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As filed with the Securities and Exchange Commission on December 15, 1997
Registration No. 333-________
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-4
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
WAYNE BANCORP, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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<S> <C> <C>
OHIO 6710 34-1516142
(State or Other Jurisdiction (Primary Standard Industrial (IRS Employer
of Incorporation or Organization) Classification Code Number) Identification No.)
112 WEST LIBERTY STREET
WOOSTER, OHIO 44691
(330) 264-1222
</TABLE>
(Address, Including Zip Code, and Telephone Number, Including Area Code, of
Registrant's Principal Executive Offices)
DAVID L. CHRISTOPHER COPIES OF COMMUNICATIONS TO:
CHAIRMAN, PRESIDENT AND CEO THOMAS C. BLANK, ESQ.
WAYNE BANCORP, INC. WERNER & BLANK CO., L.P.A.
112 W. LIBERTY STREET 7205 W. CENTRAL AVENUE
WOOSTER, OHIO 44691 TOLEDO, OH 43617
(330) 264-1222 (419) 841-8051
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code,
of Agent for Service)
Approximate date of commencement of proposed sale of the securities to the
public:
AS SOON AS PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE.
If the securities being registered on this form are being offered in connection
with the formation of a holding company and there is compliance with General
Instruction G, check the following box: | |
CALCULATION OF REGISTRATION FEE
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<CAPTION>
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Proposed Maximum Proposed Maximum
Class of Securities Amount to Offering Price Aggregate Offering Amount of
to be Registered be Registered Per Share(1) Price(1) Registration Fee(1)
- ------------------- ------------- ---------------- ------------------ -------------------
<S> <C> <C> <C> <C>
Common Stock,
no par value 1,023,737 $10.7988624 $11,055,195 $3,812.14
</TABLE>
(1) The registration fee has been computed pursuant to Rule 457(f)(2) and (3)
based on the aggregate book value of all the outstanding shares of Common
Stock, no par value, of Chippewa Valley Bancshares, Inc. as of September
30, 1997. The proposed maximum offering price per share is determined by
dividing the proposed maximum aggregate offering price by the number of
shares to be registered.
The registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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JOINT PROXY STATEMENT
FOR SPECIAL MEETINGS OF SHAREHOLDERS
CHIPPEWA VALLEY BANCSHARES, INC. WAYNE BANCORP, INC.
20 South Main Street 112 West Liberty Street
Rittman, Ohio 44270 Wooster, Ohio 44691
Special Meeting to be held Special Meeting to be held
on ___________, 1998 on ____________, 1998
----------------------
PROSPECTUS
WAYNE BANCORP, INC. COMMON STOCK
----------------------
This Prospectus of Wayne Bancorp, Inc. ("Wayne") relates to the shares
of common stock, without par value, of Wayne issuable to the shareholders of
Chippewa Valley Bancshares, Inc. ("Chippewa") upon consummation of the proposed
merger of Chippewa with and into Wayne (the "Merger"), pursuant to the terms of
a Merger Agreement between Wayne and Chippewa dated as of October 13, 1997 (the
"Merger Agreement"). The Merger Agreement is attached as Exhibit A, and is
incorporated herein by reference.
THIS PROSPECTUS ALSO SERVES AS THE JOINT PROXY STATEMENT OF CHIPPEWA
AND WAYNE FOR THEIR RESPECTIVE SPECIAL MEETINGS OF SHAREHOLDERS (THE "SPECIAL
MEETINGS") TO BE HELD ON__________, 1998 AND ______, 1998, RESPECTIVELY. SEE
"MEETING INFORMATION."
If the proposed Merger is consummated, the shareholders of Chippewa
will receive shares of Wayne Common Stock in exchange for their common shares of
Chippewa (the "Chippewa Common Stock") held by them on the effective date of the
Merger as set forth in the Agreement. Pursuant to the terms of the Agreement,
shareholders of Chippewa will exchange all of the shares of Chippewa Common
Stock held on the effective date of the Merger for, in the aggregate, between
981,837 and 1,023,737 shares of Wayne. Assuming the issuance of 1,002,787
shares, the midpoint of the number of shares of Wayne that could be issued in
the transaction, each share of Chippewa Common Stock would be converted into the
right to receive 2.2384 shares of Wayne on the effective date of the Merger. In
the event the average of the bid and asked prices of Wayne common stock reported
on NASDAQ for the 10 day period ended the fifth day before the Effective Date,
is lower than $30.00 per share, Chippewa may terminate the proposed merger
transaction unless a designated index of regional bank stocks also has
significantly declined (as specified herein).
The Merger is not intended to be taxable to Chippewa shareholders for
federal income tax purposes, except with respect to cash received by Chippewa
shareholders in lieu of a fractional share of Wayne Common Stock or as a result
of the specific shareholder's exercise of statutory rights to dissent to the
Merger. See "PROPOSED MERGER - Certain Federal Income Tax Consequences" and
"PROPOSED MERGER - Rights of Dissenting Shareholders." For a more complete
description of the Merger Agreement and terms of the Merger, see "The PROPOSED
MERGER."
This Joint Proxy Statement-Prospectus and the forms of Proxy are first
being mailed to shareholders of Chippewa and Wayne on or about _____________,
1998.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
ANY SUCH COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS JOINT PROXY STATEMENT-PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
--------------------
The date of this Joint Proxy Statement-Prospectus is ________________.
1
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TABLE OF CONTENTS
Page
AVAILABLE INFORMATION 6
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE 6
COMPLIANCE WITH THE OHIO CONTROL SHARE ACQUISITION STATUTE 7
SUMMARY 8
The Companies 8
Proposed Merger 8
Special Meeting Information 8
Vote Required 9
Reasons for the Merger; Recommendations of the Boards of Directors 9
Opinion of Financial Advisors 9
Effect on Chippewa Shareholders 10
Dissenters' Rights 10
Certain Federal Income Tax Consequences 10
Accounting Treatment 10
Effective Time of the Merger 11
Conditions to the Merger; Regulatory Approval 11
Dividends 11
Termination, Amendment and Waiver 11
Interests of Certain Persons in the Merger 11
Resales of Wayne Common Stock by Affiliates 12
Markets and Market Prices 12
Selected Financial Data 14
Comparative Per Share Data 18
MEETING INFORMATION 19
General 19
Date, Place and Time 19
Record Dates 19
Votes Required 19
Voting and Revocation of Proxies 20
Solicitation of Proxies 20
PROPOSED MERGER 21
Background and Reasons for the Merger 21
Recommendation of the Chippewa Board of Directors 21
Recommendation of the Wayne Board of Directors 22
Opinion of Chippewa's Financial Advisor 22
Opinion of Wayne's Financial Advisor 25
Terms of the Merger 28
Effective Time of the Merger 29
Surrender of Chippewa Certificates 30
Conditions to the Merger 30
Regulatory Approval 31
Conduct of Business Pending the Merger 32
Dividends 32
Termination, Amendment and Waiver 32
Termination Fee 33
Management and Operations After the Merger 33
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TABLE OF CONTENTS (CONTINUED)
Interests of Certain Persons in the Merger 33
Effect on Employee Benefit Plans 33
Certain Federal Income Tax Consequences 33
Accounting Treatment 34
Expenses 35
Resale of Wayne Common Stock 35
Dissenters' Rights 35
PRO FORMA FINANCIAL DATA 36
DESCRIPTION AND COMPARISON OF WAYNE COMMON STOCK
AND CHIPPEWA COMMON STOCK 45
General 45
Dividends 45
Preemptive Rights 45
Voting 45
Cumulative Voting 46
Liquidation 46
Liability of Directors; Indemnification 46
Antitakeover Provisions 46
INFORMATION ABOUT WAYNE 48
General 48
Competition 48
Certain Regulatory Considerations 48
Principal Holder of Wayne Common Stock 52
Legal Proceedings 52
INFORMATION ABOUT CHIPPEWA 53
General 53
Properties 53
Litigation 53
Voting, Principal Shareholders and Management Information 54
Certain Relationships and Related Transactions 54
Competition 55
Employees 55
Chippewa's Financial Statements and Management's Discussion and Analysis
of Financial Condition and Results of Operations 55
LEGAL OPINIONS 72
EXPERTS 72
3
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TABLE OF CONTENTS (CONTINUED)
CHIPPEWA FINANCIAL STATEMENTS AS OF DECEMBER 31, 1996, AND 1995
AND FOR EACH OF THE YEARS ENDED DECEMBER 31, 1996
Report of Independent Auditors F-1
Consolidated Financial Statements
Consolidated Balance Sheets F-2
Consolidated Statements of Income F-3
Consolidated Statements of Changes in Shareholders' Equity F-4
Consolidated Statements of Cash Flows F-5
Notes to Consolidated Financial Statements F-6
CHIPPEWA INTERIM FINANCIAL STATEMENTS AS OF AND FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
Consolidated Financial Statements
Unaudited Consolidated Balance Sheets S-1
Unaudited Consolidated Statements of Income S-2
Unaudited Consolidated Statements of Changes in
Shareholders' Equity S-3
Unaudited Consolidated Statements of Cash Flows S-4
Unaudited Notes to Consolidated Financial Statements S-5
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TABLE OF CONTENTS (CONTINUED)
APPENDIX A A-1
Merger Agreement dated as of October 13, 1997
APPENDIX B B-1
Opinion of Chippewa's Financial Advisor
APPENDIX C C-1
Opinion of Wayne's Financial Advisor
APPENDIX D D-1
Ohio Law on Dissenters' Rights
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NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION TO OR MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS PROXY STATEMENT-PROSPECTUS AND, IF GIVEN OR
MADE, THE INFORMATION OR REPRESENTATION SHOULD NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROXY STATEMENT-PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL
OR A SOLICITATION OF AN OFFER TO PURCHASE THE SECURITIES OFFERED HEREBY, OR THE
SOLICITATION OF A PROXY, IN ANY JURISDICTIONS OR TO OR FROM ANY PERSON TO WHOM
IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION OF AN OFFER OR PROXY IN SUCH
JURISDICTION. NEITHER THE DELIVERY OF THIS PROXY STATEMENT-PROSPECTUS NOR ANY
DISTRIBUTION OF THE SECURITIES TO WHICH THIS PROXY STATEMENT-PROSPECTUS RELATES
SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF CHIPPEWA OR WAYNE SINCE THE DATE OF THIS PROXY
STATEMENT-PROSPECTUS.
AVAILABLE INFORMATION
Wayne is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements, and other information with the
Securities and Exchange Commission (the "Commission"). The reports, proxy
statements and other information can be inspected and copied at the public
reference facilities of the Commission, Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the regional offices of the Commission located
at Room 1400, 75 Park Place, New York, New York 10007, and at Northwestern
Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661.
Copies of such materials can also be obtained from the public reference section
of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates. In addition, Wayne is required to file electronic versions of
these documents with the Commission through the Commission's Electronic Data
Gathering, Analysis and Retrieval ("EDGAR") system. The Commission maintains a
World Wide Web site at http://www.sec.gov that contains reports, proxy and
information statements and other information regarding registrants that file
electronically with the Commission including Wayne.
Wayne has filed with the Commission a Registration Statement on Form
S-4 (together with any amendments thereto, the "Registration Statement") under
the Securities Act of 1933, as amended (the "Securities Act"), with respect to
the Wayne Common Stock to be issued pursuant to the Merger described herein.
This Proxy Statement-Prospectus does not contain all the information set forth
in the Registration Statement and the exhibits thereto, certain parts of which
are omitted in accordance with the rules and regulations of the Commission. Such
additional information may be obtained from the Commission's principal office in
Washington, D.C. Statements contained in this Proxy Statement-Prospectus or in
any document incorporated herein by reference as to the contents of any contract
or other document referred to herein or therein are not necessarily complete,
and in each instance where reference is made to the copy of such contract or
other document filed as an exhibit to the Registration Statement or other
document, each such statement is qualified in all respects by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
THIS PROXY STATEMENT-PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE
WHICH ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. DOCUMENTS RELATING TO
WAYNE, EXCLUDING EXHIBITS UNLESS SPECIFICALLY INCORPORATED THEREIN, ARE
AVAILABLE WITHOUT CHARGE UPON REQUEST TO DAVID P. BOYLE, CHIEF FINANCIAL
OFFICER, WAYNE BANCORP, INC., 112 W. LIBERTY STREET, WOOSTER, OHIO 44691
(TELEPHONE (330) 264-1222). TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS, ANY
REQUESTS SHOULD BE MADE PRIOR TO ________________, 1998.
The following documents previously filed with the Commission by Wayne
(Commission File No. 0-14612) are incorporated herein by reference:
(i) Wayne's Annual Report on Form 10-K for the year ended
December 31, 1996;
(ii) Wayne's Quarterly Reports on Form 10-Q for the three
month periods ended March 31, 1997, June 30, and
September 30, 1997.
In addition, all documents subsequently filed with the Commission by
Wayne pursuant to sections 13(a), 13(e), 14 or 15(d) of the Exchange Act prior
to the date the offering is terminated are incorporated herein by reference. Any
statement contained in a document incorporated or deemed to be modified or
superceded for purposes of this Proxy Statement/Prospectus to the extent that a
statement contained herein (or in any subsequently filed document which also is
deemed to be incorporated by reference herein) modified or superceded shall not
be deemed, except as so modified or superceded, to constitute part of this Proxy
Statement-Prospectus.
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COMPLIANCE WITH THE OHIO CONTROL SHARE ACQUISITION STATUTE
Consummation of the proposed merger of Chippewa with and into Wayne in
accordance with the terms of the Merger Agreement requires compliance with the
Ohio Control Share Acquisition Act (the "Acquisition Act") The Acquisition Act
requires the advance approval of the shareholders of an Issuing Public
Corporation prior to the purchase of a controlling interest in such corporation.
Chippewa is an Issuing Public Corporation within the meaning of the Acquisition
Act and therefore the transactions contemplated by the Merger Agreement must be
approved under the Acquisition Act. A vote for the Merger will also constitute
an affirmative vote to approve the acquisition of 100% of the outstanding shares
of Chippewa Common Stock by Wayne as required by the Acquisition Act. Presented
below is Wayne's Acquiring Person Statement as required by the Acquisition Act.
Wayne submitted its Acquiring Person Statement to Chippewa on the date this
Proxy Statement was first mailed to Chippewa shareholders. Approval under the
Acquisition Act requires the favorable vote of a majority of the shares present
at the meeting in person or by proxy and entitled to vote in the election of
directors as well as a majority vote of such shares excluding any shares held by
interested shareholders, which are defined to include Wayne, any corporate
officer of Chippewa and any employee of Chippewa who is also a director of
Chippewa. In addition "interested shares" are defined to include those acquired
by any person after the first date of public disclosure (October 13, 1997) of
the Merger and prior to the date of the Special Meeting, provided such person
paid over $250,000 for such purchased shares or such purchased shares represents
greater than 5% of the outstanding shares of the Issuing Public Corporation. As
of the Record Date, Wayne owned 1,000 shares of Chippewa constituting 0.22% of
the issued and outstanding shares of Chippewa. Officers and employees of
Chippewa who are interested shareholders within the meaning of the Acquisition
Act owned 4,073 shares of Chippewa. Neither Chippewa nor Wayne are aware of any
other shares of Chippewa Common Stock which could be considered as held by an
interested shareholder as defined by the Acquisition Act.
Wayne's Acquiring Person Statement under the Ohio Control Share Acquisition Act.
1. The identity of the Acquiring Person is Wayne Bancorp, Inc.,
Wooster, Ohio.
2. This Statement is given pursuant to ORC Section 1701.831(B).
3. Wayne owns 1,000 shares of Chippewa Common Stock.
4. If the proposed Merger is consummated, Wayne will acquire
100% of the voting power of Chippewa Common Stock.
5. Wayne proposes to acquire Chippewa in a merger transaction
pursuant to and in accordance with the provisions of ORC Section 1701.78
and the Merger Agreement. The Merger Agreement is incorporated into this
Acquiring Person Statement as if fully restated herein.
6. The proposed control share acquisition, if consummated,
will not be contrary to law. The Proxy Statement-Prospectus in which
this Acquiring Person Statement appears sets forth the facts upon which the
forgoing statement is based and is incorporated by reference into this
Acquiring Person Statement as if fully restated herein.
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SUMMARY
The following summary is not intended to be a complete description of
the proposed Merger and is qualified in all respects by the more detailed
information contained in this Proxy Statement-Prospectus, the Exhibits hereto
and the documents incorporated by reference. As used in this Proxy
Statement-Prospectus, the terms Wayne and Chippewa refer to such corporations,
respectively, and where the context requires, such corporations and their
respective subsidiaries on a consolidated basis. All information concerning
Wayne included in this Proxy Statement-Prospectus has been provided by Wayne;
all information concerning Chippewa included in this Proxy Statement-Prospectus
has been provided by Chippewa.
THE COMPANIES
Wayne Bancorp, Inc. Wayne is an Ohio corporation organized under the
Ohio General Corporation Law in 1986 and is a registered bank holding company
under the Bank Holding Company Act of 1956, as amended. Wayne's common stock is
listed on the NASDAQ/Small Cap Market ("NASDAQ/SC"). The principal asset of
Wayne is its investment in its wholly-owned subsidiary,The Wayne County National
Bank, sometimes referred to herein as "Wayne Bank." Wayne's principal offices
are located at 112 W. Liberty Street, Wooster, Ohio 44691 (telephone (330)
264-1222). For additional information concerning Wayne see "INFORMATION ABOUT
WAYNE." Additional information concerning Wayne is included in the Wayne
documents incorporated herein by reference. See "INCORPORATION OF CERTAIN
DOCUMENTS BY REFERENCE."
Based on financial information as of September 30, 1997, upon
completion of the Merger Wayne will have approximately $488 million in
consolidated assets and approximately $56 million in consolidated equity capital
on a pro forma basis. See the pro forma financial information for the combined
company under "Pro Forma Financial Data." See "INFORMATION ABOUT WAYNE."
Chippewa Valley Bancshares, Inc. Chippewa is a corporation organized
under the Ohio General Corporation Law and is a registered bank holding company
under the Bank Holding Company Act of 1956, as amended, which owns all of the
outstanding capital stock of The Chippewa Valley Bank ("Chippewa Bank").
Chippewa Bank is a banking corporation chartered under the laws of the State of
Ohio. Chippewa's main office is located at 20 South Main Street, Rittman, Ohio
44270 (telephone number (216) 925-1045).
Based upon financial information as of September 30, 1997, Chippewa had
total consolidated assets of approximately $137 million and total consolidated
equity of approximately $11 million.
PROPOSED MERGER
Chippewa and Wayne have entered into a Merger Agreement (the
"Agreement"), dated as of October 13, 1997, providing, among other things, for
the merger of Chippewa with and into Wayne (the "Merger"). See "THE PROPOSED
MERGER." Upon consummation of the Merger, all of the outstanding shares of
Chippewa Common Stock will be converted into between 981,837 and 1,023,737
shares of Wayne Common Stock, in the aggregate, in accordance with the Exchange
Ratio as defined in the Agreement. The number of shares of Wayne issuable in the
Merger is dependent upon the book value of Chippewa as of December 31, 1997
adjusted for certain items, and the weighted average high and low price for
Wayne Common Stock for the ten (10) business days immediately preceding the
effective time of the Merger. Assuming the issuance of 1,002,787 shares, the
midpoint of the shares of Wayne that could be issued in the transaction, each
share of Chippewa Common Stock would be converted into the right to receive
2.2384 shares of Wayne on the effective date of the Merger.
No fractional shares of Wayne Common Stock will be issued in the
Merger, and Wayne will pay cash, without interest, for any fractional share
interests resulting from the respective exchange ratios in accordance with the
terms of the Agreement. See "PROPOSED MERGER--Terms of the Merger." Each
outstanding share of Wayne Common Stock will not change by reason of the Merger.
SPECIAL MEETING INFORMATION
Wayne Special Meeting The Special Meeting of Wayne shareholders to
consider and vote on the Merger Agreement and the issuance of Wayne Common Stock
in the Merger (the "Wayne Special Meeting") will be held on _______________,
1998 at ___:00 __.m., local time, at the Wayne County National Bank, Loan
Department, 2nd
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Floor, 140 W. Liberty Street, Wooster, Ohio 44691. Only holders of record of
Wayne Common Stock at the close of business on _____________ (the "Wayne Record
Date"), will be entitled to vote at the Wayne Special Meeting. At the Wayne
Record Date, there were outstanding and entitled to vote __________ shares of
Wayne Common Stock.
For additional information relating to the Wayne Special Meeting, see
"SPECIAL MEETING INFORMATION."
Chippewa Special Meeting The Special Meeting of Chippewa's shareholders
to consider and vote on the Agreement (the "Special Meeting") will be held on
____________________, 1998, at ___ __.m., local time, at
_______________________________ Rittman, Ohio 44270. Only holders of record of
Chippewa Common Stock at the close of business on ________________, 1998 (the
"Record Date") will be entitled to vote at the Special Meeting. At the Record
Date, there were outstanding and entitled to vote 448,000 shares of Chippewa
Common Stock.
For additional information relating to the Chippewa Special Meeting,
see "SPECIAL MEETING INFORMATION."
VOTE REQUIRED
Chippewa. Approval of the Agreement by the Chippewa shareholders
requires the affirmative vote, in person or by proxy, of the holders of record
of 66 2/3% of the outstanding shares of Chippewa Common Stock. As of the Record
Date there were 448,000 shares of Chippewa Common Stock outstanding and
therefore a vote of at least 298,667 shares is required to adopt the Agreement.
In addition, approval of the proposed acquisition of a controlling interest in
Chippewa by Wayne under the provisions of the Acquisition Act requires the
affirmative vote of shares representing a majority of the shares entitled to
vote in the election of directors present at the special meeting, in person or
by proxy, and a majority of the shares excluding interested shares, as defined
by the Acquisition Act. Each share of Chippewa Common Stock is entitled to one
vote. As of the Record Date, directors and executive officers of Chippewa and
their affiliates owned beneficially approximately 9.64% and Wayne owned 1,000
shares representing 0.22% of the shares of Chippewa Common Stock outstanding on
such date.
Wayne. Approval of the Merger Agreement and the issuance of Wayne
Common Stock in the Merger by the Wayne shareholders requires the affirmative
vote, in person or by proxy, of the holders of record of at least a majority of
the outstanding shares of Wayne Common Stock. Each share of Wayne Common Stock
is entitled to one vote. As of the Wayne Record Date, directors and executive
officers of Wayne and their affiliates owned beneficially approximately 3.0% of
the shares of Wayne Common Stock outstanding on such date. Directors and
executive officers of Wayne have indicated their intention to vote their shares
of Wayne Common Stock in favor of the Merger.
See "MEETING INFORMATION --Votes Required."
REASONS FOR THE MERGER; RECOMMENDATIONS OF THE BOARDS OF DIRECTORS
The respective Boards of Directors of Chippewa and Wayne have each
unanimously approved the Agreement. The Board of Directors of Wayne has also
unanimously authorized the issuance of a sufficient number of shares of Wayne
Common Stock in the Merger. Each Board believes that the Merger is in the best
interests of the shareholders of its respective company. THE BOARD OF DIRECTORS
OF CHIPPEWA UNANIMOUSLY RECOMMENDS A VOTE FOR THE AGREEMENT. THE BOARD OF
DIRECTORS OF WAYNE UNANIMOUSLY RECOMMENDS A VOTE FOR THE AGREEMENT AND THE
PROPOSED ISSUANCE OF THE WAYNE COMMON STOCK PURSUANT TO THE MERGER. See
"PROPOSED MERGER--Reasons for the Merger; Recommendations of the Chippewa Board
of Directors and Recommendations of the Wayne Board of Directors," for a
discussion of the factors considered by the respective Boards in reaching their
decisions to approve the Merger Agreement and the transactions contemplated
thereby.
OPINIONS OF FINANCIAL ADVISORS
Chippewa's financial advisor, Young & Associates ("Young"), has
rendered its opinion to the Board of Directors of Chippewa to the effect that
the consideration to be received by the shareholders of Chippewa upon
consummation of the Merger is fair, from a financial perspective, to the holders
of Chippewa Common Stock. The
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opinion of Young, which is attached as Appendix B to this Proxy
Statement-Prospectus, sets forth the assumptions made, the information analyzed,
and the limitations on the review undertaken in rendering such opinion. See
"PROPOSED MERGER--Opinion of Chippewa's Financial Advisor."
Wayne's financial advisor, Austin Associates, Inc. ("Austin
Associates") has rendered its opinion to the Board of Directors of Wayne to the
effect that the consideration in the form of common stock to be issued by Wayne
to the shareholders of Chippewa upon consummation of the Merger is fair, from a
financial perspective, to Wayne and its shareholders. The opinion of Austin
Associates, which is attached as Appendix C to this Proxy Statement-Prospectus,
sets forth the assumptions made, the information analyzed, and the limitations
on the review undertaken in rendering such opinion. See "PROPOSED
MERGER--Opinion of Wayne's Financial Advisor."
EFFECT ON CHIPPEWA SHAREHOLDERS
Each outstanding share of Chippewa Common Stock on the effective date
of the Merger will be converted in the Merger into shares of Wayne Common Stock
as provided for in the Agreement, see "PROPOSED MERGER -- Terms of the Merger."
Thereafter, the rights of Chippewa shareholders will be governed by Ohio law and
the Articles of Incorporation, as amended, and Code of Regulations, as amended
of Wayne. See "COMPARISON OF SHAREHOLDER RIGHTS."
DISSENTERS' RIGHTS
Pursuant to Ohio Law, shareholders of Chippewa have appraisal rights
and can demand to be paid the fair cash value of their shares of Chippewa Common
Stock if they comply with the procedures of Section 1701.85 of the Ohio General
Corporation Law ("OGCL"). The full text of Section 1701.85 of the OGCL is
attached to this Proxy Statement as Appendix C. See "PROPOSED
MERGER--Dissenters' Rights."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The Merger is expected to qualify for federal income tax purposes as a
tax-free or tax-deferred reorganization. It is a condition to consummation of
the Merger that Wayne and Chippewa each receive an opinion of counsel that the
Merger will qualify as a tax-free or tax-deferred reorganization. Werner & Blank
Co., L.P.A. special counsel to Wayne has issued such opinion for the benefit of
Wayne, Chippewa and their respective shareholders. Such opinion will not be
binding on the Internal Revenue Service.
In the event that the Merger qualifies as a tax-free reorganization,
shareholders of Chippewa will generally recognize no gain or loss for federal
income tax purposes on the exchange of their Chippewa Common Stock for Wayne
Common Stock except to the extent they receive cash as a result of the exercise
of their statutory rights to dissent to the Merger and cash received in exchange
for any fractional share interest resulting from the Exchange Ratio. See
"PROPOSED MERGER - Certain Federal Income Tax Consequences."
CHIPPEWA SHAREHOLDERS SHOULD READ CAREFULLY THE DISCUSSION SET FORTH
UNDER "PROPOSED MERGER - CERTAIN FEDERAL INCOME TAX CONSEQUENCES" AND ARE URGED
TO CONSULT THEIR OWN TAX ADVISORS AS TO THE SPECIFIC CONSEQUENCES TO THEM OF THE
MERGER UNDER FEDERAL, STATE, AND LOCAL AND ANY OTHER APPLICABLE TAX LAWS.
ACCOUNTING TREATMENT
Wayne anticipates that the Merger will be accounted for as a pooling
of interests. See "PROPOSED MERGER - Accounting Treatment."
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EFFECTIVE TIME OF THE MERGER
The Agreement provides that the Merger will take place not later than
the first business day of the first or second calendar month after receipt of
the following approvals relating to the Merger (depending upon when such
approvals are received and waiting periods expire): (i) by the Board of
Governors of the Federal Reserve System (the "Federal Reserve Board") and the
Ohio Division of Financial Institutions ("ODFI") and the expiration of any
required waiting periods following regulatory approval; and (ii) by the
shareholders of Chippewa and Wayne, unless another time is agreed upon in
writing by the parties, provided, that in no event is the Merger to become
effective prior to March 31, 1998. Although there can be no assurance, the
Merger is expected to be consummated during the first part of the second quarter
of 1998.
CONDITIONS TO THE MERGER; REGULATORY APPROVAL
The Merger is conditioned upon approval by the shareholders of Chippewa
and Wayne, the receipt of all required regulatory approvals and upon
satisfaction of other terms and conditions, including receipt of assurance that
the Merger will constitute tax-free or tax-deferred reorganization and qualify
as a pooling of interests for accounting purposes. See "PROPOSED
MERGER-Conditions to the Merger."
Wayne prepared applications and submitted them for filing with the
Federal Reserve Board under the provisions of the Federal Bank Holding Company
Act of 1956, as amended, on December _____, 1997. The application was accepted
for filing on ________________, 199__. The Federal Reserve Board has not yet
approved the application but Wayne believes that such approval will be received,
subject to shareholder approval. Wayne also filed an application for "change of
bank control" with the Ohio Division of Financial Institutions on December ___,
1997. The application was accepted on _______, 199__. While the ODFI has not yet
approved the application, Wayne believes that such approval will be received,
subject to shareholder approval. See "PROPOSED MERGER-Regulatory Approval."
DIVIDENDS
Under the Agreement, Chippewa is allowed to declare a semi-annual cash
dividend at the rate of $0.16 per share at any time prior to December 31, 1997.
Such dividend was paid on December 31, 1997. See "PROPOSED MERGER -Dividends."
TERMINATION, AMENDMENT AND WAIVER
The Merger may be terminated, among other reasons, (i) by mutual
consent of the Boards of Directors of Wayne and Chippewa at any time before the
Merger takes place; or (ii) by either Wayne or Chippewa if (a) the Merger has
not taken place by September 30, 1998, (b) Wayne does not receive all required
regulatory approvals relating to the Merger, (c) any suit, action or proceeding
is pending or overtly threatened seeking to prevent or inhibit the Merger, (d)
if any warranty or representation made by the other party is discovered to have
been untrue in any material respect, or (e) the other party commits one or more
material breaches of the Agreement; or (iii) by Chippewa in the event that the
average bid and asked price of Wayne Common Stock on NASDAQ/SC for the 10 day
period ending on the business day five days before closing is less than $30.00,
subject to a comparable change in the price of other financial institutions. See
"PROPOSED MERGER - Termination, Amendment and Waiver."
Wayne and Chippewa may amend, modify or waive certain terms and
conditions of the Agreement. See "PROPOSED MERGER - Termination, Amendment and
Waiver."
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In the Agreement, Wayne has agreed to cause Philip S. Swope, President,
Chief Executive Officer and a Director of Chippewa, to be appointed and/or
elected as the President and a Director of Wayne. Further, Wayne has agreed to
appoint two persons currently serving on the Chippewa Board of Directors to the
Wayne Board of Directors. Pursuant to the terms of the Agreement, the current
Directors of Chippewa Bank shall constitute the Board of Directors of Chippewa
Bank after consummation of the Merger subject to the right of Wayne to appoint
two additional persons to such Board.
11
<PAGE> 13
RESALES OF WAYNE COMMON STOCK BY AFFILIATES
No restrictions on the sale or transfer of the shares of Wayne Common
Stock issued pursuant to the Merger will be imposed solely as a result of the
Merger, other than restrictions on the transfer of such shares issued to any
Chippewa shareholder who may be deemed to be an "affiliate" of Chippewa for
purposes of Rule 145 under the Securities Act. Directors, executive officers and
10% shareholders are generally deemed to be affiliates for purposes of Rule 145.
Resales of Wayne Common Stock issued to "affiliates" of Chippewa have
not been registered under applicable securities laws in connection with the
Merger. Such shares may only be sold (a) under a separate registration by the
affiliates for distribution (which Wayne has not agreed to provide), (b)
pursuant to Rule 145 under the Securities Act, or (c) pursuant to another
exemption from registration requirements under the Securities Act. For Wayne to
be able to account for the Merger as a pooling of interests, pursuant to
Securities and Exchange Commission requirements, certain additional restrictions
will be placed on affiliates of Chippewa with respect to dispositions of Wayne
Common Stock and Chippewa Common Stock during the period beginning 30 days
before the Merger and ending when the results for 30 days of post-merger
combined operations have been published.
MARKETS AND MARKET PRICES
Chippewa. There is no established public trading market for shares of
Chippewa Common Stock, and shares of Chippewa Common Stock are traded in very
limited quantities in private transactions. Since there are no market makers for
shares of Chippewa Common Stock and there is no recognized exchange on which
shares of Chippewa Common Stock are traded, there is no published source of
prices relating to transactions in Chippewa Common Stock. Most trades of
Chippewa Common Stock occur as a result of private and isolated transactions,
with the result that management of Chippewa is not directly informed of trades
or prices of shares of Chippewa Common Stock. Because of the very limited market
for shares of Chippewa Common Stock, the actual per share prices shown below may
not be indicative of the value of a share of Chippewa Common Stock.
The table below sets forth, for the periods indicated, the prices of
actual trades of Chippewa Common Stock known to management of Chippewa which
have been made from January 1, 1994 through December 31, 1997. The last trade of
Chippewa Common Stock of which management of Chippewa is aware occurred during
the fourth quarter of 1997 and involved the sale of 200 shares at a price of
$37.00 per share.
Chippewa's management has not verified the accuracy of the following
prices for trades of Chippewa Common Stock. Further, these prices may not be a
reliable indicator of the price at which more than a limited number of shares
would trade, and there may have been additional shares of Chippewa Common Stock,
traded at higher or lower prices of which Chippewa's management is unaware.
12
<PAGE> 14
Number of
Shares Traded Avg. Price
During Quarter Per Share(1)
-------------- ------------
1995
- ----
First Quarter 660 $19.50
Second Quarter N/A(2) N/A(2)
Third Quarter N/A(2) N/A(2)
Fourth Quarter 800 $21.00
1996
- ----
First Quarter 900 $21.50
Second Quarter 750 $21.50
Third Quarter 3,300 $24.44
Fourth Quarter 1,070 $29.375
1997
- ----
First Quarter 2,000 $30.415
Second Quarter N/A(2) N/A(2)
Third Quarter N/A(2) N/A(2)
Fourth Quarter 1,110 $37.00
- --------------------------------------------------------------------------------
(1) Prices adjusted to reflect 2 for 1 stock split effective April 7, 1997.
(2) Management is not aware of any trades for the period indicated.
The above table includes transactions involving directors and officers of
Chippewa.
Chippewa has paid or will pay semiannual dividends of $0.1375, $0.15
and $0.16 per share (figures adjusted for 2 for 1 stock split) on Chippewa
Common Stock in each of the years ended December 31, 1995, 1996, and 1997,
respectively. As of December 31, 1995, 1996 and 1997, there were 448,000 shares
of Chippewa Common Stock outstanding.
Wayne Markets and Market Prices and Equivalent Per Share Data. Shares
of Wayne Common Stock are traded in the over-the-counter market and are listed
in NASDAQ/SC. The following table sets forth the last reported sale price per
share of Wayne Common Stock on the dates indicated.
The equivalent per share price of Chippewa Common Stock at each
specified date assumes the issuance of 1,002,787 shares, the midpoint of the
number of shares of Wayne that could be issued in the transaction, such that
each share of Chippewa Common Stock would be converted into the right to receive
2.2384 shares of Wayne on the effective date of the Merger. On September 30,
1997, Wayne shares were traded at $41.00 per share. See "SUMMARY -- Selected
Comparative Per Share Data." The actual exchange ratio will be determined by the
book value of Chippewa as of December 31, 1997 adjusted by certain items and the
trading prices of Wayne Common Stock for the 10 business day period ending 5
days prior to the effective time of the Merger and may be different than the
assumed exchange ratio.
13
<PAGE> 15
<TABLE>
<CAPTION>
EQUIVALENT PER SHARE INFORMATION
--------------------------------
WAYNE CHIPPEWA
MARKET VALUE PER SHARE AT: COMMON STOCK COMMON STOCK(1)
-------------------------- ------------ ---------------
Per Share Equivalent
Per share
<S> <C> <C>
December 31, 1995 $19.42 $43.47
March 31, 1996 $21.08 $47.17
June 30, 1996 $23.50 $52.60
September 30, 1996 $24.70 $55.29
December 31, 1996 $28.34 $64.44
March 31, 1997 $38.00 $85.06
June 30, 1997 $38.00 $85.06
September 30, 1997 $41.00 $91.77
</TABLE>
(1) Assumes an exchange ratio of 2.2384 shares of Wayne Common Stock for each
share of Chippewa Common Stock which is the midpoint of the exchange ratio.
On October 10, 1997 the business date immediately preceding the public
announcement of the Merger, the reported last sales price of Wayne Common Stock
was $41.75 per share. There were no reported sales of Chippewa Common Stock on
that date. Shareholders are advised to obtain current market quotations for
Wayne Common Stock. No assurance can be given as to the market price of Wayne
Common Stock or Chippewa Common Stock at or, in the case of Wayne Common Stock,
after the effective time of the Merger.
On September 30, 1997, there were approximately 1,258 holders of record
of Wayne Common Stock and 215 holders of record of Chippewa Common Stock.
SELECTED FINANCIAL DATA
The following unaudited tables present selected historical financial
information and selected pro forma combined financial information for Wayne and
Chippewa. This information should be read in conjunction with the historical and
pro forma financial statements and notes thereto included elsewhere in or
incorporated by reference to this Prospectus-Proxy Statement. The pro forma
combined financial information gives effect to the Merger. The pro forma
combined financial information may not be indicative of the results that
actually would have occurred if the Merger had been in effect on the dates
indicated or which may be attained in the future. The pro forma combined
financial information has been prepared on the assumption that the Merger will
be accounted for under the pooling of interests method of accounting. Further,
the pro forma financial information assumes the issuance of 1,002,787 shares,
the midpoint of the shares of Wayne that could be issued in the transaction,
such that each share of Chippewa Common Stock would be converted into the right
to receive 2.2384 shares of Wayne on the effective date of the Merger. Such
1,002,787 amount includes the issuance of 2,238 shares to Wayne representing the
1,000 shares of Chippewa Common Stock currently owned by Wayne multiplied by the
exchange ratio.
14
<PAGE> 16
SELECTED FINANCIAL DATA
HISTORICAL
WAYNE BANCORP, INC.
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31 9 MONTHS ENDED
1996 1995 1994 1993 1992 9/30/97 9/30/96
---- ---- ---- ---- ---- ------- -------
WAYNE BANCORP, INC.
(Historical)
<S> <C> <C> <C> <C> <C> <C> <C>
Income Statement Data:
Net Interest Income $ 14,984 $ 14,214 $ 13,165 $ 11,945 $ 11,561 $ 11,628 $ 11,183
Provision for Loan
Losses 180 120 346 600 750 135 135
Noninterest Income 3,893 2,765 2,597 2,639 2,510 2,004 2,209
Invest Sec Gains 6 (12) 2 0 0 (6) (1)
Noninterest Expense 10,751 10,530 9,838 9,092 9,036 7,556 7,802
Provision for Income Tax 2,420 1,832 1,560 1,220 1,171 1,829 1,662
-------- --------- -------- -------- -------- --------- ---------
Net Income 5,532 4,485 4,020 3,672 3,114 4,106 3,792
Balance Sheet Data
(period end):
Assets $352,393 $ 330,927 $315,685 $299,735 $291,282 $ 351,190 $ 334,692
Deposits 281,686 274,747 266,545 258,759 254,773 276,824 269,139
Loans, Net 215,072 208,406 193,479 178,107 171,666 234,845 215,229
Long-term Debt 0 0 0 0 0 0 0
Shareholders' Equity 41,489 37,937 33,640 30,750 27,855 44,657 40,005
Capital Ratios:
Equity to Assets Ratio 11.77% 11.46% 10.66% 10.26% 9.56% 12.72% 11.95%
Tier 1 Risk-based
Capital Ratio 18.25% 17.12% 16.80% 16.05% 15.50% 19.74% 18.73%
Total Risk-based
Capital Ratio 19.51% 18.38% 18.06% 17.31% 16.75% 20.72% 19.63%
Other Ratio:
Allowance for Loan Losses
to Underperforming Loans* 330.7% 1,699.5% 1,959.1% 3,304.3% 701.1% 2,511.2% 1,692.4%
</TABLE>
*Loans past due 90 days plus loans on nonaccrual
15
<PAGE> 17
SELECTED FINANCIAL DATA
HISTORICAL
CHIPPEWA VALLEY BANCSHARES, INC.
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 9 MONTHS ENDED
1996 1995 1994 1993 1992 9/30/97 9/30/96
---- ---- ---- ---- ---- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
CHIPPEWA VALLEY BANCSHARES, INC.
(Historical)
Income Statement Data:
Net Interest Income $ 4,498 $ 3,799 $ 3,432 $ 3,400 $ 3,293 $ 3,779 $ 3,294
Provision for Loan Losses 120 110 48 96 101 95 90
Noninterest Income 566 488 418 405 378 496 419
Invest Sec Gains (2) 0 (18) 0 0 (2) (2)
Noninterest Expense 3,636 2,949 2,583 2,428 2,317 2,802 2,625
Provision for Income Taxes 328 315 293 323 348 382 261
--------- -------- -------- ------- ------- --------- ---------
Net Income 978 913 908 958 905 994 735
Balance Sheet Data (period end):
Assets $ 131,598 $101,340 $ 89,354 $84,968 $80,404 $ 136,939 $ 129,479
Deposits 114,953 85,960 76,285 72,678 68,997 117,648 113,434
Loans, Net 69,578 58,305 49,076 44,784 43,924 78,220 65,945
Long-term Debt 213 427 640 0 0 0 213
Shareholders' Equity 10,103 9,259 8,263 8,260 7,411 11,055 9,758
Capital Ratios:
Equity to Assets Ratio 7.68% 9.14% 9.25% 9.72% 9.22% 8.07% 7.54%
Tier 1 Risk-based Capital Ratio 11.30% 15.60% 17.86% 17.39% 16.64% 11.57% 11.65%
Total Risk-based Capital Ratio 12.20% 16.50% 18.83% 18.32% 17.52% 12.42% 12.47%
Other Ratio:
Allowance for Loan Losses to
Nonperforming Loans* 106.6% 230.3% 3,260.0% 967.4% 812.5% 56.67% 643.01%
</TABLE>
* Loans past due 90 days plus loans on nonaccrual and troubled debt
restructurings
16
<PAGE> 18
SELECTED FINANCIAL DATA
PRO FORMA COMBINED
WAYNE BANCORP, INC. AND CHIPPEWA BANCORP, INC
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 9 MONTHS ENDED
1996 1995 1994 1993 1992 9/30/97 9/30/96
---- ---- ---- ---- ---- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
WAYNE BANCORP, INC.
AND CHIPPEWA VALLEY
BANCSHARES, INC.
(Pro Forma Combined)
Income Statement Data:
Net Interest Income $ 19,482 $ 18,013 $ 16,597 $ 15,345 $ 14,854 $ 15,407 $ 14,477
Provision for Loan Losses 300 230 394 696 851 230 225
Noninterest Income 4,459 3,253 3,016 3,044 2,888 2,499 2,628
Invest Sec Gains 4 (12) (16) 0 0 (8) (3)
Noninterest Expense 14,387 13,480 12,422 11,520 11,352 10,357 10,427
Provision for Income Tax 2,748 2,147 1,853 1,543 1,520 2,211 1,923
-------- --------- --------- -------- -------- --------- ---------
Net Income 6,510 5,397 4,928 4,630 4,019 5,100 4,527
Balance Sheet Data (period
end):
Assets $483,991 $ 432,267 $ 405,039 $384,703 $371,686 $ 488,129 $ 464,171
Deposits 396,639 360,707 342,830 331,437 323,770 394,472 382,573
Loans, Net 284,650 266,711 242,555 222,891 215,590 313,065 281,872
Long-term Debt 213 427 640 0 0 0 213
Shareholders' Equity 51,592 47,196 41,903 39,010 35,266 55,712 49,763
Capital Ratios:
Equity to Assets Ratio 10.66% 10.92% 10.35% 10.14% 9.49% 11.41% 10.72%
Tier 1 Risk-based Capital 16.45% 16.79% 17.01% 16.33% 15.74% 17.29% 16.64%
Ratio
Total Risk-based Capital 17.61% 17.97% 18.21% 17.52% 16.91% 18.44% 17.78%
Ratio
Other Ratio:
Allowance for Loan Losses to
Underperforming Loans 253.7% 913.2% 2,061.3% 2,525.4% 713.7% 876.9% 1,384.5%
</TABLE>
*Loans past due 90 days plus loans on nonaccrual
17
<PAGE> 19
COMPARATIVE PER SHARE DATA
The following unaudited table sets forth certain unaudited historical
and pro forma combined per common share information for Wayne and certain
historical and equivalent pro forma combined per common share information for
Chippewa. The data is derived from financial statements of Wayne and Chippewa
incorporated by reference or included elsewhere in this Proxy
Statement-Prospectus. The pro forma combined per share information for Wayne and
the equivalent pro forma combined per share information for Chippewa are stated
as if Chippewa had always been affiliated with Wayne, giving effect to the
proposed transaction under the pooling of interests method of accounting,
assuming the issuance of 1,002,787 shares, the midpoint of the shares of Wayne
that could be issued in the transaction, such that each share of Chippewa Common
Stock would be converted into the right to receive 2.2384 shares of Wayne on the
effective time of the Merger. The information presented below has been restated
to reflect stock dividends and stock splits.
SELECTED FINANCIAL DATA
PER SHARE DATA
HISTORICAL FINANCIAL DATA
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 9 MONTHS ENDED
1996 1995 1994 1993 1992 9/30/97 9/30/96
---- ---- ---- ---- ---- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
HISTORICAL PER SHARE DATA
Wayne Bancorp, Inc. (Wayne)
Net Income per Common Share $ 1.41 $ 1.14 $ 1.03 $ 0.94 $ 0.80 $ 1.04 $ 0.96
Cash Dividends Paid per Common Share $ 0.37 $ 0.34 $ 0.29 $ 0.27 $ 0.24 $ 0.31 $ 0.28
Book Value per Common Share (at $ 10.55 $ 9.65 $ 8.58 $ 7.89 $ 7.14 $ 11.35 $ 10.16
period end)
*Chippewa Valley Bancshares, Inc.
(Chippewa)
Net Income per Common Share $ 2.18 $ 2.04 $ 1.91 $ 2.00 $ 1.89 $ 2.22 $ 1.64
Cash Dividends Paid per Common Share $ 0.30 $ 0.28 $ 0.25 $ 0.23 $ 0.20 $ 0.16 $ 0.15
Book Value per Common Share
(at period end) $ 22.55 $ 20.67 $ 18.44 $ 17.21 $ 15.44 $ 24.68 $ 21.78
</TABLE>
* Periods prior to 1997 have been adjusted to reflect a 2 for 1 stock split,
which was effective April 7, 1997.
SELECTED FINANCIAL DATA
PER SHARE DATA
PRO FORMA FINANCIAL INFORMATION
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 9 MONTHS ENDED
1996 1995 1994 1993 1992 9/30/97 9/30/96
---- ---- ---- ---- ---- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Pro Forma Combined, Wayne and
Chippewa per Wayne Share
Net Income per Common Share $ 1.32 $ 1.09 $ 1.00 $ 0.94 $ 0.81 $ 1.03 $ 0.91
Cash Dividends Paid per Common Share 0.37 0.34 0.29 0.27 0.24 0.31 0.28
Book Value per Common Share
(at period end) 10.45 9.56 8.53 7.90 7.15 11.28 10.08
*Equivalent Pro Forma Combined, Wayne,
and Chippewa per Chippewa Share
Net Income per Common Share $ 2.95 $ 2.44 $ 2.22 $ 2.10 $ 1.81 $ 2.31 $ 2.04
Cash Dividends Paid per Common Share 0.83 0.76 0.65 0.60 0.54 0.69 0.62
Book Value per Common Share
(at period end) 23.39 21.40 19.09 17.68 16.00 25.25 22.56
</TABLE>
*All pro forma per share figures are based upon the issuance of 1,002,787
shares in connection with the Chippewa merger, including 2,238 that would be
issued to Wayne as the current holder of 1,000 shares of Chippewa Common Stock.
18
<PAGE> 20
MEETING INFORMATION
GENERAL
This Joint Proxy Statement-Prospectus is being furnished to holders of
Wayne Common Stock in connection with the solicitation of proxies by the Board
of Directors of Wayne for use at the Wayne Special Meeting: (i) to consider and
vote upon the approval of the Merger Agreement and the issuance of Wayne Common
Stock upon consummation of the Merger in accordance with the Agreement; and (ii)
to transact such other business as may properly come before the Wayne Special
Meeting or any adjournments or postponements thereof. Each copy of this Joint
Proxy Statement-Prospectus mailed to the holders of Wayne Common Stock is
accompanied by a form of proxy for use at the Wayne Special Meeting.
This Proxy Statement-Prospectus is being furnished to holders of
Chippewa Common Stock in connection with the solicitation of proxies by the
Board of Directors of Chippewa for use at the Special Meeting to consider and
vote upon the adoption of the Agreement and to transact such other business as
may properly come before the Special Meeting or any adjournments or
postponements thereof. Each copy of this Proxy Statement-Prospectus mailed to
the holders of Chippewa Common Stock is accompanied by a form of proxy for use
at the Special Meeting.
This Proxy Statement-Prospectus is also furnished by Wayne to Chippewa
shareholders as a Prospectus in connection with the issuance by Wayne of shares
of Wayne Common Stock upon consummation of the Merger in accordance with the
Agreement. This Proxy Statement-Prospectus, the attached Notice, and the form of
proxy enclosed herewith are first being mailed to shareholders of Chippewa and
Wayne on or about ______________, 1998.
DATE, PLACE AND TIME
The Wayne Special Meeting: The Wayne Special Meeting will be held at
Wayne County National Bank, Loan Department, 2nd Floor, 140 Liberty Street,
Wooster, Ohio 44691, on _________________, 1998, at __:00 __.m. local time.
The Chippewa Special Meeting: The Chippewa Special Meeting will be held
at the main office of Chippewa Bank, 20 South Main Street, Rittman, Ohio 44270,
on _________________, 1998, at __:00 __.m. local time.
RECORD DATES
Wayne. The Board of Directors of Wayne has fixed the close of business
on _____________ as the Wayne Record Date for the determination of the holders
of Wayne Common Stock entitled to receive notice of and to vote at the Wayne
Special Meeting.
Chippewa. The Board of Directors of Chippewa has fixed the close of
business on ___________ as the Chippewa Record Date for the determination of the
holders of Chippewa Common Stock entitled to receive notice of and to vote at
the Chippewa Special Meeting.
VOTES REQUIRED
Wayne. As of the Wayne Record Date, there were ___________ shares of
Wayne Common Stock outstanding. Holders of Wayne Common Stock are entitled to
one vote per share. Under applicable provisions of Ohio law and the Articles of
Incorporation of Wayne, the affirmative vote of at least a majority of the
outstanding shares of Wayne Common Stock is required to approve the Merger
Agreements and the issuance of Wayne Common Stock upon consummation of the
Merger.
19
<PAGE> 21
As of the Wayne Record Date, directors and executive officers of Wayne
(____ persons) and their affiliates owned beneficially an aggregate of _________
shares of Wayne Common Stock or approximately _____% of the shares of Wayne
Common Stock outstanding on such date. Directors and executive officers of Wayne
have indicated their intention to vote their shares of Wayne Common Stock in
favor of the Merger. As of the Wayne Record Date, Wayne owned 1,000 shares
(0.22%) of the Chippewa Common Stock and the directors and executive officers of
Wayne beneficially owned no shares of Chippewa Common Stock.
Chippewa. As of the Record Date, there were 448,000 shares of Chippewa
Common Stock outstanding. Holders of Chippewa Common Stock are entitled to one
vote per share. Under applicable provisions of Ohio Law and the Amended and
Restated Articles of Incorporation of Chippewa, the affirmative vote of at least
66 2/3% of the outstanding shares of Chippewa Common Stock is required to
approve the Agreement. In addition, approval of the proposed acquisition of a
controlling interest in Chippewa by Wayne under the provisions of the
Acquisition Act requires the affirmative vote of shares representing a majority
of the shares entitled to vote in the election of directors present at the
special meeting in person or by proxy and a majority of the shares excluding
interested shares, as defined by the Acquisition Act. Each share of Chippewa
Common Stock is entitled to one vote.
As of the Record Date, directors and executive officers of Chippewa
11 persons) and their affiliates owned beneficially an aggregate of 43,185
shares of Chippewa Common Stock or approximately 9.64% of the shares of Chippewa
Common Stock outstanding on such date. As of the Record Date, directors and
executive officers of Chippewa beneficially owned no shares of Wayne Common
Stock.
VOTING AND REVOCATION OF PROXIES
Shares of Wayne Common Stock and Chippewa Common Stock represented by a
proxy properly signed and received on or prior to the appropriate Special
Meeting, unless subsequently revoked, will be voted in accordance with the
instructions thereon. IF A PROXY IS SIGNED AND RETURNED WITHOUT INDICATING ANY
VOTING INSTRUCTIONS, SHARES OF WAYNE COMMON STOCK REPRESENTED BY PROXY WILL BE
VOTED FOR THE PROPOSAL TO APPROVE THE MERGER AGREEMENT AND ISSUANCE OF WAYNE
COMMON STOCK UPON CONSUMMATION OF THE MERGER AND SHARES OF CHIPPEWA COMMON STOCK
REPRESENTED BY PROXY WILL BE VOTED FOR THE MERGER AGREEMENT. Any proxy given
pursuant to this solicitation may be revoked by the person giving it at any time
before the proxy is voted by the filing of an instrument revoking it or of a
duly executed proxy bearing a later date with the Secretary of Wayne, for Wayne
shareholders, or with the Secretary of Chippewa, for Chippewa shareholders,
prior to or at the appropriate Special Meeting, or by voting in person at the
appropriate Special Meeting. Attendance at the Special Meetings will not in and
of itself constitute a revocation of a proxy.
