SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Soliciting Material Under Rule
[_] Confidential, For Use of the 14a-12
Commission Only (as permitted
by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
Suffolk Bancorp
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
________________________________________________________________________________
2) Aggregate number of securities to which transaction applies:
________________________________________________________________________________
3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
________________________________________________________________________________
4) Proposed maximum aggregate value of transaction:
________________________________________________________________________________
5) Total fee paid:
________________________________________________________________________________
[_] Fee paid previously with preliminary materials:
________________________________________________________________________________
[_] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.
1) Amount previously paid:
________________________________________________________________________________
2) Form, Schedule or Registration Statement No.:
________________________________________________________________________________
3) Filing Party:
________________________________________________________________________________
4) Date Filed:
________________________________________________________________________________
[LETTERHEAD OF SUFFOLK BANCORP]
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
March 9, 2001
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 10, 2001 at 1:00 P.M. for
the purpose of considering and voting upon the following matters:
1. The election of four 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, 2001.
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.
This page left blank intentionally.
[LETTERHEAD OF SUFFOLK BANCORP]
PROXY STATEMENT FOR
ANNUAL MEETING OF SHAREHOLDERS
April 10, 2001
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 10, 2001 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 9, 2001. 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 2, 2001, there were 5,941,929 shares of common stock, $2.50 par
value, of the Company outstanding. Only stockholders of record at the close of
business on March 2, 2001 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 2002 annual meeting of the shareholders must be received by
the Company at its principal executive offices no later than November 8, 2001.
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 four 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. 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 four nominees listed
below. Directors shall be elected by a plurality of the votes cast at the
meeting. All proxies received will be voted in accordance with their specific
instructions. In the event any nominee declines or is unable to serve, the
proxies will be voted for a successor nominee designated by the Board of
Directors. Each of the four 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 six members of the Board of Directors, who are listed on the next page,
are currently expected to continue to serve on the Board until their respective
terms expire.
1
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
Shares of
Common Stock
Position Served as Present Owned (3)
and Offices Business Experience Director Term Beneficially at % of
Name(1) Age With Company During Past 5 Years(2) Since Expires 3/2/2001 Class
- ------------------------------------------------------------------------------------------------------------------------------------
Nominees for a term of three years:
Edgar F. Goodale 47 Director President, Riverhead 1989 2001 15,887 0.27%
Building Supply Corp.
Howard M. Finkelstein 70 Director Partner, Smith, Finkelstein, 1984 2001 60,223 1.01%
Lundberg, Isler, & Yakaboski, L.L.P.
(attorneys and general counsel
for the Bank)
J. Douglas Stark 69 Director President, Stark Mobile Homes, 1984 2001 43,870 0.74%
Inc. (manufactured housing
community)
Susan V.B. O'Shea 51 Director Managing Partner 2000 2001 1,597 0.03%
Long Island Commercial Industrial Corp.
(multi-tenant commercial real estate)
Directors Continuing In Office:
Bruce Collins 70 Director Currently Retired, Former 1994 2002 15,184 0.26%
Superintendent of Public Works
Village of East Hampton, New York
Joseph A. Deerkoski 66 Director President, Neefus-Stype, Inc. 1987 2002 31,091 0.52%
(general insurance)
Edward J. Merz 69 Chairman, Chairman, President and Chief 1984 2002 37,697 0.63%
and Director Executive Officer, The Suffolk County
National Bank and Suffolk Bancorp
Director, Intervest Bancshares Corporation
Thomas S. Kohlmann 54 President, Chief Executive Vice President and Chief 1999 2003 22,868 0.38%
Executive Officer, Lending Officer, The Suffolk
and Director County National Bank
and Suffolk Bancorp
Terence X. Meyer 44 Director Partner, Meyer, Meyer, Metli 1999 2003 1,559 0.03%
& Keneally, Esqs. L.L.P.
(attorneys)
Peter Van de Wetering 69 Director President, Van de Wetering 1985 2003 44,866 0.76%
Greenhouse, Inc.
(wholesale nursery)
- ------------------------------------------------------------------------------------------------------------------------------------
(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 Thomas S. Kohlmann have been executive officers of the
Company in the last fiscal year.
(2) The business experience of each director during the past five years was that
typical of a person engaged in the principal occupations for that period listed
for each. Each of the directors has held the same or another executive position
with the same employer during the past five years.
