SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant |X|
Filed by a Party other than the Registrant |_|
Check the appropriate box:
|X| Preliminary Proxy Statement
|_| Confidential for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
|_| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
FIRST EMPIRE STATE CORPORATION
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(Name of Registrant as Specified in its Charter)
Not Applicable
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(Name of Person Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
|X| No Fee Required.
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
Not applicable.
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2) Aggregate number of securities to which transaction applies:
Not applicable.
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3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11:
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5) Total fee paid:
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|_| Fee paid previously with preliminary materials
|_| Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
1) Amount previously paid: Not applicable.
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2) Form, Schedule or Registration Statement No. Not applicable.
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3) Filing party: Not applicable.
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4) Date filed: Not applicable.
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PRELIMINARY
PROXY MATERIALS
DRAFT DATED 3/4/98
FIRST EMPIRE STATE CORPORATION
One M&T Plaza
Buffalo, New York 14240
1998
Notice of Annual Meeting of Stockholders
and
Proxy Statement
<PAGE>
YOUR VOTE IS IMPORTANT
To ensure that your shares will be represented at the Annual Meeting of
Stockholders, please mark, sign, date and mail your proxy card to the Transfer
Agent, Boston Equiserve (The First National Bank of Boston), in the enclosed
postage-paid envelope. If your shares are held in the name of a broker, bank or
other holder of record, you will receive instructions from the holder of record
which you must follow in order for your shares to be voted.
ATTENDANCE AT THE ANNUAL MEETING OF STOCKHOLDERS
Please mark the appropriate box on the proxy card if you plan on attending the
Annual Meeting of Stockholders. Any stockholder present at the meeting may
withdraw his or her proxy and vote personally on each matter brought before the
meeting.
ELIMINATE DUPLICATE MAILINGS
First Empire State Corporation currently provides annual and quarterly reports
to stockholders who receive proxy statements. If you are a stockholder of record
and have more than one account in your name or the same address as other
stockholders of record, you may authorize First Empire State Corporation to
discontinue mailings of multiple annual and quarterly reports. To discontinue
duplicate mailings, mark the appropriate box on each proxy card for each
stockholder account that you do not wish to receive annual and quarterly
reports.
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FIRST EMPIRE STATE CORPORATION
One M&T Plaza Buffalo, New York 14240
April 9, 1998
Dear Stockholder,
You are cordially invited to attend the 1998 annual meeting of stockholders of
First Empire State Corporation. Our annual meeting will be held on the 10th
floor of One M&T Plaza in Buffalo, New York on Tuesday, May 19, 1998 at 11:00
a.m.
Stockholders will be asked to elect 21 directors, approve an amendment to the
First Empire State Corporation 1983 Stock Option Plan increasing from 2,000,000
to 2,500,000 the number of shares of First Empire State Corporation common stock
subject to that plan, and approve an amendment to the First Empire State
Corporation Restated Certificate of Incorporation changing the name of First
Empire State Corporation to "M&T Bank Corporation." Information about the
nominees for director, the amendment to the Stock Option Plan and the amendment
to the Restated Certificate of Incorporation can be found in the attached proxy
statement.
Whether or not you presently plan to attend the meeting, please indicate your
vote on the enclosed proxy card, sign and date it, and then return it in the
enclosed postage-paid envelope. You may withdraw your proxy if you attend the
meeting and wish to vote in person.
We urge you to vote for the election of all 21 nominees, approve the amendment
to the First Empire State Corporation 1983 Stock Option Plan, and approve the
amendment to the First Empire State Corporation Restated Certificate of
Incorporation.
ROBERT J. BENNETT ROBERT G. WILMERS
Chairman of the Board President and Chief Executive Officer
<PAGE>
FIRST EMPIRE STATE CORPORATION
One M&T Plaza Buffalo, New York 14240
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TIME .............................. 11:00 a.m., local time, on Tuesday, May
19, 1998.
PLACE ............................. One M&T Plaza 10th Floor Buffalo, New
York 14240
ITEMS OF BUSINESS ................. (1) To elect 21 directors for a term of
one (1) year and until their successors
have been elected and qualified.
(2) To consider the approval of an
amendment to the First Empire State
Corporation 1983 Stock Option Plan to
increase from 2,000,000 to 2,500,000 the
number of shares of Common Stock of the
Company that would be subject to that
plan, as described in the accompanying
Proxy Statement.
