SCHEDULE 14A
(Rule 14a-101)
Information Required in Proxy Statement
Schedule 14a Information
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or
Rule 14a-12
LETCHWORTH INDEPENDENT BANCSHARES CORPORATION
(Name of Registrant as Specified in Charter)
Payment of Filing Fee (check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-
6(i)(1), or 14a-6(i)(2) or Item 22(a)(2) of
Schedule 14a.
[ ] Fee computed on table below per Exchange Act Rules
14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which
transaction applies:
(2) Aggregate number of securities to which
transaction applies:
(3) Per unit price or other underlying value of
transaction computed pursuant to Exchange Act
Rule 0-11:
(4) Proposed maximum aggregate value of
transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as
provided by Exchange Act Rule 0-11(a)(2) and
identify the filing for which the offsetting fee
was paid previously. Identify the previous filing
by registration statement number of the Form or
Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
PROXY
LETCHWORTH INDEPENDENT BANCSHARES CORPORATION
Proxy Solicited by the Board of Directors
For Annual Meeting of Stockholders - May 9, 1996
The undersigned stockholder of Letchworth Independent
Bancshares Corporation (the "Company") hereby appoints
Kimberly Anderson and Carolyn Bauers, or either of them, as
attorneys, agents, and proxies of the undersigned with full
power of substitution and each of them to vote in the name
and on behalf of the undersigned at the Annual Meeting of
Stockholders of the Company to be held on May 9, 1996, at
11:00 a.m., at the Batavia Party House, Route 5, Stafford,
New York 14143, and all adjournments thereof, all the
shares of Common Stock of the Company that the undersigned
would be entitled to vote if personally present, with the
powers the undersigned would possess if personally present.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD
PROMPTLY IN THE ENCLOSED POSTPAID ENVELOPE. THIS WILL SAVE
YOUR COMPANY THE COST OF A FOLLOW-UP SOLICITATION.
Please complete and sign on reverse side
This proxy, when properly executed, will be voted in the
manner directed herein. If no direction is specified, the
shares will be voted "FOR" Items 1 and 2.
1. Election of directors: Nominee: Three (3) year term-
James H. Van Arsdale III
FOR the nominee WITHHOLD
listed (except as AUTHORITY
marked to the to vote for the nominee
contrary at right) listed at right
2. Proposal to approve selection of Price Waterhouse as
independent accountants.
FOR AGAINST ABSTAIN
3. In their discretion, the Proxies are authorized to vote
upon such other business as may properly come before the
meeting.
Signature should agree with stenciled name(s) on label.
When signing as attorney, guardian, executyor, administrator
or trustee, please give title. If the signor is a
corporation, please give the full corporate name and sign by
a duly authorized officer, showing the officer's title.
EACH joint owner is requested to sign.
DO YOU PLAN TO ATTEND THE MEETING AND BE OUR GUEST FOR LUNCH
AFTER THE MEETING?
Yes No
Dated: , 1996
(Please insert date)
(Signature)
(Joint Owners Signature)
R:\USER\PJD\LIBC\PROXY.WPD
LETCHWORTH INDEPENDENT BANCSHARES CORPORATION
50 North Main Street
Castile, New York 14427
(716) 493-2577
Notice of Annual Meeting of Stockholders
to be held on May 9, 1996
TO THE STOCKHOLDERS OF LETCHWORTH INDEPENDENT BANCSHARES
CORPORATION:
PLEASE TAKE NOTICE, that the Annual Meeting of
Stockholders of Letchworth Independent Bancshares
Corporation (the "Company") will be held on May 9, 1996, at
11:00 a.m., at the Batavia Party House located on Route 5,
Stafford, New York, for the following purposes:
1. To elect one (1) director of the Company who shall
serve as a member of the Board of Directors for a term of
three (3) years;
2. To consider and act upon a proposal to ratify the
selection of Price Waterhouse as independent accountants of
the Company; and
3. To transact such other business as may properly
come before the meeting or any adjournments thereof.
Accompanying this Notice are a Proxy, Proxy Statement,
and a copy of the Company's Annual Report for the year ended
December 31, 1995.
Whether or not you expect to be present at the meeting,
please sign and date the Proxy and return it in the enclosed
envelope provided for that purpose. The Proxy may be
revoked at any time prior to the time that it is voted.
Only stockholders of record at the close of
business on March 29, 1996 will be entitled to vote at the
Annual Meeting.
BY ORDER OF THE BOARD OF DIRECTORS
James W. Fulmer
President and Chief Executive Officer
Castile, New York
April 5, 1996
LETCHWORTH INDEPENDENT BANCSHARES CORPORATION
50 North Main Street
Castile, New York 14427
(716) 493-2577
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 9, 1996
This Proxy Statement is furnished by Letchworth
Independent Bancshares Corporation (the "Company") in
connection with the solicitation of proxies on behalf of the
Board of Directors of the Company for use at the Annual
Meeting of Stockholders to be held on May 9, 1996, at 11:00
a.m., at the Batavia Party House located on Route 5,
Stafford, New York, for the purposes set forth in the Notice
of Annual Meeting of Stockholders and any and all
adjournments thereof (the "Annual Meeting").
