<PAGE> 1
SCHEDULE 14A
(RULE 14A)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
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:
<TABLE>
<S> <C>
[ X ] Preliminary Proxy Statement [ ] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY RULE
14A-6(E)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
</TABLE>
SKANEATELES BANCORP, INC.
- --------------------------------------------------------------------------------
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
- --------------------------------------------------------------------------------
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
Payment of filing fee (Check the appropriate box):
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] 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:
----------------------------------------------------
[ X ] No fee required
<PAGE> 2
SKANEATELES BANCORP, INC.
March 20, 1998
Dear Shareholder:
You are cordially invited to attend the Annual Meeting of Skaneateles
Bancorp, Inc., the holding company for Skaneateles Savings Bank, to be held on
Tuesday, April 21, 1998, at 10:00 a.m. local time. The Annual Meeting will take
place at the Skaneateles Country Club, West Lake Road, Skaneateles, New York.
The Board of Directors and members of management look forward to greeting you at
the meeting.
The Annual Meeting has been called for the following purposes: (1) to elect
four directors for a three-year term each; (2) to ratify the appointment by the
Board of Directors of KPMG Peat Marwick LLP as independent auditors for the
fiscal year ending December 31, 1998; (3) to amend the Company's certificate of
incorporation to increase the number of shares of Common Stock, par value $.01
per share, which the Corporation has authority to issue, from 2,500,000 to
4,000,000; (4) to ratify and approve the 1998 Stock Option Plan (the "Option
Plan"); (5) to ratify and approve the 1998 Non-Employee Director Warrant Plan
(the "Warrant Plan"); and (6) to transact such other business as may properly
come before the meeting or any adjournment thereof.
It is important that your shares be represented at the Annual Meeting.
Whether or not you plan to attend the Annual Meeting, you are requested to
complete, sign and return the enclosed proxy card in the attached
self-addressed, postage paid envelope as soon as possible.
Sincerely yours,
JOHN P. DRISCOLL
Chairman, President and
Chief Executive Officer
<PAGE> 3
SKANEATELES BANCORP, INC.
33 E. GENESEE STREET
SKANEATELES, NEW YORK 13152-0460
(315) 685-2265
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 21, 1998
NOTICE IS HEREBY GIVEN that an annual meeting (the "Annual Meeting") of
shareholders of Skaneateles Bancorp, Inc. (the "Company"), the holding company
for Skaneateles Savings Bank ("Skaneateles" or the "Bank"), will be held on
Tuesday, April 21, 1998 at 10:00 a.m. local time at the Skaneateles Country
Club, West Lake Road, Skaneateles, New York 13152 for the following purposes,
all of which are more completely set forth in the accompanying Proxy Statement:
(1) To elect four directors for a three-year term each or until their
successors have been elected and qualified (Proposal No. 1);
(2) To ratify the appointment by the Board of Directors of KPMG Peat Marwick
LLP as independent auditors for the fiscal year ending December 31, 1998
(Proposal No. 2);
(3) To amend the Company's certificate of incorporation to increase the number
of shares of Common Stock, par value $.01 per share, which the Corporation
has authority to issue, from 2,500,000 to 4,000,000 (Proposal No. 3);
(4) To ratify and approve the 1998 Stock Option Plan (the "Option Plan")
(Proposal No.4);
(5) To ratify and approve the 1998 Non-Employee Director Warrant Plan (the
"Warrant Plan") (Proposal No. 5); and
(6) To transact such other business as may properly come before the meeting or
any adjournment thereof
Pursuant to the Company's Bylaws, the Board of Directors of the Company has
fixed the close of business on February 20, 1998 as the record date for the
Annual Meeting. Only holders of common stock of record at the close of business
on that date will be entitled to notice of and to vote at the Annual Meeting or
any adjournments thereof.
By Order of the Board of Directors
J. David Hammond
Secretary
Skaneateles, New York
March 20, 1998
YOU ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING. IT IS IMPORTANT THAT
YOUR SHARES BE REPRESENTED REGARDLESS OF THE NUMBER YOU OWN. EVEN IF YOU PLAN TO
BE PRESENT, YOU ARE URGED TO COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED PROXY
PROMPTLY IN THE POSTAGE PAID ENVELOPE PROVIDED. IF YOU ATTEND THE MEETING, YOU
MAY VOTE EITHER IN PERSON OR BY PROXY. ANY PROXY GIVEN MAY BE REVOKED BY YOU IN
WRITING OR IN PERSON AT ANY TIME PRIOR TO THE EXERCISE THEREOF.
<PAGE> 4
SKANEATELES BANCORP, INC.
33 E. GENESEE STREET
SKANEATELES, NEW YORK 13152-0460
(315) 685-2265
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
APRIL 21, 1998
This Proxy Statement is furnished as part of the solicitation of proxies by
the Board of Directors of Skaneateles Bancorp, Inc. (the "Company"), the holding
company for Skaneateles Savings Bank ("Skaneateles" or the "Bank"), for use at
the 1998 annual meeting of shareholders (the "Annual Meeting") of the Company to
be held at the Skaneateles Country Club, West Lake Road, Skaneateles, New York
13152 on April 21, 1998 at 10:00 a.m. local time, and at any adjournment thereof
for the purposes set forth in the Notice of Annual Meeting of Shareholders. This
Proxy Statement, together with the enclosed proxy, is first being mailed to
shareholders on or about March 20, 1998.
The proxy solicited hereby and attached hereto, if properly signed and
returned to the Company and not revoked prior to its use, will be voted in
accordance with the instructions contained therein by Gary L. Karl, or his
assigns, who has been duly appointed by the Board of Directors to vote such
proxies. If no contrary instructions are given, each proxy received will be
voted for the proposals contained herein. Any shareholder giving a proxy has the
power to revoke it at any time before it is exercised by: (i) filing with the
Secretary of the Company written notice thereof (c/o J. David Hammond,
Secretary, Skaneateles Bancorp, Inc., 33 E. Genesee Street, Skaneateles, New
York 13152-0460); (ii) submitting a duly executed proxy bearing a later date; or
(iii) appearing at the Annual Meeting and giving the Secretary notice of his or
her intention to vote in person. Proxies solicited hereby may be exercised only
at the Annual Meeting and any adjournment thereof, and will not be used for any
other meeting.
VOTING SECURITIES
The securities that can be voted at the Annual Meeting are shares of
Skaneateles Bancorp, Inc. common stock, par value $0.01 per share ("Common
Stock"). Only shareholders of record at the close of business on February
20,1998 (the "Record Date") will be entitled to notice of and to vote at the
Annual Meeting. On the Record Date, there were 1,439,084 shares of Common Stock
issued and outstanding, held of record by 603 shareholders, and the Company had
no other class of equity securities outstanding. Each share of Common Stock is
entitled to one vote at the Annual Meeting. All share and per share data
contained herein (except amounts included in Proposal No.3) have been
retroactively adjusted to reflect the 3-for-2 stock split effected on
November 28, 1997.
1
<PAGE> 5
PRINCIPAL HOLDERS OF COMMON STOCK
The following table (with notes thereto) sets forth information as of the
Record Date with respect to ownership of Common Stock by any person (including
any "group" as that term is used in Section 13(d)(3) of the Securities Exchange
Act of 1934, as amended) who is known to the Company to be the beneficial owner
of more than 5% of Common Stock and with respect to ownership of Common Stock by
all directors and executive officers of the Company as a group (such information
being based on information filed by or on behalf of the beneficial holder
concerned).
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF BENEFICIAL PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER OWNERSHIP (1) CLASS
=====================================================================================================
<S> <C> <C>
Jeffrey L. Gendell 132,300 (2) 9.19
Tontine Partners, L.P.
31 West 52nd Street, 17th Floor
New York, NY 10019
Dimensional Fund Advisors 90,000 (3) 6.25
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
All current directors and executive officers as a
group (13 persons) 145,074 9.82
</TABLE>
(1) In accordance with Rule 13d-3 under the Securities Exchange Act of 1934, as
amended ("1934 Act"), a person is deemed to be the beneficial owner for
purposes of this table of any shares of Common Stock (a) over which he or
she has or shares voting or investment power, or (b) of which he or she has
the right to acquire beneficial ownership at any time within 60 days from
February 20, 1998. For purposes of the 1934 Act, "voting power" is the
power to vote or direct the voting of shares, and "investment power" is the
power to dispose or direct the disposition of shares. All shares shown in
the table above have sole voting and investment power, except as otherwise
indicated. This table includes shares of Common Stock subject to
outstanding options granted pursuant to the Company's Employee Stock Option
and Director's Warrant Plans. As of February 20, 1998, executive officers
as a group held vested options to purchase 38,675 shares. There were no
vested warrants as of this date. See "Compensation of Executive Officers."
(2) As reported by Jeffrey L. Gendell and Tontine Financial Partners, L.P., a
Delaware limited partnership ("Tontine"), in a statement as of September
28, 1995 on Schedule 13D under the Exchange Act. Of the 132,300 shares
reported above, Mr. Gendell reported sole dispositive powers as to 52,500
shares, and both Mr. Gendell and Tontine reported shared voting and
dispositive powers as to 79,800 shares.
(3) Dimensional Fund Advisors Inc. ("Dimensional"), a registered investment
advisor, is deemed to have beneficial ownership of 90,000 shares of Common
Stock as of December 31, 1997, all of which shares are held in portfolios
of DFA Investment Dimensions Group Inc., a registered open-end investment
company, or in series of the DFA Investment Trust Company, a Delaware
business trust, or the DFA Group Trust and DFA Participation Group Trust,
investment vehicles for qualified employee benefit plans, all of which
Dimensional Fund Advisors Inc. serves as investment manager. Dimensional
disclaims beneficial ownership of all such shares.
<TABLE>
<CAPTION>
<S> <C>
Sole Voting Power: 49,950 shares*
Shared Voting Power: 0
Sole Dispositive Power: 90,000
Shared Dispositive Power: 0
</TABLE>
* Persons who are officers of Dimensional Fund Advisors Inc. also serve as
officers of DFA Investment Dimensions Group Inc., (the "Fund") and the DFA
Investment Trust Company (the "Trust"), each an open-end management
investment company registered under the Investment Company Act of 1940. In
their capacity as officers of the Fund and the Trust, these persons vote
25,200 additional shares which are owned by the Fund and 14,850 shares
which are owned by the trust (both included in "Sole Dispositive Power"
above).
