<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[x] Preliminary Proxy Statement [ ] Confidential, For Use of the Commission
Only (as permitted by Rule 14a-6(e) (2))
[ ] 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 Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if OtherThan Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
-----------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:(set forth the amount on which the
filing fee is calculated and state how it was determined):
-----------------------------------------------------------------------
(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 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, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-----------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE>
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 7, 1998
--------------
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 7, 1998,
at 11:00 a.m., at the Batavia Party House located on Route 5, Stafford, New
York, for the following purposes:
1. To elect two (2) directors of the Company who shall serve as members
of the Board of Directors for a term of three (3) years;
2. To consider and act upon a proposal to amend the Company's Certificate
of Incorporation to (a) increase the number of shares of common stock which the
Company shall be authorized to issue from 1,500,000 shares of common stock to
5,000,000 shares of common stock, and (b) change each share of outstanding
common stock into three (3) shares of common stock;
3. To consider and act upon a proposal to approve the Letchworth
Independent Bancshares Corporation Stock Option Plan of 1998, and to reserve
500,000 shares of the Company's common stock for issuance thereunder;
4. To consider and act upon a proposal to ratify the selection of Price
Waterhouse LLP as independent accountants of the Company; and
5. 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, 1997.
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 27, 1998, 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 9, 1998
<PAGE>
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 7, 1998
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 7, 1998, 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 FOR all of the proposals.
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 9, 1998.
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 27, 1998 (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, 1,125,852 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
<PAGE>
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 approval and/or ratification of the other proposals to be considered at
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."
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
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, 1998, 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 75,270 (2) 6.56%
5136 Park Road West
Castile, NY 14427
Letchworth Independent Bancshares 82,702 (3) 7.20%
Corporation Employee Stock
Ownership Plan
50 North Main Street
Castile, New York 14427
______________________
(1) These percentages have been calculated based upon 1,148,060 shares of the
Company's Common Stock outstanding, which amount includes the shares of
Common Stock that James W. Fulmer, Brenda L. Copeland and Steven C.
Lockwood 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.
(2) Includes 18,668 shares of Common Stock owned by Mr. Van Arsdale's wife.
(3) Includes the shares of Common Stock allocated to certain officers and
directors of the Company and The Bank of Castile (the "Bank"). 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
23,547
2
<PAGE>
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' nominees for election to the Board of Directors of the Company, as a
group, owned 197,741 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), representing approximately 17.2%
of the outstanding voting securities of the Company at March 24, 1998.
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 Stanley J.
Harmon and Patrick J. Dalton, as directors, to hold office for the term set
forth below and thereafter until their respective successors have been duly
elected and qualified, unless a prior vacancy shall occur by reason of the
death, resignation, or removal from office of Mr. Harmon or Mr. Dalton.
Although management has no reason to believe that either Mr. Harmon or Mr.
Dalton 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 two
(2) nominees 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. One (1) director, James H. Van Arsdale, III, was re-elected
at the Annual Meeting of Stockholders held on May 9, 1996 to serve until the
Annual Meeting of Stockholders in 1999 and until his successor has been duly
elected and qualified. Two (2) other directors, Charles L. Van Arsdale and
James W. Fulmer, were re-elected at the Annual Meeting of Stockholders held on
May 8, 1997 to serve until the Annual Meeting of Stockholders in 2000 and until
their respective successors have been duly elected and qualified.
As a result, only two (2) directors are to be elected at the Annual
Meeting to serve until the Annual Meeting of Stockholders in 2001 and until
their respective successors are duly elected and qualified. The election of
each of the nominees 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 NOMINEES
<TABLE>
<CAPTION>
Common Stock
Director of Positions With Owned Bene- Percent of
the Company the Company ficially As of Common Stock
Name Age Since and the Bank March 24, 1998(1) Outstanding (2)
- ---- --- -------- ------------ ----------------- ---------------
<S> <C> <C> <C> <C> <C>
Stanley J. Harmon 77 1981 Secretary and
Director of 9,594(3) .84%
the Company
Patrick J. Dalton 39 ---- Mr. Dalton is a 500 .04%
partner in the law
firm Harris Beach &
Wilcox, LLP, the
corporate counsel
for the Company
and the Bank
</TABLE>
___________________________
(1) All such shares are owned with sole investment and voting power.
(2) These percentages have been calculated based upon 1,148,060 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.
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 of Castile, the Company's wholly-owned subsidiary (the
"Bank"), from 1960 until April 30, 1993, when he retired.
Patrick J. Dalton, Esq. has been a partner in the law firm of
-----------------------
Harris Beach & Wilcox, LLP, located in Rochester, New York, since 1994. Mr.
Dalton is co-chairman of the firm's Business, Financial and Commercial
Transaction Practice Area, and is a member of the firm's Management Committee.
Harris Beach & Wilcox, LLP serves as corporate counsel to the Company and the
Bank.
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:
<TABLE>
<CAPTION>
Common Stock
Owned Bene-
Director of Positions With ficially As Percent of
the Company the Company of March 24, Common Stock
Name Age Since and the Bank 1998(1) Outstanding (2)
- ---- --- ----------- -------------- ------------- ---------------
DIRECTORS WITH TERMS EXPIRING IN 1999:
<S> <C> <C> <C> <C> <C>
James H. 77 1981 Chairman of the 37,283 (3) 3.25%
Van Arsdale, III Board of Directors
and Director of
the Company
</TABLE>
3
<PAGE>
DIRECTORS WITH TERMS EXPIRING IN 2000:
Charles L. Van Arsdale 74 1981 Director of the 75,720 (4) 6.56%
Company
James W. Fulmer 46 1981 President, Chief 38,466 (5) 3.35%
Executive Officer and
Director of the Company,
Chairman of the Board of
Directors, Chief Executive
Officer and Director of the
Bank
- ---------------------------------------
(1) All such shares are owned with sole investment and voting power.
(2) These percentages have been calculated based upon 1,148,060 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.
(3) Includes 4,851 shares of Common Stock owned by Mr. Van Arsdale's wife.
(4) Includes 18,668 shares of Common Stock owned by Mr. Van Arsdale's wife.
(5) Includes 13,576 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 3,182 shares of Common Stock allocated to Mr. Fulmer
under the ESOP and 309 shares of Common Stock owned by Mr. Fulmer'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.
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 was a director of the Bank from 1949 until his retirement in 1996.
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.
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. He has served as director of
the Bank since 1988. 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 served as Vice Chairman of the
Board of Directors of the Bank from 1991 until May 1, 1992, when he assumed the
position of Chairman of the Board of Directors of the Bank. Mr. Fulmer currently
serves as a member of the Board of Directors of the Cherry Valley Cooperative
Insurance Company, St. Jerome's
4
<PAGE>
Hospital, the Genesee County Industrial Development Agency, and is Secretary of
the Independent Bankers Association of New York State, and currently serves as a
member of the Board of Directors of Monroe Abstract & Title Corporation. 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.