The enclosed Proxy is solicited by the Board of
Directors of the Company. All properly executed Proxies
received in time for the Annual Meeting will be voted as
specified. If no instructions are specified on a Proxy, the
Proxy will be voted (i) FOR the election of the person
nominated by the Board of Directors to be a director; and
(ii) FOR the approval of Price Waterhouse as independent
accountants of the Company for the year ending December 31,
1996.
All of the expenses involved in preparing,
assembling, and mailing this Proxy Statement and the
material enclosed herewith will be paid by the Company. The
Company may reimburse banks, brokerage firms, and other
custodians, nominees, and fiduciaries for reasonable
expenses incurred by them in sending proxy material to
beneficial owners of stock. This Proxy Statement and
accompanying form of Proxy are being mailed to stockholders
on or about April 5, 1996.
REVOCATION RIGHTS
Anyone who has given a Proxy may revoke it at any
time prior to the voting thereof by signing, dating and
delivering a subsequent Proxy or by delivering written
notice to the Secretary of the Company or by attending the
meeting and notifying the Secretary of his or her intention
to vote in person.
VOTING SECURITIES
Only holders of record of common stock of the
Company (the "Common Stock") at the close of business on
March 29, 1996 (the "Record Date") will be entitled to vote
at the Annual Meeting. The Common Stock constitutes the
only class of outstanding voting securities issued by the
Company. At the close of business on the Record Date,
905,470 shares of Common Stock were outstanding and entitled
to be voted at the Annual Meeting. Each share of Common
Stock is entitled to one vote with respect to matters to be
voted on at the Annual Meeting.
The presence, in person or by proxy, of at least a
majority of the total number of shares of Common Stock
outstanding and entitled to vote is necessary to constitute
a quorum and in the event there are not sufficient votes,
the Annual Meeting may be adjourned. Directors shall be
elected by a plurality of the eligible votes cast, and the
ratification of the appointment of independent accountants
and such other business as may properly come before
the Annual Meeting will be determined by a majority of the
eligible votes cast. Abstentions, in person or by proxy,
shall be counted toward a quorum, but abstentions under New
York law are not deemed to be votes cast and therefore
abstentions have no effect on the outcome of the vote, which
requires either a plurality or majority of the "votes cast,"
depending upon the proposal. Shares held by brokers or
nominees on behalf of beneficial owners are treated like
abstentions: the shares count toward a quorum if the broker
or nominee returns the duly executed Proxy indicating no
vote is being cast with respect to a particular proposal,
but there is no effect on the outcome of the vote on any
such matter for which no vote is being cast because action
requires a plurality or majority of "votes cast."
Information as to the name, address and holdings
of each person known by the Company to be the beneficial
owner of more than 5% of the outstanding Common Stock as of
March 24, 1996, is set forth below. Except as otherwise
indicated in this Proxy Statement, the Company believes that
each person whose share holdings are listed below has the
sole voting and investment power with respect to such
shares.
Amount of
Common Stock Percent of
Name and Address Beneficially Common Stock
Beneficial Owner Owned
Outstanding(1)
Charles L. Van Arsdale 75,246 (2) 7.82%
5136 Park Road West
Castile, NY 14427
James H. Van Arsdale, III 44,140 (3) 5.09%
71 Park Road East
Castile, NY 14427
Letchworth Independent Bancshares 92,344 (4) 9.59%
Corporation Employee Stock
Ownership Plan
50 North Main Street
Castile, New York 14427
______________________
(1) These percentages have been calculated based upon
962,700 shares of the Company's Common Stock
outstanding, which amount includes the shares of Common
Stock that James W. Fulmer and Brenda L. Copeland have
the right to acquire pursuant to the exercise of certain
options granted under the Letchworth Independent
Bancshares Corporation Stock Option Plan of 1990 (the
"Option Plan") that are exercisable within sixty (60) days
of the date of this Proxy Statement, as well as the
shares of Common Stock that certain officers and
directors of the Company and the Letchworth Independent
Bancshares Corporation Employee Stock Ownership Plan(the
"ESOP") have the right to acquire by the exercise of
certain warrants.
(2) Includes 3,528 shares of Common Stock owned by Mr. Van
Arsdale's wife.
(3) Includes 4,851 shares of Common Stock owned by Mr. Van
Arsdale's wife.
(4) Includes the shares of Common Stock allocated to
certain officers and directors of the Company and
The Bank of Castile (the "Bank"), as well as 15,050
shares of Common Stock that the ESOP has the right to
acquire by the exercise of certain warrants. The
participants in the ESOP have the sole power to vote
shares and dispositive powers for shares which have been
allocated to participant accounts. Only 15,050 shares of
Common Stock in the ESOP have not been allocated to
participant accounts. See "INFORMATION CONCERNING
DIRECTORS AND OFFICERS - Executive Compensation --
Benefits --- Employee Stock Ownership Plan."