2
<PAGE> 6
INFORMATION WITH RESPECT TO NOMINEES FOR
DIRECTOR, CONTINUING DIRECTORS AND EXECUTIVE OFFICERS
PROPOSAL NO. 1
ELECTION OF DIRECTORS
In accordance with the Company's Certificate of Incorporation, the Board of
Directors shall be divided into three classes as nearly equal in number as
possible. The members of each class are to be elected for a term of three years
and until their successors are elected and qualified. One class of directors is
to be elected annually. In accordance with the Company's Bylaws, the size of the
Board is presently set at ten by the Board of Directors.
THE NOMINEES
Unless otherwise directed, each proxy executed and returned by a
shareholder will be voted for the election of the four candidates listed who are
being nominated for a three-year term. There are no arrangements or
understandings between the persons named and any other person pursuant to which
such nominee was selected. If any person named as nominee should be unable or
unwilling to stand for election at the time of the Annual Meeting, the proxy
will nominate and vote for a replacement nominee or nominees recommended by the
Board of Directors. At this time, the Board of Directors knows of no reason why
any of the nominees listed below may not be able to serve as director if
elected. Each nominee is also a director of the Bank. Nominees receiving a
plurality of the votes represented in person or by proxy at the Annual Meeting
will be elected director.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" APPROVAL OF THE
FOLLOWING NOMINEES FOR DIRECTOR POSITIONS:
<TABLE>
<CAPTION>
DIRECTORS WITH A TERM EXPIRING IN 2001
COMMON STOCK
BENEFICIALLY OWNED
DIRECTLY OR INDIRECTLY
DIRECTOR AS OF FEBRUARY 20, 1998
POSITION WITH THE COMPANY AND PRINCIPAL OF BANK =======================
NAME AGE OCCUPATION DURING THE PAST FIVE YEARS SINCE (1) AMOUNT PERCENT (2)
===============================================================================================================================
<S> <C> <C> <C>
Walter D. Copeland 64 Director; Retired, President, Walter D. 1994 1,742(3)
Copeland Organization, Inc., a real
estate consulting firm.
John P. Driscoll 58 Chairman, President and Chief Executive 1992 31,931(4) 2.16
Officer of the Company.
Carl W. Gerst, Jr. 60 Director; Executive Vice President, Chief 1982 6,048
Operating Officer and Director of Anaren
Microwave, Inc., a manufacturer of
microwave and electronic subsystems for
commercial and defense applications.
John Bernard Henry 69 Director; Professor of pathology and former 1989 3,750(5)
President of the State University of New
York Health Science Center at Syracuse.
</TABLE>
(1) Includes terms as Trustee prior to the Bank's conversion from a mutual to
stock form of organization on May 30, 1986.
(2) All holdings amount to less than 1% of the issued and outstanding Common
Stock, unless otherwise indicated.
(3) Shares owned by Walter D. Copeland and Concetta M. Copeland Revocable
Living Trust dated October 11, 1995, Walter D. Copeland and Concetta M.
Copeland, trustees.
(4) Includes vested options to purchase 28,400 shares.
(5) All shares held jointly with Mr. Henry's wife, with whom Mr. Henry has
shared voting and investment power.
3
<PAGE> 7
<TABLE>
<CAPTION>
DIRECTORS WITH A TERM EXPIRING IN 1999
COMMON STOCK
BENEFICIALLY OWNED
DIRECTLY OR INDIRECTLY
DIRECTOR AS OF FEBRUARY 20, 1998
POSITION WITH THE COMPANY AND PRINCIPAL OF BANK =======================
NAME AGE OCCUPATION DURING THE PAST FIVE YEARS SINCE (1) AMOUNT PERCENT (2)
===============================================================================================================================
<S> <C> <C> <C>
David E. Blackwell 59 Director; Retired, President, Auburn Steel 1993 2,555
Company, Inc.
Howard J. Miller 65 Director; Retired, Vice President, 1993 3,558(3)
Distribution
Crucible Service Centers.
Raymond C. Traver, Jr., M.D. 55 Director; Orthopedic Surgeon. 1990 11,517(4)
</TABLE>
(1) Includes terms as Trustee prior to the Bank's conversion from a mutual to
stock form of organization on May 30, 1986.
(2) All holdings amount to less than 1% of the issued and outstanding Common
Stock, unless otherwise indicated.
(3) Includes 750 shares held by Mr. Miller's wife.
(4) Includes 6,075 shares held in trust under an employee defined contribution
pension plan and 786 shares held by Dr. Traver as custodian for his
children.
<TABLE>
<CAPTION>
NOMINEES FOR DIRECTOR WITH A TERM EXPIRING IN 2000
COMMON STOCK
BENEFICIALLY OWNED
DIRECTLY OR INDIRECTLY
DIRECTOR AS OF FEBRUARY 20, 1998
POSITION WITH THE COMPANY AND PRINCIPAL OF BANK =======================
NAME AGE OCCUPATION DURING THE PAST FIVE YEARS SINCE (1) AMOUNT PERCENT (2)
===============================================================================================================================
<S> <C> <C> <C>
Israel Berkman 69 Director; Retired, Examining Officer of the 1992 (1) 3,041
Federal Reserve Bank of New York.
Ann G. Higbee 55 Director; Managing Partner, Public Relations 1993 6,100
Services, Eric Mower and Associates.
Anne E. O'Connor 62 Director; Corporate Secretary, Kopp Billing 1995 52,416(3) 3.64
Agency, a medical billing agency.
</TABLE>
(1) Mr. Berkman is a director of the Company, but not the Bank.
(2) All indicated holdings amount to less than 1% of the issued and outstanding
Common Stock, unless otherwise indicated.
(3) Shares owned by Mrs. O'Connor's husband.
DIRECTOR NOMINATIONS
Article III, Section 13 of the Company's Bylaws provides that the Board of
Directors shall act as a nominating committee for selecting the nominees for
election as directors. Accordingly, the Board, as a whole, nominates individuals
for election to the Board. The Board seeks individuals of proven judgment and
competence who are outstanding in their field, and considers such factors as
anticipated participation in Board activities, education, special talents or
skills, and personal attributes. Shareholders may name nominees for election to
the Board of Directors by submitting written nominations to the Secretary of the
Company not less than 60 days nor more than 90 days prior to the date of the
Annual Meeting. Such shareholder's notice shall set forth as to (a) each person
whom the shareholder proposes to nominate for election or re-election as a
director: (i) the name, age, business address, residence address, and shares of
the Company's Common Stock held by such person, (ii) the principal occupation or
employment of such person, and (iii) such person's written consent with respect
to serving as a director, if elected; and (b) the shareholder giving the notice:
(i) the name and address of such shareholder and (ii) the number of shares of
the Company's Common Stock which are owned of record by such shareholder. If any
shareholder nomination is properly and timely made in accordance with Article
III, Section 13 of the Bylaws, ballots will be provided for use by shareholders
at the Annual Meeting bearing the name of such nominee or nominees.
THE BOARD OF DIRECTORS AND ITS COMMITTEES
The members of the Company's Board of Directors also serve as the members
of the Bank's Board of Directors, with the exception of Israel Berkman. The
Bank's Board of Directors meets regularly each month, and the Board of the
Company meets at least quarterly. The Company's Board of Directors held a total
of 6 meetings during 1997. No incumbent director attended less
4
<PAGE> 8
than 75% of the aggregate number of meetings of the Company's Board of Directors
and meetings held by all committees of the Company's Board on which such
director served during the last fiscal year. The Bank's standing committees of
the Board of Directors include the following: the Executive Committee, the
Examining Committee, the Personnel and Compensation Committee and the
Asset/Liability Management Committee. The Bank's Examining Committee serves as
the Company's Examining Committee and the Bank's Personnel and Compensation
Committee serves as the Company's Personnel and Compensation Committee. The
Board as a whole nominates new directors.
The Examining Committee reviews the internal and external audits of the
Company and Bank and the adequacy of the Company's and the Bank's accounting,
financial and compliance controls, and makes recommendations to the Company's
Board regarding the appointment of independent auditors. During 1997, this
Committee held 6 meetings, and its present members are Israel Berkman, David E.
Blackwell, Ann G. Higbee, Howard J. Miller and Anne E. O'Connor.
The Personnel and Compensation Committee reviews and makes recommendations
to the Board regarding compensation levels, adjustments and employee benefits to
be instituted. The Personnel and Compensation Committee held 3 meetings in 1997,
and its present members are David E. Blackwell, John P. Driscoll, Carl W. Gerst,
Jr., John B. Henry, Ann G. Higbee, Howard J. Miller and Raymond C. Traver, Jr.
COMPENSATION OF EXECUTIVE OFFICERS
Since the formation of Skaneateles Bancorp, Inc., none of its executive
officers has received any separate form of compensation from the Company.
Officers receive compensation in their positions as officers of the Bank.
The following table sets forth the compensation paid by the Bank to the
Company's Chairman, President and Chief Executive Officer and to each executive
officer whose aggregate annual salary and bonus exceeded $100,000 for services
rendered in all capacities during the last three fiscal years.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION
-------------------------------------------------------- ------------
AWARDS OF
SECURITIES
OTHER ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY (1) BONUS COMPENSATION OPTIONS (#) COMPENSATION
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
John P. Driscoll 1997 $143,691 $34,588(2) $11,635(3) 5,700 $21,233(4)
Chairman, President & CEO 1996 141,969 30,670 17,936 4,667 18,475
1995 124,547 17,406 10,113 0 26,417
J. David Hammond 1997 94,248 13,436(2) 0 3,000 6,165(5)
Executive Vice President & 1996 92,777 9,170 0 1,500 1,492
Secretary 1995 22,332 0 0 5,000 0
</TABLE>
(1) Includes the cost of shares allocated under the Company's Employee Stock
Ownership Plan. Mr. Hammond joined the Company in September 1995.
(2) Bonuses were paid in February 1998.
(3) Comprised entirely of country club dues.
(4) Includes contributions to the Company's 401(k) plan totaling $14,106 and
premium payments on an individual flexible premium deferred variable
annuity totaling $7,127.
(5) Comprised entirely of contributions to the Company's 401(k) plan.
