-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, G9Phh8WIxHQu01KqDvUsc/tn3vz0lbbJ06Buazv2i6BCh4AFXcEW08EVJZwVcI6M bdR2OZssI3Bhh8btTSKnbg== 0000950152-97-005835.txt : 19970813 0000950152-97-005835.hdr.sgml : 19970813 ACCESSION NUMBER: 0000950152-97-005835 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970812 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: PARK NATIONAL CORP /OH/ CENTRAL INDEX KEY: 0000805676 STANDARD INDUSTRIAL CLASSIFICATION: NATIONAL COMMERCIAL BANKS [6021] IRS NUMBER: 311179518 STATE OF INCORPORATION: OH FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-13006 FILM NUMBER: 97657197 BUSINESS ADDRESS: STREET 1: 50 NORTH THIRD ST CITY: NEWARK STATE: OH ZIP: 43055 BUSINESS PHONE: 6143498451 MAIL ADDRESS: STREET 1: P O BOX 3500 CITY: NEWARK STATE: OH ZIP: 43058-3500 10-Q 1 PARK NATIONAL CORPORATION 10-Q 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q [x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1997 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to ------------------ ------------------------- Commission File Number 1-13006 ------------------------------------------------------- Park National Corporation - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Ohio 31-1179518 ------------------------------- ------------------------------------ (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 50 North Third Street, Newark, Ohio 43055 - -------------------------------------------------------------------------------- (Address of principal executive offices) Zip Code (614) 349-8451 - -------------------------------------------------------------------------------- (Registrant's telephone number, including area code) N/A - -------------------------------------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --------- --------- 9,419,274 common shares, no par value per share, outstanding at July 31, 1997. Page 1 of 54 Exhibit Index At Page 20 2 PARK NATIONAL CORPORATION CONTENTS --------
Page ---- PART I. FINANCIAL INFORMATION 3-8 Item 1. Financial Statements 3-8 Consolidated Balance Sheet as of June 30, 1997 and December 31, 1996 (unaudited) 3 Consolidated Condensed Statement of Income for the Three Months Ended and for the Six Months Ended June 30, 1997 and 1996 (unaudited) 4-5 Consolidated Statement of Cash Flows for the Six Months ended June 30, 1997 and 1996 (unaudited) 6-7 Notes to Consolidated Financial Statements 8-10 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 11-17 PART II. OTHER INFORMATION 18 Item 1. Legal Proceedings 18 Item 2. Changes in Securities 18 Item 3. Defaults Upon Senior Securities 18 Item 4. Submission of Matters to a Vote of Security Holders 18 Item 5. Other Information 18 Item 6. Exhibits and Reports on Form 8-K 18 SIGNATURES 19 EXHIBITS 20-54
-2- 3 PARK NATIONAL CORPORATION Consolidated Balance Sheet (Unaudited) (Dollars in thousands, except per share data)
June 30, December 31, 1997 1996 ----------- ------------ Assets: Cash and due from banks $ 80,924 $ 81,765 Federal funds sold 600 0 Securities available-for-sale, at fair value (amortized cost of $576,076 and $556,436 at June 30, 1997 and December 31, 1996) 582,423 563,613 Securities held-to-maturity, at amortized cost (fair value approximates $9,462 and $11,217 at June 30, 1997 and December 31, 1996) 9,243 10,780 Loans (net of unearned interest) 1,534,410 1,472,024 Allowance for possible loan losses 34,325 32,347 Net loans 1,500,085 1,439,677 Bank premises and equipment, net 27,321 27,548 Other assets 65,857 61,587 ----------- ----------- Total assets $ 2,266,453 $ 2,184,970 Liabilities and Stockholders' Equity Deposits: Noninterest-bearing $ 242,812 $ 225,424 Interest-bearing 1,534,985 1,537,994 Total deposits 1,777,797 1,763,418 Short-term borrowings 218,356 135,111 Long term debt 41,346 62,375 Other liabilities 18,381 25,105 Total liabilities 2,055,880 1,986,009 Stockholders' Equity: Common stock (No par value; 20,000,000 shares authorized; 9,547,610 shares in 1997 and 9,443,864 shares issued in 1996) 68,063 64,612 Unrealized holding gain on available-for-sale securities, net 4,146 4,687 Retained earnings 143,665 132,647 Treasury stock (129,897 shares in 1997 and 89,426 shares in 1996) (5,301) (2,985) Total stockholders' equity 210,573 198,961 ----------- ----------- Total liabilities and stockholders' equity $ 2,266,453 $ 2,184,970
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 3 4 PARK NATIONAL CORPORATION Consolidated Condensed Statement of Income (Unaudited) (Dollars in thousands, except per share data)
Three Months Ended Six Months Ended June 30, June 30, 1997 1996 1997 1996 ------- ------- ------- ------- Interest Income: Interest & fees on loans $35,515 $31,676 $69,645 $63,426 Interest on: Obligations of U.S. Govt. its agencies & other securities 8,811 6,695 17,184 13,216 Obligations of states & political subdivisions 938 882 1,808 1,724 Other interest income 142 554 426 1,101 Total interest income 45,406 39,807 89,063 79,467 Interest expense: Interest on deposits: Demand & savings deposits 4,269 3,929 8,362 7,900 Time deposits 12,300 10,996 24,537 21,962 Non-deposit interest 2,897 1,705 5,344 3,701 Total interest expense 19,466 16,630 38,243 33,563 Net interest income 25,940 23,177 50,820 45,904 Provision for loan losses 1,454 1,256 2,648 2,342 Net interest income after provision 24,486 21,921 48,172 43,562
4 5 PARK NATIONAL CORPORATION Consolidated Condensed Statement of Income (Unaudited) - (Continued) (Dollars in thousands, except per share data)
Three Months Ended Six Months Ended June 30, June 30, 1997 1996 1997 1996 ----------- ----------- ----------- ----------- Other income $ 4,829 $ 4,238 $ 9,771 $ 8,656 Loss on sale of securities 0 (401) 0 (700) Other expense: Salaries & employee benefits 7,734 6,769 15,387 14,054 Occupancy 821 757 1,652 1,565 Furniture & equipment 890 909 1,789 1,801 Other expenses 6,021 5,149 12,250 10,994 Total other expense 15,466 13,584 31,078 28,414 Income before federal income taxes 13,849 12,174 26,865 23,104 Federal income taxes 4,297 3,751 8,324 7,092 Net income $ 9,552 $ 8,423 $ 18,541 $ 16,012 =========== =========== =========== =========== Per Share: Net income per share: Primary $ 1.01 $ 0.90 $ 1.97 $ 1.71 Fully diluted $ 1.01 $ 0.90 $ 1.97 $ 1.71 Weighted average common shares outstanding: Primary 9,419,553 9,385,147 9,402,216 9,381,644 Fully Diluted 9,430,958 9,385,933 9,408,196 9,382,760 Cash dividends declared $ 0.40 $ 0.35 $ 0.80 $ 0.70
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 5 6 PARK NATIONAL CORPORATION Consolidated Statement of Cash Flows (Unaudited) (Dollars in thousands)
Six Months Ended June 30, 1997 1996 --------- --------- Operating activities: Net income $ 18,541 $ 16,012 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation, amortization & accretion 217 591 Provision for loan losses 2,648 2,342 Amortization of the excess of cost over net assets of banks purchased 978 257 Realized investment security losses 0 700 Changes in assets & liabilities: Increase in other assets (4,959) (2,450) Decrease in other liabilities (2,969) (2,146) Net cash provided from operating activities 14,456 15,306 Investing activities: Proceeds from sales of: Available-for-sale securities 24,925 37,636 Proceeds fro maturities of: Available-for-sale securities 85,873 64,062 Held-to-maturity securities 1,888 826 Purchases of: Available-for-sale securities (129,974) (112,835) Held-to-maturity securities 0 (1,575) Net increase in loans (62,502) (16,760) Purchases of premises & equipment, net (1,358) (1,007) Net cash used by investing activities (81,148) (29,653)
6 7 PARK NATIONAL CORPORATION Consolidated Statement of Cash Flows (Unaudited) - (Continued) (Dollars in thousands)
Six Months Ended June 30, 1997 1996 --------- --------- Financing activities: Net increase in deposits $ 14,379 $ 19,370 Net increase/(decrease) in short-term borrowings 83,245 (12,623) Exercise of stock options 3,451 85 (Purchase)/reissue of treasury stock (2,317) 389 Repayment of long term debt (21,029) (507) Cash dividends paid (11,278) (8,533) Net cash provided from/(used by) financing activities 66,451 (1,819) Decrease in cash & cash equivalents (241) (16,166) Cash & cash equivalents at beginning of year 81,765 113,164 Cash & cash equivalents at end of period $ 81,524 $ 96,998 ========= ========= Supplemental disclosures of cash flow information: Cash paid for: Interest $ 39,729 $ 34,015 Income taxes 7,455 8,350
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 7 8 PARK NATIONAL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the Three and Six Month Periods Ended June 30, 1997 and 1996. Note 1 - Basis of Presentation --------------------- The consolidated financial statements included in this report have been prepared by Park National Corporation (the "Registrant", "Corporation", or "Park") without audit. In the opinion of management, all adjustments (consisting solely of normal recurring accruals) necessary for a fair presentation of results of operations for the interim periods included herein have been made. The results of operations for the periods ended June 30, 1997 are not necessarily indicative of the operating results to be anticipated for the fiscal year ended December 31, 1997. The accompanying unaudited consolidated financial statements have been prepared in accordance with the instructions for Form 10-Q, and therefore, do not include all information and footnotes necessary for a fair presentation of the balance sheet, condensed statement of income and statement of cash flows in conformity with generally accepted accounting principles. These financial statements should be read in conjunction with the financial statements included in the Annual Report for the year ended December 31, 1996. Certain amounts in prior periods have been reclassified to conform to the financial statement presentation used for current periods. Primary earnings per share is computed based on the weighted average shares outstanding during the periods presented plus common equivalent shares arising from dilutive stock options, using the treasury stock method. Fully diluted earnings per share reflects additional dilution related to stock options due to the use of market price at the end of the period when higher than the average price for the period. In February 1997, the Financial Accounting Standards Board issued SFAS No. 128, Earnings per Share, which is required to be adopted on December 31, 1997. At that time, the Corporation will be required to change the method currently used to compute earnings per share and to restate all prior periods. Under the new requirements, primary earnings per share will be replaced by a more simply calculated basic earnings per share which will not include the impact of any potentially dilutive securities. Diluted earnings per share will continue to be disclosed and will be calculated using a methodology not significantly different from that presently used to calculate fully diluted earnings per share. The new calculation methods will not have a material impact on the earnings per share results as the Corporation has not had significant dilution from stock options. Park does not have any off-balance sheet derivative financial instruments such as interest-rate swap agreements. Note 2 - Acquisition ----------- On May 5, 1997, Park merged with First-Knox Banc Corp. ("First-Knox"), a $569 million bank holding company headquartered in Mount Vernon, Ohio, in a transaction accounted for as a pooling-of-interests. Park issued approximately 2.3 million shares of common stock to the stockholders of First-Knox based upon an exchange ratio of .5914 shares of Park common stock for each outstanding share of First-Knox common stock. The historical financial statements of Park have been restated to show Park and First-Knox on a combined basis. -8- 9 Separate results of operations for Park and First-Knox follow:
Three Months Six Months Ended June 30, 1996 Ended June 30, 1996 ------------------- -------------- ---- Net Interest Income Park $17,829 $35,413 First-Knox 5,348 10,491 ------- ------- Combined $23,177 $45,904 Net Income Park $ 6,804 $12,899 First-Knox 1,619 3,113 ------- ------- Combined $ 8,423 $16,012 Net Income Per Common Share Park $ .96 $ 1.81 First-Knox .43 .82 Combined $ .90 $ 1.71
Certain amounts in prior periods in 1996 have been reclassified to conform to the financial statement presentation used for current periods. Note 3 - Allowance for Possible Loan Losses ---------------------------------- The allowance for possible loan losses is that amount believed adequate to absorb estimated credit losses in the loan portfolio based on management's evaluation of various factors including overall growth in the loan portfolio, an analysis of individual loans, prior and current loss experience, and current and anticipated economic conditions. A provision for loan losses is charged to operations based on management's periodic evaluation of these and other pertinent factors.
