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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
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Check the appropriate box:
[ ] Preliminary Proxy Statement
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RULE 14a-6(e)(2))
[X] Definitive Proxy Statement
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[ ] Soliciting Material Pursuant to Section 240.14a-12
Killbuck Bancshares, Inc.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (check the appropriate box):
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SEC 1913 (02-02)
KILLBUCK BANCSHARES, INC.
NOTICE OF ANNUAL MEETING
AND
PROXY STATEMENT
ANNUAL SHAREHOLDERS MEETING
APRIL 25, 2005
KILLBUCK BANCSHARES, INC.
165 N. Main Street
Killbuck, OH 44637
NOTICE OF ANNUAL MEETING OF
SHAREHOLDERS TO BE HELD
April 25, 2005
TO THE HOLDERS OF SHARES OF COMMON STOCK:
Notice is hereby given that the Annual Meeting of the Shareholders of
Killbuck Bancshares, Inc. (the "Corporation") will be held at the main office of
the Corporation, 165 N. Main Street, Killbuck, Ohio, on Monday, April 25, 2005,
at 7:30 p.m. (local time), for the purpose of considering and voting upon the
following matters:
1. The election of three Directors (to be elected to Class A of the
Corporation's staggered Board of Directors) to serve a three-year term or
until their successors shall have been elected and qualified.
2. To transact such other business as may properly come before the meeting or
any adjournment thereof. The Board of Directors at present knows of no
other business to be presented by or on behalf of the Corporation.
Shareholders of record at the close of business on March 19, 2005, are the
only shareholders entitled to notice of and to vote at the Annual Shareholders
Meeting.
By order of the Board of Directors
Luther E. Proper
Luther E. Proper, President and
Chief Executive Officer
March 21, 2005
IMPORTANT
WHETHER YOU EXPECT TO ATTEND THE MEETING OR NOT, PLEASE MARK, SIGN,
DATE, AND RETURN THE ACCOMPANYING PROXY CARD IN THE ENCLOSED SELF-ADDRESSED
ENVELOPE AS PROMPTLY AS POSSIBLE. NO POSTAGE IS REQUIRED.
KILLBUCK BANCSHARES, INC.
KILLBUCK, OHIO
PROXY STATEMENT
GENERAL INFORMATION
This Proxy Statement is furnished in connection with the solicitation by
the Board of Directors of Killbuck Bancshares, Inc. (the "Corporation") of
proxies to be voted at the Annual Meeting of Shareholders to be held on Monday,
April 25, 2005, in accordance with the foregoing notice.
Killbuck Bancshares, Inc. is a registered bank holding company of which
The Killbuck Saving Bank Company (hereinafter collectively "Corporation") is its
principal subsidiary.
The solicitation of proxies on the enclosed form is made on behalf of the
Board of Directors of the Corporation. All costs associated with the
solicitation will be borne by the Corporation. The Corporation does not intend
to solicit proxies other than by use of the mails, but certain officers and
regular employees of the Corporation or its subsidiaries, without additional
compensation, may use their personal efforts, by telephone or otherwise, to
obtain proxies. The proxy materials are first being mailed to shareholders on or
about March 21, 2005.
Any shareholder executing a proxy has the right to revoke it by the
execution of a subsequently dated proxy, by written notice delivered to the
Secretary of the Corporation prior to the exercise of the proxy or in person by
voting at the meeting. The shares will be voted in accordance with the direction
of the shareholder as specified on the proxy. In the absence of instructions,
the proxy will be voted "FOR" the election of the three persons listed in this
Proxy Statement.
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
Only shareholders of record at the close of business on March 19, 2005,
will be eligible to vote at the Annual Meeting or any adjournment thereof. As of
March 19, 2005, the Corporation had outstanding 657,028 shares of no par value
common stock. Shareholders are entitled to one vote for each share of common
stock owned as of the record date.
All Directors and Executive Officers of the Corporation as a group
(comprised of eleven individuals), beneficially held 22,626 shares of the
Corporation's common stock as of March 19, 2005, representing 3.44 percent of
the outstanding common stock of the Corporation.
PRINCIPAL SHAREHOLDERS
To the Corporation's knowledge, except as noted below, no person or
entity owns beneficially, directly or indirectly, 5 percent or more of the
Corporation's outstanding common stock as of March 19, 2005.
AMOUNT AND NATURE OF % OF
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP(1) CLASS
- ------------------------------------ ----------------------- -----
The Holmes Limestone Co. 45,120 Shares(2) 6.86%
P.O. Box 295
Berlin, Ohio 44610
Thomas D. Gindlesberger 35,000 Shares(2) 5.32%
401 Port Washington Road
Millersburg, Ohio 44654
- ----------------------
(1) All shares subject to sole voting and investment power unless otherwise
indicated.
