-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, I5no167q4d4B0XkMu3w7PcgjnT/fw6oiJC8WgNzjXX22+c1QLZEQO5AOKpg33DMv IhsjkcShte5MkFt6SmhAkg== 0000950123-98-002506.txt : 19980317 0000950123-98-002506.hdr.sgml : 19980317 ACCESSION NUMBER: 0000950123-98-002506 CONFORMED SUBMISSION TYPE: DEF 14A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19980414 FILED AS OF DATE: 19980313 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: SUFFOLK BANCORP CENTRAL INDEX KEY: 0000754673 STANDARD INDUSTRIAL CLASSIFICATION: NATIONAL COMMERCIAL BANKS [6021] IRS NUMBER: 112708279 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: DEF 14A SEC ACT: SEC FILE NUMBER: 000-13580 FILM NUMBER: 98564789 BUSINESS ADDRESS: STREET 1: 6 W SECOND ST CITY: RIVERHEAD STATE: NY ZIP: 11901 BUSINESS PHONE: 516725667 MAIL ADDRESS: STREET 1: 6 WEST SECOND STREET CITY: RIVERHEAD STATE: NY ZIP: 11901 DEF 14A 1 SUFFOLK BANCORP 1 SCHEDULE 14A INFORMATION PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO. ) Filed by the Registrant [X] Filed by a Party other than the Registrant [ ] Check the appropriate box: [ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) [X] Definitive Proxy Statement [ ] Definitive Additional Materials [ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-2.
SUFFOLK BANCORP - -------------------------------------------------------------------------------- (Name of Registrant as Specified In Its Charter) - -------------------------------------------------------------------------------- (Name of Person(s) Filing Proxy Statement, if other than Registrant) Payment of Filing Fee (Check the appropriate box): [X] No fee required. [ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-12. (1) Title of each class of securities to which transaction applies: ------------------------------------------------------------------------ (2) Aggregate number of securities to which transaction applies: ------------------------------------------------------------------------ (3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is calculated and state how it was determined): ------------------------------------------------------------------------ (4) Proposed maximum aggregate value of transaction: ------------------------------------------------------------------------ (5) Total fee paid: ------------------------------------------------------------------------ [ ] Fee paid previously with preliminary materials. [ ] Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. (1) Amount Previously Paid: ------------------------------------------------------------------------ (2) Form, Schedule or Registration Statement No.: ------------------------------------------------------------------------ (3) Filing Party: ------------------------------------------------------------------------ (4) Date Filed: ------------------------------------------------------------------------ 2 [SUFFOLK BANCORP LOGO] 6 West Second Street Riverhead, New York 11901 NOTICE OF ANNUAL MEETING OF SHAREHOLDERS March 13, 1998 To Shareholders of Suffolk Bancorp: Notice is hereby given that the annual meeting of shareholders of Suffolk Bancorp, a New York corporation (the "Company"), will be held at the EAST WIND, Route 25A, Wading River, New York, on Tuesday, April 14, 1998 at 1:00 P.M. for the purpose of considering and voting upon the following matters: 1. The election of three directors to hold office for a term of three years, such terms to extend until their successors have been duly elected and qualified. 2. The approval of the Board of Directors' selection of independent auditors for the year ending December 31, 1998. 3. Any other business which may be properly brought before the meeting or any adjournment thereof. By Order of the Board of Directors DOUGLAS IAN SHAW Corporate Secretary PLEASE SIGN AND RETURN THE ENCLOSED PROXY AS QUICKLY AS POSSIBLE, WHETHER YOU PLAN TO ATTEND THE MEETING IN PERSON OR NOT. YOU MAY WITHDRAW YOUR PROXY AT ANY TIME PRIOR TO THE EXERCISE OF THE PROXY AT THE MEETING BY GIVING WRITTEN NOTICE TO THE SECRETARY OF THE COMPANY. 1 3 THIS PAGE LEFT BLANK INTENTIONALLY. 