<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:
[_] Preliminary Proxy Statement [_] Confidential, For Use of the
Commission Only (as permitted by Rule
14a-6(e) (2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material pursuant to Rule 14a-11(c) or Rule 14a-12
Letchworth Independent Bancshares Corporation
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than 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:
-------------------------------------------------------------------
(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.:
-------------------------------------------------------------------
(3) Filing Party:
-------------------------------------------------------------------
(4) Date Filed:
-------------------------------------------------------------------
<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 6, 1999
-------------------------
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 6, 1999,
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 ratify the selection of
PricewaterhouseCoopers LLP as independent accountants of the Company; and
3. To transact such other business as may properly come before the meeting
or any adjournments thereof.
Accompanying this Notice are a Proxy, Proxy Statement, and a copy of the
Company's Annual Report for the year ended December 31, 1998.
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 26, 1999, 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 6, 1999
<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 6, 1999
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 6, 1999, 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 6, 1999.
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 26, 1999 (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, 3,391,650 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 26, 1999, 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 (1) Outstanding (2)
- ---------------- ------------- ---------------
Charles L. Van Arsdale 180,210 (3) 5.21%
5136 Park Road West
Castile, NY 14427
Letchworth Independent Bancshares 248,124 (4) 7.18%
Corporation Employee Stock
Ownership Plan
50 North Main Street
Castile, New York 14427
- ----------------------
(1) After giving effect to a 3-for-1 stock split that became effective on June
8, 1998.
(2) These percentages have been calculated based upon 3,457,524 shares of the
Company's Common Stock outstanding, which amount includes the shares of
Common Stock that James W. Fulmer and Brenda L. Copeland have the right to
acquire pursuant to the exercise of certain options granted under the
Letchworth Independent Bancshares Corporation Stock Option Plan of 1990
(the "Option Plan") that are exercisable within sixty (60) days of the date
of this Proxy Statement.
(3) Includes 56,004 shares of Common Stock owned by Mr. Van Arsdale's wife.
(4) Includes the shares of Common Stock allocated to certain officers and
directors of the Company and The Bank of Castile (the "Bank"). The
participants in the ESOP have the sole power to vote shares
2
<PAGE>
and dispositive powers for shares which have been allocated to participant
accounts. Only 62,793 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 477,224 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 13.80%
of the outstanding voting securities of the Company at March 26, 1999.
ELECTION OF DIRECTORS
Proxies returned by stockholders will be voted at the Annual Meeting,
in the absence of contrary indication, in favor of the election of James H.
VanArsdale III and William D. Spain, Jr., 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. Spain. Although
management has no reason to believe that either Mr. Van Arsdale or Mr. Spain
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. Two (2)
directors, Charles L. VanArsdale and James W. Fulmer were 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 successors have been duly elected and
qualified. Two (2) other directors, Patrick J. Dalton and Stanley J. Harmon
were elected at the Annual Meeting of Stockholders held on May 7, 1998 to serve
until the Annual Meeting of Stockholders in 2001 and until their respective
successors have been duly elected and qualified. Mr. Harmon, however, has
informed the Company that he will retire from the Board of Directors, effective
as of the Annual Meeting.
As a result, two (2) directors are to be elected at the Annual Meeting
to serve until the Annual Meeting of Stockholders in 2002 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.
3
<PAGE>
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 26, 1999(1) Outstanding (2)
- ---- --- ------- ------------ ----------------- ---------------
<S> <C> <C> <C> <C> <C>
James H. Van Arsdale III 78 1981 Chairman of the
Board of Directors of 86,249(3) 2.49%
the Company
William D. Spain, Jr. 47 ------ Upon consummation ------- ------
of the acquisition of
a controlling interest
in The Mahopac
National Bank, Mr.
Spain will become the
Chairman of the
Board of Directors
of The Mahopac
National Bank, and
would remain a
Director of The
Mahopac National
Bank
</TABLE>
___________________________
(1) All such shares are owned with sole investment and voting power.
(2) These percentages have been calculated based upon 3,457,524 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.
(3) Includes 11,553 shares of Common Stock owned by Mr. VanArsdale'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.
