SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No.)
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for use of the Commission Only (as permitted
by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
Farmers National Banc Corp.
(Name of Registrant of Specified in its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] $500 per each party to the controversy pursuant to Exchange
Act Rule 14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules
14a-6(i)(4) and 0-11:
Title of each class of securities to which transaction applies:
.................................................................
....................................................
Aggregate number of securities to which transaction applies:
.................................................................
...................................................
Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on
which the filing fee is calculated and state how it was
determined):
.................................................................
...................................................
Proposed maximum aggregate value of transaction:
.................................................................
...................................................
Total fee paid:
.................................................................
............................
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number or the Form or Schedule
and the date of its filing.
1. Amount Previously Paid:
......................................................
2. Form, Schedule or Registration Statement No.:
......................................................
3. Filing Party:
......................................................
4. Date Filed:
......................................................
(Amended by Sec. Act Rel No. 7331; Exch. Act Rel. No. 37692, eff 10/7/96)
FARMERS NATIONAL BANC CORP.
20 SOUTH BROAD STREET
CANFIELD, OHIO 44406
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON THURSDAY, MARCH 25, 1999
TO THE HOLDERS OF SHARES OF COMMON STOCK:
NOTICE IS HEREBY GIVEN that pursuant to call of its Directors,
the Annual Meeting of the Shareholders of FARMERS NATIONAL BANC
CORP., Canfield, Ohio will be held at Colonial Catering located
at 429 Lisbon Street, Canfield, Ohio 44406 on Thursday, March
25, 1999 at three-thirty o'clock (3:30) P.M., Eastern Standard
Time, for the purpose of considering and voting upon the
following matters:
1. ELECTION OF DIRECTORS. The election of the eight (8) persons
listed in the accompanying Proxy Statement.
2. AMENDMENT TO ARTICLE IV. To approve the proposal to amend
Article IV of the Corporation's Articles of Incorporation to
increase the authorized number of shares of common stock, no par
value, of the Corporation from 5,000,000 to 12,500,000.
3. APPROVAL OF THE 1999 STOCK OPTION PLAN AND RELEASE OF PREEMPTIVE
RIGHTS AS TO THE SHARES ISSUED UNDER THE PLAN. To approve the
adoption of the Farmers National Banc Corp. 1999 Stock Option
Plan and release of preemptive rights as to shares issued under
the Plan. A copy of the Stock Option Plan is included as
Exhibit 'A' to the Proxy Statement accompanying this Notice.
4. TO TRANSACT SUCH OTHER BUSINESS as may properly come before the
Meeting or any adjournment thereof.
Shareholders of record at the close of business on February 5,
1999 are the only shareholders entitled to notice of and to vote
at the Annual Shareholders Meeting.
By Order of the Board of Directors
/s/Frank L. Paden, President & Secretary
Canfield, Ohio
March 4, 1999
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. THEREFORE,
WHETHER OR NOT YOU PLAN TO BE PRESENT IN PERSON AT THE ANNUAL
MEETING, PLEASE SIGN, DATE AND COMPLETE THE ENCLOSED PROXY AND
RETURN IT IN THE ENCLOSED ENVELOPE WHICH REQUIRES NO POSTAGE.
FARMERS NATIONAL BANC CORP.
CANFIELD, OHIO 44406
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
MARCH 25, 1999
Farmers National Banc Corp., herein referred to as "Farmers" or
the "Corporation" is furnishing this Proxy Statement to its
shareholders in connection with the solicitation, by order of
the Board of Directors of Farmers, of proxies to be used at the
Annual Meeting of Shareholders to be held on Thursday, March 25,
1999 at 3:30 P.M., Eastern Standard Time, at Colonial Catering,
429 Lisbon Street, Canfield, Ohio 44406, and at any adjournments
thereof. The Corporation is a one-bank holding company of which
The Farmers National Bank of Canfield is the wholly owned
subsidiary.
The cost for solicitation of proxies will be borne by Farmers.
Brokerage firms and other custodians, nominees and fiduciaries
may be requested to forward soliciting material to their
principals and to obtain authorization for the execution of
proxies. Farmers will, upon request, reimburse brokerage firms,
and other custodians, nominees and fiduciaries for the execution
of proxies and for their expenses in forwarding proxy material
to their principals.
The proxy statement and the form of proxy are being mailed on
March 4, 1999 or as soon thereafter as practicable to all
shareholders entitled to vote at the meeting. In addition to
use of mails, proxies may be solicited by officers, directors,
and employees of Farmers by personal interview, telephone and
telegraph.
The 1998 Annual Report, including the required audited
financial statements of the Corporation and related financial
information, is enclosed with this proxy soliciting material.
VOTING RIGHTS
Only shareholders of record at the close of business on
February 5, 1999 will be entitled to vote at the meeting. As of
February 5, 1999, Farmers had issued and outstanding 3,657,289
shares of common stock with no par value held by approximately
2,586 holders of record eligible to vote. Each outstanding
share entitles the recordholder to one vote. The number of
shares present at the meeting in person or by proxy will
constitute a quorum for the transaction of business.
It is important that your stock be represented at the meeting,
regardless of the number of shares you may own. We would
appreciate your signing and returning the enclosed proxy. The
shares represented by each proxy, which is properly executed and
returned to Farmers, will be voted in accordance with the
instructions indicated in such proxy. If no instructions are
indicated, shares represented by proxy will be voted "FOR" the
election of each of the Directors as described herein under
Proposal 1, "FOR" approval of the amendment to Article IV of the
Corporation's Articles of Incorporation as described herein
under Proposal 2, and "FOR" approval of the 1999 Stock Option
Plan and release of preemptive rights as to shares issued under
the plan as described herein under Proposal 3. The proxy may be
revoked at any time prior to its exercise, by delivering notice
of revocation or a duly executed proxy bearing a later date to
the Treasurer of the Corporation at any time before the proxy is
voted. Shareholders who attend the meeting in person may vote
their stock even though they may have sent in a proxy. No
officer or employee of Farmers may be named as a proxy. If you
received two or more proxy forms because of difference in
addresses or registration of shareholdings, each should be
executed and returned in order to assure a complete tabulation
of shares.
The corporation will appoint two officers to act as inspectors
for the purpose of tabulating the votes cast by proxy. Broker
non-votes and abstentions are not treated as votes cast for
purposes of any of the matters to be voted on at the meeting.
The Board of Directors knows of no other business that will be
presented for consideration at the 1998 Annual Meeting other
than the matters described in this Proxy Statement. If any
other matters should come before the meeting, the proxy holders
will vote upon them in accordance with their best judgment.
PROPOSAL 1:
ELECTION OF DIRECTORS
Pursuant to the Code of Regulations, the authorized number of
Directors of Farmers has been set at eight (8). The Board of
Directors has nominated the eight (8) persons named below to
serve as Directors until the next Annual Meeting or until their
earlier death, resignation or removal from office. With the
exception of Mr. Joseph D. Lane, each of the nominees currently
serves as a Director of Farmers. Election of Directors by
shareholders shall be determined by a plurality of the votes
cast by the shareholders who are entitled to vote at the
meeting, present in person or by proxy. If any of the nominees
should be unavailable to serve for any reason (which is not
anticipated), the Board of Directors may designate a substitute
nominee or nominees (in which case the persons named on the
enclosed proxy card will vote all valid proxy cards for the
election of such substitute nominee or nominees), allow the
vacancy or vacancies to remain open until a suitable candidate
or candidates are located, or by resolution provide for a lesser
number of Directors. It is presently anticipated that each
person elected as a Director of the Corporation at the Annual
Meeting will be elected by the Corporation as a Director of the
Corporation's wholly-owned subsidiary, Farmers National Bank of
Canfield.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR"
ELECTION OF THE EIGHT NOMINEES LISTED BELOW:
INFORMATION WITH RESPECT TO NOMINEES
Certain information in the following tabulation has been
furnished to Farmers by the respective nominees for Director.
Principal Occupation and Director
Name Five Year Business Experience Age Since (A)
Benjamin R. Brown President and Owner of Castruction 53 1991
Company, Incorporated in 1965. The
Company designs and manufactures
pre-cast shapes and associated
products for the steel industry.
Richard L. Calvin Vice Chairman since 1996, formerly, 72 1975
Executive Vice President/Cashier of
Farmers National Bank since 1972
and Executive Vice President/
Treasurer of Farmers National Banc
Corp. since 1983.
