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 ss.240.14a-11(c)
or ss.240.14a-12
Rurban Financial Corp.
____________________________________________________________________________
(Name of Registrant as 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.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
_____________________________________________________________________
(2) Aggregate number of securities to which transaction applies:
_____________________________________________________________________
(3) 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):
_____________________________________________________________________
(4) Proposed maximum aggregate value of transaction:_____________________
(5) 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:__________________________________________________________
<PAGE>
RURBAN FINANCIAL CORP.
401 Clinton Street
Defiance, Ohio 43512
(419) 783-8950
_____________________________
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
_____________________________
Defiance, Ohio
March __, 1997
To the Shareholders of
Rurban Financial Corp.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of the Shareholders (the
"Annual Meeting") of Rurban Financial Corp. (the "Company") will be held at the
offices of The State Bank and Trust Company, 401 Clinton Street, Defiance, Ohio,
on Monday, April 28, 1997, at 7:00 p.m., local time, for the following purposes:
1. To elect three (3) directors to serve for terms of three (3) years
each.
2. To consider and vote upon a proposal to adopt amendments to the
Company's Amended Articles and Amended Regulations which would
eliminate cumulative voting in the election of directors.
3. To consider and vote upon a proposal to approve the adoption of the
Rurban Financial Corp. Stock Option Plan.
4. To transact such other business as may properly come before the Annual
Meeting and any adjournment(s) thereof.
Shareholders of record at the close of business on March 23, 1997, will be
entitled to receive notice of, and to vote at, the Annual Meeting and any
adjournment(s) thereof.
You are cordially invited to attend the Annual Meeting. The vote of each
shareholder is important, whatever the number of common shares held. Whether or
not you plan to attend the Annual Meeting, please sign, date and return your
proxy promptly in the enclosed envelope. If you attend the Annual Meeting, you
may revoke your proxy and vote in person. ATTENDANCE AT THE ANNUAL MEETING WILL
NOT, IN AND OF ITSELF, CONSTITUTE REVOCATION OF A PROXY.
By Order of the Board of Directors,
Thomas C. Williams, President and
Chief Executive Officer
<PAGE>
RURBAN FINANCIAL CORP.
401 Clinton Street
Defiance, Ohio 43512
(419) 783-8950
PROXY STATEMENT
This Proxy Statement and the accompanying proxy are being mailed to
shareholders of Rurban Financial Corp., an Ohio corporation (the "Company"), on
or about March __, 1997, in connection with the solicitation of proxies by the
Board of Directors of the Company for use at the Annual Meeting of Shareholders
of the Company (the "Annual Meeting") called to be held on Monday, April 28,
1997, or at any adjournment(s) thereof. The Annual Meeting will be held at 7:00
p.m., local time, at the offices of The State Bank and Trust Company, 401
Clinton Street, Defiance, Ohio.
The Company has six wholly-owned subsidiaries. They include: The State
Bank and Trust Company, Defiance, Ohio ("State Bank"); The Peoples Banking
Company, Findlay, Ohio ("Peoples Bank"); The First National Bank of Ottawa,
Ottawa, Ohio ("Ottawa"); The Citizens Savings Bank Company, Pemberville, Ohio
("Citizens"); Rurbanc Data Services, Inc., Defiance, Ohio ("Rurbanc"); and
Rurban Life Insurance Company, Defiance, Ohio ("Rurban Life"). In addition,
State Bank has received preliminary approval from the Office of the Comptroller
of the Currency to organize Reliance Financial Services, N.A., a
nationally-chartered trust and financial services company, which will be a
wholly-owned subsidiary of State Bank.
A proxy for use at the Annual Meeting accompanies this Proxy Statement and
is solicited by the Board of Directors of the Company. A shareholder of the
Company may use his proxy if he is unable to attend the Annual Meeting in person
or wishes to have his common shares voted by proxy even if he does attend the
Annual Meeting. Without affecting any vote previously taken, any shareholder
executing a proxy may revoke it at any time before it is voted by filing with
the Secretary of the Company, at the address of the Company set forth on the
cover page of this Proxy Statement, written notice of such revocation; by
executing a later-dated proxy which is received by the Company prior to the
Annual Meeting; or by attending the Annual Meeting and giving notice of such
revocation in person. Attendance at the Annual Meeting will not, in and of
itself, constitute revocation of a proxy.
Only shareholders of the Company of record at the close of business on
March 23, 1997 (the "Record Date") are entitled to receive notice of, and to
vote at, the Annual Meeting and any adjournment(s) thereof. At the close of
business on the Record Date, 2,287,851 common shares were outstanding and
entitled to vote. Each common share of the Company entitles the holder thereof
to one vote on each matter to be submitted to shareholders at the Annual
Meeting. A quorum for the Annual Meeting is a majority of the outstanding common
shares.
Common shares represented by signed proxies that are returned to the
Company will be counted toward the quorum in all matters even though they are
marked "Abstain," "Against" or "Withhold Authority" on one or more or all
matters or they are not marked at all. Broker/dealers who hold their customers'
common shares in street name may, under the applicable rules of the
self-regulatory organizations of which the broker/dealers are members, sign and
submit proxies for such common shares and may vote such common shares on routine
matters, which, under such rules, typically include the election of directors,
but broker/dealers may not vote such common shares on other matters, which
typically include amendments to the articles of incorporation of a corporation
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and the approval of certain stock compensation plans, without specific
instructions from the customer who owns such common shares. Proxies signed and
submitted by broker/dealers which have not been voted on certain matters as
described in the previous sentence are referred to as broker non-votes. Such
proxies count toward the establishment of a quorum. The effect of an abstention
or broker non-vote on the proposal to amend the Corporation's Amended Articles
(the "Amended Articles") and Amended Regulations (the "Amended Regulations") to
eliminate cumulative voting for directors and to approve the adoption of the
Rurban Financial Corp. Stock Option Plan (the "Stock Option Plan") is the same
as a "no" vote.
If written notice is given by any shareholder to the President, a Vice
President or the Secretary of the Company, not less than 48 hours before the
Annual Meeting, that the shareholder desires that the voting for the election of
directors be cumulative, and if an announcement of the giving of such notice is
made upon the convening of the Annual Meeting by the Chairman or Secretary or by
or on behalf of the shareholder giving such notice, each shareholder will have
the right to cumulate such voting power as he possesses in voting for directors.
If cumulative voting is invoked, each shareholder will have votes equal to the
number of directors to be elected, multiplied by the number of common shares
owned by him, and will be entitled to distribute his votes among the candidates
as he sees fit. Should any shareholder exercise his right to cause the vote on
the election of directors to be cumulative, the enclosed proxy would grant
discretionary authority to the proxies named therein to cumulate votes and to
distribute such votes to one or more candidates as they see fit.
The Company will bear the costs of preparing and mailing this Proxy
Statement, the accompanying proxy and any other related materials and all other
costs incurred in connection with the solicitation of proxies on behalf of the
Board of Directors. Proxies will be solicited by mail and may be further
solicited, for no additional compensation, by officers, directors or employees
of the Company and its subsidiaries by further mailing, by telephone or by
personal contact. The Company will also pay the standard charges and expenses of
brokerage houses, voting trustees, banks, associations and other custodians,
nominees and fiduciaries, who are record holders of common shares not
beneficially owned by them, for forwarding such materials to and obtaining
proxies from the beneficial owners of such common shares.
The Annual Report to the Shareholders of the Company for the fiscal year
ended December 31, 1996 (the "1996 fiscal year") is enclosed herewith.
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of the Record Date, certain information
concerning the beneficial ownership of common shares by the only person known by
the Company to beneficially own more than 5% of the outstanding common shares:
Name and Address of Amount and Nature of Percent of
Beneficial Owner Beneficial Ownership (1) Class (2)
------------------- ------------------------ ----------
Thomas E. Sheidler
P.O. Box 325
Ottawa, Ohio 45875 184,649(3) 8.07%
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(1) Unless otherwise noted, the beneficial owner has sole voting and investment
power with respect to all of the common shares reflected in the table. All
fractional common shares have been rounded to the nearest whole common
share.
(2) The percent of class is based upon 2,287,851 common shares outstanding on
the Record Date.
(3) Includes 9,928 common shares held by the wife of Mr. Sheidler and an
aggregate of 54,343 common shares held by a custodian for Mr. Sheidler's
two daughters. Mr. Sheidler has no voting or investment power with respect
to any of these common shares.
The following table sets forth, as of the Record Date, certain information
concerning the beneficial ownership of common shares by each director of the
Company, by each person nominated for election as a director of the Company, by
each of the executive officers named in the Summary Compensation Table and by
all current executive officers and directors of the Company as a group:
Name of Amount and Nature of Percent of
Beneficial Owner Beneficial Ownership (1) Class (2)
------------------ -------------------------- ------------
Richard C. Burrows 23,044(3) 1.0%
John R. Compo 15,739 (4)
John Fahl 26 (4)
Robert A. Fawcett, Jr. 1,226 (4)
Richard Z. Graham 2,665(5) (4)
Eric C. Hench 1,524(6) (4)
David E. Manz 10,907(7) (4)
John H. Moore 8,408(8) (4)
Steven D. VanDemark 241(9) (4)
J. Michael Walz, D.D.S. 2,414(10) (4)
Thomas C. Williams 630 (4)
All current executive officers
and directors as a group 74,784(11) 3.26%
(12 persons)
_________________
(1) See Note (1) to preceding table.
(2) See Note (2) to preceding table.
(3) Includes 17,463 common shares allocated to the account of Mr. Burrows in
the ESOP, as to which he exercises voting and investment power and 5,581
held in the Richard C. Burrows Trust with respect to which he has sole
voting and investment power. Does not include 3,124 common shares held in a
trust for the benefit of the wife of Mr. Burrows as to which she exercises
sole voting and investment power.
(4) Reflects ownership of less than 1% of the outstanding common shares of the
Company.
(5) Does not include 15,503 common shares held by the wife of Mr. Graham, as to
which she exercises sole voting and investment power.
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<PAGE>
(6) Includes 1,513 common shares held by the Eric C. Hench Agency Trust as to
which Mr. Hench has sole voting and investment power.
(7) Includes 10,907 common shares allocated to the account of Mr. Manz in the
ESOP, as to which he exercises voting and investment power. Does not
include 636 common shares held by the wife of Mr. Manz as to which she
exercises sole voting and investment power. On September 16, 1996, Mr. Manz
services as an officer and director with the Company and with each of the
subsidiaries of the Company with which he held a position as an officer
and/or director were terminated.
(8) Includes 6,959 common shares held jointly by Mr. Moore and his wife, as to
which he exercises shared voting and investment power.
(9) Includes 241 common shares held jointly by Mr. VanDemark and his wife, as
to which he exercises shared voting and investment power.
(10) Does not include 90 common shares held in an IRA for the benefit of the
wife of Dr. Walz, as to which she exercises sole voting and investment
power. Includes 241 common shares held jointly by Dr. Walz and his wife, as
to which Dr. Walz exercises shared voting and investment power, and 2,173
common shares held in the Krouse Evans Inc. Profit Sharing Plan, as to
which Dr. Walz exercises shared voting and investment power with the Trust
Department of State Bank.
(11) Includes common shares jointly held by executive officers and directors and
other persons. Also includes an aggregate of 36,290 common shares allocated
to the respective accounts of executive officers of the Company in the
ESOP. Does not include common shares held by wives and children of
executive officers and directors.
To the Company's knowledge, based solely on a review of the copies of the
reports furnished to the Company and written representations that no other
reports were required during the 1996 fiscal year, all filing requirements
applicable to officers, directors and owners of more than 10% of the outstanding
common shares of the Company under Section 16(a) of the Securities Exchange Act
in 1934, as amended (the "Exchange Act"), were complied with.
ELECTION OF DIRECTORS
In accordance with Article FIFTH of the Amended Articles and Section 2.02
of the Amended Regulations of the Company, three (3) directors are to be elected
for terms of three (3) years each and until their respective successors are
elected and qualified. John H. Moore, whose term as a director of the Company
expires this year, will not stand for reelection. Mr. Moore has provided the
Board of Directors a written statement that he will retire from the Board of
Directors effective April 25, 1997. Mr. Moore is retiring as a director of the
Company because he has reached the age of 70, and the Amended Regulations of the
Company provide that no person shall be eligible to be elected or reelected as a
director after such person has reached the age of 70. Due to Mr. Moore's
upcoming retirement, on March __, 1997, pursuant to the authority of Section
2.02(C) of the Amended Regulations, the Board of Directors of the Company
changed the number of directors of the Company from 10 to 9, to take effect
immediately upon the effective date of Mr.
