[LOGO]
March 25, 1996
Dear Fellow Shareholder:
On behalf of your Board of Directors, it is with great pleasure that I
extend to you a cordial invitation to attend the Annual Meeting of
Shareholders of ONBANCorp, Inc. (the "Company"). The Annual Meeting will be
held on Tuesday, April 23, 1996, at 10:00 a.m. at the Marriott Hotel located
at 6302 Carrier Parkway, East Syracuse, New York 13057. Your Board of
Directors and Management look forward to greeting personally those
shareholders able to attend.
Enclosed please find your Notice of Annual Meeting, Proxy Statement, form
of proxy for voting your shares and copy of the Company's Annual Report.
Please review these materials carefully. At the Annual Meeting you will be
asked to elect a slate of directors and to ratify the appointment of the
independent auditors. Your Board of Directors has unanimously approved each
of these two proposals and unanimously recommends that you vote FOR them. In
addition, you will be asked to consider and vote upon each of six proposals
submitted by certain shareholders of the Company. The Board of Directors has
reviewed carefully each of these shareholder proposals and unanimously
recommends that you vote AGAINST them. Finally, at the Annual Meeting,
management will present a report on the operations and activities of the
Company and will be pleased to answer your questions.
Your vote is very important regardless of the number of shares you own.
Whether or not you expect to attend, please sign, date and mail the enclosed
proxy card as soon as possible so that your shares will be represented.
If you have any questions, please call (315) 424-5995 or 1-800-311-5995.
Thank you for your continued support.
Sincerely,
/s/ Robert J. Bennett
Robert J. Bennett
Chairman, President and Chief
Executive Officer
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[LOGO]
101 South Salina Street
Syracuse, New York 13202
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders (the
"Annual Meeting") of ONBANCorp, Inc. (the "Company") will be held at the
Marriott Hotel located at 6302 Carrier Parkway, East Syracuse, New York
13057, on Tuesday, April 23, 1996 at 10:00 a.m. for the purpose of
considering and voting upon the following matters:
(1) To elect five directors, each to hold office for a term of three years
or until their successors shall have been duly elected and qualified;
(2) To ratify the appointment by the Board of Directors of the firm of
KPMG Peat Marwick LLP as independent auditors for the Company for the
fiscal year ending December 31, 1996;
(3) To consider and vote upon six proposals submitted by certain
shareholders of the Company which are more fully described in the
attached Proxy Statement; and
(4) To transact such other business as may properly come before the
meeting or any adjournments or postponements thereof.
Pursuant to the By-Laws, the Board of Directors has fixed March 21, 1996
as the record date for the determination of shareholders entitled to notice
of and to vote at the Annual Meeting. Only holders of common stock of record
at the close of business on March 21, 1996 will be entitled to notice of and
to vote at the meeting or at any adjournment or postponement thereof.
WE URGE EACH SHAREHOLDER TO SIGN, DATE AND MAIL THE ENCLOSED PROXY CARD
WITHOUT DELAY IN THE ENCLOSED POSTAGE PAID ENVELOPE WHETHER OR NOT YOU PLAN
TO ATTEND THE MEETING. ANY SHAREHOLDER PRESENT AT THE MEETING MAY REVOKE A
PREVIOUSLY DELIVERED PROXY AND VOTE PERSONALLY ON EACH MATTER.
By Order of the Board of Directors
David M. Dembowski
Secretary
March 25, 1996
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ONBANCorp, Inc.
101 South Salina Street
Syracuse, New York 13202
(315) 424-4400
PROXY STATEMENT
FOR ANNUAL MEETING OF SHAREHOLDERS
April 23, 1996
GENERAL
This Proxy Statement and the accompanying form of proxy are being
furnished to shareholders of ONBANCorp, Inc. ("ONBANCorp" or the "Company"),
the holding company of OnBank ("OnBank"), OnBank & Trust Co. ("OnBank &
Trust") and Franklin First Savings Bank ("Franklin," and, together with
OnBank and OnBank & Trust, the "Banks"), in connection with the solicitation
of proxies by the Board of Directors of ONBANCorp for use at the Annual
Meeting of Shareholders (the "Annual Meeting") scheduled to be held on
Tuesday, April 23, 1996 at 10:00 a.m. at the Marriott Hotel located at 6302
Carrier Parkway, East Syracuse, New York 13057 and at any adjournments or
postponements thereof. The Annual Report to Shareholders for the fiscal year
ended December 31, 1995 accompanies this Proxy Statement. This Proxy
Statement is being mailed to shareholders on or about March 25, 1996.
If the enclosed form of proxy is properly executed and returned to the
Company in time to be voted at the Annual Meeting, the shares represented
thereby will be voted in accordance with the instructions marked thereon.
Executed but unmarked proxies will be voted (i) FOR the election of five
directors for a three-year term; (ii) FOR the ratification of the appointment
of KPMG Peat Marwick LLP as independent auditors for the Company for the
fiscal year ending December 31, 1996; and (iii) AGAINST each of six proposals
submitted by certain shareholders of the Company and more fully described
below. If any other matters are properly brought before the Annual Meeting,
the persons named in the accompanying proxy will vote the shares represented
by such proxies on such matters in such manner as shall be determined by a
majority of the Board of Directors.
The presence of a shareholder at the Annual Meeting will not automatically
revoke such shareholder's proxy. However, shareholders may revoke a proxy at
any time prior to its exercise by (i) delivering to the Secretary of the
Company a written notice of revocation bearing a later date than the proxy;
(ii) delivering to the Secretary of the Company a duly executed proxy bearing
a later date; or (iii) attending the Annual Meeting and voting in person.
The cost of solicitation of proxies in the form enclosed herewith will be
borne by the Company. In addition to the solicitation of proxies by mail,
proxies may also be solicited personally or by mail, telephone or telegraph
by the Company's directors, officers and regular employees, without
additional compensation therefor. The Company will also request persons,
firms and corporations holding shares in their names, or in the name of their
nominees, which are beneficially owned by others, to send proxy material to
and obtain proxies from such beneficial owners and will reimburse such
holders for their reasonable expenses in doing so. ONBANCorp has also
retained D.F. King & Co., Inc. and Morrow & Co., Inc., two proxy soliciting
firms, to assist in the solicitation of proxies at an aggregate estimated fee
of $30,000, plus reimbursement of certain out-of-pocket expenses authorized
by the Company.
Only holders of common stock, par value $1.00 per share, of ONBANCorp
("ONBANCorp Common Stock") may vote at the Annual Meeting. The close of
business on March 21, 1996 has been fixed by the Board of Directors as the
record date (the "Record Date") for determination of shareholders entitled to
notice of and to vote at the Annual Meeting. The number of shares of
ONBANCorp Common Stock outstanding on the Record Date was 13,526,220. Each
share of ONBANCorp Common Stock entitles its owner to one vote on each matter
to be voted on at the Annual Meeting. The presence, in person or by proxy, of
at least a majority of the total number of outstanding shares of ONBANCorp
Common Stock entitled to vote is necessary to constitute a quorum at the
Annual Meeting. Directors shall be elected by a plurality of the votes cast
at the Annual Meeting. Under applicable Delaware law, in tabulating the vote,
abstentions and broker non-votes will be disregarded and will have no effect
on the
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outcome of the vote on the election of directors. The affirmative vote of a
majority of the shares of ONBANCorp Common Stock present in person or
represented by proxy at the Annual Meeting is required to ratify the
appointment of KPMG Peat Marwick LLP as the independent auditors of the
Company. Under applicable Delaware law, in determining whether the proposal
regarding the appointment of KPMG Peat Marwick LLP has received the requisite
number of affirmative votes, abstentions and broker non-votes will, in each
case, be counted and have the same effect as a vote against the proposal.
Finally, the affirmative vote of a majority of the shares of ONBANCorp Common
Stock present in person or represented by proxy at the Annual Meeting and
entitled to vote is required to approve each of five of the six shareholder
proposals (Proposals 3, 5, 6, 7 and 8 on the enclosed proxy card). Under
applicable Delaware law, in determining whether such proposals have received
the requisite number of affirmative votes, abstentions will be counted and
have the same effect as a vote against each proposal; broker non-votes will
be disregarded and will have no effect on the outcome of the vote. Approval
of the other shareholder proposal (Proposal 4 on the enclosed proxy card),
requires the affirmative vote of at least three-fourths of the outstanding
shares of ONBANCorp Common Stock. Under applicable Delaware law, in
determining whether Proposal 4 has received the requisite number of
affirmative votes, abstentions and broker non-votes will, in each case, be
counted and have the same effect as a vote against the proposal.
The Company's executive offices are located at 101 South Salina Street,
Syracuse, New York 13202, and its telephone number is (315) 424-4400.
PRINCIPAL OWNERS OF ONBANCorp COMMON STOCK
As of March 21, 1996, management of ONBANCorp knows of no person who is
the beneficial owner of more than 5% of ONBANCorp Common Stock.
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PROPOSAL 1: ELECTION OF DIRECTORS
The Board of Directors is divided into three classes with respect to term
of office. Pursuant to the Company's By-Laws (the "ONBANCorp By-Laws"), the
number of directors of the Company is currently set at fifteen. Directors
will serve until their successors are elected and qualified. There are no
arrangements or understandings between the Company and any person pursuant to
which such person has been elected as a director.
THE NAMES OF THE FIVE NOMINEES OF THE BOARD OF DIRECTORS FOR ELECTION AS
DIRECTORS ARE SET FORTH BELOW. If elected as a director, each nominee will
have a 3-year term that is scheduled to expire at the Annual Meeting of
Shareholders to be held in 1999. Certain information concerning the nominees
and those directors whose terms expire in the future is also provided.
Management believes that such nominees will stand for election and will serve
if elected as directors. However, if any person nominated by the Board of
Directors fails to stand for election or is unable to accept election, the
proxies may be voted for the election of such other person or persons as the
Board of Directors may recommend.
INFORMATION ABOUT NOMINEES FOR DIRECTORS
AND DIRECTORS CONTINUING IN OFFICE
NOMINEES FOR DIRECTORS
<TABLE>
<CAPTION>
Principal Occupation
Name and Age and Business Experience
<S> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------------
[PHOTO-William F. Allyn] William F. Allyn Mr. Allyn is President of Welch Allyn Incorporated, a
Served as a Director manufacturer of medical instruments. He has held such office for
since 1991. more than five years. Mr. Allyn is a director of Niagara Mohawk
Age: 60 Power Corporation and Oneida Limited, Inc. Mr. Allyn serves as a
member of the Company's Compensation Committee.
[PHOTO-Chester D. Amond] Chester D. Amond Mr. Amond was President of Syracuse China Corp., Syracuse, New
Served as a Director York from 1980 to 1991. Mr. Amond retired from Syracuse China
since 1992. Corp. in 1991. Mr. Amond serves as a member of the Company's
Age: 69 Compensation Committee.
[PHOTO-Peter O'Donnell] Peter O'Donnell Mr. O'Donnell is President and Chief Executive Officer of Pine
Director Nominee Tree Management Corp. He has served as a director of Franklin
Age: 64 since April 1994.
* The Company was organized as a bank holding company for OnBank in 1989 and, therefore, the year
set forth under the heading "Director since," includes the director's tenure with OnBank and any
term as trustee of OnBank prior to OnBank's conversion from a mutual to a stock-form savings bank
on August 6, 1987.
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Principal Occupation
Name and Age and Business Experience
- -------------------------------------------------------------------------------------------------------------------------------
[PHOTO-Russell A. King] Russell A. King Retired consulting partner and Chief Executive Officer of King
Served as a Director* and King Architects, Syracuse, New York. Mr. King has been with
since 1973. that firm since 1952. Mr. King is a director of Unity Life
Age: 66 Insurance Co. Mr. King serves as a member of the Company's
Compensation Committee.
[PHOTO-J. Kemper Matt] J. Kemper Matt President of Dupli Graphics Corp., Syracuse, New York, a
Served as a Director typographer and envelope manufacturer. He has held such office
since 1993. for more than five years. Mr. Matt has served as a director of
Age: 61 OnBank and OnBank & Trust since January 1993. Mr. Matt is
Chairman of the Company's Examining and Audit Committee.
DIRECTORS WITH TERMS EXPIRING IN 1997
[PHOTO-Robert J. Bennett] Robert J. Bennett Chairman of ONBANCorp. and OnBank since May 1, 1989 and
Served as a Director* President and Chief Executive Officer of ONBANCorp and OnBank
since 1987. since January 1989. Chairman and President of OnBank & Trust
Age: 54 since January 1993. Mr. Bennett is a Director of Fay's
Incorporated, the Federal Home Loan Bank of New York and Farmers
and Traders Life Insurance Company. Mr. Bennett is also Chairman
of the Company's Executive Committee and a member of the
Company's Compensation Committee (but not a member of the Stock
Option Committee (as defined below)).
[PHOTO-William J. Donlon] William J. Donlon Retired Chairman and Chief Executive Officer of Niagara Mohawk
Served as a Director* Power Corporation. He is a director of Utilities Mutual
since 1981. Insurance Corporation. Mr. Donlon is a member of the Company's
Age: 66 Executive Committee and Compensation Committee.
* The Company was organized as a bank holding company for OnBank in 1989 and, therefore, the year
set forth under the heading "Director since," includes the director's tenure with OnBank and any
term as trustee of OnBank prior to OnBank's conversion from a mutual to a stock-form savings bank
on August 6, 1987.
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Principal Occupation
Name and Age and Business Experience
- -------------------------------------------------------------------------------------------------------------------------------
[PHOTO-Henry G. Lavarnway, Jr.] Henry G. Lavarnway, Jr. Private Investor and Business Consultant. From July 1988 through
Served as a Director* December 1992, Mr. Lavarnway was Vice President and Chief
since 1983. Financial Officer of Gaylord Brothers, Inc., a library furniture
Age: 61 manufacturer in Syracuse, New York. Mr. Lavarnway is a member of
the Company's Executive Committee and Compensation Committee.
