SCHEDULE 14A INFORMATION STATEMENT
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than 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 Section 240.14a-11(c) or
Section 240.14a-12
KILLBUCK BANCSHARES, INC.
(Name of Registrant as Specified in its Charter)
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[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
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(4) Date Filed:
KILLBUCK BANCSHARES, INC.
NOTICE OF ANNUAL MEETING
AND
PROXY STATEMENT
ANNUAL SHAREHOLDERS MEETING
APRIL 28, 2008
KILLBUCK BANCSHARES, INC.
165 N. Main Street
Killbuck, OH 44637
NOTICE OF ANNUAL MEETING OF
SHAREHOLDERS TO BE HELD
April 28, 2008
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 28, 2008,
at 7:00 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 20, 2008, 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 24, 2008
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 28, 2008, 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 24, 2008.
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.
DIRECTOR INDEPENDENCE
The Nominating and Governance Committee of the Board of Directors has
determined that all Directors have met the independence standards of Rule
4200(a)(15) of the NASDAQ Marketplace Rules, with the exception of Luther E.
Proper, who is the Chief Executive Officer of the Corporation, and Allan R.
Mast, who is the President of Holmes M&M Construction Co. Directors deemed
independent by the Nominating and Governance Committee include Messrs Baker,
Bratton, Miller, Mullet, Patterson, Taylor and Yoder. In making its
determination regarding the independence of all directors, the Nominating and
Governance Committee reviewed and considered the following related party
transactions:
Director Miller: During 2007, the Corporation paid legal fees in the amount
of $58,036 to the law firm of Miller, Mast & Mason, Ltd., of which Director
Miller is a partner. During 2006, the Corporation paid legal fees in the
amount of $59,316 to Miller, Mast & Mason, Ltd. Upon review, the Nominating
and Governance Committee determined that the Corporation's relationship
with Miller, Mast & Mason, Ltd. during 2006 and 2007 does not cause
Director Miller to not meet the independence standards of Rule 4200(a)(15)
of the NASDAQ Marketplace Rules.
Director Mast: During 2007, the Corporation made payments to Holmes M&M
Construction Co. in the amount of $676,332 in connection with the expansion
of the Bank's Mt. Hope branch office location and the construction of the
Bank's new Berlin branch office location. This amount exceeded 5% of the
construction company's gross revenues for the year, thereby causing Mr.
Mast to not meet the independence standards of Rule 4200(a)(15) of the
National Association of Securities Dealers Marketplace Rules.
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
Only shareholders of record at the close of business on March 20, 2008,
will be eligible to vote at the Annual Meeting or any adjournment thereof. As of
March 20, 2008, the Corporation had outstanding 628,082 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 16,090 shares of the
Corporation's common stock as of March 20, 2008, representing 2.56 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 20, 2008.
AMOUNT AND NATURE OF % OF
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP(1) CLASS
------------------------------------ ----------------------- -----
The Holmes Limestone Co. 45,120 Shares(2) 7.18
P.O. Box 295
Berlin, Ohio 44610
Thomas D. Gindlesberger 35,000 Shares(2) 5.57
401 Port Washington Road
Millersburg, Ohio 44654
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(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.
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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. With the exception of Mr. Patterson, all Directors were
in attendance at last year's meeting of the shareholders.
INFORMATION WITH RESPECT TO NOMINEES
The following information is provided with respect to each Class A (term to
expire in 2008) 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
Name and Age Past Five Years Corporation Since
------------ ---------------------------- -----------------
John W. Baker Retired 1992
(Age 63) (Former President, Burgett
Term expires 2008 Insurance)
Gail E. Patterson Retired 2006
(Age 64) (Former President and CEO,
Term expires 2008 Holmes-Wayne Electric Co-Op)
Kenneth E. Taylor Farmer 1992
(Age 55)
Term expires 2008
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THE DIRECTORS UNANIMOUSLY RECOMMEND A VOTE IN FAVOR OF THIS
PROPOSAL #1.