2 4 [SUFFOLK BANCORP LOGO] 6 West Second Street Riverhead, New York 11901 PROXY STATEMENT FOR ANNUAL MEETING OF SHAREHOLDERS APRIL 14, 1998 This proxy statement is furnished in connection with the solicitation by the Board of Directors of Suffolk Bancorp, a New York corporation (the "Company"), of proxies to be voted at the annual meeting of shareholders to be held at 1:00 P.M. on Tuesday, April 14, 1998 at the East Wind, Route 25A, Wading River, New York. This proxy statement and the form of proxy are first being sent to shareholders on March 13, 1998. Any shareholder executing a proxy that is solicited in this statement has the power to revoke it by giving written notice to the Secretary of the Company at any time prior to the exercise of the proxy. Proxies will be solicited by mail. They also may be solicited by directors, officers, and regular employees of the Company, as well as those of The Suffolk County National Bank (the "Bank"), which is a wholly-owned subsidiary of the Company. They may be solicited, personally, or by telephone or telegraph, but these people will receive no additional compensation for their services. Copies of proxy material will be furnished to brokerage houses, fiduciaries, and custodians to be forwarded to the beneficial owners of the Company's common stock. The Company will bear all costs of soliciting proxies. As of March 6, 1998, there were 6,095,356 shares of common stock, $2.50 par value, of the Company outstanding. Only stockholders of record at the close of business on March 6, 1998 are entitled to notice of and to vote at the annual meeting. Each shareholder of record on that date is entitled to one vote for each share held. SHAREHOLDER PROPOSALS Shareholder proposals to be considered for inclusion in the proxy statement and considered at the annual meeting must be submitted in a timely fashion. Proposals for the 1999 annual meeting of the shareholders must be received by the Company at its principal executive offices no later than November 12, 1998. Any proposals, as well as any questions about them, should be directed to the Secretary of the Company. ITEM 1. ELECTION OF DIRECTORS AND INFORMATION WITH RESPECT TO DIRECTORS AND OFFICERS (ITEM 1 ON PROXY CARD) The first item to be acted upon at the meeting of shareholders is the election of three directors to hold office for three years, and until their successors shall have been duly elected and qualified. The By-Laws of the Company provide that the total number of directors may be fixed by resolution of the Board of Directors. At present, the Board has fixed the number of directors at ten. The By-Laws further provide that the directors shall be divided into three classes, as nearly equal as possible, with terms of office of each class expiring at the end of consecutive years. All proxies that are received by the Board of Directors conferring authority to so vote in the election of directors will be voted FOR the three nominees listed below. All proxies received will be voted in accordance with their specific instructions. In the event any nominee declines or is unable to serve, the proxies will be voted for a successor nominee designated by the Board of Directors. Each of the three nominees has consented to being named in this proxy statement and to serve if elected, and the Board of Directors knows of no reason to believe that any nominee will decline or be unable to serve, if elected. The other seven members of the Board of Directors, who are listed on the next page, are currently expected to continue to serve on the Board until their respective terms expire. 3 5 Following is information about the nominees for directors to be elected at this annual meeting of shareholders and the directors of the Company whose terms of office continue after this annual meeting of shareholders of the Company. NOMINEES FOR DIRECTOR AND DIRECTORS CONTINUING IN OFFICE
Position Served As Present and Offices Business Experience Director Term Name(1) Age With Company During Past 5 Years(2) Since Expires NOMINEES FOR A TERM OF THREE YEARS: Edgar F. Goodale 44 Director President, Riverhead 1989 1998 Building Supply, Inc. J. Douglas Stark 65 Director President, Stark Mobile Homes, 1984 1998 Inc. (manufactured housing community) Howard M. Finkelstein 67 Director Partner, Smith, Finkelstein, 1984 1998 Lundberg, Isler, and Yakaboski (attorneys and general counsel DIRECTORS CONTINUING IN OFFICE: for the Bank) Bruce Collins 67 Director Currently Retired, Former 1994 1999 Superintendent of Public Works Village of East Hampton, New York Joseph A. Deerkoski 63 Director President, See Neefus, Inc. 1987 1999 (general insurance) Edward J. Merz 66 Chairman, Chairman, President and Chief 1984 1999 and Director Executive Officer, The Suffolk County National Bank and Suffolk Bancorp Director, Intervest Bancshares Corporation Hallock Luce 3rd 76 Director Director, Lupton & Luce, Inc. 1984 2000 (general insurance) Raymond A. Mazgulski 74 Vice Chairman Chairman, The Suffolk County 1984 2000 and Director National Bank Peter Van de Wetering 66 Director President, Van de Wetering 1985 2000 Greenhouses (wholesale nursery) John F. Hanley 51 President, Chief Executive Vice President and Chief 1997 2000 Executive Officer Administrative Officer, The Suffolk and Director County National Bank & Suffolk Bancorp
