PROXY STATEMENT
This Proxy Statement is furnished in connection with solicitation of
the enclosed proxy by the Board of Directors of Bath National
Corporation (the "Company") in connection with the annual meeting of
shareholders of the Company to be held on April 28,1999 at 2:30 P.M.
at Pleasant Valley Winery (Great Western Visitors Center) Pleasant
Valley Road, Hammondsport, New York.
The principal executive offices of the Company are located at 44
Liberty Street, Bath, New York 14810. The approximate date on which
this proxy statement and the enclosed proxy are being sent to the
shareholders is April 5, 1999.
The close of business on March 31, 1999 has been fixed as the record
date for determination of the shareholders entitled to notice of, and
to vote at, the meeting. On that date there were outstanding
1,327,848 shares of Common Stock, each of which is entitled to one
vote on each matter at the meeting.
The enclosed proxy, if properly completed, signed and returned prior
to the meeting, will be voted at the meeting in accordance with the
choices specified thereon and, if no choices are specified, it will
be voted in favor of the proposals set forth in the notice attached
hereto. A shareholder giving a proxy has the right to revoke it at
any time before it has been voted by (i) giving written notice to
that effect to the Secretary of the Company, (ii) executing and
delivering a proxy bearing a later date which is voted at the Annual
Meeting, or (iii) attending and voting in person at the Annual
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Meeting. Directors are elected by a plurality of the votes cast by
shareholders entitled to vote in the election and the proposal to
appoint independent auditors requires the affirmative vote of holders
of a majority of shares entitled to vote, who are present at the
meeting if a quorum is present. A quorum will be present if the
holders of a majority of the outstanding shares of the Company
entitled to vote are present at the meeting in person or by proxy.
Abstentions and broker non-votes are counted for quorum purposes but
are not counted for or against the election of directors. An
abstention on the proposal to appoint the auditors has the same legal
effect as a vote "against" the proposal even though shareholder may
interpret such action differently.
ELECTION OF DIRECTORS
The Company's Board of Directors is divided into three classes, one
of which is elected at each Annual Meeting for a term of three years
and until their successors have been elected and qualified. The
terms of Robert H. Cole, Herbert Fort, Patrick Sullivan, and Alan J.
Wilcox expire this year and the Board of Directors has nominated each
of them to serve as a director as follows:
Robert H. Cole three years
Herbert Fort three years
Patrick Sullivan three years
Alan J. Wilcox three years
The Board of Directors believes that the nominees will be available
and able to serve as directors, but, if for any reason any of them
should not be, the persons named in the proxy may exercise
discretionary authority to vote for a substitute proposed by the
Board of Directors.
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The Board of Directors of the Company has no committees. The
Board of Directors of Bath National Bank (the Bank), comprising the
same individuals as the Board of Directors of the Company, has the
following committees: an Asset/Liability Management Committee; an
Audit Committee; a Building Committee; a Compliance Committee; an
Electronic Data Processing (EDP) Steering Committee; an Investment
Committee; a Long Range Planning Committee; a Pension Fund Review
Committee; a Salary and Personnel Committee; and a Trust Committee.
The members of the Asset/Liability Management Committee are: Laverne
H. Billings, Herbert Fort, Edward C. Galpin, Douglas L. McCabe and
Freeman H. Smith, III. This committee is responsible for
establishing goals with respect to the interest rate "gap" between
earning assets and liabilities and liquidity, and reviewing
performance against those goals. In 1998 this Committee held three
meetings.
The members of the Audit Committee are Theodore P. Capron, Lisle E.
Hopkins, Lawrence C. Howell and Constance Manikas. This Committee is
responsible for evaluating internal and external audits, the
independence of the Company's auditors, compliance with banking laws
and regulations and accounting principles, internal controls and
compliance with certain Bank policies. The Committee is also
responsible for recommendations to the Board of Directors in matters
within its jurisdiction, including the Company's choice of external
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auditors for the Bank and the results of any audit. In 1998, this
Committee held five meetings.
The members of the Building Committee are Laverne H. Billings,
Theodore P. Capron, Robert H. Cole, Joseph F. Meade, Jr., Freeman H.
Smith, III and Alan J. Wilcox. This Committee, which met once in
1998, is responsible for the review of facilities and renovations.
The members of the Compliance Committee are Laverne H. Billings,
Herbert Fort, Edward C. Galpin, Lisle E. Hopkins and Douglas L.
McCabe. This Committee, which held three meetings in 1998, is
charged with the oversight of compliance by the Company and the Bank
with applicable bank holding company and banking laws and
regulations.
The members of the EDP Steering Committee are Herbert Fort, Edward C.