5
<PAGE> 9
OPTION GRANTS IN 1997
The following table sets forth stock options granted to the Company's
Chairman, President and Chief Executive Officer and named executive officers
during 1997.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
- ------------------------------------------------------------------------------------------------------------------------------
NUMBER OF
SECURITIES % OF TOTAL
UNDERLYING OPTIONS GRANTED
OPTIONS TO EMPLOYEES IN EXERCISE PRICE EXPIRATION GRANT DATE PRESENT
NAME GRANTED (1) 1997 PER SHARE DATE VALUE (2)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
John P. Driscoll 5,700 41.3 $10.83 January 2007 $18,582
J. David Hammond 3,000 21.7 10.83 January 2007 9,780
</TABLE>
(1) Options were granted on January 21, 1997 under the Company's 1991 Long Term
Incentive and Capital Accumulation Plan, and are exercisable 50% per year
after date of grant.
(2) The Black-Scholes option pricing model was used to calculate the grant date
present value. Significant assumptions are as follows:
<TABLE>
<CAPTION>
<S> <C>
expected stock price volatility 26.61%
risk-free rate of return 5.70%
expected dividend yield 1.32%
Expected time of exercise 5 years
</TABLE>
AGGREGATED OPTION EXERCISES IN 1997 AND 1997 YEAR END OPTION VALUES
The following table sets forth information with respect to the Chief
Executive Officer and named executive officers, concerning exercises of stock
options during 1997 and the number and value of unexercised options held at
December 31, 1997.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS AT
SHARES AT DECEMBER 31, 1997 DECEMBER 31, 1997 (2)
ACQUIRED VALUE ------------------------------ --------------------------------
NAME ON EXERCISE (#) REALIZED (1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
John P. Driscoll 0 0 28,400 16,100 $394,640 182,255
J. David Hammond 0 0 450 4,800 5,047 48,822
</TABLE>
(1) Market value of underlying securities at exercise, minus the exercise
price.
(2) Market value of underlying securities at December 31, 1997, minus the
exercise price.
COMPENSATION OF DIRECTORS
Directors who are not executive officers of the Company receive a fee of
$400 per Board meeting attended. In addition, non-officer members of committees
of the Board receive a fee of $250 per committee meeting attended. Directors who
are also officers of the Company receive no compensation for attendance at Board
or committee meetings.
The 1995 Non-Employee Directors Warrant Plan (the "Warrant Plan") was
established to attract, retain and compensate for the services of highly
qualified individuals who are not employees of Company or the Bank, as members
of their respective boards of directors, and to enable them to increase their
ownership in the Company's common stock. Under the Warrant Plan, those outside
directors receive warrants (or options) to purchase shares of Common Stock only
if the Company achieves specified performance levels. The total number of shares
that may be issued pursuant to warrants granted under the Warrant Plan shall not
exceed 75,000. Each warrant that is granted vests and becomes exercisable over a
three-year period in increments of one-third on each anniversary of the grant
date. In April 1997, 13,500 warrants were granted at an exercise price of $12.83
per share.
6
<PAGE> 10
EMPLOYMENT AGREEMENTS
Mr. Driscoll has an employment agreement with the Company and the Bank
which provides for an annual adjustment in Mr. Driscoll's salary as determined
by the Board of Directors based upon an annual review of his compensation. The
Board of Directors has set Mr. Driscoll's base salary for 1998 at $138,000. Mr.
Driscoll is also entitled to receive cash bonuses based on the Company's
attainment of specific levels of earnings per share, and as the Board, in its
discretion, may award.
Under his agreement, Mr. Driscoll will receive a continuation of his salary
and benefits for three years if his employment is terminated by the Company for
any reason other than "cause", including a "change in control" of the Company.
The Company and the Bank also entered into agreements with J. David
Hammond, Executive Vice President, and William Welch, J. Daniel Mohr and Karen
Lockwood, Vice Presidents, pursuant to which they will receive a continuation of
their respective salaries and benefits for eighteen months (twenty-four in the
case of Mr. Hammond) if a "change in control" of the Company occurs.
The named executive officers, like all eligible employees of the Bank, are
entitled to receive a bonus tied to specified target levels of the Company's
earnings per share, as well as to individual and departmental goals.
PERFORMANCE GRAPH
The following table compares cumulative total shareholder returns on the
Company's stock over the last five years to the Nasdaq Stock Market Index for
U.S. companies and the Nasdaq Bank Index. Total return values were calculated
assuming a $100 investment on December 31, 1992 and reinvestment of all
dividends. The following table shall not be deemed incorporated by reference
into any filing under the Securities Act of 1933 or the 1934 Act, and shall not
be deemed filed under either such act.
<TABLE>
<CAPTION>
TOTAL RETURN
.......................................................
DATE SKANEATELES BANKCORP NASDAQ US NASD BANK
............................................................
<S> <C> <C> <C>
1992 100 100 100
1993 100 115 114
1994 120 112 114
1995 156 159 169
1996 183 195 223
1997 381 240 377
</TABLE>
INDEBTEDNESS OF MANAGEMENT
The Bank may make loans to directors and any executive officers of the
Company to the extent permitted by banking law. Any extensions of credit, to
directors or executive officers of the Company whether past or future, are made
in the ordinary course of business on substantially the same terms, including
interest rates, collateral and repayment terms, as those prevailing at the time
for comparable transactions with other persons, and do not involve more than the
normal risk of collectibility or present other unfavorable features.
7
<PAGE> 11
COMPLIANCE WITH SECTION 16 OF THE EXCHANGE ACT
Section 16 of the Securities Exchange Act of 1934 (the "Exchange Act")
requires the reporting of transactions by insiders in the Company's common stock
to the Securities and Exchange Commission (the "Commission") within required
time frames. All filings required under Section 16 of the Exchange Act during
1997 were made in a timely manner, except for a Form 4 due for the month of
January 1997 for the following directors: Clifford C. Abrams, Israel Berkman,
David E. Blackwell, Walter D. Copeland, Carl W. Gerst, Jr., Ann G. Higbee,
Howard J. Miller and Raymond C. Traver, Jr. The required forms were filed late
due to an oversight. In making these statements, the Company has relied on
written representations of its incumbent executive officers and directors.
PROPOSAL NO. 2
RATIFICATION OF APPOINTMENT OF AUDITORS
The Board of Directors of the Company has appointed KPMG Peat Marwick LLP,
independent auditors, to perform the audit of the Company's financial statements
for the year ending December 31, 1998, and has further directed that the
selection of auditors be submitted for ratification by a majority of the
outstanding shares of Common Stock present by proxy or in person and voting at
the Annual Meeting. KPMG Peat Marwick LLP was the Company's independent auditors
for the year ended December 31, 1997.
Representatives from KPMG Peat Marwick LLP will be present at the Annual
Meeting and will be given the opportunity to make a statement, if they so
desire, and will be available to respond to appropriate questions from
shareholders.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" THE APPOINTMENT
OF KPMG PEAT MARWICK LLP AS THE COMPANY'S INDEPENDENT AUDITORS.
PROPOSAL NO. 3
APPROVAL OF AMENDMENT TO CERTIFICATE OF INCORPORATION TO
INCREASE THE NUMBER OF AUTHORIZED SHARES OF
COMMON STOCK
The Company's certificate of incorporation, as amended (the "Certificate of
Incorporation"), currently authorizes the Company to issue three million
(3,000,000) shares of stock in the aggregate, of which 2,500,000 may be Common
Stock, and 500,000 may be Serial Preferred Stock, par value $.01 per share (the
"Preferred Stock"). As of the Record Date, there were 1,439,084 shares of Common
Stock and no shares of Preferred Stock issued and outstanding. Of the remaining
1,060,916 authorized but unissued shares of Common Stock, were reserved for
issuance in connection with the Company's Dividend Reinvestment Plan, Stock
Purchase Plan and employee stock option plans. The Company thus has only a
limited number of authorized but unissued shares available for issuance from
time to time as may be necessary in connection with future capital needs,
financing or investment opportunities, potential acquisitions, the declaration
of stock dividends, stock splits or other distributions, or for other corporate
purposes.
With the limited number of shares currently available for such uses, it is
presently impractical for the Company to evaluate or seek to raise capital or
consummate business combinations or other transactions which, if they could be
accomplished through the issuance of Common Stock, might enhance shareholder
value. If additional shares are available, transactions dependent upon the
issuance of additional shares would be less likely to be undermined by the
delays and uncertainties occasioned by the need to obtain shareholder approval.
The ability to issue shares in these circumstances will also permit the Company
to avoid expenses incurred in holding special meetings of shareholders to seek
such authority in the context of a specific opportunity. Thus, the Board of
Directors believes that the proposed amendment will provide several long-term
advantages to the Company and its shareholders and is in the best interests of
the Company.
Accordingly, on February 10, 1998, the Board of Directors of the Company
approved and adopted resolutions to amend Article 4 of the Certificate of
Incorporation to increase the number of authorized shares of Common Stock from
2,500,000 shares to 4,000,000 shares, subject to approval of the shareholders at
the Annual Meeting.
The Company has no present plans, commitments, understandings or
arrangements for issuing the additional shares to be authorized by the proposed
amendment. The Board of Directors believes that it is advisable and in the best
interests of the Company to have such additional shares authorized and available
for issuance in order to enable the Company, as the need may
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arise, to take prompt advantage of market conditions and opportunities without
the delay and expense incident to the holding of a special meeting of
shareholders of the Company.
The future issuance by the Company of additional shares of Common Stock may
have a dilutive effect on earnings per share and the voting power of the present
equity ownership position of current holders of the Common Stock. The proposed
amendment is not intended to have an anti-takeover effect. The issuance,
however, of any of the shares proposed to be authorized, as well as currently
authorized but unissued shares, may potentially have an anti-takeover effect by
making it more difficult to obtain shareholder approval of actions such as
certain business combinations or removal of management.
The affirmative vote of the holders of not less than a majority of the
outstanding shares of Common Stock is required to approve and adopt the proposed
amendment to the Company's Certificate of Incorporation
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE PROPOSAL TO AMEND
THE COMPANY'S CERTIFICATE OF INCORPORATION TO INCREASE THE NUMBER OF AUTHORIZED
SHARES OF COMMON STOCK TO 4,000,000 SHARES.
