<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
[ ] Confidential, for the Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
SUFFOLK BANCORP
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee 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.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
<PAGE> 2
[SUFFOLK BANCORP LETTERHEAD]
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
March 12, 1999
To Shareholders of Suffolk Bancorp:
Notice is hereby given that the annual meeting of shareholders of Suffolk
Bancorp, a New York corporation (the "Company"), will be held at the EAST WIND,
Route 25A, Wading River, New York, on Tuesday, April 13, 1999 at 1:00 P.M. for
the purpose of considering and voting upon the following matters:
1. The election of three directors to hold office for a term of three years,
such terms to extend until their successors have been duly elected and
qualified.
2. The approval of the "Suffolk Bancorp 1999 Stock Option Plan".
3. The approval of the Board of Directors' selection of independent auditors
for the year ending December 31, 1999.
4. Any other business which may be properly brought before the meeting or any
adjournment thereof.
By Order of the Board of Directors
DOUGLAS IAN SHAW
Corporate Secretary
PLEASE SIGN AND RETURN THE ENCLOSED PROXY AS QUICKLY AS POSSIBLE, WHETHER YOU
PLAN TO ATTEND THE MEETING IN PERSON OR NOT. YOU MAY WITHDRAW YOUR PROXY AT ANY
TIME PRIOR TO THE EXERCISE OF THE PROXY AT THE MEETING BY GIVING WRITTEN NOTICE
TO THE SECRETARY OF THE COMPANY.
<PAGE> 3
] [SUFFOLK BANCORP LETTERHEAD]
PROXY STATEMENT FOR
ANNUAL MEETING OF SHAREHOLDERS
APRIL 13, 1999
This proxy statement is furnished in connection with the solicitation by the
Board of Directors of Suffolk Bancorp, a New York corporation ( the "Company"),
of proxies to be voted at the annual meeting of shareholders to be held at 1:00
P.M. on Tuesday, April 13, 1999 at the East Wind, Route 25A, Wading River, New
York. This proxy statement and the form of proxy are first being sent to
shareholders on March 12, 1999. Any shareholder executing a proxy that is
solicited in this statement has the power to revoke it by giving written notice
to the Secretary of the Company at any time prior to the exercise of the proxy.
Proxies will be solicited by mail. They also may be solicited by directors,
officers, and regular employees of the Company, as well as those of The Suffolk
County National Bank (the "Bank"), which is a wholly-owned subsidiary of the
Company. They may be solicited, personally, or by telephone or telegraph, but
these people will receive no additional compensation for their services. Copies
of proxy material will be furnished to brokerage houses, fiduciaries, and
custodians to be forwarded to the beneficial owners of the Company's common
stock. The Company will bear all costs of soliciting proxies.
As of March 5, 1999, there were 6,076,080 shares of common stock, $2.50 par
value, of the Company outstanding. Only stockholders of record at the close of
business on March 5, 1999 are entitled to notice of and to vote at the annual
meeting. Each shareholder of record on that date is entitled to one vote for
each share held.
SHAREHOLDER PROPOSALS
Shareholder proposals to be considered for inclusion in the proxy statement and
considered at the annual meeting must be submitted in a timely fashion.
Proposals for the 2000 annual meeting of the shareholders must be received by
the Company at its principal executive offices no later than November 12, 1999.
Any proposals, as well as any questions about them, should be directed to the
Secretary of the Company.
ITEM 1. ELECTION OF DIRECTORS AND INFORMATION WITH RESPECT TO DIRECTORS
AND OFFICERS (ITEM 1 ON PROXY CARD)
The first item to be acted upon at the meeting of shareholders is the election
of three directors to hold office for three years, and until their successors
shall have been duly elected and qualified.
The By-Laws of the Company provide that the total number of directors may be
fixed by resolution of the Board of Directors. At present, the Board has fixed
the number of directors at ten. The By-Laws further provide that the directors
shall be divided into three classes, as nearly equal as possible, with terms of
office of each class expiring at the end of consecutive years.
All proxies that are received by the Board of Directors conferring authority to
so vote in the election of directors will be voted FOR the three nominees
listed below. Directors shall be elected by a plurality of the votes cast at
the meeting. All proxies received will be voted in accordance with their
specific instructions. In the event any nominee declines or is unable to serve,
the proxies will be voted for a successor nominee designated by the Board of
Directors. Each of the three nominees has consented to being named in this
proxy statement and to serve if elected, and the Board of Directors knows of no
reason to believe that any nominee will decline or be unable to serve, if
elected. The other seven members of the Board of Directors, who are listed on
the next page, are currently expected to continue to serve on the Board until
their respective terms expire.
1
<PAGE> 4
Following is information about the nominees for directors to be elected at this
annual meeting of shareholders and the directors of the Company whose terms of
office continue after this annual meeting of shareholders of the Company.
