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
Iroquois Bancorp, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
Marianne R. O'Connor
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
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:
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(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):
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[_] Fee paid previously with preliminary materials.
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[_] 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.
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Notes:
IROQUOIS BANCORP, INC.
115 Genesee Street
Auburn, New York 13021
(315) 252-9521
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 30, 1998
TO THE SHAREHOLDERS OF IROQUOIS BANCORP, INC.
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of Iroquois
Bancorp, Inc. (the "Company"), will be held at the Holiday Inn, 75 North Street,
Auburn, New York on Thursday, April 30, 1998 at 10:00 a.m., to consider and vote
upon the following matters:
1. The election of four (4) directors to serve for a term of three (3)
years and until their successors have been duly elected and qualified.
2. The ratification of the appointment of KPMG Peat Marwick LLP as
independent auditors for the fiscal year ending December 31, 1998.
3. The transaction of such other business as may properly come before the
Meeting or any adjournment thereof.
The close of business on March 27, 1998 has been fixed as the record date
for the determination of shareholders who will be entitled to notice of and to
vote at the Annual Meeting.
By Order of the Board of Directors
/s/ Kathleen A. Manley
Kathleen A. Manley, Corporate Secretary
April 1, 1998
THE BOARD OF DIRECTORS REQUESTS THAT YOU MARK, SIGN, AND RETURN PROMPTLY THE
ENCLOSED PROXY CARD IN THE POSTPAID ENVELOPE PROVIDED.
IROQUOIS BANCORP, INC.
115 Genesee Street
Auburn, New York 13021
(315) 252-9521
_______________________
PROXY STATEMENT
_______________________
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 30, 1998
_______________________________________
SOLICITATION AND VOTING OF PROXIES
The enclosed proxy is solicited by the Board of Directors of Iroquois
Bancorp, Inc. (the "Company") for use in connection with the Annual Meeting of
Shareholders to be held April 30, 1998. The matters to be considered and acted
upon at such meeting are referred to in the preceding notice and are more fully
discussed below. Only if the enclosed proxy card is properly executed and
returned to the Company will the shares represented thereby be voted. If no
choices are specified on the returned card, the shares will be voted for each of
the persons nominated as director and in favor of management's proposals. The
proxy may be revoked by written notice to the Company prior to the meeting or by
written notice to the Secretary at the meeting at any time prior to being voted.
The first date on which this proxy statement and accompanying proxy are being
sent to shareholders is on or about April 1, 1998.
Proxies may be solicited by mail, personal interview, telephone, or
telegraph. Directors, officers, and employees of the Company may solicit
proxies by any such method without additional compensation. Costs of all proxy
solicitation will be paid by the Company, including reimbursement of brokerage
firms and other nominees for expenses of forwarding proxy solicitation material
to the beneficial owners for whom they held the shares.
The common stock of the Company is its only class of voting securities and
each share of common stock entitles the holder thereof to one vote on all
matters to come before the meeting. The Board of Directors has fixed the close
of business on March 27, 1998 as the record date for the determination of
shareholders entitled to notice of and to vote at the Meeting. On March 27,
1998, there were 2,392,580 shares of the Company's common stock outstanding.
The presence, in person or by proxy, of at least a majority of the total number
of shares of common stock outstanding and entitled to vote is necessary to
constitute a quorum and in the event there are not sufficient votes, the Annual
Meeting may be adjourned.
Directors shall be elected by a plurality of the eligible votes cast and
the ratification of the appointment of independent auditors will be determined
by a majority of the eligible votes cast. Abstentions, in person or by proxy,
shall be counted toward a quorum, but abstentions under New York
law are not deemed to be votes cast and therefore abstentions have no effect on
the outcome of the vote, which requires either a plurality or majority of the
eligible votes cast, depending upon the proposal. Votes withheld in connection
with the election of one or more of the nominees for director will not be
counted as votes cast.
All of the items on the agenda for shareholder approval at this Annual
Meeting are deemed "discretionary" items upon which brokerage firms may vote in
their discretion on behalf of beneficial owners who have not furnished voting
instructions within ten days of the Annual Meeting. "Broker non-votes" occur
for "non-discretionary" items on which brokers may not vote if beneficial owners
have not given instruction by proxy. Broker non-votes, therefore, will not be a
factor with respect to any agenda item.
STOCK OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The table below indicates as of February 1, 1998 the only holders known to
the Company to be the beneficial owner of more than 5% of the total 2,388,936
issued and outstanding shares of the Company's common stock.
Amount and Nature Percent of
of Outstanding
Name and Address Beneficial Ownership/1/ Common Stock
---------------- -------------------- ------------
The Baird Family 233,000/2/ 9.52%
c/o Brian D. Baird
120 Delaware Avenue
Buffalo, New York 14202
Iroquois Bancorp, Inc. Employee 192,720/3/ 7.88%
Stock Ownership Plan
115 Genesee Street
Auburn, New York 13021
------------------------
/1/ Except as otherwise noted, such beneficial owner has sole voting and
investment power with respect to the stock.
/2/ Such shares are beneficially owned either directly or as trustees or
custodians for other family members or as trustees of the Cameron
Baird Foundation. The respective beneficial owners have sole
investment and voting power with respect to their shares.