(In Thousands) 1997 1996 -------- -------- Balance January 1 $ 32,347 $ 29,239 Provision for loan losses 2,648 2,342 Losses charged to the reserve (2,102) (2,037) Recoveries 1,432 1,314 -------- -------- Balance June 30, 1997 $ 34,325 $ 30,858 ======== ========
-9- 10 Note 4 - Long-Term Debt --------------
Description (In Thousands) --------------- June 30, December 31, 1997 1996 -------- -------- Fixed rate Federal Home Loan Bank advances with monthly principal and interest payments: 5.60% Advance due August 1, 2003 $ 2,043 $ 2,180 6.35% Advance due August 1, 2013 $ 2,676 $ 2,723 5.95% Advance due March 1, 2004 $ 553 $ 586 5.70% Advance due May 1, 2004 $ 4,499 $ 4,760 5.85% Advance due January 1, 2016 $ 4,325 $ 4,876 Fixed rate Federal Home Loan Bank advances with monthly interest payments: 5.35% Advance due February 1, 1999 $ 5,000 $ 5,000 5.60% Advance due April 1, 1999 $ 5,000 $ 5,000 5.70% Advance due June 1, 1999 $ 7,000 $ 7,000 6.35% Advance due March 1, 2004 $ 250 $ 250 6.15% Advance due July 21, 1997 $10,000 $ 10,000 6.60% Advance due July 21, 1999 $ -0- $ 10,000 6.90% Advance due July 21, 2001 $ -0- $ 10,000 -------- -------- $ 41,346 $ 62,375 ======== ========
Federal Home Loan Bank (FHLB) advances are collateralized by the FHLB stock owned by Park's affiliate banks and by residential mortgage loans pledged under a blanket agreement by Park's affiliate banks. -10- 11 ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Comparison of Results of Operations for the Three and Six Month Periods Ended June 30, 1997 and 1996 Net Interest Income - ------------------- The Corporation's principal source of earnings is net interest income, the difference between total interest income and total interest expense. Net interest income increased by $2.8 million or 11.9% to $25.94 million for the three months ended June 30, 1997 compared to $23.18 million for the second quarter of 1996. The following table compares the average balance and tax equivalent yield/cost for interest-earning assets and interest-bearing liabilities for the second quarter of 1997 with the same quarter in 1996.
Three Months Ended June 30th (In Thousands) 1997 1996 Tax Tax Average Equivalent Average Equivalent Balance % Balance % --------------------------- --------------------------- Loans $1,511,498 9.46% $1,350,470 9.47% Taxable Investments $ 503,649 7.02% $ 399,510 6.74% Tax-Exempt Investments $ 67,197 8.46% $ 62,639 8.56% Federal Funds Sold $ 10,878 5.24% $ 41,789 5.33% ---------- ---- ---------- ---- Interest-Earning Assets $2,093,222 8.83% $1,854,408 8.77% ---------- ---- ---------- ---- Interest-Bearing Deposits $1,554,898 4.27% $1,413,519 4.25% Short-Term Borrowings $ 158,801 4.90% $ 111,614 4.42% Long-Term Borrowings $ 63,264 6.06% $ 35,009 5.49% ---------- ---- ---------- ---- Interest-Bearing Liabilities $1,776,963 4.39% $1,560,142 4.29% ---------- ---- ---------- ---- Excess Interest-Earning Assets $ 316,259 4.44% $ 294,266 4.48% Net Interest Margin 5.09% 5.16%
-11- 12 Average interest-earning assets increased by $239 million or 12.9% to $2,093 million for the quarter ended June 30, 1997 compared to the same quarter in 1996. Average loans outstanding increased by $161 million or 11.9% to $1,511 million for the second quarter of 1997 compared to the same quarter in 1996. Approximately $31 million of this increase was due to loans acquired as part of the purchase of branches in Richland County in December, 1996. Loan demand continues to be relatively strong. Average investment securities including federal funds sold increased by $78 million or 15.4% to $582 million in 1997 compared to the same quarter in 1996. The yield on taxable investments increased to 7.02% for the second quarter of 1997 compared to 6.74% for the same quarter in 1996. The increase in yield on taxable investments resulted primarily from the purchase of longer-term mortgage-backed securities and callable U.S. Agency securities acquired during the third quarter of 1996. Average interest-bearing liabilities increased by $217 million or 13.9% to $1,777 million for the quarter ended June 30, 1997 compared to the same quarter in 1996. Average interest-bearing deposits increased by $141 million or 10.0% to $1,555 million for the second quarter of 1997 compared to the same quarter in 1996. Approximately $98 million of this increase was due to deposits acquired as part of the purchase of branches in Richland County in December, 1996. Average total borrowings increased by $75 million or 52% to $222 million for the second quarter of 1997 compared to the same quarter in 1996. The increase in average borrowings was primarily used to fund the purchase of longer-term investment securities. The increase in net interest income of $2.8 million or 11.9% to $25.94 million for the three months ended June 30, 1997 was primarily due to the 12.9% increase in average interest-earning assets. The tax equivalent net interest margin (defined as net interest income divided by average earning assets) decreased to 5.09% for the second quarter of 1997 compared to 5.16% for the same quarter in 1996. For the three months ended June 30, 1997, the net interest spread (the difference between the yield on interest-earning assets and the cost of interest-bearing liabilities) decreased by .04% to 4.44% compared to 4.48% for the same period in 1996. The yield on interest-earning assets increased by .06% to 8.83% for the second quarter of 1997 compared to 8.77% for the same quarter in 1996 and the cost of interest-bearing liabilities increased by .10% to 4.39% for the second quarter of 1997 compared to 4.29% for the same period in 1996. Net interest income increased by $4.9 million or 10.7% to $50.8 million for the six months ended June 30, 1997 compared to $45.9 million for the same period in 1996. The following table compares the average balance and tax equivalent yield/cost for interest-earning assets and interest-bearing liabilities for the first six months of 1997 with the same period in 1996.