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INFORMATION WITH RESPECT TO DIRECTORS NOT STANDING FOR REELECTION
Director of the
Name and Age Principal Occupation During Past Five Years Corporation Since
------------ ---------------------------------------------------- -----------------
Ted Bratton Farming, and Oil and Gas Production 1999
(Age 47)
Term expires 2010
Max A. Miller Attorney-at-Law, 2001
(Age 52) Miller, Mast & Mason, Ltd.
Term expires 2010
Michael S. Yoder Owens-Brockway 1994
(Age 65) (Retired 1999)
Term expires 2010
Dean J. Mullet CEO, Mullet Cabinet, Inc. and 1996
(Age 56) CEO, Fryburg Door
Term expires 2009
Luther E. Proper President and CEO, Killbuck Bancshares, Inc. and The 1992
(Age 59) Killbuck Savings Bank Co. Mr. Proper's term as
Term expires 2009 executive officer is subject to annual renewal by
resolution of the Board of Directors.
Allan R. Mast, Chairman President, Holmes M&M Construction Co. 1992
(Age 58)
Term expires 2009
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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.
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SECURITY OWNERSHIP OF MANAGEMENT
Shares of Corporation Percentage of
Common Stock Owned Beneficial Ownership
Name Beneficially as of 3/20/08 as of 3/20/08
---- -------------------------- --------------------
Max A. Miller 500 .08%
John W. Baker 106 .02%
Theodore A. Bratton(1) 309 .05%
Gail E. Patterson (2) 1,135 .18%
Craig A. Lawhead (3) 1,900 .30%
Allan R. Mast (4) 2,115 .34%
Dean J. Mullet(5) 701 .11%
Luther E. Proper 7,105 1.13%
Kenneth E. Taylor 1,769 .28%
Michael S. Yoder(6) 400 .06%
Diane S. Knowles 50 .01%
All directors and executive
officers as a group
(11 persons) 16,090 2.56%
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(1) Includes 172 shares owned individually, 107 shares owned jointly with
spouse and 30 shares owned individually by son.
(2) Includes 227 shares owned individually and 908 shares owned jointly with
spouse.
(3) Includes 785 shares owned individually, 895 shares owned jointly with
spouse, 200 shares owned individually by spouse and 20 shares owned
individually by daughter.
(4) Includes 395 shares owned individually, 905 shares owned jointly with
spouse and 815 shared owned by Holmes M&M Construction
(5) Includes 150 shares owned individually, 351 shares owned jointly with
spouse and 200 shares owned individually by spouse.
(6) Includes 250 shares owned individually and 150 shares owned individually by
spouse.
COMMITTEES 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, Mullet, Mast
and Miller (Chairman). 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 2007, the Nominating and Governance Committee met once
to consider and act upon the nomination of Directors. With the exception of
Director Mast, President of Holmes M&M Construction Co., each member of the
Nominating and Governance Committee meets the independence requirements
prescribed under Rule 4200 of the NASDAQ Marketplace listing standards. The
Board of Directors has adopted a written charter for the Nominating and
Governance Committee which may be found on the Corporation's
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website at http://www.killbuckbank.com. 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. Shareholders may submit the name and qualifications of a recommended
nominee for election to the board of directors to the attention of the Chairman
of the Nominating and Governance Committee. Each shareholder recommendation that
is supported by adequate information about the candidate's qualifications will
be evaluated by the Nominating and Governance Committee. Shareholders may refer
to the criteria set forth in the Corporation's Code of Regulations and the
Killbuck Bancshares, Inc. Corporate Governance Guidelines regarding nominee
qualifications. The Nominating and Governance Committee is not obligated to
recommend to the Board, nor is the Board obligated to nominate, any such
individual for election to the Board of Directors. 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 depth and breadth of the candidate's business and civic
experience in leadership positions; the candidate's particular skills or
expertise; the candidate's integrity, independence and experience (including
experiences in finance and banking); the candidate's familiarity with accounting
rules and practices; and the candidate's 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 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, Mullet, Mast and Miller (Chairman). The Executive
Committee met 12 times during 2007. With the exception of Director Mast,
President of Holmes M&M Construction Co., each member of the Executive Committee
meets the independence requirements prescribed under Rule 4200 of the NASDAQ
Marketplace listing standards. The Board of Directors has adopted a written
charter governing the compensation responsibilities of the Executive Committee
which may be found on the Corporation's website at http://www.killbuckbank.com.