Officers and directors of the Company, including
the Board of Directors' nominee for election to the Board of
Directors of the Company, as a group, owned 192,460 shares
of Common Stock, including shares subject to stock options
that are exercisable within sixty (60) days of the
date of this Proxy Statement (as defined in footnote (1)
above) and shares of Common Stock that certain officers and
directors of the Company and the Bank have the right to
acquire by the exercise of certain warrants, representing
approximately 19.99% of the outstanding voting securities of
the Company at March 24, 1996.
ELECTION OF DIRECTORS
Proxies returned by stockholders will be voted at
the Annual Meeting, in the absence of contrary indication,
in favor of the election of James H. Van Arsdale, III as a
director, to hold office for the term set forth below and
thereafter until his successor has been duly elected and
qualified, unless a prior vacancy shall occur by reason of
the death, resignation, or removal from office of Mr. Van
Arsdale. Although management has no reason to believe that
Mr. Van Arsdale will be unable to serve as a director, if
that contingency should occur, it is intended that the
shares represented by the Proxies will be voted, in the
absence of contrary indication, for any substitute
nominee designated by the Board of Directors, unless to the
extent permitted by law the Board determines to reduce its
size appropriately. Proxies will not be voted for more than
one (1) nominee to the Board of Directors.
Pursuant to the Bylaws of the Company, a maximum
of six (6) individuals may serve on the Board of Directors.
The directors are elected in three (3) classes and in three
(3) staggered three-year terms. In accordance with the
Bylaws of the Company, at the Annual Meeting of
Stockholders held on April 26, 1990, the stockholders of the
Company elected five (5) members to the Board of Directors.
Two (2) directors, Stanley J. Harmon and Gunther K. Buerman,
were re-elected at the Annual Meeting of Stockholders held
on May 4, 1995 to serve until the Annual Meeting of
Stockholders in 1998 and until their respective successors
have been duly elected and qualified. Two (2) other
directors, James W. Fulmer and Charles L. Van Arsdale, were
re-elected at the Annual Meeting of Stockholders held on May
12, 1994 to serve until the Annual Meeting of
Stockholders in 1997 and until their respective successors
have been duly elected and qualified.
As a result, only (1) director is to be elected at
the Annual Meeting to serve until the Annual Meeting of
Stockholders in 1999 and until his successor is duly elected
and qualified. The election of the nominee requires the
affirmative vote of a plurality of all votes cast by the
stockholders entitled to vote in person or by proxy at the
Annual Meeting.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
A VOTE "FOR" THE ELECTION OF THE FOLLOWING NOMINEE
Common Stock Percent
Director of Positions With Owned Bene- of Common
the Company the Company ficially As of Stock
Name Age Since and the Bank March 24,1996(1) Outstanding (2)
James H. 75 1981 Chairman of the 44,140 5.09%
Van Arsdale, III Board of Directors
and Director of
the Company
___________________________
(1) All such shares are owned with sole investment and
voting power.
(2) These percentages have been calculated based upon
962,700 shares of the Company's Common Stock outstanding,
which amount includes the shares of Common Stock that
certain officers and directors have the right to acquire
pursuant to the exercise of certain options granted under
the Option Plan within sixty (60) days of the date of this
Proxy Statement, as well as shares of Common Stock that
certain officers and directors of the Company and the ESOP
have a right to acquire by the exercise of certain warrants.
(3) Includes 4,851 shares of Common Stock owned by Mr. Van
Arsdale's wife.
Mr. James H. Van Arsdale, III, a director of the
Company since 1981, was named Chairman of the Board of
Directors of the Company in 1981. Prior to that time, Mr.
Van Arsdale performed various managerial functions for the
Bank and held various executive offices of the Bank. He was
the Chairman of the Board of Directors of the Bank until
1992, when he retired. Mr. Van Arsdale had also been a
director of the Bank since 1948. Mr. Van Arsdale is the
brother of Mr. Charles L. Van Arsdale.
The following table sets forth various information
relating to the members of the Board of Directors who will
continue to serve in such capacity as set forth below:
Common Stock
Owned Bene- Percent
Director of Positions With ficially As of Common
the Company the Company of March 24, Stock
Name Age Since and the Bank 1996(1) Outstanding (2)
Directors with Terms Expiring in 1997:
Charles L. 72 1981 Director of 75,246 (3) 7.82%
Van Arsdale the Company
and the Bank
James W. Fulmer 44 1988 President, Chief 27,506 (4) 2.83%
Executive Officer
and Director of
the Company; Chairman
of the Board of
Directors, Chief Executive
Officer and Director
of the Bank
Directors with Terms Expiring in 1998:
Gunther K. 52 1990 Director of the 4,200 (5) .44%
Buerman Company
Stanley J. 75 1981 Secretary and Director 9,594 1.00%
Harmon of the Company
(1) All such shares are owned with sole investment and
voting power.