Galpin and Lawrence C. Howell. This Committee, which held five
meetings in 1998, reviews developments in bank electronic data
processing, establishes guidelines for electronic data processing by
the Bank, monitors implementation of the guidelines as well as Year
2000 issues.
The members of the Investment Committee are Laverne H. Billings,
Herbert Fort, Edward C. Galpin and Alan J. Wilcox. This Committee
was established in September 1993 to provide additional oversight and
the monitoring of the investment officer and to review broker-
dealers, consultants and quality of the portfolio. The Committee
held three meetings in 1998.
All of the directors serve on the Long-Range Planning Committee.
<PAGE>
This Committee, which held three meetings in 1998, one of which was a
day long retreat, is responsible for developing long-range goals for
the Bank.
The members of the Pension Fund Review Committee are Theodore P.
Capron, Herbert Fort, Edward C. Galpin, Douglas L. McCabe and Patrick
Sullivan. This Committee reviews the performance of the investment
manager of the Company's defined contribution plan and the profit
sharing/401(K) plan, and oversees certain aspects of the
administration of the plans. This Committee met once in 1998.
The members of the Salary and Personnel Committee are Robert H. Cole,
Herbert Fort, Constance Manikas, Joseph F. Meade, Jr., Freeman H.
Smith III, Patrick Sullivan and Alan J. Wilcox. This Committee,
which held two meeting in 1998, makes recommendations to the Board of
Directors with respect to officer salaries and benefits.
The members of the Trust Committee are Robert H. Cole, Douglas L.
McCabe, Joseph F. Meade, Jr. and Alan J. Wilcox. This Committee,
which met two times in 1998, is responsible for oversight of the
trust operations of the Bank.
The Bank also has an Executive Loan Committee and a Loan Review
Committee on which directors rotate attendance with Bank officers.
These are not, however, committees of the Board of Directors.
Directors of the Bank receive a monthly fee of $1,000, but do
not receive a separate fee for attending meetings. Directors of the
Company are not paid any compensation in this capacity as such.
The Bank has a deferred trustee fee plan which provides that
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following ten year's continuous service on the Board of Directors,
and after attaining the age of sixty-two, those directors serving on
the Board on June 15, 1989 and who met such criteria after leaving
the Board are entitled to receive $250.00 per month for a period of
five years. The estimated present value of the benefit obligation,
which is included in other liabilities in the Company's 1998
consolidated balance sheet, was $145,700.
The Board of Directors of the Company met four times during
1998, and the Board of Directors of the Bank met thirteen times
during 1998. In 1998, all of the directors attended at least 75% of
the total number of meetings of the Board of Directors of the
Company.
Certain information about the nominees and those directors whose
terms of office will continue after the Annual Meeting is set forth
below.
PRINCIPAL OCCUPATION
DIRECTOR TERM AND OTHER DIRECTORSHIPS
NAME AND AGE SINCE EXPIRES HELD IN PUBLIC COMPANIES
Nominees:
Robert H. Cole 1983 1999 Chairman of the Board
(71) Bath National Corporation
Bath National Bank
Cole Law Offices, P.C.
Herbert Fort 1983 1999 Chairman Emeritus
(74) Retired Bank President
since December 31, 1989
Patrick Sullivan 1989 1999 Retired Auto Dealer
(68)
Alan J. Wilcox 1994 1999 President
(44) A. H. Wilcox & Sons, Inc.
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Other Directors:
Edward C. Galpin 1983 2000 Vice President/Treasurer
(52) Bath National Corporation
Executive Vice President
Bath National Bank
Lisle E. Hopkins 1983 2000 Retired Dairy Farmer
(83)
Lawrence C. Howell 1986 2000 Retired Dairy Farmer
(61)
Freeman H. Smith, III 1992 2000 Vice President
(55) Corning, Inc.
Laverne H. Billings 1990 2001 President
(67) R. C. Billings, Inc.
Theodore P. Capron 1983 2001 Retired Bank President
(75)
Constance Manikas 1993 2001 President
(57) Pecon Company, Inc.
Douglas L. McCabe 1993 2001 President
(50) Bath National Corporation
Bath National Bank
Joseph F. Meade, Jr. 1983 2001 Chairman of the Board
(76) Mercury Aircraft, Inc.
Messrs. McCabe and Galpin are the executive officers of the
Company. In addition, Messrs. McCabe and Galpin, along with
Ellsworth W. Beckman, Jr., age 58, Senior Vice President of Bath
National Bank since 1996, and R. Michael Briggs, Age 44, Senior Vice
President of Bath National Bank since 1997, are the executive
officers of the Bank.
STOCK OWNERSHIP
The Company does not know of any persons who beneficially
own more than 5% of its outstanding Common Stock.