[PHOTO-T. David Stapleton, Jr.] T. David Stapleton, Jr. Partner in the law firm of Karpinski. Stapleton & Fandrich, P.C.
Served as a Director* in Auburn, New York. Mr. Stapleton is a member of the Company's
since 1986. Executive Committee and Examining and Audit Committee.
Age: 53
[PHOTO-William J. Umphred, Sr.] William J. Umphred, Sr. Until September 1993, Mr. Umphred was Chairman of Franklin's
Served as a Director parent, Franklin First Financial Corporation ("Franklin Corp.").
since 1993. He retired in 1989 as Senior Vice President, Administration and
Age: 67 External Affairs of C-TEC Corporation of Wilkes-Barre,
Pennsylvania. Mr. Umphred is a member of the Company's
Compensation Committee.
DIRECTORS WITH TERMS EXPIRING IN 1998
[PHOTO-John D. Marsellus] John D. Marsellus Chairman, Marsellus Casket Company, Syracuse, New York. Mr.
Served as a Director* Marsellus has been with that firm since 1964. Mr. Marsellus is a
since 1973. member of the Company's Examining and Audit Committee.
Age: 57
* The Company was organized as a bank holding company for OnBank in 1989 and, therefore, the year
set forth under the heading "Director since," includes the director's tenure with OnBank and any
term as trustee of OnBank prior to OnBank's conversion from a mutual to a stock-form savings bank
on August 6, 1987.
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Principal Occupation
Name and Age and Business Experience
- -------------------------------------------------------------------------------------------------------------------------------
[PHOTO-Peter J. Meier] Peter J. Meier President of G.A. Braun, Inc., Syracuse, N.Y., a manufacturer of
Served as a Director laundry and textile systems for hospitals, hotels, commercial
since 1990. laundries and the textile industry. Mr. Meier has been with that
Age: 52 firm since 1967. Mr. Meier is Chairman of the Company's
Compensation Committee and a member of the Executive Committee.
[PHOTO-Thomas H. van Arsdale] Thomas H. van Arsdale President and Chief Executive Officer of Franklin. From 1990 to
Served as a Director 1993 Mr. van Arsdale was Vice-Chairman, President and Chief
since 1993. Executive Officer of Franklin Corp. and Franklin.
Age: 58
[PHOTO-John L. Vensel] John L. Vensel Chairman and Chief Executive Officer of Crucible Materials
Served as a Director Corporation since 1988, a specialty steel manufacturing company
since 1989. in Syracuse, New York. Mr. Vensel is a member of the Company's
Age: 60 Examining and Audit Committee.
[PHOTO-Joseph N. Walsh, Jr.] Joseph N. Walsh, Jr. Vice President retired, Personnel and Training of NYNEX. Mr.
Served as a Director* Walsh had been with that company from 1956 through 1993. He is a
since 1978. director of Unity Mutual Life Insurance Company. Mr. Walsh is a
Age: 61 member of the Company's Examining and Audit Committee.
</TABLE>
All of the foregoing, with the exception of Messrs. O'Donnell, Umphred and
van Arsdale, who are directors of Franklin, are also currently directors of
OnBank and OnBank & Trust. Mr. Bennett is a director of all of the Banks.
* The Company was organized as a bank holding company for OnBank in 1989 and,
therefore, the year set forth under the heading "Director since," includes
the director's tenure with OnBank and any term as trustee of OnBank prior
to OnBank's conversion from a mutual to a stock-form savings bank on August
6, 1987.
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THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR" THE
APPROVAL OF ALL THE NOMINEES FOR ELECTION AS DIRECTORS.
Security Ownership by Management
The following table sets forth information with respect to the shares of
ONBANCorp Common Stock beneficially owned by each director and director
nominee, by each non-director executive officer named in the Summary
Compensation Table below and by directors and executive officers of the
Company as a group as of March 21, 1996.
<TABLE>
<CAPTION>
Shares of
Common Stock Percentage of
Beneficially Owned as of Common Stock
Name March 21, 1996 (1) Outstanding
- ---- ------------------------ -------------
<S> <C> <C>
William F. Allyn 5,500 *
Chester D. Amond 7,790 *
Joseph W. Balz 11,551 *
Robert J. Bennett 206,824(2) 1.5%
William J. Donlon 5,562 *
Russell A. King 22,191(3) *
Henry G. Lavarnway, Jr. 11,440 *
John D. Marsellus 6,464 *
J. Kemper Matt 3,000 *
Peter J. Meier 4,175 *
Peter O'Donnell 4,975 *
T. David Stapleton, Jr. 4,167 *
William J. Umphred, Sr. 44,023 .3%
Thomas H. van Arsdale 89,565 .7%
John L. Vensel 6,000 *
Joseph N. Walsh, Jr. 3,719 *
Howard W. Sharp 26,316 *
David M. Dembowski 55,908(4) .4%
Robert J. Berger 44,146 .3%
All directors and executive officers as a group
(24 persons) 654,357(5) 4.8%
</TABLE>
* less than 1%
(1) The number of shares includes the number of shares subject to exercise of
stock options which are exercisable within 60 days of the reporting date.
(2) Includes 355 shares of which Mr. Bennett's wife is the sole owner. Mr.
Bennett disclaims beneficial ownership of such shares.
(3) Includes 1,573 shares of which Mr. King's wife is the sole owner, and 83
shares of which Mr. King's granddaughter is the sole owner. Mr. King
disclaims beneficial ownership of such shares.
(4) Includes 25 shares of which Mr. Dembowski's daughter is the sole owner.
Mr. Dembowski disclaims beneficial ownership of such shares.
(5) This number includes 39,100 shares held as unallocated shares as of March
21, 1996 in the Bank's Employee Stock Ownership Plan which is
administered by a trustee which acts in accordance with the directions of
the Compensation Committee of the Board of Directors.
Meetings and Committees
The Company's Board of Directors met 14 times during 1995. An Executive
Committee is required by the ONBANCorp By-Laws. A Compensation Committee (and
a subcommittee, the Stock Option Committee) and an Examining and Audit
Committee constitute the standing committees. The entire Board of Directors
acts as the Nominating Committee as specified in the ONBANCorp By-Laws.
Shareholders may independently nominate individuals to serve as directors by
following the procedures and providing timely notice to the Secretary of the
Company,
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as outlined in the ONBANCorp By-Laws. The Board is authorized to appoint such
other committees as it may determine and may designate each such committee as
either a standing committee or an ad hoc committee. The Board may at any time
appoint a director to fill any vacancy on any committee of the Board. The
principal responsibilities of the committees and the number of meetings held
during 1995 appear below.
All directors attended at least 75% of the total number of meetings of the
Board of Directors and the total number of meetings held by all committees on
which the directors served.
Executive Committee. (12 meetings) The Executive Committee currently
consists of four non-employee directors plus the Chairman. The Executive
Committee is authorized to exercise the powers of the Board of Directors
between regular meetings of the Board, with certain exceptions, and has
direction of the general investment policy of the Company. The Executive
Committee, a majority of whom rotate on a trimester basis, presently consists
of Mr. Bennett, who serves as Chairman, and Messrs. Donlon, Lavarnway, Meier
and Stapleton.
Compensation Committee. (4 meetings) The Compensation Committee consists
of eight members. It evaluates management recommendations concerning
promotions, salary administration practices and compensation with respect to
the executive officer staff in particular and officer/exempt staff in
general. It reviews both employee and executive compensation as well as
retirement and other employee benefit plans and makes recommendations to the
Board of Directors with regard to executive compensation. The non-employee
members of the Compensation Committee constitute a subcommittee which
administers the Company's stock option plans (the "Stock Option Committee").
The Compensation Committee consists of Mr. Meier, who serves as Chairman, and
Messrs. Allyn, Amond, Bennett, Donlon, King, Lavarnway and Umphred.
Examining and Audit Committee. (4 meetings) The Examining and Audit
Committee consists of six members, none of whom are officers of ONBANCorp.
The Committee receives and reviews the internal auditor's reports as well as
reports of the Company's independent auditors, and examines and reviews the
affairs and reports of the Company. The Committee consists of Mr. Matt, who
serves as Chairman, and Messrs. Balz, Marsellus, Stapleton, Vensel and Walsh.
Director Compensation
Directors, other than those who are also officers of the Company or the
Banks, currently receive an annual retainer of $11,000 plus $700 for each
Board meeting or committee meeting attended. Committee chairmen, other than
officers of the Company or the Banks, receive an additional $100 for each
committee meeting attended. Directors who are also officers of the Company or
the Banks do not receive any compensation as directors.
Directors of both the Company and the Banks may elect to defer fees
pursuant to elections made under the Directors' Deferred Compensation Plans
of the Company and the Banks, respectively. On September 24, 1990, the Boards
of Directors of OnBank and the Company authorized the establishment of
irrevocable "rabbi trusts" to provide for the payment of deferred fees to
such trusts in the event of a change of control (as defined in the rabbi
trusts) of the Company (or OnBank or the Company, in the case of OnBank's
rabbi trust). The rabbi trusts may be funded at any time prior to a potential
change of control (as defined in the rabbi trusts) of the Company (or OnBank
or the Company, in the case of OnBank's rabbi trust) or, if not funded
earlier, within 30 days following a potential change of control. If a change
of control does not occur within the one-year period following the time such
trusts are funded, the funds held in the rabbi trusts will revert to the
Company or OnBank. Fees deferred pursuant to a director's election currently
accumulate interest at the highest posted deposit rate paid by the Banks on
the first day of each calendar quarter for that quarter.
The 1992 ONBANCorp Directors' Stock Option Plan (the "Director Plan")
provides that each non-employee director who (i) is elected or re-elected at
an annual meeting of the Company or is continuing as a director at the
adjournment of such meeting and (ii) has not previously been granted any
option under the Director Plan, will be granted as of the date of such
meeting options to purchase 3,000 shares of ONBANCorp Common Stock. The
exercise price of each option issued under the Director Plan shall be the
fair market value of a share of ONBANCorp Common Stock on the date of the
grant. Options become exercisable as to one-third of the shares covered by
such options on the first anniversary of the date of the grant if the
optionee continues to serve as a director of the Company on that date, and
with respect to an additional one-third of the shares covered by such options
on each of the two succeeding anniversaries of the date of the grant if the
optionee continues to serve as director of the Company on
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each such date. All options held by an optionee will become fully exercisable
(to the extent not already exercisable) upon the optionee's termination of
service as a director on account of death, disability or "retirement" (as
defined in the Director Plan). All options granted under the Director Plan,
to the extent not exercised, expire on the earliest of (i) the tenth
anniversary of the date of the grant or (ii) one year following the
optionee's termination of service as a director on account of death,
disability or retirement or (iii) upon the date of the optionee's resignation
for cause at the request of the Board. Pursuant to the Director Plan, each
director then in office (other than Mr. Bennett who is an employee of the
Company) received a grant of options on April 21, 1992 to purchase 3,000
shares of ONBANCorp Common Stock. Subsequently, new directors were granted
options pursuant to the plan.
Executive Officers
The following table lists the executive officers of ONBANCorp, OnBank
and/or OnBank & Trust and/or Franklin.
<TABLE>
<CAPTION>
Position with the Officer
Name Age Company and/or the Banks Since
- ---- --- ------------------------ -----
<S> <C> <C> <C>
Robert J. Bennett 54 Chairman of the Board, President and 1987
Chief Executive Officer of the
Company, OnBank and OnBank & Trust
Robert J. Berger 49 Senior Vice President, Treasurer and 1978
Chief Financial Officer of the
Company, OnBank and OnBank & Trust
David M. Dembowski 58 Senior Vice President and Secretary 1967
of the Company and Executive Vice
President and Secretary of OnBank and
OnBank & Trust
Thomas F. Ferguson 62 Senior Vice President/Senior Trust 1993
Officer of OnBank & Trust
William M. Le Beau 47 Senior Vice President, Loan and Asset 1988
Review of the Company, OnBank and
OnBank & Trust
Lance D. Mattingly 35 Senior Vice President--Systems and 1995
Operations of OnBank & Trust Co.
Peter L. Meyers 56 Vice Chairman of the Board of 1993
OnBank & Trust
Howard W. Sharp 49 Executive Vice President of the 1989
Company, OnBank and OnBank & Trust
Thomas H. van Arsdale 58 President and Chief Executive Officer 1993
of Franklin
Randy J. Wiley 39 Vice President of Investments and 1984
Funds Management of OnBank and
OnBank & Trust
</TABLE>
Robert J. Bennett became Chairman of ONBANCorp and OnBank on May 1, 1989
and President and Chief Executive Officer of ONBANCorp and OnBank on January
1, 1989. He became Chairman, President and Chief Executive Officer of OnBank
& Trust in January 1993 upon its acquisition by the Company. He had
previously served as President and Chief Operating Officer of OnBank from
July, 1987 to January, 1989. Prior to joining OnBank, he served in various
capacities of Boatmen's Bancshares, Inc. of St. Louis, Missouri and President
of Boatmen's Bancshares of Illinois. Mr. Bennett is a graduate of Babson
College and holds an MBA from the University of Massachusetts and is a
graduate of the Harvard Business School Advanced Management Program.
Robert J. Berger became Senior Vice President, Treasurer and Chief
Financial Officer of OnBank on January 23, 1989 and of ONBANCorp on January
31, 1989. He had previously served as Treasurer of OnBank since 1986 and as
Comptroller since he joined the Bank in 1978. He became Senior Vice
President, Treasurer and Chief Financial Officer of OnBank & Trust in January
1993 upon its acquisition by the Company. Mr. Berger is a graduate of
Hamilton College and holds an MBA in accounting from Rutgers University
Graduate School of Business. He was previously employed by Price Waterhouse
and Co.