Joseph D. Lane Attorney and Principal of Lane & 46 N/A
Rusu Co. L.P.A. since 1995. Vice
President of Lane Funeral Homes,
Inc. since 1975 and Vice President
of Lane Life Paramedics Ambulance
Services since 1985.
David C. Myers President and Owner of Myers 70 1988
Equipment Corp. since 1955. The
Company sells truck equipment and
school buses. Mr. Myers has
operated a 2,000 - acre farm since
1946.
Edward A. Ort President of Ort Furniture Mfg. Co. 69 1993
since 1973. The Company
manufactures upholstered furniture
which is shipped to retail furniture
stores in northeastern United States
since 1957.
Frank L. Paden President & CEO of Farmers National 47 1992
Bank since 1996 and EVP/Sr. Loan
Officer since 1991. President &
Secretary of Farmers National Banc
Corp. since 1996.
William D. Stewart Chairman since 1996, formerly, 69 1972
President of Farmers National Bank
since 1972 and President &
Secretary of Farmers National Banc
Corp. since 1983.
Ronald V. Wertz C.P.C.U., C.I.C., Vice President 52 1989
with Acordia Insurance since 1998.
Previously was President and Owner
of Boyer Insurance, Inc. since 1981.
(A) Includes the period served as a Director of The Farmers
National Bank of Canfield prior to its reorganization into a
wholly owned subsidiary of this Corporation in 1983.
PROPOSAL 2:
PROPOSAL TO AMEND ARTICLES OF INCORPORATION TO INCREASE
AUTHORIZED NUMBER OF COMMON SHARES.
The Articles of Incorporation of the Corporation presently
authorize 5,000,000 shares, no par value. The Corporation's
Board of Directors unanimously adopted a resolution proposing
and declaring it advisable that Article IV of the Corporation's
Articles of Incorporation (the "Articles") be amended in order
to increase the authorized number of shares of the Corporation
to 12,500,000 shares, no par value ("Common Shares"), and
recommending to the shareholders of the Corporation the approval
of the proposed amendment. Of the Corporation's presently
authorized 5,000,000 Common Shares, as of December 31, 1998,
3,657,289 shares were outstanding.
The Board of Directors believes that it is desirable and in the
best interests of the Corporation and its shareholders to
increase the number of Common Shares that the Corporation is
authorized to issue. This will ensure that the Corporation will
have a sufficient number of authorized Common Shares available
in the future to provide it with the desired flexibility
necessary to meet its business needs. If this proposal is
approved by the shareholders, the additional Common Shares will
be available for a variety of corporate purposes, including for
example, the declaration and payment of share dividends to the
Corporation's shareholders; issuance of shares under the
Dividend Reinvestment Plan; share splits; use in the financing
of expansion or future acquisitions; issuance pursuant to the
terms of employee benefit plans; and use in other possible
further transactions of a currently undetermined nature.
If the proposed amendment is adopted, the Corporation would be
permitted to issue the additional authorized Common Shares
without further shareholder approval, except to the extent
otherwise required by the Articles, by law or by any securities
exchange on which the Common Shares may be listed at the time.
The authorization of additional Common Shares will enable the
Corporation, as the need may arise, to take timely advantage of
market conditions and the availability of favorable
opportunities without the delay and expense associated with the
holding of a special meeting of its shareholders. It is the
belief of the Board of Directors that the delay necessary for
shareholder approval of a specific issuance could be detrimental
to the Corporation and its shareholders. The Board of Directors
does not intend to issue any Common Shares except on terms which
the Board deems to be in the best interests of the Corporation
and its shareholders. Shareholders of the Corporation may have
preemptive rights to purchase Common Shares issued in the
future, unless such rights are specifically limited by the
Articles. Depending on the terms thereof, the issuance of the
Common Shares may or may not have a dilutive effect on the
Corporation's then-existing shareholders. Other than the Common
Shares which may be acquired pursuant to the Corporation's
existing Dividend Reinvestment Plan and Stock Option Plan (see
Proposal No. 3), the Corporation presently has no plans,
agreements or understandings to issue any of the newly
authorized Common Shares.
If the amendment is approved, it will become effective upon the
filing of a Certificate of Amendment to the Corporation's
Articles with the Ohio Secretary of State, which is expected to
be accomplished as promptly as practicable after such approval
is obtained.
ADOPTION OF THE PROPOSED AMENDMENT REQUIRES THE AFFIRMATIVE VOTE
OF THE HOLDERS OF TWO THIRDS (2/3) OF THE COMMON SHARES. THE
BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THE AMENDMENT.
PROPOSAL 3:
APPROVAL OF THE ADOPTION OF THE FARMERS NATIONAL BANC CORP. 1999
STOCK OPTION PLAN AND RELEASE OF PREEMPTIVE RIGHTS AS TO SHARES
ISSUED UNDER THE PLAN.
The following is a summary of the material provisions of the
Farmers National Banc Corp. 1999 Stock Option Plan (the "Plan")
which is attached as Exhibit `A' to this Proxy Statement and is
incorporated by reference into this summary description. This
summary is qualified entirely by reference to the Plan. Any
capitalized terms which are used in this summary description but
not defined have the meanings assigned to them in the Plan.
Introduction. On December 15, 1998, the Board of Directors
adopted the Plan. The Board of Directors urges stockholders to
read the Plan in its entirety. The Plan provides stock-based
compensation to eligible employees, including incentive and
nonqualified stock options and stock appreciation rights.
Stock-based compensation will typically be issued in
consideration for the performance of services to the Corporation.
The Board of Directors believes that the Plan will optimize the
profitability and growth of the Corporation through incentives
that link the interests of the Plan participants with those of
the Corporation's stockholders. The Board further believes that
the Plan will enable the Corporation to attract, retain and
motivate employees capable of making significant contributions
to the Corporation's success and to allow employees to share in
the success of the Corporation.
The Board of Directors expects the Plan to link the interests
of participants with those of the Corporation's stockholders by
giving participants an incentive to perform at a superior level
consistent with the Corporation's goals. The Board of Directors
believes that approval of the Plan is, therefore, in the
stockholders best interests.
Release of Preemptive Rights. Holders of Common Shares are
generally entitled to preemptive rights, subject to certain
exceptions described in Article XIII of the Corporation's
Articles of Incorporation. Consistent with the General
Corporation Law of Ohio, Article XIII allows for the release of
preemptive rights on shares issued under a stock option plan if
the release is approved by the affirmative vote of the holders
of a majority of the shares entitled to such preemptive rights.
If the holders of a majority of the common shares of the
Corporation vote "FOR" this proposal, shareholders will not have
preemptive rights on shares issued under the Plan. While the
release of preemptive rights may have a dilutive effect on the
holders of Common Shares, the Board of Directors feels that it
would not be practicable to implement a Stock Option Plan with
such shares subject to preemptive rights.
Administration. The Plan shall be administered by the
Compensation Committee of the Board or, alternatively at the
discretion of the Board, the Board may appoint a Stock Option
Plan Committee consisting of not less than two nor more than
five members to administer the Plan (collectively referred to as
the "Committee"). All Committee members shall be disinterested
directors qualified to serve pursuant to Rule 16b-3 under
Section 16 of the Securities Exchange Act of 1934, as amended
and in effect from time to time. Subject to the express
provisions of the Plan, the Committee shall have sole discretion
and authority to determine from time to time the individuals to
whom Options may be granted, the terms of the Stock Option
Agreement with the Optionee, including but not limited to, the
number of shares of Stock to be subject to each Option, the
period during which such Option may be exercised and the price
at which such Option may be exercised.
Eligibility. Directors and Officers of the Corporation and its
subsidiaries and such other employees, consultants or other
individuals the Board of Directors may from time to time
designate, shall be eligible to participate in the Plan.
Options. The Committee has discretion to award incentive stock
options ("ISOs"), which are intended to comply with Section 422
of the Internal Revenue Code, or nonqualified stock options
("NQSOs"), which are not intended to comply with Section 422 of
the Internal Revenue Code. Each option issued under the Plan
must be exercised within a period of ten years from the date of
grant, and the exercise price of an option may not be less than
the fair market value of the underlying shares of the
Corporation's Common Stock on the date of grant. At the time of
exercise, the full exercise price for a stock option must be
paid in cash or, if the Committee so provides, in shares of the
Corporation's Common Stock. Subject to the specific terms of
the Plan, the Committee has discretion to set such additional
limitations on option grants (including expiration or
termination provisions) as it deems appropriate. Options become
exercisable according to the following vesting schedule:
20% after one year from the date of grant
40% after two years from the date of grant
60% after three years from the date of grant
80% after four years from the date of grant
100% after five years from the date of grant
Stock Appreciation Rights. The Committee may grant Stock
Appreciation Rights (SAR) to participants under the Plan. A SAR
may be granted simultaneously with or subsequent to the option
to which the right is related, but each SAR must relate to a
particular option. In exchange for the surrender in whole or in
part of the related option to purchase shares of Common Stock,
the exercise of a SAR shall entitle a Participant to an amount
equal to the appreciation in value of the shares to which the
related option is being surrendered pursuant to such exercise.