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The following table sets forth information, as of March 1, 1999,
with respect to the beneficial ownership of the Company's Common
Stock by (a) each of the directors of the Company, (b) the Company's
Chief Executive Officer and (c) all directors and executive officers
of the Company, as a group.
Number of Share Percent
Name of Common Stock of Class
Laverne H. Billings 7,570 *
Theodore P. Capron 2,400 *
Robert H. Cole 12,426 *
Herbert Fort 842 *
Edward C. Galpin 7,607 *
Lisle E. Hopkins 10,969 *
Lawrence C. Howell 2,955 *
Constance Manikas 1,020 *
Douglas L. McCabe 3,595 *
Joseph F. Meade, Jr. 12,000 *
Freeman H. Smith, III 12,000 *
Patrick Sullivan 10,214 *
Alan J. Wilcox 700 *
Executive Officers
Ellsworth W. Beckman, Jr. 3,636 *
R. Michael Briggs 1,518 *
ALL DIRECTORS AND EXECUTIVE
OFFICERS AS A GROUP (15 PERSONS) 89,452 6.68%
* Represents less than one percent of the outstanding shares of
common stock of the Company.
For purposes of the table above, under the rules of the
Securities and Exchange Commission, an individual is considered to
"beneficially own" any shares of common stock of the Company (i) over
which he or she exercises sole or shared voting or investment power,
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or (ii) of which he or she has the right to acquire beneficial
ownership within sixty days. As used herein, "voting power" is the
power to vote or direct the voting of shares and "investment power"
is the power to dispose or direct the disposition of shares. All
persons shown in the table above have sole voting and investment
power with respect to the shares listed.
COMPENSATION OF EXECUTIVE OFFICERS
REPORT OF BOARD OF DIRECTORS
The Board of Directors of the Bank establishes the compensation
for executive officers of the Bank. Executive officers of the
Company are not compensated as such. The Board of Directors of the
Company, which comprises the same persons as the Bank Board, reviews
any such compensation.
The Bank's Executive Compensation Policy, which applies to the
CEO and all other executive officers, of the Bank is intended to
align executive compensation with the long-term interests of
Company's shareholders. In applying this policy, the Board of
Directors of the Bank (the "Board") has followed a program to:
establish salary and annual bonus opportunities
to attract, motivate and retain executive talent
necessary for the long-term success of the Bank and the
Company; and
integrate cash and compensation so as to reward
executives for performance that enhances the
long-term value of the Company's shareholder equity.
The total executive compensation program consists of cash based
compensation. Cash compensation consists of a base salary, with an
<PAGE>
opportunity for an annual bonus for the Chief Executive Officer,
Executive Vice President and Senior Vice President-Branch
Administration and Senior Vice President-Loan Administration.
The Bank participates in salary surveys both on a regional and
national level to help ensure that the Bank's salary structure is
competitive within the banking industry. The Board determines salary
ranges for key executives. The Board evaluates at least annually the
performance of executive officers and approves any adjustment in base
compensation. The following table shows the compensation of those
executive officers of the Bank who received aggregate annual salary
and bonus in excess of $100,000 in 1998. The members of the
Executive Salary Committee are Robert H. Cole, Herbert Fort,
Constance Manikas, Joseph F. Meade, Jr., Freeman H. Smith, III,
Patrick Sullivan and Alan J. Wilcox. This committee makes
recommendations to the Board of Directors with respect to officer
salaries and benefits.
<PAGE>
SUMMARY COMPENSATION TABLE
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ANNUAL COMPENSATION
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Name and
Principal
Position Year Salary Bonus All Other Compensation <F1>
Douglas McCabe 1998 $130,000 $54,200 $25,344
Senior Vice 1997 100,000 29,800 21,808
President 1996 90,000 28,700 20,077
Edward C. Galpin 1998 $107,500 $27,100 $31,779
Executive Vice 1997 100,000 29,800 29,471
President 1996 100,000 28,700 21,240
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[FN]
<F1>Represents the Bank's contribution to Mr. Galpin's and Mr.
McCabe's account in the Company's non-contributory profit sharing
plan and defined contribution retirement plan. There is a
deferred compensation plan in effect which allows Mr. Galpin and
Mr. McCabe the opportunity to defer a portion of the compensation
otherwise due them. Investment returns are calculated at the
highest rate of return produced by any of the investment options
available under the 401(K) retirement plan. Mr. Galpin deferred
the bonus amount of his compensation and the bank credited
investment interest of $11,000 to the deferred account in excess
of the federal adjusted applicable rates.
Employment Agreements
The Bank has entered into a severance compensation agreement with
Mr. Galpin and Mr. McCabe.