The Company has an Audit Committee established by and amongst the Board of
Directors in accordance with Section 3(a)(58)(A) of the Securities Exchange Act
of 1934. The Audit Committee's primary function involves the overseeing of the
accounting and financial reporting process of the Company and the audits of its
financial statements. In this regard, the Audit Committee is responsible for the
engagement of the independent auditors, reviewing with those independent
auditors the plans and results of the audit engagement, approving the annual
audit plans, reviewing the results of procedures for internal auditing,
reviewing the independence
6
of the independent auditors, reviewing the Company's financial results and
Securities and Exchange Commission filings, reviewing the effectiveness of the
Company's internal controls and similar functions, and approving all audit and
non-auditing services performed by the independent auditors. The Audit Committee
is composed of Messrs. Baker, Patterson, Taylor and Yoder (Chairman). All
members of the Audit Committee met the independence standards of the NASDAQ
Marketplace listing standards. The Board of Directors has determined that the
Corporation does not have an Audit Committee "financial expert," as that term is
defined under Item 407 of the Securities and Exchange Commission Regulation S-K.
However, the Board of Directors has determined that each Audit Committee member
has sufficient knowledge in financial and auditing matters to serve on the
Committee. At this time, the Board does not believe it is necessary to actively
search for an outside person to serve on the Board who would qualify as a
financial expert. The Board of Directors has adopted a written charter for the
Audit Committee which may be found on the Corporation's website at
http://www.killbuckbank.com. The Audit Committee met 4 times during 2007.
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 2007, 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 2007.
The Board has also adopted the Killbuck Bancshares, Inc. Code of Ethics and
Business Conduct, which you may find on the Corporation's website at
http://www.killbuckbank.com.
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 formal process is required. However, an
employee, officer or other interested party who has an interest in communicating
with non-management members of the Board of Directors may do so by directing the
communication to the Chairman of the Nominating and Governance Committee.
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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 Baker, Patterson, Taylor and Yoder. The
Committee recommends to the Board of Directors the selection of the
Corporation's independent auditors.
Management is responsible for the Corporation's internal controls and the
financial reporting process. The independent auditors 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 auditors. 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 auditors. The Committee discussed with the independent auditors
matters required to be discussed by Statement on Auditing Standards No. 61, as
amended, as adopted by the Public Company Accounting Oversight Board (the
"PCAOB").
The Corporation's independent auditors also provided to the Committee the
written disclosures and the letter required by Independence Standards Board
Standard No. 1 (Independence Discussions with Audit Committees), as adopted by
the PCAOB, and the Committee discussed with the independent auditors that firm's
independence. The Committee has considered whether the provision of non-audit
services by the independent auditors to the Corporation and its subsidiaries is
compatible with maintaining the independence of the independent auditors.
Based upon the Committee's discussion with management and the independent
auditors and the Committee's review of the representation of management and the
report of the independent auditors 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, 2007 to be filed with the Securities and Exchange Commission.
Michael S. Yoder, Chairman
John W. Baker
Kenneth E. Taylor
Gail E. Patterson
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AUDIT FEES
The Corporation's independent auditors billed the aggregate fees shown below for
audit and all other services rendered to Corporation and its subsidiaries for
fiscal years 2006 and 2007, respectively.
2007 2006
------- -------
AUDIT FEES $41,000 $40,800
AUDIT-RELATED FEES 11,159(1) 11,332
TAX FEES 5,300(2) 8,450
ALL OTHER FEES 0 0
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(1) Audit-Related Fees paid for fiscal year 2007 include assurance and related
services, travel expenses, and the processing of the Company's reports on
Form 10-Q and 10-K for filing with the Commission.