Such appreciation in value shall be equal to the excess of the
Fair Market Value of such shares.
Option Grant. Options granted under the Plan will be evidenced
by written Stock Option Agreements specifying the number of
shares covered thereby and the option price, the exercise period
and all other terms, restrictions and conditions of the option.
The exercise price of all stock options granted under the Plan
must be at least equal to the Fair Market Value of such shares
on the date of grant. With respect to any Optionee who owns
stock possessing more than 10% of the voting rights of the
Corporation's outstanding Common Stock, the exercise price of
any stock option must be not less than 110% of the Fair Market
Value on the date of grant for ISO's.
Number of Available Shares. Up to 375,000 shares of the
Corporation's Common Stock are authorized for issuance through
the Plan. The Plan provides for appropriate adjustments in the
number of shares of the Corporation's Common Stock subject to
awards and available for future awards in the event of changes
in outstanding Common Stock by reason of a merger, stock split
or certain other events.
Amendment and Termination. The Board of Directors may modify,
amend or terminate the Plan at any time. However, no such
action may materially increase either the benefits to
Participants under the Plan or the number of shares that may be
issued under the Plan, materially modify the eligibility
requirements, reduce the Option Price or impair any outstanding
option or SAR. The Board of Directors will seek stockholder
approval of an amendment if necessary under Internal Revenue
Service Regulations or any applicable law. Subject to the right
of the Board of Directors to modify, amend or terminate the
Plan, the Plan will remain in effect until all options and
rights granted thereunder have been exercised or expired in
accordance with the terms of the Plan. However, in no event
will the Board of Directors grant awards under the Plan on or
after December 15, 2008.
Federal Income Tax Consequences. The following description of
Federal Income Tax Consequences is based upon existing statutes,
regulations and interpretations as of the date of this Proxy
Statement. Because the currently applicable rules are complex
and the tax laws may change and because income tax consequences
may vary depending upon the particular circumstances of each
participant, each participant should consult his or her own tax
advisor concerning Federal (and any state and local) Income Tax
Consequences. The following discussion does not purport to
describe state or local income tax consequences.
Options so designated under the Option Plan are intended to
qualify as Incentive Stock Options ("ISOs") within the meaning
of Section 422 of the Internal Revenue Code of 1986 (the
"Code"). All Options that are not designated as ISOs are
intended to be Non-Qualified Stock Options ("NQSO").
Incentive Stock Options. The Optionee will recognize no income
upon the grant of an ISO and incur no tax on its exercise
(unless the Optionee is subject to the alternative minimum tax).
If the Optionee holds the stock acquired upon exercise of an
ISO (the "ISO Shares") for more than one year after the date the
option was exercised and for more than two years after the date
the option was granted, the Optionee generally will realize
long-term capital gain or loss (rather than ordinary income or
loss) upon disposition of the ISO Shares. This gain or loss
will be equal to the difference between the amount realized upon
such disposition and the amount paid for the shares.
If the Optionee disposes of ISO Shares prior to the expiration
of either holding period (a "disqualifying disposition"), then
gain realized upon such disposition, up to the difference
between the Fair Market Value of the shares on the date of
exercise (or, if less, the amount realized on a sale of such
shares) and the option exercise price, will be treated as
ordinary income. Any additional gain will be long-term or
short-term capital gain, depending upon the amount of time the
ISO Shares were held by the Optionee.
Non-Qualified Stock Options. An Optionee will not recognize
any taxable income at the time a NQSO is granted. However, upon
exercise of a NQSO, the Optionee will include in income as
compensation an amount equal to the difference between the Fair
Market Value of the shares on the date of exercise (or, in the
case of exercise for stock subject to a substantial risk of
forfeiture, at the time such forfeiture restriction lapses) and
the amount paid for that stock upon exercise of the NQSO. In
the case of stock subject to a substantial risk of forfeiture,
if the Optionee makes an 83(b) election, the included amount
will be based on the difference between the Fair Market Value on
the date of exercise and the Option exercise price. The
included amount will be treated as ordinary income by the
Optionee and will be subject to income tax withholding by the
Corporation (either by payment in cash by the Optionee or
withholding out of the Optionee's salary). Upon sale of the
shares by the Optionee, any appreciation or depreciation in the
value of the shares will be treated as capital gain or loss
(either long- or short-term, depending upon the time the
Optionee holds the shares after exercising the NQSO).
Tax Treatment of the Corporation. The Corporation will be
entitled to a deduction in connection with the exercise of a
NQSO by a domestic employee or Director to the extent that the
Optionee recognizes ordinary income and the Corporation
withholds tax. The Corporation will be entitled to a deduction
in connection with the disposition of ISO Shares only to the
extent that the Optionee recognizes ordinary income on a
disqualifying disposition of the ISO Shares.
ADOPTION AND APPROVAL OF THE FARMERS NATIONAL BANC CORP. 1999
STOCK OPTION PLAN REQUIRES THE AFFIRMATIVE VOTE OF THE HOLDERS
OF A MAJORITY OF THE COMMON SHARES. THE BOARD OF DIRECTORS
RECOMMENDS THAT YOU VOTE "FOR" THE PROPOSAL.
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth information regarding beneficial
ownership as of December 31, 1998, of the Corporation's common
shares of each Director and all Executive Officers as a group.
Aggregate Number of Percent of
Shares Beneficially Outstanding
Name Owned (A) Shares
Benjamin R. Brown 28,543 .78%
Richard L. Calvin 33,652 .92%
Joseph O. Lane 83,378 2.28%
David C. Myers 22,982 .63%
Edward A. Ort 6,562 .18%
Frank L. Paden 8,861 .24%
William D. Stewart 29,001 .79%
Ronald V. Wertz 27,536 .75%
Executive Officers as a Group 12,027 (B) .33%
All Directors and
Executive Officers as a Group 243,681 6.66%
(A) Information relating to beneficial ownership is based upon
information available to Farmers and uses "Beneficial Ownership"
concepts set forth in the rules of the Securities and Exchange
Commission under the Securities Exchange Act of 1934, as
amended. Under such rules, Beneficial Ownership includes those
shares over which an individual has sole or shared voting,
and/or investment powers such as beneficial interest of a
spouse, minor children, or other relatives living in the home of
the named individual, trusts, estates and certain affiliated
companies.
(B) Includes 8,861 shares held by Frank L. Paden, President and
CEO of Farmers National Bank of Canfield and President and
Secretary of the Corporation.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires
the Corporation's Directors and executive officers, and persons
who own more than 10% of a registered class of the Corporation's
equity securities, to file with the Securities and Exchange
Commission (the "SEC") initial reports of ownership and reports
of changes in ownership of Common Stock and other equity
securities of the Corporation. Officers, Directors and greater
than 10% stockholders are required by SEC regulation to furnish
the Corporation with copies of all Section 16(a) forms they file.
To the Corporation's knowledge, based solely on a review of the
copies of such reports furnished to the Corporation and written
representations that no other reports were required, during
1998, all Section 16(a) filing requirements applicable to its
officers, Directors and greater than 10% beneficial owners were
complied with.
COMMITTEES OF THE BOARD OF DIRECTORS
At the Directors' organizational meeting, held immediately
following the last Annual Shareholders Meeting of The Farmers
National Banc Corp. held on March 26, 1998, the following
committees were appointed by the Chairman:
EXECUTIVE COMPENSATION AND EMPLOYEES SALARY COMMITTEE: Joseph
O. Lane, Chairman; Benjamin R. Brown, Richard L. Calvin, David
C. Myers, Edward A. Ort, William D. Stewart and Ronald V. Wertz.
The Executive Compensation and Employees Salary Committee
reviews the compensation of the official staff and makes
recommendations regarding all employee benefits to the Board of
Directors. This committee met one time in 1998.
AUDIT & EXAMINING COMMITTEE: David C. Myers, Chairman;
Benjamin R. Brown, Edward A. Ort, and Ronald V. Wertz.