During 1997, the Board of Directors of the Company met seven (7)
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. It is anticipated that Mr. Dalton, if elected, would replace Mr.
Buerman as a member of the Audit Committee. During fiscal 1997, the Audit
Committee met one (1) time. Although the Board of Directors does not have a
Nominating Committee or Compensation Committee, it has formed an Option
Committee to administer the granting of options uner the "1998 Option Plan,"
defined below.
INFORMATION CONCERNING DIRECTORS AND OFFICERS
Executive Compensation
- ----------------------
The following table shows, for the years ended December 31, 1997, 1996
and 1995, the total cash compensation paid by the Company and the Bank to
executive officers who received total annual salary and bonus in excess of
$100,000 and to the Chief Executive Officer of the Company.
5
<PAGE>
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Annual Compensation Long-Term Compensation
------------------------------------ -------------------------------------------------------------
Awards
---------------------------
Long Term
Name and Other Annual Restricted Incentive All Other
Principal Compensation2 Stock Award(s) Options/SARs Payout Compensation 3
Position Year Salary ($)1 Bonus ($) ($) ($) (#) ($) ($)
- ------------------------ ---- ----------- -------- ------------ ------------- ------- ----------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
James W. Fulmer 1997 $141,463 $20,000 None None None None $16,087
President, CEO 1996 $128,015 $17,500 $8,345 None None None $ 7,349
& Director of 1995 $119,111 $17,500 $8,345 None None None $10,454
the Company, and
Chairman of the
Board of the Bank
Brenda L. Copeland 1997 $113,311 $15,000 None None None None $16,477
President of 1996 $105,601 $13,000 None None None None $ 6,042
the Bank 1995 $ 98,775 $13,000 None None None None $ 8,648
- -------------------------------------
</TABLE>
(1) Includes matching contributions under the Company's 401(k) plan in an
amount equal to $3,680.30, $3,290.30, and $3,050.32, respectively, for
James W. Fulmer, and $2,999.04,
6
<PAGE>
$2,790.00, and $2,624.96, respectively, for Ms. Brenda L. Copeland,
for the years ended December 31, 1997, 1996, and 1995, 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 portion of the Company's
contribution to the Employee Stock Ownership Plan ("ESOP") allocated
to Mr. Fulmer and Ms. Copeland, respectively.
During 1996, all directors of the Company received an annual retainer
of $3,350 in lieu of meeting attendance fees. During 1996, the directors of the
Bank each received an annual retainer of $7,550 in lieu of meeting attendance
fees. During 1996, the Board of Directors of the Bank met fourteen (14) 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 1996, 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."
7
<PAGE>
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
8
<PAGE>
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. During 1997, the ESOP exercised all of its warrants and purchased 15,050
shares of Common Stock for an amount equal to $346,150.
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 $101,800, $149,700, and $168,700
for the years ended December 31, 1997, 1996, and 1995, 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 (7.0%) at
December 31, 1997 and at December 31, 1996, 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%
9
<PAGE>
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.
<TABLE>
<CAPTION>
Normal Retirement Pension Benefit
for Years of Benefit Accrual Service
------------------------------------
Average
Compensation 15 Years 20 Years 25 Years 30 Years 35 Years 40 Years
- ------------ -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
$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
</TABLE>
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 1997, 1996 or 1995.
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.
10
<PAGE>
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 1997, the Company contributed a total of $3,680.30 as a
matching contribution for James W. Fulmer, and $2,999.04 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 $34,700, $42,500, and
$37,000 for the years ended December 31, 1997, 1996, and 1995, 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
11
<PAGE>
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, and on July 16, 1996,
the Company granted options to acquire 17,000 shares of Common Stock at a
purchase price of $29.00 per share. During 1997, 20,766 options were exercised
under the Option Plan, including the exercise by Mr. Fulmer and Ms. Copeland of
10,000 options and 8,400 options, respectively. As of December 31, 1997,
45,782 stock options have been exercised under the Option Plan, and as of such
date, Mr. Fulmer and Ms. Copeland have exercised a total of 20,000 options and
16,800 options, respectively.
The following table shows the aggregate number of options outstanding
as of March 24, 1998 for each of James W. Fulmer and Brenda L. Copeland, and for
all executive officers of the Company as a group.
Number of Options Average Per
Outstanding Share Price*
----------------- ------------
James W. Fulmer 13,576 $15.00
Brenda L. Copeland 8,382 $15.00
All Executive Officers
as a Group 24,458 $16.43**
- ---------------------------------------------------------
* 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.
** This price represents a weighted average of the exercise price of all of
the options currently outstanding to all executive officers of the Company.
The following table shows the number of options exercised and the
value of "in-the-money" options exercised by each of James W. Fulmer and Brenda
L. Copeland during 1997, as well as the breakdown between options granted to Mr.
Fulmer and Ms. Copeland that were exercisable and unexercisable as of December
31, 1997, and the potential value of "in-the-money" options, both exercisable
and unexercisable, as of December 31, 1997. "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.
12
<PAGE>
<TABLE>
<CAPTION>
No. of Unexercised Value of "In-the-Money"
Shares Options at Unexercised Options at
Acquired on Value December 31, 1997 December 31, 1997
Name Exercise Realized* (Exercisable/Unexercisable) (Exercisable/Unexercisable)**
- ---- ----------- ---------- -------------------------- ----------------------------
<S> <C> <C> <C> <C>
James W. Fulmer 10,000 $317,500 13,576 / 0 $448,008 / $ 0
Brenda L. Copeland 8,400 $266,700 8,382 / 0 $276,606 / $ 0
- ----------------
</TABLE>
* Represents the value of "In-the"Money" options on the date that the options
were exercised by Mr. Fulmer and Ms. Copeland during 1997. As of the date
of this Proxy Statement, neither Mr. Fulmer nor Ms. Copeland have sold any
of the shares of Common Stock acquired by the exercise of said options.
** Assumes that the "Bid" price of a share of the Company's Common Stock at
December 31, 1997 was $48.00, and that said price represented a reasonable
valuation of the Company's Common Stock as of such date.
No assurances can be given relating to the dilutive effect that the Option
Plan, the 1998 Option Plan, or options granted thereunder may have on the
outstanding Common Stock.