Moore's retirement.
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<PAGE>
It is the intention of the persons named in the accompanying proxy to vote
the common shares represented by the proxies received pursuant to this
solicitation for the nominees named below who have been designated by the Board
of Directors, unless otherwise instructed on the proxy.
The following table gives certain information concerning each nominee for
election as a director of the Company. Unless otherwise indicated, each person
has held his principal occupation for more than five years.
<TABLE>
Director of
Position(s) Held with the the Company Nominee
Company and its Subsidiaries Continuously for Term
Nominee Age and Principal Occupation(s) Since Expiring in
___________________________________________________________________________________________
<S> <C> <C> <C>
Richard Z. Graham 67 Vice Chairman and Chief 1984 2000
Executive Officer of
Brown's Bakery, Inc., Defiance,
Ohio, a wholesale bakery; Chief
Executive Officer of Grandma
Emilie Brown, Inc., Defiance,
Ohio, a sales company for garlic
breads and rolls, founded in
1992.
J. Michael Walz, 53 General Dentist in 1992 2000
D.D.S. Defiance, Ohio; Director
of State Bank.
Thomas C. Williams 47 President and Chief 1995 2000
Executive Officer of the
Company since June, 1995;
President and Chief
Executive Officer of
State Bank, June 1995 to
August 1996; President of
FirstMerit Bank, FSB,
Clearwater, Florida, from 1994
to June, 1995; Senior Vice
President and Managing
Officer of the Northern
Region of The First National
Bank of Ohio, Cleveland,
Ohio, from 1990 to 1994;
Director of State Bank and
Chairman of Rurbanc.
</TABLE>
While it is contemplated that all nominees will stand for election, if one
or more of the nominees at the time of the Annual Meeting should be unavailable
or unable to serve as a candidate for election as a director of the Company, the
proxies reserve full discretion to vote the common shares represented by the
proxies for the election of the remaining nominees and any substitute nominee(s)
designated by the Board of Directors. The Board of Directors knows of no reason
why any of the above-mentioned persons will be unavailable or unable to serve if
elected to the Board. Under Ohio law and the Company's Regulations, the three
nominees receiving the greatest number of votes will be elected as directors.
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<PAGE>
The following table gives certain information concerning the current
directors whose terms will continue after the Annual Meeting. Unless otherwise
indicated, each person has held his principal occupation for more than five
years.
<TABLE>
Director of
Position(s) Held with the the Company Nominee
Company and its Subsidiaries Continuously for Term
Name Age and Principal Occupation(s) Since Expiring in
___________________________________________________________________________________________
<S> <C> <C> <C>
Richard C. Burrows 66 Vice Chairman of the Board 1983 1998
of the Company and of
State Bank from June, 1995
to April 1996; President
and Chief Executive
Officer of the Company and
of State Bank from 1985 to
June, 1995; Director of
Rurbanc and of Rurban
Life; Director of State Bank.
Eric C. Hench 43 President and Chief 1997 1998
Executive Officer of Sun
Management Services, Inc.,
holding company of Chief &
Rays Supermarkets, Inc.,
since 1988; Director of
Rurbanc Data Services;
Director of State Bank.
Steven D. VanDemark 44 General Manager of 1991 1998
Defiance Publishing
Company, Defiance, Ohio, a
newspaper publisher;
Chairman of the Board of
the Company since 1992;
Chairman of the Board and
a Director of State Bank.
John R. Compo 52 Chairman of Board and 1987 1999
President of Compo
Corporation, Defiance,
Ohio, an automotive parts
manufacturer; Director of
State Bank and of Rurban
Life.
John Fahl 60 President, Tire 1996 1999
Operations, since 1994,
Vice President from 1978 to
1994, and a Director, of
Cooper Tire & Rubber Company,
Findlay, Ohio, a tire and
rubber manufacturing company;
Director of Peoples Bank.
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<PAGE>
Director of
Position(s) Held with the the Company Nominee
Company and its Subsidiaries Continuously for Term
Name Age and Principal Occupation(s) Since Expiring in
___________________________________________________________________________________________
<S> <C> <C> <C>
Robert A. Fawcett, 55 Secretary since January 1, 1992 1999
Jr. 1996, Treasurer during
1995, and President during
1994, of Fawcett, Lammon,
Recker and Associates, Inc.,
Ottawa, Ohio, a general
insurance agency; President
of Fawcett Insurance Agency,
Inc., Ottawa, Ohio, a general
insurance agency, from 1979 to
1993; Director of Ottawa.
</TABLE>
There are no family relationships among any of the directors, nominees for
election as directors and executive officers of the Company.
The Board of Directors of the Company held a total of 12 meetings during
the Company's 1996 fiscal year. Each incumbent director attended 75% or more of
the aggregate of the total number of meetings held by the Board of Directors
during the period he served as a director and the total number of meetings held
by all committees of the Board of Directors on which he served during the period
he served.
The Board of Directors of the Company has an Audit Committee comprised of
Richard C. Burrows, John R. Compo, Richard Z. Graham and John H. Moore. The
function of the Audit Committee is to review the adequacy of the Company's
system of internal controls, to investigate the scope and adequacy of the work
of the Company's independent auditors and to recommend to the Board of Directors
a firm of accountants to serve as the Company's independent auditors. The Audit
Committee met three times during the l996 fiscal year.
The Board of Directors of the Company also has a Compensation Committee
comprised of John R. Compo, Robert A. Fawcett, Jr., Steven D. VanDemark and J.
Michael Walz, D.D.S. The function of the Compensation Committee is to review and
recommend to the Board of Directors of the Company the salaries, bonuses and
other cash compensation to be paid to, and the other benefits to be received by,
the employees of the Company, who currently include Steven D. VanDemark,
Chairman of the Board of Directors, Thomas C. Williams, President and Chief
Executive Officer, Robert W. Constien, Executive Vice President, Richard C.
Warrener, Senior Vice President and Chief Financial Officer and nine other
officers (who are not executive officers) of the Company. The Compensation
Committee met a total of 3 times during the l996 fiscal year. Although Mr.
Williams attended various meetings of the Compensation Committee at the request
of the members of that Committee during the 1996 fiscal year, he did not vote on
compensation matters brought before the Compensation Committee.
The Board of Directors does not have a standing nominating committee or a
committee performing similar functions.
TRANSACTIONS INVOLVING MANAGEMENT
During the Company's 1996 fiscal year, the Company's bank subsidiaries
including State Bank, Peoples Bank, Ottawa and Citizens entered into banking
transactions, in the ordinary course of their respective businesses, with
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certain executive officers and directors of the Company (including certain
executive officers of the Company's subsidiaries), members of their immediate
families and corporations or organizations with which they are affiliated. It is
expected that similar banking transactions will be entered into in the future.
Loans to such persons have been made on substantially the same terms, including
the interest rate charged and collateral required, as those prevailing at the
time for comparable transactions with persons not affiliated with the Company or
its subsidiaries. These loans have been, and are presently, subject to no more
than a normal risk of uncollectibility and present no other unfavorable
features. The amount of loans (aggregating $60,000 or more to any one party) to
directors and executive officers of the Company (including certain executive
officers of the Company's subsidiaries) and their associates as a group at
December 31, 1996, was $1,923,359. As of the date hereof, all of such loans were
performing loans.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Steven D. VanDemark, who is Chairman of the Board of the Company, is a
member of the Compensation Committee of the Company's Board of Directors.
Thomas C. Williams is the only current executive officer of the Company
who received compensation from the Company for services rendered during the 1996
fiscal year as an executive officer of the Company. David E. Manz, who served as
Executive Vice President, Chief Financial Officer, Secretary and Treasurer of
the Company, and in various other positions as an officer and/or director of the
Company and certain of the Company's subsidiaries, also received compensation
from the Company during the 1996 fiscal year. On September 16, 1996, Mr. Manz's
services as an officer and director with the Company and with each of the
subsidiaries of the Company with which he held a position as an officer and/or
director were terminated. On March 12, 1996, Mr. Robert W. Constien was elected
Executive Vice President of the Company. Mr. Constien, who previously served as
the Senior Vice President of the Company, was paid by State Bank for services
rendered in his capacity as an executive officer of the Company and as an
executive officer of State Bank during fiscal year 1996. Mr. Constien
participates in the various compensation plans of the Company addressed below,
but was not and is not eligible to participate in any of the compensation plans
of State Bank. Mr. Richard C. Warrener, Senior Vice President and Chief
Financial Officer of the Company was hired as an executive officer of the
Company on December 31, 1996.
REPORT ON EXECUTIVE COMPENSATION
NOTWITHSTANDING ANYTHING TO THE CONTRARY SET FORTH IN ANY OF THE COMPANY'S
PREVIOUS FILINGS UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE EXCHANGE
ACT, THAT MIGHT INCORPORATE FUTURE FILINGS, INCLUDING THIS PROXY STATEMENT, IN
WHOLE OR IN PART, THIS REPORT AND THE PERFORMANCE GRAPH SET FORTH ON PAGES __
AND __ SHALL NOT BE INCORPORATED BY REFERENCE INTO ANY SUCH FILINGS.
The Compensation Committee of the Company's Board of Directors is
comprised of three outside directors and Steven D. VanDemark, Chairman of the
Board of the Company. The Compensation Committee reviews and recommends to the
full Board the salaries, bonuses and other cash compensation to be paid to, and
the other benefits to be received by, the employees of the Company. During 1996
no compensation decisions by the Compensation Committee were modified or
rejected in any material way by the full Board. Although Thomas C. Williams
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<PAGE>
attended various meetings of the Compensation Committee at the request of the
members of that Committee during the 1996 fiscal year, he did not vote on
compensation matters brought before the Compensation Committee.
Thomas C. Williams and David E. Manz were the only executive officers of
the Company who received compensation from the Company for services rendered as
executive officers of the Company during the 1996 fiscal year. Prior to 1996,
Mr. Williams and Mr. Manz received their salaries with respect to services
rendered as officers of the Company and of State Bank from State Bank. Beginning
with the 1996 fiscal year, all of Mr. Williams' and Mr. Manz's compensation was
paid by the Company.
Compensation Policies Toward Executive Officers
In determining the compensation of the employees of the Company, the
Compensation Committee has sought to create a compensation program that links
compensation to financial performance, rewards above-average corporate
performance and recognizes individual contributions and achievements. There are
two components of the annual cash compensation program for the employees of the
Company: (1) a base salary component; and (2) an incentive bonus component
payable under the Rurban Financial Corp. Bonus Plan (the "Company Bonus Plan")
which directly links the bonus to be paid to the financial performance of the
Company.
Salaries
The Compensation Committee of the Company's Board of Directors determines
the base salaries to be paid to the employees of the Company based upon an
overall evaluation of a number of factors, including a subjective evaluation of
individual performance, contributions to the Company and its subsidiaries,
experience and an analysis of how the Company's compensation of its employees
compares to compensation of individuals holding comparable positions with bank
holding companies of similar asset size (between $300 million and $500 million).
This comparative group is not the same group of bank holding companies as the
bank holding companies included in the "NASDAQ Bank Stock" index within the
Performance Graph since not all of the bank holding companies of comparable
asset size to the Company have their shares traded on NASDAQ. None of the
above-described factors are assigned a specific weighting when consideration is
given to the setting of the salaries of the employees of the Company.