The Audit and Examining Committee directs the activities of the
internal audit staff, reviews the internal auditor's reports,
reviews all examinations of the Comptroller of the Currency and
makes recommendations to the Board regarding the engagement of
an external auditing firm to perform the annual audit and
prepare income tax returns. This committee met four times in
1998.
DISCOUNT LOAN COMMITTEE: Frank L. Paden, Chairman; Benjamin
R. Brown, Richard L. Calvin, Joseph O. Lane, David C. Myers,
Edward A. Ort, William D. Stewart, and Ronald V. Wertz.
The Discount Loan Committee meets weekly to review all loans
made during the previous week and to approve all loan
commitments which are either above the assigned lending limits
of the loan officers or are not in keeping with existing bank
policy.
BUILDING COMMITTEE: Richard L. Calvin, Chairman; Ad Hoc.
The Building Committee oversees site selection, office
additions and modifications. This committee met one time in 1998.
LONG RANGE AND STRATEGIC PLANNING COMMITTEE: Frank L. Paden,
Chairman; Benjamin R. Brown, Richard L. Calvin, Joseph O. Lane,
David C. Myers, Edward A. Ort, William D. Stewart, and Ronald V.
Wertz.
The Long Range and Strategic Planning Committee is responsible
for formulation and implementation of the Strategic Plan for the
operation of the Corporation. This committee met once in 1998.
NOMINATING COMMITTEE: Frank L. Paden, Chairman; Benjamin R.
Brown, Richard L. Calvin, Joseph O. Lane, David C. Myers, Edward
A. Ort, William D. Stewart, and Ronald V. Wertz.
The Nominating Committee makes decisions with respect to: (a)
nominees for election as Director at the Annual Meeting of
shareholders; (b) nominees to fill Board vacancies between
Annual Meetings; and (c) the composition of membership of the
various other standing committees. This committee met once in
1998.
RISK MANAGEMENT AND INSURANCE COMMITTEE: Ronald V. Wertz,
Chairman; Benjamin R. Brown, Richard L. Calvin, and Carl D.
Culp, EVP/Cashier/CFO.
The Risk Management and Insurance Committee is responsible for
reviewing coverage and protection levels of insurance maintained
by the Bank. The committee met once in 1998.
During 1998, each Director standing for re-election, was
present for more that 75% of the combined number of meetings of
the Board of Directors and of each committee of the Board on
which such director served. There were twelve regular and six
special meetings of the Board of Directors in 1998.
Members of the Board of Directors receive $500.00 for each
board meeting they attend, and $300.00 for each committee
meeting they attend with the exception of inside Directors who
receive no compensation for committee meetings.
NOTE: THE ABOVE COMMITTEES ARE COMMITTEES OF THE FARMERS
NATIONAL BANK OF CANFIELD (THE BANK), A WHOLLY OWNED SUBSIDIARY
OF FARMERS NATIONAL BANC CORP. CURRENTLY, THE MEMBERS OF
FARMERS' BOARD OF DIRECTORS ALSO SERVE AS THE DIRECTORS OF THE
BANK, AND ATTEND BOARD MEETINGS FOR BOTH FARMERS AND THE BANK.
ALTHOUGH THESE MEETINGS ARE CONDUCTED SEPARATELY ON THE SAME
DAY, A MEMBER RECEIVES COMPENSATION (WHICH IS PAID BY FARMERS)
FOR ONLY ONE MEETING, CONSEQUENTLY, MEMBERS ATTENDING A MEETING
OF THE BOARDS OF BOTH FARMERS AND THE BANK ON A SINGLE DAY ARE
CREDITED WITH ONE BOARD MEETING FOR ATTENDANCE AND COMPENSATION
PURPOSES.
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
Name and Principal Position Year Annual Salary Bonus 401(k) All Other
and Director Corporation Compensation
Fees (a) Contribution (c)
(b)
<S> <C> <C> <C> <C> <C>
Frank L. Paden, President & CEO 1998 118,917 0 7,975 383
1997 103,665 0 7,486 1,098
1996 86,318 0 4,749 1,038
<FN>
(a) The amount of Director Fees included in this annual amount
is as follows: Paden ($9,300, $7,900 and $6,250).
(b) In May, 1996, the Corporation adopted a 401(k) Profit
Sharing Retirement Savings Plan. All employees of Farmers
National Bank who have completed at least one year of service
and meet certain other eligibility requirements are eligible to
participate in the Plan. Under the terms of the Plan, employees
may voluntarily defer a portion of their annual compensation,
not to exceed 15%, pursuant to Section 401(k) of the Internal
Revenue Code. The Corporation matches a percentage of the
participants' voluntary contributions up to 6% of gross wages.
In addition, at the discretion of the Board of Directors, the
Corporation may make an additional profit sharing contribution
to the Plan. The Corporation's contributions are subject to a
vesting schedule and the Plan meets the requirements of Section
401(a) of the Internal Revenue Code and Department of Labor
Regulations under ERISA.
(c) Amounts represent cost of group term life insurance and
other benefits.
Listed is the total compensation paid by the Corporation's
subsidiary, The Farmers National Bank of Canfield during the
latest fiscal year to the named person(s) for services in all
capacities, specifically setting forth the direct compensation
to the President & CEO. No other executive officer of Farmers
receives the total annual salary and bonus in excess of $100,000.
In 1991, as a result of certain changes in the Internal Revenue
Code, the Bank's pension plan was amended to reduce
significantly the benefits of several key employees, including
those of Mr. Paden. As a result, the Bank has entered into
Deferred Compensation Agreements with certain of its executive
officers, including Mr. Paden. Under the terms of the Deferred
Compensation Agreement, he will receive monthly payments of
$930.00 for a period of two hundred and four (204) months,
commencing with retirement age of 65. This agreement also
provides that these executive officers will be available to
perform consulting services for the Bank during the period he is
receiving these payments, and prohibits him from entering into
competition with the Corporation during that same period. In
the event that any payments should still remain due and payable
to the executive officer under the Agreement at the time of his
death, those payments would be made to his surviving spouse. In
the event that any payment should still remain due and payable
to either the executive officer or his spouse under the
Agreement at the death of the survivor of them, those payments
would be reduced to their then present value at a predetermined
rate of interest and paid to the estate of the survivor in a
lump sum. Payments will be prorated in the event the employee
retires before the age of 65, and will be increased
proportionately if he retires after the age of 65. The
Agreement is funded by a life insurance policy owned by the
bank, on which the Bank is the beneficiary and the premiums of
which are paid by the Bank.
NOTE: Tables containing disclosures of Stock Appreciation
Rights and Plans and Long Term Incentive Plans have been omitted
because no such programs exists for The Farmers National Bank of
Canfield and although the Farmers National Banc Corp. 1999 Stock
Option Plan has been approved by the Board of Directors on
December 15, 1998, no Options or Stock Appreciation rights have
been granted in 1998.
No Employment Contracts or Golden Parachute Agreements exist
between any executive officer and either Farmers National Banc
Corp. or The Farmers National Bank of Canfield.
INDEBTEDNESS OF MANAGEMENT
Farmers has had, and expects to have in the future, banking
transactions in the ordinary course of business with Directors,
executive officers and their associates on the same terms,
including interest rates and collateral on loans, as those
prevailing at the same time for comparable transactions with
others. Since the beginning of 1998, the largest aggregate
extensions of credit to executive officers, Directors and their
associates during the year ended December 31, 1998 was
$1,514,016 or 3.20% of Equity Capital Accounts. In the opinion
of the management of Farmers, these transactions do not involve
more than a normal risk of collectability or present other
unfavorable features.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors is made up
of all of the outside Directors of Farmers. No officers of the
corporation sit on this committee. This committee reports back
to the full board but its decisions are not subject to full
board approval. The committee has the purpose and
responsibility of providing the Bank, its staff and the
communities it serves with consistent long-term leadership of
the highest quality possible while protecting the interests of
the shareholders.
The committee sets the limits for increases in the aggregate
for all staff, reviews performance of executive officers and
sets their salaries for the coming year. In addition, any
incentive/bonus program is set by the board based on the
recommendation of the compensation committee.
The committee takes a straightforward approach to the review of
executives and bases its consideration of salaries on specific
job performance, contribution to target levels of growth,
profitability, stability, capital and return on equity (ROE) and
return on assets (ROA). Also considered is the executive's
contribution to the general success of the Bank and its business
plan and community standing, which cannot necessarily be
quantified in an appropriated manner but is weighted heavily in
a community bank, which is located exclusively in small
communities. Successful bank operations are contingent upon
accomplishment in all areas and integration with the business
community's direction and success in our market areas.