(2) Tax Fees paid for fiscal year 2007 include return preparation and related
consulting services
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EXECUTIVE COMPENSATION AND OTHER INFORMATION
COMPENSATION DISCUSSION AND ANALYSIS
Introduction. The Executive Committee, in its role as the compensation
committee, administers our executive compensation program. The committee, which
is composed entirely of independent directors, is responsible for reviewing and
determining executive officer compensation, for evaluating the President and
Chief Executive Officer, for overseeing the evaluation of all other officers and
employees, for administering our incentive compensation programs, for approving
and overseeing the administration of our employee benefits programs, for
providing insight and guidance to management with respect to employee
compensation generally, and for reviewing and making recommendations to the
board with respect to director compensation. 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 President and Chief Executive Officer participates with respect to the
Committee's decisions concerning other executive officers of the Corporation.
The Executive Committee operates under a charter adopted by the board of
directors. The Executive Committee annually reviews the adequacy of its charter
and recommends changes to the board for approval. The charter grants the
Committee the authority to retain and terminate advisors, including compensation
consultants, accountants and legal counsel, to assist in discharging its duties.
The Executive Committee meets at scheduled times during the year and also acts
upon occasion by written consent. The chair of the committee reports on
committee activities and makes committee recommendations at meetings of the
board of directors.
Compensation Philosophy. Our executive compensation programs seek to
achieve and maintain equity with respect to balancing the interests of
shareholders and executive officers, while supporting our need to attract and
retain competent executive management. Toward this end, the management Executive
Committee has developed an executive compensation policy, along with supporting
executive compensation plans and programs, which are intended to attain the
following objectives:
- Support a pay-for-performance policy that rewards executive officers
for corporate performance.
- Motivate executive officers to achieve strategic business goals.
- Provide competitive compensation opportunities critical to the
Corporation's long-term success.
The committee collects and analyzes comparative executive compensation
information from relevant peer groups, approves executive salary adjustments.
Additionally, from time to time, the committee reviews other human resource
issues, including qualified and non-qualified benefits, management performance
appraisals, and succession planning.
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The Committee uses comparisons of competitive executive pay practices taken
from banking industry compensation surveys and, may use the services of
independent executive compensation advisors. Peer groups and competitive
compensation practices are determined using executive compensation packages at
bank holding companies and subsidiaries of comparable size to the Corporation
and its subsidiaries. In making its decisions regarding annual salary
adjustments, the committee reviews quantitative and qualitative performance
factors as part of an annual performance appraisal. This appraisal is then
integrated with market-based adjustments to salary ranges to determine if a base
salary increase is merited.
There are two principal components of the compensation program for all
Executive Officers of the Corporation and its commercial bank subsidiary; a base
salary component and a cash bonus incentive component. The Corporation also has
a 401(k) plan. The accounting and tax treatment of particular forms of
compensation materially do not affect the committee's compensation decisions.
However, the committee evaluates the effect of such accounting and tax treatment
on an ongoing basis and will make appropriate modifications to its compensation
policies where appropriate.
Components of Compensation. The elements of total compensation paid by the
Corporation to its senior officers, including the President and Chief Executive
Officer (the "CEO") and the other executive officers identified in the Summary
Compensation Table which appears following this Compensation Discussion and
Analysis (the CEO and the other executive officers identified in that Table are
sometimes referred to collectively as the "Named Executive Officers"), include
the following:
- Base salary;
- Awards under our cash-based bonus compensation program;
- Awards under our 401(k) and money purchase pension plan;
Base Salary. It is the Executive Committee's policy that a competitive base
salary is essential in order to retain quality executive personnel. The base
salaries of the Named Executive Officers are reviewed by the Committee annually
as well as at the time of any promotion or significant change in job
responsibilities. The Committee reviews peer group data and compensation surveys
sponsored by trade and consulting groups within the financial services industry
to establish a market-competitive executive base salary program. 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 2007 Key
Executive Bank Cash Compensation Survey (Great Lakes 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 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 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. The
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Committee uses no particular criteria in making performance-related
determinations. Salary income for each Named Executive Officer for calendar year
2007 is reported in the "Salary" column of the Summary Compensation Table, which
appears following this Compensation Discussion and Analysis. The base salary
amounts shown in the Summary Compensation Table include: fees paid to Mr. Proper
in the amount of $17,100 for service as a director of the Corporation and the
Bank; and fees paid to Ms. Knowles in the amount of $2,215 for service in her
capacity as the Secretary of the boards of the Corporation and the Bank.