Six Months Ended June 30th (In Thousands) 1997 1996 ---------------------- ---------------------- Tax Tax Average Equivalent Average Equivalent Balance % Balance % -------------------- ---------------------- Loans $1,495,690 9.43% $1,347,995 9.50% Taxable $ 498,382 6.95% $ 398,087 6.68% Investments Tax-Exempt Investments $ 63,806 8.63% $ 61,140 8.57%
-12- 13 Federal Funds $ 16,102 5.33% $ 41,434 5.34% Sold ---------- ---- ---------- ---- Interest-Earning $2,073,980 8.79% $1,848,656 8.80% Assets ---------- ---- ---------- ---- Interest-Bearing $1,551,010 4.28% $1,399,173 4.29% Deposits Short-Term $ 147,517 4.68% $ 119,749 4.60% Borrowings Long-Term $ 61,494 6.29% $ 35,132 5.51% Borrowings ---------- ---- ---------- ---- Interest-Bearing $1,760,021 4.38% $1,554,054 4.34% Liabilities ---------- ---- ---------- ---- Excess Interest- $ 313,959 4.41% $ 294,602 4.46% Earning Assets Net Interest Margin 5.07% 5.14%
Average interest-earning assets increased by $225 million or 12.2% to $2,074 million for the six months ended June 30, 1997 compared to the same period in 1996. Average loans outstanding increased by $148 million or 11.0% to $1,496 million for the first half of 1997 compared to the same period in 1996. Approximately $31 million of this increase was due to loans acquired as part of the purchase of branches in Richland County in December, 1996. Loan demand continues to be relatively strong, particularly for consumer loans secured by automobiles. Average investment securities including federal funds sold increased by $78 million or 15.5% to $578 million for the first six months of 1997 compared to the same period in 1996. The yield on taxable investments increased to 6.95% for the first half of 1997 compared to 6.68% for the same period in 1996. The increase in yield on taxable investments resulted primarily from the purchase of longer-term mortgage-backed securities and callable U.S. Agency securities acquired during the third quarter of 1996. Average interest-bearing liabilities increased by $206 million or 13.3% to $1,760 million for the first six months of 1997 compared to the same period in 1996. Average interest-bearing deposits increased by $152 million or 10.9% to $1,551 million for the first half of 1997 compared to the same period in 1996. Approximately $98 million of this increase was due to deposits acquired as part of the purchase of branches in Richland County in December, 1996. Average total borrowings increased by $54 million or 34.9% to $209 million for the first half of 1997 compared to the same period in 1996. The increase in average borrowings was primarily used to fund the purchase of longer-term investment securities. The increase in net interest income of $4.9 million or 10.7% to $50.8 million for the first six months of 1997 was primarily due to the 12.2% increase in average interest-earning assets. The tax equivalent net interest margin (defined as net interest income divided by average earning assets) decreased to 5.07% for the first half of 1997 compared to 5.14% for the same period in 1996. For the six months ended June 30, 1997, the net interest spread (the difference between the yield on interest-earning assets and the cost of interest-bearing liabilities) decreased by .05% to 4.41% compared to 4.46% for the same period in 1996. The yield on interest-earning assets decreased by .01% to 8.79% in 1997 compared to 8.80% for 1996 and the cost of interest-bearing liabilities increased by .04% to 4.38% in 1997 compared to 4.34% in 1996. -13- 14 Provision for Loan Losses - ------------------------- The provision for loan losses increased by $198,000 to $1.45 million for the three months ended June 30, 1997 and increased by $306,000 to $2.65 million for the six months ended June 30, 1997 compared to the same periods in 1996. Net charge-offs were $716,000 and $670,000, respectively, for the three and six month periods ended June 30, 1997 compared to net charge-offs of $421,000 and $723,000, respectively, for the same periods in 1996. Non-performing loans, defined as loans that are 90 days past due, renegotiated loans and non-accrual loans were $7.1 million or .46% of loans at June 30, 1997 compared to $7.8 million or .53% of loans at December 31, 1996 and $6.9 million or .50% of loans at June 30, 1996. The reserve for loan losses as a percentage of outstanding loans was 2.24% at June 30, 1997 compared to 2.20% at December 31, 1996 and 2.25% at June 30, 1996. See Footnote 3 for a discussion of the factors considered by management in determining the provision for loan losses. Non-Interest Income - ------------------- Non-interest income increased by $591,000 or 13.9% to $4.8 million for the three months ended June 30, 1997 and increased by $1.1 million or 12.9% to $9.8 million for the six months ended June 30, 1997 compared to the same periods in 1996. The increase in non-interest income for both periods in 1997 compared to 1996 was primarily due to increases in fees from fiduciary activities and service charges on deposit accounts. Security Losses - --------------- Investment security losses were $401,000 for the three month period ended June 30, 1996 and $700,000 for the first half of 1996 compared to no gain or loss for the same periods in 1997. In 1996, taxable investment securities were sold and the proceeds reinvested into taxable investment securities with slightly longer maturities. At June 30, 1997, the unrealized net holding gain on available-for-sale securities was $4.1 million compared to an unrealized net hold gain of $4.7 million at December 31, 1996. If longer-term interest rates would increase during the second half of 1997, the Corporation could realize some investment security losses in the last two quarters of 1997. Other Expense - ------------- Total other expense increased by $1.9 million or 13.9% to $15.5 million for the three months ended June 30, 1997 and increased by $2.7 million or 9.4% to $31.1 million for the six months ended June 30, 1997 compared to the same periods in 1996. Salaries and employee benefits expense increased by $965,000 or 14.3% to $7.7 million for the three months ended June 30, 1997 and increased by $1.3 million or 9.5% to $15.4 million for the six months ended June 30, 1997 compared to the same periods in 1996. Included in salaries and employee benefits expense were expenses pertaining to the payment of stock appreciation rights and the related payroll taxes, and payroll taxes pertaining to the exercise of nonqualifying employee stock options. The stock appreciation rights and the stock options were exercised by the First-Knox employees during May, 1997 after the merger with Park was completed. See Footnote 2 for information about the merger. The additional expense due to the exercise of the stock appreciation rights and the stock options was $339,000 for the three months ended June 30, 1997 and $437,000 for the six months ended June 30, 1997 compared to the same periods in 1996. Full time equivalent employees were 980 at June 30, 1997 compared to 956 at June 30, 1996. -14- 15 The subcategory other expense which includes data processing expense, fees and service charges, marketing, telephone, postage, deposit insurance premiums, amortization of intangibles, and expenses pertaining to other real estate owned, increased by $872,000 or 16.9% to $6.0 million for the three months ended June 30, 1997 and increased by $1.3 million or 11.4% to $12.3 million for the six months ended June 30, 1997. The increase in the subcategory other expense for both periods was primarily due to increases in the amortization of intangibles and to a lesser extent increases in marketing expense and fees and service charges. The increase in the amortization of intangibles was $360,000 for the second quarter of 1997 and $721,000 for the first six months of 1997 compared to the same periods in 1996. Federal Income Taxes - -------------------- Federal income tax expense increased by $546,000 to $4.3 million and by $1.2 million to $8.3 million for the three and six month periods ended June 30, 1997, respectively, compared to the same periods in 1996. The ratio of federal income tax expense to income before taxes was approximately 31% for both periods in 1997 and 1996. Net Income - ---------- Net income increased by $1.1 million or 13.4% to $9.55 million for the three months ended June 30, 1997 compared to $8.42 million for the same period in 1996. For the six months ended June 30, 1997, net income increased by $2.5 million or 15.8% to $18.5 million compared to $16.0 million for the same period in 1996. The annualized, net income to average asset ratio (ROA) was 1.73% and 1.70%, respectively, for the three and six month periods ended June 30, 1997 compared to 1.72% and 1.64%, respectively, for the same periods in 1996. The annualized, net income to average equity ratios (ROE) was 19.25% and 18.81%, respectively, for the three and six month periods ended June 30, 1997 compared to 18.49% and 17.54%, respectively, for the same periods in 1996. -15- 16 COMPARISON OF FINANCIAL CONDITION FOR JUNE 30, 1997 AND DECEMBER 31, 1996 Changes in Financial Condition and Liquidity - -------------------------------------------- Total assets increased by $81 million or 3.7% to $2,266 million at June 30, 1997 compared to $2,185 million at December 31, 1996. Loan balances increased by $62 million to $1,534 million and federal funds sold and investment securities increased by $18 million to $592 million. Total liabilities increased by $70 million or 3.5% to $2,056 million at June 30, 1997 compared to $1,986 million at December 31. 1996. This increase was due to increases in short-term borrowings and non-interest-bearing deposits. Total borrowing increased by $62 million to $260 million at June 30, 1997. Short-term borrowings, which primarily consist of overnight repurchase agreements with customers, increased by $83 million to $218 million while long-term debt, which consists of Federal Home Loan Bank advances, decreased by $21 million to $41 million at June 30, 1997. Proceeds from short-term borrowings were used to prepay higher rate long-term debt at the end of the second quarter of 1997. Total deposits increased by $14 million to $1,778 million at June 30, 1997 as noninterest-bearing deposits increased by $17 million and interest-bearing deposits decreased by $3 million. Effective liquidity management ensures that the cash flow requirements of depositors and borrowers, as well as the operating cash needs of the Corporation, are met. Funds are available from a number of sources, including the securities portfolio, the core deposit base, Federal Home Loan Bank borrowings, and the capability to securitize or package loans for sale. The Corporation's loan to asset ratio was 67.7% at June 30, 1997 compared to 67.4% at December 31, 1996 and 69.4% at June 30, 1997. Cash and cash equivalents were unchanged during the six months ended June 30, 1997 and remained at $82 million. The present funding sources provide more than adequate liquidity for the Corporation to meet its cash flow needs. Capital Resources - ----------------- Stockholders' equity at June 30, 1997 was $210.6 million or 9.29% of total assets compared to $199.0 million or 9.11% of total assets at December 31, 1996 and $185.4 million or 9.39% of total assets at June 30, 1996. Financial institution regulators have established guidelines for minimum capital ratios for banks, thrifts, and bank holding companies. The net unrealized gain or loss on available-for-sale securities is not included in computing regulatory capital. The minimum leverage capital ratio (defined as stockholders' equity less intangible assets) is 4% and the well capitalized ratio is greater than or equal to 5%. Park's leverage ratio was 8.83% at June 30, 1997 and 8.73% at December 31, 1996. The minimum Tier I risk-based capital ratio (defined as leverage capital divided by risk-adjusted assets) is 4% and the well capitalized ratio is greater than or equal to 6%. Park's Tier I risk-based capital ratio was 13.63% at June 30, 1997 and 13.16% at December 31, 1996. The minimum total risk-based capital ratio (defined as leverage capital plus supplemental capital divided by risk-adjusted assets) is 8% and the well capitalized ratio is greater than or equal to 10%. Park's total risk-based capital ratio was 14.89% at June 30, 1997 and 14.42% at December 31, 1996. The financial institution subsidiaries of Park each met the well capitalized capital ratio guidelines at June 30, 1997. The following table indicates the capital ratios for each subsidiary and Park at June 30, 1997: -16- 17
Tier I Total Leverage Risk-Based Risk-Based -------- ---------- ---------- Park National Bank 7.73% 10.60% 11.87% Richland Trust Company 6.56% 11.69% 12.96% Century National Bank 8.24% 14.18% 15.44% First-Knox National Bank 7.40% 12.53% 13.78% Farmers and Savings Bank 8.19% 12.27% 13.52% Park National Corporation 8.83% 13.63% 14.89% Minimum Capital Ratio 4.00% 4.00% 8.00% Well Capitalized Ratio 5.00% 6.00% 10.00%