PROPOSAL NO. 4
APPROVAL OF 1998 STOCK OPTION PLAN
On February 10, 1998, the Board of Directors adopted a resolution approving
the 1998 Stock Option Plan (the "Option Plan") effective as of that date,
subject to approval and ratification by the Shareholders at the Annual Meeting.
The Option Plan is designed to attract, retain and compensate for the
services of highly qualified individuals as employees of the Company. Under the
Option Plan, these key employees may receive options to purchase shares of
Common Stock. The Option Plan will be beneficial to the Company and its
shareholders by encouraging participating employees to have a greater personal
financial stake in the Company through the ownership of Common Stock, thus
underscoring their common interest with the shareholders in increasing the value
of the Common Stock over the long-term. The Option Plan is intended to comply
with Rule 16b-3 promulgated under the Exchange Act.
The Board of Directors believes that the Option Plan is needed because
there are only a limited number of options remaining available for grant
pursuant to the Company's Long-Term Incentive and Capital Accumulation Plan,
adopted in 1991 (the "1991 Plan").
The following description of the Option Plan is qualified in its entirety
by reference to the full text thereof set forth in Exhibit A to this Proxy
Statement. Shareholders are urged to read the actual text of the Option Plan in
its entirety.
DESCRIPTION OF OPTION PLAN
The following is a summary of the principal features of the Option Plan.
SHARES AVAILABLE. The Option Plan provides for the granting of stock
options to purchase up to 71,500 shares of Common Stock (subject to adjustment
as described below). If any option granted under the Option Plan expires or
terminates without having been exercised in full, shares subject to the
unexercised portion of such option may again be available for other option
grants under the Option Plan.
NATURE OF OPTIONS. The Company may grant under the Option Plan both
incentive stock options within the meaning of section 422 of the Internal
Revenue Code ("Incentive Stock Options") and stock options that do not qualify
for treatment as Incentive Stock Options ("Nonstatutory Stock Options"). The
Company receives no consideration for the grant of any options under the Option
Plan.
TERM. The Option Plan will continue in effect until all shares of Common
Stock subject to issuance under options granted thereunder have been purchased
or expire unexercised, provided that no options may be granted under the Option
Plan after February ___ , 2008.
ADMINISTRATION. The Option Plan will be administered by a committee (the
"Stock Option Committee") designated by the Company's Board of Directors. Each
member of the Stock Option Committee must be a disinterested director within the
meaning of Rule 16b-3 promulgated under the Exchange Act. Subject to the express
provisions of the Option Plan, the Stock Option Committee has authority in its
discretion and without limitation (i) to determine the recipients of options,
whether an option is intended to be an Incentive Stock Option or Nonstatutory
Stock Option, the times of option grants, the number of shares
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subject to each option, the exercise price of each option, the term of each
option, the date when each option becomes exercisable, and any vesting schedule
of each option, and (ii) to make all other determinations necessary or advisable
for administering the Option Plan, which determinations will be final and
binding on all persons.
ELIGIBILITY. Options under the Option Plan may be granted to all full-time
employees of the Company or the Bank (or any future subsidiary of the Company),
as the Stock Option Committee may select from time to time. Officers or
directors of the Company who are not employees of the Bank are not eligible to
participate. As of December 31, 1997, the Bank had approximately 105 full-time
employees eligible to participate in the Option Plan.
TERMS AND CONDITIONS OF OPTIONS; OPTION PRICE. Except as described below,
the minimum option price of any option granted under the Option Plan is the fair
market value per share of the Common Stock on the grant date of the option, and
the term of the option, which is determined by the Stock Option Committee, may
not exceed ten years from the grant date. The fair market value of the Common
Stock (reflected by the simple average of the high and low prices thereof as
reported by the Nasdaq National Market System ("NASDAQ/NMS") on March , 1998)
was $ per share.
Notwithstanding the foregoing, in the case of an Incentive Stock Option
granted to any person owning stock possessing more than 10% of the voting power
of the Company, the option price must be at least 110% of the market value of
the Common Stock on the grant date, and the term of the option may not exceed
five years from the grant date. In addition, the aggregate fair market value
(determined as of the grant date) of the shares with respect to which Incentive
Stock Options are exercisable for the first time by any grantee during any
calendar year may not exceed $100,000.
An optionee may pay for the shares subject to the option by one or any
combination of the following methods, as determined by the Stock Option
Committee on the option grant date: (i) in cash; (ii) by delivery of shares of
Common Stock (valued at its then market value) already owned by the optionee; or
(iii) by the Company withholding shares of Common Stock (valued at its then
market value) that would otherwise be delivered to the optionee upon such
exercise.
NON-TRANSFERABILITY; EFFECT OF DEATH OR TERMINATION OF EMPLOYMENT. During
the lifetime of an optionee, an option may be exercised only by him and only
while he is an employee and has been an employee continuously since the option
grant. Options may be exercised for stated periods after termination of
employment in the case of the optionee's death, permanent and total disability,
or termination for other reason. During the lifetime of an optionee, options
issued under the Option Plan may not be transferred, whether voluntarily or
otherwise.
ADJUSTMENTS. In the event of a merger, consolidation, recapitalization,
stock split or similar event, the aggregate number and kind of shares available
for options under the Option Plan, and the number and kind of shares covered by
each outstanding option and the price per share thereof, will be appropriately
adjusted by the Stock Option Committee.
AMENDMENTS. The Board of Directors, without further shareholder approval,
may at any time further amend the Option Plan, provided that (except for
amendments made pursuant to the adjustment provisions described above), no
amendment may be made without the approval of the shareholders which would: (i)
increase the maximum number of shares that may be issued; (ii) reduce the
minimum option exercise price; (iii) change the class of individuals eligible to
receive options; (iv) extend the period for granting or exercising options; (v)
reduce the market price requirements for option vesting; or (vi) otherwise
materially increase the benefits accruing to participants under the Option Plan.
In the event that any amendment to the Option Plan so requires approval by the
shareholders, then prior to such approval the Stock Option Committee may grant
conditional options, which may not be exercised, transferred or encumbered prior
to such approval, and which will be automatically cancelled if the shareholders
fail to approve such amendment at their next meeting.
SECURITIES ACT REGISTRATION. The Company intends to file with the SEC a
Registration Statement on Form S-8 registering the shares issuable upon exercise
of options granted under the Option Plan as soon as practicable, assuming the
Option Plan is approved and ratified by the shareholders at the Annual Meeting.
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FEDERAL INCOME TAX CONSEQUENCES.
The following summarizes the federal income tax consequences to
participants and the Company of the grant and exercise of Nonstatutory Stock
Options and Incentive Stock Options under the Option Plan. This discussion is
merely a summary and does not purport to be a complete description of the
federal income tax consequences of the Option Plan. This description does not
cover state and local tax treatment of participation in the Option Plan.
Nonstatutory Stock Options: The grant of a Nonstatutory Stock Option under
the Option Plan will not result in the recognition of gross income to the
optionee or a deduction to the Company at the time of the grant. Upon the
exercise of a Nonstatutory Option, the optionee will recognize ordinary income
for federal income tax purposes in an amount equal to the excess of the fair
market value of the shares purchased over the exercise price, unless he could be
subject to liability under Section 16(b) of the Exchange Act if he were to sell
the shares at a profit at such time (in which case, unless the optionee makes a
special election under the Code within 30 days after exercise, the optionee will
recognize ordinary income for federal income tax purposes six months after the
date of the grant; if the optionee timely makes such election, he will recognize
ordinary income at the time of exercise). The Company is required to withhold
tax on the amount of income recognized by the optionee and is entitled to a tax
deduction equal to the amount of such income for the fiscal year of the Company
in which ends the taxable year of the optionee in which such amount is included
in the optionee's gross income. Subject to certain limitations on the
deductibility of capital losses, if an optionee disposes of any shares acquired
upon the exercise of a Nonstatutory Stock Option, the optionee will recognize a
capital gain or loss equal to the difference between the fair market value of
such shares at the time ordinary income was recognized and the amount realized
on disposition of such shares. The gain or loss will be either long-term or
short-term, depending on whether the shares have been held for more than 12
months from the date of exercise. The Company is not entitled to any tax
deduction in connection with such disposition of shares. Capital gain is taxed
at ordinary income rates, except that the maximum tax rate for long-term capital
gain is currently 28%.
Incentive Stock Options: In general, no income will be recognized by the
optionee and no deduction will be allowed to the Company at the time of the
grant or exercise of an Incentive Stock Option. The difference between the
exercise price and the fair market value of the shares on the date the Incentive
Stock Option is exercised is, however, an item of tax preference to the optionee
for purposes of the alternative minimum tax. Depending upon the optionee's
individual tax circumstances, there may be minimum tax liability in the year of
exercise as a result of the tax preference item. Further, depending upon the
optionee's individual tax circumstances, a credit against regular tax
corresponding to this minimum tax liability may be allowed in a subsequent year.
In computing alternative minimum taxable income in the year in which the
optionee disposes of shares acquired through the exercise of an Incentive Stock
Option, the basis of the shares so acquired will be increased by the excess of
the fair market value of the shares on the date of exercise over the exercise
price. Subject to certain limitations on deductibility of capital losses, when
the shares acquired upon exercise of an Incentive Stock Option are sold, the
optionee will recognize long-term capital gain or loss equal to the difference
between the amount realized and the exercise price of the Incentive Stock
Option, provided that the sale of the shares is not made within two years from
the date of grant of the Incentive Stock Option or within one year of the date
of issuance of such shares to the optionee. If such holding period requirements
of the Code are not met, the sale of the shares acquired upon exercise of an
Incentive Stock Option is a "disqualifying disposition" and, in general, at the
time of such disposition, the optionee will recognize (i) ordinary income in an
amount equal to the difference between the exercise price and the lesser of the
fair market value of the shares on the date the Incentive Stock Option is
exercised or the amount realized on such disqualifying disposition, and (ii)
capital gain to the extent the amount realized on such disqualifying disposition
exceeds the fair market value of the shares on the date the Incentive Stock
Option is exercised. Alternatively, if the amount realized on such disqualifying
disposition is less than the exercise price, the optionee will recognize a
capital loss in the amount of the difference. Any capital gain or loss will be
long-term or short-term depending upon the holding period of the shares sold. In
the event of a disqualifying disposition, the Company may claim a deduction in
the taxable year of the disqualifying disposition equal to the amount taxable to
the optionee as ordinary income. In the absence of any disqualifying
disposition, the Company is denied any deduction in respect of shares
transferred upon the exercise of an Incentive Stock Option.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" THE ADOPTION OF
THIS PROPOSAL.