In the case of Mr. Galpin, the agreement provides that upon
terminating Mr. Galpin's employment, as a result of or following
any change in control of the Bank, he is entitled as a severance
fee an amount equal to 3 times the previous three year's average
compensation (including bonuses and profit sharing plan
contributions).
If Mr. Galpin's employment had terminated at the end of 1998
under circumstances requiring payment under the agreement, he
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would have been entitled to receive a lump sum of $423,100.
In the case of Mr. McCabe, the agreement provides that upon
terminating Mr. McCabe's employment, as a result of or following
any change in control of the Bank, he is entitled as a severance
fee an amount equal to 3 times the previous three year's average
compensation (including bonuses and profit sharing plan
contributions). If Mr. McCabe's employment had terminated at the
end of 1998 under circumstances requiring payment under the
agreement, he would have been entitled to receive a lump sum of
$462,700.
The following graph compares the yearly percentage change in the
Company's cumulative total shareholder return on its common stock
over the last five years (assuming reinvestment of dividends at date
of payment into common stock of the Company) with the cumulative
total return of the Russell 2000 stock index and the cumulative total
return of the NASDAQ bank index. The Company believes that while
total shareholder return is an important criteria of corporate
performance, it is subject to the vagaries of the market. In
addition to the creation of shareholder value, the Company's
executive compensation program is based on operating and strategic
results.
<PAGE>
Cumulative Total Return
12/93 12/94 12/95 12/96 12/97 12/98
Bath National Bank XBTHN 100.00 128.00 161.00 204.00 232.00 304.00
RUSSELL 2000 IR20 100.00 98.00 126.00 147.00 180.00 179.00
NASDAQ BANK INAB 100.00 100.00 148.00 196.00 328.00 325.00
Compensation Committee Interlocks and Insider Participation
The Bank has extended credit to directors and officers of both
the Company and the Bank since the Company and Bank commenced
business. In the opinion of management, these loans were made in the
ordinary course of business and were made on substantially the same
terms, including interest rates and collateral, as those prevailing
at the time for comparable transactions with other persons and did
not involve more than the normal risk of collectibility or present
other unfavorable features.
Mr. Robert H. Cole, a Director of the Company and the Bank, is a
member of Cole Law Offices, P.C. The Company and the Bank paid a
total of $92,833 to Cole Law Offices, P.C. for legal services
rendered during 1998.
INDEPENDENT AUDITORS
The Board of Directors has recommended that Urbach Kahn & Werlin PC
be appointed as independent auditors of the Company for 1999. A
representative of that firm will be present at the meeting, will have
the opportunity to make a statement, and will be available to respond
to appropriate questions.
<PAGE>
PROPOSALS OF SHAREHOLDERS
In order to be eligible for inclusion in the Company's proxy
statement and form of proxy for next year's Annual Meeting,
shareholder proposals that action be taken at the meeting must be
received at the Company's principal executive offices by
December 20, 1999. If a notice of a proposal by a shareholder of the
Company is intended to be presented at next year's Annual Meeting is
received by the Company after February 18, 2000, the persons
authorized under the Company's management proxies may exercise
discretionary authority to vote or act on such proposal if the
proposal is raised at next year's Annual Meeting.
OTHER MATTERS
The Board of Directors of the Company knows of no other matters to be
presented at the meeting. However, if any other matters properly
come before the meeting, the persons named in the enclosed proxy will
vote on such matters in accordance with their best judgment.
The cost of solicitation of proxies will be borne by the Company. In
addition to solicitation by mail, some officers and regular employees
of the Company may, without extra compensation, solicit proxies
personally or by telephone or telegraph and the Company will request
brokerage houses, nominees, custodians and fiduciaries to forward
proxy materials to beneficial owners and will reimburse their
expenses.
<PAGE>
Section 16(a) of the Securities Exchange Act of 1934 requires that
the Company's directors and executive officers, and persons who own
more than ten percent of a registered class of the Company's equity
securities, to file with the Securities and Exchange Commission
initial reports of ownership and reports of changes in ownership of
Common Stock of the Company. To the Company's knowledge, based
solely on review of copies of reports furnished to the Company and
written representations that no other reports were required, during
the fiscal year ended December 31, 1998 all Section 16(a) filing
requirements applicable to its officers, directors and greater than
ten percent beneficial owners were complied with.
SHAREHOLDERS MAY RECEIVE A COPY OF THE COMPANY'S ANNUAL REPORT ON
FORM 10-K FILED WITH THE SECURITIES AND EXCHANGE COMMISSION WITHOUT
CHARGE ON REQUEST TO THE SECRETARY, BATH NATIONAL BANK, 44 LIBERTY
STREET, BATH, NEW YORK 14810.
April 5, 1999
By Order of the Board of Directors
Patricia H. Crippen
Secretary-Board of Directors