(3) Included are the following shares in which directors disclaim beneficial
ownership: Joseph A. Deerkoski 8,084 shares owned by Patricia B. Deerkoski,
wife; Howard M. Finkelstein 12,697 shares owned by Deonne C. Finkelstein, wife.
2
The primary business of the Company is the operation of The Suffolk County
National Bank. The directors of the Company met thirteen times during the fiscal
year ended December 31, 2000, and its Audit Committee met three times. The Board
of The Suffolk County National Bank met thirteen times, and the Personnel
Committee met three times in 2000. No director serving currently attended fewer
than 75 percent of the meetings of the Board of the Company and its committees,
or of the Bank and its committees.
The Boards of the Company and the Bank have standing Audit and Personnel
Committees composed as follows:
The Audit Committee consists of Messrs. Edgar F. Goodale, Joseph A. Deerkoski,
and Terence X. Meyer. This committee performs the functions described below
under "AUDIT - Report of the Audit Committee".
The Personnel Committee consists of Messrs. 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.
AUDIT
Report of the Audit Committee
The role of the Audit Committee is to assist the Board of Directors in its
oversight of the Company's financial reporting process. The Board of Directors,
in its business judgment, has determined that all members of the Committee are
"independent" as required by, and meet the experience requirements of, the
applicable listing standards of NASDAQ. The Committee operates pursuant to a
Charter that was last amended and restated by the Board on May 22, 2000, a copy
of which is attached to this Proxy Statement as Appendix A. As set forth in the
Charter, management of the Company is responsible for the preparation,
presentation, and integrity of the Company's financial statements; the Company's
accounting and financial reporting principles; and the Company's internal
controls and procedures designed to assure compliance with accounting standards
and applicable laws and regulations. The independent auditors are responsible
for auditing the Company's financial statements and expressing an opinion as to
their conformity with generally accepted accounting principles.
In the performance of its oversight function, the Committee has reviewed and
discussed the audited financial statements with management and the independent
auditors. The Committee has also discussed with the independent auditors the
matters required to be discussed by Statement on Auditing Standards No. 61,
Communication with Audit Committees, as currently in effect. Finally, the
Committee (i) has received the written disclosures and the letter from the
independent auditors required by Independent Standards Board Standard No. 1,
Independence Discussions with Audit Committees, as currently in effect; (ii) has
received written confirmations from management with respect to information
technology consulting services relating to financial information systems design
and implementation, internal audit, and any other services provided by the
auditors; (iii) has considered whether the provision of those services by the
independent auditors to the Company is compatible with maintaining the auditor's
independence; and (iv) has discussed with the auditors the auditors'
independence.
The members of the Audit Committee are not professionally engaged in the
practice of auditing or accounting and are not experts in the fields of
accounting or auditing, including in respect of auditor independence. Members of
the Committee rely without independent verification on the information provided
to them and on the representations made by management and the independent
accountants. Accordingly, the Audit Committee's oversight does not provide an
independent basis to determine that management has maintained appropriate
accounting and financial reporting principles or appropriate internal control
and procedures designed to assure compliance with accounting standards and
applicable laws and regulations. Furthermore, the Audit Committee's
considerations and discussions referred to above do not assure that the
Company's financial statements are complete and accurate, that the audit of the
Company's financial statements has been carried out in accordance with generally
accepted auditing standards, that the financial statements are presented in
accordance with generally accepted accounting principles, or that the Company's
auditors are in fact "independent."
Based upon the reports and discussions described in this report, and subject to
the limitations on the role and responsibilities of the Committee referred to
above and in the Charter, the Committee recommended to the Board that the
audited financial statements be included in the Company's Annual Report on Form
10-K for the year ended December 31, 2000 to be filed with the Securities and
Exchange Commission.
3
Submitted by: Edgar F. Goodale, Chairman of the Committee
Joseph A. Deerkoski
Terence X. Meyer
The following aggregate fees were billed by the accountants during 2000:
$140,000 for audit services for prior fiscal year;
$ 0 for financial information systems design and implementation; and
$414,700 for all other fees (primarily internal audit and tax work).