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PROPOSAL NO. 5
ADOPTION OF 1998 NON-EMPLOYEE DIRECTORS WARRANT PLAN
On February 10, 1998, the Board of Directors adopted a resolution approving
the 1998 Non-Employee Directors Warrant Plan (the "Warrant Plan") effective as
of that date, subject to approval and ratification by the Shareholders at the
Annual Meeting. The Warrant Plan replaces a similar plan approved by the
Shareholders in 1995, which expired by its terms on December 31, 1997.
The Warrant Plan is established to attract, retain and compensate for the
services of highly qualified individuals who are not employees of the Company or
the Bank as members of their respective Boards of Directors. Under the Warrant
Plan, these outside directors will receive warrants (or options) to purchase
shares of Common Stock only if the Company achieves certain specified
performance levels. The Warrant Plan will be beneficial to the Company and its
shareholders by encouraging the outside directors to have a greater personal
financial stake in the Company through the ownership of Common Stock, thus
underscoring their common interest with the shareholders in increasing the value
of the Common Stock over the long-term. The Warrant Plan is intended to comply
with Rule 16b-3 promulgated under the Exchange Act.
The following description of the Warrant Plan is qualified in its entirety
by reference to the full text of the Warrant Plan as Exhibit B to this Proxy
Statement. Shareholders are urged to read the actual text of the Warrant Plan in
its entirety.
ELIGIBILITY
Participation in the Warrant Plan is limited to members of the Boards of
Directors of the Company and the Bank who are not (i) current employees of the
Company or the Bank, or (ii) otherwise eligible to receive stock options under
the Company's two existing stock option plans for employees ("Participating
Directors"). As of March 20, 1998, there are nine such outside Directors.
Directors who are officers or employees of the Company or the Bank are not
eligible to participate in the Warrant Plan.
SHARES AVAILABLE
A total of 65,000 shares of Common Stock is reserved for issuance under the
Warrant Plan, subject to certain adjustments. Such shares may be authorized by
unissued shares, treasury shares, or shares purchased on the open market.
WARRANT GRANT
The Warrant Plan is designed to provide a benefit to Participating
Directors only if specified performance criteria, which should benefit all
shareholders, are achieved.
Under the Warrant Plan, on each April 1 from 1999 through 2003 (such date
being referred to as a "Grant Date"), each individual elected, re-elected or
continuing as a Participating Director will automatically receive a warrant to
purchase shares of common stock, provided that (i) the Company's return on
equity for its most recently completed fiscal year has reached a minimum level
(set forth below), and (ii) in the case of re-elected or continuing
Participating Directors, that individual shall have attended at least 70% of the
meetings of the Boards and any committees thereof on which he or she served
during preceding fiscal year.
The number of shares subject to Warrants is determined with reference to
the Company's return on equity for the immediately preceding fiscal year. If the
Company's return on equity is at least nine percent (9%) and equals or exceeds
125% of the simple average return on equity of Peer Institutions (as defined in
the Plan), the Warrant shall apply to 1,000 shares. If the Company's return on
equity is at least nine percent (9%) and equals or exceeds 150% of the simple
average return on equity of Peer Institutions, the Warrant shall apply to 2,000
shares. No Warrants shall be granted in respect of any fiscal year for which
fewer than all of the foregoing conditions are satisfied.
For purposes of the Warrant Plan, "Peer Institutions" means a comparison
group consisting of at least six (6) thrift institutions that are operating in
New York State only as a single banking name or franchise and having between
$175 and $500 million in assets, which are organized as publicly-held stock
companies or as subsidiaries of publicly-held stock companies. The return on
equity of the Company and the Peer Institutions means the calculation thereof as
set forth in their respective filings with the Securities and Exchange
Commission.
EXERCISE PRICE
Under the Warrant Plan's formula, the exercise price for Warrants will be
the market value on the Grant Date, defined therein as the higher of (a) the
simple average of the high and low prices at which the Common Stock traded on
the NASDAQ/NMS on the Grant Date, or (b) the last sale price of Common Stock on
the NASDAQ/NMS on the Grant Date.
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LIMITATION ON GRANTING WARRANTS
If, on the Grant Date, the General Counsel of the Company determines, in
his or her sole discretion, that the Company is in possession of material,
undisclosed information that would prevent it from issuing securities, then the
annual grant of Warrants to Participating Directors will be suspended until the
second day after public dissemination of the information (or the first trading
day thereafter). The General Counsel may only suspend the annual grant; the
amount, pricing and other terms of the grant will remain as set forth in the
Warrant Plan, with the exercise price of the Warrant to be determined in
accordance with the formula on the date the Warrant is finally granted.
CESSATION OF SERVICE
Upon termination of service as a Participating Director for reasons other
than retirement at or after age 72 or death, only those Warrants immediately
exercisable at the termination date shall thereafter be exercisable, and only
for three months after termination of service (but in no event after their
expiration date). Upon retirement at or after age 72 or death, all Warrants
granted to a Participating Director shall immediately vest, without the passage
of time, and become fully exercisable by such Participating Director or his or
her legal representative of heirs, for three months after the date of retirement
or death (but in no event after the expiration date).
OTHER INFORMATION
The Warrant Plan will become effective on approval of the Company's
shareholders, and will terminate, for purposes of granting further warrants, on
the day after the Grant Date in 2003, unless terminated earlier by the Board of
Directors or extended by the Board with approval of shareholders.
1933 ACT REGISTRATION
The Company intends to register the shares to be issued or issuable under
the Plan pursuant to a registration statement on Form S-8 as soon as practicable
after the Annual Meeting of Shareholders.
FEDERAL INCOME TAX RAMIFICATIONS OF THE PLAN
The warrants issued pursuant to the Warrant Plan will be non-qualified
stock options. A non-qualified stock option granted under the Plan is taxed in
accordance with Section 83 of the Internal Revenue Code of 1986, as amended, and
the Regulations promulgated thereunder. The following general rules are
applicable to Participating Directors and to the Company for Federal income tax
purposes under existing law, based upon the assumptions that (i) the Warrants
will not have a readily ascertainable fair market value as of the date of the
grant, and (ii) the Common Stock acquired by exercising the non-qualified stock
option will be either transferable or not subject to a substantial risk of
forfeiture as defined in Regulations under Section 83 of the Code:
1. The Participating Director does not realize any taxable income upon the
grant of a Warrant, and the Company is not allowed a business expense deduction
by reason of such grant.
2. The Participating Director will recognize ordinary compensation income
at the time of exercise of a Warrant in an amount equal to the excess, if any,
of the fair market value of the shares on the date of exercise over the exercise
price. In accordance with the Regulations under the Code and applicable state
law, the Company will require the Participating Director to pay to the Company
an amount sufficient to satisfy withholding taxes in respect of such
compensation income at the time of the exercise of the Option.
3. If the Participating Director sells the shares, he or she will recognize
a capital gain or loss in an amount equal to the difference between the amount
realized upon the sale of the shares and his or her basis in the shares (i.e.,
the exercise price plus the amount taxed to the Participating Director as
compensation income). If the Participating Director holds the shares for longer
than the statutory holding period, this gain or loss will be a long-term capital
gain or loss. The statutory holding period presently is one year.
4. In general, the Company will be entitled to a tax deduction in the year
in which compensation income is recognized.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" THE ADOPTION OF
THIS PROPOSAL.
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DEADLINE FOR SUBMISSION OF SHAREHOLDER PROPOSALS
TO BE PRESENTED AT 1999 ANNUAL MEETING
Any proposal intended to be presented by any shareholder at the 1999 Annual
Meeting of the Company must be received by the Secretary of the Company at the
principal executive offices, 33 E. Genesee Street, Skaneateles, New York
13152-0460, no later than November 20, 1998, to be considered for inclusion in
the Proxy Statement and proxy relating to the 1999 Annual Meeting.
ANNUAL REPORT TO SHAREHOLDERS
A copy of the Company's Annual Report to Shareholders for the year ended
December 31, 1997 accompanies this Proxy Statement. The Annual Report includes a
general description of the business of Skaneateles Bancorp, Inc., management's
discussion and analysis of financial condition and results of operations, and
the Company's consolidated financial statements, with the independent auditor's
report thereon.
ANNUAL REPORT ON FORM 10-K
Upon receipt of a written request, the Company also will furnish to
shareholders, without charge, a copy of the Company's Annual Report on Form
10-K, for the year ended December 31, 1997. Such a written request should be
directed to J. Daniel Mohr, Investor Relations, Skaneateles Bancorp, Inc., 33 E.
Genesee Street, Skaneateles, New York 13152-0460.
OTHER MATTERS
Other than procedural matters with respect to the conduct of the meeting,
management is not aware of any business to come before the meeting other than
those matters described in this Proxy Statement. However, if any other matters
should properly come before the meeting, it is intended that the proxy set forth
in the accompanying proxy will be voted with respect to those other matters in
accordance with the judgment of the person voting the proxies.
The cost of the solicitation of proxies will be borne by the Company. The
Company has engaged Regan & Associates, Inc. for the purpose of soliciting
proxies. The cost of these services is approximately $3,000, plus out-of-pocket
expenses. The Company will reimburse brokerage firms and other custodians,
nominees and fiduciaries for reasonable expenses incurred by them in sending the
proxy materials to the beneficial owners of Common Stock. In addition to
solicitations by mail, directors, officers and employees of the Company may
solicit proxies personally or by telephone without additional compensation.
By Order of the Board of Directors,
JOHN P. DRISCOLL
Chairman, President and
Chief Executive Officer
Skaneateles, New York
March 20, 1998
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APPENDIX A
SKANEATELES BANCORP, INC.
1998 STOCK OPTION PLAN
1. PURPOSE.
The Skaneateles Bancorp, Inc. 1998 Stock Option Plan (the "Plan"),
effective , 1998, is designed to attract and retain key employees of Skaneateles
Bancorp, Inc., a Delaware corporation (the "Company"), and its wholly owned
subsidiary, Skaneateles Savings Bank (the "Bank"), and to encourage them to
contribute to the success of the Bank and the Company by providing the
opportunity for stock ownership. The Company may grant under the Plan both
incentive stock options within the meaning of Section 422 of the Internal
Revenue Code ("Incentive Stock Options") and stock options that do not qualify
for treatment as Incentive Stock Options ("Nonstatutory Stock Options"). Unless
expressly provided to the contrary, all references herein to "Options" include
both Incentive Stock Options and Nonstatutory Stock Options.