Mutual Federal Savings Bank converted from a thrift charter to a national commercial bank charter effective April 7, 1997 and accordingly changed its name to Century National Bank. At the July 21, 1997 Park National Corporation Board of Directors' Meeting, a cash dividend of $.40 per share was declared payable on September 10, 1997 to stockholders of record on August 22, 1997. -17- 18 PARK NATIONAL CORPORATION PART II - OTHER INFORMATION Item 1. Legal Proceedings ----------------- Park National Corporation is not engaged in any legal proceedings of a material nature at the present time. Item 2. Changes in Securities --------------------- Not applicable Item 3. Defaults Upon Senior Securities ------------------------------- Not applicable Item 4. Submission of Matters to a Vote of Security Holders --------------------------------------------------- Not applicable Item 5. Other Information ----------------- Not Applicable Item 6. Exhibits and Reports on Form 8-K -------------------------------- a. Exhibits -------- See Exhibit Index at Page 20 b. Reports on Form 8-K ------------------- A Form 8-K was filed by Park on May 19, 1997 announcing the acquisition of First-Knox. Included in the filing were a condensed pro forma combined balance sheet of Park and First-Knox as of March 31, 1997 and condensed pro forma combined statements of income for the quarters ended March 31, 1997 and 1996. -18- 19 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. PARK NATIONAL CORPORATION DATE: August 12, 1997 BY: /s/ C. Daniel DeLawder ------------------------- ------------------------------------ C. Daniel DeLawder President DATE: August 12, 1997 BY: /s/ David C. Bowers ------------------------- ------------------------------------ David C. Bowers Chief Financial Officer/Secretary -19- 20 PARK NATIONAL CORPORATION EXHIBIT INDEX EXHIBIT NUMBER DESCRIPTION -------------- ----------- 3(a)1 Certificate of Amendment by Shareholders to the Articles of Incorporation of Park National Corporation as filed with the Ohio Secretary of State on April 22, 1997. 3(a)2 Articles of Incorporation of Park National Corporation (reflecting amendments through April 22, 1997) (for SEC reporting compliance purposes only; not filed with Ohio Secretary of State) 3(b)1 Certified Resolution regarding adoption of amendment to Subsection 2.02(A) of the Regulations of Park National Corporation by shareholders on April 21, 1997. 3(b)2 Regulations of Park National Corporation (reflecting amendments through April 21, 1997) (For SEC reporting compliance purposes only) 27 Financial Data Schedule -20- EX-3.A.1 2 EXHIBIT 3A1 1 EXHIBIT 3(a)(1) --------------- CERTIFICATE OF AMENDMENT BY SHAREHOLDERS TO THE ARTICLES OF INCORPORATION OF PARK NATIONAL CORPORATION AS FILED WITH THE OHIO SECRETARY OF STATE ON APRIL 22, 1997 2 [Seal of Ohio Secretary of State] Prescribed by BOB TAFT, Secretary of State Charter No. 815582 30 East Broad Street, 14th Floor Approved CR Columbus, Ohio 43266-0418 Date: 4-22-97 Form SH-AMD (January 1991) Fee 35 - 97042256301 CERTIFICATE OF AMENDMENT BY SHAREHOLDERS TO THE ARTICLES OF INCORPORATION OF - -------------------------------------------------------------------------------- Park National Corporation (Name of Corporation) C. Daniel Delawder, who is: - ------------------ [ ] Chairman of the Board [X] President [ ] Vice President (Check One) and David C. Bowers, who is: [X] Secretary [ ] Assistant Secretary (Check One) - --------------- of the above name Ohio corporation for profit do hereby certify that: (check the appropriate box and complete the appropriate statements) [X] a meeting of the shareholders was duly called for the purpose of adopting this amendment and held on April 21, 1997 at which meeting a quorum of the shareholders was present in person or by proxy, and by the affirmative vote of the holders of shares entitling them to exercise 86.3% of the voting power of the corporation. [ ] in a writing signed by all of the shareholders who would be entitled to notice of a meeting held for that purpose, the following resolution to amend the articles was adopted: Please see Annex 1 for resolution adopted by shareholders to amend Article SIXTH of Articles of Incorporation IN WITNESS WHEREOF, the above named officers, acting for and on the behalf of the corporation, have hereto subscribed their names this 21st day of April, 1997. By /s/ C. Daniel DeLawder -------------------------------- C. Daniel DeLawder, President By /s/ David C. Bowers -------------------------------- David C. Bowers, Secretary NOTE: Ohio law does not permit one officer to sign in two capacities. Two separate signatures are required, even if this necessitates the election of a second officer before the filing can be made. 3 Annex 1 ------- RESOLVED, that the Articles of Incorporation of Park National Corporation be, and the same hereby are, amended by deleting present Article SIXTH in its entirety and by substituting in its place new Article SIXTH in the following form: ARTICLE SIXTH OF THE ARTICLES OF INCORPORATION OF PARK NATIONAL CORPORATION SIXTH: The holders of the shares of any class of the Corporation shall, upon the offering or sale of any shares of the Corporation of the same class, have the right, during a reasonable time and on reasonable terms fixed by the directors, to purchase such shares in proportion to their respective holdings of shares of such class at the price fixed for the sale of the shares, unless (A) the shares offered or sold are treasury shares; OR (B) the shares offered or sold are issued as a share dividend or distribution; OR (C) the shares are offered or sold in connection with any merger or consolidation to which the Corporation is a party or any acquisition of, or investment in, another corporation, partnership, proprietorship or other business entity or its assets by the Corporation, whether directly or indirectly, by any means whatsoever; OR (D) the shares are offered or sold pursuant to the terms of a stock option plan or employee benefit, compensation or incentive plan, which stock option plan or employee benefit, compensation or incentive plan is approved by the holders of three-fourths of the issued and outstanding shares of the Corporation; OR (E) the shares offered or sold are released from preemptive rights by the affirmative vote or written consent of the holders of two-thirds of the shares entitled to such preemptive rights. EX-3.A.2 3 EXHIBIT 3A2 1 EXHIBIT 3(a)(2) --------------- ARTICLES OF INCORPORATION OF PARK NATIONAL CORPORATION (REFLECTING AMENDMENTS THROUGH APRIL 22, 1997) [FOR PURPOSES OF SEC REPORTING COMPLIANCE ONLY] 2 ARTICLES OF INCORPORATION OF PARK NATIONAL CORPORATION (reflecting amendments through April 22, 1997) [For purposes of SEC reporting compliance only] FIRST: The name of the corporation shall be Park National Corporation (the "Corporation"). SECOND: The place in Ohio where the principal office of the Corporation is to be located is in the City of Newark, County of Licking. THIRD: The purpose for which the Corporation is formed is to engage in any lawful act or activity for which corporations may be formed under Sections 1701.01 to 1701.98 of the Ohio Revised Code. FOURTH: The authorized number of shares of the Corporation shall be 20,000,000, all of which shall be common shares, each without par value. FIFTH: The directors of the Corporation shall have the power to cause the Corporation from time to time and at any time to purchase, hold, sell, transfer or otherwise deal with (A) shares of any class or series issued by it, (B) any security or other obligation of the Corporation which may confer upon the holder thereof the right to convert the same into shares of any class or series authorized by the Articles of the Corporation, and (C) any security or other obligation which may confer upon the holder thereof the right to purchase shares of any class or series authorized by the Articles of the Corporation. The Corporation shall have the right to repurchase, if and when any shareholder desires to sell, or on the happening of any event is required to sell, shares of any class or series issued by the Corporation. The authority granted in this Article FIFTH of these Articles shall not limit the plenary authority of the directors to purchase, hold, sell, transfer or otherwise deal with shares of any class or series, securities, or other obligations issued by the Corporation or authorized by its Articles. SIXTH: The holders of the shares of any class of the Corporation shall, upon the offering or sale of any shares of the 3 Corporation of the same class, including treasury shares, have the right, during a reasonable time and on reasonable terms fixed by the directors, to purchase such shares in proportion to their respective holdings of shares of such class at the price fixed for the sale of the shares, unless (A) the shares offered or sold are treasury shares; OR (B) the shares offered or sold are issued as a share dividend or distribution; OR (C) the shares are offered or sold in connection with any merger or consolidation to which the Corporation is a party or any acquisition of, or investment in, another corporation, partnership, proprietorship or other business entity or its assets by the Corporation whether directly or indirectly, by any means whatsoever; OR (D) the shares are offered or sold pursuant to the terms of a stock option plan or employee benefit, compensation or incentive plan, which stock option plan or employee benefit, compensation or incentive plan is approved by the holders of three-fourths of the issued and outstanding shares of the Corporation; OR (E) the shares offered or sold are released from preemptive rights by the affirmative vote or written consent of the holders of two-thirds of the shares entitled to such preemptive rights. SEVENTH: Chapter 1704 of the Ohio Revised Code does not apply to the Corporation. EIGHTH: (A) In addition to any affirmative vote required by any provision of the Ohio Revised Code or by any other provision of these Articles, the affirmative vote or consent of the holders of the greater of (i) four-fifths (4/5) of the outstanding common shares of the Corporation entitled to vote thereon or (ii) that fraction of such outstanding common shares having as the numerator a number equal to the sum of (a) the number of outstanding common shares Beneficially Owned by Controlling Persons (as hereinafter defined) plus (b) two-thirds (2/3) of the remaining number of outstanding common shares, and as the denominator a number equal to the total number of outstanding common shares entitled to vote, shall be required for the adoption or authorization of a Business Combination (as hereinafter defined) unless: (1) The Business Combination will result in an involuntary sale, redemption, cancellation or other termination of ownership of all common shares of the Corporation owned by shareholders who do not vote in favor of, or consent in writing to, the Business Combination and the cash or fair value of other readily marketable consideration to be received by such shareholders for such common shares shall at least be equal to the Minimum Price Per Share (as hereinafter defined); and (2) A proxy statement responsive to the requirements of the Securities Exchange Act of 1934 shall be mailed to 4 the shareholders of the Corporation for the purpose of soliciting shareholder approval of the proposed Business Combination. (B) For purposes of this Article EIGHTH, the following definitions shall apply: (1) "Affiliate" shall mean a Person that directly or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, another Person. (2) "Associate" shall mean (a) any corporation or organization of which a Person is an officer or partner or is, directly or indirectly, the Beneficial Owner of ten percent (10%) or more of any class of equity securities, (b) any trust or other estate in which a Person has a ten percent (10%) or greater individual interest of any nature or as to which a Person serves as trustee or in a similar fiduciary capacity, (c) any spouse of a Person, and (d) any relative of a Person, or any relative of a spouse of a Person, who has the same residence as such Person or spouse. (3) "Beneficial Ownership" shall include without limitation (a) all shares directly or indirectly owned by a Person, by an Affiliate of such Person or by an Associate of such Person or such Affiliate, (b) all shares which such Person, Affiliate or Associate has the right to acquire through the exercise of any option, warrant or right (whether or not currently exercisable), through the conversion of a security, pursuant to the power to revoke a trust, discretionary account or similar arrangement, or pursuant to the automatic termination of a trust, discretionary account or similar arrangement; and (c) all shares as to which such Person, Affiliate or Associate directly or indirectly through any