus, that could cause our actual results
to differ materially from those anticipated in these forward-looking statements.
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<PAGE> 18
USE OF PROCEEDS
We estimate that we will receive net proceeds of between $8,575,000 and
$11,152,000, depending on the size of the offering after deducting commissions
and estimated offering expenses. The following two paragraphs describe our
proposed use of proceeds based on our present plans and business conditions.
USE OF PROCEEDS BY OHIO LEGACY CORP
The following table shows the anticipated use of the proceeds by Ohio
Legacy Corp. We describe Ohio Legacy Bank's anticipated use of proceeds in the
following section. As shown, we will use between $8,035,000 and $10,612,000,
depending on the size of the offering, to capitalize Ohio Legacy Bank.
<TABLE>
<CAPTION>
Minimum Offering Maximum Offering
---------------- ----------------
<S> <C> <C>
Gross proceeds from offering......................... $ 9,000,000 $ 12,000,000
============= ===============
Sales agent commissions and fees..................... $ 260,000 $ 683,000
Offering expenses(1)................................. 165,000 165,000
Start-up expenses(2)................................. 540,000 540,000
Investment in capital stock of Ohio Legacy Bank...... 8,035,000 10,612,000
-------------- ----------------
Total use of proceeds................................ $ 9,000,000 $ 12,000,000
============= =============
</TABLE>
(1) Offering expenses consist of legal, accounting, printing and registration
fees associated with the preparation and filing of the registration
statement.
(2) Start-up expenses consist of payroll, occupancy, advertising, supplies and
other expenses incurred while getting Ohio Legacy Bank ready for opening.
A portion of the start-up expenses have been financed on an interim basis by
loans totaling $425,000 at June 30, 2000 from the organizers of Ohio Legacy.
These loans, which bear interest at the prime rate in effect at the time the
loans were made, will be repaid promptly following the completion of the
offering.
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<PAGE> 19
USE OF PROCEEDS BY OHIO LEGACY BANK
The following table shows the anticipated use of the proceeds by Ohio
Legacy Bank. All proceeds received by the bank will be in the form of an
investment in its capital stock by Ohio Legacy Corp, as described above. The
table shows the cost of the temporary and permanent facilities for a period of
twelve months from the completion of the offering. Furniture, fixtures, and
equipment will be capitalized and amortized over the estimated useful life of
the asset. Ohio Legacy Bank will use the remaining proceeds to make loans,
purchase securities, and otherwise conduct the business of the bank.
<TABLE>
<CAPTION>
Minimum Offering Maximum Offering
---------------- ----------------
<S> <C> <C>
Investment by Ohio Legacy Corp in the bank's capital stock $ 8,035,000 $ 10,612,000
Furniture, fixtures and equipment........................... (425,000) (425,000)
Initial payment and lease of temporary facilities (6 months) (32,000) (32,000)
Lease of permanent facilities (6 months).................... (88,000) (88,000)
Construction of leasehold improvements...................... (230,000) (230,000)
-------------- -------------
Remaining proceeds $ 7,260,000 $ 9,837,000
============= ============
</TABLE>
DETERMINATION OF OFFERING PRICE
Prior to this offering, there has been no market for the common shares.
The offering price for the common shares and the exercise price for the warrants
were arbitrarily determined by Ohio Legacy in consultation with the sales agent.
This price is not based upon earnings or any history of operations. In
determining the offering amount, we took into account the following factors:
- capital requirements of the OCC for Ohio Legacy Bank;
- expenses related to the simultaneous opening of two separate
banking centers; and
- general market conditions for the sale of securities.
PLAN OF DISTRIBUTION
GENERAL
We will offer the shares and attached warrants to the public until
August 8, 2000. We may, however, in our discretion, extend the offering period
by up to thirty days. We have engaged McDonald and Trident to consult with and
advise us with respect to the offering. McDonald and Trident have agreed to use
their best efforts to solicit subscriptions and purchase orders for our shares.
McDonald and Trident will have no obligation to take or purchase any
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<PAGE> 20
of our shares in the offering. In addition, we expect to grant up to an
aggregate of 150,000 warrants to our organizers. Organizers will receive these
warrants based upon their contribution to Ohio Legacy, subject, however, to an
individual limit of 18,000 warrants and an overall limit of 150,000 warrants in
order to comply with a regulatory 15.0% limit being imposed on grants of
warrants and options to directors, officers, promoters, 5.0% shareholders and
employees for a period of one year following the offering. See "Capitalization"
on page 20.
Shares will be offered primarily to persons who reside in the State of
Ohio. We also plan to register this offering in Florida, Indiana and Michigan.
If you are not a resident of one of these states, please call The Stock
Information Center at (330) 263-1955 before subscribing. 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 Daylight Time on
August 8, 2000 unless extended by Ohio Legacy an additional thirty
days. 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 Key Trust Company, 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 and McDonald
during the offering period that subscriptions totaling not less than $9,000,000,
including subscriptions from our organizers and management, have been received
and fully collected, the escrow agent will release to Ohio Legacy all
subscription funds, and any income received thereon.
Prior to the closing and the distribution of funds from 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 thirty days. Ohio Legacy will
invest the subscription funds in a similar manner after breaking escrow and
prior to the time that it infuses capital into Ohio Legacy Bank. The escrow
agent, by accepting appointment, in no way endorses the purchase of our shares
by any person.
In the event the offering conditions are not met within the offering
period or if we terminate the offering prior to withdrawing the subscription
funds, the escrow agent will promptly return to the subscribers their
subscription funds, together with their allocated share of interest, if any,
earned on the
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<PAGE> 21
investment of the escrow account, and without deduction of offering expenses.
The latest date to which the subscription funds might be held in escrow prior to
their return in the event the minimum offering is not reached is August 30,
2000.
METHOD OF SUBSCRIPTION
We may cancel this offering for any reason at any time prior to the
release of subscription funds from the escrow account in the event that we elect
to cancel the offering in its entirety.
The minimum subscription is 500 shares and the maximum subscription,
without Ohio Legacy board approval, is 50,000 shares. We may, however, accept
subscriptions for more than 50,000 shares in order to reach the minimum offering
amount.
In order to purchase shares you may:
- complete and sign the Stock Order Form 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 "Key Trust
Company, Trust No. 2020200-0605820;" and
- return your Stock Order Form and full payment to Key Trust
Company in the enclosed reply envelope before the expiration
date of the offering.
If you are a brokerage customer of McDonald, you may follow the
procedures set forth above to purchase shares or you may:
- complete and sign the Stock Order Form 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 "Key Trust
Company, Trust No. 2020200-0605820;" or arrange for payment
with your McDonald Investment Consultant; and
- return your Stock Order Form and full payment to your McDonald
Investment Consultant 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 on Ohio Legacy
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
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<PAGE> 22
potential to do business with Ohio Legacy Bank; and, factors that may cause an
aggregation of ownership under federal banking regulations. No subscription will
be deemed accepted until we deliver written notification of acceptance to the
subscriber. After a subscription is accepted and proper payment received, we
will not cancel such subscription, unless all accepted subscriptions are
canceled.
Once we accept a subscription, it cannot be withdrawn. Payment from any
subscriber for shares in excess of the number of shares allocated to such
subscriber, if any, will be refunded by mail, without interest, within ten days
of the date of rejection.
Certificates representing common shares of Ohio Legacy, duly authorized
and fully paid, will be issued to shareholders, or their McDonald Investment
Consultants, 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 Ohio Legacy Bank's earnings, capital requirements, financial
condition and other factors deemed relevant by our board of directors.
Our ability to pay any cash dividends will depend primarily on Ohio
Legacy Bank's profitability and its ability to pay dividends to Ohio Legacy. In
addition, the payment of cash dividends by a newly organized bank is prohibited
by the FDIC for three years, unless special exceptions are made. In order to pay
dividends, Ohio Legacy Bank must comply with the requirements of all applicable
laws and regulations. See "Supervision and Regulation - Ohio Legacy Bank -
Dividends" on page 37 and "Supervision and Regulation - Ohio Legacy Bank -
Capital Regulations" on page 38. In addition to the availability of funds from
Ohio Legacy Bank, our dividend policy is subject to the discretion of our board
of directors and will depend upon a number of factors, including future
earnings, financial condition, cash needs, and general business conditions.
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<PAGE> 23
CAPITALIZATION
The following table sets forth the estimated capitalization of Ohio
Legacy as of March 31, 2000, 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 $10.00 per share, net of estimated offering expenses.
This table does not include potential dilution for exercise of stock options or
warrants.
<TABLE>
<CAPTION>
As Adjusted
Actual -----------------------------
March 31, Minimum Maximum
2000 Offering Offering
---- -------- --------
<S> <C> <C> <C>
Stockholders' equity
Common stock - no par value, 135
shares issued and outstanding;
913,500 shares issued and outstanding
as adjusted (minimum); 1,213,500
shares issued and outstanding
(maximum)(2).............................. $135,000 $ 8,575,000(1) $11,152,000(1)
Deficit accumulated during the
development stage......................... (362,780) (362,780) (362,780)
-------- ----------- -----------
Total stockholders' equity......... ($227,780) $ 8,212,220 $10,789,220
======== =========== ===========
</TABLE>
(1) Represents the sale of 900,000 shares at $10.00 per share less estimated
offering costs of $425,000 (minimum) and 1,200,000 shares at $10.00 per
share less estimated offering costs of $848,000 (maximum).
(2) Represents the total number of common shares outstanding after giving
effect to a 100 to 1 stock split concerning the 135 shares purchased by
the organizers prior to this offering. The stock split will occur
immediately prior to the closing of this offering.
Our organizers and executive officers intend to purchase approximately 272,000
shares, including the 13,500 shares purchased by the organizers prior to this
offering, for a total investment of $2,720,000. In addition, our organizers
have loaned Ohio Legacy $425,000 through June 30, 2000. As part of our initial
organization and prior to the closing of this offering, we expect to grant up
to 150,000 warrants to our organizers which will vest in approximately equal
percentages each year over our initial three years of operation. These warrants
will be issued in addition to any warrants received in connection with the
purchase of shares in this offering. Organizers will receive warrants based
upon their contribution to Ohio Legacy, subject, however, to an individual
limit of 18,000 organizer warrants and an overall limit of 150,000 organizer
warrants in order to comply with a 15.0% regulatory limit being imposed on
grants of warrants and options to directors, officers, promoters, 5.0%
shareholders and employees for a period of one year following the offering. The
warrant will entitle the holder to purchase a share of common stock at the
price of $10.00 per share and will expire 10 years from the date of issuance.
These warrants will be nontransferable, except to affiliates of the holder and
for estate planning reasons.
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<PAGE> 24
IMPACT OF WARRANTS AND DILUTION.
If all organizer warrants were issued and exercised, we would receive
approximately $1.5 million in new capital and would issue 150,000 shares. The
exercise of these warrants would reduce your proportionate interest in Ohio
Legacy by 11.0%, assuming that we sell the maximum number of shares in this
offering.
IMPACT OF STOCK OPTIONS AND DILUTION.
In October, 1999, Ohio Legacy adopted a stock option plan providing for
the grant of non-qualified stock options to directors and key employees of Ohio
Legacy and Ohio Legacy Bank. Stock options differ from warrants in several ways.
For example, a gain on a stock option is measured on the exercise date as the
difference 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.
We have not yet granted any options. However, we intend to eventually
issue options to our non-employee directors. See "Management-Compensation of
Directors." If all available options were granted and exercised at $10.00 per
share, we would receive a total of approximately $1.0 million in new capital and
would issue 100,000 shares. This would reduce your proportionate interest in
Ohio Legacy by 7.6%.
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<PAGE> 25
BUSINESS
BACKGROUND
According to the FDIC, at the end of 1990 there were approximately
15,158 financial institutions in the United States, which number declined to
10,220 by the end of 1999. 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 led 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 32 de novo community banks chartered in the United States. By 1999 this
figure rose to 228 de novos. There were 289 insured commercial banks and 207
insured savings and loans in the State of Ohio at the end of 1990. As of
December 31, 1999 there were only 219 insured commercial banks and 135 insured
savings and loans in Ohio, which represents a decline of approximately 29.0% in
the number of financial institutions.
We believe that industry consolidation has created significant
opportunities in the Wayne and Stark County, Ohio communities, along with
communities in contiguous counties, for us to satisfy the needs of 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 Ohio Legacy Bank will provide a
community based banking alternative to the large institutions for the small
businesses in the Ohio Legacy Bank service areas. The organizers and senior
management have had significant experience in the financial industry either
directly or through director experience. The experience and community
connections of all 11 organizers and senior management and their knowledge of
the Wayne and Stark County, Ohio markets led them to identify the need for a
locally chartered, owned and operated community bank that would be
service-driven and technologically advanced and capable of serving the small
businesses of Stark and Wayne County, Ohio.
The directors and management hold strong ties to both communities.
These people have a combined financial institution directorship of over 30
years and a combined financial institution experience of over 25 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. Both markets have a diversified economic base that is
not overly dependent on any single industry. These primary service areas
represent the geographic areas from which each office is expected to generate
approximately 75.0% of its business. Residents outside of these areas would, for
the purpose of convenience, choose branches close to where they work, live or
shop.
