PROXY STATEMENT FOR THE ANNUAL MEETING OF
SHAREHOLDERS TO BE HELD APRIL 30, 1996
GENERAL
Introduction, Date, Place and Time of Meeting
This Proxy Statement is being furnished for the solicitation
by the Board of Directors of Lake Ariel Bancorp, Inc. (the
"Corporation"), a Pennsylvania business corporation, of proxies
to be voted at the Annual Meeting of Shareholders of the
Corporation to be held at the St. Thomas More Church Parish Hall,
Lake Ariel, Pennsylvania 18436, on Tuesday, April 30, 1996, at
11:00 a.m., prevailing time, or at any adjournment or
postponement of the Annual Meeting.
The main office of the Corporation is located at LA Bank,
N.A., Route 191, Lake Ariel, Pennsylvania 18436. The telephone
number for the Corporation is (717) 698-5695. All inquiries
should be directed to Louis M. Martarano, Vice President of the
Corporation. This Proxy Statement and the enclosed form of proxy
(the "Proxy") are first being sent to shareholders of the
Corporation on March 29, 1996.
Solicitation
Shares represented by proxies on the accompanying Proxy, if
properly signed and returned, will be voted in accordance with
the specifications made thereon by the shareholders. Any Proxy
not specifying to the contrary will be voted for the election of
the two nominees for Class 3 director named below and for the
approval of Parente, Randolph, Orlando, Carey & Associates,
Certified Public Accountants, as the independent auditors for the
fiscal year ending December 31, 1996. Execution and return of
the enclosed Proxy will not affect a shareholder's right to
attend the Annual Meeting and vote in person.
The cost of preparing, assembling, mailing and soliciting
proxies will be borne by the Corporation. In addition to the use
of the mails, certain directors, officers and employees of the
Corporation intend to solicit proxies personally, by telephone
and by telefacsimile. Arrangements will be made with brokerage
houses and other custodians, nominees and fiduciaries to forward
proxy solicitation material to the beneficial owners of stock
held of record by these persons, and, upon request therefor, the
Corporation will reimburse them for their reasonable forwarding
expenses.
Right of Revocation
A shareholder who returns a Proxy may revoke it at any time
before it is voted by: (1) delivering written notice of
revocation to Louis M. Martarano, Vice President and Assistant
Secretary, Lake Ariel Bancorp, Inc., Post Office Box 67, Route
191, Lake Ariel, Pennsylvania 18436, telephone: (717) 698-5695;
(2) executing a later-dated Proxy and giving written notice
thereof to the Assistant Secretary of the Corporation or (3)
voting in person after given written notice to the Assistant
Secretary of the Corporation.
Voting Securities, Record Date and Quorum
At the close of business on March 19, 1996, the Corporation
had outstanding 1,662,911 shares of common stock, $.42 par
value per share. No shares of preferred stock, $1.25 par value
per share, were issued and outstanding. A majority of the
outstanding shares of the common stock will constitute a quorum
at the Annual Meeting.
Only holders of common stock of record at the close of
business on March 19, 1996, will be entitled to notice of and to
vote at the Annual Meeting. Cumulative voting rights do not
exist with respect to the election of directors. On all matters
to come before the Annual Meeting, each share of common stock is
entitled to one vote.
Under Pennsylvania law, the presence of a quorum is required
for each matter to be acted upon at the Annual Meeting. The
presence, in person or by proxy, of shareholders entitled to cast
at least a majority of the votes which all shareholders are
entitled to cast shall constitute a quorum for the transaction of
business at the Annual Meeting. Votes withheld and abstentions
will be counted in determining the presence of a quorum for the
particular matter. Broker non-votes will not be counted in
determining the presence of a quorum for the particular matter as
to which the broker withheld authority.
Assuming the presence of a quorum, the two nominees for
director receiving the highest number of votes cast by
shareholders entitled to vote for the election of directors shall
be elected. Votes withheld from a nominee and broker non-votes
will not be cast for such nominee.
Assuming the presence of a quorum, the affirmative vote of a
majority of all votes cast by shareholders is required for the
ratification of the selection of independent auditors.
Abstentions and broker non-votes are not votes cast and therefore
do not count either for or against such respective approval and
ratification. Abstentions and broker non-votes, however, have
the practical effect of reducing the number of affirmative votes
required to achieve a majority for each such matter by reducing
the total number of shares voted from which the required majority
is calculated.
PRINCIPAL BENEFICIAL OWNERS OF THE CORPORATION'S STOCK
Principal Owners
The following table sets forth, as of March 19, 1996, the
name and address of each person who owns of record or who is
known by the Board of Directors to be the beneficial owner of
more than five percent (5%) of the Corporation's outstanding
Common Stock, the number of shares beneficially owned by such
person and the percentage of the Corporation's outstanding Common
Stock so owned.
Percent of Outstanding
Shares Beneficially Common Stock
Name and Address Owned (1) Beneficially Owned
Bruce D. Howe (4)(11) 170,720 10.3%
R.D. #6, Box 6332
Lake Ariel, PA 18436
John G. Martines (5)(13) 96,426 5.5%
RD #1
Newton Lake
824 Sunset Avenue
Carbondale, PA 18407
Beneficial Ownership by Officers, Directors and Nominees
The following table sets forth as of March 14, 1995, the
amount and percentage of the Common Stock of the Corporation
beneficially owned by each director, each nominee and all
officers and directors of the Corporation as a group.