/3/ Such shares are held in trust for the participants in the plan who are
the beneficial owners and who direct the voting of their allocated
shares in the trust. All unallocated shares in the trust are voted by
the independent trustee.
As of February 1, 1998, no director except Brian Baird and no executive
officer of the Company or any subsidiary beneficially owned more than 5% of any
class of the Company's outstanding stock. All directors and executive officers
as a group (13 persons) beneficially owned 643,046 shares of the Company's
common stock, including exercisable options, representing approximately 26.28%
of the 2,388,936 outstanding shares of common stock plus 57,800 outstanding
exercisable options. Those ownership interests are set forth in the following
table.
2
Amount and Nature of Percent Common
Name Positions Held Beneficial Ownership/1/ Stock Outstanding
---- -------------- ---------------------- -----------------
Joseph P. Ganey Chairman of the Board 66,672/2/ 2.72%
Richard D. Callahan President and CEO, Director 54,204/3/ 2.22
Brian D. Baird Director 233,000/4/ 9.52
John Bisgrove, Jr. Director 31,411/5/ 1.28
Peter J. Emerson Director 58,592/6/ 2.39
Arthur A. Karpinski Director 23,485 *
Henry D. Morehouse Director 10,041 *
Richard J. Notebaert, Jr. Vice President 15,748 *
Marianne R. O'Connor Treasurer and CFO 27,782/7/ 1.14
Edward D. Peterson Director 9,232 *
W. Anthony Shay, Jr. Vice President 7,466/8/ *
Lewis E. Springer, II Director 64,894 2.65
All directors and executive
officers as a group (13 persons) 643,046/9/ 26.28
* less than 1%
- --------------------------------
/1/ Except as otherwise noted, each beneficial owner listed has sole voting and
investment power with respect to the stock.
/2/ Includes 4,966 shares held jointly with spouse.
/3/ Includes 900 shares held by spouse, and exercisable options to purchase
45,300 shares of common stock.
/4/ Such shares are beneficially owned either directly or as trustees or
custodians for other family members or as trustees of the Cameron Baird
Foundation. The respective beneficial owners have sole investment and
voting power with respect to their shares.
/5/ Includes 266 shares held by spouse.
/6/ Includes 2,000 shares held by spouse, 1,100 shares held by an independent
trustee for a child, and 36,000 shares held by the F.L. Emerson Foundation,
Inc., of which he is a director and as to which he disclaims beneficial
ownership.
/7/ Includes 217 shares held as custodian for minor children, and exercisable
options to purchase 6,200 shares of common stock.
/8/ Includes exercisable option to purchase 3,600 shares of common stock.
/9/ Includes 36,510 shares held in the ESOP that have not been awarded or
allocated and are therefore voted by the ESOP independent trustee and
exercisable options to purchase 57,800 shares.
3
The following table sets forth information with respect to the shares of
the Company's Floating Rate Cumulative Preferred Stock, Series A (the "Series A
Preferred Stock"), which is non-voting stock, beneficially owned by each
director and each executive officer named in the Summary Compensation Table on
Page 8 and by all directors and officers as a group as of February 1, 1998. As
of that date, there were 29,999 shares of the Series A Preferred Stock issued
and outstanding.
Amount and Percent of
Nature of Series A
Beneficial Preferred
Name Positions Held Ownership/1/ Stock Outstanding
---- -------------- ------------ -----------------
Joseph P. Ganey Chairman of the Board 100/2/ * %
Arthur A. Karpinski Director 700/3/ 2.33
All directors and executive
officers as a group (13 persons) 800 2.67
* less than one percent
-----------------------
/1/ Except as otherwise noted, each beneficial owner listed has sole voting and
investment power with respect to the stock.
/2/ All shares held jointly with spouse.
/3/ All shares held by spouse.
The following table sets forth the information with respect to the shares
of the Company's Floating Rate Noncumulative Preferred Stock, Series B (the
"Series B Preferred Stock"), which is non-voting stock, beneficially owned by
each director and executive officer and by all directors and officers as a group
as of February 1, 1998. As of that date there were 18,552 shares of the Series
B Preferred Stock issued and outstanding.
Amount and Percent of
Nature of Series B
Beneficial Preferred
Name Positions Held Ownership/1/ Stock Outstanding
---- -------------- ------------ -----------------
Joseph P. Ganey Chairman of the Board 148 * %
Arthur A. Karpinski Director 520/2/ 2.80
Marianne R. O'Connor Treasurer and Chief Financial 10/3/ *
Officer
All directors and executive
officers as a group (13 persons) 678 3.65
* less than one percent
- ---------------------
/1/ Except as otherwise noted, each beneficial owner listed has sole voting and
investment power with respect to the stock.
/2/ Includes 500 shares held by spouse.
/3/ All shares as custodian for minor children.
4
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
In accordance with the rules of the Securities and Exchange Commission
under Section 16(a) of the Securities Exchange Act of 1934, as awarded,
directors, executive officers, and beneficial owners of 10% or more of the
Company's stock must file certain reports of stock ownership and changes of
stock ownership. During 1997 James H. Paul, an executive officer at the time,
failed to file one report on a timely basis containing a late filing with
respect to one transaction. John Bisgrove Jr., a director, failed to file two
reports on a timely basis, each containing a late filing relating to one
transaction.