The respective Boards of Directors of Wayne and Chippewa are not aware
of any business to be acted upon at their respective Special Meetings other than
as described herein. If, however, other matters properly come before any of the
Special Meetings, or any adjournments or postponements thereof, the person(s)
appointed as proxies will have discretion to vote or act thereon according to
their best judgment.
Ohio law affords dissenters' rights to holders of Chippewa Common Stock
in connection with the Merger. For additional information regarding dissenters'
rights see "PROPOSED MERGER - Dissenters' Rights".
SOLICITATION OF PROXIES
In addition to solicitation by mail, directors, officers and employees
of Wayne and Chippewa, who will not be specifically compensated for such
services, may solicit proxies from the shareholders of Wayne and Chippewa,
respectively, personally or by telephone or other forms of communication.
Brokerage houses, nominees, fiduciaries, and other custodians will be requested
to forward soliciting materials to beneficial owners and will be reimbursed for
the reasonable expenses incurred in doing so.
Neither Wayne nor Chippewa anticipates that anyone will be specially
engaged to solicit proxies or that special compensation will be paid for that
purpose, but Wayne and Chippewa each reserve the right to do so should
20
<PAGE> 22
it conclude that such efforts are needed. Wayne and Chippewa will each bear its
own expenses in connection with the solicitation of proxies for its Special
Meeting. See "PROPOSED MERGERS -- Expenses."
HOLDERS OF WAYNE COMMON STOCK ARE REQUESTED TO COMPLETE, DATE AND SIGN
THE ACCOMPANYING PROXY AND RETURN IT PROMPTLY TO WAYNE IN THE ENCLOSED
POSTAGE-PREPAID ENVELOPE. HOLDERS OF CHIPPEWA COMMON STOCK ARE REQUESTED TO
COMPLETE, DATE AND SIGN THE ACCOMPANYING PROXY AND RETURN IT PROMPTLY TO
CHIPPEWA IN THE ENCLOSED POSTAGE-PREPAID ENVELOPE.
PROPOSED MERGER
This section of the Proxy Statement-Prospectus describes certain
aspects of the proposed Merger. The following description does not purport to be
complete and is qualified in its entirety by reference to the Agreement which is
attached as Exhibit A to this Proxy Statement-Prospectus and is incorporated
herein by reference.
BACKGROUND AND REASONS FOR THE MERGER
Chippewa. In mid September of 1997 the management of Chippewa met to
discuss an indication of interest received from Wayne with respect to a possible
merger transaction (the "Merger"). At that time the Board of Directors
authorized Chippewa's management to pursue preliminary discussions with Wayne
with a view to obtaining information regarding the merger.
Late in September of 1997 Chippewa's Board of Directors met to discuss
Wayne's offer of a merger as outlined in a "Letter of Intent". The Board of
Directors authorized the signing of the "Letter of Intent". The Board of
Directors also authorized management to conduct a due diligence investigation of
Wayne and to retain the firm of Dinsmore & Shohl as it's legal advisor to assist
in the negotiation and completion of the definitive merger agreement. During the
following weeks, Chippewa and Wayne and their respective financial and legal
advisors engaged in negotiations concerning the terms of the Merger and each of
Wayne and Chippewa performed due diligence reviews of the other.
On October 13, 1997, Chippewa's Board of Directors met to consider the
proposed terms of the Merger. This Meeting included an oral report of the due
diligence findings by Chippewa's management as well as a review of the proposed
definitive agreement, including the summary of it's legal advisor. The Board of
Directors authorized the engagement of Young & Associates, ("Young") as their
financial advisor to provide an opinion to Chippewa as to the fairness of the
transaction to the stockholders of Chippewa from a financial standpoint.
At the October 13, 1997 meeting, Chippewa's Board of Directors
unanimously approved the Merger based upon the following factors. (1) the
overall financial terms of the Merger; (2) Wayne's representations with respect
to the operation of Chippewa and Chippewa Bank after the Merger; (3) the
short-term and long-term prospects of Chippewa and Chippewa Bank; (4) current
long-term industry developments and trends; (5) competitive factors and (6)
considerations concerning the employees of Chippewa Bank and the communities in
which it operates.
RECOMMENDATION OF THE CHIPPEWA BOARD OF DIRECTORS
THE BOARD OF DIRECTORS OF CHIPPEWA UNANIMOUSLY RECOMMENDS THAT THE
SHAREHOLDERS OF CHIPPEWA VOTE FOR APPROVAL OF THE AGREEMENT.
Wayne. In September of 1997 the Board of Directors of Wayne authorized
Wayne management to proceed to negotiate a letter of intent with Chippewa.
Subsequent to entering into a letter of intent with Chippewa regarding the
proposed Merger, Wayne conducted a due diligence investigation of Chippewa and
completed negotiations for the definitive merger agreement.
On October 13, 1997, Wayne's Board of Directors met to consider the
proposed terms of the Merger. This Meeting included a presentation by Austin
Associates and Wayne's legal advisor, which included summaries of
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financial and valuation analyses, the terms of the proposed acquisition as set
forth in the Agreement, regulatory and accounting matters, the due diligence
findings of Wayne's management, and Austin Associates' written opinion relating
to the fairness of the Merger to the shareholders of Wayne from a financial
perspective. At the conclusion of this meeting, the Board of Directors of Wayne
authorized Wayne's management to execute the Agreement with Chippewa in the form
which had been reviewed on that date by the Wayne Board of Directors. The Merger
Agreement was executed on October 13, 1997.
The Board of Directors of Wayne has concluded that the Merger would be
in the best interests of Wayne and its shareholders. Numerous factors were
considered by the Board of Directors of Wayne in approving and recommending the
terms of the Merger. These factors included information concerning the financial
condition, results of operations, and prospects of Wayne and Chippewa; the
capital adequacy of the resulting entity; the composition of the businesses of
the two organizations in the rapidly changing banking and financial services
industry; the historical and current market prices of each company's stock and
of certain other bank holding companies whose securities are publicly traded;
the relationship of the consideration to be paid in the Merger to such market
prices and to the book value and earnings per share of Chippewa and the
financial terms of certain other recent business combinations in the banking
industry. In addition the Board of Directors considered the advice of its
financial advisor, Austin Associates, Inc.
The Board of Directors of Wayne believes that combining with Chippewa
which has established banking operations in Rittman, Ohio is a natural and
desirable extension of Wayne's market area. The Board of Directors of Wayne also
believes that the consolidation of resources by reason of the Merger will enable
the resulting organization to provide a wider and improved array of financial
services to customers and to achieve added flexibility in dealing with the
changing competitive environment in the financial services industry.
RECOMMENDATION OF THE WAYNE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS OF WAYNE UNANIMOUSLY RECOMMENDS THAT THE
SHAREHOLDERS OF WAYNE VOTE FOR APPROVAL OF THE AGREEMENT.
OPINION OF CHIPPEWA'S FINANCIAL ADVISOR
Chippewa retained Young & Associates, Inc., a financial institution
consulting firm located in Kent, Ohio, to issue a fairness opinion in connection
with the Merger. Young & Associates issued its written opinion to the Board of
Directors on November 13, 1997, stating that the terms of the Merger Agreement
were fair and equitable to Chippewa and its shareholders from a financial point
of view. Young & Associates updated its opinion to ________, 199___ and
reaffirmed that the terms of the Merger Agreement were fair and equitable to
Chippewa and its shareholders from a financial point of view. A copy of the
opinion of Young & Associates is set forth as Appendix B to this Joint Proxy
Statement-Prospectus and should be read in its entirety.
Young & Associates, Inc., regularly evaluates financial institutions
and their securities for a wide range of purposes, including, but not limited
to, mergers and acquisitions. Chippewa selected Young & Associates to issue a
fairness opinion on the basis of its experience, reputation, and qualifications.
The participation of Young & Associates was limited solely to the
issuing of the fairness opinion. The firm was not involved in any other capacity
and did not participate in any of the negotiations between Chippewa and Wayne.
Young & Associates considered information from various public and
non-public sources in arriving at its opinion including, but not limited to, the
following: (1) financial data of Chippewa Valley from December 31, 1992 through
September 30, 1997, from published annual reports, internal bank reports,
interviews with bank management, and its Uniform Bank Performance Report
("UBPR"), which provides a comparison of banks with other banks sharing similar
characteristics; (2) financial data of Wayne from Sheshunoff Data Services,
Inc., which compiles data derived from all bank regulatory reports and provides
certain peer group comparisons; (3) information
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from the financial and banking press concerning mergers and acquisitions similar
to that proposed in the Merger Agreement; (4) this Joint Proxy
Statement/Prospectus; (5) pro forma financial projections of Chippewa; and (6) a
table of relative price/book of the transaction constructed by Young &
Associates at various share prices of Wayne.
Young & Associates performed several analyses which are common within
the banking industry and made certain assumptions, which it believes to be
reasonable, about future performance. As with any projection of future outcomes,
actual performance may vary. The focus of the analysis was on the value of
Chippewa as an independent entity, and whether the Merger fairly compensated the
shareholders of Chippewa for that value; whether the Merger provided adequately
for declines in the price of Wayne shares both at the time of the Merger and
after; whether the price/book to Chippewa at various prices of Wayne shares was
relative to similar and recent Merger transactions; and how the earnings
performance of Wayne compared with banks sharing similar characteristics.
Financial Analysis of Chippewa and Forecast.
Young & Associates analyzed the past and present earnings performance
of Chippewa and its subsidiary, Chippewa Bank, compared the bank with peers, and
projected earnings ten years into the future. Various assumptions were developed
through interviews with management and are believed to be reasonable and
attainable.
The earnings of Chippewa Bank measured by return on average assets
("ROA") have tended to trail peer banks slightly from December 31, 1992, through
June 30, 1997 (the last date for which comparative data were available). As of
June 30, 1997, for example, Chippewa Bank's ROA was 1.03 percent compared with
1.31 percent for peers. The return on average equity ("ROE") for Chippewa Bank
also trailed peer banks very slightly during the same period, reflecting 12.86
percent as of June 30, 1997, versus average peer ratios of 13.93 percent.
Earnings, however, were characterized by better than average control of loan
losses, evidenced by lower provisions for loan losses, lower net losses to
average loans, and higher earnings coverage of loan losses. Earnings are also
aided by adequate control of overhead expenses, evidenced by non-interest income
to average assets at peer bank levels.
Net interest income as a percent of average assets has lagged behind
peer banks (3.98 percent versus 4.37 percent as of June 30, 1997) primarily
because of a loan mix heavily weighted toward residential mortgages and a lower
percentage of loans to average assets. Non-interest income to average assets has
also trailed peer banks slightly. The management of Chippewa Bank expects to
improve net interest income by increasing loans through both origination and the
purchase of participation loans and changing the mix of the loan portfolio by
increased emphasis on consumer and commercial lending. Non-interest income will
be improved primarily by fees from the bank's alternative investment program and
additional fees on ATM transactions.
With the improvements to both net interest income and non-interest
income anticipated above achieved gradually, Young & Associates believes it
reasonable to assume that ROA would reach the 1.31 percent peer level by
year-end 1999 and continue to improve. The probability that the improvements
will be realized should be aided by the merger, since Wayne has consistently
achieved net interest income levels above peer banks, has historically had
better than average control of loan losses, and has consistently managed
non-interest expense to a level below its peer banks.
The ten-year forecast of earnings was discounted to a present value to
develop a probable trading range of the shares of Chippewa as an independent
entity. Young & Associates believes that the shares of Chippewa should command
a price between 1.5 and 1.6 times book value or roughly 13.7 to 15 times
twelve-month trailing earnings before any consideration is given to the Merger.
Terms of Agreement - Exchange Ratio.
The Agreement provides that the 448,000 shares of Chippewa will be
exchanged for between 981,837 and l,023,737 shares of Wayne. The exchange was
estimated to be 350 percent of book value to the shareholders of Chippewa,
assuming that, as of December 31, 1997, the book value per share of Chippewa
would be $24.89 and the market price per share of Wayne would be $39.75 at the
minimum number of shares of Wayne (981,837). The agreement further provides that
"the average price of Wayne Common Stock shall not be less than $30.00..." with
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the additional provision that Chippewa cannot terminate the Merger below the
$30.00 price if ... "the S & P Major Regional Bank Index declines 25 percent..."
Value of Exchange to Shareholders of Chippewa and Comparison.
Young & Associates constructed a computer model which showed the change
in the multiple of book value to the shareholders of Chippewa at various prices
of Wayne and compared those results with other mergers in the third quarter of
1997. The Agreement will produce 350 percent of book value to the shareholders
of Chippewa at all values of Wayne between approximately $38.25 and $39.75 per
share as assumed in the maximum and minimum number of shares stated in the
Exchange Ratio. Values of Wayne below $38.25 would reduce the multiple of book
value to Chippewa, and values above $39.75 would increase the multiple of book
value to Chippewa.
As of October 20, 1997, the shares of Wayne were $44.25 per share or
28.4 times twelve-month trailing earnings. That price, if sustained and all
other relative values remained equal, would result in a price/book to Chippewa
shareholders of approximately 394 percent. The price/book to Chippewa would be
approximately 270 percent if the share price of Wayne fell to the $30.00 minimum
described above. $30.00 per share would be approximately 19 times Wayne's
twelve-month trailing earnings.
In the October 3, 1997, American Banker an article, "Time to Sell?..."
referring to a study by Sheshunoff Information Services, Inc., reported that for
the third quarter of 1997 the average price/book for merger/acquisitions for
banks under three billion dollars in assets was 2.02 times book value. From the
October 13, 1997, American Banker, "Market Monitor" - Midwestern Community
Banks, Young & Associates selected 24 banks and arrived at an average
price/earnings ratio ("P/E") of 18.64 times earnings. The selection considered
all banks in the "Market Monitor" except those showing PEs obviously affected
by unusually low trailing earnings or accounting adjustments.
Comparing the terms of the Merger and applying the Exchange Ratio at
various share prices of Wayne, Young & Associates concludes that the exchange,
even at the $30.00 minimum share price of Wayne, will produce a multiple in
excess of that of the average of similar transactions. At $30.00 per share for
Wayne the P/E is very near the average of Midwestern Community Banks. It is also
important to note that, even if the price per share of Wayne declined to
approximately $22.00, shareholders of Chippewa would still receive the
equivalent of 202 percent of book value, the third quarter average referred to
above. The latter point would apply only in the event of a decline in the share
price of Wayne of over 50 percent from the October 20, 1997, level. Young &
Associates assets, therefore, that shareholders of Chippewa will receive fair
value for the exchange at the time of the Merger and beyond.
Financial Performance of Wayne Bank.
Through December 31, 1996, Wayne Bank achieved an ROA of 1.65 percent,
placing it in the top 29 percent of Ohio banks as ranked by Sheshunoff
Information Services, Inc. The ROE of Wayne Bank was 15.19 percent, somewhat
below that of peers at 17.77 percent. The latter comparison should be understood
in light of Wayne Bank's higher than peer equity/total assets ratio of 8.69
percent versus 7.45 percent for peers. The strong capital position would cause
ROE to be somewhat lower. Another measure of capital adequacy is risk-based
capital to risk-weighted assets, which simply requires greater levels of capital
for greater levels of risk. Wayne Bank's risk-based capital to risk-weighted
assets ratio was 19.90 percent as of March 31, 1997, considerably above the
12.25 percent for peer banks, which is another indication of a stronger than
average equity position. Wayne Bank's earnings are characterized by slightly
higher than average net interest income/average assets, lower non-interest
expense, and better than average control of loan losses. It is important to note
that the performance of Wayne Bank has been consistently superior, remaining at
or near the top 25 percent of banks from December 31, 1994 through the present,
achieving 1.33 percent ROA in 1994, 1.43 percent in 1995, and 1.67 ROA in 1996.
Merger Analysis and Other Considerations.
Young & Associates produced a pro forma analysis for the Merger,
considering the forecast for the earnings contributed by Chippewa described
above, and certain assumptions regarding the future earnings of
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Wayne. Wayne was assumed to grow assets at 2 percent from 1996 to 1997, and 5
percent in each subsequent year. ROA was assumed to be 1.40 percent in 1997,
1.50 percent in 1998, 1.60 percent in 1999, and 1.65 percent in 2000 and beyond.
It was also assumed that Wayne would pay out 33 percent annually in cash
dividends. The resulting ROE would thus be between 15.5 percent and 14 percent
in each of the five years following the Merger.
Chippewa shareholders would own between 19.97 percent and 20.64 percent
of Wayne. With the assumptions employed above, Chippewa would contribute
approximately 24 percent of the earnings of the merged bank in 1998.
The Agreement was examined for other issues which might affect the
shareholders of Chippewa from a financial point of view. It was noted that
charges of up to $1,200,000 may be made to write off goodwill by Chippewa at the
request of Wayne, and that an additional provision for loan losses of $500,000
will also be charged against 1997 earnings. Both charges will be added back in
full to the book value of Chippewa for the purpose of the Exchange Ratio
calculation.
The analysis by Young & Associates was performed independently and
without limitations imposed by any of the parties involved in the Merger. In
conducting the analysis, use was made of information from publicly available
financial data resources, financial data from internal bank records of
Chippewa, and representations of the parties in the Merger Agreement and/or the
Joint Proxy Statement/Prospectus. That information was assumed to be reliable
and no attempt was made to verify the information independently. It was further
assumed that the Merger will be completed as planned and that no other
conditions will be imposed which might work to the detriment of the
shareholders of Chippewa.
Chippewa will pay Young & Associates, Inc., a fee of $7,500 for the
issuance of the fairness opinion plus reasonable out-of-pocket expenses, and
agrees to indemnify Young & Associates against certain liabilities, including
liabilities under the securities laws.
OPINION OF WAYNE'S FINANCIAL ADVISOR
Wayne retained the financial institution consulting and investment
banking firm of Austin Associates, Inc., Toledo, Ohio ("Austin Associates"), to
issue a fairness opinion in connection with the Merger. As of October 13, 1997,
Austin Associates issued a written opinion to the Board of Directors that the
terms of the Agreement were fair, from a financial point of view, to Wayne and
its shareholders. Austin Associates updated its opinion to _________, 1998 that,
based on the matters set forth therein, the terms of the Agreement are fair,
from a financial point of view, to Wayne and its shareholders. A copy of Austin
Associates' opinion is set forth as Appendix C to this Joint Proxy
Statement/Prospectus and should be read in its entirety.
Austin Associates is a recognized investment banking firm regularly
engaged in the valuation of financial institutions and their securities in
connection with mergers and acquisitions and other purposes. Wayne selected
Austin Associates to issue a fairness opinion in connection with the Merger on
the basis of its reputation and qualifications.
The terms of the Agreement, including the exchange ratio, were
negotiated by Wayne and Chippewa, and their legal representatives, on an
arm's-length basis. Austin Associates did not participate in the negotiation of
the terms of the Agreement; however, did advise Wayne's legal counsel during the
drafting of the financial terms of the Agreement.
In arriving at its opinion, Austin Associates reviewed and analyzed
material bearing upon the financial and operating condition of Wayne and
Chippewa, including but not limited to the following: (1) this Joint Proxy
Statement/Prospectus; (2) the financial statements of Wayne and Chippewa for the
period 1992 through September of 1997; (3) certain other publicly available
information on Wayne and Chippewa, consisting principally of data obtained from
each organization's Uniform Bank Performance Report ("UBPR") compiled by the
applicable federal banking regulatory agencies, which provides peer group ratios
and other financial data; (4) other internal financial
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and operating information which was provided to Austin Associates by Wayne,
consisting of pro forma financial projections reflecting the Merger; (5)
publicly available information regarding the terms of certain transactions
believed to be comparable to the Merger, including the financial performance and
condition of those organizations involved in the comparable transactions; (6)
the Merger Agreement dated October 13, 1997 and related documents; and (7)
Austin Associates' experience with respect to bank merger transactions which
provides insight into the unique aspects of any one particular transaction, thus
influencing its conclusion as to whether a transaction is fair from a financial
point of view.
In connection with rendering its opinion, Austin Associates performed a
variety of financial analyses, which are summarized below. Austin Associates
believes its analyses must be considered as a whole and that selecting portions
of such analyses and the factors considered therein, without considering all
factors and analyses, could create an incomplete view of the analyses and the
process underlying Austin Associates' opinion. The preparation of a fairness
opinion is a complex process involving subjective judgments and is not
necessarily susceptible to partial analyses or summary description. In its
analyses, Austin Associates made numerous assumptions with respect to industry
performance, business and economic conditions, and other matters, many of which
are beyond the control of Wayne or Chippewa. Any estimates contained in Austin
Associates analyses are not necessarily indicative of future results or values,
which may be significantly more or less favorable than the estimates.
Financial Terms of Agreement.
The terms of the Agreement provide for all of the outstanding shares of
Chippewa common stock, subject to statutory dissenters' rights, to be converted
into the right to receive shares of Wayne common stock based on an Exchange
Ratio. The Agreement further provides for all of the outstanding common shares
of Wayne to remain outstanding. Based on 448,000 shares of Chippewa stock issued
and outstanding, a total of between 981,837 and 1,023,737 shares of Wayne common
stock shall be issued in the Merger. As of September 30, 1997, Wayne had
3,935,512 common shares outstanding. As a result, Chippewa shareholders, in the
aggregate, will own between 19.97 percent and 20.64 percent of Wayne on a pro
forma basis.
Financial Performance Analysis.
Austin Associates completed a financial analysis of the performance and
condition of Wayne and Chippewa, including their affiliate banks. This analysis
included a detailed five year balance sheet and income statement comparison, and
a performance ratio analysis, including a comparison to industry peer groups.
Two key measures in the banking industry are the return on average asset ratio
("ROA") and the return on average equity ratio ("ROE"). ROA is equal to net
income as a percent of average assets and ROE is equal to net income as a
percent of average equity. Wayne's 1994 through September 30, 1997 average ROA
was 1.47 percent and its average ROE was 12.91 percent. Another key measure is
the leverage ratio, which is equal to tangible equity as percent of tangible
assets. This measure is the principal indicator of capital adequacy for banking
companies. Wayne's leverage ratio at September 30, 1997 was 12.41 percent. The
comparable measures for Chippewa include a 1994 to September 30, 1997 average
ROA of 0.96 percent, an average ROE of 11.01 percent and a leverage ratio at
September 30, 1997 of 7.09 percent. Impacting Chippewa's performance measures
and leverage ratio was a branch acquisition completed during 1996.
Economic Value Contribution Analysis.
Austin Associates prepared an economic value contribution analysis of
Wayne and Chippewa. This analysis consisted of several steps. First, a
projection of the future performance for each company was developed. For Wayne,
future performance was projected based on a continuation of current trends with
respect to growth and profitability. An approximate 5 percent asset growth rate
and an ROA ratio in the 1.50 percent range was utilized. For Chippewa, two
separate projections were used: (1) a continuation of current profitability
levels, including a 1.00 percent ROA; and (2) an increase in performance to the
1.20 to 1.35 percent ROA range, reflecting Wayne's management estimate of
performance going forward as part of the Wayne organization. We have analyzed
Wayne's management projections for Chippewa, and we believe that they are
reasonable.
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The next step involved calculating the present value of the projected
earnings streams using a discounted cash flow model specifically designed for
banking companies. This resulted in the determination of relative economic
values for each company. Austin Associates then added the relative economic
values, and computed the percentage contribution that each company would make to
the combined organization. Finally, the relative contributions were compared to
the ownership percentage that each company's shareholders, in the aggregate,
would have in the combined company. Using the 1.00 percent ROA assumption for
Chippewa, Chippewa would contribute approximately 17.6 percent of the economic
value of the pro forma combined company. Using the higher ROA assumption,
Chippewa would contribute approximately 23.0 percent of the economic value of
the combined organization. Using the midpoint of the range of possible Exchange
Ratios, Chippewa shareholders would own, in the aggregate, 20.3 percent of the
combined company.
Balance Sheet and Income Statement Contribution Analysis.
Austin Associates compared the pro forma ownership interest in Wayne
that current Wayne shareholders would receive, in the aggregate, to the
contribution by Wayne to various balance sheet and income statement accounts,
including total assets, loans, equity and net income in the combined
organization. Assuming the mid-point of the Exchange Ratio range, Wayne
shareholders would own approximately 79.7 percent of the combined organization,
while Wayne's contribution of total assets would equal 71.9 percent, 75.1
percent of the total loans, 80.2 percent of the total equity, and 80.5 percent
of year-to-date September 30, 1997 net income.
Prices Paid in Guideline Transactions.
Austin Associates identified 6 stock merger transactions in Ohio since
1994 involving a buying bank holding company having assets of less than $1
billion, and a selling organization with assets of less than $500 million and an
ROA of at least 0.50 percent. The median price to book value was 218 percent and
average price to book value was 215 percent. The median and average price to
earnings multiples were 19.2 and 19.5, respectively. The high price to book
value ratio was 300 percent and the high price to earnings multiple was 24.8
times. The estimated consideration in the Merger is 350 percent of book value
and 32.0 times earnings.
The median selling bank, on average, recorded an ROA of 1.13 percent,
an ROE of 10.95 percent and a leverage ratio of 9.39 percent. These compare to
Chippewa's September 30, 1997 ROA of 0.99 percent, 12.53 percent ROE and 6.98
percent leverage ratio. Of the six guideline transactions, the selling
organization achieving the highest price to book value and price to earnings
ratios recorded an ROA of 1.15 percent and an ROE of 11.84 percent.
Contribution Analysis for Guideline Transactions
Austin Associates further evaluated the six guideline transactions to
compare the relative contribution measures to the contribution analysis
completed for the Merger involving Wayne and Chippewa. For the guideline
transactions, the median ownership percentage issued to the selling company was
10.7 percent. The median earnings contributed by the selling bank was 7.1
percent. The median ownership issued as a percent of earnings contributed was
129 percent. In the Merger, it is estimated that Chippewa shareholders will
receive 20.3 percent of Wayne, while contributing year to date 1997 earnings of
19.5 percent. The ownership issued as a percent of earnings contributed is
estimated at 104 percent. From a contribution perspective, based on historical
earnings, the Merger involves a much lower premium than the typical guideline
transaction.
The median equity contributed in the guideline transactions was 9.4
percent, comparing to the 10.7 percent ownership issued. The median ownership
issued as a percent of equity contributed was 100 percent. In the
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Merger, based on September 30 data, Chippewa would contribute 19.8 percent of
the pro forma equity of Wayne, compared to receiving 20.3 percent ownership,
thus resulting in a ratio of ownership issued to equity contributed of 103
percent.
The median assets contributed in the guideline transactions was 9.7
percent, comparing to the 10.7 percent ownership issued. The median ownership
issued as a percent of assets contributed was 95 percent. In the Merger, based
on September 30 data, Chippewa would contribute 28.1 percent of the pro forma
assets of Wayne, compared to receiving 20.3 percent ownership, thus resulting in
a ratio of ownership issued to assets contributed of 72 percent.
Pro Forma Merger Analysis.
Austin Associates reviewed the pro forma effect of the Merger to
Wayne's December 31, 1996 and September 30, 1997 earnings per share and book
value per share. Wayne recorded earnings per share in 1996 of $1.41 and a book
value of $10.55 per share as of year end 1996. Giving effect to the Merger, the
equivalent Wayne earnings per share would have equaled $1.32, a decrease of 6.4
percent from actual results. Book value per share would have decreased to $10.45
per share, a decrease of 0.9 percent below actual book value.
Wayne recorded year to date earnings per share of $1.04 and a book
value of $11.35 per share as of September 30, 1997. Giving effect to the Merger,
the equivalent Wayne earnings per share would have equaled $1.03, a decrease of
1.0 percent from actual results. Book value per share would have decreased to
$11.28 per share, a decrease of 0.6 percent below actual book value.
In addition to reviewing the pro forma effect to historical earnings
and book value, Austin Associates completed a forward looking analysis based on
the performance projections used in the Economic Value Contribution Analysis.
Assuming a 1.00 percent future ROA for Chippewa, it is estimated that the Merger
would reduce Wayne's earnings per share by less than 1.0 percent annually in the
future. Using Wayne's management projections, which assume a higher ROA level,
pro forma earnings per share for Wayne would be increased by $0.05 in 1998,
which is more than 3.0 percent over the stand-alone forecast. This earnings per
share enhancement would continue, rising to an approximate 7.5 percent
improvement over projected stand-alone earnings per share within five years.
The summary set forth above does not purport to be a complete
description of the analyses performed by Austin Associates. Further, Austin
Associates did not conduct a physical inspection of any of the properties or
assets of Wayne or Chippewa. Austin Associates has assumed and relied upon the
accuracy and completeness of the financial and other information provided to it
or publicly available, has relied upon the representations and warranties of
Wayne and Chippewa made pursuant to the Agreement, and has not independently
attempted to verify any of such information. Austin Associates has also assumed
that the conditions to the Merger as set forth in the Agreement would be
satisfied and that the Merger would be consummated on a timely basis in the
manner contemplated by the Agreement. No limitations were imposed by Wayne or
Chippewa on Austin Associates regarding the scope of its investigation nor were
any specific instructions given to Austin Associates in connection with its
fairness opinion.
For Austin Associates' services as financial advisor in the proposed
transaction, Wayne will pay the firm a fee of $50,000, including $25,000 through
the issuance of the fairness opinion and an additional $25,000 upon completion
of the Merger. In addition, Wayne has agreed to reimburse Austin Associates for
reasonable out-of-pocket expenses and indemnify Austin Associates against
certain liabilities, including liabilities under the securities laws.
TERMS OF THE MERGER
At the Effective Time (as defined below), Chippewa will merge with
Wayne with the result that Chippewa Bank will become a wholly owned subsidiary
bank of Wayne. At the Effective Time, the directors and officers of Chippewa
Bank serving in such capacity immediately prior to the Effective Time shall
continue to be the directors and officers of Chippewa Bank, provided that Wayne
has the right to appoint two persons to the Board of Directors
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of Chippewa. Wayne has decided to appoint David P. Boyle, the Chief Financial
Officer of Wayne and F. Bill Damron, the Senior Executive Vice President of
Wayne to the Chippewa Board. In addition, at the Effective Time, the Agreement
provides that two additional persons from Chippewa will become members of the
Board of Directors of Wayne. The Board of Directors of Wayne has determined that
Philip S. Swope, the President, Chief Executive Officer and a director of
Chippewa and Carl H. Bradford, Jr., currently a member of the Board of Directors
of Chippewa, will become the persons appointed to the Wayne Board. In addition,
Philip S. Swope shall become the President of Wayne after the Effective Time.
At the Effective Time, all of the outstanding shares of Chippewa Common
Stock will be converted into the right to receive shares of Wayne Common Stock
in accordance with the terms of the Agreement and the Exchange Ratio as defined
by the Agreement. The Exchange Ratio provides that each outstanding share of
Chippewa Common Stock shall be exchanged for and converted into the right to
receive the number of shares of Wayne Common Stock determined by multiplying the
"adjusted book value" (as defined in the Agreement) of a share of Chippewa
Common Stock by 350% and dividing the resultant by the "market value" (as
defined in the Agreement) of Wayne Common Stock. The Agreement provides further
that Wayne will not issue more that 1,023,737 shares nor less than 981,837
shares of Wayne Common Stock in connection with the Merger. Assuming the
issuance of 1,002,787 shares, the midpoint of the shares of Wayne that could be
issued in the transaction, each share of Chippewa Common Stock would be
converted into the right to receive 2.2384 shares of Wayne on the effective date
of the Merger. The minimum exchange ratio will be 2.1916 shares of Wayne for
each share of Chippewa and the maximum exchange ratio will be 2.28512 shares of
Wayne for each share of Chippewa The average bid and asked price of a share of
Wayne Common Stock on _________, 1997 was $____, such that each shareholder of
Chippewa would have received $______ in Wayne Common Stock had the Merger been
consummated as of that date, assuming the issuance of 2.2384 shares of Wayne for
each share of Chippewa.
The Merger Agreement provides that if the Wayne Average Price Per Share
for the 10 business days preceding the effective date of the Merger is less than
$30.00 per share, the Board of Directors of Chippewa may terminate the Merger
unless the S & P Major Regional Bank Index shall have declined by 25% or more
from the date of the Agreement through the Effective Date, in which case
Chippewa shall not have a right to terminate the Agreement.
No fractional shares of Wayne Common Stock will be issued in the
Merger. Rather, each holder of Chippewa Common Stock who otherwise would have
been entitled to a fraction of a share of Wayne Common Stock shall receive in
lieu thereof cash, without interest, in an amount determined by multiplying the
fractional share interest to which such holder would otherwise be entitled by
the average of the bid and asked closing price on the Effective Date of the
Merger as reported by NASDAQ.
EFFECTIVE TIME OF THE MERGER
Subject to satisfaction or waiver of all other conditions contained in
the Agreement, the Merger, will become effective on the first business day of
the next calendar month after the later to occur of: (i) approval of the
Agreement by the Federal Reserve Board and ODFI; and (ii) approval of the Merger
by the shareholders of Chippewa and Wayne. The Merger will become effective on
the first day of the second calendar month following the events specified in (i)
and (ii) above if the last of such events occurs after the sixteenth of the
month, provided that the Effective Date shall not be before March 31, 1998.
Another time may be agreed upon in writing by the parties. Upon the filing of an
executed Certificate of Merger with the Ohio Secretary of State, the Merger will
become effective at such time as is specified in the Certificate of Merger (the
"Effective Time"). Subject to the conditions contained in the Agreement, the
Effective Time is currently expected to occur early in the second quarter of
1998.
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<PAGE> 31
SURRENDER OF CHIPPEWA CERTIFICATES
As soon as practicable after the Effective Time of the Merger, Wayne is
required by the Agreement to mail to each holder of record of Chippewa Common
Stock a letter of transmittal and instructions for use in surrendering such
holder's Chippewa Common Stock certificates and receiving shares of Wayne Common
Stock to be issued in the Merger.
CHIPPEWA SHAREHOLDERS SHOULD NOT SEND IN THEIR STOCK CERTIFICATES UNTIL
THEY RECEIVE A LETTER OF TRANSMITTAL FORM AND INSTRUCTIONS FROM WAYNE.
Upon surrender to Wayne of one or more certificates of Chippewa Common
Stock together with a properly completed letter of transmittal, Wayne will issue
and deliver to the holder of record of Chippewa Common Stock, a certificate
representing the number of shares of Wayne Common Stock to which the holder is
entitled and, where applicable, a check for the amount representing any
fractional share interest.
All Wayne Common Stock issued pursuant to the Agreement will be issued
as of the Effective Time. No dividends or other distributions declared with
respect to Wayne Common Stock payable to former holders of Chippewa Common
Stock, pursuant to the Merger and payable to the holders thereof after the
Effective Time shall be paid until each holder surrenders such holder's Chippewa
Common Stock certificates. Subject to the effect of applicable laws, after the
surrender and exchange of such certificates, the holder of certificates for
shares of Wayne Common Stock into which the shares of Chippewa Common Stock
shall have been converted shall be entitled to receive any dividends or other
distributions, but without any interest, which previously became payable by
Wayne with respect to the shares of Chippewa Common Stock represented by such
certificate or certificates.
In the case of any lost, stolen or destroyed Chippewa Common Stock
certificate, Wayne will issue a new certificate representing shares of Wayne
Common Stock and a check for the cash into which a fractional share of Chippewa
Common Stock shall have been converted only if Wayne receives: (i) evidence to
the reasonable satisfaction of Wayne that such certificate has been lost,
wrongfully taken or destroyed, (ii) such indemnity agreement as reasonably may
be requested by Wayne to save it harmless, and (iii) evidence satisfactory to it
of ownership of Chippewa Common Stock for which the certificate has been lost,
wrongfully taken or destroyed.
After the Effective Time, there will be no further registration of
transfers on the stock transfer books of Wayne of shares of Chippewa Common
Stock. Shares of Chippewa Common Stock presented to Wayne for transfer after the
Effective Time will be canceled and exchanged for certificates representing
shares of Wayne Common Stock and cash in lieu of any fractional share interest
as provided in the Agreement.
CONDITIONS TO THE MERGER
The Merger will occur only if the Agreement is adopted by the requisite
vote of the shareholders of Chippewa and Wayne and the acquisition of a
controlling interest in Chippewa is approved by the shareholders of Chippewa as
required by the Acquisition Act. Consummation of the Merger is subject to the
satisfaction of certain other conditions, unless waived to the extent waiver is
permitted by applicable law. Such conditions include, but are not limited to,
the following: (i) the receipt of all necessary regulatory approvals, including
the approval of the Federal Reserve Board and the ODFI; (ii) the effectiveness
of the Registration Statement registering the shares of Wayne to be issued in
the Merger, and the absence of a stop order suspending such effectiveness or
proceedings seeking a stop order; (iii) the absence of a temporary restraining
order, injunction or other order of any court of competent jurisdiction or other
legal restraint or prohibition preventing the consummation of the Merger; (iv)
the continued accuracy of representations and warranties by Chippewa and Wayne
regarding, among other things, the organization of the parties, financial
statements, capitalization, pending and threatened litigation, enforceability of
the Agreement and compliance with law and tax matters; (v) the performance by
Chippewa and Wayne in all material respects of each of the obligations required
to be performed by them under the Agreement; (vi) the receipt by Chippewa and
Wayne and the continuing effectiveness of opinion of counsel as to certain
federal income tax consequences of the respective Merger; (vii) the receipt of
all consents or approvals from third parties required
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<PAGE> 32
under agreements for consummation of the Merger other than those agreements for
which failure to obtain such consents or approval would not have a material
adverse effect on Chippewa; (viii) that no event shall have occurred, which, in
the reasonable opinion of Wayne and its auditors, would prevent the Merger from
being accounted for as a pooling of interests; (ix) the absence of any material
adverse change since December 31, 1996, in the financial condition, results of
operation or business of Chippewa and Wayne in each case, together with their
respective subsidiaries taken as a whole; (x) the absence of any material
action, suit or proceeding commenced against Chippewa and Wayne with respect to
the Merger seeking to restrain, enjoin, prevent, change or rescind the
transaction contemplated by the Agreements or questioning the validity or
legality of any such transaction; (xi) the receipt by Chippewa and Wayne of
opinions of counsel as provided in the Agreement; (xii) the receipt by Chippewa
and Wayne of opinions, from their respective financial advisors, dated within
two days of the Proxy Statement-Prospectus, that the Merger is fair to the
holders of Chippewa Common Stock and Wayne Common Stock, respectively, from a
financial point of view; and (xiii) that not more than ten percent of the voting
power of the issued and outstanding shares of Chippewa Common Stock shall have
taken steps, at the time the Merger shall become effective, to perfect their
rights as dissenting shareholders under Ohio Law; (xiv) that the Wayne Average
Price Per Share for the 10 business days preceding the effective date of the
Merger shall not be less than $30.00 per share, unless the S & P Major Regional
Bank Index shall have declined by 25% or more from the date of the Agreement
through the Effective Date.
The consummation of the Merger is conditioned upon the determination
that the Merger will be accounted for under the pooling of interests method of
accounting. In the event the Merger did not qualify for pooling accounting
treatment, but the parties determined to consummate the Merger and to waive the
condition, the Merger would not be consummated without a resolicitation of the
vote of shareholders of Chippewa. In such an event, the revised pro forma
financial information would be materially different than those presented
elsewhere herein.
In addition, unless waived, each party's obligation to consummate the
Merger is subject to performance by the other party of its obligations under the
respective Agreement and the receipt of certain certificates from the other
party.
REGULATORY APPROVAL
The Merger is subject to prior approval by the Federal Reserve Board
under the Bank Holding Company Act of 1956, as amended ("BHC Act"), which
requires that the Federal Reserve Board take into consideration the financial
and managerial resources and future prospects of the respective institutions and
the convenience and needs of the communities to be served. The BHC Act prohibits
the Federal Reserve Board from approving the Merger if it would result in a
monopoly or be in furtherance of any combination or conspiracy to monopolize or
to attempt to monopolize the business of banking in any part of the United
States, or if its effect in any section of the country may be substantially to
lessen competition or tend to create a monopoly, or if it would in any other
manner be a restraint of trade, unless the Federal Reserve Board finds that the
anti-competitive effects of the Merger are clearly outweighed in the public
interest by the probable effect of the transaction in meeting the convenience
and needs of the communities to be served. The Federal Reserve Board has the
authority to deny an application if it concludes that the combined organization
would have an inadequate capital position.
Under the BHC Act, the Merger may not be consummated until the 15th day
following the date of Federal Reserve Board approval, during which time the
United States Department of Justice may challenge the Merger on antitrust
grounds. The commencement of an antitrust action would stay the effectiveness of
the Federal Reserve Board's approval unless a court specifically orders
otherwise. The BHC Act provides for the publication of notice and public comment
on the application and authorizes the regulatory agency to permit interested
parties to intervene in the proceedings.
Wayne filed an application with the Federal Reserve Bank of Cleveland
(the "Federal Reserve Bank") on December ___, 1997, seeking approval of the
Merger. The application was accepted for processing on ________, 199__. The
application has not yet been approved by the Federal Reserve Board but the
parties believe that the Federal Reserve Board will approve the application on
or before _______________, 1998.
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<PAGE> 33
The approval of the Federal Reserve Board is not to be interpreted as
the opinion of such regulatory authority that the Merger is fair to the
shareholders of Chippewa from a financial point of view or that such regulatory
authority has considered the adequacy of the terms of the Merger. An approval by
such regulatory authority in no way constitutes an endorsement or a
recommendation of the Merger by the Federal Reserve Board.
There can be no assurance that the Department of Justice will not
challenge the Merger or if such a challenge is made, as to the result thereof.
In addition to the approval of the Federal Reserve Board, the
consummation of the Merger is subject to approval of the transaction by the Ohio
Division of Financial Institutions. Such approval is required because the Merger
will result in a "change of control" of Chippewa Bank, the wholly-owned Ohio
chartered commercial banking subsidiary of Chippewa. The ODFI also will take
into consideration the financial and managerial resources and future prospects
of Wayne and the convenience and needs of the communities to be served. An
application was filed with the ODFI on December ___, 1997, seeking approval for
such "change of control." While approval of the change of control has not yet
been received, the parties believe that such approval will be received on or
before ________________, 1998.
Other than the regulatory approvals described herein and required
compliance with certain federal and state securities laws by Wayne in connection
with its issuance of shares of Wayne Common Stock in connection with the Merger
with which Wayne will comply, Wayne and Chippewa are not aware of any other
governmental approvals or actions that are required for consummation of the
Merger. Should any other approval or action be required, it is presently
contemplated that such approval or action would be sought. There can be no
assurance that any such approval or action, if needed, could be obtained and, if
such approvals or actions are obtained, there can be no assurance as to the
timing thereof.
CONDUCT OF BUSINESS PENDING THE MERGER
Under the Agreement Chippewa and Wayne are generally obligated to (and
to cause their respective subsidiaries to) operate their respective businesses
only in the usual and ordinary course consistent with past practices; use
reasonable efforts to keep in force current insurance coverage; refrain from any
change in their methods of accounting or certain other policies and refrain from
taking any action that would adversely affect or delay regulatory approval of
the Agreement; give the other party and its representatives access to
information concerning its affairs as may be reasonably requested; and with
respect to Chippewa refrain from paying cash dividends except as permitted under
the Agreement, see "Dividends."
DIVIDENDS
Under the Agreement, Chippewa may not pay cash dividends prior to the
Effective Time of the Merger except for a semi-annual cash dividend at the rate
of $0.16 per share payable before December 31, 1997.
TERMINATION, AMENDMENT AND WAIVER
The Agreement may be terminated at any time prior to the Effective Time
whether before or after approval of the matters presented by the shareholders of
Chippewa: (i) by mutual consent of the Boards of Directors of Chippewa and
Wayne; (ii) by either party to the Merger if all required regulatory approvals
are not received; (iii) by the Board of Directors of either party if there has
been a willful breach of any representation, warranty, covenant or agreement by
the other party which is not cured after 10 days' written notice; (iv) by either
party if the required vote of Chippewa shareholders is not received; or (v) by
the Board of Directors of either party if the Merger is not consummated by
December 31, 1998.
The Agreement may not be amended except in writing signed on behalf of
both parties, whether before or after approval of the matters presented in
connection with the Merger by the shareholders of Chippewa. At any time prior to
the Effective Time, either party to the Agreement may, to the extent legally
allowed, extend the time for
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<PAGE> 34
performance of any of the obligations of the other party, waive any inaccuracies
in representations and warranties of the other and waive compliance with any of
the agreements or conditions of the Agreement.
TERMINATION FEE
If Chippewa shareholders fail to approve the Agreement and Chippewa or
its shareholders receive an offer from and negotiate with any party other than
Wayne at any time within one year of the date of the Agreement, then, subject to
certain other conditions set forth in the Agreement, Chippewa shall pay a
termination fee to Wayne of $1,500,000.
MANAGEMENT AND OPERATIONS AFTER THE MERGER
As a result of the Merger, Chippewa Bank will become a wholly owned
subsidiary of Wayne. Wayne expects to continue to operate Chippewa Bank at its
present locations. Immediately after the Effective Time of Merger, the Board of
Directors of Chippewa Bank shall be comprised of all those persons serving as a
director of Chippewa Bank immediately prior to the Effective Time of the Merger
with the addition of David P. Boyle, currently the Chief Financial Officer of
Wayne and F. Bill Damron, currently the Senior Executive Vice President of
Wayne. The Board of Directors of Wayne after the Effective Time of the Merger
shall be comprised of all those persons serving as directors of Wayne
immediately prior to the Effective Time plus two additional persons to be added
to the Board of Directors from Chippewa. Wayne has determined that such persons
will be Philip S. Swope, President, Chief Executive Officer and a Director of
Chippewa and Carl H. Bradford, Jr., currently a director of Chippewa. Further,
the Agreement provides that Wayne will appoint Mr. Swope as the President of
Wayne after the Effective Time of the Merger.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
As of the Record Date, Wayne owned 1,000 shares representing 0.22% of
Chippewa's outstanding Common Stock. As of the Record Date, executive officers
and directors of Chippewa owned none of the outstanding shares of Wayne Common
Stock and executive officers and directors of Wayne beneficially owned no shares
of Chippewa Common Stock. As discussed above, Mr. Philip S. Swope, President,
Chief Executive Officer and a Director of Chippewa, will become the President of
Wayne upon consummation of the Merger.
EFFECT ON EMPLOYEE BENEFIT PLANS
Chippewa. Subsequent to the Merger, and subject to applicable law and
regulations, Wayne intends to adopt employee benefit plans at Chippewa Bank
comparable to those currently in place at Wayne Bank. For purposes of
eligibility and vesting in such employee benefits, employees of Chippewa and
Chippewa Bank will be given credit for their years of service as employees of
Chippewa and Chippewa Bank.
Wayne. Employee benefits of Wayne will not be changed as a result of
the Merger.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a summary description of the anticipated federal
income tax consequences of the Merger to holders of Wayne Common Stock and
Chippewa Common Stock and to Wayne and Chippewa. The summary is not a complete
description of the federal income tax consequences of the Merger. Each
shareholder's individual circumstances may affect the tax consequences of the
Merger to such shareholder.
Neither Wayne nor Chippewa has requested or will receive an advance
ruling from the Internal Revenue Service (the "Service") as to the tax
consequences of the Merger. With respect to the Merger, Wayne and Chippewa have
received an opinion from special counsel to Wayne, Werner & Blank Co., L.P.A.
This tax opinion is based upon certain representations made by Wayne and
Chippewa and upon the current law and the current judicial and administrative
interpretations thereof. This opinion will not be binding on the Service or any
court. Consequently, there can be no assurance that the tax consequences set
forth below will continue as described herein, nor can any
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<PAGE> 35
assurance be given that the issues discussed below will not be challenged by the
Service, or, if so challenged, will be decided favorably to the parties to the
Merger or their shareholders.
Subject to the foregoing, the opinions of Werner & Blank Co., L.P.A.,
are substantially as follows:
(i) Since the merger of Chippewa with and into Wayne qualifies
as a statutory merger under applicable federal law, the Merger will
qualify as a "reorganization" within the meaning of Section
368(a)(1)(A) of the Internal Revenue Code of 1986, as amended (the
"Code");
(ii) No gain or loss will be recognized by Chippewa or Wayne
upon merger of Chippewa with and into Wayne;
(iii) No gain or loss will be recognized by the Chippewa
shareholders who exchange, pursuant to the Merger, their shares of
Chippewa Common Stock solely for shares of Wayne Common Stock;
(iv) The federal income tax basis of the Wayne Common Stock to
be received by the Chippewa shareholders in Merger, including
fractional share interests, will be the same as the federal income tax
basis of such Chippewa Common Stock surrendered therefor;
(v) The holding period of the Wayne Common Stock to be
received by the Chippewa shareholders in the Merger will include the
period during which the Chippewa Common Stock surrendered was held as a
capital asset on the Effective Date of the Merger;
(vi) The payment of cash in lieu of fractional share interests
of Wayne Common Stock will be treated as if the fractional shares were
distributed as part of the Merger and then were redeemed by Wayne.
These cash payments will be treated as having been received as
distributions in full payment in exchange for the stock redeemed as
provided in Section 302(a) of the Code; and
(vii) Where a Chippewa shareholder dissents to the Merger, and
such shareholder receives solely cash in exchange for his or her
Chippewa Common Stock, such cash will be treated as having been
received by such shareholder as a distribution in redemption of his or
her shares subject to the provisions and limitations of Section 302 of
the Code.
THE FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE HAS NOT BEEN VERIFIED
WITH THE INTERNAL REVENUE SERVICE AND IS BASED UPON THE FEDERAL INTERNAL REVENUE
CODE AS IN EFFECT ON THE DATE OF THIS PROXY STATEMENT-PROSPECTUS WITHOUT
CONSIDERATION OF ANY STATE LAWS OR THE PARTICULAR FACTS OR CIRCUMSTANCES OF ANY
CHIPPEWA SHAREHOLDER.
BECAUSE OF THE COMPLEXITY OF THE FEDERAL, STATE AND LOCAL TAX LAWS, IT
IS RECOMMENDED THAT SHAREHOLDERS OF CHIPPEWA CONSULT WITH THEIR OWN TAX ADVISORS
REGARDING THE TAX CONSEQUENCES RESULTING FROM THE MERGER.
ACCOUNTING TREATMENT
The Agreement provides that consummation of the Merger is conditioned
upon the receipt by Wayne of assurances, satisfactory to it, that the Merger
qualifies for accounting treatment as a pooling of interests if consummated in
accordance with the Agreement. Under the pooling of interests method of
accounting, the historical basis of the assets and liabilities of Wayne and
Chippewa will be combined at the Effective Time and carried forward at their
previously recorded amounts, and the shareholders' equity accounts of Chippewa
and Wayne's will be consolidated on Wayne's balance sheet. Income and other
financial statements of Wayne issued after consummation of the Merger will be
restated retroactively to reflect the consolidated operations of Wayne and
Chippewa as if the Merger had taken place prior to the periods covered by such
financial statements.
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<PAGE> 36
For the Merger to qualify as a pooling of interests for accounting
purposes, substantially all (90% or more) of the outstanding Chippewa Common
Stock must be exchanged for Wayne Common Stock. All parties have agreed not to
take any action which would disqualify the Merger from pooling of interests
treatment by Wayne.
EXPENSES
The Agreement provides that whether or not the Merger is consummated,
all costs and expenses incurred in connection with the Agreement and the
transactions contemplated therein shall be paid by the party incurring such
expense.
RESALE OF WAYNE COMMON STOCK
The shares of Wayne Common Stock to be issued in the Merger to holders
of Chippewa Common Stock have been registered under the Securities Act and may
be freely traded by holders of Chippewa Common Stock who, at the Effective Time,
are not "affiliates" of Chippewa (and who are not affiliates of Wayne at the
time of the proposed resale). Directors, executive officers, and 10%
shareholders of Chippewa are generally deemed to be affiliates under the
Securities Act. Pursuant to the Agreement, Wayne must have received from each
affiliate of Chippewa a written undertaking to the effect that: (a) he or she
will not sell or dispose of Wayne Common Stock acquired in the Merger other than
in accordance with the Securities Act, except under (i) a separate registration
statement for distribution (which Wayne has not agreed to provide), or (ii) Rule
145 promulgated thereunder by the SEC, or (iii) some other exemption from
registration; and (b) he or she will not otherwise dispose of the Wayne Common
Stock or otherwise reduce his or her market risk relative to the Wayne Common
Stock within 30 days prior to the Effective Time of the Merger or prior to the
publication by Wayne of an earnings statement covering at least 30 days of
combined operations after the Effective Time.
