SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
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RURBAN FINANCIAL CORP.
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(Name of Person(s) Filing Proxy Statement)
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March 24, 2003
Dear Shareholder,
The directors, management and employees of Rurban Financial Corp. will remember
the year 2002 as one of discovery and challenge. Early in the year we became
aware of numerous, serious deficiencies in the organization that had not been
previously reported to us.
Changes were quickly implemented which resulted in new senior management of the
holding company and both lead banks. During the past nine months this group has
worked diligently to analyze every part of the organization and began
implementing the changes necessary to fix it. To date their work has given us
confidence in both their abilities and integrity.
The board's goal, and the charge to our management, is simply to rebuild the
best community banking organization possible and to do that from the foundation
up. Once this process is completed we believe the result will be positive growth
of the investment of all shareholders, including ourselves.
This rebuilding effort will be in our primary market areas of Defiance, Paulding
and Fulton Counties. It is important to note that in 2002 RDSI continued its
solid and consistent earnings performance and we are confident that it will
continue as an outstanding growth company for Rurban.
The Rurban Board takes our responsibilities as your representatives seriously
and was sickened as we discovered the depth of the loan problems that surfaced
in 2002. That said, we have restructured everything from our board committees to
our internal loan review processes as we work toward rebuilding the company.
We appreciate every opportunity to communicate with you. Your comments and
suggestions are always appreciated and we are eager to listen. Please feel free
to provide feedback on our progress by emailing us at rfcinv@rurban.net.
We look forward to talking with you at the Rurban Annual Shareholders meeting on
April 28, 2003 at the Knights of Columbus Hall in Defiance. The meeting is
scheduled for 10 a.m.
Sincerely,
RURBAN FINANCIAL CORP.
/s/ Steve Vandemark
Steve Vandemark Thomas M. Callan John R. Compo
Chairman
John Fahl Robert A. Fawcett, Jr. Eric C. Hench
Gary A. Koester J. Michael Walz, D.D.S. Kenneth A. Joyce
RURBAN FINANCIAL CORP.
401 CLINTON STREET
DEFIANCE, OHIO 43512
(419) 783-8950
---------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
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Defiance, Ohio
March 24, 2003
To the Shareholders of
Rurban Financial Corp.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of the Shareholders (the
"Annual Meeting") of Rurban Financial Corp. (the "Company") will be held at the
Knights of Columbus Hall ("K of C Hall"), 111 Elliott Lane, Defiance, Ohio, on
Monday, April 28, 2003, at 10:00 a.m., local time, for the following purposes:
1. To elect three (3) directors to serve for terms of three (3) years
each.
2. To transact such other business as may properly come before the Annual
Meeting and any adjournment(s) thereof.
Shareholders of record at the close of business on March 3, 2003 will be
entitled to receive notice of, and to vote at, the Annual Meeting and any
adjournment(s) thereof.
You are cordially invited to attend the Annual Meeting. The vote of each
shareholder is important, whatever the number of common shares held. Whether or
not you plan to attend the Annual Meeting, please sign, date and return your
proxy promptly in the enclosed envelope. If you attend the Annual Meeting and
desire to revoke your proxy, you may do so and vote in person. Attendance at the
Annual Meeting will not, in and of itself, constitute revocation of a proxy.
By Order of the Board of Directors,
/s/ Kenneth A. Joyce
Kenneth A. Joyce
President and Chief Executive Officer
RURBAN FINANCIAL CORP.
401 CLINTON STREET
DEFIANCE, OHIO 43512
(419) 783-8950
PROXY STATEMENT
This Proxy Statement and the accompanying proxy are being mailed to
shareholders of Rurban Financial Corp., an Ohio corporation (the "Company"), on
or about March 24, 2003, in connection with the solicitation of proxies by the
Board of Directors of the Company for use at the Annual Meeting of Shareholders
of the Company (the "Annual Meeting") called to be held on Monday, April 28,
2003, or at any adjournment(s) thereof. The Annual Meeting will be held at 10:00
a.m., local time, at the Knights of Columbus Hall ("K of C Hall"), 111 Elliott
Lane, Defiance, Ohio.
The Company's wholly-owned subsidiaries include: (1) The State Bank and
Trust Company, Defiance, Ohio ("State Bank"); (2) RFC Banking Company ("RFCBC"),
which is comprised of the following banking divisions: The Peoples Banking
Company, Findlay, Ohio ("Peoples Bank"), The First Bank of Ottawa, Ottawa, Ohio
("Ottawa") and The Citizens Savings Bank Company, Pemberville, Ohio
("Citizens"); (3) Rurbanc Data Services, Inc., Defiance, Ohio ("RDSI"); and (4)
Rurban Life Insurance Company, Defiance, Ohio ("Rurban Life"). State Bank has
two-wholly owned subsidiaries, Reliance Financial Services, N.A. ("RFS"), a
nationally-chartered trust and financial services company and Rurban Mortgage
Company ("RMC"), an Ohio corporation and mortgage company with its principle
offices located in Defiance, Ohio. The Company has entered into written
agreements providing for the sale of the three divisions that make up RFCBC
headquartered in Findlay. The sale of these divisions is subject to regulatory
approval and other customary conditions to closing.
A proxy for use at the Annual Meeting accompanies this Proxy Statement and
is solicited by the Board of Directors of the Company. A shareholder of the
Company may use his proxy if he is unable to attend the Annual Meeting in person
or wishes to have his common shares voted by proxy even if he does attend the
Annual Meeting. Without affecting any vote previously taken, any shareholder
executing a proxy may revoke it at any time before it is voted by (1) filing
with the Secretary of the Company, at the address of the Company set forth on
the cover page of this Proxy Statement, written notice of such revocation; (2)
executing a later-dated proxy which is received by the Company prior to the
Annual Meeting; or (3) attending the Annual Meeting and giving notice of such
revocation in person. Attendance at the Annual Meeting will not, in and of
itself, constitute revocation of a proxy.
Only shareholders of the Company of record at the close of business on
March 3, 2003 (the "Record Date") are entitled to receive notice of, and to vote
at, the Annual Meeting and any adjournment(s) thereof. At the close of business
on the Record Date, 4,565,721 common shares were outstanding and entitled to
vote. Each common share of the Company entitles the holder thereof to one vote
on each matter to be submitted to shareholders at the Annual Meeting. A quorum
for the Annual Meeting is a majority of the outstanding common shares.
The Company's common shares are listed on the NASDAQ National Market.
Common shares represented by signed proxies that are returned to the Company
will be counted toward the quorum in all matters even though they are marked
"Abstain," "Against" or "Withhold Authority" on one or more or all matters or
they are not marked at all. Broker/dealers who hold their customers' common
shares in street name may, under the applicable rules of the self-regulatory
organizations of which the broker/dealers are members, sign and submit proxies
for such common shares and may vote such common shares on routine matters,
which, under such rules, typically include the election of directors, but
broker/dealers may not vote such common shares on other matters, which typically
include amendments to the articles of incorporation of a corporation and the
approval of certain stock compensation plans, without specific instructions from
the customer who owns such common shares. Proxies signed and submitted by
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broker/dealers which have not been voted on certain matters as described in the
previous sentence are referred to as broker non-votes. Such proxies count toward
the establishment of a quorum.