NOMINEES FOR DIRECTOR AND DIRECTORS CONTINUING IN OFFICE
<TABLE>
<CAPTION>
Shares of
Common Stock
Position Served As Present Owned
and Offices Business Experience Director Term Beneficially % of
Name Age With Company During Past 5 Years(2) Since Expires at 3/5/99(3) Class
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
NOMINEES FOR A TERM OF THREE YEARS:
Bruce Collins 68 Director Currently Retired, Former 1994 1999 14,650 0.24%
Superintendent of Public Works
Village of East Hampton, New York
Joseph A. Deerkoski 64 Director President, Neefus-Stype, Inc. 1987 1999 36,950 0.61%
(general insurance)
Edward J. Merz 67 Chairman Chairman, President and Chief 1984 1999 37,697 0.62%
and Director Executive Officer, The Suffolk County
National Bank and Suffolk Bancorp
Director, Intervest Bancshares Corporation
DIRECTORS CONTINUING IN OFFICE
Hallock Luce 3rd 77 Director Director, Lupton & Luce, Inc. 1984 2000 109,177 1.80%
(general insurance)
Raymond A. Mazgulski 75 Vice Chairman Chairman, The Suffolk County 1984 2000 16,281 0.27%
and Director National Bank
Peter Van de Wetering 67 Director President, Van de Wetering 1985 2000 42,344 0.70%
Greenhouses (wholesale nursery)
John F. Hanley 52 President, Chief Executive Vice President and Chief 1997 2000 18,251 0.30%
Executive Officer Administrative Officer, The Suffolk
and Director County National Bank
& Suffolk Bancorp
Edgar F. Goodale 45 Director President, Riverhead 1989 2001 13,928 0.23%
Building Supply, Inc.
J. Douglas Stark 66 Director President, Stark Mobile Homes, 1984 2001 43,178 0.71%
Inc. (manufactured housing
community)
Howard M. Finkelstein 68 Director Partner, Smith, Finkelstein, 1984 2001 56,911 0.94%
Lundberg, Isler, and Yakaboski, LLP
(attorneys and general counsel
for the Bank)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) All of the nominees and all of the directors continuing in office are also
directors of the Bank. Of the nominees and directors continuing in office,
only Edward J. Merz and John F. Hanley have been executive officers of the
Company in the last fiscal year.
(2) The business experience of each director during the past five years was
that typical of a person engaged in the principal occupations for that
period listed for each. Each of the directors has held the same or another
executive position with the same employer during the past five years.
(3) Included are the following shares in which directors disclaim beneficial
ownership: Joseph A. Deerkoski 8,084 shares owned by Patricia B. Deerkoski,
wife; Howard M. Finkelstein 11,919 shares owned by Deonne C. Finkelstein,
wife.
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<PAGE> 5
The primary business of the Company is the operation of The Suffolk County
National Bank. The directors of the Company met fourteen times during the fiscal
year ended December 31, 1998, and its Audit Committee met three times. The Board
of The Suffolk County National Bank met thirteen times, and its Personnel
Committee met three times in 1998. No director attended fewer than 75 percent of
the meetings of the Board of the Company and its committees, or of the Bank and
its committees.
The Boards of the Company and the Bank have standing Audit and Personnel
Committees composed as follows:
The Audit Committee consists of Messrs. Edgar F. Goodale, Hallock Luce 3rd, and
Joseph A Deerkoski. This committee reviews the internal audit controls and
procedures and the financial affairs of the Company and the Bank, and reports
the results to the Board. Additionally, the committee reviews the certified
examination prepared by the independent auditors who also provide certain tax
preparation services.
The Personnel Committee consists of Messrs. J. Douglas Stark, Hallock Luce 3rd,
Joseph A. Deerkoski, and Howard M. Finkelstein. This committee reviews salaries,
benefits, and employment policies of the Company and the Bank at least annually,
and makes recommendations to the Board.
The Company does not have a Nominating Committee.
COMPENSATION
Report of the Personnel Committee
The Company's Personnel Committee serves as its Compensation Committee. It
consists of four Directors who are not employees as well as the President and
Chief Executive Officer, John F. Hanley. Members of the Bank's management attend
Committee meetings regularly to provide information about personnel policies and
programs, along with their cost. Management's participation in this Committee
plays an important part in the development and continuation of benefit plans,
and in determining appropriate compensation. The Committee holds discussions
with management in attendance to ensure that decisions affecting both return to
shareholders and the Bank's operations are made diligently. The Committee was
established to review, at least annually, the salaries, benefits, and employment
policies of the Bank and then make recommendations to the full Board.
Compensation Policy
It is the Company's policy to compensate individuals at fair and competitive
levels to encourage them to work to the benefit of the shareholders. It is to
this end that the Company has established a program that links employees'
remuneration to demonstrated and measurable performance goals. These goals are
aligned with corporate philosophy and the annual business plan. The performance
of an employee is reviewed individually. However, the individual's impact on
overall corporate success is also weighed. Leadership, presence in community,
and loyalty to the company are other factors. The Company continues to attract
and maintain qualified staff. The Company, through the use of incentives,
competitive salaries, and direct ownership rewards these individuals for their
on-going commitment to our shareholders. Management remains diligent in its
pursuit of new and innovative ways to determine compensation.