The salary paid to Mr. Williams for services rendered in his capacities as
President and Chief Executive Officer of the Company during the 1996 fiscal year
was approved by the Compensation Committee on August 26, 1996, and represented,
on an annualized basis, no increase over the salary paid to Mr. Williams with
respect to the 1995 fiscal year. However, Mr. Williams' bonus for fiscal year
1996 was increased to $50,000, as discussed below under the section "REPORT ON
EXECUTIVE COMPENSATION--Bonus Plans". Mr. Williams' salary and bonus were
determined based upon a subjective evaluation of his individual performance, his
contributions to the Company and its subsidiaries, his experience and an
analysis of how the Company's compensation of Mr. William's compared to
compensation of individuals holding comparable positions with bank holding
companies of similar asset size, the Company's results of operations compared to
other bank holding companies of similar size and the fact that the Company made
its budget for the 1996 fiscal year. None of the foregoing factors was assigned
a specific weighting when consideration was given to the setting of Mr.
Williams' salary.
The salary paid to Mr. Manz for services rendered in his capacities as
Executive Vice President, Chief Financial Officer, Secretary and Treasurer of
the Company and Executive Vice President of State Bank during the 1996 fiscal
year was approved by the Compensation Committee on December 11, 1995, and
represented a 37.4% increase over the salary paid to Mr. Manz with respect to
the 1995 fiscal year. Mr. Manz's salary was determined based upon a subjective
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evaluation of his performance, his contributions to the Company and its
subsidiaries, his experience and an analysis of how the Company's compensation
of Mr. Manz compared to compensation of individuals holding comparable positions
with bank holding companies of similar asset size and the Company's results of
operations compared to other bank holding companies of similar size. None of the
foregoing factors was assigned a specific weighting when consideration was given
to the setting of Mr. Manz's salary.
Bonus Plans
The Company Bonus Plan has two options for determining the amount payable
thereunder and the Company will pay bonuses pursuant to the option which results
in the greater amount of bonuses. If the Company makes its budget for a fiscal
year, a bonus in the amount of $50,000 is available to be paid to the Chief
Executive Officer and a bonus in the amount of $35,000 is available to be paid
to the Executive Vice President (at the end of fiscal year 1996, the Company did
not have an Executive Vice President). In addition, bonuses in an aggregate
amount of up to $120,000 may be paid to the remaining employees of the Company
with the amount, if any, of each bonus determined by the Chief Executive Officer
of the Company in his sole discretion. Alternatively, if the Company has a
return on average assets ("ROAA") greater than the average ROAA of all U.S. bank
holding companies of similar asset size ($300 million to $500 million), based on
the ROAA of such bank holding companies published in the Federal Reserve Bank
Holding Company Performance Report, 30% of the amount by which the Company's
ROAA exceeds that of these peer bank holding companies will be paid out in the
following manner: (1) the Chief Executive Officer and the Executive Vice
President of the Company will receive 50% and 35%, respectively, of the amount
available for bonuses, subject to a limit of 75% of their respective base
salaries; and (2) bonuses in an aggregate amount of up to 15% of the amount
available for bonuses may be paid to the remaining employees of the Company with
the amount, if any, of each bonus to be determined by the Chief Executive
Officer of the Company in his sole discretion. The time period over which the
determination is made of the amount, if any, of bonuses to be paid is the fiscal
year of the Company. The determination of the amounts of bonuses to be paid and
the payment of such bonuses is made during the first quarter of the next fiscal
year. Mr. Williams was paid a bonus in the amount of $50,000 under the Company
Bonus Plan with respect to the 1996 fiscal year because the Company made its
budget for the 1996 fiscal year. Because Mr. Manz's positions with the Company
and its subsidiaries were terminated on September 16, 1996, he did not receive a
bonus under the Company Bonus Plan with respect to the 1996 fiscal year.
Additional Compensation Plans
To enhance the long-term commitment of the officers and employees of the
Company and its subsidiaries, the Company adopted the ESOP in 1985, and The
Rurban Financial Corp. Savings Plan and Trust (the "Savings Plan") in 1988. Mr.
Williams, as well as all officers and employees of the Company and its
subsidiaries who meet applicable eligibility criteria, may participate in the
ESOP and the Savings Plan.
Each year, the Company and each of its subsidiaries may contribute an
amount in cash and/or common shares of the Company to the ESOP which does not
exceed the amount of the annual net profits of the corporation making the
contribution. Pro rata allocations of amounts contributed by the Company or one
of its subsidiaries are made to the accounts of the participants in the ESOP.
The Company and its subsidiaries contributed an aggregate amount of $431,000 to
the ESOP with respect to the 1996 fiscal year. As of the date of this Proxy
Statement, no determination has been made as to the amount to be allocated to
the account of Mr. Williams under the ESOP with respect to the 1996 fiscal year.
No ESOP allocation will be made to the account of Mr. Manz for fiscal year 1996,
as he was not employed by the Company on December 31, 1996.
-10-
<PAGE>
Three types of contributions are contemplated under the Savings Plan: (1)
pre-tax elective deferral contributions by each participant in the Savings Plan
of a percentage of his or her annual compensation; (2) matching contributions
made by the Company or the corporation employing the Savings Plan participant in
cash in an amount determined by the Board of Directors of the Company; and (3)
qualified rollover contributions by a Savings Plan participant from other
qualified plans. The Board of Directors of the Company determined that for 1996,
the amount of the matching contributions to be made on behalf of each
participant in the Savings Plan would be 50% of the amount of such participant's
pre-tax elective deferral contributions, but only upon that portion of his or
her pre-tax elective deferral contributions which did not exceed 6% of his or
her annual compensation. Matching contributions in the amount of $2,278 and
$3,298 were made on behalf of Mr. Williams and Mr. Manz, respectively, to match
their respective 1996 pre-tax elective deferral contributions made to the
Savings Plan. Mr. Williams was not eligible to participate in the Savings Plan
until July of 1996.
Submitted by the Compensation Committee of the Company's Board of Directors:
JOHN R. COMPO, ROBERT A. FAWCETT, JR., STEVEN D. VANDEMARK
AND J. MICHAEL WALZ, D.D.S.
COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS
Summary of Cash and Certain Other Compensation
The following table shows, for the last three years, the cash compensation
paid by the Company and its subsidiaries, as well as certain other compensation
paid or earned for those years, to Thomas C. Williams, the Company's Chief
Executive Officer and David E. Manz, the former Executive Vice President, Chief
Financial Officer, Secretary and Treasurer of the Company. None of the other
executive officers of the Company or its subsidiaries were paid salary and bonus
for the 1996 fiscal year in an amount which exceeded $100,000.
<TABLE>
SUMMARY COMPENSATION TABLE
Name and All Other
Principal Position Year Salary($)(1) Bonus($) Compensation($)(2)
- ------------------ ------ ------------ ---------- ------------------
<S> <C> <C> <C> <C>
Thomas C. Williams, 1996 $141,400 $ 40,500 $ 15,232(3)
President and Chief 1995 $ 67,300 $ 25,000 $ 242(3)
Executive Officer of 1994 -- -- --
the Company(4)
-11-
<PAGE>
Name and All Other
Principal Position Year Salary($)(1) Bonus($) Compensation($)(2)
- ------------------ ------ ------------ ---------- ------------------
David E. Manz, Former 1996 $103,505 $ 20,000 $ 7,656(5)
Executive Vice 1995 $ 75,000 $ 23,062 $ 15,131(5)
President, Chief 1994 $ 69,900 $ 44,750 $ 22,601(5)
Financial Officer,
Secretary and
Treasurer of the
Company and former
Executive Vice
President of State
Bank (6)
</TABLE>
- --------------------
(1) "Salary" includes (a) for Mr. Williams, fees received during 1996 and 1995
as a director of the Company and its subsidiaries in the amounts of $16,400
and $2,400, respectively, and (b) for Mr. Manz fees received during 1996,
1995 and 1994 as a director of the Company and its subsidiaries in the
amount of $7,350, $5,000 and $4,900, respectively.
(2) All numbers shown for "All Other Compensation" have been rounded to the
nearest whole dollar.
(3) "All Other Compensation" for fiscal years 1996 and 1995 includes: (i) a
contribution of $2,278 to the Savings Plan on behalf of Mr. Williams to
match 1996 pre-tax elective deferral contributions (included under
"Salary") made by him to the Savings Plan, (ii) a payment of $12,346 during
fiscal year 1996 representing the grossed-up premium for a life insurance
policy which Mr. Williams personally owns and (iii) $608 and $242 received
by Mr. Williams from the Company during fiscal year 1996 and fiscal year
1995, respectively, as an automobile allowance. The amount to be allocated
to the account of Mr. Williams under the ESOP with respect to fiscal year
1996 has not been determined as of the date of this Proxy Statement. Mr.
Williams was not eligible to participate in either the Savings Plan or the
ESOP during the 1995 fiscal year.
(4) Mr. Williams became President and Chief Executive Officer of the Company on
June 12, 1995.
(5) "All Other Compensation" for 1996, 1995 and 1994 includes contributions of
$3,298, $2,918 and $3,387, respectively, to the Savings Plan on behalf of
Mr. Manz to match 1996, 1995 and 1994 pre-tax elective deferral
contributions (included under "Salary") made by him to the Savings Plan and
the amount of $80, $50 and $90 which represents the premiums which were
paid on behalf of Mr. Manz in 1996, 1995 and 1994, respectively, under a
life insurance policy which had a death benefit payable thereunder equal to
approximately two times Mr. Manz's annual salary less $50,000. The amounts
allocated to the account of Mr. Manz under the ESOP for 1995 and 1994 were
$7,782 and $9,540, respectively. No ESOP allocation will be made to the
account of Mr. Manz for fiscal year 1996, as he was not employed by the
Company on December 31, 1996.
(6) On September 16, 1996, Mr. Manz's services as an officer and director with
the Company and with each of the subsidiaries of the Company with which he
held a position as an officer and/or director were terminated.
-12-
<PAGE>
Salary Continuation Agreements
The Company entered into an Executive Salary Continuation Agreement
(the "Williams Agreement") with Thomas C. Williams, President and Chief
Executive Officer of the Company, on October 11, 1995. Under the Williams
Agreement, if Mr. Williams remains in the continuous employment of the Company
until the first December 31st after his 65th birthday (unless by action of the
Board of Directors of the Company, his period of active employment with the
Company for purposes of the Williams Agreement is shortened or extended), he is
to retire as of that date. Upon such retirement, Mr. Williams (and, upon his
death, his designated beneficiary) will be entitled to receive an annual benefit
equal to 15% of his annual base salary as in effect immediately prior to his
retirement in equal monthly installments (of 1/12th of the annual benefit) for a
period of 180 months. If Mr. Williams dies while actively employed by the
Company prior to his retirement, the Company will pay an annual benefit equal to
15% of his annual base salary as in effect immediately prior to his death in
equal monthly installments (of 1/12th of the annual benefit) for a period of 180
months to his designated beneficiary. In the event that Mr. Williams' employment
is terminated as a result of his voluntary action, the Williams Agreement will
terminate immediately on the date of such termination of employment and the
Company will pay to Mr. Williams as severance compensation monthly for fifteen
years an amount of money on an annual basis equal to: (a) 5% of Mr. Williams'
annual base salary as in effect immediately prior to the date of his termination
of employment, if, at the termination date, Mr. Williams is between age 55 and
60; (b) 10% of such annual base salary if, at the termination date, Mr. Williams
is between age 60 and 65; and (c) 15% of such annual base salary if (i) at the
termination date, Mr. Williams is age 65 or over; (ii) such termination of
employment occurs after there has been a change in control of the ownership of
the Company; or (iii) such termination of employment occurs after the Company
merges or consolidates with another company or organization, permits its
business activities to be taken over by another organization, ceases its
business activities or terminates its existence. If the Company discharges Mr.
Williams for cause, no compensation will be payable to him under the terms of
the Williams Agreement. Mr. Williams will not receive any benefits under the
Williams Agreement if he engages in any activity that directly or indirectly
competes with the Company's interest, within 25 miles of any office of the
Company and its subsidiaries existing at the time of his retirement or
termination of employment. The payment of the benefits contemplated by the
Williams Agreement will be accelerated if, after Mr. Williams' retirement, the
leverage capital ratio and/or the risk-based capital ratio of the Company fall
below the minimum ratios established by the Company's regulatory authority for
well-capitalized bank holding companies and/or the Company fails to have net
income in any two successive fiscal years.