Name of Individual Amount and Nature of Percent
or Identity of Group Beneficial Ownership(1)(2) of
Class
Donald E. Chapman(3)(6) 55,666 3.3%
Peter O. Clauss(4)(7) 21,975 1.3%
Arthur M. Davis(3)(8) 33,638 2.0%
Joseph J. Earyes(9) 16,625 1.0%
William C. Gumble(3)(10) 50,707 3.0%
Bruce D. Howe(4)(11) 170,720 10.3%
Louis M. Martarano(12) 35,502 2.1%
John G. Martines(5)(13) 96,426 5.5%
Harry F. Schoenagel(5)(14) 41,145 2.5%
All Officers and Directors
as a Group (7 directors,
5 officers, 9 persons in total) 522,404 29.6%
______________________________
(1) The securities "beneficially owned" by an individual are
determined in accordance with the definitions of
"beneficial ownership" set forth in the General Rules and
Regulations of the Securities and Exchange Commission
("SEC") and may include securities owned by or for the
individual's spouse and minor children and any other
relative who has the same home, as well as securities to which
the individual has or shares voting or investment power or
has the right to acquire beneficial ownership within 60 days
after March 19, 1996. Beneficial ownership may be
disclaimed as to certain of the securities.
(2) Information furnished by the directors and the Corporation.
(3) A Class 1 Director Whose Term Expires in 1998.
(4) A Class 2 Director Whose Term Expires in 1997.
(5) Nominees for Class 3 Director Whose Term Will Expire in 1999
and current Class 3 Directors Whose Term Expires in
1996.
(6) Of the 55,666 shares beneficially owned by Donald E.
Chapman, 16,116 are owned by him individually;
36,098 are owned jointly with his spouse; 2,393 are held
individually by his spouse; and 1,059 are held jointly
with his son.
(7) Of the 21,975 shares beneficially owned by Peter O. Clauss,
8,644 are held by him individually, 12,331 are owned
jointly with his wife; and 1,000 are owned individually by his
spouse.
(8) Of the 33,638 shares beneficially owned by Arthur M. Davis,
15,205 are owned by him individually; 16,969 are
owned jointly with his wife; and 1,464 are owned by Lake Ariel
Hardware & Supply Co., Inc., of which Mr. Davis is
President..
(9) Of the 16,625 shares beneficially owned by Joseph J. Earyes,
5,700 are owned by him individually, 925 are held
jointly with his spouse; and 10,000 shares may be acquired at any
time by the exercise of stock options.
(10) All shares are held individually.
(11) Of the 170,720 shares beneficially owned by Bruce D. Howe,
152,794 are owned by him individually; 16,196 are owned
jointly with his spouse; and 1,730 are owned individually by his
spouse.
(12) Of the 35,502 shares beneficially owned by Louis M.
Martarano, 1,014 are owned by him individually; 7,582
are owned jointly with his wife; 1,270 shares held as custodian
for his two sons; 636 shares as custodian for his
daughter; and 25,000 shares may be acquired at any time by the
exercise of stock options.
(13) Of the 96,426 shares beneficially owned by John G. Martines,
7,474 are owned by him individually; 23,952 are
held jointly with his spouse; and 65,000 shares may be acquired
at any time by the exercise of stock options.
(14) Of the 41,145 shares beneficially owned by Harry F.
Schoenagel, 16,107 are owned by him individually;
3,000 are owned jointly with his spouse; and 22,038 are
owned by his spouse individually.
Compliance with Section 16(a) of the Securities Exchange Act of
1934
Section 16(a) of the Securities Exchange Act of 1934
requires the Corporation's officers and directors, and persons
who own more than ten percent of a registered class of the
Corporation's equity securities (in this case the Corporation's
Common Stock), to file reports of ownership and changes in
ownership with the SEC. Officers, directors and greater than
ten-percent shareholders are required by SEC regulation to
furnish the Corporation with copies of all Section 16(a) forms
that they file.
Based solely on its review of the copies of such forms
received by it, or written representations from certain reporting
persons that no Forms 5 were required for those persons, the
Corporation believes that, during the period January 1, 1995
through December 31, 1995, all filing requirements applicable to
its officers, directors and greater than ten-percent shareholders
were complied with.
ELECTION OF DIRECTORS
(ITEM 1)
The Corporation has a classified Board of Directors with
staggered three-year terms of office. In a classified board, the
directors are generally divided into separate classes of equal
number. The terms of the separate classes expire in successive
years. Thus, at each Annual Meeting of Shareholders successors
to the class of directors whose term shall then expire shall be
elected to hold office for a term of three years, so that the
term of office of one class of directors shall expire in each
year.
In addition, there is no cumulative voting for the election
of directors. Each share of common stock is entitled to cast
only one vote for each nominee. For example, if a shareholder
owns 100 shares of common stock, he or she may cast up to 100
votes for each of the nominees for director in the class to be
elected.
Unless otherwise instructed, the proxy holders will vote the
proxies received by them for the election of the two nominees for
Class 3 Director named below. If any nominee should become
unavailable for any reason, proxies will be voted in favor of a
substitute nominee as the Board of Directors of the Corporation
shall determine. The Board of Directors has no reason to believe
the nominees named will be unable to serve if elected. Any
vacancy occurring on the Board of Directors of the Corporation
for any reason may be filled by a majority of the directors then
in office until the expiration of the term of vacancy. Election
of a nominee to the office of director will require an
affirmative vote of a majority of the shares of Common Stock
represented at the Annual Meeting.