(2) This percentage has been calculated based upon 962,700
shares of the Company's Common Stock outstanding, which
amount includes the shares of Common Stock that certain
officers and directors of the Company have the right to
acquire pursuant to the exercise of certain options granted
under the Option Plan within sixty (60) days of the date of
this Proxy Statement, as well as shares of Common Stock that
certain officers and directors of the Company and the ESOP
have a right to acquire by the exercise of certain warrants.
(3) Includes 3,528 shares of Common Stock owned by Mr. Van
Arsdale's wife.
(4) Includes 23,503 shares of Common Stock that Mr. Fulmer
has the right to acquire by the exercise of certain stock
options granted under the Option Plan that are exercisable
within sixty (60) days of the date of this Proxy Statement,
as well as 2,608 shares of Common Stock allocated to Mr.
Fulmer under the ESOP.
(5) Includes 600 shares of Common Stock that Mr. Buerman
has the right to acquire by the exercise of certain
warrants.
Mr. Charles L. Van Arsdale was the President of the
Company from the date of its incorporation in 1981 until
December 31, 1990. In addition, Mr. Van Arsdale has been a
director of The Bank of Castile, the Company's wholly-owned
subsidiary (the "Bank"), since 1949. Prior to 1981, Mr. Van
Arsdale performed various managerial functions for the Bank
and held various executive offices of the Bank. Mr. Van
Arsdale is the brother of Mr. James H. Van Arsdale, III.
In December, 1994, the Company was advised that
the Bank may be named as a defendant in a certain lawsuit
entitled American River Bank, Inc., et al v. Community
Bankers Mutual Fund, Inc., et al., a lawsuit which was
commenced on or about October 21, 1994 in United States
District Court, Central District of California. In this
action, the plaintiffs alleged that they purchased certain
shares in the United States Government Money Market Fund
(the "Fund"), which were allegedly issued and sold by one of
the defendants, namely, Community Bankers Mutual Fund, Inc.
In connection therewith, the plaintiffs sued the Community
Bankers Mutual Fund, Inc., Community Asset Management, Inc.,
allegedly the investment advisor for the Fund, the directors
of Community Asset Management, Inc. and various participants
in the Fund that were alleged to be "affiliates" of such
directors, for alleged violations of Federal and State
securities laws, fraud, breach of fiduciary duty, negligence
and an accounting.
Although the Bank was subsequently named in the
action, the lawsuit was settled on September 6, 1995. The
terms of the settlement had no material impact on the Bank
or the Company.
Mr. James W. Fulmer has served as the President
and Chief Executive Officer of the Company since January 1,
1991, and as the Chief Executive Officer of the Bank since
January, 1996. Before joining the Company as the Executive
Vice President in December, 1988, Mr. Fulmer held various
executive positions with Fleet Bank of New York (formerly
known as Security New York State Corporation and Norstar
Bank) for approximately twelve (12) years and with the
Genesee Valley Penny Saver for approximately one year. Mr.
Fulmer has served as a director of the Bank since 1988 and
as Vice Chairman of the Board of Directors of the Bank since
1991. Effective May 1, 1992, he assumed the position of
Chairman of the Board of Directors of the Bank, and
currently serves as a member of the Board of Directors of
the Cherry Valley Cooperative Insurance Company, St.
Jerome's Hospital, the Genesee County Industrial Development
Agency, and is Treasurer of the Independent Bankers
Association of New York State. He is also the past Chairman
of the Executive Committee for Retail Banking for the New
York State Bankers Association and is a past member of the
Board of Directors of the New York State Bankers
Association.
Gunther K. Buerman, Esq. has been a director of
the Company since January 25, 1990. Mr. Buerman has been a
partner in the law firm of Harris Beach & Wilcox, LLP,
located in Rochester, New York, since 1982 and has been the
Managing Partner of the firm since 1984. Harris Beach &
Wilcox, LLP serves as corporate counsel to the Company and
the Bank.
Stanley J. Harmon, a retired funeral home
director, has been the Secretary and a director of the
Company since 1981. Mr. Harmon served as a director of the
Bank from 1960 until April 30, 1993, when he retired.
During 1994, the Board of Directors of the Company
met five (5) times. During this period, all directors
attended 75% or more of the total number of meetings of the
Board of Directors. The Board of Directors has formed an
Audit Committee to examine and review the accounting,
reporting and financial practices of the Company. The
Committee also reviews the reports of the Company's
independent accountants, and reviews and approves all non-
audit services to be performed by the independent
accountants. The current members of the Audit Committee are
Gunther K. Buerman, Charles L. Van Arsdale and Stanley J.
Harmon. During fiscal 1995, the Audit Committee met one (1)
time. The Board of Directors does not have a Nominating
Committee or Compensation Committee.
INFORMATION CONCERNING DIRECTORS AND OFFICERS
Executive Compensation
The following table shows, for the years ended
December 31, 1995, 1994, and 1993, the total cash
compensation paid by the Company and the Bank to executive
officers who received total annual salary and bonus in
excess of $100,000 and to the Chief Executive Officer
of the Company.