Incentive Bonus Compensation. 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, with respect to Named Executive Officers, is comprised of two components.
The first component consists of the profit sharing bonus, which is open to all
employees and payable out of a bonus pool equal to 2.75% of the Corporation's
net income before income taxes. In 2007, all employees of the Corporation
received 6.5129% of their base salaries pursuant to the profit sharing bonus
component. Officers of the Corporation may also receive a discretionary cash
bonus award under the Bonus Plan, the amount of which is based primarily upon a
subjective evaluation of the performance of the respective individual and the
overall performance of the Corporation for the previous fiscal year. As in the
case of salary determinations, the Committee uses no particular criteria in
making performance-related determinations. All payments under the Bonus Plan are
shown in the "Bonus" column of the Summary Compensation Table.
Integrated Money Purchase Pension and 401(k) Plan. The Corporation maintains an
integrated money purchase pension plan and a 401(k) plan. Under the integrated
money purchase pension plan contribution formula, the Corporation, for each plan
year, will contribute an amount equal to 8% of an employee's compensation for
the plan year and 5.7% of the amount of an employee's excess compensation for
the plan year. Excess compensation is a participant's compensation in excess of
the designated integration level. This designated integration level is 100% of
the taxable wage base in effect at the beginning of the plan year. The federal
government annually adjusts the taxable wage base. This plan does not permit nor
require employees to make contributions to the plan.
The 401(k) plan allows employees to make salary reduction contributions to
the plan up to 20% of a participant's compensation. For each plan year, the
Corporation may contribute to the plan an amount of matching contributions for a
particular plan year, but the Bank may choose not to make matching contributions
for a particular year. For 2007, the Bank matched 25% of the employees'
voluntary contributions up to 1% of the employee's compensation. The maximum
annual contribution to a participant's retirement account for 2007 could not
exceed $45,000.
Both plans cover substantially all employees with one year of service and
attained age 21. The Corporation's contributions under these plans on behalf of
the Named Executive Officers is included in the "all other compensation" column
in the summary compensation table.
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Group Life, Health and Disability Benefits. The Corporation provides healthcare,
life and disability insurance and other employee benefits programs to its
employees, including its senior officers. The Committee is responsible for
overseeing the administration of these programs and believes that its employee
benefits programs should be comparable to those maintained by other members of
the relevant peer groups so as to assure that the Corporation is able to
maintain a competitive position in terms of attracting and retaining officers
and other employees. Except for the Corporation's bank-owned life insurance
("BOLI") arrangements with certain executive officers, our employee benefits
plans are provided on a non-discriminatory basis to all employees.
The Corporation has BOLI arrangements with Messrs. Proper and Lawhead that
provide a death benefit in the amount of $20,000 payable to the respective
executive's beneficiaries upon death. The Corporation has purchased life
insurance policies on the lives of Messrs. Proper and Lawhead in amounts
sufficient to provide the sums necessary to pay the beneficiaries, and the
Corporation pays all premiums due on the policies. The economic benefit (the
imputed income amount of this insurance) for the year 2007 to the named
executive officers is included in the amounts for each of these executive
officers set forth in the Summary Compensation Table under the column "All Other
Compensation."
2007 Executive Officer Compensation. For 2007 the executive officers named
in the Summary Compensation Table received salaries that were intended to
maintain their compensation at a competitive level.
Adjustments in 2007 base salary were based upon each Named Executive's
annual performance review, an annual review of peer compensation, and the
overall performance of the company. These adjustments are consistent with the
company's salary budget which is approved by the Executive Committee and becomes
part of the overall budget approved annually by the board of directors.
The Corporation provides a reasonable level of personal benefits, and
perquisites to one or more Named Executive Officers to support the business
interests of the bank, provide competitive compensation, and to recognize the
substantial commitment both professionally and personally expected from
executive officers. The aggregate value of perquisites and personal benefits, as
defined under SEC rules, provided to each named executive officer is less than
the reporting threshold value of $10,000.