The Company will bear the costs of preparing and mailing this Proxy
Statement, the accompanying proxy and any other related materials and all other
costs incurred in connection with the solicitation of proxies on behalf of the
Board of Directors. Proxies will be solicited by mail and may be further
solicited, for no additional compensation, by officers, directors or employees
of the Company and its subsidiaries by further mailing, by telephone or by
personal contact. The Company will also pay the standard charges and expenses of
brokerage houses, voting trustees, banks, associations and other custodians,
nominees and fiduciaries, who are record holders of common shares not
beneficially owned by them, for forwarding such materials to and obtaining
proxies from the beneficial owners of such common shares.
The Annual Report to the Shareholders of the Company for the fiscal year
ended December 31, 2002 (the "2002 fiscal year") is enclosed herewith.
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
As of the Record Date, other than the Employee Stock Ownership Plan and
Savings Plan of Rurban Financial Corp., no person or entity had beneficial
ownership of more than 5% of the outstanding common shares of the Company.
The following table sets forth, as of the Record Date, certain information
concerning the beneficial ownership of common shares by each director of the
Company, by each person nominated for election as a director of the Company, by
each of the executive officers named in the Summary Compensation Table and by
all current executive officers and directors of the Company as a group:
Amount & Nature Common Shares Which Percent
Name of of Beneficial Can Be Acquired Upon of
Beneficial Owner Ownership (1) Exercise of Options Total Class (2)
---------------- ------------- ------------------- ----- ---------
(Exercisable within
60 Days)
Rurban Financial Corp.
Employee Stock Ownership
& Savings Plan 643,379 0 643,379 14.09%
Thomas A. Buis 2,610 (3) 1,692 4,302 (4)
Richard C. Burrows 42,851 (5) 2,316 45,167 (4)
Thomas M. Callan 35,388 (6) 1,692 37,080 (4)
John R. Compo 41,222 (7) 4,600 45,822 (4)
Robert W. Constien 27,723 (8) 10,038 37,761 (4)
John Fahl 13,832 4,600 18,432 (4)
Robert A. Fawcett, Jr. 6,389 (9) 4,600 10,989 (4)
Eric C. Hench 17,995 (10) 4,600 22,595 (4)
Kenneth A. Joyce 9,995 (11) 10,038 20,033 (4)
Gary A. Koester 1,514 1,692 3,206 (4)
Steven D. VanDemark 13,865 (12) 6,132 19,997 (4)
J. Michael Walz, D.D.S. 24,429 (13) 4,600 29,029 (4)
Richard C. Warrener 7,555 10,038 17,593 (4)
Thomas C. Williams 0 0 0 (4)
All current executive officers and 955,385 (14) 20.93%
directors as a group (14 persons)
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(1) Unless otherwise noted, the beneficial owner has sole voting and investment
power with respect to all of the common shares reflected in the table.
(2) The percent of class is based upon 4,565,721 common shares outstanding on
the Record Date.
(3) Does not include 1,707 common shares held in the name of Mr. Buis' wife, as
to which she exercises sole voting and investment power.
(4) Reflects ownership of less than 1% of the outstanding common shares of the
Company.
(5) Does not include 6,888 common shares held in a trust for the benefit of the
wife of Mr. Burrows as to which she exercises sole voting and investment
power.
(6) Includes 30,730 common shares held in a trust for the benefit of the wife
of Mr. Callan as to which he exercises shared voting and investment power.
(7) Does not include 2,756 common shares held in Mr. Compo's wife name, as to
which she exercises sole voting and investment power.
(8) Does not include 10 common shares held in the name of Mr. Constien's wife,
as to which she exercises sole voting and investment power.
(9) Includes 6,389 common shares held by the Robert A. Fawcett Jr. Trust as to
which Mr. Fawcett has sole voting and investment power.
(10) Includes 17,995 common shares held by the Eric C. Hench Agency Trust as to
which Mr. Hench has sole voting and investment power.
(11) Includes 1,816 common shares held jointly by Mr. Joyce and his wife, as to
which he exercises shared voting and investment power.
(12) Includes 4,390 common shares held jointly by Mr. VanDemark and his wife, as
to which he exercises shared voting and investment power. Also includes
4,132 common shares held in the names of Mr. VanDemark's children for which
Mr. VanDemark is custodian.
(13) Does not include 206 common shares held in IRA for the benefit of the wife
of Dr. Walz, as to which she exercises sole voting and investment power.
Includes 21,100 common shares held in the Krouse Evans Inc. Profit Sharing
Plan, as to which Dr. Walz exercises shared voting and investment power
with Reliance Financial Services, N.A. and includes 531 common shares held
by Dr. Walz and his spouse to which Dr. Walz exercises shared voting and
investment power.
(14) Also includes an aggregate of 64,131 common shares allocated to the
respective accounts of executive officers of the Company in the Employee
Stock Ownership Plan ("ESOP"). Does not include common shares held by wives
of executive officers and directors if such wives exercise sole voting and
investment powers.
To the Company's knowledge, based solely on a review of the copies of the
reports furnished to the Company and written representations that no other
reports were required during the 2002 fiscal year, all filing requirements
applicable to officers, directors and owners of more than 10% of the outstanding
common shares of the Company under Section 16(a) of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), were complied with except that Mr.
VanDemark inadvertently failed to file a
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Form 4 relating to the purchase of 986 shares in September, 2002. A Form 5 was
filed on February 12, 2003 reporting this purchase.
ELECTION OF DIRECTORS
In accordance with Article FIFTH of the Amended Articles of Incorporation
of the Company (the "Amended Articles") and Section 2.02 of the Amended
Regulations of the Company (the "Amended Regulations"), three (3) directors are
to be elected for terms of three (3) years each and until their respective
successors are elected and qualified. The three directors standing for election
as directors of the Company are Thomas A. Buis, Kenneth A. Joyce and J. Michael
Walz.
It is the intention of the persons named in the accompanying proxy to vote
the common shares represented by the proxies received pursuant to this
solicitation for the nominees named below who have been designated by the Board
of Directors, unless otherwise instructed on the proxy.
The following table gives certain information concerning each nominee for
election as a director of the Company. Unless otherwise indicated, each person
has held his principal occupation for more than five years.
Director of the
Position(s) Held with the Company Nominee
Company and its Subsidiaries Continuously for Term
Nominee Age and Principal Occupation(s) Since Expiring in
------- --- ------------------------------- --------------- -----------
Thomas A. Buis 64 Chairman of Spencer-Patterson 2001 2006
Agency Inc., Findlay, Ohio, a
general insurance agency since
January 2000; President of
Spencer-Patterson Agency Inc. from
1975 to January 2000; Director of
Peoples Bank of RFCBC since 1990;
Director of RFS since 2002.
Kenneth A. Joyce 55 President and Chief Executive 2002 2006
Officer of the Company since August
2002; Chairman and Chief Executive
Officer of RDSI since October 1997;
Director of State Bank since 2002;
Director of RFCBC since 2002.
J. Michael Walz, D.D.S. 59 General Dentist in Defiance, Ohio; 1992 2006
Director of State Bank since 1989;
Director of RFS since 1997.
While it is contemplated that all nominees will stand for election, if one
or more of the nominees at the time of the Annual Meeting should be unavailable
or unable to serve as a candidate for election as a director of the Company, the
proxies reserve full discretion to vote the common shares represented by the
proxies for the election of the remaining nominees and any substitute nominee(s)
designated by the Board of Directors. The Board of Directors knows of no reason
why any of the above-mentioned persons will be unavailable or unable to serve if
elected to the Board. Under Ohio law and the Company's Regulations, the three
nominees receiving the greatest number of votes will be elected as directors.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF THE ABOVE NOMINEES.