2. ADMINISTRATION.
(a) The Plan shall be administered by a stock option committee (the
"Committee") designated by the Board of Directors of the Company (the "Board").
(b) Subject to the express provisions of the Plan, the Committee shall have
the authority, in its discretion and without limitation:
(i) to determine the individuals to whom Options are granted, whether
an Option is intended to be an Incentive Stock Option or a Nonstatutory
Stock Option, the times when such individuals shall be granted Options, the
number of shares to be subject to each Option, the term of each Option, the
date when each Option shall become exercisable, whether an Option shall be
exercisable in whole or in part in installments, the number of shares to be
subject to each installment, the date each installment shall become
exercisable, the term of each installment, and the option price of each
Option;
(ii) to accelerate the date of exercise of any Option or any
installment thereof (irrespective of any vesting schedule that may have
been part of the grant of such Option); and
(iii) to make all other determinations necessary or advisable for
administering the Plan.
(c) The Committee shall act by majority vote. The Committee's decision on
any question concerning or involving the interpretation or administration of the
Plan shall, as between the Company and Option holders, be final and conclusive.
The Committee may consult with counsel, who may be counsel for the Company, and
shall not incur any liability for any action taken in good faith in reliance
upon the advice of counsel.
3. ELIGIBILITY.
(a) Participants in the Plan shall be selected by the Committee from among
the employees of the Company or its subsidiaries. All references in this Plan to
employees of the Company shall mean and include employees of any subsidiary of
the Company, as such term is defined in Section 424 of the Internal Revenue
Code.
(b) The right of the Company to terminate the employment of a Plan
participant at any time, with or without cause, shall in no way be restricted by
the existence of the Plan, any Option granted hereunder, or any stock option
agreement relating thereto.
4. NUMBER OF SHARES.
Subject to the provisions of Section 5, the total number of shares of the
Company's common stock, par value $.01 per share (the "Common Stock"), which may
be issued under Options granted pursuant to the Plan shall not exceed 71,500.
Shares subject to the Plan may be either authorized but unissued shares or
shares that were once issued and subsequently reacquired by the Company. If any
Option is surrendered before exercise, or lapses without exercise, or for any
other reason ceases to be exercisable, the shares subject to such Option shall
continue to be available for the grant of Options under the Plan. The Plan shall
terminate on , 2008, or the earlier dissolution of the Company, and no Option
shall be granted after such date.
5. ADJUSTMENT PROVISIONS.
In the event that:
(a) in connection with a merger or consolidation of the Company or a
sale by the Company of all or a part of its assets, the outstanding shares
of Common Stock are exchanged for a different number or class of shares of
stock or other securities of the Company, or for shares of the stock or
other securities of any other entity; or
(b) new, different or additional shares or other securities of the
Company or of another entity are received by the holders of Common Stock,
whether by way of recapitalization or otherwise; or
(c) any dividend in the form of stock is made to the holders of Common
Stock, or any stock split or reverse split pertaining to Common Stock is
effected;
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<PAGE> 19
then the Board shall make the appropriate adjustment to:
(i) the number and kind of shares or other securities that may be
issued upon exercise of Options yet to be granted;
(ii) the option price per share to be paid upon exercise of each
outstanding Option; and
(iii) the number and kind of shares or other securities covered by
each outstanding Option.
6. ANNUAL LIMITATION ON INCENTIVE STOCK OPTIONS.
The aggregate fair market value (determined as of the date the Option is
granted) of the shares with respect to which Incentive Stock Options are
exercisable for the first time by a grantee during any calendar year (under all
plans of the Company and any parent and subsidiaries of the Company) shall not
exceed $100,000.
7. OPTION PRICE.
(a) For purposes of the Plan, the term "Grant Date" shall mean the date on
which the grant of an Option is duly authorized by the Board. The option price
at which an Option shall be exercisable shall be at least the Fair Market Value
(as such term is defined below) per share of the Common Stock on the Grant Date
of such Option. However, if an Option is granted to any person who would, after
the grant of such Option, be deemed to own stock possessing more than 10 percent
of the total combined voting power of all classes of stock of the Company, or of
any parent or subsidiary of the Company (a "Ten Percent Shareholder"), the
option price shall be not less than 110 percent of the fair market value per
share of the Common Stock on the Grant Date of such Option.
(b) For purposes of the Plan, Fair Market Value of the Common Stock shall
be the the higher of: (a) the simple average of the high and low prices at which
the Common Stock is traded on the Grant Date, as quoted on NASDAQ/NMS on that
date; or (b) the price of the last sale of Common Stock on the Grant Date as
quoted by NASDAQ/NMS. If the Company's Common Stock is not listed on NASDAQ/NMS,
then the foregoing price determination shall be made by reference to any
National Exchange (as that term is defined by Section 12 of the Securities and
Exchange Act of 1934) or any other electronic transfer or exchange service on
which the Company's Common Stock may be listed.
8. TERM OF OPTIONS.
Subject to the provisions of Section 18, the term of each Option shall be
determined by the Committee, but in no event shall an Option be exercisable,
either in whole or in part, after the expiration of ten years from the Grant
Date of such Option. Notwithstanding the foregoing, an Incentive Stock Option
granted to a Ten Percent Shareholder shall not be exercisable, either in whole
or in part, after the expiration of five years from the Grant Date of such
Option. The Committee and an Option holder may at any time by mutual agreement
terminate any Option held by such Option holder.
9. STOCK OPTION AGREEMENTS.
Each Option shall be evidenced by a written agreement which sets forth: (a)
the number of shares subject to the Option; (b) the option price; (c) the
vesting schedule of the Option or a statement that the Option is immediately
exercisable in full; (d) the expiration date of the Option; (e) the method of
payment on exercise of the Option; (f) whether the Option is an Incentive Stock
Option or a Nonstatutory Stock Option; and (g) such additional provisions, not
inconsistent with the Plan, as the Committee may prescribe.
10. EXERCISE OF OPTIONS.
(a) Each Option, or any installment thereof, shall be exercised, whether in
whole or in part, by giving written notice to the Company at its principal
office, specifying the number of shares of Common Stock being purchased and the
purchase price being paid, and accompanied by payment in full of the purchase
price.
(b) An Option holder shall pay for the shares subject to the Option by one
or any combination of the following methods, as determined by the Committee on
the Grant Date of the Option: (i) in cash, or (ii) by delivery of shares of
Common Stock already owned by the Option holder. Any shares of Common Stock that
are so delivered to pay the option price shall be valued at Fair Market Value on
the date of such Option exercise.
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<PAGE> 20
(c) The exercise of an Option shall be conditioned upon the Option holder
making arrangements satisfactory to the Committee for the payment to the Company
of the amount of all taxes required by any governmental authority to be withheld
and paid over by the Company to the governmental authority on account of the
exercise. The payment of such withholding taxes to the Company shall be made by
one or any combination of the following methods, as determined by the Committee:
(i) in cash, or (ii) by the Company withholding such taxes from any other
compensation owed to the Option holder by the Company or any of its
subsidiaries.
11. NON-ASSIGNMENT.
Each Option by its terms shall provide that it is not transferable by the
Option holder otherwise than by will or the laws of descent and distribution,
and that during the lifetime of the Option holder, it is exercisable only by
him.
12. DEATH OF OPTION HOLDER.
In the event that an Option holder shall die (i) while he is an employee,
director or advisor of the Company, or within three months after termination of
such status, and (ii) prior to the complete exercise of Options granted to him
under the Plan, then any such remaining Options with exercise periods
outstanding may be exercised, in whole or in part, within one year after the
date of the Option holder's death and then only:
(a) by the Option holder's estate or by such person(s) to whom the
Option holder's rights hereunder shall have passed under his will or the
laws of descent and distribution;
(b) to the extent that the Option holder was entitled to exercise the
Option on the date of his death, and subject to all of the conditions on
exercise imposed hereby; and
(c) prior to the expiration of the term of the Option.
13. TERMINATION OF EMPLOYMENT.
(a) During the lifetime of an Option holder, an Option shall be exercisable
only while he is an employee, director or advisor of the Company and has been an
employee, director or advisor continuously since the Grant Date of the Option,
or within three months after the date on which he ceases to be such an employee,
director or advisor for any reason; provided, however, that in the case of an
Option holder who is permanently and totally disabled (within the meaning of
Section 22(e)(3) of the Internal Revenue Code), such three-month period shall
instead be one year.
(b) Any Option that is exercisable after termination of service as an
employee, director or advisor, as provided by Section 13(a), shall be
exercisable only to the extent that the Option holder would have been entitled
to exercise the Option on the date of such termination; and further, no Option
shall be exercisable after the expiration of the term thereof.
(c) For purposes of this Section 13, an employment relationship shall be
treated as continuing during the period when an Option holder is on military
duty, sick leave or other bona fide leave of absence if the period of such leave
does not exceed 90 days or, if longer, so long as a statute or contract
guarantees the Option holder's right to re-employment with the Company. When the
period of leave exceeds 90 days and the individual's right to re-employment is
not so guaranteed, the employment relationship shall be deemed to have
terminated on the 91st day of such leave.
14. ADDITIONAL REQUIREMENTS.
Each grant of an Option under the Plan, and (unless a Registration
Statement with respect thereto shall then be effective under the Securities Act
of 1933, as amended (the "Securities Act")) each issuance of shares of Common
Stock upon exercise of an Option, shall be conditioned upon the Company's prior
receipt of a duly executed letter of investment intent, in form and content
satisfactory to counsel for the Company, of the Option holder that such Option
and such shares are being acquired by such holder solely for investment and not
with a view to, or for sale in connection with, any distribution thereof, nor
with any present intention of selling, transferring or disposing of the same.
Any shares of Common Stock acquired by the holder upon exercise of the Option
may not thereafter be offered for sale, sold or otherwise transferred unless (a)
a Registration Statement with respect thereto shall then be effective under the
Securities Act, and the Company shall have been furnished with proof
satisfactory to it that such holder has complied with applicable state
securities laws, or (b) the Company shall have received an opinion of counsel in
form and substance satisfactory to counsel for the Company that the proposed
offer for sale, sale or transfer is exempt from the registration requirements of
the Securities Act and may otherwise be transferred in compliance with the
Securities Act and in compliance with any other applicable law, including all
applicable state securities laws; and the Company may withhold transfer,
registration and delivery of such securities until one of the foregoing
conditions shall have been met.