(3) To consider the approval of an
amendment to the Company's Restated
Certificate of Incorporation to change
the name of the Company to "M&T Bank
Corporation."
(4) To transact such other business as
may properly come before the meeting and
any adjournments thereof.
RECORD DATE ....................... Holders of the Common Stock of record at
5:00 p.m. April 2, 1998 are entitled to
vote at the meeting.
PROXY VOTING ...................... It is important that your shares be
represented and voted at the meeting.
Please MARK, SIGN, DATE AND RETURN
PROMPTLY the enclosed proxy card in the
postage-paid envelope furnished for that
purpose. Any proxy may be revoked in the
manner described in the accompanying
Proxy Statement at any time prior to its
exercise at the meeting.
MARIE KING
Corporate Secretary
April 9, 1998
<PAGE>
Table of Contents
Page
PROXY STATEMENT............................................................. 1
VOTING RIGHTS............................................................... 1
PRINCIPAL BENEFICIAL OWNERS OF SHARES....................................... 2
ACQUISITION OF ONBANCORP, INC............................................... 4
ELECTION OF DIRECTORS....................................................... 4
NOMINEES FOR DIRECTOR....................................................... 4
PROPOSED AMENDMENT TO THE FIRST EMPIRE STATE CORPORATION
1983 STOCK OPTION PLAN................................................ 9
PROPOSED AMENDMENT TO THE FIRST EMPIRE STATE CORPORATION
RESTATED CERTIFICATE OF INCORPORATION................................. 15
STOCK OWNERSHIP BY DIRECTORS AND EXECUTIVE OFFICERS......................... 16
Section 16(a) Beneficial Ownership Reporting Compliance............... 18
PERFORMANCE GRAPH........................................................... 19
COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS............................ 20
Compensation Committee Report on Executive Compensation............... 20
Compensation Committee Interlocks and Insider Participation........... 22
Executive Compensation................................................ 22
Stock Option Grants in 1997........................................... 24
Stock Options and Stock Appreciation Rights Exercised in 1997 and
Year-End Values................................................... 26
Retirement Plan ...................................................... 27
Supplemental Benefit Plans............................................ 28
Employment Agreement ................................................. 29
Directors' Fees....................................................... 30
TRANSACTIONS WITH DIRECTORS AND EXECUTIVE OFFICERS.......................... 31
BOARD OF DIRECTORS, COMMITTEES OF THE BOARD AND
ATTENDANCE............................................................ 31
NOTIFICATION OF BYLAW AMENDMENTS ........................................... 32
OTHER MATTERS............................................................... 33
INDEPENDENT PUBLIC ACCOUNTANTS ............................................. 33
SOLICITATION COSTS.......................................................... 34
STOCKHOLDER PROPOSALS ...................................................... 34
APPENDIX A
FIRST EMPIRE STATE CORPORATION 1983 STOCK OPTION PLAN
APPENDIX B
BYLAW PROVISIONS AFFECTING THE ELECTION OF DIRECTORS AND
THE CALLING AND CONDUCT OF MEETINGS OF STOCKHOLDERS
<PAGE>
FIRST EMPIRE STATE CORPORATION
---------
PROXY STATEMENT
---------
This Proxy Statement is furnished in connection with the solicitation by the
Board of Directors of First Empire State Corporation ("First Empire" or the
"Company") of proxies in the accompanying form for use at the 1998 Annual
Meeting of Stockholders or any adjournment or adjournments thereof.
The proxies designated on the form, or any one of them, may exercise all the
powers of said proxies and each shall have the power to appoint a substitute to
act in his place.
The Annual Meeting of Stockholders of First Empire will be held on the 10th
floor of One M&T Plaza in Buffalo, New York on Tuesday, May 19, 1998, at 11:00
a.m., local time.
First Empire's mailing address is One M&T Plaza, Buffalo, New York 14240 and its
telephone number is (716) 842-5445.
This Proxy Statement and the accompanying form of proxy are first being sent to
stockholders on or about April 9, 1998. A copy of the Company's Annual Report
for 1997, which either accompanies this Proxy Statement or has been previously
mailed to stockholders, is not part of the proxy solicitation materials.
VOTING RIGHTS
Stockholders of record at 5:00 p.m., Eastern Standard Time, on April 2, 1998 are
entitled to vote at the Annual Meeting. At that time First Empire had
outstanding [x,xxx,xxx] shares of common stock, $5 par value per share ("Common
Stock"). Each share of Common Stock is entitled to one vote. Shares may not be
voted at the meeting unless the owner is present or represented by proxy.