Components of Compensation
The Committee examines three components of compensation annually: base salary,
executive incentive (bonus), and long term incentive. The Company uses base
salary ranges for all employees, with the exception of the President and
Executive Vice Presidents. The ranges have been determined by regional salary
surveys, industry guides, and regional economic conditions. Comparisons to
compensation at similar companies are made regularly. Information gained from
membership in regional banking organizations also permit valuable comparisons.
The Company also participates in comparison surveys conducted by independent
consulting firms that provide additional information in return. The second
component of executive compensation is the Executive Officer Incentive Program
(Bonus). This program rewards key individuals who have contributed successfully
to the Company's profitability during the business year. Over the years,
differing methods have been used to determine these awards. Recent methods have
included a formula based strictly on net earnings, pro-rating by base salary,
and ratings matrices based on individual performance and position. The Company
has investigated alternatives and retained an outside consulting firm. Long-term
incentives take the form of stock options. The Committee acknowledges the value
of using such incentives as they tie the executives' interest to the
shareholders'. The purpose of executive
3
<PAGE> 6
compensation, in general, is to provide incentives to increase the net worth of
the Company, and ultimately shareholders' wealth. It should be noted that the
Company has no long-term contracts in effect for its Executive Officers other
than contracts that would become effective only if a change in control of the
Company occurs.
Compensation of Chief Executive Officer
To assess the appropriate form and amount of compensation, the Committee
evaluates the performance of the Company and the C.E.O.'s individual
contribution to that performance. In evaluating the Company, the Committee
considers return on stockholders' equity, return on assets, the quality and
quantity of assets, operating efficiency, growth in earnings and
earnings-per-share, and the market price of the Company's common stock. The
C.E.O.'s individual performance is evaluated on the basis of the quality or
oversight and the development of strategy. The Company's operating results and
market performance are compared quarterly to the commercial banking industry as
a whole, all banking companies in the New York metropolitan area, all banking
companies of similar size nationwide, and selected regional competitors. The
C.E.O.'s compensation is compared annually to selected regional competitors
operating in the state of New York. The Committee then makes an estimation in
awarding base salary, cash bonus, and stock options.
Conclusion
The Committee believes that the compensation awarded to the Company's senior
executives is appropriate given the Company's performance and the performance of
individual executives.
Submitted by: J. Douglas Stark, Chairman of the Committee
Hallock Luce 3rd
Joseph A. Deerkoski
Howard M. Finkelstein
The following table sets forth the cash compensation paid to the C.E.O. and each
of the four highest paid executive officers of the Company whose salary and
bonus exceeded $100,000 as accrued for the fiscal year ended December 31, 1998.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation
---------------------------------- --------------------------------
Awards Payouts
---------------------- ------- All
Name Restricted Other
and Other Annual Stock Options/ LTIP Compen-
Principal Position Year Salary Bonus Compensation Award(s) SARs Payouts sation
($) ($) ($) ($) (#) ($) ($)(1)
(a) (b) (c) (d) (e) (f) (g) (h) (i)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
John F. Hanley 1998 200,000 43,013 n/a n/a n/a n/a 8,272
President and 1997 185,000 34,781 n/a n/a 5,000 n/a 2,026
Chief Executive Officer 1996 150,965 n/a n/a n/a 7,400 n/a 1,999
Victor F. Bozuboski, Jr. 1998 148,900 25,707 n/a n/a n/a n/a 14,054
Executive Vice President 1997 146,170 25,972 n/a 1,500 n/a 3,426
1996 142,083 n/a n/a n/a 2,600 n/a 1,438
Thomas S. Kohlmann 1998 129,067 22,281 n/a n/a n/a n/a 6,383
Executive Vice President 1997 125,004 20,405 n/a n/a 1,500 n/a 1,745
& Chief Lending Officer
Augustus C. Weaver 1998 129,066 22,282 n/a n/a n/a n/a 7,106
Executive Vice President & 1997 125,003 21,184 n/a n/a 1,500 n/a 1,154
Chief Information Officer 1996 116,454 n/a n/a n/a 2,600 n/a 675
J. Gordon Huszagh 1998 98,102 14,136 n/a n/a n/a n/a 3,787
Executive Vice President &
Chief Financial Officer
</TABLE>
(1)Includes above-market or preferential earnings on deferred compensation,
and company matching contributions to 401(K) plan.
4
<PAGE> 7
STOCK OPTION AND OTHER PLANS
The Company has adopted a 1999 Stock Option Plan for its employees and
employees of its subsidiaries, subject to the approval of the shareholders. The
Option Plan provides for incentive stock options and non-qualified stock
options. Under the Option Plan, options to purchase up to 600,000 shares of
Common Stock may be issued. Options for 578,706 shares not granted under
previous plans were incorporated into the 1999 plan.
No options were granted during 1998. During 1998, executive officers acquired
no shares on exercise and no value was realized. At fiscal year-end 1998, there
were 34,700 unexercised options or stock appreciation rights, of which 34,700
have vested and may be exercised. The aggregate value of unexercised
in-the-money options or stock appreciation rights was $143,150.