DISSENTERS' RIGHTS
Under the provisions of Ohio Revised Code, Section 1701.85, any
shareholder of Chippewa who does not vote in favor of the Agreement is entitled
to receive the fair cash value of his shares, upon perfecting his right of
appraisal. Not later than ten (10) days after the date upon which the
shareholders voted upon the Merger, any shareholder seeking to perfect his
appraisal right must make a written demand upon Chippewa for the fair cash value
of those shares so held by him. A negative vote alone is not sufficient to
perfect rights as a dissenter. No notice of the results of the meeting will be
given to shareholders. If Chippewa and the shareholder have not come to an
agreement within three (3) months of the shareholder's written demand, the
shareholder or Chippewa may file a petition in court for a formal judicial
appraisal. Failure to follow the procedures enumerated in the Ohio Revised Code,
Section 1701.85, Qualifications of and Procedures for Dissenting Shareholders,
which is Appendix C of this Proxy Statement (the Dissenters' Statute), will
waive the shareholder's right of appraisal.
THE FOREGOING SUMMARY OF DISSENTERS' STATUTE DOES NOT PURPORT TO BE
COMPLETE AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO DISSENTERS' STATUTE
AND THE OTHER PROVISIONS OF THE OHIO LAW. THE FAILURE OF A SHAREHOLDER OF
CHIPPEWA TO FOLLOW THE PROCEDURES SET FORTH IN DISSENTERS' STATUTE WILL
TERMINATE SUCH SHAREHOLDER'S APPRAISAL RIGHTS. AS A CONSEQUENCE, EACH
SHAREHOLDER OF CHIPPEWA WHO DESIRES TO EXERCISE SUCH RIGHTS SHOULD REVIEW
DISSENTERS' STATUTE AND FOLLOW ITS PROVISIONS. THE COMPLETE TEXT OF THE RELEVANT
PROVISIONS OF DISSENTERS' STATUTE IS ANNEXED TO THIS PROXY STATEMENT AS APPENDIX
C.
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<PAGE> 37
PRO FORMA FINANCIAL DATA
The following unaudited Pro Forma Combined Condensed Balance Sheets as
of December 31, 1996 and September 30, 1997, and the Pro Forma Combined
Condensed Statements of Income for each of the three-year periods ended December
31, 1996, and the nine months ended September 30, 1997 and 1996, gives effect to
the Merger based on the historical consolidated financial statements of Wayne
and Chippewa under the assumptions and adjustments set forth in the accompanying
notes to the pro forma financial statements.
The Pro Forma Condensed Balance Sheets assume the Merger was
consummated on the dates indicated, and the Pro Forma Condensed Statements of
Income assume that the Merger was consummated on January 1 of each period
presented. The pro forma statements may not be indicative of the results that
actually would have occurred if the Merger had been in effect on the dates
indicated or which may be obtained in the future. The pro forma financial
statements should be read in conjunction with Wayne's historical financial
statements and the related notes thereto incorporated by reference herein and
Chippewa's historical financial statements and the related notes thereto
included elsewhere in this Proxy Statement-Prospectus. The proforma information
assumes the issuance of 1,002,787 shares, the midpoint of the shares of Wayne
that could be issued in the transaction, such that each share of Chippewa Common
Stock would be converted into the right to receive 2.2384 shares of Wayne on the
effective date of the Merger. Such 1,002,787 amount includes the issuance of
2,238 shares to Wayne representing the 1,000 shares of Chippewa Common Stock
currently owned by Wayne multiplied by the exchange ratio.
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<PAGE> 38
PRO FORMA COMBINED CONDENSED BALANCE SHEET
(UNAUDITED)
DECEMBER 31, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
WAYNE AND
CHIPPEWA
PRO FORMA PRO FORMA
WAYNE CHIPPEWA ADJUSTMENTS COMBINED
-------- --------- ----------- ---------
<S> <C> <C> <C>
ASSETS
Cash and due from banks $ 14,975 $ 5,841 $ 20,816
Federal funds sold 7,620 0 7,620
Interest bearing deposits in other banks 0 0 0
Investment securities 103,294 50,935 154,229
Assets held for sale 0 0 0
Loans 218,729 70,195 288,924
Less allowance for loan losses 3,657 617 4,274
-------- -------- --------
Net loans 215,072 69,578 284,650
Premises and equipment, net 6,215 2,342 8,557
Goodwill and Other Intangibles 962 1,624 2,586
Other assets 4,255 1,278 5,533
-------- -------- --------
Total assets 352,393 131,598 483,991
======== ======== ========
LIABILITIES
Noninterest bearing deposits 43,414 12,494 55,908
Interest-bearing deposits 238,272 102,459 340,731
-------- -------- --------
Total deposits 281,686 114,953 396,639
Federal funds purchased and
securities sold under
agreements to repurchase 26,142 5,189 31,331
Notes payable 0 555 555
FHLB advances 0 0 0
Other liabilities 3,076 798 3,874
-------- -------- --------
Total liabilities 310,904 121,495 432,399
SHAREHOLDERS' EQUITY
Common stock 3,935 600 403 4,938
Capital surplus 13,356 700 (1,056) 13,000
Retained earnings 24,038 9,385 33,423
Shares held in the treasury (88) (653) 653 (88)
Net unrealized (losses) gains on
securities available for sale 248 71 319
Total shareholders' equity 41,489 10,103 51,592
-------- -------- --------
Total liabilities and shareholders' equity $352,393 $131,598 $483,991
======== ========= ========
</TABLE>
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<PAGE> 39
PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
(UNAUDITED)
YEAR ENDED DECEMBER 31, 1994
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
WAYNE AND CHIPPEWA
PRO FORMA PRO FORMA
WAYNE CHIPPEWA ADJUSTMENTS COMBINED
------- -------- ----------- ------------------
INTEREST INCOME:
<S> <C> <C> <C>
Interest and fees on loans $16,465 $3,958 $20,423
Interest on deposits 0 0 0
Interest on federal funds sold 109 86 195
Interest on investment securities 4,522 1,641 6,163
------- ------ -------
Total interest income 21,096 5,685 0 26,781
INTEREST EXPENSE:
Interest on deposits 7,541 2,125 9,666
Interest on borrowings 390 128 518
------- ------ -------
Total interest expense 7,931 2,253 0 10,184
------- ------ ----------- -------
NET INTEREST INCOME 13,165 3,432 0 16,597
======= ====== =========== =======
Provision for loan losses 346 48 394
------- ------ -------
Net interest income after provision for
Loan losses 12,819 3,384 0 16,203
Noninterest income 2,598 418 3,016
Investment Securities Gains (and
Losses) 2 (18) (16)
Noninterest expense 9,839 2,583 12,422
------- ------ -------
Income before income taxes 5,580 1,201 0 6,781
Income taxes 1,560 293 1,853
------- ------ -------
NET INCOME $ 4,020 $ 908 $ 0 $ 4,928
======= ====== ========== =======
Net income per common share $ 1.03 $ 1.91 $ 1.00
Pro forma net income per common share
AVERAGE SHARES OUTSTANDING 3,918,907 476,000 4,921,694
CONVERSION RATIO 2.2384
</TABLE>
38
<PAGE> 40
PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
(UNAUDITED)
YEAR ENDED DECEMBER 31, 1995
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
WAYNE AND CHIPPEWA
PRO FORMA PRO FORMA
WAYNE CHIPPEWA ADJUSTMENTS COMBINED
---------- ---------- ----------- ------------------
INTEREST INCOME:
<S> <C> <C> <C> <C>
Interest and fees on loans $ 18,956 $ 5,106 $ 24,062
Interest on deposits 0 0 0
Interest on federal funds sold 239 131 370
Interest on investment securities 4,935 1,696 6,631
---------- ---------- -------------
Total interest income 24,130 6,933 0 31,063
INTEREST EXPENSE:
Interest on deposits 9,276 2,863 12,139
Interest on borrowings 640 271 911
---------- ---------- -------------
Total interest expense 9,916 3,134 0 13,050
---------- ---------- ---------- -------------
NET INTEREST INCOME 14,214 3,799 0 18,013
========== ========== ========== =============
Provision for loan losses 120 110 230
---------- ---------- -------------
Net interest income after provision for
loan losses 14,094 3,689 0 17,783
Noninterest income 2,765 488 3,253
Investment Securities Gains (and Losses) (12) 0 (12)
Noninterest expense 10,530 2,950 13,480
---------- ---------- -------------
Income before income taxes 6,317 1,227 0 7,544
Income taxes 1,832 315 2,147
---------- ---------- -------------
NET INCOME $ 4,485 $ 912 $ 0 $ 5,397
========== ========== ========== =============
Net income per common share $ 1.14 $ 2.04 $ 1.09
Pro forma net income per common share
AVERAGE SHARES OUTSTANDING 3,931,595 448,000 4,934,382
CONVERSION RATIO 2.2384
</TABLE>
39
<PAGE> 41
PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
(UNAUDITED)
YEAR ENDED DECEMBER 31, 1996
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
WAYNE AND CHIPPEWA
PRO FORMA PRO FORMA
WAYNE CHIPPEWA ADJUSTMENTS COMBINED
---------- --------- ----------- ------------------
INTEREST INCOME:
<S> <C> <C> <C> <C>
Interest and fees on loans $ 19,546 $ 5,842 $ 25,388
Interest on deposits 0 0 0
Interest on federal funds sold 184 153 337
Interest on investment securities 5,700 2,821 8,521
---------- --------- ----------
Total interest income 25,430 8,816 0 34,246
INTEREST EXPENSE:
Interest on deposits 9,452 4,067 13,519
Interest on borrowings 994 251 1,245
---------- --------- ----------
Total interest expense 10,446 4,318 0 14,764
---------- --------- ------- ----------
NET INTEREST INCOME 14,984 4,498 0 19,482
========== ========= ======= ==========
Provision for loan losses 180 120 300
---------- --------- ----------
Net interest income after provision for
loan losses 14,804 4,378 0 19,182
Noninterest income 3,893 566 4,459
Investment Securities Gains (and Losses) 6 (2) 4
Noninterest expense 10,751 3,636 14,387
---------- --------- ----------
Income before income taxes 7,952 1,306 0 9,258
Income taxes 2,420 328 2,748
---------- --------- ----------
NET INCOME $ 5,532 $ 978 $ 0 $ 6,510
========== ========= ======= ==========
Net Income per common share $ 1.41 $ 2.18 $ 1.32
Pro forma net income per common share
AVERAGE SHARES OUTSTANDING 3,932,527 448,000 4,935,314
CONVERSION RATIO FOR COMMON STOCK 2.2384
</TABLE>
40
<PAGE> 42
PRO FORMA COMBINED CONDENSED BALANCE SHEET
(UNAUDITED)
SEPTEMBER 30, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
WAYNE AND CHIPPEWA
PRO FORMA PRO FORMA
WAYNE CHIPPEWA ADJUSTMENTS COMBINED
---------- ---------- ----------- ------------------
<S> <C> <C> <C>
ASSETS
Cash and due from banks $ 13,996 $ 5,751 $ 19,747
Federal funds sold 5,000 1,220 6,220
Interest bearing deposits in other banks 0 0 0
Investment securities 86,186 46,549 (33) 132,702
Assets held for sale 0 0 0
Loans 238,436 78,917 317,353
Less allowance for loan losses 3,591 697 4,288
---------- ---------- -------------
Net loans 234,845 78,220 0 313,065
Premises and equipment, net 6,217 2,298 8,515
Goodwill and Other Intangibles 785 1,504 2,289
Other assets 4,161 1,397 5,558
---------- ---------- -------------
Total assets 351,190 136,939 (33) 488,096
========== ========== ========== =============
LIABILITIES
Noninterest bearing deposits 45,517 11,960 57,477
Interest-bearing deposits 231,307 105,688 336,995
---------- ---------- -------------
Total deposits 276,824 117,648 0 394,472
Federal funds purchased and
securities sold under
agreements to repurchase 26,480 6,942 33,422
Notes payable 0 470 470
FHLB advances 836 0 836
Other liabilities 2,393 824 3,217
---------- ---------- -------------
Total liabilities 306,533 125,884 0 432,417
SHAREHOLDERS' EQUITY
Common stock 3,935 560 443 4,938
Capital surplus 13,356 87 (443) 13,000
Retained earnings 26,949 10,307 37,256
Shares held in the treasury (15) 0 (33) (48)
Net unrealized (losses) gains on
securities available for sale 432 101 533
---------- ---------- -------------
Total shareholders' equity 44,657 11,055 (33) 55,712
---------- ---------- ---------- -------------
Total liabilities and shareholders' equity $ 351,190 $ 136,939 $ 0 $ 488,096
========== ========== ========== =============
</TABLE>
41
<PAGE> 43
PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
(UNAUDITED)
SEPTEMBER 30, 1996
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
WAYNE AND CHIPPEWA
PRO FORMA PRO FORMA
WAYNE CHIPPEWA ADJUSTMENTS COMBINED
---------- ---------- ----------- ------------------
INTEREST INCOME:
<S> <C> <C> <C> <C>
Interest and fees on loans $ 14,661 $ 4,233 $ 18,894
Interest on deposits 0 0 0
Interest on federal funds sold 68 134 202
Interest on investment securities 4,246 2,089 6,335
---------- ---------- -------------
Total interest income 18,975 6,456 0 25,431
INTEREST EXPENSE:
Interest on deposits 7,115 2,978 10,093
Interest on borrowings 677 184 861
---------- -------------
Total interest expense 7,792 3,162 0 10,954
---------- ---------- -----------
NET INTEREST INCOME 11,183 3,294 0 14,477
========== ========== =========== =============
Provision for loan losses 135 90 225
---------- ---------- -------------
Net interest income after provision for
loan losses 11,048 3,204 0 14,252
Noninterest income 2,209 419 2,628
Investment Securities Gains (and Losses) (1) (2) (3)
Noninterest expense 7,802 2,625 10,427
---------- -------------
Income before income taxes 5,454 996 0 6,450
Income taxes 1,662 261 1,923
----------
NET INCOME $ 3,792 $ 735 $ 0 $ 4,527
========== ========== ============ =============
Net income per common share $ 0.96 $ 1.64 0.92
Pro forma net income per common share
AVERAGE SHARES OUTSTANDING 3,935,139 448,000 4,937,926
CONVERSION RATIO FOR COMMON STOCK 2.2384
</TABLE>
42
<PAGE> 44
PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
(UNAUDITED)
SEPTEMBER 30, 1997
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
WAYNE AND
CHIPPEWA
PRO FORMA PRO FORMA
WAYNE CHIPPEWA ADJUSTMENTS COMBINED
-------- ----------- ----------- ----------
INTEREST INCOME:
<S> <C> <C> <C> <C>
Interest and fees on loans $ 15,249 $ 5,020 $ 20,269
Interest on deposits 0 0 0
Interest on federal funds sold 114 55 169
Interest on investment securities 4,233 2,179 6,412
----------- --------- ---------
Total interest income 19,596 7,254 0 26,850
INTEREST EXPENSE:
Interest on deposits 7,031 3,290 10,321
Interest on borrowings 937 185 1,122
----------- --------- ---------
Total interest expense 7,968 3,475 0 11,443
----------- --------- --- ---------
NET INTEREST INCOME 11,628 3,779 0 157,407
=========== ========= === =========
Provision for loan losses 135 95 230
----------- --------- ---------
Net interest income after provision for
loan losses 11,493 3,684 0 15,177
Noninterest income 2,004 495 2,499
Investment Securities Gains (and Losses) (6) (2) (8)
Noninterest expense 7,556 2,801 10,357
----------- ---------
Income before income taxes 5,935 1,376 0 7,311
Income taxes 1,829 382 2,211
----------- --------- ---------
NET INCOME $ 4,106 $ 994 $ 0 $ 5,100
=========== ========= === =========
Net income per common share $ 1.04 $ 2.22 $ 1.03
Pro forma net income per common share
AVERAGE SHARES OUTSTANDING 3,935,498 448,000 4,938,285
CONVERSION RATIO FOR COMMON STOCK 2.2384
</TABLE>
43
<PAGE> 45
DESCRIPTION AND COMPARISON OF WAYNE COMMON STOCK
AND CHIPPEWA COMMON STOCK
GENERAL
Wayne is an Ohio corporation governed by and subject to the Ohio
General Corporation Law ("OGCL") and is a registered bank holding company under
the Bank Holding Company Act. Chippewa is an Ohio corporation organized under
and governed by the provisions of the OGCL and is a registered bank holding
company under the Bank Holding Company Act. If the proposed Merger is
consummated, shareholders of Chippewa who receive Wayne Common Stock will become
shareholders of Wayne and, as such, their rights as shareholders will be
governed by the OGCL and by Wayne's Articles, Code of Regulations and other
corporate documents. The rights of holders of shares of Chippewa Common Stock
differ in certain respects from the rights of holders of Wayne Common Stock. A
summary of the material differences between the respective rights of Chippewa
from that of Wayne shareholders is set forth below.
As of the date of the Agreement, Wayne was authorized to issue
5,400,000 shares of no par value common stock ("Wayne Common Stock"). As of the
date of the Agreement, Wayne had 3,935,512 shares of Wayne Common Stock issued
and outstanding, which left 1,464,488 shares available for future issuance and
380 treasury shares. Pursuant to the terms of the Merger, Wayne will issue an
aggregate of between 981,837 and 1,023,737 shares of Wayne Common Stock to
shareholders of Chippewa.
The authorized Common Stock of Chippewa consists of 500,000 shares of
Common Stock without par value per share, 448,000 of which were issued and
outstanding as of the Record Date.
While there are a substantial number of similarities between the Wayne
Common Stock and the Chippewa Common Stock, the rights of shareholders of
Chippewa will be different after the Effective Time of the Merger. Shareholders
will be affected by differences in the Articles of Incorporation and Code of
Regulations of Wayne and Chippewa. Listed below are the more important
attributes of the Wayne Common Stock and the differences, if any, from the
Chippewa Common Stock.
DIVIDENDS
Holders of Wayne Common Stock are entitled to dividends out of funds
legally available therefor, as governed by the OGCL, and if declared by the
Board of Directors. The amount and timing of dividends on Wayne Common Stock is
subject to the earnings of its subsidiaries and the amounts available for
payment of dividends by such subsidiaries under federal banking laws and
regulations. Generally, dividends from Wayne's banking subsidiaries are
restricted to net profits of the current year plus the preceding two years less
dividends paid.
PREEMPTIVE RIGHTS
Shareholders of Wayne do not have preemptive rights pursuant to Wayne's
Articles of Incorporation and the OGCL. Shareholders of Chippewa do have the
preemptive right to subscribe to additional shares of common stock when issued
by Chippewa. Preemptive rights permit a shareholder to purchase their pro rata
share of any offering by the company, subject to certain exceptions and
limitations as provided by law.
VOTING
On all matters to properly come before shareholders, each share of
stock of Wayne and Chippewa entitles the holder thereof to one vote, except,
with respect to the right to vote cumulatively in the election of Directors
which is available for shareholders of Chippewa but not shareholders of Wayne.
(See "Cumulative Voting"). Further, each of Wayne and Chippewa have certain
"supermajority vote" requirements regarding business combinations contained in
their respective Articles of Incorporation. (See "Antitakeover Provisions"). The
affirmative vote of the holders of a majority of the outstanding Wayne Common
Stock is required to amend the Articles of Incorporation or Code of Regulations
of Wayne, except the amendment of the provisions contained in its
44
<PAGE> 46
Articles of Incorporation requiring a supermajority vote in certain business
combination transactions, which amendment requires, in certain circumstances,
the affirmative vote of the holders of eighty percent (80%) of the Wayne Common
Stock. The amendment of the Articles of Incorporation or Code of Regulations of
Chippewa requires a vote of 66 2/3% of the outstanding shares as provided by the
OGCL.
CUMULATIVE VOTING
Shareholders of Chippewa have the right to vote cumulatively in the
election of Directors. Shareholders of Wayne do not have the right to vote
cumulatively in the election of directors which right is specifically excluded
in Wayne's Articles of Incorporation. In cumulative voting, a shareholder may
cumulate a number of votes equal to the number of directors to be elected times
the number of shares held by the shareholder and cast all of such votes for one
nominee for director, or allocate such votes among the nominees as the
shareholder sees fit. Cumulative voting rights afford shareholders controlling a
minority stock position the opportunity to have representation on the Board of
Directors.
LIQUIDATION
Holders of Wayne and Chippewa stock are entitled to a pro rata
distribution of the corporation's assets upon liquidation.
LIABILITY OF DIRECTORS; INDEMNIFICATION
Under their respective Articles of Incorporation Wayne and Chippewa may
indemnify present or past directors, officers, employees or agents to the full
extent permitted by law.
The Articles of Incorporation of Wayne provide that the company shall
have the power to indemnify its present and past directors, officers, employees
and agents, and such other persons as it shall have the power to indemnify to
the full extent permitted under, and subject to the limitations of, Title 17 of
the Ohio Revised Code. Additionally, and subject to the limitations set forth
below, Wayne's Articles of Incorporation require that Wayne indemnify its
present and past Directors for personal liability for monetary damages resulting
from breach of their fiduciary duty as Directors. Notwithstanding the above, no
indemnification for personal liability shall be provided for: (i) any breach of
the Directors' duty of loyalty to the Corporation or its shareholders; (ii) acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law; (iii) the illegal distribution of dividends; and (iv)
any transaction from which the Director derived an improper personal benefit.
The Code of Regulations of Chippewa provides that the company shall
indemnify its present, past and future directors and officers, and may indemnify
its employees and agents, and such other persons as it shall have power to
indemnify to the full extent permitted under, and subject to the limitations of,
Title 17 of the Ohio Revised Code.
ANTITAKEOVER PROVISIONS
Ohio Law Applicable to Wayne and Chippewa
Both Chippewa and Wayne are Ohio-chartered corporations and are
"issuing public corporations" under the laws of Ohio, and subject to the
provisions of the Ohio Control Share Acquisition Statute (ORC ss.1701.831) and
the Merger Moratorium Act (ORC ss.1704). Pursuant to the Ohio Control Share
Acquisition Statute, the purchase of certain levels of voting power of a company
(one-fifth or more, one-third or more, or a majority) can be made only with the
prior authorization of at least a majority of the total voting power of such
company and a separate prior authorization of the holders of at least a majority
of the voting power held by shareholders other than the proposed purchaser,
officers of the company and directors of the company who are also employees.
This law has the potential effect of deterring certain potential acquisitions of
the company which might be beneficial to shareholders. The Merger Moratorium
Act, enacted in 1990, prohibits certain Ohio corporations from engaging in
specified types of transactions with an "interested shareholder" for a period of
three years after the shareholder becomes an "interested
45
<PAGE> 47
shareholder" unless the shareholder receives the approval of the corporation's
board of directors prior to the acquisition of shares or the consummation of the
specified type of transaction. The anticipated effect of the Merger Moratorium
Act is to encourage a potential acquirer to negotiate with a target
corporation's board of directors prior to obtaining a 10 percent or greater
block of shares in the corporation.
Wayne's and Chippewa's Articles of Incorporation
Wayne's and Chippewa's Articles of Incorporation contain four
provisions which can be characterized as antitakeover in nature. These
provisions are summarized below:
Supermajority Vote and Fair Price Provision
Wayne has a provision in its Articles of Incorporation which provides
that in certain business combination transactions, which are not approved by the
incumbent board of directors, a supervote is required by shareholders in order
to approve such a business combination. The vote of shareholders required under
such circumstances is 80% In addition the Articles of Incorporation of Wayne
contain a "fair price" provision which requires an acquirer to pay the same
level of consideration for all shares of the company acquired by the "interested
shareholder." The supermajority and fair price provisions do not apply to
transactions which are approved by the incumbent board of directors of the
company nor to a transaction approved by a vote of at least 66 2/3% of the
shares excluding those owned by the acquirer.
Chippewa also has antitakeover provisions in its Articles of
Incorporation. Such provisions require, in certain business combination
transactions which are not approved by three-fourths (75%) of the members of the
incumbent board of directors, a supermajority vote of shareholders in order to
approve such a business combination. The vote of shareholders required under
such circumstances is a majority of the outstanding shares excluding shares held
by the proposed acquirer if the acquirer is the holder of 10% of the outstanding
shares. The Articles of Incorporation of Chippewa does not contain a "fair
price" provision similar to that of Wayne's described above.
Classified Board Provision
Wayne and Chippewa currently have in operation, a classified election
system for electing their Board of Directors. Directors are elected to a
designated class and shall serve until the expiration of the term for which they
are elected, and until their successors have been duly elected and qualified.
Each of Wayne and Chippewa have three (3) classes and each director is elected
to a three (3) year term such that one-third of the Board is elected each year.
Authorized Shares
The availability of authorized and unissued shares for future issuance
by Wayne may be deemed to have an antitakeover effect. As of the date of this
Agreement, Wayne had 1,464,488 authorized shares available for future issuance.
The authorized and unissued shares are available for issuance and thereby could
be issued into "friendly hands" to dilute the ownership of an individual or
corporation that has acquired shares of Wayne and intends to conduct an
acquisition of Wayne that is deemed to be undesirable by the Board of Directors
of Wayne. Chippewa has 500,000 shares authorized and 448,000 outstanding as of
the Record Date. Such unauthorized Chippewa shares also could be issued into
friendly hands, subject to the preemptive rights of the existing Chippewa
shareholders.
Supermajority for Removal of Directors
The Code of Regulations of Wayne contains a provision requiring a vote
of 75% of the outstanding shares of Wayne to remove all or a portion of the
members of the Board of Directors. Such provision increases the requirements of
the OGCL which provide for removal of Directors upon a vote of the majority of
outstanding shares.
46
<PAGE> 48
None of these provisions were adopted as a result of the knowledge of
management for either Wayne or Chippewa of any effort to obtain control of Wayne
or Chippewa by any means. Neither Wayne's nor Chippewa's respective Articles of
Incorporation and Codes of Regulations currently contain any other provisions
that were intended to be or could fairly be considered as antitakeover in nature
or effect. Further, the Board of Directors of Wayne has no current intention to
amend the Articles of Incorporation or Code of Regulations to add any additional
antitakeover provisions.
INFORMATION ABOUT WAYNE
GENERAL
Wayne, through its affiliate, The Wayne County National Bank, conducts
the business of a commercial banking organization. At September 30, 1997, Wayne
and its subsidiaries had consolidated total assets of approximately $351
million, consolidated total deposits of approximately $277 million and
consolidated total equity of approximately $45 million.
Wayne, through its banking affiliate, offers a broad range of banking
services to the commercial, industrial and consumer market segments which it
serves. Services include commercial, real estate and personal loans; checking,
savings and time deposits and other customer services such as safe deposit
facilities. Wayne does not have any foreign operations, assets or investments.
Wayne Bank is a national banking association. Wayne Bank is regulated
by the Office of the Comptroller of the Currency ("OCC") and its deposits are
insured by the Federal Deposit Insurance Corporation to the extent permitted by
law and, as a subsidiary of Wayne, is regulated by the Federal Reserve Board.
THIS PROXY STATEMENT-PROSPECTUS, AS MAILED TO SHAREHOLDERS OF CHIPPEWA
IS ACCOMPANIED BY WAYNE'S ANNUAL REPORT TO SHAREHOLDERS FOR THE YEAR ENDED
DECEMBER 31, 1996 (THE "WAYNE 1996 ANNUAL REPORT"). ADDITIONAL INFORMATION
CONCERNING WAYNE IS CONTAINED IN DOCUMENTS INCORPORATED IN THIS PROXY STATEMENT
BY REFERENCE. THESE DOCUMENTS, INCLUDING THE WAYNE 1996 ANNUAL REPORT AND
WAYNE'S FIRST, SECOND AND THIRD QUARTER REPORTS ON FORM 10-Q, ARE AVAILABLE
WITHOUT CHARGE UPON WRITTEN REQUEST TO DAVID P. BOYLE, CHIEF FINANCIAL OFFICER
OF WAYNE, 112 W. LIBERTY STREET, WOOSTER, OHIO 44691. IN ORDER TO ASSURE TIMELY
DELIVERY OF THESE DOCUMENTS, ANY REQUEST SHOULD BE MADE BY ____________.
COMPETITION
The commercial banking and trust business in the market areas served by
Wayne Bank is very competitive. Wayne and Wayne Bank are in competition with
commercial banks located in their own service areas. Some competitors of Wayne
and Wayne Bank are substantially larger than Wayne Bank. In addition to local
bank competition, Wayne Bank competes with larger commercial banks located in
metropolitan areas, savings banks, savings and loan associations, credit unions,
finance companies and other financial institutions for loans and deposits.
CERTAIN REGULATORY CONSIDERATIONS
The following is a summary of certain statutes and regulations
affecting Wayne and its subsidiaries. This summary is qualified in its entirety
by such statutes and regulations.
Wayne
Wayne is a registered bank holding company under the Bank Holding
Company Act of 1956, as amended, ("BHC Act") and as such is subject to
regulation by the Federal Reserve Board. A bank holding company is required to
file with the Federal Reserve Board quarterly reports and other information
regarding its business operations and those of its subsidiaries. A bank holding
company and its subsidiary banks are also subject to examination by the Federal
Reserve Board.
47
<PAGE> 49
The BHC Act requires every bank holding company to obtain the prior
approval of the Federal Reserve Board before acquiring substantially all the
assets of any bank or bank holding company or ownership or control of any voting
shares of any bank or bank holding company, if, after such acquisition, it would
own or control, directly or indirectly, more than five percent (5%) of the
voting shares of such bank or bank holding company.
In approving acquisitions by bank holding companies of companies
engaged in banking-related activities, the Federal Reserve Board considers
whether the performance of any such activity by a subsidiary of the holding
company reasonably can be expected to produce benefits to the public, such as
greater convenience, increased competition, or gains in efficiency, which
outweigh possible adverse effects, such as over concentration of resources,
decrease of competition, conflicts of interest, or unsound banking practices.
Bank holding companies are restricted in, and subject to, limitations
regarding transactions with subsidiaries and other affiliates.
In addition, bank holding companies and their subsidiaries are
prohibited from engaging in certain "tie in" arrangements in connection with any
extensions of credit, leases, sales of property, or furnishing of services.
Wayne Subsidiaries
Wayne operates a single national bank, namely, The Wayne County
National Bank. As a national bank Wayne Bank is supervised and regulated by the
OCC, and subject to laws and regulations applicable to national banks.
Capital
The Federal Reserve Board, OCC, and FDIC require banks and holding
companies to maintain minimum capital ratios.
The Federal Reserve Board adopted final "risk-adjusted" capital
guidelines for bank holding companies. The guidelines became fully implemented
as of December 31, 1992. The OCC and FDIC have adopted substantially similar
risk-based capital guidelines. These ratios involve a mathematical process of
assigning various risk weights to different classes of assets, then evaluating
the sum of the risk-weighted balance sheet structure against Wayne's capital
base. The rules set the minimum guidelines for the ratio of capital to
risk-weighted assets (including certain off-balance sheet activities, such as
standby letters of credit) at 8%. At least half of the total capital is to be
composed of common equity, retained earnings, and a limited amount of perpetual
preferred stock less certain goodwill items ("Tier 1 Capital"). The remainder
may consist of a limited amount of subordinated debt, other preferred stock, or
a limited amount of loan loss reserves. At September 30, 1997 Wayne's
consolidated risk-adjusted Tier 1 Capital and total capital, as defined by the
regulatory agencies based on the fully phased in 1992 guidelines, were 19.47%
and 20.72% of risk-weighted assets, respectively, well above the 4% and 8%
minimum standards mandated by the regulatory agencies.
In addition, the federal banking regulatory agencies have adopted
leverage capital guidelines for banks and bank holding companies. Under these
guidelines, banks and bank holding companies must maintain a minimum ratio of
three percent (3%) Tier 1 Capital (as defined for purposes of the year-end 1992
risk-based capital guidelines) to total assets. The Federal Reserve Board has
indicated, however, that banking organizations that are experiencing or
anticipating significant growth, are expected to maintain capital ratios well in
excess of the minimum levels. As of September 30, 1997, Wayne's core leverage
ratio was 12.70%, well above the regulatory minimum.
Regulatory authorities may increase such minimum requirements for all
banks and bank holding companies or for specified banks or bank holding
companies. Increases in the minimum required ratios could adversely affect Wayne
and Wayne Banks, including their ability to pay dividends.
48
<PAGE> 50
Additional Regulation
Wayne Bank is also subject to federal regulation as to such matters as
required reserves, limitation as to the nature and amount of its loans and
investments, regulatory approval of any merger or consolidation, issuance or
retirement of their own securities, limitations upon the payment of dividends
and other aspects of banking operations. In addition, the activities and
operations of Wayne Bank are subject to a number of additional detailed, complex
and sometimes overlapping laws and regulations. These include state usury and
consumer credit laws, state laws relating to fiduciaries, the Federal
Truth-in-Lending Act and Regulation Z, the Federal Equal Credit Opportunity Act
and Regulation B, the Fair Credit Reporting Act, the Truth in Savings Act, the
Community Reinvestment Act, anti-redlining legislation and antitrust laws.
Dividend Regulation
The ability of Wayne to obtain funds for the payment of dividends and
for other cash requirements is largely dependent on the amount of dividends
which may be declared by Wayne Bank. Generally, Wayne Bank may not declare a
dividend, without the approval of the OCC, if the total of dividends declared in
a calendar year exceeds the total of its net profits for that year combined with
its retained profits of the preceding two years.
Government Policies and Legislation
The policies of regulatory authorities, including the OCC, Federal
Reserve Board, FDIC and the Depository Institutions Deregulation Committee, have
had a significant effect on the operating results of commercial banks in the
past and are expected to do so in the future. An important function of the
Federal Reserve System is to regulate aggregate national credit and money supply
through such means as open market dealings in securities, establishment of the
discount rate on member bank borrowings, and changes in reserve requirements
against member bank deposits. Policies of these agencies may be influenced by
many factors, including inflation, unemployment, short-term and long-term
changes in the international trade balance and fiscal policies of the United
States government.
The United States Congress has periodically considered and adopted
legislation which has resulted in further deregulation of both banks and other
financial institutions, including mutual funds, securities brokerage firms and
investment banking firms. No assurance can be given as to whether any additional
legislation will be adopted or as to the effect such legislation would have on
the business of Wayne or Wayne Bank.
In addition to the relaxation and elimination of certain geographic
restrictions on banks and bank holding companies, a number of regulatory and
legislative initiatives have the potential for eliminating many of the product
line barriers presently separating the services offered by commercial banks from
those offered by nonbanking institutions. For example, Congress recently has
considered legislation which would expand the scope of permissible business
activities for bank holding companies (and in some cases banks) to include
securities underwriting, insurance services and various real estate related
activities.
Deposit Insurance
The Federal Deposit Insurance Corporation Improvement Act of 1991
("FDICIA") was enacted in 1991. Among other things, FDICIA, requires federal
bank regulatory authorities to take "prompt corrective action" with respect to
banks that do not meet minimum capital requirements. For these purposes, FDICIA
establishes five capital tiers: well capitalized, adequately capitalized,
undercapitalized, significantly undercapitalized, and critically
undercapitalized.
As an FDIC-insured institution, Wayne Bank is required to pay deposit
insurance premium assessments to the FDIC. The amount each institution pays for
FDIC deposit insurance coverage is determined in accordance with a risk-based
assessment system under which all insured depository institutions are placed
into one of nine categories and assessed insurance premiums based upon their
level of capital and supervisory evaluation. Institutions classified as
well-capitalized (as defined by the FDIC) and considered healthy pay the lowest
premium while
49
<PAGE> 51
institutions that are less than adequately capitalized (as defined by the FDIC)
and considered substantial supervisory concerns pay the highest premium.
Beginning in 1996, such deposit insurance runs from a cost of zero percent to
0.27% of deposits. Because Wayne Bank is "well-capitalized," it currently pays
no deposit insurance premiums.
The FDIC may terminate the deposit insurance of any insured depository
institution if the FDIC determines, after a hearing, that the institution has
engaged or is engaging in unsafe or unsound practices, is in an unsafe or
unsound condition to continue operations or has violated any applicable law,
regulation, order, or any condition imposed in writing by, or written agreement
with, the FDIC. The FDIC may also suspend deposit insurance temporarily during
the hearing process for a permanent termination of insurance if the institution
has no tangible capital. Management of Wayne is not aware of any activity or
condition that could result in termination of the deposit insurance of the Wayne
Bank.
Recent Legislation
On September 29, 1994, the Reigle/Neal Interstate Banking and Branching
Efficiency Act of 1994 (the "Interstate Act") was signed into law. The
Interstate Act effectively permits nationwide banking. The Interstate Act
provides that one year after enactment, adequately capitalized and adequately
managed bank holding companies may acquire banks in any state, even in those
jurisdictions that currently bar acquisitions by out-of-state institutions,
subject to deposit concentration limits. The deposit concentration limits
provide that regulatory approval by the Federal Reserve Board may not be granted
for a proposed interstate acquisition if after the acquisition, the acquirer on
a consolidated basis would control more than 10% of the total deposits
nationwide or would control more than 30% of deposits in the state where the
acquiring institution is located. The deposit concentration state limit does not
apply for initial acquisitions in a state and in every case, may be waived by
the state regulatory authority. Interstate acquisitions are subject to
compliance with the Community Reinvestment Act ("CRA"). States are permitted to
impose age requirements not to exceed five years on target banks for interstate
acquisitions. States are not allowed to opt-out of interstate banking.
Branching between states may be accomplished either by merging separate
banks located in different states into one legal entity, or by establishing de
novo branches in another state. Consolidation of banks was not permitted until
June 1, 1997, provided that the state had not passed legislation "opting-out" of
interstate branching. If a state opted-out prior to June 1, 1997, then banks
located in that state may not participate in interstate branching. A state could
have opted-in to interstate branching by bank consolidation or by de novo
branching by passing appropriate legislation earlier than June 1, 1997.
Interstate branching is also subject to a 30% statewide deposit concentration
limit on a consolidated basis, and a 10% nationwide deposit concentration limit.
The laws of the host state regarding community reinvestment, fair lending,
consumer protection (including usury limits) and establishment of branches shall
apply to the interstate branches. The State of Ohio opted-in to the legislation
in May of 1997.
De novo branching by an out-of-state bank is not permitted unless the
host state expressly permits de novo branching by banks from out-of-state. The
establishment of an initial de novo branch in a state is subject to the same
conditions as apply to initial acquisition of a bank in the host state other
than the deposit concentration limits.
The FDIC, together with the Federal Reserve, the OCC and the Office of
Thrift Supervision (the "OTS"), have established rules implementing requirement
that the federal banking agencies establish operational and managerial standards
to promote the safety and soundness of federally insured depository
institutions. The guidelines establish standards for internal controls,
information systems, internal audit systems, loan documentation, credit
underwriting, interest rate exposure, asset growth, and compensation, fees and
benefits. In general, the guidelines prescribe the goals to be achieved in each
area, and each institution is responsible for establishing its own procedures to
achieve those goals. If an institution fails to comply with any of the standards
set forth in the guidelines, the institution's primary federal regulator may
require the institution to submit to a plan for achieving and maintaining
compliance. Failure to submit an acceptable plan, or failure to comply with a
plan that has been accepted by the appropriate regulator, would constitute
grounds for further enforcement action.
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<PAGE> 52
The Federal Reserve, the OCC and the OTS have adopted new regulations
under the Community Reinvestment Act ("CRA"). Under the new regulations, an
institution's performance in meeting the credit needs of its entire community,
including low and moderate income areas, as required by the CRA, is generally
evaluated under three tests: the "lending test," which considers the extent to
which the institution makes loans in the low and moderate income areas of its
market; the "service test," which considers the extent to which the institution
makes branches accessible to low and moderate income areas of its market and
provides other services that promote credit availability; and the "investment
test," which considers the extent to which the institution invests in community
and economic development activities. Wayne Bank had a satisfactory CRA rating as
of its latest examination.
Proposed Legislation
In addition to the above, there have been proposed a number of
legislative and regulatory proposals designed to strengthen the federal deposit
insurance system and to improve the overall financial stability of the U.S.
banking system. It is impossible to predict whether or in what form these
proposals may be adopted in the future, and if adopted, what their effect would
be on Wayne.
PRINCIPAL HOLDERS OF WAYNE COMMON STOCK
The following table sets forth information concerning the number of
shares of Wayne Common Stock held as of September 30, 1997, by each shareholder
who is known to Wayne management to have been the beneficial owners of more than
five percent of the outstanding shares of Wayne Common Stock as of that date:
Name and Address of Shares Beneficially Percent
Beneficial Owner Owned of Class
- ------------------- ------------------- --------
Raymond E. Dix 205,408 5.22%
P.O. Drawer D
Wooster, OH 44691
Wayco & Company(1) 602,851 15.32%
P.O. Box 757
Wooster, OH 44691
(1) Wayco & Company is a partnership formed for the purpose of holding legal
title, as nominee, to securities designated by Wayne Bank with respect to the
business of its trust department.
LEGAL PROCEEDINGS
Wayne and its subsidiaries are from time to time subject to various
pending and threatened lawsuits in which claims for monetary damages are
asserted in the ordinary course of business. While any litigation involves an
element of uncertainty, management of Wayne does not anticipate that any
currently pending or threatened litigation has the potential to materially
affect the financial condition or results of operations of Wayne.
As of the date of this Proxy-Statement Prospectus management is aware
of no pending litigation against Wayne or any of its subsidiaries.
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<PAGE> 53
INFORMATION ABOUT CHIPPEWA
GENERAL
Chippewa is an Ohio general business corporation and a registered bank
holding company with its main office located in Rittman, Ohio. Chippewa Bank is
an Ohio state chartered bank and a wholly owned subsidiary of Chippewa. Chippewa
Bank operates its main office at 20 South Main Street, Rittman, Ohio 44270.
Chippewa Bank operates 9 branches
The principal business of Chippewa Bank consists of attracting retail
deposits from the general public and investing those funds in one to four family
residential mortgage loans, consumer loans, commercial real estate, construction
and commercial business loans primarily in its market area. Chippewa Bank also
purchases mortgage-backed securities and loan participation's, and invests in
U.S. Government and agency obligations and other permissible investments.
Chippewa Bank's revenues are derived primarily from interest on loans,
investments, income from service charges and loan originations, and loan
servicing fee income.
PROPERTIES
Chippewa owns no real or personal property of a material nature other
than its main office, branch locations, and the furniture, fixtures and
equipment used in its banking business. The main office of Chippewa is located
at 20 South Main Street, Rittman, Ohio and its branch offices are located at the
following addresses:
Address Address
------- -------
RITTMAN MAIN OFFICE RITTMAN NORTH
20 South Main Street 205 North Main Street
Rittman, OH 44270 Rittman, OH 44270
CHIPPEWA LAKE CLINTON
5797 Chippewa Road 7871 Main Street
Chippewa Lake, OH 44215 Clinton, OH 44216
DOYLESTOWN STERLING
25 South Portage Street 13840 Kauffman Avenue
Doylestown, OH 44230 Sterling, OH 44276
WADSWORTH NORTH WADSWORTH SQUARE (LEASED)
1052 North High Street 130 High Street
Wadsworth, OH 44281 Wadsworth, OH 44281
WESTFIELD CENTER
6990 Greenwich Road
Westfield Center, OH 44251
Chippewa owns the land and buildings on which its main office and
branch offices are located (except 130 High Street, Wadsworth, Ohio which is
leased), free and clear of any major encumbrances.
LITIGATION
There is no pending litigation of a material nature in which Chippewa
is a party or to which any of its property is subject. Further, there is no
material legal proceeding in which any director, executive officer, principal
shareholder or affiliate of Chippewa, or any associate of any such director,
executive officer, principal shareholder or affiliate, is a party or has a
material interest adverse to Chippewa. None of the ordinary routine litigation
in
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<PAGE> 54
which Chippewa is involved is expected to have a material adverse effect on
the financial condition, results of operations or business of Chippewa.
VOTING, PRINCIPAL SHAREHOLDERS AND MANAGEMENT INFORMATION
Holders of record of Chippewa Common Stock at the close of business on
the Record Date will be entitled to vote at the Special Meeting of shareholders.
On the Record Date there were 448,000 shares of Chippewa Common Stock issued and
outstanding. Each share of Chippewa Common Stock is entitled to one vote on each
matter presented for shareholder action.
The following table sets forth information concerning the number of
shares of Chippewa Common Stock held as of, September 30, 1997, by each
shareholder who is known to Chippewa management to have been the beneficial
owner of more than five percent of the outstanding shares of Chippewa Common
Stock as of that date:
Shares Beneficially
owned at Percent
Beneficial Owners 9/30/97 of Class
- ----------------- -------------------- ----------
Miriam C. Huff (1) 51,200 11.42%
1488 Ramblewood Drive
Wooster, OH 44691
Shirley S. Mason, Trustee(2) 46,080 10.29%
1570 London
Columbus, Ohio 43221
=======================
(1) Includes 25,600 shares owned in "Streetname" and 25,600 shares owned as
a life estate under the will of G.H. Clippinger.
(2) Held as Trustee U.A.D. _____________, 19_____.
The following table shows certain information concerning the number of
shares of Chippewa Common Stock held as of September 30, 1997, by each director
of Chippewa and by all of Chippewa's directors and executive officers as a
group:
Shares of
Common Stock
Beneficially owned at Percent
Name 9/30/97 of Class
- ---- --------------------- --------
Carl H. Bradford, Jr. 305 0.07%
Allan J. Broadhurst 6,560 1.46%
Richard K. Gillman 1,200 0.27%
Roger G. Hessidence 7,800 1.74%
Don G. Houglan 7,000 1.56%
R. Tim Hubiak 1,300 0.29%
Joseph L. Ramsier 14,760 3.29%
Gerald E. Ritzman 492 0.11%
Philip S. Swope 2,400(1) 0.54%
All executive officers and 43,185 9.64%
directors as a group (11 persons)
- -------------
(1) Includes 400 shares owned by spouse
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Directors and executive officers of Chippewa and their associates are
customers of and have had transactions with Chippewa from time to time in the
ordinary course of business. Such transactions have been made on substantially
the same terms, including interest rates and collateral on loans, as those
prevailing at the time for
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<PAGE> 55
comparable transactions with other persons and did not and will not involve
more than the normal risk of collectibility or present other unfavorable
features. Similar transactions may be expected to take place in the ordinary
course of business in the future.
COMPETITION
The principal markets in which Chippewa competes are Wayne, Medina, and
Summit Counties in Ohio. For deposits and loans Chippewa competes with other
banks, savings institutions, credit unions, finance companies, factoring
companies, insurance companies, governmental agencies and other financial
institutions.
EMPLOYEES
At September 30, 1997, Chippewa had 69 full-time equivalent employees.
Chippewa is not a party to any collective bargaining agreement and employee
relations are considered to be excellent by Chippewa management.
CHIPPEWA'S FINANCIAL STATEMENTS AND MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
Financial Condition
General. Total assets increased $30.3 million or 29.9% from $101.3 million at
December 31, 1995 to $131.6 million at December 31, 1996. This growth was a
combined result of the acquisition of two branch offices, in March 1996,
amounting to net proceeds of $22.3 million and internal growth of $9.0 million.
The branch offices which were acquired during the period were strategically
located in markets which management believed would provide competitive
advantages. Chippewa also experienced strong growth internally, primarily as a
result of the promotion of maximum value passbook account. During this period
there were increases of $11.3 million in net loans and $19.0 million in
investment securities which were primarily funded by the overall increase in
deposits of $28.9 million resulting from the branch acquisitions and internal
promotions.
Total assets continued to increase by $5.3 million or 4.1% to $136.9 million
during the nine months ended September 30, 1997. During this period, loans
continued to increase by $8.6 million which were funded by a decline in
investment securities of $4.4 million and increases in deposits of $2.7 million
and securities sold under agreements to repurchase of $1.8 million.
Investment Portfolio. Total investment securities increased during the year by
approximately $19.0 million or 59.5% from $31.9 million at December 31, 1995 to
$50.9 million at December 31, 1996. This increase resulted from the funds
obtained in the branch acquisitions. The funds that were in excess of
anticipated short-term loan demand were invested in investment securities, as
opposed to federal funds sold, to maximize profitability. The securities
acquired with these funds typically have maturities within five years or are
mortgage-backed securities which will provide the liquidity needs of future loan
demand.
Investment securities declined during the nine months ended September 30, 1997
by approximately $4.4 million from December 31, 1996. This decline resulted
primarily from maturities and principal repayments. Historically, management has
not typically sold investment securities nor do they intend to in the
foreseeable future; however, management will use the available for sale portion
of the securities portfolio to help manage liquidity needs of the bank's
operations.
Historically, Chippewa has been a conservative investor, investing primarily in
U. S. Treasury securities and obligations of U. S. Government agencies and
corporations, and to a lesser extent local obligations of states and political
subdivisions and corporate obligations. During 1996 and continuing through 1997,
management has restructured its investment securities portfolio to include a
greater investment in mortgage-backed securities. These mortgage-backed
securities are all with agencies of the U. S. Government and provide for monthly
repayment of interest and principal, thus providing for greater liquidity.
Management determined that with the current rate of loan growth, greater
liquidity in the investment portfolio was necessary.
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<PAGE> 56
The following table sets forth the carrying amount of securities at the dates
Windicated:
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1997 1996 1995 1994
------------ -------- -------- --------
(In thousands)
<S> <C> <C> <C> <C>
Available for Sale
- ------------------
U.S. Treasury securities $ 8,060 $14,509 $ 9,609 $ 5,390
U.S. Government agency securities 9,122 6,954 1,514 2,482
Mortgage-backed securities 7,960 7,340 2,195 1,879
Marketable equity securities 462 369 60 -
----------------------------------------------------
TOTAL $25,604 $29,172 $13,378 $ 9,751
====================================================
Held to Maturity
- ----------------
U.S. Treasury securities $ 0 $ 0 $ 0 $ 5,008
U.S. Government agency securities 6,513 8,553 7,742 6,752
Mortgage-backed securities - 54 106 135
Obligations of states and political subdivisions 7,020 7,129 6,303 6,418
Corporate securities 7,411 6,026 4,450 3,501
Marketable equity securities 0 0 0 60
----------------------------------------------------
TOTAL $20,944 $21,762 $18,601 $21,874
====================================================
</TABLE>
At September 30, 1997, Chippewa had no securities of any issuer for which the
carrying value of such securities exceeded 10% of stockholders' equity.
The following table sets forth the maturities of securities at September 30,
1997, and the weighted average yields of such securities (calculated on the
basis of the cost and effective yields weighted for the scheduled maturity of
each security). Tax-equivalent adjustments (using a 34% federal income tax rate)
have been made in calculating yields on obligations of state and political
subdivisions.
<TABLE>
<CAPTION>
Maturing
------------------------------------------------------------------------------------------------
Within After One But After Five But After No Fixed
One Year Within Five Years Within Ten Years Ten Years Maturity
---------------- ----------------- ----------------- ---------------- -----------
Amount Yield Amount Yield Amount Yield Amount Yield Amount
------ ----- ------ ----- ------ ----- ------ ----- ------
(In thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Available for Sale
U.S. Treasury securities $3,502 6.92% $ 4,558 6.33% $ - $ -
U.S. Government agency 503 6.16% 8,619 6.40% - -
securities
Mortgage-backed securities - 3,953 6.40% 2,714 6.56% 1,293 6.47%
Marketable equity securities - - - - 462
------ ------- ------ ------ -----
$4,005 $17,130 $2,714 $1,293 $ 462
====== ======= ====== ====== =====
Held to Maturity
U.S. Government agency $ 500 5.52% $ 4,515 5.90% $1,498 6.35% $ - $ -
securities
Obligations of states and 295 8.68% 3,220 8.70% 3,381 7.52% 124 7.42%
political subdivisions
Corporate securities 501 6.07% 6,910 6.34% - -
------ ------- ------ ------ -----
$1,296 $14,645 $4,879 $ 124 $ -
====== ======= ====== ====== =====
</TABLE>
Note: Mortgage-backed securities are distributed on a contractual maturity.
55
<PAGE> 57
Loans. Total loans amounted to $70.2 million at December 31, 1996 compared to
$58.9 million at December 31, 1995, an increase of $11.3 million or 19.2%. Total
real estate loans, consumer installment, commercial and agriculture and credit
card loans amounted to $44.5 million, $16.1 million, $9.1 million and $565,000
which represents 63%, 22.9%, 12.9% and .8% of total loans at December 31, 1996,
respectively.
Total loans amounted to $78.9 million at September 30, 1997, an increase of $8.7
million or 12.4%. Total real estate loans, consumer, and commercial and
agriculture loans amounted to $52.8 million, $17.0 million, and $9.1 million
which represents 66.9%, 21.6%, and 11.5% of total loans, respectively.
At September 30, 1997, Chippewa continues to focus its primary lending efforts
in residential mortgages, which comprise 47.7% of the total loan portfolio, and
consumer installment loans, comprised primarily of unsecured personal and
automobile loans, which comprise 21.6% of total loans. In recent years there has
been a very strong loan demand in residential real estate as well as somewhat
less traditional commercial real estate and construction real estate loans. The
loan growth has been spurred by new housing developments in the local market
combined with strong marketing efforts of Chippewa. Management believes that the
conservative lending practices employed by Chippewa reduce, to an acceptable
level, the impact of declining values of real estate should a downturn in the
local real estate market occur. The Bank has had a strong historical performance
regarding collection of loans, with no real estate losses incurred over the last
five years.