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The following table gives certain information concerning the current
directors whose terms will continue after the Annual Meeting. Unless otherwise
indicated, each person has held his principal occupation for more than five
years.
Director of the
Position(s) Held with the Company Term
Company and its Subsidiaries Continuously Expires
Name Age and Principal Occupation(s) Since In
---- --- ------------------------------- --------- -------
Thomas M. Callan 60 President of Defiance Stamping 2001 2004
Company; Director of State Bank since
1996.
John R. Compo 58 Chairman of Board and President of 1987 2005
Compo Corporation, Defiance, Ohio, an
automotive parts manufacturer and
wholesaler; Director of State Bank
since 1985 and of Rurban Life since
1995.
John Fahl 66 Retired in 2001 as President, Tire 1996 2005
Operations, and a Director, of Cooper
Tire & Rubber Company Findlay, Ohio, a
tire and rubber manufacturing company;
Director of Peoples Bank of RFCBC
since 1994.
Robert A. Fawcett, Jr. 61 Partner, Fawcett, Lammon, Recker and 1992 2005
Associates, Inc., Ottawa, Ohio, sales
and service of property and casualty
insurance policies since 1998;
Director of Ottawa of RFCBC since 1982.
Eric C. Hench 49 Chairman of Chief Supermarkets, Inc. 1997 2004
since June 2000; Chief Executive
Officer of Chief Supermarkets, Inc.
and Sun Management Services from 1990
to June 2000; Director of RDSI from
1990 to October of 1997; Director of
State Bank since 1985.
Gary A. Koester 42 President of Koester Metals, Inc., a 2001 2004
quality electrical enclosures and
precision sheet metal fabrication
company and privately held "S"
corporation. Owner since January
1992; Director of RDSI since 1997.
Steven D. VanDemark 50 General Manager of Defiance Publishing 1991 2004
Company, Defiance, Ohio a newspaper
publisher; Chairman of the Board of
the Company; Director of State Bank
since 1990; Chairman of the Board of
State Bank since 1992; Director of
RFCBC since 2001; Director of RDSI
since 1997.
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There are no family relationships among any of the directors, nominees for
election as directors or executive officers of the Company.
The Board of Directors of the Company held a total of twenty-six meetings
during the Company's 2002 fiscal year. This total does not include monthly
subsidiary board meetings and various other subsidiary committee meetings of
which these directors also attend. Each incumbent director attended 75% or more
of the aggregate of the total number of meetings held by the Board of Directors
and meetings of committees on which he served.
The Board of Directors of the Company has an Executive-Compliance Committee
comprised of John R. Compo, Robert A. Fawcett, Jr., Eric C. Hench, Steven D.
VanDemark, J. Michael Walz D.D.S. and Kenneth A. Joyce. The function of the
Executive-Compliance Committee is to act on behalf of the Board of Directors
between regularly scheduled meetings of the Board of Directors and to monitor
corporate compliance with applicable laws and regulations. The
Executive-Compliance Committee met ten times during the 2002 fiscal year.
The Board of Directors of the Company has a Governance Committee (formerly
referred to as the Director's Committee) comprised of Thomas A. Buis, Robert A.
Fawcett, Jr., Gary A. Koester, J. Michael Walz, D.D.S. and Steven D. VanDemark.
The function of the Governance Committee is to review the role, composition and
structure of the Board and its committees as well as directors' compensation. It
also reviews and evaluates Board members for the Company as well as the
respective Boards of Directors of the Company's subsidiaries in determining the
annual directors' slate and identifies new director nominees. The Governance
Committee met once during the 2002 fiscal year.
The Board of Directors of the Company also has a Compensation Committee
comprised of John R. Compo, John Fahl, Eric C. Hench, Steven D. VanDemark and J.
Michael Walz, D.D.S. The function of the Compensation Committee is to review and
recommend to the Board of Directors of the Company, the salary, bonus and other
cash compensation to be paid to, and the other benefits to be received by, the
President and Chief Executive Officer of the Company and the other executive
officers of the Company. The Compensation Committee met two times during the
2002 fiscal year.
The Board of Directors of the Company has an Audit Committee comprised of
Thomas M. Callan, Robert A. Fawcett, Jr., Eric C. Hench and Gary A. Koester. In
addition, Todd Taylor, a Director of RDSI serves as an advisor to the Audit
Committee. The function of the Audit Committee is to review the adequacy of the
Company's system of internal controls and risk management, to investigate the
scope and adequacy of the work of the Company's independent and internal
auditors and to evaluate and recommend to the Board of Directors a firm of
accountants to serve as the Company's independent auditors. The Audit Committee
met thirteen times during the 2002 fiscal year.
The Board of Directors of the Company also has an independent Loan Review
Committee comprised of Thomas A. Buis, Thomas M. Callan and J. Michael Walz. The
function of the Loan Review Committee is to assist the board of directors in
fulfilling its oversight responsibilities of credit quality in subsidiary banks
and is comprised of independent, outside directors who are not involved in the
loan approval process at subsidiary banks. The Loan Review Committee met five
times during the 2002 fiscal year.
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REPORT OF THE AUDIT COMMITTEE
GENERAL
In accordance with the written Audit Committee Charter adopted by the
Company's Board of Directors, the Audit Committee assists the board in
fulfilling their responsibility for oversight of the quality and integrity of
the accounting, auditing and financial reporting practices of the Company. Each
member of the Audit Committee qualifies as independent under applicable
Securities and Exchange Commission and Nasdaq regulations. The Board of
Directors of the Company adopted the charter of the Audit Committee in April
1999 and amended the Audit Committee Charter to its current form on May 14,
2002. The Audit Committee Charter is included at the end of the proxy statement
as APPENDIX A.
CHANGE OF INDEPENDENT AUDITOR
On September 24, 2002, the Company announced that it had retained BKD, LLP
("BKD") as its principal accountants (independent auditors) effective November
15, 2002. BKD replaced Crowe, Chizek and Company LLP ("Crowe") which had served
as the company's independent auditor since 1988. The Company filed a Form 8-K
with the Securities and Exchange Commission disclosing the change as required by
federal securities law.
The decision was not the result of any disagreement between Rurban and
Crowe on any matter of accounting principles or practices, financial statement
disclosure, or auditing scope or procedure. The change in independent auditors
was recommended by Rurban's Audit Committee and approved by the Board of
Directors on September 18, 2002. BKD was selected based on the results of an
extensive proposal and interview process to evaluate several well qualified
accounting firms.
The Company also retained the services of Plante & Moran, LLP to perform an
independent loan review. Plante & Moran was selected by the Audit Committee and
approved by the Board of Directors based on the results of a similar search
process which involved the review of proposals and interviews of several
well-qualified firms.
REVIEW AND DISCUSSION WITH INDEPENDENT ACCOUNTANTS AND AUDITORS
In discharging its oversight responsibility as to the audit process, the
Audit Committee obtained from BKD, a formal written statement describing all
relationships between the Company and BKD that might bear on BKD's independence
consistent with Independence Standards Board Standard No. 1, Independence
Discussions with Audit Committees, discussed with BKD any relationships or
services that may impact the objectivity and independence of BKD and satisfied
itself as to BKD's independence. The Audit Committee also discussed with
management and BKD the adequacy and effectiveness of the Company's internal
accounting and financial controls. In addition, the Audit Committee discussed
and reviewed with BKD all communications required by auditing standards
generally accepted in the United States of America, including those described in
Statement on Auditing Standards No. 61, Communication with Audit Committees, as
amended, and, with and without management present, discussed and reviewed the
results of BKD's examination of the financial statements.