Proxies will be voted in accordance with the stockholder's direction, if any. A
stockholder giving a proxy may revoke it at any time before it is exercised by
giving written notice of such revocation or by delivering a later dated proxy or
by the vote of the stockholder in person at the Annual Meeting. Unless otherwise
directed, proxies will be voted in favor of the election as directors of the
persons named under the caption "NOMINEES FOR DIRECTOR," in favor of the
amendment to the First Empire State Corporation 1983 Stock Option Plan ("Stock
Option Plan"), and in favor of the amendment to the Company's Restated
Certificate of Incorporation.
The vote of a plurality of the shares of the Company's Common Stock present or
represented at the meeting is required for the election of directors, assuming a
quorum is present or represented at the meeting. The vote of a majority of the
votes cast at the meeting is required to approve the amendment to the Company's
Stock Option Plan. The vote of the holders of a majority of all outstanding
shares of the Common Stock
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entitled to vote thereon is required to approve the amendment to the Company's
Restated Certificate of Incorporation. Accordingly, an abstention with respect
to approving the amendment to the Stock Option Plan will not constitute a vote
cast and therefore will not affect the outcome of the vote on the Stock Option
Plan, but an abstention with respect to the amendment to the Restated
Certificate of Incorporation will have the effect of a vote "against" such
amendment. The presence in person or by proxy of the holders of a majority in
voting power of the Common Stock will constitute a quorum for the transaction of
business at the meeting. Broker non-votes will be counted as being present or
represented at the meeting for purposes of establishing a quorum, but will not
have an effect on the outcome of the vote for the election of directors or the
amendment to the Company's Stock Option Plan. However, broker non-votes will
have the effect of a vote "against" the amendment to the Company's Restated
Certificate of Incorporation.
PRINCIPAL BENEFICIAL OWNERS OF SHARES
The following table sets forth certain information with respect to all persons
or groups known by the Company to be the beneficial owners of more than 5% of
its shares as of April 2, 1998.
Title of Name and address Number Percent
class of beneficial owner of shares of class
- ------------ --------------------- ----------- --------
Common Stock A group ("Group I")
comprised of:
Robert G. Wilmers 672,126 xx.xx%
One M&T Plaza
Buffalo, NY 14240
West Ferry Foundation 23,000 less than 1%
One M&T Plaza
Buffalo, NY 14240
Rem Foundation 451,320 x.xx%
Allgemeines Treuun-
ternehmen,
Postfach 34 722,
FL 9490
Vaduz, Liechtenstein
Hofin Anstalt 320,400 x.xx%
P.O. Box 83
Vaduz, Liechtenstein
Argali [BVI] Limited 30,200 less than 1%
P.O. Box 71
Craigmuir Chambers
Road Town
Tortola, British
Virgin Islands
----------- --------
Total for Group I 1,474,046(1) xx.xx%
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Title of Name and address Number Percent
class of beneficial owner of shares of class
- ------------ --------------------- ----------- --------
Common Stock National Indemnity 506,930(2) x.xx%
Company
3024 Harney Street
Omaha, NE 68131
Common Stock Oppenheimer Capital 467,510(3) x.xx%
Oppenheimer Tower
World Financial Center
New York, NY 10281
- ----------
(1) The members of Group I have jointly filed with the Securities and Exchange
Commission ("SEC") a Schedule 13D, as amended, indicating that they
constitute a "group" as such term is used in Section 13(d)(3) of the
Securities Exchange Act of 1934, as amended ("Exchange Act"). Each member
of Group I has indicated in such amended Schedule 13D or otherwise advised
the Company that such member has sole voting and dispositive power with
respect to the shares indicated opposite such member's name in the table.
Robert G. Wilmers, President and Chief Executive Officer of the Company,
is the trustee of the West Ferry Foundation, a charitable trust formed by
him, and, as trustee, he holds sole voting and dispositive power over the
shares which it owns. As to Mr. Wilmers, the shares indicated in the table
include the shares owned by the West Ferry Foundation and 96,000 shares
subject to options granted under the Stock Option Plan which are currently
exercisable or are exercisable within 60 days after April 2, 1998 and
which were deemed to be outstanding for purposes of calculating the
percentage of outstanding shares beneficially owned by Mr. Wilmers and
Group I. See also the footnotes applicable to Mr. Wilmers in the table set
forth under the caption "STOCK OWNERSHIP BY DIRECTORS AND EXECUTIVE
OFFICERS." Hofin Anstalt is a corporation controlled by Jorge G. Pereira,
a director and vice chairman of the Board of Directors of the Company. The
shares indicated for Hofin Anstalt include shares held by its wholly owned
subsidiaries.