(2) The source for this information is a Form SC 13-G, as filed by shareholder
with the Securities and Exchange Commission on August 27, 1998.
PROPOSAL #1 ELECTION OF DIRECTORS AND INFORMATION
WITH RESPECT TO DIRECTORS AND OFFICERS
CLASSIFICATION SYSTEM FOR THE ELECTION OF DIRECTORS
The Corporation has a staggered system for the election of Directors.
Directors are divided into three classes as nearly equal in number as possible.
The Corporation has nine Directors, and they are elected to serve a three-year
term. The three nominees receiving the greatest number of votes will be elected
as Directors. There is no minimum number of votes required to elect a Director.
Shares represented at the annual meeting in person or by proxy but withheld or
otherwise not cast for the election of directors, including abstentions and
broker non-votes, will have no impact on the outcome of the election. The Board
of Directors has no policy regarding Board member attendance at the annual
meeting of shareholders. All nine Directors were in attendance at last year's
meeting of the shareholders.
2
INFORMATION WITH RESPECT TO NOMINEES
The following information is provided with respect to each Class A (term
to expire in 2005) nominee for Director and each present and continuing Director
whose term of office extends beyond the Annual Meeting of the Corporation's
Shareholders.
Principal Occupation During Director of the Corporation
Name and Age Past Five Years Since
- ----------------- -------------------------------- ---------------------------
John W. Baker Retired 1992
(Age 60) (President, Burgett Insurance
Term expires 2005 through December 31, 1997)
Richard L. Fowler President, Mobile Homes of Ohio 1992
(Age 74)
Term expires 2005
Kenneth E. Taylor Farmer 1992
(Age 52)
Term expires 2005
THE DIRECTORS UNANIMOUSLY RECOMMEND A VOTE IN FAVOR OF THIS
PROPOSAL #1.
INFORMATION WITH RESPECT TO DIRECTORS NOT STANDING FOR REELECTION
Principal Occupation During Past Director of the Corporation
Name and Age Five Years Since
- ----------------- ----------------------------------------- ---------------------------
Dean J. Mullet President, Mullet Cabinet 1996
(Age 53)
Term expires 2006
Luther E. Proper President and CEO, Killbuck 1992
(Age 56) Bancshares, Inc. and The Killbuck
Term expires 2006 Savings Bank Co. Mr. Proper's term
as executive officer is subject to annual
renewal by resolution of the Board
of Directors.
Allan R. Mast Co-Owner Holmes M&M Construction 1992
(Age 55)
Term expires 2006
Ted Bratton Farmer 1999
(Age 43)
Term expires 2007
3
Max A. Miller Attorney-at-Law 2001
(Age 49)
Term expires 2007
Michael S. Yoder Owens-Brockway 1994
(Age 62) (Retired 1999)
Term expires 2007
The business experience of each of the above-listed nominees and Directors
during the past five years was that typical to a person engaged in the principal
occupation listed. Unless otherwise indicated, each of the nominees and
Directors has had the same position or another executive position with the same
employer during the past five years.
Shareholders desiring to nominate individuals to serve as Directors may do
so by following the procedure outlined in the Corporation's Code of Regulations
requiring advance notice to the Corporation of such nomination and certain
information regarding the proposed nominee.
SECURITY OWNERSHIP OF MANAGEMENT
Shares of Corporation Common Stock Percentage of Beneficial
Name Owned Beneficially as of 3/19/05 Ownership as of 3/19/05
- -------------------------------- ---------------------------------- ------------------------
Max A. Miller 500 .08%
John W. Baker 106 .02%
Ted Bratton(1) 245 .04%
Richard L. Fowler (2) 8,787 1.34%
Craig A. Lawhead (3) 1,795 .27%
Allan R. Mast (4) 1,980 .30%
Dean J. Mullet(5) 299 .05%
Luther E. Proper 7,005 1.07%
Kenneth E. Taylor 1,459 .22%
Michael S. Yoder(6) 400 .06%
Diane S. Knowles 50 .01%
All directors and executive
officers as a group (11 persons) 22,626 3.44%
- ---------------------
(1) Includes 118 shares owned individually, 107 shares owned jointly with
spouse and 20 shares owned individually by son.
(2) Includes 4,700 shares owned individually and 4,087 shares owned jointly
with spouse.
(3) Includes 680 shares owned individually, 1,095 shares owned jointly with
spouse and 20 shares owned by daughter.
(4) Includes 375 shares owned individually, 905 shares owned jointly with
spouse and 700 shared owned by Holmes M&M Construction
(5) Includes 150 shares owned individually and 149 shares owned jointly with
spouse.