SUMMARY COMPENSATION TABLE
Annual Compensation
Name and Other Annual
Principal Compensation2
Position Year Salary($)1 Bonus($) ($)
James W. Fulmer 1995 $119,111 $17,500 $8,345
President, CEO 1994 $105,122 $15,000 $8,345
& Director of 1993 $101,344 $10,000 $8,345
the Company, and
Chairman of the
Board of the Bank
Brenda L. Copeland 1995 $ 98,775 $13,000 None
President of 1994 $ 90,863 $10,000 None
the Bank 1993 $ 85,756 $ 7,500 $6,499
Long Term Compensation
Awards
Long Term
Name and Restricted Options Incentive All Other
Principal Stock Award(s) SARs Payout Compensation3
Position Year
($) (#) ($) ($)
James W. Fulmer 1995 None None None $10,454
President, CEO 1994 None None None 6,555
& Director of 1993 None None None 5,868
the Company, and
Chairman of the
Board of the Bank
Brenda L. Copeland 1995 None None None $8,648
President of 1994 None None None 5,599
the Bank 1993 None None None 5,739
(1) Includes matching contributions under the Company's
401(k) plan in an amount equal to $3,050.32, $2,553.88, and
$2,642.38, respectively, for James W. Fulmer, and $2,624.96,
$2,394.80, and $2,313.24, respectively, for Ms. Brenda L.
Copeland, for the years ended December 31, 1995, 1994, and
1993, respectively, as well as director's fees and certain
fringe benefits such as automobiles and group term life
insurance.
(2) The amounts disclosed represent the Company's
contribution pursuant to the Executive Supplemental Income
Agreements executed by and between the Company and each of
Mr. Fulmer and Ms. Copeland. See "Executive Compensation -
Benefits -- Executive Supplemental Income Agreements."
(3) The amounts disclosed represent the Company's
contribution to the Employee Stock Ownership Plan ("ESOP").
During 1995, all directors of the Company received
an annual retainer of $3,000 in lieu of meeting attendance
fees. During 1995, the directors of the Bank each received
an annual retainer of $6,650 in lieu of meeting attendance
fees. During 1995, the Board of Directors of the Bank met
thirteen (13) times. Two (2) of the members of the Board of
Directors of the Bank entered into a certain Deferred
Compensation Agreement relating to all amounts received from
the Bank during the period from 1986 until 1990. Under
these agreements, all fees earned as a director during that
period are deferred until such director's death or
retirement from the Board of Directors of the Bank.
Payments of the fees so deferred, as well as all earnings on
such deferred amounts, are then paid to such director or his
beneficiary, as the case may be, in one hundred twenty (120)
equal monthly installments. The Bank does not currently
intend to offer such agreements to other members of its
Board of Directors.
In addition, during 1995, one designated director of
the Board of Directors of the Bank received a weekly fee of
$100 for his services in connection with the Bank's Loan
Committee. Members of the Examining Committee also receive
a quarterly fee of $100 in lieu of meeting attendance fees.
Employment Contracts
On January 1, 1991, James W. Fulmer began to serve
as the President and Chief Executive Officer of the Company
in accordance with his employment agreement dated September
12, 1989, as amended, effective January 1, 1991.
Subsequently, on May 1, 1992, Mr. Fulmer became the Chairman
of the Board of Directors of the Bank. Pursuant to the
terms of the agreement, as amended, each year the term of
Mr. Fulmer's employment agreement is automatically extended
for an additional year so that the term of the employment
agreement is always three (3) years. In the event that the
Company terminates the employment agreement without cause,
the Company is required to pay Mr. Fulmer, as severance pay,
his annual compensation plus all fringe benefits for a
period of three (3) years from the date of such termination.
In addition, in the event of such termination without cause
or the sale, merger, or substantial reorganization of the
Company or the Bank, all of Mr. Fulmer's options to purchase
Common Stock shall become immediately exercisable. See
"INFORMATION CONCERNING DIRECTORS AND OFFICERS - Executive
Compensation --Benefits --- Stock Option Plan."
Effective January 1, 1991, the Company entered
into an amended employment agreement with Ms. Brenda L.
Copeland whereby Ms. Copeland agreed to serve as the
President of the Bank or in any other capacity that the
Board of Directors of the Company or the Bank may reasonably
request. Each year the term of Ms. Copeland's employment
agreement is automatically extended for an additional year
so that the term of the employment agreement is always three
(3) years. In the event that the Company terminates the
employment agreement without cause, the Company is required
to pay Ms. Copeland, as severance pay, her annual
compensation plus all fringe benefits for a period of
eighteen (18) months from the date of such termination. In
addition, in the event that the Company terminates the
employment agreement as a result of a change of "control" of
the Company, the Company is required to pay Ms. Copeland, as
severance pay, her annual compensation plus all
fringe benefits for a period of three (3) years from the
date of such termination. For purposes of the employment
agreement, the term "control" is defined as the possession
of the power to elect a majority of the members of the Board
of Directors of the Company through the ownership of voting
securities in the Company.