STOCK SPLIT AND INCREASE IN AUTHORIZED COMMON STOCK
The Board of Directors deems it advisable and in the best interest of the
Company and its stockholders that the Certificate of Incorporation of the
Company be amended to effect a three-for-one split in the outstanding shares of
the Common Stock of the Company, so that each outstanding share of Common Stock,
par value $1.00 per share, will thereafter become three shares of Common Stock,
par value $1.00 per share (hereinafter sometimes referred to as the "Stock
Split" or "Split"). The Stock Split will not affect the relative rights of any
stockholder or result in the dilution or diminution of that stockholder's
proportionate interest in the Company. In the opinion of the Board of
Directors, the Stock Split will enhance the marketability of the Common Stock of
the Company and will result in a wider distribution of such stock.
To implement the Stock Split, as well as to provide additional authorized
Common Stock for the future needs of the Company, the Certificate of
Incorporation, upon approval by the stockholders, will be amended to increase
the authorized shares of Common Stock from 1,500,000 shares, par value $1.00 per
share, to 5,000,000 shares of Common Stock, par value $1.00 per share.
The Option Plan provides, in the case of a stock split, for appropriate
adjustments in the number and price of shares of Common Stock issuable upon
exercise of options and in the number of shares available for options. If the
proposed amendment to the Certificate of Incorporation and the proposed increase
in authorized shares of Common Stock are approved, these adjustments will take
effect as of the effective date of the Stock Split.
As of March 24, 1998, there were 1,125,852 shares of Common Stock
outstanding. As of that same date, 52,476 shares of Common Stock were reserved
for issuance upon the exercise of
13
<PAGE>
stock options granted under the Option Plan, and 1,742 shares of Common Stock
were reserved for issuance upon the exercise of stock options which may be
granted under the Option Plan. Assuming that the 1998 Option Plan is approved
by the stockholders, no additional options will be granted under the Option
Plan. After giving effect to the Stock Split, there would have been issued and
outstanding as of the same date, 3,377,556 shares of Common Stock, and 1,622,444
shares of Common Stock would have been authorized and unissued, of which 157,428
shares would have been reserved for issuance upon the exercise of stock options
granted under the Option Plan.
The Company has no present plans to issue any of the additional shares of
Common Stock except for those to be issued in connection with the Stock Split
and those to be reserved under the Option Plan and under the 1998 Option Plan.
See "APPROVAL OF STOCK OPTION PLAN OF 1998" on page 15 of this Proxy Statement.
The Board of Directors, however, believes it to be in the best interest of the
Company to increase the authorized shares of Common Stock in order to meet
possible future contingencies for which the issuance of shares may be deemed
advisable. These additional authorized shares would be subject to issuance in
the discretion of the Board of Directors from time to time for any proper
corporate purpose without further action by the shareholders, except as may be
required by law or other governmental or regulatory bodies.
The Company has been advised by its counsel that, in their opinion, the
Stock Split will not result in any taxable gain or deductible loss being
recognized by stockholders for federal income tax purposes. A stockholder's tax
basis for shares held immediately prior to the Split will be allocated
proportionately among the shares held prior to the Stock Split and the shares
received as a result of the Split. The holding period of the shares received as
a result of the Split shall include the period for which the shares held
immediately prior to the Split were held.
Since the Stock Split will increase the number of shares held by each
stockholder, higher total brokerage commissions and higher New York State
transfer taxes (when applicable) may be paid in selling the higher number of
shares following the Split.
If the requisite stockholder approval is obtained, it is expected that a
Certificate of Amendment to the Certificate of Incorporation of the Company will
be filed in the Department of State of the State of New York and, upon
acceptance thereof by the Secretary of State, the amendment will become
effective. From and after the close of business on that day, which is expected
to be on or about May 8, 1998 (the "Effective Date"), each certificate
representing shares of the Company's present Common Stock, par value $1.00 per
share, would continue to represent the same number of shares of Common Stock,
par value $1.00 per share, and it is anticipated that on or about June 1, 1998,
the Company will cause to be mailed to each holder of Common Stock of record as
of the close of business on the Effective Date, certificates for new shares of
Common Stock, par value $1.00 per share, at the rate of two (2) shares for each
share of the Common Stock registered in the stockholder's name at the close of
business on the Effective Date. The additional shares of Common Stock will be
listed on the National Association of Securities Dealers Small Cap Market prior
to issuance.
It will not be necessary for any stockholders to submit certificates for
exchange since the present certificates will represent exactly the same number
of shares of Common Stock as the number of shares of Common Stock held
immediately preceding the Effective Date.
14
<PAGE>
It is very important that you keep your present Common Stock certificates.
Please do not return them to the Company, or its transfer agent, and above all,
do not destroy them.
The affirmative vote of the holders of a majority of all outstanding shares
of Common Stock is required for approval of the proposals. Approval of the
Stock Split is contingent upon approval of the increase in authorized Common
Stock. Approval of the increase in authorized Common Stock, however, is not
contingent upon approval of the Stock Split.
Please remember that you DO NOT need to turn in your stock certificate(s)
if the Stock Split is approved.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
A VOTE "FOR" THE PROPOSALS TO INCREASE THE
AUTHORIZED COMMON STOCK AND TO IMPLEMENT THE
STOCK SPLIT
APPROVAL OF STOCK OPTION PLAN OF 1998
On January 15, 1998, the Board of Directors of the Company adopted,
subject to stockholder approval, the Stock Option Plan of 1998 (the "1998 Option
Plan"). The 1998 Option Plan, as proposed, is set forth on Exhibit A to this
Proxy Statement, and the following description of the 1998 Option Plan is
qualified in its entirety by reference thereto.
The Board of Directors recommends the reservation of 500,000 shares of
the Company's Common Stock as the maximum number of shares which may be optioned
and sold under the 1998 Option Plan. The "Bid" and "Ask" prices of the Common
Stock, as reported on the NASDAQ System for March 23, 1998, were $51.50 per
share and $54.50 per share, respectively.
The purpose of the 1998 Option Plan is to promote the interests of the
Company and its stockholders by helping the Company and its subsidiaries
attract, retain, and motivate key employees of the Company and the Bank,
including officers and directors who are employees of the Company or the Bank.
In addition, the Letchworth Independent Bancshares Corporation Stock Option Plan
of 1990, the current incentive stock option plan in place for the Company and
the Bank, terminates on February 28, 2000. The 1998 Option Plan would replace
the current Option Plan with a plan that will remain in effect until January 14,
2008. Upon approval of the 1998 Option Plan, the Option Plan currently in
effect would terminate; provided, however, that the Option Plan would remain in
effect to the extent that there remain unexercised options issued in accordance
with the terms and conditions of that plan.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
A VOTE "FOR" THE ADOPTION OF THE 1998 OPTION
PLAN AND "FOR" THE RESERVATION OF 500,000
SHARES OF COMMON STOCK FOR ISSUANCE THEREUNDER
15
<PAGE>
The affirmative vote of stockholders holding at least a majority of
Common Stock voting in person or by proxy at the Annual Meeting is necessary for
approval of the 1998 Option Plan. Unless otherwise specified, Proxies solicited
by the Board of Directors will be voted "FOR" the adoption of the 1998 Option
Plan and the reservation of 500,000 shares of Common Stock for issuance
thereunder.