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<PAGE>
David M. Dembowski was named Executive Vice President, Residential Lending
of OnBank effective November 1, 1989 and Senior Vice President and Secretary
of ONBANCorp on January 31, 1989. He has also served as Secretary of OnBank
since 1984. He joined OnBank in 1957 and has served in many capacities,
primarily within the retail lending area. He became Executive Vice President,
Residential Lending and Secretary of OnBank & Trust in January 1993 upon its
acquisition by the Company. Mr. Dembowski is a graduate of Central City
Business Institute, the Graduate School of Mortgage Banking of Northwestern
University, and Income Property Lending Case Study Seminar at the University
of Michigan.
Thomas F. Ferguson became Senior Vice President/Senior Trust Officer of
OnBank & Trust in January 1993. Mr. Ferguson previously served since November
1983 as Senior Vice President/Senior Trust officer of The Merchants National
Bank & Trust Co. of Syracuse ("Merchants") prior to the acquisition of that
bank from Midlantic Corp. by the Company. Mr. Ferguson had previously been
associated with Marine Midland Bank, N.A. He is a graduate of Babson College
and holds a MBA degree from Columbia University.
William M. Le Beau was named Senior Vice President, Loan and Asset Review
of the Company and OnBank in January 1991. He became Senior Vice President
Loan and Asset Review of OnBank & Trust in January 1993 upon its acquisition
by the Company. He was Vice President, Loan and Asset Review of the Company
and OnBank from April 1988 to January 1991. Mr. Le Beau served in various
bank examination and liquidation capacities with the FDIC from 1970 until his
employment by OnBank in April 1988. He is a graduate of Bemidji State College
and the National School of Finance and Management at Fairfield University.
Lance D. Mattingly became Senior Vice President--Systems and Operations of
OnBank & Trust Co. in June 1995. Mr. Mattingly served previously as both an
account manager and programming manager for Alltel Financial Services, a
leading data processing company. Mr. Mattingly is a graduate of the
University of Arkansas.
Peter L. Meyers became Vice Chairman of OnBank & Trust in January 1993.
Mr. Meyers had served as President and Chief Executive Officer of Merchants
from November 1988 until the acquisition of that bank from Midlantic Corp. by
the Company. He had served as Executive Vice President and Chief Operating
Officer of Merchants from February 1988 to November 1988. Mr. Meyers is a
graduate of Syracuse University and the Stonier Graduate School of Banking.
Howard W. Sharp has served as Executive Vice President of the Company
since October 1994 and of OnBank since joining OnBank on November 1, 1989. He
became Executive Vice President of OnBank & Trust in January 1993 upon its
acquisition by the Company. He has 20 years of banking experience, most
recently as Regional President of the $3.1 billion Boatmen's First National
Bank of Kansas City and President and Chief Executive Officer of Boatmen's
Bank of Independence, Missouri. Mr. Sharp attended Rockhurst College and is
also a graduate of the Wharton School of Financial Management, the ABA
Graduate School of Commercial Lending and the ABA National Commercial Lending
School, University of Oklahoma, Norman.
Thomas H. van Arsdale has served as President and Chief Executive Officer
of Franklin since November 1990 and was Vice Chairman, President and Chief
Executive Officer of Franklin Corp. from November 1990 to September 1993.
Prior to November 1990 Mr. van Arsdale served as President and Chief
Executive Officer of Dime Savings Bank of New Jersey and as a director of
Dime Savings Bank of New York. Mr. van Arsdale graduated with degrees in
business and banking from Raritan Valley Community College and from Thomas A.
Edison State College and is also a graduate of The National School of Finance
& Management at Fairfield University.
Randy J. Wiley became Vice President of Investments and Funds Management
of OnBank on February 1, 1989. He became Vice President of Investments and
Funds Management at OnBank & Trust in January, 1993 upon its acquisition by
the Company. He had previously served in the funds management, secondary
markets, investments and internal audit areas since joining OnBank in 1980.
Mr. Wiley is a graduate of the State University of New York at Oswego.
MANAGEMENT REMUNERATION
Executive Compensation
The following table summarizes the cash and noncash compensation paid by
ONBANCorp and the Banks for services rendered to the Company and its
subsidiaries, during the fiscal years ended December 31, 1993, 1994 and 1995,
by the Company's Chief Executive Officer and four other most highly
compensated executive officers
10
<PAGE>
for 1995 (collectively, the "named executive officers"). The amounts shown in
the Summary Compensation Table below include only compensation earned during
the years in which the named executive officers served as executive officers.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term
Compen-
sation (5)
Annual ----------
Compensation (4) Awards
---------------- All Other
Name and Bonus Options/ LTIP Compen-
Principal Position Salary ($) SARs Payouts sation
(1) Year ($) (3) Shares ($) ($) (6)
------------------ ---- ------ ----- ------ ------- -------
<S> <C> <C> <C> <C> <C> <C>
Robert J. Bennett 1995 500,000 -0- -0- 39,200 3,466
Chairman, President and 1994 488,079 -0- 50,000 102,200 3,585
Chief Executive 1993 393,378 300,000 35,000 -0- 3,466
Officer
Thomas H. van Arsdale (2) 1995 225,004 5,000 3,000 -0- 4,500
President and Chief 1994 220,003 -0- -- -0- 4,315
Executive Officer of 1993 218,477 122,000 -- -0- --
Franklin
Howard W. Sharp 1995 175,000 -0- 5,000 22,400 4,620
Executive Vice 1994 170,827 -0- 7,500 58,400 4,620
President 1993 138,700 62,500 6,000 -0- 4,176
David M. Dembowski 1995 155,000 -0- -0- 22,400 3,756
Secretary of the 1994 152,377 -0- 7,500 58,400 3,977
Company and 1993 132,274 57,500 6,000 -0- 3,861
Executive Vice
President of OnBank
and OnBank & Trust
Robert J. Berger 1995 116,000 -0- -0- 16,800 3,480
Senior Vice President, 1994 115,404 -0- 7,000 43,800 3,462
Treasurer and Chief 1993 108,689 40,000 6,000 -0- 3,309
Fnancial Officer
</TABLE>
(1) See "Executive Officers" for additional positions held by these
executives with the Company and its subsidiaries.
(2) Includes compensation paid to Mr. van Arsdale by Franklin during 1993
prior to the completion of the acquisition of Franklin by the Company.
(3) "Bonus" consists of cash amounts earned for the fiscal year in question
under the Company's 1987 Annual Incentive Bonus Plan ("Bonus Plan")
(except for Mr. van Arsdale's bonus for 1993, which was paid to Mr. van
Arsdale pursuant to Franklin's existing bonus plan, and his bonus for
1995, which was paid at the discretion of the Board of Directors).
Pursuant to the Bonus Plan, participating employees qualify for bonuses
upon satisfaction of certain measurable "target" performance criteria.
Such performance criteria and the amount of the potential bonus are
established at the start of the year by the Board of Directors or a
committee thereof.
(4) "Other Annual Compensation" received by the named executive officers
consisted of certain perquisites. For each fiscal year in question, the
aggregate amount of perquisites received by each named executive officer
was less than the lesser of $50,000 or 10% of such officer's reported
salary and bonus. In accordance with applicable requirements, no
information under the heading "Other Annual Compensation" is included.
(5) No restricted stock awards have been made during each of the past three
fiscal years. No restricted stock awards are outstanding.
(6) "All Other Compensation" received by all named executive officers during
1995 consisted of the Company's contributions under its 401(k) defined
contribution plan.
11
<PAGE>
OPTION GRANTS IN 1995
The following table contains information concerning the grant of stock
options under the Company's Restated 1987 Stock Options and Appreciation
Rights Plan (the "Stock Option Plan") during 1995.
<TABLE>
<CAPTION>
Potential Realizable
Value ($) at Assumed
Annual Rates of
Stock Price
Appreciation
Individual Grants for Option Term
- ------------------------------------------------------------------------------- -----------------
% of
Total
Options Market
Granted Price
Options in Fiscal on Exercise Grant Expiration
Name Granted(1) Year Price($) Date($) Date 5%(2) 10%(3)
---- ---------- ---- -------- ------- ---- ----- ------
<S> <C> <C> <C> <C> <C> <C> <C>
Robert J. Bennett -0- 0% -- -- -- -- --
Thomas H. van Arsdale 3,000 18.6% 22.875 22.875 1/24/2005 43,234 109,114
Howard W. Sharp 5,000 31.1% 22.875 22.875 1/24/2005 72,056 181,856
David M. Dembowski -0- 0% -- -- -- -- --
Robert J. Berger -0- 0% -- -- -- -- --
</TABLE>
(1) No stock appreciation rights (whether free standing or in tandem with
stock options) were granted during 1995. The options were granted on
January 23, 1995 at fair market value under the Stock Option Plan. They
become exercisable with respect to one-third of the shares covered by the
option beginning at the first anniversary of the grant date; thereafter
they become exercisable with respect to an additional one-third of the
shares covered on each subsequent anniversary through and including the
third anniversary.
(2) Assumes that the market price of ONBANCorp Common Stock appreciates in
value from the date of grant to the end of the option term at 5% per annum.
(3) Assumes that the market price of ONBANCORP Common Stock appreciates in
value from the date of grant to the end of the option term at 10% per annum.
AGGREGATED OPTION/SAR EXERCISES IN 1995,
AND 1995 YEAR-END OPTION/SAR VALUES
The following table provides information, with respect to the named
executive officers, concerning the exercise of options during 1995 and the
number and value of unexercised options held as of December 31, 1995.
<TABLE>
<CAPTION>
Number of Value of
Unexercised Unexercised
Options/SARs In-the-Money
at 1995 Options/SARs at
Year-End (#) 1995 Year-End ($)
Shares Value
Acquired on Realized Exercisable/ Exercisable/
Name Exercise (1) ($) (2) Unexercisable Unexercisable(3)
---- ------------ ------- ------------- ----------------
<S> <C> <C> <C> <C>
Robert J. Bennett -- -- 94,000/45,000 1,023,250/0
Thomas H. van Arsdale 7,735 115,290 80,437(4)/3,000 1,514,226/21,000
Howard W. Sharp 4,000 73,000 16,500/9,500 185,000/26,250
David M. Dembowski -- -- 35,500/7,000 658,875/0
Robert J. Berger 3,000 70,500 28,333/6,667 478,250/0
</TABLE>
(1) No share appreciation rights were exercised in 1995.
(2) Market value of underlying securities at exercise, minus the exercise price.
(3) Market value of underlying securities at 1995 year-end, minus the
exercise or base price.
(4) Mr. van Arsdale received these options in exchange for his options on
shares of common stock of Franklin Corp. in connection with the Company's
acquisition of Franklin.
12
<PAGE>
Long-Term Incentive Plan. The Stock Option Committee administers the 1991
Long-Term Incentive Plan of ONBANCorp, Inc. (the "Long-Term Plan"), selects
participants for the plan and determines the form, size and substance of the
performance grants, the length of each performance cycle and the form of
payment to be made to each participant. Performance grants may include (i)
specific dollar-value target grants, (ii) performance units (valued as
determined by the Stock Option Committee at issuance), and/or (iii)
performance shares (valued at the market value of a share of ONBANCorp Common
Stock). The value of each performance grant may be fixed or may be permitted
to fluctuate based upon a performance factor (e.g., return on equity)
selected by the Stock Option Committee. The Stock Option Committee
establishes performance goals that, depending on the degree to which they
have been met, will determine the value of the performance grants awarded to
participants and determines the portion of each performance grant that is
earned by participants based upon ONBANCorp's performance during the
performance cycle in relation to the performance goals for such cycle. At the
discretion of the Stock Option Committee, performance unit payouts can
increase or decrease up to 40% depending on the 1995-1997 percentage change
in the Company's stock price plus cumulative dividends. Additionally, the
Stock Option Committee may elect to make no awards if the Company's return on
assets ("ROA") in any of the plan years is less than .50%. Payments to
participants will be made as soon as practicable after the end of each
performance cycle in the forms of cash, options and/or shares issued pursuant
to the Long-Term Plan, as determined by the Stock Option Committee at the
time of the performance grant.
In the event of a "change in control" of ONBANCorp (as defined in the
Long-Term Plan) prior to the end of a performance cycle, the Stock Option
Committee shall have the discretion to determine the minimum portion of
performance grants earned by participants. Otherwise, a participant in the
Long-Term Plan generally must be an active employee of ONBANCorp or its
subsidiaries at the end of the performance cycle to receive a payment for
such cycle. However, if termination is on account of death, retirement or
disability, unless otherwise determined by the Stock Option Committee, the
participant will be entitled to a pro rata distribution based upon the
elapsed portion of the performance cycle and ONBANCorp's performance over
such portion of the cycle.
The second performance cycle under the Long-Term Plan ended on December
31, 1994. Payments for this second cycle were made to participants in the
Long-Term Plan in February 1995.
The following table provides information, with respect to the named
executive officers, concerning threshold, target and maximum award levels
determined in 1995 under the Long-Term Plan for the 3-year performance cycle
beginning 1995 and ending 1997.
LONG-TERM INCENTIVE PLAN AWARDS IN 1995
<TABLE>
<CAPTION>
Performance Estimated Future Payouts
or under Non-Stock Price Based
Other Period Plans
Number Until ------------------------------
of Maturation Threshold Target Maximum
Name Units(1) or Payout ($)(2)(3) ($)(2)(4) ($)(2)(5)
- -------------------- -------- ------------- -------- ------ --------
<S> <C> <C> <C> <C> <C>
Robert J. Bennett 6,000 12/31/97 60,000 120,000 180,000
Thomas H. van Arsdale 3,000 12/31/97 30,000 60,000 90,000
Howard W. Sharp 3,500 12/31/97 35,000 70,000 105,000
David M. Dembowski 3,500 12/31/97 35,000 70,000 105,000
Robert J. Berger 2,000 12/31/97 20,000 40,000 60,000
</TABLE>
(1) No stock or stock rights have been granted in 1995 in connection with the
Long-Term Plan.
