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 Rule 14a-11(c) or Rule 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)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number 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 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
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IROQUOIS BANCORP, INC.
115 Genesee Street
Auburn, New York 13021
(315) 252-9521
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 29, 1999
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 29, 1999 at 10:00 a.m., to
consider and vote upon the following matters:
1. The election of two (2) 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 LLP as independent
auditors for the fiscal year ending December 31, 1999.
3. The transaction of such other business as may properly come before the
Meeting or any adjournment thereof.
The close of business on March 25, 1999 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
Kathleen A. Manley, Corporate
Secretary
March 31, 1999
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 29, 1999
----------------
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 29, 1999. 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 March 31,
1999.
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 25, 1999 as the record date for the determination of
shareholders entitled to notice of and to vote at the Meeting. On March 25,
1999, there were 2,426,880 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 MANAGMENT
The table below indicates as of February 1, 1999 the only holders known to
the Company to be the beneficial owner of more than 5% of the total 2,409,980
issued and outstanding shares of the Company's common stock.
Percent of
Amount and Nature of Outstanding
Name and Address Beneficial Ownership (1) Stock
---------------- ------------------------ -----------
The Baird Family........................ 236,248 (2) 9.46%
c/o Brian D. Baird
120 Delaware Avenue
Buffalo, New York 14202
lIroquois Bancorp, Inc. Employee
Stock Ownership Plan................... 204,452 (3) 8.18%
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, 1999, 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 (12 persons) beneficially owned 655,739 shares of the
Company's common stock, including exercisable options, representing
approximately 26.25% of the 2,409,980 outstanding shares of common stock plus
88,500 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 67,885(2) 2.72%
Richard D. Callahan..... President and CEO, Director 72,504(3) 2.90
Brian D. Baird.......... Director 236,248(4) 9.46
John Bisgrove, Jr....... Director 9,709 *
Peter J. Emerson........ Director 57,683(5) 2.31
Arthur A. Karpinski..... Director 24,295 *
Henry D. Morehouse...... Director 8,895 *
Richard J. Notebaert,
Jr..................... Vice President 25,453(6) 1.02
Marianne R. O'Connor.... Treasurer and CFO 35,642(7) 1.43
Edward D. Peterson...... Director 9,367 *
W. Anthony Shay, Jr..... Vice President 12,060(8) *
Lewis E. Springer, II... Director 66,364 2.65
All directors and
executive officers as a
group (12 persons)..... 655,739(9) 26.25
* 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 6,179 shares held jointly with spouse.
(3) Includes 800 shares held by spouse, and exercisable options to purchase
59,900 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 2,000 shares held by spouse 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.
(6) Includes exercisable options to purchase 8,100 shares of common stock.
(7) Includes 1,821 shares held as custodian for minor children, and
exercisable options to purchase 13,300 shares of common stock.
(8) Includes exercisable options to purchase 7,200 shares of common stock.
(9) Includes 29,634 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 88,500 shares of common stock.
During 1998, the Company redeemed all of its issued and outstanding Floating
Rate Cumulative Preferred Stock, Series A (the "Series A Preferred Stock") and
all of its issued and outstanding Floating Rate Noncumulative Preferred Stock,
Series B (the "Series B Preferred Stock", and together with the Series A
Preferred Stock, the "Preferred Stock"). According to the terms of the
Preferred Stock, all such shares have been canceled and retired, and may not
be hereafter reissued. As of February 1, 1999, therefore, there were no such
shares issued and outstanding.
3
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 1998 Richard D. Callahan, president and chief executive
officer of the Company, failed to file one report on a timely basis, resulting
in a late filing with respect to two transactions.
ELECTION OF DIRECTORS
The Board of Directors of the Company currently consists of nine (9)
directors, a reduction of one director. The Board determined that the needs of
the Corporation are being adequately met with nine directors since the vacancy
created by the death of former director William Humes in 1998. The Board is
divided into a total of three classes, with terms expiring in 1999, 2000 and
2001. At the Annual Meeting, two (2) directors will be elected for a term of
office expiring in 2002 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 1999 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. Except for Brian D. Baird,
Henry D. Morehouse and Edward D. Peterson, all present directors and 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.