Summary of the 1998 Option Plan
- -------------------------------
Administration. The Board of Directors has formed an Option
--------------
Committee which will be responsible for administering the 1998 Option Plan. The
Option Committee shall be composed solely of two (2) or more "Non-Employee
Directors," as that term is defined in Rule 16b-3(b)(3)(i) promulgated under
Section 16 of the Securities Exchange Act of 1934, as amended (the"Exchange
Act"). The Option Committee has full authority, subject to the terms of the
1998 Option Plan, to make all determinations under the 1998 Option Plan. The
Company will indemnify each member of the Board of Directors and the Option
Committee for actions taken under the 1998 Option Plan.
Incentive and Non-Statutory Stock Options. The Option Committee may
-----------------------------------------
grant Incentive Stock Options (as defined in Section 422 of the Internal Revenue
Code of 1986, as amended) under the 1998 Option Plan and options which do not
qualify as Incentive Stock Options ("Non-Statutory Stock Options").
Eligibility. The persons eligible to receive options under the 1998
-----------
Option Plan shall be such officers and key employees of the Company and its
subsidiaries, including the Bank, as the Option Committee of the Company shall
select from time to time. Directors who are not otherwise officers or employees
of the Company shall not be eligible to receive options under the 1998 Option
Plan.
Stock Subject to 1998 Option Plan. The number of shares of Common
---------------------------------
Stock of the Company which may be subject to options granted under the 1998
Option Plan is 500,000 shares. Shares subject to options which are no longer
exercisable will be available for issuance pursuant to other options.
Exercise Price. The 1998 Option Plan provides that the exercise price
--------------
under each option shall be no less than 100% of the Fair Market Value (as
defined in the 1998 Option Plan) of the Common Stock on the day the option is
granted. The exercise price of an option is to be paid in cash, or by the
delivery of a certified check or a bank check payable to the order of the
Company. Alternatively, an optionee may pay for such shares, in whole or in
part, by the delivery of shares of Common Stock of the Company already owned by
such optionee in exchange for such new shares, provided that the value of such
shares so exchanged shall be determined by the value of such shares on the date
of exercise.
Non-Transferability. Options granted under the 1998 Option Plan
-------------------
generally may be exercised during the optionee's lifetime only by the optionee
and shall not be assignable or transferable by the optionee, whether voluntarily
or by operation of law or otherwise, except by Will or the laws of descent and
distribution.
16
<PAGE>
Exercise. Generally, except as otherwise specified by the Option
--------
Committee, the the duration of each option will be ten (10) years from the date
of grant and the optionee may exercise an option for certain amounts of the
shares subject to the option based on the optionee's number of years of
continuous service with the Company or a subsidiary of the Company from the date
on which the option is granted. Except as otherwise specified by the Option
Committee, after one year of continuous service, the optionee may exercise the
option for up to 10% of the shares originally subject to the option; after two
years of continuous service, the optionee may exercise the option for up to 20%
of the shares originally subject to the option; after three years of continuous
service, the optionee may exercise the option for up to 30% of the shares
originally subject to the option; after four years of continuous service, the
optionee may exercise the option for up to 40% of the shares originally subject
to the option; after five years of continuous service, the optionee may exercise
the option for up to 50% of the shares originally subject to the option; after
six years of continuous service, the optionee may exercise the option for up to
60% of the shares originally subject to the option; after seven years of
continuous service, the optionee may exercise the option for up to 70% of the
shares originally subject to the option; after eight years of continuous
service, the optionee may exercise the option for up to 80% of the shares
originally subject to the option; and after nine years of continuous service,
the optionee may exercise the option for all of the shares that remain subject
to the option. In no event will an option be exercisable later than ten years
from the date of grant of the option.
Effect of Termination of Services. Optionees shall have the right to
---------------------------------
exercise the vested portion of any options granted under the 1998 Option Plan
only while the optionee maintains a relationship as an employee of the Company
or any of its subsidiaries and has been an employee of one or more of such
corporations continuously since the grant of the option, except as otherwise
expressly provided in the 1998 Option Plan. An optionee will be eligible to
participate under the 1998 Option Plan and will be treated as a continuing
employee during the period when the optionee is on military duty, sick leave or
other bona fide leave of absence if the period of such leave does not exceed
ninety (90) days, or, if longer, so long as a statute or contract guarantees the
optionee's right to re-employment with the Company or its subsidiary. If an
optionee's employment is terminated because of the optionee's death, options
held by the optionee may be exercised by the person designated in the optionee's
Will or by the optionee's proper legal representative for a period of twelve
(12) months after the date of the optionee's death. If an optionee is an
employee of the Company or a subsidiary of the Company and the termination is
due to the optionee's permanent and total disability, options held by the
optionee may be exercised for a period of twelve (12) months following the date
of such permanent and total disability. If an optionee's employment with the
Company or any of its subsidiaries is terminated without cause, all options
granted under the 1998 Option Plan to said optionee shall vest immediately and
any such unexercised options or portion thereof may be exercised, in whole or in
part, by the optionee for a period of ninety (90) days after the effective date
of such termination. In the event of an optionee's termination of employment for
cause, any option or options held by him or her under this Plan, to the extent
not exercised before the effective date of such termination, shall immediately
terminate In the case of optionee's death or permanent and total disability, the
options may be exercised only to the extent exercisable on the date of
termination of employment. Notwithstanding any provision to the contrary, in no
event is an option exercisable after the termination date specified in the
option grant.
17
<PAGE>
Stock Dividends and Stock Splits. The number, kind and price of the
--------------------------------
shares subject to each outstanding option will be proportionately and
appropriately adjusted in the event of any stock dividend, stock split,
recapitalization, reclassification, or other similar change in the Company's
outstanding securities. The number of shares of Common Stock of the Company
reserved for issuance pursuant to options granted under the 1998 Option Plan
will be adjusted by the Board of Directors for any such changes.
Reorganization. Pursuant to the terms and conditions of the 1998
--------------
Option Plan, all options granted thereunder shall have full and immediate
vesting in the event that (i) the Company shall dispose of all or substantially
all of its assets as an entity and thereafter dissolve, or (ii) consolidate with
or merge into another corporation or permit one or more corporations to
consolidate with or merge into it, and pursuant to any such merger or
consolidation, the Company shall not be the resulting or surviving corporation.