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<PAGE> 26
Ohio Legacy Bank intends to operate as a full-service financial
institution with an emphasis on serving small businesses. Therefore, Ohio Legacy
Bank's product and service line will consist of all traditional banking
activities, including the following:
- LENDING: Ohio Legacy Bank will offer loans to individuals,
partnerships, 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 secured and unsecured consumer
loans, home equity lines of credit, home improvement loans,
general lines of credit including overdraft lines, and
mortgage lending. We anticipate that Ohio Legacy Bank will set
up the capability to sell loans in the secondary market while
maintaining servicing. The volume of loans to be sold will be
determined based on asset/liability and capital positions.
- DEPOSIT: Deposit products will include interest-bearing and
non-interest bearing checking accounts, money market savings
accounts, certificates of deposit, regular savings accounts,
individual retirement accounts, and cash management services.
- OPERATIONS/OTHER: Ohio Legacy Bank will offer ATM services,
and will seek to offer direct dial-up cash management services
to commercial accounts. Ohio Legacy Bank also intends to offer
internet banking services to both retail and commercial
customers. Further, while it is our opinion that both markets
would support trust services, Ohio Legacy Bank will not offer
trust services initially and will consult the OCC for guidance
prior to any future decisions with respect to fiduciary
services.
Market characteristics in both Wayne and Stark counties suggest the
ability to generate solid deposit and loan growth both in consumer and
commercial services. Therefore, both office locations will offer Ohio Legacy
Bank's complete line of services.
PROPOSED LENDING PRACTICES
Ohio Legacy Bank expects to make loans to individuals and businesses
located within its proposed market area. Ohio Legacy Bank anticipates that its
loan portfolio will consist of commercial loans (50.0%), residential mortgage
loans (20.0%) and consumer/personal loans (30.0%), although these percentages
are approximations and the actual percentages may vary. Ohio Legacy Bank
anticipates that its legal lending limit under applicable regulations will be
approximately $1.59 million immediately following the offering if the maximum
number of shares are sold, based on the legal lending limit of 15.0% of capital
and surplus.
COMMERCIAL LOANS. Commercial loans will be made primarily to small and
medium-sized businesses. These loans will be both secured and unsecured and are
expected to be made available for general operating purposes, acquisition of
fixed assets including real estate, purchases of equipment and machinery,
financing of inventory and accounts receivable, as well as any other purposes
considered appropriate. Ohio Legacy Bank will generally look to a borrower's
business operations as
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the principal source of repayment, but will also receive, when appropriate,
mortgages on real estate, security interests in inventory, accounts receivable
and other personal property and/or personal guarantees. In addition, Ohio Legacy
Bank expects that the majority of Ohio Legacy's commercial loans that are not
mortgage loans will be secured by a lien on equipment, inventory and/or other
assets of the commercial borrower.
Commercial lending involves more risk than residential lending because
loan balances are greater and repayment is dependent upon the borrower's
operations. Ohio Legacy Bank will attempt to minimize the risks associated with
these transactions by generally limiting its exposure to owner-operated
properties of customers with an established, profitable history. In many cases,
risk will be further reduced by (1) limiting the amount of credit to any one
borrower to an amount less than Ohio Legacy Bank's legal lending limit and (2)
avoiding certain types of commercial real estate financings.
RESIDENTIAL MORTGAGE LOANS. Ohio Legacy Bank expects to originate
residential mortgage loans, which are generally long-term, with either fixed or
variable interest rates. Ohio Legacy's anticipated general policy will be to
retain all or a portion of variable interest rate mortgage loans in Ohio Legacy
Bank's loan portfolio and to sell all fixed rate loans in the secondary market.
This policy is subject to review by management and may be revised as a result of
changing market and economic conditions and other factors. Ohio Legacy Bank also
expects to offer home equity loans. Ohio Legacy Bank expects to retain servicing
rights with respect to all of the residential mortgage loans that it originates.
We anticipate, but do not guarantee, that substantially all of Ohio Legacy
Bank's residential real estate loans will be secured by a first lien on the real
estate and that the majority of Ohio Legacy Bank's personal loans will be home
equity loans secured by a second lien on real estate.
PERSONAL LOANS AND LINES OF CREDIT. Ohio Legacy Bank will make personal
loans and lines of credit available to consumers for various purposes, such as
the purchase of automobiles, boats and other recreational vehicles, and the
making of home improvements and personal investments. Ohio Legacy Bank expects
to retain all of such loans. Depending, in part, on the level of demand among
Ohio Legacy Bank's customers and other considerations, Ohio Legacy Bank may
consider offering credit card services.
Consumer loans generally have shorter terms and higher interest rates
than residential mortgage loans and, except for home equity lines of credit,
usually involve more credit risk than mortgage loans because of the type and
nature of the collateral. Consumer lending collections are dependent on a
borrower's continuing financial stability and are thus likely to be adversely
affected by job loss, illness or personal bankruptcy. In many cases, repossessed
collateral for a defaulted consumer loan will not provide an adequate source of
repayment of the outstanding loan balance because of depreciation of the
underlying collateral. Ohio Legacy Bank intends to underwrite its loans
carefully, with a strong emphasis on the amount of the down payment, credit
quality, employment stability and monthly income. These loans are expected
generally to be repaid on a monthly repayment schedule with the payment amount
tied to the borrower's periodic income. Ohio Legacy Bank believes that the
generally higher yields earned on consumer loans will help compensate for the
increased credit risk associated with such loans and that consumer loans will be
important to its efforts to serve the credit needs of its customer base.
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LOAN POLICIES. Although Ohio Legacy Bank intends to take a progressive
and competitive approach to lending, it will stress high quality in its loans.
Because of Ohio Legacy Bank's local nature, management believes that quality
control should be achievable while still providing prompt and personal service.
Ohio Legacy Bank will be subject to written loan policies that contain general
lending guidelines and will be subject to periodic review and revision by Ohio
Legacy Bank's Loan Committee and its board of directors. These policies will
concern loan administration, documentation, approval and reporting requirements
for various types of loans.
Ohio Legacy Bank will seek to make sound loans while recognizing that
lending money involves a degree of business risk. Ohio Legacy's loan policies
will be designed to assist Ohio Legacy Bank in managing the business risk
involved in making loans. These policies will provide a general framework for
Ohio Legacy Bank's loan operations while recognizing that not all loan
activities and procedures can be anticipated. Ohio Legacy Bank's loan policies
will instruct lending personnel to use care and prudent decision making and to
seek the guidance of the Senior Loan Officer, or President and Chief Executive
Officer of Ohio Legacy Bank where appropriate.
Ohio Legacy Bank's loan policies will include procedures for oversight
and monitoring of Ohio Legacy's lending practices and loan portfolio. Ohio
Legacy Bank will have a Loan Committee comprised initially of Mr. Douce, Mr.
Pettit, Mr. Boss and other appropriate lending personnel. Initially, Mr. Pettit
will have individual signatory authority for loans up to $400,000 and Mr. Douce
and Mr. Pettit will have joint signatory authority for loans up to $500,000.
These limits will be subject to review and revision by Ohio Legacy Bank's board
of directors and its Loan Committee will be responsible for approving all loans
that exceed the established limits for the senior officers.
Ohio Legacy Bank's loan policies will provide guidelines for
loan-to-value ratios that limit the size of certain types of loans to a maximum
percentage of the value of the collateral securing the loans, which percentage
varies by the type of collateral, including the following maximum loan-to-value
ratios:
- raw land (65.0%)
- improved residential real estate lots (75.0%)
- owner-occupied commercial real estate (80.0%)
- non-owner occupied commercial real estate (75.0%)
- first mortgages on residences (80.0%)
- junior mortgages on residences (100.0%)
Ohio Legacy Bank's loan policies will also include other underwriting
standards for loans secured by liens on real estate. These underwriting
standards are designed to determine the maximum
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loan amount that a borrower has the capacity to repay based upon the type of
collateral securing the loan and the borrower's income. For owner-occupied
residential real estate mortgages, the monthly payments on the loan will not
exceed 28.0% of the borrower's monthly income. For owner-occupied commercial
real estate mortgages, the annual payments, combined with the borrower's other
required debt payments, will not exceed 80.0% of the borrower's net annual
projected cash flow. In addition, the loan policies will require that Ohio
Legacy Bank obtain a written appraisal by a state certified appraiser for loans
secured by real estate in excess of $250,000, subject to certain limited
exceptions. The appraiser must be selected by Ohio Legacy Bank and must be
independent and licensed. For loans secured by real estate that are less than
$250,000, Ohio Legacy Bank may elect to conduct an in-house real estate
evaluation. Ohio Legacy Bank's loan policies will also include maximum
amortization schedules and loan terms for each category of loans secured by
liens on real estate. Loans secured by commercial real estate will be subject
to a maximum term of ten years and a maximum amortization schedule of 20 years.
Loans secured by residential real estate with variable interest rates will have
a maximum term and amortization schedule of 30 years. Ohio Legacy Bank will, at
its option, sell to the secondary market loans secured by residential real
estate with fixed interest rates, thereby reducing the interest rate risk and
credit risk to Ohio Legacy Bank. Loans secured by vacant land will be subject
to a maximum term of three years and a maximum amortization schedule of seven
years.
Ohio Legacy Bank's loan policies will also establish a limit on the
aggregate amount of loans to any one borrower. These loan policies will provide
that no loan shall be granted where the aggregate liability of the borrower to
Ohio Legacy Bank will exceed 50.0% of Ohio Legacy Bank's legal lending limit.
This internal lending limit will be subject to review and revision by the board
of directors from time to time.
In addition, Ohio Legacy Bank's loan policies will provide guidelines
for:
- personal guarantees;
- environmental policy review;
- loans to employees, executive officers and directors;
- problem loan identification;
- maintenance of a loan loss reserve; and
- other matters relating to Ohio Legacy Bank's lending
practices.
DEPOSITS
Ohio Legacy Bank intends to offer a broad range of deposit products,
including checking, business checking, savings and money market accounts,
certificates of deposit and direct-deposit services. Transaction accounts and
certificates of deposit will be tailored to the primary market area at rates
competitive with those offered in Wayne and Stark County. All deposit accounts
will be insured by the FDIC up to the maximum amount permitted by law. Ohio
Legacy Bank intends to solicit those accounts from individuals, businesses,
associations, financial institutions and government entities.
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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.
COMPETITION
The statistical data below is publicly available and was provided by
SNL Datasource.
WAYNE COUNTY AND WOOSTER. As of June 30, 1999, the primary service area
of Wayne County was served by 43 branch offices, representing 12 bank or savings
and loan holding companies. Total deposits in Wooster increased by 17.4% or
$112.5 million, between June 30, 1997 and June 30, 1999.
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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 recently opened new banking
offices in Wooster. Therefore, despite the branch closings from the
Signal-FirstMerit merger, the net number of branches serving Wooster remained
the same at the end of 1999.
Total deposits in Wayne County grew by more than 16.7% between 1997 and
1999, reaching $1.3 billion in June 1999. It is important to note that Wooster
represents more than 58.0% of total deposits in the county.
STARK COUNTY AND CANTON. Deposits in Canton increased by 13.0%, or
$212.7 million since 1997, resulting in total deposits of nearly $1.8 billion in
June 1999. Additionally, North Canton realized a solid increase in deposits.
Total deposits in North Canton increased from $408.2 million in June 1997 to
$465.7 million in June 1999 for growth of 14.1%.
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 56.8% of total Stark County deposits.
SUMMARY. In reviewing the competitive nature of both markets there are
two positive characteristics that suggest the potential for success of Ohio
Legacy Bank. First, both markets have significant deposit bases, which have
provided growth for the majority of financial institutions serving the areas.
Wooster has a deposit base of $759.6 million and has realized growth
since 1996. Canton also has a growing deposit base of approximately $1.8
billion. The overall size of the deposit base in both markets suggests the
opportunity for the new bank to generate deposit growth. Second, the presence of
locally-owned and managed community banks in both markets is limited. Larger
regional banks hold approximately 47.4% of market share in Wooster,
approximately 79.1% of market share in Canton, and approximately 96.4% of market
share in North Canton. While the larger regional banks in the markets are
strong, several studies recently conducted by Young & Associates have indicated
that smaller community banks have been growing at a faster rate than larger
regional banks presumably by offering a higher level of customer service and by
benefiting from positive customer perception of local ownership, local
management, and community involvement. Though no assurances can be given, we
believe that the large deposit market shares held by the larger regional banks
provide Ohio Legacy Bank with the opportunity to effectively position itself as
a stable and attractive community banking alternative.
COMMUNITY INVOLVEMENT
We realize that our success will be dependent on the success of the
local communities of Wayne and Stark County, Ohio. We plan to attract and
maintain support in each community through the following three methods:
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- PUBLIC OFFERING - This public offering of our shares will give
residents in the community an opportunity to have an ownership
interest in Ohio Legacy from its inception and be part of its
future success.
- COMMUNITY PARTICIPATION - Our directors and officers are
currently and will continue to be members of civic, social and
religious organizations, through which we will maintain
regular contact with various leaders throughout the community.
This type of association will provide a forum for exchange of
thoughts and ideas regarding a variety of subjects, including
identification of community needs and ways in which we can
assist.