The information contained in the Audit Committee Report is not deemed filed for
purposes of the Securities Exchange Act of 1934, shall not be deemed
incorporated by reference by any general statement incorporating the document by
reference into any filing under the Securities Act of 1933 or the Securities
Exchange Act of 1934, except to the extent that the Company specifically
incorporates such information by reference, and shall not otherwise be deemed
filed under such Acts.
COMPENSATION
Report of the Personnel Committee
The Company's Personnel Committee serves as its Compensation Committee. It
consists of three Directors who are not employees as well as the President and
Chief Executive Officer. 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 and presence in the
community 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 ongoing
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 permits 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 based on individual performance and position. 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 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.
4
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: J. Douglas Stark, Chairman of the Committee
Joseph A. Deerkoski
Howard M. Finkelstein
The following table sets forth the cash compensation paid to each person who
served as C.E.O. during the fiscal year ended December 31, 2000, and each of the
other four highest paid executive officers of the Company whose salary and bonus
exceeded $100,000 as accrued for the fiscal year ended December 31, 2000.
SUMMARY COMPENSATION TABLE
- --------------------------------------------------------------------------------------------------------------------
Annual Compensation Long-Term Compensation
-----------------------------------------------------------------
Awards Payouts
--------------------------- All
Name Restricted Other
and Other Annual Stock Options/ LTIP Compen-
Principal Position Year Salary Bonus Compensation Award(s) SARs Payouts sation
($) ($) ($) ($) (#) ($) ($)(1)
(a) (b) (c) (d) (e) (f) (g) (h) (i)
- --------------------------------------------------------------------------------------------------------------------
Thomas S. Kohlmann 2000 225,838 40,000 n/a n/a 5,000 n/a 3,950
President and 1999 154,844 25,361 n/a n/a 1,500 n/a 3,790
Chief Executive Officer 1998 125,004 20,405 n/a n/a 1,500 n/a 6,383
J. Gordon Huszagh 2000 111,859 25,000 n/a n/a 1,500 n/a 4,538
Executive Vice President & 1999 102,629 15,754 n/a n/a 1,500 n/a 3,914
Chief Financial Officer 1998 98,102 14,136 n/a n/a n/a n/a 3,787
Victor F. Bozuhoski, Jr. 2000 169,131 40,000 n/a n/a 1,500 n/a 8,041
Executive Vice President 1999 148,900 25,707 n/a n/a n/a n/a 7,204
1998 146,170 25,972 n/a n/a 1,500 n/a 11,054
Robert C. Dick 2000 118,723 24,352 n/a n/a n/a n/a 3,895
Executive Vice President & 1999 107,033 16,169 n/a n/a n/a n/a 3,037
Chief Lending Officer
Augustus C. Weaver 2000 142,825 31,026 n/a n/a 1,500 n/a 3,954
Executive Vice President & 1999 138,359 25,361 n/a n/a 1,500 n/a 3,777
Chief Information Officer 1998 129,066 22,282 n/a n/a 1,500 n/a 7,106
- --------------------------------------------------------------------------------------------------------------------
(1) Includes above-market or preferential earnings on deferred compensation, and
company matching contributions to 401(K) plan.
5
STOCK OPTION AND OTHER PLANS
The Company adopted a 1999 Stock Option Plan for its employees and employees of
its subsidiaries which was approved by the shareholders. The Option Plan
provides for incentive stock options and non-qualified stock options. Under the
Option Plan, options to purchase up to 600,000 shares of Common Stock may be
issued. As of December 31, 2000, options for 590,500 shares remained to be
granted: 9,500 options were granted in 2000 to the persons named in the summary
compensation table. During 2000, executive officers acquired no shares on
exercise and no value was realized. At December 31, 2000, there were 55,200
unexercised options or stock appreciation rights outstanding, of which 45,700
had vested and may be exercised. As of December 31, 2000, the difference between
the market value of the Common Stock and the exercise price of unexercised
in-the-money options or stock appreciation rights was $389,725.
Under the Plan, key employees are granted options to purchase Common Stock of
the Company at a price equal to the fair market value of the shares on the date
that the option is granted. Almost all of the Company's approximately 400
employees could qualify as key employees. The Personnel Committee of the Board
of Directors determines the optionee, the number of shares covered by the
options, and the exercise price of options granted under the Plans. When
granted, options expire after a time determined by the Personnel Committee, but
in no event longer than ten years, or on termination of the employment of the
optionee unless the termination resulted from death, disability, or retirement.