Benefits
Employee Stock Ownership Plan. In 1986, the Board
of Directors of the Company adopted the Employee Stock
Ownership Plan ("ESOP"), effective as of January 1,
1986. Employees eligible to participate in the ESOP are all
regular full-time employees on the effective date of
adoption of the ESOP, and any employees hired subsequent to
that date who have completed one year of service, work at
least 1,000 hours per year, and have attained the
age of 21 years. Contributions to the ESOP are
discretionary, as determined by the Board of Directors of
the Bank. All funds contributed are received, held,
invested and reinvested by the ESOP trustee. Although the
trustee may invest the funds contributed to the ESOP in such
prudent investments as the trustee deems desirable,
substantially all the trust funds are invested in the Common
Stock of the Company.
Each participant is entitled to direct the trustee
as to the exercise of any voting rights attributable to the
shares of Common Stock allocated to such participant and if
the trustee receives no voting instructions, the shares of
Common Stock are not voted. All shares of Common Stock of
the ESOP not allocated to the plan participants is voted by
the trustee in its sole discretion. The ESOP also contains
provisions permitting the ESOP to borrow funds to purchase
Common Stock and on June 16, 1986, the ESOP borrowed
$500,000 pursuant to a certain loan and pledge agreement
with two (2) unaffiliated banks. The proceeds of the loan
were used to purchase approximately 48,000 newly issued
shares of Common Stock, after giving effect to the 6-for-1
stock split of the Company, with such shares pledged as
security for the payment of principal and interest as
provided in the above-mentioned agreement. All amounts due
and owing under this loan have been satisfied.
In November of 1990, the Company borrowed $185,500
on behalf of the ESOP pursuant to a loan and pledge
agreement with an unaffiliated bank. The loan proceeds were
used to purchase 14,000 shares of the Company's outstanding
stock, with such shares pledged as security for the payment
of principal and interest as provided in said agreement. In
November of 1993, the Company borrowed $301,000 on behalf of
the ESOP to purchase 15,050 shares of the Company's Common
Stock and 15,050 warrants to purchase additional shares
of Common Stock as part of the Company's public offering.
All amounts due and owing under these loans were
subsequently refinanced with the Bank (with appropriate
collateral granted to the Bank), which in turn, borrowed the
funds from the Federal Home Loan Bank under an existing
accommodation. In 1995, the Company borrowed $140,511 on
behalf of the ESOP to purchase 5,500 shares of Common Stock.
Upon an ESOP participant's retirement, disability
or death, as those terms are defined in the ESOP, the
participant shall be fully vested in all amounts allocated
to such participant under the ESOP, as well as such
participant's share in the allocation of all contributions
made by the Company during the "Plan Year" (as that term is
defined in the ESOP) in which such retirement, disability or
death occurs. In the event a participant's service
terminates for any reason other than retirement, disability
or death, such participant's account becomes vested based
upon the number of years of "Credited Service" of such
participant (as that term is defined in the ESOP) in
accordance with the following schedule, as amended so
as to comply with the requirements of the Tax Reform Act of
1986, as amended (the "1986 Act"):
Credited Service Vested Percentage
Less than three years 0%
Three years 30%
Four years 40%
Five years 100%
Contributions to the ESOP amounted to $169,000,
$123,000, and $69,000, for the years ended December 31,
1995, 1994, and 1993, respectively.
Defined Benefit Pension Plan. The Company
maintains a defined benefit pension plan for the benefit of
all employees covered under the Company's prior pension plan
and any other employees with at least six (6) months of
service who work at least 1,000 hours per year and have
attained the age of 21 years. Amounts contributed to the
pension plan for each covered employee by the Company are
determined on an actuarial basis. The discount rate used in
determining the actuarial present value of accumulated
benefits was seven percent (7.00%) and seven and one-quarter
percent (7.25%) at December 31, 1995 and December 31,
1994, respectively.
Under the plan, a participant is eligible for the
"Normal Retirement Pension Benefits" upon attainment of age
65 years. Vested employees who terminate before attaining
age 65 may elect optional early retirement benefits (at
reduced levels).
The following table sets forth the current regular
vesting schedule for participants under the plan, as amended
so as to comply with the requirements of the 1986 Act):
Years of Service Vested Percentage
Less than three years 0%
Three years 20%
Four years 40%
Five years 60%
Six years 80%
Seven years 100%
An employee's "Normal Retirement Pension" benefit
under the plan is an amount (payable monthly in the form of
a life only annuity) equal to the product of 1% of such
employee's "Average Compensation" and such employee's years
of "Benefit Accrual Service" (not to exceed forty (40)
years), as those terms are defined in the plan. The
following table sets forth the annual Normal Retirement
Pension benefit at age 65 to an employee covered by the
plan for each of the following Average Compensation amounts
and periods of Benefit Accrual Service with the Company.