(6) Includes 250 shares owned individually and 150 shares owned individually
by spouse.
4
COMMITTEES AND COMPENSATION OF, AND COMMUNICATIONS WITH, THE BOARD OF DIRECTORS
Committees
The Board of Directors conducts its business through meetings of the Board
and through its committees. In accordance with the Code of Regulations of the
Corporation, the Board of Directors has appointed and maintains an Audit
Committee, Nominating and Governance Committee, Executive Committee, and
Investment & Funds Committee and Loan Committee.
The Corporation's nominating function is performed by the Nominating and
Governance Committee, which is composed of Messrs. Baker, Bratton, Fowler,
Miller and Mast (Chairman). Until 2004, the nominating function was handled by
the entire Board of Directors of the Corporation. In conducting its nominating
function, the Nominating and Governance Committee is responsible for making
annual nominations for Directors to fill vacancies created by expired terms of
Directors and from time to time, making appointments to fill vacancies created
prior to the expiration of a Director's term. During 2004, the Nominating and
Governance Committee met once to consider and act upon the nomination of
Directors. Each member of the Nominating and Governance Committee meets the
independence requirements prescribed under Rule 4200 of the NASDAQ Marketplace
listing standards. The Committee operates under a written charter, a copy of
which was provided to shareholders as an appendix to the proxy materials
delivered in connection with our 2004 annual meeting. This charter is not
available for on-line viewing on any website of the Corporation or otherwise.
While the Nominating and Governance Committee will consider nominating persons
recommended by shareholders, it has not actively solicited recommendations from
the Corporation's shareholders for nominees nor established any procedures for
this purpose. The Committee has determined that based upon the Corporation's
size and the accessibility of the directors and executive management to the
shareholders, no such policy or procedures are presently required. However,
shareholders may also nominate persons for election to the Board of Directors by
following the procedures contained in the Corporation's Code of Regulations.
These procedures are discussed more thoroughly in this proxy statement under the
section captioned "Shareholder Proposals." The identification and evaluation of
all candidates for nominee to the Board of Director are undertaken on an ad hoc
basis within the context of the Corporation's strategic initiatives at the time
a vacancy occurs on the Board. In evaluating candidates, the Committee considers
a variety of factors, including the candidate's integrity, independence,
qualifications, skills, experience (including experiences in finance and
banking), familiarity with accounting rules and practices, and compatibility
with existing members of the Board. Other than the foregoing, there are no
stated minimum criteria for nominees, although the Committee may consider such
other factors as it may deem at the time to be in the best interest of the
Corporation and its shareholders, which factors may change from time to time.
The Executive Committee of the Board is also responsible for administering
the Corporation's employee benefit plans; setting the compensation of the
President and Chief Executive Officer; reviewing the criteria that form the
basis for management's officer and employee compensation recommendations and
reviewing management's recommendations in this regard. The Executive Committee
is composed of Messrs. Baker, Bratton, Fowler, Miller and Mast (Chairman). The
Executive Committee met 12 times during 2004.
5
The Corporation's Audit Committee has been established by and amongst the
Board for the purpose of overseeing the accounting and financial reporting
processes of the Corporation and the audits of its financial statements. In this
capacity, the Audit Committee reviews with the Corporation's independent
auditors, the audit plan, the scope and results of their audit engagement and
the accompanying management letter, if any; reviews the scope and results of the
Corporation's internal auditing procedures; consults with the independent
auditors and management with regard to the Corporation's accounting methods and
the adequacy of its internal accounting controls; approves all professional
services provided by the independent auditors; reviews the independence of the
independent auditors; and reviews the range of the independent auditors' audit
and nonaudit fees. The Audit Committee is composed of Messrs. Miller, Mast,
Taylor and Yoder (Chairman). All members of the Audit Committee met the
independence standards of Rule 4200 of the NASDAQ Marketplace listing standards.
The Audit Committee operates under a written charter, a copy of which was
provided to shareholders as an appendix to the proxy materials delivered in
connection with our 2004 annual meeting. The Audit Committee met 5 times during
2004.
The Investment & Funds Committee is responsible for reviewing the
securities portfolio of the Corporation and makes recommendations to the full
Board on matters affecting the market for the Corporation's common stock and the
Corporation's dividend policy.
The Loan Committee reviews loan policy matters and approves loan requests
as required by internal policy.
The Board of Directors of the Corporation meets bi-monthly for its regular
meetings and upon call for special meetings. During 2004, the Board met 24
times. All Directors of the Corporation attended at least 75 percent of the
Board and Committee Meetings that they were scheduled to attend during 2004.