Directors' Compensation
During the 1996 fiscal year, each director of the Company who served the
entire year received an annual retainer of $6,000 and each director who served
for less than the full year received $500 for each meeting of the Board of
Directors attended. For fiscal year 1997, each director of the Company who
serves the entire year will receive an annual retainer of $9,000 and each
director who serves for less than the full year will receive $750 for each
meeting of the Board of Directors attended.
Mr. Steven D. VanDemark, who serves as the Chairman of Board of Directors
of the Company and State Bank, received $12,000 during the 1996 fiscal year for
his services as Chairman of the Board of Directors of State Bank. Mr. VanDemark
was not compensated for his services as Chairman of the Board of the Company in
1996. During the 1997 fiscal year, Mr. VanDemark will receive $12,000 for his
services as Chairman of the Board of the Company. He will not receive
compensation for his services as Chairman of the Board of State Bank.
-13-
<PAGE>
Adoption of the Rurban Financial Corp. Plan to Allow Directors to Elect to
Defer Compensation
On March 12, 1997, the Board of Directors of the Company adopted the
Rurban Financial Corp. Plan to Allow Directors to Elect to Defer Compensation
(the "Plan"). The purpose of the Plan is to advance the interests of the Company
and its shareholders by allowing the directors of the Company and the directors
of any of the Company's subsidiaries an opportunity to elect to defer payment of
all or a portion of their compensation received for their services as directors.
The annual directors' fees to be received by the directors of the Company and
the directors of the Company's subsidiaries will not be increased as a result of
the adoption of the Plan.
The Plan is administered by the Board of Directors of the Company. Subject
to the express provisions of the Plan, the Board has sole discretion and
authority to determine from time to time the individuals eligible to participate
in the Plan.
Each director of the Company and its subsidiaries is eligible to
participate in the Plan by electing to defer the receipt of all or a portion of
the compensation to be received by such director or otherwise payable to him
during any calendar year. At the time that a director first elects to defer
compensation, the Company will establish an account ("Account") in such
director's name and all deferred compensation will be credited to such
director's Account. At the end of each calendar year, the account of the
director shall be allocated an amount of interest equal to the rate determined
by the Board of Directors for such year, in its discretion, multiplied by the
weighted average of such director's Account balance during such year, and such
amount of interest shall then be credited to the director's Account.
In the event that a director's service to the Company or any subsidiary of
the Company, as the case may be, is terminated for any reason, such director
will be entitled to receive a distribution (a "Distribution") from the Company
for the amount then credited to such director's Account. A Distribution to a
director for the amount credited to such director's Account may be made in cash
either in a lump sum or in approximately equal annual installments over a period
of ten years. Each director will be allowed to suggest his preferred method of
Distribution; however, the Board shall have the ultimate discretion in
determining the actual method of Distribution. Directors who receive a
Distribution from the Plan in installment payments, shall, each year, earn
interest on any undistributed amounts credited to such director's Account as of
the last day of each calendar year at a rate equal to the prime rate offered by
the Company on the first day of that year.
Any Distribution received by a director under the Plan will be treated as
ordinary income for federal income tax purposes at the time that such director
receives the Distribution.
The Board of Directors may amend or terminate the Plan at any time,
without the consent of any director of the Company or any director of any of the
Company's subsidiaries.
-14-
<PAGE>
PERFORMANCE GRAPH
Set forth on the following page is a line graph comparing the yearly
percentage change in the Company's cumulative total shareholder return on its
common shares with an index for the NASDAQ Stock Market (U.S. Companies)
comprised of all domestic common shares traded on the NASDAQ National Market
System and the NASDAQ Small-Cap Market and an index for NASDAQ Bank Stocks
comprised of all depository institutions (SIC Code #602) and holding and other
investment companies (SIC Code #671) that are traded on the NASDAQ National
Market System and the NASDAQ Small-Cap Market ("NASDAQ Bank Stocks"), for the
five-year period ended December 31, 1996.
Performance graph is omitted. It is represented by the following table:
Comparison of Five-Year Cumulative Total Return
Rurban Financial Corp., NASDAQ Bank Stocks, and NASDAQ Stock Market
(U.S. Companies)
1991 1992 1993 1994 1995 1996
------ ------ ------ ------ ------ ------
Rurban Financial Corp. $100 $122.05 $156.61 $225.88 $287.80 $304.32
NASDAQ Bank Stocks $100 145.55 165.99 165.39 246.32 325.60
NASDAQ Stock Market $100 116.38 133.60 130.59 184.67 227.16
(U.S. Companies)
___________________
Return based on $100 invested on December 31, 1991 and the reinvestment of
dividends.
Return includes the 5% stock dividend paid on January 31, 1997; All market
values used in determining the return have been restated for stock splits and
stock dividends.
-15-
<PAGE>
[This page is intentionally left blank.]
-16-
<PAGE>
PROPOSED AMENDMENT OF
AMENDED ARTICLES AND AMENDED REGULATIONS
TO ELIMINATE CUMULATIVE VOTING IN THE
ELECTION OF DIRECTORS
(Item 2 on Proxy)
Introduction
The Board of Directors is requesting, and unanimously recommends, that the
shareholders approve certain amendments to the Amended Articles and the Amended
Regulations of the Company that would eliminate cumulative voting in the
election of directors. The text of the proposed amendments to the Amended
Articles and the Amended Regulations to eliminate cumulative voting in the
election of directors is set forth in the resolutions attached to this Proxy
Statement as Exhibit A. Adoption of the proposal to eliminate cumulative voting
may involve disadvantages to the shareholders by making it more difficult for a
minority shareholder to elect a person as a director of the Company.
Shareholders are urged to read carefully the following descriptions of the
proposed amendments.
The amendments are permitted under Ohio law. This proposal is not in
response to any effort of which the Board of Directors is aware by a shareholder
or group of shareholders to gain representation for their specific interests on
the Board of Directors or to accumulate common shares or to secure control of
the Company.
Existing Provisions in the Amended Articles and the Amended Regulations
The proposed amendments to the Amended Articles and the Amended
Regulations to eliminate cumulative voting in the election of directors may have
certain anti-takeover effects discussed below. In addition, the Amended Articles
and the Amended Regulations of the Company presently contain several other
provisions which may be deemed to have certain anti-takeover effects. These
include (a) the classification of the Board of Directors of the Company into
three classes of directors so that each director serves for three years, with
one class being elected each year; (b) the requirement that shareholder
nominations for election to the Board of Directors be in writing and delivered
or mailed to the Secretary of the Company within the timeframes specified in the
Company's Regulations; (c) the requirement of the affirmative vote of not less
than 80% of the voting power of the Company entitled to vote thereon, unless
recommended by at least 2/3 of the whole authorized number of directors of the
Company, in order to (i) adopt new or amended articles or regulations, (ii)
approve certain mergers, certain consolidations, certain share issuances and
certain asset sales, leases or exchanges, (iii) approve the dissolution of the
Company and (iv) fix or change the number of directors by action of the
shareholders; (d) the requirement of the affirmative vote of at least 4/5 of the
outstanding common shares entitled to vote thereon, in addition to any other
vote required by law or the Amended Articles of the Company, as a condition of
specified Business Combinations (as defined in Article TENTH of the Amended
Articles), except in cases in which certain price criteria and procedural
requirements are satisfied; (e) the requirement of the affirmative vote of at
least 2/3 of the whole authorized number of directors of the Company in order to
fix or change the number of directors or to fill a vacancy in the directors by
action of the directors; (f) the requirement of the affirmative vote of at least
4/5 of the outstanding voting power of the Company to fill a vacancy in the
directors by action of the shareholders; (g) the requirement that holders of
shares entitling them to exercise not less than 80% of the voting power of the
Company vote in favor of the removal of a director from office; and (h) the
requirement of the written consent of all of the shareholders in order to amend
the Amended Regulations by an action in writing without a meeting. In addition
to these specific provisions of the Amended Articles and Amended Regulations,
the Company, in 1985, adopted the ESOP. Other than the proposals set forth in
this Proxy Statement, the Board of Directors has no present intention of
soliciting a shareholder vote on any other proposal which may be viewed as
having an anti-takeover effect.
-17-
<PAGE>
Elimination of Cumulative Voting
Prior to July 24, 1986, Ohio law required cumulative voting in the
election of directors if requested by a shareholder. In cumulative voting, the
number of votes given a shareholder in the election of directors equals the
number of common shares held by such shareholder times the number of directors
to be elected. A shareholder, in his sole discretion, may cast all votes for a
single director or distribute them among the nominees. With cumulative voting,
it is possible for holders of a minority of shares to elect one or more board
members, even though the holders of a majority of shares opposes their election.
To elect these directors, the minority shareholders would cumulate their votes
and cast them for a select number of directors (fewer than the total number of
directors to be elected).
Ohio Revised Code Section 1701.69 requires that the Company state to the
shareholders that the elimination of cumulative voting will do both of the
following: (A) PERMIT A MAJORITY OF THE VOTING POWER OF THE COMPANY IN THE
ELECTION OR REMOVAL OF DIRECTORS TO ELECT OR REMOVE EVERY DIRECTOR AND (B) TO
PRECLUDE A MINORITY OF THE VOTING POWER OF THE COMPANY IN THE ELECTION OR
REMOVAL OF DIRECTORS FROM ELECTING OR PREVENTING THE REMOVAL OF ANY DIRECTOR.
While this statement is accurate with respect to the effect of the Company
eliminating cumulative voting in the election of directors, it is not completely
accurate with respect to the removal of one or more of the Company's directors.
This is because Section 2.04 of the Company's Amended Regulations currently
provides that one or more directors can only be removed from office by the
affirmative vote of the holders of at least 80% of the voting power of the
Company. Thus, regardless of whether the proposal to eliminate cumulative voting
in the election of directors is adopted by the shareholders, any one or more of
the Company's directors may only be removed from office by the affirmative vote
of the holders of at least 80% of the voting power of the Company.
Other possible disadvantages to the shareholders resulting from the
elimination of cumulative voting could include, but would not be limited to, the
following: (a) shareholders may not be able to receive a premium price for their
common shares based upon the voting power which those common shares represent to
a prospective purchaser or to benefit from temporary market fluctuations
reflecting common share acquisitions by persons attempting to acquire control
through market purchases; and (b) the accomplishment of a business combination
or election of a "minority director" may be rendered more difficult even though
certain of the shareholders may believe such events to be desirable and
beneficial.
Ohio law was amended in 1986 to permit the articles of an Ohio corporation
to be amended by its shareholders to eliminate cumulative voting in the election
of directors.
Recommendation and Vote
The Board of Directors recommends that the shareholders adopt the
amendment to the Amended Articles of the Company to eliminate cumulative voting
in the election of directors and the related amendments to the Amended
Regulations (a) to delete in its entirety Section 1.10 of Article ONE, which
Section deals with cumulative voting; and (b) to delete the reference in Section
2.04 of Article TWO to cumulative voting. The proposed resolutions which the
Board of Directors recommends that the shareholders adopt are attached as
Exhibit A to this Proxy Statement.
-18-
<PAGE>
The Board of Directors does not consider cumulative voting to be in the
best interests of the Company or its shareholders. For a board of directors to
work effectively for all of the shareholders, each director should feel a
responsibility to the shareholders as a whole and not to any special group of
minority shareholders. Cumulative voting could result in a relatively small
number of shares being responsible for the election of one or more directors
whose loyalty could be primarily directed to the interests of the minority group
responsible for such election, rather than to the Company and all its
shareholders.
In order for the Company's corporate records to be consistent, the
proposal recommended by the Board of Directors also amends the Amended
Regulations (a) by deleting in its entirety Section 1.10 of Article ONE, which
Section deals with cumulative voting; and (b) by deleting the reference in
Section 2.04 of Article TWO to cumulative voting. Section 1.10 of Article ONE of
the Amended Regulations deals with cumulative voting rights in the election of
directors. Section 2.04 of Article TWO of the Amended Regulations deals
generally with the removal of directors and includes a reference to cumulative
voting. If the Amended Articles are amended to eliminate cumulative voting in
the election of directors, the reference in Section 2.04 of Article TWO of the
Amended Regulations to cumulative voting and Section 1.10 of Article ONE of the
Amended Regulations would be of no force or effect. Accordingly, the Board of
Directors believes that corresponding amendments must be made to both Sections
of the Amended Regulations to delete any reference to cumulative voting. Present
Section 1.11 and Section 1.12 of the Amended Regulations would be renumbered as
Section 1.10 and Section 1.12, respectively.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE RESOLUTIONS
ATTACHED TO THIS PROXY STATEMENT AS EXHIBIT A TO AMEND THE AMENDED ARTICLES AND
THE AMENDED REGULATIONS TO ELIMINATE CUMULATIVE VOTING IN THE ELECTION OF
DIRECTORS.