In those events, the option expires in two years, one year, and three months
after termination of employment, respectively. The exercise price may be paid
either in cash or by delivery of shares of the Company's Common Stock, valued at
the market price. Optionees may also be given stock appreciation rights in
connection with the option. The Personnel Committee may, in its discretion,
establish provisions for the exercise of stock options different from those
described in this paragraph. Copies of the Plans are available upon shareholder
request.
STOCK OPTION TABLE
- ------------------------------------------------------------------------------------------------
INDIVIDUAL GRANTS
- ------------------------------------------------------------------------------------------------
Percent of
Number of Total
Securities Options/SAR's
Underlying Granted to Exercise of
Options/SAR's Employees Base Price Expiration Grant Date
Name Granted (#) in Fiscal Year ($/Sh) Date Present Value $
(a) (b) (c) (d) (e) (h)
- ------------------------------------------------------------------------------------------------
Thomas S. Kohlmann 5,000 53% $26.25 1/18/2010 $38,600
J. Gordon Huszagh 1,500 16% $26.25 1/18/2010 $11,580
Victor F. Bozuhoski, Jr. 1,500 16% $26.25 1/18/2010 $11,580
Augustus C. Weaver 1,500 16% $26.25 1/18/2010 $11,580
- ------------------------------------------------------------------------------------------------
**The weighted-average, fair value of the options granted during 2000 was
$7.72. 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 during 2000: risk-free interest rate of 6.73%; expected
dividend yield of 2.78%; expected life of ten years; and expected volatility of
19.1%.
COMPENSATION PURSUANT TO PLANS
The Company has a defined-benefit pension plan. It is the only form of
contingent remuneration. It is noncontributory and is applicable to all officers
and employees after one year of eligible service and attainment of age 21.
Annual Retirement Allowance is equal to 1 3/4 percent of Average Compensation
times Creditable Service up to thirty-five years, plus 1 1/4 percent of Average
Compensation times Creditable Service in excess of thirty-five years (up to five
such years), less 0.49 percent of the Final Three Year Average Compensation
(limited to Covered Compensation) times Creditable Service up to thirty-five
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
thirty-five years ending with the year an individual attains Social Security
Retirement Age. Vesting is 100 percent after five years of creditable service
from employment. The total pension plan expense for all officers and employees
for 2000 was $89,692.
6
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
- --------------------------------------------------------------------------------
Annual Average Years of Creditable Service
----------------------------------------------------------------
Compensation 15 25 35
- --------------------------------------------------------------------------------
$ 50,000 10,545 17,575 24,605
100,000 23,670 39,450 55,230
150,000 36,795 61,325 85,855
200,000 39,420 65,700 91,980
250,000 39,420 65,700 91,980
300,000 39,420 65,700 91,980
- --------------------------------------------------------------------------------
The single plan maximum benefit limit under Internal Revenue Code Section 415 as
of January 1, 2000, $135,000 ($131,707 under the Normal Form of Payment for a
Single Participant), is reflected in the benefits. The maximum annual
compensation allowed under a qualified plan, $170,000 for 2000, is also
reflected in the calculations.
YEARS OF CREDITABLE SERVICE
Name of Officer Capacities In Which Served Years of Creditable Service
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
Thomas S. Kohlmann President & Chief Executive Officer 8
Victor F. Bozuhoski, Jr. Executive Vice President 34
Augustus C. Weaver Executive Vice President & Chief Information Officer 13
Robert C. Dick Senior Vice President & Chief Lending Officer 20
J. Gordon Huszagh Executive Vice President & Chief Financial Officer 17
- --------------------------------------------------------------------------------------------------------
BENEFICIAL INTEREST OF EXECUTIVE OFFICERS
as of March 2, 2001
- ---------------------------------------------------------------------------------------------------------------
# of Shares *** % of Fully
Name Position Held Owned Diluted Shares
Beneficially Outstanding
- ---------------------------------------------------------------------------------------------------------------
Thomas S. Kohlmann President & Chief Executive Officer 22,868 0.38%
J. Gordon Huszagh Executive Vice President & Chief Financial Officer 7,738 0.13%
Victor F. Bozuhoski, Jr. Executive Vice President 17,563 0.29%
Robert C. Dick Executive President & Chief Lending Officer 4,440 0.07%
Augustus C. Weaver Executive Vice President & Chief Information Officer 11,514 0.19%
- ---------------------------------------------------------------------------------------------------------------
*** includes options currently exerciseable
Directors and executive officers of the Company and the Bank, who as a group
total fourteen, own beneficially 316,097 shares of common stock or 5.32 percent
of the fully diluted shares of the company outstanding as of March 2, 2001.