COMPENSATION PURSUANT TO PLANS
The Company has a defined benefit pension plan. It is the only form of
contingent remuneration. It is non-contributory and is applicable to all
officers and employees after one year of service and attainment of age 21.
Annual Retirement Allowance is equal to 1 3/4 percent of Average Compensation
times Creditable Service up to 35 years, plus 1 1/4 percent of Average
Compensation times Creditable Service in excess of 35 years (up to 5 such
years), less .49% of the Final Three Year Average Compensation (limited to
Covered Compensation) times Creditable Service up to 35 years. "Average
Compensation" is the average of compensation during the five consecutive years
of employment affording the highest such average. "Covered Compensation" is the
average of the Social Security taxable wage base for the 35 years ending with
the year an individual attains Social Security Retirement Age. Vesting is 100%
after five years of service from employment. The total pension plan expense for
all officers and employees for 1998 was $180,460. In addition to the pension
plan, the Company adopted a supplemental deferred compensation retirement
benefit for Mr. Merz by establishing a trust which was funded by the transfer
and surrender of a life insurance policy covering his life having a value of
$91,811, and by three payments of $20,000 each in 1994, 1995 and 1996, which
purchased a variable retirement annuity.
The following table presents the estimated retirement benefits payable under the
Plan based on selected compensation amounts and years of service after deducting
Covered Compensation. Only those directors who are also executive officers of
the Company participate in the Plan.
APPROXIMATE ANNUAL RETIREMENT BENEFITS BASED ON
AVERAGE ANNUAL EARNINGS FOR HIGHEST FIVE CONSECUTIVE YEARS
<TABLE>
<CAPTION>
Years of Creditable Service
Annual Average ------------------------------------
Compensation 15 25 35
-------------- ------ ------ ------
<S> <C> <C> <C>
$ 50,000 10,837 18,062 25,287
100,000 23,962 39,037 55,912
150,000 37,087 61,812 86,537
200,000 39,712 66,187 92,662
250,000 39,712 66,187 92,662
300,000 39,712 66,187 92,662
</TABLE>
The single plan maximum benefit limit under Internal Revenue Code Section 415 as
of January 1, 1998, $130,000 ($126,829 under the Normal Form of Payment for a
Single Participant), is reflected in the benefits. The maximum annual
compensation allowed under a qualified plan, $160,000 for 1998, is also
reflected in the calculations.
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<PAGE> 8
- --------------------------------------------------------------------------------
YEARS OF CREDITABLE SERVICE
<TABLE>
<CAPTION>
NAME OF OFFICER CAPACITIES IN WHICH SERVED YEARS OF CREDITABLE SERVICE
- ------------------------ ------------------------------------------------------------- ---------------------------
<S> <C> <C>
John F. Hanley President and Chief Executive Officer 26
Victor F. Bozuloski, Jr. Executive Vice President, Retail Banking 32
Thomas S. Kohlmann Executive Vice President & Chief Lending Officer 6
Augustus C. Weaver Executive Vice President & Chief Information Officer 11
J. Gordon Huszagh Executive Vice President & Chief Financial Officer 15
</TABLE>
BENEFICIAL INTEREST OF EXECUTIVE OFFICERS
<TABLE>
<CAPTION> # OF SHARES*** % OF FULLY-
OWNED DILUTED SHARES
NAME POSITION HELD BENEFICIALLY OUTSTANDING
- ------------------------ ------------------------------------------------------------- -------------- --------------
<S> <C> <C> <C>
John F. Hanley President & Chief Executive Officer 18,251 0.30%
Victor F. Bozuhoski, Jr. Executive Vice President, Retail Banking 13,224 0.22%
Thomas S. Kohlmann Executive Vice President & Chief Lending Officer 10,245 0.17%
Augustus C. Weaver Executive Vice President & Chief Information Officer 5,885 0.10%
J. Gordon Huszagh Executive Vice President & Chief Financial Officer 2,101 0.03%
</TABLE>
(***includes options currently exerciseable)
Directors and executive officers of the Company and the Bank who as a group
total 14 own beneficially 420,856 shares of common stock or 6.93 percent of the
outstanding shares of the company as of March 5, 1999.
EMPLOYMENT CONTRACTS
The Company has entered into agreements with twelve employees, including Messrs.