In the event of any merger or consolidation involving the Company pursuant to
which the Company shall be the resulting or surviving corporation, any options
granted under the 1998 Option Plan shall not be subject to full and immediate
vesting.
Term of 1998 Option Plan; Amendment. The 1998 Option Plan will
-----------------------------------
terminate on January 14, 2008, ten (10) years from the date the 1998 Option Plan
was adopted by the Board of Directors, or, if earlier, upon the purchase of all
Common Stock subject to the 1998 Option Plan pursuant to the exercise of options
granted thereunder. Any options outstanding after the termination of the 1998
Option Plan will remain in effect in accordance with their terms. The Board of
Directors may terminate or amend the 1998 Option Plan, except that the Board may
not, without stockholder approval, increase the number of shares of Common Stock
as to which options may be granted or change the class of employees eligible to
receive options under the 1998 Option Plan.
Federal Income Tax Consequences
- -------------------------------
Incentive Stock Options. An optionee will not recognize taxable
-----------------------
income upon the grant of an Incentive Stock Option under the 1998 Option Plan.
In addition, an optionee will not recognize taxable income for regular tax
purposes upon the exercise of an Incentive Stock Option if the optionee holds
the shares acquired until at least one (1) year after exercise and, if later,
until two (2) years after the date of grant of the option. The amount by which
the fair market value of the shares exceeds the option exercise price at the
time of exercise will be included in alternative minimum taxable income for
purposes of the alternative minimum tax in the year of exercise. If an optionee
acquires stock through the exercise of an Incentive Stock Option under the 1998
Option Plan and subsequently sells the stock after holding the stock for at
least the holding periods described above, the gain (which is the difference
between the sales price of the stock and the option exercise price) will be
taxed as capital gain. Under current law, capital gain is taxed at rates that
are generally lower than the rates for ordinary income. The character of the
gain as capital gain may also be important for other purposes, such as
offsetting capital losses. The gain will not be treated as compensation income
except when the holding period requirements discussed above are not satisfied. A
disposition of shares acquired pursuant to an Incentive Stock Option prior to
the expiration of the holding periods will result in the recognition of
compensatory income by the optionee in an amount equal to the "spread" between
the option price and the fair market value of the shares at the exercise date,
unless the fair market value of the shares on the
18
<PAGE>
sale date is less than the fair market value on the exercise date, in which case
----
the compensatory income would be limited to such lesser "spread" amount.
An Incentive Stock Option does not entitle the Company to an income
tax deduction except to the extent that an optionee recognizes taxable
compensation income therefrom by reason of a disposition of the shares prior to
the expiration of the holding periods.
An optionee's basis in the shares acquired pursuant to the exercise of
an Incentive Stock Option will be the option exercise price paid for such
shares, for purposes of computing the optionee's gain on a subsequent
disposition of the shares.
Non-Statutory Stock Options. An optionee will not recognize taxable
---------------------------
income upon the grant of a Non-Statutory Stock Option. When an optionee
exercises a Non-Statutory Stock Option, the optionee will recognize taxable
compensation income at that time equal to the difference between the option
exercise price and the fair market value of the stock on the date of exercise.
If, however, an optionee is subject to Section 16(b) of the Exchange Act (i.e.,
the optionee is an officer, director or ten percent (10%) shareholder of the
Company and the option does not fall within the exemption provided by Section
16(b)), the optionee will not recognize taxable compensation income until six
(6) months after he or she exercises the Non-Statutory Stock Option, unless the
optionee affirmatively makes an election to recognize the income on the exercise
date, as discussed below. Assuming that no such election is made, the amount of
the optionee's compensation income will equal the difference between the option
exercise price and the fair market value of the stock on the date immediately
preceding the six month anniversary date of optionee's exercise.
An optionee who is subject to Section 16(b) may, however, elect under
Section 83(b) of the Internal Revenue Code of 1986, as amended, to be fully
taxed at the time the optionee exercises his or her Non-Statutory Stock Option
in the same manner as an optionee who is not subject to Section 16(b).
An optionee will generally have a basis in stock acquired through the
exercise of a Non-Statutory Stock Option under the 1998 Option Plan equal to the
fair market value of the stock on the date of exercise. If the optionee
subsequently sells the stock, the gain (which is the difference between the
sales price and the optionee's basis) will be taxed as capital gain in the
taxable year in which the sale occurs.
Any compensation income recognized by an optionee upon the exercise of
a Non-Statutory Stock Option will be allowable to the Company as a business
deduction at the time it is recognized by the optionee.
19
<PAGE>
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 1997. 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,
1997. Total loans outstanding to all directors and executive officers of the
Company and the Bank amounted to $6,464,700 at December 31, 1997.
The law firm of Harris Beach & Wilcox, LLP serves as corporate counsel
to the Company and the Bank. Patrick J. Dalton, one of the nominees to serve as
a member of the Board of Directors of the Company, is a Partner and member of
the Management Committee of Harris Beach & Wilcox, LLP.
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, 1998.
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
1999 and would therefore expect to commence solicitation of Proxies for that
meeting in early April of 1999.
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.
20
<PAGE>
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 9, 1998
21
<PAGE>
EXHIBIT A
---------
LETCHWORTH INDEPENDENT BANCSHARES CORPORATION
STOCK OPTION PLAN OF 1998
1. Purpose. THE LETCHWORTH INDEPENDENT BANCSHARES CORPORATION STOCK
-------
OPTION PLAN OF 1998 (hereinafter referred to as the "Plan") is designed to
attract the best available personnel for positions of substantial responsibility
and to furnish additional incentive to officers and key employees of LETCHWORTH
INDEPENDENT BANCSHARES CORPORATION (hereinafter referred to as the "Company"),
or THE BANK OF CASTILE, the Company's wholly-owned subsidiary, upon whose
efforts the successful conduct of the business of the Company largely depends,
by encouraging such officers and key employees to acquire a proprietary interest
in the Company or to increase the same. This purpose will be effected through
the granting of options to purchase the common stock of the Company which will
be either "Incentive Stock Options" within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended to date (hereinafter referred to as
the "Code") or Non-Statutory Stock Options (which shall not qualify under
Section 422 of the Code) on the terms provided herein. Hereinafter the term
"option" shall be deemed to refer to either Incentive Stock Options or Non-
Statutory Stock Options as the context requires, unless specific reference is
made to Incentive Stock Options.