EMPLOYMENT CONTRACTS
The Company has entered into agreements with fourteen employees, including
Messrs. Bozuhoski, Dick, Huszagh, Kohlmann, Merz, 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
7
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) there is a
reorganization, merger, or consolidation of the Company or sale or other
disposition of all the Company's assets; or (iv) the shareholders of the Company
approve its liquidation or dissolution. An acquisition by a corporation
otherwise described in (i) above and the events described in (iii) above do not
comprise a "change of control" when or if (a) the holders of 60 percent of the
Company's common stock and voting securities own substantially the same
proportion of common stock and voting securities of the corporation resulting
from such event; (b) no person, entity, or group owns 25 percent or more of the
common stock or voting securities of the resulting corporation except one who
did not own more than 25 percent before the event; and (c) a majority of the
directors of the board of the resulting corporation are currently incumbent
directors or are incumbent directors at the time of the action by the board
approving the event. After an event of termination following a change in
control, an employee shall be entitled to a monthly payment in the amount of his
or her monthly rate of salary immediately before the " event of termination,"
plus one-twelfth of all bonuses paid to the employee in the twelve 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 thirty-six 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, 2005.
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 $19,500 for their services. All directors of the Bank,
except Messrs. Kohlmann and Merz, also receive $1,100 for four meetings during
the month of service on the Finance Committee and $700 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 percent 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, 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 during 2000, except for the
following. The law firm of Smith, Finkelstein, Lundberg, Isler & Yakaboski,
L.L.P., of which Director Finkelstein is a partner, has been employed by the
Bank as general counsel and was paid $106,799 for legal services. It is
anticipated that the Bank will employ this law firm in the future. The insurance
firm of Neefus-Stype, Inc., of which Director Deerkoski serves as President, was
paid $350,074 in premiums on various commercial and liability insurance 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.
8
PRINCIPAL SHAREHOLDERS OF THE COMPANY
To the knowledge of the Company, the table below presents the total number of
shares and percent beneficially owned by shareholders who own more than 5
percent of the Company's common stock as of March 2, 2001.
Name and Address of Amount, Nature and Percent
Title of Class Beneficial Owner of Beneficial Ownership of Class
- -------------- ------------------- --------------------------------
Common Stock Private Capital Management 490,368
3003 Tamiami Trail
Naples, Florida 34103 8.25%
COMPARISON OF CUMULATIVE TOTAL RETURN OF SUFFOLK BANCORP,
INDUSTRY INDEX, AND BROAD MARKET INDEX
The following chart and table compare the total return to shareholders of
Suffolk Bancorp with national commercial banks, and the NASDAQ Composite Index,
both of which Suffolk Bancorp is a part.
[LINE CHART OMITTED]
Comparison of Cumulative Total Return of Suffolk Bancorp, Industry Index, and Broad Market
(in $)
- --------------------------------------------------------------------------------------------------
1/1/1996 12/31/96 12/31/97 12/31/98 12/31/99 12/31/2000
- --------------------------------------------------------------------------------------------------
Suffolk Bancorp 100 115.01 183.68 175.46 171.95 208.05
- --------------------------------------------------------------------------------------------------
Commercial Banks 100 140.46 208.90 225.56 191.69 221.85
- --------------------------------------------------------------------------------------------------
NASDAQ 100 124.27 152.00 214.39 378.12 237.12
- --------------------------------------------------------------------------------------------------
ASSUMES $100 INVESTED ON JANUARY 1, 1996
ASSUMES DIVIDEND REINVESTED
FISCAL YEAR ENDING DECEMBER 31, 2000
ITEM 2. APPROVAL OF INDEPENDENT AUDITORS
(Item 2 on Proxy Card)
The Board of Directors has selected Arthur Andersen, L.L.P., independent
auditors, to audit the financial statements of the Company for the fiscal year
ending December 31, 2001, 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.