As part of its compensation program the Corporation has entered into
agreements with each of the Named Executive Officers pursuant to which they will
be entitled to receive severance benefits upon the occurrence of certain
enumerated events, including under certain circumstances following a change in
control of the Corporation. The events that trigger payment are generally those
related to termination of employment without cause or detrimental changes in the
executive's terms and conditions of employment. See Employment Contracts and
Payments Upon Termination or "Change in Control" below for a more detailed
description of these events. the Corporation believes that this structure will
help: (i) assure the executives' full attention and dedication to the company,
free from distractions caused by personal uncertainties and risks related to a
pending or threatened change in control, (ii) assure the executives' objectivity
for shareholders' interests, (iii) assure the executives of fair treatment in
case of involuntary termination following a change in control, and (iv) attract
and retain key talent during uncertain times.
13
COMPENSATION COMMITTEE REPORT
The management compensation committee has reviewed and discussed with
management the compensation discussion and analysis set forth above. Based on
such review and discussions, the management compensation committee has
recommended to the board of directors that the compensation discussion and
analysis be included in this proxy statement and in the Annual Report on Form
10-K for the year ended December 31, 2007, filed by us with the Securities and
Exchange Commission.
COMPENSATION COMMITTEE
Max Miller, Chairman
John Baker
Ted Bratton
Allan Mast
Dean Mullet
The following table sets forth the annual and long-term compensation for
the Corporation's Named Executive Officers for 2007 and 2006.
SUMMARY COMPENSATION TABLE
CHANGE IN
PENSION
NON-EQUITY VALUE AND
INCENTIVE NONQUALIFIED
STOCK OPTION PLAN DEFERRED ALL OTHER
NAME AND PRINCIPAL SALARY BONUS AWARDS AWARDS COMPENSATION COMPENSATION COMPENSATION
POSITION YEAR ($) ($) ($) ($) ($) EARNINGS ($) ($)(1) TOTAL ($)
------------------ ---- -------- ------- ------ ------ ------------ ------------ ------------ ---------
Mr. Luther E. Proper 2007 $204,100 $53,963 $28,603 $286,666
President and Chief 2006 $192,400 $41,492 -- -- -- -- $28,609 $262,491
Executive Officer
Ms. Diane S. Knowles 2007 $119,815 $28,229 $16,540 $164,584
Senior Vice President and 2006 $113,123 $21,688 -- -- -- -- $14,568 $149,379
Chief Financial Officer
Mr. Craig A. Lawhead 2007 $124,500 $30,653 $17,669 $172,822
Executive Vice President 2006 $117,500 $24,013 -- -- -- -- $15,653 $157,166
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(1) The amounts shown in this column for the most recently completed fiscal
year were derived from the following figures: (1) contributions by the
Corporation to its 401(k) Plan on behalf of the Named Executive Officers as
follows - Mr. Luther E. Proper, $27,517.50; Ms. Diane S. Knowles
$16,205.00; and Mr. Craig A. Lawhead $17,249.99; (2) the economic benefit
of life insurance coverage provided for the benefit of the Named Executive
Officers as follows - Mr. Luther E. Proper, $1,085.38; Ms. Diane S. Knowles
$334.80; and Mr. Craig A. Lawhead $419.27.
14
EMPLOYMENT CONTRACTS AND PAYMENTS UPON
TERMINATION OR "CHANGE IN CONTROL"
On April 25, 2005, the Corporation entered into certain
severance/change-in-control agreements with Messrs. Proper and Lawhead and with
Ms. Knowles. Each agreement is for a one year period and is renewable annually
upon resolution of the Board of Directors. The agreements provide that each
Named Executive Officer will be entitled to a severance benefit in the event of
their involuntary termination of employment (other than for cause) following a
"change in control" (as defined under the agreement) of the Corporation. In the
event any of the Named Executive Officers are terminated in connection with a
change in control, the agreement provides for payments as follows: 2.99 times
the "base amount" (as defined in Section 280G of the Internal Revenue Code) of
Mr. Proper's annual earnings; 2.00 times the base amount of Mr. Lawhead's annual
earnings; and 2.00 times the base amount of Ms. Knowles' annual earnings. Under
certain delineated circumstances, each of the Named Executive Officers is also
entitled to the respective multiple of his or her base amount in the event he or
she voluntarily terminates employment following a change in control. If a change
in control had occurred as of December 31, 2007, this would have resulted in
payments to the executives as shown on the table below.