Growth in the loan portfolio was primarily due to significant increases in
consumer real estate loans, which grew from $23.2 million at December 31, 1995
to $37.6 million at September 30, 1997, which represents an increase of $14.9
million or 74.4% Of the total loan growth during this period. The remainder of
the real estate mortgage portfolio is comprised of loans secured by commercial
and agricultural properties. Such loans grew only $349,000 from December 31,
1995 to September 30, 1997. Since 1992, the Bank has not incurred any losses or
has had to foreclose on any of its real estate mortgage loans. Real estate
construction loans grew from $1.9 million to $4.0 million during this same
period. The increase of $2.1 million or 10.1% Of the total loan portfolio growth
is the direct result of management's plan to be more actively involved with
local-market residential home builders and land developers. Additional
construction loan commitments, available and unfunded at September 30, 1997
amounted to $2.1 million. Commercial, industrial and agricultural loans grew by
$2.0 million from December 31, 1995 to September 30, 1997, which represents
10.0% Of the total loan growth for this period. Such loan originations have been
concentrated primarily in agricultural working capital, crop and equipment
financing. Although the Bank has historically specialized in
commercial-agricultural-based lending, such loans represent only 11.5% Of the
total loan portfolio at September 30, 1997. Consumer installment loans,
comprised primarily of personal unsecured and automobile loans have grown from
$16.3 million at December 31, 1995 to $17.0 million at September 30, 1997. This
represents 3.6% Of the total loan growth for the period.
Management intends to continue to promote residential real estate lending in its
local market of Northern Wayne, Southern Medina, and Western Summit counties.
Management desires to maintain a diversified loan portfolio in its local market
area to support the communities it serves. Although the Bank has a diversified
loan portfolio, at September 30, 1997 and December 31, 1996 and 1995, loans
outstanding to individuals dependent on the agricultural economic sector
approximate $8.1 million or 10.2%, $7.4 million or 10.5% and $7.0 million or
12.0% of the loan portfolio, respectively. These loans are typically secured by
residential and commercial farm real estate and farm equipment.
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<PAGE> 58
The following table shows Chippewa's loan distribution at the end of each
reported period:
The bank's loan portfolio is comprised of commercial and agricultural loans
extended to businesses and farm operations and consumer loans consisting
primarily of residential mortgages, automobile loans, and personal credit card
lines.
<TABLE>
<CAPTION>
Sept. 30, December 31,
1997 1996 1995 1994 1993 1992
----------------------------------------------------------------------------
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
Commercial, industrial
and agricultural $ 9,087 $ 9,087 $ 7,045 $ 6,816 $ 7,165 $ 6,361
Real estate-construction 3,958 2,972 1,942 3,152 1,601 1,693
Real estate-mortgage 48,850 41,505 33,598 28,381 25,950 25,133
Consumer 17,022 16,631 16,298 11,216 10,513 11,127
------- ------- ------- ------- ------- -------
Total loans $78,917 $70,195 $58,883 $49,565 $45,229 $44,314
======= ======= ======= ======= ======= =======
</TABLE>
The following table shows the maturity of loans (excluding real estate mortgages
and installment loans) outstanding as of September 30, 1997. Also provided are
the amounts due after one year classified according to the sensitivity to
changes in interest rates.
<TABLE>
<CAPTION>
After One
Within But Within After
One Year Five Years Five Years Total
--------------------------------------------------------------------
(In thousands)
<S> <C> <C> <C> <C>
Commercial, industrial
and agricultural $2,410 $4,102 $2,575 $ 9,087
Real estate - construction 1,832 2,126 - 3,958
------ ------ ------ -------
TOTAL $4,242 $6,228 $2,575 $13,045
====== ====== ====== =======
</TABLE>
Nonperforming Assets. Chippewa's nonperforming assets, which are comprised of
any nonaccrual loans, accruing loans past due 90 days or more and other real
estate owned, have been minimal in amount for the periods from December 31, 1992
through September 30, 1997. Nonperforming assets amounted to only .90% and .44%
of total assets at September 30, 1997 and December 31, 1996, respectively.
Non-performing loans amounted to only 1.56% and .82% of total loans for these
same periods.
The Bank's general collection policy is to provide a late notice to commercial
and consumer installment accounts after 10 days past due, and after 15 days past
due for residential mortgage accounts. Delinquent accounts are contacted by
telephone once the loan becomes delinquent in excess of 15 days, with collection
letters issued between the 30th and 60th days. Notice of intent to foreclose is
provided to consumer mortgage customers between 100 and 120 days past due. At
120 days past due, foreclosure proceedings are initiated. In general, personal
property securing loans aresubject to repossession at 60 days past due.
Management regularly reviews the loan portfolio in order to identify potential
problem loans, and classifies any potential problem loans as a special mention,
substandard, doubtful, or loss asset. An asset is considered substandard if it
is inadequately protected by the current equity and paying capacity of the
borrower or of the collateral pledged, if any. Substandard assets include those
characterized by the distinct possibility that the bank will sustain some loss
if the deficiencies are not corrected. Assets classified as
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<PAGE> 59
doubtful have all the weaknesses of those classified as substandard with the
additional characteristic that the weakness makes collection or liquidation in
full highly questionable and improbable. Assets classified as loss are
considered not collectible and of such little value that their continuance as
assets without the establishment of a specific reserve is not warranted. Assets
that do not currently expose the bank to a sufficient degree of risk to warrant
classification but do possess credit deficiencies or potential weaknesses
deserving management's close attention are designated special mention. Special
mention assets have a potential weakness or pose an unwarranted financial risk
that, if not corrected, could weaken the asset and increase risk in the future.
A loan is considered impaired when, based on current information, it is probable
the Chippewa Bank will be unable to collect all principal and interest due in
accordance with the contractual terms of the loan agreements. All nonaccrual
commercial and commercial real estate loans, including agricultural-related
business loans, if any, are considered to be impaired.
The accrual of interest on a loan is generally discontinued when management
believes, after considering economic and business conditions, the borrower's
financial condition is such that collection of interest is doubtful. Interest
payments received on nonaccrual loans are recorded as income or applied against
principal according to management's judgment as to the collectibility of such
principal. At September 30, 1997, the Bank had $334,000 in loans greater than 90
days past due and still accruing interest, and no loans on nonaccrual status, or
any other real estate owned. The loans greater than 90 days past due are
comprised of five individual loans, to two different customers. These loans are
secured by farm, residential properties and acreage. In all instances, the
overall credit relationships are considered impaired. Management continues to
work closely with these customers in an effort to either restructure the loans
to permit the contractual repayment of amounts due, and further enhance the
Chippewa Bank's security position regarding collateral, or to assist the
customer in finding alternative financing.
During the course of 1997, the Chippewa Bank restructured various delinquent
credit arrangements that were outstanding to a particular farm operation
customer. The farm operations experienced ongoing declines in profitability and
a general downturn in economic conditions that had a direct effect on the farm's
revenue generated from its products. As a result, in August, 1997 the various
loans outstanding, which approximated $600,000 were restructured into two
separate obligations, and an additional $300,000 working capital loan was also
extended. All borrowings were cross-collateralized with farmland, including
residences, livestock and equipment with estimated market values far exceeding
the outstanding loans extended. In addition, a guarantee from the Farmers Home
Administration in the amount of $630,000 was also obtained as part of the
restructuring. The loans are performing, as agreed, under the current loan
arrangements. There are no other restructured loan arrangements outstanding at
September 30, 1997.
The following table summarizes Chippewa Bank's nonaccrual, past due loans,
restructured loans and other real estate owned:
<TABLE>
<CAPTION>
December 31,
September 30, ----------------------------------------------------------------
1997 1996 1995 1994 1993 1992
-------------------------------------------------------------------------------
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
Loans past due 90 days or more and $334 $15 $251 $15 $46 $48
still accruing
Nonaccrual loans - 563 - - - -
Restructurings 896 - - - - -
Other real estate owned - - - - - -
-------------------------------------------------------------------------------
Total nonperforming assets $1,230 $578 $251 $15 $46 $48
===============================================================================
Nonperforming loans to total loans 1.56% 0.82% 0.43% 0.03% 0.10% 0.11%
Allowance for loan losses to 56.67% 106.75% 230.28% 3,260.00% 967.39% 812.50%
nonperforming loans
Nonperforming loans to total assets 0.90% 0.44% 0.25% 0.02% 0.05% 0.06%
</TABLE>
58
<PAGE> 60
For the year ended December 31, 1996, interest income that would have been
recorded on loans accounted for on a nonaccrual basis under the original terms
of such loans was $73,000, of which $53,000 was recorded as interest income.
There were no nonaccrual loans as of September 30, 1997 or December 31, 1995.
On the basis of management's review of its loan portfolio, at September 30,
1997, Chippewa has classified $1.9 million of its loans as substandard and
$130,000 as special mention. Chippewa has no loans classified as doubtful or
loss at September 30, 1997. Of the total substandard classification amount,
$795,000 represent loans in addition to those disclosed previously as either
restructured or delinquent in excess of 90 days. The loans represent extensions
of credit to a farm business, approximating $665,000 and to an auto dealership
for approximately $131,000. The farm loans are cross-collateralized with farm
acreage, residences, operation facilities and equipment and livestock with
estimated fair values substantially in excess of the outstanding loan amounts.
However, due to ongoing marginal profitability from operations, depressed
economic conditions relating to the product offered, and the customer's prior
history of payment delinquencies, these loan credits are considered substandard
and impaired in determining the ongoing adequacy of the allowance for loan
losses.
The loans outstanding to the auto dealership are comprised of two unsecured
working-capital term loans. Because of marginal profitability and increases in
cash flows, these loans were considered as a special mention classification, but
impaired. The loans continue to be current in payment, and each has less than 40
monthly payments remaining.
As a part of management's ongoing assessment of its loan portfolio, $314,000 of
the allowance for loan losses at September 30, 1997 has been allocated for these
substandard and special mention credits, and for those loans noted as
restructured and loans past due 90 days or more and still accruing interest.
Allowance for Loan Losses. The allowance for loan losses increased to $697,000
or .88% of total loans at September 30, 1997 from $617,000 or .88% of total
loans at December 31, 1996 as compared to $578,000 or .98% at December 31, 1995.
The increase in the allowance for loan losses resulted primarily from
corresponding increases in the loan portfolio. The adequacy of the allowance for
loan losses is determined by management's periodic evaluation of individual
loans, the overall risk characteristics of the various portfolio segments, past
experience with losses, the impact of economic conditions on borrowers, and
other relevant factors.
59
<PAGE> 61
This table summarizes Chippewa's loan loss experience for each of the periods
indicated:
<TABLE>
<CAPTION>
Nine Months Ended
September 30, Years Ended December 31,
1997 1996 1996 1995 1994 1993 1992
------------------------------------------------------------------------------------
(In thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, beginning of period $617 $578 $578 $489 $445 $390 $359
Charge-offs:
Commercial, industrial
and agricultural 3 2 4 4 2 3 1
Real estate-mortgage
Consumer 42 86 99 53 36 75 90
---- ---- ---- ---- ---- ---- ----
45 88 103 57 38 78 91
---- ---- ---- ---- ---- ---- ----
Recoveries:
Commercial, industrial
and agricultural 1 3
Real estate-mortgage
Consumer 29 18 22 36 34 34 21
---- ---- ---- ---- ---- ---- ----
30 18 22 36 34 37 21
---- ---- ---- ---- ---- ---- ----
Net charge-offs 15 70 81 21 4 41 70
Provision for loan losses 95 90 120 110 48 96 101
---- ---- ---- ---- ---- ---- ----
Balance, end of period $697 $598 $617 $578 $489 $445 $390
==== ==== ==== ==== ==== ==== ====
Ratio of net charge-offs to
average loans outstanding 0.02% 0.11% 0.13% 0.04% 0.01% 0.09% 0.16%
Average loans outstanding $74,264 $61,638 $63,349 $55,485 $47,469 $44,772 $42,808
</TABLE>
Management uses the aforementioned review and analysis to determine the
adequacy of the allowance for loan losses on a quarterly basis. The provision
for loan losses represents an amount that is intended to be sufficient to
maintain the reserves at a level necessary to meet present and potential risk
characteristics of the loan portfolio. The Merger Agreement requires that
Chippewa Bank increase its loan loss reserve $500,000 to recognize loan growth
and size of loans. Further, the Chippewa Bank Board of Directors intends to
adopt a policy to maintain the loan loss reserve of Chippewa Bank at between
1.25% and 1.75% of total loans. With such revisions, management believes that
the allowance for loan losses is adequate to absorb probable loan losses.
60
<PAGE> 62
This table shows the allocation of the allowance for loan losses as of the end
of each reported period:
<TABLE>
<CAPTION>
December 31,
September 30, ------------------------------------------------------------------------------------------------
1997 1996 1995 1994 1993 1992
--------------------------------------------------------------------------------------------------------------------
Percent Percent Percent Percent Percent Percent
of Loans of Loans of Loans of Loans of Loans of Loans
in Each in Each in Each in Each in Each in Each
Category Category Category Category Category Category
to Total to Total to Total to Total to Total to Total
Amount Loans Amount Loans Amount Loans Amount Loans Amount Loans Amount Loans
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Commercial,
industrial and
agricultural 383 12% $331 13% $330 12% $340 14% $309 16% $252 14%
Real
estate-mortgage 106 67% 89 63% 71 60% 63 63% 55 61% 54 61%
Consumer 208 21% 197 24% 177 28% 86 23% 81 23% 84 25%
--------------------------------------------------------------------------------------------------------------------
$697 100% $617 100% $578 100% $489 100% $445 100% $390 100%
====================================================================================================================
</TABLE>
Deposits. Total deposits increased during the year by $29.0 million from $86.0
million at December 31, 1995 to $115.0 million at December 31, 1996.
Noninterest-bearing deposits increased by $2.5 million while interest-bearing
deposits increased by $26.5 million. Overall deposits showed normal growth from
December 31, 1996 to September 30, 1997, however noninterest-bearing deposits
decreased by $534,000 while interest-bearing deposits increased by $3.2 million.
The deposit growth during this period, as mentioned above, is two-fold.
Substantial growth occurred in 1996 as a result of the purchase of two branch
offices compounded by strong internal growth in the maximum value passbook
accounts due to promotional activities. In recent years, Chippewa has been and
continues to be in a growth strategy to maximize return to its shareholders and
to meet the community banking needs of the markets in which it operates. As a
result of this strategy, when the opportunity presented itself to acquire two
branches in neighboring communities, management actively pursued this endeavor
and was successful. At the same time, Chippewa Bank was actively promoting a
savings product which offered a preferred interest rate which averaged 50 basis
points (1% equals 100 basis points) higher than market rates offered on regular
savings and money market accounts. A promotional advertising campaign was
conducted during 1996 and is responsible for the overall growth in savings of
$10.4 million.
61
<PAGE> 63
The daily average amounts of deposits and rates paid on such deposits is
summarized for the periods indicated in the following table:
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996 1995 1994
-------------------------------------------------------------------------------------------
Amount Rate Amount Rate Amount Rate Amount Rate
------ ---- ------ ---- ------ ---- ------ ----
(In thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Noninterest-bearing $ 11,783 $ 11,176 $ 9,196 $ 8,941
demand deposits
Interest-bearing demand 13,709 2.50% 13,108 2.49% 9,856 2.52% 8,529 2.51%
deposits
Money market accounts 5,705 2.66% 6,845 2.67% 7,984 2.88% 8,569 2.74%
Savings deposits 33,214 3.22% 28,974 3.12% 21,642 2.71% 24,057 2.74%
Time deposits 51,018 5.53% 47,118 5.63% 31,282 5.75% 22,847 4.46%
--------- -------- ------- -------
$115,429 $107,221 $79,960 $72,943
======== ======== ======= =======
</TABLE>
Maturities of time certificates of deposit of $100,000 or more outstanding at
September 30, 1997, are summarized as follows:
<TABLE>
<S> <C>
3 Months or less $3,271
Over 3 through 6 months 1,329
Over 6 through 12 months 1,497
Over 12 months 171
------
$6,268
======
</TABLE>
Borrowings. Chippewa Bank's borrowings are primarily comprised of funds received
from the sale of securities under agreements to repurchase, which are considered
for reporting purposes, borrowings secured by the securities sold. These
agreements generally have maturities of 180 days or less.
The following table presents certain information regarding Chippewa's securities
sold under agreements to repurchase at the dates and for the periods ended.
<TABLE>
<CAPTION>
December 31,
September 30, --------------------------------------------
1997 1996 1995 1994
--------------- ------------- ------------ ----------
<S> <C> <C> <C> <C>
Amount outstanding at period end $ 6,942 $ 5,189 $5,013 $3,440
Maximum outstanding at any month end 6,942 5,501 5,873 4,458
Average outstanding during the period 4,990 4,737 4,298 3,454
Weighted average interest rate at period end 4.30% 4.31% 4.51% 4.18%
Weighted average rate during the period 4.28 4.33 4.77 3.16
</TABLE>
Repurchase agreements represent overnight borrowing arrangements. The bank
pledges U.S. Treasury securities as collateral for these agreements.
Impact of Inflation and Changing Prices. The financial statements of Chippewa
and the notes thereto, presented elsewhere herein, have been prepared in
accordance with generally accepted accounting standards, which require the
measurement of financial position and operating results in terms of historical
dollars without considering the change in the relative purchasing power of money
over time due to inflation. The impact of inflation is reflected in the
62
<PAGE> 64
increased cost of Chippewa's operations. Unlike most companies, nearly all of
Chippewa's assets and liabilities are monetary. As a result, interest rates have
a greater impact on Chippewa's performance than do the effects of general levels
of inflation. Interest rates do not necessarily move in the same direction or
the same extent as the price of goods and services.
Shareholders' Equity. Shareholders' equity was $10.1 million at December 31,
1996, an increase of $0.8 million from $9.3 million at December 31, 1995. The
increase was comprised of net profits of $1.0 million, offset by dividends paid
to shareholders of $134,000.
Shareholders' equity increased by $1.0 million to $11.1 million at
September 30, 1997. The increase was made up of net profits of $1.0 million, net
unrealized gain on securities of $30,000, offset by dividends paid to
shareholders of $72.000.
Chippewa is subject to risk-based capital rules. These guidelines include a
common framework for defining elements of capital and a system for relating
capital to risk. The minimum risk-based capital requirement is 8%. Additionally,
the general regulatory guidelines establish a minimum ratio of leverage capital
to adjusted total assets of 4% for top rated financial institutions, with less
highly rated institutions or those with higher levels of risk, required to
maintain ratios of 100 to 200 basis points above the minimum level. As of
September 30, 1997, the most recent notification from the Federal Deposit
Insurance Corporation has categorized the Bank as well capitalized under the
regulatory framework for prompt corrective action. There have been no conditions
or events since that notification that management believes have changed
Chippewa's or the Chippewa Bank's category.
The following table reflects Chippewa's capital ratios for the periods
presented:
<TABLE>
<CAPTION>
December 31,
September 30, ---------------------------------
1997 1996 1995
------------------ ---------------- ----------------
(In Thousands)
<S> <C> <C> <C>
CAPITAL COMPONENTS
Tier 1 $ 9,449 $ 8,407 $ 9,188
Total risk-based 10,146 9,024 9,766
ASSETS
Risk-weighted assets $ 81,673 $ 74,197 $59,069
Average tangible assets 133,231 129,226 99,940
CAPITAL RATIOS
Tier 1 risk-based capital 11.57% 11.30% 15.60%
Total risk-based capital 12.42% 12.20% 16.50%
Leverage 7.09% 6.50% 9.20%
MINIMUM REGULATORY GUIDELINES
Tier 1 risk-based capital 4.00% 4.00% 4.00%
Total risk-based capital 8.00% 8.00% 8.00%
Leverage 4.00% 4.00% 4.00%
</TABLE>
Liquidity and Interest Rate Sensitivity. The liquidity of a banking institution
reflects its ability to provide funds to meet loan requests, to accommodate
possible outflows of deposits, and to take advantage of interest rate market
opportunities. Funding of loan requests, providing for liability outflows, and
management of interest rate fluctuations require continuous analysis in order to
match the maturities of specific categories of short-term loans and investments
with specific types of deposits. Chippewa Bank's liquidity is thus normally
considered in terms of the nature and mix of the institution's sources and uses
of funds.
63
<PAGE> 65
Deposits are the primary source of Chippewa Bank's funds for lending and
investing activities. Secondary sources of funds are derived from loan
repayments, investment maturities, available borrowing lines of credit with the
Federal Home Loan Bank of Cincinnati, Ohio, and short-term borrowings in the
form of securities sold under agreement to repurchase and federal funds
purchased from independent third parties. Loan repayments can be considered a
relatively stable funding source, while deposit activity is greatly influenced
by interest rates and general market conditions. Chippewa also has access to
funds from the Federal Reserve Bank discount window.
Chippewa Bank offers a wide variety of retail deposit account products to both
consumer and commercial deposit customers. Time deposits, consisting primarily
of retail fixed-rate certificates of deposit comprise 45.6% of the total deposit
portfolio at September 30, 1997. Core deposits considered to be noninterest
bearing and interest-bearing demand deposit accounts, savings deposits, and
money market accounts comprised 54.4% of the deposit portfolio at September 30,
1997. Chippewa intends to continue to emphasize retail deposits as its primary
source of funds. Deposit products are promoted in periodic newspaper and radio
advertisements, along with notices provided in customer account statements.
Chippewa does not broker certificates of deposits and held no such deposits at
September 30, 1997.
Chippewa pays interest rates on its interest-bearing deposit products that are
competitive with rates offered by other financial institutions in its market
area. Interest rates on deposits are reviewed weekly by management considering a
number of factors including (1) Chippewa's internal cost of funds; (2) rates
offered by competition; (3) investing and lending opportunities; and (4)
Chippewa's liquidity position.
Chippewa anticipates that it will have sufficient funds available to meet the
needs of its customers for deposit repayments and loan fundings. At September
30, 1997, loan and letter of credit commitments totaled $ 10.5 million. These
commitments are in the form of personal and commercial lines of credit,
undisbursed construction loans, and letters of credit. Certificates of deposit
scheduled to mature in one year or less totaled $ 34.2 million at September 30,
1997; however, historically these deposits have renewed with Chippewa, and
management anticipates that this trend will continue since Chippewa offers
competitive rates of interest and instrument terms with those offered by other
financial institutions in its market area.
Closely related to the concept of liquidity is the management of
interest-earning assets and interest-bearing liabilities. Chippewa manages its
rate sensitivity position to minimize fluctuation in the net interest margin and
to minimize the risk due to changes in interest rates, thereby attempting to
achieve consistent growth of net interest income.
The difference between a financial institution's interest rate sensitive assets
and interest rate sensitive liabilities is commonly referred to as its "gap" or
"interest rate sensitivity gap." An institution having more interest rate
sensitive assets than interest rate sensitive liabilities within a given time
period is said to have a "positive gap"; an institution having more interest
rate sensitive liabilities than interest rate sensitive assets within a given
time period is said to have a "negative gap."
64
<PAGE> 66
The table below is presented in conformity with industry practice and reflects
Chippewa's interest rate sensitivity position by selected periods:
Results of Operations
<TABLE>
<CAPTION>
ASSET & LIABILITY INTEREST RATE SENSITIVITY
(In thousands)
3 months to One to Over Five
0-3 Months One Year Five Years Years Total
---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Interest Earning Assets:
Federal funds sold $1,220 $ - $ - $ - $1,220
Investment securities 3,161 2,101 24,865 16,421 46,548
Loans 17,159 21,077 20,221 20,460 78,917
------- ------- ------- ------- ------
Total Interest Earning Assets $21,540 $23,178 $45,086 $36,881 $126,685
======= ======== ======== ======== ========
Interest-Bearing Liabilities:
Deposits $64,660 $21,948 $18,887 $193 $105,688
Securities sold under
Agreements to repurchase 6,942 6,942
Short-term borrowings 470 470
---- ---
Total Interest Bearing $72,072 $21,948 $18,887 $193 $113,100
------- ------- -------- ----- --------
Liabilities
Period GAP ($50,532) $1,230 $26,199 $36,688 $13,585
Cumulative Gap ($50,532) ($49,302) ($23,103) $13,585
Cumulative GAP as a Percent of
Total Assets -36.90% -36.00% -16.87% 9.92%
</TABLE>
Note - Information was developed for the table using actual loan, investment,
and certificate of deposit maturity, repricing or payment amortization data as
generated internally by the Chippewa Bank's core application systems. Demand,
savings and money market deposit accounts were considered immediately
repricable, and were placed in the "0-3 month " category. There were no
prepayment or decay rates assumptions used in developing the table.
Net interest income represents the difference between the interest and fees
earned on interest-bearing assets and the interest paid on interest-bearing
liabilities. Net interest income is affected by changes in the volume of
interest-earning assets and interest-bearing liabilities and changes in interest
yields and rates. Interest on certain loans and obligations of state and
political subdivisions' investment securities are not subject to federal income
tax. As such, the stated (pre-tax) yield on these securities is lower than the
yields on taxable securities of similar risk and maturity. In order to make the
pre-tax yields comparable to taxable investment securities, the yields on such
loans and securities have been shown in a tax equivalent manner in the following
tables. This adjustment has been calculated using the U. S. federal statutory
income tax rate of 34% for the nine months ended September 30, 1997 and 1996,
and the years ended December 31, 1996, 1995, and 1994.
The average balance sheet and net interest income analysis for the nine months
ended September 30, 1997 and 1996 and for the years ended December 31, 1996,
1995, and 1994, is as follows:
65
<PAGE> 67
<TABLE>
<CAPTION>
September 30
-----------------------------------------------------------------------------------
1997 (2) 1996 (2)
----------------------------------------------------------------------------
Average Yield/ Average Yield/
Balance Interest Rate Balance Interest Rate
----------------------------------------------------------------------------
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Interest-earning assets:
Loans(1) $74,264 $5,020 9.02% $61,638 $4,233 9.17%
Taxable investment securities 40,243 1,895 6.28% 39,966 1,807 6.03%
Tax-exempt investment securities 7,099 283 8.05% 6,992 282 8.14%
Federal funds sold 1,330 55 5.51% 3,290 134 5.43%
------------------------ -------------------------
Total interest-earning assets 122,936 7,253 7.87% 111,886 6,456 7.69%
Noninterest-earning assets
Cash and due from banks 4,799 4,385
Premises and equipment 2,313 2,260
Other assets 3,010 2,504
Less allowance for loan losses 649 602
----------- ------------
$132,409 $120,433
=========== ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
Demand deposits $13,709 $257 2.50% $12,766 $237 2.48%
Money market accounts 5,705 114 2.66% 6,863 136 2.64%
Savings deposits 33,214 803 3.22% 28,007 647 3.08%
Time deposits 51,018 2,116 5.53% 46,357 1,959 5.63%
Securities sold under agreement to
repurchase 4,990 160 4.28% 4,509 144 4.26%
Short-term borrowings 456 20 5.85% 332 16 6.43%
Long-term borrowings 71 5 9.39% 354 23 8.65%
------------------------ -------------------------
Total interest-bearing liabilities 109,163 3,475 4.24% 99,188 3,162 4.25%
Noninterest-bearing liabilities:
Demand deposits 11,783 10,926
Other 885 813
Shareholders' equity 10,578 9,506
----------- ------------
$132,409 $120,433
===========------------- ============-------------
Net interest income $3,778 $3,294
============ =============
Net yield on interest-earning assets 4.10% 3.93%
(3)
Interest rate spread(4) 3.63% 3.44%
Ratio of average interest-earning 112.62% 112.80%
assets to average interest-bearing
liabilities
</TABLE>
- ----------------------------------------
(1) Average balances include non-accrual loans.
(2) Tax equivalent adjustments have been made to yields on loans and securities
that are exempt from federal income tax.
(3) Net yield on interest - earning assets represents net interest income as a
percentage of average interest - earning assets.
(4) Interest rate spread represents the difference between the average yield
on interest - earning assets and the cost of interest-bearing liabilities.
66
<PAGE> 68
<TABLE>
<CAPTION>
December 31
---------------------------------------------------------------------------------------------
1996 (2) 1995 (2) 1994 (2)
---------------------------------------------------------------------------------------------
Average Yield/ Average Yield/ Average Yield/
Balance Interest Rate Balance Interest Rate Balance Interest Rate
---------------------------------------------------------------------------------------------
(In thousands)
ASSETS
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans(1) $63,349 $5,842 9.23% $55,485 $5,105 9.53% $47,469 $3,958 8.37%
Taxable investment 41,051 2,443 5.95% 24,229 1,347 5.56% 24,804 1,294 5.22%
securities
Tax-exempt investment 7,039 378 8.13% 6,413 350 8.27% 6,345 347 8.29%
securities
Federal funds sold 2,825 153 5.42% 2,289 131 5.72% 2,029 86 4.24%
-------------------- -------------------- ------------------
Total interest-earning assets 114,264 8,816 7.72% 88,416 6,933 7.84% 80,647 5,685 7.05%
Noninterest-earning assets
Cash and due from banks 4,454 3,668 3,132
Premises and equipment 2,287 1,799 1,331
Other assets 2,647 1,062 963
Less allowance for loan 602 527 486
losses
---------- ---------- --------
$123,050 $94,418 $85,587
========== ========== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
Demand deposits $13,108 $327 2.49% $9,856 $248 2.52% $8,529 $214 2.51%
Money market accounts 6,845 183 2.67% 7,984 230 2.88% 8,569 235 2.74%
Savings deposits 28,974 903 3.12% 21,642 586 2.71% 24,057 658 2.74%
Time deposits 47,118 2,654 5.63% 31,282 1,798 5.75% 22,847 1,019 4.46%
Securities sold under 4,737 205 4.33% 4,298 205 4.77% 3,454 109 3.16%
agreement to repurchase
Short-term borrowings 316 19 6.01% 298 17 5.70% 248 11 4.44%
Long-term borrowings 318 28 8.81% 531 50 9.42% 93 7 7.53%
-------------------- -------------------- ------------------
Total interest-bearing 101,416 4,319 4.26% 75,891 3,134 4.13% 67,797 2,253 3.32%
liabilities
Noninterest-bearing
liabilities:
Demand deposits 11,176 9,196 8,941
Other 831 574 317
Shareholders' equity 9,627 8,757 8,532
---------- ---------- --------
$123,050 $94,418 $85,587
========== ========== ========
--------- --------- ---------
Net interest income $4,497 $3,799 $3,432
========= ========= =========
Net yield on 3.94% 4.30% 4.26%
interest-earning assets(3)
Interest rate spread(4) 3.46% 3.71% 3.73%
Ratio of average interest-earning
assets to average interest-bearing 112.67% 116.50% 118.95%
liabilities
</TABLE>
- ------------------------------
(1) Average balances include non-accrual loans.
(2) Tax equivalent adjustments have been made to yields on loans and securities
that are exempt from federal income tax.
(3) Net yield on interest-earning assets represents net interest income as a
percentage of average interest - earning assets.
(4) Interest rate spread represents the difference between the average yield on
interest-earning assets and the cost of interest-bearing liabilities.
67
<PAGE> 69
The following tables set forth for the periods indicated a summary of the
changes in interest earned and interest paid resulting from changes in volume
and changes in rate:
For each category of our interest-earning assets and interest-bearing
liabilities, information is provided on changes attributable to (i) changes in
volume ( changes in volume multiplied by old rate), (ii) changes in rate
(changes in rate multiplied by old volume), and (iii) the change in interest due
to both volume and rate, which has been allocated to volume and rate changes in
proportion to the relationship of the absolute dollar amounts of the change in
each.
<TABLE>
<CAPTION>
Nine Months Ended September 30, Year Ended December 31,
1997 vs 1996 1996 vs 1995
Increase (Decrease) Due to Increase (Decrease) Due to
----------------------------------- ----------------------------------------
Volume Rate Net Volume Rate Net
----------------------------------- ----------------------------------------
(In thousands of dollars)
<S> <C> <C> <C> <C> <C> <C>
Interest earned on:
Loans $853 ($66) $787 $940 ($203) $737
Taxable investment securities 13 75 88 995 101 1,096
Tax-exempt investment securities 3 (2) 1 34 (6) 28
Federal funds sold (81) 2 (79) 28 (6) 22
---- -- ---- --- --- --
Total interest-earning assets $788 $9 $797 $1,997 ($114) $1,883
Interest paid on:
Demand deposits 18 2 20 81 (2) 79
Money market accounts (24) 2 (22) (31) (16) (47)
Savings deposits 125 31 156 220 97 317
Time deposits 192 (35) 157 891 (35) 856
Securities sold under agreement to
repurchase 15 1 16 19 (19) 0
Short-term borrowings 5 (1) 4 1 1 2
Long-term borrowings (20) 2 (18) (19) (3) (22)
---- -- ---- ---- --- ----
Total interest-bearing liabilities $311 $2 $313 $1,162 $23 $1,185
------------ --------------
Change in net interest income $484 $698
------------ --------------
</TABLE>
Comparison of the year ended December 31, 1996 and 1995
Net Income. Net income amounted to $1.0 million or $2.18 per share in 1996,
representing an increase of 7.2% from $913,000 or $2.04 per share in 1995. The
return on average assets was .79% for 1996 and .97% for 1995. The return on
average equity was 10.16% in 1996 compared to 10.43% in 1995.
Net Interest Income. Net interest income increased $698,000 or 18.4% in 1996 as
compared to 1995. The net yield on interest-earning assets decreased by 36 basis
points (1% equals 100 basis points) to 3.94%, while the average balance of
interest-earning assets increased by $25.8 million or 29.2%.
68
<PAGE> 70
Although the net yield on interest-earning assets declined, accounting for a
decline in net interest income of $138,000, the increase in average earning
assets resulted in an increase in net interest income of $836,000.
As discussed above, Chippewa acquired two branch offices and experienced strong
growth during the year. The funds obtained from these transactions are primarily
being used to fund current loan demand as evidenced by average loans increasing
by $7.9 million. Funds not used immediately to fund loan demand are being
invested in short-term investment, and mortgage-backed securities, average
investment securities increased by $17.4 million. These funds were invested in
short-term investment securities to provide liquidity for future loan demand,
while still obtaining an adequate rate of return.
Provision for Loan Losses. The provision for loan losses amounted to $120,000
for 1996 compared to $110,000 in 1995. The increase in the provision is
primarily the result of the loan growth in 1996. Historically, Chippewa has
experienced minimal net charge-offs relating to real estate loans, however
management recognizes that consumer lending inherently possesses a greater
degree of risk of loss. Net charge-offs were only $81,000 in 1996 and $21,000 in
1995.
Noninterest Income. Noninterest income increased $76,000 or 15.6% in 1996
compared to 1995. Noninterest income is primarily made up of service charges on
deposit accounts and other service charges and fees. Service charges on deposit
accounts increased by $50,000 as a result of an increased level of demand
deposit accounts due to the two branch offices acquired during the first quarter
of 1996. Management believes the level of service charges are competitive with
other local community financial institutions. Other service charges which are
primarily made up of credit card service fees and merchant credit card
processing fees, increased by $24,000, due to an increase in merchant accounts
being processed in 1996.
Noninterest Expense. Noninterest expense increased by $687,000 in 1996 compared
to 1995. The increase was primarily the result of increases in salaries and
employee benefits of $267,000, occupancy of $56,000, furniture and equipment of
$49,000, intangible asset amortization of $204,000 and other expenses of
$183,000; offset by a decrease in federal deposit insurance premiums of $85,000.
The increase in salary and employee benefits, occupancy, furniture and
equipment, and other expenses was primarily the direct result of the two branch
acquisitions, as well as normal annual increases. The intangible asset
amortization relating to the branch acquisitions is made up of two segments,
goodwill which is being amortized on a straight-line basis over 15 years and
core deposit which is being amortized on a straight-line basis over 6 years
which corresponds to the average deposit life expectancy. Additionally, the
intangible asset amortization includes a one-time charge of $85,000 which
represents a payment made by the Bank as part of the purchase arrangement for
the branch offices. The payment represents the selling institutions special
one-time Federal Deposit Insurance Corporation insurance assessment which was
paid in October, 1996.
The decline in the FDIC insurance premiums were due to reduced insurance rates
from 23 basis points to 4 basis points which resulted in a savings of $85,000 to
the Bank. The FDIC insurance rate was reduced as a result of the Bank Insurance
Fund reaching its required level of capitalization.
Federal Income Taxes. Federal income tax expense increased $13,000 to $328,000
in 1996, as a result of a higher level of pre-tax income partially offset by
higher levels of tax-exempt income. The 1996 effective tax rate of 25.1% was
below the 34% statutory rate primarily as a result of tax-exempt interest.
Comparison of the Nine Months Ended September 30, 1997 and 1996
Net Income. Net income amounted to $1.0 million or $2.22 per share in 1997,
representing an increase of 35.2% from the $735,000 or $1.64 per share in 1996.
The annualized return on average assets was 1.00% for 1997 and .81% for 1996.
The annualized return on average equity was 12.53% in 1997 compared to 10.31% in
1996.
69
<PAGE> 71
Net Interest Income. Net interest income increased $484,000 or 14.7% in 1997 as
compared to 1996. The net yield on interest-earning assets increased by 17 basis
points to 4.10%, while the average balance of interest-earning assets increased
by $11.1 million or 9.9%.
Total interest income increased $797,000 which is primarily the result of the
increased levels of interest-earning assets. As discussed above, Chippewa
acquired two branches at the end of the first quarter in 1996, as well as
experienced strong levels of internal growth during 1996, providing additional
investable funds.
Total interest expense increased by $313,000 primarily as a result of the growth
in deposits, as discussed above. The total growth in interest-bearing
liabilities amounted to $10.0 million, of which $9.7 million was in deposit
products.
Provision for Loan Losses. The provision for loan losses amounted to $94,500 for
1997 compared to $90,000 in 1996. The increase in the provision continues to
result primarily from the increases in the loan portfolio. The increases in the
loan portfolio continue to be comprised primarily of residential real estate
mortgages.
Noninterest Income. Noninterest income increased $77,000 or 18.4% in 1997
compared to 1996. The increase was attributable to increased levels of service
charges on deposit accounts of $12,000, other service charges and fees of
$37,000 and other income of $27,000.
The increase in service charges on deposit accounts is the result of additional
deposit accounts acquired. The primary increases in other service charges and
fees related to ATM surcharges and interchange fees on debit cards, which had
not previously been charged by the Bank of $16,000 and $11,000, respectively and
continued increased levels of merchant credit card charges of $7,000. The
increase in other income relates to increased rental income from Specialized
Investments Division, a wholly owned subsidiary of Financial Services
Corporation of Atlanta, Georgia of $30,000. Chippewa rents work space at certain
branch offices to representatives of Specialized Investments Division to provide
counseling on alternative investment opportunities to its customer base.
Noninterest Expense. Noninterest expense increased by $177,000 in 1997 compared
to 1996. The increase was primarily the result of increases in salaries and
employee benefits of $88,000, occupancy expenses of $32,000 and intangible asset
amortization of $40,000.
The increases in salaries and employee benefits and occupancy were a result of
increased levels of employees and branch offices resulting from the branches
acquired and normal operating expense increases.
The increase in intangible asset amortization was the result of the intangible
being amortized for a longer period in 1997. The two branches were acquired
in late March 1996, therefore nine months amortization occurred in 1997 and
six months amortization occurred in 1996.
Federal Income Taxes. Federal income tax expense increased $121,000 to $382,000
in 1997, as a result of higher levels of pre-tax income. The 1997 effective tax
rate of 27.7% was below the 34% statutory rate primarily as a result of
tax-exempt interest.
Comparison of the three months ended September 30, 1997 and 1996
Net Income. Net income amounted to $327,000 or $.73 per share in 1997,
representing an increase of 28.0% from the $256,000 or $.57 per share in 1996.
Net Interest Income. Net interest income increased $125,000 or 10.9% in 1997 as
compared to 1996. As discussed above, Chippewa's deposits had strong growth
throughout 1996, resulting in additional investable funds earning at rates above
those paid on deposits used for funding purposes.
70
<PAGE> 72
Provision for Loan Losses. The provision for loan losses amounted to $31,500 for
1997 compared to $30,000 in 1996. As discussed above the level of the provision
for loan losses has primarily been effected by growth in the loan portfolio,
mitigated by the continued low levels of nonperforming loans.
Noninterest Income. Noninterest income increased $27,000 or 19.1% in 1997
compared to 1996. This increase was primarily made of increased levels of
interchange debit card fees and merchant credit card fees.
Noninterest Expense. Noninterest expense increased by $44,000 in 1997 compared
to 1996. Salaries and benefits increased by $39,000 or 8.5% as a part of normal
annual salary and benefit increases. All other noninterest expenses had nominal
fluctuations which were considered normal economic increases.
Federal Income Taxes. Federal income tax expense increased $34,000 to $125,000
in 1997, as a result of higher levels of pre-tax income. The 1997 effective tax
rate of 27.6% was below the 34% statutory rate primarily as a result of
tax-exempt interest.
LEGAL OPINIONS
Certain legal matters in connection with the merger will be passed upon
for Wayne by Werner & Blank Co., L.P.A., Toledo, Ohio and for Chippewa by
Dinsmore & Shohl, LLP, Cincinnati, Ohio.
EXPERTS
The consolidated financial statements of Wayne as of December 31, 1996
and 1995 and for each of the two years in the period ended December 31, 1996
incorporated by reference into this Proxy Statement-Prospectus have been audited
by Crowe Chizek and Company LLP, independent auditors, as stated in their
reports which are incorporated herein by reference, and have been so
incorporated in reliance upon reports of such firms given upon their authority
as experts in accounting and auditing.
The consolidated financial statements of Chippewa as of December 31,
1996 and 1995, and for each of the years in the period ended December 31, 1996,
included in this Proxy Statement-Prospectus have been audited by S. R.
Snodgrass, A.C., independent auditors, as stated in their report which is
contained herein in reliance upon the report of such firm given upon their
authority as experts in accounting and auditing.
71
<PAGE> 73
CHIPPEWA VALLEY BANCSHARES, INC. AND SUBSIDIARY
INDEX TO THE CONSOLIDATED FIANANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Auditors.......................................................................... F-1
Consolidated Balance Sheet as of December 31, 1996 and 1995............................................. F-2
Consolidated Statement of Income for the Years
Ended December 31, 1996 and 1995................................................................... F-3
Consolidated Statement of Changes in Stockholders' Equity
for the Years Ended December 31, 1996 and 1995..................................................... F-4
Consolidated Statement of Cash Flows for the
Years Ended December 31, 1996 and 1995............................................................. F-5
Notes to Consolidated Financial Statements.............................................................. F-6
Unaudited Consolidated Balance Sheet as of
September 30, 1997 and December 31, 1996........................................................... S-1
Unaudited Consolidated Statement of Income for the Three and Nine
Months ended September 30, 1997 and 1996........................................................... S-2
Unaudited Consolidated Statement of Changes in Stockholders'
Equity for the Nine Months ended September 30, 1997................................................ S-3
Unaudited Consolidated Statement of Cash Flows for the
Nine Months ended September 30, 1997 and 1996...................................................... S-4
Notes to Unaudited Consolidated Financial Statements.................................................... S-5
</TABLE>
<PAGE> 74
[LETTERHEAD OF S.R. SNODGRASS, A.C.]
REPORT OF INDEPENDENT AUDITORS
Board of Directors and Shareholders
Chippewa Valley Bancshares, Inc.
We have audited the consolidated balance sheet of Chippewa Valley Bancshares,
Inc. and Subsidiary as of December 31, 1996 and 1995 and the related
consolidated statements of income, changes in stockholders' equity and cash
flows for the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Chippewa Valley
Bancshares, Inc. and Subsidiary as of December 31, 1996 and 1995, and the
results of their operations and their cash flows for the years then ended in
conformity with generally accepted accounting principles.
As explained in the notes to the consolidated financial statements, effective
January 1, 1995, the Company changed its method of accounting for impaired loans
and the related allowance for loan losses.
/s/ S.R. Snodgrass, A.C.
- ------------------------
Wexford, PA
February 7, 1997
except for Note 17,
as to which the date is
October 13, 1997.
F-1
<PAGE> 75
CHIPPEWA VALLEY BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
December 31,
1996 1995
------------------ --------------------
<S> <C> <C>
ASSETS
Cash and due from banks $ 5,840,547 $ 4,344,307
Federal funds sold - 3,810,000
Investment securities:
Available for sale 29,171,332 13,378,215
Held to maturity (approximate market value of
$21,831,624 and $18,790,298) 21,763,420 18,601,263
Loans 70,195,083 58,882,912
Less allowance for loan losses 616,621 578,046
----------------- --------------------
Net loans 69,578,462 58,304,866
Premises and equipment 2,341,802 1,943,271
Intangible assets 1,624,284 -
Accrued interest and other assets 1,278,088 957,643
----------------- --------------------
TOTAL ASSETS $ 131,597,935 $ 101,339,565
================= ====================
LIABILITIES
Deposits:
Noninterest-bearing demand $ 12,493,907 $ 9,947,258
Interest-bearing demand 14,748,319 10,776,868
Savings 31,968,696 21,579,852
Money market 6,671,868 7,394,879
Time 49,069,931 36,261,337
----------------- --------------------
Total deposits 114,952,721 85,960,194
Securities sold under agreement to repurchase 5,188,863 5,012,840
Short-term borrowings 341,542 14,818
Long-term borrowings 213,333 426,667
Accrued interest and other liabilities 798,662 666,428
----------------- --------------------
TOTAL LIABILITIES 121,495,121 92,080,947
----------------- --------------------
STOCKHOLDERS' EQUITY
Common stock, $1.25 stated value; 500,000 shares
authorized; 480,000 shares issued 600,000 600,000
Surplus 700,000 700,000
Retained earnings 9,384,680 8,541,328
Net unrealized gain on securities 71,094 70,250
Treasury Stock, at cost (32,000 shares) (652,960) (652,960)
----------------- --------------------
TOTAL STOCKHOLDERS' EQUITY 10,102,814 9,258,618
----------------- --------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 131,597,935 $ 101,339,565
================= ====================
</TABLE>
See accompanying notes to the consolidated financial statements.
F-2
<PAGE> 76
CHIPPEWA VALLEY BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF INCOME
<TABLE>
<CAPTION>
Year Ended December 31,
1996 1995
---------------------- -----------------------
<S> <C> <C>
INTEREST INCOME
Loans, including fees $ 5,841,737 $ 5,105,572
Federal funds sold 153,361 131,184
Investment securities:
Taxable 2,442,834 1,346,809
Exempt from federal income tax 378,437 349,513
--------------------- -----------------------
Total interest income 8,816,369 6,933,078
--------------------- -----------------------
INTEREST EXPENSE
Deposits 4,066,804 2,862,765
Securities sold under agreement to repurchase 204,870 204,899
Short-term borrowings 18,691 16,913
Long-term borrowings 28,100 49,680
--------------------- -----------------------
Total interest expense 4,318,465 3,134,257
--------------------- -----------------------
NET INTEREST INCOME 4,497,904 3,798,821
Provision for loan losses 120,000 110,000
--------------------- -----------------------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 4,377,904 3,688,821
--------------------- -----------------------
NONINTEREST INCOME
Service fees on deposit accounts 389,369 339,274
Other service charges and fees 139,583 115,570
Securities losses, net (1,957) (78)
Other 36,626 32,828
--------------------- -----------------------
Total noninterest income 563,621 487,594
--------------------- -----------------------
NONINTEREST EXPENSE
Salaries and employee benefits 1,784,001 1,516,522
Occupancy 244,242 188,161
Furniture and equipment 297,069 248,544
Federal deposit insurance premiums 2,000 87,149
State franchise tax 145,959 133,268
Intangible asset amortization 204,216 -
Other 958,343 775,099
--------------------- -----------------------
Total noninterest expense 3,635,830 2,948,743
--------------------- -----------------------
Income before income taxes 1,305,695 1,227,672
Income taxes 327,943 315,324
--------------------- -----------------------
NET INCOME $ 977,752 $ 912,348
===================== =======================
EARNINGS PER SHARE $ 2.18 $ 2.04
AVERAGE SHARES OUTSTANDING 448,000 448,000
</TABLE>
See accompanying notes to the consolidated financial statements.
F-3
<PAGE> 77
CHIPPEWA VALLEY BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Net
Unrealized
Common Retained Gain (Loss) Treasury
Stock Surplus Earnings on Securities Stock Total
------------- ----------- -------------- ---------------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1994 $ 600,000 $ 700,000 $ 7,752,180 $ (136,240) $ (652,960) $ 8,262,980
Net income 912,348 912,348
Cash dividends ($.28 per
share) (123,200) (123,200)
Net unrealized gain on
securities 206,490 206,490
------------ ----------- -------------- ---------------- ------------- ------------
Balance, December 31, 1995 600,000 700,000 8,541,328 70,250 (652,960) 9,258,618
Net income 977,752 977,752
Cash dividends ($.30 per
share) (134,400) (134,400)
Net unrealized gain on
securities 844 844
------------ ----------- -------------- ---------------- ------------- ------------
Balance, December 31, 1996 $ 600,000 $ 700,000 $ 9,384,680 $ 71,094 $ (652,960) $ 10,102,814
============ =========== ============== ================ ============= ============
</TABLE>
See accompanying notes to the consolidated financial statements.
F-4
<PAGE> 78
CHIPPEWA VALLEY BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended December 31,
1996 1995
---------------------- ----------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 977,752 $ 912,348
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan losses 120,000 110,000
Depreciation and amortization 541,552 181,158
Deferred income taxes (1,440) (11,772)
Investment securities losses, net 1,957 78
Increase in accrued interest receivable (347,105) (121,200)
Increase in accrued interest payable 48,026 71,506
Other, net 111,873 128,582
---------------------- ---------------------
Net cash provided by operating activities 1,452,615 1,270,700
---------------------- ---------------------
INVESTING ACTIVITIES
Investment securities available for sale:
Proceeds from sales 497,773 499,922
Proceeds from maturities and repayments 5,832,311 3,767,412
Purchases (22,119,776) (958,972)
Investment securities held to maturity:
Proceeds from maturities and repayments 10,425,185 3,348,501
Purchases (13,676,166) (6,693,495)
Net loan originations (10,007,866) (9,325,670)
Purchase of premises and equipment (339,401) (609,708)
Branch office acquisitions:
Purchase of loans (1,383,885) 0
Purchase of premises and equipment (313,591) 0
Net deposit proceeds 22,947,060 0
--------------------- ----------------------
Net cash used for investing activities (8,138,356) (9,972,010)
--------------------- ----------------------
FINANCING ACTIVITIES
Net increase in deposits 4,216,967 9,674,744
Net increase in securities sold under agreement to repurchase 176,023 1,572,679
Net increase (decrease) in short-term borrowings 326,724 (259,650)
Repayment of long-term borrowings (213,333) (213,333)
Cash dividends paid (134,400) (123,200)
--------------------- ----------------------
Net cash provided by financing 4,371,981 10,651,240
activities
--------------------- ----------------------
Increase (decrease) in cash and cash (2,313,760) 1,949,930
equivalents
--------------------- ----------------------
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 8,154,307 6,204,377
--------------------- ----------------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 5,840,547 $ 8,154,307
===================== ======================
</TABLE>
See accompanying notes to the consolidated financial statements.
F-5
<PAGE> 79
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
Chippewa Valley Bancshares, Inc. (Company) is an Ohio corporation organized
as the holding company of Chippewa Valley Bank (Bank). The Company has no
other investments. The Bank is a state-chartered bank located in Rittman,
Ohio. The Bank's principal sources of revenues emanate from its portfolio
of residential real estate, commercial mortgage, commercial and consumer
loans, as well as a variety of deposit services to its customers through
nine locations. The Company is supervised by the Board of Governors of the
Federal Reserve System, while the Bank is also subject to regulation and
supervision by the Ohio Division of Banks.
BASIS OF PRESENTATION
The consolidated financial statements of the Company include its
wholly-owned subsidiary, the Bank. All intercompany items have been
eliminated in consolidation. The investment in subsidiary on the Company's
financial statements is carried at its equity position in the underlying
net assets of the Bank.
The financial statements have been prepared in conformity with generally
accepted accounting principles. In preparing the financial statements,
management is required to make estimates and assumptions that affect the
reported amounts of assets and liabilities as of the date of the balance
sheet and revenues and expenses for the period. Actual results could
differ significantly from those estimates.
A summary of the significant accounting and reporting policies applied in
the presentation of the accompanying financial statements follows:
INVESTMENT SECURITIES
The Bank has classified investment securities into two categories: Held to
Maturity and Available for Sale. Debt securities acquired with the
intent to hold to maturity are stated at cost adjusted for amortization
of premium and accretion of discount, which are computed using the
interest method and recognized as adjustments of interest income.
Certain other debt and equity securities have been classified as available
for sale, to serve principally for liquidity purposes. Unrealized holding
gains and losses for available for sale securities are reported as a
separate component of stockholders' equity, net of tax, until realized.
Realized securities gains and losses are computed using the specific
identification method. Interest and dividends on securities are
recognized as income when earned.
Common stock of the Federal Reserve Bank, Federal Home Loan Bank, and
Independent State Bank of Ohio represents ownership in institutions which
are wholly-owned by other financial institutions. These equity securities
are accounted for at cost.