ELECTION OF DIRECTORS
The Board of Directors of the Company currently consists of ten (10)
directors, including one vacancy created by the death of former board member
William Humes. The Board is divided into a total of three classes, with terms
expiring in 1998, 1999, and 2000, with the vacancy in the class whose term
expires in 1999. At the Annual Meeting, four (4) directors will be elected for
a term of office expiring in 2001 and until the election and qualification of
their successors.
It is intended that, if no contrary specification is made, the persons
named on the proxy card will vote for the nominees named below. The Board
believes that all of the nominees will be available and able to serve as
directors, but if for any reason any of these persons should not be available or
able to serve, the proxies may exercise discretionary authority to vote for a
substitute or substitutes. All nominees for election in 1998 have been
previously elected by the shareholders of the Company.
There is set forth below certain information about the nominees for
election to the Board of Directors, as well as about those present directors
whose term of office will continue after the meeting. The names of the directors
and nominees below represent a full Board of Directors, with one vacancy as
described above. Except for Brian D. Baird, Henry D. Morehouse and Edward D.
Peterson, all present directors, including the nominees, are also serving as
directors of the Company's subsidiary, Cayuga Bank (formerly Cayuga Savings
Bank). Mr. Morehouse and Mr. Peterson also serve on the Board of Directors of
the Company's other subsidiary, The Homestead Savings (FA) ("Homestead
Savings"). Pursuant to an arrangement between the Company and Homestead Savings
at the time Homestead Savings was acquired, the Company undertook to maintain
two positions on its Board of Directors for representation by Homestead Savings.
Cayuga Bank and Homestead Savings are currently the only subsidiaries of the
Company (also referred to as "member banks").
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL THE NOMINEES FOR ELECTION AS
DIRECTORS.
5
NOMINEES FOR ELECTION AS DIRECTORS FOR TERMS OF OFFICE EXPIRING IN 2001:
- ------------------------------------------------------------------------
PETER J. EMERSON, age 57, a director of Cayuga Bank since 1971, is a Director of
the F.L. Emerson Foundation, Inc., a charitable foundation, where he also served
as President until June, 1997.
JOSEPH P. GANEY, age 74, a director of Cayuga Bank since 1974, was named
Chairman of the Board of Cayuga Savings Bank in 1985, and remains as Chairman of
the Board of the Company as well. Having served as Chief Executive Officer
since 1976, he retired at the end of 1988. Before joining Cayuga Savings Bank
as Executive Vice President in 1971, Mr. Ganey had 29 years of banking
experience.
EDWARD D. PETERSON, age 63, a director of the Homestead Savings since 1978,
became a director of Iroquois in 1996, having been elected by the board in 1996
to fill the vacancy arising from the retirement of Russel C. Fielding. Mr.
Peterson is retired from General Electric Corporation, where he served for 34
years in a number of positions, including Manager of Employee and Community
Relations for Aerospace Electronic Systems and the Aerospace Operations
Departments.
LEWIS E. SPRINGER II, age 59, a director of Cayuga Bank since January, 1987, has
been President of Creative Electric, Inc. since 1967 and Chairman of its
subsidiary, Andersen Laboratories, since 1989. Both companies manufacture
electronic components for guidance systems and other applications.
PRESENT DIRECTORS WHOSE TERMS OF OFFICE EXPIRE IN 1999:
- -------------------------------------------------------
ARTHUR A. KARPINSKI, age 69, a director of Cayuga Bank since 1969, is now
retired from the practice of periodontics.
HENRY D. MOREHOUSE, age 68, a director of the Homestead Savings since 1968, is
the owner of
Morehouse Appliances, a retail appliance business, where he has been employed
since 1942.
PRESENT DIRECTORS WHOSE TERMS OF OFFICE EXPIRE IN 2000:
- -------------------------------------------------------
BRIAN D. BAIRD, age 47, became a director on July 1, 1990, through an expansion
of the Board, and was thereafter elected by the shareholders at the Company's
next Annual Meeting. He is an attorney with the law firm of Kavinoky and Cook
in Buffalo, New York, where he has practiced law since 1983.
JOHN BISGROVE, JR., age 58, a director of Cayuga Bank since 1978, is the owner
and President of Sunrise Farms with business activity in cattle breeding, horses
and related interests.
RICHARD D. CALLAHAN, age 55, became a director of Iroquois and Cayuga Bank in
1994 after his appointment as Chief Executive Officer and President of both the
Company and Cayuga Savings. Prior to joining Iroquois, he was Regional Executive
Vice President, Regional President, and Senior Executive Vice President of
Operations and Marketing, in that order, for Marine Midland Bank from 1983 to
1993, after 18 years of prior banking experience.
6
There are no family relationships between any director, executive officer,
or any person nominated or chosen by the Board to become a director or executive
officer.
BOARD OF DIRECTORS MEETINGS AND COMMITTEES
The Board of Directors held 4 regular quarterly meetings during 1997, and
all of the directors attended more than 75% of the aggregate of the total number
of Board meetings and meetings of committees of the Board on which they served
except Mr. Bisgrove, whose absences were excused for good cause. The Board of
Directors currently has three standing committees: Executive, Audit, and
Nominating/Personnel. The Chairman of the Board is a member ex-officio, with
vote, of all committees. The principal responsibilities of the standing
committees, the number of meetings held during 1997, and the present committee
members are set forth below.