Nominees for Election as Directors for Terms of Office Expiring in 2002:
ARTHUR A. KARPINSKI, age 70, a director of Cayuga Bank since 1969, is now
retired from the practice of periodontics.
HENRY D. MOREHOUSE, age 69, 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 48, 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 59, 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.
4
RICHARD D. CALLAHAN, age 56, 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.
Present Directors Whose Terms of Office Expire in 2001:
PETER J. EMERSON, age 58, 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 75, 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 64, 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 60, a director of Cayuga Bank since January, 1987,
is a director, Senior Vice President and major shareholder of Sawgrass
Electronics Group, Inc. of Boca Raton, Florida. Mr. Springer was formerly the
President and owner of Creative Electric, Inc. of Auburn, New York and
Andersen Laboratories, Inc. of Bloomfield, Connecticut, both of which merged
into Sawgrass Electronics. The companies manufacture electronic components for
guidance systems and other applications.
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 1998, and
all of the directors attended at least 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 1998, 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 5 times during 1998. The Committee presently
consists of 5 appointed members with Mr. Bisgrove as chairperson, Messrs.
Baird, Callahan, Emerson, Morehouse and Peterson 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 1998, the
Committee met 3 times. This Committee presently consists of 4 appointed
members, with Mr. Morehouse as chairperson, Messrs. Karpinski, Peterson and
Springer 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
5
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 1998, this Committee met 4 times. The
Committee presently consists of 7 appointed members, with Mr. Springer as
chairperson, Messrs. Baird, Bisgrove, Callahan, Emerson, Karpinski 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 requires a minimum level of stock 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.
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.
6
EXECUTIVE COMPENSATION
Summary Compensation Table
The table on the following page shows, for the three years ended December
31, 1998, 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 $100,000. As explained in the Report on Executive Compensation
below, this compensation is paid by the subsidiary for which each individual
also serves in an executive capacity.
Annual Compensation Long Term Compensation
-------------------------------- --------------------------
Awards Payouts
------------------ -------
Other Restricted
Annual Stock Options LTIP All Other
Name and Salary Bonus Compensation Awards SARs Payouts Compensation
Principal Position Year ($) ($) ($) ($) ($) ($) ($)
- --------------------- ---- ------- ------ ------------ ---------- ------- ------- ------------
Richard D. Callahan, 1998 223,700 83,284 5,000 -- 9,500 -- 15,751(1)
CEO 1997 211,000 80,412 5,000 -- 10,700 -- 15,942
1996 195,000 43,366 5,000 -- 13,900 -- 15,630
Richard J. Notebaert,
Jr., 1998 127,000 23,241 -- -- 3,500 -- 19,684(2)
Vice President 1997 121,000 32,501 5,000 -- 3,200 -- 19,387
1996 111,000 27,872 5,000 -- 4,900 -- 16,747
Marianne R. O'Connor, 1998 105,000 28,718 5,000 -- 3,000 -- 13,811(3)
CFO 1997 100,800 31,006 5,000 -- 2,800 -- 12,334
1996 96,000 16,550 3,242 -- 4,300 -- 11,832
W. Anthony Shay, Jr., 1998 90,400 18,387 5,000 -- 1,700 -- 10,727(4)
Vice President 1997 85,300 19,380 5,000 -- 1,300 -- 9,113
1996 79,000 7,252 5,000 -- 2,300 -- 8,388
- --------
(1) This amount reflects 3 components:
(a) $6,290 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) $4,800 for the employer matching contributions on behalf of this
employee for participation in the Company's 401(k) Savings Plan.
(c) $4,661 for the employer contribution on behalf of this employee to the
Company's Employee Stock Ownership Plan.
(2) This amount reflects 3 components:
(a) $10,252 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) $4,785 for the employer matching contribution on behalf of this
employee for participation in the Company's 401(k) Savings Plan.
(c) $4,647 for the employer contribution on behalf of this employee to the
Company's Employee Stock Ownership Plan.