William D. Spain, Jr., is an attorney and the Managing Partner of
---------------------
Spain & Spain, P.C., a law firm located in Mahopac, New York. Mr. Spain has
practiced law and has been a member of the Board of Directors of The Mahopac
National Bank for more than five (5) years. Upon consummation of the
acquisition of a controlling interest in The Mahopac National Bank by the
Company, Mr. Spain will become the Chairman of the Board of Directors of The
Mahopac National 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:
4
<PAGE>
<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 26, 1999(1) Outstanding (2)
- ---- --- ------- ------------ ----------------- ---------------
<S> <C> <C> <C> <C> <C>
Directors with Terms Expiring in 2000:
Charles L. Van Arsdale 75 1981 Director of the 180,210 (3) 5.21%
Company
James W. Fulmer 47 1981 President, Chief 88,695 (4) 2.56%
Executive Officer and
Director of the Company,
Chairman of the Board of
Directors, Chief Executive
Officer and Director of the
Bank
Directors with Terms Expiring in 2001:
Patrick J. Dalton 40 1998 Director of the Company 1,500 .04%
</TABLE>
- ---------------------------------------
(1) All such shares are owned with sole investment and voting power.
(2) These percentages have been calculated based upon 3,457,524 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 56,004 shares of Common Stock owned by Mr. Van Arsdale's wife.
(4) Includes 40,728 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 10,083 shares of Common Stock allocated to Mr. Fulmer
under the ESOP, and 945 shares of Common Stock owned by Mr. Fulmer's wife.
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
5
<PAGE>
the Board of Directors of the Cherry Valley Cooperative Insurance Company, St.
Jerome's 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.
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.
INFORMATION CONCERNING DIRECTORS AND OFFICERS
Executive Compensation
- ----------------------
The following table shows, for the years ended December 31, 1998, 1997
and 1996, the total cash compensation paid by the Company and the Bank to
executive officers who received total annual salary and bonus in excess of
$100,000 and to the Chief Executive Officer of the Company.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Annual Compensation Long-Term Compensation
---------------------------------------- -----------------------------------------------------------
Awards
----------------------------
Other Long Term
Name and Annual Restricted Incentive All Other
Principal Compensation/2/ Stock Award(s) Options/SARs Payout Compensation/3/
Position Year Salary ($)/1/ Bonus ($) ($) ($) (#) ($) ($)
- -------- ------ ------------- --------- --------------- -------------- -------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
James W. Fulmer 1998 $160,561 $21,500 $9,012 None None None $ 9,941
President, CEO 1997 $141,463 $20,000 None None None None $ 16,087
& Director of 1996 $128,015 $17,500 $8,345 None None None $ 7,349
the Company, and
Chairman of the
Board of the Bank
Brenda L.Copeland 1998 $129,047 $ 17,500 None None None None $ 9,210
President of 1997 $113,311 $15,000 None None None None $ 16,477
the Bank 1996 $105,601 $13,000 None None None None $ 6,042
</TABLE>
- ------------------
(1) Includes matching contributions under the Company's 401(k) plan in an
amount equal to $4,166.33, $3,680.30, and $3,290.30, respectively, for
James W. Fulmer, and $3,365.87, $2,999.04 and $2,790.00, respectively,
for Ms. Brenda L. Copeland, for the years ended December 31, 1998,
1997 and 1996, 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."
6
<PAGE>
(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 1998, all directors of the Company received an annual retainer
of $4,800 in lieu of meeting attendance fees. The Board of Directors of the
Company met six (6) times during 1998. 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 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 Patrick J. Dalton
and Charles L. Van Arsdale. During fiscal 1998, 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 under the "1998 Plan," defined below.