(2) National Indemnity Company has advised the Company that the reporting
person has shared voting and dispositive powers with respect to the shares
of the Common Stock held by it.
(3) Oppenheimer Capital has filed with the SEC a Schedule 13G reporting that
it is the beneficial owner of in excess of 5% of the outstanding Common
Stock and that it has shared voting and dispositive power with respect to
467,510 shares.
3
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ACQUISITION OF ONBANCORP, INC.
On April 1, 1998, First Empire acquired ONBANCorp, Inc. ("ONBANCorp") and its
two subsidiary banks, OnBank & Trust Co., a New York commercial bank, and
Franklin First Savings Bank, a Pennsylvania savings bank. OnBank & Trust Co. and
Franklin First Savings Bank were merged into Manufacturers and Traders Trust
Company ("M&T Bank") on that date. First Empire issued X,XXX,XXX shares of
Common Stock to the stockholders of ONBANCorp as a portion of the consideration
in the transaction.
Pursuant to the Agreement and Plan of Reorganization between First Empire and
ONBANCorp providing for the acquisition, William F. Allyn, Robert J. Bennett,
Russell A. King, Peter J. O'Donnell and John L. Vensel, each a former director
of ONBANCorp, have been elected directors of First Empire and of M&T Bank. In
addition, Mr. Bennett, the former chairman of the board, president and chief
executive officer of ONBANCorp, has been elected chairman of the board of First
Empire and vice chairman of M&T Bank. See "NOMINEES FOR DIRECTOR."
ELECTION OF DIRECTORS
Shares represented by properly executed proxies will be voted, unless such
authority is withheld, for the election as directors of First Empire of the
following twenty-one (21) persons, to hold office until the 1999 Annual Meeting
of Stockholders and until their successors have been elected and qualified. Each
of the nominees listed below was elected at the 1997 Annual Meeting of
Stockholders, except for Messrs. Allyn, Bennett, King, O'Donnell and Vensel,
each of whom became a director on April 1, 1998. See "ACQUISITION OF ONBANCORP,
INC." If any nominee for any reason should become unavailable for election or if
a vacancy should occur before the election (which events are not expected), it
is intended that the shares represented by the proxies will be voted for such
other person as the Company's management shall designate.
The principal occupation of each of the nominees for the last five years was
substantially the same as is listed below. The information with respect to the
nominees is as of April 2, 1998 and includes their affiliations with First
Empire's subsidiary banks, M&T Bank and M&T Bank, National Association ("M&T
Bank, N.A."), and with First Empire's other subsidiaries.
NOMINEES FOR DIRECTOR
WILLIAM F. ALLYN is 62 and has been a director since April 1, 1998.
Mr. Allyn is president of Welch Allyn Incorporated, a manufacturer of medical
instruments. He is a director of M&T Bank. Mr. Allyn is a director of Niagara
Mohawk Power Corporation and Oneida Limited, Inc. He is a trustee of Syracuse
University and an overseer of the Thayer School of Engineering at Dartmouth
College. Mr. Allyn is a board member and regional chairman of the Business
Council of New York and is
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chairman of the Manufacturers Association of Central New York. He also had
served as a director of ONBANCorp from 1991 through First Empire's acquisition
of ONBANCorp.
BRENT D. BAIRD is 59, is a member of the Executive and Compensation Committees
and has been a director since 1983.
Mr. Baird is a private investor. Prior to 1992, he was a limited partner of
Trubee, Collins & Co., Inc., a member firm of the New York Stock Exchange, Inc.
Mr. Baird is a director of M&T Bank and a member of its Executive, Trust and
Investment, Nomination, and Community Reinvestment Act Committees. He is a
director of M&T Financial Corporation and a member of M&T Bank's Directors
Advisory Council-New York City Division. Mr. Baird is chairman of the board of
directors of First Carolina Investors, Inc. and president of Citizens Growth
Properties, both of which are engaged in the real estate business. He is also
president and a director of Merchants Group, Inc. and a director of Oglebay
Norton Company, Todd Shipyards Corporation and Exolon-ESK Company.