The agreement further provides that, in the event any of the Named
Executive Officers is terminated by the Corporation without "just cause" (as
defined under the agreement), other than in connection with a change in control,
the Corporation shall continue to pay his or her current salary up until the
termination date of the current term of the agreement, as well as the
approximate cost of the Named Executive's current health, life, disability, and
other benefits through such date. The table below shows the amount of payments
to the respective Named Executive Officers that would have been payable had they
been termination without just cause on December 31, 2007. Also shown in the
table are amounts that would be payable to the executive or their estate
pursuant to the Corporation's BOLI and group life insurance arrangements.
AMOUNTS PAYABLE ON
AMOUNTS PAYABLE TERMINATION IN AMOUNTS PAYABLE ON
ON TERMINATION CONNECTION WITH A DEATH UNDER LIFE
NAME OF EXECUTIVE WITHOUT JUST CAUSE CHANGE IN CONTROL INSURANCE ARRANGEMENTS
----------------- ------------------ ------------------ ----------------------
Mr. Luther E. Proper $58,405 $559,130 $114,000
Ms. Diane S. Knowles 36,730 235,200 85,000
Mr. Craig A. Lawhead 38,885 249,000 122,361
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15
DIRECTOR COMPENSATION
CHANGE IN
NON-EQUITY PENSION VALUE
FEES INCENTIVE AND NONQUALIFIED
EARNED OR STOCK PLAN DEFERRED ALL OTHER
PAID IN AWARDS COMPENSATION COMPENSATION COMPENSATION
NAME CASH ($) ($) ($) EARNINGS ($) ($) TOTAL ($)
---- --------- ------ ------------ ---------------- ------------ ---------
John W. Baker $23,350 0 0 0 0 $23,350
Theodore A. Bratton 22,350 0 0 0 0 22,350
Allan R. Mast 14,550 0 0 0 0 14,550
Max A. Miller 16,400 0 0 0 0 16,400
Dean J. Mullet 12,200 0 0 0 0 12,200
Kenneth E. Taylor 23,750 0 0 0 0 23,750
Michael S. Yoder 14,300 0 0 0 0 14,300
Gail E. Patterson 11,750 0 0 0 0 11,750
Luther E. Proper 17,100* 0 0 0 0 17,100*
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* This amount is included in Mr. Proper's salary as reported in the "Salary"
column of the Summary Compensation Table.
Directors of the Corporation and its subsidiary, The Killbuck Savings Bank
Company, received an annual retainer of $10,800 during 2007. The Chairman of the
Board received an annual retainer of $12,000. In addition, committee members
receive $250 per committee meeting attended.
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; Ted Bratton; Max Miller; Dean
Mullet; 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. With the exception of Director Mast,
President of Holmes M&M Construction Co., all members of the compensation
committee are independent directors, as determined by reference to the
definition of "independent" under the NASDAQ Marketplace Rules. During 2007, the
Corporation made payments to Holmes M&M Construction Co. in the amount of
$676,332 in connection with the expansion of the Bank's Mt. Hope branch office
location and the construction of the Bank's new Berlin branch office location.
This amount exceeded 5% of the construction company's gross
16
revenues for the year, thereby causing Mr. Mast to not meet the independence
standards of Rule 4200(a)(15) of the National Association of Securities Dealers
Marketplace Rules. No member of the Executive Committee is a present or past
employee or officer of the Corporation or the Bank.
In addition, all directors of the Corporation and their associates were
customers of, and have had transactions with, the Corporation in the ordinary
course of business during 2007. 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.