2. Eligibility. The persons eligible to receive options under this Plan
-----------
shall be such officers and key employees of the Company as the Board of
Directors of the Company shall select from time to time; provided, however, that
all options must be approved by the Option Committee. The Option Committee
shall be composed solely of two (2) or more "Non-Employee Directors," as that
term is defined in Rule 16b-3(b)(3)(i) promulgated under Section 16 of the
Securities Exchange Act of 1934, as amended. Directors who are not otherwise
officers or employees of the Company shall not be eligible to receive options
under the Plan. All references in this Plan to employees of the Company shall
include the officers and key employees of any parent or subsidiary of the
Company, as those terms are defined in Section 424 of the Internal Revenue Code.
3. Stock Subject to Options. Subject to the provisions of Section 11
------------------------
hereof, options may be granted under this Plan for up to 500,000 shares of the
common stock, par value $1.00 per share, of the Company (hereinafter referred to
as "Shares"), which Shares may, in the discretion of the Board of Directors of
the Company, consist either in whole or in part of authorized but unissued
shares of common stock or shares of common stock held in the treasury of the
Company. Any Shares subject to an option that expires or terminates unexercised
as to such Shares for any reason whatsoever, shall continue to be available for
options under this Plan.
22
<PAGE>
4. Effective Date. The effective date of this Plan shall be January 15,
--------------
1998, the date that the Plan was adopted by the Board of Directors of the
Company; provided, however, that the effectiveness of the Plan shall be subject
to and contingent upon the approval by the stockholders of the Company within
twelve (12) months of the date that this Plan is so adopted by the Board of
Directors.
5. Terms and Conditions of Options. Each option granted by the Option
-------------------------------
Committee on behalf of the Board of Directors pursuant to this Plan shall be
evidenced by a certain stock option agreement (the "Agreement") containing
provisions consistent with this Plan. The Agreement shall specify whether the
options granted are Incentive Stock Options, designed to qualify under the
provisions of Section 422 of the Code, or Non-Statutory Stock Options, which are
not designed to qualify under Section 422 of the Code. The Agreement, whether
for Incentive Stock Options, Non-Statutory Stock Options, or both, shall
incorporate in substance the following terms and conditions:
(a) Price. Each option shall state the number of Shares subject to
-----
the option as well as the option price of each such Share, which shall be
an amount not less than the "Fair Market Value" of a share of common stock
of the Company as of the date the option is granted. For the purposes of
the Plan, the "Fair Market Value" of each share of common stock of the
Company shall be an amount equal to the average "Bid" and "Ask" price of
the common stock of the Company as set forth in the NASDAQ Bid and Ask
Quotations supplied by the National Association of Securities Dealers, Inc.
on the date immediately preceding the date of such grant. If for any
reason the common stock of the Company is no longer being traded at the
time of the grant of the option, the "Fair Market Value" of each share of
common stock of the Company shall be determined by the Option Committee;
provided, however, that the "Fair Market Value" shall in no event be less
than the book value of the common stock of the Company as of the date said
option is granted, excluding goodwill. In the event an option, which is
designed to qualify as an Incentive Stock Option, is granted to any person
who would after the grant of such option be deemed to beneficially own
stock possessing more than ten percent (10%) of the total combined voting
power of all classes of stock of the Company within the meaning of Section
422(b)(6) of the Code (hereinafter referred to as a "Ten Percent
Shareholder"), the option price per share shall be an amount not less than
one hundred ten percent (110%) of the "Fair Market Value" of a share of
common stock of the Company.
(b) Term. The term of each option shall be determined by the Option
----
Committee, but in no event shall an option be exercisable either in whole
or in part after the expiration of ten (10) years from the date on which it
is granted, or in the case of a Ten Percent Shareholder where the option is
designed to qualify as an Incentive Stock Option, in no event shall such an
option be exercisable either in whole or in part after the expiration of
five (5) years from the date on which it is granted. The Board of
Directors and an optionee may at any time by mutual agreement terminate any
option granted to such optionee under this Plan.
(c) Vesting Schedule. Each Agreement may include, in the discretion
----------------
of the Option Committee, a vesting period following the grant of any option
during which all or any part of such option remains forfeitable and cannot
be exercised. All Agreements
23
<PAGE>
shall provide for full and immediate vesting in the event that (i) the
Company shall dispose of all or substantially all of its assets as an
entity and thereafter dissolve, or (ii) consolidate with or merge into
another corporation or permit one or more corporations to consolidate with
or merge into it and pursuant to any such merger or consolidation the
Company shall not be the resulting or surviving corporation. In the event
of any merger or consolidation involving the Company and pursuant to which
the Company shall be the resulting or surviving corporation, then any
options granted under this Plan shall not be subject to full and immediate
vesting. Additional specific provisions regarding vesting in the event of
an optionee's death or disability are set forth at Sections 9 and 10 of
this Plan, respectively.
(d) Exercise. Each option, or any installment thereof, shall be
--------
exercised whether in whole or in part, by giving written notice to the
Company at its principal office, specifying the number of Shares to be
purchased and the purchase price to be paid, and accompanied by the payment
of the purchase price. Any optionee may pay for the Shares subject to the
option with cash, a certified check or a bank check payable to the order of
the Company. Alternatively, the optionee may pay for the Shares, in whole
or in part, by the delivery of shares of common stock of the Company
already owned by him or her which will be accepted in exchange for the
Shares at their value on the date of exercise. Certificates representing
the Shares purchased by the optionee shall be issued as soon as practicable
after the optionee has complied with the provisions hereof.
6. Annual Limitation for Incentive Stock Options. The aggregate Fair
---------------------------------------------
Market Value of the Shares (determined under Section 5 as of the time the option
is granted) with respect to which Incentive Stock Options are first exercisable
by an optionee during any calendar year (under all stock option plans of the
Company or any of its subsidiaries) shall not exceed One Hundred Thousand
Dollars ($100,000).
7. Non-Assignment. During the lifetime of the optionee, options issued
--------------
hereunder shall be exercisable only by the optionee and shall not be assignable
or transferable by the optionee, whether voluntarily or by operation of law or
otherwise, and no other person shall acquire any rights therein.
8. Termination of Employment.
-------------------------
(a) Optionees shall have the right to exercise the vested portion of
any options granted under this Plan only while the optionee maintains a
relationship as an employee of the Company or any of its subsidiaries and has
been an employee of one or more such corporations continuously since the grant
of the option, except as otherwise expressly provided herein. For purposes of
this Section, a relationship qualifying an optionee to participate under this
Plan will be treated as continuing during the period when the optionee is on
military duty, sick leave or other bona fide leave of absence if the period of
such leave does not exceed ninety (90) days, or, if longer, so long as a statute
or contract guarantees the optionee's right to re-employment with the Company.