INFORMATION AS TO NOMINEES,
DIRECTORS AND EXECUTIVE OFFICERS
The following table contains certain information with
respect to the nominees and the directors whose terms of office
expire in 1996, 1997 and 1998, respectively.
Principal Occupation Director Since
Name Age for Past Five Years Corporation/Bank
Nominees for Class 3 Directors Whose Term Will Expire In 1999 and
current
Class 3 Directors Whose Term Expires in 1996
John G. Martines (1)(3)(5)(7) 49 President of the Bank and 1983/1979
Chief Executive Officer of
the Corporation
Harry F. Schoenagel (1)(2)(6)(7) 60 Partner of Schoenagel and 1985/1985
Schoenagel (general civil
engineering and surveying)
Class 2 Directors Whose Term Expires In 1997
Bruce D. Howe (3)(4)(5) 64 President of John T. Howe, Inc. 1983/1977
(a company that operates local
fuel and heating oil companies,
a motel and an interstate truck
stop) and President of Howe's
Twin Rocks, Inc. (a local restaurant).
Peter O. Clauss (3)(5)(6)(7) 66 Retired; Former President of 1988/1988
C & D Builders Inc.
(construction of residential and
light commercial buildings)
Class 1 Directors Whose Term Expires In 1998
Donald E. Chapman 59 Self-employed insurance broker 1983/1972
(1)(2)(4)(6)(7) and real estate developer
Arthur M. Davis (1)(2)(6)(7) 68 President of Lake Ariel 1983/1969
Hardware & Supply Co., Inc.
William C. Gumble (3)(4)(5) 58 Retired Attorney-at-law 1985/1985
______________________________
(1) Member of the Loan Review Committee of the Bank. This
committee reviews past due and classified loans and
actions to be taken. Moreover, this committee determines the
adequacy of the loan loss reserve and the amount to be
charged for the provision of loan losses. The committee met six
(6) times in 1995.
(2) Member of the Audit Committee of the Bank. This committee
reviews the reports of the auditors and the results
of examinations by the Federal Reserve System and Comptroller of
the Currency. This committee makes recommendations to
the Board based upon a review of the reports and regulatory
examinations. This committee met three (3) times in
1995.
(3) Member of the Asset/Liability Management Committee of the
Bank. This committee reviews quarterly the asset/ liability
management report and the investment portfolio. In
addition, this committee reviews strategies for GAP analysis,
liquidity, tax position and various profitability
ratios. Moreover, this committee determines product pricing and
development. This committee met five (5) times in
1995.
(4) Member of the Executive Committee of the Bank. This
committee reviews annually the profit sharing and
benefit plans of the Bank as well as salaries and promotions.
The committee makes recommendations to the Board of
Directors of the Bank on changes in the employee benefit plans,
compensation, promotions and the contribution to the
profit sharing plan. This committee also reviews non-personnel
matters such as bank expansion and profitability. This
committee met two (2) times in 1995.
(5) Member of the Loan Committee of the Bank. This committee
meets to consider and recommend approval of loans in
the principal amount of $100,000 or more. Directors receive no
additional compensation for attendance at meetings of
this committee. This committee met twenty-four (24) times in
1995.
(6) Member of Benefit/Compensation Committee of the Bank. This
committee meets to perform on annual review of executive
salary increases and executive stock option grants. This
committee met one (1) time in 1995.
(7) Member of 401(k) Committee of the Bank. This committee
meets to review semi-annual investment results of plan
funds, makes recommendations and changes to available investment
options, reviews IRS and DOL legal participation,
discrimination and other issues, and recommends annual Bank
contributions to plan. This committee met one (1) time in
1995.
During 1995, the Board of Directors of the Corporation held
six (6) meetings. Directors received no additional remuneration
for attendance at meetings of the Board of Directors of the
Corporation.
Each of the Directors attended at least 75% of the combined
total number of meetings of the Corporation's and Bank's Board of
Directors and of the committees on which they serve.
The Board of Directors of the Corporation has at present no
standing committees. The Corporation does not have a nominating
committee. A shareholder who desires to propose an individual
for consideration by the Board of Directors as a nominee for
director should submit a proposal in writing to the Secretary of
the Corporation in accordance with Section 202 of the
Corporation's By-laws.
Executive Compensation
The following table sets forth the total compensation for
services in all capacities paid by the Corporation and the Bank
(1) during 1995, 1994, and 1993, to the Corporation's Chief
Executive Officer and the Bank's President, (2) during 1995, 1994
and 1993, to the Corporation's Vice President and the Bank's
Senior Vice President and Chief Operating Officer, and (3) during
1995, to the Corporation's Vice President and the Bank's Senior
Vice President and Chief Financial Officer. No other executive
officer's annual compensation exceeded $100,000 for the years
presented and therefore is not required to be presented.