Executive Committee: The Executive Committee is authorized to exercise the
powers of the Board of Directors to take action between regular meetings of the
Board. This Committee met 2 times during 1997. The Committee presently consists
of 5 appointed members with Mr. Bisgrove as chairperson, Messrs. Baird,
Callahan, Morehouse and Springer as appointed members and Mr. Ganey ex-officio.
Audit Committee: The Audit Committee examines and reviews the accounting,
reporting, and financial practices of the Company. The Committee also receives
reports of the Company's independent auditors, and reviews and approves all non-
audit services performed by the independent auditors. During 1997, the
Committee met 3 times. This Committee presently consists of 4 appointed
members, with Mr. Emerson as chairperson, Messrs. Karpinski, Morehouse and
Peterson as appointed members, and Mr. Ganey ex-officio.
Nominating/Personnel Committee: The Nominating/Personnel Committee reviews
the qualifications of candidates for the Board and recommends a slate of
nominees for election at the annual meeting of shareholders, as well as
considers nominees recommended by shareholders on the same basis as other
persons considered provided such names are submitted in sufficient time for the
Committee to review the potential candidate's qualifications. The Committee is
also responsible for Company policy regarding general management and human
resource matters, including compensation. During 1997, this Committee met 5
times. The Committee presently consists of 5 appointed members, with Mr.
Springer as chairperson, Messrs. Baird, Bisgrove, Callahan and Peterson as
appointed members, and Mr. Ganey ex-officio. With the exception of Mr.
Callahan, the Nominating/Personnel Committee members serve as the Board's
compensation committee and have been designated the Stock Option Committee to
administer the Company's 1996 Stock Option Plan.
DIRECTOR COMPENSATION
The Company compensates its non-employee directors $1,600 per year in cash
for service on the Board of the Company. Directors who reside beyond a 50 mile
radius of the Company's principal office also receive reimbursement for travel
expenses, and all directors receive a fee of $150 for each committee meeting
attended, with the chairperson presiding at each committee meeting receiving
$175. Directors who serve on the boards of member bank subsidiaries also
receive compensation for such service from the subsidiary in accordance with
policy set by its board of directors.
The Company maintains a Stock Incentive Program to provide financial
incentives for directors to increase stock ownership and strengthen their
commitment to the Company's success. The Program is also consistent with the
Company's policy that now requires a minimum level of stock
7
ownership by directors. Under the Program, each director who purchases shares
of common stock of the Company may be reimbursed up to $5,000 of the cost of the
shares purchased during any year.
The Company also maintains a Chairman's Stock Award Program, established in
1989 to award shares of common stock to the Company's Chairman over a period of
time. During 1997, 2,400 shares were distributed for the account of the
Chairman of the Board. The Chairman's Stock Award Program terminates effective
January 1, 1999.
INSURANCE
As authorized by law and its Bylaws, the Company maintains insurance for
itself and subsidiaries to indemnify directors and officers. It has obtained
insurance from Executive Risk Indemnity, Inc, of Simsbury, Connecticut insuring
the Company and its subsidiaries against any obligation incurred as a result of
indemnification of their directors and officers and insuring such persons for
liabilities for which they may not be indemnified. This insurance policy has a
three-year term expiring November 1, 2000, with coverage of $5,000,000 aggregate
annual limitation. As of this date, no sums have been paid under this policy.
The current annual premium is $28,440.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The table on the following page shows, for the three years ended December
31, 1997, the cash compensation paid to the Company's chief executive officer
and other executive officers of the Company who received total compensation in
excess of $100,000. As explained in the Report on Executive Compensation below,
this compensation is paid by the subsidiary for which each individual also
serves in an executive capacity.
8
Annual Compensation Long Term Compensation
------------------------------------ --------------------------------
Awards Payouts
------------------- -------
Other
Annual Restricted All Other
Compen- Stock Options LTIP Compen-
Name and Salary Bonus sation Awards SARs Payouts sation
Principal Position Year ($) ($) ($) ($) (#) ($) ($)
- ---------------------------- ------- --- --- --- --- --- --- ---
Richard D. Callahan, 1997 211,000 80,412 5,000 -- 10,700 -- 15,942/1/
CEO 1996 195,000 43,366 5,000 -- 13,900 -- 15,630
1995 181,000 47,965 5,000 -- 17,800 -- 14,542
Richard J. Notebaert, Jr., 1997 121,000 32,501 5,000 -- 3,200 -- 19,387/2/
Vice President 1996 111,000 27,872 5,000 -- 4,900 -- 16,747
1995 105,000 16,916 5,000 -- 7,200 -- 14,901
Marianne R. O'Connor, 1997 100,800 31,006 5,000 -- 2,800 -- 12,334/3/
CFO 1996 96,000 16,550 3,242 -- 4,300 -- 11,832
1995 91,000 19,356 3,823 -- 6,200 -- 9,494
W. Anthony Shay, Jr., 1997 85,300 19,380 5,000 -- 1,300 -- 9,113/4/
Vice President 1996 79,000 7,252 5,000 -- 2,300 -- 8,388
1995 61,731 11,018 35,453/5/ -- 3,600 -- --
- ---------------------------------------
/1/ This amount reflects 3 components:
(a) $6,365 for the employer contribution to the Company's money purchase
(defined contribution) pension plan in which all eligible employees
participate and for which contributions are determined by the same
salary based formula for all employees.