Executive performance must therefore be evaluated by using these
factors as well. Specific results of each executive's area of
responsibility are evaluated and considered, but would not be
appropriately discussed here as a matter of confidentiality.
The committee evaluates the President on the same basis as
other executive offices with weight being given to the
achievement of target levels of growth, capital and return on
equity and, in addition, specific target goals of the overall
strategic plan of the Bank. The accomplishment of meeting the
goals and targets are reflected in the Summary Compensation
Table.
The members of the Compensation Committee are Joseph O. Lane,
Chairman; Benjamin R. Brown, Richard L. Calvin, David C. Myers,
Edward A. Ort, William D. Stewart and Ronald V. Wertz. None has
registered a disagreement with the above report.
Compensation Committee Interlocks and Insider Participation
No member of the Compensation Committee is currently or was at
any time during 1998, an officer or an employee of, or had an
employment agreement with the Corporation or the Bank. No
corporate or committee interlocks exist which require disclosure
under SEC regulations.
PERFORMANCE GRAPH
The Securities and Exchange Commission requires a line graph
presentation comparing cumulative, five-year shareholder returns
on an indexed basis with a broad equity market index and either
a nationally recognized industry standard or an index of peer
companies selected by the Corporation. The Corporation has
selected the NASDAQ Stock Market US Index and the NASDAQ Banks
Index for purposes of this performance comparison which appears
below. The Performance Graph presents a comparison which
assumes $100 invested on December 31, 1993, in the Corporation's
common stock, The NASDAQ Stock Market US Index and the NASDAQ
Banks Index.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN *
AMONG FARMERS NATIONAL BANC CORP., THE NASDAQ STOCK MARKET - US
INDEX AND THE NASDAQ BANKS INDEX
[PERFORMANCE GRAPH PAPER COPY MAILED TO SEC]
TOTAL RETURN GRAPH DATA
12/93 12/94 12/95 12/96 12/97 12/98
Farmers National Banc Corp. 100 131 192 251 350 499
NASDAQ Stock Mkt-US 100 98 138 170 209 293
NASDAQ Bank 100 100 148 196 328 325
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has elected Hill, Barth and King to
serve as the Corporation's independent public accountant for the
fiscal year ending December 31, 1999. Hill, Barth and King also
served as the Corporation's independent public accountant for
the fiscal year ended December 31, 1998. Hill, Barth and King
is expected to have a representative present at the Annual
Meeting and will be available to respond to shareholders'
questions and if they desire, will have an opportunity to make
any statement they consider appropriate.
SHAREHOLDER PROPOSALS
Any Shareholder proposal intended to be placed in the Proxy
Statement for the 1999 Annual Meeting to be held in March 2000
must be received by the Corporation no later than December 1,
1999. Written proposals should be sent to Carl D. Culp,
Executive Vice President and Treasurer, Farmers National Banc
Corp., 20 South Broad Street, P.O. Box 555, Canfield, Ohio
44406. Each proposal submitted should be accompanied by the
name and address of the shareholder submitting the proposal and
the number of shares owned. If the proponent is not a
shareholder of record, proof of beneficial ownership should also
be submitted. All proposals must be a proper subject for action
and comply with the proxy rules of the Securities and Exchange
Commission. Reference is made to Rule 14a-8 under the
Securities Exchange Act of 1934, as amended, for information
concerning the content and form of such proposal and the manner
in which such proposal must be made.
ANNUAL REPORT ON FORM 10-K
A copy of the Corporation's 1998 report filed with the
Securities and Exchange Commission, on Form 10-K, will be
available without charge to shareholders upon written request to
Carl D. Culp, Executive Vice President and Treasurer, Farmers
National Banc Corp., 20 South Broad Street, P.O. Box 555,
Canfield, Ohio 44406.
BY ORDER OF THE BOARD OF DIRECTORS
FRANK L. PADEN, PRESIDENT & SECRETARY
FARMERS NATIONAL BANC CORP.
20 South Broad St., P.O. Box 555, Canfield, Ohio 44406
PROXY FOR ANNUAL MEETING
SOLICITED BY THE BOARD OF DIRECTORS
KNOW ALL MEN BY THESE PRESENT, that I, the Undersigned
Shareholder of Farmers National Banc Corp. of Canfield, Ohio, do
hereby nominate and appoint William D. Calhoun, Ronald V. Wertz
and David W. Yeany (no officer or employee of the Corporation
may be named as proxy) or any one of them (with full power to
act alone), my true and lawful attorney(s) with full power of
substitution, for me and in my name, place and stead to vote all
the Common Stock of said Corporation standing in my name on its
books on February 5, 1999, at the Annual Meeting of its
Shareholders to be held at Colonial Catering, 429 Lisbon Street,
Canfield, Ohio 44406, on Thursday, March 25, 1999, at 3:30 P.M.,
Eastern Standard Time, or any adjournment thereof with all the
powers the undersigned would possess if personally present as
follows:
1. ELECTION OF DIRECTORS: The election of the eight (8) persons
listed in the Proxy Statement dated March 4, 1999 accompanying
the notice of said meeting.
FOR (all nominees except as indicated below) ______
WITHHOLD AUTHORITY (as to all nominees)______ To withhold your
vote from certain nominees, strike a line through their name.
Benjamin R. Brown, Richard L. Calvin, Joseph D. Lane,
David C. Myers, Edward A. Ort, Frank L. Paden,
William D. Stewart, Ronald V. Wertz
2. AMENDMENT TO ARTICLE IV: To approve the proposal to amend
Article IV of the Corporation's Articles of Incorporation to
increase the authorized number of common shares, no par value,
of the Corporation from 5,000,000 to 12,500,000.
( ) FOR ( ) AGAINST ( ) ABSTAIN
3. APPROVAL OF THE 1999 STOCK OPTION PLAN AND RELEASE OF PREEMPTIVE
RIGHTS AS TO THE SHARES ISSUED UNDER THE PLAN. To approve the
adoption of the Farmers National Banc Corp. 1999 Stock Option Plan
and release of preemptive rights as to shares issued under the Plan.
( ) FOR ( ) AGAINST ( ) ABSTAIN
4. SUCH OTHER BUSINESS as may properly come before the meeting or
any adjournment thereof.
IN THE ABSENCE OF INSTRUCTIONS TO THE CONTRARY, THIS PROXY
CONFERS AUTHORITY TO VOTE AND WILL BE VOTED "FOR" EACH
PROPOSITION LISTED. If any other business is presented at said
meeting, this Proxy shall be voted in accordance with the
recommendations of The Board of Directors.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH OF THE
LISTED PROPOSITIONS. This proxy is solicited on behalf of The
Board of Directors and may be revoked prior to its exercise.
WE URGE YOU TO SIGN AND RETURN THE ENCLOSED PROXY AS PROMPTLY
AS POSSIBLE (whether or not you plan to attend the meeting in
person).
IF YOU DO ATTEND THE MEETING, YOU MAY THEN WITHDRAW YOUR PROXY.
THE PROXY MAY BE REVOKED AT ANY TIME PRIOR TO ITS EXERCISE.
DATED ________________________________________
________________________________________
________________________________________
Signature of Shareholder(s) *
*When signing as attorney, executor, administrator, trustee or
guardian, please give full title. If more than one trustee, all
should sign. All joint others must sign.
The following exhibits are filed or incorporated by reference as part
of this report:
1. Farmers National Banc Corp. 1999 Stock Option Plan (filed herewith).
</TABLE>
FARMERS NATIONAL BANC CORP.
1999 STOCK OPTION PLAN
ARTICLE I
THE PLAN
Section 1.1 Name. This plan shall be known as the "Farmers
National Banc Corp. 1999 Stock Option Plan."
Section 1.2 Purpose. The purpose of the Plan is to advance the
interests of Farmers National Banc Corp. (the "Company") and its
shareholders by affording to Directors and officers of the
Company and Farmers National Bank (the "Bank") an opportunity to
acquire or increase their proprietary interest in the Company by
the grant to such persons of (a) options to purchase shares of
the Company's common stock and (b) Stock Appreciation Rights
related to the Options under the terms set forth herein. By
encouraging such persons to become owners of the Company, the
Company seeks to attract, motivate, reward and retain those
highly competent individuals upon whose judgment, initiative,
leadership and efforts the success of the Company depends. It
is intended that certain Options granted under this Plan will
qualify and that certain other Options will not qualify as
incentive stock options as defined in Section 422 of the
Internal Revenue Code of 1986, as amended, and the terms of the
Options shall be interpreted in accordance with their
designation in the Option Agreement.
