EXECUTIVE COMPENSATION
REMUNERATION OF EXECUTIVE OFFICERS
The Company does not pay any compensation to its officers or employees.
Compensation is paid by the Bank only. For the President and Chief Executive
Officer of the Bank, and for any of the Bank's most highly compensated
executive officers who was serving as an executive officer of the Bank at the
end of fiscal year 1997 and whose total compensation (including salary and
bonus) exceeded $100,000, the following table sets forth information regarding
all forms of compensation paid or payable by the Bank for services in all
capacities for the years indicated (see "Management Changes in 1996" below):
SUMMARY COMPENSATION TABLE
Long-Term Compensation
Annual Compensation
Awards Payouts
Securities
Name and ($) Other Annual Underlying All Other
Principal Position Year Salary ($) Bonus Compensation ($) Options (#) LTIP Payouts ($) Compensation ($)
__________________ ____ __________ _____ ________________ ___________ ________________ ________________
G.W. Holden, 1997 $87,098 $4,500 - <F2> 8,125 - $5,194 <F3><F4>
President and Chief 1996 N/A - - - - -
Executive Officer <F1> 1995 N/A - - - - -
John O'Shea, 1997 $16,334 - - - - -
Interim President and 1996 $ 4,970<F5> - - - - -
Chief Executive Officer 1995 N/A - - - - -
until March 1, 1997<F1>
_______________________
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[FN]
<F1> Mr. Holden's service as President and Chief Executive Officer commenced
on March 1, 1997. Prior to commencement of service by Mr. Holden, Mr.
John O'Shea provided executive services to the Company and the Bank on an
as-needed basis. See "Management Changes in 1996."
<F2> Perquisites and other personal benefits did not exceed the lesser of
$50,000 or 10% of total salary and bonus.
<F3> The Bank has a split-dollar life insurance policy on the life of the
President and Chief Executive Officer. Under the terms of the policy,
the Bank is responsible for all of the premium costs but obtains a
security interest in the insurance proceeds in order to ensure that the
Bank is reimbursed for the cost of the premiums at the time proceeds
become payable or when the policy is cancelled. Allocation of the
proceeds of the split-dollar policy is as follows: the Bank is first re-
imbursed for its premium cost; the executive then receives an amount
that is calculated by reference to the executive's final compensation;
and the Bank receives the remainder of the proceeds, if any. Because
coverage under an existing policy on the life of the previous Chief
Executive Officer was transferred to a policy covering the life of Mr.
Holden (and the Bank was credited for the lump sum premium previously
paid for the former executive's policy), the split-dollar life insurance
policy obtained by the Bank on the life of Mr. Holden represented no
additional cost to the Bank. The Bank did not obtain a split-dollar
policy on the life of Mr. O'Shea.
<F4> Bank contributions in 1997 to defined contribution plans on behalf of Mr.
Holden consisted of a $2,346 matching contribution and a $2,613
discretionary contribution under the 401(k) retirement plan. Mr. O'Shea
was not a participant in the defined contribution plans.
<F5> Mr. O'Shea entered into a contract dated December 9, 1996 whereby Mr.
O'Shea provided executive services to the Company and the Bank on an
as-needed basis, for up to 250 hours, with compensation at an hourly rate
of $75 per hour. The contract provided by its terms that it would
terminate no later than March 31, 1997. The amount shown was earned in
1996 and paid in 1997. The amounts shown in the table as compensation
paid to Mr. O'Shea do not reflect fees paid to his firm, Banking
$olutions, for consulting services in any of the years presented in the
table. Such consulting fees were negotiated at arm's length and, in the
Company's and the Bank's opinion, were consistent in amount and in their
terms with prevailing industry standards. The Bank paid to Banking
$olutions consulting fees of approximately $22,371 in 1997, $18,283 in
1996 and none in 1995.
1997 STOCK OPTION AND INCENTIVE PLAN
The following table provides information concerning grants of stock
options in 1997 under the Company's 1997 Stock Option and Incentive Plan to
the executive officers named in the summary compensation table.
Number of Percent of Total
Securities Options Granted
Underlying to Employees in Exercise or Base Expiration
Name Options Granted (#) Fiscal Year Price ($/Sh) Date
____ ___________________ ___________ ____________ ____
G.W. Holden 8,125 100% $44 April 23, 2007
John O'Shea 0 0 N/A N/A
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The 1997 Stock Option and Incentive Plan was adopted in 1997. The
options shown in the preceding table were granted effective April 23, 1997,
becoming exercisable in five equal annual installments, beginning in 1998. No
options granted under the 1997 Stock Option and Incentive Plan are exercisable
as of the date hereof.
The following table shows the number of shares of Common Stock acquirable
upon exercise of options by the individuals named in the Summary Compensation
Table above. The table also indicates the extent to which such options were
exercisable at December 31, 1997, as well as the approximate value of such
options based on the fair market value of the Common Stock at December 31,
1997.
Securities Underlying Value of Unexercised In-The-
Unexercised Options at Fiscal Money Options at Fiscal Year
Year End (#) End ($) <F1>
Shares Acquired on
Name Exercise (#) Value Realized ($) Exercisable Unexercisable Exercisable Unexercisable
____ ____________ __________________ ___________ _____________ ___________ _____________
G.W. Holden 0 0 0 8,125 0 $0
John O'Shea 0 0 0 0 0 0
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[FN]
<F1> In general, a stock option is "in-the-money" when the stock's fair market
value exceeds the option exercise price. Value of unexercised options
equals the estimated fair market value of a share acquirable upon
exercise of an option at December 31, 1997, less the exercise price,
multiplied by the number of shares acquirable upon exercise of the
options. The Common Stock is quoted on the NASD's OTC Bulletin Board.