Director Compensation
Directors of the Corporation and its subsidiary, The Killbuck Savings Bank
Company, received an annual retainer of $9,600 during 2004. The Chairman of the
Board received an annual retainer of $12,000. In addition, committee members
receive $150 per committee meeting attended.
Communications with the Board of Directors
The Board of Directors has not established a formal process for security
holders to send communications to the board of directors. The Board of Directors
has determined that in light of the general accessibility of the directors in
the community served by the Company, no such process is required.
6
AUDIT COMMITTEE REPORT
The Audit Committee of the Corporation's Board of Directors (the
"Committee") is composed of four directors, each of whom is independent as
defined by the National Association of Securities Dealers' listing standards,
and operates under a written charter adopted by the Board of Directors. The
members of the Committee are directors Miller, Mast, Taylor and Yoder. The
Committee recommends to the Board of Directors the selection of the
Corporation's independent accountants.
Management is responsible for the Corporation's internal controls and the
financial reporting process. The independent accountants are responsible for
performing an independent audit of the Corporation's consolidated financial
statements in accordance with generally accepted auditing standards and to issue
a report thereon. The Committee's responsibility is to monitor and oversee these
processes.
In this context, the Committee has met and held discussions with
management and the independent accountants. Management represented to the
Committee that the Corporation's consolidated financial statements were prepared
in accordance with generally accepted accounting principles, and the Committee
has reviewed and discussed the consolidated financial statements with management
and the independent accountants. The Committee discussed with the independent
accountants matters required to be discussed by Statement on Auditing Standards
No. 61 (Communication with Audit Committees).
The Corporation's independent accountants also provided to the Committee
the written disclosures and the letter required by Independence Standards Board
Standard No. 1 (Independence Discussions with Audit Committees), and the
Committee discussed with the independent accountants that firm's independence.
The Committee has considered whether the provision of non-audit services by the
independent accountants to the Corporation and its subsidiaries is compatible
with maintaining the independence of the independent accountants.
Based upon the Committee's discussion with management and the independent
accountants and the Committee's review of the representation of management and
the report of the independent accountants to the Committee, the Committee
recommended that the Board of Directors include the audited consolidated
financial statements in the Corporation's Annual Report on Form 10-K for the
year ended December 31, 2004 to be filed with the Securities and Exchange
Commission.
Michael S. Yoder, Chairman
Max A. Miller
Allen R. Mast
Kenneth E. Taylor
7
The Corporation's independent accountants billed the aggregate fees shown below
for audit and all other services rendered to Corporation and its subsidiaries
for fiscal years 2004 and 2003, respectively.
2004 2003
--------- ---------
Audit Fees: $ 43,100 $ 40,470
Audit-Related Fees: $ 0 $ 0
Tax Fees: $ 8,200(1) $ 8,000
All Other Fees: $ 0 $ 0
- -----------------------------
(1) Tax Fees paid for fiscal year 2004 include return preparation and related
consulting services
EXECUTIVE COMPENSATION AND OTHER INFORMATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following remuneration table sets forth all direct remuneration paid
by the Bank in 2004, 2003, and 2002 to the Corporation's President and Chief
Executive Officer, Executive Vice President and Chief Financial Officer.
SUMMARY COMPENSATION TABLE
Annual Compensation
-----------------------------------------------
Other Annual
Name and Principal Position Year Salary Bonus Compensation
- ------------------------------------- ---- -------- ------- ------------
Mr. Luther E. Proper 2004 $172,382 $26,191 $ 1,114
President and Chief Executive Officer 2003 $163,918 $26,617 $ 1,120
2002 $148,215 $25,260 $ 1,052
Mr. Craig A. Lawhead 2004 $105,680 $15,127 -
Executive Vice President 2003 $100,548 $15,496 -
2002 $ 95,250 $14,252 -
Ms. Diane S. Knowles 2004 $101,800 $13,921 -
Chief Financial Officer 2003 $ 96,942 $14,248 -
2002 $ 91,588 $13,016 -
8
EMPLOYMENT AGREEMENTS WITH NAMED EXECUTIVE OFFICERS
On April 26, 2004, the Corporation executed employment agreements with
each of the executive officers named in the Summary Compensation Table above.
The material terms of each officer's employment agreement with the Company are
described below. The following descriptions are intended to provide an overview
of the material terms, but do not purport to be complete and are qualified in
their entirety by reference to the full text of each employment agreement,
copies of which were attached as Exhibits 10.1 through 10.3, respectively, to
the Corporation's Quarterly Report on Form 10-Q that was filed with the
Commission on August 12, 2004.