Normal Retirement Pension Benefit
for Years of Benefit Accrual Service
Average
Compensation 15 Years 20 Years 25 Years 30 Years 35 Years 40 Years
$15,000 $ 2,250 $ 3,000 $ 3,750 $ 4,500 $ 5,250 $ 6,000
$30,000 $ 4,500 $ 6,000 $ 7,500 $ 9,000 $10,500 $12,000
$45,000 $ 6,750 $ 9,000 $11,250 $13,500 $15,750 $18,000
$60,000 $ 9,000 $12,000 $15,000` $18,000 $21,000 $24,000
$75,000 $11,250 $15,000 $18,750 $22,500 $26,250 $30,000
The pension plan also provides for certain
disability retirement benefits and death benefits as well as
optional forms of payment of benefits which a covered
employee may elect. The benefits provided for under the
plan are in addition to and separate from the benefits
available to the participants under the Social Security Act.
The pension plan was adopted in 1986, to be
effective as of January 1, 1986, the date in which the
Company terminated its former defined benefit pension plan.
There were no contributions made in 1995, and contributions
of approximately $50,000 were made for each of the years
ended December 31, 1994 and 1993.
401(k) Plan. The Bank maintains a qualified 401(k)
plan, entitled the "Salary Savings Plan of The Bank of
Castile," to encourage the accumulation of savings for
retirement or other purposes. Employees of the Bank who
have attained the age of 20-1/2 years and work at least
1,000 hours per year are eligible to join the plan following
the completion of six (6) months of service.
Under the terms of the plan, participants may
elect to contribute from 1% to 6% of their eligible salary
and the Bank contributes an amount equal to 50% of this
participant contribution for employees. Employees may elect
to contribute up to an additional 9% of eligible salary
without any matching Bank contribution.
All amounts contributed into the plan are invested
with the Principal Mutual Life Insurance Company (formerly
known as Bankers Life Company), with its principal office
located at 711 High Street, Des Moines, Iowa. Pursuant to
the plan, contributions by and for employees are held in
trust by the Bank.
Participants are immediately fully vested in all
contributions to the plan. Withdrawals of contributions are
subject to limitations and except in the event of hardship,
generally not permitted until termination of employment or
the participant's attainment of "Normal Retirement Age", as
that term is defined in the plan. During 1995, the Company
contributed a total of $3,050.32 as a matching contribution
for James W. Fulmer, and $2,624.96 as a matching
contribution for Brenda L. Copeland, which amounts are
included in the Summary Compensation Table set forth on page
6 of this Proxy Statement.
Executive Supplemental Income Agreements. The
Bank has also entered into certain executive supplemental
income agreements which provide for specified deferred
compensation benefits payable to certain highly compensated
officers and members of a select management group of the
Bank in the event of death, disability or retirement. The
Board of Directors, in its sole discretion, determines who
is eligible to participate in this arrangement. Although the
Bank is not under any obligation whatsoever to fund its
obligations under the above-mentioned agreements, the Bank
is both the owner and beneficiary of a life insurance
policy on the life of each participant, the proceeds from
which can be used to fund the after-tax cost of the promised
benefits. Charges to income related to these agreements
were approximately $37,000, $8,000, and $52,000 for the
years ended December 31, 1995, 1994, and 1993, respectively.
Under these agreements, a participant who has
reached "Normal Retirement Age," as that term is defined in
the agreements, and has attained twenty (20) continuous
years of service with the Bank (including periods of
disability and authorized leaves of absence) receives an
annual amount equal to the difference between (i) 75% of
such officer's average "Annual Compensation," as that term
is defined in the agreements, during his final five (5)
calendar years of employment with the Bank, and (ii) the sum
of all social security benefits paid to such officer and any
amounts paid to such officer under the Company's defined
benefit pension plan. Participants may retire after age 55
with the approval of the Board of Directors and in the event
that there has been a buy-out, merger, or substantial change
in ownership of the Bank, an officer may retire at any time
after attaining the age of 55 years without approval
of the Board of Directors. In either case, the benefits
available on early retirement are equal to the benefits
available at "Normal Retirement Age," actuarially reduced.
The agreements also contain certain provisions for the
payment of pre-"Normal Retirement Age" death benefits.
Stock Option Plan. At the Annual Meeting of
Stockholders of the Company on April 26, 1990, the
stockholders approved the Letchworth Independent Bancshares
Corporation Stock Option Plan of 1990 (the "Option Plan").
The purpose of the Option Plan is to increase
the incentive and to encourage the continued employment and
services of key employees of the Company and the Bank by
facilitating their purchase of a stock interest in the
Company. Management believes that the implementation of the
Option Plan is in the best interests of the Company and its
stockholders since it will enhance the Company's ability to
continue to attract and retain qualified directors, officers
and other key employees.