Shares of Common Stock Owned Beneficially at % of Name(1) 3/6/98(3) Class NOMINEES FOR A TERM OF THREE YEARS: Edgar F. Goodale 12,612 0.21% J. Douglas Stark 103,768 1.70% Howard M. Finkelstein 55,937 0.92% DIRECTORS CONTINUING IN OFFICE: Bruce Collins 13,840 0.23% Joseph A. Deerkoski 36,056 0.59% Edward J. Merz 37,630 0.62% Hallock Luce 3rd 113,523 1.86% Raymond A. Mazgulski 16,225 0.27% Peter Van de Wetering 40,953 0.67% John F. Hanley 13,114 0.22%
(1) All of the nominees and all of the directors continuing in office are also directors of the Bank. Of the nominees and directors continuing in office, only Edward J. Merz and John F. Hanley have been executive officers of the Company in the Company's last fiscal year. (2) The business experience of each director during the past five years was that typical of a person engaged in the principal occupations for that period listed for each. Each of the directors has held the same or another executive position with the same employer during the past five years. (3) Included are the following shares in which directors disclaim beneficial ownership: Joseph A. Deerkoski 7,584 shares owned by Patricia B. Deerkoski, wife; Howard M. Finkelstein 7,444 shares owned by Deonne C. Finkelstein, wife; J. Douglas Stark 20,553 shares owned by Michelle Stark, daughter, and 19,025 shares owned by Tracy Stark, daughter. 4 6 The primary business of the Company is the operation of The Suffolk County National Bank. The directors of the Company met fourteen times during the fiscal year ended December 31, 1997, and its Audit Committee met three times. The Board of The Suffolk County National Bank met thirteen times, and its Personnel Committee met three times in 1997. No director attended fewer than 75 percent of the meetings of the Board of the Company and its committees, or of the Bank and its committees. The Boards of the Company and the Bank have standing Audit and Personnel Committees composed as follows: The Audit Committee consists of Messrs. J. Douglas Stark, Hallock Luce 3rd, Joseph A. Deerkoski, Edgar F. Goodale. This committee reviews the internal audit controls and procedures and the financial affairs of the Company and the Bank, and reports the results to the Board. Additionally, the committee reviews the certified examination prepared by the independent auditors who also provide certain tax preparation services. The Personnel Committee consists of Messrs. Hallock Luce 3rd, J. Douglas Stark, Joseph A. Deerkoski, and Howard M. Finkelstein. This committee reviews salaries, benefits, and employment policies of the Company and the Bank at least annually, and makes recommendations to the Board. The Company does not have a Nominating Committee. COMPENSATION REPORT OF THE PERSONNEL COMMITTEE The Company's Personnel Committee serves as its Compensation Committee. It consists of four Directors who are not employees as well as the President and Chief Executive Officer, John F. Hanley. Members of the Bank's management attend Committee meetings regularly to provide information about personnel policies and programs, along with their cost. Management's participation in this Committee plays an important part in the development and continuation of benefit plans, and in determining appropriate compensation. The Committee holds discussions with management in attendance to ensure that decisions affecting both return to shareholders and the Bank's operations are made diligently. The Committee was established to review, at least annually, the salaries, benefits, and employment policies of the Bank and then make recommendations to the full Board. COMPENSATION POLICY It is the Company's policy to compensate individuals at fair and competitive levels to encourage them to work to the benefit of the shareholders. It is to this end that the Company has established a program that links employees' remuneration to demonstrated and measurable performance goals. These goals are aligned with corporate philosophy and the annual business plan. The performance of an employee is reviewed individually. However, the individual's impact on overall corporate success is also weighed. Leadership, presence in community, and loyalty to the company are other factors. The Company continues to attract and maintain qualified staff. The Company, through the use of incentives, competitive salaries, and direct ownership rewards these individuals for their on-going commitment to our shareholders. Management remains diligent in its pursuit of new and innovative ways to determine compensation. COMPONENTS OF COMPENSATION The Committee examines three components of compensation annually: base salary, executive incentive (bonus), and long term incentive. The Company uses base salary ranges for all employees, with the