9
Representatives of Arthur Andersen, L.L.P. 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, 2001.
The Board of Directors recommends a vote FOR this proposal, which is Item 2 on
the proxy card.
FILING OF S.E.C. REPORTS
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange Act")
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 2000 its executive officers, directors, and beneficial
owners of more of the stock complied with all applicable filing requirements of
Section 16(a), except for Bruce Collins, a director of the Company, who did not
file a Form 5 with respect to fiscal year 1999 which is required to reflect
changes in period-end holdings of Company stock resulting from certain dividend
reinvestment transactions in 1999 that were exempt from Section 16.
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 9, 2001
By Order of the Board of Directors
DOUGLAS IAN SHAW
Corporate Secretary
10
Appendix A
Suffolk Bancorp
Board of Directors
Examination & Audit Committee Charter
Adopted May 22, 2000
PURPOSE
The primary function of the Committee is to assist the Board of Directors
in fulfilling its oversight responsibilities. This is accomplished by reviewing:
1. The financial reports and other financial information provided by the
Corporation to any governmental body or the public.
2. The Corporation's systems of internal controls regarding finance,
accounting, legal compliance and ethics that management and the Board have
established.
3. The Corporation's auditing, accounting, and financial reporting
processes, generally.
Consistent with this function, the Committee should encourage continuous
improvement of, and should foster adherence to, the Corporation's policies,
procedures, and practices at all levels.
The Committee's primary duties and responsibilities are to:
1. Serve as an independent and objective party to monitor the Corporation's
financial reporting process and internal control system.
2. Review and appraise the audit efforts of the Corporation's independent
accountants and internal auditing department.
3. Provide an open avenue of communication among the independent
accountants, financial and senior management, the internal auditing department,
and the Board of Directors.
4. The Committee will primarily fulfill these responsibilities by carrying
out the activities enumerated in the Responsibilities and Duties Section of this
Charter.
COMPOSITION
The Committee shall be comprised of three or more directors determined by
the Board. Each member shall be an independent director, free from any
relationship that, in the opinion of the Board, would interfere with the
exercise of his or her independent judgment as a member of the Committee.
A director will be deemed independent if he or she meets the definition of
an "independent director" set forth in NASD Rule 4200.
All members of the Committee shall have a working familiarity with basic
finance and accounting practices and shall otherwise have the qualifications set
forth for all audit committee members in NASD Rule 4460(d)(2)(A), and at least
one member of the Committee shall have accounting or finance employment
experience, requisite professional certification in accounting, or otherwise
possess financial sophistication as contemplated by NASD Rule 4460(d)(2)(A).
Committee members may enhance their familiarity with finance and accounting by
participating in educational programs conducted by the Corporation or an outside
consultant.
The Board, at its annual organizational meeting, shall elect the members of
the Committee. They shall serve until their successors are duly elected and
qualified. Unless a Chair is elected by the full Board, the members of the
Committee may designate a Chair by majority vote of the full Committee
membership.
i
MEETINGS
The Committee shall meet at least four times annually, or more frequently
as circumstances dictate. As part of its job to foster open communication, the
Committee will meet at least annually with management, the director of the
internal auditing department, and the Corporation's independent accountants in
separate executive sessions.
RESPONSIBILITIES AND DUTIES
To fulfill its responsibilities and duties the Committee shall:
Documents/Reports Review
1. Review and recommend any proposed changes to Charter to the Board for
approval at least annually. Interim review will be conducted as conditions
dictate.
2. Review the Corporation's annual financial statements. Review any reports or
financial information submitted to any governmental body or to the public,
including any certification, report, opinion, or review rendered by the
independent accountants.
3. Review the regular internal reports to management prepared by the internal
auditing department, as well as management's response.
4. Review, quarterly, with management and with the independent accountants the
quality of the Corporation's accounting principles as applied in its external
financial reporting, including earnings releases, reports to the Securities and
Exchange Commission on Form 10-K (annual) and Form 10-Q (quarterly), and reports
to shareholders since the previous quarterly meeting of the committee. Prepare
the report required by the rules of the Securities and Exchange Commission to be
included in the Corporation's annual proxy statement.