Except for the transactions described above, including banking transactions
in the ordinary course of business, no director, executive officer or beneficial
owner of more than five percent of the Corporation's outstanding voting
securities (or any member of their immediate families) engaged in any
transaction with the Corporation during 2007 in which the amount involved
exceeded $120,000. It is however customary and routine for directors, officers
and employees of community banks and their spouses, family members and
associates to do business with their community bank. Such a relationship,
including routine banking business, is viewed as beneficial to the Corporation
and is encouraged, so long as such relationships are fair and reasonable to the
Corporation and are entered into upon terms and conditions generally available
to the public, or similar to that which could be obtained from an independent
third party. In that regard, pursuant to the Corporation's Code of Ethics and
Business Conduct, the Corporation may do business and have financial dealings
with directors, officers and employees and their respective spouses, family
members and associates provided either of the following criteria are satisfied:
- such business or financial dealings involve the Corporation's
subsidiary banks or any other financial services subsidiary providing
banking or financial services to such person in the ordinary course of
business upon terms and conditions generally available to the public,
to the extent such arrangements are made in compliance with all
applicable banking and securities laws and regulations; or
- the terms and conditions of such relationship have been presented to
and approved by the Audit Committee of the Corporation's Board of
Directors, including any "related party transaction" requiring
disclosure in the Corporation's annual meeting proxy statement. In the
event any member of the Audit Committee, any entity controlled by such
member, or any associate or family member of such member, proposes to
provide products or services to the Corporation, such member must
recuse him or herself from the discussion and decision about the
appropriateness of such arrangement.
17
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. 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.
The Corporation is aware that Director Patterson untimely filed a report on
Form 3 with the Securities and Exchange Commission to report his initial
beneficial ownership of the Corporation's common shares. Mr. Patterson was
appointed to the Board on December 26, 2006 and filed a report on Form 3 on July
13, 2007. 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 2007 all Section 16(a) filing requirements
applicable to its Officers and Directors were otherwise complied with. The
Corporation has no shareholders who are ten percent beneficial owners.
SELECTION OF AUDITORS
S.R. Snodgrass, A.C. served as the Independent Auditor for the Corporation
and its subsidiary for the fiscal year ended December 31, 2007. It is the
intention of the Corporation to appoint S.R. Snodgrass, A.C. as Independent
Auditor for 2008. 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 2009, 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 22, 2008. Proposals from shareholders for next year's
annual meeting received by the Corporation after February 6, 2009 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 22, 2008 but
prior to February 6, 2009, 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
18
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 2008 must provide
notice of such nominee to the Corporation not later than March 14, 2009. 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 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. Unless the Nominating and Governance Committee of
the Board of Directors independently determines in its discretion to nominate
your candidate for election to the Board, submitting a nomination in this manner
in no way requires the Company to provide a spot for your candidate on its form
of proxy.
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 2007 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.
19
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 28, 2008
The undersigned hereby appoints LUTHER E. PROPER, MAX A. MILLER 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 Killbuck Bancshares, Inc.
standing in my name on the books of said Corporation on March 20, 2008, at the
stockholders meeting, to be held at THE MAIN OFFICE OF SAID CORPORATION LOCATED
AT 165 N. MAIN STREET, KILLBUCK, OHIO ON APRIL 28, 2008 AT 7:00 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 W. Baker Gail E. Patterson Kenneth E. 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. THIS PROXY CONFERS ABSOLUTE DISCRETION TO VOTE ALL SHARES REPRESENTED
HEREBY ON ANY BUSINESS AS MAY COME BEFORE THE MEETING (OR ANY ADJOURNMENT
THEREOF) FOR WHICH THE CORPORATION HAD NOT RECEIVED PROPER NOTICE PRIOR TO
FEBRUARY 3, 2008.
THIS PROXY WILL BE VOTED AS DIRECTED ABOVE AND, IF NO DIRECTION IS PROVIDED,
WILL BE VOTED "FOR" EACH OF THE NOMINEES INDICATED UNDER PROPOSAL 1.
THIS PROXY MAY BE REVOKED PRIOR TO ITS EXERCISE BY EITHER WRITTEN NOTICE OR
PERSONALLY AT THE MEETING OR BY DELIVERY TO THE CORPORATION OF A SUBSEQUENTLY
DATED AND PROPERLY EXECUTED FORM OF PROXY.
Dated: , 2008
-------------- ----------------------------------------
----------------------------------------
Signatures of stockholder(s)
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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.)
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