However, the shares of Common Stock are not actively traded. Therefore,
very limited price data are available. Solely for purposes of the
preceding table and for no other purpose, the Company has estimated the
per share fair market value of the Common Stock at December 31, 1997 as
$44. This figure is based upon prices paid for known sales occurring
at or about this time. Shareholders are cautioned that the foregoing
figure is an estimate only. The estimate does not necessarily reflect
the price shareholders may obtain upon sale of their stock or the price
at which shares of Common Stock may be acquired, nor should such estimate
be taken to represent management or the Board of Directors' estimate of
the intrinsic value of the shares of Common Stock.
MANAGEMENT CHANGES IN 1996
Mr. Robert L. Morton retired as President and Chief Executive Officer on
May 14, 1996. Mr. Phillip W. Gerber thereafter served as Interim President
and Chief Executive Officer until his resignation on or about December 6,
1996. On November 15, 1996, the Bank and the Company entered into an
employment agreement with Mr. G.W. Holden whereby Mr. Holden serves as the
Company's and the Bank's President and Chief Executive Officer. Mr. Holden's
service as President and Chief Executive Officer commenced March 1, 1997.
Following resignation of Mr. Gerber as Interim President and Chief
Executive Officer, Mr. John O'Shea performed executive services on behalf of
the Company and the Bank on an interim, as-needed basis. Mr. O'Shea is the
owner of a Marion, Ohio consulting firm, Banking $olutions. Prior to forming
Banking $olutions in 1995, Mr. O'Shea had served as President and Chief
Executive Officer of a bank in Marion, Ohio, retiring in 1995 after a
thirty-year banking career that also included service as President and Chief
Executive Officer of banks in Coshocton, Portsmouth and Milford, Ohio. Mr.
O'Shea's service was temporary only, providing various executive services to
the Company and the Bank until Mr. Holden's service as President and Chief
Executive Officer formally commenced. Mr. O'Shea's services included
monitoring and supervision of the Bank's day-to-day operations, supervising
Bank investment activities, participating in lending decisions, supervising
preparation of the Bank's annual financial statements and preparation of
financial disclosures for the Company's 1996 Annual Report and attending
meetings of the Board of Directors of the Company and the Bank. From time to
time the Bank has engaged Mr. O'Shea to provide consulting services to the
Bank, and the Bank may continue to do so hereafter on the same terms and
circumstances under which the Bank, like other financial institutions,
generally seeks the assistance of outside consultants on various matters
within their expertise. Banking $olutions currently performs loan review
services for the Bank on a quarterly basis pursuant to a consulting contract.
The Company and the Bank entered into an employment agreement dated
November 15, 1996 with Mr. Holden (the "Employment Agreement"). The
Employment Agreement provides for a base salary of $90,000 during its term,
together with an annual bonus based upon satisfaction of performance goals and
the grant of options pursuant to the Company's 1997 Stock Option and Incentive
Plan. The Employment Agreement also provided financial assistance for Mr.
Holden's relocation to the Bucyrus, Ohio area and hourly compensation for his
service to the Bank prior to formal commencement of the Employment Agreement's
term. Under the employment agreement, Mr. Holden is entitled to an annual
bonus calculated by reference to the Bank's performance goals for the year, as
follows: a bonus of $4,500 if the Bank achieves 100% of its performance goals
for the year; $9,000 if the Bank achieves 110% of its performance goals;
$13,500 if the Bank achieves 120% and $18,000 if the Bank achieves 130% of its
performance goals. For this purpose, "performance goals" means goals for net
income after taxes and satisfaction of certain other criteria, including
favorable results of periodic bank examinations by regulatory authorities.
Pursuant to the terms of his employment agreement, effective April 23, 1997
Mr. Holden was granted a ten-year incentive stock option to acquire 8,125
shares of Company common stock, which option vests and becomes exercisable in
equal annual installments over a period of five years.
With an original term of two years commencing no later than March 31,
1997, the Employment Agreement automatically renews for successive one-year
periods, unless sooner terminated, beginning on the second anniversary of
commencement of the Employment Agreement's original term. In early 1998, the
Employment Agreement was renewed and extended by Board action, effective March
31, 1998. The effect of the renewal and extension is that the Employment
Agreement has a new two-year term.
Except in the case of termination for cause, the Employment Agreement
provides that Mr. Holden would be entitled to a lump sum payment in the amount
of $100,000 in the event his employment is terminated during the term of the
Employment Agreement (and, in the event of termination with or without cause,
his rights and interests in and to any split-dollar life insurance obtained by
the Company or the Bank would terminate). A material reduction in his salary
or benefits, transfer to a location outside Crawford County or significant
change in his status or responsibilities could be treated by Mr. Holden under
the Employment Agreement as a termination without cause.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE NOMINEES IDENTIFIED HEREIN
RATIFICATION OF INDEPENDENT AUDITOR
The Company's independent auditor for the fiscal year ended December 31,
1997 was Robb, Dixon, Francis, Davis, Oneson & Company. The Board of
Directors has selected Robb, Dixon, Francis, Davis, Oneson & Company to be its
independent auditor for the fiscal year ending December 31, 1998. This
appointment is being presented to the shareholders for ratification.
One or more members of the firm of Robb, Dixon, Francis, Davis, Oneson &
Company are expected to be present at the Meeting. The representative(s) of
the independent auditor will have the opportunity to make a statement if
desired, and will be available to respond to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" RATIFICATION OF
THE APPOINTMENT OF ROBB, DIXON, FRANCIS, DAVIS, ONESON & COMPANY AS
INDEPENDENT AUDITOR FOR THE FISCAL YEAR ENDING DECEMBER 31, 1998
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