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REVIEW WITH MANAGEMENT
The Audit Committee reviewed and discussed the audited consolidated
financial statements of the Company as of and for the fiscal year ended December
31, 2002 with management. Management has the responsibility for the preparation
of the Company's consolidated financial statements and BKD has the
responsibility for the audit of those statements.
AUDIT FEES
The aggregate fees billed for professional services rendered by BKD for the
audit of the Company's annual consolidated financial statements for the 2002
fiscal year and the reviews of the consolidated financial statements included in
the Company's Quarterly Reports on Form 10-Q for the 2002 fiscal year
(collectively, the "Audit Services") were $88,500.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES
BKD did not render any of the professional services described in Paragraph
(c)(4)(ii) of Rule 2-01 of Regulation S-X (17 VFR 210.2-01(c)(4)(ii)) (the
"Financial Information Systems Design and Implementation Services") during the
2002 fiscal year for the Company or its subsidiaries.
ALL OTHER FEES
The aggregate fees billed for services rendered by BKD, other than Audit
Services and Financial Information Systems Design and Implementation Services,
for the 2002 fiscal year (the "Other Services") were $9,865.
CONCLUSION
Based on the reviews and discussions with management and BKD noted above,
the Audit Committee recommended to the Board of Directors that the Company's
audited consolidated financial statements be included in the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 2002 to be filed with
the SEC and the Board approved such recommendation. The Audit Committee also
determined that the provision of the Other Services was compatible with
maintaining BKD's independence.
Submitted by the Audit Committee of the Company's Board of Directors.
Robert A. Fawcett, Jr., Chairman, Thomas M. Callan, Eric C. Hench and Gary A,
Koester
TRANSACTIONS INVOLVING MANAGEMENT
During the Company's 2002 fiscal year, the Company's subsidiaries including
State Bank, RFCBC, RFS and RMC entered into banking-related transactions, in the
ordinary course of their respective businesses, with certain executive officers
and directors of the Company (including certain executive officers of the
Company's subsidiaries), members of their immediate families and corporations or
organizations with which they are affiliated. It is expected that similar
transactions will be entered into in the future. Loans to such persons have been
made on substantially the same terms, including the interest rate charged and
collateral required, as those prevailing at the time for comparable transactions
with persons not affiliated with the Company or its subsidiaries and all such
loans comply with Regulation O of the federal banking laws and comparable laws
of the State of Ohio. These loans have been, and are presently, subject to no
more than a normal risk of uncollectibility and present no other
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unfavorable features. The amount of loans to directors and executive officers of
the Company (including certain executive officers of the Company's subsidiaries)
and their associates as a group at December 31, 2002, was $7,169,881. As of the
date hereof, all of such loans were performing loans.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Steven D. VanDemark, who is Chairman of the Board of the Company, is a
member of the Compensation Committee of the Company's Board of Directors. Other
members of the Company's Compensation Committee are John R. Compo, Eric C.
Hench, J. Michael Walz, D.D.S. and John Fahl, Chairman.
REPORT ON EXECUTIVE COMPENSATION
Notwithstanding anything to the contrary set forth in any of the Company's
previous filings under the Securities Act of 1933, as amended, or the Exchange
Act, that might incorporate future filings, including this Proxy Statement, in
whole or in part, this Report and the performance graph set forth on pages 16
and 17 shall not be incorporated by reference into any such filings.
Kenneth A. Joyce, current President and Chief Executive Officer of the
Company, Richard C. Burrows, Interim President and Chief Executive Officer of
the Company, Thomas C. Williams, former President and Chief Executive Officer of
the Company, Robert W. Constien, Senior Executive Vice President and Chief
Operating Officer of the Company, President and Chief Executive Officer of State
Bank and Chief Executive Officer of RFS and Richard C. Warrener, Executive Vice
President and Chief Financial Officer of the Company, received compensation from
the Company for services rendered during the 2002 fiscal year as executive
officers of the Company.
Kenneth A. Joyce is also Chairman and Chief Executive Officer of RDSI and
was paid by RDSI for services rendered in his capacity as an executive officer
of RDSI during fiscal year 2002 prior to being appointed President and Chief
Executive Officer of the Company.
During 2002, Mr. Joyce, Mr. Williams, Mr. Constien and Mr. Warrener
participated in the various compensation plans of the Company addressed below.
The Board of Directors has directed the Compensation Committee to develop,
implement and maintain an Executive Compensation Program that supports the
overall objectives and performance of the Company; provides compensation levels
that enable the organization to attract, retain and reward competent executive
officers; and meets all regulatory requirements. The Compensation Committee is
comprised of five outside directors including, Steven D. VanDemark, who also
serves as Chairman of the Board of the Company, John R. Compo, Eric C. Hench, J.
Michael Walz, D.D.S. and its Chairman, John Fahl. The Compensation Committee
reviews and recommends to the full Board the salaries, bonuses and other cash
compensation to be paid to, and the other benefits to be received by, the
executive officers of the Company. During 2002, no compensation decisions by the
Compensation Committee were modified or rejected in any material way by the full
Board.
COMPENSATION POLICIES TOWARD EXECUTIVE OFFICERS
In determining the compensation of the executive officers of the Company,
the Compensation Committee has sought to create a compensation program which is
competitive with programs of a peer group of similar organizations and that
links compensation to financial performance, rewards above-average corporate
performance and recognizes individual contributions and achievements. There are
two components of the annual cash compensation program for the executive
officers of the Company: (1) a base salary component; and (2) an incentive bonus
component payable under the Rurban Financial Corp.
9
Incentive Compensation Plan (the "Company Bonus Plan") which directly links the
bonus to be paid to the financial performance of the Company.
During 2001 and 2002, the Compensation Committee utilized the services of
L.R. Webber Associates, Inc. ("Webber"), a regionally recognized independent
compensation consulting company, to review and to make recommendations regarding
the competitiveness and effectiveness of the Company's executive compensation
program. As part of that review, Webber was requested to review executive
compensation programs of banking organizations that shared one or more common
traits with the Company (such as asset size and geographic location). The
information and recommendations of Webber have been utilized by the Compensation
Committee and the Board of Directors.
SALARIES
The determination of the base salaries of the executive officers of the
Company is based upon an overall evaluation of a number of factors, including a
subjective evaluation of individual performance, contributions to the Company
and its subsidiaries, experience and an analysis of how the Company's
compensation of its employees compares to compensation of individuals holding
comparable positions with bank holding companies of similar asset size and
complexity of operations. In addition, prior to him being appointed President
and Chief Executive Officer of the Company, the determination of the base salary
of Mr. Joyce also took into account the compensation of individuals holding
comparable positions with bank data processing companies. Peer group
compensation was the primary factor in setting of the salary of the executive
officers of the Company.
The salary paid to Mr. Joyce for services rendered in his capacities as
President and Chief Executive Officer of the Company and to Mr. Burrows for
services rendered in his capacities as Interim President and Chief Executive
Officer during the 2002 fiscal year was approved by the Compensation Committee.