exception of the President and Executive Vice Presidents. The ranges have been determined by regional salary surveys, industry guides, and regional economic conditions. Comparisons to compensation at similar companies are made regularly. Information gained from membership in regional banking organizations also permit valuable comparisons. The Company also participates in comparison surveys conducted by independent consulting firms that provide additional information in return. The second component of executive compensation is the Executive Officer Incentive Program (Bonus). This program rewards key individuals who have contributed successfully to the Company's profitability during the business year. Over the years, differing methods have been used to determine these awards. Recent methods have included a formula based strictly on net earnings, prorating by base salary, and ratings matrices based on individual performance and position. The Company has investigated alternatives and retained an outside consulting firm. Long-term incentives take the form of stock options. The Committee acknowledges the value of using such incentives as they tie the executives' interest to the shareholders'. The purpose of executive compensation, in general, is to provide incentives to increase the net worth of the Company, and ultimately 5 7 shareholders' wealth. It should be noted that the Company has no long-term contracts in effect for its Executive Officers other than contracts that would become effective only if a change in control of the Company occurs. COMPENSATION OF CHIEF EXECUTIVE OFFICER To assess the appropriate form and amount of compensation, the Committee evaluates the performance of the Company and the C.E.O.'s individual contribution to that performance. In evaluating the Company, the Committee considers return on stockholders' equity, return on assets, the quality and quantity of assets, operating efficiency, growth in earnings and earnings-per-share, and the market price of the Company's common stock. The C.E.O.'s individual performance is evaluated on the basis of the quality of oversight and the development of strategy. The Company's operating results and market performance are compared quarterly to the commercial banking industry as a whole, all banking companies in the New York metropolitan area, all banking companies of similar size nationwide, and selected regional competitors. The C.E.O.'s compensation is compared annually to selected regional competitors operating in the state of New York. The Committee then makes an estimation in awarding base salary, cash bonus, and stock options. CONCLUSION The Committee believes that the compensation awarded to the Company's senior executives is appropriate given the Company's performance and the performance of individual executives. Submitted by: Hallock Luce 3rd, Chairman of the Committee J. Douglas Stark Joseph A. Deerkoski Howard M. Finkelstein The following table sets forth the cash compensation paid to the C.E.O. and each of the four highest paid executive officers of the Company whose salary and bonus exceeded $100,000 as accrued for the fiscal year ended December 31, 1997. SUMMARY COMPENSATION TABLE
Annual Compensation Long Term Compensation -------------------------------------- -------------------------------- Awards Payouts --------------------- ------- All Name Restricted Other and Other Annual Stock Options/ LTIP Compen- Principal Position Year Salary Bonus Compensation Award(s) SARs Payouts sation ($) ($) ($) ($) (#) ($) ($)(1) (a) (b) (c) (d) (e) (f) (g) (h) (i) - ------------------------------------------------------------------------------------------------------------------------------ Edward J. Merz, 1997 158,032 70,790 n/a n/a n/a n/a 62,775 Chairman 1996 258,622 n/a n/a n/a 10,000 n/a 20,175 1995 254,410 24,000 n/a n/a n/a n/a 16,859 John F. Hanley 1997 185,000 34,781 n/a n/a 5,000 n/a 2,026 President and 1996 150,965 n/a n/a n/a 7,400 n/a 1,999 Chief Executive Officer 1995 113,492 12,000 n/a n/a n/a n/a 2,131 Victor F. Bozuhoski, Jr 1997 146,170 25,972 n/a 1,500 n/a 3,426 Executive Vice President, Treasurer, 1996 142,083 n/a n/a n/a 2,600 n/a 1,438 & Chief Financial Officer 1995 140,012 12,000 n/a n/a n/a n/a 1,400 Thomas S. Kohlmann 1997 125,004 20,405 n/a n/a 1,500 n/a 1,745 Executive Vice President & Chief Lending Officer Augustus C. Weaver 1997 125,003 21,184 n/a n/a 1,500 n/a 1,154 Executive Vice President & 1996 116,454 n/a n/a n/a 2,600 n/a 675 Chief Information Officer 1995 118,831 9,600 n/a n/a n/a n/a n/a - ------------------------------------------------------------------------------------------------------------------------------