contract, arrangement, understanding, relationship or otherwise (including without limitation any written or unwritten agreement to act in concert) has or shares voting power (which includes the power to vote or to direct the voting of such shares) or investment power (which includes the power to dispose or direct the disposition of such shares) or both. (4) "Business Combination" shall mean (a) any merger or consolidation of the Corporation with or into a Controlling Person or an Affiliate of a Controlling Person or an Associate of such Controlling Person or Affiliate, (b) any sale, lease, exchange, transfer or other disposition, including without limitation a mortgage or any other security device, of all or any Substantial Part of the assets of the Corporation, including without limitation any voting securities of a Subsidiary, or of the assets of a Subsidiary, to a Controlling Person or Affiliate of a Controlling Person or Associate of such Controlling Person 5 or Affiliate, (c) any merger into the Corporation, or into a Subsidiary, of a Controlling Person or an Affiliate of a Controlling Person or an Associate of such Controlling Person or Affiliate, (d) any sale, lease, exchange, transfer or other disposition to the Corporation or a Subsidiary of all or any part of the assets of a Controlling Person or Affiliate of a Controlling Person or Associate of such Controlling Person or Affiliate but not including any disposition of assets which, if included with all other dispositions consummated during the same fiscal year of the Corporation by the same Controlling Person, Affiliates thereof and Associates of such Controlling Person or Affiliates, would not result in dispositions during such year by all such Persons of assets having an aggregate fair value (determined at the time of disposition of the respective assets) in excess of one percent (1%) of the total consolidated assets of the Corporation (as shown on its certified balance sheet as of the end of the fiscal year preceding the proposed disposition); provided, however, that in no event shall any disposition of assets be excepted from shareholder approval by reason of the preceding exclusion if such disposition when included with all other dispositions consummated during the same and immediately preceding four (4) fiscal years of the Corporation by the same Controlling Person, Affiliates thereof and Associates of such Controlling Person or Affiliates, would result in disposition by all such Persons of assets having an aggregate fair value (determined at the time of disposition of the respective assets) in excess of two percent (2%) of the total consolidated assets of the Corporation (as shown on its certified balance sheet as of the end of the fiscal year preceding the proposed disposition), (e) any reclassification of the common shares of the Corporation, or any recapitalization involving common shares of the Corporation, consummated within five (5) years after a Controlling Person becomes a Controlling Person, and (f) any agreement, contract or other arrangement providing for any of the transactions described in the definition of Business Combination. (5) "Control" shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise. (6) "Controlling Person" shall mean any Person who Beneficially Owns shares of the Corporation entitling that Person to exercise twenty percent (20%) or more of the voting power of the Corporation entitled to vote in the election of directors. (7) "Minimum Price Per Share" shall mean the sum of (a) the higher of either (i) the highest gross per share price paid or agreed to be paid to acquire any common shares of the 6 Corporation Beneficially Owned by a Controlling Person, provided such payment or agreement to make payment was made within five (5) years immediately prior to the record date set to determine the shareholders entitled to vote or consent to the Business Combination in question, or (ii) the highest per share closing public market price for such common shares during such five (5) year period, plus (b) the aggregate amount, if any, by which five percent (5%) for each year, beginning on the date on which such Controlling Person became a Controlling Person, of such higher per share price exceeds the aggregate amount of all common share dividends per share paid in cash since the date on which such Person became a Controlling Person. The calculation of the Minimum Price Per Share shall require appropriate adjustments for capital changes, including without limitation stock splits, stock dividends and reverse stock splits. (8) "Person" shall mean an individual, a corporation, a partnership, an association, a joint-stock company, a trust, any unincorporated organization, a government or political subdivision thereof, and any other entity. (9) "Securities Exchange Act of 1934" shall mean the Securities Exchange Act of 1934, as amended from time to time as well as any successor or replacement statute. (10) "Subsidiary" shall mean any corporation more than twenty-five percent (25%) of whose outstanding securities entitled to vote for the election of directors are Beneficially Owned by the Corporation and/or one or more Subsidiaries. (11) "Substantial Part" shall mean more than ten percent (10%) of the total assets of the corporation in question, as shown on its certified balance sheet as of the end of the most recent fiscal year ending prior to the time the determination is being made. (C) During any period in which there are one or more Controlling Persons, this Article EIGHTH shall not be altered, changed or repealed unless the amendment effecting such alteration, change or repeal shall have received, in addition to any affirmative vote required by any provision of the Ohio Revised Code or by any other provision of these Articles, the affirmative vote or consent of the holders of the greater of (i) four-fifths (4/5) of the outstanding common shares of the Corporation entitled to vote thereon or (ii) that fraction of such outstanding common shares having as the numerator a number equal to the sum of (a) the number of outstanding common shares Beneficially Owned by Controlling Persons plus (b) two-thirds (2/3) of the remaining number of outstanding common shares, and as the 7 denominator a number equal to the total number of outstanding common shares entitled to vote. EX-3.B.1 4 EXHIBIT 3B1 1 EXHIBIT 3(b)(1) --------------- CERTIFIED RESOLUTION REGARDING ADOPTION OF AMENDMENT TO SUBSECTION 2.02(A) OF THE REGULATIONS OF PARK NATIONAL CORPORATION BY SHAREHOLDERS ON APRIL 21, 1997 2 CERTIFICATE ----------- The undersigned hereby certifies that he is the duly elected, qualified and acting Secretary of Park National Corporation (the "Corporation"); and that the resolution set forth below was duly adopted by the shareholders at the 1997 Annual Meeting of the Shareholders (the "Annual Meeting") of the Corporation held on April 21, 1997: RESOLUTION REGARDING ADOPTION OF AMENDMENT TO SUBSECTION 2.02(A) OF THE REGULATIONS RESOLVED, that Section 2.02 of the Company's Regulations be amended by deleting the existing Subsection 2.02(A) in its entirety and substituting therefor the following new Subsection 2.02(A): Section 2.02. Number of Directors and Term of Office. ------------------------------------------------------ (A) The number of directors of the corporation may be determined at a meeting of the shareholders called for the purpose of electing directors at which a quorum is present, by the affirmative vote of the holders of not less than a majority of the voting shares which are represented at the meeting, in person or by proxy, and entitled to vote on such proposal; or by resolution adopted by the affirmative vote of a majority of the directors then in office. Notwithstanding the foregoing, the number of directors shall in no event be fewer than five or more than sixteen and the directors may not increase the number of directors to a number which exceeds by 3 more than two the number of directors last elected by the shareholders. IN WITNESS WHEREOF, the undersigned has signed this Certificate this 19th day of May, 1997. /S/David C. Bowers -------------------------- David C. Bowers, Secretary EX-3.B.2 5 EXHIBIT 3B2 1 EXHIBIT 3(b)(2) --------------- REGULATIONS OF PARK NATIONAL CORPORATION (REFLECTING AMENDMENTS THROUGH APRIL 21, 1997) [FOR PURPOSES OF SEC REPORTING COMPLIANCE ONLY] 2 REGULATIONS OF PARK NATIONAL CORPORATION (REFLECTING AMENDMENTS THROUGH APRIL 21, 1997) [FOR PURPOSES OF SEC REPORTING COMPLIANCE ONLY] INDEX
SECTION CAPTION PAGE NO. - ------- ------- -------- ARTICLE ONE MEETINGS OF SHAREHOLDERS 1.01 Annual Meetings.............................................. 1 1.02 Calling of Meetings.......................................... 1 1.03 Place of Meetings............................................ 1 1.04 Notice of Meetings........................................... l 1.05 Waiver of Notice............................................. 2 1.06 Quorum....................................................... 2 1.07 Votes Required............................................... 2 1.08 Order of Business............................................ 3 1.09 Shareholders Entitled to Vote................................ 3 1.10 Cumulative Voting............................................ 3 1.11 Proxies...................................................... 3 1.12 Inspectors of Election....................................... 4 ARTICLE TWO DIRECTORS 2.01 Authority and Qualifications................................. 4 2.02 Number of Directors and Term of Office....................... 4 2.03 Nomination and Election...................................... 5 2.04 Removal...................................................... 6 2.05 Vacancies.................................................... 6 2.06 Meetings..................................................... 7 2.07 Notice of Meetings........................................... 7 2.08 Waiver of Notice............................................. 8 2.09 Quorum....................................................... 8 2.10 Executive Committee.......................................... 8 2.11 Compensation................................................. 9 2.12 By-Laws...................................................... 9 ARTICLE THREE OFFICERS 3.01 Officers..................................................... 9 3.02 Tenure of Office............................................. 9 3.03 Chief Executive Officer...................................... 9 3.04 Chairman of the Board........................................ 10 3.05 President.................................................... 10
i 3 3.06 Vice Presidents.............................................. 10 3.07 Secretary.................................................... 10 3.08 Treasurer.................................................... 10 ARTICLE FOUR SHARES 4.01 Certificates................................................. 11 4.02 Transfers.................................................... 11 4.03 Transfer Agents and Registrars............................... 4.04 Lost, Wrongfully Taken or Destroyed Certificates............. 11 ARTICLE FIVE INDEMNIFICATION AND INSURANCE 5.01 Mandatory Indemnification.................................... 12 5.02 Court-Approved Indemnification............................... 13 5.03 Indemnification for Expenses ................................ 13 5.04 Determination Required....................................... 13 5.05 Advances for Expenses........................................ 14 5.06 Article FIVE Not Exclusive................................... 15 5.07 Insurance.................................................... 15 5.08 Certain Definitions.......................................... 15 5.09 Venue........................................................ 16 ARTICLE SIX MISCELLANEOUS 6.01 Amendments................................................... 16 6.02 Action by Shareholders or Directors Without a Meeting........ 17 6.03 Section 1701.831 of the Ohio Revised Code Not Applicable..... 17