(b) $4,750 for the employer matching contributions on behalf of this
employee for participation in the Company's 401(k) Savings Plan.
(c) $4,827 for the employer contribution on behalf of this employee to the
Company's Employee Stock Ownership Plan.
/2/ This amount reflects 3 components:
(a) $10,242 for the employer contribution to the Company's money purchase
(defined contribution) pension plan in which all eligible employees
participate and for which contributions are determined by the same
salary-based formula for all employees.
(b) $4,367 for the employer matching contribution on behalf of this
employee for participation in the Company's 401(k) Savings Plan.
(c) $4,778 for the employer contribution on behalf of this employee to the
Company's Employee Stock Ownership Plan.
/3/ This amount reflects 3 components:
(a) $4,483 for the employer contribution to the Company's money purchase
(defined contribution) pension plan in which all eligible employees
participate and for which contributions are determined by the same
salary-based formula for all employees.
(b) $4,159 for the employer matching contribution on behalf of this
employee for participation in the Company's 401(k) Savings Plan.
(c) $3,692 for the employer contribution on behalf of this employee to the
Company's Employee Stock Ownership Plan.
/4/ This amount reflects 3 components:
(a) $3,243 for the employer contribution to the Company's money purchase
(defined contribution) pension plan in which all eligible employees
participate and for which contributions are determined by the same
salary-based formula for all employees.
(b) $2,927 for the employer matching contribution on behalf of this
employee for participation in the Company's 401(k) Savings Plan.
(c) $2,943 for the employer contribution on behalf of this employee to the
Company's Employee Stock Ownership Plan.
/5/ This amount reflects 2 components:
(a) $10,000 signing bonus.
(b) $25,453 reimbursable moving expenses.
9
Option/SAR Grants Table
During 1997, the Company granted options pursuant to the Company's 1996
Stock Option Plan. The Table below shows the relevant information pertaining to
the grant of options during 1997.
Option/SAR Grants in Last Fiscal Year
-------------------------------------
Potential Realizable
Value at Assumed
Annual Rates of Stock
Price Appreciation
Individual Grants for Option Term
----------------- --------------------
- ------------------------------------------------------------------------------------------- --------------------
(a) (b) (c) (d) (e) (f) (g)
% of Total
Options/
Options/ SARs
SARs Granted to Exercise or
Granted Employees in Base Price Expiration 5% 10%
Name (#) Fiscal Year ($/Sh) Date ($) ($)
---- --- ---------- ----- ---- --- ---
Richard D. Callahan, 10,700 39.8% 17.20 1/29/04 77,55 178,251
CEO
Richard J. Notebaert, Jr., 3,200 11.9% 17.20 1/29/04 23,19 53,309
Vice President
Marianne R. O'Connor, 2,800 10.4% 17.20 1/29/04 20,29 46,645
CFO
W. Anthony Shay, Jr., 1,300 4.8% 17.20 1/29/04 9,4 21,657
Vice President
10
Aggregated Option/SAR Exercises and Values
The Table below shows for all officers named in the Summary
Compensation Table above the total number of options exercised during 1997 and
unexercised options held as of December 31, 1997.
Aggregated Option/SAR Exercises in Last Fiscal Year
---------------------------------------------------
and FY-End Option/SAR Values
----------------------------
(a) (b) (c) (d) (e)
Value
Number of Unexercised
Unexercised In-the-Money
Options/SARs at Options/SARs at
Shares Acquired FY-End (#) FY-End ($)
on Exercise Value Realized Exercisable/ Exercisable/
Name (#) ($) Unexercisable Unexercisable
- ----------------------------------------------------------------------------------------------------------------
Richard D. Callahan, 0 0 45,300 698,860
CEO exercisable exercisable
24,600 236,045
unexercisable unexercisable
Richard J. Notebaert, Jr., 7,200 92,340 0 0
Vice President exercisable exercisable
8,100 78,320
unexercisable unexercisable
Marianne R. O'Connor, 0 0 6,200 81,065
CFO exercisable exercisable
7,100 68,660
unexercisable unexercisable
W. Anthony Shay, Jr., 0 0 3,600 47,070
Vice President exercisable exercisable
3,600 35,035
unexercisable unexercisable
Employment Contracts
The Company is a party to employment agreements with the named
executive officers shown in the Summary Compensation Table on page 9 and certain
officers who do not appear in the Table. These employment agreements are
effective for a term of one year, subject to renewal by the Company.
Compensation under these agreements remains a primary obligation of the
subsidiary for whom the named executive also serves in an executive capacity.
The Company may in the future agree to become the primary obligor if the
officer's duties for the Company are expanded sufficiently to warrant a change
in the primary compensation obligation.
Mr. Callahan has an employment agreement with both the Company, as
President and Chief Executive Officer, and with Cayuga Bank, for which he also
serves as President and Chief Executive Officer. Mr. Callahan's employment
agreement with the Company and Cayuga Bank fixed annual base compensation for
1998 in the amount of $223,700. Mr. Notebaert has an employment agreement with
the Company, as
11
Vice President, and Homestead Savings for which he serves as President and Chief
Executive Officer. Mr. Notebaert's agreement provides for 1998 annual
compensation in the amount of $127,000.