- COMMUNITY COMMUNICATION - We plan to maintain consistent,
ongoing communication with Wayne and Stark County, Ohio
residents. We will use advertising and public relations tools
to consistently inform the communities with respect to our
products, services and involvement in local activities and
community development.
EMPLOYEES
We anticipate that when Ohio Legacy Bank opens for business, it will
employ approximately 15 full-time employees and 5 part-time employees.
Initially, the executive officers of Ohio Legacy Bank will consist of three
persons, the Chief Executive Officer and President, the Senior Loan Officer and
President of the Stark County Division and the Senior Vice President of
Commercial Lending. The remaining employees will provide personal banking
services to customers and staff support in the areas of accounting, lending and
operations. Other non-banking services such as data processing, compliance and
internal audit will be outsourced to companies specializing in these areas.
We expect that total compensation for Ohio Legacy Bank's employees for
the first year of operations will be approximately $853,000. There are no
significant increases in compensation planned for the second and third years
unless significant increases in deposits and loans occur that would require
additional staff. We also intend to provide employees with benefit programs,
including medical insurance, paid vacation time and sick leave, and employee
stock options.
LITIGATION
We are not a party to any pending legal proceedings.
DESCRIPTION OF PROPERTY
Our headquarters and the Wayne County banking center will be located at
305 West Liberty St., Wooster, Ohio 44691. We have entered into a 15 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 December 2000. The
annual base rent is approximately $50,000 plus an amount equal to the yearly
amortization of the construction costs, which are estimated to be $550,000, over
180 months, with interest charged at the prime rate plus 1/2%. The
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facility will include a vault, safe deposit boxes, personal banker stations, an
automated teller machine, a night depository drop and drive-up teller stations.
We have also entered into a lease for temporary facilities four blocks
from the permanent site at 132 E. Liberty St., Wooster, Ohio. The temporary site
will be used for administrative purposes during the organization of Ohio Legacy
Bank and then as a branch office once we receive our charter, until the
permanent site is completed.
Our Stark County banking center will be located at 3900 Dressler Road
in Canton, Ohio. We have entered into a ten year lease agreement for the
property with two five year renewal options. Annual rent payments will be
approximately $60,500 for the first five years of the lease, with 15.0%
increases for each renewal term. This facility will be approximately 3,500
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. We have received all preliminary regulatory approvals.
Whether the OCC and FDIC grant us final approval and deposit insurance will
depend upon, among other things, our compliance with legal requirements imposed
by the OCC and the FDIC, including capitalization of Ohio Legacy Bank with at
least a specified minimum amount of capital, which management believes Ohio
Legacy Bank will be able to meet. In the event these requirements are not met,
the offering will be terminated. Upon receipt of these final regulatory
approvals from the OCC and the FDIC, we expect to receive final regulatory
approval from the Federal Reserve to become a bank holding company, which must
be approved before we can acquire the capital stock of Ohio Legacy Bank. We
expect to receive all final regulatory approvals by the third quarter of 2000.
Our profitability will be dependent upon the successful operations of
Ohio Legacy Bank. New banks are typically not profitable in the first year of
operation and sometimes do not become profitable for several years, if at all.
At March 31, 2000, our accumulated deficit was $362,780. We will continue to
incur pre-opening expenses until Ohio Legacy Bank commences operations. We
expect to incur total pre-opening expenses of approximately $540,000. Based upon
industry standards, management's experience and current market demand, we
believe that Ohio Legacy Bank will begin to be profitable in the third quarter
of the second year of operations. We cannot assure you, however, that Ohio
Legacy Bank will be profitable, or if profitable, that its earnings will equal
those of similar banking institutions.
We face stiff competition in making loans and attracting deposits in
our service area. In order to overcome this competitive environment, we plan to
become the premier community based financial institution in our service areas by
providing personalized bank products and traditional bank services to
individuals, small businesses, professionals and other local organizations. We
intend to employ professional and consumer friendly individuals who can think
outside of the box. While Ohio Legacy
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Bank will provide personal computer banking and telephone banking for customers
who want this convenience, customers will still be able to talk with employees
and have their transactions handled by employees who have the authority and
knowledge to take care of them. We plan to open Ohio Legacy Bank with
approximately 15 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 12 to 24 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, with the exception of the
exercise of warrants and options, we do not anticipate any need to raise
additional capital for the next three to five years.
We anticipate that expenditures for furniture, fixtures, and equipment
will be approximately $425,000 in the first year of operation. Our largest
expenditure items will be for bank equipment such as vaults, safe deposit boxes,
ATMs, personal computers, teller equipment and leasehold improvements. These
expenditures are expected to meet our needs for the next few years.
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SUPERVISION AND REGULATION
Both Ohio Legacy and Ohio Legacy Bank are or will soon be subject to
extensive state and federal banking laws and regulations which impose specific
requirements or restrictions on and provide for general regulatory oversight of
virtually all aspects of operations. These laws and regulations are generally
intended to protect depositors, not shareholders. The following summary is
qualified by reference to the statutory and regulatory provisions discussed.
Changes in applicable laws or regulations may have a material effect on our
business and prospects. Beginning with the enactment of the Financial
Institution Report Recovery and Enforcement Act in 1989 and following with the
FDIC Improvement Act in 1991, numerous additional changes have been proposed.
Our operations may be affected by legislative changes and the policies of
various regulatory authorities, including changes brought about by the Financial
Services Modernization Act of 1999. We cannot predict the effect that fiscal or
monetary policies, economic control, or new federal or state legislation may
have in the future on our business and earnings.
OHIO LEGACY CORP
Because we will own the outstanding capital stock of Ohio Legacy Bank,
we will be deemed a bank holding company under the federal Bank Holding Company
Act of 1956.
THE BANK HOLDING COMPANY ACT. Under the Bank Holding Company Act, Ohio
Legacy will be subject to periodic examination by the Federal Reserve and
required to file periodic reports of its operations and any additional
information that the Federal Reserve may require. Our activities at the bank
holding company level will be limited to:
- banking, managing or controlling banks;
- furnishing services to or performing services for our
subsidiaries; and
- engaging in other activities that the Federal Reserve
determines to be so closely related to banking, managing, or
controlling banks as to be a proper incident thereto.
INVESTMENTS, CONTROL, AND ACTIVITIES. With some limited exceptions, the
Bank Holding Company Act requires every bank holding company to obtain the prior
approval of the Federal Reserve before:
- acquiring substantially all the assets of any bank;
- acquiring direct or indirect ownership or control of any
voting shares of any bank if after such acquisition it would
own or control more than 5.0% of the voting shares of such
bank (unless it already owns or controls the majority of such
shares); or
- merging or consolidating with another bank holding company.
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In addition, and subject to some exceptions, the Bank Holding Company
Act and the Change in Bank Control Act, together with regulations thereunder,
require Federal Reserve approval prior to any person or company acquiring
"control" of a bank holding company. Control is conclusively presumed to exist
if an individual or company acquires 25.0% or more of any class of voting
securities of the bank holding company. Control is rebuttably presumed to exist
if a person acquires 10.0% or more, but less than 25.0%, 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 5.0% 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 associations; and
- making investment in certain corporations or projects designed
primarily to promote community welfare.
The Federal Reserve Board imposes capital requirements on Ohio Legacy
under the Bank Holding Company Act, including a minimum leverage ratio and a
minimum ratio of "qualifying" capital to risk-weighted assets. These
requirements are described below under "Capital Regulations." Subject to its
capital requirements and certain other restrictions, Ohio Legacy is able to
borrow money to make a capital contribution to Ohio Legacy Bank, and these loans
may be repaid from dividends paid from Ohio Legacy Bank to Ohio Legacy. Our
ability to pay dividends will be subject to regulatory restrictions as described
below in "Ohio Legacy Bank - Dividends." Ohio Legacy is also able to raise
capital for contribution to Ohio Legacy Bank by issuing securities without
having to receive regulatory approval, subject to compliance with federal and
state securities laws.
SOURCE OF STRENGTH; CROSS-GUARANTEE. In accordance with Federal Reserve
Board policy, Ohio Legacy will be expected to act as a source of financial
strength to Ohio Legacy Bank and to commit resources to support Ohio Legacy Bank
in circumstances in which Ohio Legacy might not otherwise do so. Under the Bank
Holding Company Act, the Federal Reserve Board may require a
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bank holding company to terminate any activity or relinquish control of a
nonbank subsidiary, other than a nonbank subsidiary of a bank, upon the Federal
Reserve Board's determination that such activity or control constitutes a
serious risk to the financial soundness or stability of any subsidiary
depository institution of the bank holding company. Further, federal bank
regulatory authorities have additional discretion to require a bank holding
company to divest itself of any bank or nonbank subsidiary if the agency
determines that divestiture may aid the depository institution's financial
condition.
OHIO LAW. Ohio's Merger Moratorium Act, enacted in 1990, prohibits
certain Ohio corporations from engaging in specified types of transactions with
an "interested shareholder" for a period of three years after the shareholder
becomes an "interested shareholder" unless the shareholder receives the approval
of the corporation's board of directors prior to the acquisition of shares or
the consummation of the specified type of transaction. The anticipated effect of
the Merger Moratorium Act is to encourage a potential acquiror to negotiate with
a target corporation's board of directors prior to obtaining a 10.0% or
greater block of shares in the corporation.
OHIO LEGACY BANK
Ohio Legacy Bank will operate as a national banking association
incorporated under the laws of the United States and subject to examination by
the Office of the Comptroller of the Currency. Deposits in Ohio Legacy Bank will
be insured by the FDIC up to a maximum amount, which is generally $100,000 per
depositor subject to aggregation rules.
The Office of the Comptroller of the Currency and the FDIC will
regulate or monitor virtually all areas of Ohio Legacy Bank's operations,
including:
- security devices and procedures;
- adequacy of capitalization and loss reserves;
- loans;
- investments;
- borrowings;
- deposits;
- mergers;
- issuances of securities;
- payment of dividends;
- interest rates payable on deposits;
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- interest rates or fees chargeable on loans;
- establishment of branches;
- corporate reorganizations;
- maintenance of books and records; and
- adequacy of staff training to carry on safe lending and
deposit gathering practices.
The OCC requires Ohio Legacy Bank to maintain specified capital ratios
and imposes limitations on Ohio Legacy Bank's aggregate investment in real
estate, bank premises, and furniture and fixtures. The OCC will also require
Ohio Legacy Bank to prepare quarterly reports on Ohio Legacy Bank's financial
condition and to conduct an annual audit of its financial affairs in compliance
with its minimum standards and procedures.
Under the FDIC Improvement Act, all insured institutions must undergo
regular on site examinations by their appropriate banking agency. The cost of
examinations of insured depository institutions and any affiliates may be
assessed by the appropriate agency against each institution or affiliate, as it
deems necessary or appropriate. Insured institutions are required to submit
annual reports to the FDIC, their federal regulatory agency, and state
supervisor when applicable. The FDIC Improvement Act directs the FDIC to develop
a method for insured depository institutions to provide supplemental disclosure
of the estimated fair market value of assets and liabilities, to the extent
feasible and practicable, in any balance sheet, financial statement, report of
condition or any other report of any insured depository institution. The FDIC
Improvement Act also requires the federal banking regulatory agencies to
prescribe, by regulation, standards for all insured depository institutions and
depository institution holding companies relating, among other things, to the
following:
- internal controls;
- information systems and audit systems;
- loan documentation;
- credit underwriting;
- interest rate risk exposure; and
- asset quality.
National banks and their holding companies that have been chartered or
registered or have undergone a change in control within the past two years or
that have been deemed by the OCC or the Federal Reserve Board to be troubled
institutions must give the OCC or the Federal Reserve Board 30 days prior
notice of the appointment of any senior executive officer or director. Within
the 30
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day period, the OCC or the Federal Reserve Board, as the case may be, may
approve or disapprove any such appointment.
DEPOSIT INSURANCE. The FDIC establishes rates for the payment of
premiums by federally insured banks and thrifts for deposit insurance. A
separate Bank Insurance Fund and Savings Association Insurance Fund are
maintained for commercial banks and savings associations with insurance premiums
from the industry used to offset losses from insurance payouts when banks and
thrifts fail. In 1993, the FDIC adopted a rule, which establishes a risk-based
deposit insurance premium system for all insured depository institutions. Under
this system, until mid-1995 depository institutions paid to Bank Insurance Fund
or Savings Association Insurance Fund from $0.23 to $0.31 per $100 of insured
deposits depending on its capital levels and risk profile, as determined by its
primary federal regulator on a semiannual basis. Once Bank Insurance Fund
reached its legally mandated reserve ratio in mid-1995, the FDIC lowered
premiums for well-capitalized banks, eventually eliminating premiums for
well-capitalized banks, with a minimum semiannual assessment of $1,000. However,
in 1996 Congress enacted the Deposit Insurance Funds Act of 1996, which
eliminated even this minimum assessment. It also separated the Financial
Corporation (FICO) assessment to service the interest on its bond obligations.
The amount assessed on individual institutions, including Ohio Legacy Bank, by
FICO is in addition to the amount paid for deposit insurance according to the
risk-related assessment rate schedule. Increases in deposit insurance premiums
or changes in risk classification will increase Ohio Legacy Bank's cost of
funds, and we may not be able to pass these costs on to our customers.