UNDER ARTICLE SIXTH OF THE AMENDED ARTICLES, THE AFFIRMATIVE VOTE OF THE
HOLDERS OF SHARES ENTITLING THEM TO EXERCISE NOT LESS THAN A MAJORITY OF THE
VOTING POWER OF THE COMPANY IS REQUIRED TO ADOPT THE PROPOSED AMENDMENTS TO THE
AMENDED ARTICLES AND THE AMENDED REGULATIONS. As of March 23, 1997, the
Company's executive officers and directors, together with participants in the
ESOP, held approximately 18% of the Company's common shares and voting power. If
the amendment is approved, it will become effective upon the filing of a
Certificate of Amendment to the Company's Amended Articles with the Ohio
Secretary of State, which is expected to be accomplished as promptly as
practicable after such approval is obtained. Unless otherwise directed, the
persons named in the enclosed proxy will vote the common shares represented by
all proxies received prior to the Annual Meeting, and not properly revoked, in
favor of the proposed amendments to the Amended Articles and the Amended
Regulations. The effect of an abstention or broker non-vote with respect to this
proposal is the same as a "no" vote.
-19-
<PAGE>
PROPOSAL TO APPROVE THE ADOPTION OF THE
RURBAN FINANCIAL CORP. STOCK OPTION PLAN
(Item 3 on Proxy)
On March 12, 1997, the Board of Directors of the Company adopted, subject
to approval by the shareholders, the Rurban Financial Corp. Stock Option Plan
(the "Stock Option Plan") for directors and officers of the Company and its
subsidiaries (the "Key Employees"). The Stock Option Plan authorizes the
granting of (i) incentive stock options ("ISOs") as defined in Section 422 of
the Internal Revenue Code of 1986, as amended (the "Code"), (ii) non-qualified
stock options ("NQSOs") and (iii) stock appreciation rights ("SARs") (ISOs,
NQSOs and SARs are sometimes referred to collectively herein as "Awards"). The
purpose of the Stock Option Plan is to encourage Key Employees to acquire or
increase and retain a financial interest in the Company, to remain in the
service of the Company, and to put forth maximum efforts for the success of the
Company, and to enable the Company and its subsidiaries to compete effectively
for the services of potential employees and directors by furnishing an
additional incentive to join the service of the Company and its subsidiaries.
The Stock Option Plan also provides an incentive to Key Employees of the Company
and its subsidiaries to put forth a maximum effort to increase the value of the
Company's common shares, because, as more fully described below, under the Stock
Option Plan, the exercise price of the options cannot be less than the fair
market value of the common shares on the date the options are granted.
As of the date of this Proxy Statement, no determination has been made
regarding the identity of the Key Employees to whom Awards may be granted under
the Stock Option Plan or the kinds of Awards or numbers of common shares to be
subject to Awards that will be granted to such Key Employees. The Company
currently estimates that 60 Key Employees of the Company and its subsidiaries
will be eligible to be granted Awards under the Stock Option Plan.
The following is a brief summary of the material features of the Stock
Option Plan. This summary is qualified in its entirety by reference to the full
text of the Stock Option Plan, a copy of which is attached to this Proxy
Statement as Exhibit B.
Summary of Operation of the Stock Option Plan
ADMINISTRATION OF THE STOCK OPTION PLAN
The Stock Option Plan will be administered by the Compensation Committee
of the Board of Directors which, together with the Board of Directors, has the
authority to determine, among other things, the Key Employees to whom Awards
will be granted under the Stock Option Plan and the terms and conditions of such
Awards. The Compensation Committee consists of three members of the Board of
Directors of the Company who are "non-employee directors" within the meaning of
Rule 16b-3 under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"). These members of the Compensation Committee are John R. Compo, Robert A.
Fawcett, Jr. and J. Michael Walz, D.D.S. In addition, Steven D. VanDemark, the
Chairman of the Board of the Company and State Bank also serves on the
Compensation Committee.
GRANTS OF OPTIONS; LIMITATIONS
ISOs and NQSOs (together, "Options") may be granted under the Stock Option for
terms of up to, but not exceeding, ten years from the date of grant. The actual
period of exercise for each Option is determined by the Compensation Committee.
No Awards may be granted under the Stock Option Plan after the tenth anniversary
-20-
<PAGE>
of the effective date of the Stock Option Plan, which is March 12, 1997. ISOs
may only be granted to employees of the Company or any of the Company's
subsidiaries, as the case may be.
In the case of ISOs, the aggregate fair market value of the common shares
of the Company with respect to which ISO's are exercisable for the first time by
an optionee (an "Optionee") during any calendar year may not exceed $100,000.
The aggregate fair market value of the common shares subject to the ISOs shall
be determined by the Compensation Committee or the Board of Directors as of the
date of grant. If the aggregate fair market value of the common shares subject
to any such ISO's which are exercisable for the first time by an Optionee during
any calendar year exceeds $100,000, the portion of the ISO's exceeding $100,000
shall be treated as NQSO's.
EXERCISE OF OPTIONS; TERMINATION
Under the Stock Option Plan, an Option may be exercised in whole or in
part and from time to time by delivering to the Company a written notice of
intent to exercise such Option. The vesting schedule for all Options granted
under the Stock Option Plan will be determined by the Compensation Committee or
the Board of Directors and will be set forth in the respective Stock Option
Agreement relating to such Options.
If an Optionee's status as a director or as an employee of the Company or
any of the Company's subsidiaries, as the case may be, terminates for any
reason, other than his retirement, death or disability (as determined by the
Compensation Committee), before the date of expiration of NQSOs and SARs held by
such Optionee, such NQSOs and SARs shall become null and void on the date of
such termination. An Optionee who terminates his employment, but retains his
status as a director, is not considered terminated for purposes of the Stock
Option Plan.
If an Optionee dies before the expiration of any NQSOs and SARs held by
such Optionee, such NQSOs and SARs shall terminate on the earlier of (i) the
date of expiration of the NQSOs and SARs or (ii) one year following the date of
the Optionee's death. The executor or administrator or personal representative
of the estate of a deceased Optionee, or the person or persons to whom a NQSO
and SAR granted hereunder shall have been validly transferred by the executor or
the administrator or the personal representative of the Optionee's estate, shall
have the right to exercise the Optionee's NQSOs and SARs.
If an Optionee becomes totally disabled before the expiration of NQSOs and
SARs held by the Optionee, such NQSOs and SARs shall terminate on the earlier of
(i) the date of expiration of the NQSOs and SARs or (ii) one year following the
date of the Optionee's termination of service due to disability.
In the case of ISOs, if an Optionee's status as an employee of the Company
terminates for any reason, other than retirement, death or disability, before
the date of expiration of the ISOs held by such Optionee, such ISOs become null
and void on the date of such termination. If an Optionee's employment with the
Company terminates due to retirement or death, the ISO's held by such Optionee
terminate on the earlier of (i) the date of the expiration of the ISO or (ii)
three months following such termination of employment. For an Optionee who
terminates employment with the Company due to disability, as defined in Section
22(e)(3) of the Code, the three month period specified in the prior sentence is
extended to one year.
In addition, upon the earlier of (i) an Optionee's 65th birthday, (ii) the
approval by the shareholders of the Company of an agreement to merge or
consolidate the Company with or into another entity where the Company is not the
surviving entity, (iii) an agreement to sell or otherwise dispose of all or
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substantially all of the Company's assets (including a plan of liquidation),
(iv) the approval by the shareholders of the Company of an agreement to merge or
consolidate the Company with or into another entity where the Company is the
surviving entity, pursuant to which more than 50% of the Company's issued and
outstanding common shares have been transferred or (v) the expiration of a
tender offer or exchange offer (other than an offer by the Company) pursuant to
which more than 30% of the Company's issued and outstanding common shares have
been purchased, all Options granted to such Optionee become fully exercisable in
accordance with the terms of the Stock Option Plan.
OPTION EXERCISE PRICE
The exercise price of the common shares of the Company subject to each
Option shall not be less than the fair market value of the common shares on the
date the Option is granted. The aggregate fair market value of the common shares
subject to the Options shall be determined on the date of grant by the
Compensation Committee or the Board of Directors. The option price for each ISO
granted to an Optionee, who directly or indirectly owns stock possessing more
than 10% of the total combined voting power of all classes of common shares of
the Company, may not be less than 110% of the fair market value of a single
common share of the Company.
PAYMENT OF EXERCISE PRICE
Payment of the exercise price may be made by check payable to the Company
or by delivery of common shares of the Company having a fair market value equal
to the exercise price of the Option, or a combination thereof, equal in the
aggregate to the option price for the common shares being purchased. Each Option
will provide for appropriate arrangements for the satisfaction of all tax
withholding requirements applicable to the exercise of such Option. "Appropriate
arrangements" may include the right of the Company to receive transfers of
already-owned common shares from the Award holder or to deduct or withhold
common shares from transfer to the Award holder in such amount as the
Compensation Committee deems appropriate.
STOCK APPRECIATION RIGHTS
The Compensation Committee may, in its discretion, grant SARs to Optionees
at the same time as such Optionees are awarded Options under the Stock Option
Plan. Each SAR issued under the Stock Option Agreement must relate to a specific
Option and must be awarded to an Optionee concurrently with the grant of such
Option. The number of SARs granted to an Optionee shall be equal to a proportion
of the number of common shares of the Company that the Optionee is entitled to
receive pursuant to the corresponding Option under the Stock Option Plan.
Because each SAR is parallel to an Option, the exercise by an Optionee of all or
a portion of any Options will cause an equal exercise of the same proportion of
SARs granted under the Stock Option Plan.
Each SAR entitles the Optionee to the excess of the fair market value of a
single common share of the Company on the exercise date over the fair market
value of a single common share on the date the SAR is granted. The total
appreciation available to an Optionee from any exercise of SARs is to be equal
to the number of SARs being exercised times the amount of appreciation per SAR.
The total appreciation available to an Optionee from an exercise of Stock
Appreciation Rights shall be paid in a single lump sum payment in cash.
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ADJUSTMENTS UPON CHANGES IN CAPITALIZATION
The Stock Option Plan authorizes the granting of Awards with respect to a
maximum of 200,000 common shares. The number of common shares available for
Awards under the Stock Option Plan and subject to outstanding Awards will be
adjusted upward or downward, as the case may be, in the event of any merger,
consolidation, recapitalization, reclassification, split-up, combination of
shares, stock dividend or other similar transaction affecting common shares of
the Company. The exercise price of an outstanding Award may also be adjusted in
the event of any such transaction. If any Option or SAR or a portion thereof is
terminated without having been exercised, the common shares of the Company
subject to the portion of such Option or SAR not so exercised will be available
for subsequent grants under the Stock Option Plan. If the shareholders of the
Company approve the Stock Option Plan, the Board of Directors will reserve up to
200,000 common shares of the Company for issuance under the Stock Option Plan.
AMENDMENT AND TERMINATION
The Board of Directors of the Company may terminate, amend or modify the
Stock Option Plan in whole or in part. However, the Board may not amend the
Stock Option Plan, without shareholder approval, if such shareholder approval is
required (a) to satisfy the requirements of Section 16(b) under the Exchange
Act; (b) to satisfy applicable requirements of the Code; or (c) to satisfy
applicable requirements of any securities exchange on which are listed any of
the Company equity securities. In addition, if any provisions of the Stock
Option Plan cause the Stock Option Plan to violate any applicable law, rule or
government regulation or to be considered null and void, such noncomplying
provisions will be severed from the Stock Option Plan.
Federal Income Tax Matters
Based on current provisions of the Code and the existing regulations
thereunder, the anticipated federal income tax consequences in respect of ISOs,
NQSOs and SARs are as described below. The following discussion is not intended
to be a complete statement of applicable law and is based upon the federal
income tax laws as in effect on the date hereof.