Mr. Joyce was appointed President and Chief Executive Officer of the Company on
August 2, 2002. Mr. Burrows was appointed Interim President & Chief Executive
Officer of the Company on April 25, 2002.
The salary paid to Mr. Constien for services rendered in his capacities as
President and Chief Executive Officer of State Bank during the 2002 fiscal year
represented no increase over salaries paid with respect to the 2001 fiscal year.
The salary paid to Mr. Warrener for services rendered in his capacities as
Executive Vice President and Chief Financial Officer of the Company during the
2002 fiscal year represented no increase over the salary paid to Mr. Warrener
with respect to the 2001 fiscal year.
The salary paid to Mr. Williams for services rendered in his capacities as
President and Chief Executive Officer of the Company during the 2002 fiscal year
was determined by a special committee and approved by the Compensation
Committee.
INCENTIVE COMPENSATION
In 1999, the Rurban Financial Corp. 1999 Incentive Compensation Plan (the
"1999 Incentive Compensation Plan") was implemented, linking executive officers'
incentive compensation directly to the Company's return on equity. This plan is
designed to better match incentive compensation to shareholder value. It is the
Compensation Committee's philosophy, over time, to increase the "at-risk"
portion of executive officer total compensation by directly linking a greater
percentage of executive officers' total compensation to the Company's return on
equity and thereby to shareholder value.
Under the 1999 Incentive Compensation Plan, the year-end bonus was
determined under a sliding scale based on the Company's return on equity
("ROE"). The determination of the amounts of bonuses
10
to be paid and the payment of such bonuses is made during the first quarter of
the following fiscal year. Under this bonus plan, Mr. Joyce, Mr. Burrows, Mr.
Constien, Mr. Warrener and Mr. Williams received no bonuses under the Company
Bonus Plan with respect to the 2002 fiscal year as a result of the Company's
financial performance.
Other employees of the Company and subsidiaries are eligible to receive
bonuses under the Company Incentive Compensation Plan.
STOCK OPTION PLAN
On March 12, 1997, the Board of Directors of the Company adopted, the
Rurban Financial Corp. Stock Option Plan (the "Stock Option Plan") for directors
and officers of the Company and its subsidiaries (the "Key Employees"). The
Stock Option Plan was approved by the Company's shareholders at the April 28,
1997 Annual Meeting. The Stock Option Plan authorizes the granting of (i)
incentive stock options ("ISOs") as defined in Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code"), (ii) non-qualified stock options
("NQSOs") and (iii) stock appreciation rights ("SARs") (ISOs and NQSOs are
sometimes referred to collectively herein as "Options"). The purpose of the
Stock Option Plan is to encourage Key Employees to acquire or increase and
retain a financial interest in the Company, to remain in the service of the
Company, and to put forth maximum efforts for the success of the Company, and to
enable the Company and its subsidiaries to compete effectively for the services
of potential employees and directors by furnishing an additional incentive to
join the service of the Company and its subsidiaries. The Stock Option Plan also
provides an incentive to Key Employees of the Company and its subsidiaries to
put forth a maximum effort to increase the value of the Company's common shares,
because, under the Stock Option Plan, the exercise price of the Options cannot
be less than the fair market value of the common shares on the date the Options
are granted.
Options for approximately 3,500 of the Company's common shares were granted
to newly appointed directors, officers and employees of the Company and/or its
subsidiaries during 2002; however, none of the executive officers listed in the
Summary Compensation Table of this proxy statement nor the Company's directors
were issued options during the 2002 fiscal year.
ADDITIONAL COMPENSATION PLANS
To enhance the long-term commitment of the officers and employees of the
Company and its subsidiaries, the Company adopted the Employee Stock Ownership
Plan ("ESOP") in 1985, and The Rurban Financial Corp. Savings Plan and Trust
(the "Savings Plan") in 1988. Mr. Joyce, Mr. Constien, Mr. Warrener, and Mr.
Williams as well as all officers and employees of the Company and its
subsidiaries who met applicable eligibility criteria, participated in the ESOP
and the Savings Plan during 2002.
Each year, the Company and each of its subsidiaries may contribute an
amount in cash and/or common shares of the Company to the ESOP. Pro rata
allocations of amounts contributed by the Company or one of its subsidiaries are
made to the accounts of the participants in the ESOP. The Company and its
subsidiaries contributed an aggregate amount of $503,000 to the ESOP with
respect to the 2002 fiscal year. As of the date of this Proxy Statement, no
determination has been made as to the amount to be allocated to the account of
Mr. Joyce, Mr. Constien and Mr. Warrener under the ESOP with respect to the 2002
fiscal year. Mr. Williams will not receive an allocation with respect to the
2002 fiscal year.
Three types of contributions are contemplated under the Savings Plan: (1)
pre-tax elective deferral contributions by each participant in the Savings Plan
of a percentage of his or her annual compensation; (2) matching contributions
made by the Company or the corporation employing the Savings Plan participant in
cash in an amount determined by the Board of Directors of the Company; and
11
(3) qualified rollover contributions by a Savings Plan participant from other
qualified plans. The Board of Directors of the Company determined that for 2002,
the amount of the matching contributions to be made on behalf of each
participant in the Savings Plan would be 50% of the amount of such participant's
pre-tax elective deferral contributions, but only upon that portion of his or
her pre-tax elective deferral contributions which did not exceed 6% of his or
her annual compensation. Matching contributions in the amount of $3,000, $4,976,
$4,373 and $2,810 were made on behalf of Mr. Joyce, Mr. Constien, Mr. Warrener
and Mr. Williams, respectively, to match their respective 2002 pre-tax elective
deferral contributions made to the Savings Plan.
Submitted by the Compensation Committee of the Company's Board of Directors:
John Fahl, Chairman, John R. Compo, Eric C. Hench,, Steven D. VanDemark & J.
Michael Walz, D.D.S
COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table shows, for the last three years, the cash compensation
paid by the Company and its subsidiaries, as well as certain other compensation
paid or earned for those years, to Kenneth A. Joyce, President and Chief
Executive Officer of the Company, Robert W. Constien, Senior Executive Vice
President of the Company, President and Chief Executive Officer of State Bank
and Chief Executive Officer of RFS, Richard C. Warrener, Executive Vice
President and Chief Financial Officer of the Company, Thomas C. Williams, the
Company's former President and Chief Executive Officer.