TRANSACTIONS WITH AFFILIATES AND INSIDERS. Ohio Legacy Bank will be
subject to the provisions of Section 23A of the Federal Reserve Act, which
places limits on the amount of loans or extensions of credit to, or investments
in, or certain other transactions with, affiliates and on the amount of advances
to third parties collateralized by the securities or obligations of affiliates.
The aggregate of all covered transactions is limited in amount, as to any one
affiliate, to 10.0% of Ohio Legacy Bank's capital and surplus and, as to all
affiliates combined, to 20.0% of Ohio Legacy Bank's capital and surplus.
Furthermore, within the foregoing limitations as to amount, each covered
transaction must meet specified collateral requirements. Compliance is also
required with certain provisions designed to avoid the taking of low quality
assets.
Ohio Legacy Bank will also be subject to the provisions of Section 23B
of Federal Reserve Act which among other things, prohibits an institution from
engaging in certain transactions with certain affiliates unless the transactions
are on terms substantially the same, or at least as favorable to such
institution or its subsidiaries, as those prevailing at the time for comparable
transactions with nonaffiliated companies. Ohio Legacy Bank will be subject to
certain restrictions on extensions of credit to executive officers, directors,
certain principal shareholders, and their related interests. Such extensions of
credit:
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- 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. In addition, the payment of cash dividends by a newly
organized bank is prohibited by the FDIC for three years, unless special
exceptions are made.
BRANCHING. National banks are required by the National Bank Act to
adhere to branch office banking laws applicable to state banks in the states in
which they are located. Under current Ohio law, Ohio Legacy Bank may establish
banking offices in Ohio with the prior approval of the superintendent of
financial institutions. In addition, with prior regulatory approval, Ohio Legacy
Bank will be able to acquire existing banking operations in Ohio. Furthermore,
federal legislation allows interstate branching. The law permits out-of-state
acquisitions by bank holding companies, interstate branching by banks if allowed
by state law, and interstate merging by banks.
COMMUNITY REINVESTMENT ACT. The Community Reinvestment Act requires
that, in connection with examinations of financial institutions within their
respective jurisdictions, the Federal Reserve, the FDIC, or the OCC, shall
evaluate the record of each financial institution in meeting the credit needs of
its local community, including low and moderate income neighborhoods. These
factors are also considered in evaluating mergers, acquisitions, and
applications to open a branch or facility. Failure to adequately meet these
criteria could impose additional requirements and limitations on Ohio Legacy
Bank.
OTHER REGULATIONS. Interest and other charges collected or contracted
for by Ohio Legacy Bank are subject to state usury laws and federal laws
concerning interest rates. Ohio Legacy Bank's loan operations are also subject
to federal laws applicable to credit transactions, such as the:
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- Truth-In-Lending Act, governing disclosures of credit terms to
consumer borrowers;
- Home Mortgage Disclosure Act of 1975, requiring financial
institutions to provide information to enable the public and
public officials to determine whether a financial institution
is fulfilling its obligation to help meet the housing needs of
the community it serves;
- Equal Credit Opportunity Act, prohibiting discrimination on
the basis of race, creed or other prohibited factors in
extending credit;
- Fair Credit Reporting Act of 1978, governing the use and
provision of information to credit reporting agencies;
- Fair Debt Collection Act, governing the manner in which
consumer debts may be collected by collection agencies; and
- rules and regulations of the various federal agencies charged
with the responsibility of implementing such federal laws.
The deposit operations of Ohio Legacy Bank also are subject to the:
- Right to Financial Privacy Act, which imposes a duty to
maintain confidentiality of consumer financial records and
prescribes procedures for complying with administrative
subpoenas of financial records; and
- Electronic Funds Transfer Act and Regulation E issued by the
Federal Reserve Board to implement that act, which governs
automatic deposits to and withdrawals from deposit accounts
and customers' rights and liabilities arising from the use of
automated teller machines and other electronic banking
service.
CAPITAL REGULATIONS. The federal bank regulatory authorities have
adopted risk-based capital guidelines for banks and bank holding companies that
are designed to make regulatory capital requirements more sensitive to
differences in risk profiles among banks and bank holding companies and account
for off-balance sheet items. The guidelines are minimums, and the federal
regulators have noted that banks and bank holding companies contemplating
significant expansion programs should not allow expansion to diminish their
capital ratios and should maintain ratios in excess of the minimums. We have not
received any notice indicating that either Ohio Legacy or Ohio Legacy Bank is
subject to higher capital requirements. The current guidelines require all bank
holding companies and federally-regulated banks to maintain a minimum risk-based
total capital ratio equal to eight percent, of which at least four percent must
be Tier 1 capital. Tier 1 capital includes common shareholders' equity,
qualifying perpetual preferred stock, and minority interests in equity accounts
of consolidated subsidiaries, but excludes goodwill and most other intangibles
and excludes the allowance for loan and lease losses. Tier 2 capital includes
the excess of any preferred stock not included in Tier 1 capital, mandatorily
convertible securities, hybrid capital instruments, subordinated debt and
intermediate term-preferred stock, and general reserves for loan and lease
losses up to one percent of risk-weighted assets.
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Under these guidelines, banks' and bank holding companies' assets are
given risk-weights of zero percent, 20.0%, 50.0%, or 100.0%. 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 100.0% risk category, except for first mortgage loans fully
secured by residential property and, under certain circumstances, residential
construction loans, both of which carry a 50.0% rating. Most investment
securities are assigned to the 20.0% category, except for municipal or state
revenue bonds, which have a 50.0% rating, and direct obligations of or
obligations guaranteed by the United States Treasury or United States
Government agencies, which have a zero percent 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 three percent, 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 5.0%, a Tier 1 risk-based ratio
of no less than 6.0%, and a total risk-based capital ratio of no less than
10.0%, and Ohio Legacy Bank must not be under any order or directive from the
appropriate regulatory agency to meet and maintain a specific capital level.
Initially, we will qualify as "well capitalized."
Under the FDIC Improvement Act regulations, the applicable agency can
treat an institution as if it were in the next lower category if the agency
determines, after notice and an opportunity for hearing, that the institution is
in an unsafe or unsound condition or is engaging in an unsafe or unsound
practice. The degree of regulatory scrutiny of a financial institution
increases, and the permissible activities of the institution decreases, as it
moves downward through the capital categories. Institutions that fall into one
of the three undercapitalized categories may be required to do some or all of
the following:
- submit a capital restoration plan;
- raise additional capital;
- restrict their growth, deposit interest rates, and other
activities;
- improve their management;
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- eliminate management fees; or
- divest themselves of all or a part of their operations.
Bank holding companies controlling financial institutions can be called upon to
boost the institutions' capital and to partially guarantee the institutions'
performance under their capital restoration plans.
These capital guidelines can affect us in several ways. If we grow at a
rapid pace, a premature "squeeze" on capital could occur making a capital
infusion necessary. The requirements could impact our ability to pay dividends.
Our capital levels will initially be more than adequate; however, rapid growth,
poor loan portfolio performance, poor earnings performance, or a combination of
these factors could change our capital position in a relatively short period of
time.
The FDIC Improvement Act requires the federal banking regulators to
revise the risk-based capital standards to provide for explicit consideration of
interest-rate risk, concentration of credit risk, and the risks of untraditional
activities. We are uncertain what effect these regulations would have.
Failure to meet these capital requirements would mean that a bank would
be required to develop and file a plan with its primary federal banking
regulator describing the means and a schedule for achieving the minimum capital
requirements. In addition, such a bank would generally not receive regulatory
approval of any application that requires the consideration of capital adequacy,
such as a branch or merger application, unless the bank could demonstrate a
reasonable plan to meet the capital requirement within a reasonable period of
time.
ENFORCEMENT POWERS. The Financial Institution Reform Recovery and
Enforcement Act expanded and increased civil and criminal penalties available
for use by the federal regulatory agencies against depository institutions and
certain "institution-affiliated parties." Institution-affiliated parties
primarily include management, employees, and agents of a financial institution,
as well as independent contractors and consultants such as attorneys and
accountants and others who participate in the conduct of the financial
institution's affairs. These practices can include the failure of an institution
to timely file required reports or the filing of false or misleading information
or the submission of inaccurate reports. Civil penalties may be as high as
$1 million a day for such violations. Criminal penalties for some financial
institution crimes have been increased to 20 years. In addition, regulators
are provided with greater flexibility to commence enforcement actions against
institutions and institution-affiliated parties. Possible enforcement actions
include the termination of deposit insurance. Furthermore, banking agencies'
power to issue cease-and-desist orders were expanded. Such orders may, among
other things, require affirmative action to correct any harm resulting from a
violation or practice, including restitution, reimbursement, indemnifications or
guarantees against loss. A financial institution may also be ordered to restrict
its growth, dispose of certain assets, rescind agreements or contracts, or take
other actions as determined by the ordering agency to be appropriate.
RECENT LEGISLATIVE DEVELOPMENTS. On November 12, 1999, the President of
the United States signed into law the Financial Services Modernization Act of
1999. FSMA contains a number of provisions that will fundamentally alter the
banking and financial services industries. The FSMA
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repeals Section 20 of the Banking Act of 1933, commonly known as the
Glass-Steagall Act, which generally has separated commercial from investment
banking. The FSMA will also for the first time allow banks, securities firms and
insurance companies to affiliate in a new financial holding company structure.
Under the FSMA, national bank affiliates will be able to conduct a
broad range of financial activities, including providing insurance and
securities services. However, the national bank must be well-capitalized and
well-managed. In addition, insurance and securities activities will be
functionally regulated. For example, the Securities and Exchange Commission will
regulate most national bank affiliates' securities activities and the states
will regulate their insurance activities. The FSMA preserves the thrift charter,
but bars new unitary thrift holding companies from approval that were applied
for after May 4, 1999.
It is not possible to predict what impact the FSMA will have on Ohio
Legacy Corp or Ohio Legacy Bank. One consequence may be increased competition
from large financial services companies that, under the FSMA, will be permitted
to provide many types of financial services to customers.
EFFECT OF GOVERNMENTAL MONETARY POLICIES. Our earnings are affected by
domestic economic conditions and the monetary and fiscal policies of the United
States government and its agencies. The Federal Reserve Bank's monetary policies
have had, and are likely to continue to have, an important impact on the
operating results of commercial banks through its power to implement national
monetary policy in order, among other things, to curb inflation or combat a
recession. The monetary policies of the Federal Reserve Board have major effects
upon the levels of bank loans, investments and deposits through its open market
operations in United States government securities and through its regulation of
the discount rate on borrowings of member banks and the reserve requirements
against member bank deposits. It is not possible to predict the nature or impact
of future changes in monetary and fiscal policies.
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MANAGEMENT
DIRECTORS AND OFFICERS
The following table sets forth the names, ages, classes and positions
of Ohio Legacy's and Ohio Legacy Bank's executive officers and directors. Our
articles of incorporation provide for a classified board of directors, so that,
as nearly as possible, one-third of the directors are elected each year to serve
three year terms. The terms of office of the classes of directors expire as
follows: Class I at the 2003 annual meeting of shareholders, Class II at the
2002 annual meeting of shareholders and Class III at the 2001 annual meeting of
shareholders. Executive officers serve at the discretion of the board of
directors, a summary of the background and experience of each of these
individuals is set forth after the table.
<TABLE>
<CAPTION>
Name Age Class Position with Ohio Legacy Position with Ohio Legacy Bank
---- --- ----- ------------------------- ------------------------------
<S> <C> <C> <C> <C>
D. William Allen 48 III Director Director
Robert F. Belden 53 II Director Director
Robert E. Boss 43 N/A Senior Vice President of Commercial
Lending
J. Edward Diamond 61 I Director Director
L. Dwight Douce 51 I President, Chief Executive President, Chief Executive Officer
Officer and Director and Director
Scott J. Fitzpatrick 47 III Director Director
Gregory A. Long 51 II Director Director
Michael D. Meenan 46 III Director Director
Steven G. Pettit 42 Vice President Senior Loan Officer, President of
Stark County Division
Daniel H. Plumly 47 I Director and Secretary Director
Thomas W. Schervish 59 II Director Director
</TABLE>
D. William Allen (Director). Since 1997, Mr. Allen has been in
commercial real estate sales and management for George N. Swallow, Inc. From
1994 to 1997, Mr. Allen served as the President, Chief Operating Officer and
owner of Service Packaging Corporation. Mr. Allen currently serves as the
President of Meals on Wheels of Stark and Wayne Counties and as Secretary of the
Board of Governors of Mercy Medical Hospital. Mr. Allen is also involved with
the Pro Football Hall of Fame Festival, where his involvement spans 25 years,
and served as its General Chairman in 1993. Mr. Allen's activities also include
Congress Lake Club Board of Directors, Greater Canton Chamber of Commerce Vice
Chairman of the Board of Directors, Chairman of the Norma Tschantz and Walter C.
Deuble Caddy Scholarship Fund, Clubs for Kids Board of Directors, Buckeye
Council of the Boy Scouts of America, United Way and Walsh University.
Robert F. Belden (Director). Since 1995, Mr. Belden has served as the
President of the Belden Brick Company, a Canton based company since 1885. From
1983 to 1995, Mr. Belden served as the Vice President of Marketing for Belden
Brick. Mr. Belden served as a director of both Signal Corporation and Signal
Bank from 1988 to 1999. He graduated from the University of Notre Dame in 1969
with a BS
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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 Regional Chamber of
Commerce, Junior Achievement of Stark County, Stark County Foundation and
others.