(1) Includes above-market or preferential earnings on deferred compensation not previously disclosed, and company matching contributions to 401(K) plan. 6 8 STOCK OPTION AND OTHER PLANS The Company has two stock option plans for its employees and employees of its subsidiaries. The plans are an incentive stock option plan (the "Incentive Stock Option Plan") and a non-qualified stock option plan (the "Non-Qualified Plan"). Under the Plans, options to purchase up to 660,000 shares of Common Stock may be issued. As of March 6, 1998, options for 589,706 shares remain to be granted: 9,500 options were granted in 1997 to the persons named in the summary compensation table. Under the Plans, key employees are granted options to purchase Common Stock of the Company at a price equal to the fair market value of the shares on the date that the option is granted. Almost all of the Company's 400 employees could qualify as key employees. The Personnel Committee of the Board of Directors determines the optionee, the number of shares covered by the options, and the exercise price of options granted under the Plans. When granted, options expire after a time determined by the Personnel Committee, but in no event longer than ten years, or on termination of the employment of the optionee unless the termination resulted from death, disability, or retirement. In those events, the option expires in two years, one year, and three months after termination of employment, respectively. The exercise price may be paid either in cash or by delivery of shares of the Company's Common Stock, valued at the market price. Optionees may also be given stock appreciation rights in connection with the option. The Personnel Committee may, in its discretion, establish provisions for the exercise of stock options different from those described in this paragraph. Copies of the Plans are available upon shareholder request. STOCK OPTION TABLE
INDIVIDUAL GRANTS Potential Realizable Alternative To - ----------------------------------------------------------------------------------------- Value At Assumed (f) And (g): Percent of Annual Rate of Stock Grant Date Number of Total Price Appreciation Value Securities Options/SAR's For Option Term ** Underlying Granted to Exercise of ------------------ ----------------- Options/SAR's Employees Base Price Expiration Grant Date Name Granted (#) in Fiscal Year ($/Sh) Date 5%($) 10%($) Present Value $ (a) (b) (c) (d) (e) (f) (g) (h) - ----------------------------------------------------------------------------------------------------------------------------------- John F. Hanley 5,000 53% $30.00 12/22/07 $46,950 Victor F. Bozuhoski, Jr. 1,500 16% $30.00 12/22/07 $14,085 Thomas S. Kohlmann 1,500 16% $30.00 12/22/07 $14,085 Augustus C. Weaver 1,500 16% $30.00 12/22/07 $14,085 - -----------------------------------------------------------------------------------------------------------------------------------
** The weighted-average, fair value of the options granted during 1997 was $9.39. The fair value of each option was estimated on the date granted using the Black-Scholes option pricing model. The following weighted-average assumptions were used for grants in 1997: risk-free interest rate of 5.7%; expected dividend yield of 2.8%; expected life of ten years; and expected volatility of 24.9%. During 1997, executive officers acquired no shares on exercise and no value was realized. At fiscal year-end 1997, there were 37,300 unexercised options or stock appreciation rights, of which 27,800 have vested and may be exercised. The aggregate value of unexercised in-the-money options or stock appreciation rights was $827,050.00. COMPENSATION PURSUANT TO PLANS The Company has a defined-benefit pension plan. It is the only form of contingent remuneration. It is non-contributory and is applicable to all officers and employees after one year of service and attainment of age 21. Annual Retirement Allowance is equal to 1 3/4 percent of Average Compensation times Creditable Service up to 35 years, plus 1 1/4 percent of Average Compensation times Creditable Service in excess of 35 years (up to 5 such years), less .49% of the Final Three Year Average Compensation (limited to Covered Compensation) times Creditable Service up to 35 years. "Average Compensation" is the average of compensation during the five consecutive years of employment affording the highest such average. "Covered Compensation" is the average of the Social Security taxable wage base for the 35 years ending with the year an individual attains Social Security Retirement Age. Vesting is 100% after five years of service from employment. The total pension plan expense for all officers and employees for 1997 was $134,730. In addition to the pension plan, the Company adopted a supplemental deferred compensation retirement benefit for Mr. Merz by establishing a trust which was funded by the transfer and surrender of a life insurance policy covering his life having a value of $91,811, and by three payments of $20,000 each in 1994, 1995 and 1996, which purchased a variable retirement annuity. 