During 1998, all directors of the Bank received an annual retainer of
$9,000 in lieu of meeting attendance fees. The Board of Directors of the Bank
met fourteen (14) times during 1998. 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 1998, one designated director of the Board of
Directors of the Bank received a weekly fee of $150 for his services in
connection with the Bank's Loan Committee. Members of the Examining Committee
also receive a quarterly fee of $150 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%
Compensation expense related to the ESOP amounted to $131,800,
$101,800 and $149,700, for the years ended December 31, 1998, 1997 and 1996,
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 six and one-half percent
(6.5%) and seven percent (7.0%) at December 31, 1998 and December 31, 1997,
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):
9
<PAGE>
Years of Service Vested Percentage
---------------- -----------------
Less than three years 0%
Three years 20%
Four years 40%
Five years 60%
Six years 80%
Seven years 100%
An employee's "Normal Retirement Pension" benefit under the plan is an
amount (payable monthly in the form of a life only annuity) equal to the product
of 1% of such employee's "Average Compensation" and such employee's years of
"Benefit Accrual Service" (not to exceed forty (40) years), as those terms are
defined in the plan. The following table sets forth the annual Normal
Retirement Pension benefit at age 65 to an employee covered by the plan for each
of the following Average Compensation amounts and periods of Benefit Accrual
Service with the Company.
Normal Retirement Pension Benefit
for Years of Benefit Accrual Service
------------------------------------
Average
Compensation 15 Years 20 Years 25 Years 30 Years 35 Years 40 Years
- ------------ -------- -------- -------- -------- -------- --------
$15,000 $ 2,250 $ 3,000 $ 3,750 $ 4,500 $ 5,250 $ 6,000
$30,000 $ 4,500 $ 6,000 $ 7,500 $ 9,000 $10,500 $12,000
$45,000 $ 6,750 $ 9,000 $11,250 $13,500 $15,750 $18,000
$60,000 $ 9,000 $12,000 $15,000 $18,000 $21,000 $24,000
$75,000 $11,250 $15,000 $18,750 $22,500 $26,250 $30,000
The pension plan also provides for certain disability retirement
benefits and death benefits as well as optional forms of payment of benefits
which a covered employee may elect. The benefits provided for under the plan
are in addition to and separate from the benefits available to the participants
under the Social Security Act.
The pension plan was adopted in 1986, to be effective as of January 1,
1986, the date in which the Company terminated its former defined benefit
pension plan. There were no contributions made in 1998, 1997 or 1996.
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
10
<PAGE>
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 Tompkins
County Trust Company, with its principal office located at The Commons, P.O. Box
460, Ithaca, New York. Pursuant to the plan, contributions by and for employees
are held in trust by the Bank.
Participants are immediately fully vested in all contributions to the
plan. Withdrawals of contributions are subject to limitations and except in the
event of hardship, generally not permitted until termination of employment or
the participant's attainment of "Normal Retirement Age", as that term is defined
in the plan. During 1998, the Company contributed a total of $4,166.33 as a
matching contribution for James W. Fulmer, and $3,365.87 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 $10,600, $34,700 and
$42,500, for the years ended December 31, 1998, 1997 and 1996, 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"). At the
Annual Meeting of Stockholders of the Company on May 7, 1998, the Stockholders
approved the Letchworth Independent Bancshares Corporation Stock Option Plan of
1998 (the "1998 Plan"). The purpose of the Option Plan and the 1998 Plan are to
increase the incentive and to encourage the continued employment and
11
<PAGE>
services of key employees of the Company, the Bank and the other subsidiaries of
the Company by facilitating their purchase of a stock interest in the Company.
Management believes that the implementation of the Option Plan and the 1998 Plan
are 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 1998 Plan, the Board of Directors may grant incentive stock
options as well as options that do not qualify as incentive stock options ("non-
statutory stock options"). The Board of Directors determines the individuals to
receive grants and the number of shares to be awarded, subject to certain
federal tax regulations in the case of incentive stock options granted under the
1998 Plan. The 1998 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 1998 Plan) of the Common Stock on the date the option is granted. The
exercise price for each non-statutory stock option granted under the 1998 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 1998 Plan) of the Common Stock on the date the option is granted.
On December 1, 1998, the Company issued options to acquire 10,000
shares of its Common Stock at a purchase price of $15.00 per share. No other
options were granted during 1998 under the 1998 Plan or under the Option Plan.
No additional options will be granted under the Option Plan.
As of December 31, 1998, 153,140 stock options have been exercised
under the Option Plan, 8,298 of which were exercised in 1998. During 1998, no
options were exercised by James W. Fulmer or Brenda L. Copeland and no options
were exercised under the 1998 Plan. To 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 26, 1999 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 40,728 $5.00
Brenda L. Copeland 25,146 $5.00
All Executive Officers
as a Group 65,874 $5.00***
- -------------------
* After giving effect to the 3-for-1 stock split that became effective on
June 8, 1998.