When the period of leave exceeds ninety (90) days and the optionee's right to
re-employment is not guaranteed either by statute or by contract, the
relationship will be deemed to have terminated on the ninety-first (91st) day of
such leave.
24
<PAGE>
(b) In the event of an optionee's termination of employment without
cause, other than by reason of death or permanent and total disability, all
rights to purchase Shares shall vest immediately and any such unexercised option
or portion thereof may be exercised in whole or in part by the optionee at any
time within ninety (90) days of said termination date; provided, however, that
in any event, the option cannot be exercised after the expiration of the term of
the option. Options not exercised within the applicable period specified above
shall terminate. In the event of an optionee's termination of employment for
cause, any option or options held by him or her under this Plan, to the extent
not exercised before the effective date of such termination, shall forthwith
terminate.
9. Death of Optionee. In the event that an optionee shall die while an
-----------------
employee of the Company and prior to the complete exercise of options granted to
the optionee under this Plan, any such unexercised option or portion thereof may
be exercised in whole or in part within one (1) year after the date of the
optionee's death and then only: (i) by the optionee's estate or by or on behalf
of such person or persons to whom the optionee's rights pass under the
optionee's Will or the laws of descent and distribution; and (ii) prior to the
expiration of the term of the option.
10. Disability. In the event that an optionee shall become permanently
----------
and totally disabled (within the meaning of Section 22(e)(3) of the Code) while
an employee of the Company and prior to the complete exercise of options granted
to the optionee under this Plan, any such remaining options may be exercised in
whole or in part within one (1) year following the determination date of said
permanent and total disability; provided, however, that in no event shall any
such options be exercisable after the expiration of the term of the option.
11. Adjustments to Number of Shares. The aggregate number and kind of
-------------------------------
Shares available for options under this Plan, the number and kind of Shares
subject to any outstanding option and the option price of each outstanding
option, shall be proportionately adjusted by the Board of Directors for any
increase, decrease or change in the total outstanding common shares of the
Company resulting from a stock dividend, recapitalization, merger,
consolidation, split-up, combination, exchange of stock or similar transaction
(but not by reason of the issuance or purchase of common voting stock by the
Company in consideration for money, services or property).
12. Rights as a Shareholder. The optionee shall have no rights as a
-----------------------
Shareholder with respect to the Shares purchased by him or her pursuant to the
exercise of an option until the date of the issuance to him or her of a
certificate of stock representing such Shares. No adjustment shall be made for
dividends or for distributions of any other kind with respect to Shares for
which the record date is prior to the date of the issuance to the optionee of a
certificate for the Shares.
13. Investment Purpose. Each written notice by which an optionee
------------------
exercises an option shall contain representations on behalf of the optionee that
he or she acknowledges that the Company is selling or distributing Shares to him
or her under a claim of exemption from registration under the Securities Act of
1933, as amended (hereinafter referred to as the "Act"), as a transaction not
involving any public offering; that he or she represents and warrants that he or
she is acquiring such Shares with a view to investment and not with a
25
<PAGE>
view to distribution or resale; and that he or she agrees not to make any sale
or other distribution or disposition of such Shares unless (i) a registration
statement with respect to such Shares shall be effective under the Act, together
with proof satisfactory to the Company that there has been compliance with
applicable state law, or (ii) the Company shall have received an opinion of
counsel satisfactory to it that no violation of the Act or applicable state law
will be involved in such transfer. The Company shall include on any certificate
for Shares issued under this Plan such legend restricting the transfer thereof
as it may deem appropriate to comply with any requirement established by law or
by the rules of any stock exchange.
14. Term of Plan. This Plan originally was adopted by the Board of
------------
Directors on January 15, 1998, and approved by the stockholders of the Company
at the [Annual Meeting of Stockholders on May 7, 1998], and shall remain in
effect until all Shares subject to issuance hereunder have been purchased
pursuant to the exercise of the options granted under this Plan or until all
such options have lapsed or terminated unexercised; provided, however, that all
options and rights under this Plan must be granted on or before January 14,
2008, which date is ten (10) years from the date that this Plan was adopted by
the Board of Directors of the Company.
15. Amendment and Termination of Plan. The Board of Directors of the
---------------------------------
Company, without further approval of the stockholders of the Company, may at any
time suspend or terminate this Plan or may amend it from time to time in any
manner; provided, however, that no amendment shall be effective without prior
approval of the stockholders of the Company which would (i) except as provided
in Section 11 hereof, increase the maximum number of Shares which may be issued
under this Plan, (ii) change the eligibility requirements for individuals
entitled to receive options under this Plan, (iii) extend the period for
granting options, (iv) change the manner of determining the option price, or (v)
materially increase the benefits accruing to employees under this Plan. No
amendment, modification or termination of this Plan shall in any manner
adversely affect any outstanding option under this Plan without the consent of
the optionee holding such affected options.
16. Termination of Prior Stock Option Plans. Upon adoption of this Plan
---------------------------------------
by the Board of Directors of the Company, all other stock option plans in effect
on behalf of the Company or any of its subsidiaries shall terminate; provided,
however, such plans shall remain in effect to the extent there remain
unexercised options issued in accordance with the terms and conditions of such
plan or plans.
17. Administration. This Plan shall be administered by the Option
--------------
Committee of the Board of Directors and decisions of the Option Committee
concerning the interpretation and construction of any provisions hereof or any
option granted pursuant hereto shall be final. The Company shall effect the
grant of options under this Plan in accordance with the decisions of the Option
Committee, which may, from time to time, adopt rules and regulations for
carrying out this Plan. For purposes of this Plan, an option shall be deemed to
be granted when the written Agreement for the same is signed on behalf of the
Company by its duly authorized officer or representative. Subject to the
express provisions of this Plan, the Option Committee shall have the authority,
in its discretion and without limitation, to determine: the optionees to
receive options, the times when such individuals shall receive such options, the
number of Shares to be subject to each option, the term of each option, the date
when each
26
<PAGE>
option or portion thereof shall become exercisable, the term of each
installment, the option price of each Share subject to option, and such other
terms or conditions of any option that are not inconsistent with the terms and
conditions of this Plan or, in the case of an Incentive Stock Option, not
inconsistent with the qualification of such option under Section 422 of the
Code; to accelerate the date of exercise of any option or installment thereof;
and to make all other recommendations advisable for administering this Plan.
18. Reservation of Shares. The Company shall be under no obligation to
---------------------
reserve Shares to fill options. The grant of options to employees hereunder
shall not be construed to constitute the establishment of a trust of such Shares
and no particular Shares shall be identified as optioned and reserved for
employees hereunder. The Company shall be deemed to have complied with the
terms of this Plan if, at the time of issuance and delivery pursuant to the
exercise of an option, it has a sufficient number of Shares authorized and
unissued or in its treasury which may then be appropriated and issued for the
purposes contemplated herein, irrespective of the date when such Shares were
authorized.