Merz, Hanley, Bozuhoski, and Weaver. These agreements provide for certain
benefits in the event that the employee is terminated involuntarily within three
years of a "change of control" of the Company. It also provides benefits if the
employee leaves voluntarily within three years of a "change of control" if there
has been a material change in the employee's salary, function, duties or
responsibilities that causes the employee's position to be of less dignity,
responsibility, importance, or scope than it was immediately before the "change
of control." It further applies if there is a significant change in geographic
location of the employee's place of employment. Under the agreements, a "change
of control" occurs if (i) any individual, entity or group acquires 25 percent or
more of the Company's common stock or the outstanding voting securities of the
Company; (ii) the current directors of the Company and directors approved in the
future by a majority of the current directors and their approved successors
("Incumbent Directors") cease to comprise a majority of the directors of the
Company; (iii) the reorganization, merger or consolidation of the Company or
sale or other disposition of all the Company's assets; or (iv) the shareholders
of the Company approve its liquidation or dissolution. An acquisition by a
corporation otherwise described in (i) above and the events described in (iii)
above do not comprise a "change of control" when or if (a) the holders of 60
percent of the Company's common stock and voting securities own substantially
the same proportion of common stock and voting securities of the corporation
resulting from such event; (b) no person, entity, or group owns 25 percent or
more of the common stock or voting securities of the resulting corporation
except who did not own more than 25 percent before the event; and (c) a majority
of the directors of the board of the resulting corporation are currently
incumbent directors or are incumbent directors at the time of the action by the
board approving the event. After an event of termination following a change in
control, an employee shall be entitled to a monthly payment in the amount of his
or her monthly rate of salary immediately before the "event of termination,"
plus 1/12 of all bonuses paid to the employee in the 12 preceding months. In
addition, the employee shall be entitled to receive the Company's health
benefits during the benefit period. The payments and benefits shall continue for
up to 36 months. These payments and benefits will be reduced by the amount of
salary and benefits the employee receives from other employment during the
benefit period. The agreements are effective for any "change of control" taking
place prior to January 1, 2000.
6
<PAGE> 9
DIRECTORS' COMPENSATION
With the exception of director fees described below, directors of the Company
are not compensated in any way for their services. All directors of the Bank
receive an annual fee of $18,200 for their services. All directors of the Bank,
except Messrs. Hanley, Mazgulski, and Merz, also receive $1,000 for four
meetings during the month of service on the Finance Committee and $650 per
meeting of any other committee of which each may be a member.
The Company maintains a Directors' Deferred Compensation Plan, under which a
director may defer receipt of his fees as a director of the Bank until
retirement or age 72, termination of service, or death. During the deferral
period, amounts deferred earn interest at 1% less than the prime rate.
Upon the merger of Hamptons Bancshares, Inc. into Suffolk Bancorp, the Company
assumed the retirement plan for the directors of Hamptons Bancshares, Inc.,
which had been established in 1988, and covered ten directors who had served for
at least seven consecutive years including Mr. Collins. These directors, upon
attaining age 70, will receive a benefit of $833 per month payable for 120
months, and for which the Company contributes the sum of $8,000 per month.
TRANSACTIONS WITH DIRECTORS, EXECUTIVE OFFICERS AND ASSOCIATES
Some of the nominees, directors continuing in office, and executive officers of
the Company, as well as members of their immediate families and the
corporations, organizations, trusts, and other entities with which they are
associated, are also customers of the Bank in the ordinary course of business.
They may also have taken loans from the Bank of $60,000 or more. It is
anticipated that these people and their associates will continue to be customers
of, and indebted to, the Bank in the future. All such loans, however, were made
in the ordinary course of business, did not involve more than normal risk of
collectibility or present other unfavorable features. They were made on
substantially the same terms as those prevailing at the time for comparable
transactions with unaffiliated persons, including interest rates and collateral.
At present, none of these loans to nominees, directors, executive officers or
their associates is non-performing.
Other than normal relationships as customers or by virtue of position or
ownership in the Company, none of the directors or officers of the Company or
their associates now maintains, or has maintained, any significant business or
personal relationship with the Company or the Bank in the past 12 months, except
for the following. The law firm of Smith, Finkelstein, Lundberg, Isler &
Yakaboski, LLP, of which Director Finkelstein is a partner, has been employed by
the Bank as general counsel and was paid $92,511 for legal services. It is
anticipated that the Bank will employ this law firm in the future. The insurance
firm of Neefus Stype, Inc., in which Director Deerkoski had an equity interest,
was paid $148,178 for insurance premiums on various commercial and liability
policies for current and future coverage, and other fees. Management and the
board of directors of the Company have determined that these amounts are fair
and competitive for the services provided.
PRINCIPAL SHAREHOLDERS OF THE COMPANY
To the knowledge of the Company, there are no owners of more than five percent
of the Company's common stock as of March 5, 1999.
7
<PAGE> 10
COMPARISON OF CUMULATIVE TOTAL RETURN OF SUFFOLK BANCORP,
INDUSTRY INDEX AND BROAD MARKET INDEX.
The following table compares the total return to shareholders of Suffolk Bancorp
with a group of 188 national commercial banks, and the NASDAQ Composite Index,
both of which Suffolk Bancorp is a part.