** 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.
12
<PAGE>
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 1998, as well as the breakdown between options granted to Mr.
Fulmer and Ms. Copeland that were exercisable and unexercisable as of December
31, 1998, and the potential value of "in-the-money" options, both exercisable
and unexercisable, as of December 31, 1998. "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.
<TABLE>
<CAPTION>
No. of Unexercised Value of "In-the-Money"
Shares Options at Unexercised Options at
Acquired on Value December 31, 1998 December 31, 1998
Name Exercise Realized (Exercisable/Unexercisable) (Exercisable/Unexercisable)*
- ---- -------- -------- --------------------------- ----------------------------
<S> <C> <C> <C> <C>
James W. Fulmer None None 40,728 / 0 $448,008 / $ 0
Brenda L. Copeland None None 25,146 / 0 $276,606 / $ 0
</TABLE>
- ----------------
* Assumes that the "Bid" price of a share of the Company's Common Stock at
December 31, 1998 was $16.00, 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 Plan, or options granted thereunder may have on the outstanding
Common Stock.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Certain of the directors and officers of the Company and the Bank,
members of their families and companies or firms with which they are associated,
were customers of and had banking transactions with the Bank in the ordinary
course of business during 1998. 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,
1998. Total loans outstanding to all directors and executive officers of the
Company and the Bank amounted to $7,472,861 at December 31, 1998.
The law firm of Harris Beach & Wilcox, LLP serves as corporate counsel
to the Company and the Bank. Patrick J. Dalton, a Partner and member of the
Management Committee of Harris Beach & Wilcox, LLP, is a member of the Board of
Directors of the Company.
13
<PAGE>
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP has served as the Company's independent
accountants since June, 1989. Representatives of PricewaterhouseCoopers 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, 1999.
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
2000 and would therefore expect to commence solicitation of Proxies for that
meeting in early April of 2000. The Company may use its discretion in voting
proxies with respect to stockholder proposals not included in the Proxy
Statement for the Annual Meeting in May, 2000, unless it receives notice of such
proposals on or before March 15, 2000.
OTHER MATTERS
The Board of Directors does not intend to bring before the Annual
Meeting any business other than as set forth in this Proxy Statement and has not
been informed that any other business is to be presented to the Annual Meeting.
If any matters other than those referred to above should properly come before
the meeting, however, it is the intention of the persons named in the enclosed
Proxy to vote such Proxy in accordance with their best judgment.
Please sign and return promptly the enclosed Proxy in the envelope
provided. The signing of a Proxy will not prevent you from attending the Annual
Meeting and voting in person.
By Order of the Board of Directors
James W. Fulmer
President and Chief Executive
Officer
Castile, New York
April 6, 1999
14
<PAGE>
This proxy, when properly executed, will be voted in Please mark
the manner directed herein. If no direction is specified, your votes as [X]
the shares will be voted "FOR" Items 1 and 2. indicated in
this example.
1. Election of directors:
FOR the nominees WITHHOLD
listed (except as AUTHORITY
marked to the to vote for the Nominees: Three (3) year terms
contrary to the nominees listed James H. VanArsdale, III
right) to the right William D. Spain, Jr.
[_] [_]
2. Proposal to approve selection of PricewaterhouseCoopers, LLP as Independent
Accountants.
FOR AGAINST ABSTAIN
[_] [_] [_]
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: ________________________, 1999
(Please insert date)
_____________________________________
(Signature)
_____________________________________
(Joint Owners Signature)
Signatures(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 6, 1999
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.
<PAGE>
PROXY
LETCHWORTH INDEPENDENT BANCSHARES CORPORATION
Proxy Solicited by the Board of Directors
For Annual Meeting of Stockholders -- May 6, 1999
The undersigned stockholder of Letchworth Independent Bancshares Corporation
(the "Company") hereby appoints Gregg McAllister and Carolyn Bauers, or either
of them, as attorney, 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 6, 1999, at 11:00 a.m., at 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 1999 Annual
Meeting of Stockholders to be held on Thursday, May 6, 1999. 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. Fuller
President and
Chief Executive Officer