(2) Payouts of awards are tied to achieving specified levels of ROA, return
on equity ("ROE"), net interest margin ("NIM") and amount of
nonperforming assets ("NPA"). With respect to ROA, the threshold amount,
target amount or maximum amount, as the case may be, will be earned if
95% or 109%, respectively, of the targeted ROA is achieved. With respect
to ROE, the threshold amount, target amount or maximum amount, as the
case may be, will be earned if 96% or 104%, respectively, of the targeted
ROE is achieved. With respect to NIM, the threshold amount, target amount
or maximum amount, as the case may be, will be earned if 96% or 104%,
respectively, of the targeted NIM is achieved. With respect to NPA, the
threshold amount, target amount or maximum amount, as the case may be,
will be earned if 108% or 92%, respectively, of the targeted NPA is
achieved. The actual payouts, if any, are fractionally weighted sums of
payouts with respect to the four performance measures.
(3) Assumes that the threshold amount is earned with respect to each of the
four performance measures. Payouts will be smaller if, for example, the
threshold amount is earned with respect to one performance measure and no
amounts are earned with respect to the remaining performance measures.
(4) Assumes that the target amount is earned with respect to each of the four
performance measures.
(5) Assumes that the maximum amount is earned with respect to each of the
four performance measures.
13
<PAGE>
Employment and Severance Contracts. Effective as of September 1, 1990,
ONBANCorp and OnBank entered into an employment agreement (the "Employment
Agreement") with Mr. Bennett, amending and restating Mr. Bennett's prior
employment agreement, in order to secure his continued service. Under the
Employment Agreement, his annual base salary is prescribed by the Board
(subject to a minimum). As of the date of this Proxy Statement, Mr. Bennett's
annual base salary is $500,000. The Employment Agreement provides that if Mr.
Bennett's employment is terminated due to (i) discharge without "cause" (as
defined in the Employment Agreement) or the Board's election (without "cause"
from Mr. Bennett) to stop extending the Employment Agreement, thereby ending
the contractual employment period prior to Mr. Bennett's attaining the age of
sixty-five (65), (ii) Mr. Bennett's voluntary resignation as a result of a
reduction in his official position or responsibilities, (iii) Mr. Bennett's
voluntary resignation for any reason within 180 days following a "change of
control" of ONBANCorp or OnBank (as defined in the Employment Agreement), or
(iv) Mr. Bennett's voluntary resignation within 120 days after a reduction of
his official position, responsibilities or base salary; or a significant
relocation of his principal place of employment, provided that such reduction
or relocation occurs within three years of a "change of control," then Mr.
Bennett will receive the following special severance amounts: (a) a severance
payment equal to three times his highest annual base salary, (b) a payment
equal to the value of all his outstanding stock options and appreciation
rights (whether vested or unvested), (c) a payment equal to the excess, if
any, of the present value of his benefits under the Retirement Plan and the
401(k) Plan calculated as if he had been employed for an additional three
years at his highest base salary, over the present value of the benefits to
which he would actually be entitled under the Retirement Plan and the 401(k)
Plan, respectively, (d) a continuation of group life, health, accident and
dental insurance benefits for the employment period remaining under the
Employment Agreement, (e) professional outplacement counselling and executive
placement services and (f) to the extent any payments made to him under his
Employment Agreement or otherwise are determined to be either "excess
parachute payments" under Section 280G of the Internal Revenue Code (the
"Code") which are subject to an excise tax pursuant to Section 4999 of the
Code or payments subject to any surtax which is in addition to the income tax
imposed under the normal tax tables or their functional equivalent, an
indemnification payment so that Mr. Bennett's benefit after such
indemnification is equal to the amount he would have received had no excise
tax or surtax been imposed upon his payments. The benefits set forth under
clauses (c), (d) and (e) of the preceding sentence will be subject to
reduction in the event that Mr. Bennett obtains alternate employment during
the three years immediately succeeding his termination. Mr. Bennett is
entitled to recover reasonable costs and expenses if he in good faith
institutes an action against ONBANCorp or OnBank based upon his Employment
Agreement. To ensure that the benefits set forth in his Employment Agreement
will be received without Mr. Bennett incurring litigation costs, the
Employment Agreement provides that, within three business days of written
demand by Mr. Bennett ONBANCorp and/or OnBank will establish an irrevocable
standby letter of credit providing for $200,000 of credit for Mr. Bennett for
five years. The Employment Agreement is initially effective for a period of
three years commencing September 1, 1990, and is automatically extended for
one year on each anniversary date of its commencement unless either ONBANCorp
or OnBank or Mr. Bennett gives advance written notice at least sixty days
prior to such anniversary date not to further extend the employment period.
Upon a change of control of ONBANCorp and/or OnBank, Mr. Bennett's employment
period shall automatically be extended for a three-year period commencing
with the date of such change of control. If Mr. Bennett is discharged for
"cause," dies, retires, becomes disabled, or voluntarily terminates his
employment (in a manner not described above) he does not become entitled to
the severance payments described above. In connection with the acquisition of
OnBank & Trust by the Company in January 1993, the Company, OnBank and OnBank
& Trust entered into an employment agreement with Mr. Bennett, effective as
of January 15, 1993, whereby Mr. Bennett would serve as Chairman, President
and Chief Executive Officer of OnBank & Trust under terms and conditions
identical to those contained in the Employment Agreement.
Mr. van Arsdale has entered into an Employment Agreement (the "Agreement")
with the Company and with Franklin, pursuant to which Mr. van Arsdale will be
employed by Franklin through December 31, 1997 (the "Employment Period") and
serves as President and Chief Executive Officer of Franklin and a member of
the Board of Directors of Franklin. Under the Agreement, Mr. van Arsdale
receives an annual salary of at least $212,000 subject to annual review, as
well as executive benefits and perquisites. Upon involuntary termination of
Mr. van Arsdale's employment without "cause" or his voluntary termination for
Good Reason, after October 31, 1994 but prior to the end of the Employment
Period, Mr. van Arsdale will be paid as liquidated damages an amount equal to
the base salary he would have earned through the end of the Employment Period
and will be provided with employee benefit coverage through the end of the
Employment Period. Notwithstanding the foregoing, during the Employment
Period, if a "Change in Control" of ONBANCorp (as defined in the Agreement)
occurs, the Agreement will remain
14
<PAGE>
in effect for three (3) years thereafter (the "Change in Control Protective
Period"). During the Change in Control Protective Period, if Mr. van
Arsdale's employment is terminated involuntarily for any reason other than
"cause" or if Mr. van Arsdale terminates his own employment after a reduction
of his offices and positions, a reduction of his authority which is not cured
within a reasonable time upon notice, a reduction of his base salary or a
relocation of his place of employment of more than fifty miles, he shall be
entitled to the following benefits (in addition to accrued compensation and
normal benefits as a former employee): a lump sum equal to three (3) times
annual base salary plus three (3) times the greater of the bonus for the year
most recently ended or the mean average bonus for the most recent three
years; a right to elect to be paid an amount equal to the excess of the fair
market value (as defined in the Agreement) of the common stock underlying all
his stock options (whether or not vested) over the aggregate exercise price
thereof; and continued life, health, accident and dental insurance for the
balance of the Change in Control Protective Period (which insurance coverage
is subject to offset upon his obtaining alternate employment).
Effective as of July 30, 1990, ONBANCorp and OnBank entered into severance
agreements (the "Severance Agreements") with Messrs. Dembowski, Sharp, Berger
and, effective as of June 5, 1995, Mr. Mattingly (the "Executives"). The
Severance Agreements provide that if the Executive's employment is terminated
within three years following a "change in control" of ONBANCorp (as defined
in the Severance Agreements) due to (i) discharge without "cause" (as defined
in the Severance Agreements), or (ii) the Executive's voluntary resignation
after a reduction of his official position, responsibilities or base salary,
or a non-consensual relocation of his principal place of employment, or a
decrease in his material compensation, pension or welfare benefits or fringe
benefits, then the Executive will receive the following special severance
amounts: (a) severance payment equal to three times the sum of (i) the base
compensation in effect at the time of termination and (ii) the higher of the
amount awarded to him under the Bonus Plan for the most recently ended
performance year or the mean average award for the three most recently ended
performance years, (b) a payment equal to the value of all his outstanding
stock options (other than "incentive stock options") and appreciation rights
(whether vested or unvested), (c) a payment equal to the excess, if any, of
the present value of his benefits under the Retirement Plan calculated as if
he had been employed for an additional three years (at his highest annual
rate of compensation applicable during his last twelve months of employment)
over the present value of the benefits to which he would actually be entitled
under the Retirement Plan, (d) a payment equal to three times the matching
contribution made by ONBANCorp for the Executive's account under the 401(k)
Plan during the calendar year immediately preceding termination, (e) a
continuation of employee benefits until the earlier of the third anniversary
of the Executive's termination or such time as the Executive receives
comparable benefits elsewhere, (f) outplacement consulting services upon
request, and (g) to the extent any payments made under the Executive's
Severance Agreement or otherwise are determined to be either "excess
parachute payments" under Section 280G of the Code which are subject to an
excise tax pursuant to Section 4999 of the Code or payments subject to any
surtax which is in addition to the income tax imposed under the normal tax
tables or their functional equivalent, an additional payment such that the
Executive's benefit after such additional payments is equal to the amount he
would have received had no excise tax or surtax been imposed upon his
payments. The Executive is also entitled to recover legal fees and expenses
incurred as a result of his termination of employment or his seeking the
enforcement of his Severance Agreement. To ensure that the benefits set forth
in the Severance Agreements will be received without the Executive incurring
litigation costs, ONBANCorp and OnBank and the Executives have entered into
related letter agreements which provide that, within three business days of a
written demand by the Executive, ONBANCorp will establish an irrevocable
standby letter of credit providing for $200,000 of credit for the Executive
for five years. The Severance Agreements are initially effective for a period
of three years commencing July 30, 1990, and are automatically extended for
one year on each anniversary date of their commencement, unless ONBANCorp
gives advance written notice (at least thirty days prior to such anniversary
date) not to further extend the Severance Agreement. Upon a change in control
of ONBANCorp, the term of the Severance Agreements shall automatically be
extended for a three-year period commencing with the date of such change in
control. If the Executive is discharged for "cause," dies, retires, becomes
disabled, or voluntarily resigns without having any of the reasons for
resignation described above, the Executive does not become entitled to the
special severance amounts described above. In connection with the Company's
acquisition of OnBank & Trust in January 1993, the Company, OnBank and OnBank
& Trust entered into assumption agreements with each of the Executives (the
"Assumption Agreements"), effective as of January 15, 1993, whereby OnBank &
Trust assumed all of the obligations of OnBank under the Severance
Agreements. With respect to Messrs. Dembowski and Sharp, the practical effect
of the Assumption Agreements was to substitute OnBank & Trust for OnBank as a
party to the Severance Agreements such that benefits payable to Messrs.
Dembowski or Sharp pursuant to their Severance Agreements will be triggered
following a termination of employment with OnBank & Trust rather than OnBank,
under the circumstances described above.
15
<PAGE>
Retirement Plan. The Retirement Plan is a defined benefit pension plan for
the benefit of salaried employees employed by ONBANCorp and its subsidiaries.
The Retirement Plan is administered through the Retirement System for Savings
Institutions ("Retirement System"), the trustees of which serve as the
trustees of the Retirement Plan. Eligible employees become participants of
the Retirement Plan upon attainment of age 21 and completion of one year of
service. The Retirement Plan provides a normal retirement benefit for each
participant who terminates employment at the later of age 65 or the fifth
anniversary of participating in the Retirement Plan (the "Normal Retirement
Date"). The amount of the normal retirement benefit, when paid in the form of
a single life annuity, is generally equal to the greater of (A) 2% of the
participant's average annual earnings (defined as annualized amount of base
salary over the 36 consecutive months of highest base salary (which, for the
named executive officers, is reportable under the salary column of the
Summary Compensation Table) included in the participant's final 120 months of
creditable service) multiplied by the number of his years (and any fraction
thereof) of creditable service (up to a maximum of 35 years), reduced by
1-2/3% of the participant's primary Social Security benefit multiplied by the
number of his years (and any fraction thereof) of creditable service
subsequent to April 1, 1983 (up to a maximum of 30 years) or (B) the
participant's total annual benefit accrued as of March 1, 1983 under the
provisions of the Retirement Plan in effect as of such date. In no event may
a normal retirement benefit exceed 60% of a participant's average annual
earnings.
The following table sets forth the estimated annual benefit payable upon
retirement at age 65 in calendar year 1995, without regard to any offset in
respect of Social Security benefits, expressed in the form of a single life
annuity, based on the average annual earnings and creditable service
classifications specified.
<TABLE>
<CAPTION>
Years of Creditable Service
----------------------------------------------------------------------------------
Average Annual Earnings 15 20 25 30 35
- ----------------------- -- -- -- -- --
<S> <C> <C> <C> <C> <C>
$100,000 $ 30,000 $ 40,000 $ 50,000 $60,000 $ 60,000
150,000 45,000 60,000 75,000 90,000 90,000
200,000 60,000(1) 80,000(1) 100,000(1) 120,000(1) 120,000(1)
250,000 75,000(1) 100,000(1) 125,000(1) 150,000(1) 150,000(1)
300,000 90,000(1) 120,000(1) 150,000(1) 180,000(1) 180,000(1)
350,000 105,000(1) 140,000(1) 175,000(1) 210,000(1) 210,000(1)
400,000 120,000(1) 160,000(1) 200,000(1) 240,000(1) 240,000(1)
450,000 135,000(1) 180,000(1) 225,000(1) 270,000(1) 270,000(1)
500,000 150,000(1) 200,000(1) 250,000(1) 300,000(1) 300,000(1)
</TABLE>
(1) Under applicable provisions of the Code, for the calendar year 1996, (i)
the maximum annual benefit actually permitted to be paid under the
Retirement Plan is $120,000 and (ii) the maximum annual compensation on
which benefits may be calculated ("maximum annual compensation limit") is
$150,000. Both the maximum annual benefit and the maximum annual
compensation limit are subject to annual adjustment to reflect cost of
living increases. Messrs. Bennett, van Arsdale, Sharp and Dembowski
currently receive annual compensation in excess of the Code limitation.