7 9 The following table presents the estimated retirement benefits payable under the Plan based on selected compensation amounts and years of service, after deducting Covered Compensation. Only those directors who are also executive officers of the Company participate in the plan. APPROXIMATE ANNUAL RETIREMENT BENEFITS BASED ON AVERAGE ANNUAL EARNINGS FOR HIGHEST FIVE CONSECUTIVE YEARS
YEARS OF CREDITABLE SERVICE ANNUAL AVERAGE ----------------------------------------------------- COMPENSATION 15 25 35 - -------------- ------ ------ ------ $50,000 11,098 18,497 25,896 100,000 24,223 40,372 56,521 150,000 37,348 62,247 87,146 200,000 37,348 62,247 87,146 250,000 37,348 62,247 87,146 300,000 37,348 62,247 87,146
The single plan maximum benefit limit under Internal Revenue Code Section 415 as of January 1, 1997, $120,000 ($117,073 under the Normal Form of Payment for a Single Participant), is reflected in the benefits. The maximum annual compensation allowed under a qualified plan, $150,000 for 1997, is also reflected in the calculations. YEARS OF CREDITABLE SERVICE
NAME OF OFFICER CAPACITIES IN WHICH SERVED YEARS OF CREDITABLE SERVICE --------------- -------------------------- --------------------------- Edward J. Merz Chairman, President & Chief Executive Officer 21 John F. Hanley Executive Vice President & Chief Administrative Officer 25 Victor F. Bozuhoski, Jr. Executive Vice President, Treasurer, & Chief Financial Officer 31 Thomas S. Kohlmann Executive Vice President & Chief Lending Officer 5 Augustus C. Weaver Executive Vice President & Chief Information Officer 10
BENEFICIAL INTEREST OF EXECUTIVE OFFICERS
# OF SHARES*** % OF FULLY- NAME POSITION HELD OWNED DILUTED SHARES BENEFICIALLY OUTSTANDING - ----------------------------------------------------------------------------------------------------------------------------------- Edward J. Merz Chairman, President & Chief Executive Officer 37,630 0.61% John F. Hanley Executive Vice President & Chief Administrative Officer 13,114 0.21% Victor F. Bozuhoski, Jr. Executive Vice President, Treasurer, & Chief Financial Officer 11,579 0.19% Thomas S. Kohlmann Executive Vice President & Chief Lending Officer 8,666 0.14% Augustus C. Weaver Executive Vice President & Chief Information Officer 4,354 0.07% ***includes options currently exerciseable
EMPLOYMENT CONTRACTS The Company has entered into agreements with twelve employees, including Messrs. Merz, Hanley, Bozuhoski, and Weaver. These agreements provide for certain benefits in the event that the employee is terminated involuntarily within three years of a "change of control" of the Company. It also provides benefits if the employee leaves voluntarily within three years of a "change of control" if there has been a material change in the employee's salary, function, duties or responsibilities that causes the employee's position to be of less dignity, responsibility, importance, or scope than it was immediately before the "change of control." It further applies if there is a significant change in geographic location of the employee's place of employment. Under the agreements, a "change of control" occurs if (i) any individual, entity or group acquires 25 percent or more of the Company's common stock or the outstanding voting securities of the Company; (ii) the current directors of the Company and directors approved in the future by a majority of the current directors and their approved successors ("Incumbent Directors") cease to comprise a majority of the directors of the Company; (iii) the reorganization, merger, or consolidation of the Company or sale or other disposition of all the Company's assets; or (iv) the shareholders of the Company approve its liquidation or dissolution. An acquisition by a corporation otherwise described in (i) above and the events described in (iii) above do not comprise a "change of control" when or if (a) the holders 8 10 of 60 percent of the Company's common stock and voting securities own substantially the same proportion of common stock and voting securities of the corporation resulting from such event; (b) no person, entity, or group owns 25 percent of more of the common stock or voting securities of the resulting corporation except who did not own more than 25 percent before the event; and (c) a majority of the directors of the board of the resulting corporation are currently incumbent directors or are incumbent directors