Agreement with Luther E. Proper - The Agreement provides for Mr. Proper's
employment in the capacity as President of the Corporation's commercial
banking subsidiary, The Killbuck Savings Bank Company, and requires him to
promote the business thereof and to render such administrative and
management services as customarily performed by others similarly situated.
Other material terms of the employment agreement include: a minimum base
salary of $158,000 per year; an annual bonus calculated at the discretion
of the Board of Directors; participation in the Corporation's retirement,
medical and disability plans; and vacation and sick leave in accordance
with the Corporation's policies and as otherwise may be determined by the
Board from time to time. The term of Mr. Proper's agreement is for one
year periods, which are renewable annually upon resolution of the Board of
Directors, except in the event that the Corporation enters into
negotiations which, if concluded by agreement, would result in a "Change
in Control" (as defined under the agreement). In such instances, the
agreement provides that Mr. Proper's term of employment would
automatically be extended for an additional one year period. The agreement
further provides that, in the event Mr. Proper is terminated by the
Corporation without "Just Cause" (as defined under the agreement), the
Corporation shall continue to pay Mr. Proper's current salary up until the
termination date of his current term. In the event Mr. Proper is
terminated in connection with a Change in Control, the agreement provides
for payment in the amount of 2.99 times the "base amount" of his annual
earnings, as defined in Section 280G of the Internal Revenue Code. Under
certain delineated circumstances, Mr. Proper is also entitled to 2.99
times his base amount in the event he voluntarily terminates his
employment following a Change in Control.
Agreement with Craig A. Lawhead - The Agreement provides for Mr. Lawhead's
employment in the capacity as Executive Vice President of the
Corporation's commercial banking subsidiary, The Killbuck Savings Bank
Company, and requires him to promote the business thereof and to render
such administrative and management services as customarily performed by
others similarly situated. Other material terms of the employment
agreement include: a minimum base salary of $105,500 per year; an annual
bonus calculated at the discretion of the Board of Directors;
participation in the Corporation's retirement, medical and disability
plans; and vacation and sick leave in accordance with the Corporation's
policies and as otherwise may be determined by the Board from time to
time. The term of Mr. Lawhead's agreement is for one year periods, which
are renewable annually upon resolution of the Board of Directors, except
in the
9
event that the Corporation enters into negotiations which, if concluded by
agreement, would result in a "Change in Control" (as defined under the
agreement). In such instances, the agreement provides that Mr. Lawhead's
term of employment would automatically be extended for an additional one
year period. The agreement further provides that, in the event Mr. Lawhead
is terminated by the Corporation without "Just Cause" (as defined under
the agreement), the Corporation shall continue to pay Mr. Lawhead's
current salary up until the termination date of his current term. In the
event Mr. Lawhead is terminated in connection with a Change in Control,
the agreement provides for payment in the amount of 2.00 times the "base
amount" of his annual earnings, as defined in Section 280G of the Internal
Revenue Code. Under certain delineated circumstances, Mr. Lawhead is also
entitled to 2.00 times his base amount in the event he voluntarily
terminates his employment following a Change in Control.
Agreement with Diane S. Knowles - The Agreement provides for Ms. Knowles'
employment in the capacity as Chief Financial Officer of the Corporation's
commercial banking subsidiary, The Killbuck Savings Bank Company, and
requires her to promote the business thereof and to render such
administrative and management services as customarily performed by others
similarly situated. Other material terms of the employment agreement
include: a minimum base salary of $100,000 per year; an annual bonus
calculated at the discretion of the Board of Directors; participation in
the Corporation's retirement, medical and disability plans; and vacation
and sick leave in accordance with the Corporation's policies and as
otherwise may be determined by the Board from time to time. The term of
Ms. Knowles' agreement is for one year periods, which are renewable
annually upon resolution of the Board of Directors, except in the event
that the Corporation enters into negotiations which, if concluded by
agreement, would result in a "Change in Control" (as defined under the
agreement). In such instances, the agreement provides that Ms. Knowles'
term of employment would automatically be extended for an additional one
year period. The agreement further provides that, in the event Ms. Knowles
is terminated by the Corporation without "Just Cause" (as defined under
the agreement), the Corporation shall continue to pay Ms. Knowles' current
salary up until the termination date of her current term. In the event Ms.
Knowles is terminated in connection with a Change in Control, the
agreement provides for payment in the amount of 2.00 times the "base
amount" of her annual earnings, as defined in Section 280G of the Internal
Revenue Code. Under certain delineated circumstances, Ms. Knowles is also
entitled to 2.00 times her base amount in the event she voluntarily
terminates her employment following a Change in Control.