ii 4 REGULATIONS OF PARK NATIONAL CORPORATION (reflecting amendments through April 21, 1997) [For purposes of SEC reporting compliance only] ARTICLE ONE MEETINGS OF SHAREHOLDERS SECTION 1.01. ANNUAL MEETINGS. The annual meeting of the shareholders for the election of directors, for the consideration of reports to be laid before such meeting and for the transaction of such other business as may properly come before such meeting, shall be held on the third Monday of April in each year or on such other date as may be fixed from time to time by the directors. SECTION 1.02. CALLING OF MEETINGS. Meetings of the shareholders may be called only by the chairman of the board, the president, or, in case of the president's absence, death, or disability, the vice president authorized to exercise the authority of the president; the secretary; the directors by action at a meeting, or a majority of the directors acting without a meeting; or the holders of at least twenty-five percent of all shares outstanding and entitled to vote thereat. SECTION 1.03. PLACE OF MEETINGS. All meetings of shareholders shall be held at the principal office of the corporation, unless otherwise provided by action of the directors. Meetings of shareholders may be held at any place within or without the State of Ohio. SECTION 1.04. NOTICE OF MEETINGS. (A) Written notice stating the time, place and purposes of a meeting of the shareholders shall be given either by personal delivery or by mail not less than seven nor more than sixty days before the date of the meeting, (1) to each shareholder of record entitled to notice of the meeting, (2) by or at the direction of the president or the secretary. If mailed, such notice shall be addressed to the shareholder 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. In the event of a transfer of shares after the record date for determining the shareholders who are entitled to receive notice of a meeting of 5 shareholders, it shall not be necessary to give notice to the transferee. Nothing herein contained shall prevent the setting of a record date in the manner provided by law, the Articles or the Regulations for the determination of shareholders who are entitled to receive notice of or to vote at any meeting of shareholders or for any purpose required or permitted by law. (B) Following receipt by the president or the secretary of a request in writing, specifying the purpose or purposes for which the persons properly making such request have called a meeting of the shareholders, delivered either in person or by registered mail to such officer by any persons entitled to call a meeting of shareholders, such officer shall cause to be given to the shareholders entitled thereto notice of a meeting to be held on a date not less than seven nor more than sixty days after the receipt of such request, as such officer may fix. If such notice is not given within fifteen days after the receipt of such request by the president or the secretary, then, and only then, the persons properly calling the meeting may fix the time of meeting and give notice thereof in accordance with the provisions of the Regulations. SECTION 1.05. WAIVER OF NOTICE. Notice of the time, place and purpose or purposes of any meeting of shareholders may be waived in writing, either before or after the holding of such meeting, by any shareholders, which writing shall be filed with or entered upon the records of such meeting. The attendance of any shareholder, in person or by proxy, at any such meeting without protesting the lack of proper notice, prior to or at the commencement of the meeting, shall be deemed to be a waiver by such shareholder of notice of such meeting. SECTION 1.06. QUORUM. At any meeting of shareholders, the holders of a majority of the voting shares of the corporation then outstanding and entitled to vote thereat, present in person or by proxy, shall constitute a quorum for such meeting. The holders of a majority of the voting shares represented at a meeting, whether or not a quorum is present, or the chairman of the board, the president, or the officer of the corporation acting as chairman of the meeting, may adjourn such meeting from time to time, and if a quorum is present at such adjourned meeting any business may be transacted as if the meeting had been held as originally called. SECTION 1.07. VOTES REQUIRED. At all elections of directors, the candidates receiving the greatest number of votes shall be elected. Any other matter submitted to the shareholders for their vote shall be decided by the vote of such proportion of the shares, or of any class of shares, or of each class, as is required by law, the Articles or the Regulations. 2 6 SECTION 1.08. ORDER OF BUSINESS. The order of business at any meeting of shareholders shall be determined by the officer of the corporation acting as chairman of such meeting unless otherwise determined by a vote of the holders of a majority of the voting shares of the corporation then outstanding, present in person or by proxy, and entitled to vote at such meeting. SECTION 1.09. SHAREHOLDERS ENTITLED TO VOTE. Each shareholder of record on the books of the corporation on the record date for determining the shareholders who are entitled to vote at a meeting of shareholders shall be entitled at such meeting to one vote for each share of the corporation standing in his name on the books of the corporation on such record date. The directors may fix a record date for the determination of the shareholders who are entitled to receive notice of and to vote at a meeting of shareholders, which record date shall not be a date earlier than the date on which the record date is fixed and which record date may be a maximum of sixty days preceding the date of the meeting of shareholders. SECTION 1.10. CUMULATIVE VOTING. If notice in writing shall be given by a shareholder to the president, a vice president or the secretary of the corporation, not less than forty-eight hours before the time fixed for holding a meeting of the shareholders for the purpose of electing directors if notice of such meeting shall have been given at least ten days prior thereto, and otherwise not less than twenty-four hours before such time, that such shareholder desires that the voting at such election shall be cumulative, and if an announcement of the giving of such notice is made upon the convening of the meeting by the chairman or secretary or by or on behalf of the shareholder giving such notice, each shareholder shall have the right to cumulate such voting power as he possesses and to give one candidate as many votes as is determined by multiplying the number of directors to be elected by the number of votes to which such shareholder is entitled, or to distribute such number of votes on the same principle among two or more candidates, as he sees fit. SECTION 1.11. PROXIES. At meetings of the shareholders, any shareholder of record entitled to vote thereat may be represented and may vote by a proxy or proxies appointed by an instrument in writing signed by such shareholder, but such instrument shall be filed with the secretary of the meeting before the person holding such proxy shall be allowed to vote thereunder. No proxy shall be valid after the expiration of eleven months after the date of its execution, unless the 3 7 shareholder executing it shall have specified therein the length of time it is to continue in force. SECTION 1.12. INSPECTORS OF ELECTION. In advance of any meeting of shareholders, the directors may appoint inspectors of election to act at such meeting or any adjournment thereof; if inspectors are not so appointed, the officer of the corporation acting as chairman of any such meeting may make such appointment. In case any person appointed as inspector fails to appear or act, the vacancy may be filled only by appointment made by the directors in advance of such meeting or, if not so filled, at the meeting by the officer of the corporation acting as chairman of such meeting. No other person or persons may appoint or require the appointment of inspectors of election. ARTICLE TWO DIRECTORS SECTION 2.01. AUTHORITY AND QUALIFICATIONS. Except where the law, the Articles or the Regulations otherwise provide, all authority of the corporation shall be vested in and exercised by its directors. Directors must be shareholders of the corporation. SECTION 2.02. NUMBER OF DIRECTORS AND TERM OF OFFICE. (A) The number of directors of the corporation may be determined at a meeting of the shareholders called for the purpose of electing directors at which a quorum is present, by the affirmative vote of the holders of not less than a majority of the voting shares which are represented at the meeting, in person or by proxy, and entitled to vote on such proposal; or by resolution adopted by the affirmative vote of a majority of the directors then in office. Notwithstanding the foregoing, the number of directors shall in no event be fewer than five or more than sixteen and the directors may not increase the number of directors to a number which exceeds by more than two the number of directors last elected by the shareholders. (B) The board of directors shall be divided into three classes as nearly equal in number as the then fixed number of directors permits, with the term of office of one class expiring each year. The election of each class of directors shall be a separate election. At the first meeting of shareholders, directors of one class shall be elected to hold office for a term expiring at the 1993 annual meeting, directors of another class shall be elected to hold office for a term expiring at the 1994 4 8 annual meeting and directors of another class shall be elected to hold office for a term expiring at the 1995 annual meeting. At the 1993 annual meeting of shareholders and each succeeding annual meeting, successors to the class of directors whose term then expires shall be elected to hold office for a three-year term. A director shall hold office until the annual meeting for the year in which his term expires and until his successor is duly elected and qualified, or until his earlier resignation, removal from office or death. In the event of any increase in the number of directors of the corporation, the additional directors shall be similarly classified in such a manner that each class of directors shall be as equal in number as possible. In the event of any decrease in the number of directors of the corporation, such decrease shall be effected in such a manner that each class of directors shall be as equal in number as possible. (C) The directors may fill any director's office that is created by an increase in the number of directors. (D) No reduction in the number of directors shall of itself have the effect of shortening the term of any incumbent director. SECTION 2.03. NOMINATION AND ELECTION. (A) Any nominee for election as a director of the corporation may be proposed only by or at the direction of the board of directors or by any shareholder entitled to vote for the election of directors. Nominations, other than those made by or at the direction of the board of directors, shall be made in writing and shall be delivered or mailed to the president of the corporation not less than fourteen days nor more than fifty days prior to any meeting of shareholders called for the election of directors; provided, however, that if less than twenty-one days' notice of the meeting is given to shareholders, such nomination shall be mailed or delivered to the president of the corporation not later than the close of business on the seventh day following the day on which the notice of meeting was mailed. Such notification shall contain the following information to the extent known to the notifying shareholder: (1) the name and address of each proposed nominee; (2) the principal occupation of each proposed nominee; 5 9 (3) the total number of shares of capital stock of the corporation that will be voted for each proposed nominee; (4) the name and residence address of the notifying shareholder; and (5) the number of shares of capital stock of the corporation beneficially owned by the notifying shareholder. (B) If a shareholder shall attempt to nominate one or more persons for election as a director at any meeting at which directors are to be elected without having identified each such person in a written notice given as contemplated by, and/or without having provided therein the information specified in, division (A) of this Section, each such attempted nomination shall be invalid and shall be disregarded unless the person acting as chairman of the meeting determines that the facts warrant the acceptance of such nomination. (C) The election of directors shall be by ballot whenever requested by the presiding officer of the meeting or by the holders of a majority of the voting shares outstanding, entitled to vote at such meeting and present in person or by proxy, but unless such request is made, the election shall be by voice vote. SECTION 2.04. REMOVAL. A director or directors may be removed from office, with or without assigning any cause, only by the vote of the holders of shares entitling them to exercise not less than a majority of the voting power of the corporation to elect directors in place of those to be removed, provided that unless all the directors, or all the directors of a particular class (if the directors of the corporation are divided into classes), are removed, no individual director shall be removed in case the votes of a sufficient number of shares are cast against his removal that, if cumulatively voted at an election of all directors, or all the directors of a particular class, as the case may be, would be sufficient to elect at least one director. In case of any such removal, a new director may be elected at the same meeting for the unexpired