at the time of the action by the board approving the event. After an "event of termination," an employee shall be entitled to a monthly payment in the amount of his or her monthly rate of salary. Immediately before the "event of termination," plus 1/12 of all bonuses paid to the employee in the 12 preceding months. In addition, the employee shall be entitled to receive the Company's health benefits during the benefit period. The payments and benefits shall continue for up to 36 months. These payments and benefits will be reduced by the amount of salary and benefits the employee receives from other employment during the benefit period. The agreements are effective for any "change of control" taking place prior to January 1, 2000. DIRECTORS' COMPENSATION With the exception of directors' fees described below, directors of the Company are not compensated in any way for their services. All directors of the Bank receive an annual fee of $18,200 for their services. All directors of the Bank, except Messrs. Hanley, Mazgulski, and Merz, also receive $1,000 for four meetings during the month of service on the Finance Committee and $650 per meeting of any other committee of which each may be a member. The Company maintains a Directors' Deferred Compensation Plan, under which a director may defer receipt of his fees as a director of the Bank until retirement or age 72, termination of service, or death. During the deferral period, amounts deferred earn interest at 1% less than the prime rate. Upon the merger of Hamptons Bancshares, Inc. into Suffolk Bancorp, the Company assumed the retirement plan for the directors of Hamptons Bancshares, Inc., which had been established in 1988, and covered ten directors who had served for at least seven consecutive years including Mr. Collins. These directors, upon attaining age 70, will receive a benefit of $833 per month payable for 120 months, and for which the Company contributes the sum of $8,000 per month. TRANSACTIONS WITH DIRECTORS, EXECUTIVE OFFICERS AND ASSOCIATES Some of the nominees, directors continuing in office, and executive officers of the Company, as well as members of their immediate families and the corporations, organizations, trusts, and other entities with which they are associated, are also customers of the Bank in the ordinary course of business. They may also have taken loans from the Bank of $60,000 or more. It is anticipated that these people and their associates will continue to be customers of, and indebted to, the Bank in the future. All such loans, however, were made in the ordinary course of business, did not involve more than normal risk of collectibility or present other unfavorable features. They were made on substantially the same terms as those prevailing at the time for comparable transactions with unaffiliated persons, including interest rates and collateral. At present, none of these loans to nominees, directors, executive officers or their associates is non-performing. Other than normal relationships as customers or by virtue of position or ownership in the Company, none of the directors or officers of the Company or their associates now maintains, or has maintained, any significant business or personal relationship with the Company or the Bank in the past 12 months, except for the following. The law firm of Smith, Finkelstein, Lundberg, Isler & Yakaboski, of which Director Finkelstein is a partner, has been employed by the Bank as general counsel and was paid $73,653 for this and litigation. It is anticipated that the Bank will employ this law firm in the future. The insurance firm of See Neefus, Inc., in which Director Deerkoski has an equity interest, was paid $294,787 for insurance premiums on various commercial and liability policies for current and future coverage, and other fees, Management and the board of directors of the Company have determined that these amounts are fair and competitive for the services provided. PRINCIPAL SHAREHOLDERS OF THE COMPANY To the knowledge of the Company, there are no owners of more than five percent of the Company's common stock as of March 6, 1998. 9 11 COMPARISON OF CUMULATIVE TOTAL RETURN OF SUFFOLK BANCORP, INDUSTRY INDEX AND BROAD MARKET INDEX. The following table compares the total return to shareholders of Suffolk Bancorp with a group of 188 national commercial banks, and the NASDAQ Composite Index, both of which Suffolk Bancorp is a part. [LINE CHART] COMPARISON OF CUMULATIVE TOTAL RETURN OF SUFFOLK BANCORP, INDUSTRY INDEX, AND BROAD MARKET
DECEMBER 31, 1992 1993 1994 1995 1996 1997 - ------------ ---- ---- ---- ---- ---- ---- Suffolk Bancorp 100 118.75 138.27 188.60 216.91 346.41 Industry Index 100 111.41 109.60 174.13 244.58 363.76 Broad Market 100 119.95 125.94 163.35 202.99 248.30
