UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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-12
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(Name of Registrant as Specified In Its Charter)
ARGO BANCORP, INC.
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(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.
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[_] Fee paid previously with preliminary materials.
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Notes:
Argo Bancorp, Inc.
7600 West 63rd Street
Summit, Illinois 60501
(708) 496-6010
March 31, 1999
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders (the
"Annual Meeting") of Argo Bancorp, Inc. (the "Company"), the holding company for
Argo Federal Savings Bank, FSB (the "Savings Bank"), Summit, Illinois, and On-
Line Financial Services, Inc. ("On-Line"), Oak Brook, Illinois, which will be
held on April 27, 1999, at 3:00 p.m., at 7600 West 63rd Street, Summit, Illinois
60501.
The attached notice of the Annual Meeting and proxy statement describe the
formal business to be transacted at the Annual Meeting. Directors and officers
of the Company as well as a representative of Crowe, Chizek and Company LLP, the
Company's independent auditors, will be present at the Annual Meeting to respond
to any questions from our stockholders.
The scheduled business of the Annual Meeting shall be the election of one
director and the ratification of the appointment of Crowe, Chizek and Company
LLP as independent auditors for the fiscal year ending December 31, 1999.
The Board of Directors of the Company has determined that the matter to be
considered at the Annual Meeting is in the best interests of the Company and its
stockholders. For the reasons set forth in the proxy statement, the Board of
Directors unanimously recommends a vote "FOR" the matters to be considered.
Please sign and return the enclosed proxy card promptly. Your cooperation
is appreciated since a majority of the common stock must be represented, either
in person or by proxy, to constitute a quorum for the conduct of business.
On behalf of the Board of Directors and all of the employees of the Company
and its subsidiaries, I wish to thank you for your continued support. We
appreciate your interest.
Sincerely yours,
/s/ John G. Yedinak
John G. Yedinak
Chairman of the Board of Directors
Argo Bancorp, Inc.
7600 West 63rd Street
Summit, Illinois 60501
(708) 496-6010
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held On April 27, 1999
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the "Annual
Meeting") of Argo Bancorp, Inc. (the "Company") will be held on April 27, 1999
at 3:00 p.m., at 7600 West 63rd Street, Summit, Illinois 60501.
The Annual Meeting is for the purpose of considering and voting upon the
following matters:
1. The election of one director for a term of three years or until a
successor is elected and qualified;
2. The ratification of the appointment of Crowe, Chizek and Company LLP as
independent auditors for the fiscal year ending December 31, 1999; and
3. Such other matters as may properly come before the Annual Meeting or
any adjournments thereof.
The Board of Directors has established March 23, 1999, as the record date
for the determination of stockholders entitled to notice of and to vote at the
Annual Meeting and any adjournments thereof. Only record holders of the common
stock of the Company as of the close of business on that date will be entitled
to vote at the Annual Meeting or any adjournments thereof. In the event there
are not sufficient votes for a quorum or to approve or ratify any of the
foregoing proposals at the time of the Annual Meeting, the Annual Meeting may be
adjourned in order to permit further solicitation of proxies by the Company. A
list of stockholders entitled to vote at the Annual Meeting will be available at
Argo Federal Savings Bank, FSB, 7600 West 63rd Street, Summit, Illinois, 60501,
for a period of ten days prior to the Annual Meeting and will also be available
at the meeting itself.
By Order of the Board of Directors
/s/ Frances M. Pitts
Frances M. Pitts
Secretary
Summit, Illinois
March 31, 1999
ARGO BANCORP, INC.
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
April 27, 1999
Solicitation and Voting of Proxies
This proxy statement is being furnished to stockholders of Argo Bancorp,
Inc. ("Argo" or the "Company") in connection with the solicitation by the Board
of Directors of the Company (the "Board of Directors" or "Board") of proxies to
be used at the Annual Meeting of Stockholders (the "Annual Meeting") to be held
on April 27, 1999, at 3:00 p.m., at 7600 West 63rd Street, Summit, Illinois
60501, and at any adjournments thereof. The 1998 Annual Report to Stockholders,
including the consolidated financial statements for the fiscal year ended
December 31, 1998, accompanies this proxy statement, which is first being mailed
to stockholders on or about March 31, 1999.
Regardless of the number of shares of common stock owned, it is important
that recordholders of a majority of the shares be represented by proxy or
present in person at the Annual Meeting. Stockholders are requested to vote by
completing the enclosed proxy card and returning it signed and dated in the
enclosed postage-paid envelope. Stockholders are urged to indicate their vote
in the spaces provided on the proxy card. Proxies solicited by the Board of
Directors of Argo will be voted in accordance with the directions given therein.
Where no instructions are indicated, signed proxies will be voted "FOR" the
election of the nominee for director named in Proposal 1 of this proxy statement
and "FOR" the ratification of the independent auditors as set forth in Proposal
2 of this proxy statement.
The Board of Directors knows of no additional matters that will be
presented for consideration at the Annual Meeting. Execution of a proxy,
however, confers on the designated proxyholders discretionary authority to vote
the shares in accordance with their best judgment on such other business, if
any, that may properly come before the Annual Meeting or any adjournments
thereof.
A proxy may be revoked at any time prior to its exercise by the filing of a
written notice of revocation with the Secretary of the Company, by delivering to
the Company a duly executed proxy bearing a later date, or by attending the
Annual Meeting and voting in person. However, if you are a stockholder whose
shares are not registered in your own name, you will need appropriate
documentation from your recordholder to vote personally at the Annual Meeting.