SUMMARY COMPENSATION TABLE
Annual Compensation
Name and Other Annual Securities All Other
Principal Position Fiscal Salary Bonus Compensation Underlying
Compensation
Year ($) ($) ($) Options/ ($)
SARs(#)
John G. Martines (President of the 1995 138,007 35,000 26,108 (1)
40,000 (2) 19,498 (3)
Bank and Chief Executive Officer 1994 130,005 30,000 19,811 (4)
25,000 (2) 21,435 (5)
of the Corporation) 1993 115,536 25,000 21,639 (6) 20,212
(7)
Louis M. Martarano 1995 97,154 13,500 8,796 (8) 15,000 (2)
15,013 (9)
(Senior Vice President and Chief 1994 91,750 12,500 3,452
(10) 10,000 (2) 15,903 (11)
Operating Officer of the Bank and 1993 80,301 10,000 4,002
(12) 14,333 (13)
Vice President of the Corporation)
Joseph J. Earyes (Senior Vice 1995 70,207 6,500 4,345
(14) 10,000 (2) 11,398 (15)
President and Chief Financial Officer
of the Bank and Vice President
and Treasurer of the Corporation)
(1) Includes $6,148 paid on behalf of Mr. Martines for initial
and periodic club dues; $12,000 paid to Mr. Martines for
directors' fees; $4,791 paid pursuant to the Salary Continuation
Plan; and $3,169 representing the personal use value of
a company-owned automobile.
(2) For further information on these stock options, see "Stock
Option Plan" below.
(3) Of the $19,498 paid to Mr. Martines in 1995 as All Other
Compensation, $2,098 and $3,888 was for life and medical
insurance premiums, respectively; and $13,512 was accrued by the
Corporation for the benefit of Mr. Martines pursuant to
a profit-sharing/401(k) plan.
(4) Includes $3,405 paid on behalf of Mr. Martines for periodic
club dues; $13,350 paid to Mr. Martines for directors'
fees; $1,128 paid pursuant to the Salary Continuation Plan; and
$1,928 representing the personal use value of a
company-owned automobile.
(5) Of the $21,435 paid to Mr. Martines in 1994 as All Other
Compensation, $2,073 and $4,362 was for life and medical
insurance premiums, respectively; and $15,000 was accrued by the
Corporation for the benefit of Mr. Martines pursuant to
a profit-sharing retirement plan.
(6) Includes $4,202 paid on behalf of Mr. Martines for periodic
club dues; $14,000 paid to Mr. Martines for directors'
fees; $1,121 paid pursuant to the Salary Continuation Plan; and
$2,316 representing the personal use value of a
company-owned automobile.
(7) Of the $20,212 paid to Mr. Martines in 1993 as All Other
Compensation, $1,874 and $4,325 was for life and medical
insurance premiums, respectively; and $14,013 was accrued by the
Corporation for the benefit of Mr. Martines pursuant to
a profit-sharing retirement plan.
(8) Includes $6,500 paid on behalf of Mr. Martarano for initial
and periodic club dues and $2,296 representing the
personal use value of a company-owned automobile.
(9) Of the $15,013 paid to Mr. Martarano in 1995 as All Other
Compensation, $1,022 and $4,281 was for life and
medical insurance premiums, respectively; and $9,710 was accrued
by the Corporation for the benefit of Mr. Martarano
pursuant to a profit-sharing/401(k) plan.
(10) Includes $1,510 paid on behalf of Mr. Martarano for periodic
club dues and $1,942 representing the personal use value
of a company-owned automobile.
(11) Of the $15,903 paid to Mr. Martarano in 1994 as All Other
Compensation, $1,050 and $4,428 was for life and
medical insurance premiums, respectively; and $10,425 was accrued
by the Corporation for the
benefit of Mr. Martarano pursuant to a profit-sharing
retirement plan.
(12) Includes $1,362 paid on behalf of Mr. Martarano for periodic
club dues and $2,640 representing the personal use value
of a company-owned automobile.
(13) Of the $14,333 paid to Mr. Martarano in 1993 as All Other
Compensation, $949 and $4,325 was for life and medical
insurance premiums, respectively; and $9,059 was accrued by the
Corporation for the benefit of Mr. Martarano pursuant
to a profit-sharing retirement plan.
(14) Includes $3,580 paid on behalf of Mr. Earyes for periodic
club dues and $765 representing the personal use value of a
company-owned automobile.
(15) Of the $11,398 paid to Mr. Earyes in 1995 as All Other
Compensation, $406 and $4,280 was for life and medical
insurance premiums, respectively; and $6,712 was accrued by the
Corporation for the benefit of Mr. Earyes pursuant to a
profit-sharing/401(k) plan.
Report of the Benefit/Compensation Committee on Executive
Compensation
The Benefit/Compensation Committee ("Committee"), as
directed by the Corporation's Board of Directors, is responsible
for all matters pertaining to executive compensation. The
Committee is entirely composed of directors of the Corporation.
The members of the Committee have compiled the following report
and presented the same to the entire Board of Directors for their
approval.
Through the Bank, defined compensation policies have been
implemented to properly analyze, describe and evaluate various
positions in the Corporation and the Bank for the determination
of their relative worth. This basis is used to establish a
salary structure for executive officers and senior management
that is both internally equitable and externally competitive.
The Committee takes into consideration the following ten factors
in making recommendations to the Board of Directors, on an annual
basis, as to base salary for the Chief Executive Officer and
other members of senior management:
1. Return on assets
2. Return on equity
3. Earnings
4. Growth in deposits
5. Current economic climate
6. Familiarity with market area
7. Length of service, experience and age
8. Comparison with peer and core groups -- currently the
committee relies upon an independent
study to determine these comparisons and it is
contemplated that these studies will continue.