ISOS
An Optionee who is granted an ISO does not recognize taxable income either
on the date of grant or on the date of exercise. However, upon the exercise of
an ISO, the difference between the fair market value of the common shares of the
Company received and the option price paid is a tax preference item potentially
subject to the alternative minimum tax. However, on the later sale or other
disposition of the common shares, generally, only the difference between the
fair market value of the common shares on the exercise date and the amount
realized on the sale or disposition is includable in alternative minimum taxable
income.
Upon disposition of common shares acquired from exercise of an ISO,
long-term capital gain or loss is generally recognized in an amount equal to the
difference between the amount realized on the sale or disposition and the
exercise price. However, if the Optionee disposes of the common shares within
two years of the date of grant or within one year from the date of the transfer
of the common shares to the Optionee (a "Disqualifying Disposition"), then the
Optionee will recognize ordinary income, as opposed to capital gain, at the time
of disposition. In general, the amount of ordinary income recognized will be
equal to the lesser of (i) the amount of gain realized on the disposition, or
(ii) the difference between the fair market value of the common shares received
on the date of exercise and the exercise price. Any remaining gain or loss is
treated as a short-term or long-term capital gain or loss, depending upon the
period of time the common shares have been held.
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The Company is not entitled to a tax deduction upon either exercise of an
ISO or disposition of common shares acquired pursuant to such exercise, except
to the extent that an Optionee recognizes ordinary income in a Disqualifying
Disposition.
If the holder of an ISO pays the exercise price, in whole or in part, with
previously acquired common shares, the exchange should not effect the ISO tax
treatment of the exercise. Upon such exchange, and except as otherwise described
herein, no gain or loss is recognized by the Optionee upon delivering previously
acquired common shares to the Company for payment of the exercise price. The
common shares received by the Optionee, equal in number to the previously
acquired common shares exchanged therefor, will have the same basis and holding
period for long-term capital gain purposes as the previously acquired common
shares. The Optionee, however, will not be able to utilize the prior holding
period for the purpose of satisfying the ISO statutory holding period
requirements. Common shares received by the Optionee in excess of the number of
previously acquired common shares will have a basis of zero and a holding period
which commences as of the date the common shares are transferred to the Optionee
upon exercise of the ISO. If the exercise of an ISO is affected using common
shares previously acquired through the exercise of an ISO, the exchange of such
previously acquired common shares will be considered a disposition of such
common shares for the purpose of determining whether a Disqualifying Disposition
has occurred.
NQSOS
An Optionee receiving an NQSO does not recognize taxable income on the
date of grant of the NQSO, provided that the NQSO does not have a readily
ascertainable fair market value at the time it is granted. In general, the
Optionee must recognize ordinary income at the time of exercise of the NQSO in
the amount of the difference between the fair market value of the common shares
of the Company on the date of exercise and the option price. The ordinary income
received will constitute compensation for which tax withholding generally will
be required. The amount of ordinary income recognized by an Optionee will be
deductible by the Company in the year that the Optionee recognizes the income if
the Company complies with the applicable withholding requirement.
If the sale of the common shares could subject the Optionee to liability
under Section 16(b) of the Exchange Act, the Optionee generally will recognize
ordinary income only on the date that the Optionee is no longer subject to such
liability in an amount equal to the fair market value of the common shares on
such date less the option price. Nevertheless, the Optionee may elect under
Section 83(b) of the Code within 30 days of the date of exercise to recognize
ordinary income as of the date of exercise, without regard to the restrictions
of Section 16(b).
Common shares acquired upon exercise of an NQSO will have a tax basis
equal to their fair market value on the exercise date or other relevant date on
which ordinary income is recognized, and the holding period for the common
shares generally will begin on the date of exercise or such other relevant date.
Upon subsequent disposition of the common shares, the Optionee will recognize
long-term capital gain or loss if the Optionee has held the common shares for
more than one year prior to disposition, or short-term capital gain or loss if
the Optionee has held the common shares for one year or less.
If an Optionee pays the exercise price with respect to an NQSO, in whole
or in part, with previously acquired common shares, the Optionee will recognize
ordinary income in the amount by which the fair market value of the common
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shares received exceeds the exercise price. The Optionee will not recognize gain
or loss upon delivering such previously acquired common shares to the Company.
Common shares received by an Optionee, equal in number to the previously
acquired common shares exchanged therefor, will have the same basis and holding
period as such previously acquired common shares. Common shares received by an
Optionee in excess of the number of such previously acquired common shares will
have a basis equal to the fair market value of such additional common shares as
of the date ordinary income is recognized. The holding period for such
additional common shares will commence as of the date of exercise or such other
relevant date.
SARS
A participant is not taxed upon the grant of SARs. Rather, participants
will generally be taxed upon the exercise date, at ordinary income tax rates, on
the amount of cash received and the fair market value of any common shares
received. However, if the sale of common shares could subject a participant to
liability under Section 16(b) of the Exchange Act, such participant generally
will not recognize ordinary income with respect to such common shares until the
participant is no longer subject to such liability, at which time the
participant will recognize ordinary income in an amount equal to the fair market
value of the common shares on such date.
Recommendation and Vote
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE PROPOSAL TO
APPROVE THE ADOPTION OF THE RURBAN FINANCIAL CORP. STOCK OPTION PLAN, WHICH IS
ATTACHED AS EXHIBIT B TO THIS PROXY STATEMENT.
UNDER ARTICLE SIXTH OF THE AMENDED ARTICLES, THE AFFIRMATIVE VOTE OF THE
HOLDERS OF SHARES ENTITLING THEM TO EXERCISE NOT LESS THAN A MAJORITY OF THE
VOTING POWER OF THE COMPANY IS REQUIRED TO APPROVE THE ADOPTION OF THE RURBAN
FINANCIAL CORP. STOCK OPTION PLAN. As of March 23, 1997, the Company's executive
officers and directors, together with participants in the ESOP, held
approximately 18% of the Company's common shares and voting power. Unless
otherwise directed, the persons named in the enclosed proxy will vote the common
shares represented by all proxies received prior to the Annual Meeting, and not
properly revoked, in favor of the proposal to approve the adoption of the Rurban
Financial Corp. Stock Option Plan. The effect of an abstention or broker
non-vote with respect to this proposal is the same as a "no" vote.
SHAREHOLDER PROPOSALS FOR
1998 ANNUAL MEETING
Any qualified shareholder who desires to present a proposal for
consideration at the 1998 Annual Meeting of Shareholders must submit the
proposal in writing to the Company. If the proposal is received by the Company
on or before November 28, 1997, and otherwise meets the requirements of
applicable state and federal law, it will be included in the proxy statement and
form of proxy of the Company relating to its 1998 Annual Meeting of
Shareholders.
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NOTIFICATION OF APPOINTMENT
OF INDEPENDENT AUDITORS
The Board of Directors of the Company has appointed the firm of Crowe,
Chizek and Company LLP to serve as independent auditors for the Company for the
1997 fiscal year. That firm has served as independent auditors for the Company
since 1988. The Board of Directors expects that representatives of Crowe, Chizek
and Company LLP will be present at the Annual Meeting, will have the opportunity
to make a statement if they desire to do so and will be available to respond to
appropriate questions.
OTHER MATTERS
As of the date of this Proxy Statement, the Board of Directors knows of no
other business to be presented for action by the shareholders at the 1997 Annual
Meeting of Shareholders other than as set forth in this Proxy Statement.
However, if any other matter is properly presented at the Annual Meeting, or at
any adjournment(s) thereof, it is intended that the persons named as proxies in
the enclosed proxy may vote the common shares represented by such proxy on such
matters in accordance with their best judgment in light of the conditions then
prevailing.
IT IS IMPORTANT THAT PROXIES BE VOTED AND RETURNED PROMPTLY. EVEN IF YOU
PLAN TO ATTEND THE ANNUAL MEETING IN PERSON, PLEASE FILL IN, DATE, SIGN AND
RETURN THE PROXY PROMPTLY USING THE ENCLOSED SELF-ADDRESSED ENVELOPE. IF YOU
ATTEND THE ANNUAL MEETING, YOU MAY REVOKE YOUR PROXY AND VOTE IN PERSON IF YOU
WISH TO DO SO.
March __, 1996 By Order of the Board of Directors,
Thomas C. Williams, President
and Chief Executive Officer
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<PAGE>
RURBAN FINANCIAL CORP.
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 28, 1997
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned holder(s) of common shares of Rurban Financial Corp. (the
"Company") hereby constitutes and appoints Thomas C. Williams and Richard C.
Warrener, or either of them, the Proxy or Proxies of the undersigned, with full
power of substitution, to attend the Annual Meeting of Shareholders of the
Company (the "Annual Meeting") to be held on Monday, April 28, 1997, at the
offices of The State Bank and Trust Company, 401 Clinton Street, Defiance, Ohio
at 7:00 p.m., local time, and any adjournment(s) thereof, and to vote all of the
common shares of the Company which the undersigned is entitled to vote at such
Annual Meeting or at any adjournment(s) thereof:
1. To elect three directors to serve for terms of three years each.
_____FOR election as directors of the _____WITHHOLD AUTHORITY
Company of all the nominees to vote for all of the
listed below (except as marked nominees listed below.
to the contrary below.)*
Richard Z. Graham J. Michael Walz Thomas C. Williams
*(INSTRUCTION: To withhold authority to vote for any individual nominee,
strike a line through the nominee's name in the list above.)
2. To approve the proposed amendments to the Amended Articles and the Amended
Regulations of the Company to eliminate cumulative voting in the election
of directors. The proposed resolutions to amend the Amended Articles and
the Amended Regulations are described in the accompanying Proxy Statement
and are attached to the Proxy Statement as Exhibit A.
____FOR ____AGAINST ____ABSTAIN
3. To approve the adoption of the Rurban Financial Corp. Stock Option Plan
(the "Stock Option Plan"). The Stock Option Plan is described in the
accompanying Proxy Statement and is attached to the Proxy Statement as
Exhibit B.
____FOR ____AGAINST ____ABSTAIN
4. In their discretion, the Proxies are authorized to vote upon such other
matters as may properly come before the Annual Meeting or any
adjournment(s) thereof.
(Continued, and to be executed and dated on the reverse side hereof.)
<PAGE>
(Continued from front.)
WHERE A CHOICE IS INDICATED, THE COMMON SHARES REPRESENTED BY THIS PROXY
WHEN PROPERLY EXECUTED WILL BE VOTED OR NOT VOTED AS SPECIFIED. IF NO CHOICE IS
INDICATED, THE COMMON SHARES REPRESENTED BY THIS PROXY WILL BE VOTED FOR THE
ELECTION OF THE NOMINEES LISTED IN ITEM NO. 1 AS DIRECTORS OF THE COMPANY, FOR
PROPOSAL NO. 2 AND FOR PROPOSAL NO. 3. IF ANY OTHER MATTERS ARE PROPERLY BROUGHT
BEFORE THE ANNUAL MEETING OR ANY ADJOURNMENT(S) THEREOF OR IF A NOMINEE FOR
ELECTION AS A DIRECTOR NAMED IN THE PROXY STATEMENT IS UNABLE TO SERVE OR FOR
GOOD CAUSE WILL NOT SERVE, THE COMMON SHARES REPRESENTED BY THIS PROXY WILL BE
VOTED IN THE DISCRETION OF THE PROXIES ON SUCH MATTERS OR FOR SUCH SUBSTITUTE
NOMINEE(S) AS THE DIRECTORS MAY RECOMMEND.
All proxies previously given or executed by the undersigned are hereby
revoked. The undersigned acknowledges receipt of the accompanying Notice of
Annual Meeting of Shareholders and Proxy Statement for the April 28, 1997
meeting and the Annual Report to Shareholders for the fiscal year ended December
31, 1996.
Dated: _______________________________, 1997
____________________________________________
Signature of Shareholder(s)
____________________________________________
Signature of Shareholder(s)
Please sign exactly as your name appears
hereon. When common shares are registered in
two names, both shareholders should sign.
When signing as executor, administrator,
trustee, guardian, attorney or agent, please
give full title as such. If shareholder is a
corporation, please sign in full corporate
name by President or other authorized
officer. If shareholder is a partnership,
please sign in partnership name by
authorized person. (Please note any change
of address on this proxy.)