---------------------------------------------------------
[SUFFOLK BANCORP PERFORMANCE GRAPH]
Comparison of Cumulative Total Return of Suffolk Bancorp,
Industry Index, and Broad Market
DECEMBER 31, 1993 1994 1995 1996 1997 1998
- --------------------------------------------------------------------------------
Suffolk Bancorp 100 116.44 158.82 182.66 291.72 278.66
Commercial Banks 100 98.37 156.29 219.53 326.49 352.52
NASDAQ 100 104.99 136.18 169.23 207.00 291.96
ASSUMES $100 INVESTED ON JANUARY 1, 1994
ASSUMES DIVIDEND REINVESTED
FISCAL YEAR ENDING DECEMBER 31, 1998
ITEM 2. PROPOSAL TO APPROVE THE SUFFOLK BANCORP 1999 STOCK OPTION PLAN
(Item 2 on Proxy Card)
Introduction
At the annual meeting, the Company's shareholders will be requested to consider
and act upon a proposal to approve and adopt a stock option plan to be known as
the Suffolk Bancorp 1999 Stock Option Plan (the "Option Plan").
On January 22, 1999, the Board of Directors adopted the Option Plan, subject to
approval by the Company's shareholders. The Option Plan will become effective
immediately upon approval by the Company's shareholders. The purpose of the
Option Plan is to provide a means by which the Company can attract, retain and
motivate officers and employees and to provide the Company with the ability to
provide incentives more directly linked to the profitability of the Company.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR APPROVAL OF THE OPTION
PLAN.
-8-
<PAGE> 11
DESCRIPTION
Set forth below is a summary of certain important features of the Option Plan,
which summary is qualified in its entirety by reference to the actual plan
attached as Exhibit A to this Proxy Statement:
Administration. The Option Plan will be administered by the Personnel Committee
of the Board of Directors (the "Committee"). Among other things, the Committee
will have the authority to select officers and employees to whom awards may be
granted, to determine the type of award as well as the number of shares of the
Company's common stock to be covered by each award, and to determine the terms
and conditions of any such awards. The Committee also will have the authority
to adopt, alter and repeal such administrative rules and regulations governing
the Option Plan as it deems advisable, to interpret the terms and provisions of
the Option Plan and any awards issued thereunder and to otherwise supervise the
administration of the Option Plan.
Eligibility. Employees, including officers and directors who are also
employees, of the Company or of a subsidiary of the Company that the Committee
deems to be key employees who in the judgment of the Committee are considered
important to the future of the Company or a subsidiary corporation are eligible
to be granted awards under the Option Plan. No grant will be made under the
Option Plan to a director who is not an officer or employee.
Plan Features. The Option Plan authorizes the issuance of up to 600,000 shares
of common stock, which number includes the 578,706 shares of common stock
remaining available for awards as of the date of adoption of the Option Plan
under the Company's 1989 Incentive Stock Option Plan and 1989 Non-Qualified
Stock Option Plan of the Corporation's common stock, pursuant to the grant of
stock options, including incentive stock options ("ISOs") and nonqualified
stock options, and related stock appreciation rights ("SARs"). No single
participant may be granted awards pursuant to the Option Plan covering in
excess of 50,000 shares of the Company's common stock during any calendar year.
The shares subject to grant under the Option Plan are to be made available from
authorized but unissued shares or from treasury shares as determined from time
to time by the Board. Awards may be granted for such terms as the Committee may
determine, except that the term of an ISO may not exceed ten years from its
date of grant. Awards will not be transferable, except by will and the laws of
descent and distribution. The Committee has broad authority to fix the terms
and conditions of individual agreements with participants.
The Option Plan provides that in the event of any change in corporate
capitalization, such as a stock split, or a corporate transaction, such as any
merger, consolidation, separation, spin-off or other distribution of property,
or any reorganization or partial or complete liquidation of the Company, the
Committee or Board may make such substitution or adjustment in the aggregate
number and kind of shares reserved for issuance under the Option Plan, and the
maximum limitation upon options to be granted to any participant, in the
number, kind and option price of shares subject to outstanding stock options
and SARs, or such other equitable adjustments as determined to be appropriate
by the Committee or Board in its sole discretion. The Option Plan also provides
that in the event of a change in control of the Company (as defined in the
Option Plan) any options (including any related SARs) outstanding as of the
date of the change in control which are not then exercisable and vested will
become fully exercisable and vested.
Stock Options. The Option Plan authorizes the Committee to grant options to
purchase the Company's stock at an exercise price which cannot be less than 100%
of the fair market value of such stock on the date of grant. The Option Plan
permits optionees, with the approval of the Committee, to pay the exercise price
of options in cash, stock (valued at its fair market value on the date of
exercise) or a combination thereof. The term of options shall be as determined
by the Committee, but not longer than ten years from the date of grant in the
case of incentive stock options. The Committee will determine when and subject
to what conditions options will become exercisable. In the event of an
optionee's termination of employment as a result of death (or if the optionee
dies within three months of a termination due to disability), the optionee's
estate may exercise the options for two years after the optionee's death. In the
event the optionee terminates employment due to disability, the optionee may
exercise the options within one year of such termination. In the event of
termination due to retirement or involuntarily other than for cause (as defined
in the Option Plan), the optionee may exercise the options within three months
of such termination. Upon all other terminations of employment, the right to
exercise options shall terminate on the date of termination. If an optionee's
employment is terminated other than for cause during the 24-month period
following a change in control, the optionee may exercise the option for the
longer of the period described above for such termination of employment or one
year from the date of termination. In no event may an option under the Option
Plan be exercisable beyond the expiration date set forth in the option award
agreement. As noted above, options may be granted either as ISOs or nonqualified
options. The principal difference between ISOs and nonqualified options is their
tax treatment. See "Federal Income Tax Consequences" below.