Robert E. Boss (Senior Vice President of Commercial Lending). Mr. Boss
has more than 20 years of financial institution experience in a variety of
lending positions. From January 1990 to March of 2000, Mr. Boss held several
positions at the Commercial and Savings Bank of Millersburg, Ohio, the last of
which was the position of Senior Vice President and Senior Lending Officer. Mr.
Boss previously worked in various loan areas for Bank One of Wooster from 1987
to 1990. Mr. Boss is on the Board of the Holmes County Training Center,
President of the Holmes County Economic Development Council and a Director of
the Buckeye Council of the Boy Scouts of America. Mr. Boss is a graduate of
Mount Union College with a BA Degree in accounting. Mr. Boss was born and lives
in Millersburg.
J. Edward Diamond (Director). Mr. Diamond, a private investor since
1984 in the Canton area, is the retired Chairman of Glendale Oxygen Company, a
Canton based supplier of cryogenic gases and welding supplies. He has served on
the boards of Arrowhead Country Club, The Canton Club, The Canton Ballet and The
Canton Symphony Orchestra Association. He is a graduate of the University of
Virginia and has been a resident of Canton his entire life.
L. Dwight Douce (President/Chief Executive Officer and Director). Mr.
Douce has more than 26 years of financial institution experience in a diverse
number of positions, with 16 years experience in the Wooster area. From October
of 1996 to February of 1999, Mr. Douce served as President-Chief Operating
Officer of Signal Bank, a $1.8 billion commercial bank headquartered in Wooster,
which operated more than 25 branches. From 1985 to October of 1996, Mr. Douce
served as Executive Vice President and Chief Financial Officer of First Federal
Savings and Loan Association (Signal Bank's predecessor). During Mr. Douce's
tenure, Signal Bank grew from a $200.0 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 J. Fitzpatrick (Director). Since 1983, Mr. Fitzpatrick has served
as a partner in Fitzpatrick Enterprises in Canton, Ohio. The partnership is
primarily involved in the development and sale of real estate and management of
properties.
Gregory A. Long (Director). Mr. Long is a licensed CPA with over 27
years experience in the business and, since 1983, has served as the President of
Long & Wilson, Inc. CPA's of Wooster, Ohio. Mr. Long is actively involved as a
board member of the Wayne County Historical Society and is President of Buckeye
Council, Inc., Boy Scouts of America. He is also a member of Rotary Club and a
coach in Wooster Youth Baseball, and is retired from the Army Reserve as a Lt.
Col. and is Scoutmaster of Boy Scout Troop 61 of Wooster.
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Michael D. Meenan (Director). Since 1989, Mr. Meenan has served as the
President and owner of Riverview Industrial Wood Products, Inc. based in
Wooster. Mr. Meenan is involved in the local rotary organization as well as
other non-profit organizations in the Wooster area.
Steven G. Pettit (Senior Loan Officer, President of Stark County
Division). Mr. Pettit has 15 years of commercial banking experience in a diverse
number of lending positions in both Stark and Wayne Counties. From February to
September of 1999, Mr. Pettit held the position of Senior Vice President, Senior
Loan Officer for two regions of FirstMerit Bank, N.A. From March of 1996 to
February of 1999, Mr. Pettit held the same position at Signal Bank, N.A., a $1.8
billion financial institution. From January of 1994 to March of 1996, Mr. Pettit
served as Manager of Commercial Lending for FirstMerit. 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.
Daniel H. Plumly (Director and Secretary). Since 1981, Mr. Plumly has
been a partner with Critchfield, Critchfield & Johnston, the largest law firm in
Wooster. Mr. Plumly served on the board of directors of Signal Corporation and
Signal Bank from 1986 to 1999. Mr. Plumly is the Vice President of Meals on
Wheels of Stark and Wayne Counties and is involved in coaching youth football,
basketball and lacrosse. He also serves as Chairman of the Board of Governors of
Wooster Country Club, as a trustee of the Wooster Boosters Club, as a member of
the Board of Trustees of the United Methodist Church, as a member of the Board
of Directors of Main Street, Inc. and as a trustee of the Wooster Lacrosse Club.
Thomas W. Schervish (Director). Since 1984, Mr. Schervish has served as
the owner and president of Stark Management Company, which owns and operates a
number of restaurant franchises in the Stark County area. The company also
provides management and consulting services to other local businesses. He
graduated from the University of Detroit with a B.S. in marketing. Mr. Schervish
is very active in community affairs including the Pro Football Hall of Fame,
Stark Development Board, Rotary, Walsh University Board of Trustees, Junior
Achievement and others.
GENERAL
Initially, our board will consist of nine directors, eight of whom will
be independent directors. Our board will always consist of at least a majority
of independent directors. The directors will be divided into three classes,
designated Class I, Class II and Class III. Each class will consist, as nearly
as possible, of one third of the total number of directors constituting the
entire board of directors. In accordance with our code of regulations, the
initial term of office of directors of Class I will expire at the annual meeting
of the shareholders to be held in 2003 and when their respective successors are
duly elected and qualified; the initial term of the office of Director of Class
II will expire at the annual meeting of shareholders to be held in 2002 and when
their respective successors are duly elected and qualified; and the initial term
of the office of Director of Class III will expire at the annual meeting of
shareholders to be held in 2001 and when their respective successors are duly
elected and qualified. At each annual meeting of shareholders, successors to the
directors whose term expires at the annual meeting will be elected for
three-year terms.
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If the number of directors is changed, an increase or decrease will be
apportioned among the classes so as to maintain the number of directors to fill
a vacancy resulting from an increase in such class will hold office for a term
that will coincide with the remaining term of that class, but in no event will a
decrease in the number of directors shorten the term of any incumbent director.
Any director elected to fill a vacancy not resulting in an increase in the
number of directors will have the same remaining term as that of his
predecessor. Except in the case of removal from office, any vacancy on the board
of directors will be filled by a majority vote of the remaining directors then
in office. The executive officers of Ohio Legacy and Ohio Legacy Bank are
elected annually by the board of directors following the annual meeting of
shareholders and serve at the pleasure of the board.
COMMITTEES OF THE BOARD OF DIRECTORS
Ohio Legacy Bank's board of directors has established four committees.
These committees meet with management on a regularly scheduled basis to review
Ohio Legacy Bank's policies, procedures and operating performance on particular
functional areas. The activities of all committees are reviewed by the board of
directors. These committees are established in accordance with the bylaws of
Ohio Legacy Bank, which may be changed from time to time by a majority vote of
Ohio Legacy Bank.
The Loan Committee will be comprised of five directors, one of whom
will be an officer of Ohio Legacy Bank. The primary responsibilities of the Loan
Committee are to review and approve loans over particular limits and review and
approve changes to Ohio Legacy Bank's lending policies and procedures.
The Executive Committee is comprised of three directors. The directors
currently serving on this Committee include Messrs. Douce, Schervish and Belden.
The Executive Committee meets as needed, and its primary responsibilities
include exercising the authority of the board of directors in between board
meetings, to the extent permitted by law.
The Compensation Committee is comprised of three directors, with its
primary responsibility being the review of personnel policies and practices and
evaluation of senior management. The directors currently serving on the
Compensation Committee include Messrs. Plumly, Diamond and Belden.
The Audit/Compliance Committee is comprised of three directors, none of
whom are officers of Ohio Legacy Bank. The Audit/Compliance Committee's primary
responsibilities are the review of internal and external auditors' reports, the
review of internal loan review reports, evaluation of the internal auditor and
external audit firm, and the review of regulatory examination results. The
directors currently serving on this Audit/Compliance Committee include Messrs.
Long, Allen and Fitzpatrick.
COMPENSATION OF DIRECTORS
Employee directors will receive no compensation for their services as
directors. Non-employee directors will receive reimbursement of reasonable
expenses incurred in serving as a director. In addition, subject to compliance
with the restrictions and requirements of the FDIC stock benefit plan policy,
each non-employee director of Ohio Legacy will receive:
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- a grant of 2,500 non-qualified options to purchase shares of
Ohio Legacy on the date that person first becomes a director
or at the closing of this offering, which will vest annually
in equal amounts over three years and have an exercise price
equal to the fair market value on the date of grant.
- an annual grant of 1,000 non-qualified options at each annual
meeting of shareholders under the Omnibus Stock Option, Stock
Ownership and Long Term Incentive Plan, which will vest
immediately and have an exercise price equal to the fair
market value on the date of grant.
However, due to FDIC Regulations, options will not be granted to any
non-employee director for one year following the offering.
EXECUTIVE COMPENSATION
Ohio Legacy Corp and Ohio Legacy Bank have entered into one-year
employment agreements with Mr. Douce, as its Chief Executive Officer and
President, and Mr. Pettit, as its Senior Vice President of Lending and President
of the Stark County Division. Each employment agreement renews automatically for
an additional year unless either party furnishes at least sixty days notice to
the other of its intent to terminate the agreement. Mr. Douce's employment
agreement commences on the date that Ohio Legacy Bank begins operations. Mr.
Pettit's employment agreement commenced effective October 6, 1999. If we do not
open Ohio Legacy Bank, we must continue paying Mr. Pettit under his employment
agreement for a period of one year from the commencement date of his agreement
or until he finds other employment.
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.
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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; and
- restricted stock.
STOCK OPTIONS TO EMPLOYEES AND DIRECTORS. Under the plan, we will
automatically grant 2,500 non-qualified options to each non-employee director at
the time that person first becomes a director or at the closing of this
offering. In addition, each non-employee director will receive an annual grant
of 1,000 non-qualified options during his tenure on the board. However, due to
FDIC Regulations, options will not be granted to any non-employee director for
one year following the offering.
We may grant incentive stock options, as defined in Section 422 of the
Internal Revenue Code, and/or non-qualified stock options to our employees,
including employees who also serve as directors. We may, however, only grant
non-qualified stock options to non-employee directors.
Each option granted under the plan will be evidenced by an option
agreement or, in the case of an automatic grant to a non-employee director, a
director option agreement.
The exercise price of an option shall not be less than the fair market
value of the underlying common stock on the date of the grant. For a recipient
of incentive stock options that already owns more than 10.0% of the combined
voting power of Ohio Legacy at the time of the grant, however, the exercise
price of an incentive stock option shall not be less than 110.0% of such fair
market value.
In the event of a change in control of Ohio Legacy, outstanding options
may become immediately exercisable in full at the discretion of the compensation
committee. Otherwise, all outstanding options will terminate unless the
successor corporation agrees to assume or replace such options with an
equivalent entitlement.
RESTRICTED STOCK. We may also grant restricted stock awards under the
plan to our directors and employees. Each grant of restricted stock will be
evidenced by a restricted stock grant agreement.
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<PAGE> 51
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
We expect to have banking and other transactions in the ordinary course
of business with the organizers, directors, and officers and their affiliates,
including members of their families or corporations, 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 "Supervision and Regulation
-- Transactions with Affiliates and Insiders" on page 36. These transactions are
not expected to involve more than the normal risk of collectibility nor present
other unfavorable features.
Loans to individual directors and officers must also comply with Ohio
Legacy Bank's lending policies, regulatory restrictions, and statutory lending
limits, and directors with a personal interest in any loan application will be
excluded from the consideration of such loan application. We intend for all of
our transactions with organizers or other affiliates to be on terms no less
favorable than could be obtained from an unaffiliated third party and to be
approved by a majority of our disinterested directors who will have access, at
Ohio Legacy's expense, to Ohio Legacy's or independent legal counsel.
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<PAGE> 52
PRINCIPAL SHAREHOLDERS
The following table gives information about the anticipated beneficial
ownership of Ohio Legacy capital stock after the offering by:
- each person expected to own more than five percent of Ohio
Legacy's common shares;
- each of Ohio Legacy's executive officers and directors; and
- all of Ohio Legacy's executive officers and directors as a
group.
<TABLE>
<CAPTION>
Percent of Class Percent of Class
Name Common Shares(1) Warrants Granted (2) (Minimum)(3) (Maximum)(3)
----- ------------- ---------------- --------- ---------
<S> <C> <C> <C> <C>
Directors and executive
officers:
L. Dwight Douce............... 45,000 26,700 6.4% 5.1%
Gregory A. Long............... 30,000 23,700 4.8 3.8
Michael D. Meenan............. 15,000 17,700 2.9 2.3
Daniel H. Plumly.............. 15,000 17,700 2.9 2.3
D. William Allen.............. 15,000 17,700 2.9 2.3
Robert F. Belden.............. 15,000 17,700 2.9 2.3
J. Edward Diamond............. 50,000 27,700 7.0 5.5
Thomas W. Schervish........... 40,000 25,700 5.9 4.6
Scott J. Fitzpatrick.......... 35,000 24,700 5.4 4.2
Steven G. Pettit.............. 2,000 400 .2 .2
Robert E. Boss................ 10,000 2,000 1.1 .5
------- ------- ---- ----
Directors and executive
officers as a group (11):..... 272,000 201,700 42.4% 33.5%
======= ======= ==== ====
</TABLE>
(1) Reflects common shares purchased prior to this offering (as adjusted
for the stock split), and common shares purchased in this offering.