These employment agreements with Messrs. Callahan and Notebaert contain a
severance provision that allows for a cash payment in the amount of two (2)
times the executive's annual base salary plus target annual incentive for the
year in which termination occurs and the two years immediately preceding the
year of termination, divided by three. The severance provision applies only to
termination by the Company or its subsidiary without cause.
The employment agreements with Messrs. Callahan and Notebaert also contain a
provision regarding a change of control of the Company. Under these agreements
"change of control" occurs if (i) any "person", including a "group" as
determined in accordance with the Section 13(d) of the Securities Exchange Act
of 1934 (the "Exchange Act"), is or becomes the beneficial owner, directly or
indirectly, of securities of Iroquois representing 20% or more of the combined
voting power of the then outstanding securities of Iroquois; (ii) as a result
of, or in connection with, any tender offer or exchange offer, merger or other
business combination (a "Transaction"), the persons who were directors of
Iroquois before the Transaction shall cease to constitute a majority of the
board of directors of Iroquois or any successor of Iroquois, (iii) Iroquois is
merged or consolidated with another corporation and as a result of the merger or
consolidation less than 80% of the outstanding voting securities of the
surviving or resulting corporation shall then be owned in the aggregate by the
former shareholders of Iroquois, other than (A) affiliates within the meaning of
the Exchange Act, or (B) any party to the merger or consolidation; (iv) a tender
offer or exchange offer is made and consummated for the ownership of securities
of Iroquois representing 20% or more of the combined voting power of Iroquois'
then outstanding voting securities; or (v) Iroquois transfers substantially all
of its assets to another corporation which is not controlled by Iroquois. If
employment is terminated for any reason within 24 months following a change of
control, the executive will receive a lump-sum cash payment of 2.99 times base
salary and the average annual incentive.
Ms. O'Connor's employment agreement with the Company and Cayuga Bank, where
she also serves as Treasurer and Chief Financial Officer, provides for 1998
annual compensation in the amount of $105,000. Mr. Shay's employment agreement
with the Company and Cayuga Bank, where he also serves as Vice President of
Operations, provides for 1998 annual compensation in the amount of $90,400. The
employment agreement with Ms. O'Connor, Mr. Shay and other officers (except as
described above) contain a severance provision that allows for a cash payment in
the amount of the officer's annual base salary plus target annual incentive for
the year in which termination occurs and the two years immediately preceding the
year of termination, divided by three. The severance provision applies only to
termination by the Company or its subsidiary without cause. These employment
agreements also contain a provision regarding a change of control of the Company
(as defined above). If the officer's employment is (i) terminated involuntarily
for any reason other than death, disability, or just cause or constructively
terminated for good reason during the 24-month period following a change of
control, or, (ii) terminated voluntarily by the executive during the 30-day
period beginning on the first anniversary of the change of control, the officer
will receive a lump-sum cash payment of 2.99 times base salary and the average
annual incentive.
James H. Paul, formerly Executive Vice President of the Company and Cayuga
Bank, has entered into a separate agreement that provides for continuation of
his current base salary and certain fringe benefits through December 31, 1998.
12
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Joseph P. Ganey, Chairman of the Board of Directors of the Company and a
member of its Compensation Committee, served as Acting President and Chief
Executive Officer from the time that office became vacant in November, 1993
through May, 1994, when Richard D. Callahan was appointed. Mr. Ganey also served
as President and Chief Executive Officer of Cayuga Savings Bank, as predecessor
to the Company from 1976 through 1988, when he retired from active employment.
REPORT ON EXECUTIVE COMPENSATION
OVERALL COMPENSATION POLICY
1997 was the Company's second full year under the Company's executive
compensation strategy recently developed to place greater emphasis on the
incentive and equity components of compensation than had been utilized under
past compensation policy. The current compensation policy recognizes that the
chief executive officer (CEO) and other executive officers should, as all
employees, have both appropriate financial rewards and incentives to encourage
long term commitment and high quality performance. The compensation policy also
serves as a guide for the ongoing development and improvement of company-wide
procedures and programs relating to compensation that are consistent among the
different entities within the Iroquois family. The executive compensation
strategy now being relied on was designed to further the Company's key business
objectives and incorporate consideration of current market data relating to
compensation levels for executives at comparable companies. The strategy relies
on four elements of compensation:
. Base salary levels that are targeted below the relevant comparable
market to emphasize the pay for performance strategy and to preserve
effective management of fixed costs.
. Annual incentive compensation that (a) offers awards ranging from at
to above comparable annual incentives in the relevant market for
executive performance that exceeds quantitative targets of financial
and operational results and (b) mimimizes awards for executive
performance which only meets plan targets.
. Equity compensation to align executives' interests with
shareholder values.
. Benefits tied to market for comparable positions in comparable
companies in the same industry group.
When these four elements are integrated into the Company's compensation
programs, the result is an effective strategy that has the following
characteristics:
. Balanced reinforcement of decision making for short term and long
term corporate objectives.
. Total executive compensation within the range for the same
industry category and for comparably sized companies to ensure
compensation remains comparable and competitive for the relevant
market.