19. Application of Proceeds. The proceeds of a sale of Shares by the
-----------------------
Company under this Plan will constitute general funds of the Company and may be
used by the Company for any purpose.
20. No Rights Conferred. The adoption and maintenance of this Plan shall
-------------------
not be deemed to constitute a contract between the Company and any officer or
employee or to be a consideration for, or an inducement to or condition of, the
employment of any person. Nothing herein contained shall be deemed to: (i)
give to any officer or employee the right to be retained in the employ of the
Company, (ii) interfere with the right of the Company to discharge any officer
or employee at any time, (iii) give to the Company the right to require any
officer or employee to remain in its employ, or (iv) interfere with any
officer's or employee's right to terminate his or her employment with the
Company at any time.
21. Tax Withholding. The Company, which employs an officer or employee
---------------
granted an option under this Plan, shall have the right to deduct or otherwise
effect a withholding of any amount required by federal or state laws to be
withheld with respect to the grant, exercise, or surrender of any option, or the
sale of Shares acquired upon the exercise of an option, in order for the Company
(or one of its subsidiaries, as the case may be) to obtain a tax deduction
otherwise available as a consequence of such grant, exercise, surrender or sale,
as the case may be. Under appropriate circumstances, such right shall include
the right to receive payment from the optionee of the required withholding
amount. In addition, if, following the exercise of an option granted hereunder,
an optionee sells Shares purchased on exercise of an Incentive Stock Option
within two (2) years from the date of the granting of such Incentive Stock
Option or within one (1) year after the transfer of such Shares to the optionee,
the optionee shall notify the Company at the time of such sale.
22. Indemnification. To the extent permitted by law, each person who is
---------------
or shall have been a member of the Board of Directors of the Company or the
Option Committee shall be indemnified and held harmless by the Company against
and from any loss, cost, liability, or expense that may be imposed upon or
reasonably incurred by him or her in connection with or resulting from any
claim, action, suit, or proceeding to which he or she may be a party or in
27
<PAGE>
which he or she may be involved by reason of any action taken or failure to act
under this Plan and against and from any and all amounts paid by him or her in
settlement thereof, with the Company's approval, or paid by him or her in
satisfaction of judgment in any such action, suit, or proceeding against him or
her, provided he or she shall give the Company an opportunity, at its own
expense, to handle and defend the same before he or she undertakes to handle and
defend on his or her own behalf. The foregoing right of indemnification shall
not be exclusive of any other rights of indemnification to which such persons
may be entitled under the Company's Certificate of Incorporation or Bylaws, as a
matter of law, or otherwise, or any power that the Company or any subsidiary
thereof may have to indemnify them or hold them harmless.
23. Governing Law. This Plan shall be governed by and construed in
-------------
accordance with the laws of the State of New York.
The undersigned, being the President and Chief Executive Officer of
Letchworth Independent Bancshares Corporation, hereby certifies that the
foregoing Stock Option Plan was duly adopted by the Board of Directors of the
Company on January 15, 1998, and was approved by the stockholders of the Company
on May 7, 1998.
LETCHWORTH INDEPENDENT
BANCSHARES CORPORATION
By:
________________________________
James W. Fulmer
President and Chief Executive Officer
28
<PAGE>
PROXY
LETCHWORTH INDEPENDENT BANCSHARES CORPORATION
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR ANNUAL MEETING OF STOCKHOLDERS-MAY 7, 1998
The undersigned stockholder of Letchworth Independent Bancshares Corporation
(the "Company") hereby appoints Gregg McAllister 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 7, 1998, 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.
FOLD AND DETACH HERE
Dear Stockholder(s):
Enclosed you will find material relative to the Company's 1998 Annual Meeting
of Stockholders to be held on Thursday, May 7, 1998. The Notice of the Annual
Meeting and Proxy Statement describe the formal business to be transacted at the
Annual Meeting, as summarized on the attached proxy card.
Whether or not you expect to attend the Annual Meeting, please complete and
return promptly the attached proxy card in the accompanying envelope, which
requires no postage if mailed in the United States. As a stockholder, please
remember that your vote is important to us.
As has been our tradition, the Annual Meeting will begin at 11:00 a.m., with
lunch served immediately thereafter. We look forward to seeing you there.
Sincerely,
James W. Fulmer
President and
Chief Executive Officer
<PAGE>
Please mark
your vote as
indicated in
this sample [X]
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 1,2,3 AND
4.
1. Election of directors:
FOR the nominees listed WITHHOLD AUTHORITY
(except as marked to to vote for the nominees
the contrary at right) listed at right
[_] [_]
Nominees: Three (3) year terms
Stanley J. Harmon,
Patrick J. Dalton
2. Proposal to amend the Company's Certificate of Incorporation to (a) increase
the number of shares of common stock which the Company shall be authorized to
issue from 1,500,000 shares to 5,000,000 shares, and (b) change each share of
outstanding common stock into three (3) shares of common stock.
FOR AGAINST ABSTAIN
[_] [_] [_]
3. Proposal to approve the Letchworth Independent Bancshares Corporation Stock
Option Plan of 1998, and to reserve 500,000 shares of the Company's common
stock for issuance thereunder.
FOR AGAINST ABSTAIN
[_] [_] [_]
4. Proposal to approve selection of Price Waterhouse as independent accountants.
FOR AGAINST ABSTAIN
[_] [_] [_]
5. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
-----
|
|
DO YOU PLAN TO ATTEND THE MEETING AND BE OUR GUEST FOR LUNCH AFTER THE MEETING?
YES NO
[_] [_]
Dated _________________________________________________________________, 1998
(Please insert date)
______________________________________________________________________________
(Signature)
______________________________________________________________________________
(Joint Owners Signature)
Signature(s) should agree with stenciled name(s) on label. When signing as
attorney, guardian, executor, 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.
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
ANNUAL MEETING
OF
LETCHWORTH INDEPENDENT BANCSHARES CORPORATION
Thursday, May 7, 1998
11:00 a.m.
Batavia Party House
Route 5
Stafford, NY 14143
================================================================================
Agenda
- ------
. 11:00 Annual Meeting
. Election of Directors, Action on Proposals and Election of Accountants
. Report on the progress of the Company
. Discussion on matters of current interest
. 12:15 Luncheon
================================================================================
IF YOU PLAN TO ATTEND THE MEETING, WE INVITE YOU AND A GUEST TO JOIN US FOR A
LUNCHEON, PLEASE MARK THE APPROPRIATE BOX LOCATED ON THE PROXY CARD.