(2) Reflects warrants granted in connection with Ohio Legacy's initial
capitalization and warrants issued in connection with the purchase of
common shares in this offering. In recognition of the financial risk
and efforts they have undertaken in organizing Ohio Legacy, we expect
to grant the organizers up to an aggregate of 150,000 warrants. These
warrants are in addition to any warrants received in connection with
the purchase of shares in this offering. Organizers will receive
warrants based upon their contribution to Ohio Legacy, subject to an
individual limit of 18,000 warrants and an overall limit of 150,000
warrants in order to comply with a 15.0% regulatory limit imposed on
grants of warrants and options to directors, officers, promoters, 5.0%
shareholders and employees for a period of one year following the
offering. This column
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<PAGE> 53
reflects all warrants owned by the respective shareholder, regardless
of vesting requirements of the organizer warrants. For a description of
the distribution and terms of the warrants, please see "Capitalization"
on page 20.
(3) We calculated the minimum and maximum percentages based on the exercise
of 201,700 warrants, which would increase the total number of
outstanding shares by 201,700.
-50-
<PAGE> 54
DESCRIPTION OF SECURITIES
GENERAL
We are authorized to issue up to 2,500,000 common shares, without par
value and 500,000 preferred shares, also without par value. We have no preferred
shares outstanding as of the date of this offering. Upon completion of this
offering, we will have up to 1,213,500 common shares issued and outstanding and
490,000 shares reserved for issuance.
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, subject to regulatory restrictions. 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.
PUBLIC WARRANTS
Each purchaser of our common shares will receive one warrant for every
five shares purchased. The warrants will carry no voting rights and may be
exercised at any time within the seven years following their issuance. Each
warrant will entitle the holder to purchase one common share at a purchase
price of $10.00 at any time during the life of the warrant. The warrants may be
called by Ohio Legacy at any time after the first year of issuance at $0.10 per
warrant. We may wish to raise additional capital in order to support future
loan growth or for branch expansion, prior to engaging in any other capital
enhancement alternative. If called, each holder of a warrant must exercise the
warrant within 30 days after such call or the warrant will expire with no
payment being made to the warrant holder, other than $0.10 per warrant.
Warrants are only transferable with the underlying common shares in increments
of one warrant for every five shares transferred. In no case will we issue
fractional warrants. If less than five shares are transferred, no warrants will
be passed with that transfer and the warrant will be terminated. Warrants
entitle the holder thereof to no other rights in Ohio Legacy.
ORGANIZER WARRANTS
In addition to the warrants received in connection with the purchase of
common shares in this offering as described in the above paragraph, we expect to
grant to our organizers up to an aggregate of 150,000 warrants, which will vest
in approximately equal percentages each year over the initial three years
-51-
<PAGE> 55
of operation. Organizers will receive warrants based upon their contribution to
Ohio Legacy, subject, however, to an individual limit of 18,000 warrants and an
overall limit of 150,000 warrants in order to comply with a 15.0% regulatory
limit being imposed on grants of warrants and options to directors, officers,
promoters, 5.0% shareholders and employees for a period of one year following
the offering. Each warrant will entitle the holder to purchase a share of
common stock at the price of $10.00 per share and will expire ten years from
the date of issuance. The warrants will be nontransferable, except to
affiliates of the holder and for estate planning reasons. The warrants and the
shares issued pursuant to the exercise of such warrants will be subject to
transferability restrictions applicable to affiliates of Ohio Legacy. For more
information on these restrictions see "Shares Eligible For Future Sale" on page
56.
SPECIAL VOTE FOR CONTROL SHARE ACQUISITIONS
Under Ohio law, unless a corporation's articles of incorporation or
regulations provide otherwise, any "control share acquisition" of an "issuing
public corporation" can be made only with the prior authorization of the
corporation's shareholders in accordance with the Ohio control share acquisition
statute (the "statute"). As an alternative, an Ohio corporation may include in
its articles of incorporation or regulations restrictions on transfer of its
shares in connection with a "control share acquisition," including procedures
for obtaining the consent of shareholders and for the screening by directors of
proposals for such acquisitions. Our articles provide that the statute does not
apply to us. Specifically, Article Eighth sets forth a procedure for obtaining
shareholder consent that is consistent with the statute, subject to the right of
directors to screen out proposals that do not meet the standards set forth in
Article Eighth. The right of the board to screen control share acquisitions is
the principal difference between Article Eighth and the requirements of Ohio law
which would otherwise be applicable to Ohio Legacy.
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 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:
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<PAGE> 56
- the notice was not given in good faith;
- the proposed control share acquisition would not be in the
best interests of Ohio Legacy and its shareholders; or
- the proposed control share acquisition could not be completed
for financial or legal reasons.
In addition, the board of directors may adjourn the special
shareholders meeting if prior to the meeting Ohio Legacy has received notice of
another proposed control share acquisition, merger, consolidation or sale of
assets of the corporation and decided that such proposal should be presented to
shareholders instead either at the adjourned meeting or a special meeting to be
held at a later date.
Article Eighth provides that a determination by the board not to call
the special shareholders meeting will not be deemed void or voidable with
respect to Ohio Legacy merely because one or more directors who participate in
making the determination might be deemed to be other than "disinterested
directors," if in any such case the material facts of the relationship giving
rise to a basis for self-interest are known to the directors participating in
the determination, and these directors, in good faith reasonably justified by
the facts, make this determination by a majority of the "disinterested
directors," even though such "disinterested directors" constitute less than a
quorum. For these purposes, a "disinterested director" means a director whose
material contacts with Ohio Legacy are limited principally to activities as a
director, a shareholder, a customer or a depositor of Ohio Legacy or any of its
subsidiaries or affiliates. However, a director would not be deemed to be other
than a "disinterested director" merely because he would no longer be a director
if the proposed control share acquisition were approved and consummated.
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 80.0% of Ohio Legacy's outstanding voting stock.
-53-
<PAGE> 57
Each Ohio Legacy stock certificate will have a legend stating that such
shares are subject to the provisions of Article Eighth. The issuance or transfer
of shares in violation of Article Eighth will be null and void. In the event
Ohio Legacy is not permitted to treat an issuance or transfer of shares in
violation of Article Eighth as null and void, Article Eighth provides that such
shares will be treated as treasury shares, not entitling the holder to exercise
shareholder rights or receive dividends.
SERIAL PREFERRED SHARES
Article Fourth of our articles authorizes 500,000 preferred shares,
with no par value, which may be issued in one or more series by the board of
directors. We intend that the issuance of the preferred shares must be approved
by a majority of our independent directors who do not have an interest in the
transaction and who have access, at our expense, to Ohio Legacy's or independent
legal counsel. The board may establish, among other things, the number of shares
in each series, dividend rates, cumulative rights, redemption rights or prices,
sinking fund provisions, and conversion rights of the serial preferred shares.
The serial preferred shareholders are entitled to be paid dividends when and as
declared in preference to the common shareholders. In liquidation or
dissolution, the serial preferred shareholders are entitled to be paid for their
shares, plus the amount of any dividends in arrears, before any amounts are paid
to the common shareholders. The serial preferred shareholders are entitled to
one vote per share on all matters presented to the shareholders. Except as
indicated below, the serial preferred shareholders vote with the common
shareholders on matters presented to the shareholders. All serial preferred
shares shall be of equal rank unless otherwise determined by the board of
directors.
In the event of a control share acquisition of Ohio Legacy that the
board of directors does not approve, it would be possible for the board to
authorize the issuance of a series of serial preferred 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 50.0% 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.
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<PAGE> 58
SALES AGENTS
We have engaged McDonald Investments Inc. and Trident Securities, a
division of McDonald Investments Inc., to serve as our sales agents in
connection with this offering, pursuant to a Placement Agent Agreement. McDonald
and Trident were chosen because of their general experience in the financial
services industry and because of their experience in transactions involving
community offerings.
McDonald and Trident have provided advice to us regarding the structure
of the offering and the marketing of our shares. McDonald and Trident will use
their best efforts to solicit subscriptions and purchase orders for our shares.
McDonald and Trident have not prepared any report or opinion
constituting a recommendation or advice to us, nor have they prepared an opinion
as to the fairness of the offering price or the terms of the offering. McDonald
and Trident express no opinions 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 McDonald and
Trident as follows:
- a management fee of $200,000, provided that McDonald and
Trident raise at least $9,500,000 before expenses;
- a sales commission equal to four percent of the aggregate
dollar amount of shares sold in excess of $4,000,000 and not
to exceed $7,000,000;
- a sales commission equal to seven percent of the aggregate
dollar amount of shares sold in excess of $7,000,000 and not
to exceed $9,500,000; and
- a sales commission equal to seven and one-half percent of the
aggregate dollar amount of shares sold in excess of $9,500,000
and not to exceed $12,000,000.
In the event that selected dealers are used to facilitate sales of
stock, such dealers will be paid a fee in an amount competitive with
underwriting discounts charged for comparable amounts of stock sold at a
comparable price per share in a similar market environment. It is anticipated
such fees may approximate five percent of the amount of the order and will be
paid by McDonald and Trident from their fee, and not in addition to their fee.
We have agreed to indemnify, defend and hold harmless McDonald and
Trident, their officers, employees, agents and controlling persons, against all
claims, losses, actions, judgments, damages and expenses arising from their
engagement with McDonald and Trident, including liabilities under the federal
securities laws, provided that indemnification shall not be provided for such
matters if due to the gross negligence of McDonald or Trident, and to contribute
payments to McDonald or Trident should McDonald or Trident be required to make
payments in connection with any such claims or liabilities.
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<PAGE> 59
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 March 31, 2000, Ohio Legacy had 135 common shares outstanding
held by a group of nine organizers. We expect to authorize a 100 to 1 stock
split concerning these 135 shares immediately prior to the closing of this
offering, increasing those shares to 13,500. Upon completion of this offering,
we will have a minimum of 913,500 and a maximum of 1,213,500 common shares
outstanding. All of these shares will be freely transferable without restriction
of future registration, except for the approximately 272,000 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 one percent 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.
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 agents by Brouse McDowell L.P.A., 500 First National Tower, Akron, Ohio
44308.
EXPERTS
The financial statements of Ohio Legacy Corp as of December 31, 1999
and for the period from July 1, 1999, the date of inception, to December
31,1999, included in this prospectus and in the Registration Statement have been
audited by Crowe, Chizek and Company LLP, independent public
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<PAGE> 60
accountants, as set forth in their report dated February 2, 2000, 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) 263-1955.
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<PAGE> 61
OHIO LEGACY CORP
(A DEVELOPMENT STAGE COMPANY)
Wooster, Ohio
FINANCIAL STATEMENTS
March 31, 2000 (Unaudited) and December 31, 1999
<PAGE> 62
OHIO LEGACY CORP
(A Development Stage Company)
Wooster, Ohio
FINANCIAL STATEMENTS
March 31, 2000 (Unaudited) and December 31, 1999
CONTENTS
<TABLE>
<S> <C>
REPORT OF INDEPENDENT AUDITORS............................................................................ F-1
FINANCIAL STATEMENTS
BALANCE SHEETS AS OF MARCH 31, 2000 (UNAUDITED) AND
DECEMBER 31, 1999................................................................................. F-2
STATEMENT OF OPERATIONS FOR THE THREE MONTHS ENDED
MARCH 31, 2000 (UNAUDITED) AND FOR THE PERIOD FROM
JULY 1, 1999 TO DECEMBER 31, 1999................................................................. F-3
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY FOR THE
THREE MONTHS ENDED MARCH 31, 2000 (UNAUDITED) AND FOR
THE PERIOD FROM JULY 1, 1999 TO DECEMBER 31, 1999................................................. F-4
STATEMENT OF CASH FLOWS FOR THE THREE MONTHS ENDED
MARCH 31, 2000 (UNAUDITED) AND FOR THE PERIOD FROM
JULY 1, 1999 TO DECEMBER 31, 1999................................................................. F-5
NOTES TO FINANCIAL STATEMENTS....................................................................... F-6
</TABLE>
<PAGE> 63
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
December 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 December 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 December
31, 1999, and the results of its operations and its cash flows for the period
from July 1, 1999 (date of inception) to December 31, 1999, in conformity with
generally accepted accounting principles.