9. Number of branches
10. Any other factors deemed by the Committee to be
beneficial to the Corporation.
No set numerical figure has been fixed to any of the factors
so as to allow the greatest flexibility to adjust to changing
economic conditions.
The Committee meets without the Chief Executive Officer's
presence to evaluate his performance and reports on the
evaluation to the outside Directors of the Board of Directors.
Pursuant to the 1994 Stock Option Plan, the
Benefit/Compensation Committee made grants in 1995 to Messrs.
Martines, Martarano and Earyes of stock options to give these
officers a further incentive to continue the growth and success
of the Corporation.
Bonus compensation is determined on an annual basis by
analyzing specific goals that are established at the beginning of
the year. These goals include, but are not limited to, earnings
growth, return on equity and return on assets. The bonus of the
Chief Executive Officer is based on the performance of the
Corporation and its success in attaining specific strategic
goals. The bonus compensation of other members of senior
management is determined by their respective annual salaries,
position within the Corporation and the Bank and the performance
of the individual in contributing to the success of the
Corporation and the Bank.
Submitted by the members of the
Benefit/Compensation Committee:
Harry F. Schoenagel, Peter O. Clauss, Arthur
M. Davis, and
Donald E. Chapman
Directors' Compensation
During 1995, the Bank's Board of Directors met on a monthly
basis; Directors received $1,000 per month and were allowed one
paid absence per year; and Bruce D. Howe, the Chairman, received
$500 in addition to his monthly Directors' fee of $1,000 or
$1,500 per month in the aggregate. Mr. Howe was also allowed one
paid absence per year from a meeting of the Bank's Board of
Directors. During 1995, the Board of Directors of the
Corporation held six (6) meetings. Directors received no
remuneration for attendance at meetings of the Board of Directors
of the Corporation in excess of remuneration each of them
received for attendance at meetings of the Board of Directors of
the Bank.
Salary Continuation Plan for Directors
The Bank has entered into an agreement with its directors to
establish a non-qualified salary continuation plan (the "Salary
Continuation Plan"). If such director continues to serve as a
director of the Corporation until he attains sixty-five (65)
years of age, the Corporation agrees to pay him a guaranteed
annual payment in each of ten years on the first day of the month
following such director's 65th birthday. Each director's
guaranteed annual payment is based upon the future value of the
life insurance purchased with the funds which would otherwise be
used to pay the directors' compensation. If such director
attains sixty-five (65) years of age, but dies before receiving
ten annual payments, then the Corporation will continue to make
these payments to such director's designated beneficiary or to
the representative of his estate. In the event that such
director dies while serving as a director but prior to the
attainment of sixty-five (65) years of age, then the Corporation
shall remit a guaranteed annual payment for a period of ten years
to such director's designated beneficiary or to the
representative of his estate. The Bank has obtained life
insurance (designating the Bank as the beneficiary) on each
participating director in an amount which will cover the Bank's
obligations under the Salary Continuation Plan. This plan is
based upon certain actuarial assumptions in seeking funding
through life insurance policies. In 1995, the Bank accrued
$38,524 as an expense for the Salary Continuation Plan, of which
approximately $4,791 was allocated to Mr. Martines.
The salary continuation plan for Messrs. Martines, Howe,
Chapman and Davis was established in July, 1987; for Messrs.
Gumble and Schoenagel in July, 1990; and for Mr. Clauss, in July,
1993.
Employment Agreement with Mr. Martines
The Corporation and the Bank entered into a 5-year
employment agreement with Mr. Martines, the Chief Executive
Officer of the Corporation and the President and Chief Executive
Officer of the Bank. Mr. Martines' annual base salary at
September 1, 1993, the date of commencement of the agreement, was
$125,000. His salary will increase each year in accordance with
a merit review by the Board of Directors. Under the agreement,
his salary is increased each year by not less than the minimum
average increase of other senior executive personnel. Mr.
Martines receives the employee fringe benefits that are received
by all personnel of the Bank as well as standard perquisites that
are given to officers of comparable financial institutions in
similar capacities. Mr. Martines has agreed to serve as the
Chief Executive Officer of the Corporation without any additional
compensation. At the end of the first year of the term of the
agreement, the term is automatically extended for one additional
year; therefore, there is a constant 5-year term in effect on the
first day of September of each year.
Mr. Martines may unilaterally terminate his employment with
the Corporation and the Bank if: (1) his health should become
impaired to an extent that it makes continued performance of his
duties hazardous to his physical or mental health or his life;
(2) without his consent, any assignment of duties or limitation
of powers is made that is not contemplated by the agreement; (3)
he is removed or is not re-elected to any of the positions that
he holds currently (except if terminated for cause); (4) a
reduction in the rate of compensation is made; (5) without his
consent, the current fringe benefits and perquisites are modified
or terminated; and (6) there is a "change in control."