10
REPORT OF THE EXECUTIVE COMMITTEE OF KILLBUCK BANCSHARES, INC. ON COMPENSATION
This report reflects the Corporation's compensation philosophy as endorsed
by the Executive Committee. The Executive Committee of the Corporation has the
responsibility of determining the compensation policy and practices with respect
to all Executive Officers. At the direction of the Board of Directors, the
Executive Committee has prepared the following report for inclusion in this
Proxy Statement.
Compensation Philosophy. The employee compensation program of the
Corporation has been designed to:
- Support a policy that rewards all employees for positive corporate
performance;
- Motivate all employees to advance the strategic business goals of the
Corporation; and
- Provide competitive compensation opportunities that allow the Corporation
to compete for and retain talented employees who are critical to the
Corporation's long-term success.
The Executive Committee annually evaluates the performance, considers
compensation adjustments and makes a recommendation to the full Board of
Directors regarding the level of compensation for Mr. Proper. The Executive
Committee determines the level of compensation for all other Executive Officers
within the constraints of the amounts approved by the Board. In this regard, the
Executive Committee conducts reviews, assembles compensation survey data and
makes any necessary recommendations to the full Board of Directors regarding
compensation matters. The primary compensation for the named executive officers
is comprised of two principal components: (1) base salary; and (2) distributions
pursuant to the Corporation's Cash Bonus Plan.
Salary. It is the Executive Committee's policy that a competitive base
salary is essential in order to retain quality executive personnel. The salary
for each named executive officer is determined annually based upon the
Committee's consideration of two primary factors: competitive compensation
levels; and individual performance. As a method for determining competitive
salary levels, the Committee reviews reports of peer data and compensation
surveys sponsored by trade and consulting groups within the financial services
industry. The reports and surveys utilized by the Committee generally break down
overall compensation data into subcategories based upon the relative asset size
of the various respondent institutions. The Committee primarily utilizes the
compensation data within its respective asset category. For purposes of salary
determinations made for the previous year, the Executive Committee used the
Delves Group BAI 2004 Key Executive Bank Cash Compensation Survey (North-East
Central Region) as its primary peer data resource. Based upon an analysis of the
report data, the Committee determines an appropriate competitive salary range
for each named executive officer. The exact placement of each named executive
officer within the pre-established range is determined by a final subjective
evaluation by the Committee of the performance of the executive during the prior
year.
11
The Executive Committee also undertakes a subjective evaluation of the
performance of each respective individual and the performance of the Corporation
overall for the previous fiscal year. The Committee uses no particular criteria
in making performance-related determinations.
Cash Bonus Plan. It is the Executive Committee's policy that a significant
portion of employee compensation should be payable annually in the form of a
bonus based principally upon the overall financial performance of the
Corporation. The Corporation maintains a cash bonus plan (the "Bonus Plan")
which allocates a portion of the Corporation's net income for the purpose of
employee cash bonuses on an annual basis. The award of a bonus to any employee
under the terms of the Bonus Plan is wholly discretionary and is based primarily
upon a subjective evaluation of the performance of each respective individual
and the performance of the Corporation overall for the previous fiscal year. As
in the case of salary determinations, the Committee uses no particular criteria
in making performance-related determinations.
Discussion of CEO Compensation. Effective for the 2004 pay period, the
Executive Committee recommended and the Board approved the increase in the base
salary of the Chief Executive Officer to $172,382. This increase reflected
consideration of competitive data reported in the compensation survey discussed
above and the Committee's subjective assessment of the CEO and recognition of
the Corporation's performance during 2003. With respect to competitive
compensation data reviewed by the Committee, the Committee recommended a base
salary for Mr. Proper at a point roughly mid-way between the 25th and 50th
percentiles of CEO salaries reported by respondent institutions within the $250
to $499 million asset range. All compensation granted to the CEO pursuant to the
Corporation's Cash Bonus Plan for fiscal year 2004, in the amount of $26,191,
was calculated entirely at the discretion of the Corporation's Board of
Directors, upon review of the Corporation's overall performance during the 2003
fiscal year.
THIS REPORT ON COMPENSATION IS SUBMITTED BY THE EXECUTIVE COMMITTEE MEMBERS:
John Baker
Richard Fowler
Ted Bratton
Max Miller
Allan Mast
12
EXECUTIVE COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION AND OTHER RELATED
TRANSACTIONS
The following individuals served as members of the Executive Committee
during the last completed fiscal year: John Baker; Richard Fowler; Ted Bratton;
Max Miller; and Allan Mast. Additionally, Luther E. Proper, the Corporation's
President and Chief Executive Officer served as an Ex Officio member of the
Executive Committee of the Corporation, which is responsible for compensation
matters (see "Report of the Executive Committee of Killbuck Bancshares, Inc. on
Compensation" in this Proxy Statement). Although Mr. Proper attends meetings of
the Executive Committee as an Ex Officio member, he did not attend those
portions of meetings, nor participate in any decisions, regarding his own
compensation as an Executive Officer.