The cost of solicitation of proxies on behalf of management will be borne
by the Company. In addition to the solicitation of proxies by mail, proxies may
also be solicited personally or by telephone by directors, officers and regular
employees of the Company and
Argo Federal Savings Bank, FSB (the "Savings Bank") without additional
compensation therefor. Argo 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.
Voting Securities
The securities which may be voted at the Annual Meeting consist of shares
of common stock of Argo ("Common Stock"), with each share entitling its owner to
one vote on all matters to be voted on at the Annual Meeting except as described
below. There is no cumulative voting for the election of directors.
The close of business on March 23, 1999, has been fixed by the Board of
Directors as the record date (the "Record Date") for the determination of
stockholders of record entitled to notice of and to vote at the Annual Meeting
and any adjournments thereof. The total number of shares of Common Stock
outstanding on the Record Date was 2,004,896 shares.
The presence, in person or by proxy, of the holders of at least a majority
of the total number of shares of Common Stock entitled to vote is necessary to
constitute a quorum at the Annual Meeting. In the event there are not
sufficient votes for a quorum or to approve or ratify any proposal at the time
of the Annual Meeting, the Annual Meeting may be adjourned in order to permit
the further solicitation of proxies.
As to the election of directors, the proxy card being provided by the Board
of Directors enables a shareholder to vote "FOR" the election of the nominee
proposed by the Board, or to "WITHHOLD AUTHORITY" to vote for the nominee being
proposed. Under Delaware law and the Company's certificate of incorporation,
directors are elected by a plurality of shares voted, without regard to either
(i) broker non-votes, or (ii) proxies as to which authority to vote for one or
more of the nominees being proposed is withheld.
As to the ratification for the appointment of Crowe, Chizek and Company LLP
as independent auditors of the Company set forth in Proposal 2, and all other
matters that may properly come before the Annual Meeting, by checking the
appropriate box, you may: (i) vote "FOR" the item; (ii) vote "AGAINST" the item;
or (iii) "ABSTAIN" with respect to the item. Under the Company's bylaws, unless
otherwise required by law, all such matters shall be determined by a majority of
the votes cast, without regard to either (a) broker non-votes, or (b) proxies
marked "ABSTAIN" as to that matter.
Proxies solicited hereby will be returned to the Company, and will be
tabulated by inspectors of election designated by the Board, who will neither be
employed by nor be a director of the Company or any of its affiliates.
2
Security Ownership of Certain Beneficial Owners
The following table sets forth certain information as to those persons
believed by management to be beneficial owners of more than 5% of the
outstanding shares of Common Stock on the Record Date, as disclosed in certain
reports regarding such ownership filed with the Company and with the Securities
and Exchange Commission (the "SEC"), in accordance with Sections 13(d) or 13(g)
of the Securities Exchange Act of 1934, as amended ("Exchange Act") by such
persons and groups. Other than those persons listed below, the Company is not
aware of any person or group, as such term is defined in the Exchange Act, that
owns more than 5% of the Common Stock as of the Record Date.
Amount and
Nature of
Name and Address of Beneficial Percent
Title of Class Beneficial Owner Ownership of Class
- ------------------------------- ----------------------------- ------------------------------ ----------------------
Common Stock John G. Yedinak 980,489(1) 46.67%
1300 Hawthorne Lane
Hinsdale, Illinois 60521
Common Stock The Deltec Banking 501,224(2) 25.00%
Corporation, Limited
Deltec House
Lyford Cay
Nassau, Bahamas
Common Stock Sergio Martinucci 275,676(1) 13.49%
5440 N. Paris
Chicago, Illinois 60656
Common Stock Frances M. Pitts 109,148(1) 5.30%
6624 Greene Road
Woodridge, Illinois 60517
(1) Includes shares set forth below under "Proposal 1 - Information with
Respect to the Nominees, Continuing Directors and Executive Officers."
(2) On December 31, 1996, the Company entered into a Stock Purchase Agreement
(the "Purchase Agreement") with The Deltec Banking Corporation Limited, a
banking corporation organized under the laws of the Commonwealth of the
Bahamas ("Deltec") whereby Deltec acquired 25% of the issued and
outstanding shares of the Company as of that date at $38.00 per share for
an aggregate purchase price of $4.2 million. The Purchase Agreement was
entered into following the submission by Deltec of a Rebuttal of Control to
the Office of Thrift Supervision ("OTS") and the execution by Deltec
International, S.A., the parent of Deltec, of a Rebuttal Agreement with the
OTS. Pursuant to the Purchase Agreement, the Company, Deltec and John G.
Yedinak also entered into a stockholder agreement (the "Stockholder
Agreement"). The Stockholder Agreement stipulates that any time that the
Company proposes to issue and sell any additional shares of its Common
Stock, it shall notify Deltec and shall offer to sell to Deltec
concurrently with the issuance and sale of additional shares (including
fractional shares) such number of shares so that Deltec will continue to
own 25% of the outstanding shares of the Company's Common Stock.
Generally, the additional shares offered and sold to Deltec pursuant to the
Stockholder Agreement will be at a similar price and upon substantially the
same terms and conditions as the other additional shares sold.