Crowe, Chizek and Company LLP
Columbus, Ohio
February 2, 2000
________________________________________________________________________________
F-1
<PAGE> 64
OHIO LEGACY CORP
(A Development Stage Company)
BALANCE SHEET
March 31, 2000 (Unaudited) and December 31, 1999
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
---- ----
(Unaudited)
<S> <C> <C>
ASSETS
Cash and due from banks $ 15,199 $ 116,757
Leasehold improvements 2,469 --
Furniture and equipment 42,769 --
Computer equipment and software 57,440 --
Deferred offering costs 50,356 79,552
Other assets 66,519 84,218
------------ ------------
Total assets $ 234,752 $ 280,527
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Accounts payable $ 247,532 $ 129,171
Notes payable to stockholders 215,000 135,000
------------ ------------
Total liabilities 462,532 264,171
Stockholders' equity
Common stock - no par value, 2,500,000 shares authorized;
13,500 shares issued and outstanding 135,000 135,000
Deficit accumulated during the development stage (362,780) (118,644)
------------ ------------
Total stockholders' equity (227,780) 16,356
------------ ------------
Total liabilities and stockholders' equity $ 234,752 $ 280,527
============ ============
___________________________________________________________________________________________________________________
</TABLE>
See accompanying notes to financial statements
F-2
<PAGE> 65
OHIO LEGACY CORP
(A Development Stage Company)
STATEMENT OF OPERATIONS
For the Three Months ended March 31, 2000 (Unaudited) and
For the Period from July 1, 1999 (Date of Inception) to December 31, 1999
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months From
Ended July 1, 1999 to
March 31, 2000 December 31, 1999
-------------- -----------------
(Unaudited)
<S> <C> <C>
EXPENSES
Salaries and benefits $ 148,129 $ 31,171
Occupancy and equipment 14,145 --
Offering expense 65,648 --
Professional fees 989 69,920
OCC application fee -- 15,000
Telephone, supplies and other 11,576 2,553
Interest expense 3,649 --
------------ ------------
Net loss $ 244,136 $ 118,644
============ ============
___________________________________________________________________________________________________________________
</TABLE>
See accompanying notes to financial statements
F-3
<PAGE> 66
OHIO LEGACY CORP
(A Development Stage Company)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
For the Three Months Ended March 31, 2000 (Unaudited) and For the Period from
July 1, 1999 (Date of Inception) to December 31, 1999
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Total
Common Accumulated Stockholders'
Stock Deficit Equity
----- ------- ------
<S> <C> <C> <C>
Issuance of common stock $ 135,000 $ -- $ 135,000
Net loss July 1, 1999 (date of inception) to
December 31, 1999 -- (118,644) (118,644)
------------- ------------ ------------
Balance December 31, 1999 135,000 (118,644) 16,356
Net loss for the three months ended March 31, 2000
(Unaudited) -- (244,136) (244,136)
------------- ------------ ------------
Balance March 31, 2000 (Unaudited) $ 135,000 $ (362,780) $ (227,780)
============= ============ ============
___________________________________________________________________________________________________________________
</TABLE>
See accompanying notes to financial statements
F-4
<PAGE> 67
OHIO LEGACY CORP
(A Development Stage Company)
STATEMENT OF CASH FLOWS
For the Three Months Ended March 31, 2000 (Unaudited) and For the Period from
July 1, 1999 (Date of Inception) to December 31, 1999
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months July 1, 1999 to
Ended March 31, December 31,
2000 1999
---- ----
(Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (244,136) $ (118,644)
Adjustments to reconcile net loss to net cash from operating
activities
Change in deferred offering costs 29,196 (79,552)
Change in other assets 17,699 (84,218)
Increase in accounts payable 118,361 129,171
------------ ------------
Net cash from operating activities (78,880) (153,243)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of premises and equipment (102,678) --
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of common stock -- 135,000
Proceeds from notes payable to stockholders 80,000 135,000
------------ ------------
Net cash from financing activities 80,000 270,000
------------ ------------
Net change in cash and cash equivalents (101,558) 116,757
Cash and cash equivalents at beginning of period 116,757 --
------------ ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 15,199 $ 116,757
============ ============
___________________________________________________________________________________________________________________
</TABLE>
See accompanying notes to financial statements
F-5
<PAGE> 68
OHIO LEGACY CORP
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
March 31, 2000 (Unaudited) and December 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 March 31, 2000 (unaudited) and
December 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. The Corporation is expected, upon completion of a
public stock offering, to purchase 100% of the common stock of Ohio Legacy Bank,
a national-chartered bank. The Corporation will file an application to become a
bank holding company with the Board of Governors of the Federal Reserve System
pursuant to the Bank Holding Company Act of 1956, as amended.
The Corporation intends to sell between 900,000 and 1,200,000 shares of its
common stock at $10.00 per share. Each purchaser of common stock in this
offering will receive one warrant for every five common shares purchased. Each
warrant will represent the right of the holder to purchase one common share at a
price of $10.00 at any time within seven years following the opening of Ohio
Legacy Bank. The offering is expected to raise between $8,575,000 and
$11,152,000, net of estimated underwriting commissions and offering expenses.
The Board of Directors and Executive Officers of the Corporation are expected to
own approximately 272,000 shares of common stock at $10.00 per share after the
public offering.
NATURE OF BUSINESS: The Corporation, through its subsidiary, Ohio Legacy Bank,
intends to open banking centers in Wooster and Canton, Ohio, and offer a full
range of consumer and commercial banking services to individuals and businesses
in the Wayne and Stark County, Ohio, markets.
USE OF ESTIMATES: To prepare financial statements in conformity with generally
accepted accounting principles, management makes estimates and assumptions based
on available information. These estimates and assumptions affect the amounts
reported in the financial statements and the disclosures provided, and future
results could differ. Areas involving the use of management's estimates and
assumptions include the realization of deferred tax assets.
CASH FLOWS: Cash and cash equivalents include cash and deposits with a financial
institution with original maturities under ninety days.
ORGANIZATION AND STOCK OFFERING COSTS: Costs directly associated with the
organization of the Corporation and Ohio Legacy Bank have been expensed as
incurred. Costs directly associated with preparing a previous stock offering,
which expired on April 14, 2000, with no continuing value to the current stock
offering, have been expensed during the three months ended March 31, 2000
(unaudited). Costs directly associated with preparing the current 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.
________________________________________________________________________________
(Continued)
F-6
<PAGE> 69
OHIO LEGACY CORP
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
March 31, 2000 (Unaudited) and December 31, 1999
--------------------------------------------------------------------------------
NOTE 1 - ORGANIZATION AND SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES (Continued)
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 basis 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
stockholders' equity. The Corporation had no other comprehensive income items
for the period presented. As a result, comprehensive income consists only of net
loss for the period presented.
STOCK SPLIT: As part of its initial capitalization, the Corporation sold 135
shares of common stock at a price of $1,000 per share to its nine organizing
directors, totaling $135,000. Upon full subscription of the offering and just
prior to the closing, a 100 to 1 stock split will take effect concerning the 135
common shares purchased by the organizers prior to the offering. All share
information has been retroactively adjusted to reflect the effect of the
100 to 1 stock split.
NOTE 2 - NOTES PAYABLE TO STOCKHOLDERS
The Corporation borrowed funds from the stockholders for working capital until
completion of the public stock offering. The notes are payable upon demand and
accrue interest at the prime rate of interest.
NOTE 3 - 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.
________________________________________________________________________________
(Continued)
F-7
<PAGE> 70
OHIO LEGACY CORP
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
March 31, 2000 (Unaudited) and December 31, 1999
--------------------------------------------------------------------------------
NOTE 3 - STOCK OPTIONS (Continued)
The following types of awards may be granted under the plan to eligible persons:
nonqualified stock options, incentive stock options and restricted stock. Under
the plan, each nonemployee Director will be granted 2,500 nonqualified options
at the time that person first becomes a Director or at the closing of the
offering. The initial option grant will vest annually in equal amounts over a
three-year term. In addition, each nonemployee Director will receive an annual
grant of 1,000 nonqualified options during his tenure on the Board, which will
vest immediately. The exercise price of an option shall not be less than the
fair market value of the underlying common stock on the date of the grant. No
options have been granted as of March 31, 2000 (unaudited) and December 31,
1999.
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 4 - STOCK WARRANTS
The Corporation expects to grant up to an aggregate of 150,000 warrants to the
Board of Directors and Executive Officers of the Corporation. The warrants will
vest in approximately equal percentages each year over the initial three years
of operations. The Corporation expects to account for this stock-based
compensation under the provisions of APB No. 25 and as such will disclose the
pro forma impact of the grant on net income in accordance with SFAS No. 123.
NOTE 5 - COMMITMENTS AND CONTINGENCIES
The Bank has entered 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 individuals 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.
________________________________________________________________________________
(Continued)
F-8
<PAGE> 71
OHIO LEGACY CORP
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
March 31, 2000 (Unaudited) and December 31, 1999
--------------------------------------------------------------------------------
NOTE 5 - COMMITMENTS AND CONTINGENCIES (Continued)
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 Canton Division commenced October
6, 1999. 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 a fifteen-year lease agreement for the property, with two five-year
renewal options, with its owner. The Corporation was required to pay the lessor
$5,000 upon execution of the lease, which is nonrefundable and does 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 notices at various interim dates and making nonrefundable extension
payments which total $100,000 on or before each extension deadline. Extension
payments made will be credited dollar-for-dollar against monthly rent
installments. At March 31, 2000 (unaudited) and December 31, 1999, the
Corporation has paid the $5,000 nonrefundable lease execution fee and a $25,000
extension payment. 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 percentage
increase in the Consumer Price Index over the same five-year period. The lease
is expected to be accounted for as a capital lease.
The Stark County banking center will be located at 3900 Dressler Road in Canton,
Ohio. The Corporation has entered a ten-year lease agreement for the property
with two five-year renewal options. Annual rent payments will be $52,500 for the
first five years of the lease, with the lease increasing 15% for each renewal
term. Additionally, the Company will pay $8,000 annually for the drive-through
area for the term of the lease. The lease is expected to be accounted for as an
operating lease.
The Corporation also entered a one-year lease beginning January 1, 2000 for
temporary facilities four blocks from the permanent site at 132 East Liberty
Street, Wooster, Ohio. The temporary site will be used for administrative
purposes during the organization of Ohio Legacy Bank. Once 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. Rent expense for the three months ended
March 31, 2000 (unaudited) was $5,685.
________________________________________________________________________________
(Continued)
F-9
<PAGE> 72
OHIO LEGACY CORP
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
March 31, 2000 (Unaudited) and December 31, 1999
--------------------------------------------------------------------------------
NOTE 5 - COMMITMENTS AND CONTINGENCIES (Continued)
Estimated rental commitments under these leases for their noncancelable periods
assuming the payments begin on January 1, 2000, prime rate is 8.5% and the
Consumer Price Index increases by 12.25% each five years are as follows:
<TABLE>
<CAPTION>
Year ending December 31,
<S> <C>
2000 $ 200,582
2001 177,842
2002 177,842
2003 177,842
2004 177,842
Thereafter 1,611,683
-------------
Total $ 2,523,633
=============
</TABLE>
Estimated rental commitments under these leases for their noncancelable periods
assuming the payments begin on April 1, 2000 for the headquarters and Stark
County Banking Center, prime rate is 9.0% and the Consumer Price Index increases
by 12.71% each five years are as follows:
<TABLE>
<CAPTION>
Year ending March 31, (unaudited)
<S> <C>
2001 $ 196,874
2002 179,819
2003 179,819
2004 179,819
2005 179,819
Thereafter 1,635,187
-------------
Total $ 2,551,337
=============
</TABLE>
NOTE 6 - INCOME TAXES
The tax benefit of $123,345 at March 31, 2000 (unaudited) and $40,339 at
December 31, 1999 associated with the net operating loss carryforwards of
$362,780 at March 31, 2000 (unaudited) and $118,644 at December 31, 1999, has
been offset with a valuation allowance as of March 31, 2000 (unaudited) and
December 31, 1999 since the Corporation is in the development stage and has no
history of generating taxable income. The net operating loss carryforward
generated in 1999 expires December 31, 2019. Any net operating loss carryforward
generated in 2000 expires December 31, 2020.
________________________________________________________________________________
(Continued)
F-10
<PAGE> 73
<TABLE>
<S> <C>
APPENDIX A
OHIO LEGACY CORP
STOCK ORDER FORM & (Ohio Legacy Bank)
CERTIFICATION FORM (ON THE REVERSE SIDE) Stock Information Center (330) 263-1955
====================================================================================================================================
Deadline: The Subscription Offering ends at 5:00 P.M. EASTERN TIME, August 8, 2000. 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.
------------------------------------------------------------------------------------------------------------------------------------
(3) METHOD OF PAYMENT PURCHASER INFORMATION
------------------------------------------------------------------------------------------------------------------------------------
(4) [_] Check here if you are a director, officer or employee of Ohio
[_] Enclosed is a check, bank draft or money order Legacy Bank or a member of such person's immediate family.
payable to "KEY TRUST COMPANY, TRUST NO. 2020200-0605820"
in the amount of
$ _________________.
(5) If purchasing through a broker/dealer, please list the name,
(For wire instructions, call (330) 263-1955) address and phone number below:
[_] I will have my McDonald Investment Consultant
arrange payment from my Brokerage account.
McDonald Acct. No.___________________
-----------------------------------------------------------
(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: Zip:
-----------------------------------------------------------------------
[_] Partnership [_] Individual Retirement Account E-Mail Address:
-----------------------------------------------------------------------
[_] Fiduciary/Trust (under Agreement Dated ___________) Phone Number:
-----------------------------------------------------------------------
IF YOUR SHARES ARE TO BE HELD IN STREET NAME, PLEASE INDICATE ON THE "NAME" LINE BELOW.
------------------------------------------------------------------------------------------------------------------------------------
Name Social Security or Tax I.D.
------------------------------------------------------------------------------------------------------------------------------------
Name Daytime Telephone
------------------------------------------------------------------------------------------------------------------------------------
Street Address Evening Telephone
------------------------------------------------------------------------------------------------------------------------------------
City State Zip Code County of Residence
------------------------------------------------------------------------------------------------------------------------------------
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 June 30, 2000. 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.