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<PAGE> 21
15. LISTING AND REGISTRATION.
The Company, in its discretion, may postpone the issuance and delivery of
shares upon any exercise of an Option until completion of such stock exchange
listing, or registration or other qualification of such shares under any state
or federal law, rule or regulation, as the Company may consider appropriate; and
may require any person exercising an Option to make such representations and
furnish such information as it considers appropriate in connection with the
issuance of the shares in compliance with applicable law, including without
limitation federal or state laws regulating the sale or issuance of securities.
Notwithstanding the foregoing, the Company shall be under no obligation
whatsoever to list, register or otherwise qualify any shares subject to Options
under the Plan.
16. RIGHTS AS A SHAREHOLDER.
No Option holder shall have any rights as a shareholder with respect to the
shares of Common Stock purchased by him pursuant to the exercise of an Option
until the date of the issuance to him of a stock certificate representing such
shares. No adjustment shall be made for dividends or for distributions of any
other kind with respect to shares for which the record date is prior to the date
of the issuance to the Option holder of a certificate for the shares.
17. EFFECT OF ACQUISITION, REORGANIZATION OR LIQUIDATION.
Notwithstanding any provision to the contrary in this Plan or in any
agreement evidencing Options granted hereunder, all Options with exercise
periods then currently outstanding shall become immediately exercisable in full
and remain exercisable until their expiration in accordance with their
respective terms upon the occurrence of either of the following events:
(a) the first purchase of shares pursuant to a tender or exchange
offer which is intended to effect the acquisition of more than 50% of the
voting power of the Company (other than a tender or exchange offer made by
the Company); or
(b) approval by the Company's shareholders of: (i) a merger or
consolidation of the Company with or into another corporation (other than a
merger or consolidation in which the Company is the surviving corporation
and which does not result in any reclassification or reorganization of the
shares), (ii) a sale or disposition of all or substantially all of the
Company's assets, or (iii) a plan of complete liquidation or dissolution of
the Company.
18. CONDITIONAL OPTIONS.
Prior to approval and ratification of the Plan by the shareholders of the
Company, the Committee may grant "Conditional Options" under the Plan. In
addition, in the event that any amendment to the Plan requires approval and
ratification by the shareholders, then prior to such approval and ratification
the Committee may grant Conditional Options under the Plan. Conditional Options
may be granted under the Plan only under the following conditions: (a) a
Conditional Option shall be clearly identified as a Conditional Option; (b) the
grant of a Conditional Option shall be expressly conditioned upon the approval
and ratification of the Plan (or of the amendment to the Plan, as the case may
be) by the shareholders of the Company; (c) such shareholder approval and
ratification shall occur no later than the Annual Meeting of Shareholders of the
Company next following the effective date of the Plan (or of the amendment to
the Plan, as the case may be); and (d) notwithstanding any other provision of
the Plan, no holder of a Conditional Option shall have any right to exercise
such Option prior to such approval and ratification of the Plan (or of the
amendment to the Plan, as the case may be) by the shareholders. Notwithstanding
any other provision of the Plan, prior to approval and ratification of the Plan
(or of the amendment to the Plan, as the case may be) by the shareholders of the
Company, no holder of a Conditional Option shall have any right to sell, assign,
transfer, pledge or encumber the Conditional Option, or the shares underlying
the Conditional Option, except by will or the laws of descent and distribution.
If the shareholders of the Company fail to approve and ratify the Plan (or the
amendment to the Plan, as the case may be) by the date of such Annual Meeting of
Shareholders, then all Conditional Options granted hereunder conditioned upon
such approval and ratification shall be automatically cancelled and shall
immediately become null and void.
19. AMENDMENT OF PLAN.
The Plan may be amended at any time by the Committee, provided that (except
for amendments made pursuant to Section 5) no amendment made without the
approval and ratification of the shareholders of the Company shall increase the
total number of shares which may be issued under Options granted pursuant to the
Plan, extend the latest date upon which Options may be granted or shall be
exercisable, change the class of persons eligible to be granted Options, or
otherwise materially increase the benefits accruing to participants under the
Plan.
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<PAGE> 22
20. NO RESERVATION OF SHARES.
The Company shall be under no obligation to reserve shares of Common Stock
or other securities to satisfy the exercise of Options. The grant of Options
hereunder shall not be construed as constituting the establishment of a trust of
such shares, and no particular shares shall be identified as optioned or
reserved for issuance hereunder. The Company shall have complied with the terms
of the Plan if, at the time of its delivery of shares upon the exercise of any
Option, it has a sufficient number of shares authorized and unissued, or issued
and held in its treasury, which may then be delivered under the Plan,
irrespective of the date on which such shares were authorized.
21. APPLICATION OF PROCEEDS.
The proceeds of the sale of shares of Common Stock by the Company under the
Plan will constitute general funds of the Company and may be used by the Company
for any purpose.
22. CHOICE OF LAWS.
The validity, interpretation and administration of the Plan and of any
rules, regulations, determinations or decisions made hereunder, and the rights
of any and all persons having or claiming to have any interest herein or
hereunder, shall be determined exclusively in accordance with the laws of the
State of New York (without regard to the choice of law provisions of such laws).
23. IN GENERAL.
(a) As used herein, the masculine pronoun shall include the feminine and
the neuter, as appropriate to the context.
(b) As used herein, the term "Section" shall mean the appropriate Section
of the Plan unless the context clearly indicates otherwise.
* * * * *
THE FOREGOING SKANEATELES BANCORP, INC. 1998 STOCK OPTION PLAN WAS DULY ADOPTED
BY THE BOARD OF DIRECTORS ON FEBRUARY 10, 1998 AND THE SHAREHOLDERS OF THE
COMPANY ON APRIL 21, 1998.
-------------------------------
J. David Hammond, Secretary
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APPENDIX B
SKANEATELES BANCORP, INC.
1998 NON-EMPLOYEE DIRECTORS WARRANT PLAN
The Skaneateles Bancorp, Inc. 1998 Non-Employee Directors Warrant Plan (the
"Plan") is established to attract, retain and compensate for the services of
highly qualified individuals who are not employees of Skaneateles Bancorp, Inc.
(the "Company") or its wholly owned subsidiary, Skaneateles Savings Bank (the
"Bank"), as members of their respective Boards of Directors, and to enable them
to increase their ownership in the Company's Common Stock, par value per share
$.01 (the "Common Stock"). The Plan will be beneficial to the Company and its
stockholders since it will allow these directors to have a greater personal
financial stake in the Company through the ownership of Company stock, in
addition to underscoring their common interest with stockholders in increasing
the value of the Common Stock over the long term.
1. ELIGIBILITY. All members of the Boards of Directors of the Company and
the Bank (including those elected after the effective date of this Plan) who are
not (i) current employees of the Company or the Bank, or (ii) otherwise eligible
for stock option grants pursuant to the Company's stock option plans for
employees (such individuals being referred to in this Plan as "Non-Employee
Directors") are eligible to participate in this Plan.
2. WARRANTS. All Warrants granted under this Plan shall be deemed
non-qualified stock options ("NQSO").
3. SHARES AVAILABLE.
A. NUMBER OF SHARES AVAILABLE. The total number of Shares that may be
issued pursuant to Warrants granted hereunder shall not exceed 65,000.
Shares subject to Warrants granted hereunder may be authorized but unissued
shares, treasury shares, shares purchased on the open market or shares
issued pursuant to a rights offering or dividends. If any Warrant is
surrendered before exercise, or lapses without exercise, or for any other
reason ceases to be exercisable, in whole or in part, the Shares reserved
for the unexercised portion thereof shall continue to be available for the
grant of Warrants hereunder.
B. ADJUSTMENTS. In event of a reorganization, stock split, stock
dividend, distribution in shares, combination of shares, merger
consolidation, rights offering, or any other change in the corporate
structure of shares of the Company, then adjustments shall be made in the
number and kind of shares authorized by this Plan, in the number and kind
of shares covered by, and in the option price of, outstanding Warrants
under this Plan if, and in the same manner as, such adjustments are made to
any option issued under the Company's then current incentive stock option
plan.
4. GRANTS OF WARRANTS.
A. ANNUAL GRANTS BASED ON COMPANY'S RETURN ON EQUITY. On each April 1,
beginning in 1999 and continuing through 2003 (each, a "Grant Date"), each
individual elected or continuing as a Non-Employee Director shall be
granted a Warrant to purchase, for the price and on the terms and
conditions set forth in this Plan:
(i) 1,000 shares of Common Stock, if the Company's Return on
Equity (as defined below) for its immediately preceding fiscal year
(a) is at least nine percent (9%) and (b) equals or exceeds 125% of
the simple average Return on Equity of Peer Institutions (as defined
below);
(ii) 2,000 shares of Common Stock, if the Company's Return on
Equity for its immediately preceding fiscal year (a) is at least nine
percent (9%) and (b) equals or exceeds equals 150% of the simple
average Return on Equity of Peer Institutions;
In the case of any re-elected or continuing director, the grant of any Warrant
shall be subject to the condition that he or she shall have attended (or been
excused for an appropriate reason from attending) at least seventy percent (70%)
of the meetings of the full Board of Directors of the Company or the Bank, as
the case may be, and of any applicable committees thereof on which he or she
served during the preceding fiscal year while the Plan is in effect.
No Warrants shall be granted in respect of any fiscal year unless all of the
conditions of this Section 4 are satisfied.
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B. DEFINITIONS. For purposes of this Plan:
(i) "Peer Institutions" means at least six (6) thrift
institutions that are operating in New York State only as a single
banking name or franchise and having between $175 and $500 million in
assets, which are organized as publicly-held stock companies or as
subsidiaries of publicly-held stock companies.
(ii) "Return on Equity" means the calculation thereof for the
Peer Institutions as set forth in their respective filings with the
Securities and Exchange Commission.