Additionally, in the event that the Company purchases or otherwise acquires
any of its outstanding shares of Common Stock, it shall offer to purchase
from Deltec such number of shares that, after the purchase, Deltec will
continue to own 25% of the outstanding shares of the Company's Common
Stock. Arthur E. Byrnes currently serves as Deltec's nominee and all of
the shares owned by Deltec are also attributable to Mr. Byrnes. During the
term of the Stockholder Agreement, and for so long as Deltec holds at least
15% of
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the Company's Common Stock, Deltec has the right to nominate one director
to the Company's Board of Directors. The Stockholder Agreement also grants
Deltec registration rights in respect of any shares of Common Stock that
Deltec decides to sell. Furthermore, John G. Yedinak, the President and
Chief Executive Officer of the Company has agreed that, during this time
period, he will vote all shares of the Company's Common Stock owned by him
for the nominee designated by Deltec. Finally, during the term of the
Stockholder Agreement, Deltec has agreed to remain in compliance with the
Rebuttal Agreement between Deltec and the OTS.
4
PROPOSALS TO BE VOTED ON AT THE ANNUAL MEETING
PROPOSAL 1. ELECTION OF DIRECTOR
Directors are elected for staggered terms of three years each, with a term
of office of only one of the three classes of directors expiring each year.
Directors serve until their successors are elected and qualified.
The nominee proposed for election at the Annual Meeting is Donald G.
Wittmer. Mr. Wittmer is a director of the Company. Mr. Wittmer is not being
proposed for election pursuant to any agreement or understanding between any
person and the Company.
In the event that the nominee is unable to serve or declines to serve for
any reason, it is intended that proxies will be voted for the election of such
other person as may be designated by the present Board of Directors. The Board
of Directors has no reason to believe that Mr. Wittmer will be unable or
unwilling to serve. Unless authority to vote for the director is withheld, it
is intended that the shares represented by the enclosed proxy card if executed
and returned will be voted "FOR" the election of the nominee proposed by the
Board of Directors.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF THE NOMINEE
NAMED IN PROPOSAL 1.
Information with respect to the Nominee, Continuing Directors and Certain
Executive Officers
The following table sets forth, as of the Record Date, the names of the
nominees and continuing directors and the named Executive Officers, as defined
below, as well as their ages; a brief description of their recent business
experience, including present occupations and employment; certain directorships
held by each; and the year in which each first became a director of the Company
or Savings Bank and the year in which their term (or in the case of the
nominees, proposed terms) as director of the Company expires. This table also
sets forth the amount of Common Stock and the percent thereof beneficially owned
by each director and the named Executive Officers and all directors and
executive officers as a group as of the Record Date.
Amount
Name and Principal Expiration and Nature Ownership
Occupation at Present Director of Term of Beneficial at Percent
and for Past Five Years Age Since(1)(2) as Director Ownership(3) of Class
- ------------------------------------------ --- ------------ ----------- ---------------- -----------
Nominee:
Donald G. Wittmer 63 1992 2002 28,004(4) 1.38%
President and owner of Wittmer
Financial Services, Ltd.
5
Name and Principal Expiration and Nature Ownership
Occupation at Present Director of Term of Beneficial at Percent
and for Past Five Years Age Since(1)(2) as Director Ownership(3) of Class
- ------------------------------------------ --- ------------ ----------- ---------------- -----------
Continuing Directors:
Arthur E. Byrnes 54 1997 2000 501,224(5) 25.00%
Chairman, The Deltec Asset
Management Corporation, a wholly
owned subsidiary of Deltec;
Director of Deltec International
S.A., the parent holding company of
Deltec.
Frances M. Pitts 39 1992 2000 109,148(6) 5.30%
Executive Vice President and Secretary
of the Company; Senior Vice President,
General Counsel and Secretary of the
Savings Bank.
Sergio Martinucci 64 1987 2001 275,676(4) 13.49%
Vice President of the Company, and
Chairman of the Board of the Savings
Bank since 1987, President of Coldwell
Banker-Stanmeyer Real Estate, a real
estate brokerage firm.
John G. Yedinak 49 1987 2001 980,489(6) 46.67%
Chairman of the Board, President and
Chief Executive Officer of the Company,
Vice Chairman and Chief Executive
Officer of the Savings Bank since 1987.
Stock ownership of all directors and 1,898,096(7) 85.59%
executive officers as a group (6 persons)
____________________________
(1) Includes years of service as a director of the Savings Bank.
(2) All directors, except Ms. Pitts and Messrs. Wittmer and Byrnes, are
currently directors of the Savings Bank.
(3) Each person or relative of such person whose shares are included herein,
exercises sole (or shared with spouse, relative or affiliate) voting or
dispositive power as to the shares reported.
(4) Includes 38,000 and 24,000 shares subject to options which are currently
exercisable and which may be acquired by Mr. Martinucci and Mr. Wittmer,
respectively.
(5) See "Security Ownership of Certain Beneficial Owners" for a further
discussion of the ownership of Deltec.
(6) Includes 95,984 and 54,000 shares subject to options which are currently
exercisable and which may be acquired by Mr. Yedinak and Ms. Pitts,
respectively.
(7) Includes 211,984 shares subject to options which are currently exercisable
and 720 shares allocated to executive officers under the Company's MRP.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires the Company's officers (as
defined in regulations promulgated by the SEC thereunder) and directors, and
persons who own more than ten percent of a registered class of the Company's
equity securities, to file reports of ownership and changes in ownership with
the SEC. Officers, directors and greater than ten percent
6
shareholders are required by SEC regulation to furnish the Company with copies
of all Section 16(a) forms they file.
Based solely on a review of copies of such reports of ownership furnished
to the Company, or written representations that no forms were necessary, the
Company believes that during the past fiscal year all filing requirements
applicable to its officers, directors and greater than ten percent beneficial
owners were complied with, with the exception of a Form 5 filing for each of
John Yedinak, Dominic Fejer, George Koehm, Maria Garcia, Frank Lis, Sergio
Martinucci, Frances Pitts and Patricia Reid. The transactions were subsequently
reported.