In addition, Directors of the Corporation and their associates were
customers of, and have had transactions with, the Corporation in the ordinary
course of business during 2004. These transactions consisted of extensions of
credit by the Corporation in the ordinary course of business and were made on
substantially the same terms as those prevailing at the time for comparable
transactions with other persons. In the opinion of the management of the
Corporation, those transactions do not involve more than a normal risk of being
collectible or present other unfavorable features. The Corporation expects to
have, in the future, banking transactions in the ordinary course of its business
with Directors and their associates on the same terms, including interest rates
and collateral on loans, as those prevailing at the time of comparable
transactions with others.
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13
PERFORMANCE GRAPH - FIVE-YEAR SHAREHOLDER RETURN COMPARISON
The SEC requires that the Corporation include in this Proxy Statement a
line-graph presentation comparing cumulative five-year shareholder returns on an
indexed basis with a broad equity market index and either a nationally
recognized industry standard or an index of peer companies selected by the
Corporation. The Corporation has selected the Dow Jones Equity Market Index and
the Dow Jones Regional Bank Index for purposes of this performance comparison.
The chart below compares the value of $100 invested on December 31, 1999, in the
Corporation's stock, the Dow Jones Total Market Index and the Dow Jones Bank
Index.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN* AMONG KILLBUCK BANCSHARES,
INC., DOW JONES U.S. TOTAL MARKET INDEX & DOW JONES U.S. BANK INDEX FOR FICAL
YEARS ENDING DECEMBER 31
[PERFORMANCE GRAPH]
12/31/1999 12/31/2000 12/31/2001 12/31/2002 12/31/2003 12/31/2004
---------- ---------- ---------- ---------- ---------- ----------
Killbuck Bancshares, Inc. $ 100.00 $ 99.66 $ 98.61 $ 101.59 $ 105.80 $ 109.98
Dow Jones U.S. Total
Market Index $ 100.00 $ 90.77 $ 79.92 $ 62.27 $ 81.42 $ 91.20
Dow Jones U.S. Bank Index $ 100.00 $ 117.86 $ 117.30 $ 115.09 $ 152.99 $ 174.97
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, to file reports
with regard to their ownership of Corporation Shares, and changes in such
ownership, with the Securities and Exchange Commission.
14
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
they file.
Based solely on review of the copies of such forms furnished to the
Corporation or written representations that no Form 5s were required, the
Corporation believes that during 2004 all Section 16(a) filing requirements
applicable to its Officers and Directors were complied with. The Corporation has
no shareholders who are ten percent beneficial owners.
SELECTION OF AUDITORS
S. R. Snodgrass, A.C. has been appointed to serve as the Independent
Auditor for the Corporation and its subsidiary for the fiscal year ended
December 31, 2004. It is the intention of the Corporation to appoint S. R.
Snodgrass, A.C. as Independent Auditor for 2005. Representatives of S. R.
Snodgrass, A.C. are expected to be present at the Annual Meeting to respond to
appropriate questions from shareholders and to have the opportunity to make any
statements they consider appropriate.
SHAREHOLDER PROPOSALS
If any stockholder of the Corporation wishes to submit a proposal to be
included in next year's Proxy Statement and acted upon at the annual meeting of
the Corporation to be held in 2006, the proposal must be received by the
Secretary of the Corporation at the principal executive offices of the
Corporation, 165 N. Main Street, Killbuck, Ohio 44637, prior to the close of
business on November 20, 2005. Proposals from shareholders for next year's
annual meeting received by the Corporation after February 4, 2006 will be
considered untimely. With respect to such proposals, the Corporation will vote
all shares for which it has received proxies in the interest of the Corporation
as determined in the sole discretion of its Board of Directors. The Corporation
also retains its authority to discretionarily vote proxies with respect to
shareholder proposals received by the Corporation after November 20, 2005 but
prior to February 4, 2006, unless the proposing shareholder takes the necessary
steps outlined in Rule 14a-4(c)(2) under the Securities Exchange Act of 1934 to
ensure the proper delivery of proxy materials related to the proposal.