Section 1.3 Effective Date and Term. The Plan was approved by
the Board of Directors of the Company on December 15, 1998, and
shall be effective March 25, 1999, subject to approval and
ratification by a majority of the shareholders of the Company,
present in person or by proxy, at the annual meeting of
shareholders of the Company to be held in 1999. The Plan shall
terminate upon the tenth (10th) anniversary of the Effective
Date.
ARTICLE II
DEFINITIONS
Section 2.1 Definitions. As used herein, the following terms
shall have the meaning set forth below, unless the context
clearly requires otherwise:
(a) "Bank" shall mean the Farmers National Bank.
(b) "Board" shall mean the Board of Directors of the Company.
(c) "Code" shall mean the Internal Revenue Code of 1986, as
amended, and any successor statutes.
(d) "Committee" shall mean the Compensation Committee of the
Board, or the Stock Option Plan Committee if one is appointed by
the Board to administer the Plan.
(e) "Company" shall mean Farmers National Banc Corp.
(f) "Director" shall mean a member of the Board of Directors of
the Company and, or the Bank.
(g) "Effective Date" with respect to the Plan shall mean the
date specified in Section 1.3 as the Effective Date.
(h) "Fair Market Value" with respect to a share of Stock shall
mean the Fair Market Value of the Stock as determined by the
Committee on the basis of such factors as they deem appropriate;
provided, however, that if at the time the determination of fair
market value is made, those shares are admitted to trading on a
national securities exchange for which sales prices are
regularly reported the fair market value of those shares shall
not be less than the mean of the high and low asked or closing
sales price reported for the Common Stock on that exchange on
the day or most recent trading day preceding the date on which
the Option is granted. For purposes of this Section 2.1(h), the
term "national securities exchange" shall include the National
Association of Securities Dealers Automated Quotation System and
the over-the-counter market.
(i) "ISO" shall mean any Option under this Plan which is to be
an incentive stock option under Code Sections 422.
(j) "NQSO" shall mean any Option granted under this Plan which
is not intended to qualify as an incentive stock option under
Code Section 422.
(k) "Option" shall mean a stock option, whether an ISO or NQSO,
granted pursuant to this Plan.
(l) "Optioned Stock" shall mean the Stock subject to an
Option or Stock Appreciation Right.
(m) "Optionee" or "Participant" shall mean a Director,
officer or employee of the Bank or the Company to whom an Option
has been granted.
(n) "Plan" shall mean the Farmers National Banc Corp. 1999 Stock
Option Plan, the terms of which are set forth herein.
(o) "SEC" shall mean the Securities and Exchange Commission.
(p) "Plan Year" shall mean the twelve-month period beginning on
the Effective Date, and each twelve-month period thereafter
beginning on the anniversary date of the Effective Date.
(q) "Stock" shall mean the Common Stock of the Company or, in
the event that the outstanding shares of Stock are changed into
or exchanged for shares of a different stock or securities of
the Company or some other entity, such other stock or securities.
(r) "SAR" or "Stock Appreciation Right" shall mean a right to
receive cash in an amount equal to the excess of the fair market
value of a share of Stock on the exercise date over the fair
market value of a share of Stock on the date the Stock
Appreciation Right is granted pursuant to the provisions of the
Plan.
(s) "Stock Option Agreement" shall mean the agreement between
the Company and the Optionee under which the Optionee may
purchase Stock pursuant to the terms of the Plan.
ARTICLE III
CHARACTERIZATION OF OPTIONS
Section 3.1 Characterization of Options. Options granted in
accordance with the terms hereof within the limits prescribed by
Article VII hereof and which are specified in the Option
Agreement as intended to be incentive stock options, are to be
incentive stock options as provided in Code Section 422. All
other Options granted hereunder shall be nonqualified options.
ARTICLE IV
ADMINISTRATION
Section 4.1 Administration.
(a) The Plan shall be administered by the Compensation Committee
of the Board or, alternatively at the discretion of the Board,
the Board may appoint a Stock Option Plan Committee consisting
of not less that two nor more than five members to administer
the Plan. All Committee members shall be disinterested
directors qualified to serve pursuant to Rule 16b-3 under
Section 16 of the Securities Exchange Act of 1934, as amended
and in effect from time to time.
(b) Subject to the express provisions of the Plan, the Committee
shall have sole discretion and authority to determine from time
to time the individuals to whom Options may be granted, the
terms of the Stock Option Agreement with the Optionee, including
but not limited to, the number of shares of Stock to be subject
to each Option, the period during which such Option may be
exercised and the price at which such Option may be exercised.
(c) Meetings of the Committee shall be held at such times and
places as shall be determined from time to time by the
Committee. A majority of the members of the Committee shall
constitute a quorum for the transaction of business and the vote
of a majority of those members present at any meeting shall
decide any question brought before the meeting. In addition, the
Committee may take any action otherwise proper under the Plan by
the affirmative vote, taken without a meeting, of a majority of
the members.
(d) No member of the Committee shall be liable for any act or
omission of any other member of the Committee or for any act or
omission on his own part, including, but not limited to, the
exercise of any power or discretion given to him under the Plan,
except those resulting from his own gross negligence or willful
misconduct. All questions of interpretations and application
with respect to the Plan or Options granted thereunder shall be
subject to the determination, which shall be final and binding,
of a majority of the whole Committee.
(e) In addition, the Committee shall have the sole discretion
and authority to determine whether an Option shall be an
Incentive Stock Option or a Non-qualified Stock Option, or both
types of options, provided that Incentive Stock Options may be
granted only to persons who are employees of the Company or the
Bank.
Section 4.2 Company Assistance. The Company and the Bank shall
supply full and timely information to the Committee on all
matters relating to eligible employees, their employment, death,
retirement, disability or other termination of employment and
such other pertinent facts as the Committee may require. The
Company and the Bank shall furnish the Committee with such
clerical and other assistance as is necessary in the performance
of its duties.
ARTICLE V
OPTIONEES
Section 5.1 Eligibility. Directors and officers of the Company
and the Bank and such other employees, consultants, or other
individuals as the Board of Directors may from time to time
designate shall be eligible to participate in the Plan. The
Committee may grant Options to any eligible individual subject
to the provisions of Section 6.1.
ARTICLE VI
SHARES SUBJECT TO PLAN
Section 6.1 Stock Available for Options. Subject to adjustment
pursuant to the provisions of Section 9.2 hereof, the number of
shares with respect to which Options may be granted during the
term of the Plan shall not exceed 375,000 shares of Company
Stock provided, however, that the number of shares which may be
designated as Incentive Stock Options shall be limited to
375,000, subject to adjustment in accordance with paragraph 9.2
hereof. Shares with respect to which Options may be granted may
be either authorized and unissued shares or shares issued and
thereafter acquired by the Company.
Section 6.2 Options Under the Plan. Shares of Stock with respect
to which an Option granted hereunder shall have been exercised
shall not again be available for grant hereunder. If Options
granted hereunder shall expire, terminate or be canceled for any
reason without being wholly exercised, new Options may be
granted hereunder covering the number of shares to which such
Option expiration, termination or cancellation relates.
Section 6.3 Adjustments in Authorized Shares. In the event of
any change in corporate capitalization, such as a stock split,
or a corporate transaction, such as any merger, consolidation,
separation, including a spin-off, or other distribution of stock
or property of the Company, any reorganization (whether or not
such reorganization comes within the definition of such term in
Code Section 368) or any partial or complete liquidation of the
Company, such adjustment shall be made in the number of Shares
which may be delivered under Section 6.1, as may be determined
to be appropriate and equitable by the Committee, in its sole
discretion, to prevent dilution or enlargement of rights;
provided, however, that the number of Shares subject to any
Option shall always be a whole number.
ARTICLE VII
OPTIONS
Section 7.1 Terms and Conditions of Options. Each Option shall
be evidenced by a Stock Option Agreement which shall contain
such terms and conditions consistent with the provisions of the
Plan as may be approved by the Committee and shall be signed by
an officer of the Company and the Optionee. The Stock Option
Agreement shall specify the Option Price, the duration of the
option, the number of shares to which the option pertains, and
such other provisions as the Committee shall determine. The
Stock Option Agreement shall specify whether the Option is
intended to be an ISO or a NQSO. Each Option granted under the
Plan shall be subject to such terms and conditions as follows:
(a) Terms of ISO's. ISO's granted hereunder shall be subject
to the terms and conditions contained in subparagraphs (i)-(v)
below of this Plan and to such other terms and conditions as the
Committee may deem appropriate contained in the Stock Option
Agreement with the Optionee; provided, however, that no Option
that is intended to qualify as an ISO shall be subject to any
condition that is inconsistent with the provisions of Code
Section 422(b). In the event that any condition imposed
hereunder on an Option intended to qualify as an ISO is at any
time determined by the Internal Revenue Service or a court of
competent jurisdiction to be inconsistent with Code Section 422,
then such Option shall be deemed to have been granted without
such conditions as may be applicable as if the invalid condition
had not been included.