LOANS
Loans are reported at their principal amount, net of the allowance for loan
losses. Interest on all loans is recognized as income when earned on the
accrual method. The accrual of interest is discontinued on a loan when
management believes, after considering economic and business conditions,
that the borrowers' financial condition is such that collection of interest
is doubtful. Interest payments received on nonaccrual loans is recorded as
income or applied against principal according to management's judgment as
to the collectibility of such principal.
F-6
<PAGE> 80
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
LOANS (CONTINUED)
Loan origination fees and certain direct loan origination costs are being
deferred and the net amount amortized as an adjustment of the related loan
yield. The Bank is amortizing these amounts over the contractual lives of
the related loans.
ALLOWANCE OF LOAN LOSSES
Effective January 1, 1995, the Bank adopted statement of Financial
Accounting Standards Statement No. 114 "Accounting by Creditors for
Impairment of a Loan" as amended by Statement No. 118. Under this Standard,
the Bank estimates credit losses on impaired loans based on the present
value of expected cash flows or the fair value of the underlying collateral
if the loan repayment is expected to come from the sale or operation of
such collateral. The adoption of Statements No. 114 and No. 118 had no
material effect on the Bank's financial position or results of operations.
For purposes of this Standard, nonaccrual commercial and commercial real
estate loans are considered to be impaired.
The Bank uses the allowance method in providing for loan losses.
Accordingly, all loan losses are charged to the allowance and all
recoveries are credited to it. The allowance for loan losses is established
through a provision for loan losses charged to operations. The allowance is
maintained at a level believed by management to be sufficient to absorb
estimated potential credit losses. Management's determination of the
adequacy of the allowance is based on periodic evaluations of the credit
portfolio and other relevant factors. This evaluation is inherently
subjective as it requires material estimates, including the amounts and
timing of expected future cash flows on impaired loans, which may be
susceptible to significant change. The allowance for loan losses on
impaired loans is one component of the methodology for determining the
allowance for loan losses. The remaining components of the allowance for
loan losses provide for estimated losses on commercial loans, consumer
loans, real estate mortgages, and general amounts for historical loss
experience, uncertainties in estimating losses and inherent risks in the
various credit portfolio.
PREMISES AND EQUIPMENT
Premises and equipment are stated at cost, net of accumulated depreciation.
Depreciation is computed on the straight-line method over the estimated
useful lives of the assets. Expenditures for maintenance and repairs are
charged against income as incurred. Costs of major additions and
improvements are capitalized.
INTANGIBLE ASSETS
As of December 31, 1996, intangible assets are comprised of goodwill and
core deposit acquisition premiums. Prior to 1996, there were no intangible
assets. Goodwill is amortized using the straight line method over a fifteen
year period. Core deposit acquisition premiums, which were developed by
specific core deposit life studies, are amortized using the straight-line
method over six years. Annual assessments of the carrying values and
remaining amortization periods of intangible assets are made to determine
possible carrying value impairment, and appropriate adjustments, as deemed
necessary.
EMPLOYEE BENEFITS
Salaries and employee benefits include contributions, determined
actuarially, to a defined benefit plan covering all eligible employees of
the Bank.
F-7
<PAGE> 81
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INCOME TAXES
The Company and the Bank file a consolidated federal income tax return.
Deferred tax assets and liabilities are reflected at current enacted income
tax rates applicable to the period in which the deferred tax asset or
liabilities are expected to be realized or settled. As changes in the tax
laws or rates are enacted, deferred tax assets and liabilities are adjusted
through the provision for income taxes.
EARNINGS PER SHARE
Earnings per share are calculated using the weighted average number of
shares outstanding for the periods.
CASH FLOW INFORMATION
The Company has defined cash equivalents as those amounts due from
depository institutions and federal funds sold.
Cash payments for interest in 1996 and 1995 were $4,270,439 and $3,062,751,
respectively. Net cash payments for income taxes in 1996 and 1995 amounted
to $274,763 and $272,047, respectively.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1996, the Financial Accounting Standards Board ("the FASB") issued
Statement of Financial Accounting Standards No. 125, "Accounting for
Transfers and Servicing of Financial Assets and Extinguishment of
Liabilities," which provides accounting and reporting standards for
transfers and servicing of financial assets and extinguishment of
liabilities. This statement applies prospectively in fiscal years beginning
after December 31, 1996, and establishes new standards that focus on
control whereas, after a transfer of financial assets, an entity recognizes
the financial and servicing assets it controls and the liabilities it has
incurred, derecognizes financial assets when control has been surrendered,
and derecognizes liabilities when extinguished. The adoption of Statement
125 did not have a material impact on the Company's results of operations
or financial position at or for the nine months ended September 30, 1997.
On March 3, 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standard No. 128, "Earnings Per Share." Statement
no. 128 Will become effective for the Company beginning in December 1997.
This statement re-defines the standards for computing earnings per share
("EPS") previously found in accounting principles Board Opinion No. 15,
Earnings Per Share. Statement No. 128 Establishes new standards for
computing and presenting eps and requires dual presentation of "basic" and
"diluted" EPS on the face of the income statement for all entities with
complex capital structures. Under Statement No. 128, basic EPS is to be
computed based upon income availability to common shareholders and the
weighted average number of common shares outstanding for the period.
Diluted EPS is to reflect the potential dilution that could occur if
securities or other contracts to issue common stock were exercised or
converted into common stock or resulted in the issuance of common stock
that then shared in the earnings of the Company. Statement No. 128 Also
requires the restatement of all prior-period EPS data presented. The
company will adopt Statement No. 128 as of December 31, 1997 and does not
believe the effect of adoption will have an impact on the Company's
financial position, results of operations or disclosures thereon.
F-8
<PAGE> 82
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
In July 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income."
Statement No. 130 is effective for fiscal years beginning after December
15, 1997. This statement establishes standards for reporting and the
presentation of comprehensive income and its components (revenues,
expenses, gains and losses) in a full set of general purpose financial
statements. It requires that all items that are required to be recognized
under accounting standards as
RECENT ACCOUNTING PRONOUNCEMENTS (CONTINUED)
components of comprehensive income be reported in a financial statement
that is presented with the same prominence as other financial statements.
Statement No. 130 requires that companies (i) classify items of other
comprehensive income by their nature in a financial statement and (ii)
display the accumulated balance of other comprehensive income separately
from retained earnings and additional paid-in capital in the equity section
of the statement of financial condition. Reclassification of financial
statements for earlier periods provided for comprehensive purposes is
required.
2. BRANCH ACQUISITION
On March 23, 1996, the Bank, pursuant to a purchase and assumption
agreement entered into with First National Bank of Ohio (Seller), assumed
deposit liabilities and acquired the branch banking properties, facilities,
all cash funds on hand and selected commercial and consumer loans of the
Doylestown and Clinton, Ohio operations. As part of the purchase
arrangement, the Bank paid in addition to a core deposit acquisition
premium, an amount equal to the Seller's liability for the special one-time
Federal Deposit Insurance Corporation insurance assessment, which was paid
in October, 1996. The assessment was calculated based upon certain deposits
assumed at the Doylestown branch office, and amounted to $84,620. The
assessment was expensed in 1996, and recorded as a component of the
intangible asset amortization classification in the consolidated statement
of income.
F-9
<PAGE> 83
3. INVESTMENT SECURITIES
In December, 1995, in accordance with the Financial Accounting Standards
Board Special Report "A Guide to Implementation of Statement No. 115 On
Accounting for Certain Investments in Debt and Equity Securities," the Bank
reclassified investment securities from the held to maturity
classification to the available for sale classification with an amortized
cost of $6,564,720 and an estimated market value of $6,604,281.
The amortized cost and estimated market values of investment securities
available for sale are as follows:
<TABLE>
<CAPTION>
1996
-------------------------------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
-------------- -------------- --------------- ----------------
<S> <C> <C> <C> <C>
U. S. Treasury securities $14,423,694 $ 85,681 $ - $ 14,509,375
Obligations of U. S. Government
agencies and corporations 6,902,130 51,738 (330) 6,953,538
Mortgage-backed securities 7,369,240 17,611 (46,982) 7,339,869
----------- --------- ---------- ------------
Total debt securities 28,695,064 155,030 (47,312) 28,802,782
Equity Securities 368,550 - - 368,550
----------- --------- ---------- ------------
Total $29,063,614 $ 155,030 $ (47,312) $ 29,171,332
=========== ========= ========== =============
1995
-------------------------------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
-------------- -------------- --------------- ----------------
U. S. Treasury securities $ 9,496,438 $ 123,618 $ (11,148) $ 9,608,908
Obligations of U. S. Government
agencies and corporations 1,500,000 16,125 (1,851) 1,514,274
Mortgage-backed securities 2,215,587 16 (20,320) 2,195,283
------------- ------------- ----------- -------------
Total debt securities 13,212,025 139,759 (33,319) 13,318,465
Equity Securities 59,750 - - 59,750
------------- ------------- ----------- -------------
Total $ 13,271,775 $ 139,759 $ (33,319) $ 13,378,215
============= ============= =========== =============
</TABLE>
F-10
<PAGE> 84
3. INVESTMENT SECURITIES (CONTINUED)
The amortized cost and estimated market values of investment securities held to
maturity are as follows:
<TABLE>
<CAPTION>
1996
-------------------------------------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
----------------- --------------- --------------- ------------------
<S> <C> <C> <C> <C>
Obligations of U. S. Government
agencies and corporations $ 8,554,643 $ - $ (70,849) $ 8,483,794
Obligations of states and political
subdivisions 7,128,716 189,878 (41,748) 7,276,846
Corporate securities 6,025,629 26,916 (36,033) 6,016,512
Mortgage-backed securities 54,432 40 - 54,472
---------------- --------------- --------------- ------------------
Total $ 21,763,420 $ 216,834 $ (148,630) $ 21,831,624
================ =============== =============== ==================
</TABLE>
<TABLE>
<CAPTION>
1995
-------------------------------------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
----------------- --------------- --------------- ------------------
<S> <C> <C> <C> <C>
Obligations of U. S. Government
agencies and corporations $ 7,741,896 $ 16,067 $ (35,262) $ 7,722,701
Obligations of states and political
subdivisions 6,303,030 231,384 (29,475) 6,504,939
Corporate securities 4,450,166 25,419 (19,311) 4,456,274
Mortgage-backed securities 106,171 213 - 106,384
---------------- --------------- --------------- ------------------
Total $ 18,601,263 $ 273,083 $ (84,048) $ 18,790,298
================ =============== =============== ==================
</TABLE>
F-11
<PAGE> 85
3. INVESTMENT SECURITIES (CONTINUED)
The amortized cost and estimated market values of debt securities at
December 31, 1996, by contractual maturity, are shown below. Expected
maturities will differ from contractual maturities because borrowers may
have the right to call or prepay obligations with or without call or
prepayment penalties. Mortgage-backed securities provide for periodic,
generally monthly, payments of principal and interest and have average
contractural maturities ranging from four to fifteen years.
<TABLE>
<CAPTION>
AVAILABLE FOR SALE HELD TO MATURITY
------------------------------------- -----------------------------------------
Estimated Estimated
Amortized Market Amortized Market
Cost Value Cost Value
---------------- ---------------- ------------------- ------------------
<S> <C> <C> <C> <C>
Due in one year or less $ 7,494,744 $ 7,544,768 $ 2,233,897 $ 2,227,895
Due after one year through
five years 13,831,080 13,918,145 13,651,633 13,749,230
Due after five years through
ten years - - 5,597,739 5,583,797
Due after ten years - - 225,719 216,230
--------------- ---------------- ------------------- ------------------
21,325,824 21,462,913 21,708,988 21,777,152
Mortgage-backed securities 7,369,240 7,339,869 54,432 54,472
--------------- ---------------- ------------------- ------------------
Total $ 28,695,064 $ 28,802,782 $ 21,763,420 $ 21,831,624
=============== ================ =================== ==================
</TABLE>
Proceeds from the sale of debt securities available for sale and gross
realized gains and losses on those sales are as follows:
<TABLE>
<CAPTION>
1996 1995
--------------- ---------------
<S> <C> <C>
Total proceeds received $ 497,773 $ 499,922
Gross realized gains - -
Gross realized losses 1,957 78
</TABLE>
Investment securities with a carrying value of $12,506,268 and $11,526,947
at December 31, 1996 and 1995, respectively, were pledged to secure public
deposits, repurchase agreements and other purposes as required by law.
4. LOANS
Major classifications of loans are summarized as follows:
<TABLE>
<CAPTION>
1996 1995
---------------------- -----------------------
<S> <C> <C>
Real estate mortgages $ 44,477,401 $ 35,540,206
Consumer installment 16,065,986 15,693,050
Commercial and agriculture 9,086,436 7,044,419
Credit cards 565,260 605,237
--------------------- -----------------------
70,195,083 58,882,912
Less allowance for loan losses 616,621 578,046
--------------------- -----------------------
Net loans $ 69,578,462 $ 58,304,866
===================== =======================
</TABLE>
F-12
<PAGE> 86
4. LOANS (CONTINUED)
As of December 31, 1996, aggregate loans of $60,000 or more
extended to directors, executive officers and their affiliates were
$437,236. In management's opinion, all of these loans are on substantially
the same terms and conditions as loans to other individuals and businesses
of comparable creditworthiness. A summary of loan activity during the year
is as follows:
<TABLE>
<CAPTION>
Balance Amounts Balance
December 31, 1995 Collected December 31, 1996
----------------- ---------- -----------------
ADDITIONS
---------
<S> <C> <C> <C> <C>
$ 269,152 $ 238,477 $ 70,393 $ 437,236
</TABLE>
The Bank's primary business activity is with customers located within its
local trade area of Wayne and Medina Counties. Commercial, residential,
personal, and agricultural loans are granted. The Bank also selectively
funds commercial and residential loans originated outside of its immediate
trade area provided such loans meet the Bank's credit policy guidelines.
Although the Bank has a diversified loan portfolio, at December 31, 1996
and 1995, loans outstanding to individuals dependent upon the agricultural
economic sector approximated $7,381,000 or 10.5% and $7,042,000 or 12.0% of
the loan portfolio, respectively. These loans are typically secured by
residential and commercial farm real estate and equipment. In general,
loans outstanding to individuals and businesses are dependent upon the
local economic conditions in the immediate trade area.
At December 31, 1996, the recorded investment in loans which are considered
to be impaired in accordance with SFAS 114 was $2,115,000 including
$563,000 considered to be nonaccrual. Included in this amount is $1,505,000
of impaired loans for which the related allowance for loan losses is
$320,000, and $610,000 of impaired loans for which no allowance for loan
losses has been allocated due to the loans being collateral dependent and
the fair value of the collateral exceeding the recorded investment in the
related loans. There were no loans considered impaired at or for the year
ending December 31, 1995.
The average recorded investment in impaired loans during the year ended
December 31, 1996, was approximately $2,087,000. For the year ended
December 31, 1996, interest income totaling $210,000 was recognized on
impaired loans of which $189,000 was recognized using the cash basis method
of income recognition.
5. ALLOWANCE FOR LOAN LOSSES
Changes in the allowance for loan losses for the years ended December 31
are as follows:
<TABLE>
<CAPTION>
1996 1995
----------------------- ----------------------
<S> <C> <C> <C>
Balance, January 1 $ 578,046 $ 488,656
Add:
Provision charged to operations 120,000 110,000
Recoveries 22,007 36,602
Less loans charged off 103,432 57,212
---------------------- ----------------------
Balance, December 31 $ 616,621 $ 578,046
====================== ======================
</TABLE>
For federal income tax purposes the reserve for loan losses is maintained
at the maximum allowable under the Internal Revenue Code, and approximated
$163,000 at December 31, 1996 and 1995, respectively.
F-13
<PAGE> 87
6. PREMISES AND EQUIPMENT
Major classifications of premises and equipment are summarized as follows:
<TABLE>
<CAPTION>
1996 1995
----------------------- -----------------------
<S> <C> <C>
Land and improvements $ 377,536 $ 297,536
Buildings and improvements 1,976,535 1,699,560
Furniture, fixtures, and equipment 2,106,896 1,828,966
---------------------- -----------------------
4,460,967 3,826,062
Less accumulated depreciation 2,119,165 1,882,791
---------------------- -----------------------
Total $ 2,341,802 $ 1,943,271
====================== =======================
</TABLE>
Depreciation and amortization charged to operations was $254,461 in 1996
and $199,985 in 1995.
7. DEPOSITS
Time deposits include certificates of deposit in denominations of $100,000
or more. Such deposits aggregated $4,903,000 and $5,076,000 at December 31,
1996 and 1995, respectively.
8. SHORT-TERM BORROWINGS
The components of the Bank's short-term borrowings consists of federal
funds purchased and U. S. Treasury demand notes are summarized as follows:
<TABLE>
<CAPTION>
1996 1995
------------------ ------------------
<S> <C> <C>
Balance at year end $ 341,542 $ 14,818
Maximum amount outstanding at any month end 1,285,575 5,873,050
Average balance outstanding during the year 315,931 298,528
Weighted average interest rate:
As of year end 6.16 % 5.15 %
Paid during the year 5.92 5.67
</TABLE>
The Bank has pledged U. S. Treasury securities with carrying values and
approximate market values of $499,910 and $501,562, respectively at
December 31, 1996 and $499,702 and $505,312, respectively at December 31,
1995, as collateral for these borrowings.
The Bank initiated a new credit arrangement with a borrowing limit at
December 31, 1996, of approximately $2,700,000 with the Federal Home Loan
Bank of Cincinnati. This credit line is subject to annual renewal, incurs
no service charges, and is secured by a blanket security agreement on
outstanding residential mortgage loans. There were no outstanding
borrowings on this line of credit during 1996.
F-14
<PAGE> 88
9. SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE
The outstanding balances and related information for securities sold under
agreements to repurchase are summarized as follows:
<TABLE>
<CAPTION>
1996 1995
---------------------- -----------------------
<S> <C> <C>
Balance at year end $ 5,188,863 $ 5,012,840
Average balance outstanding during the year 4,737,068 4,297,987
Maximum amount outstanding at any month end 5,501,361 5,873,050
Weighted average interest rate at year end 4.31 % 4.51 %
Weighted average interest rate during the year 4.32 4.77
</TABLE>
The repurchase agreements typically represent overnight borrowing
arrangements. The Bank has pledged U. S. Treasury securities with carrying
values and approximate market values of $6,011,000 and $6,031,000,
respectively at December 31, 1996 and $6,505,000 and $6,558,000,
respectively at December 31, 1995, as collateral for these agreements.
10. LONG-TERM BORROWINGS
On November 8, 1994, the Company initiated a commercial installment loan
with a correspondent bank for $640,000. The loan is secured by 140 shares
of Bank stock, with interest at prime plus .4%. The loan is payable in
semi-annual principal installments of $106,666, and quarterly interest
payments through October 1, 1997. The loan agreement contains covenants
requiring a minimum leverage capital ratio and earnings performance as well
as maximum levels of long-term borrowings on a consolidated basis.
Scheduled maturities for 1997 are $213,333.
11. COMMITMENTS
In the normal course of business, there are various outstanding commitments
which are not reflected in the accompanying consolidated financial
statements. Commitments to extend credit are agreements to lend to a
customer as long as there is no violation of any condition established in
the contract. Standby letters of credit are conditional commitments issued
by the Bank to guarantee the performance of a customer to a third party.
These commitments were comprised of the following at December 31:
<TABLE>
<CAPTION>
1996 1995
---------------------- ----------------------
<S> <C> <C>
Commitments to extend credit $ 9,551,389 $ 10,040,521
Standby letters of credit 137,185 119,000
---------------------- ----------------------
Total $ 9,688,574 $ 10,159,521
====================== ======================
</TABLE>
The instruments involve, to varying degrees, elements of credit and
interest rate risk in excess of the amount recognized in the balance sheet.
Management minimizes its exposure to credit loss under these commitments by
subjecting them to credit approval, review procedures, and collateral
requirements, as deemed necessary.
F-15
<PAGE> 89
11. COMMITMENTS (CONTINUED)
Commitments to extend credit are comprised primarily of available
commercial and personal lines of credit, and unfunded loans granted. The
terms of the credit lines are typically for a one year period, with an
annual renewal option subject to prior approval by management.
Substantially all of the Bank's commitments to extend credit are contingent
upon customers maintaining specific credit standards at the time of the
loan funding in compliance with lending policy guidelines. Management
assesses the credit risk associated with certain commitments to extend
credit in determining the level of the allowance for loan losses. Since
many of the credit line commitments are expected to expire without being
drawn upon, the total contractual amounts do not necessarily represent
future funding requirements.
12. INCOME TAXES
The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
1996 1995
---------------------- ----------------------
<S> <C> <C>
Currently payable $ 329,383 $ 327,096
Deferred (1,440) (11,772)
--------------------- ----------------------
Total $ 327,943 $ 315,324
===================== ======================
</TABLE>
The tax effects of deductible and taxable temporary differences that give
rise to significant portions of the deferred tax assets and deferred tax
liabilities, respectively, at December 31 are as follows:
<TABLE>
<CAPTION>
1996 1995
---------------------- ----------------------
Deferred tax assets:
<S> <C> <C>
Allowance for loan losses $ 154,086 $ 140,971
Intangible asset amortization 11,017 -
Employee Benefits 67,916 60,205
Other - 5,566
--------------------- ----------------------
Gross deferred tax assets 233,019 206,742
--------------------- ----------------------
Deferred tax liabilities:
Net unrealized gain on securities 36,624 36,189
Depreciation 36,627 31,029
Deferred origination fees and costs 39,291 21,684
Other 1,632 -
--------------------- ----------------------
Gross deferred tax liabilities 114,174 88,902
--------------------- ----------------------
Net deferred tax assets $ 118,845 $ 117,840
===================== ======================
</TABLE>
No valuation allowance was established at December 31, 1996 and 1995 in
view of the Company's ability to carryback to taxes paid in previous years,
coupled with anticipated future taxable income as evidenced by the
Company's earnings potential and the deferred tax liability amounts at each
year end.
F-16
<PAGE> 90
12. INCOME TAXES (INCOME TAXES)
The following is a reconciliation between the actual expense for income
taxes and the amount of income taxes which would have been provided at the
federal statutory rate.
<TABLE>
<CAPTION>
1996 1995
-------------------------------------- -----------------------------------
% of % of
Pretax Pretax
Amount Income Amount Income
----------------- --------------- ----------------- ---------------
<S> <C> <C> <C> <C>
Provision at statutory rate $ 443,936 34.0 % $ 417,360 34.0 %
Effect of tax exempt income (138,239) (10.6) (115,373) (9.4)
Other 22,246 1.7 13,337 1.1
---------------- --------------- ----------------- ---------------
Actual tax expense and
effective rate $ 327,943 25.1 % $ 315,324 25.7 %
================ =============== ================= ===============
</TABLE>
13. EMPLOYEE BENEFITS
DEFINED BENEFIT PLAN
The Bank sponsors a noncontributory defined benefit pension plan
covering substantially all of its employees. The plan calls for the
benefits to be paid to eligible employees at retirement based primarily
upon years of service with the Bank and compensation rates near retirement.
The pension expense includes the following components:
<TABLE>
<CAPTION>
1996 1995
---------------------- ----------------------
<S> <C> <C>
Service cost of the current period $ 42,432 $ 29,437
Interest cost on projected benefit obligation 55,031 52,291
Return on plan assets (53,164) (48,445)
Net amortization and deferral (3,277) (3,277)
--------- --------
Net periodic pension cost $ 41,022 $ 30,006
========= ========
</TABLE>
The actuarial present value of accumulated benefit obligations at December
31, 1996 and 1995 was $385,239 and $362,283, including vested benefit
obligations of $379,452 and $353,273. The following table sets forth the
funded status and amounts recognized in the balance sheet at December 31:
<TABLE>
<CAPTION>
1996 1995
------------------ ------------------
<S> <C> <C>
Plan assets at fair value $ 760,347 $ 668,899
Projected benefit obligation (838,229) (758,368)
----------- -----------
Funded status (77,882) (89,469)
Unrecognized net (gain) loss from past experience
different from that assumed (51,756) 4,130
Unrecognized prior service cost (35,297) (38,493)
Unrecognized net transition asset (568) (649)
----------- -----------
Accrued pension cost $ (165,503) $ (124,481)
=========== ===========
</TABLE>
The plan assets are invested in equity, bond, and money market mutual
funds.
F-17
<PAGE> 91
13. EMPLOYEE BENEFITS (CONTINUED)
The weighted discount rate used to measure the projected benefit obligation
is 7%, the long-term rate of return on assets is 8% and the rate of
increase in future compensation levels is 6% for both 1996 and 1995.
SAVINGS PLAN
Effective January 1, 1996, the Bank established a Section 401(k) employee
savings plan for substantially all employees and officers of the Bank. The
Bank may make matching contributions as approved at the discretion of the
Board of Directors. All employees who work over 1,000 hours per year are
eligible to participate in the plan. Employee contributions are vested at
all times; and Bank contributions are fully vested after five years. The
Bank made contributions of $19,054 for the year ended December 31, 1996.
14. REGULATORY MATTERS
CASH AND DUE FROM BANKS
The district Federal Reserve Bank requires the Bank to maintain certain
average balances. As of December 31, 1996 and 1995, the Bank had required
reserves of $769,000 and $576,000. The required reserves are computed by
applying prescribed ratios to the classes of average deposit balances.
These are held in the form of vault cash and a depository balance
maintained directly with the Federal Reserve Bank.
LOANS
Federal law prevents the Company from borrowing from the Bank unless the
loans are secured by specified obligations. Further, such secured loans are
limited in amount to 10% of the Bank's capital and surplus.
There were no such loans in 1996 or 1995.
DIVIDENDS
The Bank is subject to a dividend restriction which generally limits
the amount of dividends that can be paid by a state chartered member of the
Federal Reserve Bank System. Prior approval of the Federal Reserve Board is
required if the total of all dividends declared by the Bank in any calendar
year exceeds net profits, as defined for the year, combined with its
retained net profits for the two preceding calendar years less any required
transfers to surplus. Using this formula, the amount available for payment
of dividends by the Bank in 1997, without approval of the Federal Reserve
Board, will be limited to $1,209,000 plus net profits retained up to the
date of the dividend declaration.
F-18
<PAGE> 92
14. REGULATORY MATTERS (CONTINUED)
CAPITAL REQUIREMENTS
The Company and the Bank are subject to various regulatory capital
requirements administered by the federal banking agencies. Failure to meet
capital requirements can initiate certain mandatory, and possibly
additional discretionary actions by the regulators that, if undertaken,
could have a direct material effect on the Company's and Bank's financial
statements. Under capital adequacy guidelines and the regulatory framework
for prompt corrective action, the Company and the Bank must meet specific
capital guidelines that involve quantitative measures of the Company's and
Bank's assets, liabilities, and certain off-balance sheet items as
calculated under regulatory accounting practices. The Company and the
Bank's capital amounts and classification are also subject to qualitative
judgments by the regulators about components, risk weightings, and other
factors.
Quantitative measures established by regulation to ensure capital adequacy
require the Company and the Bank to maintain minimum amounts and ratios of
Total and Tier I (as defined in the regulations) to risk-weighted assets
(as defined), and of Tier I capital to average assets (as defined).
Management believes, as of December 31, 1996 and 1995, that the Company and
the Bank meet all capital adequacy requirements to which they are subject.
As of December 31, 1996, the most recent notification from the Federal
Deposit Insurance Corporation has categorized the Bank as well capitalized
under the regulatory framework for prompt corrective action. To be
categorized as well capitalized the Company and the Bank must maintain
minimum Total risk-based, Tier I risk-based and Tier I leverage ratios at
least 100 to 200 basis points above those ratios set forth in the table.
There have been no conditions or events since that notification that
management believes have changed the Company's or the Bank's category.
<TABLE>
<CAPTION>
1996
---------------------------------------------------------------------------------
For Minimum Capital
Actual Adequacy Purposes
------------------------------------- --------------------------------------
Amount Ratio Amount Ratio
---------------- --------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Total Capital
(To Risk Weighted Assets)
Consolidated $ 9,024,055 12.2 % $ 5,935,760 8.0 %
Bank 9,216,525 12.4 5,935,760 8.0
Tier I Capital
(To Risk Weighted Assets)
Consolidated $ 8,407,434 11.3 % $ 2,967,880 4.0 %
Bank 8,599,904 11.6 2,967,880 4.0
Tier I Capital
(To Average Assets)
Consolidated $ 8,407,434 6.5 % $ 5,169,029 4.0 %
Bank 8,599,904 6.7 5,169,029 4.0
</TABLE>
F-19
<PAGE> 93
14. REGULATORY MATTERS (CONTINUED)
<TABLE>
<CAPTION>
1995
------------------------------------------------------------------------------
For Minimum Capital
Actual Adequacy Purposes
--------------------------------- ---------------------------------------
Amount Ratio Amount Ratio
--------------- ------------ ----------------- -----------
<S> <C> <C> <C> <C>
Total Capital
(To Risk Weighted Assets)
Consolidated $ 9,766,414 16.5 % $ 4,725,520 8.0 %
Bank 10,158,545 17.2 4,725,520 8.0
Tier I Capital
(To Risk Weighted Assets)
Consolidated $ 9,188,368 15.6 % $ 2,362,760 4.0 %
Bank 9,580,499 16.2 2,362,760 4.0
Tier I Capital
(To Average Assets)
Consolidated $ 9,188,368 9.2 % $ 3,997,600 4.0 %
Bank 9,580,499 9.6 3,997,600 4.0
</TABLE>
15. FAIR VALUE DISCLOSURE OF FINANCIAL INSTRUMENTS
The estimated fair values at December 31 of the Company's financial
instruments are as follows:
<TABLE>
<CAPTION>
1996 1995
-------------------------------------- --------------------------------------
Carrying Fair Carrying Fair
Value Value Value Value
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Financial assets:
Cash and due from banks
and federal funds sold $ 5,840,547 $ 5,840,547 $ 8,154,307 $ 8,154,307
Investment securities 50,934,752 51,002,956 31,979,478 32,168,513
Net loans 69,578,462 69,677,000 58,304,866 59,206,000
Accrued interest receivable 996,548 996,548 649,443 649,443
---------------- ----------------- ----------------- -----------------
$ 127,350,309 $ 127,517,051 $ 99,088,094 $ 100,178,263
================ ================= ================= =================
Financial liabilities:
Deposits $ 114,952,721 $ 115,217,000 $ 85,960,194 $ 86,351,000
Securities sold under
agreements to repurchase 5,188,863 5,188,863 5,012,840 5,012,840
Short-term borrowings 341,542 341,542 14,818 14,818
Long-term borrowings 213,333 214,101 426,667 430,000
Accrued interest payable 440,928 440,928 392,902 392,902
---------------- ----------------- ----------------- -----------------
$ 121,137,387 $ 121,402,434 $ 91,807,421 $ 92,201,560
================ ================= ================= =================
</TABLE>
F-20
<PAGE> 94
15. FAIR VALUE DISCLOSURE OF FINANCIAL INSTRUMENTS (Continued)
Financial instruments are defined as cash, evidence of an ownership
interest in an entity, or a contract which creates an obligation or right
to receive or deliver cash or another financial instrument from/to a second
entity on potentially favorable or unfavorable terms.
Fair value is defined as the amount at which a financial instrument could
be exchanged in a current transaction between willing parties, other than
in a forced or liquidation sale. If a quoted market price is available for
a financial instrument, the estimated fair value would be calculated based
upon the market price per trading unit of the instrument.
If no readily available market exists, the fair value estimates for
financial instruments are based upon management's judgment regarding
current economic conditions, interest rate risk, expected cash flows,
future estimated losses and other factors, as determined through various
option pricing formulas or simulation modeling. Since many of these
assumptions result from judgments made by management based upon estimates
which are inherently uncertain, the resulting estimated fair values may not
be indicative of the amount realizable in the sale of a particular
financial instrument. In addition, changes in the assumptions on which the
estimated fair values are based may have a significant impact on the
resulting estimated fair values.
As certain assets and liabilities such as intangible assets, deferred tax
assets and premises and equipment are not considered financial instruments,
the estimated fair value of financial instruments would not represent the
full value of the Company.
The Company employed simulation modeling in determining the estimated fair
value of financial instruments for which quoted market prices were not
available, based upon the following assumptions:
CASH AND DUE FROM BANKS, FEDERAL FUNDS SOLD, ACCRUED INTEREST RECEIVABLE,
SECURITIES SOLD UNDER AGREEMENT TO REPURCHASE, SHORT-TERM BORROWINGS AND
ACCRUED INTEREST PAYABLE
The fair value is equal to the current carrying value.
INVESTMENT SECURITIES
The fair value of securities held to maturity is equal to the available
quoted market price. If no quoted market price is available, fair value is
estimated using the quoted market price for similar securities.
The fair value of securities available for sale is equal to the current
carrying value.
LOANS, DEPOSITS AND LONG-TERM BORROWINGS
The fair value of loans is estimated by discounting the future cash flows
using a simulation model which estimates future cash flows and constructs
discount rates that consider reinvestment opportunities, operating
expenses, non-interest income, credit quality, and prepayment risk. Demand,
savings, and money market deposit accounts are valued at the amount payable
on demand as of year end. Fair value for time deposits and long-term
borrowings are estimated using a discounted cash flow calculation that
applies contractual costs currently being offered in the existing portfolio
to current market rates being offered for deposits and notes with similar
remaining maturities.
F-21
<PAGE> 95
15. FAIR VALUE DISCLOSURE OF FINANCIAL INSTRUMENTS (CONTINUED)
COMMITMENTS TO EXTEND CREDIT AND STANDBY LETTERS OF CREDIT
These financial instruments are generally, not subject to sale and
estimated fair values are not readily available. The carrying value,
represented by the net deferred fee arising from the unrecognized
commitment or letter of credit, and the fair value determined by
discounting the remaining contractual fee over the term of the commitment
using fees currently charged to enter into similar agreements with similar
credit risk, are not considered material for disclosure. The contractual
amounts of unfunded commitments and letters of credit are presented in Note
11.
16. PARENT COMPANY
CONDENSED BALANCE SHEET
<TABLE>
<CAPTION>
December 31,
1996 1995
----------------------- -----------------------
<S> <C> <C>
ASSETS
Cash on deposit in subsidiary bank $ 10,645 $ 17,121
Investment in subsidiary 10,295,285 9,650,749
Other assets 10,217 17,415
---------------------- -----------------------
Total assets $ 10,316,147 $ 9,685,285
====================== =======================
LIABILITIES
Long-term borrowings $ 213,333 $ 426,667
STOCKHOLDERS' EQUITY 10,102,814 9,258,618
---------------------- -----------------------
Total liabilities and stockholders' equity $ 10,316,147 $ 9,685,285
====================== =======================
CONDENSED STATEMENT OF INCOME
<CAPTION>
Year Ended December 31,
1996 1995
----------------------- -----------------------
<S> <C> <C>
INCOME
Dividends from subsidiary bank $ 348,160 $ 386,214
---------------------- -----------------------
EXPENSES
Interest expense on long-term borrowings 28,100 49,680
Other 1,950 1,400
---------------------- -----------------------
Total expenses 30,050 51,080
---------------------- -----------------------
Income before income taxes 318,110 335,134
Income tax benefit (10,170) (17,415)
---------------------- -----------------------
Income before equity in undistributed 328,280 352,549
net earnings of subsidiary
Equity in undistributed net earnings of subsidiary 649,472 559,799
---------------------- -----------------------
NET INCOME $ 977,752 $ 912,348
====================== =======================
</TABLE>
F-22
<PAGE> 96
16. PARENT COMPANY (CONTINUED)
CONDENSED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended December 31,
1996 1995
---------------------- ----------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 977,752 $ 912,348
Adjustments to reconcile net income to net
cash provided by operating activities:
Undistributed net earnings of subsidiary (649,472) (559,799)
Other, net 12,978 (13,911)
--------------------- ----------------------
Net cash provided by operating activities 341,258 338,638
--------------------- ----------------------
FINANCING ACTIVITIES
Repayments of long-term borrowings (213,334) (213,333)
Cash dividends paid (134,400) (123,200)
--------------------- ----------------------
Net cash used for financing activities (347,734) (336,533)
--------------------- ----------------------
Increase (decrease) in cash (6,476) 2,105
CASH AT BEGINNING OF YEAR 17,121 15,016
--------------------- ----------------------
CASH AT END OF YEAR $ 10,645 $ 17,121
===================== ======================
</TABLE>
17. SUBSEQUENT EVENTS
STOCK SPLIT
The Board of Directors approved, effective April 7, 1997, a two for one
stock split of the Company's common stock and the reduction of the stated
value per share from $2.50 to $1.25 per
share. All references in theaccompanying financial statements to the number
of common shares and the per share amounts have been restated to reflect
the stock split.
MERGER AGREEMENT
On October 13, 1997, the Board of Directors entered into a Merger Agreement
whereby the Company shall be merged into Wayne Bancorp, Inc. (Wayne), an
Ohio corporation headquartered in Wooster, Ohio. Under the terms of the
Agreement, all outstanding shares of the Company shall be converted by
operation of law without any action by the holder thereof and shall be
exchanged for such number of shares of Wayne common stock equal to three
hundred fifty percent of the "Adjusted Book Value," as defined in the
Agreement, of a share of the Company's common stock divided by the "Market
Value," as also defined in the Agreement of Wayne common stock, subject to
the terms, conditions, and limitations set forth in the Agreement.
Completion of the merger is subject to approval by various regulatory
agencies and the stockholders of the Company and Wayne.
F-23
<PAGE> 97
CHIPPEWA VALLEY BANCSHARES, INC.
CONSOLIDATED BALANCE SHEET
(Unaudited)
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
----------------------- ---------------------
<S> <C> <C>
ASSETS
Cash and due from banks $ 5,750,579 $ 5,840,547
Federal funds sold 1,220,000 -
Investment securities:
Available for sale 25,604,211 29,171,332
Held to maturity (approximate market value of
$21,174,376 and $21,831,624) 20,944,262 21,763,420
Loans 78,917,167 70,195,083
Allowance for loan losses 696,695 616,621
---------------------- ---------------------
Net loans 78,220,472 69,578,462
Premises and equipment 2,298,331 2,341,802
Intangible assets 1,504,656 1,624,284
Accrued interest and other assets 1,396,926 1,278,088
---------------------- ---------------------
TOTAL ASSETS $ 136,939,437 $ 131,597,935
====================== =====================
LIABILITIES
Deposits:
Noninterest-bearing demand $ 11,960,310 $ 12,493,907
Interest-bearing demand 14,188,928 14,748,319
Savings 32,888,042 31,968,696
Money market 4,945,737 6,671,868
Time 53,665,163 49,069,931
---------------------- ---------------------
Total deposits 117,648,180 114,952,721
Securities sold under agreements to repurchase 6,942,255 5,188,863
Short-term borrowings 470,097 341,542
Long-term borrowings - 213,333
Accrued interest and other liabilities 823,710 798,662
---------------------- ---------------------
TOTAL LIABILITIES 125,884,242 121,495,121
---------------------- ---------------------
STOCKHOLDERS' EQUITY
Common stock, stated value $1.25; 500,000 shares
authorized, 448,000 and 480,000 issued 560,000 600,000
Surplus 87,040 700,000
Retained earnings 10,306,837 9,384,680
Net unrealized gain on securities 101,318 71,094
Treasury Stock, at cost (32,000 shares) - (652,960)
---------------------- ---------------------
TOTAL STOCKHOLDERS' EQUITY 11,055,195 10,102,814
---------------------- ---------------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 136,939,437 $ 131,597,935
====================== =====================
</TABLE>
See accompanying notes to the consolidated financial statements.
S-1
<PAGE> 98
CHIPPEWA VALLEY BANCSHARES, INC.
CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1997 1996 1997 1996
--------------- --------------- ---------------- ----------------
<S> <C> <C> <C> <C>
INTEREST INCOME
Loans, including fees $ 1,737,596 $ 1,475,439 $ 5,020,156 $ 4,232,528
Federal funds sold 39,808 9,054 54,900 133,897
Investment securities:
Taxable 615,763 708,291 1,895,136 1,807,065
Exempt from federal income tax 94,025 97,763 283,405 282,271
-------------- --------------- ---------------- ----------------
Total interest income 2,487,192 2,290,547 7,253,597 6,455,761
-------------- --------------- ---------------- ----------------
INTEREST EXPENSE
Deposits 1,151,039 1,072,961 3,290,385 2,978,366
Securities sold under agreements to
repurchase 45,536 49,921 160,018 144,831
Short-term borrowings 15,221 10,179 19,749 15,347
Long-term borrowings - 7,053 4,609 23,424
-------------- --------------- ---------------- ----------------
Total interest expense 1,211,796 1,140,114 3,474,761 3,161,968
-------------- --------------- ---------------- ----------------
NET INTEREST INCOME 1,275,396 1,150,433 3,778,836 3,293,793
Provision for loan losses 31,500 30,000 94,500 90,000
-------------- --------------- ---------------- ----------------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 1,243,896 1,120,433 3,684,336 3,203,793
-------------- --------------- ---------------- ----------------
NONINTEREST INCOME
Service charges on deposit accounts 103,326 102,471 300,621 288,271
Other service charges and fees 42,131 33,793 138,896 101,954
Securities losses, net - (1,957) (1,699) (1,957)
Other 21,750 6,147 55,774 28,502
-------------- --------------- ---------------- ----------------
Total noninterest income 167,207 140,454 493,592 416,770
-------------- --------------- ---------------- ----------------
NONINTEREST EXPENSE
Salaries and employee benefits 495,355 456,556 1,422,788 1,334,426
Occupancy 65,364 65,177 206,892 174,467
Furniture and equipment 76,505 80,654 231,205 219,442
Federal deposit insurance premiums 3,500 500 10,237 1,500
State franchise tax 38,607 35,531 116,607 110,423
Intangible asset amortization 39,876 124,496 119,628 164,340
Other 239,668 151,473 694,734 620,019
-------------- --------------- ---------------- ----------------
Total noninterest expense 958,875 914,387 2,802,091 2,624,617
-------------- --------------- ---------------- ----------------
Income before income taxes 452,228 346,500 1,375,837 995,946
Income taxes 124,738 90,680 382,000 260,749
-------------- --------------- ---------------- ----------------
NET INCOME $ 327,490 $ 255,820 $ 993,837 $ 735,197
============== =============== ================ ================
EARNINGS PER SHARE $ 0.73 $ 0.57 $ 2.22 $ 1.64
AVERAGE SHARES OUTSTANDING 448,000 448,000 448,000 448,000
</TABLE>
See accompanying notes to the consolidated financial statements.
S-2
<PAGE> 99
CHIPPEWA VALLEY BANCSHARES, INC.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(Unaudited)
<TABLE>
<CAPTION>
Net
Unrealized Total
Common Retained Gain (Loss) Treasury Stockholders'
Stock Surplus Earnings on Securities Stock Equity
--------- --------- ----------- -------------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Balance, $ 600,000 $ 700,000 $ 7,752,180 $ (136,240) $ (652,960) $ 8,262,980
December 31,
1994
Net 912,348 912,348
income
Dividends ($.28 (123,200) (123,200)
per share)
Net unrealized
gain on 206,490 206,490
securities
--------- --------- ----------- ----------- ---------- ------------
Balance, 600,000 700,000 8,541,328 70,250 (652,960) 9,258,618
December 31,
1995
Net 977,752 977,752
income
Dividends ($.30 (134,400) (134,400)
per share)
Net unrealized
gain on 844 844
securities
--------- --------- ----------- ----------- ---------- ------------
Balance, 600,000 700,000 9,384,680 71,094 (652,960) 10,102,814
December 31,
1996
Net 993,837 993,837
income
Dividends ($.16 (71,680) (71,680)
per share)
Retirement of -
treasury shares (40,000) (612,960) 652,960
Net unrealized
gain on 30,224 30,224
securities
--------- --------- ----------- ----------- ---------- ------------
Balance,
September 30, $ 560,000 $ 87,040 $10,306,837 $ 101,318 $ - $ 11,055,195
1997
========= ========= =========== =========== ========== ============
</TABLE>
See accompanying notes to the consolidated financial statements.
S-3
<PAGE> 100
CHIPPEWA VALLEY BANCSHARES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
1997 1996
------------ --------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 993,837 $ 735,197
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan losses 94,500 90,000
Depreciation, amortization, and accretion, net 443,101 417,453
Securities losses, net 1,699 1,957
Increase in accrued interest receivable (140,648) (533,875)
Increase (decrease) in accrued interest payable (103,002) 129,022
Other, net 134,290 10,802
------------ --------------
Net cash provided by operating activities 1,423,777 850,556
------------ --------------
INVESTING ACTIVITIES
Investment securities available for sale:
Proceeds from the sale of securities 985,489 495,817
Proceeds from maturities and repayments of securities 9,536,141 3,858,481
Purchases of securities (6,924,634) (21,578,536)
Investment securities held to maturity:
Proceeds from maturities and repayments of securities 2,861,713 8,789,600
Purchases of securities (2,125,715) (12,339,907)
Net increase in loans (8,751,832) (7,044,785)
Purchases of premises and equipment (167,300) (296,855)
Branch office acquisitions:
Purchase of loans - (1,383,885)
Purchase of premises and equipment - (313,591)
Net deposit proceeds - 22,947,060
------------ --------------
Net cash used for investing activities (4,586,138) (6,866,601)
------------ --------------
FINANCING ACTIVITIES
Net decrease in deposits 2,695,459 2,698,456
Net increase (decrease) in securities sold under agreements to repurchase 1,753,392 (191,755)
Net increase in short-term borrowings 128,555 421,054
Repayment of long-term borrowings (213,333) (213,334)
Cash dividends (71,680) (64,960)
------------ --------------
Net cash provided by financing activities 4,292,393 2,649,461
------------ --------------
Increase (decrease) in cash and cash equivalents 1,130,032 (3,366,584)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 5,840,547 8,154,307
------------ --------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 6,970,579 $ 4,787,723
============ ===============
</TABLE>
See accompanying notes to the consolidated financial statements.
S-4
<PAGE> 101
CHIPPEWA VALLEY BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. GENERAL
The accounting and financial reporting policies of Chippewa Valley
Bancshares, Inc. and its wholly-owned subsidiary, Chippewa Valley Bank
("Bank"), conform to generally accepted accounting principles and to
general practice within the banking industry. In the opinion of management,
the accompanying unaudited consolidated financial statements of Chippewa
Valley Bancshares, Inc. ("Company") contain all adjustments, consisting of
only normal and recurring adjustments, necessary for the fair presentation
of the Company's financial position, results of operations and cash flows
for the periods presented. The results of operations for the interim
periods are not necessarily indicative of the results to be expected for
the full year.
2. SUBSEQUENT EVENT
MERGER AGREEMENT
On October 13, 1997, the Board of Directors entered into a Merger Agreement
whereby the Company shall be merged into Wayne Bancorp, Inc. (Wayne), an
Ohio corporation headquartered in Wooster, Ohio. Under the terms of the
Agreement, all outstanding shares of the Company shall be converted by
operation of law without any action by the holder thereof and shall be
exchanged for such number of shares of Wayne common stock equal to three
hundred fifty percent of the "Adjusted Book Value," as defined in the
Agreement, of a share of the Company's stock divided by the "Market Value,"
as also defined in the Agreement of Wayne common stock, subject to the
terms, conditions, and limitations set forth in the Agreement.
Completion of the merger is subject to approval by various regulatory
agencies and the stockholders of the Company and Wayne.
S-5
<PAGE> 102
APPENDIX A
MERGER AGREEMENT
A-1
<PAGE> 103
MERGER AGREEMENT
This Merger Agreement ("Agreement") is entered into as of this 13th day
of October, 1997, by and between Wayne Bancorp, Inc. (hereinafter called
"Wayne") and Chippewa Valley Bancshares, Inc.
(hereinafter called "CVB").
RECITALS
A. Wayne is a corporation duly organized under the laws of the State of
Ohio. Its principal office is located at 112 W. Liberty Street, Wooster, Ohio
44691. As of the date hereof, Wayne had authorized capital stock consisting of
5,400,000 shares of common stock without par value ("Wayne Common Stock") of
which a total of 3,935,512 shares were issued and outstanding and 380 shares
were held as treasury shares. Wayne owns all of the outstanding capital stock of
The Wayne County National Bank ("Wayne Bank"), a national banking association
organized under the laws of the United States of America.
B. CVB is a corporation duly organized under the laws of the State of
Ohio. Its principal office is located at 20 South Main Street, Rittman, Ohio
44270. As of the date hereof, CVB had authorized capital stock consisting of
500,000 shares of common stock without par value ("CVB Common Stock"), of which
448,000 shares were issued and outstanding and no shares were held as treasury
shares. CVB owns all of the outstanding capital stock of The Chippewa Valley
Bank (hereinafter referred to as the "Chippewa Bank"), a banking corporation
organized under the laws of the State of Ohio.
C. At least a majority of the entire Board of Directors of Wayne and at
least a majority of the entire Board of Directors of CVB, respectively, have
approved the entering into of this Merger Agreement and have authorized the
execution and delivery of this Merger Agreement. From and after the time the
merger of CVB into Wayne shall become effective, the "Merger" as defined in
Section 1 of this Merger Agreement, and as and when required by this Merger
Agreement, Wayne will issue shares of Wayne Common Stock in exchange for all of
the issued and outstanding shares of CVB Common Stock in accordance with the
provisions hereinafter set forth. It is understood by each of the parties hereto
that Wayne seeks to acquire CVB and all of the operating assets of CVB including
the Chippewa Bank and the entities and assets which CVB and the Chippewa Bank
may acquire prior to the time the Merger shall become effective, through the
Merger of CVB with and into Wayne under the charter of Wayne and Chippewa Bank
will, immediately after the effective date of the Merger, remain an independent
operating subsidiary of Wayne. The parties will exert their best efforts to
obtain such regulatory approvals and to complete such other actions as are
necessary or appropriate to effect the Merger.
AGREEMENT
In consideration of mutual covenants and premises herein contained, Wayne and
CVB hereby make this Merger Agreement and prescribe the terms and conditions of
the Merger and the mode of carrying the Merger into effect as follows:
1. Merger. Subject to the terms and conditions hereinafter set forth, CVB
shall be merged with and into Wayne under the Articles of Incorporation
of Wayne pursuant to and in accordance with the applicable provisions
of the laws of the State of Ohio ("Merger").
2. Name. The name of the surviving corporation (hereinafter called the
"Surviving Corporation" whenever reference is made to it as of the time
the Merger shall become effective, as hereinafter provided, or
thereafter) shall be "Wayne Bancorp, Inc."
3. Business. The business of Wayne as the Surviving Corporation shall be
that of a bank holding company. The Surviving Corporation shall exist
by virtue of, and be governed by the laws of the State of Ohio and
shall have its principal office in Ohio at 112 W. Liberty Street,
Wooster, Ohio 44691.
A-2
<PAGE> 104
4. Effective Time of Merger: Articles of Merger. The Merger shall become
effective upon the date of the filing of the appropriate Certificate of
Merger with the Ohio Secretary of State (the "time the Merger shall
become effective") in accordance with applicable provisions of the laws
of the State of Ohio.
The Articles of Incorporation of Wayne in effect immediately prior to
the time the Merger shall become effective, shall be the Articles of
Incorporation of the Surviving Corporation, and the Code of Regulations
of Wayne in effect immediately prior to the time the Merger shall
become effective, shall be the Code of Regulations of the Surviving
Corporation.
5. Effect of Merger. At the time the Merger shall become effective, the
separate corporate existence of CVB shall, in accordance with
applicable provisions of the laws of the State of Ohio, be merged into
and continued in Wayne as the Surviving Corporation, with the effect as
provided by Section 1701.82 of the Ohio Revised Code.
6. Liabilities upon Merger. The Surviving Corporation shall be responsible
for all of the liabilities and obligations of each of the corporations
so merged in the same manner and to the same extent as if such single
corporation had itself incurred the same or contracted therefor, all in
the manner and as provided for by Sections 1701.82(A)(1),(2),(3),(4),
and (5) of the Ohio Revised Code.
7. Conversion of Shares.
(a) At the time the Merger shall become effective;
(i) All of the outstanding shares of CVB Common Stock shall be
converted by operation of law without any action by the
holder thereof and shall be exchanged for such number of
shares of Wayne Common Stock equal to three hundred fifty
percent (350%) of the "Adjusted Book Value" (as defined
below) of a share of CVB Common Stock divided by the "Market
Value" ( as defined below ) of Wayne Common Stock which
amount shall be herein referred to as the "Exchange Ratio."
"Adjusted Book Value" shall mean the book value of a share
of CVB Common Stock as of December 31, 1997, calculated in
accordance with Generally Accepted Accounting Principles, as
adjusted for: (1) the impact of FASB 115; and (2) increased
by the net write-off of goodwill during the fourth quarter
of 1997; and (3) increased by the net effect of increasing
CVB's loan loss reserve in the amount of $500,000 during the
fourth quarter of 1997. The "Market Value" shall represent
the per share market value of the Wayne Bancorp Common Stock
at the Effective Date and shall be determined by calculating
the average of the closing bid and asked prices of the
Common Stock of Wayne as reported by the NASDAQ on each of
the ten (10) consecutive trading days ending on the trading
day five calendar days preceding the Effective Date.