For purposes of the agreement, a "change in control" means:
(1) the acquisition of the beneficial ownership of at least
twenty-five percent (25%) of the Corporation's voting securities
or all or substantially all of the assets of the Corporation or
the Bank or both by a single person or entity or a group of
affiliated persons or entities; (2) the merger, consolidation or
combination of the Corporation or the Bank or both with an
unaffiliated corporation in which the directors of the
Corporation or the Bank or both, immediately prior to such
merger, consolidation or combination constitute less than a
majority of the board of directors of the surviving, new or
combined entity; or (3) during any period of two consecutive
years during the term of the agreement, persons who at the
beginning of such period constitute the Board of Directors of the
Corporation cease for any reason to constitute at least a
majority thereof. The date of a change in control shall mean the
earlier of: (1) the first date on which a person, entity, or
group of affiliated persons or entities, acquire the beneficial
ownership of twenty-five percent (25%) or more of the
Corporation's voting securities; (2) the date of the transfer of
all or substantially all of the Corporation's or the Bank's
assets; (3) the date on which a merger, consolidation or
combination is consummated; or (4) the date on which persons who
formerly constituted a majority of the Board of Directors of the
Corporation ceased to be a majority.
Upon termination of employment by Mr. Martines for the above
reasons, the Bank shall pay to him, no later than 30 days after
the date of termination and for a period of three years, annual
compensation prorated into monthly payments equal to his annual
base salary on the date of termination or on the date six months
prior to the date of termination, whichever is greater. In the
event of termination as a result of a change in control, Mr.
Martines may, at his option, elect to receive in one lump sum the
aggregate present value of the above termination payments. The
present value shall be determined by the federal discount rate
published under Section 1274(d) of the Internal Revenue Code of
1986, as amended, then in effect, and compounded semi-annually.
Employment Agreement with Louis M. Martarano
The Corporation and the Bank entered into a 5-year
employment agreement with Louis M. Martarano, the Vice President
and Assistant Secretary of the Corporation and the Senior Vice
President of the Bank. Mr. Martarano's annual base salary at
September 1, 1993, the date of commencement of the agreement, was
$87,500. His salary will increase each year in accordance with
the terms of the agreement. Under the agreement, his salary is
increased each year by not less than the minimum average increase
of other senior executive personnel. Mr. Martarano receives the
employee fringe benefits that are received by all personnel of
the Bank, as well as standard perquisites that are given to
officers of comparable financial institutions in similar
capacities. Mr. Martarano has agreed to serve as Vice President
and Assistant Secretary of the Corporation without any additional
compensation. At the end of the first year of the term of the
agreement, the term is automatically extended for one additional
year; therefore, there is a constant 5-year term in effect on the
first day of September of each year.
The agreement with Mr. Martarano has the same terms and
conditions as described above, with respect to the agreement with
Mr. Martines relating to voluntary termination by Mr. Martarano,
to a change in control of the Corporation and to termination
payments.
1994 Stock Option Plan
At the 1994 annual meeting of shareholders, the Option Plan
was approved by the shareholders. The Option Plan is intended to
secure for the Corporation and its shareholders the benefits
arising from share ownership by those officers and key employees
of the Corporation and the Bank who will be responsible for the
Corporation's future growth and continued success. The following
table presents the grants that were made in 1995 and 1994 to the
persons so indicated.
STOCK OPTION GRANTS
Potential Realizable Value
at Assumed Annual Rates
of Stock Price Apprecia-
Individual Grants(1) tion for Option Term
Name Number of % of Total
Securities Options
Underlying Granted to Exercise or
Options Employees in Base Price Expiration
Granted Fiscal Year ($/Sh) Date 5%($) 10%($)
John G. Martines 40,000 62% $14.49 August 8, $18.50 $23.35
(President of the Bank (Granted- 2005
and Chief Executive August 8, 1995)
Officer of the
Corporation) 25,000 71% $15.12 August 7, $19.30
$24.35
(Granted- 2004 August 7, 1994)
Louis M. Martarano 15,000 23% $14.49 August 8, $18.50 $23.35
(Senior Vice President (Granted- 2005
and Chief Operating August 8, 1995)
Officer of the Bank
and Vice President 10,000 29% $15.12 August 7, $19.30
$24.35
of the Corporation) (Granted- 2004
August 7, 1994)
Joseph J. Earyes 10,000 15% $14.49 August 8, $18.50 $23.35
(Senior Vice President (Granted- 2005
and Chief Financial August 8, 1995)
Officer of the Bank
and Vice President
and Treasurer of
the Corporation)
___________________________
(1) No options have been exercised by Messrs. Martines,
Martarano, and Earyes as of March 19, 1996.
Certain Relationships and Related Transactions
There have been no material transactions since January 1,
1995, nor are any such transactions currently proposed, to which
the Corporation or the Bank was or is to be a party and in which
any director or executive officer of the Corporation, or any
beneficial owner of more than 5% of the Common Stock of the
Corporation (or any associate thereof, respectively), had or will
have a material interest. The Corporation and the Bank have had
and intend to continue to have banking and financial transactions
in the ordinary course of business with directors and executive
officers of the Corporation and the Bank and their respective
associates on comparable terms and with similar interest rates as
those prevailing from time to time for other non-affiliated
customers of the Corporation and the Bank. Total loans
outstanding from the Corporation and the Bank, at December 31,
1995, to the Corporation's and the Bank's officers and directors
as a group and members of their immediate families and companies
in which they had an ownership interest of 10% or more was $953
thousand or 4.9% of the Bank's total equity capital accounts.
The largest amount of indebtedness outstanding at any time during
fiscal year 1995 to the above identified group was $1.21 million
or 6.2% of the Bank's total equity capital accounts. Such loans
do not involve more than the normal risk of collectibility nor do
they present other unfavorable features.