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SARs. The Option Plan authorizes the Committee to grant SARs in conjunction
with a stock option granted under the Option Plan. An SAR will entitle the
optionee to receive shares of common stock with a fair market value at such
time equal to the excess, if any, of the fair market value of a share of common
stock on the date of exercise, over the option price multiplied by the number
of shares as to which the optionee is exercising the SAR. Since an SAR is an
alternative to an option, the option will be cancelled to the extent that the
SAR is exercised and the SAR will be cancelled to the extent the option is
exercised.
Amendment and Discontinuance. The Option Plan may be amended, altered or
discontinued by the Board, but no amendment, alteration or discontinuation
shall be made which would impair the rights of an optionee under an option
(including any related SAR) theretofore granted without the optionee's consent,
except such an amendment made to comply with applicable law, stock exchange
rules or accounting rules. In addition, no such amendment shall be made without
the approval of the Company's shareholders to the extent such approval is
required by applicable law or stock exchange rules. The Committee may amend the
terms of any option, (including any related SAR) prospectively or
retroactively, but no such amendment shall impair the rights of any holder
without the holder's consent except such an amendment made to cause the Option
Plan or option (including any related SAR) to comply with applicable law, stock
exchange rules or accounting rules.
FEDERAL INCOME TAX CONSEQUENCES
The following discussion is intended only as a brief summary of the federal
income tax rules that are generally relevant to stock options and SARs. The
laws governing the tax aspects of awards are highly technical and such laws are
subject to change.
Nonqualified Options and SARs. Upon the grant of a nonqualified option (with or
without an SAR), the optionee will not recognize any taxable income and the
Company will not be entitled to a deduction. Upon the exercise of such an
option or a related SAR, the excess of the fair market value of the shares
acquired on the exercise of the option over the option price (the "spread"), or
the consideration paid to the optionee upon exercise of the SAR, will
constitute compensation taxable to the optionee as ordinary income. The
Company, in computing its federal income tax, will generally be entitled to a
deduction in an amount equal to the compensation taxable to the optionee.
ISOs. An optionee will not recognize taxable income on the grant or exercise of
an ISO. However, the spread at exercise will constitute an item includible in
alternative minimum taxable income, and thereby may subject the optionee to the
alternative minimum tax. Such alternative minimum tax may be payable even though
the optionee receives no cash upon the exercise of his ISO with which to pay
such tax.
Upon the disposition of shares of stock acquired pursuant to the exercise of an
ISO after the later of (a) two years from the date of grant of the ISO or (b)
one year after the transfer of the shares to the optionee (the "ISO Holding
Period"), the optionee will recognize long-term capital gain or loss, as the
case may be, measured by the difference between the stock's selling price and
the exercise price. The Company is not entitled to any tax deduction by reason
of the grant or exercise of an ISO, or by reason of a disposition of stock
received upon exercise of an ISO if the ISO Holding Period is satisfied.
Different rules apply if the optionee disposes of the shares of stock acquired
pursuant to the exercise of an ISO before the expiration of the ISO Holding
Period.
Section 162(m). The Option Plan has been designed to take into account Internal
Revenue Code ("IRC") provisions that impose limits on the ability of a public
corporation to claim tax deductions for compensation paid to certain highly
compensated executives. IRC Section 162(m) generally denies a corporate tax
deduction for annual compensation exceeding $1 million paid to the Chief
Executive Officer and the four other most highly compensated officers of a
public corporation. Certain types of compensation, including options granted
with a fair-market-value exercise price, are generally excluded from this
deduction limit. So that options under the Option Plan will qualify for the
exclusion for performance-based compensation, the Option Plan is being submitted
to shareholders for approval at the 1999 annual meeting. By approving the Option
Plan, the shareholders will be approving, among other things, the eligibility
requirements and limits on stock awards contained therein for purposes of IRC
Section 162(m).
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NEW PLAN BENEFITS
It cannot be determined at this time what benefits or amounts, if any, will be
received by or allocated to any person or group of persons under the Option Plan
if the Option Plan is adopted or what benefits or amounts would have been
received by or allocated to any person or group of persons for the last calendar
year if the Option Plan had been in effect.
VOTE REQUIRED
Approval of the Suffolk Bancorp 1999 Stock Option Plan requires the affirmative
approval of the holders of a majority of the shares of common stock present in
person, or represented by proxy and entitled to vote, at the annual meeting.