SUMMARY COMPENSATION TABLE
Long-Term
Compensation
Awards
------
Name and Securities Underlying All Other
Principal Position Year Salary($) Bonus($) Options(#) Compensation ($)
------------------ ---- --------- -------- ---------- ----------------
Kenneth A. Joyce, Chairman 2002 $200,839 $0 0 $ 9,616(1)
and Chief Executive Officer 2001 $155,150 $0 0 $25,245(1)
of the Company 2000 $145,000 $43,500 5,000 $17,532(1)
Robert W. Constien, Senior 2002 $165,880 $0 0 $ 9,728(2)
Executive Vice President 2001 $165,880 $0 0 $16,371(2)
and Chief Operating 2000 $145,000 $43,500 5,000 $18,159(2)
Officer of the Company,
President and CEO of State
Bank and CEO of RFS
Richard C. Warrener, 2002 $145,788 $0 0 $ 9,212(3)
Executive Vice President 2001 $145,788 $0 0 $23,611(3)
and Chief Financial Officer 2000 $125,000 $37,500 5,000 $23,514(3)
of the Company
12
Long-Term
Compensation
Awards
------
Name and Securities Underlying All Other
Principal Position Year Salary($) Bonus($) Options(#) Compensation ($)
------------------ ---- --------- -------- ---------- ----------------
Thomas C. Williams, former 2002 $194,503 $0 0 $ 9,595(4)
President and Chief 2001 $238,500 $0 0 $52,111(4)
Executive Officer of the 2000 $225,000 $67,500 0 $35,649(4)
Company
(1) "All Other Compensation" for fiscal years 2002, 2001 and 2000 includes: (i)
a contribution of $3,000, $5,250 and $2,938, respectively, to the Savings
Plan on behalf of Mr. Joyce to match 2002, 2001 and 2000 pre-tax elective
deferral contributions (included under "Salary") made by him to the Savings
Plan, (ii) $5,932, $8,875 and $2,783 received by Mr. Joyce from the Company
during fiscal years 2002, 2001 and 2000, respectively, as an automobile
useage/allowance and (iii) payments of $684, $690 and $795 which represent
the premiums paid on Mr. Joyce's behalf for a group term life insurance
policy which has a death benefit equal to 200% of Mr. Joyce's annual salary
less $50,000. The amounts allocated to the account of Mr. Joyce under the
ESOP for 2001 and 2000 were $10,429 and $11,015, respectively. The amount
to be allocated to the account of Mr. Joyce under the ESOP with respect to
fiscal year 2002 has not been determined as of the date of this Proxy
Statement.
(2) "All Other Compensation" for 2002, 2001 and 2000 includes (i) contributions
of $4,976, $2,132 and $4,936 respectively, to the Savings Plan on behalf of
Mr. Constien to match 2002, 2001 and 2000 pre-tax elective deferral
contributions (included under "Salary") made by him to the Savings Plan,
(ii) $4,752, $3,568 and $2,073 received by Mr. Constien from the Company
during fiscal years 2002, 2001 and 2000, respectively, as an automobile
useage/allowance and (iii) payments of $242 and $134 for 2001 and 2000
respectively, which represent the premiums paid on Mr. Constien's behalf
for a group term life insurance policy which has a death benefit equal to
200% of Mr. Constien's annual salary less $50,000. The amounts allocated to
the account of Mr. Constien under the ESOP for 2001 and 2000 were $10,429
and $11,015, respectively. The amount to be allocated to the account of Mr.
Constien under the ESOP with respect to fiscal year 2002 has not been
determined as of the date of this Proxy Statement.
(3) "All Other Compensation" for 2002, 2001 and 2000 includes (i) contributions
of $4,373, $5,250 and $5,249 respectively, to the Savings Plan on behalf of
Mr. Warrener to match 2002, 2001 and 2000 pre-tax elective deferral
contributions (included under "Salary") made by him to the Savings Plan,
(ii) $3,590, $6,683, $6,217 received by Mr. Warrener from the Company
during fiscal years 2002, 2001 and 2000, respectively, as an automobile
useage/allowance and (iii) payments of $1,249, $1,249 and $1,032 which
represent the premiums paid on Mr. Warrener's behalf for a group term life
insurance policy which has a death benefit equal to 200% of Mr. Warrener's
annual salary less $50,000. The amounts allocated to the account of Mr.
Warrener under the ESOP for 2001 and 2000 were $10,429 and $11,015,
respectively. The amount to be allocated to the account of Mr. Warrener
under the ESOP with respect to fiscal year 2002 has not been determined as
of the date of this Proxy Statement.
(4) "All Other Compensation" for 2002, 2001 and 2000 includes (i) contributions
of $2,810, $5,250 and $5,250, respectively, to the Savings Plan on behalf
of Mr. Williams to match 2002, 2001 and 2000 pre-tax elective deferral
contributions (included under "Salary") made by him to the Savings Plan,
(ii) $6,520, $18,829 and $612 received by Mr. Williams from the Company
during
13
fiscal years 2002, 2001 and 2000, respectively, as an automobile
useage/allowance and (iii) payments of $12,586 and $13,755, respectively,
during fiscal years 2001 and 2000 representing grossed-up premiums for a
life insurance policy which Mr. Williams personally owns, (iv) for fiscal
years 2002, 2001 and 2000, payments of $265, $690 and $690, respectively,
which represent the premiums paid on Mr. Williams' behalf for a group term
life insurance policy which has a death benefit equal to 200% of Mr.
Williams' annual salary less $50,000. The amounts allocated to the account
of Mr. Williams under the ESOP for 2001 and 2000 were $10,429 and $11,015,
respectively. There was not an allocation made to the account of Mr.
Williams under the ESOP with respect to fiscal year 2002.
OPTION EXERCISES AND HOLDINGS
The following table sets forth information with respect to Options
exercised during, and unexercised Options held as of the end of, the 2002 fiscal
year by each of the executive officers named in the Summary Compensation Table.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
Number of Securities Value of Unexercised
Number of Underlying Unexercised In-the-Money
Securities Options At FY-End (#) Options At FY-End($)(1)
Underlying Value ------------------------------- ------------------------------
Options Exercised Realized($) Exercisable Unexercisable Exercisable Unexercisable
----------------- ----------- ----------- ------------- ----------- -------------
Kenneth A. Joyce 0 $0 10,038 3,481 $0 $0
Robert W. Constien 0 $0 10,038 3,481 $0 $0
Richard C. Warrener 0 $0 10,038 3,481 $0 $0
Thomas C. Williams 0 $0 0 0 $0 $0
-------
(1) "Value of Unexercised In-the-Money Options at FY-End" is based upon the
fair market value of the Company's common shares on December 31, 2002 ($9.28)
less the exercise price of the options at the end of the 2002 fiscal year.
SALARY CONTINUATION AGREEMENTS
The Company has entered into Executive Salary Continuation Agreements (the
"Agreements") with Kenneth A. Joyce, President and Chief Executive Officer on
December 3, 2001, Robert W. Constien, Senior Executive Vice President of the
Company, President and Chief Executive Office of State Bank and Chief Executive
Officer of RFS on December 21, 2000 and Richard C. Warrener, the Executive Vice
President and Chief Financial Officer, on February 25, 1998. Under the
Agreements, if the executive officer remains in the continuous employment of the
Company until the first December 31st after his 65th birthday (unless by action
of the Board of Directors of the Company, his period of active employment with
the Company for purposes of the Agreement is shortened or extended), he is to
retire as of that date. Upon such retirement, such executive officer (and, upon
his death, his designated beneficiary) will be entitled to receive an annual
benefit equal to 15% of his annual base salary as in effect immediately prior to
his retirement in equal monthly installments (of 1/12th of the annual benefit)
for a period of 180 months. If the executive officer dies while actively
employed by the Company prior to his retirement, the Company will pay an annual
benefit equal to 15% of his annual base salary as in effect immediately prior to
his death in equal monthly installments (of 1/12th of the annual benefit) for a
period of 180 months to his designated beneficiary. In the event that the
executive
14
officer's employment is terminated as a result of his voluntary action, the
Agreement will terminate immediately on the date of such termination of
employment and the Company will pay to such executive officer as severance
compensation monthly for fifteen years an amount of money on an annual
basis equal to: (a) 5% of such executive officer's annual base salary as in
effect immediately prior to the date of his termination of employment, if,
at the termination date, such executive officer is between age 55 and 60;
(b) 10% of such annual base salary if, at the termination date, such
executive officer is between age 60 and 65; and (c) 15% of such annual base
salary if (i) at the termination date, such executive officer is age 65 or
over; (ii) such termination of employment occurs after there has been a
change in control of the ownership of the Company; or (iii) such
termination of employment occurs after the Company merges or consolidates
with another company or organization, permits its business activities to be
taken over by another organization, ceases its business activities or
terminates its existence. If the Company discharges the executive officer
for cause, no compensation will be payable to him under the terms of the
Agreement. The executive officer will not receive any benefits under the
Agreement if he engages in any activity that directly or indirectly
competes with the Company's interest, within 25 miles of any office of the
Company and its subsidiaries existing at the time of his retirement or
termination of employment. The payment of the benefits contemplated by the
Agreement will be accelerated if, after such executive officer's
retirement, the leverage capital ratio and/or the risk-based capital ratio
of the Company fall below the minimum ratios established by the Company's
regulatory authority for well-capitalized bank holding companies and/or the
Company fails to have net income in any two successive fiscal years.