JOHN H. BENISCH is 63 and has been a director since 1988.
Mr. Benisch is a founder and limited principal of Colliers ABR, Inc., a real
estate firm based in New York City which is engaged in leasing, management and
consulting services. Colliers ABR, Inc. is also an owner/member of Colliers
International Property Consultants, which has regional offices throughout the
United States and internationally. He is a member of M&T Bank's Directors
Advisory Council-New York City Division and a member of its Community
Reinvestment Act Committee. Mr. Benisch is a member of The Real Estate Board of
New York, Inc. He is also an honorary trustee of St. Mary's Hospital for
Children, Bayside, New York, and is a member of The Salvation Army of Greater
New York Advisory Board.
ROBERT J. BENNETT is 56 and has been a director since April 1, 1998. He is
chairman of the board of First Empire and a member of its Executive Committee.
Mr. Bennett is a vice chairman of the board and a director of M&T Bank and a
member of its Executive Committee. He is a member and chairman of M&T Bank's
Directors Advisory Council-Syracuse Division. From May 1989 through March 31,
1998, Mr. Bennett served as chairman of the board, president and chief executive
officer of ONBANCorp and its main bank subsidiary. He is also a director of the
Federal Home Loan Bank of New York and Farmers and Traders Life Insurance
Company.
C. ANGELA BONTEMPO is 57, is a member of the Audit Committee and has been a
director since 1991.
Ms. Bontempo is senior vice president and executive director of the Roswell Park
Cancer Institute. She served as the administrator of health services at Covenant
House in New York City from July 1993 to January 1994, and from January 1987 to
October 1992 was president and chief executive officer of the Sisters of Charity
Hospital, Buffalo, New York. Ms. Bontempo is a director of M&T Bank and the
chairman of its Examining Committee. She is also a fellow of the American
College of Health Care Executives and
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a member of its nominating committee, a member of the advisory board of
Ciminelli Development Company, Inc. and the Dean's Advisory Council of the
School of Management of the State University of New York at Buffalo, and a
director of the American Automobile Association, Western and Central New York.
ROBERT T. BRADY is 57, is a member of the Compensation Committee and has been a
director since 1994.
Mr. Brady is president, chief executive officer and chairman of the board of
directors of Moog, Inc., a manufacturer of control systems and components for
aircraft, satellites and automated machinery. He is a director of M&T Bank. Mr.
Brady is a director of Seneca Foods Corporation, Acme Electric Corporation,
National Fuel Gas Company and Astronics Corporation. He is also a director of
the Buffalo Niagara Partnership and serves as a trustee of the University at
Buffalo Foundation, Inc.
PATRICK J. CALLAN is 62 and has been a director since 1988.
Mr. Callan is a principal of The RREEF Funds, pension fund real estate
investment advisors and managers. He is a partner of RREEF America Partners and
a trustee of BRT Realty Trust. Mr. Callan is a member of M&T Bank's Directors
Advisory Council-New York City Division and a member of its Mortgage Investment
Committee. He is also a member of The New York University Real Estate Institute
Advisory Board, the MIT Center for Real Estate Advisory Board, the Association
for Foreign Investors in U.S. Real Estate and The Real Estate Board of New York,
Inc.
RICHARD E. GARMAN is 67, is a member of the Executive Committee and has been a
director since 1987.
Mr. Garman is president and chief executive officer of A.B.C. Paving Co., Inc.,
a general construction contractor, and Buffalo Crushed Stone, Inc., an operator
of quarries and asphalt production facilities, both of which are located in
Buffalo, New York. He is a director of M&T Bank and a member of its Executive
and Trust and Investment Committees. Mr. Garman is a director of Merchants
Group, Inc., Associated General Contractors - New York State, the Buffalo
Niagara Partnership and Millard Fillmore Hospitals. He is also chairman of the
Greater Niagara Frontier Council of the Boy Scouts of America.
JAMES V. GLYNN is 63, is a member of the Audit Committee and has been a director
since 1994.
Mr. Glynn is president and owner of Maid of the Mist Corporation, a provider of
scenic boat tours of Niagara Falls. He is a director of M&T Bank and a member of
its Examining Committee. Mr. Glynn is a director of National Fuel Gas Company.