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF RURBAN FINANCIAL
CORP. IT IS IMPORTANT THAT PROXIES BE VOTED AND RETURNED PROMPTLY. EVEN IF YOU
PLAN TO ATTEND THE ANNUAL MEETING IN PERSON, PLEASE FILL IN, DATE, SIGN AND
RETURN THE PROXY PROMPTLY USING THE ENCLOSED SELF-ADDRESSED ENVELOPE. IF YOU
ATTEND THE ANNUAL MEETING, YOU MAY REVOKE YOUR PROXY AND VOTE IN PERSON IF YOU
WISH TO DO SO.
<PAGE>
EXHIBIT A
RESOLUTIONS TO AMEND THE AMENDED ARTICLES AND AMENDED
REGULATIONS OF RURBAN FINANCIAL CORP. TO ELIMINATE CUMULATIVE
VOTING IN THE ELECTION OF DIRECTORS
RESOLVED, that the Amended Articles of Rurban Financial Corp. shall be
amended by the addition of Article TWELFTH in the following form:
TWELFTH: Shareholders shall have no right to vote cumulatively in the
election of directors.
FURTHER RESOLVED, that the Amended Regulations of Rurban Financial Corp. be
amended by (1) deleting in its entirety present Section 1.10 of Article ONE, (2)
renumbering present Sections 1.11 and 1.12 of the Amended Regulations as
Sections 1.10 and 1.11, respectively, and (3) deleting present Section 2.04 of
Article TWO in its entirety and by substituting in its place new Section 2.04 of
Article TWO in the following form:
Section 2.04. Removal. A director or directors may be removed from office,
with or without assigning any cause, only by the vote of the holders of shares
entitling them to exercise not less than eighty percent (80%) of the voting
power of the corporation entitling them to elect directors in place of those to
be removed. In case of any such removal, a new director may be elected at the
same meeting for the unexpired term of each director removed. Failure to elect a
director to fill the unexpired term of any director removed shall be deemed to
create a vacancy in the board.
<PAGE>
EXHIBIT B
RURBAN FINANCIAL CORP.
STOCK OPTION PLAN
ARTICLE I
Definitions
Section 1.1 Definitions: As used herein, the following terms shall have the
meaning set forth below, unless the context clearly requires otherwise:
(a) "Applicable Event" shall mean (i) the expiration of a tender offer or
exchange offer (other than an offer by the Company) pursuant to which
more than 30% of the Company's issued and outstanding Stock has been
purchased, or (ii) the approval by the shareholders of the Company of
an agreement to merge or consolidate the Company with or into another
entity where the Company is not the surviving entity, an agreement to
sell or otherwise dispose of all or substantially all of the Company's
assets (including a plan of liquidation), or the approval by the
shareholders of the Company of an agreement to merge or consolidate
the Company with or into another entity where the Company is the
surviving entity, pursuant to which more than 50% of the Company's
issued and outstanding Stock has been transferred.
(b) "Committee" shall mean a Committee consisting of the members of the
Board of Directors of the Company, who are not employees of the
Company.
(c) "Company" shall mean Rurban Financial Corp. and any subsidiary of the
Rurban Financial Corp.
(d) "Director" shall mean a member of the Board of Directors of the
Company.
(e) "Effective Date" with respect to the Plan shall mean the date
specified in Section 2.3 as the Effective Date.
(f) "Employee" shall mean any person, including an executive officer, who
is employed by the Company.
(g) "Fair Market Value" with respect to a share of Stock shall mean the
fair market value of the Stock, as determined by application of such
reasonable valuation methods as the Committee shall adopt or apply.
The Committee's determination of Fair Market Value shall be conclusive
and binding on the Company and the Optionee. The Committee shall take
into account the valuation performed for the employee stock ownership
plan (ESOP) maintained for the benefit of the employees of the
Company.
(h) "Option" shall mean an option to purchase Stock granted pursuant to
the provisions of the Plan. Options granted under the Plan shall be
either Nonqualified Stock Options or Incentive Stock Options. An
Incentive Stock Option shall mean an Option to purchase shares of
Stock which is designated as an Incentive Stock Option by the
Committee and is intended to meet the requirements of Section 422 of
the Internal Revenue Code of 1986, as amended. A Nonqualified Stock
Option shall mean an Option to purchase shares of Stock which is not
an Incentive Stock Option.
<PAGE>
(i) "Optionee" shall mean a Director, officer or Employee of the Company
to whom an Option has been granted.
(j) "Plan" shall mean the Rurban Financial Corp. Stock Option Plan, the
terms of which are set forth herein and in any amendment which may be
made hereto.
(k) "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.
(l) "Stock" shall mean the common shares of Rurban Financial Corp. or, in
the event that the outstanding shares of Stock are changed into or
exchanged for different shares or securities of Rurban Financial Corp.
or some other entity, such other shares or securities.
(m) "Stock Appreciation Right" or "SAR" 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.
(n) "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.
(o) "Subsidiary" shall mean "subsidiary corporation" as defined in Section
424 (f) of the Internal Revenue Code of 1986, as amended.
ARTICLE II
The Plan
Section 2.1 Name. This Plan shall be known as the "Rurban Financial Corp. Stock
Option Plan."
Section 2.2 Purpose. The purpose of the Plan is to advance the interests of the
Company and its shareholders by affording to Directors and officers of the
Company an opportunity to acquire or increase their proprietary interest in the
Company by the grant to such persons of 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 are key to the success
of the Company.
Section 2.3 Effective Date and Termination of Plan. The Plan was approved by the
affirmative vote of the Board of Directors of Rurban Financial Corp. and became
effective on March 12, 1997; provided, however, that, if the Plan is not
approved by the shareholders of Rurban Financial Corp. within twelve (12) months
following such adoption, the Plan and all outstanding Options and Stock
Appreciation Rights, if any, shall be deemed null and void and shall be of no
force or effect. No Options or Stock Appreciation Rights granted under the Plan
may be exercised prior to approval of the Plan by the shareholders of Rurban
Financial Corp. This Plan shall terminate upon the earliest of (a) March 12,
2007; or (b) the date on which all Stock available for issuance under the Plan
has been issued pursuant to the exercise of Options granted hereunder or with
respect to which payments have been made upon the exercise of Stock Appreciation
Rights or other rights; or (c) the determination of the Board of Directors of
Rurban Financial Corp. that the Plan shall terminate. No Options or Stock
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<PAGE>
Appreciation Rights may be granted under the Plan after such termination date,
provided that the Options and Stock Appreciation Rights granted and outstanding
on such date shall continue to have force and effect in accordance with the
provisions of the documents evidencing such Options and Stock Appreciation
Rights.
ARTICLE III
Administration
Section 3.1 Administration.
(a) The Plan shall be administered by the Committee. 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 or SARs may be granted, the number of
shares of Stock to be subject to each Option, the period during which
each Option or SAR may be exercised and the price at which each Option
or SAR may be exercised.
(b) 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. The vote of a majority of the members of the
Committee shall decide any question brought before the meeting. In
addition, the Committee may take any action otherwise proper under the
Plan by the execution of a written action, taken without a meeting,
and signed by all of the members of the Committee.
(c) All questions of interpretation and application with respect to the
Plan or Options or SARs granted thereunder shall be subject to the
determination, which shall be final and binding, of a majority of the
whole Committee.
(d) In addition, the Committee shall have the sole discretion and
authority to determine whether an Option shall be an Incentive Stock
Option or a Nonqualified Stock Option, or both types of Options,
provided that Incentive Stock Options may be granted only to persons
who are Employees of the Company.
(e) Notwithstanding any provision contained herein, a grant of an Option
to a Director of the Company must be approved by the full Board of
Directors or the Committee, provided the Committee is comprised of
"non-employee directors" within the meaning of Rule 16b-3 under the
Securities Exchange Act of 1934, as amended, or any successor rule or
regulation, as the Board of Directors of the Company may from time to
time designate.
(f) Each person who is or shall have been a member of the Committee or of
the Board of Directors of the Company 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 in
connection with or resulting from any claim, action, suit or
proceeding to which he may be a party or in which he may be involved
by reason of any action taken or failure to act under the Plan and
against and from any and all amounts paid by him in settlement
thereof, with the Company's approval, or paid by him in satisfaction
of judgment in any such action, suit or proceeding against him;
provided that he shall give the Company an opportunity, at its own
expense, to handle and defend the same before he undertakes to handle
and defend it on his own behalf. The foregoing right of
indemnification shall not be exclusive of any other rights of
indemnification to which such person may be entitled under the
Company's articles of incorporation or regulations, as a matter of
law, or otherwise, or any power that the Company may have to indemnify
him or hold him harmless.
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<PAGE>
Section 3.2 Company Assistance. The Company 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 shall furnish the Committee with such clerical and other assistance as
is necessary in the performance of its duties.
ARTICLE IV
Optionees
Section 4.1 Eligibility. Directors and officers of the Company shall be eligible
to participate in the Plan. The Committee may grant Options and/or Stock
Appreciation Rights to any eligible individual subject to the provisions of
Sections 3.1(e) and 5.1
ARTICLE V
Shares of Stock Subject to Plan
Section 5.1 Grant of Options and Limitations.
(a) Grant of Options. The Committee or the Board of Directors shall
designate the Key Employees eligible to receive Options and/or Stock
Appreciation Rights, the number of Options and/or SARs to be received
by such Key Employees and the number of shares of Stock subject to
such Options and SARs.
(b) Stock Available for Options. Subject to adjustment pursuant to the
provisions of Section 10.4 hereof, the aggregate number of shares of
Stock with respect to which Options and Stock Appreciation Rights may
be granted during the term of the Plan shall not exceed 200,000.
Shares with respect to which Options and Stock Appreciation Rights may
be granted may be either authorized and unissued shares or shares
issued and thereafter acquired by the Company.
(c) Incentive Stock Options. In the case of an Incentive Stock Option, the
aggregate Fair Market Value of the shares of 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. The aggregate Fair Market Value of the shares is determined
at the date of grant. Such Options that exceed $100,000 shall be
treated as Nonqualified Stock Options.
Section 5.2 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 of Stock to which such Option's
expiration, termination or cancellation relates.
ARTICLE VI
Options
Section 6.1 Option Grant and Agreement. Each Option granted hereunder shall be
evidenced by minutes of a meeting or the written consent of all of the members
of the Committee and by a written Stock Option Agreement dated as of the date of
grant and executed by the Company and the Optionee. The Stock Option Agreement
shall set forth such terms and conditions as may be determined by the Committee
consistent with the Plan.
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Section 6.2 Option Price. The exercise price of the Stock subject to each Option
shall not be less than the Fair Market Value of the Stock on the date the Option
was granted. The option price for each Incentive Stock Option granted to an
optionee, who directly or indirectly owns stock possessing more than 10% of the
total combined voting power of all classes of stock of the Company, may not be
less than 110% of the Fair Market Value of the Stock. Section 6.3 Option Grant
and Exercise Periods. No Option may be granted after the tenth anniversary of
the Effective Date. The period for exercise of each Option shall be determined
by the Committee, but in no instance shall such period extend beyond the tenth
anniversary of the date of grant of the Option. The period of exercise for each
Incentive Stock Option granted to an Optionee, who directly or indirectly owns
stock possessing more than 10% of the total combined voting power of all classes
of stock of the Company, may not be more than 5 years from the date of grant of
the Option.
Section 6.4 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 of 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 or 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 6.4(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 (but with
respect to whole shares only) 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.
(c) Options shall be exercisable according to respective vesting schedules
set forth in each Stock Option Agreement as determined by the
Committee or the Board of Directors.
Provided, however, that upon the earlier of (i) the Optionee's 65th
birth date, (ii) the occurrence of an Applicable Event, (iii) the
death of the Optionee or (iv) total disability, all Options granted to
the Optionee shall be fully exercisable in accordance with terms of
the Plan. For purposes of this paragraph, an Optionee is totally
disabled if he is receiving disability benefits under the Social
Security Act as the result
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of a total and permanent disability, or is determined to be totally
disabled under any long-term disability plan sponsored by the Company.