(3) This amount reflects 3 components:
(a) $5,340 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) $4,363 for the employer matching contribution on behalf of this
employee for participation in the Company's 401(k) Savings Plan.
(c) $4,108 for the employer contribution on behalf of this employee to the
Company's Employee Stock Ownership Plan.
(4) This amount reflects 3 components:
(a) $4,029 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) $3,354 for the employer matching contribution on behalf of this
employee for participation in the Company's 401(k) Savings Plan.
(c) $3,344 for the employer contribution on behalf of this employee to the
Company's Employee Stock Ownership Plan.
7
Option/SAR Grants Table
During 1998, the Company granted options pursuant to the Company's 1996
Stock Option Plan. The Table below shows the relevant information pertaining
to the grant of options during 1998 to executive officers named in the Summary
Compensation Table.
Option/SAR Grants in Last Fiscal Year
Potential Realizable
Value at Assumed
Annual Rates of Stock
Price Appreciation
Individual Grants for Option Term
------------------------- ---------------------
(a) (b) (c) (d) (e) (f) (g)
% of Total
Options/SARs
Options/SARs Granted to Exercise or
Granted Employees in Base Price Expiration 5% 10%
Name (#) Fiscal Year ($/Sh) Date ($) ($)
---- ------------ ------------ ----------- ---------- ---------- ----------
Richard D. Callahan, 9,500 40.9% 25.65 1/19/05 100,537 233,030
CEO
Richard J. Notebaert, 3,500 15.1% 25.65 1/19/05 37,040 85,853
Jr.,
Vice President
Marianne R. O'Connor, 3,000 12.9% 25.65 1/19/05 31,749 73,588
CFO
W. Anthony Shay, Jr., 1,700 7.3% 25.65 1/19/05 17,991 41,700
Vice President
8
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 1998 and unexercised
options held as of December 31, 1998.
Aggregated Option/SAR Exercises in Last Fiscal Year
and FY-End Option/SAR Values
(a) (b) (c) (d) (e)
Value
Number of Unexercised
Shares Unexercised In-the-Money
Acquired Options/SARs at Options/SARs at
on Value FY-End (#) FY-End ($)
Exercise Realized Exercisable/ Exercisable/
Name (#) ($) Unexercisable Unexercisable
---- -------- -------- -------------------- ---------------------
Richard D. Callahan, 10,000 171,375 49,200 exercisable 440,220 exercisable
CEO 29,200 unexercisable 40,660 unexercisable
Richard J. Notebaert,
Jr., 0 0 4,900 exercisable 27,685 exercisable
Vice President 6,700 unexercisable 12,160 unexercisable
Marianne R. O'Connor, 0 0 10,500 exercisable 75,910 exercisable
CFO 5,800 unexercisable 10,640 unexercisable
W. Anthony Shay, Jr., 0 0 5,900 exercisable 42,965 exercisable
Vice President 3,000 unexercisable 4,940 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 1999 in
the amount of $240,000. Mr. Notebaert has an employment agreement with the
Company, as Vice President, and Homestead Savings for which he serves as
President and Chief Executive Officer. Mr. Notebaert's agreement provides for
1999 annual compensation in the amount of $134,000.
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
9
"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 1999
annual compensation in the amount of $108,300. Mr. Shay's employment agreement
with the Company and Cayuga Bank, where he also serves as Vice President of
Operations, provides for 1999 annual compensation in the amount of $96,700.
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.
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.
10
Report on Executive Compensation
OVERALL COMPENSATION POLICY
The Company's executive compensation strategy was developed to place greater
emphasis on the incentive and equity components of compensation and to
minimize the base salary aspect of compensation. This policy, which was
introduced in 1996, continues to serve the Company's objectives because it
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
policy also enables continued development and improvement of Company-wide
compensation procedures and programs to assure reasonable consistency among
the various entities within the Iroquois family. The policy relies primarily
on an executive compensation strategy designed to further the Company's
specific business objectives without sacrificing consideration of current
market data relating to compensation levels for executives at comparable
companies. The four key elements of Iroquois executive compensation are:
. 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.