Independent Accountants
5. Recommend to the Board of Directors the selection of the independent
accountants whose firm is ultimately accountable to the Audit Committee and the
Board as representatives of the Corporation's shareholders, considering
independence and effectiveness.
6. Approve the fees and other compensation to be paid to the independent
accountants.
7. Evaluate the independent accountants on an annual basis and, where
appropriate, recommend a replacement for the independent accountants. In such
evaluation, the Committee shall ensure that the independent accountants deliver
a formal written statement delineating all relationships between such
independent accountants and the Corporation. The Committee shall also engage in
a dialogue with the independent accountants with respect to any disclosed
relationships or services that may impact the objectivity and independence of
the independent accountants and, in response to the independent accountant's
report, take, or recommend that the Board take, appropriate action to satisfy
itself of the independent accountant's independence.
8. Review the performance of the independent accountants and, if circumstances
warrant, recommend to the Board the replacement of the independent accountants.
9. Periodically consult with the independent accountants, out of the presence of
management, about internal controls and the completeness and accuracy of the
Corporation's financial statements.
Financial Reporting Processes
10. In consultation with the independent accountants and the internal auditors,
review the integrity of the Corporation's financial reporting processes, both
internal and external.
11. Consider the independent accountants' judgments about the quality and
appropriateness of the Corporation's accounting principles, as applied in its
financial reporting.
ii
12. Consider and approve, if appropriate, major changes to the Corporation's
auditing and accounting principles and practice as suggested by the independent
accountants, management, or the internal auditing department.
Process Improvement and Audit
13. Establish regular and separate systems of reporting to the Committee by
management, independent accountants, and internal auditors regarding any
significant judgments made in management's preparation of the financial
statements. Secure the view of each as to appropriateness of such judgments.
14. Meet with the independent accountants prior to the audit to review the
planning and staffing of the audit. Obtain from the independent accountants
assurance that Section 10A of the Private Securities Litigation Reform Act of
1995 has not been implicated. Discuss with the independent accountants the
matters required to be discussed by Statement on Auditing Standards No. 60
relating to the conduct of the audit. Following completion of the annual audit,
review separately with management, the independent accountants, and the internal
auditing department, any significant difficulties encountered during the course
of the audit, including any restrictions on the scope of work or access to
required information.
15. Review any significant disagreement among management, the independent
accountants, and the internal auditing department in connection with the
preparation of the financial statements.
16. Review with the independent accountants, the internal auditing department,
and management the extent to which changes or improvements in financial or
accounting practices, as approved by the Committee, have been implemented. (This
review should be conducted at an appropriate time subsequent to implementation
of changes or improvements, as decided by the Committee.)
Ethical and Legal Compliance
17. Establish, review, and update periodically a Code of Ethical Conduct. Ensure
that management has established a system to enforce this Code.
18. Review management's monitoring of the Corporation's compliance with the
organization's Ethical Code.
19. Ensure that management has the proper review system in place to ensure that
the Corporation's financial statements, reports, and other financial information
disseminated to governmental organizations and to the public satisfy legal
requirements.
20. Review activities, organizational structure, and qualifications of the
internal audit department. Review the appointment and replacement of the senior
auditing executive.
21. Review, with the organization's counsel, legal compliance matters including
corporate securities trading policies.
22. Review, with the organization's counsel, any legal matter that could have a
significant impact on the organization's financial statements.
23. Secure the service of independent counsel, or other professional service or
consultants, as deemed necessary and appropriate. The Committee may request any
officer or employee of the Corporation, or the Corporation's outside counsel or
independent accountants, to attend a meeting of the Committee or to meet with
any members of, or consultants to, the Committee.
24. Perform any other activities consistent with this Charter, the Corporation's
By-laws, and governing law, as the Committee or the Board deems necessary or
appropriate.
25. While the Committee has the responsibilities and powers set forth in this
Charter, it is not the duty of the Committee to plan or conduct audits or to
determine that the Corporation's financial statements are complete and accurate
and are in accordance with generally accepted accounting principles; these tasks
are the responsibility of management and the independent accountants. Nor is it
the duty of the Committee to conduct investigations, to resolve disagreements,
if any, between management and the independent accountants, or to assure
compliance with laws and regulations and the Corporation's Code of Ethics.
iii