DIRECTORS' COMPENSATION
During the 2002 fiscal year, each outside director of the Company who
served the entire year received an annual retainer of $9,000.
Mr. Steven D. VanDemark, who serves as the Chairman of the Board of
Directors of the Company, received an additional $12,000 during the 2002 fiscal
year for his services as Chairman of the Board of Directors of the Company.
RURBAN FINANCIAL CORP. PLAN TO ALLOW DIRECTORS TO ELECT TO DEFER COMPENSATION
On March 12, 1997, the Board of Directors of the Company adopted the Rurban
Financial Corp. Plan to Allow Directors to Elect to Defer Compensation (the
"Deferred Compensation Plan"). The purpose of the Plan is to advance the
interests of the Company and its shareholders by allowing the directors of the
Company and the directors of any of the Company's subsidiaries an opportunity to
elect to defer payment of all or a portion of their compensation received for
their services as directors. The annual directors' fees to be received by the
directors of the Company and the directors of the Company's subsidiaries will
not be increased as a result of the adoption of the Deferred Compensation Plan.
15
PERFORMANCE GRAPH
Set forth on the following page is a line graph comparing the yearly
percentage change in the Company's cumulative total shareholder return on its
common shares with an index for the NASDAQ Stock Market (U.S. Companies)
comprised of all domestic common shares traded on the NASDAQ National Market
System and the NASDAQ Small-Cap Market and an index for NASDAQ Bank Stocks
comprised of all depository institutions (SIC Code #602) and holding and other
investment companies (SIC Code #671) that are traded on the NASDAQ National
Market System and the NASDAQ Small-Cap Market ("NASDAQ Bank Stocks") for the
five-year period ended December 31, 2002.
RURBAN FINANCIAL CORP.
PERIOD ENDING
--------------------------------------------------------------------------
INDEX 12/31/97 12/31/98 12/31/99 12/31/00 12/31/01 12/31/02
---------------------------------------------------------------------------------------------------
Rurban Financial Corp. 100.00 102.31 91.53 85.69 109.83 75.98
NASDAQ - Total US* 100.00 140.99 261.48 157.42 124.89 86.33
NASDAQ Bank Index* 100.00 99.36 95.51 108.95 117.97 120.61
16
SHAREHOLDER PROPOSALS FOR
2004 ANNUAL MEETING
Any qualified shareholder who desires to present a proposal for
consideration at the 2004 Annual Meeting of Shareholders must submit the
proposal in writing to the Company. If the proposal is received by the Company
on or before November 28, 2003, and otherwise meets the requirements of
applicable state and federal law, it will be included in the proxy statement and
form of proxy of the Company relating to its 2004 Annual Meeting of
Shareholders. If a shareholder intends to present a proposal at the 2004 Annual
Meeting, but has not sought the inclusion of such proposal in the Company's
proxy materials, such proposal must be received by the Company prior to February
15, 2004, or the Company's management proxies for the 2004 Annual Meeting will
be entitled to use their discretionary voting authority should such proposal
then be raised, without any discussion of the matter in the Company's proxy
materials.
NOTIFICATION OF APPOINTMENT
OF INDEPENDENT AUDITORS
As discussed in the Report of the Audit Committee section of this proxy
statement, effective November 15, 2002, the Board of Directors of the Company
appointed the firm of BKD, LLP to serve as independent auditors for the Company.
BKD replaced Crowe, Chizek and Company LLP which had served as the company's
independent auditor since 1988. The Board of Directors expects that
representatives of BKD, LLP will be present at the Annual Meeting and will have
the opportunity to make a statement if they desire to do so and will be
available to respond to appropriate questions.
ANNUAL REPORT ON FORM 10-K
The Company will provide without charge to any shareholder, on the written
request of such shareholder, a copy of the Company's Annual Report on Form 10-K,
including financial statements and schedules thereto, required to be filed under
the Securities Exchange Act of 1934, as amended, for the Company's fiscal year
ended December 31, 2002. Such written request should be directed to Sandra
Stockhorst, Vice President, Investor Relations, Rurban Financial Corp., 401
Clinton Street, Defiance, Ohio 43512.
OTHER MATTERS
As of the date of this Proxy Statement, the Board of Directors knows of no
other business to be presented for action by the shareholders at the 2003 Annual
Meeting of Shareholders other than as set forth in this Proxy Statement.
However, if any other matter is properly presented at the Annual Meeting, or at
any adjournment(s) thereof, it is intended that the persons named as proxies in
the enclosed proxy may vote the common shares represented by such proxy on such
matters in accordance with their best judgment in light of the conditions then
prevailing.
IT IS IMPORTANT THAT PROXIES BE VOTED AND RETURNED PROMPTLY. EVEN IF YOU
PLAN TO ATTEND THE ANNUAL MEETING IN PERSON, PLEASE FILL IN, DATE, SIGN AND
RETURN THE PROXY PROMPTLY. IF YOU ATTEND THE ANNUAL MEETING, YOU MAY REVOKE YOUR
PROXY AND VOTE IN PERSON IF YOU WISH TO DO SO.
March 24, 2003 By Order of the Board of Directors,
/s/ Kenneth A. Joyce
Kenneth A. Joyce
President and Chief Executive Officer
17
APPENDIX A
RURBAN FINANCIAL CORP.
AUDIT COMMITTEE CHARTER
PURPOSE/FUNCTION:
The primary function of the audit committee is to assist the board of directors
in fulfilling its oversight responsibilities by reviewing all audit processes,
financial reporting and the systems of internal control established by
management and the board of directors.
MEMBERSHIP:
Three or more independent outside directors.
FREQUENCY OF MEETINGS:
Generally, once per quarter on a regularly scheduled basis and at such other
times as requested by a committee member, management, the internal auditor or
the independent accountant.
DUTIES/RESPONSIBILITIES:
- GENERAL RESPONSIBILITIES
1. To provide avenues of communication among the internal auditor, the
internal audit outsourcing firm, the independent accountant and the board
of directors.
2. To report committee actions to the full board of directors and make
appropriate recommendations.
3. To conduct or authorize investigations into matters within the committee's
scope of responsibilities. The committee is authorized to retain
independent counsel, accountants or others needed to assist in an
investigation.