13
The Company believes that this approach to total compensation for executives
will attract, retain, and motivate executives and will promote results for
shareholders. The following sections summarize the analysis and
recommendations of the Company's Compensation Committee for executive
compensation during 1997.
BASE SALARY
EXECUTIVE OFFICERS COMPENSATION. The determination of base salary for executive
officers relies on three components: market information, performance and
relevant experience. In accordance with the Company's compensation strategy,
information from the Company's independent consultant on the ranges of salaries
for executive officers at companies of similar size in the same industry group
were reduced by 10% to establish a below market base salary range for executive
officers. Each individual executive officer was then evaluated based upon
performance and experience and base salary compensation was awarded within the
established range. Base salaries for executive officers were established by the
chief executive officer or the appropriate member bank Board in this manner. The
Committee then reviewed the analysis and base salary recommendations and
concluded they were consistent with the base salary element of the Company's
overall compensation strategy.
CEO COMPENSATION. Mr. Callahan's base salary was determined directly by the
Committee based upon the market information and performance criteria method that
was applied to all executive officers as described above. A base salary range
was derived from specific market information on chief executive officer salaries
at companies within the financial services industry and of similar asset size to
Iroquois. Mr. Callahan's base salary was then fixed within that range, taking
into consideration his performance during the previous year. Consideration of
the level of Mr. Callahan's experience has become less relevant to the
determination of base salary now that the chief executive has had a sufficient
period of time in the employ of the Company for the evaluation of his actual
performance to be meaningful.
ANNUAL INCENTIVE COMPENSATION
EXECUTIVE OFFICERS COMPENSATION. Annual incentive compensation during 1997 was
used to reward executives upon achievement of key operating and financial
results. The Company's 1997 incentive awards were made to executives for the
achievement of both their subsidiary bank and individual performance goals,
where the weight allocated between the performance achieved for those two
elements varied, with greater weight attached to overall bank performance for
higher levels of responsibility. Overall bank performance was determined
according to net income. Under the Annual Management Incentive Plan, the
executives were awarded for performance within a range of 20% to38% of base
salary based on the level of achievement of the established performance goals.
Targeted incentive award percentages under the Annual Management Incentive Plan
were established based on market information provided by the Company's
independent consultant for companies of similar size and in the same industry
group.
Incentive compensation once again played a critical role in the Company's
effort to reinforce the pay for performance goal by placing a portion of the
executive's compensation for the year at risk if either Company or individual
performance goals were not achieved.
CEO COMPENSATION. Annual incentive compensation was awarded to Mr. Callahan
during 1997 under the Company's Annual Management Incentive Plan described above
based upon his individual performance and the performance of Cayuga Bank, for
which he also serves as Chief Executive Officer. The Committee determined that
no additional incentive compensation was necessary for holding company
responsibilities independent of the subsidiary, which comprises the Company's
primary asset and operations. This
14
determination is consistent with the Company's compensation philosophy that
compensation be paid and primary performance be measured at the operating
subsidiary level until the size and complexity of the holding company indicates
a change is appropriate.
EQUITY BASED INCENTIVE COMPENSATION
Equity based compensation was once again utilized in 1997 to provide
balance to the short term pay for performance strategy achieved through annual
incentive compensation described above. Awards for 1997 were granted in the form
of stock options under the Company's 1996 Stock Option Plan. Options were
awarded to top management as determined by the Stock Option Committee as
contemplated by the terms of the 1996 Stock Option Plan. The option award
allocations made in 1997 were based on each executive's level within the Company
as well as the return on equity (ROE) of the Company attained for 1996. The
multiple factor was derived from market level long-term incentive opportunities
within similar sized financial institutions. Options granted in 1997 vest after
two years and expire if not exercised within their term of seven years.
The Company believes this component of compensation was essential in order
to reinforce the Company's long-term goal of increasing shareholder value, and
was successful because equity interests align executives' interests more closely
with those of the shareholders.
IROQUOIS BANCORP, INC.
COMPENSATION COMMITTEE
Lewis E. Springer II, Chairperson
Brian D. Baird
John Bisgrove, Jr.
Joseph P. Ganey
Edward D. Peterson
15
PERFORMANCE GRAPH
The following graph compares the yearly percentage change in the Company's
cumulative total shareholder return on its common stock to (a) the cumulative
return of the Nasdaq Stock Market (US Companies) index and to (b) the cumulative
return of the Nasdaq Bank Stocks index. The graph and tabular explanation of
the graph assume that $100 was invested on December 31, 1992 in each of Iroquois
common stock, the Nasdaq Stock Market (US Companies) Index and the Nasdaq Stock
Market Bank Stocks Index, and that all dividends were reinvested. The data was
furnished by the Center for Research in Security Prices (CRSP).