Mr. Bennett would be entitled to receive benefits in excess of the Code
limitations pursuant to his Supplemental Employee Retirement Agreement
(described below).
The following table sets forth the years of creditable service as of
December 31, 1995 for each of the individuals named in the Summary
Compensation Table:
Creditable Service
--------------------
Years Months
----- ------
Robert J. Bennett 22 6
Thomas H. van Arsdale 5 1
Howard W. Sharp 5 1
David M. Dembowski 33 4
Robert J. Berger 16 5
The "creditable service" of Mr. Bennett reflects the additional credits
provided by his Supplemental Employee Retirement Agreement (described below).
A portion of his aggregate annual benefit under the Retirement Plan and such
Agreement of ($28,014) will be paid by a prior employer.
16
<PAGE>
The current compensation covered by the Retirement Plan with respect to
the named executive officers are as follows: Robert J. Bennett ($500,000);
Thomas H. van Arsdale ($230,000); Howard W. Sharp ($175,000); David M.
Dembowski ($155,000); Robert J. Berger ($116,000).
Supplemental Employee Retirement Agreement. ONBANCorp and OnBank have also
entered into a Supplemental Employee Retirement Agreement (the "Supplemental
Agreement"), effective as of January 1, 1991, with Mr. Bennett. The
Supplemental Agreement generally provides Mr. Bennett with monthly benefits
(in excess of any limitations imposed by the Code) equal to (a) the normal
retirement benefit he would receive under the Retirement Plan, if such
benefit were to be calculated treating as creditable service under the
Retirement Plan Mr. Bennett's 12 years of service with his previous employer
(Boatmen's Bancshares, Inc. of St. Louis, Missouri) plus his initial year of
service with ONBANCorp in addition to his years of creditable service under
the Retirement Plan less (b) the sum of the monthly normal retirement benefit
actually payable to Mr. Bennett under the Retirement Plan and the monthly
retirement benefit payable to Mr. Bennett commencing at age 65 from the
retirement plan of Boatmen's Bancshares, Inc. The supplemental benefit shall
be paid to Mr. Bennett at the same time and in the same form under which his
normal retirement benefit is payable from the Retirement Plan. Mr. Bennett's
rights to his supplemental retirement benefits vest at a rate of 20% per year
of creditable service as calculated under the Retirement Plan, but shall
become 100% vested if his employment with ONBANCorp and OnBank is terminated
in a manner which would entitle Mr. Bennett to severance benefits under his
Employment Agreement. On January 28, 1991, the Boards of Directors of OnBank
and the Company authorized the use of an irrevocable "rabbi trust"
substantially identical to those described under "Director Compensation" to
provide for Mr. Bennett's payments under the Supplemental Agreement in the
event of a change in control of the Company or OnBank (as defined in the
rabbi trust). In connection with the Company's acquisition of OnBank & Trust
in January 1993, the Company, OnBank and OnBank & Trust entered into a SERP
assumption agreement (the "SERP Assumption Agreement") with Mr. Bennett,
effective as of January 15, 1993, pursuant to which OnBank & Trust assumed
all of the obligations of OnBank under the Supplemental Agreement. The
practical effect of the SERP Assumption Agreement was to make the terms and
conditions set forth in the Supplemental Agreement governing the payment of
benefits thereunder applicable to Mr. Bennett's employment with OnBank &
Trust as well as to his employment with the Company and OnBank, and to make
the Company, OnBank and OnBank & Trust jointly and severally liable for any
payment due Mr. Bennett under the Supplemental Agreement.
Compensation Committee Report on Executive Compensation
Compensation Philosophy, Policies and Programs for Executive Officers
The Company, a bank holding company, is engaged in a highly competitive
business. The prominent leadership position attained by the Company in the
communities it serves in terms of quality of services rendered, market share,
revenue, profitability and rate of growth, has been earned largely through
the selection, training and development of top caliber executive and
professional talent. Ongoing investment in the Company's human capital has
produced favorable long-term returns to Company stockholders. Therefore, it
is deemed critical to the ongoing success of the Company that its executives
continue to be among the most highly qualified and talented available to lead
the organization in the creation of shareholder value.
The Compensation Committee (the "Committee") reviews, and makes
recommendations to the Board of Directors with regard to, executive
compensation. The Board of Directors and the Committee have implemented an
executive compensation philosophy that seeks to relate executive compensation
to corporate performance, individual performance, and creation of shareholder
value. This is achieved through compensation programs pursuant to which a
substantial portion of executive officers' compensation is based on the
short-term and long-term results achieved for ONBANCorp and ONBANCorp
shareholders and on the executive officers' individual performances. These
programs are intended to be (1) retrospective, reflecting past individual and
organizational performance, (2) prospective, providing motivation and rewards
for the achievement of future success, and (3) highly competitive in the
marketplace.
In accordance with the Committee's executive compensation philosophy, the
major components of compensation under ONBANCorp executive compensation
program are: (i) base salary, (ii) annual incentive bonus, (iii) long-term
incentive compensation, and (iv) stock option grants.
Base Salary. Annual salary reviews are based on current individual and
organizational performance, affordability and competitive marketplace trends.
For the purpose of informing the Committee of competitive marketplace
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trends, compensation data (including base salary, incentive bonus, stock
option grants and other long-term incentives) were obtained through a recent
survey of comparable regional financial institution peers conducted by an
external executive compensation consulting firm. Rather than using the same
peer group as is used in the Performance Graph on page 20 below, the surveyed
group of companies was chosen because they are comparable organizations in
terms of either size, performance, type of institution, or national or
regional lines of business and, accordingly, are the companies with whom the
Company competes for executive talent. While there is no specific weighting
of these factors, competitive positioning is the primary consideration in
setting the salary levels. Business and other economic factors such as net
income and estimates of inflation are secondary considerations. Generally,
the Company's executive officer salary ranges are positioned between the
median and high end of survey data given the Company's size and performance
relative to the surveyed companies.
Annual Cash Bonus. Annual cash bonus awards are made pursuant to the Bonus
Plan or at the discretion of the Board of Directors. Participating employees
who in 1995 included all executive officers and certain performance and
business heads qualify for bonuses upon satisfaction of certain measurable
"target" performance criteria which may include ONBANCorp's financial
performance measured by rates of return, increase in net income for the year
and other financial performance measures the Committee determines to be
appropriate, as well as prescribed individual performance goals (such as
profitability, asset quality and expense controls). Such performance criteria
and the amount of the potential bonuses are established at the start of the
year and the amounts payable, if any, are computed at year-end based on the
predetermined criteria without giving any specific weight to any particular
factor. Three classes of awards exist, within which all participants are
categorized with predetermined threshold, target and maximum award
percentages. No bonuses were paid in 1995 under the Bonus Plan, although the
Board of Directors paid a discretionary bonus to Mr. van Arsdale in 1995.
Stock Options. It is the Committee's strong belief that the continuing
success of the Company is dependent on the effective retention and motivation
of its executives. Accordingly, one component of long-term compensation is
designed to recognize the individual's past cumulative and, more important,
future potential contributions to the organization, and to connect the
executive's financial interests with those of the Company's shareholders by
fostering ownership of the Company's stock. Such equity participation for
Company executives is currently made available through the
shareholder-approved Stock Option Plan that provides for stock option grants,
the size of which are based on the employee's organizational role and
performance and the goal of providing a competitive compensation package. The
stock options generally become partially exercisable beginning one year after
the grant date and fully exercisable three years after the grant date. This
scheme further promotes retention of key talent through accumulated
beneficial stock ownership that is at risk.
Long-Term Incentive Awards. The Company's Long-Term Plan provides
performance-based incentives to the named executive officers and other key
employees who contribute materially to the financial success of the Company.
Most executive officers are eligible to receive an annual grant of
performance units, cash or stock options. The size of the award reflects the
financial performance of the Company and the organizational level and
performance of the individual. Each year, at the beginning of the new
performance cycle (which is currently set at 3 years), performance goals are
identified and performance units, cash or stock options are allocated to
participants. To date, the established performance goals relate to specified
levels of return on average assets, return on equity, net interest margin and
nonperforming assets. Payouts (currently structured in the form of cash
awards) will be made only if certain threshold levels of performance have
been achieved. The payouts increase with performance until preset maxima are
reached. The levels established for threshold, target and maximum awards are
intended to encourage performance levels which the Company believes would
enhance shareholder value through increasing stock price and dividends.
Basis for CEO Compensation
Within the framework described above, both quantitative and qualitative
criteria are applied in assessing the performance of the chairman, president
and chief executive officer of the Company, Robert J. Bennett. The current
financial performance and long-term financial performance of the
Company--information which is available to all Company shareholders--are
major factors in compensation decisions made by the Committee relative to Mr.
Bennett. Comparable weight is placed on his leadership and the impact of his
decision-making on the long-term health and performance of the Company.
Critical aspects considered in this performance evaluation include: (1)
mastery of the market and economic dynamics of each community served, thus
enabling the chief executive officer to evaluate effectively and approve
business strategies in order to exploit business opportunities; (2) the
staffing and effec-
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tive motivation of executives at the Company and operating units; (3)
leadership in providing perspective and vision to heads of business segments
to foster initiatives that enhance the value of the Company and its services;
and (4) competitive peer compensation levels.
Total compensation in 1995 for Mr. Bennett included all the components
previously discussed, i.e., base salary, annual cash bonus, stock options and
deferred three-year performance units incentive awards. Mr. Bennett's 1995
cash compensation is between the median and high end of cash compensation
paid to the chief executive officers of the surveyed companies. In
determining the appropriate amount of increase, his cash compensation was
evaluated relative to those individuals in similar positions among the
surveyed companies. In addition to seeking to position his cash compensation
appropriately in comparison with the marketplace, the appropriate
differential is sought between Mr. Bennett's salary and those of executives
reporting to him. Such a differential is generally a component in the
compensation structure of competitor companies.
Historically, the target grant value of the deferred long-term executive
incentive program had been made in accordance with comparative analyses and
recommendations made by an outside professional compensation consultant.
Certain Tax Matters
While the Committee is cognizant of Section 162(m) of the Code and intends
to take any and all appropriate steps to maximize its deductions in
compliance with such section, given the competitive nature of the
marketplace, the Committee reserves the right, in conjunction with Board, to
structure its compensation program in a manner which may result in the
payment of non-deductible compensation.
Summary
The Committee believes that ONBANCorp has had, and continues to have, an
appropriate and competitive executive compensation program, and its mix of a
sound base salary position, relatively short-term bonus, options and a
suitable emphasis on long-term incentives forms a foundation which builds
stability and supports the interests of the Company and its shareholders.
Peter J. Meier (Chairman)
William F. Allyn Russell L. King Chester D. Amond
Robert J. Bennett Henry G. Lavarnway, Jr. William J. Umphred, Sr.
William J. Donlon
Compensation Committee Interlocks and Insider Participation
The Company's Compensation Committee currently consists of eight members.
The non-employee members of the Compensation Committee constitute the Stock
Option Committee, which administers the Company's stock option plans. Robert
J. Bennett, the Company's Chief Executive Officer, was during the last fiscal
year and is a member of the Compensation Committee but not the Stock Option
Committee. Chairman, President and Chief Executive Officer Bennett does not
participate in the Committee or Board determination of, and does not vote on,
his own compensation.
SHAREHOLDER RETURN PERFORMANCE GRAPH
Set forth below is a line graph comparing the yearly percentage change in
the cumulative total shareholder return on ONBANCorp Common Stock against the
cumulative total return of the S&P Composite - 500 Stock Index and the KBW 50
Index. The KBW 50 Index is a published index made up of 50 of the nation's
major banking companies, including all the money center banks and most major
regional banks. According to Keefe, Bruyette & Wood, this index is meant to
be representative of the price performance of the nation's large banks.
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[GRAPH-LINE CHART PLOT POINTS]
TOTAL RETURN INDICES 1990-1995
KBW50 S&P 500 ONBK
12/90 100 100 100
12/91 158.28 130.48 184.51
12/92 201.68 140.41 290.32
12/93 212.86 154.56 322.87
12/94 202 156 216.37
12/95 323.53 214.06 332.14
Certain Transactions. The current policy of the Banks is to make mortgage
and consumer loans to the Company's officers and employees to the extent
consistent with applicable laws and regulations. Such loans are made in the
ordinary course of business and on substantially the same terms as those
prevailing at the time for comparable transactions with unaffiliated persons,
except for interest rates and origination and application fees, and do not
involve more than the normal risk of collectability or present other
unfavorable features to the Banks. Loans to employees are subject to the same
credit guidelines as those pertaining to all of the Banks' customers. For as
long as an employee of the Banks remains such, and subject to applicable laws
and regulations, the interest rate actually charged on a mortgage loan on
such employee's primary residence may under certain circumstances be 1% below
the stated contract rate (which is equal to the prevailing market rate). Upon
termination of employment for any reason, the loan reverts to the stated
contract rate. Payment of origination and application fees may be waived.