Meetings of the Board and Committees of the Board
The Board of Directors met on a monthly basis during the year ended December
31, 1998. No directors attended fewer than 75% of the total number of Board and
Committee meetings held during this period. The Board of Directors of the
Company maintains committees, the nature and composition of which are described
below:
Executive Committee. The Executive Committee of the Company consists of
Messrs. Yedinak, Wittmer, and Martinucci. This committee exercises the
authority of the Board of Directors with respect to matters requiring action
between meetings of the Board of Directors. Any actions by this committee
require subsequent ratification by the Board of Directors at the next regular
meeting. This committee meets as needed between regular meetings of the Board.
The Executive Committee met 12 times in 1998.
Compensation Committee. The Compensation Committee of the Company consists of
the full Board of Directors of the Company. The Board of Directors establishes
compensation and benefits for each of the executive officers of the Company and
the Savings Bank.
Audit Committee. The Audit Committee of the Company consists of Messrs.
Wittmer, Byrnes and Yedinak. The Audit committee met 12 times in 1998.
Nominating Committee. The Company's Nominating Committee for the 1999 Annual
Meeting of Stockholders consisted of the entire Board of Directors. The
Nominating Committee considers and recommends the nominees for director to stand
for election at the Company's annual meeting of stockholders. The Company's
Bylaws provide for stockholder nominations of directors. These provisions
require such nominations to be made pursuant to timely notice in writing to the
Secretary of the Company. The stockholder's notice of nomination must contain
all information relating to the nominee which is required to be disclosed by the
Company's bylaws and by the Exchange Act. The Nominating Committee last met on
February 18, 1998.
Directors' Compensation
Directors' Fees. Directors of the Company are paid $700 monthly for
attendance at meetings and for services rendered to the Company. Directors of
the Bank are paid $700 for attendance at monthly meetings of the Board, and are
also compensated for service to and attendance at meetings of the committees of
the Board on which they serve at the rate of $400
7
($450 for the Chairman) for each committee meeting. The Chairman of each Board
and each committee is compensated at a higher rate for attendance at monthly
meetings and for duties performed during the month and the Secretary of the
Board and of each committee also receives compensation for services, at the rate
of $400 each meeting.
1998 Incentive Stock Option Plan. Each member of the Board of Directors who
is not an officer or employee of the Bank or the Company, is eligible to receive
non-statutory stock options to purchase shares of Common Stock under the
Company's 1998 Incentive Stock Option Plan ("Incentive Stock Option Plan"). As
of December 31, 1998, 12,000 options had been granted under the Incentive Stock
Option Plan.
Executive Compensation
The report of the Compensation Committee and the stock performance graph shall
not be deemed incorporated by reference by any general statement incorporating
by reference this proxy statement into any filing under the Securities Act of
1933 (the "Securities Act") or the Exchange Act, except as to the extent that
the Company specifically incorporates this information by reference, and shall
not otherwise be deemed filed under such Acts.
Compensation Committee Report on Executive Compensation. Under rules
established by the SEC, the Company is required to provide certain data and
information in regard to the compensation and benefits provided to the Company's
Chief Executive Officer and the other executive officers of the Company. The
disclosure requirements for the Chief Executive Officer and other executive
officers include the use of tables and a report explaining the rationale and
considerations that led to fundamental compensation decisions affecting those
individuals. In fulfillment of this requirement, the Compensation Committee for
the Company (the "Committee"), has prepared the following report for inclusion
in this proxy statement:
The Company's Compensation Committee has responsibility for reviewing the
compensation policies and plans for the Company and its subsidiaries. The
policies and plans established are designed to enhance both short-term and long-
term operational performance of the Company and to build stockholder value
through appreciation in the price of the Company's Common Stock.
The Company provides certain benefits to all officers and employees who meet
certain minimum requirements, regardless of position. These benefits include
health insurance, vacation allowances, and life and long-term disability
insurance. Officers are also provided the opportunity to participate in the
Company's 401(k) Plan, Employee Stock Ownership Plan, and are eligible for
awards of Options under the Company's 1998 Stock Option Plan. In past years,
officers have also been paid discretionary bonuses based on the successful
operations of the Company and subsidiaries; however, such bonuses have not been
awarded since the 1996 fiscal year.
One of the Committee's primary objectives is to develop and maintain
compensation plans which provide the Company with the means of attracting and
retaining high quality
8
executives at competitive compensation levels and implement compensation plans
which seek to motivate executives to perform to the fullest extent of their
abilities by aligning the financial interests of the Company's senior management
with those of its stockholders, thereby enhancing stockholder value. The
Committee considers the level of compensation paid to executive officers of
companies with operations and affiliates similar to that of the Company's, and
reviews market trends in annual increases awarded to senior management.
Adjustments to base salaries are made annually for all senior officers and
employees of the Company, and have averaged 4% annually in the last three years,
based on the Committee's consideration of comparable industry and market place
averages, and assessment of the individual contributions of executives to the
Company's overall operational success and performance.
Each of the named Executive Officers of the Company, President and Chief
Executive Officer John G. Yedinak and Executive Vice President and Corporate
Counsel Frances M. Pitts, have been provided long-term Employment Agreements by
the Company as previously described in this Proxy. In addition to establishing
the mechanism for annual adjustment to base salary compensation, these
Employment Agreements also provide for the payment of annual bonuses based on
the results of operations of the Company. Bonuses have been paid under the
terms of each of the Employment Agreements in four of the last five years.