He is vice chairman of the board of trustees of Niagara University. Mr. Glynn
also is a director of the Catholic Health System of Western, New York, Artpark &
Company and the Greater Buffalo Partnership.
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ROY M. GOODMAN is 68 and has been a director since 1984.
Senator Goodman is a New York State senator serving his sixteenth term in the
Legislature representing the East Side of Manhattan. He is the deputy majority
leader for policy of the New York State Senate, chairman of the Senate Committee
on Investigations, Taxation, and Government Operations, and chairman of the
Senate Special Committee on the Arts and Cultural Affairs. Senator Goodman
serves as a member of the National Council on the Arts for the National
Endowment for the Arts, a position to which he was appointed in 1989 by then
President Bush.
PATRICK W.E. HODGSON is 57, is a member of the Audit Committee and has been a
director since 1987.
Mr. Hodgson is president of Cinnamon Investments Limited, a private investment
company with real estate and securities holdings. He is chairman of the board of
Todd Shipyards Corporation and he held the additional position of chief
executive officer from February 1993 through July 1997. From June 1994 through
August 1996, Mr. Hodgson served as chairman of the board of Scotts Hospitality
Inc. He is a director and a member of the Examining Committee of M&T Bank, and a
director of M&T Capital Corporation. Mr. Hodgson is a director of Todd Shipyards
Corporation, First Carolina Investors, Inc., Scotts Restaurants Inc., Versacold
Corp and Exolon-ESK Company. He is also chairman of the board of T-W Truck
Equippers Inc., Buffalo, New York.
SAMUEL T. HUBBARD, JR. is 48 and has been a director since 1994.
Mr. Hubbard is president, chief executive officer and a director of The Alling &
Cory Company, a distributor of paper products. He is a director of M&T Bank and
is a member and the chairman of its Directors Advisory Council-Rochester
Division. Mr. Hubbard is a director of Rochester Gas & Electric Corp., the
Genesee Corporation, McCurdy & Company, Inc. and The Sodus Cold Storage Co.,
Inc. He is also a trustee of the Rochester Institute of Technology.
RUSSELL A. KING is 68 and has been a director since April 1, 1998.
Mr. King is a consulting partner of King and King Architects, Manlius, New York,
and had served as chief executive officer of that firm until his retirement in
1993. He is a director of M&T Bank. Mr. King is a director of Unity Mutual Life
Insurance Co. and a director and chairman of Onondaga Venture Capital. He is a
member emeritus of the American Institute of Architects. Mr. King also had
served as a director of ONBANCorp from 1973 through First Empire's acquisition
of ONBANCorp.
LAMBROS J. LAMBROS is 62, is a member of the Audit Committee and has been a
director since 1984.
Mr. Lambros is managing director of J.W. Childs Associates, L.P., a private
investment company, a position he has held since October 1995. A private
investor from 1994 until October 1995, he was chairman,
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president, chief executive officer and a director of Norfolk Holdings Inc., an
independent oil and gas exploration and production company, from 1986 through
1993. Prior to 1986, Mr. Lambros had been executive vice president and a
director of Amerada Hess Corporation, an integrated oil and gas producer,
refiner and marketer, where he was responsible for that company's financial and
administrative activities.
WILFRED J. LARSON is 70, is the chairman of the Audit Committee and has been a
director since 1987.
Mr. Larson retired in 1991 as president and chief executive officer of
Westwood-Squibb Pharmaceuticals Inc., a subsidiary of the Bristol-Myers Squibb
Company. Prior to his retirement, he also served as a vice president of
Bristol-Myers Squibb Company. Mr. Larson is a director of M&T Bank.
PETER J. O'DONNELL is 66 and has been a director since April 1, 1998.
Mr. O'Donnell is president and chief executive officer of Pine Tree Management
Corporation, a northeastern Pennsylvania management consulting company based in
Clarks Summit, Pennsylvania. He is a director of M&T Bank. Mr. O'Donnell also
had served as a director of ONBANCorp from 1996 through First Empire's
acquisition of ONBANCorp.
JORGE G. PEREIRA is 64 and has been a director since 1982. He is vice chairman
of the board of First Empire and is the chairman of its Compensation Committee.
Mr. Pereira is a private investor. He is a vice chairman of the board and a
director of M&T Bank, and serves as chairman of its Nomination Committee. Mr.