At the discretion of the Committee, all or a portion of Options
previously granted to a Optionee can be amended to reduce the vesting
schedule or immediately 100% vest such Options.
(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 Rurban Financial Corp. at its principal office a
check payable to the order of Rurban Financial Corp., in the
amount of the Option price for the number of shares of Stock with
respect to which the Option is then being exercised; or
(2) By delivering to Rurban Financial Corp. at its principal office
certificates representing Stock, duly endorsed for transfer to
Rurban Financial Corp., 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 6.5 Rights as Shareholder. An Optionee shall have no rights as a
shareholder with respect to any share of Stock subject to such Option prior to
the exercise of the Option and the purchase of such shares of Stock.
Section 6.6 Limited Rights. Within the earlier of (i) the occurrence of an
Applicable Event, or (ii) 30 days following the date on which the Company
obtains knowledge of and notifies an Optionee of an Applicable Event, an
Optionee shall have the right (without regard to the limitation on the exercise
of Options set forth in Section 6.4(c) of the Plan and similar limitations in
the Stock Option Agreement) to exercise Options then held, or to surrender
unexercised Options in exchange for a cash amount. Such cash amount shall be
equal to the product of (1) the number of shares of Stock subject to the Option,
or portion thereof which is surrendered, multiplied by (2) the amount by which
the highest price paid or to be paid per share of Stock, pursuant to an
Applicable Event, exceeds the exercise price.
ARTICLE VII
Stock Appreciation Rights
Section 7.1 Stock Appreciation Rights. The Board of Directors may, upon
recommendation of the Committee, grant Stock Appreciation Rights to Optionees at
the same time as such Optionees are awarded Options under the Plan. Such Stock
Appreciation Rights shall be evidenced by an agreement in such form as the
Committee shall from time to time approve. Such agreements shall comply with,
and be subject to, the following terms and conditions:
(a) Grant. Each Stock Appreciation Right shall relate to a specific Option
under the Plan and shall be awarded to an Optionee concurrently with
the grant of such Option. The number of Stock Appreciation Rights
granted to an Optionee shall be equal to a proportion of the number of
shares of Stock that the Optionee is entitled to receive pursuant to
the Plan.
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(b) Grant of Parallel Award. Since each Stock Appreciation Right is
parallel to an Option, the exercise of all or a portion of the Options
shall cause an equal exercise of the same proportion of Stock
Appreciation Rights granted under the Plan. A Stock Appreciation Right
can only be exercisable in conjunction with the exercise of the
parallel Option.
(c) Calculation of Appreciation. Each Stock Appreciation Right shall
entitle an Optionee 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 was granted. The total
appreciation available to an Optionee from any exercise of Stock
Appreciation Rights shall be equal to the number of Stock Appreciation
Rights being exercised times the amount of appreciation per Stock
Appreciation Right.
(d) Payment of Appreciation. The total appreciation available to an
Optionee from an exercise of Stock Appreciation Rights shall be paid
in a single lump sum payment in cash.
(e) Exercise Limitations. An Optionee may exercise a Stock Appreciation
Right only in conjunction with the exercise of the Option to which the
Stock Appreciation Right is attached. Stock Appreciation Rights may be
exercised only at such times and by such persons as may exercise
Options under the Plan.
ARTICLE VIII
Amendment and Modification of Plan
(a) Section 8.1 Amendment. The Board of Directors of the Company may from
time to time amend or modify or make such changes in and additions to
this Plan as it may deem desirable, without further action on the part
of the shareholders of the Company except as such shareholder approval
may be required (a) to satisfy the requirements of Rule 16b-3 under
the Securities Exchange Act of 1934, as amended, or any successor rule
or regulation; (b) to satisfy applicable requirements of the Internal
Revenue Code of 1986, as amended; or (c) to satisfy applicable
requirements of the Nasdaq Stock Market or any securities exchange on
which are listed any of the Company's equity securities. No such
action to amend the Plan shall reduce the then-existing number of
Options or Stock Appreciation Rights granted to any Employee or
adversely change the terms and conditions thereof without such
Employee's consent.
ARTICLE IX
Withholding
Section 9.1 Tax Withholding. The Company shall have the power and the right to
deduct or withhold an amount sufficient to satisfy Federal, state and local
taxes required by law to be withheld with respect to any grant, exercise, or
payment made under or as a result of the Plan. At the discretion of the
Committee, an Optionee may be permitted to pay to the Company the withholding
amount in the form of cash or previously owned Shares. If payment of the
withholding amount is made by delivery of shares of Stock, the value of the
shares of Stock delivered shall equal the Fair Market Value of the shares of
Stock on the day preceding the date of exercise of the Option.
Section 9.2 Share Withholding. With respect to tax withholding required upon
exercise of Options, an Optionee 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 of Stock having a Fair Market Value on the
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date the tax is to be determined equal to an amount sufficient to satisfy
Federal, state and local taxes. If the Optionee is a "reporting person" under
Section 16(a) of the Securities Exchange Act of 1934, as amended, then any
withholding shall comply with Rule 16b-3(e) thereunder.
ARTICLE X
Miscellaneous
Section 10.1 Transferability. During the Optionee's lifetime, any Option or
Stock Appreciation Right may be exercised only by the Optionee or any guardian
or legal representative of the Optionee, and the Option shall not be
transferable except, with respect to both Nonqualified Stock Options and
Incentive Stock Options, in the case of the death of the Optionee, by will or
the laws of descent and distribution, and with respect to Nonqualified Stock
Options (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. An Optionee 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 Optionee at any time by written
notice to the Company. Upon the death of an Optionee and upon receipt by the
Company of proof of identity and the existence of a beneficiary at the time of
the Optionee's death validly designated by the Optionee under the Plan, the
Company shall deliver such Stock and/or cash to such beneficiary. In the event
of the death of an Optionee in the absence of a beneficiary validly designated
under the Plan who is living at the time of such Optionee's death, the Company
shall deliver such Stock and/or cash to the executor or the administrator of the
estate of the Optionee, 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 Optionee as the Company may designate. No beneficiary shall, prior to the
death of the Optionee by whom he has been designated, acquire any interest in
the Stock and/or cash credited to the Optionee under the Plan.
Section 10.3 Effect of Termination of Employment or Death.
(a) If an Optionee's status as a Director or as an Employee of the Company
terminates for any reason, other than his retirement, death or
disability, before the date of expiration of Nonqualified Stock
Options and Stock Appreciation Rights held by such Optionee, such
Nonqualified Stock Options and Stock Appreciation Rights shall become
null and void on the date of such termination. An Optionee who
terminates employment with the Company, but retains his status as a
Director is not considered terminated for purposes of this Section
10.3. The date of such termination shall be the date the Optionee
ceases to be both a Director and an Employee of the Company.
(b) If an Optionee dies before the expiration of Nonqualified Stock
Options and Stock Appreciation Rights held by the Optionee, such
Nonqualified Stock Options and Stock Appreciation Rights shall
terminate on the earlier of (i) the date of expiration of the
Nonqualified Stock Options and Stock Appreciation Rights or (ii) one
year following the date of the Optionee's death. The executor or
administrator or personal representative of the estate of a deceased
Optionee, or the person or persons to whom a Nonqualified Stock Option
and Stock Appreciation Right granted hereunder shall have been validly
transferred by the executor or the administrator or the personal
representative of the Optionee's estate, shall have the right to
exercise the Optionee's Nonqualified Stock Option and Stock
Appreciation Rights. To the extent that such Nonqualified Stock
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Options and Stock Appreciation Rights would otherwise by exercisable
under the terms of the Plan and the Optionee's Stock Option Agreement
and Stock Appreciation Right Agreement, such exercise may occur at any
time prior to the termination date specified in this paragraph.
(c) If an Optionee becomes totally disabled before the expiration of
Nonqualified Stock Options and Stock Appreciation Rights held by the
Optionee, such Nonqualified Stock Options and Stock Appreciation
Rights shall terminate on the earlier of (i) the date of expiration of
the Nonqualified Stock Options and Stock Appreciation Rights or (ii)
one year following the date of the Optionee's termination of service
due to disability.
(d) In the case of Incentive Stock Options, if an Optionee's status as an
Employee of the Company terminates for any reason, other than
disability, before the date of expiration of Incentive Stock Options
held by such Optionee, such Incentive Stock Options shall become null
and void on the date of such termination. If an Optionee's employment
with the Company terminates due to retirement or death, an Incentive
Stock Option shall terminate on the earlier of (i) the date of the
expiration of the Incentive Stock Option or (ii) three months
following such termination of employment. For an Optionee who
terminates employment with the Company due to disability, as defined
in Section 22(e)(3) of the Internal Revenue Code of 1986, as amended,
the three month period specified in the prior sentence shall become
one year.
Section 10.4 Antidilution. The provisions of subsections (a) and (b) shall apply
in the event that the outstanding shares of Stock are changed into or exchanged
for a different number or kind of shares or other securities of the Company or
another entity by reason of any merger, consolidation, reorganization,
recapitalization, reclassification, combination, stock split or stock dividend.
(a) The aggregate number and kind of shares of Stock subject to Options
and Stock Appreciation Rights which may be granted hereunder shall be
adjusted appropriately.
(b) Where dissolution or liquidation of the Company or any merger or
combination in which Rurban Financial Corp. is not a surviving company
is involved, each outstanding Option and Stock Appreciation Right
granted hereunder shall, subject to Section 6.6, terminate.
The foregoing adjustments and the manner of application of the foregoing
provisions shall be determined solely by the Committee and any such adjustment
may provide for the elimination of fractional share interests.
Section 10.5 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 10.6 Tenure. Nothing in the Plan or in any Option or Stock Appreciation
Right granted hereunder or in any Stock Option Agreement or Stock Appreciation
Right Agreement relating thereto shall confer upon any Director, or upon any
officer or Employee, the right to continue in such position with the Company.
Section 10.7 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, nor shall the Plan preclude the Company from establishing any other
forms of incentive or other compensation for Directors, officers or Employees of
the Company.
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Section 10.8 No Obligation to Exercise Options. The granting of an Option or
Stock Appreciation Right shall impose no obligation upon the Optionee to
exercise such Option or Stock Appreciation Right.
Section 10.9 Plan Binding on Successors. The Plan shall be binding upon the
successors and assigns of the Company.
Section 10.10 Compliance with Section 16. If the Company has a class of equity
securities registered under Section 12 of the Securities Exchange Act of 1934,
as amended, transactions under the Plan are intended to comply with all
applicable conditions of Rule 16B-3 or its successors under the Securities
Exchange Act of 1934, as amended. To the extent that any transaction or action
by the Committee fails to so comply, the Committee may amend the Plan and the
terms of any outstanding Option, and any action of the Committee which fails to
comply shall be deemed void to the extent permitted by law and deemed advisable
by the Committee.
Section 10.11 Distribution of Stock - Securities Restrictions. The Company may
require an Optionee receiving shares of Stock pursuant to any Option under the
Plan to represent to and agree with the Company in writing that the Optionee is
acquiring the shares for investment without a view to distribution thereof. No
shares of Stock shall be issued or transferred pursuant to an Option unless such
issuance or transfer complies with all relevant provisions of law, including but
not limited to, the (i) limitations, if any, imposed in the state of issuance or
transfer, (ii) restrictions, if any, imposed by the Securities Act of 1933, as
amended, the Securities Exchange Act of 1934, as amended, and the rules and
regulations promulgated thereunder, and (iii) requirements of the Nasdaq Stock
Market or any stock exchange upon which the Company's shares may then be listed.
The certificates for such shares of Stock may include any legend which the
Committee deems appropriate to reflect any restrictions on transfer.
Section 10.12 Singular, Plural Gender. Whenever used herein, nouns in the
singular shall include the plural, and the masculine pronoun shall include the
feminine.
Section 10.13 Headings, Etc., No Part of Plan. Headings of Articles and Sections
hereof are inserted for convenience of reference; they constitute no part of the
Plan.
Section 10.14 Governing Law. Except as otherwise required by law, the validity,
construction and administration of this Plan shall be determined under the Laws
of the State of Ohio.
Signed this _________ day of _____________________, 1997.
RURBAN FINANCIAL CORP.
By: __________________________________
Chairman of the Board of Directors