Although bonuses were earned in fiscal 1997 under the terms of each of the
Agreements, each of the named Executive Officers declined to accept such bonuses
during this period of restructuring by the Company.
The compensation of the Company's Chief Executive Officer is set based on the
method described above. For 1998, Mr. Yedinak earned approximately $387,000 in
salary and bonus. Although few, if any, financial services holding companies'
operations mirror that of the Company's, the Committee believes that, given the
level of his responsibilities and the diverse nature of the Company's
operations, Mr. Yedinak's 1998 compensation falls within the mid-range of
similar companies.
The Company has also provided Termination Agreements to certain senior
executives of the Company which, in material part, establish base salary
compensation and eligibility for bonus compensation, grant awards of Stock
Options under the Company's 1998 Stock Option Plan based on operational results,
and provide for the payment of additional compensation in the event of
termination based on a change-of-control of the Company or its subsidiary, Argo
Federal Savings Bank. Termination Agreements have, in the most recent two year
period, been provided to the Chief Financial Officer of the Company, and the
Chief Operating Officer and Controller of Argo Federal. In 1998, 12,000 Stock
Options were issued pursuant to the terms of the Termination Agreements. No
bonus payments or additional compensation based on the change-in-control
provisions was paid in either 1997 or 1998 under any of the Agreements.
Section 162(m) of the Internal Revenue limits tax deductions for executive
compensation to $1 million. There are several exemptions to Section 162(m),
including one for qualified performance-based compensation. To be qualified,
performance-based compensation must meet various requirements, including
shareholder approval. The Committee intends to consider annually whether it
should adopt a policy regarding 162(m) and to date has concluded that it is not
appropriate to do so. One reason for this conclusion is that, assuming current
compensation
9
policies remain in place, Section 162(m) will not be applicable in the near term
to any executive's compensation.
Submitted by the members of the Compensation Committee of the Board of
Directors:
Sergio Martinucci, Donald G. Wittmer, Arthur Byrnes, John G. Yedinak,
Frances M. Pitts
10
Stock Performance Graph
The following graph draws a five-year comparison of stockholder return on the
Company's Common Stock based on the market price of the Common Stock assuming
reinvestment of dividends, with the cumulative total returns of companies on the
Nasdaq Stock Market Index and the S&P Mid-Cap Bank Index supplied by SNL
Securities, LLP.
[GRAPH APPEARS HERE]
Summary
Index Period Ending
- ------------------------ -----------------------------------------------------------
6/21/94 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98
------- -------- -------- -------- -------- --------
Argo Bancorp, Inc. 100.00 101.37 107.21 133.22 148.68 169.10
NASDAQ Total U.S. Index 100.00 106.67 150.87 185.53 227.61 319.97
SNL Midwest Thrift Index 100.00 98.22 148.45 187.03 301.43 278.50
- ----------------------------------------------------------------------------------------------
11
Executive Compensation
Summary Compensation Table. The following table shows for the fiscal years
ending December 31, 1996, 1997 and 1998, the cash compensation paid by the
Company and its subsidiaries, the Savings Bank and On-Line, as well as certain
other compensation paid or accrued for those years, to the Chief Executive
Officer and to the other executive officers of the Company who received total
salary and bonus in excess of $100,000 in 1998 (the "Named Executive Officers").
Annual Compensation Long-Term Compensation
-------------------------------------------- ---------------------------------------------------------
Awards Payouts
------------------------------ -------------------------
Other Securities
Annual Restricted Under- All Other
Compen- Stock lying LTIP Compen-
Name and Salary Bonus sation Award(s) Options/ Payouts sation
Principal Officer Year ($)(1)(2) ($)(3) ($)(4) ($) SARs(#) ($)(5) ($)
- ------------------ ------- ----------- ------------ ----------- ------------- --------------- ----------- ------------
John G. Yedinak 1998 $378,811 $ 40,398 $ -- $ -- $ -- None $ 17,701(6)
President and 1997 359,804 176,000 -- -- -- None 24,816(6)
Chief Executive 1996 320,336 200,998 -- -- -- None 58,451
Officer of the
Company and
President and
Chief Executive
Officer of the
Savings Bank
Frances M. Pitts 1998 $161,781 $ 20,199 $ -- $ -- $ -- None $14,569(6)
Executive Vice 1997 144,615 70,500 -- -- -- None 23,482(6)
President and 1996 126,368 82,989 -- -- -- None 21,453
Secretary of the
Company and
Senior Vice
President,
General Counsel
and Secretary of
the Savings Bank
____________________________
(1) Includes amounts of salary deferred pursuant to the Savings Bank 401(k)
Plan. Under the Plan, participants may elect to have up to the lesser of
12% or $9,500 of annual compensation deferred for the Plan year.
(2) Includes directors' fees received from the Company, the Savings Bank and
On-Line with respect to Mr. Yedinak; and directors' fees and Secretary's
fees received from the Company and the Savings Bank with respect to Ms.
Pitts.
(3) Includes deferred bonus amounts as described under the "Employment
Agreements" with respect to Mr. Yedinak and Ms. Pitts. Such bonuses were
based upon the financial results of the Company for 1996 and 1998. No
bonuses were paid for 1997.
(4) For 1996, 1997 and 1998, there were no (a) perquisites over the lesser of
$50,000 or 10% of the individual's total salary and bonus for the years;
(b) payments of above market preferential earnings on deferred
compensation; (c) payments of earnings with respect to long term incentive
plans prior to settlement or maturation; (d) tax payment reimbursements; or
(e) preferential discounts on stock.