- RESPONSIBILITIES FOR ENGAGING INDEPENDENT ACCOUNTANTS AND APPOINTING THE
INTERNAL AUDITOR
1. To select the independent accountants for company audits. The committee's
selection is subject to approval by the full board of directors. The audit
committee also will review and approve audit related fees paid to the
independent accountants and review and approve a change in the independent
accountants.
2. To review and approve the appointment, replacement, reassignment or
dismissal of the internal auditor and the internal audit outsourcing firm.
To review and approve audit related fees paid to the internal audit
outsourcing firm.
18
3. To assure the independence of the internal auditor and the independent
accountant, including a review of management consulting services provided
by the independent accountant and the fees paid for such consulting
services.
- RESPONSIBILITIES FOR REVIEWING THE ANNUAL EXTERNAL AUDIT AND THE ANNUAL
FINANCIAL STATEMENTS, INTERNAL AUDITS AND REGULATORY EXAMINATIONS.
1. To assure that the independent accountant views the board of directors as
its client, that it will be available to the full board of directors and
that it will provide the committee with a timely analysis of significant
financial reporting issues.
2. To question management, the internal auditor and the independent accountant
about significant risks and exposures and to assess management's steps to
minimize them.
3. To consider, in consultation with the independent accountant and the
internal auditor, the audit scope and procedural plans for the internal
audit and the independent audit and to assure effective coordination of
internal and external audits.
4. To review the following with the independent accountant and the internal
auditor:
a. The adequacy of the company's internal controls, including
computerized information system controls and security.
b. Any significant findings and recommendations made by the
independent accountant or the internal auditing function,
together with management's responses to them.
5. Shortly after the annual independent audit is completed, to review the
following with management and the independent accountant:
a. The company's annual financial statements and related footnotes.
b. The independent accountant's audit of and report on the financial
statements.
c. The independent accountant's qualitative judgments regarding the
appropriateness of accounting principles and financial
disclosures and their evaluation of the degree of
aggressiveness/conservatism of the accounting principles and
underlying estimates.
d. Any serious difficulties or disputes with management encountered
during the course of the audit.
e. The independent accountant's "management letter" regarding:
1. Recommendations for improvements in internal control and its
operation.
2. An update on new accounting pronouncements.
19
f. The independent accountant's "SAS 61 Letter" regarding
required communications with the Audit Committee.
6. To consider and review with management and the internal auditor:
a. Any significant internal audit findings and recommendations during the
year and management's responses to them.
b. Any difficulties encountered in the internal auditing process,
including any restrictions on the scope of work or access to required
information.
c. Any changes to the planned scope of management's internal audit plan
that the committee thinks advisable.
d. The internal auditing department's budget and staffing.
7. To consider and review with management regulatory agency examination
reports and management's responses, including:
a. Safety and Soundness examinations
b. Compliance and CRA examinations
- PERIODIC RESPONSIBILITIES
1. To review and update, if necessary, the committee's charter annually.
2. To review legal and regulatory matters that may have a material effect on
the organization's financial statements, compliance policies and programs
and reports from regulators.
20
[X] PLEASE MARK VOTES REVOCABLE PROXY
AS IN THIS EXAMPLE RURBAN FINANCIAL CORP.
-------------------------------------------------------------------------------
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 28, 2003
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned holder(s) of common shares of Rurban Financial Corp.
(the "Company") hereby constitutes and appoints Kenneth A. Joyce and Richard
C. Warrener, or either of them, the Proxy or Proxies of the undersigned, with
full power of substitution, to attend the Annual Meeting of Shareholders of the
Company (the "Annual Meeting") to be held on Monday, April 28, 2003, at the
Knights of Columbus Hall ("K of C Hall"), 111 Elliott Lane, Defiance, Ohio at
10:00 A.M., local time, and any adjournment(s) thereof, and to vote all of the
common shares of the Company which the undersigned is entitled to vote at such
Annual Meeting or at any adjournment(s) thereof:
With- For All
For hold Except
1. To elect three (3) directors to serve [ ] [ ] [ ]
for terms of three years each:
Thomas A. Buis Kenneth A. Joyce J. Michael Walz
INSTRUCTION: To withhold authority to vote for any individual nominee, mark
"For All Except" and write that nominee's name in the space provided below.
_______________________________________________________________________________
2. In their discretion, the Proxies are authorized to vote upon such other
matters as may properly come before the Annual Meeting or any adjournment(s)
thereof.
WHERE A CHOICE IS INDICATED, THE COMMON SHARES REPRESENTED BY THIS
PROXY WHEN PROPERLY EXECUTED WILL BE VOTED OR NOT VOTED AS SPECIFIED. IF NO
CHOICE IS INDICATED, THE COMMON SHARES REPRESENTED BY THIS PROXY WILL BE VOTED
FOR THE ELECTION OF THE NOMINEES LISTED IN ITEM NO. 1 AS DIRECTORS OF THE
COMPANY. IF ANY OTHER MATTERS ARE PROPERLY BROUGHT BEFORE THE ANNUAL MEETING OR
ANY ADJOURNMENT(S) THEREOF OR IF A NOMINEE FOR ELECTION AS A DIRECTOR NAMED IN
THE PROXY STATEMENT IS UNABLE TO SERVE OR FOR GOOD CAUSE WILL NOT SERVE, THE
COMMON SHARES REPRESENTED BY THIS PROXY WILL BE VOTED IN THE DISCRETION OF THE
PROXIES ON SUCH MATTERS OR FOR SUCH SUBSTITUTE NOMINEE(S) AS THE DIRECTORS MAY
RECOMMEND.
ALL PROXIES PREVIOUSLY GIVEN OR EXECUTED BY THE UNDERSIGNED ARE HEREBY
REVOKED. The undersigned acknowledges receipt of the accompanying Notice of
Annual Meeting to Shareholders and Proxy Statement for the Annual Meeting and
the Annual Report to Shareholders for the fiscal year ended December 31, 2002.
Please sign exactly as your name appears hereon. When common shares are
registered in two names, both shareholders should sign. When signing as
executor, administrator, trustee, guardian, attorney or agent, please give full
title as such. If shareholder is a corporation, please sign in full corporate
name by president or other authorized officer. If shareholder is a partnership,
please sign in partnership name by authorized person. (Please note any change of
address on this proxy.)
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PLEASE BE SURE TO SIGN AND DATE DATE
THIS PROXY IN THE BOX BELOW
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SHAREHOLDER SIGN ABOVE CO-HOLDER (IF ANY) SIGN ABOVE
-- DETACH ABOVE CARD, SIGN, DATE AND MAIL IN POSTAGE PAID ENVELOPE PROVIDED. --
RURBAN FINANCIAL CORP.
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THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF RURBAN FINANCIAL
CORP. IT IS IMPORTANT THAT PROXIES BE VOTED AND RETURNED PROMPTLY. EVEN IF YOU
PLAN TO ATTEND THE ANNUAL MEETING IN PERSON, PLEASE FILL IN, DATE, SIGN AND
RETURN THE PROXY PROMPTLY USING THE ENCLOSED SELF-ADDRESSED ENVELOPE. IF YOU
ATTEND THE ANNUAL MEETING, YOU MAY REVOKE YOUR PROXY AND VOTE IN PERSON IF YOU
WISH TO DO SO.
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If your address has changed, please correct
the address in the space provided below
and return this portion with the proxy in the
envelope provided.
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