(i) Option Period. Each Stock Option Agreement
shall specify the period during which the ISO thereunder is
exercisable (which shall not exceed ten years from the date of
grant) and shall provide that the ISO shall expire at the end of
such period.
(ii) Option Price. The Option Price per share shall be
determined by the Committee at the time any ISO is granted and
shall not be less than one hundred percent (100%) of the Fair
Market Value of a share of Stock on the day that the ISO is
granted. Such price shall be subject to adjustment as provided
in Section 9.2.
(iii) Ten Percent Stockholders. ISO's shall not
be granted to any person who, immediately before the ISO is granted,
owns stock possessing more than ten percent (10%) of the total
combined voting power of all classes of Stock of the Company;
provided, however, that this prohibition shall not apply if at
the time such ISO is granted the Option Price is at least one
hundred ten percent (110%) of the Fair Market Value of the stock
and such ISO is not exercisable after the expiration of five (5)
years from the date such ISO is granted.
(iv) Limit on Incentive Stock Options. To the extent the
aggregate Fair Market Value of the shares (valued at the time of
grant in accordance with subparagraph (ii) above) with respect
to which ISO's (determined without regard to this subparagraph
(iv) are exercisable for the first time by any individual during
any calendar year (under all stock option plans of the Company)
exceeds $100,000.00, such ISO's in excess of $100,000.00 shall
be treated as Options which are NQSO's. This subparagraph (iv)
shall be applied by taking ISO's into account in the order in
which they were granted.
(v) Period to Exercise Option. Any ISO granted
hereunder may, prior to its expiration or termination, be exercised
from time to time, in whole or in part, up to the total number of shares
with respect to which it shall have then become exercisable. An
ISO granted hereunder may become exercisable in installments as
determined by the Committee; provided, however, that if the
Committee grants an ISO or ISO's exercisable in more than one
installment, and if the employment of an Optionee holding such
ISO is terminated, the ISO shall be exercisable in accordance
with the terms of the Option Agreement only as to such number of
shares as to which the Participant had the right to exercise the
ISO on the date of termination of employment.
(b) Terms of NQSO's. NQSO's granted hereunder shall be subject
to the terms and conditions contained in subparagraphs (i)-(iii)
below and to such other terms and conditions as the Committee
may deem appropriate which shall be contained in the Stock
Option Agreement.
(i) Option Period. Each Stock Option Agreement shall
specify the period during which the Option thereunder is exercisable,
(which shall not exceed ten years from the date of grant) and
shall provide that the NQSO shall expire at the end of such
period.
(ii) Option Price. The Committee shall determine the
Option Price per Share at the time any NQSO is granted. Such price
shall be subject to adjustment as provided in Section 9.2.
(iii) Period to Exercise Option. Any NQSO granted
hereunder may, prior to its expiration or termination, be exercised
from time to time, in whole or in part, up to the total number of
Shares with respect to which it shall have then become
exercisable. A NQSO granted hereunder may become exercisable in
installments as determined by the Committee; provided, however,
that if the Committee grants an Option exercisable in more than
one installment, and if the employment of an Optionee holding
such Option is terminated, the Option shall be exercisable in
accordance with the terms of the Option Agreement only as to
such number of shares as to which the Optionee had the right to
exercise the Option on the date of termination of Employment.
Section 7.2 Option Exercise.
(a) The Company shall not be required to sell or issue shares
under any Option if the issuance of such shares shall constitute
or result in a violation by the Optionee or the Company of any
provisions of any law, statute or regulation of any governmental
authority. Specifically, in connection with the Securities Act
of 1933, (the "Act"), upon exercise of any Option, the Company
shall not be required to issue such shares unless the Committee
has received evidence satisfactory to it to the effect that
registration under the Act and applicable state securities laws
is not required, unless the offer and sale of securities under
the Plan is registered or qualified under the Act and applicable
state laws. Any determination in this connection by the
Committee shall be final, binding and conclusive. If shares are
issued under any Option without registrations under the Act or
applicable state securities laws, the Optionee may be required
to accept the shares subject to such restrictions on
transferability as may in the reasonable judgment of the
Committee be required to comply with exemptions from
registrations under such laws. The Company may, but shall in no
event be obligated to, register any securities covered hereby
pursuant to the Act of applicable state securities laws. The
Company shall not be obligated to take any other affirmative
action in order to cause the exercise of an Option or the
issuance of shares pursuant thereto to comply with any law or
regulation of any governmental authority.
(b) Subject to Section 7.2(c) and such terms and conditions as
may be determined by the Committee in its sole discretion upon
the grant of an Option, an Option may be exercised in whole or
in part and from time to time by delivering to the Company at
its principal office written notice of intent to exercise the
Option with respect to a specified number of shares. In the
case of an ISO, the aggregate Fair Market Value of the Stock
(under all plans of the Company), with respect to which such
options are exercisable for the first time by an Optionee during
any calendar year may not exceed $100,000.00. The aggregate fair
market value of the shares is determined at the date of grant.
(c) Options shall be exercisable according to the following
vesting schedule:
20% after one year from the date of grant
40% after two years from the date of grant
60% after three years from the date of grant
80% after four years from the date of grant
100% after five years from the date of grant
(d) Subject to such terms and conditions as may be determined
by the Committee in its sole discretion upon grant of any
Option, payment for the shares to be acquired pursuant to
exercise of the Option shall be made as follows:
1. by delivering to the Company at its principal office a
check payable to the order of the Company, in the amount
of the Option price for the number of shares of Stock with
respect to which the Option in then being exercised; or
2. by delivering to the Company at its principal office
certificates representing Stock, duly endorsed for transfer
to the Company, having an aggregate Fair Market Value as of
the date of exercise equal to the amount of the Option price,
for the number of shares of Stock with respect to which the
Option is then being exercised; or
3. by any combination of payments delivered pursuant to
paragraphs (d)(1) and (d)(2) above.
Section 7.3 Rights as Shareholder. An Optionee shall have no SAR
as a Shareholder with respect to any share subject to such
Option prior to the exercise of the Option and the purchase of
such shares.
Section 7.4 Termination of Employment. Each Participant's Stock
Option Agreement shall set forth the extent to which the
Participant shall have the right to exercise the Option
following the termination of the Participant's employment with
the Company. Such provisions shall be determined in the sole
discretion of the Committee, shall be included in the Stock
Option Agreement entered into with each Participant, need not be
uniform among all Options issued pursuant to this Article 6, and
may reflect distinctions based on the reasons for termination of
employment.
Section 7.5 Committee Discretion. Option Agreements need not
contain provisions identical to or similar to other Option
Agreements. The Committee may, in its discretion, vary among
Participants and among Options granted to the same Participant
any and all of the terms and conditions of Options granted under
the Plan, including the term during which and the amounts in
which and dates at or after which such Options may be exercised.
ARTICLE VIII
STOCK APPRECIATION RIGHTS
Section 8.1 Stock Appreciation Rights. The Committee may grant
Stock Appreciation Rights to individuals granted related Options
under the Plan. A SAR may be granted simultaneously with or
subsequent to the Option to which the right is related, but each
SAR must relate to a particular Option. In exchange for the
surrender in whole or in part of the related Option to purchase
shares of Common Stock, the exercise of a SAR shall entitle a
Participant to an amount equal to the appreciation in value of
the shares to which the related Option is being surrendered
pursuant to such exercise. Such appreciation in value shall be
equal to the excess of the Market Value of such shares. Upon
the exercise of a SAR, payment by the Company may be made in
cash and partly in share of Common Stock as determined by the
Committee. If payment is made in shares of Common Stock, such
shares shall be valued at their Market Value as of the date of
surrender of the Option.
Section 8.2 Terms and Conditions of Stock Appreciation Rights.