(5) The Company does not maintain a long-term incentive plan and therefore,
there were no payouts or awards under such plan.
12
(6) Includes $4,750 and $4,750 contributed by the Savings Bank pursuant to the
401(k) Plan for the account of Mr. Yedinak and Ms. Pitts, respectively,
for the year ended December 31, 1998. Excludes $84,378 and $12,032 which
represents the market value of premiums paid on supplemental policies
covering life (with proceeds to be paid to the Company and the Bank) and
long-term disability for Mr. Yedinak and Ms. Pitts for the year ended
December 31, 1998. Includes $12,951 and $9,819, the market value of the
allocations of shares made under the Employee Stock Ownership Plan for 1998
to Mr. Yedinak and Ms. Pitts, respectively.
Employment Agreements. The Company and the Savings Bank (collectively, the
"Employer") entered into employment agreements ("Agreements") with each of Mr.
Yedinak and Ms. Pitts (the "Executives"), effective November 1, 1996. The
Savings Bank employment agreements provide for a three year term and, commencing
on the first anniversary date and continuing each anniversary date thereafter,
the Board of Directors may extend the agreements for an additional year so that
the remaining term shall be three years after conducting a performance
evaluation of the Executives. The Savings Bank employment agreements for Mr.
Yedinak and Ms. Pitts were renewed in November 1998. The Company Agreements
provide for a five year term and shall be extended on a daily basis unless
written notice of non-renewal is given by the Board of the Company. Under the
Agreements with each of the Executives, base compensation of $159,428 and
$177,283 with respect to Mr. Yedinak, and $105,480 and $34,500 with respect to
Ms. Pitts will be paid by each of the Savings Bank and the Company,
respectively. The salary amounts under the Agreements may be increased at the
discretion of the Board of Directors, or authorized committee of the Board, of
each of the Company and the Savings Bank. The salary may not be decreased
during the term of the Agreements without the prior written consent of the
executive officer.
Pursuant to the Agreements, in addition to the Executive's base
compensation, an amount equal to 2% for Mr. Yedinak and 1% for Ms. Pitts of
gross profits of each of the Company and Savings Bank shall be credited as
additional compensation to the executive to be paid on the earlier of
termination for other than cause, death or disability, the expiration of the
Agreements, or annually on the anniversary date of the Agreements. The deferred
amounts will be forfeited if the Executive is terminated prior to the
anniversary date of the Agreements for any reason other than death or
disability. The Agreements also provide for, among other things, participation
in stock benefits plans and other fringe benefits applicable to executive
personnel. The Agreements provide for termination by the Savings Bank or the
Company for cause as defined in the Agreements at any time.
In the event the Savings Bank or the Company chooses to terminate the
Executive's employment for reasons other than for cause, or in the event of the
Executive's resignation from the Savings Bank and the Company upon: (i)
termination of employment other than for disability, retirement or cause or (ii)
the Executive's resignation upon: (a) a failure to re-elect the Executive or his
current offices or failure to nominate or renominate the Executive to the board;
(b) a material demotive change in the Executive's functions, duties or
responsibilities; (c) a relocation of the Executive's principal place of
employment by more than 30 miles; (d) a material reduction in benefits or
perquisites being provided to the Executive under the Agreements; (e)
liquidation or dissolution of the Savings Bank or the Company; or (f) a breach
of the Agreements by the Savings Bank or the Company, the Executive or, in the
event of death, his beneficiary would be entitled to receive an amount equal to
the base salary increased annually by four percent (4.0%) due to the Executive
for the remaining term of the Agreements and the
13
contributions that would have been made on the Executive's behalf to any
employee benefit plans of the Savings Bank or the Company during the remaining
term of the Agreements. The Savings Bank and the Company would also continue and
pay for the Executive's life, health and disability coverage for the remaining
term of the Agreements.
Under the Agreements, if voluntary or involuntary termination follows a
change in control of the Savings Bank or the Company (as defined in the
Agreements), the Executive or, in the event of the Executive's death, his
beneficiary, would be entitled under the Company Agreements to a severance
payment equal to five times the average of the three preceding taxable years'
annual compensation. Under the Savings Bank Agreements, the Executive would be
entitled to a severance payment equal to three times the Executive's average
annual compensation for the five most recent taxable years. The Savings Bank
and the Company would also continue the Executive's life, health, and disability
coverage for sixty months. Notwithstanding that both the Savings Bank and the
Company Agreements provide for a severance payment in the event of a change in
control, the Executive would only be entitled to receive a severance payment
under one agreement. Any excise taxes due as a result of an "excess parachute
payment" under the Company Agreements will be reimbursed under the Agreements.
Based solely on the Salary and Bonus reported in the Summary Compensation Table
for 1998 assuming all compensation was paid under the Company Agreement with
respect to Mr. Yedinak and the Savings Bank Agreement with respect to Ms. Pitts,
and excluding any benefits under any employee plan which may be payable,
following a change in control and termination of employment, Mr. Yedinak and Ms.
Pitts would be entitled to severance payments of approximately $886,415 and
$316,440, respectively.
Payments to the Executive under the Savings Bank Agreements will be
guaranteed by the Company in the event that payments or benefits are not paid by
the Savings Bank. Payment under the Company Agreements would be made by the
Company. The Agreements also provide that the Savings Bank and Company shall
indemnify the Executive to the fullest extent allowable under federal and
Delaware law, respectively.