term of each director removed. Failure to elect a director to fill the unexpired term of any director removed shall be deemed to create a vacancy in the board. SECTION 2.05. VACANCIES. The remaining directors, though less than a majority of the whole authorized number of directors, may, by the vote of a majority of their number, fill any vacancy in the board for the unexpired term. A vacancy in 6 10 the board exists within the meaning of this Section 2.05 in case the shareholders increase the authorized number of directors but fail at the meeting at which such increase is authorized, or an adjournment thereof, to elect the additional directors provided for, or in case the shareholders fail at any time to elect the whole authorized number of directors. SECTION 2.06. MEETINGS. A meeting of the directors shall be held immediately following the adjournment of each annual meeting of shareholders at which directors are elected, and notice of such meeting need not be given. The directors shall hold such other meetings as may from time to time be called, and such other meetings of directors may be called only by the chairman of the board, the president, or any two directors. All meetings of directors shall be held at the principal office of the corporation in Newark, Ohio or at such other place within or without the State of Ohio, as the directors may from time to time determine by a resolution. Meetings of the directors may be held through any communications equipment if all persons participating can hear each other and participation in a meeting pursuant to this provision shall constitute presence at such meeting. SECTION 2.07. NOTICE OF MEETINGS. Notice of the time and place of each meeting of directors for which such notice is required by law, the Articles, the Regulations or the By-Laws shall be given to each of the directors by at least one of the following methods: (A) In a writing mailed not less than three days before such meeting and addressed to the residence or usual place of business of a director, as such address appears on the records of the corporation; or (B) By telegraph, cable, radio, wireless, or a writing sent or delivered to the residence or usual place of business of a director as the same appears on the records of the corporation, not later than the day before the date on which such meeting is to be held; or (C) Personally or by telephone not later than the day before the date on which such meeting is to be held. Notice given to a director by any one of the methods specified in the Regulations shall be sufficient, and the method of giving notice to all directors need not be uniform. Notice of any meeting of directors may be given only by the chairman of the 7 11 board, the president or the secretary of the corporation. Any such notice need not specify the purpose or purposes of the meeting. Notice of adjournment of a meeting of directors need not be given if the time and place to which it is adjourned are fixed and announced at such meeting. SECTION 2.08. WAIVER OF NOTICE. Notice of any meeting of directors may be waived in writing, either before or after the holding of such meeting, by any director, which writing shall be filed with or entered upon the records of the meeting. The attendance of any director at any meeting of directors without protesting, prior to or at the commencement of the meeting, the lack of proper notice, shall be deemed to be a waiver by him of notice of such meeting. SECTION 2.09. QUORUM. A majority of the directors then in office shall be necessary to constitute a quorum for a meeting of directors. The act of a majority of the directors present at a meeting at which a quorum is present is the act of the board, except as otherwise provided by law, the Articles or the Regulations. SECTION 2.10. EXECUTIVE COMMITTEE. The directors may create an executive committee or any other committee of directors, to consist of not less than three directors, and may authorize the delegation to such executive committee or other committees of any of the authority of the directors, however conferred, other than that of filling vacancies among the directors or in the executive committee or in any other committee of the directors. Such executive committee or any other committee of directors shall serve at the pleasure of the directors, shall act only in the intervals between meetings of the directors, and shall be subject to the control and direction of the directors. Such executive committee or other committee of directors may act by a majority of its members at a meeting or by a writing or writings signed by all of its members. Any act or authorization of any act by the executive committee or any other committee within the authority delegated to it shall be as effective for all purposes as the act or authorization of the directors. No notice of a meeting of the executive committee or of any other committee of directors shall be required. A meeting of the executive committee or of any other committee of directors may be called only by the president or by a member of such executive or other committee of directors. Meetings of the executive committee or of any other committee of directors may be held through any communications equipment if all 8 12 persons participating can hear each other and participation in such a meeting shall constitute presence thereat. SECTION 2.11. COMPENSATION. Directors shall be entitled to receive as compensation for services rendered and expenses incurred as directors, such amounts as the directors may determine. SECTION 2.12. BY-LAWS. The directors may adopt, and amend from time to time, By-Laws for their own government, which By-Laws shall not be inconsistent with the law, the Articles or the Regulations. ARTICLE THREE OFFICERS SECTION 3.01. OFFICERS. The officers of the corporation to be elected by the directors shall be a president, a secretary, a treasurer, and, if desired, one or more vice presidents and such other officers and assistant officers as the directors may from time to time elect. The directors shall elect a chairman of the board, who must be a director. Officers need not be shareholders of the corporation, and may be paid such compensation as the board of directors may determine. Any two or more offices 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, the Articles, the Regulations or the By-Laws to be executed, acknowledged, or verified by two or more officers. SECTION 3.02. TENURE OF OFFICE. The officers of the corporation shall hold office at the pleasure of the directors. Any officer of the corporation may be removed, either with or without cause, at any time, by the affirmative vote of a majority of all the directors then in office; such removal, however, shall be without prejudice to the contract rights, if any, of the person so removed. SECTION 3.03. CHIEF EXECUTIVE OFFICER. The chief executive officer of the corporation, who shall be a member of the board of directors and shall also be either the chairman of the board or the president (or if the chairman of the board and the president shall be absent or unable to act, a vice president), shall be such officer who from time to time is so designated by the directors. The chief executive officer shall have general and active management of the business of the corporation and shall see that all orders and regulations of the directors are carried into effect. The chief executive officer 9 13 shall perform all duties incident to the office of chief executive officer and shall have and may exercise such other powers and duties as from time to time may be conferred upon or assigned to him by the directors. SECTION 3.04. CHAIRMAN OF THE BOARD. The directors shall appoint one of the directors to be chairman of the board to serve at the pleasure of the directors. Such person shall preside at all meetings of the directors and at all meetings of the shareholders. He shall have and may exercise such other powers and duties as from time to time may be conferred upon or assigned to him by the directors. SECTION 3.05. PRESIDENT. The directors shall appoint one of the directors to be president of the corporation. In the absence of the chairman of the board, he shall preside at any meeting of the directors and at any meeting of the shareholders. The president shall have and may exercise such other powers and duties as from time to time may be conferred upon or assigned to him by the directors. SECTION 3.06. VICE PRESIDENTS. The directors may appoint one or more vice presidents, one or more executive vice presidents and one or more senior vice presidents. Each officer shall have and may exercise such powers and duties as from time to time may be conferred upon or assigned to him by the directors. SECTION 3.07. SECRETARY. The directors shall appoint and designate an officer who shall be secretary of the corporation and shall keep minutes of all proceedings of the shareholders and the directors and make a proper record of the same. The secretary shall attend to the giving of all notices required by law, the Articles or the Regulations to be given; shall be custodian of the records, documents and papers of the corporation; shall provide for the keeping of proper records of all transactions of the corporation; shall have and may exercise any and all powers and duties pertaining to the office of secretary as may be required by law, the Articles or the Regulations; and upon the expiration of his term of office, shall deliver all records, documents, papers and property of the corporation in his possession or custody to his successor or the chief executive officer. The secretary shall have and may exercise such other powers and duties as from time to time may be conferred upon or assigned to him by the directors. SECTION 3.08. TREASURER. The directors shall appoint a treasurer who shall receive and safely keep in charge all money, bills, notes, choses in action, securities and similar property belonging to the corporation, and shall do with or 10 14 disburse the same as directed by the chief executive officer or the directors; shall keep an accurate account of the finances and business of the corporation, including accounts of its assets, liabilities, receipts, disbursements, gains, losses, stated capital and shares, together with such other accounts as may be required and hold the same open for inspection and examination by the directors; shall give bond in such sum with such security as the directors may require for the faithful performance of his duties; shall, upon the expiration of his term of office, deliver all money and other property of the corporation in his possession or custody to his successor or the chief executive officer; and shall have and may exercise such other powers and duties as from time to time may be conferred upon or assigned to him by the directors. ARTICLE FOUR SHARES SECTION 4.01. CERTIFICATES. Certificates evidencing ownership of shares of the corporation shall be issued to those entitled to them. Each certificate evidencing shares of the corporation shall bear a distinguishing number; the signatures of the chairman of the board, the president, or a vice president, and of the secretary, an assistant secretary, the treasurer or an assistant treasurer (except that when any such certificate is countersigned by an incorporated transfer agent or registrar, such signatures may be facsimile, engraved, stamped or printed); and such recitals as may be required by law. Certificates evidencing shares of the corporation shall be of such tenor and design as the directors may from time to time adopt and may bear such recitals as are permitted by law. SECTION 4.02. TRANSFERS. Shares of the corporation shall be transferable in the manner prescribed by law and these Regulations. Transfers of shares shall be made on the share transfer books of the corporation only by the person named in the certificate or by attorney lawfully constituted in writing and upon the surrender of the certificate therefor, which shall be cancelled when a new certificate shall be issued. SECTION 4.03. TRANSFER AGENTS AND REGISTRARS. The directors may appoint one or more agents to transfer or to register shares of the corporation, or both. SECTION 4.04. LOST, WRONGFULLY TAKEN OR DESTROYED CERTIFICATES. Except as otherwise provided by law, where the owner of a certificate evidencing shares of the corporation claims that such certificate has been lost, destroyed or 11 15 wrongfully taken, the directors must cause the corporation to issue a new certificate in place of the original certificate if the owner: (1) So requests before the corporation has notice that such original certificate has been acquired by a bona fide purchaser; and (2) Files with the corporation, unless waived by the directors, an indemnity bond, with surety or sureties satisfactory to the corporation, in such sums as the directors may, in their discretion, deem reasonably sufficient as indemnity against any loss