Under the Option Plan, the Board of Directors may
grant incentive stock options as well as options that do not
qualify as incentive stock options ("non-statutory stock
options"). The Board of Directors determines the
individuals to receive grants and the number of shares
to be awarded, subject to certain federal tax regulations in
the case of incentive stock options granted under the Option
Plan. The Option Plan provides that the exercise price
under each incentive stock option shall be no less than 100%
of the "Fair Market Value" (as defined in the Option Plan)
of the Common Stock on the date the option is granted. The
exercise price for each non-statutory stock option granted
under the Option Plan is the price established by the
Board of Directors of the Company, which normally is
expected to be no less than 100% of the "Fair Market Value"
(as defined in the Option Plan) of the Common Stock on the
date the option is granted.
On May 3, 1990, the Company issued options to
acquire 81,258 shares of its Common Stock at a purchase
price of $15.00 per share. No options were granted or
exercised under the Option Plan during 1995. The following
table shows the aggregate number of options outstanding as
of March 24, 1996 for each of James W. Fulmer and Brenda L.
Copeland, and for all executive officers as a group.
Number of Options Average Per
Outstanding Share Price*
James W. Fulmer 33,576 $15.00
Brenda L. Copeland 25,182 $15.00
All Executive Officers
as a Group 58,758 $15.00
* This price represents the "Fair Market Value," as that
term is defined in the Option Plan, of the Common Stock of
the Company on the date that the options were granted.
The following table shows the breakdown between
options granted to James W. Fulmer and Brenda L. Copeland
that were exercisable and unexercisable as of the end of the
fiscal year, and the potential value of "in-the-money"
options, both exercisable and unexercisable, as of the end
of the fiscal year. "In-the-money" options are those
options where the Fair Market Value of the Company's Common
Stock as of the close of the fiscal year was in excess of
the exercise price established on the grant date. This
value is only realized by the executive when the option is
exercised and will fluctuate with changes in the price for
the Company's Common Stock after the close of the fiscal
year.
No. of Unexercised Value of "In-the-Money"
Options at Unexercised Options at
December 31, 1995 December 31,1995
Name (Exercisable/Unexercisable) (Exercisable/Unexercisable)*
James W. Fulmer 23,504 / 10,072 $346,684 /$148,562
Brenda L. Copeland 17,627 / 7,555 $259,998 /$111,436
* Assumes that the Bid price of a share of the Company's
Common Stock at December 31,1995 was $29.75.
No assurances can be given relating to the dilutive
effect that the Option Plan or options granted thereunder
may have on the outstanding Common Stock.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Certain of the directors and officers of the
Company and the Bank, members of their families and
companies or firms with which they are associated, were
customers of and had banking transactions with the Bank in
the ordinary course of business during 1995. All loans and
commitments to loan included in such transactions 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, in the
opinion of management, did not involve more than a normal
risk of collectibility or present other unfavorable
features. None of such loans outstanding to directors or
officers of the Company, members of their families or
companies or firms with which directors or officers of the
Company are associated were non-performing as of December
31, 1995. Total loans outstanding to all directors and
executive officers of the Company and the Bank amounted to
$5,316,500 at December 31, 1995.
The law firm of Harris Beach & Wilcox, LLP serves
as corporate counsel to the Company and the Bank. Gunther
K. Buerman, a director of the Company, is the managing
partner of Harris Beach & Wilcox, LLP.
In addition, other than those sales made pursuant
to the Company's initial public offering and the public
offering completed in November, 1993, there have been no
sales of Common Stock to the officers, directors, promoters
or other affiliated persons of the Company during the past
five (5) years. All such transactions were specifically
approved in writing by the Board of Directors and were made
on terms no less favorable to the Company than similar
transactions made to other persons unaffiliated with the
Company.
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP has served as the Company's
independent accountants since June, 1989. Representatives
of Price Waterhouse LLP are expected to be present at the
Annual Meeting and will have an opportunity to make a
statement if they desire to do so. They will also be
available to answer questions that may be asked by
stockholders and have been selected by the unanimous vote of
the Board of Directors of the Company to serve as
independent accountants of the Company for the year ending
December 31, 1996.
PROPOSALS OF STOCKHOLDERS
Proposals of stockholders of the Company intended
to be presented at the Company's next Annual Meeting of
Stockholders must be received by the President of the
Company at the address stated at the beginning of this Proxy
Statement a reasonable time before Proxies are solicited for
the next Annual Meeting of Stockholders in order for any
such proposals to be included in the Company's Proxy
Statement and form of Proxy relating to that meeting. The
Company would expect to hold the next Annual Meeting of
Stockholders in May of 1997 and would therefore expect to
commence solicitation of Proxies for that meeting in early
April of 1997.
OTHER MATTERS
The Board of Directors does not intend to bring
before the Annual Meeting any business other than as set
forth in this Proxy Statement and has not been informed that
any other business is to be presented to the Annual Meeting.
If any matters other than those referred to above should
properly come before the meeting, however, it is the
intention of the persons named in the enclosed Proxy to vote
such Proxy in accordance with their best judgment.
Please sign and return promptly the enclosed Proxy
in the envelope provided. The signing of a Proxy will not
prevent you from attending the Annual Meeting and voting in
person.
By Order of the Board of Directors
James W. Fulmer
President and Chief Executive Officer
Castile, New York
April 5, 1996