. A strong annual incentive compensation component that (a) is designed to
reward only above-market target performance levels to account for
adverse impact of economic factors on community banks, (b) emphasizes
rewards for performance that exceeds the higher level quantitative
targets of financial and operational results to assure a sufficiently
challenging incentive program, and (c) minimizes 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 management performance to meet both short term
and long term Company objectives.
. Total executive compensation within industry ranges for comparably sized
companies to ensure compensation remains competitive in the relevant
market yet recognizes the particular needs and conditions of the
Company.
The Company continues to believe that its approach to total compensation for
executives, by emphasizing the incentive compensation component, 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 1998.
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 in this manner by the chief executive officer or the
appropriate member bank Board. The Committee then reviewed the analysis and
base salary recommendations and determined it would continue to differentiate
executives from the nonexecutive levels of management, for which the reduction
below market is only 5% to place even greater emphasis on incentive
compensation for that group.
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
11
companies comparable within the financial services industry and with 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.
ANNUAL INCENTIVE COMPENSATION
Executive Officers Compensation. Annual incentive compensation during 1998
was used to reward executives upon achievement of key operating and financial
results. The Company's 1998 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 19% to 37% 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 1998 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 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 1998 to provide balance
to the short term pay for performance strategy. Awards for 1998 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 in accordance with the terms of the 1996 Stock Option Plan. The
option award allocations made in 1998 were based on each executive's level
within the Company as well as the return on equity (ROE) of the Company
attained for 1997. The factor used as the multiple was derived from market
level long-term incentive opportunities within similar sized financial
institutions. Options granted in 1998 vest after two years and expire if not
exercised within their term of seven years.
The Company believes this component of compensation is essential to
reinforce the Company's long-term goal of increasing shareholder value, and
has been 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.
Peter J. Emerson
Joseph P. Ganey
Arthur A. Karpinski
Edward D. Peterson
12
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, 1993 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).
[GRAPH]
- ------------------------------------------------------------------------
1993 1994 1995 1996 1997 1998
- ------------------------------------------------------------------------
Iroquois Bancorp, Inc. $100.0 99.6 164.6 209.8 322.9 269.7
- ------------------------------------------------------------------------
Nasdaq Stock Market
(National Market -
US Companies $100.0 97.8 138.3 170.0 208.6 293.2
- ------------------------------------------------------------------------
Nasdaq Bank
Stocks $100.0 99.6 148.4 148.4 328.0 324.9
- ------------------------------------------------------------------------
13
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 LLP to serve as
independent auditors of the Company for the fiscal year ending December 31,
1999, subject to ratification of such appointment by the shareholders of the
Company. KPMG LLP, and its predecessors, have served as auditors of Cayuga
Bank and the Company for more than 25 years. Representatives of KPMG 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 LLP AS INDEPENDENT AUDITORS FOR THE FISCAL YEAR
ENDING DECEMBER 31, 1999.
----------------
14
SHAREHOLDER PROPOSALS FOR NEXT ANNUAL MEETING
All proposals of shareholders intended to be presented at the 2000 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, 1999 in order to be
included in the proxy statement and form of proxy for the 2000 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. With
respect to proposals not required to be included in the proxy statement under
the rules of the Securities and Exchange Commission, management will be
permitted to exercise discretionary voting power for all proxies and to vote
against the proposal unless notice of such proposal is received by the Company
at the address on the cover of this proxy statement no later than February 14,
2000.
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, 1998 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
Kathleen A. Manley, Corporate
Secretary
Auburn, New York
March 31, 1999
The Company will furnish, without charge, to any record holder or beneficial
owner of its common stock at any time after March 30, 1999 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.
15
APPENDIX TO PROXY STATEMENT
REVOCABLE IROQUOIS BANCORP, INC.
PROXY COMMON STOCK
ANNUAL MEETING OF SHAREHOLDERS APRIL 29, 1999
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 29, 1999 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 2002
[_] FOR all nominees listed below [_] WITHHOLD AUTHORITY to vote
(except as marked to the for all nominees listed
contrary below) below
Class of 1999: Arthur A. Karpinski; Henry D. Morehouse. (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 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.