The grant of SARs shall be evidenced by written agreements
(which may also be Option Agreements) containing such terms and
conditions, consistent with the provisions of this Plan, as the
Committee shall from time to time determine. SARs shall be
exercisable in whole or in part in such amounts and at or after
such dates as may be specified in the agreement; provided,
however, that SARs may be exercised only when the related Option
could be exercised and only when the Market Value of the Common
Stock subject to the Option exceeds the Option Price. In no
event, however, shall any SAR be exercisable after the
expiration of ten years from the date of grant. The Committee
may in its discretion require a Participant to continue his
service with the Company and its Subsidiaries for a certain
length of time prior to the SARs becoming exercisable. Unless
otherwise provided in the written agreement, a SAR shall be
deemed outstanding until it either expires, is canceled by
mutual consent, or is exercised in full. As described above in
Section 7.5 with respect to Options, the Committee may also
vary, among the Participants and among SAR granted to the same
Participants, any and all of the terms and conditions of SAR
granted under the Plan. Neither SARs nor any related Option
issued to Directors and officers subject to Section 16 of the
Securities and Exchange Act of 1934 shall be exercisable during
the first six months of their respective terms.
ARTICLE IX
TERMINATION, AMENDMENT AND MODIFICATION OF PLAN
Section 9.1 Termination and Amendment. The Board may terminate
or suspend the Plan at any time, or may from time to time amend
the Plan as it deems proper and in the best interests of the
Company, provided that no such amendment may materially increase
either the benefits to Participants under the Plan or the number
of shares that may be issued under the Plan, materially modify
the eligibility requirements, reduce the Option Price (except
pursuant to adjustments under Section 9.2) or impair any
outstanding Option or SAR.
9.2 Adjustment of Options Upon the Occurrence of Certain Unusual
or Nonrecurring Events. The Committee may make adjustments in
the terms and conditions of, and the criteria included in,
Options in recognition of unusual or nonrecurring events
(including, without limitation, the events described in Section
6.3 hereof) affecting the Company or the financial statements of
the Company or of changes in applicable laws, regulations, or
accounting principles, whenever the Committee determines that
such adjustments are appropriate in order to prevent dilution or
enlargement of the benefits or potential benefits intended to be
made available under the Plan.
ARTICLE X
MISCELLANEOUS
Section 10.1 Transferability During the Grantee's Lifetime. Any
Option or Stock Appreciation SAR may be exercised only by the
Grantee or any guardian or legal representative of the Grantee,
and the Option shall not be transferable except, with respect to
both NQSOs and ISOs, in case of the death of the Grantee, by
will or the laws of descent and distribution, and with respect
to NQSO; (i) as specifically permitted by and solely to the
extent permitted in the Stock Option Agreement, or (ii) to an
immediate family member, a partnership consisting solely of
immediate family members or trusts for the benefit of immediate
family members.
Section 10.2 Designation of Beneficiary. A participant may file
a written designation of a beneficiary who is to receive any
stock and/or cash. Such designation of beneficiary may be
changed by the participant at any time by written notice to the
Treasurer of the Company. Upon the death of a participant and
upon receipt by the Company of proof of identity and existence
at the participant's death of a beneficiary validly designated
by him under the Plan, the Company shall deliver such stock
and/or cash to such beneficiary. In the event of the death of a
participant and in the absence of a beneficiary validly
designated under the Plan who is living at the time of such
participant's death, the Company shall deliver such stock and/or
cash to the executor or administrator of the estate of the
participant or if no such executor or administrator has been
appointed (to the knowledge of the Company), the Company, in its
discretion, may deliver such stock and/or cash to the spouse or
to any one or more dependents of the participant as the Company
may designate. No beneficiary shall, prior to the death of the
participant by whom he has been designated, acquire any interest
in the stock or cash credited to the participant under the Plan.
Section 10.3 Application of Funds. The proceeds received by the
Company from the sale of Stock pursuant to Options shall be used
for general corporate purposes.
Section 10.4 Tenure. Nothing in the Plan or in any Option or SAR
granted hereunder or in any Stock Option Agreement or SAR
Agreement relating thereto shall confer upon any Director, or
upon any officer or employee, the right to continue in such
position with the Company or the Bank.
Section 10.5 Other Compensation Plans. The adoption of the Plan
shall not affect any other stock option or incentive or other
compensation plans in effect for the Company or the Bank, nor
shall the Plan preclude the Company or the Bank from
establishing any other forms of incentive or other compensation
for Directors, officers or employees of the Company or the Bank.
Section 10.6 Tax Withholding. The Company shall have the power
and the right to deduct or withhold, or require a Participant to
remit to the Company, an amount sufficient to satisfy Federal,
state, and local taxes, domestic or foreign, required by law or
regulation to be withheld or deducted with respect to any
taxable event arising as a result of this Plan.
Section 10.7 Share Withholding. With respect to withholding
required upon the exercise of Options or SARs or upon any other
taxable event arising as a result of Awards granted hereunder,
Participants may elect, subject to the approval of the
Committee, to satisfy the withholding requirement, in whole or
in part, by having the Company withhold Shares having a Fair
Market Value on the date the tax is to be determined equal to
the minimum statutory total tax which could be imposed on the
transaction. All such elections shall be irrevocable, made in
writing, signed by the Participant, and shall be subject to any
restrictions or limitations that the Committee, in its sole
discretion, deems appropriate.
Section 10.8 Indemnification. Each person who is or shall have
been a member of the Committee, or of the Board, shall be
indemnified and held harmless by the Company against and from
any loss, cost, liability, or expense that may be imposed upon
or reasonably incurred by him or her in connection with or
resulting from any claim, action, suit, or proceeding to which
he or she may be a party or in which he or she may be involved
by reason of any actions taken or failure to act under the Plan
and against and from any and all amounts paid by him or her in
settlement thereof, with the Company's approval, or paid by him
or her in satisfaction of any judgment in any such action, suit,
or proceeding against him or her, provided he or she shall give
the Company an opportunity, at its own expense, to handle and
defend the same before he or she undertakes to handle and defend
it on his or her own behalf. The foregoing right of
indemnification shall not be exclusive of any other right of
indemnification to which such persons may be entitled under the
Company's Articles of Incorporation or Bylaws.
Section 10.9 Merger or Asset Sale. In the event of a merger of
the Company with or into another corporation, or the sale of
substantially all of the assets of the Company, each outstanding
Option and SAR will be assumed or an equivalent Option and SAR
substituted by the successor corporation or a Parent or
Subsidiary of the successor corporation (the "Successor
Corporation"), unless the Successor Corporation refuses to
assume or substitute for the Option and SAR, in which case the
Optionee shall have the right to exercise the Option and SAR as
to all of the Optioned Stock, including Shares as to which it
would not otherwise be exercisable. If an Option or SAR is
exercisable in lieu of assumption or substitution in the event
of a merger or sale of assets, the Committee shall notify the
Optionee that the Option shall be fully exercisable for a period
of thirty (30) days from the date of such notice, and the Option
shall terminate upon the expiration of such period. For the
purposes of this paragraph, the Option and SAR shall be
considered assumed if, following the merger or sale of assets,
the option and SAR confers the right to purchase or receive, for
each share of Optioned Stock subject to the Option or SAR
immediately prior to the merger or sale of assets, the
consideration (whether stock, cash, or other securities or
property) received in the merger or sale of assets by holders of
Common Stock for each Share held on the effective date of the
transaction (and if holders were offered a choice of
consideration, the type of consideration chosen by the holders
of a majority of the outstanding Shares); provided, however,
that if such consideration received in the merger or sale of
assets was not solely common stock of the Successor Corporation,
the Committee may, with the consent of the Successor
Corporation, provide for the consideration to be received upon
the exercise of the Option or SAR, for each Share of Optioned
Stock subject to the Option or SAR, to be solely common stock of
the Successor Corporation equal in fair market value to the per
share consideration received by holders of Common Stock in the
merger or sale of assets.
Section 10.10 Gender and Number. Except where otherwise
indicated by the context, any masculine term used herein also
shall include the feminine; the plural shall include the
singular and the singular shall include the plural.
Section 10.11 Severability. In the event any provision of the
Plan shall be held illegal or invalid for any reason, the
illegality or invalidity shall not affect the remaining parts of
the Plan, and the Plan shall be construed and enforced as if the
illegal or invalid provision had not been included.
Section 10.12 Requirements of the Law. The granting of awards
and the issuance of Shares under the Plan shall be subject to
all applicable laws, rules, and regulations, and to such
approvals by any governmental agencies or national securities
exchanges as may be required.
Section 10.13 Governing Law. To the extent not preempted by
Federal Law, the Plan, an all agreements hereunder, shall be
construed in accordance with and governed by the laws of the
State of Ohio.
BY ORDER OF THE BOARD OF DIRECTORS
FRANK L. PADEN, PRESIDENT & SECRETARY