Employees (excluding officers) are eligible for discounts of up to 1% on
selected types of consumer loans. The employee discount is eliminated upon
termination of employment for any reason. The amount of loans outstanding to
executive officers and directors of the Company and their affiliates, as of
December 31, 1995 equaled approximately $5,369,175 or 1.4% of shareholders'
equity.
OnBank has retained the law firm of Karpinski, Stapleton & Fandrich, P.C.,
of which T. David Stapleton, Jr., a director of the Company, is a member, to
provide certain legal services to OnBank. These services include providing
legal representation for OnBank at mortgage loan closings in the Auburn, New
York area. OnBank neither pays any fees to Karpinski, Stapleton & Fandrich,
nor is there any contractual relationship between OnBank and Karpinski,
Stapleton & Fandrich.
Future transactions, other than transactions in the ordinary course of
business, between the Company and its officers, directors, principal
shareholders or other affiliates will be on terms no less favorable to the
Company than could be obtained from unaffiliated third parties on an
arm's-length basis and will be approved by a majority of the Company's
disinterested directors.
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PROPOSAL 2. RATIFICATION OF APPOINTMENT OF INDEPENDENT
PUBLIC ACCOUNTANTS
The Board of Directors has appointed the firm of KPMG Peat Marwick LLP to
continue as independent auditors for the Company for the fiscal year ending
December 31, 1996, subject to ratification of such appointment by the
shareholders. Representatives of KPMG Peat Marwick LLP are expected to attend
the Annual Meeting. They will be given an opportunity to make a statement if
they desire to do so and will be available to respond to appropriate
questions from shareholders present at the meeting.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR" THE
RATIFICATION OF THE APPOINTMENT OF KPMG PEAT MARWICK LLP AS INDEPENDENT
AUDITORS OF THE COMPANY FOR THE 1996 FISCAL YEAR.
PROPOSALS 3-8
The Company has received six shareholder proposals which are described
below. For the reasons described in the respective "Statement of the Board of
Directors" responding to each proposal, THE BOARD OF DIRECTORS BELIEVES THAT
APPROVAL OF EACH OF THE PROPOSALS IS NOT IN THE BEST INTERESTS OF THE COMPANY
OR ITS SHAREHOLDERS AND UNANIMOUSLY RECOMMENDS A VOTE AGAINST EACH OF THE SIX
PROPOSALS.
Proposal No. 3
Mr. David Tarantini, 16 Labor Street, Swoyersville, Pennsylvania 18704,
owner of 490 shares of ONBANCorp Common Stock, has submitted the following
proposal:
"Resolved, that the Board of Directors of ONBANCorp, Inc., ("ONBK") be
requested to initiate the amendment of Article EIGHTH of the Certificate
of Incorporation to remove restrictions on business transactions between
ONBK and certain stockholders and to insert a provision expressly stating
that ONBK shall not be governed by Section 203 of the Delaware General
Corporation Law."
SUPPORTING STATEMENT: Except under certain highly restrictive
circumstances, all of which require the approval of the Board, Article
EIGHTH prohibits "business combinations" between ONBK and "related
persons," unless these "business combinations" are approved by the holders
of an unrealistically high 80% of the Common Stock, including at least 50%
of the Common Stock not held by the "related person." A "related person"
is an owner of 10% or more of ONBK's shares; a "business combination"
includes the acquisition of ONBK by another party. The Proponent believes
that Article EIGHTH means no one is going to buy ONBK if the Board, for
whatever reason, does not wish to sell.
This provision makes it more difficult for potential purchasers or merger
partners to acquire ONBK. Parties interested in acquiring control of ONBK
would have to pay stockholders a premium price for it. If potential
acquirors are discouraged by Article EIGHTH, stockholders are deprived of
the opportunity to reap this premium. The Proponent believes that if ONBK
is so attractive to a strategic buyer that the buyer is willing to pay a
premium for it, the Board should facilitate the sale and seek the highest
premium possible. Action by the Board to amend Article EIGHTH will, in the
Proponent's opinion, make ONBK more attractive to a potential acquiror and
thereby enhance the value of stockholders' investments.
The Proponent believes that Article EIGHTH is directly opposed to the
goal of maximizing stockholder value. Merely removing this provision,
however, will not be enough. Delaware's corporation law contains a similar
"business combination" provision. This provision applies to any
corporation chartered in Delaware, including ONBK, unless the corporation
expressly opts out of the provision. The Proponent believes that the
Delaware provision has the same dampening effect on ONBK's value as
Article EIGHTH. Therefore the Proponent urges you to vote FOR this
Proposal to remove the Article EIGHTH barrier to maximum stockholder value
and to opt out of the similar Delaware corporation law provision.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE AGAINST THE ADOPTION
OF PROPOSAL 3.
STATEMENT OF THE BOARD OF DIRECTORS: Article EIGHTH of the Company's
Certificate of Incorporation ("Article EIGHTH") and Section 203 of the
Delaware General Corporation Law ("Section 203") were adopted to protect
shareholders from coercive takeover tactics and to discourage inadequate
buyout offers. These
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provisions neither prohibit all business combinations nor prevent
shareholders from accepting a tender offer opposed by the Board of Directors
as long as the transaction satisfies certain conditions designed to protect
the interests of shareholders. However, these provisions prevent a potential
takeover party from using the assets of your Company to finance the takeover
and using tactics which unfairly coerce the remaining minority shareholders
into tendering their shares.
Section 203 focuses on transactions after a takeover has occurred by
restricting for a period of three years a corporation's ability to engage in
certain business combinations with an "Interested Stockholder" (defined
generally as a person holding 15% or more of the Company's shares). However,
the three-year restriction does not apply to a business combination approved
by the Board before the Interested Stockholder becomes such, to any acquiror
who holds at least 85% of the corporation's shares (with certain exceptions)
upon consummation of the transaction in which the Interested Stockholder
became such, or to a business combination that is approved by the Board and
by an affirmative vote of 662/3% of the outstanding shares of ONBANCorp Common
Stock not owned by the Interested Stockholder. Moreover, Section 203 does not
restrict any business combination after the three-year period.
Similarly, Article EIGHTH requires that the holders of at least 80% of the
outstanding shares of the ONBANCorp Common Stock (including at least 50% of
the outstanding shares held by shareholders other than a "related person"
(defined generally as a person holding 10% or more of the shares of ONBANCorp
Common Stock)) approve certain business combinations, including mergers,
consolidations and sales of substantially all of the assets of the Company.
The 80% affirmative shareholder vote is not required if: (i) the transaction
has been approved by a majority of the entire Board of Directors prior to the
time the related person became a related person; (ii) the transaction has
been approved by a majority of the entire Board of Directors after the time
the related person became a related person, but only if the Board of
Directors has unanimously approved the acquisition of 10% or more of
ONBANCorp Common Stock by the related person before such ONBANCorp Common
Stock was acquired; or (iii) certain price criteria and procedural
requirements are met.
Under Delaware law, directors have a duty to act on behalf of the
shareholders to oppose inadequate or coer- cive takeover offers and to take
steps to defeat such offers. Section 203 and Article EIGHTH underscore this
duty by giving acquirors an incentive to negotiate with the Board in order to
avoid the need to comply with the requirements of such provisions. The
three-year restriction imposed by Section 203, balanced with the exceptions
to the restriction, was determined by the General Assembly of Delaware to be
a compromise that provides greater protection to shareholders against unfair
takeovers, without limiting the ability of shareholders to receive fair and
fully- priced bids. The Board of Directors concurs with this determination,
and also believes that the restrictions imposed by Article EIGHTH, balanced
with the exceptions thereto, provides a similar reasonable compromise.
Section 203 and Article Eighth are not intended to, and do not, prevent or
discourage an acquisition of the Company in a negotiated transaction approved
by the Board of Directors or if the acquiring entity is prepared to pay the
same price to all holders of each class of the Company's voting stock and a
sufficient number of the Company's shareholders support the transaction.
Although there can be no certainty as to the results of any particular
transaction, the Board of Directors believes that the interests of
shareholders would be best served if any acquisition of the Company results
from arm's length negotiations and reflects the Board's careful consideration
of the proposed terms of the transaction. Moreover, even if the Board did not
approve a particular transaction, neither Section 203 nor Article Eighth
would preclude its consummation.
Accordingly, the Board of Directors believes that Article EIGHTH and
Section 203 are appropriate corporate and legislative responses,
respectively, to abusive takeover tactics and that to maintain the
applicability of these provisions is in the best interests of the
shareholders.
FOR THE REASONS STATED ABOVE, THE BOARD OF DIRECTORS BELIEVES THAT
PROPOSAL 3 IS NOT IN THE BEST INTERESTS OF THE COMPANY AND ITS SHAREHOLDERS.
ACCORDINGLY, THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE
AGAINST PROPOSAL 3.
Approval of this proposal requires the affirmative vote of a majority of
the shares of ONBANCorp Common Stock present in person or represented by
proxy at the 1996 Annual Meeting and entitled to vote on this proposal.
However, approval of Proposal 3 will not result in the Certificate of
Incorporation being amended in the manner contemplated by such proposal.
Pursuant to Article EIGHTH, any such amendment would require both the
approval of the Board of Directors and subsequent approval by the affirmative
vote of the holders of not less than 80% of
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the issued and outstanding shares of the Company's voting stock. In addition,
to the extent Proposal 3 seeks to amend the Certificate of Incorporation to
cause the Company to opt out of the provisions of Section 203, such amendment
(i) would require both the approval of the Board of Directors and subsequent
approval by the affirmative vote of the holders of a majority of shares of
ONBANCorp Common Stock entitled to vote thereon and (ii) if it is so approved,
will not be effective until twelve months after the approval and shall not
apply to any business combination between the Company and any person who became
an Interested Stockholder of the Company on or prior to such approval.
Proposal No. 4
Dr. Lanning A. Anselmi, 16 Fox Hollow, Dallas, Pennsylvania 18612, owner of
836 shares of ONBANCorp Common Stock, has submitted the following proposal and
supporting statement:
"Resolved, that a special meeting of stockholders of ONBANCorp ("ONBK")
shall be called for any purpose by the stockholders of at least ten
percent (10%) of all the outstanding capital stock of ONBK entitled to
vote at the meeting."
SUPPORTING STATEMENT: ONBK's By-Laws currently permit stockholders to
call a special meeting only if the holders of at least 75% of all voting
shares act together to do so. It is extraordinarily difficult for
stockholders to collect such a high number of requests. This
"supermajority" requirement may create an appearance of corporate
democracy, but in reality, it ensures that stockholders will almost never
be able to force the Board to summon a special meeting.
When important matters arise--for example, the prospect of a major
transaction involving ONBK --stockholders should be able to make
themselves heard on the matter by calling a special meeting, even if the
Board chooses not to call such a meeting. The Proponent believes that the
proposed 10% threshold is high enough to ensure that stockholders take the
extraordinary step of calling a special meeting only when it is truly
warranted, while giving them the power to do so whether the Board wishes
it or not. Vote FOR the proposal to give yourself and other stockholders
the meaningful power to call a special meeting.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE AGAINST THE ADOPTION
OF PROPOSAL 4.
STATEMENT OF THE BOARD OF DIRECTORS: Currently, the By-Laws of the Company
provide, among other things, that a special meeting of shareholders must be
called upon the written request of the holders of three-fourths of all the
outstanding capital stock of the Company entitled to vote at the meeting. By
reducing drastically the shareholder request requirement from 75% to only 10%,
Proposal 4, if adopted, would enable a single shareholder or group of
affiliated shareholders that held a 10% position to call a special meeting of
the shareholders whenever, however frequently, and for whatever reason that
shareholder or group may desire.
Applicable Delaware law does not grant the shareholders of a public
corporation the absolute right to call a special meeting, and instead permits
each individual corporation to determine in its by-laws whether shareholders
will have such a right (and, if such a right is granted, what the requisite
shareholder consent to call a meeting will be). The Board of Directors believes
that the Delaware legislature adopted this approach due to the significant
financial and administrative burdens that a special meeting can impose on a
public corporation. Approximately 12,100 persons and entities are the record
and beneficial owners of the ONBANCorp Common Stock, each of whom would be
entitled to notice of, and to receive proxy materials relating to, any special
meeting, thereby necessitating actual expenditures (legal, printing and
postage) in addition to those associated with the Company's annual meeting. The
calling of a special meeting would also necessitate the diversion of corporate
officers and employees from their other duties in order to prepare for such a
meeting. Moreover, this problem could be compounded if no shareholder owns 10%
of the outstanding stock, because it would encourage consent solicitations by
dissident shareholders seeking consents to call a special meeting.
Therefore, the Board of Directors believes that adoption of Proposal 4 could
leave the Company exposed to numerous calls for special meetings that may be of
little or no benefit to shareholders and which are a significant burden to the
Company. If the Board determines, in the exercise of its fiduciary duties to
the Company and its shareholders, that a matter proposed by a shareholder
warrants a hearing before the shareholders as a whole, the Company's By-Laws
permit the Board to call a special meeting at the appropriate time.
FOR THE REASONS STATED ABOVE, THE BOARD OF DIRECTORS BELIEVES THAT PROPOSAL
4 IS NOT IN THE BEST INTERESTS OF THE COMPANY AND ITS SHAREHOLDERS. ACCORDINGLY,
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE AGAINST PROPOSAL 4.
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Pursuant to Article XI of the Company's By-Laws, Proposal 4 will be
adopted only if the votes cast in favor of the proposal represent
three-fourths of all of the outstanding shares of ONBANCorp Common Stock
entitled to vote thereon.
Proposal No. 5
Mr. Theodore Winters, RR#2, Box 322 D-1, Lake Ariel, Pennsylvania 18436,
owner of 1,237 shares of ONBANCorp Common Stock, has submitted the following
proposal and supporting statement:
"Resolved, that the Board of Directors of ONBANCorp., Inc. ("ONBK") be
requested to initiate amendments to the Certificate of Incorporation such
that the Board is constituted in a single, undivided class, all Directors
serving a term of one year and the entire Board being elected at each
year's annual meeting, and any Director or the entire Board may be
removed, with or without cause, by the holders of a majority of the shares
entitled to vote at an election of Directors."