or liability that the corporation may incur by reason of the issuance of each such new certificate; and (3) Satisfies any other reasonable requirements which may be imposed by the directors, in their discretion. ARTICLE FIVE INDEMNIFICATION AND INSURANCE SECTION 5.01. MANDATORY INDEMNIFICATION. The corporation shall indemnify any officer or director of the corporation who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (including, without limitation, any action threatened or instituted by or in the right of the corporation), by reason of the fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, trustee, officer, employee or agent of another corporation (domestic or foreign, nonprofit or for profit), partnership, joint venture, trust or other enterprise, against expenses (including, without limitation, attorneys' fees, filing fees, court reporters' fees and transcript costs), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation, and with respect to any criminal action or proceeding, he had no reasonable cause to believe his conduct was unlawful. A person claiming indemnification under this Section 5.01 shall be presumed, in respect of any act or omission giving rise to such claim for indemnification, to have acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation, and with respect to any criminal matter, to have had no reasonable cause to believe his conduct was unlawful, 12 16 and the termination of any action, suit or proceeding by judgment, order, settlement or conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, rebut such presumption. SECTION 5.02. COURT-APPROVED INDEMNIFICATION. Anything contained in the Regulations or elsewhere to the contrary notwithstanding: (A) the corporation shall not indemnify any officer or director of the corporation who was a party to any completed action or suit instituted by or in the right of the corporation to procure a judgment in its favor by reason of the fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, trustee, officer, employee or agent of another corporation (domestic or foreign, nonprofit or for profit), partnership, joint venture, trust or other enterprise, in respect of any claim, issue or matter asserted in such action or suit as to which he shall have been adjudged to be liable for acting with reckless disregard for the best interests of the corporation or misconduct (other than negligence) in the performance of his duty to the corporation unless and only to the extent that the Court of Common Pleas of Licking County, Ohio or the court in which such action or suit was brought shall determine upon application that, despite such adjudication of liability, and in view of all the circumstances of the case, he is fairly and reasonably entitled to such indemnity as such Court of Common Pleas or such other court shall deem proper; and (B) the corporation shall promptly make any such unpaid indemnification as is determined by a court to be proper as contemplated by this Section 5.02. SECTION 5.03. INDEMNIFICATION FOR EXPENSES. Anything contained in the Regulations or elsewhere to the contrary notwithstanding, to the extent that an officer or director of the corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in Section 5.01, or in defense of any claim, issue or matter therein, he shall be promptly indemnified by the corporation against expenses (including, without limitation, attorneys' fees, filing fees, court reporters' fees and transcript costs) actually and reasonably incurred by him in connection therewith. SECTION 5.04 DETERMINATION REQUIRED. Any indemnification required under Section 5.01 and not precluded under Section 5.02 shall be made by the corporation only upon a determination that such indemnification of the officer or director is proper in the circumstances because he has met the 13 17 applicable standard of conduct set forth in Section 5.01. Such determination may be made only (A) by a majority vote of a quorum consisting of directors of the corporation who were not and are not parties to, or threatened with, any such action, suit or proceeding, or (B) if such a quorum is not obtainable or if a majority of a quorum of disinterested directors so directs, in a written opinion by independent legal counsel other than an attorney, or a firm having associated with it an attorney, who has been retained by or who has performed services for the corporation, or any person to be indemnified, within the past five years, or (C) by the shareholders, or (D) by the Court of Common Pleas of Licking County, Ohio or (if the corporation is a party thereto) the court in which such action, suit or proceeding was brought, if any; any such determination may be made by a court under division (D) of this Section 5.04 at any time [including, without limitation, any time before, during or after the time when any such determination may be requested of, be under consideration by or have been denied or disregarded by the disinterested directors under division (A) or by independent legal counsel under division (B) or by the shareholders under division (C) of this Section 5.04]; and no failure for any reason to make any such determination, and no decision for any reason to deny any such determination, by the disinterested directors under division (A) or by independent legal counsel under division (B) or by shareholders under division (C) of this Section 5.04 shall be evidence in rebuttal of the presumption recited in Section 5.01. Any determination made by the disinterested directors under division (A) or by independent legal counsel under division (B) of this Section 5.04 to make indemnification in respect of any claim, issue or matter asserted in an action or suit threatened or brought by or in the right of the corporation shall be promptly communicated to the person who threatened or brought such action or suit, and within ten (l0) days after receipt of such notification such person shall have the right to petition the Court of Common Pleas of Licking County, Ohio or the court in which such action or suit was brought, if any, to review the reasonableness of such determination. SECTION 5.05. ADVANCES FOR EXPENSES. Expenses (including, without limitation, attorneys' fees, filing fees, court reporters' fees and transcript costs) incurred in defending any action, suit or proceeding referred to in Section 5.01 shall be paid by the corporation in advance of the final disposition of such action, suit or proceeding to or on behalf of the officer or director promptly as such expenses are incurred by him, but only if such officer or director shall first agree, in writing, to repay all amounts so paid in respect of any claim, issue or other matter asserted in such action, suit or proceeding in defense of which he shall not have been successful on the merits or otherwise: 14 18 (A) if it shall ultimately be determined as provided in Section 5.04 that he is not entitled to be indemnified by the corporation as provided under Section 5.01; or (B) if, in respect of any claim, issue or other matter asserted by or in the right of the corporation in such action or suit, he shall have been adjudged to be liable for acting with reckless disregard for the best interests of the corporation or misconduct (other than negligence) in the performance of his duty to the corporation, unless and only to the extent that the Court of Common Pleas of Licking County, Ohio or the court in which such action or suit was brought shall determine upon application that, despite such adjudication of liability, and in view of all the circumstances, he is fairly and reasonably entitled to all or part of such indemnification. SECTION 5.06. ARTICLE FIVE NOT EXCLUSIVE. The indemnification provided by this Article FIVE shall not be exclusive of, and shall be in addition to, any other rights to which any person seeking indemnification may be entitled under the Articles or the Regulations or any agreement, vote of shareholders or disinterested directors, or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office, and shall continue as to a person who has ceased to be an officer or director of the corporation and shall inure to the benefit of the heirs, executors, and administrators of such a person. SECTION 5.07. INSURANCE. The corporation may purchase and maintain insurance or furnish similar protection, including but not limited to trust funds, letters of credit, or self-insurance, on behalf of any person who is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, trustee, officer, employee, or agent of another corporation (domestic or foreign, nonprofit or for profit), partnership, joint venture, trust or other enterprise, against any liability asserted against him and incurred by him in any such capacity, or arising out of his status as such, whether or not the corporation would have the obligation or the power to indemnify him against such liability under the provisions of this Article FIVE. Insurance may be purchased from or maintained with a person in which the corporation has a financial interest. SECTION 5.08. CERTAIN DEFINITIONS. For purposes of this Article FIVE, and as examples and not by way of limitation: (A) A person claiming indemnification under this Article FIVE shall be deemed to have been successful on the 15 19 merits or otherwise in defense of any action, suit or proceeding referred to in Section 5.01, or in defense of any claim, issue or other matter therein, if such action, suit or proceeding shall be terminated as to such person, with or without prejudice, without the entry of a judgment or order against him, without a conviction of him, without the imposition of a fine upon him and without his payment or agreement to pay any amount in settlement thereof (whether or not any such termination is based upon a judicial or other determination of the lack of merit of the claims made against him or otherwise results in a vindication of him); and (B) References to an "other enterprise" shall include employee benefit plans; references to a "fine" shall include any excise taxes assessed on a person with respect to an employee benefit plan; and references to "serving at the request of the corporation" shall include any service as a director, officer, employee or agent of the corporation which imposes duties on, or involves services by, such director, officer, employee or agent with respect to an employee benefit plan, its participants or beneficiaries; and a person who acted in good faith and in a manner he reasonably believed to be in the best interests of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner "not opposed to the best interests of the corporation" within the meaning of that term as used in this Article FIVE. SECTION 5.09. VENUE. Any action, suit or proceeding to determine a claim for indemnification under this Article FIVE may be maintained by the person claiming such indemnification, or by the corporation, in the Court of Common Pleas of Licking County, Ohio. The corporation and (by claiming such indemnification) each such person consent to the exercise of jurisdiction over its or his person by the Court of Common Pleas of Licking County, Ohio in any such action, suit or proceeding. ARTICLE SIX MISCELLANEOUS SECTION 6.01. AMENDMENTS. The Regulations may be amended, or new regulations may be adopted, at a meeting of shareholders held for such purpose, only by the affirmative vote of the holders of shares entitling them to exercise not less than two-thirds of the voting power of the corporation on such proposal, or without a meeting by the written consent of the holders of shares entitling them to exercise not less than two-thirds of the voting power of the corporation on such proposal. 16 20 SECTION 6.02. ACTION BY SHAREHOLDERS OR DIRECTORS WITHOUT A MEETING. Anything contained in the Regulations to the contrary notwithstanding, except as provided in Section 6.01, any action which may be authorized or taken at a meeting of the shareholders or of the directors or of a committee of the directors, as the case may be, 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 shareholders who would be entitled to notice of a meeting of the shareholders held for such purpose, or all the directors, or all the members of such committee of the directors, respectively, which writings shall be filed with or entered upon the records of the corporation. SECTION 6.03. SECTION 1701.831 OF THE OHIO REVISED CODE NOT APPLICABLE. Section 1701.831 of the Ohio Revised Code does not apply to control share acquisitions of shares of the corporation. EX-27 6 EXHIBIT 27
9 1,000 6-MOS DEC-31-1997 JAN-01-1997 JUN-30-1997 80,924 0 600 0 582,423 9,243 0 1,534,410 34,325 2,266,453 1,777,797 218,356 18,381 41,346 68,063 0 0 142,510 2,266,453 69,645 18,992 426 89,063 32,899 38,243 50,820 2,648 0 31,078 26,865 18,541 0 0 18,541 1.97 1.97 5.07 2,029 2,176 2,882 7,087 32,347 2,102 1,432 34,325 34,325 0 0
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