Principal Officers of the Corporation
The following table sets forth selected information about
the principal officers of the Corporation, each of whom is
selected by the Board of Directors and each of whom holds office
at the discretion of the Board of Directors:
Bank
Held Employee Number of Shares Age as of
Name Since Since Beneficially Owned(1) March 19,
1996
Bruce D. Howe, President 1983 (2) 170,720 64
John G. Martines, Chief 1983 (3) 96,426 49
Executive Officer
Donald E. Chapman, Secretary 1983 (2) 55,666 59
Louis M. Martarano, Vice 1989 (3) 35,502 45
President and Assistant Secretary
Joseph J. Earyes, Vice President 1995 (3) 16,625 39
and Treasurer
____________________________
(1) See notes under the caption "Beneficial Ownership by
Officers, Directors and Nominees" for shareholdings of
these officers.
(2) Messrs. Howe, Chapman and Davis are not employees of the
Corporation.
(3) Messrs. Martines, Martarano, and Earyes are full-time
salaried employees of the Bank.
Principal Officers of the Bank
The following table sets forth selected information about
the principal officers of the Bank, each of whom is elected by
the Board of Directors of the Bank and each of whom holds office
at the discretion of the Board of Directors of the Bank:
Bank Number Age as of
Held Employee of Shares March 19,
Name Office/Position with Bank Since Since
Owned 1996
Bruce D. Howe Chairman of the Board 1986 (1) 170,720 (2) 64
John G. Martines President and CEO 1986 1979 96,426 (2) 49
Louis M. Martarano Senior Vice President and 1990 1981 35,502 (2) 45
Chief Operating Officer
Joseph J. Earyes Senior Vice President and 1995 1995 16,625 (2) 39
Chief Financial Officer
Christe A. Casciano Vice President 1990 1990 267 39
Kathleen L. Enslin Vice President and 1992 1975 2,927 38
Cashier
Cynthia A. Smaniotto Vice President 1992 1974 1,214 38
Karen T. Pasternak Vice President 1992 1987 560 49
Gregory G. Gula Vice President 1992 1990 191 33
William R. Kerstetter Vice President 1992 1992 503 44
Theodore G. Daniels Vice President 1993 1993 161 65
____________________________
(1) Mr. Howe is not an employee of the Bank.
(2) See notes under the caption "Beneficial Ownership by
Officers, Directors and Nominees" for shareholdings of
these officers.
RATIFICATION OF INDEPENDENT PUBLIC ACCOUNTANTS
(ITEM 2)
Unless instructed to the contrary, it is intended that votes
will be cast pursuant to the proxies for the ratification of the
selection of Parente, Randolph, Orlando, Carey & Associates,
Certified Public Accountants, of Scranton, Pennsylvania ("Parente
Randolph"), as the Corporation's independent public accountants
for its fiscal year ending December 31, 1996. The Corporation
has been advised by Parente Randolph that none of its members has
any financial interest in the Corporation. Ratification of
Parente Randolph will require an affirmative vote of a majority
of the shares of Common Stock represented at the Annual Meeting.
Parente Randolph served as the Corporation's independent public
accountants for the Corporation's 1995 fiscal year.
In addition to performing customary audit services, Parente
Randolph assisted the Corporation with the preparation of its
federal and state tax returns, and provided assistance in
connection with regulatory matters, charging the Corporation for
such services at its customary hourly billing rates. These
non-audit services were approved by the Corporation's and the
Bank's Board of Directors, after due consideration of the effect
of the performance thereof on the independence of the accountants
and after the conclusion by the Corporation's and the Bank's
Board of Directors that there was no effect on the independence
of the accountants.
In the event that the shareholders do not ratify the
selection of Parente Randolph as the Corporation's independent
public accountants for the 1996 fiscal year, another accounting
firm will be chosen to provide independent public accountant
audit services for the 1996 fiscal year. The Board of Directors
recommends that the shareholders vote FOR the ratification of the
selection of Parente Randolph as the auditors for the Corporation
for the year ending December 31, 1996.
It is understood that even if the selection of Parente
Randolph is ratified, the Board of Directors, in its discretion,
may direct the appointment of a new independent auditing firm at
any time during the year if the Board of Directors determines
that such a change would be in the best interests of the
Corporation and its shareholders.
LEGAL PROCEEDINGS
General
The nature of the Corporation's and the Bank's business
generates a certain amount of litigation involving matters
arising in the ordinary course of business. However, in the
opinion of management of the Corporation and the Bank, there are
no proceedings pending to which the Corporation and the Bank is a
party or to which their property is subject, which, if determined
adversely to the Corporation and the Bank, would be material in
relation to the Corporation's and the Bank's undivided profits or
financial condition, nor are there any proceedings pending other
than ordinary routine litigation incident to the business of the
Corporation and the Bank, In addition, no material proceedings
are pending or are known to be threatened or contemplated against
the Corporation and the Bank by government authorities or others.
Environmental Issues
There are several federal and state statutes that govern the
obligations of financial institutions with respect to
environmental issues. Besides being responsible under such
statutes for its own conduct, a bank also may be held liable
under certain circumstances for actions of borrowers or other
third parties on properties that collateralize loans held by the
bank. Such potential liability may far exceed the original
amount of the loan made by the bank. Currently, the Bank is not
a party to any pending legal proceedings under any environmental
statute nor is the Bank aware of any circumstances that may give
rise to liability of the Bank under any such statute.