SUPPORTING STATEMENT: ONBK's Board is "staggered." Instead of electing
the entire Board at the annual meeting, stockholders are permitted to
elect only a third of the Board each year. Even if the majority of
stockholders decided to replace the entire Board, it would take three
years to do so.
Everyone knows that politicians can become arrogant when they do not have
to worry about reelection. A corporation's directors can likewise lose
sight of the stockholders' interests if it is made harder for stockholders
to replace them. And indeed, once Directors of ONBK are elected, it is
nearly impossible to remove them before their term is expired, since
stockholders cannot remove a Director unless the Director is guilty of
some specific wrongdoing. But even then, removal requires the votes of an
unrealistically high 75% or more of the shares. Most significantly, poor
performance is no grounds for removal.
Our ultimate power as stockholders is the power to elect or remove a
member of the Board of Directors. But this Board is largely shielded from
that power. The Proponent urges you to vote for the proposal to reform the
Board so that all Directors face election each year and serve at the will
of the majority of stockholders. A vote for this proposal will send the
Board a powerful reminder that they are in business to serve the
stockholders. An effective, responsive Board has nothing to fear from
yearly elections. But if that Board becomes ineffective and arrogant, it
should not be permitted to escape its accountability to us, ONBK's
stockholders.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE AGAINST THE ADOPTION
OF PROPOSAL 5.
STATEMENT OF THE BOARD OF DIRECTORS: In accordance with the Company's
Certificate of Incorporation, and as permitted by applicable Delaware
corporate law, the Board of Directors is divided into three classes with five
directors in each class. Each director serves a three-year term, and
directors for one of the three classes are elected each year. Similar
procedures for electing directors by class have been adopted by many major
corporations, including numerous large bank holding companies. Under
applicable Delaware corporate law, directors serving on a classified board of
directors may only be removed for cause unless the certificate of
incorporation provides otherwise. The Company's Certificate of Incorporation
does not so provide, and also requires that the removal of any director be
approved by the affirmative vote of the holders of record of at least 75% of
the outstanding shares of ONBANCorp Common Stock.
The classified election of directors and the current procedures for
removing directors are intended to provide continuity of experienced
directors on the Board of Directors and prevent a precipitous and unwarranted
change in the composition of the Board. As a result of the division of the
Board into three classes, at least two annual shareholder meetings would be
required to effect a change in control of the Board of Directors. By allowing
directors to be removed only for cause and only by a supermajority vote of
shareholders, the Certificate of Incorporation ensures that special interest
shareholder groups, even sizeable ones, will have less power to pressure the
Board to take action which the Board does not believe to be in the best
interests of the Company and its other shareholders. The Board believes that
directors must be able to fulfill their fiduciary responsibilities to the
Company and its shareholders through making their own reasoned decisions,
based upon the information presented to them and their own experiences,
rather than feeling susceptible to the demands of a shareholder faction which
might attempt to remove them if they refuse to take action which is
consistent with such faction's special interests. In addition, these two
current provisions in the Certificate of Incorporation enhance management's
ability to negotiate in the best interest of all the shareholders with a
person seeking to gain control of the Company and ensure that a majority of
directors will always have prior experience as directors of the Company.
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FOR THE REASONS STATED ABOVE, THE BOARD OF DIRECTORS BELIEVES THAT
PROPOSAL 5 IS NOT IN THE BEST INTERESTS OF THE COMPANY AND ITS SHAREHOLDERS.
ACCORDINGLY, THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE
AGAINST PROPOSAL 5.
Approval of Proposal 5 requires the affirmative vote of a majority of the
shares of ONBANCorp Common Stock present in person or represented by proxy at
the 1996 Annual Meeting and entitled to vote thereon. However, approval of
Proposal 5 will not result in the Company's Certificate of Incorporation
being amended in the manner contemplated by such proposal. Pursuant to
applicable Delaware law and Article NINTH of the Company's Certificate of
Incorporation, any such amendment would require both the approval of the
Board of Directors and subsequent approval by the affirmative vote of the
holders of not less than three-fourths of the issued and outstanding shares
of ONBANCorp Common Stock entitled to vote thereon.
Proposal No. 6
The Allison Holtzman Trust 1971, c/o Theodore L. Krohn, Trustee, 400 Third
Avenue, Suite 201, Kingston, Pennsylvania 18704, owner of 13,612 shares of
ONBANCorp Common Stock, has submitted the following proposal and supporting
statement:
"Resolved, that the Board of Directors of ONBANCorp, Inc. ("ONBK") be
requested to initiate an amendment of the Certificate of Incorporation to
direct the Board, in connection with the exercise of its judgment in
determining what is in the best interests of ONBK and its shareholders, to
give due consideration only to the price or other consideration being
offered when evaluating any offer of another party to (a) purchase or
exchange any securities or property for any outstanding equity securities
of ONBK, (b) merge or consolidate ONBK with another corporation, or (c)
purchase or otherwise acquire all or substantially all of the properties
and assets of ONBK."
SUPPORTING STATEMENT: If a party offers to buy ONBK, the Board must
decide whether or not the offer is a good one. Common sense suggests that
the main question the Board should ask is, "How much are you offering to
pay?" At present, however, ONBK's Certificate of Incorporation makes the
price only one factor among many. In evaluating an offer, the Board must
consider not only the price offered but the effect the sale might have on
such groups as depositors, employees, customers, suppliers, and
communities where ONBK has facilities. The Proponent believes this
provision does not reflect the fact that ONBK belongs to shareholders who
want the best possible return on their investment. If someone offers to
buy ONBK, the Proponent believes the Board of Directors should sell if the
price is right.
Of course, relationships with customers, suppliers and the like are very
important in the ordinary course of business. But it is a special case
when someone offers to buy a corporation. Customers and suppliers do not
own corporations, stockholders do. Price is the key issue in any offer to
purchase, and shareholders should be able to sell at the best possible
price. ONBK belongs to the shareholders, and when it comes to maximizing
the value of our investment, the Board should put our interests first.
The Proponent believes that this provision directing the Board to
consider non-shareholder interests simply lets the Board reject an offer
to buy ONBK, even if selling ONBK would give stockholders the maximum
return on their investment. Maximization of stockholder value should be
ONBK's foremost policy, and the Board should honor this policy by making
price alone the deciding factor in evaluating an offer to buy ONBK.
Vote FOR this Proposal to make stockholder value the cornerstone of the
Board's decisionmaking.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE AGAINST THE ADOPTION
OF PROPOSAL 6.
STATEMENT OF THE BOARD OF DIRECTORS: Article SEVENTH of the Company's
Certificate of Incorporation presently provides that in evaluating certain
merger or other bulk sale transactions, the Board of Directors:
"shall, in connection with the exercise of its judgment in determining
what is in the best interests of the Corporation and its stockholders,
give due consideration not only to the price or other consideration being
offered, but also to other relevant factors including, without limitation,
the financial and managerial resources and future prospects of the other
party, the possible effects on the business of the Company and its
subsidiaries
25
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and on the depositors, employees, customers, suppliers and creditors of
the Company and its subsidiaries, and the effects on the communities in
which the Company's facilities are located (emphasis added)."
In the event that any party attempts to engage in a merger or similar
acquisition transaction involving the Company, the Board of Directors
believes that, for the reasons described below, this current provision of the
Certificate of Incorporation, rather than the provision contemplated by
Proposal 6, better serves the Board's ability to protect and further the
interests of the Company's shareholders and to maximize shareholder value.
Proposal 6 would require the Board to consider solely the price being
offered in a given transaction. Even if the Board of Directors were to
receive numerous acquisition proposals, the interests of shareholders would
not be served if the Board were to focus solely on this factor in seeking to
determine which transaction was the best alternative for the Company's
shareholders. For example, certain acquisition proposals could contain terms
and conditions other than the price which would make consummation of the
proposed transaction questionable and would lead the Board of Directors to
conclude that shareholder interests would be better served by accepting a
proposal with a lower price but a significantly greater probability of
consummation. In addition, transactions in the banking industry are often
stock-for-stock mergers in which the Board of Directors of the target company
should, in addition to comparing the indicated value of the various
transactions based upon recent trading values of each competing acquiror's
common stock, make a determination as to which transaction will provide
greater long-term value to the Company's shareholders. Such an evaluation
would require the Board to consider a myriad of factors, including the
financial and managerial resources and future prospects of the various
potential acquirors and the possible effects the competing transactions would
have on the business, employees and customers of the Company (which
consideration could include, among other matters, consideration of the
combined company's future operating strategies and any possible divestiture
requirements which could be imposed in connection with obtaining regulatory
approval for the transaction). All of these factors, which the Board must
consider under the current provisions of the Certificate but would be
precluded from considering if the Certificate is amended in the manner
contemplated by Proposal 6, could directly impact the long-term value of the
transaction to the Company's shareholders.
In addition, the current Certificate of Incorporation provision enables
the Company to negotiate and structure the most favorable relationships
possible with its employees, suppliers, creditors and local communities. As
the proponent of Proposal 6 admits in his supporting statement above, such
relationships are very important in the ordinary course of the Company's
business and inure to the benefit of the Company's shareholders. However,
these relationships do not occur without some cost. Such parties might
extract greater concessions or be less willing to enter into certain
long-term relationships with the Company without the assurance of the
potential consideration afforded by the current provision in certain
corporate change in control situations.
It is important to note, as well, that the current provision in the
Certificate of Incorporation does not allow the Board to consider the
non-shareholder constituencies in a vacuum, but rather only in connection
with the Board's determination of what is in the best interests of the
Company and its shareholders. Thus, even under the current provision, the
Board is required to, and will, make the interests of shareholders its
paramount consideration. The current provision merely affords the Board the
necessary flexibility to consider all relevant information, rather than
solely the stated price of a transaction, in considering the course of action
which it believes is best for the Company and its shareholders.
FOR THE REASONS STATED ABOVE, THE BOARD OF DIRECTORS BELIEVES THAT
PROPOSAL 6 IS NOT IN THE BEST INTERESTS OF THE COMPANY AND ITS SHAREHOLDERS.
ACCORDINGLY, THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE
AGAINST PROPOSAL 6.
Approval of Proposal 6 requires the affirmative vote of a majority of the
shares of ONBANCorp Common Stock present in person or represented by proxy at
the 1996 Annual Meeting and entitled to vote thereon. However, approval of
Proposal 6 will not result in the Company's Certificate of Incorporation
being amended in the manner contemplated by such proposal. Any such amendment
would require both the approval of the Board of Directors and subsequent
approval by the affirmative vote of a majority of the issued and outstanding
shares of ONBANCorp Common Stock entitled to vote thereon.
26
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Proposal 7
Berkshire Capital Partners, 11 West Market Street, Suite 510,
Wilkes-Barre, Pennsylvania 18701, the owner of 264,296 shares of ONBANCorp
Common Stock, has submitted the following proposal and supporting statement:
"RESOLVED, that the shareholders of ONBANCorp., Inc. (the "Company")
request that as soon as practicable after the 1996 annual meeting of
shareholders the Board of Directors take those steps necessary to effect
the sale or merger of the Company on terms that are in the best interest
of the Company's shareholders."
SUPPORTING STATEMENT: Since September 30, 1993, the Company's real value,
and as a result the market value of its shareholders' investment, have
experienced a meaningful decline. In fiscal year 1994, the Company
realized a $79.5 million net loss on securities transactions, which
contributed materially to the Company's posting a net loss in Fiscal 1994
of $0.15 per common share. In addition, shareholders' equity decreased by
$67.7 million in 1994, a decrease of 15.72% compared to year end 1993.
Most important to shareholders, over the last two years the per share
price of the Company's common stock has declined. On September 30, 1993,
the Company's closing stock price was $38.875, whereas on October 31,
1995, the closing stock price was $29.75, representing a decrease of 23.5%
in the value of the stock over that period. The total return of
ONBANCorp's common stock during this period substantially underperformed
general market and bank industry benchmarks. We believe these results are
directly attributable to management failure and inadequate oversight by
the Company's Board of Directors.
Set forth below is a graph comparing the cumulative total shareholder
return on ONBANCorp common stock to the cumulative return of the Keefe,
Bruyette & Wood 50 Bank Index (the "KBW 50"), the NASDAQ Bank Index and
the S&P 500 Stock Index. The KBW 50 Index is a published index made up of
50 of the Nation's major banking companies, including all the money center
banks and most major regional banks.
[GRAPH-LINE CHART]
[The printed Proxy Statement contains a line graph, furnished by the Proponent
of Proposal 7, depicting the indices mentioned in the supporting statement to
Proposal 7 for the various months indicated below. Because the Proxy Statement
has been filed with the Securities and Exchange Commission ("SEC") by
electronic transmission, this graph is not contained herein. Pursuant to
Regulation S-T promulgated by the SEC, the Company has inspected visually the
line graph and attempted in good faith to estimate fairly and accurately the
information therein. However, the information below is a set of estimates only
since the Proponent furnished the graph to the Company for inclusion in the
Proxy Statement without a table of corresponding plot points. Shareholders are
encouraged to consult the printed Proxy Statement for a copy of the actual line
graph. Shareholders may obtain, free of charge, a copy of the printed Proxy
Statement by writing to Mr. David M. Dembowski, Secretary, ONBANCorp, Inc.,
101 South Salina Street, Syracuse, New York 13202.
ONBANCorp Stock Performance
ONBK NASDAQ Bank Index KBW 50 S&P 500
Sep 93 100 100 100 100
Dec 93 91 99 96 102
Mar 94 80 97 95 99
Jun 94 81 109 101 100
Sep 94 72 111 100 103
Dec 94 62 100 92 103
Mar 95 70 111 102 114
Jun 95 77 122 117 124
Sep 95 90 139 137 136
Oct 95 84 138 135 135]
27
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We believe the real value of the Company is much greater than that
reflected in its current stock price. However, we do not believe that the
Company's current management is capable of obtaining such value.