The Corporation's Code of Regulations establish advance notice procedures
as to the nomination, other than by or at the direction of the Board of
Directors, of candidates for election as directors. In order to make a director
nomination at a stockholder meeting, it is necessary that you notify the
Corporation: (i) with respect to an election to be held at an annual meeting of
Shareholders, not fewer than 45 days in advance of the corresponding date for
the date of the preceding year's annual meeting of Shareholders, and (ii) with
respect to an election to be held at a special meeting of Shareholders for the
election of Directors, the close of business on the seventh day following the
date on which notice of such meeting is first given to Shareholders. Therefore a
shareholder desiring to make a nomination for consideration at the annual
meeting of the Corporation in 2006 must provide notice of such nominee to the
Corporation not later than March 11, 2006. In addition, the notice must meet all
other requirements contained in the Corporation's Code of Regulations. Any
stockholder who wishes to take such action should
15
obtain a copy of the Code of Regulations and may do so by written request
addressed to the Secretary of the Corporation at the principal executive offices
of the Corporation.
OTHER MATTERS
The Board of Directors of the Corporation is not aware of any other
matters that may come before the meeting. However, the enclosed Proxy will
confer discretionary authority with respect to matters which are not known to
the Board of Directors at the time of printing hereof and which may properly
come before the meeting. A copy of the Corporation's 2004 report filed with the
Securities and Exchange Commission, on Form 10-K, will be available without
charge to shareholders on request. Address all requests, in writing, for this
document to: Mr. Luther E. Proper, President & CEO, Killbuck Bancshares, Inc.,
165 N. Main Street, Killbuck, Ohio 44637.
DELIVERY OF DOCUMENTS TO SHAREHOLDERS SHARING AN ADDRESS
Only one Proxy Statement and Annual Report are being delivered to multiple
security holders sharing an address unless the Corporation has received contrary
instructions from one or more of the security holders. The Corporation will
deliver promptly, upon written or oral request, a separate copy of the Proxy
Statement and Annual Report to a security holder at a shared address to which a
single copy of the documents was delivered. To request separate delivery of
these materials now or in the future, a security holder may submit a written
request to the Secretary of Killbuck Bancshares, Inc. at 165 N. Main Street,
Killbuck, Ohio 44637 or call (330) 276-4881. Additionally, any security holders
presently sharing an address who are receiving multiple copies of the Proxy
Statement and Annual Report and would like to receive a single copy of such
materials may do so by directing their request to the Corporation in the manner
provided above.
16
KILLBUCK BANCSHARES, INC.
165 N. MAIN STREET, KILLBUCK, OHIO 44637
PROXY
PLEASE SIGN AND RETURN IMMEDIATELY
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON APRIL 25, 2005
The undersigned hereby appoints LUTHER E. PROPER, TED BRATTON AND ALLAN
MAST, or any one of them (with full power of substitution for me and in my name,
place and stead), to vote all the common stock of said Corporation, standing in
my name on its books on March 19, 2005, at the stockholders meeting, to be held
at THE MAIN OFFICE OF SAID CORPORATION LOCATED AT 165 N. MAIN STREET, KILLBUCK,
OHIO ON APRIL 25, 2005 AT 7:30 P.M. (local time), or any adjournments thereof,
upon all matters as set forth in the Notice of Annual Meeting and Proxy
Statement, receipt of which is hereby acknowledged.
1. ELECTION OF THREE DIRECTORS TO CLASS A
The Board of Directors recommends a vote "For" the election of the
following nominees to the Corporation's Board of Directors:
John Baker Richard Fowler Kenneth Taylor
For All the Nominees Withholding Authority for All the Nominees
[ ] [ ]
TO WITHHOLD AUTHORITY TO VOTE FOR ANY ONE OR MORE NOMINEES, INDICATE YOUR
SELECTION AS "FOR ALL THE NOMINEES" AND DRAW A LINE THROUGH THE NAME OF
SUCH NOMINEE OR NOMINEES FOR WHICH AUTHORITY IS WITHHELD.
2. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER
BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING OR AN ADJOURNMENT
THEREOF.
This proxy will be voted as directed above, and if no direction is given, will
be voted FOR PROPOSAL 1.
THIS PROXY MAY BE REVOKED PRIOR TO ITS EXERCISE BY EITHER WRITTEN NOTICE OR
PERSONALLY AT THE MEETING OR BY A SUBSEQUENTLY DATED PROXY.
Dated: ______________, 2005 _____________________________________
_____________________________________
Signatures of stockholder(s)
THIS PROXY MUST BE SIGNED EXACTLY AS THE NAME APPEARS HEREON.
(WHEN SIGNING AS ATTORNEY, EXECUTOR, ADMINISTRATOR, TRUSTEE, GUARDIAN, PLEASE
GIVE FULL TITLE. IF MORE THAN ONE TRUSTEE, ALL SHOULD SIGN. ALL JOINT
OWNERS MUST SIGN.)