Management Recognition Plan and Trust. The Management Recognition and
Retention Plan (the "MRP") provides stock awards to officers and key employees.
Awards made after June 1, 1995 are subject to performance goals and vest at a
rate of 16.66% on the last day of each six month period following the date of
grant. Awards made prior to June 1, 1995 are not subject to performance goals
and vest at a rate of 33.33% per year commencing on the date of grant. As of
December 31, 1998, 2,340 shares have been granted pursuant to the MRP and remain
unvested and 26,852 shares remain available for grant.
Stock Option Plans. On May 20, 1998 the Stockholders of the Company approved
the Incentive Stock Option Plan. The Incentive Stock Option Plan provides for
discretionary awards of options to purchase Common Stock to officers and key
employees as determined by a committee of disinterested directors. During 1998,
12,000 stock options were granted under the Incentive Stock Option Plan. All
outstanding options to purchase common stock held by employees were granted
under the Argo Bancorp, Inc. 1991 Employee Stock Option and Incentive Plan (the
"1991 Stock Option Plan"). The following table provides certain information
with respect to option exercises in the previous fiscal year by Named Executive
Officers and the
14
number of shares of Common Stock represented by outstanding stock options held
by the Named Executive Officers as of December 31, 1998. Also reported are the
values for "in-the-money" options which represent the positive spread between
the exercise price of any such existing stock options and the year-end price of
the Common Stock. As of December 31, 1998, 388,000 options to purchase shares of
Common Stock are available for grant (all under the Incentive Stock Option Plan)
and 383,068 options to purchase Common Stock have been granted under predecessor
plans and are currently outstanding.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR END OPTION/SAR VALUES
Value of
Number of Securities Underlying Unexercised In-the-Money
Shares Unexercised Options Options/SARs
Acquired on at Fiscal Year End at Fiscal Year-End
Name Exercise Value Realized (#)(1)(2)(3)(4) ($)(5)
- ------------------ ---------------- ------------------ -------------------------------------------------------------------
Exercisable Unexercisable Exercisable Unexercisable
---------------- ------------------ ------------- --------------
John G. Yedinak 0 $ -- 95,984(6) -- $494,318 $ --
Frances M. Pitts -- -- 54,000(7) -- 291,000 --
________________________
(1) All options become 100% exercisable upon death, disability, retirement or a
change in control, as defined generally under the Incentive Option Plan.
In addition, vesting of non-statutory options may be accelerated by a
committee consisting of outside directors.
(2) The purchase price may be made in whole or in part through the surrender of
previously held shares of common stock.
(3) Under limited circumstances, such as death, disability or normal retirement
of an employee, the employee (or his beneficiary) may request that the
Company, in exchange for the employee's surrender of an option, pay to the
employee (or beneficiary) the amount by which the fair market value of the
Common Stock exceeds the exercise price of the option on the date of the
employee's termination of employment. It is within the company's
discretion to accept or reject such a request.
(4) Options are subject to limited (SAR) rights pursuant to which the options,
to the extent outstanding for at least six months, may be exercised in the
event of a change in control of the Company. Upon the exercise of a
limited right, the optionee would receive a cash payment equal to the
difference between the exercise price of the related option on the date of
grant and the fair market value of the underlying shares of Common Stock on
the date the limited right is exercised.
(5) The price of the Common Stock on December 31, 1998 was $9.00.
(6) The exercise price for 95,984 options is $3.85.
(7) The exercise price for 50,000 options is $3.50 and the exercise price for
4,000 options is $5.00.
Indebtedness of Management and Transactions with Certain Related Persons
The Savings Bank has adopted a policy which requires that all loans or
extensions of credit to executive officers and directors must be made on
substantially the same terms, including interest rates and collateral, as those
prevailing at the time for comparable transactions
15
with the general public and must not involve more than the normal risk of
repayment or present other unfavorable features.
PROPOSAL 2. RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Company's independent auditors for the year ended December 31, 1998
were KPMG Peat Marwick LLP. The Board of Directors has appointed Crowe, Chizek
and Company LLP as independent auditors for the Company for the year ending
December 31, 1999.
On December 2, 1998, the Company dismissed KPMG Peat Marwick LLP ("KPMG")
as the Company's independent accountants and engaged Crowe, Chizek and Company
LLP as its independent accountants. KPMG's reports on the financial statements
of the Company for the past two fiscal years did not contain an adverse opinion
or a disclaimer of opinion and were not qualified or modified as to uncertainty,
audit scope, or accounting principles. The decision to change independent
accountants was approved by the Company's Board of Directors and its Audit
Committee. During the Company's fiscal years ending December 31, 1996 and
December 31, 1997 and the subsequent interim period preceding the dismissal,
there were no disagreements with KPMG on any matter of accounting principles or
practices, financial statement disclosure, or auditing scope or procedure which,
if not resolved to the satisfaction of KPMG, would have caused KPMG to make
reference to the subject matter of the disagreement(s) in connection with their
report. The Company has provided KPMG with a copy of this disclosure and KPMG
has written a letter addressed to the Securities and Exchange Commission (the
"Commission") stating that it agrees with the above statements.
On the date of dismissal of KPMG, the Company engaged Crowe, Chizek and
Company LLP as independent accountants for the fiscal year ending December 31,
1999. Prior to the appointment of Crowe, Chizek and Company LLP, the Company did
not engage or consult with Crowe, Chizek and Company LLP regarding any of the
matters described in Item 304(a)(2) of Regulation S-K.