Management's performance over the past two years has, in our view, shown
no evidence that a strategy exists that will obtain this value. Therefore,
we believe that the best way for shareholders to realize the real value of
their investment is to put the Company up for sale. By doing so,
interested acquirors with superior resources and management strategies
will have an opportunity to bid on the Company and in the process the
Company's true worth will be realized. In our view, a sale or merger to a
stronger banking company would maximize shareholder value and also provide
stockholders greater potential for long term rewards. If such a sale or
merger is not undertaken, we fear that existing management will continue
its current operating policies resulting in a possible further decline in
shareholder value. Accordingly, we urge you to VOTE FOR this resolution to
urge the Board of Directors to take the actions necessary to sell or merge
the Company.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE AGAINST THE ADOPTION
OF PROPOSAL 7.
STATEMENT OF THE BOARD OF DIRECTORS: The purpose of Proposal 7 is to have
the Board take immediate action directed at causing the sale or merger of the
Company to or with a third party. The supporting statement for the proposal
suggests that such a transaction would reward the Company's shareholders
better than continued ownership of shares of ONBANCorp Common Stock.
The Board is always open to suggestions that would benefit the Company and
enhance value for its shareholders. Although certain sale transactions do
provide a premium over market value for a corporation's shareholders, that
premium is not always large and does not always reflect the true long-term
value of a company's stock.
At present, thirteen of the fifteen members of the Board of Directors are
independent outside directors who are not employees of the Company or any of
its subsidiaries, and twelve of the fifteen directors have never been so
employed. This overwhelmingly independent Board of Directors, consistent with
its fiduciary duties to all shareholders, frequently reviews the strategic
alternatives available to the Company, and is committed to maximizing value
for all shareholders. In addition to its own strategic alternative analyses
and review, and in furtherance of such review, the Board has retained the
investment banking firm of Sandler O'Neill & Partners, L.P. During the past
year, the Board of Directors has carefully considered, and representatives of
Sandler O'Neill have made numerous presentations to the Board concerning, the
various strategic alternatives, including a sale or merger, available for
enhancing shareholder value, and the possible values to shareholders which
might be realized if each of such strategic alternatives were pursued. In the
exercise of its fiduciary duties, the Board remains open to, and will
continue to consider carefully, all options to enhance shareholder value.
The Board of Directors believes that a "fire-sale" atmosphere could be
created if Proposal 7 is approved. In its judgment, this would disadvantage
any efforts to merge or sell the Company, whether now, as the proponents
suggest, or in the future. Approval of the proposal might be regarded as a
signal that the Board of Directors, under pressure from dissident
shareholders, has lost its ability to determine the appropriateness of the
timing of the sale of the Company, and thus has little bargaining power and
could be pressured into accepting a reduced price.
In its supporting statement, the Proponent of Proposal 7 has included a
graph comparing the performance of ONBANCorp Common Stock to that of each of
the S&P 500 Stock Index, the KBW 50, and the NASDAQ Bank Index for the period
between September 1993 and October 1995. A similar graph for the period
between December 1990 and December 1995 is included on page 20 of this Proxy
Statement. The Board of Directors believes that this graph demonstrates that,
contrary to the assertions of the Proponent of Proposal 7, each of the
Company, its Board of Directors and its senior management have, over the
long-term, provided superior returns for the Company's shareholders.
FOR THE REASONS STATED ABOVE, THE BOARD OF DIRECTORS BELIEVES THAT
PROPOSAL 7 IS NOT IN THE BEST INTERESTS OF THE COMPANY AND ITS SHAREHOLDERS.
ACCORDINGLY, THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE
AGAINST PROPOSAL 7.
Approval of Proposal 7 requires the affirmative vote of a majority of the
shares of ONBANCorp Common Stock present in person or represented by proxy at
the 1996 Annual Meeting and entitled to vote on this proposal.
28
<PAGE>
Proposal No. 8
Dr. Thomas E. Baker, R.D. #5 Country Club Road, Dallas, Pennsylvania
18612, owner of 3,000 shares of ONBANCorp Common Stock, has submitted the
following proposal and supporting statement:
"Resolved, that the Board of Directors of ONBANCorp, Inc. ("ONBK") be
requested to initiate amendments to the Certificate of Incorporation such
that each holder of stock entitled to vote at elections of Directors is
entitled to a number of votes equal to the number of shares owned,
multiplied by the number of Directors to be elected, and to cast all of
these votes for a single candidate, or for any two or more candidates, as
the stockholder sees fit."
SUPPORTING STATEMENT: The law permits corporations to use "cumulative
voting" in elections of Directors. Cumulative voting enables stockholders
to distribute their votes as they think best. In any election involving
five Directors, for example, a stockholder owning one share could vote
once for a candidate for one of the seats. Cumulative voting does not give
stockholders more votes; but it allows them to use their votes more
effectively.
The law permits cumulative voting; but ONBK does not. If cumulative
voting were possible, stockholders who disagree with the policies of the
Board could pool their votes to help ensure the election of at least one
Director to be their voice on the Board. The Proponent believes that, with
cumulative voting, the Board would be more likely to reflect the full
range of stockholder views on the way ONBK should be run.
Cumulative voting helps guard against a monolithic, rubber-stamp Board of
Directors. When such mechanisms as a staggered board weaken stockholder
control, cumulative voting becomes even more important. Vote FOR
cumulative voting and for a more democratic and representative Board of
Directors.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE AGAINST THE ADOPTION
OF PROPOSAL NO. 8.
STATEMENT OF THE BOARD OF DIRECTORS: At present, thirteen of the fifteen
members of the Board of Directors are independent outside directors who are
not and have never been employees of the Company or any of its subsidiaries,
and twelve of the fifteen directors have never been so employed. The Board of
Directors believes that this overwhelming majority of independent directors
assures the continued independence of the Board, which has the responsibility
to represent all of the Company's shareholders. The Board of Directors
believes that for it to continue to be effective, each member must feel a
responsibility to represent all shareholders, and that this sense of
responsibility could be impaired if the Company's directors were elected by
cumulative voting. If cumulative voting is instituted, assuming that the
holders of approximately 86% of the outstanding shares of ONBANCorp Common
Stock vote at an Annual Meeting (the approximate average amount voting at the
previous 6 Annual Meetings), and five directors are to be elected, the
holders of as few as approximately 14% of the outstanding shares of ONBANCorp
Common Stock would have the power to elect a director. Any director so
elected might be concerned principally with representing the interests of the
special faction of shareholders responsible for his or her election rather
than the interests of all shareholders. Cumulative voting also introduces the
possibility of partisanships among Board members that could impair their
ability to work together, a requirement essential to the effective
functioning of any board of directors.
Currently, all of the Company's shareholders are minority owners, albeit
some with more extensive holdings than others. The Board of Directors does
not believe that any particular minority group of shareholders should be
advantaged--or disadvantaged--compared with all other shareholders. In other
words, all shareholders are, and should be, represented equally. Although
there have been efforts by some minority shareholders to have corporations
adopt cumulative voting, the trend is in the opposite direction. Many
corporations over the years have eliminated cumulative voting. Overall, its
presence has declined.
FOR THE REASONS STATED ABOVE, THE BOARD OF DIRECTORS BELIEVES THAT
PROPOSAL 8 IS NOT IN THE BEST INTERESTS OF THE COMPANY AND ITS SHAREHOLDERS.
ACCORDINGLY, THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE
AGAINST PROPOSAL 8.
Approval of Proposal 8 requires the affirmative vote of the holders of a
majority of the shares of ONBANCorp Common Stock present in person or
represented by proxy at the 1996 Annual Meeting and entitled to vote thereon.
However, approval of Proposal 8 will not result in the Company's Certificate
of Incorporation being amended in
29
<PAGE>
the manner contemplated by such proposal. Any such amendment would require
both the approval of the Board of Directors and subsequent approval by the
affirmative vote of a majority of the issued and outstanding shares of
ONBANCorp Common Stock entitled to vote thereon.
PROPOSAL 9:OTHER MATTERS
As of the date of this Proxy Statement, management and the Board of
Directors do not know of any other matters to be brought before the
shareholders at the Annual Meeting. If one proposal that was excluded from
this Proxy Statement in accordance with Rule 14a-8 of the Securities Exchange
Act of 1934, as amended, is properly brought before the Annual Meeting, it is
intended that the persons named in the accompanying proxy will use their
discretionary authority to vote the proxies against such proposal. If any
other matters not now known are properly brought before the Annual Meeting,
the proxy holders will vote the shares represented by all properly executed
proxies on such matters in such manner as shall be determined by a majority
of the Board of Directors. Under the Company's By-laws, shareholders of the
Company are required to provide advance notice to the Company if they wish to
nominate persons for election as directors or propose items of business at an
annual meeting of the Company's shareholders. In the case of an annual
meeting of shareholders, this notice must be delivered not less than 90 days
nor more than 120 days prior to the anniversary date of the Company's proxy
statement release to shareholders in connection with the preceding year's
annual meeting of shareholders. A copy of the Corporation's By-laws
specifying the advance notice requirements will be furnished to any
shareholder upon written request to the Secretary of the Corporation.
SHAREHOLDER PROPOSALS
Any proposal which a shareholder wishes to have presented at the next
annual meeting of shareholders must, in addition to other applicable
requirements, be set forth in writing and filed with the Secretary of
ONBANCorp, no later than November 25, 1996.
ANNUAL REPORT
A copy of the Annual Report to Shareholders for the fiscal year ended
December 31, 1995 ("Annual Report") accompanies this Proxy Statement. The
Company is required to file an annual report on Form 10-K for its fiscal year
ended December 31, 1995 with the Securities and Exchange Commission.
Shareholders may obtain, free of charge, a copy of such annual report
excluding exhibits by writing to Mr. Robert J. Berger, Senior Vice President,
Chief Financial Officer and Treasurer, ONBANCorp, 101 South Salina Street,
Syracuse, New York 13202.
IMPORTANT--MAIL YOUR SIGNED PROXY CARD
Please sign, date and mail your Proxy Card
30
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[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
Notice of
ANNUAL MEETING
and
PROXY STATEMENT
[ONBANCorp, Inc.-LOGO]
Annual Meeting of Shareholders
APRIL 23, 1996
<PAGE>
[LOGO] REVOCABLE PROXY
Annual Meeting of Shareholders-April 23, 1996
This Proxy is Solicited on Behalf of the Board of Directors
The undersigned hereby appoints William M. Le Beau and Illana P. Raia, and
each of them, as proxies of the undersigned, with full power of substitution,
to vote all shares of stock of the undersigned in ONBANCorp, Inc. with like
effect as if the undersigned were personally present and voting at the Annual
Meeting of Shareholders of ONBANCorp, Inc. to be held on April 23, 1996, and
at any adjournments or postponements thereof.
The shares represented by this proxy will be voted as directed by the
shareholder. Unless otherwise directed, such shares will be voted "FOR"
proposals 1 and 2 and "AGAINST" proposals 3 through 8.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" PROPOSALS 1 AND 2.
1. ELECTION OF DIRECTORS
(Terms of Office Expire in 1999)
|_| For all nominees listed below
(except as indicated to the contrary)
|_| WITHHOLD AUTHORITY to vote
for all nominees
Nominees: William F. Allyn, Chester D. Amond, Peter O'Donnell,
Russell A. King, and J. Kemper Matt
INSTRUCTIONS: To withhold authority to vote for any individual nominee, write
his or her name on the line below.
2. PROPOSAL TO APPOINT KPMG PEAT MARWICK LLP as independent auditors for the
fiscal year ending December 31, 1996.
|_| FOR |_| AGAINST |_| ABSTAIN
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "AGAINST" SHAREHOLDER
PROPOSALS 3 THROUGH 8.
3. SHAREHOLDER PROPOSAL regarding business combinations with certain
interested stockholders.
|_| FOR |_| AGAINST |_| ABSTAIN
4. SHAREHOLDER PROPOSAL to amend the By-Laws to alter the percentage of
shareholders necessary to call a special meeting.
|_| FOR |_| AGAINST |_| ABSTAIN
(Continued and to be signed on the reverse side)
<PAGE>
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "AGAINST" SHAREHOLDER
PROPOSALS 5 THROUGH 8.
5. SHAREHOLDER PROPOSAL regarding the procedures governing the election and
removal of directors.
|_| FOR |_| AGAINST |_| ABSTAIN
6. SHAREHOLDER PROPOSAL regarding the Board's consideration of various
factors in certain sale of control transactions.
|_| FOR |_| AGAINST |_| ABSTAIN
7. SHAREHOLDER PROPOSAL requesting that the Board take steps to cause a sale
or merger of the Company.
|_| FOR |_| AGAINST |_| ABSTAIN
8. SHAREHOLDER PROPOSAL regarding cumulative voting.
|_| FOR |_| AGAINST |_| ABSTAIN
9. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the Annual Meeting or any
adjournments or postponements thereof.
Please Mark, Sign, Date and Mail this Proxy Promptly Using the Enclosed
Envelope.
Date:
-------------------------------------------------------------------
Signature:
--------------------------------------------------------------
Signature:
--------------------------------------------------------------
(Please date and sign exactly as name appears on this card and return in
the enclosed envelope. If acting as executor, administrator, trustee,
guardian, or otherwise, please so indicate when signing. If the signer is
a corporation, a duly authorized officer should sign the full corporate
name. If shares are held jointly, each shareholder named should sign.)