ASSUMES $100 INVEST ON JANUARY 1, 1993 ASSUMES DIVIDEND REINVESTED FISCAL YEAR ENDING DECEMBER 31,1997 ITEM 2. APPROVAL OF INDEPENDENT AUDITORS (ITEM 2 ON PROXY CARD) The Board of Directors has selected Arthur Andersen, LLP, independent auditors, to audit the financial statements of the Company for the fiscal year ending December 31, 1998, and recommends that shareholders vote for ratification of the appointment. Notwithstanding the selection, the Board, in its discretion, may direct the appointment of new independent auditors at any time during the year, if the Board feels that the change would be in the best interests of the Company and its shareholders. In the event shareholders vote against ratification, the Board will reconsider its selection. Representatives of Arthur Andersen, LLP are expected to be present at the annual meeting of the shareholders. They will have the opportunity to make a statement if they so desire, and are expected to be available to respond to appropriate questions. The affirmative vote of the holders of a majority of the shares present in person or represented by proxy and entitled to vote is required for approval of the Board of Directors' selection of independent auditors for the year ending December 31, 1998, The Board of Directors recommends a vote FOR this proposal, which is Item 3 on the proxy card. 10 12 FILING OF S.E.C. REPORTS Section 16(a) of the Securities Exchange Act of 1934 requires executive officers, directors, and persons who beneficially own more than 10 percent of the stock of the Company to file initial reports of ownership and reports of changes in ownership. Such persons are also required by S.E.C. regulations to furnish the Company with copies of these reports. Based solely on a review of the copies of such reports furnished to the Company, the Company believes that during 1997 its executive officers, directors, and beneficial owners of more than 10% of the stock complied with all applicable filing requirements of section 16(a). OTHER MATTERS The Board of Directors of the Company is not aware of any other matters that may come before the meeting. However, the proxies may be voted with discretionary authority with respect to any other matters that may properly come before the meeting. Date: March 13, 1998 By Order of the Board of Directors DOUGLAS IAN SHAW Corporate Secretary 11 13 SUFFOLK BANCORP PROXY FOR THE ANNUAL MEETING OF SHAREHOLDERS - APRIL 14, 1998 THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS The undersigned hereby appoint(s) HAROLD E. BURNS, Jr. And LEO STERNLICHT as proxies, each with the power to appoint his substitute, and hereby authorizes them to represent and to vote, as designated on the matters shown on the reverse side in the manner directed, and upon any other matter which may properly come before the meeting, all the shares of common stock of Suffolk Bancorp held on record by the undersigned on March 6, 1998 at the annual meeting of shareholders to be held on April 14, 1998, or any adjournment thereof. The undersigned hereby revokes any proxy previously given. (CONTINUED AND TO BE SIGNED ON REVERSE SIDE) 14 / X / Please mark your votes as in this example. FOR WITHHOLD 1. The election of / / / / Nominees: Edgar F. Goodale three directors to J. Douglas Stark hold office for a Howard M. Finkelstein term of three years. Such terms to extend until their successors have been duly elected and qualified. (INSTRUCTION: To withhold authority to vote for any individual nominee, write such name or names in the space provided below: - ------------------------------------------------------- FOR AGAINST ABSTAIN 2. The Approval of the Board of Directors' selection / / / / / / of independent auditors for the year ending December 31, 1998. 4. Any other business which may be properly brought before the meeting or any adjournment thereof. PLEASE SIGN AND RETURN THE ENCLOSED PROXY AS QUICKLY AS POSSIBLE WHETHER YOU PLAN TO ATTEND THE MEETING IN PERSON OR NOT. YOU MAY WITHDRAW YOUR PROXY AT ANY TIME PRIOR TO THE EXERCISE OF THE PROXY AT THE MEETING BY GIVING WRITTEN NOTICE TO THE SECRETARY OF THE COMPANY. SIGNATURE__________________________________DATE ________________,1998 SIGNATURE__________________________________DATE ________________,1998 (SIGNATURE IF HELD JOINTLY) NOTE: Please sign exactly as shown on your stock certificate and on the envelope in which this proxy was mailed. When signing as partner, corporate officer, attorney, executor, administrator, trustee, guardian or in any other representative capacity, give full title as such and sign your own name as well. If stock is held jointly, each joint owner should sign. -----END PRIVACY-ENHANCED MESSAGE-----