Representatives of KPMG Peat Marwick LLP are not expected to be present at
the Annual Meeting. Representatives of Crowe, Chizek and Company LLP will be
present at 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 stockholders present at the Annual Meeting.
Unless marked to the contrary, the shares represented by the enclosed proxy
card will be voted FOR ratification of the appointment of Crowe, Chizek and
Company LLP as the independent auditors of the Company.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR RATIFICATION OF THE
APPOINTMENT OF CROWE, CHIZEK AND COMPANY LLP AS THE INDEPENDENT AUDITORS OF THE
COMPANY.
16
ADDITIONAL INFORMATION
Stockholder Proposals
To be considered for inclusion in the proxy statement and proxy relating to
the Annual Meeting of Stockholders to be held in 2000, a stockholder proposal
must be received by the Secretary of the Company at the address set forth on the
Notice of Annual Meeting of Stockholders, not later than December 10, 1999. Any
such proposal will be subject to 17 C.F.R. (S) 240.14a-8 of the Rules and
Regulations under the Exchange Act.
Notice of Business to be Conducted at an Annual Meeting
The bylaws of the Company provide an advance notice procedure for certain
business to be brought before an annual meeting. In order for a stockholder to
properly bring business before an annual meeting, the stockholder must give
written notice to the Secretary of the Company not less than thirty (30) days
nor more than sixty (60) days prior to such annual meeting, provided, however,
that if less than thirty-one days' notice of the annual meeting is given to
stockholders, notice by the stockholder shall be delivered to the Secretary of
the Company not later than the close of the tenth (10) day following the day on
which notice of the annual meeting was mailed to stockholders. The notice must
include the stockholder's name and address as it appears on the Company's record
of stockholders, a brief description of the proposed business, the reason for
conducting such business at the annual meeting, the class and number of shares
of the Company's capital stock that are beneficially owned by such stockholder,
and any material interest of such stockholder in the proposed business. In the
case of nominations to the Board, certain information regarding the nominee must
be provided. Nothing in this paragraph shall be deemed to require the Company
to include in its proxy statement and proxy relating to an annual meeting any
stockholder proposal which does not meet all of the requirements for inclusion
established by the SEC in effect at the time such proposal is received.
Other Matters Which May Properly Come Before the Annual Meeting
The Board of Directors knows of no business which will be presented for
consideration at the Annual Meeting other than as stated in the Notice of Annual
Meeting of Stockholders. If, however, other matters are properly brought before
the Annual Meeting, it is the intention of the persons named in the accompanying
proxy to vote the shares represented thereby on such matters in accordance with
their best judgment.
Whether or not you intend to be present at the Annual Meeting, you are
urged to return your proxy promptly. If you are present at the Annual Meeting
and wish to vote your shares in person, your proxy may be revoked by voting at
the Annual Meeting.
A copy of the Form 10-K (without exhibits) for the year ended December 31,
1998, as filed with the SEC will be furnished without charge to stockholders of
record upon
17
written request to Argo Bancorp, Inc., Ms. Frances M. Pitts, Secretary, 7600
West 63rd Street, Summit, Illinois 60501.
By Order of the Board of Directors
/s/ Frances M. Pitts
Frances M. Pitts
Secretary
Summit, Illinois
March 31, 1999
YOU ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING IN PERSON. WHETHER OR
NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, YOU ARE REQUESTED TO SIGN AND
PROMPTLY RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
18
[FRONT SIDE]
REVOCABLE PROXY
ARGO BANCORP, INC.
ANNUAL MEETING OF STOCKHOLDERS
April 27, 1999
3:00 p.m. Central Time
The undersigned hereby appoints the official proxy committee of the Board
of Directors of Argo Bancorp, Inc. (the "Company"), each with full power of
substitution, to act as attorneys and proxies for the undersigned, and to vote
all shares of Common Stock of the Company which the undersigned is entitled to
vote only at the Annual Meeting of Stockholders, to be held on April 27, 1999 at
3:00 p.m. Central Time, at 7600 West 63rd Street, Summit, Illinois, and at any
and all adjournments thereof, as follows:
1. The election as director of the nominee listed.
Donald G. Wittmer
FOR VOTE WITHHELD
--- -------------
[_] [_]
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE LISTED NOMINEE.
2. The ratification of the appointment of Crowe, Chizek and Company
LLP as independent auditors for the fiscal year ending December 31,
1999.
FOR AGAINST ABSTAIN
--- ------- -------
[ ] [ ] [ ]
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSAL 2.
[BACK SIDE]
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
This proxy is revocable and will be voted as directed, but if no
instructions are specified, this proxy will be voted FOR the proposals listed.
If any other business is presented at the Annual Meeting, including whether or
not to adjourn the meeting, this proxy will be voted by those named in this
proxy in their best judgment. At the present time, the Board of Directors knows
of no other business to be presented at the Annual Meeting.
The undersigned acknowledges receipt from the Company prior to the
execution of this proxy of a Notice of Annual Meeting of Stockholders and of a
Proxy Statement dated March 30, 1999 and of the Annual Report to Stockholders.
Please sign exactly as your name appears on this card. When signing as
attorney, executor, administrator, trustee or guardian, please give your full
title. If shares are held jointly, each holder may sign but only one signature
is required.
Dated: ________________________
________________________
SIGNATURE OF STOCKHOLDER
________________________
SIGNATURE OF STOCKHOLDER
-------------------------------
PLEASE COMPLETE, DATE, SIGN AND MAIL THIS PROXY PROMPTLY
IN THE ENCLOSED POSTAGE-PAID ENVELOPE