C. LIMITATION. Notwithstanding anything to the contrary contained
herein, if, on any Grant Date, counsel to the Company determines, in his or
her sole discretion, that the Company is in possession of material,
undisclosed information about the Company which might reasonably be
determined to have an effect on the trading price of its securities, the
annual grant of Warrants to Non-Employee Directors shall be suspended until
the second day after public dissemination of such information and the price
and other relevant terms shall then be determined by reference to such
later date. If, on a Grant Date, the Common Stock is not traded on the
National Association of Securities Dealers Automated Quotation National
Market System ("NASDAQ/NMS") or other exchange as described in Section 5,
then the grant shall be made the next day thereafter on which Common Stock
is so traded.
D. DECLINING A WARRANT. Any Non-Employee Director may, by written
notice received by the Company prior to the Grant Date of such Warrant,
elect to decline a Warrant, in which case such Warrant shall not be granted
to him or her, but in no event shall the Company pay or provide such
Non-Employee Director anything of value in lieu of the declined Warrant. An
election to decline a Warrant shall be revocable by a Non-Employee Director
by written notice received by the Company prior to the Grant Date of such
Warrant.
5. PRICE. The per share exercise price of each Warrant shall be the higher
of the following ("Market Value"): (a) the simple average of the high and low
prices at which the Common Stock is traded on the date of the grant, as quoted
on NASDAQ/NMS on that date; or (b) the price of the last sale of Common Stock on
that date as quoted by NASDAQ/NMS. If the Company's Common Stock is not listed
on NASDAQ/NMS, then the foregoing price determination shall be made by reference
to any National Exchange (as that term is defined by Section 12 of the
Securities and Exchange Act of 1934) or any other electronic transfer or
exchange service on which the Company's Common Stock may be listed.
6. EXPIRATION. To the extent any vested Warrant remains unexercised on the
tenth anniversary of the Grant Date, it shall be forfeited.
7. MANNER OF EXERCISE. A Warrant shall be exercised by written notice to
the Company specifying the number of whole Shares to be purchased and
accompanied by full payment, in cash, for such Shares. Alternatively, the
exercise price of a Warrant may be paid, in whole or in part, by delivery of
Shares already owned by the Non-Employee Director (or his estate), which will be
accepted in exchange at the Market Value of the Shares on the date of exercise.
Upon determining that compliance with this Plan has occurred, the Company shall
cause to be issued certificates for the Shares purchased.
8. CESSATION OF SERVICE.
A. Except as provided in Section 9 hereof, upon termination of service
as a Participating Director, only those Warrants immediately exercisable at
the termination date shall thereafter be exercisable. Any such Warrants
must be exercised within three months of cessation of service (but in no
event after the expiration date) or they shall be forfeited.
B. If a Non-Employee Director becomes an employee of the Company or
the Bank or otherwise no longer satisfies the requirements for eligibility
set forth in Section 1 hereof, then all Options already granted to him
hereunder shall continue in full force and effect, in accordance with their
original terms, for so long as he remains a member of the Board of
Directors, but he shall be entitled to no further grants of Warrants
hereunder.
9. RETIREMENT; DEATH. Upon his or her retirement from Board service at or
after age 72 or death, all Warrants granted to a Participating Director shall
immediately vest, without the passage of time, and become fully exercisable by
such Participating Director or his or her legal representative or heirs,
notwithstanding any other provision of the Plan to the contrary. Such Warrants
must be exercised, in whole or in part, within three months from date of
retirement or death (but in no event after the expiration date) or they shall be
forfeited.
10. ADMINISTRATION AND AMENDMENT OF THE PLAN. This Plan shall be
administered by the Board of Directors of the Company. This Plan may be
terminated or amended by the Board of Directors as it deems advisable. However,
an amendment revising timing of Warrant grants, the recipients of Warrants, the
pricing mechanism, vesting schedule or option period of, or amount of shares
under a Warrant shall not be made more frequently than every six months unless
otherwise necessary to comply with the Internal Revenue Code of 1986, as
amended, or with the Employee Retirement Income Security Act of 1974, as
amended. No amendment may revoke or alter in a manner unfavorable to the
grantees any Warrants then outstanding, nor may the
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<PAGE> 25
Board amend this Plan without stockholder approval where the absence of such
approval would cause the Plan to fail to comply with Rule 16b-3 under the
Securities Exchange Act of 1934 (the "Act"), or any other requirement of
applicable law or regulation. Warrants may not be granted under the Plan in
respect of any fiscal year ending after December 31, 2002.
11. NON-TRANSFERABILITY. No Warrant granted under this Plan is transferable
other than by will or the laws of descent and distribution. During the
Non-Employee Director's lifetime, a Warrant may only be exercised by him or her
or his or her guardian or legal representative.
12. COMPLIANCE WITH SEC REGULATIONS. It is the Company's intent that the
Plan comply in all respects with Rule 16b-3 of the Act and any regulations
promulgated thereunder. If any provision of this Plan is later found not to be
in compliance with the Rule, the provision shall be deemed null and void. All
grants and exercises of Warrants under this Plan shall be executed in accordance
with the requirements of Section 16 of the Act, as amended, and any regulations
promulgated thereunder.
13. NOTICES. All notices and other communications required or permitted
under this Plan shall be written, and shall be either delivered personally or
sent by registered or certified first-class mail, postage prepaid and return
receipt requested, or by telex or telecopier, addressed as follows: if to the
Company, to the Company's principal office at P.O. Box 460, Skaneateles, New
York 13152, Attention: President; and if to a Participating Director or his
legal representative, to the address last furnished by such person to the
Company. Each such notice and communication that is delivered personally shall
be deemed to have been given when delivered, given by mail shall be deemed to
have been given when it is deposited in the United States mail in the manner
specified herein, and given by telex or telecopier shall be deemed to have been
given when it is so transmitted and the appropriate answer back is received. A
party may change its address for the purpose hereof by giving notice in
accordance with the provisions of this Section 15.
14. NONTRANSFERABILITY. No Warrant granted under this Plan is transferable
other than by will or the laws of descent and distribution. During a
Participating Director's lifetime, an Warrant may only be exercised by him.
15. NO ADDITIONAL RIGHTS. Except as provided in this Plan, no Participating
Director shall have any claim or right to be granted an Warrant under this Plan.
Neither this Plan nor any action taken hereunder shall be construed as giving
any person any right to continue to serve as a member of the Board of Directors.
No person, estate or other entity shall have any rights as a stockholder of the
Company with respect to Shares subject to Warrants until a certificate for such
Shares has been delivered to the person exercising the Warrant in accordance
with the terms of this Plan.
16. CHOICE OF LAW. The validity, interpretation and administration of this
Plan and of any rules, regulations, determinations or decisions made hereunder,
and the rights of any and all persons having or claiming to have any interest
herein or hereunder, shall be determined exclusively in accordance with the laws
of the State of Delaware (without regard to the choice of law provisions of such
laws).
17. INTERPRETATION. As used herein, and as appropriate to the context, the
masculine pronoun shall include the feminine and the neuter, and the singular
shall include the plural.
18. MISCELLANEOUS. Except as provided in this Plan, no Non-Employee
Director shall have any claim or right to be granted a Warrant under this Plan.
Neither the Plan nor any action thereunder shall be construed as giving any
director any right to be retained in the service of the Company.
19. EFFECTIVE DATE. The Plan shall become effective immediately following
the annual meeting of stockholders at which time stockholder approval of the
Plan is obtained, but no Warrant shall be issued hereunder to any Non-Employee
Director until after the Company's 1998 Annual Meeting of Stockholders.
* * * * *
THE FOREGOING SKANEATELES BANCORP, INC. 1998 NON-EMPLOYEE DIRECTORS WARRANT PLAN
WAS DULY ADOPTED BY THE BOARD OF DIRECTORS ON FEBRUARY 10, 1998 AND THE
SHAREHOLDERS OF THE COMPANY ON APRIL 21, 1998.
---------------------------------
J. David Hammond, Secretary
22
<PAGE> 26
/X/ PLEASE MARK VOTES REVOCABLE PROXY
AS IN THIS EXAMPLE SKANEATELES BANCORP, INC.
ANNUAL MEETING OF STOCKHOLDERS
APRIL 21, 1998
The undersigned hereby appoints Gary L. Karl proxy for the undersigned with
full power of substitution, to vote all shares of the Common Stock of
SKANEATELES BANCORP, INC. (the "Company") owned by the undersigned at the Annual
Meeting of Stockholders to be held at the Skaneateles Country Club on Tuesday,
April 21, 1998 at 10:00 a.m. local time, and at any adjournments thereof:
LEAVE THIS AREA
BLANK FOR ADDRESS
Please be sure to sign and date Date
this Proxy in the box below.
-------------------------------------------
----------Stockholder sign above ------- Co-holder (if any) sign above
<TABLE>
<CAPTION>
<S> <C> <C> <C>
FOR ALL
1. The election as directors of all nominees listed (except as FOR WITHHOLD EXCEPT
marked to the contrary below): / / / / / /
WALTER D. COPELAND, JOHN P. DRISCOLL, CARL W. GERST, JR.,
JOHN B. HENRY
INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL
NOMINEE, MARK "FOR ALL EXCEPT" AND WRITE THAT NOMINEE'S NAME
IN THE SPACE PROVIDED.
2. The approval of KPMG Peat Marwick LLP as the Company's FOR AGAINST ABSTAIN
independent auditors for the fiscal year ending December / / / / / /
31, 1998.
3. The proposal to amend the Company's certificate of / / / / / /
incorporation to increase the number of shares of Common
Stock, par value $.01 per share, which the Corporation has
authority to issue, from 2,500,000 to 4,000,000.
4. The proposal to ratify and approve the 1998 Stock Option / / / / / /
Plan.
5. The proposal to ratify and approve the 1998 Non-Employee / / / / / /
Director Warrant Plan.
</TABLE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH OF THE
LISTED PROPOSALS.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS.
The undersigned acknowledges receipt from the Company prior
to the execution of this proxy of a Notice of Meeting and of a
Proxy Statement dated March 20, 1998.
Please sign exactly as your name appears on this card. When
shares are held by joint tenants, both should sign. When signing
as attorney, executor, administrator, trustee or guardian, please
so indicate.
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DETACH ABOVE CARD, SIGN, DATE AND MAIL IN POSTAGE PAID ENVELOPE PROVIDED.
SKANEATELES BANCORP, INC.
PLEASE ACT PROMPTLY
SIGN, DATE & MAIL YOUR PROXY CARD TODAY