ANNUAL REPORT
A copy of the Corporation's Annual Report for its fiscal
year ended December 31, 1995, is being mailed with this Proxy
Statement. A representative of Parente Randolph, the accounting
firm which examined the financial statements in the Annual
Report, will attend the Annual Meeting. This representative of
Parente Randolph will have the opportunity to make a statement,
if he or she desires to do so, and will be available to respond
to any appropriate questions presented by shareholders at the
Annual Meeting.
SHAREHOLDER PROPOSALS
Any shareholder who, in accordance with and subject to the
provisions of the proxy rules of the SEC, wishes to submit a
proposal for inclusion in the Corporation's proxy statement for
its 1997 Annual Meeting of Shareholders must deliver such
proposal in writing to the Secretary of Lake Ariel Bancorp, Inc.
at the principal executive offices of the Corporation on Route
191, Post Office Box 67, Lake Ariel, Pennsylvania 18436, not
later than Friday, November 29, 1996.
OTHER MATTERS
The Board of Directors does not know of any matters to be
presented for consideration other than the matters described in
the Notice of Annual Meeting of Shareholders, but if any matters
are properly presented, it is the intention of the persons named
in the accompanying Proxy to vote on such matters in accordance
with their judgment.
ADDITIONAL INFORMATION
Upon written request of any shareholder, a copy of the
Corporation's report on Form 10-KSB for its fiscal year ended
December 31, 1995, including the financial statements and the
schedules thereto, required to be filed with the SEC, may be
obtained, without charge, from Joseph J. Earyes, CPA, Vice
President, Lake Ariel Bancorp, Inc., Post Office Box 67, Route
191, Lake Ariel, Pennsylvania 18436, telephone: (717) 698-5695.
In addition, a copy of the Annual Disclosure Statement of LA
Bank, N.A. may be also obtained, without charge, from Joseph J.
Earyes, CPA, Chief Financial Officer of the Bank.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To the Shareholders of Lake Ariel Bancorp, Inc.:
Notice is hereby given that the Annual Meeting of
Shareholders of Lake Ariel Bancorp, Inc. (the "Corporation") will
be held at 11:00 a.m., prevailing time, on Tuesday, April 30,
1996, at the St. Thomas More Church Parish Hall, Lake Ariel,
Pennsylvania 18436, for the following purposes:
1. To elect two Class 3 directors to serve for a
three-year term and until their successors are duly
elected and qualified;
2. To ratify the selection of Parente, Randolph,
Orlando, Carey & Associates, Certified Public
Accountants of Scranton, Pennsylvania as the independent
auditors of the Corporation for the fiscal year
ending December 31, 1996; and
3. To transact such other business as may properly
come before the Annual Meeting and any
adjournment or postponement thereof.
Only those shareholders of record at the close of business,
at 5:00 p.m., on Tuesday, March 19, 1996, will be entitled to
notice of and to vote at the Annual Meeting.
A copy of the Corporation's Annual Report for the fiscal
year ended December 31, 1995, is being mailed with this notice.
You are urged to mark, sign, date and promptly return your
proxy in the enclosed envelope so that your shares may be voted
in accordance with your wishes and in order that the presence of
a quorum may be assured. The prompt return of your signed proxy,
regardless of the number of shares you hold, will aid the
Corporation in reducing the expense of additional proxy
solicitation. The giving of such proxy does not affect your
right to vote in person if you attend the meeting.
By Order of the
Board of Directors
Bruce D. Howe,
President
March 29, 1996
LAKE ARIEL BANCORP, INC.
PROXY
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD APRIL 30, 1996
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby constitutes and appoints Charles
Phillips and Joseph Collins and each and any of them, proxies of
the undersigned, with full power of substitution, to vote all of
the shares of Lake Ariel Bancorp, Inc. (the "Corporation") that
the undersigned may be entitled to vote at the Annual Meeting of
Shareholders of the Corporation to be held at the St. Thomas More
Church Parish Hall, Lake Ariel, Pennsylvania 18436, on Tuesday,
April 30, 1996 at 11:00 a.m., prevailing time, and at any
adjournment or postponement thereof as follows:
1. ELECTION OF CLASS 3 DIRECTORS
[ ] For all nominees listed [ ] WITHHOLD
AUTHORITY
below (except as marked to vote on all
nominees
to the contrary below) listed
below
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL
NOMINEE, WRITE THAT NOMINEE'S NAME ON THE SPACE PROVIDED BELOW.)
John G. Martines and Harry F. Schoenagel
___________________________________________________________
2. Ratification of the selection of Parente, Randolph, Orlando,
Carey & Associates, Certified Public Accountants, as the
independent auditors of the Corporation for the fiscal year
ending December 31, 1996.
[ ] FOR [ ] AGAINST
3. In their discretion, the proxies are authorized to vote upon
such other business as may properly come before the meeting and
any adjournment or postponement thereof.
THIS PROXY, WHEN PROPERLY SIGNED, WILL BE VOTED IN THE
MANNER DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO
DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR ALL NOMINEES
LISTED ABOVE AND FOR PROPOSAL 2.
Dated
____________________________, 1996
_______________________________________
_______________________________________
Signature(s)
Number of Shares Held of
Record on March 19, 1996: _______________