Graphical Representation of the following data:
- --------------------------------------------------------------------------------
1992 1993 1994 1995 1996 1997
- --------------------------------------------------------------------------------
Iroquois Bancorp
Inc. $100.0 147.8 147.2 243.2 310.0 477.1
- --------------------------------------------------------------------------------
Nasdag Stock
Market (National Market-
US Companies $100.0 114.8 112.2 158.7 195.2 239.5
- --------------------------------------------------------------------------------
Nasdaq Bank $100.0 114.0 113.6 169.2 223.4 377.4
Stocks
- --------------------------------------------------------------------------------
16
CERTAIN TRANSACTIONS
From time to time, Cayuga Bank and The Homestead Savings (FA) make loans to
their directors and officers and those of the Company, as well as to other
companies and businesses with which directors of the Company and its
subsidiaries may be affiliated. Included are loans that may be secured by a
mortgage on the officer's or director's primary residence. All loans to
directors and executive officers and to any affiliated business are specifically
approved in writing by the lending institution's Board of Directors, and are
made on substantially the same terms, including interest rates and collateral,
as those for comparable transactions with other persons prevailing at the time,
and do not involve more than the normal risk of collectability or present other
unfavorable features.
-------------------------------
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has appointed the firm of KPMG Peat Marwick LLP to
serve as independent auditors of the Company for the fiscal year ending December
31, 1998, subject to ratification of such appointment by the shareholders of the
Company. KPMG Peat Marwick LLP, and its predecessors, have served as auditors
of Cayuga Bank and the Company for more than 24 years. Representatives of KPMG
Peat Marwick LLP will be present at the Annual Meeting of Shareholders and will
have the opportunity to make a statement, if they so desire, and will be
available to respond to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE RATIFICATION OF
THE APPOINTMENT OF KPMG PEAT MARWICK LLP AS INDEPENDENT AUDITORS FOR THE FISCAL
YEAR ENDING DECEMBER 31, 1998.
-------------------------------
17
SHAREHOLDER PROPOSALS FOR NEXT ANNUAL MEETING
All proposals of shareholders intended to be presented at the 1999 Annual
Meeting of Shareholders must be received by the Company at the address on the
cover of this proxy statement no later than December 2, 1998 in order to be
included in the proxy statement and form of proxy for the 1999 Annual Meeting.
All such proposals shall be subject to the requirements of the Securities and
Exchange Commission adopted under the Securities Act of 1934, as amended.
OTHER MATTERS
As of this date, the Board of Directors does not know of any business to be
brought before the Annual Meeting other than as specified above. If any other
matters properly come before the Meeting, however, it is the intention of the
persons named in the enclosed proxy to vote such proxy in accordance with their
judgment on such matters.
A copy of the Annual Report to Shareholders of the Company containing
consolidated financial statements prepared in conformity with generally accepted
accounting principles for the year ended December 31, 1997 accompany this proxy
statement being mailed to shareholders and is incorporated by reference, and
made a part of this proxy statement. Additional copies of the Annual Report to
Shareholders may be obtained without charge from the Secretary of the Company,
115 Genesee Street, Auburn, New York 13021.
By Order of the Board of Directors
/s/ Kathleen A. Manley
Kathleen A. Manley, Corporate Secretary
Auburn, New York
April 1, 1998
THE COMPANY WILL FURNISH, WITHOUT CHARGE, TO ANY RECORD HOLDER OR
BENEFICIAL OWNER OF ITS COMMON STOCK AT ANY TIME AFTER MARCH 30, 1998 A COPY OF
THE COMPANY'S ANNUAL REPORT TO THE SECURITIES AND EXCHANGE COMMISSION ON FORM
10-K. WRITTEN REQUESTS SHOULD BE DIRECTED TO IROQUOIS BANCORP, INC., TO THE
ATTENTION OF KATHLEEN A. MANLEY, 115 GENESEE STREET, AUBURN, NEW YORK 13021.
18
APPENDIX TO PROXY STATEMENT
REVOCABLE
PROXY IROQUOIS BANCORP, INC.
COMMON STOCK
ANNUAL MEETING OF SHAREHOLDERS APRIL 30, 1998
The undersigned holder of common stock of Iroquois Bancorp, Inc.
hereby appoints Marianne R. O'Connor and Anthony Franceschelli and each of them
his/her attorneys, agents and proxies to represent the undersigned and to vote
and act upon the shares of common stock standing in the name of the undersigned
which he/she would be entitled to vote if personally present, as specified
below, at the Annual Meeting of Shareholders to be held on Thursday, April 30,
1998 at 10:00 a.m. or at any adjournment thereof, with full power of
substitution and revocation.
BALLOT
1. ELECTION OF DIRECTORS FOR THREE YEAR TERMS EXPIRING IN 2001
[ ] FOR all nominees listed below [ ] WITHHOLD AUTHORITY to vote
(except as marked to the for all nominees listed below
contrary below)
Class of 1998: Peter J. Emerson; Joseph P. Ganey; Edward D. Peterson; Lewis E.
Springer II (Instruction: To withhold authority to vote for any individual
nominee, write that nominee's name in the space provided below).
------------------------------------------------------------------------
2. PROPOSAL TO RATIFY THE APPOINTMENT OF KPMG PEAT MARWICK LLP AS INDEPENDENT
AUDITORS
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting.
(Signature on reverse side required)
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED ON THE
OTHER SIDE OF THIS CARD. IF NO DIRECTION IS MADE, IT WILL BE VOTED FOR
PROPOSALS 1 AND 2.
Date: ___________________________________
Signed __________________________________
(Name of shareholder should be signed exactly as
it appears to the left) Please mark, sign, date
and return this proxy card promptly in the
enclosed postpaid envelope. This will save your
Company the cost of a follow-up solicitation.
Do you plan to attend the meeting? ____ YES ____ NO