Regardless of the Market Value, however, the maximum number
of shares of Wayne Bancorp Common Stock to be issued in the
Merger shall be 1,023,737 shares, and the minimum number of
shares of Wayne Bancorp Common Stock to be issued in the
Merger shall be 981,837, all of which calculations assume
448,000 shares of CVB Common Stock outstanding.
(ii) The shares of Wayne Common Stock issued and outstanding
immediately prior to the time the Merger shall become
effective shall continue to be issued and outstanding shares
of the Surviving Corporation.
(iii)If prior to the Merger, shares of Wayne Common Stock shall
be changed into a different number of shares or a different
class of shares by reason of any reclassification,
recapitalization, split-up, combination, exchange of shares
or readjustment, or there occurs a distribution of warrants
or rights with respect to the Wayne Common Stock or a stock
dividend, stock split or other general distribution of Wayne
Common Stock is declared with a record date prior to the
effective time of the Merger, then in any event the Exchange
Ratio shall be appropriately adjusted.
A-3
<PAGE> 105
(b) No fractional shares of Wayne Common Stock will be issued by
Wayne in connection with the Merger, but in lieu thereof,
holders of CVB Common Stock shall, upon surrender of the
certificate or certificates formerly representing such CVB
Common Stock be paid cash without interest by Wayne for such
fractional share(s). The cash paid for each fractional share
shall be the same fraction of the average bid and asked
closing price per share of Wayne Common Stock on the Closing
Date.
(c) As soon as practicable, but not later than ten (10) days after
the time the Merger shall become effective, and subject to the
provisions set forth above relating to the fractional shares,
Wayne, or an Exchange Agent designated thereby and approved by
CVB, will distribute to the former holders of CVB Common Stock
in exchange for and upon surrender for cancellation by such
holders of a certificate or certificates formerly representing
shares of CVB Common Stock the certificate(s) for shares of
Wayne Common Stock in accordance with the Exchange Ratio and
any cash payment in lieu of fractional shares. Each
certificate formerly representing CVB Common Stock (other than
certificates representing shares of CVB Common Stock subject
to the rights of dissenting shareholders) shall be deemed for
all purposes to evidence the ownership of the number of whole
shares of Wayne Common Stock and cash for fractional share
interests in Wayne Common Stock into which such shares have
been converted pursuant to the Exchange Ratio. Until surrender
of the certificate or certificates formerly representing
shares of CVB Common Stock, the holder thereof shall not be
entitled to receive any dividend or other payment or
distribution payable to holders of Wayne Common Stock. Upon
such surrender (or in lieu of surrender other provisions
reasonably satisfactory to Wayne as are made as set forth in
the next following paragraph), there shall be paid to the
person entitled thereto the aggregate amount of dividends or
other payments or distributions (in each case without
interest) which became payable after the time the Merger shall
become effective on the whole shares of Wayne Common Stock
represented by the certificates issued upon such surrender and
exchange or in accordance with such other provisions, as the
case may be. After the time the Merger shall become effective,
the holders of certificates formerly representing shares of
CVB Common Stock shall cease to have rights with respect to
such shares (except such rights, if any, as a holder of
certificates formerly representing shares of CVB Common Stock
may have as dissenting shareholders pursuant to the Ohio
General Corporation Law) and except as aforesaid, their sole
rights shall be to exchange said certificates for certificates
for shares of Wayne Common Stock in accordance with this
Merger Agreement.
Certificates formerly representing shares of CVB Common Stock
surrendered for cancellation by each shareholder entitled to
exchange shares of CVB Common Stock for shares of Wayne Common
Stock by reason of the Merger shall be accompanied by such
appropriate instruments of transfer as Wayne may reasonably
require, provided, however, that if there be delivered to
Wayne by any person who is unable to produce any such
certificate formerly representing shares of CVB Common Stock
for transfer (i) evidence to the reasonable satisfaction of
Wayne that any such certificate has been lost, wrongfully
taken or destroyed, and (ii) such indemnity agreement and, at
the discretion of Wayne, an indemnity bond, as reasonably may
be requested by Wayne to save it harmless, and (iii) evidence
to the reasonable satisfaction of Wayne that such person is
the owner of the shares theretofore represented by each
certificate claimed by him to be lost, wrongfully taken or
destroyed and that he is the person who would be entitled to
present each such certificate and to receive shares of Wayne
Common Stock pursuant to this Merger Agreement, then Wayne, in
the absence of actual notice to it that any shares theretofore
represented by any such certificate have been acquired by a
bona fide purchaser, shall deliver to such person the
certificate(s) representing shares of Wayne Common Stock which
such person would have been entitled to receive upon surrender
of each such lost, wrongfully taken or destroyed certificate
representing shares of CVB Common Stock.
A-4
<PAGE> 106
8. Board of Directors. The Board of Directors of Wayne as constituted at
the time the Merger shall become effective shall serve as the Board of
Directors of Wayne as the Surviving Corporation plus two additional
members from CVB's board of directors to be named by Wayne.
9. Discussions with Others. On and after the date hereof, except with the
written consent of Wayne, CVB shall not directly or indirectly solicit
or encourage (nor shall CVB permit any of its officers, directors,
employees or agents directly or indirectly to solicit or encourage),
including by way of furnishing information, any inquiries or proposals
for a merger, consolidation, share exchange or similar transaction
involving CVB or Chippewa Bank or for the acquisition of the stock or
all or substantially all of the assets or business of CVB or Chippewa
Bank, or discuss with or enter into conversations with any person,
other than CVB shareholders or employees, concerning any such merger,
consolidation, share exchange, acquisition or other transaction, other
than the proposed transaction with Wayne, provided, however, that CVB
may communicate information about any such proposals or inquiries to
its shareholders if and to the extent that it is required to do so in
order to reasonably comply with its legal obligations. CVB will
promptly notify Wayne orally (to be confirmed in writing as soon as
practicable thereafter) of all of the relevant details relating to any
inquiries or proposals that it may receive relating to any such
matters, including actions it intends to take with respect to such
matters. In order to induce Wayne to enter into this Agreement and
incur the substantial expenses involved in effectuating the
transactions contemplated herein, CVB agrees and does hereby promise to
pay to Wayne the sum of One Million Five Hundred Thousand Dollars
($1,500,000), upon Wayne's demand therefor, in the event that the CVB
shareholders fail to approve the proposed transaction with Wayne and
CVB or its shareholders receive an offer from and negotiate with any
party other than Wayne at any time within one (1) year of the date
hereof concerning a merger, consolidation, purchase of substantially
all of the CVB Common Stock, or similar transaction involving either
CVB or Chippewa Bank or the sale of all or substantially all of the
assets of CVB and/or Chippewa Bank.
10. Undertakings of the Parties. Wayne and CVB further agree as follows:
(a) This Merger Agreement shall be submitted to the shareholders
of CVB and Wayne for approval and adoption at separate
meetings to be called and held in accordance with law and the
Articles of Incorporation and Code of Regulations of CVB and
Wayne.
(b) Wayne and CVB will cooperate in the preparation by Wayne of
the application to the Board of Governors of the Federal
Reserve System (the "Board") under the appropriate provisions
of Section 3 of the Bank Holding Company Act of 1956, as
amended, and to any other state or federal regulatory agency
which may be required to facilitate the Merger. Wayne will
file such applications within seventy-five (75) days after the
date of this Merger Agreement and shall forward a copy of such
applications to CVB and its counsel upon filing. Wayne and CVB
will cooperate in the preparation of proxy and registration
statements under federal and state securities laws so as to
facilitate the exchange of shares as contemplated by this
Merger Agreement.
(c) Each party will assume and pay all of its fees and expenses
incurred by it incident to the negotiation, preparation and
execution of this Agreement, obtaining of the requisite
regulatory and shareholder consents and approvals and all
other acts incidental to, contemplated by or in pursuance of
this Agreement. Wayne shall promptly prepare and file at no
expense to CVB: (i) any and all required regulatory
applications necessary in connection with the transactions
contemplated by this Agreement; and (ii) an S-4 Registration
Statement to be filed with the Securities and Exchange
Commission to register the shares of Wayne Common Stock to be
issued in connection with the transactions contemplated by
this Agreement. Such registration statement will not cover
resales by any persons who may be considered "underwriters"
under Rule 145(c) of the Securities Act of 1933, as amended
(the "1933 Act"). Wayne will also take any action required to
be taken under any applicable state securities or "Blue Sky"
laws in connection with the Merger. Wayne will provide CVB and
it counsel with a copy of the S-4 Registration Statement for
review and comment prior to filing with the Securities and
Exchange Commission.
A-5
<PAGE> 107
(d) All information furnished by one party to another party in
connection with this Merger Agreement and the transactions
contemplated hereby will be kept confidential by such other
party and will be used only in connection with this Merger
Agreement and the transactions contemplated hereby, except to
the extent that such information: (i) is already known to such
other party when received; (ii) thereafter becomes lawfully
obtainable from other sources; or (iii) is required to be
disclosed in any document filed with the Securities and
Exchange Commission, the Board, or any other governmental
agency or authority (except under a claim of confidentiality).
In the event the Merger Agreement is terminated, all such
information shall be promptly returned by each party to the
other party or be destroyed.
(e) After: (i) receipt of the Federal Reserve Board's prior
approval of Wayne's acquisition of CVB; (ii) the approval of
the shareholders of CVB and Wayne as provided in Section 10(a)
has occurred; and (iii) all other regulatory approvals have
been obtained and the regulatory waiting period(s) have
expired, Wayne shall designate the date as of which Wayne
desires the Merger to become effective and shall file the
appropriate Certificate of Merger with the Ohio Secretary of
State in accordance herewith and the time the Merger shall
become effective shall occur at the time and on the date so
designated, consistent with the terms of Section 4 hereof.
However, any date so specified shall not be later than either
(a) the first day of the month immediately following the month
in which the last of the events described above (i-iii) occurs
if said event occurs before the sixteenth day of such month or
(b) the first day of the second month immediately following
such month if the last of the events described above occurs
after the sixteenth day of such month. Notwithstanding the
foregoing, in no event shall the Merger become effective
before March 31, 1998.
(f) Subject to the terms and conditions of this Merger Agreement,
Wayne and CVB each agree that, subject to applicable laws and
to the fiduciary duties of its Directors, each will promptly
take or cause to be taken all action, and promptly do or cause
to be done all things necessary, proper or advisable under
applicable laws and regulations to consummate and make
effective the Merger and other transactions contemplated by
this Merger Agreement.
(g) Wayne undertakes to cause, immediately after the effective
date of the Merger, the election as Directors of Chippewa
Bank, all those persons serving as Directors immediately prior
to the effective time of the Merger together with two
additional persons to be selected by Wayne.
(h) Wayne and its Board of Directors undertake to appoint,
immediately after the effective date of the Merger, Philip S.
Swope, currently the President of Chippewa, as the President
of Wayne. David L. Christopher, currently the Chairman,
President and CEO of Wayne shall continue as Chairman and CEO
of Wayne after the Merger and the appointment of Mr. Swope as
President of Wayne. Mr. Swope also shall continue to be
President of Chippewa Bank after the effective date of the
Merger. Notwithstanding the foregoing, Mr. Swope shall
continue to be an employee "at will" and his appointment to
the offices set forth above will not effect the ability of the
Board of Directors of Wayne to terminate Mr. Swope or
otherwise appoint him to another position within Wayne or
Chippewa Bank at some point in time after the effective date
of the Closing.
(i) Wayne, CVB, and their respective Directors and Executive
Officers shall not cause any trades, transfers or other
transactions in Wayne Common Stock during the 20 business days
immediately preceding the effective date of the Merger.
11. Dissenting Shareholders. Holders of CVB Common Stock shall have the
rights accorded to dissenting shareholders under Section 1701.85 of the
Ohio Code, as amended.
12. Representations and Warranties of Wayne. Wayne represents and warrants
to CVB as follows:
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(a) Wayne is a corporation duly organized and validly existing
under the laws of the State of Ohio, is a registered bank
holding company under the Bank Holding Company Act of 1956, as
amended, and is qualified to do business and is in good
standing in the State of Ohio, together with all other
jurisdictions where it is both required to so qualify and the
failure to so qualify would have material and adverse
consequences to Wayne. Wayne has full power and authority
(including all licenses, franchises, permits and other
governmental authorizations which are legally required) to
engage in the businesses and activities now conducted by it.
As of the date of this Agreement, the authorized capital stock
of Wayne consisted of 5,400,000 shares of common stock without
par value of which a total of 3,935,512 shares were issued and
outstanding and 380 shares were held as treasury shares. All
of said shares of capital stock are fully paid and
nonassessable and are not issued in violation of the
preemptive rights of any shareholder. Wayne owns all of the
outstanding capital stock of Wayne Bank. There are no
outstanding options, warrants or commitments of any kind
relating to the issue or sale of Wayne's capital stock.
The corporate minute books of Wayne which will be made
available to CVB contain, in all material respects, records of
all meetings and other corporate actions of Wayne's
shareholders, directors and committees of directors. Wayne
will deliver to CVB copies of the Articles of Incorporation
and Code of Regulations of Wayne, including all amendments
thereto. Wayne Bank is a national banking association duly
organized and validly existing under the laws of the United
States and has the full power and authority, corporate or
otherwise, to own its property and to carry on its business
activities as such activities are presently conducted.
(b) Wayne has furnished to CVB and its counsel copies of the
following financial statements relating to Wayne and its
consolidated subsidiaries: (i) the audited Consolidated
Balance Sheet of Wayne as of December 31, 1996 and 1995 and
the Consolidated Statements of Income, Shareholders' Equity
and Statements of Cash Flows for the years then ended,
together with the notes and report of Crowe, Chizek & Company
LLP thereto. Each of the aforementioned financial statements
is true and correct in all material respects and together
present fairly the consolidated financial position and results
of operations of Wayne as of the dates and for the periods
therein set forth in conformity with generally accepted
accounting principles ("GAAP"). Such financial statements do
not, as of the dates thereof, include any material asset or
omit any material liability, absolute or contingent, or other
fact, the inclusion or omission of which renders such
financial statements, in light of the circumstances under
which they were made, misleading in any material respect.
Since December 31, 1996, there has not been any material
adverse change in the financial condition, results of
operations, business or prospects of Wayne and its
subsidiaries on a consolidated basis.
(c) The Board of Directors of Wayne has authorized execution of
this Merger Agreement and approved the merger of CVB and Wayne
as contemplated by said Merger Agreement. Wayne, subject to
approval of its shareholders, has all requisite power and
authority to enter into this Merger Agreement and Wayne has
the authority to consummate the transactions contemplated
hereby. This Merger Agreement constitutes the valid and
legally binding obligation of Wayne and this Merger Agreement
and the consummation hereof has been duly authorized and
approved on behalf of Wayne by all requisite corporate action.
Provided the required approvals are obtained from the Federal
Reserve Board and any other necessary regulatory agencies, and
the shareholders of Wayne, neither the execution and delivery
of this Merger Agreement nor the consummation of the Merger
will conflict with, result in the breach of, constitute a
default under or accelerate the performance provided by the
terms of any law, or any rule or regulation of any
governmental agency or authority or any judgment, order or
decree of any court or other governmental agency to which
Wayne may be subject, any contract, agreement or instrument to
which Wayne is a party or by which Wayne is bound or
committed, or the Articles of Incorporation or Code of
Regulations of Wayne or the Articles of Association or Bylaws
of Wayne Bank, or constitute an event which, including with
the lapse of time or action by a third party, could, to the
best of Wayne's knowledge, result in the default under any of
the foregoing or result in the creation of any lien, charge or
encumbrance upon any of the assets or properties of Wayne or
any of its subsidiaries or
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upon any of the stock of Wayne or any of its subsidiaries,
except, however, in the case of contracts, agreements or
instruments, such defaults, conflicts or breaches which either
(i) will be cured or waived prior to the time the Merger
becomes effective, or (ii) if not so cured or waived would
not, in the aggregate, have any material adverse effect on the
financial condition, results of operations or business of
Wayne on a consolidated basis.
(d) There is no litigation, action, suit, investigation or
proceeding pending or, to the best of the knowledge after due
inquiry of Wayne and its executive officers, threatened,
against Wayne or its subsidiaries or involving any of their
respective properties or assets, at law or in equity, before
any federal, state, municipal, local or other governmental
authority, involving a material amount which, if resolved
adversely to the interest of Wayne or its subsidiaries, would
materially affect the financial condition or operations of
Wayne or its subsidiaries on a consolidated basis and/or
Wayne's ability to perform under this Merger Agreement, and to
the best of the knowledge and belief after due inquiry of
Wayne and its executive officers, no one has asserted and no
one has reasonable or valid grounds on which it reasonably can
be expected that anyone will assert any such claims against
Wayne or its subsidiaries based upon the wrongful action or
inaction of Wayne or its subsidiaries or any of their
respective officers, directors or employees.
(e) At the time the Merger shall become effective and on such
subsequent date when the former shareholders of CVB surrender
their CVB share certificates for cancellation, the shares of
Wayne Common Stock to be received therefore will have been
duly authorized and validly issued by Wayne and will be fully
paid and nonassessable and be issued free of preemptive
rights.
(f) Wayne has timely filed all reports and registration statements
(collectively, "SEC Documents") required to be filed by it
pursuant to the Securities Act of 1933, as amended, and the
Securities Exchange Act of 1934, as amended, and such SEC
Documents complied in all material respects with the
Securities Act of 1933 and the Securities Exchange Act of 1934
and all applicable rules and regulations promulgated
thereunder (the "SEC Laws"). Wayne has delivered to CVB copies
of the Annual Report on Form 10-K filed with the Securities
and Exchange Commission by Wayne for its fiscal year ended
December 31, 1996, including exhibits and all documents
incorporated by reference therein, and the proxy materials
disseminated by Wayne to its shareholders in connection with
the 1997 Annual Meeting of Shareholders of Wayne. Promptly
upon the execution of this Agreement, Wayne will deliver to
representatives of CVB its Quarterly Reports on Form 10-Q
filed with the Securities and Exchange Commission for the
quarters ended March 31, June 30, and September 30, 1997. Such
Annual and Quarterly Reports and proxy materials and the SEC
Documents do not misstate a material fact or omit to state a
material fact necessary in order to make the statements
contained therein, in light of the circumstances under which
they are made, not misleading.
(g) Since December 31, 1996: (i) each of Wayne and its
subsidiaries has conducted business in the ordinary course,
and has preserved its corporate existence, business and
goodwill intact; (ii) there has been no material adverse
change in the assets, liabilities, business or operations of
Wayne or its subsidiaries; and (iii) there has been no damage,
destruction, loss, or which in the aggregate has had or might
reasonably be expected to have a material adverse effect on
the business or operations of Wayne or any of its
subsidiaries.
(h) To the best of the knowledge after due inquiry of Wayne and
its executive officers, Wayne and Wayne Bank have complied
with all laws, regulations and orders applicable to Wayne and
Wayne Bank and to the conduct of their businesses, including
without limitation, all statutes, rules and regulations
pertaining to the conduct of banking activities except for
possible technical violations which together with any penalty
which results therefrom do not or will not have a material
adverse effect on the financial condition, results of
operations or business of Wayne and Wayne Bank on a
consolidated basis. Neither Wayne nor Wayne Bank are in
default under, and no event has occurred which, with the lapse
of time or action by a third party, could, to the best of
Wayne's
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knowledge after due inquiry, result in the default under the
terms of any judgment, decree, order, writ, rule or regulation
of any governmental authority or court, whether federal, state
or local and whether at law or in equity, where the default(s)
could reasonably be expected to have a material adverse effect
on the financial conditions, results of operations or business
of Wayne and Wayne Bank on a consolidated basis.
(i) Wayne has duly and timely filed all federal, state, county and
local income, excise, real and personal property and other tax
returns and reports (including, but not limited to, social
security, withholding, unemployment insurance, and sales and
use taxes) required to have been filed by Wayne up to the date
hereof. To the best of the knowledge and belief of Wayne all
such returns are true and correct in all material respects,
and Wayne has paid or, prior to the time the Merger shall
become effective, will pay all taxes, interest and penalties
shown on such return or reports or claimed (other than those
claims being contested in good faith) to be due to any
federal, state, county, local or other taxing authority, and
there is, and at the time the Merger shall become effective
will be, no basis for any additional claim or assessment which
might materially and adversely affect Wayne or Wayne Bank, and
for which an adequate reserve has not been established. To the
best of its knowledge and belief, Wayne has paid or made
adequate provision in its financial statements or its books
and records for all taxes payable in respect of all periods
ending as of the date thereof. To the best of its knowledge
and belief Wayne has, or at the time the Merger shall become
effective will have, no material liability for any taxes,
interest or penalties of any nature whatsoever, except for
those taxes which may have arisen up to the time the Merger
shall become effective in the ordinary course of business and
are properly accrued on the books of Wayne as of the time the
Merger shall become effective.
(j) The deposits of Wayne Bank are insured by the Federal Deposit
Insurance Corporation and Wayne Bank has paid all premiums and
assessments with respect to such deposit insurance.
(k) Wayne has no knowledge of any hazardous substances, hazardous
waste, pollutant or contaminant, including, but not limited
to, asbestos (except as previously disclosed to CVB in a
letter of even date herewith), PCB's or urea formaldehyde,
having been generated, released into, stored or deposited
over, upon or below (in storage tanks or otherwise) the
premises of Wayne or Wayne Bank or any other real property
owned or leased by Wayne or Wayne Bank, or into any water
systems on or below the surface of Wayne or Wayne Bank
premises or any other real property owned or leased by Wayne
or Wayne Bank in violation of any law, regulation or
requirement or in any manner which could result in a material
adverse impact on the value of the premises or property or
present a threat to human health or the environment. As used
in this Merger Agreement, the terms "hazardous substance,"
"hazardous waste, "pollutant" and "contaminant" mean any
substance, waste, pollutant or contaminant included within
such terms under any applicable Federal, state or local
statute or regulation.
(l) Wayne and Wayne Bank have in effect insurance coverage with
reputable insurers, which in respect of amounts, premiums,
types and risks insured, constitutes reasonably adequate
coverage against all risks customarily insured against by
companies comparable in size and operation to Wayne or Wayne
Bank.
13. Representations and Warranties of CVB. CVB represents and warrants to
Wayne as follows:
(a) CVB is a corporation duly organized and validly existing under
the laws of the State of Ohio, and is a registered bank
holding company under the Bank Holding Company Act of 1956, as
amended. CVB has full power and authority (including all
licenses, franchises, permits and other governmental
authorizations which are legally required which, if not
obtained or possessed, would have a materially adverse effect
on the business and operations of CVB) to engage in the
businesses and activities now conducted by it. As of the date
of this Merger Agreement, the authorized capital stock of CVB
consists of 500,000 shares of common stock without par value,
of which a total of 448,000 shares are issued and outstanding
and no shares are held as treasury
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shares. All of said shares of capital stock are fully paid and
nonassessable and were not issued in violation of the
preemptive rights of any shareholder. There are no outstanding
options, warrants or commitments of any kind relating to CVB's
authorized but unissued capital stock except as disclosed in
the letter to Wayne of even date herewith.
(b) CVB has furnished to Wayne copies of the following financial
statements relating to CVB and its consolidated subsidiaries:
(i) the audited Consolidated Balance Sheets of CVB as of
December 31, 1996 and 1995 and the Consolidated Statements of
Income, Changes in Shareholders' Equity and Statements of Cash
Flows for the years then ended, together with the notes and
report of S. R. Snodgrass, A.C. thereto, (ii) copies of all
reports of CVB and Chippewa Bank as filed with the appropriate
regulatory agencies, as of and for the years ended December
31, 1996 and 1995 and through the date hereof. Each of the
aforementioned financial statements is true and correct in all
material respects and together present fairly in all material
respects the consolidated financial position and results of
operations of CVB as of the dates and for the periods therein
set forth in conformity with GAAP. Such financial statements
do not, as of the dates thereof, include any material asset or
omit any material liability, absolute or contingent, or other
fact, required to be included or omitted as the case may be,
by GAAP. Since December 31, 1996, there has not been any
material adverse change in the financial condition, results of
operations, or business of CVB and Chippewa Bank on a
consolidated basis.
(c) The Board of Directors of CVB has authorized execution of this
Merger Agreement. Subject to the approval by the shareholders
of CVB, CVB has all requisite power and authority to enter
into this Merger Agreement. CVB owns all of the shares of
Chippewa Bank and CVB has the authority to consummate the
transactions contemplated hereby so that, provided all
required corporate and regulatory approvals are obtained and
all conditions to CVB's obligations as set forth in this
Merger Agreement are satisfied, neither the execution and
delivery of this Merger Agreement nor the consummation of the
Merger will conflict with, result in the breach of, constitute
a default under or accelerate the performance provided by the
terms of any law, or any rule or regulation of any
governmental agency or authority or any judgment, order or
decree of any court or other governmental agency to which CVB
may be subject, any contract, agreement or instrument to which
CVB is a party or by which CVB is bound or committed, or the
Articles of Incorporation or Code of Regulations of CVB or
Chippewa Bank, or constitute an event which with the lapse of
time or action by a third party, could, to the best of CVB's
knowledge, result in the default under any of the foregoing or
result in the creation of any lien, charge, encumbrance upon
any of the assets, property or capital stock of CVB, except,
however, in the case of contracts, agreements or instruments,
such defaults, conflicts or breaches which either (i) will be
cured or waived prior to the time the Merger becomes
effective, or (ii) if not so cured or waived would not, in the
aggregate, have any material adverse effect on the financial
condition, results of operations or business of CVB and
Chippewa Bank on a consolidated basis.
(d) There is no litigation, action, suit, investigation or
proceeding pending or, to the best of their knowledge after
due inquiry of CVB and its executive officers, overtly
threatened, against CVB or Chippewa Bank or involving any of
their respective properties or assets, at law or in equity,
before any federal, state, municipal, local or other
governmental authority, involving a material amount which, if
resolved adversely to the interest of CVB or Chippewa Bank
would materially affect the financial condition or operations
of CVB and Chippewa Bank on a consolidated basis and/or CVB's
ability to perform under this Merger Agreement. To the best
knowledge after due inquiry of CVB and its executive officers,
no one has asserted and no one has reasonable or valid ground
on which it reasonably can be expected that anyone will assert
any such claims against CVB or Chippewa Bank or be based upon
the wrongful action or inaction of CVB or Chippewa Bank or any
of their respective officers, directors or employees.
(e) CVB and Chippewa Bank have good and marketable title to all
assets and properties, whether real or personal, tangible or
intangible, including without limitation the capital stock of
Chippewa
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Bank, reflected in CVB's Balance Sheet of December 31, 1996 or
acquired subsequent thereto (except to the extent that such
assets and properties have been disposed of for fair value in
the ordinary course of business since December 31, 1996)
subject to no liens, mortgages, security interests,
encumbrances, pledges or charges of any kind, except: (i)
those items that secure liabilities that are reflected in said
Balance Sheet; (ii) statutory liens for taxes not yet
delinquent; (iii) minor defects and irregularities in title
and encumbrances which do not materially impair the use
thereof for the purposes for which they are held; (iv) pledges
or liens required to be granted in connection with the
acceptance of government deposits or granted in connection
with repurchase agreements; and (v) easements, encumbrances,
liens, mortgages and security interests of record which do not
impair the use thereof for the purposes intended and such
liens, mortgages, security interests, encumbrances and charges
are not in the aggregate, material to the assets and
properties of CVB. CVB or Chippewa Bank have as lessee the
contractual right under valid leases to occupy, use, possess
and control all material property leased by CVB or Chippewa
Bank.
(f) To the best of the knowledge after due inquiry of CVB and its
executive officers, CVB and Chippewa Bank have complied with
all laws, regulations and orders applicable to CVB and
Chippewa Bank and to the conduct of their businesses,
including without limitation, all statutes, rules and
regulations pertaining to the conduct of banking activities
except for possible technical violations which together with
any penalty which results therefrom do not or will not have a
material adverse effect on the financial condition, results of
operations or business of CVB and Chippewa Bank on a
consolidated basis. Neither CVB nor Chippewa Bank are in
default under, and no event has occurred which, with the lapse
of time or action by a third party, could, to the best of
CVB's knowledge after due inquiry, result in the default under
the terms of any judgment, decree, order, writ, rule or
regulation of any governmental authority or court, whether
federal, state or local and whether at law or in equity, where
the default(s) could reasonably be expected to have a material
adverse effect on the financial conditions, results of
operations or business of CVB and Chippewa Bank on a
consolidated basis.
(g) Except as disclosed in CVB's letter to Wayne of even date
herewith, CVB and Chippewa Bank have not, since December 31,
1996 to the date hereof: (i) issued or sold any of its capital
stock or any issued any corporate debt securities other than
in the ordinary course of its banking business; (ii) granted
any option for the purchase of capital stock; (iii) declared
or set aside or paid any dividend or other distribution in
respect of its capital stock except as permitted pursuant to
Section 14(a) hereof or, directly or indirectly, purchased,
redeemed or otherwise acquired any shares of such stock; (iv)
incurred any obligation or liability (absolute or contingent),
except for obligations reflected in this Merger Agreement, and
except for obligations or liabilities incurred in the ordinary
course of business, or mortgaged, pledged or subjected to lien
or encumbrance (other than statutory liens for taxes not yet
delinquent or other than in the ordinary course of business)
any of its assets or properties; (v) discharged or satisfied
any lien or encumbrance or paid any obligation or liability
(absolute or contingent), other than the current portion of
any long term liabilities which become due after December 31,
1996, business, liabilities incurred in carrying out the
transactions contemplated by this Merger Agreement and
obligations and liabilities paid in the ordinary course of
business; (vi) sold, exchanged or otherwise disposed of any of
its material capital assets outside the ordinary course of
business; (vii) made any extraordinary officers' salary
increase or wage increase, entered into any employment
contract with any officer or salaried employee or, instituted
any employee welfare, bonus, stock option, profit-sharing,
retirement or similar plan or arrangement; (viii) suffered any
damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting its business,
property or assets or waived (except for fair consideration)
any rights of value which are material in the aggregate,
considering CVB's business taken as a whole; or (ix) entered
or agreed to enter into any agreement or arrangement granting
any preferential right to purchase any of its assets,
properties or rights or requiring the consent of any party to
the transfer and assignment of any such assets, properties or
rights.
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(h) Except as set forth in CVB's letter to Wayne of even date
herewith, neither CVB nor Chippewa Bank is a party to or bound
by any written or, to the best of its knowledge after due
inquiry, oral: (i) employment or consulting contract which is
not terminable by CVB or Chippewa Bank on 60 days or less
notice, (ii) employee bonus, deferred compensation, pension,
stock bonus or purchase, profit-sharing, retirement or stock
option plan, (iii) other employee benefit or welfare plan, or
(iv) other executory material agreements which in any case
obligate CVB or Chippewa Bank to make any payment(s) which in
the aggregate exceed $25,000 per year except for contracts
terminable on 60 days' notice. All such pension, stock bonus
or purchase, profit-sharing, defined benefit and retirement
plans set forth under the caption "Qualified Plans" in the CVB
letter (hereinafter referred to collectively as the "plans")
are qualified plans under Section 401(a) of the Internal
Revenue Code and in compliance in all material respects with
ERISA. All material notices, reports and other filings
required under applicable law to be given or made to or with
any governmental agency with respect to the plans have been
timely filed or delivered where failure to file could result
in a penalty of $25,000 and/or result in disqualification of
the plan. CVB has no knowledge either of any circumstances
which would adversely affect the qualification of the plans or
their compliance with ERISA, or of any unreported "reportable
event" (as such term is defined in Section 4043(b) of ERISA)
or, except as indicated in the CVB letter to Wayne of even
date herewith, any "prohibited transaction" (as such term is
defined in Section 406 of ERISA and Section 4975(c) of the
Internal Revenue Code) which has occurred since the date on
which said sections became applicable to the plans. No such
plan is subject to the minimum funding standards set forth in
the Code and ERISA.
(i) CVB has duly filed all federal, state, county and local
income, excise, real and personal property and other tax
returns and reports (including, but not limited to, social
security, withholding, unemployment insurance, and sales and
use taxes) required to have been filed by CVB up to the date
hereof. Except as set forth in CVB's letter to Wayne of even
date herewith, to the best of the knowledge and belief of CVB
all such returns are true and correct in all material
respects, and CVB has paid or, prior to the time the Merger
shall become effective, will pay all taxes, interest and
penalties shown on such return or reports or claimed (other
than those claims being contested in good faith and which have
been disclosed to Wayne) to be due to any federal, state,
county, local or other taxing authority, and there is, and at
the time the Merger shall become effective will be, no basis
for any additional claim or assessment which might materially
and adversely affect CVB or Chippewa Bank and for which an
adequate reserve has not been established. To the best of its
knowledge and belief, CVB has paid or made adequate provision
in its financial statements or its books and records for all
taxes payable in respect of all periods ending as of the date
thereof. To the best of its knowledge and belief, CVB has, or
at the time the Merger shall become effective will have, no
material liability for any taxes, interest or penalties of any
nature whatsoever, except for those taxes which may have
arisen up to the time the Merger shall become effective in the
ordinary course of business and are properly accrued on the
books of CVB as of the time the Merger shall become effective.
(j) CVB has no knowledge of any hazardous substances, hazardous
waste, pollutant or contaminant, including, but not limited
to, asbestos except as disclosed to Wayne in the CVB letter of
even date herewith, PCB's or urea formaldehyde, having been
generated, released into, stored or deposited over, upon or
below (in storage tanks or otherwise) the Chippewa Bank
premises or any other real property owned or leased by CVB or
Chippewa Bank, or into any water systems on or below the
surface of the Chippewa Bank premises or any other real
property owned or leased by CVB or the Chippewa Bank in
violation of any law, regulation or requirement or in any
manner which could result in a material adverse impact on the
value of the premises or property or present a threat to human
health or the environment. As used in this Merger Agreement,
the terms "hazardous substance," "hazardous waste, "pollutant"
and "contaminant" mean any substance, waste, pollutant or
contaminant included within such terms under any applicable
Federal, state or local statute or regulation.
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(k) CVB or Chippewa Bank has in effect insurance coverage with
reputable insurers, which in respect of amounts, premiums,
types and risks insured, constitutes reasonably adequate
coverage against all risks customarily insured against by
companies comparable in size and operation to CVB or Chippewa
Bank.
(l) Other than as previously disclosed to Wayne, in writing, with
respect to the fairness opinion relating to the Merger and
other than professional fees and disbursements of its
accountants and attorneys, CVB has not incurred and will not
incur any liability for brokerage, finders', agents', or
investment bankers' fees or commissions in connection with
this Merger Agreement or the transactions contemplated hereby.
14. Action by CVB Pending Effective Time. CVB agrees that from the date of
this Merger Agreement until the time the Merger shall become effective,
or until this Merger Agreement is terminated as provided for herein,
except with prior written permission of Wayne:
(a) Beginning with the date hereof and until such time as the
Merger shall become effective, CVB will not declare or pay any
dividends (cash or stock) or make any distributions other than
its ordinary and normal cash dividend at the rate of $0.32 per
share per year for the year ended December 31, 1997. CVB
already has paid $0.16 per share as a dividend in 1997 and
will pay only an additional $0.16 per share, which amount will
paid on or before December 31, 1997.
(b) CVB will not issue, sell, grant any option for, or acquire for
value any shares of its capital stock or otherwise effect any
change in connection with its capitalization.
(c) Except as set forth in or contemplated by this Merger
Agreement, CVB and Chippewa Bank will carry on their
respective businesses in substantially the same manner as on
the date hereof, keep in full force and effect insurance
comparable in amount and scope of coverage to that now
maintained by it and use its best efforts to maintain and
preserve its business organization intact.
(d) Except as specifically set forth in CVB's letter to Wayne of
even date herewith, CVB and Chippewa Bank will not: (i) enter
into any transaction other than in the ordinary course of
business or incur or agree to incur any obligation or
liability except liabilities incurred and obligations entered
into in the ordinary course of business; (ii) change Chippewa
Bank's lending, investment, liability management and other
material banking policies in any material respect; (iii)
except as committed for adjustment as of the date hereof and
consistent with prior practice, grant any general or uniform
increase in the rates of pay of employees; (iv) incur or
commit to any capital expenditures other than in the ordinary
course of business (which in no event shall include the
establishment of new branches and such other facilities) or
any capital expenditures for any purpose which exceed $50,000
in the aggregate, or (v) except as provided in Section 9
hereof, merge into, consolidate with or sell its assets to any
other corporation or person, or permit any other corporation
to be merged or consolidated with it or acquire all of the
assets of any other corporation or person.
(e) CVB will not change its or Chippewa Bank's methods of
accounting in effect at December 31, 1996 except as required
by changes in generally accepted accounting principles and
concurred in by CVB's independent auditors, and except for the
adjustments required as of December 31, 1997 pursuant to
paragraph 7(a) hereof, or change any of its methods of
reporting income and deductions for Federal income tax
purposes from those employed in the preparation of CVB's
Federal income tax returns for the taxable year ending
December 31, 1996, except for changes required by law.
(f) CVB will afford Wayne, its officers and other authorized
representatives, subject to the confidentiality requirements
of Section 10(d) hereof, such access to all books, records,
tax returns, leases, contracts and documents of CVB or
Chippewa Bank and will furnish to Wayne such
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information with respect to the assets and business of CVB and
Chippewa Bank as Wayne may from time to time reasonably
request in connection with this Merger Agreement and the
transactions contemplated hereby.
(g) CVB will promptly furnish Wayne with copies of all interim
financial statements of CVB as they become available, and keep
Wayne fully informed concerning all developments which in the
opinion of CVB may have a material effect upon the business,
properties or condition (either financial or otherwise) of
CVB.
15. Action by Wayne Pending Effective Time. Wayne agrees that from the date
of this Agreement until the time the Merger shall become effective or
until this Merger Agreement is terminated as provided for herein:
(a) Wayne will carry on its business in substantially the same
manner as heretofore except as otherwise set forth in or
contemplated by this Merger Agreement, and Wayne will keep in
full force and effect insurance comparable in amount and scope
of coverage to that now maintained by it and use its best
efforts to maintain and preserve its business organization
intact. CVB acknowledges that, in the ordinary course of its
business as a bank holding company, Wayne from time-to-time,
enters into an agreement(s) to acquire by merger, stock
purchase or like means, another financial institution or its
holding company.
(b) Wayne will not change its methods of accounting in effect at
December 31, 1996, except as required by changes in generally
accepted accounting principles as concurred in by Wayne's
independent auditors, or change any of its methods of
reporting income and deductions for Federal income tax
purposes from those employed in the preparation of the Federal
income tax returns of Wayne Bank for the taxable year ending
December 31, 1996, except for changes required by law or take
any action which could jeopardize the tax free nature of the
Merger or the pooling of interests accounting treatment for
the Merger.
(c) Wayne will promptly furnish CVB with copies of press releases,
interim financial statements of Wayne and all reports,
schedules and statements filed by or delivered to Wayne
pursuant to the Securities and Exchange Act of 1934 and the
rules and regulations promulgated thereunder, as they become
available.
(d) Wayne will afford CVB, its officers and other authorized
representatives, subject to the confidentiality requirements
of Section 10(d) hereof, such access to all books, records,
tax returns, leases, contracts and documents of Wayne and will
furnish to CVB such information with respect to the assets and
business of Wayne as CVB may from time to time reasonably
request in connection with this Merger Agreement and the
transactions contemplated hereby.
16. Conditions to Obligations of Wayne. The obligations of Wayne under this
Merger Agreement are subject, unless waived by Wayne, to the
satisfaction of the following conditions on or prior to the time the
Merger shall become effective:
(a) Prior to the time the Merger shall become effective, Wayne
shall not have been deprived of adequate opportunity to
conduct such review and examination of the business,
properties, and condition (financial or otherwise) of CVB and
Chippewa Bank as Wayne shall have deemed prudent, and such
review and examination shall not have disclosed matters which
are inconsistent in any material respect with any of the
representations and warranties of CVB contained in this Merger
Agreement.
(b) There shall not have been any material adverse change or
discovery of a condition or the occurrence of an event which
has or is likely to result in such a material adverse change,
in the financial condition, aggregate net assets,
shareholders' equity, business or operating results of
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CVB on a consolidated basis from December 31, 1996 to the time
the Merger shall become effective.
(c) All representations by CVB contained in this Merger Agreement
shall be true in all material respects immediately prior to
the time the Merger shall become effective as though such
representations were made at and as of said date, except for
changes contemplated by the Merger Agreement and except also
for representations as of a specified time other than the time
the Merger shall become effective, which shall be true in all
material respects at such specified time.
(d) Wayne shall have received the opinion of legal counsel for
CVB, dated the time the Merger shall become effective,
substantially to the effect set forth in Exhibit A hereto.
(e) CVB shall have performed or satisfied in all material respects
all agreements and conditions required by this Merger
Agreement to be performed or satisfied by it at or prior to
the time the Merger shall become effective.
(f) At the time the Merger shall become effective, no suit, action
or proceeding shall be pending or overtly threatened before
any court or other governmental agency of the federal or state
government in which it is sought to restrain or prohibit the
consummation of the Merger, and no other suit, action or
proceeding shall be pending or overtly threatened and no
liability or claim shall have been asserted against CVB or
Chippewa Bank which Wayne shall in good faith determine, with
advice of counsel: (i) has a reasonable likelihood of being
successfully prosecuted and (ii) if successfully prosecuted,
would materially and adversely affect the financial condition,
results of operations or shareholders' equity of CVB on a
consolidated basis.
(g) The number of shares as to which shareholders of CVB have
exercised their dissenters' rights of appraisal pursuant to
the provisions of Section 1701.85 of the Ohio Revised Code
does not exceed 10 percent (10%) of the outstanding shares of
CVB Common Stock.
(h) CVB shall have furnished Wayne certificates, signed on its
behalf by the Chairman or President and the Secretary or an
Assistant Secretary of CVB and dated the time the Merger shall
become effective, to the effect that to the best of their
knowledge, after due inquiry, the conditions described in
Paragraphs (b), (c), (e) and (f) of this Section 16 have been
fully satisfied.
(i) Austin Associates, Inc. ("AAI") shall have issued its written
fairness opinion stating that the terms of the Merger are fair
and equitable to the shareholders of Wayne from a financial
perspective. Such written fairness opinion shall be: (a) in
form and substance reasonably satisfactory to Wayne; (b) dated
as of a date not later than the mailing date of the Proxy
Statement/Prospectus relating to the Merger to be mailed to
Wayne shareholders; (c) included in the Proxy
Statement/Prospectus; and (d) confirmed by AAI as of the time
the Merger shall become effective that the terms of the Merger
continue to be fair and equitable to the shareholders of CVB
from a financial perspective.
(j) Wayne shall have received assurances, satisfactory to it, that
the Merger will be accounted for as a pooling of interests
transaction.
(k) CVB shall have taken action necessary to cause the adjustments
described in paragraph 7(a) hereof related to FASB 115, the
write-off of intangibles and the increase in the loan loss
reserve effective as of December 31, 1997.
(l) Wayne shall have been afforded the opportunity to conduct a
phase I environmental audit of any real property owned by CVB
or its subsidiaries. In the event a matter is discovered which
if known by CVB as of the date of this Agreement would have
violated the representation contained in paragraph 13(j)
hereof, involves an amount in excess of $50,000, and CVB shall
fail to remedy
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such matter to the reasonable satisfaction of Wayne, then
Wayne may terminate this Agreement and neither party shall
thereafter have any liability resulting from this Agreement or
the transactions contemplated thereby. Wayne shall complete
any phase I examination within 90 days of this Agreement.
(m) The members of the Board of Directors of CVB shall have
executed this Agreement stating that they shall vote their
shares of CVB in favor of the Merger and shall recommend
approval of the Merger to the CVB shareholders.
17. Conditions to Obligations of CVB. The obligations of CVB under this
Merger Agreement are subject, unless waived by CVB, to the satisfaction
on or prior to the time the Merger shall become effective of the
following conditions:
(a) There shall not have been any material adverse change or
discovery of a condition or the occurrence of an event which
has or is likely to result in such a material adverse change,
in the financial condition, aggregate net assets,
shareholders' equity, business, or operating results of Wayne
on a consolidated basis from December 31, 1996 to the time the
Merger shall become effective.
(b) All representations and warranties by Wayne contained in this
Merger Agreement shall be true in all material respects
immediately prior to the time the Merger shall become
effective as though such representations and warranties were
made at and as of said date, except for changes contemplated
by this Merger Agreement, and except also for representations
as of a specified time other than the time the Merger shall
become effective, which shall be true in all material respects
at such specified time.
(c) CVB shall have received the opinion of Counsel for Wayne dated
the time the Merger shall become effective substantially to
the effect set forth in Exhibit B hereto.
(d) Wayne shall have performed or satisfied in all material
respects all agreements and conditions required by this Merger
Agreement to be performed or satisfied by it at or prior to
the time the Merger shall become effective.
(e) At the time the Merger shall become effective, no suit, action
or proceeding shall be pending or overtly threatened before
any court or other governmental agency of the federal or state
government in which it is sought to restrain, prohibit or set
aside consummation of the Merger and no other suit, action or
proceeding shall be pending or overtly threatened and no
liability or claim shall have been asserted against Wayne or
Wayne Bank which CVB shall in good faith determine, with
advice of counsel: (i) has a reasonable likelihood of being
successfully prosecuted and (ii) if successfully prosecuted,
would materially and adversely affect the financial condition,
results of operations or shareholders' equity of Wayne, on a
consolidated basis.
(f) Wayne shall have furnished CVB a certificate, signed by the
Chairman or President and by the Secretary or Assistant
Secretary of Wayne and dated the time the Merger shall become
effective to the effect that to the best of their knowledge
after due inquiry the conditions described in Paragraphs (a),
(b), (d) and (e) of this Section 17 have been fully satisfied.
(g) Prior to the time the Merger shall become effective, CVB shall
not have been deprived of adequate opportunity to conduct such
review and examination of the business, properties and
condition (financial or otherwise) of Wayne and its
subsidiaries as CVB shall have deemed prudent, and such review
and examination shall not have disclosed matters which are
inconsistent in any material respect with any of the
representations and warranties of Wayne contained in this
Merger Agreement.
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(h) Gary Young and Associates ("Young") or such other financial
advisor acceptable to CVB shall have issued its written
fairness opinion stating that the terms of the Merger are fair
and equitable to the shareholders of CVB from a financial
perspective. Such written fairness opinion shall be: (a) in
form and substance reasonably satisfactory to CVB; (b) dated
as of a date not later than the mailing date of the Proxy
Statement/Prospectus relating to the Merger to be mailed to
CVB shareholders; (c) included in the Proxy
Statement/Prospectus; and (d) confirmed by Young as of the
time the Merger shall become effective that the terms of the
Merger continue to be fair and equitable to the shareholders
of CVB from a financial perspective.
(i) The average of the bid and asked price of a share of Wayne
Common Stock as of the end of the business day five (5) days
before the effective date of the Merger shall not be less than
$30.00, provided, however, that Chippewa shall not be entitled
to terminate the Merger based upon such condition if the price
per share of the financial institutions comprising the S & P
Major Regional Bank Index shall have declined by 25% or more
from the date hereof until the date five (5) days before the
effective date of the Merger.
18. Conditions to Obligations of All Parties. In addition to the provisions
of Sections 16 and 17 hereof, the obligations of Wayne and CVB to cause
the transactions contemplated herein to be consummated shall be subject
to the satisfaction of the following conditions on or prior to the time
the Merger shall become effective:
(a) The parties hereto shall have received all necessary approvals
of governmental agencies and authorities of the transactions
contemplated by this Merger Agreement and each of such
approvals shall remain in full force and effect at the time
the Merger shall become effective and such approvals and the
transactions contemplated thereby shall not have been
contested by any federal or state governmental authority by
formal proceeding, or contested by any other third party by
formal proceeding which the Board of Directors of the party
asserting a failure of a condition under this Section 18(a)
shall in good faith determine, with the advice of counsel: (i)
has a reasonable likelihood of being successfully prosecuted
and (ii) if successfully prosecuted, would materially and
adversely affect the benefits hereunder intended for such
party. It is understood that, if any contest as aforesaid is
brought by formal proceedings, Wayne may, but shall not be
obligated to, answer and defend such contest. Wayne shall
notify CVB promptly upon receipt of all necessary governmental
approvals.
(b) The registration statement required to be filed by Wayne
pursuant to Section 10(c) of this Merger Agreement shall have
become effective by an order of the Securities and Exchange
Commission, the shares of Wayne Common Stock to be exchanged
in the Merger shall have been qualified or exempted under all
applicable state securities laws, and there shall have been no
stop order issued or threatened by the Securities and Exchange
Commission that suspends or would suspend the effectiveness of
the registration statement, and no proceeding shall have been
commenced, pending or overtly threatened for such purpose.
(c) This Merger Agreement shall have been duly adopted, ratified
and confirmed by the requisite affirmative votes of the
shareholders of CVB and Wayne.
(d) Wayne and CVB shall have received the opinion and there shall
exist as of, at or immediately prior to the time the Merger
shall become effective no facts or circumstances which would
render such opinion inapplicable in any respect to the
transactions to be consummated hereunder of Werner & Blank
Co., L.P.A. substantially to the effect that:
(i) The statutory merger of CVB with and into Wayne will
constitute a reorganization within the meaning of
Section 368(a)(1)(A) of the Internal Revenue Code;
(ii) No gain or loss will be recognized by CVB or Wayne as
a consequence of the transactions herein
contemplated;
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(iii) No gain or loss will be recognized by the
shareholders of CVB on the exchange of their shares
of CVB Common Stock for shares of Wayne Common Stock
(disregarding for this purpose any cash received for
fractional share interests to which they may be
entitled);
(iv) The federal income tax basis of the Wayne Common
Stock received by the shareholders of CVB Common
Stock for their shares of CVB Common Stock will be
the same as the federal income tax basis of the CVB
Common Stock surrendered in exchange therefor; and
(v) The holding period of the Wayne Common Stock received
by a shareholder of CVB for his shares of CVB Common
Stock will include the period for which the CVB
Common Stock exchanged therefor was held, provided
the exchanged CVB Common Stock was held as a capital
asset by such shareholder on the date of the
exchange.
19. Nonsurvival of Representations and Warranties. The respective
representations and warranties of Wayne and CVB set forth in Sections
12 and 13 shall not survive the time the Merger shall become effective.
20. Governing Law. This Merger Agreement shall be construed and
interpreted according to the applicable laws of the State of Ohio.
21. Assignment. This Merger Agreement and all of the provisions hereof
shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and permitted assigns, but neither this
Merger Agreement nor any of the rights, interests, or obligations
hereunder shall be assigned by either of the parties hereto without the
prior written consent of the other party.
22. Satisfaction of Conditions; Termination.
(a) Wayne agrees to use its best effort to obtain satisfaction of
the conditions insofar as they relate to Wayne, and CVB agrees
to use its best efforts to obtain the satisfaction of the
conditions insofar as they relate to CVB. If any condition to
the obligations of Wayne set forth in Section 16 or 18 is not
substantially satisfied at the time or times contemplated
thereby and such condition is not waived by Wayne, or if any
condition to the obligations of CVB set forth in Section 17 or
18 is not substantially satisfied at the time or times
contemplated thereby and such condition is not waived by CVB,
or if at any time prior to the time the Merger shall become
effective, it shall become reasonably certain that such
condition will not be substantially satisfied and such
condition is not waived by Wayne or CVB, as the case may be,
either Wayne or CVB may terminate this Merger Agreement by
written notice to the other party after the expiration of
fifteen (15) days written notice to the other party during
which time such other party shall have an opportunity to cure
such defect in said condition. This Merger Agreement may be
terminated and abandoned (either before or after the meetings
of shareholders contemplated hereby) by mutual written consent
of Wayne and CVB authorized by their respective Boards of
Directors. In the event of such termination caused otherwise
than by breach of this Merger Agreement by any of the parties
hereto, this Merger Agreement shall cease and terminate, the
acquisition of CVB as provided herein shall not be
consummated, and neither Wayne nor CVB shall have any further
liability under this Merger Agreement of any nature whatever,
including any liability for damages. In the event this Merger
Agreement is terminated, the duties of both parties with
respect to confidential information set forth in Sections
10(d) shall survive any such termination. In addition to the
other grounds for termination of this Merger Agreement set
forth herein, this Merger Agreement can be terminated by
written notice by either party to the other, in each case
authorized by its Board of Directors, if the Merger shall not
have been consummated by September 30, 1998 or the date of
such notice, whichever is later.
(b) If termination of this Merger Agreement shall be judicially
determined to have been caused by breach of this Merger
Agreement, then, in addition to other remedies at law or
equity for breach of this Merger Agreement, the party so found
to have breached this Merger Agreement shall indemnify the
other parties for their respective costs, fees and expenses of
its counsel, accountants and other experts and advisors as
well as fees and expenses incident to negotiation, preparation
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and execution of this Merger Agreement and related actions and
its shareholders' meetings and actions.