SIGNATURE THIS ORDER FORM TOGETHER WITH THE CERTIFICATION -----------------------------------------------------------------------
FORM MUST BE SIGNED AND DATED. THIS ORDER IS NOT VALID IF Signature Title (if applicable) Date
THE 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 Signature Title (if applicable) Date
custodian, corporate officer, etc., include your full
title. If you need help completing this Form, you may call -----------------------------------------------------------------------
(330) 263-1955.
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.
-----------------------------------------------------------------------
Date Rec'd ___/___/___ Order # _________ Batch # Key Trust Company Ohio Legacy Corp
OFFICE USE Check # Category _________ 127 Public Square Stock Information Center
Amount $ _____________ Initials _________ 15th Floor 132 East Liberty Street
----------------------------------------------------------------------- Cleveland, Ohio 44114 Wooster, Ohio 44691
</TABLE>
<PAGE> 74
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 June 30, 2000. BY EXECUTING THIS
CERTIFICATION FORM, I HAVE NOT WAIVED ANY OF MY RIGHTS UNDER THE SECURITIES ACT
OF 1933 AND THE SECURITIES EXCHANGE ACT OF 1934.
<TABLE>
<S> <C>
---------------------------------------------------------------- --------------------------------------------------------------
Signature Signature
---------------------------------------------------------------- --------------------------------------------------------------
(NOTE: IF SHARES ARE TO BE HELD JOINTLY, BOTH PARTIES MUST SIGN)
----
</TABLE>
Date:_________________________________________
Return This Form To:
Key Trust Company
127 Public Square
15th Floor
Cleveland, Ohio 44114
<PAGE> 75
OHIO LEGACY CORP STOCK OWNERSHIP GUIDE
--------------------------------------------------------------------------------
Instructions: See your legal advisor if you are unsure about the correct
registration of your stock. If you prefer to register your shares in street
name, please indicate on the "Name line in Section 6 of the stock order form.
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- If you wish to use funds in an Individual
Retirement Account (IRA) to purchase shares of stock, please call our Stock
Information Center at (330)263-1955 for assistance. If you already have a
self-directed IRA with McDonald Investments, please see your investment
consultant for assistance in purchasing the Stock. If you do not have a
self-directed IRA with a brokerage firm, a representative from the Stock
Information Center will be glad to assist you in determining the best procedure
to direct your IRA funds.
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 "KEY TRUST COMPANY, TRUST NO. 2020200-0605820" DO NOT MAIL CASH. If
you have an account with McDonald Investments, you can also transfer funds from
your McDonald account. Please see your McDonald Investment Consultant. 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.
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 noting in you will hold the shares in street
name. 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> 76
APPENDIX B
ESCROW AGREEMENT
The Agreement is made and entered into as of _______________________,
2000, by and among Key Trust Company, N.A. (the "Escrow Agent"), McDonald
Investments, Inc. (the "Sales Agent"), and Ohio Legacy Corp (the "Company").
Recitals
--------
A. The Company proposes to offer for sale to investors through one or more
registered broker-dealers up to 1,200,000 shares of common stock and
attached warrants (the "Securities") at a price of $10.00 per share (the
"Proceeds").
B. The Sales Agent intends to sell the Securities as the Company's agent on a
best-efforts part-or-none basis for 900,000 shares and on a best-efforts
basis for the remaining Securities in a public offering (the "Offering").
C. The Company and the Sales Agent desire to establish an escrow account in
which funds received from subscribers will be deposited pending completion
of the escrow period. Key Trust Company, N.A. agrees to serve as Escrow
Agent in accordance with the terms and conditions set forth herein.
D. The term Selected Dealer as used herein shall include the Sales Agent and
other selected dealers as part of the selling group. All Selected Dealers
shall be bound by this Agreement. However, for purposes of communications
and directives, the Escrow Agent need only accept those signed by McDonald
Investments, Inc.
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. Company and/or Sales Agent will be responsible for
delivery of all deposits to Escrow Agent's principal office at 127 Public
Square, 15th Floor, Cleveland, Ohio 44114.
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
<PAGE> 77
b) The expiration of 30 days from the date of commencement of the
Offering (unless extended as permitted in the offering document for an
additional 30 days by mutual written agreement between the Company and
the Sales Agent with a copy of such extension to the Escrow Agent); or
c) The date upon which a determination is made by the Company and the
Sales Agent to terminate the offering prior to the sale of the
Minimum.
During the escrow period, the Company is aware and understands that it is
not entitled to any funds received into escrow and no amounts deposited in
the Escrow Account shall become the property of the Company or any other
entity, or be subject to the debts of the Company or any other entity.
3) Deposits into the Escrow Account. The Selected Dealer agrees to direct
subscribers to submit funds directly to the Escrow Agent in the form of
wire transfer, check, draft, or money order for deposit in the Escrow
Account. If the funds are instead delivered to the Selected Dealer, it
shall promptly deliver all monies received from subscribers for the
payment of the Securities to the Escrow Agent for deposit in the Escrow
Account. For each subscriber, the Selected Dealer shall provide a written
account of each sale, which account shall set forth, among other things,
the subscriber's name and address, the subscriber's Taxpayer
Identification Number, the number of securities purchased, and the amount
paid therefor. All monies so deposited in the Escrow Account are
hereinafter referred to as the "Escrow Amount". The Selected Dealer shall,
in all events, transmit all monies received from subscribers for the
payment of Securities directly to the Escrow Agent for deposit in the
Escrow Account, by noon of the next business day after receipt by the
Selected Dealer.
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. Further, refunds to
subscribers shall include each subscriber's pro-rata share of any income
earned while the subscriber's funds were on deposit in the Escrow Account.
Escrow Agent will not be responsible for tax reporting of any kind.
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
2
<PAGE> 78
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 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.
All disbursements from the Escrow Account will be directed in writing and
signed by both the Company and Sales Agent stating that the Minimum
threshold amount has been met.
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.
Should any released Escrow funds be found to be uncollectable by Escrow
Agent after funds have been released to the Company, the Company will
immediately
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deposit such amount via federal fund with Escrow Agent upon demand. Company
shall be responsible in pursuing subscriber regarding the status of its
deposit.
6) Investment of Escrow Amount. The Escrow Agent will invest the Escrow Amount
in The Victory U.S. Government Select Obligation Money Market Fund 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. See Escrow Agent's schedule of fees attached
as "Exhibit A".
8) Indemnification of the Escrow Agent. The Company and the Sales Agent agree
to indemnify and hold harmless the Escrow Agent against any and all losses,
claims, damages, liabilities and expenses which may be imposed upon the
Escrow Agent or incurred by the Escrow Agent in connection with the
performance of its duties hereunder, by reason of any litigation arising
from the agreement or involving the subject matter hereof of the funds
deposited hereunder; provided, however, that such indemnity shall not
extend to any of such losses, claims, damages, liabilities and expenses
which are so imposed upon or incurred by the Escrow Agent by reason of its
own negligence or willful misconduct.
Notwithstanding any provision contained in this agreement to the contrary,
the Escrow Agent, including its officers, directors, employees, and agents,
shall:
a) Have no responsibility to inquire into or determine the genuineness,
authenticity, or sufficiency of any securities, checks, subscription
agreements, confirmation of sales, or other documents or instruments
submitted to it in connection with its duties under this agreement;
and
b) Be entitled to deem the signatories of any documents or instruments to
it under this agreement as being those purported to be authorized to
sign such documents or instruments on behalf of the parties thereto
and shall be entitled to rely upon the genuineness of the signatures
of such signatories without inquiry and without requiring
substantiating evidence of any kind.
9) Notices. All notices, requests, demands, and other communications required
or permitted to be given hereunder shall be in writing and shall be deemed
to have been duly given if delivered personally, sent by overnight delivery
service, or mailed first-class mail, postage prepaid to the other parties
addressed to the address set forth below or to any other address hereafter
designated by the party to whom notice is given.
10) Governing Law. All questions concerning the validity, intention, or meaning
of this agreement or relating to the rights and obligations of the parties
with respect to
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performance hereunder shall be construed and resolved under the laws of the
State of Ohio.
11) Resignation. The Escrow Agent may resign by mailing written notice to all
parties. In the event of any such resignation, the Escrow Agent shall
refrain from taking any action with respect to the Escrow Funds until it
receives written instructions from all parties to the Escrow Agreement
designating a successor Escrow Agent.
12) 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.
OHIO LEGACY CORP
305 West Liberty Street
Wooster, OH 44691
-----------------------------------------------------------
By: L. Dwight Douce, President and Chief Executive Officer
McDonald Investments Inc.
800 Superior Avenue
Cleveland, Ohio 44114
-----------------------------------------------------------
By: Charles R. Crowley, Managing Director
Key Trust Company, N.A.
127 Public Square
Cleveland, Ohio 44114
By: __________________________________________
Name:_________________________________________
Title_________________________________________
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<PAGE> 81
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.
Ohio Legacy has purchased director and officer liability insurance in
the amount of $3 million covering its current executive officers and directors.
RECENT SALES OF UNREGISTERED SECURITIES
In August 1999, as part of its initial capitalization Ohio Legacy sold
135 common shares at a price of $1,000 per share to its nine (9) organizing
directors, totaling $135,000, in an offering exempt from registration under
Section 4(2) of the Securities Act. No underwriters were involved in the sale
and no underwriting discounts or commissions were paid.
OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the estimated costs and expenses of Ohio
Legacy in connection with the offering other than underwriting discounts or
commissions.
SEC Registration Fee $ 5,000
Legal Fees and Expenses 75,000
Accounting Fees and Expenses 25,000
Printing and Engraving Expenses 40,000
Blue Sky Fees and Expenses 10,000
D&O Insurance Premium 10,000
--------
Total $165,000
EXHIBITS
The information required by this Item 27 is set forth in the Index to
Exhibits accompanying this Registration Statement and is incorporated herein by
reference.
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<PAGE> 82
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> 83
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.
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<PAGE> 84
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form SB-2 and authorized this Post-Effective
Amendment No. 1 to the registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Wooster, State of Ohio on
July 5, 2000
<TABLE>
<S> <C>
OHIO LEGACY CORP
By: /s/ L. Dwight Douce
---------------------------------------
L. Dwight Douce,
Chief Executive Officer and
President
(Principal Executive, Financial and
Accounting Officer)
In accordance with the requirements of the Securities Act of 1933, this registration statement
has been signed by the following persons in the capacities and on the dates stated.
SIGNATURE: TITLE:
/s/ L. Dwight Douce President, Chief Executive Officer
--------------------------------------------
L. Dwight Douce and Director
/s/ Gregory Long Director
--------------------------------------------
Gregory Long*
/s/ Michael Meenan Director
--------------------------------------------
Michael Meenan*
/s/ Daniel H. Plumly Director
--------------------------------------------
Daniel H. Plumly*
/s/ D. William Allen Director
--------------------------------------------
D. William Allen*
/s/ Robert Belden Director
--------------------------------------------
Robert Belden*
/s/ J. Edward Diamond Director
--------------------------------------------
J. Edward Diamond*
/s/ Thomas Schervish Director
--------------------------------------------
Thomas Schervish*
/s/ Scott Fitzpatrick Director
--------------------------------------------
Scott Fitzpatrick*
* By L. Dwight Douce pursuant to a power of attorney dated May 31,
2000.
</TABLE>
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<PAGE> 85
EXHIBIT INDEX*
Exhibit
No. Description
-------- -----------
1 + Form of Placement Agent Agreement.
3.1 * Amended and Restated Articles of Incorporation.
3.2 * Code of Regulations.
4.1 * See Pages 1 through 9 of Exhibit 3.1 for provisions defining the
rights of the holders of common shares.
4.2 * Form of Ohio Legacy Corp common share certificate.
4.3 * Form of Organizer Stock Purchase Warrant.
4.4 * Form of Public Stock Purchase Warrant.
5.1 * Opinion of Squire, Sanders & Dempsey L.L.P.
10.1 * Omnibus Stock Option, Stock Ownership and Long Term Incentive Plan.
10.2 * Employment Agreement dated November 29, 1999 by and between Ohio
Legacy Bank, Ohio Legacy Corp and L. Dwight Douce.
10.3 * Employment Agreement by and between Ohio Legacy Bank, Ohio Legacy
Corp and Steven G. Pettit.
10.4 * Lease Agreement dated August 24, 1999 by and between Jack K. and
Heidi M. Gant and Ohio Legacy Corp.
10.5 * Lease Agreement dated November 30, 1999 by and between Schoeppner
Properties and Ohio Legacy Corp.
10.6 * Escrow Agreement by and among Key Trust Company, Ohio Legacy Corp,
McDonald Investments Inc. and Trident Securities, a division of
McDonald Investments Inc.
21 * List of subsidiaries of Ohio Legacy Corp.
23.1 * Consent of Squire, Sanders & Dempsey L.L.P. (see Exhibit 5.1).
23.2 + Consent of Crowe, Chizek and Company L.L.P.
23.3 * Consent of Young & Associates.
24 * Power of Attorney.
27 * Financial Data Schedule.
99 + Form of Investor Letter
Items marked with a + are filed with this Post-Effective Amendment
No. 1 to the Registration Statement. Items marked with an asterisk
were previously filed and are incorporated by reference.