THE BOARD OF DIRECTORS BELIEVES THAT APPROVAL OF THE OPTION PLAN IS IN THE BEST
INTERESTS OF ALL SHAREHOLDERS AND, ACCORDINGLY, RECOMMENDS A VOTE FOR THE
APPROVAL OF THE PROPOSED SUFFOLK BANCORP 1999 STOCK OPTION PLAN. YOUR PROXY WILL
BE SO VOTED UNLESS YOU SPECIFY OTHERWISE.
ITEM 3. APPROVAL OF INDEPENDENT AUDITORS
(Item 3 on Proxy Card)
The Board of Directors has selected Arthur Andersen, LLP, independent auditors,
to audit the financial statement of the Company for the fiscal year ending
December 31, 1999, and recommends that shareholders vote for ratification of the
appointment. Notwithstanding the selection, the Board, in its discretion, may
direct the appointment of new independent auditors at any time during the year,
if the Board feels that the change would be in the best interests of the Company
and its shareholders. In the event shareholders vote against ratification, the
Board will reconsider its selection.
Representatives of Arthur Andersen, LLP are expected to be present at the annual
meeting of the shareholders. They will have the opportunity to make a statement
if they so desire, and are expected to be available to respond to appropriate
questions.
The affirmative vote of the holders of a majority of the shares present in
person or represented by proxy and entitled to vote is required for approval of
the Board of Directors' selection of independent auditors for the year ending
December 31, 1999.
The Board of Directors recommends a vote FOR this proposal, which is Item 3 on
the proxy card.
FILING OF S.E.C. REPORTS
Section 16(a) of the Securities Exchange Act of 1934 requires executive
officers, directors, and persons who beneficially own more than 10 percent of
the stock of the Company to file initial reports of ownership and reports of
changes in ownership. Such persons are also required by S.E.C. regulations to
furnish the Company with copies of these reports. Based solely on a review of
the copies of such reports furnished to the Company, the Company believes that
during 1998 its executive officers, directors and beneficial owners of more of
the stock complied with all applicable filing requirements of section 16(a).
OTHER MATTERS
The Board of Directors of the Company is not aware of any other matters that may
come before the meeting. However, the proxies may be voted with discretionary
authority with resect to any other matters that may properly come before the
meeting.
Date: March 12, 1999
By Order of the Board of Directors
DOUGLAS IAN SHAW
Corporate Secretary
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SUFFOLK BANCORP
PROXY FOR THE ANNUAL MEETING OF SHAREHOLDERS - APRIL 13, 1999
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoint HAROLD E. BURNS, Jr. and DAVID A.
KANDELL as proxies, each with the power to appoint his substitute, and hereby
authorizes them to represent and to vote, as designated on the matters shown on
the reverse side in the manner directed, and upon any other matter which may
properly come before the meeting, all the shares of common stock of Suffolk
Bancorp held on record by the undersigned on March 5, 1999 at the annual meeting
of shareholders to be held on April 13, 1999, or any adjournment thereof. The
undersigned hereby revokes any proxy previously given.
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE)
<PAGE> 15
PLEASE DATE, SIGN AND MAIL YOUR
PROXY CARD BACK AS SOON AS POSSIBLE!
ANNUAL MEETING OF SHAREHOLDERS
SUFFOLK BANCORP
APRIL 13, 1999
| |
V Please Detach and Mail in the Envelope Provided V
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A [X] Please mark your
votes as in this
example.
FOR WITHHOLD
1. The election of three directors to hold office for a term [ ] [ ]
of three years, such terms to extend until their successors
have been duly elected and qualified.
(INSTRUCTION: To withhold authority to vote for any individual
nominee, write such name or names in the space provided below.)
_______________________________________________________________
NOMINEES: Bruce Colins
Joseph A. Deerkoski
Edward J. Merz
FOR AGAINST ABSTAIN
2. The Approval of the "Suffolk Bancorp 1999 Stock [ ] [ ] [ ]
Option Plan."
3. The Approval of the Board of Directors' selection [ ] [ ] [ ]
of independent auditors for the year ending
December 31, 1999.
4. Any other business which may be properly brought before the meeting or
any adjournment thereof.
PLEASE SIGN AND RETURN THE ENCLOSED PROXY AS QUICKLY AS POSSIBLE, WHETHER YOU
PLAN TO ATTEND THE MEETING IN PERSON OR NOT. YOU MAY WITHDRAW YOUR PROXY AT
ANY TIME PRIOR TO THE EXERCISE OF THE PROXY AT THE MEETING BY GIVING WRITTEN
NOTICE TO THE SECRETARY OF THE COMPANY.
I WILL I WILL NOT
ATTEND THE [ ] ATTEND THE [ ]
MEETING MEETING
SIGNATURE ________________________________________ DATE: ______________, 1999
SIGNATURE ________________________________________ DATE: ______________, 1999
(SIGNATURE IF HELD JOINTLY)
NOTE: (Please sign exactly as shown on your stock certificate and on the
envelope in which this proxy was mailed. When signing as partner,
corporate officer, attorney, executor, administrator, trustee, guardian
or in any other representative capacity, give full title as such and
sign your own name as well. If stock is held jointly, each joint owner
should sign.)
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