23. Waivers Amendments. Any of the provisions of this Merger Agreement may
be waived at any time by the party which is, or the shareholders of
which are, entitled to the benefit thereof, by such party. This Merger
Agreement may be amended or modified in whole or in part by an
agreement in writing executed in the same manner (but not necessarily
by the same person) as this Merger Agreement and which makes reference
to this Merger Agreement, pursuant to a resolution, adopted by the
Boards of Directors of the respective parties, provided, however, such
amendment or modification may be made in this manner by the respective
Boards of Directors of Wayne and CVB at any time prior to a favorable
vote of such party's shareholders, but may be made after a favorable
vote by the shareholders of such party, only if, in the opinion of its
Board of Directors, such amendment or modification will not have any
material adverse effect on the benefits intended under this Merger
Agreement for the shareholders of such party and will not require
resolicitation of any proxies from such shareholders or further
shareholder approval is obtained.
24. Entire Agreement. This Agreement supersedes any other agreement,
whether written or oral, that may have been made or entered into by
Wayne and CVB or by any officer or officers of such parties relating to
the acquisition of the business or the capital stock of CVB by Wayne.
Except for the letters specified in this Merger Agreement and of even
date herewith, this Agreement and the Exhibits thereto constitute the
entire agreement by the parties, and there are no agreements or
commitments except as set forth herein and therein.
25. Captions; Counterparts. The captions in this Merger Agreement are for
convenience only and shall not be considered a part of or affect the
construction or interpretation of any provision of this Merger
Agreement. This Merger Agreement may be executed in several
counterparts, each of which shall constitute one and the same
instrument.
26. Notices. All notices and other communications hereunder shall be deemed
to have been duly given if forwarded by a nationally recognized
overnight courier service. All notices and other communications
hereunder given to any party shall be communicated to the remaining
party to this Merger Agreement by mail in the same manner as herein
provided.
(a) If to Wayne, to:
Mr. David L. Christopher
Chairman, President and CEO
Wayne Bancorp, Inc.
112 W. Liberty Street
Wooster, Ohio 44691
With copies to:
Thomas C. Blank, Esq.
Werner & Blank Co., L.P.A.
7205 W. Central Avenue
Toledo, Ohio 43617
(b) If to CVB, to:
Philip S. Swope
President and CEO
Chippewa Valley Bancshares, Inc.
20 South Main Street
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Rittman, Ohio 44270
With copies to:
Clifford A. Roe, Jr., Esq.
Dinsmore & Shohl, P.L.L.
1900 Chemed Center
255 East Fifth Street
Cincinnati, Ohio 45202-3172
27. Undertakings of Affiliates. Wayne shall have received undertakings in
writing from each of such persons, if any, as counsel for Wayne
believes might reasonably be considered "affiliates" of CVB within the
meaning of Rule 145 of the Securities and Exchange Commission pursuant
to the Securities Act of 1933, in each case in form and substance
satisfactory to counsel for Wayne, to the effect that so long as Wayne
continues to file all "current public information" concerning Wayne,
any disposition made by such person of any share of Wayne Common Stock
received by such person pursuant to this Merger Agreement shall be made
within the limits and in accordance with the applicable provisions of
said Rule 145, as such Rule may be amended from time to time, and (ii)
such person will not sell, assign or transfer any of such Wayne Common
Stock until Wayne shall have published financial results including the
combined operations of Wayne and CVB for a period of at least 30 days
following the time the Merger shall become effective.
28. Publicity. Wayne and CVB agree to consult with and obtain the consent
of the other, prior to any media release or other public disclosures as
to the matters covered by this Agreement, except as may be required by
law.
{SIGNATURES ON FOLLOWING PAGE}
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<PAGE> 122
IN WITNESS WHEREOF, this Merger Agreement has been executed the day and
year first above written.
ATTEST: Wayne Bancorp, Inc.
By: /s/ David P. Boyle By: /s/ David L. Christopher
------------------------- -------------------------------
David P. Boyle, David L. Christopher, Chairman,
Vice President & CFO President, and CEO
ATTEST: Chippewa Valley Bancshares, Inc.
By: /s/ Donna Henthorn By: /s/ Philip S. Swope
------------------------- -------------------------------
Donna Henthorn Philip S. Swope
Assistant Secretary President
DIRECTORS UNDERTAKING
Pursuant to the provisions of Sections 16(m) and 27 hereof, each of the
undersigned, being a Director of CVB, hereby agrees to vote shares of CVB owned
by them or over which they exercise voting control in favor of the Merger, to
support the Merger and to the undertakings set forth in Section 27.
/s/ Carl H. Bradford, Jr. /s/ Allan J. Broadhurst
------------------------- -----------------------
/s/ Richard K. Gillman /s/ Roger G. Hessidence
------------------------- -----------------------
/s/ Don G. Houglan /s/ R. Tim Hubiak
------------------------- -----------------------
/s/ Joseph L. Ramsier /s/ Gerald E. Ritzman
------------------------- -----------------------
/s/ Philip S. Swope
-------------------------
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EXHIBIT A
__________, 1998
Wayne Bancorp, Inc.
112 W. Liberty Street
Wooster, Ohio 44691
Ladies and Gentlemen:
We have acted as special counsel to Chippewa Valley Bancshares, Inc.
("CVB"), an Ohio corporation and bank holding company, solely in connection with
certain transactions contemplated by the Agreement of Merger (the "Agreement of
Merger"), dated _______, 1997, by and between CVB and Wayne Bancorp, Inc.
("Wayne"), an Ohio corporation and bank holding company.
This opinion is furnished to you pursuant to Section 16(e) of the
Merger Agreement.
You have requested our opinion regarding certain matters in connection with the
Agreement. In our capacity as special counsel for CVB and Chippewa Bank, we have
examined the originals or copies of such certificates, documents and corporate
records upon which we have relied regarding our opinion expressed below. We have
assumed the genuineness of all signatures, the authenticity of all items
submitted to us as certified or photostatic copies and the authenticity of the
originals of such copies. We have further assumed the due authorization of such
documents by all parties other than CVB and Chippewa Bank and the taking of all
requisite action respecting such documents, the due execution and delivery of
such documents by each party and have additionally assumed that all agreements
are the valid and binding agreement of all parties to such agreements, other
than CVB and Chippewa Bank.
Wherever a statement herein is qualified by "to the best of our knowledge," or a
similar phrase, it is intended to indicate that, during the course of our
representation of CVB and Chippewa Bank, no information has been provided to
those partners in this firm who have had substantive involvement in rendering
legal services in connection with the representation described in the
introductory paragraph of this opinion letter that would give us knowledge of
the inaccuracy of such statement.
This Opinion Letter is governed by, and shall be interpreted in accordance with,
the Legal Opinion Accord (the "Accord") of the ABA Section of Business Law
(1991). As a consequence, it is subject to a number of qualifications,
exceptions, definitions, limitations on coverage and other limitations, all as
more particularly described in the Accord, and this Opinion Letter should be
read in conjunction therewith. The law addressed by this opinion is limited to
the law of the State of Ohio and the federal law of the United States of
America.
The opinions hereinafter expressed are subject to the following qualifications,
notwithstanding anything herein to the contrary:
(a) Our opinions in paragraphs (1) and (4) below as to the valid
existence CVB and Chippewa Bank are based solely upon certificates from public
officials as to valid existence, copies of which certificates are attached
hereto.
(b) Our opinions below are limited to the matters expressly set forth
in this opinion letter, and no opinion is to be implied or may be inferred
beyond the matters expressly so stated. Without limiting the foregoing, we
express no opinion as to the antifraud provisions of federal and state
securities laws.
(c) We disclaim any obligation to update this opinion letter for events
occurring after the date of this opinion letter.
(d) Our opinions below are limited to the effect of the laws of Ohio
and the federal laws of the United States of America. We express no opinion with
respect to the effect of the laws of any other jurisdiction on the transactions
contemplated by the Agreement.
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<PAGE> 124
(e) In rendering this opinion, we have relied as to all matters of fact
on certificates or responsible officers of CVB and Chippewa Bank and of public
officials, copies of which are attached hereto.
Based upon and subject to the foregoing and in reliance thereon, and
subject to the assumptions, exceptions and qualifications set forth herein, it
is our opinion that:
1. CVB is a corporation validly existing and in good standing under the laws
of the State of Ohio and has the requisite corporate power and authority to
own its properties and to carry on the business in which it is now engaged.
CVB owns all of the capital stock of Chippewa Bank free and clear of all
liens and security interests.
2. All necessary corporate proceedings of CVB have been duly taken to
authorize the execution, delivery and performance of the Agreement by CVB
and the consummation of the transactions contemplated by the Agreement,
subject in all events to any conditions stated in said Agreement. The
Agreement constitutes the legal, valid and binding obligation of CVB,
enforceable in accordance with its terms, except:
a. as such enforceability may be limited by bankruptcy, insolvency,
reorganization, fraudulent conveyance or similar laws affecting
creditors' rights; and
b. that the remedy of specific performance and injunctive and other forms
of equitable relief are subject to certain equitable defenses and to
the discretion of the court before which any proceedings may be
brought.
3. The execution, delivery and performance of the Agreement by CVB will not
violate or result in a breach of any term of CVB's Articles of
Incorporation or Code of Regulations, or violate, result in a breach of, or
constitute a default under any term of any material agreement known to us
to which CVB is a party.
4. Chippewa Bank is a banking corporation validly existing under the laws of
the State of Ohio, is a member of the Federal Reserve System and has the
requisite corporate power and authority to own its properties and carry on
the business in which it is now engaged.
5. The authorized capital stock of CVB consists of _________, shares of common
stock without par value 448,000 of which are outstanding To our knowledge,
there are no outstanding options, warrants, or other rights to acquire, or
securities convertible into any capital stock of CVB. The outstanding
shares of common stock of CVB validly authorized and issued, and
non-assessable, and not, to the best of our knowledge, issued in violation
of the pre-emptive rights of any person.
6. To our knowledge, except as disclosed herein, there is no litigation,
action, suit, investigation or proceeding pending or, to the best of our
knowledge after due inquiry of CVB and its executive officers, overtly
threatened against or affecting CVB or involving any of its respective
properties or assets, at law or in equity, before any federal, state,
municipal, local or other governmental authority.
7. All consents or approvals of any regulatory authority having jurisdiction
over CVB or its subsidiaries that are required to be obtained in connection
with the Merger and the transactions contemplated by the Agreement have
been obtained.
This opinion is solely for the benefit of the addressee hereof and may not be
relied upon by any other person or party or in any other context without our
prior written consent. This opinion is delivered as of the date hereof, and we
expressly disclaim any undertaking to update it.
Very truly yours,
Dinsmore & Shohl
- --------------------
A-23
<PAGE> 125
EXHIBIT B
____________, 1998
Chippewa Valley Bancshares, Inc.
20 South Main Street
Rittman, Ohio 44270
Re: Wayne Bancorp, Inc.
Gentlemen:
We have acted as special counsel to Wayne Bancorp, Inc. ("Wayne") an Ohio
corporation, in connection with the contemplated Merger Agreement dated ______,
1998 (the "Agreement") between Chippewa Valley Bancshares, Inc. ("CVB") and
Wayne. This Opinion Letter is rendered to you pursuant to Section 17(c) of the
Agreement. Capitalized terms not otherwise defined herein shall have the
meanings ascribed to them in the Agreement.
You have requested our opinion regarding certain matters in connection with the
Agreement. In our capacity as special counsel for Wayne and Wayne Bank, we have
examined the originals or copies of such certificates, documents and corporate
records upon which we have relied regarding our opinion expressed below. We have
assumed the genuineness of all signatures, the authenticity of all items
submitted to us as certified or photostatic copies and the authenticity of the
originals of such copies. We have further assumed the due authorization of such
documents by all parties other than Wayne and Wayne Bank and the taking of all
requisite action respecting such documents, the due execution and delivery of
such documents by each party and have additionally assumed that all agreements
are the valid and binding agreement of all parties to such agreements, other
than Wayne and Wayne Bank.
Wherever a statement herein is qualified by "to the best of our knowledge," or a
similar phrase, it is intended to indicate that, during the course of our
representation of Wayne and Wayne Bank, no information has been provided to
those partners in this firm who have had substantive involvement in rendering
legal services in connection with the representation described in the
introductory paragraph of this opinion letter that would give us knowledge of
the inaccuracy of such statement.
This Opinion Letter is governed by, and shall be interpreted in accordance with,
the Legal Opinion Accord (the "Accord") of the ABA Section of Business Law
(1991). As a consequence, it is subject to a number of qualifications,
exceptions, definitions, limitations on coverage and other limitations, all as
more particularly described in the Accord, and this Opinion Letter should be
read in conjunction therewith. The law addressed by this opinion is limited to
the law of the State of Ohio and the federal law of the United States of
America.
The opinions hereinafter expressed are subject to the following qualifications,
notwithstanding anything herein to the contrary:
(a) Our opinions in paragraphs (1) and (4) below as to the valid
existence of Wayne and Wayne Bank are based solely upon certificates from public
officials as to valid existence, copies of which certificates are attached
hereto.
(b) Our opinions below are limited to the matters expressly set forth
in this opinion letter, and no opinion is to be implied or may be inferred
beyond the matters expressly so stated. Without limiting the foregoing, we
express no opinion as to the antifraud provisions of federal and state
securities laws.
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<PAGE> 126
(c) We disclaim any obligation to update this opinion letter for events
occurring after the date of this opinion letter.
(d) Our opinions below are limited to the effect of the laws of Ohio,
the federal laws of the United States of America, and the state securities "blue
sky" laws of jurisdictions where shareholders of CVB reside. We express no
opinion with respect to the effect of the laws of any other jurisdiction on the
transactions contemplated by the Agreement.
(e) In rendering this opinion, we have relied as to all matters of fact
on certificates or responsible officers of Wayne and Wayne Bank and of public
officials, copies of which are attached hereto.
Based upon and subject to the foregoing and in reliance thereon, and
subject to the assumptions, exceptions and qualifications set forth herein, it
is our opinion that:
1. Wayne is a corporation validly existing and in good standing under the laws
of the State of Ohio and has the requisite corporate power and authority to
own its properties and to carry on the business in which it is now engaged.
Wayne owns all of the capital stock of Wayne Bank free and clear of all
liens and security interests.
2. All necessary corporate proceedings of Wayne have been duly taken to
authorize the execution, delivery and performance of the Agreement by Wayne
and the consummation of the transactions contemplated by the Agreement,
subject in all events to any conditions stated in said Agreement. The
Agreement constitutes the legal, valid and binding obligation of Wayne,
enforceable in accordance with its terms, except:
a. as such enforceability may be limited by bankruptcy, insolvency,
reorganization, fraudulent conveyance or similar laws affecting
creditors' rights; and
b. that the remedy of specific performance and injunctive and other forms
of equitable relief are subject to certain equitable defenses and to
the discretion of the court before which any proceedings may be
brought.
3. The execution, delivery and performance of the Agreement by Wayne will not
violate or result in a breach of any term of Wayne's Articles of
Incorporation or Code of Regulations, or violate, result in a breach of, or
constitute a default under any term of any material agreement known to us
to which Wayne is a party.
4. Wayne Bank is a national banking association validly existing under the
laws of the United States of America and has the requisite corporate power
and authority to own its properties and carry on the business in which it
is now engaged.
5. The authorized capital stock of Wayne consists of 5,400,000, shares of
common stock without par value ___________ of which are outstanding To our
knowledge, there are no outstanding options, warrants, or other rights to
acquire, or securities convertible into any capital stock of Wayne. The
outstanding shares of common stock of Wayne are, and the shares to be
issued in accordance with the Agreement will be, validly authorized and
issued, and non-assessable, and not, to the best of our knowledge, issued
in violation of the pre-emptive rights of any person.
6. To our knowledge, except as disclosed herein, there is no litigation,
action, suit, investigation or proceeding pending or, to the best of our
knowledge after due inquiry of Wayne and its executive officers, overtly
threatened against or affecting Wayne or involving any of its respective
properties or assets, at law or in equity, before any federal, state,
municipal, local or other governmental authority.
7. All consents or approvals of any regulatory authority having jurisdiction
over Wayne or its subsidiaries that are required to be obtained in
connection with the Merger and the transactions contemplated by the
Agreement have been obtained.
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<PAGE> 127
8. The Registration Statement on Form S-4 filed by Wayne pursuant to the
Agreement has become effective and no stop order revoking such
effectiveness has been issued or has been threatened. Wayne has complied,
in all material respects, with the state securities "blue sky" laws of the
jurisdictions where CVB shareholders reside in connection with the issuance
of the Wayne Common Stock in connection with the Merger.
This opinion is solely for the benefit of the addressee hereof and may not be
relied upon by any other person or party or in any other context without our
prior written consent. This opinion is delivered as of the date hereof, and we
expressly disclaim any undertaking to update it.
Very truly yours,
Werner & Blank Co. L.P.A.
A-26
<PAGE> 128
APPENDIX B
OPINION OF CHIPPEWA'S FINANCIAL ADVISOR
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<PAGE> 129
November 13,1997
Board of Directors
Chippewa Valley Bancshares, Inc.
P. O. Box 68
Rittman, Ohio 44270-0068
Attention: Philip S. Swope, President
Members of the Board:
You have requested our opinion as to the fairness to Chippewa Valley Bancshares,
Inc. ("Chippewa Valley") and its shareholders, from a financial point of view,
of the terms of the Merger Agreement ("Merger") dated October 13, 1997 between
Wayne Bancorp, Inc. ("Wayne") and Chippewa Valley Bancshares, Inc. The Merger
will be completed through a merger of Chippewa Valley with and into Wayne
Bancorp. Chippewa Valley will become, as a result, a wholly-owned subsidiary of
Wayne Bancorp.
Subject to dissenters' rights, all of the outstanding shares of Chippewa Valley
will be converted into the right to receive shares of Wayne Bancorp as set forth
in the Exchange Ratio provision of the Merger. Based on the Exchange Ratio,
shareholders of Chippewa Valley will receive between 981,837 and 1,023,737
shares of Wayne Bancorp, or between 19.97 percent and 20.64 percent of Wayne
Bancorp.
We analyzed various public and non-public sources of information in developing
our opinion, included but not limited to, (i) financial data of Chippewa Valley
from December 31, l992 through September 30, 1997 from published annual reports,
internal bank reports, and interviews with bank management; (ii) financial data
regarding Wayne Bancorp from publicly available regulatory reports; (iii)
comparative financial data of peers for each institution from public sources
(iv) published reports from various sources regarding transactions similar in
nature to that proposed in the Merger; and (v) the Merger Agreement itself.
Our analysis forecasted the potential future flow of income likely to be
generated by Chippewa Valley over a ten year horizon. This step required both a
study of historical trends of Chippewa Valley from national peer group data and
interviews with management to develop a consensus on assumptions used to
forecast potential fixture results. The assumptions were considered to be
reasonable and attainable should Chippewa Valley have continued to operate
without the merger. We then calculated the present va1ue of that ten-year flow
of income to arrive at both a multiple of book value and a price-to-earnings
ratio to suggest a probable trading range for the shares of Chippewa Valley.
We also analyzed the financial performance of Wayne Bancorp compared with banks
with similar characteristics using nationally available peer group data.
We then tested various conversion scenarios, based on different share prices of
Wayne Bancorp and the resulting number of shares to the shareholders of Chippewa
Valley specified in the Merger, and compared the results obtained with similar
merger transactions in the third quarter of 1997. The comparison disclosed that
the transaction would be fair and equitable to the shareholders of Chippewa
Valley at a11 price ranges of Wayne Bancorp provided for in the Merger.
In conducting our analysis, we assumed the information provided to us or
publicly available was both accurate and complete. We assumed further that the
transaction was a tax-free reorganization without adverse tax implications to
the shareholders of either Chippewa Valley or Wayne Bancorp shareholders, and
that the transaction will be completed as planned without other conditions which
would work to the detriment of the shareholders of Chippewa Valley.
B-2
<PAGE> 130
Based on our analysis as described and qualified above, we believe that the
terms of the Merger, from a financial viewpoint, are fair and equitable to the
shareholders of Chippewa Valley Bancshares, Inc.
Chippewa will pay Young & Associates, Inc. a fee for the issuance of the
fairness opinion plus reasonable out-of-pocket expenses, and to indemnify Young
& Associates against certain liabilities, including liabilities under the
securities laws.
Young & Associates, Inc.
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<PAGE> 131
APPENDIX C
FAIRNESS OPINION - AUSTIN ASSOCIATES, INC.
C-1
<PAGE> 132
_______ ___, 1997
Board of Directors
Wayne Bancorp, Inc.
112 West Liberty Street
Wooster, Ohio 44691
Members of the Board:
You have requested our opinion as to the fairness, from a financial point of
view, to Wayne Bancorp, Inc. ("Wayne Bancorp") and its shareholders of the terms
of the Merger Agreement dated as of October 13, 1997 ("Agreement") between Wayne
Bancorp and Chippewa Valley Bancshares, Inc., Rittman, Ohio ("Chippewa Valley").
The terms of the Agreement provide for the acquisition of Chippewa Valley by
Wayne Bancorp (the "Merger"). The Merger will be completed through a merger of
Chippewa Valley with and into Wayne Bancorp. As a result of the Merger, Chippewa
Valley Bank will become a wholly-owned subsidiary bank of Wayne Bancorp.
The terms of the Agreement provide for all of the outstanding shares of Chippewa
Valley common stock, subject to statutory dissenters' rights, to be converted
into the right to receive shares of Wayne Bancorp common stock based on an
Exchange Ratio. The Agreement further provides for all of the outstanding common
shares of Wayne Bancorp to remain outstanding. Based on 448,000 shares of
Chippewa Valley stock issued and outstanding, a total of between 981,837 and
1,023,737 shares of Wayne Bancorp common stock shall be issued in the Merger. As
of the date of this letter, Wayne Bancorp had 3,935,512 common shares
outstanding. As a result, Chippewa Valley shareholders, in the aggregate, will
own between 19.97 percent and 20.64 percent of Wayne Bancorp on a pro forma
basis.
In carrying out our engagement, we have reviewed and analyzed material bearing
upon the financial and operating condition of Wayne Bancorp and Chippewa Valley,
including but not limited to the following: (i) the Merger Agreement; (ii) the
financial statements of Wayne Bancorp and Chippewa Valley for the period 1992
through September 30, 1997; (iii) certain other publicly available information
regarding Wayne Bancorp and Chippewa Valley; (iv) publicly available information
regarding the performance of certain other companies whose business activities
were believed by Austin Associates to be generally comparable to those of Wayne
Bancorp and Chippewa Valley; (v) the financial terms, to the extent publicly
available, of certain comparable transactions; and (vi) such other analysis and
information as we deemed relevant.
In our review and analysis, we relied upon and assumed the accuracy and
completeness of the financial and other information provided to us or publicly
available, and have not attempted to verify the same. We have made no
independent verification as to the status of individual loans made by Wayne
Bancorp or Chippewa Valley, and have instead relied upon representations and
information concerning loans of Wayne Bancorp and Chippewa Valley in the
aggregate. In rendering our opinion, we have assumed that the transaction will
be a tax-free reorganization with no material adverse tax consequences to Wayne
Bancorp or Chippewa Valley. In addition, we have assumed in the course of
obtaining the necessary regulatory approvals for the transaction, no condition
will be imposed that will have a material adverse effect on the contemplated
benefits of the transaction to Wayne Bancorp and its shareholders.
Based upon our analysis and subject to the qualifications described herein, we
believe that as of the date of this letter, the terms of the Agreement are fair,
from a financial point of view, to Wayne Bancorp and its shareholders.
For our services in rendering this opinion, Wayne Bancorp will pay us a fee and
indemnify us against certain liabilities.
Austin Associates, Inc.
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<PAGE> 133
APPENDIX D
Ohio Revised Code Section 1701.85
Qualifications of and Procedures for Dissenting Shareholders
Section 1701.85 - Qualifications of and Procedures for Dissenting
Shareholders.
(A) (1) A shareholder of a domestic corporation is entitled to
relief as a dissenting shareholder in respect of the proposals
in Sections 1701.74, 1701.76, and 1701.84 of the Revised Code,
only in compliance with this section.
(2) If the proposal must be submitted to the shareholders of the
corporation involved, the dissenting shareholder shall be a
record holder of the shares of the corporation as to which he
seeks relief as of the date fixed for the determination of
shareholders entitled to notice of a meeting of the
shareholders at which the proposal is to be submitted, and
such shares shall not have been voted in favor of the
proposal. Not later than 10 days after the date on which the
vote on such proposal was taken at the meeting of the
shareholders, the shareholder shall deliver to the corporation
a written demand for payment to him of the fair cash value of
the shares as to which he seeks relief, stating his address,
the number and class of such shares, and the amount claimed by
him as the fair cash value of the shares.
(3) The dissenting shareholder entitled to relief under division
(C) of Section 1701.84 of the Revised Code in the case of a
merger pursuant to Section 1701.80 of the Revised Code and a
dissenting shareholder entitled to relief under division (E)
of Section 1701.801 of the Revised Code in the case of a
merger pursuant to Section 1701.801 of the Revised Code shall
be a record holder of the shares of the corporation as to
which he seeks relief as of the date on which the agreement of
merger was adopted by the directors of that corporation.
Within 20 days after he has been sent the notice provided in
Section 1701.80 or 1701.801 of the Revised Code, the
shareholder shall deliver to the corporation a written demand
for payment with the same information as that provided for in
division (A)(2) of this section.
(4) In the case of a merger or consolidation, a demand served on
the constituent corporation involved constitutes service on
the surviving or the new corporation, whether served before,
on, or after the effective date of the merger or
consolidation.
(5) If the corporation sends to the dissenting shareholder, at the
address specified in his demand, a request for the
certificates representing the shares as to which he seeks
relief, he, within 15 days from the date of the sending of
such request, shall deliver to the corporation the
certificates requested, in order that the corporation may
forthwith endorse on them a legend to the effect that demand
for the fair cash value of such shares has been made. The
corporation promptly shall return such endorsed certificates
to the shareholder. Failure on the part of the shareholder to
deliver such certificates terminates his rights as a
dissenting shareholder, at the option of the corporation,
exercised by written notice sent to him within 20 days after
the lapse of the 15 day period, unless a court for good cause
shown otherwise directs. If shares represented by a
certificate on which such a legend has been endorsed are
transferred, each new certificate issued for them shall bear a
similar legend, together with the name of the original
dissenting holder of such shares. Upon receiving a demand for
payment from a dissenting shareholder who is the record holder
of uncertificated securities, the corporation shall make an
appropriate notation of the demand for payment in its
shareholder records. If uncertificated shares for which
payment has been demanded are to be transferred, any new
certificate issued for the shares shall bear the legend
required for certificate securities as provided in this
paragraph. A transferee of the shares so endorsed, or of
uncertificated securities where such notation has been made,
acquires only such rights in the corporation as the original
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<PAGE> 134
dissenting holder of such shares had immediately after the
service of a demand for payment of the fair cash value of the
shares. Such request by the corporation is not an admission by
the corporation that the shareholder is entitled to relief
under this section.
(B) Unless the corporation and the dissenting shareholder shall have come
to an agreement on the fair cash value per share of the shares as to
which he seeks relief, the shareholder or the corporation, which in
case of a merger or consolidation may be the surviving or the new
corporation, within three months after the service of the demand by the
shareholder, may file a complaint in the court of common pleas of the
county in which the principal office of the corporation which issued
such shares is located, or was located at the time when the proposal
was adopted by the shareholders of the corporation, or, if the proposal
was not required to be submitted to the shareholders, was approved by
the directors. Other dissenting shareholders, within the period of
three months, may join as plaintiffs, or may be joined as defendants in
any such proceeding, and any two or more such proceedings may be
consolidated. The complaint shall contain a brief statement of the
facts, including the vote and the facts entitling the dissenting
shareholder to the relief demanded. No answer to such complaint is
required. Upon the filing of the complaint, the court, on motion of the
petitioner, shall enter an order fixing a date for a hearing on the
complaint, and requiring that a copy of the complaint and a notice of
the filing and of the date for hearing be given to the respondent or
defendant in the manner in which the summons is required to be served
or substituted service is required to be made in other cases. On the
day fixed for the hearing on the complaint or any adjournment of it,
the court shall determine from the complaint and from such evidence as
is submitted by either party whether the shareholder is entitled to be
paid the fair cash value of any shares and, if so, the number and class
of such shares. If the court finds that the shareholder is so entitled,
the court may appoint one or more persons as appraisers to receive
evidence and to recommend a decision on the amount of the fair cash
value. The appraisers have such power and authority as is specified in
the order of their appointment. The court thereupon shall make a
finding as to the fair cash value of a share, and shall render judgment
against the corporation for the payment of it, with interest at such
rate and from such date as the court considers equitable. The costs of
the proceeding, including reasonable compensation to the appraisers to
be fixed by the court, shall be assessed or apportioned as the court
considers equitable. The proceeding is a special proceeding, and final
orders in it may be vacated, modified, or reversed on appeal pursuant
to the Rules of Appellate Procedure and, to the extent not in conflict
with those rules, Chapter 2505 of the Revised Code. If, during the
pendency of any proceeding instituted under this section, a suit or
proceeding is or has been instituted to enjoin or otherwise to prevent
the carrying out of the action as to which the shareholder has
dissented, the proceeding instituted under this section shall be stayed
until the final determination of the other suit or proceeding. Unless
any provision in Division (D) of this section is applicable, the fair
cash value of the shares as agreed upon by the parties or as fixed
under this section shall be paid within thirty days after the date of
final determination of such value under this division, the effective
date of the amendment to the articles, or the consummation of the other
action involved, whichever occurs last. Upon the occurrence of the last
such event, payment shall be made immediately to a holder of
uncertificated securities entitled to such payment. In the case of
holders of shares represented by certificates, payment shall be made
only upon and simultaneously with the surrender to the corporation of
the certificates representing the shares for which such payment is
made.
(C) If the proposal was required to be submitted to the shareholders of the
corporation, fair cash value as to those shareholders shall be
determined as of the day prior to that on which the vote by the
shareholders was taken and, in the case of a merger pursuant to Section
1701.80 or 1701.801 of the Revised Code, fair cash value as to
shareholders of a constituent subsidiary corporation shall be
determined as of the day before the adoption of the agreement of merger
by the directors of the particular subsidiary corporation. The fair
cash value of a share for the purposes of this section is the amount
that a willing seller, under no compulsion to sell, would be willing to
accept, and that a willing buyer, under no compulsion to purchase,
would be willing to pay, but in no event shall the fair cash value of
it exceed the amount specified in the demand of the particular
shareholder.
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<PAGE> 135
In computing such fair cash value, any appreciation or depreciation in
market value resulting from the proposal submitted to the directors or
to the shareholders shall be excluded.
(D) The right and obligation of a dissenting shareholder to receive such
fair cash value and to sell such shares as to which he seeks relief,
and the right and obligation of the corporation to purchase such shares
and to pay the fair cash value of them terminates if:
(1) Such shareholder has not complied with this section, unless
the corporation by its directors waives such failure;
(2) The corporation abandons, or is finally enjoined or prevented
from carrying out, or the shareholders rescind their adoption,
of the action involved;
(3) The shareholder withdraws his demand, with the consent of the
corporation by its directors;
(4) The corporation and the dissenting shareholder shall not have
come to an agreement as to the fair cash value per share, and
neither the shareholder nor the corporation shall have filed
or joined in a complaint under Division (B) of this section
within the period provided.
(E) From the time of giving the demand, until either the termination of the
rights and obligations arising from it or the purchase of the shares by
the corporation, all other rights accruing from such shares, including
voting and dividend or distribution rights, are suspended. If during
the suspension, any dividend or distribution is paid in money upon
shares of such class, or any dividend, distribution, or interest is
paid in money upon any securities issued in extinguishment of or in
substitution for such shares, an amount equal to the dividend,
distribution, or interest which, except for the suspension, would have
been payable upon such shares or securities, shall be paid to the
holder of record as a credit upon the fair cash value of the shares. If
the right to receive fair cash value is terminated otherwise than by
the purchase of the shares by the corporation, all rights of the holder
shall be restored and all distributions which, except for the
suspension, would have been made shall be made to the holder of record
of the shares at the time of termination.
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<PAGE> 136
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Ohio General Corporation Law ("OGCL") provides that Ohio corporations
may indemnify an individual made a party to any threatened, pending, or
completed action, suit or proceeding whether civil, criminal, administrative or
investigative, because the individual is or was a director, officer, employee or
agent of the corporation, against liability incurred in the proceeding if the
person: (i) acted in good faith and (ii) the individual believes his conduct was
in the corporation's best interest or was not opposed to the corporation's best
interest.
The OGCL further provides that a corporation shall indemnify an
individual who was fully successful on the merits or otherwise in any proceeding
to which the director, officer, employee or agent was a party because the
individual was or is a director, officer, employee or agent of the corporation,
for reasonable expenses incurred by the director in connection with the
proceeding. The OGCL also provides that a corporation may purchase and maintain
insurance on behalf of the individual who is or was a director, officer,
employee or agent of the corporation or who, while a director, officer, employee
or agent of the corporation is or was serving at the request of the corporation
as a director, officer, partner, trustee, employer or agent of another foreign
or domestic corporation, partnership, joint venture, trust, employee benefit
plan or other enterprises, against liability asserted against or incurred by the
individual in that capacity or arising from the individual status as a director,
officer, employee, or agent.
Registrant maintains a directors' and officers' liability insurance
policy, including bank reimbursement, for the purpose of providing
indemnification to its directors and officers in the event of such a threatened,
pending or completed action.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENTS
The exhibits filed pursuant to this Item 21 immediately follow the
Exhibit Index. The following is a description of the applicable exhibits
required for Form S-4 provided by Item 601 of Regulation S-K.
Exhibit
Number Description
(1) Not Applicable.
(2) The Merger Agreement by and between Wayne Bancorp, Inc. and Chippewa
Valley Bancshares, Inc. dated October 13, 1997, is attached as Exhibit
A to the Proxy Statement-Prospectus.
<PAGE> 137
Exhibit Number Description
(3) Articles of Incorporation and Code of Regulations.
A. A copy of the Amended and Restated Articles of Incorporation
(as amended) of the Registrant included herein as an
Exhibit.
B. A copy of the Amended Code of Regulations of the Registrant
as currently in effect is included herein as an Exhibit.
(4) Instruments defining the rights of Wayne shareholders, including
indentures.
A. Instruments defining the rights of Wayne shareholders are
included in the Articles of Incorporation and Code of
Regulations.
(5) Opinion of Werner & Blank Co., L.P.A., regarding Wayne Bancorp,
Inc. Common Stock, and Consent
(6) Not Applicable.
(7) Not Applicable.
(8) Opinion of Werner & Blank Co., L.P.A., regarding certain tax
matters, and Consent.
(9) Not Applicable.
(10) Not Applicable
(11) Not Applicable.
(12) Not Applicable.
(13) Registrant's Annual Report to Wayne shareholders for the year
ended December 31, 1996 and its Quarterly Reports on Form 10Q for
the Quarters ended March 31, June 30 and September 30, 1997 have
previously been filed with the Commission via EDGAR.
(14) Not Applicable.
(15) Not Applicable
(16) Not Applicable.
<PAGE> 138
Exhibit
Number Description
(21) List of the subsidiaries of the Registrant and their jurisdictions
of incorporation or organization as of December 31, 1996 is
presented in Registrant's Annual Report on form 10-K incorporated
herein by reference.
(22) None.
(23) Consents of Experts and Counsel.
A. Consent of S.R. Snodgrass, A.C.
B. Consent of Crowe Chizek and Company LLP
C. Consent of Werner & Blank Co., L.P.A. (the consent is
contained in that firm's opinions filed as Exhibits (5) and
(8)).
D. Consent of Austin Associates, Inc.
E. Consent of Young & Associates
(24) Power of Attorney.
(25) Not Applicable.
(26) Not Applicable.
(27) Financial Data Schedule-Not Applicable
(28) Not Applicable.
(29) Not Applicable.
(99) Additional Exhibits.
A. Form of Notice for Special Shareholders' Meeting of Wayne
Bancorp,Inc.
B. Form of Proxy to be delivered to Shareholders of Wayne
Bancorp, Inc.
C. Form of Notice for Special Shareholders' Meeting of
Chippewa Valley Bancshares, Inc.
D. Form of Proxy to be delivered to Shareholders of Chippewa
Valley Bancshares, Inc.
<PAGE> 139
ITEM 22. UNDERTAKINGS.
A. The undersigned Registrant hereby undertakes as follows:
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales
are being made, a post-effective amendment to this
Registration Statement:
(i) To include any prospectus required by
Section 10(a)(3) of the Securities Act
of 1933;
(ii) To reflect in the Prospectus any facts or
events arising after the Effective Date of
the Registration Statement (or the most
recent post-effective amendment thereof)
which, individually or in the aggregate,
represent a fundamental change in the
information set forth in the Registration
Statement;
(iii) To include any material information with
respect to the plan of distribution not
previously disclosed in the Registration
Statement or any material change to the
information set forth in the Registration
Statement;
(2) That, for the purpose of determining any liability
under the Securities Act of 1933, each such
post-effective amendment shall be deemed to be a new
Registration Statement relating to the securities
offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a
post-effective amendment any of the securities being
registered which remain unsold at the termination of
the offering.
(b) The undersigned Registrant hereby undertakes that, for
purposes of determining any liability under the Securities Act
of 1933, each filing of the Registrant's annual report
pursuant to Section 13(a) or Section 15(d) of the Securities
Exchange Act of 1934 that is incorporated by reference in this
Registration Statement shall be deemed to be a new
Registration Statement relating to the securities offered
therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to officers,
directors, and controlling persons of the Registrant pursuant
to the foregoing provisions, or otherwise, the Registrant has
been
<PAGE> 140
advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of
expenses incurred or paid by a director, officer, or
controlling person of the Registrant in the successful defense
of any action, suit, or proceeding) is asserted by such
director, officer, or controlling person in connection with
the securities being registered, the Registrant will, unless
in the opinion of its counsel that matter has been settled by
controlling precedent, submit to a court of appropriate
jurisdiction the question of whether such indemnification by
it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
B. The undersigned Registrant hereby undertakes to respond to requests for
information that are incorporated by reference into the
Prospectus/Proxy Statement pursuant to Items 4, 10(b), 11, or 13 of
this form, within one business day of receipt of such request, and to
send the incorporated documents by first class mail or other equally
prompt means. This includes information contained in the documents
filed subsequent to the Effective Date of this Registration Statement
through the date of responding to the request.
C. The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and
the company being acquired involved therein, that was not the subject
of and included in this Registration Statement when it became
effective.
<PAGE> 141
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-4 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Wooster, State of Ohio, this 15th day of December,
1997.
Wayne Bancorp, Inc.
By: /s/ David L. Christopher
----------------------------------------
David L. Christopher
Chairman, President and Chief Executive
Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated. Further, each signature shall designate
authorization of and pursuant to the power of attorney herein described.
/s/ David L. Christopher December 15, 1997
- ------------------------------------------
David L. Christopher, Chairman, President,
Chief Executive Officer and Director
/s/ David P. Boyle December 15, 1997
- ------------------------------------------
David P. Boyle, Controller, Chief
Financial and Chief Accounting Officer
James O. Basford, Director*
Joseph R. Benden, Director*
Gwenn E. Bull, Director*
Dennis B. Donahue, Director*
B. Diane Gordon, Director*
John C. Johnston, III, Director*
Darcy B. Pajak, Director*
Stephen L. Shapiro, Director*
Jeffrey E. Smith, Director*
David E. Taylor, Director*
Bala Venkataraman, Director*
*By:/s/ David L. Christopher December 15, 1997
--------------------------------------
David L. Christopher, Attorney-in-Fact
<PAGE> 142
Exhibit Index
Exhibit 3.a Articles of Incorporation of Wayne Bancorp, Inc.
Exhibit 3.b Code of Regulations of Wayne Bancorp, Inc.
Exhibit 5 Legal Opinion - Werner & Blank Co., LPA
Exhibit 8 Tax Opinion - Werner & Blank Co., LPA
Exhibit 23 Consents
A-Consent of S.R. Snodgrass, A.C.
B-Consent of Crowe Chizek and Company LLP
C-Consent of Austin Associates, Inc.
D-Consent of Young & Associates
Exhibit 24 Power of Attorney
Exhibit 99 Form of Notices and Proxy Cards
A-Form of Notice for Special Meeting of Wayne Bancorp, Inc.
B-Form of Proxy Card for Special Meeting of Wayne Bancorp, Inc.
C-Form of Notice for Special Meeting of Chippewa Valley
Bancshares, Inc.
D-Form of Proxy Card for Special Meeting of Chippewa Valley
Bancshares, Inc.
<PAGE> 1
EXHIBIT 3.A - ARTICLES OF INCORPORATION
AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
WAYNE BANCORP, INC.
(AS AMENDED)
FIRST: The name of the Corporation is: WAYNE BANCORP, INC.
SECOND: The place in the State of Ohio where its principal office is to be
located is Wooster in Wayne County.
THIRD: The purposes for which it is formed are:
To engage in any lawful act or activity for which corporations may be
formed under Sections 1701.01 to 1701.98 inclusive of the Revised Code
of Ohio.
FOURTH: The authorized number of shares of the Corporation is Five Million Four
Hundred Thousand (5,400,000) all of which shall be common stock without par
value.
FIFTH: Each stockholder shall be entitled to one vote for each common share
standing in his name on the books of the Corporation for all purposes and
stockholders shall not have the right to cumulate vote in the election of
directors of the Corporation. Upon the Offering for sale for cash of shares of
stock of the Corporation, stockholders shall not have any preemptive right to
subscribe to such stock.
SIXTH: The following provisions are hereby agreed to for the purpose of
defining, limiting and regulating the exercise of the authority of the
Corporation, or of the directors, or of all of the stockholders.
The Board of Directors is expressly authorized to set apart out of any of the
funds of the Corporation available for dividends a reserve or reserves for any
proper purpose or to abolish any such reserve in the manner in which it was
created, and to purchase on behalf of the Corporation any shares issued by it to
the extent of the surplus of the aggregate of its assets over the aggregate of
its liabilities plus stated capital.
The Corporation may in its regulations confer powers upon its Board of Directors
in addition to the powers and authorities conferred upon it expressly by
Sections 1701.01 et seq. of the Revised Code of Ohio.
Any meeting of the stockholders or the Board of Directors may be held at any
place within or without the State of Ohio in the manner provided for in the
regulations of the Corporation.
<PAGE> 2
Any amendments to the articles of incorporation may be made from time to time,
and any proposal or proposition requiring the action of stockholders may be
authorized from time to time by the affirmative vote of the holders of shares
entitling them to exercise a majority of the voting power of the Corporation.
SEVENTH:
A. DEFINITIONS AS USED IN THIS ARTICLE SEVENTH
1. "Affiliate" or "Associate" shall have the respective meanings
given such terms in Rule 12b-2 of the General Rules and
Regulations under the Securities Exchange Act of 1934, as in
effect on January 1, 1990.
2. A person shall be a "beneficial owner" of any Voting Stock:
i) which such person or any of its Affiliates or Associates
beneficially owns, directly or indirectly; or
ii) which such person or any of its Affiliates or Associates has
by itself or with others (a) the right to acquire (whether
such right is exercisable immediately or only after the
passage of time), pursuant to any agreement, arrangement or
understanding or upon the exercise of conversion rights,
exchange rights, warrants or options, or otherwise, or (b) the
right to vote pursuant to any agreement, arrangement or
understanding; or
iii)which is beneficially owned, directly or indirectly, by any
other person with which such person or any of its Affiliates
or Associates has any agreement, arrangement or understanding
for the purpose of acquiring, holding, voting or disposing of
any shares of Voting Stock.
3. "Business Combination" shall include:
i) any merger or consolidation of the Corporation or any of its
subsidiaries with or into an Interested Stockholder,
regardless of which person is the surviving entity;
ii) any sale, lease, exchange, mortgage, pledge, or other
disposition (in one transaction or a series of transactions)
from the Corporation or any of its subsidiaries to an
Interested Stockholder, or from an Interested Stockholder to
the Corporation or any of its subsidiaries, of assets having
an aggregate Fair Market Value of ten percent (10%) or more of
the Corporation's total stockholders equity;
iii)the issuance, sale or other transfer by the Corporation or any
subsidiary thereof of any securities of the Corporation or any
subsidiary thereof to an Interested Stockholder (other than an
issuance or transfer of securities which is effected on a pro
rata basis to all stockholders of the Corporation);
iv) the acquisition by the Corporation of any of its subsidiaries
of any securities of an Interested Stockholder;
<PAGE> 3
v) the adoption of any plan or proposal for the liquidation or
dissolution of the Corporation proposed by or on behalf of an
Interested Stockholder;
vi) any reclassification or recapitalization of securities of the
Corporation if the effect, directly or indirectly, of such
transaction is to increase the relative voting power of an
Interested Stockholder; or
vii)any agreement, contract or other arrangement providing for or
resulting in any of the transactions described in this
definition of Business Combination.
4. "Continuing Director" shall mean any member of the Board of
Directors of the Corporation who is unaffiliated with the
Interested Stockholder and was a member of the Board of Directors
prior to the time that the Interested Stockholder became an
Interested Stockholder; any successor of a Continuing Director who
is unaffiliated with the Interested Stockholder and is approved to
succeed a Continuing Director by the Continuing Directors; any
member of the Board of Directors who is appointed to fill a
vacancy on the Board of Directors who is unaffiliated with the
Interested Stockholder and is approved by the Continuing
Directors.
5. "Fair Market Value" shall mean:
i) in the case of securities listed on a national securities
exchange or quoted in the National Association of Securities
Dealers Automated Quotations System (or any successor
thereof), the highest sales price or bid quotation, as the
case may be, reported for securities of the same class or
series traded on the national securities exchange or in the
over-the-counter market during the 30-day period immediately
prior to the date in question, or if no such report or
quotation is available, the Fair Market Value as determined by
the Continuing Directors; and
ii) in the case of other securities and of other property or
consideration (other than cash), the Fair Market Value as
determined by the Continuing Directors; provided, however, in
the event the power and authority of the Continuing Directors
ceases and terminates pursuant to Subdivision F of this
Article SEVENTH as a result of there being less than seven (7)
Continuing Directors at any time, then (a) for purposes of
clause (ii) of the definition of "Business Combination," any
sale, lease, exchange, mortgage, pledge, or other disposition
of assets from the Corporation or any of its subsidiaries to
an Interested Stockholder or from an Interested Stockholder to
the Corporation or any of its subsidiaries, regardless of the
Fair Market Value thereof, shall constitute a Business
Combination, and (b) for purposes of paragraph 1 of
Subdivision D of this Article SEVENTH, in determining the
amount of consideration received or to be received per share
by the Independent Stockholders in a Business Combination,
there shall be excluded all consideration other than cash and
the Fair Market Value of securities listed on a national
securities exchange or quoted in the National Association of
Securities Dealers Automated Quotations System (or any
successor thereof for which there is a reported sales price or
bid quotation, as the case may be, during the 30-day period
immediately prior to the date in question .
<PAGE> 4
6. "Independent Stockholder" shall mean stockholders of the
Corporation other than the Interested Stockholder engaged in or
proposing the Business Combination.
7. "Interested Stockholder" shall mean: (a) any person (other than
the Corporation or any of its subsidiaries) and (b) the Affiliates
and Associates of such person, who, or which together, are:
i) the beneficial owner, directly or indirectly, of 5 percent or
more of the outstanding Voting Stock or were within the
two-year period immediately prior to the date in question the
beneficial owner, directly or indirectly, or 5 percent or more
of the then outstanding Voting Stock; or
ii) an assignee of or other person who has succeeded to any shares
of the Voting Stock which were at any time within the two-year
period immediately prior to the date in question beneficially
owned by an Interested Stockholder, if such assignment or
succession shall have occurred in the course of a transaction
or series of transactions not involving a public offering
within the meaning of the Securities Act of 1933.
Notwithstanding the foregoing, no Trust Department, or designated fiduciary or
other trustee of such Trust Department of the Corporation or a subsidiary of the
Corporation, or other similar fiduciary capacity of the Corporation with direct
voting control of the outstanding Voting Stock shall be included or considered
as an Interested Stockholder. Further, no profit sharing, employee stock
ownership, employee stock purchase and savings, employee pension, or other
employee benefit plan of the Corporation or any of its subsidiaries, and no
trustee of any such plan in its capacity as such trustee, shall be included or
considered as an Interested Stockholder.
8. A "Person" shall mean an individual, partnership, trust,
corporation, or other entity and includes any two or more of the
foregoing acting in concert.
9. "Voting Stock" shall mean all outstanding common shares of capital
stock of the Corporation.
B. SUPERMAJORITY VOTE TO EFFECT BUSINESS COMBINATION. No Business
Combination shall be effected or consummated unless:
1. Authorized and approved by the Continuing Directors and, if
otherwise required by law to authorize or approve the transaction,
the approval or authorization of stockholders of the Corporation,
by the affirmative vote of holders of shares mandated by the Ohio
Revised Code; or
2. Authorized and approved by the affirmative vote of holders of not
less than 80 percent of the outstanding Voting Stock voting
together as a single class.
The authorization and approval required by this Subdivision B is
in addition to any authorization and approval required by
Subdivision C of this Article SEVENTH.
<PAGE> 5
C. FAIR PRICE REQUIRED TO EFFECT BUSINESS COMBINATION. No Business
Combination shall be effected or consummated unless:
1. All the conditions and requirements set forth in Subdivision D of
this Article SEVENTH have been satisfied; or
2. Authorized and approved by the Continuing Directors; or
3. Authorized and approved by the affirmative vote of holders of not
less than 66% percent of the outstanding Voting Stock held by all
Independent Stockholders voting together as a single class.
Any authorization and approval required by this Subdivision C is
in addition to any authorization and approval required by
Subdivision B of this Article SEVENTH.
D. CONDITIONS AND REQUIREMENTS TO FAIR PRICE. All the following conditions
and requirements must be satisfied in order for clause (1) of
Subdivision C of this Article SEVENTH to be applicable.
1. The cash and Fair Market Value of the property, securities or
other consideration to be received by the Independent Stockholders
in the Business Combination per share for each share of capital
stock of the Corporation must not be less than the sum of:
i) the highest per share price (including brokerage commissions,
transfer taxes, soliciting dealer's fees and similar payments)
paid by the Interested Stockholder in acquiring any shares;
and
ii) the amount, if any, by which interest on the per share price,
calculated at the Treasury Bill rate from time-to-time in
effect, from the date the Interested Stockholder first became
an Interested Stockholder until the Business Combination has
been consummated, exceeds the per share amount of cash
dividends received by the Independent Stockholders during such
period. The "Treasury Bill Rate" means for each calendar
quarter, or part thereof, the interest rate of the last
auction in the preceding calendar quarter of 91-day United
States Treasury Bills expressed as a bond equivalent yield.
For purposes of this paragraph (1), per share amounts shall be
appropriately adjusted for any recapitalization, reclassification,
stock dividend, stock split, reverse split, or other similar
transaction. Any Business Combination which does not result in the
Independent Stockholders receiving consideration for or in respect
of their shares of capital stock of the Corporation shall not be
treated as complying with the requirements of this paragraph (1).
2. The form of the consideration to be received by the Independent
Stockholders owning the Corporation's shares must be the same as
was previously paid by the Interested Stockholder(s); provided,
however, if the Interested Stockholders previously paid for such
shares with different forms of consideration, the form of the
consideration to be received by the Independent Stockholders must
be in the form as was previously paid
<PAGE> 6
by the Interested Stockholder in acquiring the largest number of
shares. The provisions of this paragraph (2) are not intended to
diminish the aggregate amount of cash and Fair Market Value of
any other consideration that any holder of the Corporation's
shares is otherwise entitled to receive upon the liquidation or
dissolution of the Corporation, under the terms of any contract
with the Corporation or an Interested Stockholder, or otherwise.
3. From the date the Interested Stockholder first became an
Interested Stockholder until the business combination has been
consummated, the following requirements must be complied with
unless the Continuing Directors otherwise approve:
i) the Interested Stockholder has not received, directly or
indirectly, the benefit (except proportionately as a
stockholder) of any loan, advance, guaranty, pledge, or other
financial assistance, tax credit or deduction, or other
benefit from the Corporation or any of its subsidiaries;
ii) there shall have been no failure to declare and pay in full,
when and as due or scheduled, any dividends required to be
paid on any class or series of the Corporation's shares;
iii)there shall have been (a) no reduction in the annual rate of
dividends paid on Common Shares of the Corporation (except as
necessary to reflect any split of such shares) and (b) an
increase in the annual rate of dividends as necessary to
reflect reclassification (including a reverse split),
recapitalization or any similar transaction which has the
effect of reducing the number of outstanding Common Shares;
and
iv) there shall have been no amendment or other modification to
any profit sharing, employee stock ownership, employee stock
purchase and savings, employee pension or other employee
benefit plan of the Corporation or any of its subsidiaries the
effect of which is to change in any manner the provisions
governing the voting of any shares of capital stock of the
Corporation in or covered by such plan.
4. A proxy or information statement describing the Business
Combination and complying with the requirements of the
Securities Exchange Act of 1934, as amended, and the rules
and regulations under it (or any subsequent provisions
replacing the Act and the rules and regulations under it) has
been mailed at least 30 days prior to the completion of the
Business Combination to the holders of all outstanding Voting
Stock. If deemed advisable by the Continuing Directors, the
proxy or information statement shall contain a recommendation
by the Continuing Directors as to the advisability (or
inadvisability) of the Business Combination and/or an opinion
by an investment banking firm, selected by the Continuing
Directors and retained at the expense of the Corporation, as
to the fairness (or unfairness) of the Business Combination
to the Independent Stockholders.
E. OTHER APPLICABLE VOTING REQUIREMENTS. The affirmative votes required to
be received from stockholders of the Corporation under Subdivisions B,
C and H of this
<PAGE> 7
Article SEVENTH shall apply even though no vote or lesser percentage
vote, may be required by law, or by other provisions of these Articles
of Incorporation, or otherwise. Any authorization, approval or other
action of the Continuing Directors under this Article SEVENTH is in
addition to any required authorization, approval or other action of
the Board of Directors.
F. CONTINUING DIRECTORS. All actions required or permitted to be
taken by the Continuing Directors shall be taken with or without a
meeting by the vote or written consent of two-thirds of the Continuing
Directors, regardless of whether the Continuing Directors constitute a
quorum of the members of the Board of Directors then in office. In
the event that the number of Continuing Directors is at any time less
than seven (7), all power and authority of the Continuing Directors
under the Article SEVENTH shall thereupon cease and terminate,
including, without limitation, the authority of the Continuing
Directors to authorize and approve a Business Combination under
Subdivisions B and C of this Article SEVENTH and to approve a
successor Continuing Director. Two-thirds of the Continuing Directors
shall have the power and duty, consistent with their fiduciary
obligations, to determine for the purpose of this Article SEVENTH, on
the basis of information known to them:
1. Whether any person is an Interested Stockholder;
2. Whether any person is an Affiliate or Associate of another;
3. Whether any person has an agreement, arrangement, or understanding
with another or is acting in concert with another; and
4. The Fair Market Value of property, securities or other consideration
(other than cash).
The good faith determination of the Continuing Directors on such
matters shall be binding and conclusive for purposes of this Article
SEVENTH.
G. EFFECT ON FIDUCIARY OBLIGATIONS OF INTERESTED STOCKHOLDERS. Nothing
contained in this Article SEVENTH shall be construed to relieve any
Interested Stockholder from any fiduciary obligations imposed by law.
H. REPEAL. Notwithstanding any other provisions of these Articles of
Incorporation (and notwithstanding the fact that a lesser percentage
vote may be required by law or other provision of these Articles of
Incorporation), the provisions of this Article SEVENTH may not be
repealed, amended, supplemented or otherwise modified, unless:
1. The Continuing Directors (or, if there is no Interested
Stockholder, a majority vote of the whole Board of Directors of
the Corporation) recommend such repeal, amendment, supplement or
modification and such repeal, amendment, supplement or
modification is approved by the affirmative vote of the holders of
not less than 66 2/3 percent of the outstanding Voting Stock; or
2. Such repeal, amendment, supplement or modification is approved by
the affirmative vote of holders of (a) not less than 80 percent of
the outstanding Voting Stock voting
<PAGE> 8
together as a single class, and (b) not less than 66 2/3 percent
of the outstanding Voting Stock held by all stockholders other
than Interested Stockholders voting together as a single class.
EIGHTH: The Corporation shall have the power to indemnify its present and past
directors, officers, employees and agents, and such other persons as it shall
have powers to indemnify to the full extent permitted under, and subject to the
limitations of, Title 17 of the Ohio Revised Code. Additionally, and subject to
the limitations set forth below, the Corporation shall indemnify its present and
past Directors for personal liability for monetary damages resulting from breach
of their fiduciary duty as Directors. Notwithstanding the above, no
indemnification for personal liability shall be provided for:
1. Any breach of the Director's duty of loyalty to the Corporation or its
stockholders;
2. Acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;
3. Illegal distribution of dividends; and
4. Any transaction from which the Director derived an improper personal
benefit.
The Corporation may, upon the affirmative vote of a majority of its Board of
Directors, purchase insurance for the purpose of indemnifying its Directors,
officers, employees, and agents, to the extent that such indemnification is
allowed in the preceding paragraph.
NINTH: The Corporation reserves the right to amend, alter, change or repeal any
provision contained in its Articles of Incorporation, in the manner now or
hereafter prescribed by Sections 1701.01 et seq. of the Revised Code of Ohio,
and all rights conferred upon Stockholders herein are granted subject to this
reservation.
TENTH: No Business Combination shall be effected or consummated unless, in
addition to the consideration set forth in Subdivisions B, C, D, and E of
Article SEVENTH, the Board of Directors of the Corporation, including the
Continuing Directors shall consider all of the following factors and any other
factors which it (they) deem relevant:
1. The social and economic effects of the transaction on the Corporation
and its subsidiaries, employees, depositors, loan and other customers,
creditors and other elements of the communities in which the
Corporation and its subsidiaries operate or are located;
2. The business and financial conditions and earnings prospects of the
Interested Stockholder, including, but not limited to, debt service and
other existing or likely financial obligations of the Interested
Stockholder, and the possible effect on other elements of the
communities in which the Corporation and its subsidiaries operate or
are located; and
3. The competence, experience and integrity of the Interested Stockholder
and his (its) or their management.
<PAGE> 9
ELEVENTH: These Amended and Restated Articles of Incorporation take the place
of and supersede the existing Amended Articles of Incorporation as theretofore
amended.
<PAGE> 1
EXHIBIT 3.B - CODE OF REGULATIONS
WAYNE BANCORP, INC.
AMENDED AND RESTATED
CODE OF REGULATIONS
(April, 1993)
ARTICLE I
OFFICES
Section l. The principal office shall be in the City of Wooster,
County of Wayne, State of Ohio.
Section 2. The Corporation may also have offices at such other
places as the Board of Directors may from time to time determine or the
business of the Corporation may require.
ARTICLE II
STOCKHOLDERS' MEETINGS
Section 1. Meetings of the Stockholders shall be in the City of
Wooster, County of Wayne, State of Ohio.
Section 2. An annual meeting of the Stockholders shall be held on the
fourth Thursday in March in each year if not a legal holiday, and, if a legal
holiday, then on the next day following at 2:00 p.m., or on such other date and
at such other time as the Board of Directors, in its sole discretion, shall
establish from time-to-time, to elect members of the Board of Directors and
transact such other business as may properly by brought before the meeting.
Section 3. Written notice stating the time, place and purpose of a
meeting of the Stockholders shall be given either by personal delivery or by
mail not less than seven or more
<PAGE> 2
than sixty days before the date of the meeting to each Stockholder of record
entitled to notice of the meeting by or at the direction of the President or a
Vice President or the Secretary or an Assistant Secretary. If mailed, such
notice shall be addressed to the Stockholder at his address as it appears on
the records of the Corporation. Notice of adjournment of a meeting need not be
given if the time and place to which it is adjourned are fixed and announced at
such meeting.
Section 4. Meetings of the Stockholders may be called by the President
or a Vice President, or the Directors by action at a meeting, or a majority of
the Directors acting without a meeting or by the Secretary of the Corporation
upon the order of the Board of Directors, or by the persons who hold twenty-five
per cent (25%) of all the shares outstanding and entitled to vote thereat. Upon
the request in writing delivered either in person or by registered mail to the
President or Secretary by any persons entitled to call a meeting of the
Stockholders, such officer shall forthwith cause notice to be given to the
Stockholders entitled thereto. If such request be refused, then the persons
making such request may call a meeting by giving notice in the manner provided
in these regulations.
Section 5. Business transacted at any special meeting of Stockholders
shall be confined to the purposes stated in the notice.
Section 6. Upon request of any Stockholder at any meeting of
Stockholders, there shall be produced at such meeting an alphabetically arranged
list, or classified lists, Or the Stockholders of record as of the record date
of such meeting, who are entitled to vote, showing their respective addresses
and the number and class of shares held by each. Such list or lists when
certified by the officer or agent in charge of the transfers of shares shall be
prima-facie evidence of the facts shown therein.
Section 7. The holders of a majority of the shares issued and
outstanding having voting power, present in person or represented by proxy,
shall be requisite and shall constitute a quorum
<PAGE> 3
at all meetings of Stockholders for the transaction of business, except that at
any meeting of Stockholders called to take any action which is authorized or
regulated by statute, in order to constitute a quorum, there shall be present
in person or represented by proxy the holders of record of shares entitling
them to exercise the voting power required by statute, the Articles of
Incorporation, or these Regulations, to authorize or take the action proposed
or stated in the notice of the meeting. If, however, such quorum shall not be
present or represented at any meeting of the Stockholders, the Stockholders
entitled to vote thereat, present in person or represented by proxy, shall have
power to adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present or represented. At
such adjourned meeting at which a quorum shall be present or represented any
business may be transacted which might have been transacted at the meeting as
originally notified.
Section 8. When a quorum is present or represented at any meeting, the
vote of the holders of a majority of the stock having voting power, present in
person or represented by proxy, shall decide any question brought before such
meeting, unless the question is one upon which, by express provision of the
statutes or of the Articles of Incorporation or of these Regulations, a
different vote is required, in which case such express provision shall govern
and control the decision of such question.
Section 9. At every meeting of Stockholders, each outstanding share
having power shall entitle the holder thereof to one vote on each matter
properly submitted to the Stockholders. A Stockholder shall be entitled to vote
even though his shares have not been fully paid, but shares upon which an
installment of the purchase price is overdue and unpaid shall not be voted.
Section 10. A person who is entitled to attend a Stockholders' meeting,
to vote thereat, or to execute consents, waivers, or releases, may be
represented at such meeting or vote thereat, and execute consents, waivers, and
releases, and exercise any of his other rights, by proxy or proxies
<PAGE> 4
appointed by a writing signed by such person. A telegram or cablegram appearing
to have been transmitted by such person, or a photographic, photo static, or
equivalent reproduction of a writing, appointing a proxy is sufficient writing.
No appointment of a proxy shall be valid after the expiration of eleven months
after it is made unless the writing specifies the date on which it is to expire
or the length of time it is to continue in force.
Section 11. Unless the Articles of Incorporation or these Regulations
prohibit the authorization or taking of any action of the Stockholders without a
meeting, any action which may be authorized or taken at a meeting of the
Stockholders may be authorized or taken without a meeting with the affirmative
vote or approval of, and in a writing or writings signed by all the Stockholders
who would be entitled to notice of a meeting of the Stockholders held for such
purpose, which writing or writings shall be filed with or entered upon the
records of the Corporation.
ARTICLE III
DIRECTORS
Section 1. The election of Directors shall take place at the Annual
Meeting of Stockholders, or at a special meeting called for that purpose, and
shall be by ballot. Directors shall be elected for one term and shall continue
in office until their successors are elected and qualified. The number of
members of the Board of Directors constituting the entire Board shall be
determined by a two-thirds majority vote of the Continuing Directors (or, if
there is no "interested stockholder," a majority vote of the whole Board of
Directors of the Corporation), and such exact number shall be twelve (12) until
otherwise so determined, provided, however, that in no event shall a change be
made to the number of Directors elected greater than two positions in any one
year.
<PAGE> 5
The Board of Directors shall be divided into three classes, as nearly
equal in number as the then total number of Directors constituting the whole
Board permits, with the term of office of one class expiring each year. At the
first annual meeting of Stockholders, Directors of the first class shall be
elected to hold office for a term expiring at the next succeeding annual
meeting, Directors of the second class shall be elected to hold office for a
term expiring at the second succeeding annual meeting and Directors of the third
class shall be elected to hold office for a term expiring at the third
succeeding annual meeting. Any vacancies in the Board of Directors for any
reason, and any newly created Directorships resulting from any increase in the
number of Directors, may be filled by the Board of Directors, acting by a
majority of the Directors then in office, and any Directors so chosen shall hold
office until the next election of the class for which such Directors shall have
been chosen and until their successors shall be elected and qualified. No
decrease in the number of Directors shall shorten the term of any incumbent
Director. Notwithstanding the foregoing, and except as otherwise required by
law, the terms of the Directors or Directors elected by such holders shall
expire at the next succeeding annual meeting of Stockholders. Subject to the
foregoing, at each annual meeting of Stockholders, the successors to the class
of Directors whose term shall then expire shall be elected to hold office for a
term expiring at the third succeeding annual meeting.
Section 2. For their own government the Directors may adopt by-laws not
inconsistent with the Articles of Incorporation or these Regulations.
Section 3. The Directors may hold their meeting, and keep the books of
the Corporation, outside the State of Ohio, at such places as they may from time
to time determine but, if no transfer agent is appointed to act for the
Corporation in Ohio, it shall keep an office in Ohio at which shares shall be
transferable and at which it shall keep books in which shall be recorded the
names and addresses of all Stockholders and all transfers of shares.
<PAGE> 6
COMMITTEES
Section 4. The Directors may at any time elect three or more of their
number as an executive committee or other committees, which shall, in the
interval between meetings of the Board of Directors, exercise such powers and
perform such duties as may from time to time be prescribed by the Board of
Directors. Any such committee shall be subject at all times to the control and
direction of the Board of Directors. Unless otherwise ordered by the Board of
Directors, any such committee may act by a majority of its members at a meeting
or by a writing or writings signed by all its members. An act or authorization
of an act by any such committee within the authority delegated to it shall be as
effective for all purposes as the act or authorization of the Board of
Directors.
Section 5. The committee shall keep regular minutes of their
proceedings and report the same to the Board when required.
COMPENSATION OF DIRECTORS
Section 6. Directors, as such, shall not receive any stated salary for
their services but, by resolution of the Board, a fixed sum, and expenses of
attendance if any, may be allowed for attendance at each regular or special
meeting of the Board; provided that nothing herein contained shall be construed
to preclude any Director from serving the Corporation in any other capacity and
receiving compensation there for.
Section 7. Members of the executive committee or other committees may
be allowed like compensation for attending committee meetings.
<PAGE> 7
MEETINGS OF THE BOARD
Section 8. The first meeting of each newly elected Board shall be held
at such time and place, either within or without the State of Ohio, as shall be
fixed by the vote of the Stockholders at the annual meeting, of which two days'
notice shall be delivered personally or sent by mail or telegram to each newly
elected Director. Such meeting may be held at any place or time as may be fixed
by the consent in writing of all the Directors, given either before or after the
meeting.
Section 9. Regular meetings of the Board may be held at such time and
place, either within or without the State of Ohio, as shall be determined by the
Board.
Section 10. Special meetings of the Board of Directors may be held
anytime upon the call of the Chairman of the Board of Directors, President, a
Vice President, Treasurer, Secretary or any two members of the Board.
Notice of any special meeting of the Board of Directors shall be mailed
to each Director, addressed to him at his residence or usual place of business,
at least two (2) days before the day on which the meeting is to be held. If the
purpose of the meeting, or other exigent events requires the Board of Directors
to meet in a more timely manner, in the discretion of the individual(s) calling
the meeting, such notice of the meeting may be given by telephone or in person
as soon as practicable before the meeting, up to the start of such meeting
called. if less than two (2) days notice is given, the purpose of the meeting
must be specified in the notice. Every notice shall state the time and place of
the meeting. Notice of any meeting of the board need not be given to any
Director, however, if waived by him in writing or by telegraph, cable, radio,
wireless, or telephonic communication whether before or after such meeting is
held, or if he shall be present at such meeting and any meeting of the Board
shall be a legal meeting without any notice thereof having been given, if all
the Directors shall be present thereat.
<PAGE> 8
Meetings of the Board of Directors, both regular and special, may also
be held by the utilization of simultaneous telephonic communications linking all
Directors present at such meetings, and all such business conducted via such
telephonic communication shall be considered legally enforceable by the
Corporation.
Section 11. At all meetings of the Board a majority of Directors shall
be necessary and sufficient to constitute a quorum for the transaction of
business, and the act of a majority of the Directors present at any meeting at
which there is a quorum shall be the act of the Board of Directors, except as
may be otherwise specifically provided by statute or by the Articles of
Incorporation or by these Regulations. If a quorum shall not be present at any
meeting of Directors, the Directors present thereat may adjourn the meeting from
time to time, until a quorum shall be present. Notice of adjournment of a
meeting need not be given to absent Directors if the time and place are fixed at
the meeting adjourned.
Section 12. Unless the Articles or these Regulations prohibit the
authorization or taking of any action of the Directors without a meeting, any
action which may be authorized or taken at a meeting of the Directors may be
authorized or taken without a meeting with the affirmative vote or approval of,
and in a writing or writings signed by all the Directors, which writing or
writings shall be filed with or entered upon the records of the Corporation.
Section 13. Removal of Director. A Director shall be removed from the
Board of Directors only by the affirmative vote of the holders of 75% of the
outstanding voting stock qualified to vote at a meeting for the election of
Directors.
Section 14. Nominations for the election of Directors may be made by
the Board of Directors or by any Stockholder entitled to vote in the election of
Directors. However, any Stockholder entitled to vote in the election of
Directors at a meeting may nominate a Director only if written notice of such
Stockholder's intent to make such nomination or nominations has
<PAGE> 9
been given, either by personal delivery or by United States mail, postage
prepaid, to the Secretary of the Corporation not later than (a) with respect to
an election to be held at an Annual Meeting of Stockholders, ninety (90) days
in advance of the date in the current year, corresponding to the date of the
previous year's annual meeting at which Directors were elected, and (b) with
respect to an election to be held at a Special Meeting of Stockholders for the
election of the Directors, the close of business on the seventh (7th) day
following the date on which notice of such meeting is first given to
Stockholders. Each such notice shall set forth (a) the name and address of the
Stockholder who intends to make the nomination and of the person or persons to
be nominated, (b) a representation that the Stockholder is a holder of record
of shares of the Corporation entitled to vote at such meeting and intends to
appear in person or by proxy at the meeting to nominate the person or persons
specified in the notice, (c) a description of all arrangements or understanding
between the Stockholder and each nominee and any other person or persons
(naming such person or persons) pursuant to which the nomination or nominations
are to be made by the Stockholder, (d) such other information regarding each
nominee proposed by such Stockholder as would be required to be included in a
proxy statement filed pursuant to the proxy rules of the Securities and
Exchange Commission had the nominee been nominated, or intended to be
nominated, by the Board of Directors, and (e) the consent of each nominee to
serve as a Director of the Corporation if so elected. The chairman of the
meeting may refuse to acknowledge the nomination of any person not made in
compliance with the foregoing procedure.
In order for any person to be elected as a Director of this Corporation
other than persons serving as Directors as of December 31, 1992, he/she shall
meet each of the following qualifications:
<PAGE> 10
a) the Director elect shall be under the age of 72 as of the date
of election, provided, however, that if such Director nominee
is older than 72 but still active in the business community,
in the sole discretion of the Board of Directors of the
Corporation, the Director may be nominated and elected but
only for one additional three-year term;
b) such Director elect shall reside or have his/her principal
business address within Wayne County National Bank's "market
area" as then defined under the Community Reinvestment Act;
and
c) such Director elect shall own not less than $10,000 aggregate
fair market value of common stock of this Corporation.
ARTICLE IV
NOTICES
Section 1. Notices to Directors and Stockholders shall be in writing
and delivered personally or mailed to the Directors or Stockholders at their
addresses appearing on the books of the Corporation. Notice by mail shall be
deemed to be given at the time when the same shall be mailed. Notice to
Directors and Stockholders may also be given by telegram or telephone.
Section 2. Notice of the time, place and purposes of any meeting of
Stockholders or Directors as the case may be, whether required by law, the
Articles of Incorporation or these Regulations, may be waived in writing, either
before or after the holding of such meeting, by any Stockholder, or by any
Director, which writing shall be filed with or entered upon the records of the
meeting.
<PAGE> 11
ARTICLE V
OFFICERS
Section 1. The officers of the Corporation shall be chosen by the
Directors and shall be a President, a Vice President, a Secretary and a
Treasurer. The Board of Directors may also choose additional Vice Presidents,
and one or more assistant secretaries and assistant treasurers. Any two or more
of such offices except the offices of President and Vice President, may be held
by the same person, but no officer shall execute, acknowledge or verify any
instrument in more than one capacity if such instrument is required by law or by
these Regulations to be executed, acknowledged or verified by any two or more
officers.
Section 2. The Board of Directors at its first meeting after each
annual meeting of Stockholders shall choose a President, a Vice President, a
Secretary and a Treasurer, none of whom need be a member of the Board.
Section 3. The Board may appoint such other officers and agents as it
shall deem necessary, who shall hold their offices for such terms and shall
exercise such powers and perform such duties as shall be determined from time to
time by the Board.
Section 4. The salaries of all officers and agents of the Corporation
shall be fixed by the Board of Directors.
Section 5. The officers of the Corporation shall hold office until
their successors are chosen and qualify in their stead. Any officer elected or
appointed by the Board of Directors may be removed at any time by the
affirmative vote of a majority of the whole Board of Directors. If the office of
any officer or officers becomes vacant for any reason, the vacancy shall be
filled by the Board of Directors
<PAGE> 12
THE PRESIDENT
Section 6. The President shall be the chief executive officer of the
Corporation; he shall preside at all meetings of the Stockholders and Directors,
shall be ex officio a member of the executive committee or any other committee,
shall have general and active management of the business of the Corporation, and
shall see that all orders and resolutions of the Board are carried into effect.
Section 7. He shall execute bonds, mortgages and other contracts
requiring a seal, under the seal of the Corporation, except where required or
permitted by law to be otherwise signed and executed and except where the
signing and execution thereof shall be expressly delegated by the Board of
Directors to some other officer or agent of the Corporation.
THE VICE PRESIDENTS
Section 8. The Vice Presidents in the order of their seniority, unless
otherwise determined by the Board of Directors, shall, in the absence or
disability of the President, perform the duties and exercise the powers of the
President. They shall perform such other duties and have such other powers as
the Board of Directors may from time to time prescribe.
THE SECRETARY AND ASSISTANT SECRETARIES
Section 9. The Secretary shall attend all meetings of the Board of
Directors and all meetings of the Stockholders and record all the proceedings of
the meetings of the Corporation and of the Board of Directors in a book to be
kept for that purpose and shall perform like duties for the standing committees
when required. He shall give, or cause to be given, notice of all meetings of
the Stockholders and special meetings of the Board of Directors, and shall
perform such other duties as may be prescribed by the Board of Directors or
President, under whose
<PAGE> 13
supervision he shall be. He shall keep in safe custody the seal of the
Corporation and, when authorized by the Board of Directors, affix the same to
any instrument requiring it and, when so affixed, it shall be attested by his
signature or by the signature of the Treasurer or an Assistant Secretary.
Section 10. The Assistant Secretaries in the order of their seniority
unless otherwise determine by the Board of Directors, shall, in the absence or
disability of the Secretary, perform the duties and exercise the powers of the
Secretary. They shall perform such other duties and have such other powers as
the Board of Directors may from time to time prescribe.
THE TREASURER AND ASSISTANT TREASURERS
Section 11. The Treasurer shall have the custody of the corporate funds
and securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the Corporation and shall deposit all moneys
and other valuable effects in the name and to the credit of the Corporation in
such depositories as may be designated by the Board of Directors.
Section 12. He shall disburse the funds of the Corporation as may be
ordered by the Board of Directors, taking proper vouchers for such
disbursements, and shall render to the President and the Board of Directors, at
its regular meetings, or when the Board of Directors so requires, an account of
all his transactions as Treasurer and of the financial condition of the
Corporation.
Section 13. If required by the Board of Directors, he shall give the
Corporation a bond (which shall be renewed every six years) in such sum and with
such surety or sureties as shall be satisfactory to the Board of Directors for
the faithful performance of the duties of his office and for the restoration to
the Corporation, in case of his death, resignation, retirement or removal
<PAGE> 14
from office, of all books, papers, vouchers, money and other property of
whatever kind in his possession or under his control belonging to the
Corporation.
Section 14. The Assistant Treasurers in the order of their seniority,
unless otherwise determined by the Board of Directors, shall, in the absence or
disability of the Treasurer, perform the duties and exercise the powers of the
Treasurer. They shall perform such other duties and have such other powers as
the Board of Directors may from time to time prescribe.
ARTICLE VI
CERTIFICATES OF STOCK
Section 1. Each holder of shares is entitled to one or more
certificates, signed by the President or a Vice President and by the Secretary,
an Assistant Secretary, the Treasurer, or an Assistant Treasurer of the
Corporation, which shall certify the number and class of shares held by him in
the Corporation. Every certificate shall state that the Corporation is organized
under the laws of Ohio, the name of the person to whom the shares represented by
the certificate are issued, the number of shares represented by the certificate,
and the par value of each share represented by it or that the shares are without
par value, and if the shares are classified, the designation of the class, and
the series, if any, of the shares represented by the certificate. There shall
also be stated on the face or back of the certificate the express terms, if any,
of the shares represented by the certificate and of the other class or classes
and series of shares, if any, which the Corporation is authorized to issue, or a
summary of such express terms, or that the Corporation will mail to the
Stockholder a copy of such express terms without charge within five days after
receipt of written request there for, or that a copy of such express terms is
attached to and by reference made a part of such certificate and that the
Corporation will mail to the Stockholder a copy of
<PAGE> 15
such express terms without charge within five days after receipt of written
request there for if the copy has become detached from the certificate.
Section 2. In case of any restriction on transferability of shares or
reservation of lien thereon, the certificate representing such shares shall set
forth on the face or back thereof the statements required by the General
Corporation Law of Ohio to make such restrictions or reservations effective.
Section 3. Where a certificate is countersigned by an incorporated
transfer agent or registrar, the signature of any of the officers specified in
Section 1 of this article may be facsimile, engraved, stamped, or printed.
Although any officer of the Corporation, whose manual or facsimile signature has
been placed upon such certificate, ceases to be such officer before the
certificate is delivered, such certificate nevertheless shall be effective in
all respects when delivered.
LOST CERTIFICATES
Section 4. The Board of Directors may direct a new certificate or
certificates to be issued in place of any certificate or certificates
theretofore issued by the Corporation alleged to have been lost or destroyed,
upon the making of an affidavit of that fact by the person claiming the
certificate of stock to be lost or destroyed. When authorizing such issue of a
new certificate or certificates, the Board of Directors may, in its discretion
and as a condition precedent to the issuance thereof, require the owner of such
lost or destroyed certificate or certificates, or his legal representative, to
advertise the same in such manner as it shall require and/or to give the
Corporation a bond in such sum as it may direct as indemnity against any claim
that may be made against the Corporation with respect to the certificate alleged
to have been lost or destroyed.
<PAGE> 16
TRANSFERS OF STOCK
Section 5. Upon surrender to the Corporation or the transfer agent of
the Corporation of a certificate for shares duly endorsed or accompanied by
proper evidence of succession, assignment or authority to transfer, it shall be
the duty of the Corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate and record the transaction upon its books.
Section 6. For any lawful purpose, including without limitation, (1)
the determination of the Stockholders who are entitled to receive notice of or
to vote at a meeting of Stockholders; (2) receive payment of any dividend or
distribution; (3) receive or exercise rights of purchase of or subscription for,
or exchange or conversion of, shares or other securities, subject to contract
rights with respect thereto; or (4) participate in the execution of written
consents, waivers, or releases, the Directors may fix a record date which shall
not be a date earlier than the date on which the record date is fixed and, in
the cases provided for in clauses (1), (2) and (3) above, shall not be more than
sixty days, preceding the date of the meeting of the Stockholders, or the date
fixed for the payment of any dividend or distribution, or the date fixed for the
receipt or the exercise of rights, as the case may be.
Section 7. If a meeting of the Stockholders is called by persons
entitled to call the same, or action is taken by Stockholders without a meeting,
and if the Directors fail or refuse, within such time as the persons calling
such meeting or initiating such other action may request, to fix a record date
for the purpose of determining the Stockholders entitled to receive notice of or
vote at such meeting, or to participate in the execution of written consents,
waivers, or releases, then the persons calling such meeting or initiating such
other action may fix a record date for such purposes, subject to the limitations
set forth in Section 6 of this article.
<PAGE> 17
Section 8. The record date for the purpose of clause (1) of Section 6
of this article shall continue to be the record date for all adjournments of
such meeting, unless the Directors or the persons who shall have fixed the
original record date shall, subject to the limitations set forth in Section 6 of
this article, fix another date, and in case a new record date is so fixed,
notice thereof and of the date to which the meeting shall have been adjourned
shall be given to Stockholders of record as of said date in accordance with the
same requirements as those applying to a meeting newly called.
Section 9. The Directors may close the share transfer books against
transfers of shares during the whole or any part of the period provided for in
Section 6 of this article, including the date of the meeting of the Stockholders
and the period ending with the date, if any, to which adjourned. If no record
date is fixed there for, the record date for determining the Stockholders who
are entitled to receive notice of, or who are entitled to vote at, a meeting of
Stockholders, shall be the date next preceding the day on which notice is given,
or the date next preceding the day on which the meeting is held, as the case may
be.
Section 10. The Corporation shall be entitled to recognize the
exclusive rights of a person registered on its books as the owner of shares to
receive dividends, and to vote as such owner, and shall not be bound to
recognize any equitable or other claim to or interest in such share or shares on
the part of any other person, whether or not it shall have express or other
notice thereof, except as otherwise provided by the laws of the State of Ohio.
<PAGE> 18
ARTICLE VII
GENERAL PROVISIONS
DIVIDENDS
Section 1. The Board of Directors may declare and the Corporation may
pay dividends and distributions on its outstanding shares in cash, property, or
its own shares pursuant to law and subject to the provisions of its Articles of
Incorporation.
Section 2. Before payment of any dividend or distribution, there may be
set aside out of any funds of the Corporation available for dividends or
distributions such sum or sums as the Directors from time to time, in their
absolute discretion, think proper as a reserve fund to meet contingencies, or
for equalizing dividends or distributions, or for repairing or maintaining any
property of the Corporation, or for such other purposes as the Directors shall
think conducive to the interests of the Corporation, and the Directors may
modify or abolish any such reserve in the manner in which it was created.
ANNUAL STATEMENT
Section 3. At the annual meeting of Stockholders, or the meeting held
in lieu of it, the Corporation shall prepare and lay before the Stockholders a
financial statement consisting of: A balance sheet containing a summary of the
assets, liabilities, stated capital, if any, and surplus (showing separately any
capital surplus arising from unrealized appreciation of assets, other capital
surplus, and earned surplus) of the Corporation as of a date not more than four
months before such meeting; if such meeting is an adjourned meeting, the balance
sheet may be as of a date not more than four months before the date of the
meeting as originally convened; and a statement of profit and loss and surplus,
including a summary of profits, dividends or distributions paid, and other
changes in the surplus accounts of the Corporation for the period
<PAGE> 19
commencing with the date marking the end of the period for which the last
preceding statement of profit and loss required under this section was made and
ending with the date of the balance sheet, or in the case of the first
statement of profit and loss, from the incorporation of the Corporation to the
date of the balance sheet.
The financial statement shall have appended to it a certificate signed
by the President or a vice President or the treasurer or an assistant treasurer
or by a public accountant or firm of public accountants to the effect that the
financial statement presents fairly the position of the Corporation and the
results of its operations in conformity with generally accepted accounting
principles applied on a basis consistent for the period covered thereby, or to
the effect that the financial statements have been prepared on the basis of
accounting practices and principles that are reasonable in the circumstances.
Section 4. Upon the written request of any Stockholder made within
sixty days after notice of any such meeting has been given, the Corporation, not
later than the fifth day after receiving such request or the fifth day before
such meeting, whichever is the later date, shall mail to such Stockholder a copy
of such financial statement.
CHECKS
Section 5. All checks or demands for money and notes of the Corporation
shall be signed by such officer or officers as the Board of Directors may from
time to time designate.
FISCAL YEAR
Section 6. The fiscal year of the Corporation shall be fixed by
resolution of the Board of Directors.
<PAGE> 20
SEAL
Section 7. The corporate seal shall have inscribed thereon the name of
the Corporation, the year of its organization and the words "Corporate Seal,
Ohio." The seal may be used by causing it or a facsimile thereof to be impressed
or affixed or in any other manner reproduced.
ARTICLE VIII
AMENDMENTS
Section 1. These Regulations may be amended or new regulations adopted
by the affirmative vote of the holders of shares entitling them to exercise a
majority of the voting power on such proposal, at any regular meeting of the
Stockholders, or at any special meeting of the Stockholders if notice of the
proposal to amend or add to the Regulations be contained in the notice of the
meeting, or, without a meeting, by the written consent of the holders of record
of shares entitling them to exercise a majority of the voting power on such
proposal.
Section 2. Notwithstanding the provisions of Section 1 of this Article
VIII, amendments to Article III, Section 1, 13 and 14 of these Regulations shall
require the affirmative vote of the holders of 80% of the outstanding voting
stock of the Corporation, unless such amendment is approved by a two-thirds
majority of the "Continuing Directors" (or, if there is not an "Interested
Stockholder," such amendment is approved by a majority vote of the whole Board
of Directors), then such amendment procedure shall meet the requirements of
Section 1 of this Article VIII.
For purposes of this Article VIII, Section 2, the terms "Continuing
Director(s)" and "Interested Stockholder(s)" are as defined in Article Seventh
of the Article of Incorporation.
<PAGE> 1
EXHIBIT 5 - LEGAL OPINION
[WERNER & BLANK CO. L.P.A. LETTERHEAD]
December 15, 1997
Board of Directors
Chippewa Valley Bancshares, Inc.
20 South Main Street
Rittman, Ohio 44270
RE: S-4 Registration Statement for Shares of Wayne Bancorp, Inc. Common Stock
Gentlemen:
We have acted as counsel to Wayne Bancorp, Inc. (the "Company") in connection
with the preparation of its S-4 Registration Statement to be filed on or about
December 15, 1997 with the Securities and Exchange Commission, for the purpose
of registering shares of the Company to be issued to shareholders of Chippewa
Valley Bancshares, Inc. ("Chippewa"), pursuant to the terms and conditions of a
Merger Agreement dated as of October 13, 1997 (the "Agreement"). In connection
with the filing of the Registration Statement, we are providing this opinion as
to the shares to be registered under the Securities Act of 1933 and issued in
connection with the Agreement.
We are of the opinion that the shares of common stock of the Company are duly
authorized, and when issued in accordance with the terms of the Agreement, will
be validly issued, fully paid and nonassessable.
This opinion is intended solely for your use and other than its inclusion in the
Registration Statement of the Company and reference to it in the Proxy
Statement-Prospectus issued in connection therewith, may not be quoted,
circulated or copied without our express prior written consent.
Very truly yours,
/s/ Werner & Blank Co., LPA
Werner & Blank Co., L.P.A.
<PAGE> 1
EXHIBIT 8 - TAX OPINION
[WERNER & BLANK CO. L.P.A. LETTERHEAD]
December 15, 1997
Board of Directors
Wayne Bancorp, Inc.
112 W. Liberty Street
Wooster, Ohio 44691
and
Board of Directors
Chippewa Valley Bancshares, Inc.
20 S. Main Street
Rittman, Ohio 44270
Ladies and Gentlemen:
You have requested our opinion as to the federal income tax consequences of the
transactions contemplated by a certain Merger Agreement dated as of October 13,
1997, by and between Wayne Bancorp, Inc. ("Wayne") and Chippewa Valley
Bancshares, Inc. ("Chippewa"), hereinafter referred to as the "Agreement." Our
opinion is made in reliance upon and is limited to the following facts and
circumstances:
FACTS
Chippewa is an Ohio corporation, is a registered bank holding company and is
located in Rittman, Ohio. Wayne is an Ohio corporation, is a registered bank
holding company and is located in Wooster, Ohio.
Wayne and Chippewa have only common shares outstanding. Chippewa is to be merged
into Wayne, under the Articles of Incorporation of Wayne and in compliance with
applicable Ohio law.
Each share of Chippewa common stock outstanding on the effective date of the
transaction will be converted into shares of common stock of Wayne as provided
by the Agreement. The effect of the consummation of the transaction and the
exchange of shares will be that shareholders of Chippewa will become
shareholders of Wayne, and Wayne will own all of the outstanding common stock of
The Chippewa Valley Bank, Rittman, Ohio, a wholly owned subsidiary of Chippewa.
<PAGE> 2
The business of Chippewa and Wayne (and affiliates) will continue substantially
unchanged after the effective date of the transaction.
No fractional shares will be issued in the transaction. In lieu thereof, holders
otherwise entitled to receive such fractional shares will be issued cash.
We are not aware, and have been advised by the management of Chippewa that they
have no knowledge, of any plan or intention on the part of shareholders of
Chippewa to sell or otherwise dispose of an amount of the Wayne shares to be
received in the transaction, which could reduce Chippewa's shareholders
ownership of Wayne shares after the merger of Chippewa and Wayne to shares
having an aggregate value as of the effective date of the transaction, of less
than fifty percent (50%) of the value of all the formerly outstanding shares of
Chippewa as of the same date.
The transaction will be carried out pursuant to and in accordance with all
applicable corporate and banking laws relating to the transaction. On the
effective date, Wayne will succeed to all assets of Chippewa and will be liable
for the liabilities of Chippewa then existing or arising as a result of the
transactions.
Following the consummation of the transaction resulting in the merger of
Chippewa with and into Wayne, Wayne will continue to operate the business of
Chippewa and its existing affiliates in substantially the same manner.
Arms-length negotiations were carried on between the management of Wayne and
management of Chippewa which led to the Agreement and fixed the terms of the
transaction. Consideration was given to both financial and nonfinancial factors
involved in the transaction and the business benefits from the transaction were
discussed and considered by the parties.
In the opinion of the management of Wayne and Chippewa, its employees and
customers will benefit from the affiliation. It is also expected that the
transaction will better enable the resulting corporation to compete with other
financial institutions.
OPINION
Based upon the above, it is our opinion that the Agreement will have the
following federal income tax consequences:
1. The merger of Chippewa with and into Wayne will constitute a "Statutory
Merger" within the meaning of Section 368(a)(1)(A) of the Internal Revenue
Code of 1986, as amended, and Chippewa and Wayne will each be a "party to a
reorganization" within the meaning of Section 368(b).
2. No gain or loss will be recognized by Chippewa as a result of the transfer
of its assets to and the assumption of its liabilities by Wayne. Section
361(a) and 357(a).
3. No gain or loss will be recognized by Chippewa's shareholders who exchange
their respective shares solely for Wayne shares. Section 354(a).
<PAGE> 3
4. The basis of the Wayne shares received by Chippewa's shareholders in
exchange for their shares will be the same as the basis in the shares
exchanged therefor, respectively. Section 358(a).
5. The holding period of the Wayne shares received by Chippewa's shareholders
will include the period during which shares exchanged therefor were held,
provided such shares were held as a capital asset. Section 1223(1).
6. The payment of cash in lieu of fractional shares for the purpose of
mechanically rounding off the fractions resulting from the exchange, will,
in each instance, constitute a distribution not essentially equivalent to a
dividend within the meaning of Section 302(b)(1) of the Internal Revenue
Code of 1986, as amended. The amount received will be treated as a
distribution in full payment in exchange for the shareholders' fractional
share of interest under Section 302(a) of the Code.
7. Gain or loss will be recognized by each Chippewa shareholder who dissents
and receives only cash in exchange for all of the shares owned by them.
This letter is solely for your information and use, and except: (i) for its
reliance upon by Wayne, Chippewa and their respective shareholders; and (ii) to
the extent that such may be referred to in the Proxy Statement-Prospectus to be
distrubuted to the shareholders of Wayne and Chippewa and in the related
Registration Statement to be filed with the Securities and Exchange Commission
as an exhibit to same, it is not to be used, circulated, quoted or otherwise
referred to for any other purpose, or relied upon by any other person, for
whatever reason without our prior written consent.
Very truly yours,
/s/ Werner & Blank Co., LPA
Werner & Blank Co., L.P.A.
<PAGE> 1
EXHIBIT 23 - A CONSENT OF S.R. SNODGRASS, A.C.
INDEPENDENT AUDITOR'S CONSENT
We consent to the use in this Registration Statement of Wayne Bancorp, Inc. on
Form S-4 of our report dated February 7, 1997, except for Note 17, as to which
the date is October 13, 1997, appearing in the Proxy Statement/Prospectus,
which is part of this Registration Statement.
We also consent to the reference to us under the headings "Experts" in such
Proxy Statement/Prospectus.
/s/ S.R. Snodgrass, A.C.
------------------------
S.R. Snodgrass, A.C.
Wexford, Pennsylvania
December 11, 1997
<PAGE> 1
EXHIBIT 23 - B CONSENT OF CROWE, CHIZEK AND COMPANY LLP
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We consent to the incorporation in this registration statement of Wayne
Bancorp, Inc. on Form S-4, of our report dated January 28, 1997 on the
consolidated financial statements of Wayne Bancorp, Inc. as of December 31,
1996 and 1995 and for each of the three years in the period ended December 31,
1996. We also consent to the reference to our firm under the heading "Expert"
in the prospectus, which is part of this registration statement.
/s/ Crowe, Chizek and Company LLP
---------------------------------
Crowe, Chizek and Company LLP
Cleveland, Ohio
December 11, 1997
<PAGE> 1
EXHIBIT 23-C CONSENT OF AUSTIN ASSOCIATES, INC.
CONSENT OF INVESTMENT BANKER
We hereby consent to the discussion relative to our opinion delivered to the
Board of Directors of Wayne Bancorp, Inc. in connection with its proposed
acquisition of Chippewa Valley Bancshares, Inc. in the Proxy
Statement-Prospectus included in Wayne Bancorp, Inc.'s Registration Statement
on Form S-4 under the heading "Opinion of Wayne's Financial Advisor," to the
references to our firm in such Proxy Statement-Prospectus and to the inclusion
of such opinion as an Appendix to the Proxy Statement and Prospectus.
/s/ Austin Associates, Inc.
---------------------------
Austin Associates, Inc..
Toledo, Ohio
December 15, 1997
<PAGE> 1
EXHIBIT 23-D CONSENT OF YOUNG & ASSOCIATES, INC.
CONSENT OF INVESTMENT BANKER
We hereby consent to the discussion relative to our opinion delivered to the
Board of Directors of Chippewa Valley Bancshares, Inc. in connection with its
proposed merger with Wayne Bancorp, Inc. in the Proxy Statement-Prospectus
included in Wayne Bancorp, Inc.'s Registration Statement on Form S-4 under the
heading "Opinion of Chippewa's Financial Advisor," to the references to our firm
in such Proxy Statement-Prospectus and to the inclusion of such opinion as an
Appendix to the Proxy Statement and Prospectus.
/s/ Tom P. Smith, consultant
Young & Associates, Inc.
-----------------------------
Young & Associates, Inc.
Kent, Ohio
December 15, 1997
<PAGE> 1
EXHIBIT 24. POWER OF ATTORNEY
POWERS OF ATTORNEY
DIRECTORS OF WAYNE BANCORP, INC.
Know all men by these presents that each person whose name is signed
below has made, constituted and appointed, and by this instrument does make,
constitute and appoint David L. Christopher or David P. Boyle, or either one of
them acting alone, his true and lawful attorney with full power of substitution
and resubstitution to affix for him and in his name, place and stead, as
attorney-in-fact, his signature as director or officer, or both, of Wayne
Bancorp, Inc., an Ohio corporation, (the "Company"), to a Registration Statement
on Form S-4 or other form registering common stock of the Company under the
Securities Act of 1933 in connection with the Company's acquisition of Chippewa
Valley Bancshares, Inc., and to any and all amendments, post effective
amendments and exhibits to that Registration Statement, and to any and all
applications and other documents pertaining thereto, giving and granting to such
attorney-in-fact full power and authority to do and perform every act and thing
whatsoever necessary to be done in the premises, as fully as he might or could
do if personally present, and hereby ratifying and confirming all that said
attorney-in-fact or any such substitute shall lawfully do or cause to be done by
virtue hereof.
IN WITNESS WHEREOF, this Power of Attorney has been signed at Wooster,
Ohio, this 3rd day of December, 1997.
/s/David l. Christopher
- -----------------------
David L. Christopher
/s/ James O. Basford
- --------------------
James O. Basford
/s/ Joseph R. Benden
- --------------------
Joseph R. Benden
/s/ Gwenn E. Bull
- -----------------
Gwenn E. Bull
/s/ Dennis B. Donahue
- ---------------------
Dennis B. Donahue
/s/ B. Diane Gordon
- -------------------
B. Diane Gordon
/s/ John C. Johnston, III
- -------------------------
John C. Johnston, III
/s/ Darcy B. Pajak
- ------------------
Darcy B. Pajak
/s/ Stephen L. Shapiro
- ----------------------
Stephen L. Shapiro
/s/ Jeffrey E. Smith
- --------------------
Jeffrey E. Smith
/s/ David E. Taylor
- -------------------
David E. Taylor
/s/ Bala Venkataraman
- ---------------------
Bala Venkataraman
<PAGE> 1
Exhibit 99A - Form of Notice for Special Meeting of Wayne Bancorp, Inc.
WAYNE BANCORP, INC
112 West Liberty Street
Wooster, Ohio 44691
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS TO BE HELD ON
____________, 1998
TO SHAREHOLDERS OF WAYNE BANCORP, INC.:
Notice is hereby given that a special meeting of the shareholders of
Wayne Bancorp, Inc., an Ohio corporation and bank holding company located in
Wooster, Ohio (`Wayne"), will be held at the Wayne County National Bank Loan
Department, 2nd Floor, 140 W. Liberty Street, Wooster, Ohio 44691, on
__________, 1998, at ___:00 __.m., local time, to consider and take action upon:
1. A proposal to approve and adopt a Merger Agreement dated as of October
13, 1997 (the "Merger Agreement") by and between Wayne and Chippewa
Valley Bancshares, Inc., an Ohio corporation and bank holding company
("Chippewa"), with such agreement providing for, among other things,
the merger of Chippewa with and into Wayne. Each outstanding share of
Chippewa Common Stock will be converted into Wayne Common Stock in
accordance with the terms of the Merger Agreement. As a result of the
proposed merger, Chippewa will be merged into Wayne.
2. SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE SPECIAL MEETING
AND ANY ADJOURNMENT THEREOF.
The record date for the meeting has been fixed at ____________, 199_.
Only the shareholders of record at the close of business on that date will be
entitled to notice of and to vote at the special meeting or any adjournment
thereof.
A favorable vote of at least a majority of the outstanding shares of
Wayne Common Stock is required to approve the Merger Agreement. Accordingly,
each shareholder is urged to sign the enclosed proxy card and return it promptly
to Wayne.
By order of the Board of Directors
Jimmy D. Vaughn
Secretary
YOUR VOTE IS IMPORTANT. EVEN IF YOU PLAN TO ATTEND THE MEETING,
PLEASE DATE AND SIGN THE ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE
ENCLOSED ENVELOPE. IF YOUR STOCK IS HELD IN MORE THAN ONE NAME, ALL PARTIES
MUST SIGN THE PROXY FORM.
<PAGE> 1
Exhibit 99B - Form of Proxy Card for Special Meeting of Wayne Bancorp, Inc.
PROXY FOR SPECIAL MEETING OF WAYNE BANCORP,INC.
WOOSTER, OHIO
KNOW ALL MEN BY THESE PRESENTS, that I, the undersigned shareholder of
Wayne Bancorp, Inc. ("Wayne"), do hereby nominate, constitute, and appoint
____________, ____________ and ____________, or any one of them, (with full
power of substitution for me and in my name, place and stead), to vote all
the common stock of said Corporation, standing in my name on its books on
_______, 199__, at the Special Meeting of its shareholders to be held at
Wayne County National Bank Loan Department, 2nd Floor, 140 W. Liberty
Street, Wooster, Ohio 44691, on ________, 1998, at _____ __.M. local time,
or any adjournments thereof with all the powers the undersigned would
possess if personally present as follows:
1. To ratify, confirm, approve and adopt, pursuant to Ohio Revised Code
Sections 1701.78, a Merger Agreement dated as of October 13, 1997, (the
"Agreement") by and between Wayne and Chippewa Valley Bancshares, Inc.,
an Ohio corporation and bank holding company ("Chippewa"), with such
Agreement providing for, among other things, the merger of Chippewa
with and into Wayne. Each outstanding share of Chippewa Common Stock
will be converted into Wayne Common Stock in accordance with the terms
of the Agreement and all outstanding shares of Wayne Common Stock shall
remain outstanding.
For |_| Against |_| Abstain |_|
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE PROPOSITION.
2. TO TRANSACT SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING
OR ANY ADJOURNMENT THEREOF.
This proxy confers authority to vote "FOR" the propositions listed above
unless "AGAINST" or "ABSTAIN" is indicated. If any other business is
presented at said meeting, this proxy shall be voted in accordance with the
recommendations of management. All shares represented by properly executed
proxies will be voted as directed.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS AND MAY BE
REVOKED PRIOR TO ITS EXERCISE BY EITHER WRITTEN NOTICE OR PERSONALLY AT THE
MEETING OR BY A SUBSEQUENTLY DATED PROXY.
Date:_______________________, 1998 ______________________________________
_______________________________ (L.S.)
(Signature(s) of Shareholder(s))
(When signing as Attorney, Executor, Administrator, Trustee, or Guardian,
please give full title. If more than one Trustee, all should sign. All
joint owners must sign.)
<PAGE> 1
Exhibit 99C - Form of Notice for Special Meeting of Chippewa Valley Bancshares,
Inc.
CHIPPEWA VALLEY BANCSHARES, INC.
20 South Main Street
Rittman, Ohio 44270
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS TO BE HELD ON
____________, 1998
TO SHAREHOLDERS OF CHIPPEWA VALLEY BANCSHARES, INC.:
Notice is hereby given that a special meeting of the shareholders of
Chippewa Valley Bancshares, Inc., an Ohio corporation and bank holding company
located in Rittman, Ohio ("Chippewa"), will be held at
________________________, Rittman, Ohio 44270, on __________, 1998, at ___:00
__.m., local time, to consider and take action upon:
1. A proposal to approve and adopt a Merger Agreement dated as of October
13, 1997 (the "Merger Agreement") by and between Chippewa and Wayne
Bancorp, Inc., an Ohio corporation and bank holding company ("Wayne"),
with such agreement providing for, among other things, the merger of
Chippewa with and into Wayne. Each outstanding share of Chippewa Common
Stock will be converted into Wayne Common Stock in accordance with the
terms of the Merger Agreement. As a result of the proposed merger,
Chippewa will be merged into Wayne.
2. SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE SPECIAL MEETING
AND ANY ADJOURNMENT THEREOF.
The record date for the meeting has been fixed at ____________, 199_.
Only the shareholders of record at the close of business on that date will be
entitled to notice of and to vote at the special meeting or any adjournment
thereof.
A favorable vote of at least sixty-six and two-thirds percent (66 2/3%)
of the outstanding shares of Chippewa Common Stock is required to approve the
Merger Agreement. Accordingly, each shareholder is urged to sign the enclosed
proxy card and return it promptly to Chippewa.
By order of the Board of Directors
Philip S. Swope
President
YOUR VOTE IS IMPORTANT. EVEN IF YOU PLAN TO ATTEND THE MEETING,
PLEASE DATE AND SIGN THE ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE
ENCLOSED ENVELOPE. IF YOUR STOCK IS HELD IN MORE THAN ONE NAME, ALL PARTIES
MUST SIGN THE PROXY FORM.
<PAGE> 1
Exhibit 99D - Form of Proxy Card for Special Meeting of Chippewa Valley
Bancshares, Inc.
PROXY FOR SPECIAL MEETING OF CHIPPEWA VALLEY BANCSHARES, INC.
RITTMAN, OHIO
KNOW ALL MEN BY THESE PRESENTS, that I, the undersigned shareholder of
Chippewa Valley Bancshares, Inc. ("Chippewa"), do hereby nominate,
constitute, and appoint _____________, ___________, and __________, or any
one of them, (with full power of substitution for me and in my name, place
and stead), to vote all the common stock of said Corporation, standing in
my name on its books on _______, 1997, at the Special Meeting of its
shareholders to be held at __________________________________, on
________1998, at _____ __.M. local time, or any adjournments thereof with
all the powers the undersigned would possess if personally present as
follows:
1. To ratify, confirm, approve and adopt, pursuant to Ohio Revised Code
Sections 1701.78 and 1701.831 a Merger Agreement dated as of October
13, 1997, (the "Agreement") by and between Chippewa and Wayne Bancorp,
Inc., an Ohio corporation and bank holding company ("Wayne"), with such
Agreement providing for, among other things, the merger of Chippewa
with and into Wayne. Each outstanding share of Chippewa Common Stock
will be converted into Wayne Common Stock in accordance with the terms
of the Agreement.
For |_| Against |_| Abstain |_|
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE PROPOSITION.
2. TO TRANSACT SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING
OR ANY ADJOURNMENT THEREOF.
This proxy confers authority to vote "FOR" the propositions listed above
unless "AGAINST" or "ABSTAIN" is indicated. If any other business is
presented at said meeting, this proxy shall be voted in accordance with the
recommendations of management. All shares represented by properly executed
proxies will be voted as directed.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS AND MAY BE
REVOKED PRIOR TO ITS EXERCISE BY EITHER WRITTEN NOTICE OR PERSONALLY AT THE
MEETING OR BY A SUBSEQUENTLY DATED PROXY.
Date:_______________________, 1998 ______________________________________
_______________________________ (L.S.)
(Signature(s) of Shareholder(s))
(When signing as Attorney, Executor, Administrator, Trustee, or Guardian,
please give full title. If more than one Trustee, all should sign. All
joint owners must sign.)