Pereira is also owner of Hofin Anstalt, a private investment company.
JOHN L. VENSEL is 62 and has been a director since April 1, 1998.
Mr. Vensel is chairman and chief executive officer of Crucible Materials
Corporation, a manufacturer and distributor of specialty steels and stainless
pipe and tube. He is a director of M&T Bank. Mr. Vensel is chairman of the board
of trustees of Crouse Health and a member of the board of trustees of LeMoyne
College, the Metropolitan Development Association, and the Manufacturers
Association of Central New York. He also had served as a director of ONBANCorp
from 1989 through First Empire's acquisition of ONBANCorp.
HERBERT L. WASHINGTON is 47 and has been a director since 1996.
Mr. Washington is president of H.L.W. Fast Track, Inc., the owner and operator
of six McDonald's Restaurants in the greater Rochester, New York area, and
Syracuse Minority Television, Inc. He is a director of M&T Bank and a member of
its Community Reinvestment Act Committee. Mr. Washington is a trustee of the
Rochester Institute of Technology and a member of the board of governors of
Strong Memorial Hospital.
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JOHN L. WEHLE, JR. is 52, is a member of the Executive Committee and has been a
director since 1994.
Mr. Wehle is chairman of the board, chief executive officer and president of the
Genesee Corporation, and chairman of the board and chief executive officer of
The Genesee Brewing Company, Inc. He is a director of M&T Bank and a member of
its Executive and Trust and Investment Committees. Mr. Wehle is a trustee,
treasurer and the chairman of the executive committee of the Genesee Country
Museum, and a trustee of the United Neighborhood Center of Greater Rochester
Foundation, Inc. He is also a director of the University of Rochester Medical
Center and chairman of its facilities committee, a director of The Greater
Rochester Chamber of Commerce and a member of its executive committee, and a
director of the Industrial Management Council and the Trooper Foundation, State
of New York, Inc.
ROBERT G. WILMERS is 63 and has been a director since 1982. He is the president
and chief executive officer of First Empire, and is the chairman of its
Executive Committee.
Mr. Wilmers is chairman of the board, chief executive officer and a director of
M&T Bank, chairman of its Executive Committee and a member of its Trust and
Investment Committee; chairman of the board and a director of M&T Bank, N.A.;
and a director of M&T Financial Corporation. Prior to the acquisition of
ONBANCorp, he held the additional position of chairman of the board of First
Empire from April 1994 through March 1998. Mr. Wilmers served as president of
M&T Bank from March 1984 through June 1996. He is a director of the Buffalo
Niagara Partnership, the Federal Reserve Bank of New York and The Business
Council of New York State, Inc., and a member of the Visiting Committee of the
John F. Kennedy School of Government at Harvard University. Mr. Wilmers is also
a director of the Albright-Knox/Buffalo Fine Arts Academy.
The Board of Directors recommends a vote FOR
the election of all 21 nominees.
PROPOSED AMENDMENT TO THE FIRST EMPIRE STATE CORPORATION
1983 STOCK OPTION PLAN
The purpose of the Stock Option Plan is to aid in maintaining and developing
strong management through encouraging the ownership of Common Stock by key
employees and to provide an incentive to the continued service of such key
employees. The Stock Option Plan originally was adopted by the Board of
Directors in 1983 and approved by the stockholders in 1984. In 1986, 1988, 1990,
1992 and 1995, the Board of Directors adopted amendments to the Stock Option
Plan, in each case with subsequent approval by the stockholders. In February
1998, the Board of Directors adopted further amendments to the Stock Option Plan
("1998 Amendments"), subject to the stockholder approval solicited hereby.
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Description of and Reasons for the 1998 Amendments
The 1998 Amendments revised the Stock Option Plan in a number of respects. A
copy of the Stock Option Plan, as amended and restated, is attached to this
Proxy Statement as Appendix A. Each stockholder is urged to review the Stock
Option Plan in its entirety.
One aspect of the 1998 Amendments requires stockholder approval. This is the
amendment that increases the number of shares issuable pursuant to the Stock
Option Plan from 2,000,000 to 2,500,000. In addition, the Board of Directors has
approved certain other amendments to the Stock Option Plan. These amendments are
principally intended to update and streamline the Stock Option Plan in light of
extensive amendments to the SEC's rules under Section 16 of the Exchange Act.
Specifically, these changes eliminate unnecessary references to these rules,
unnecessary restrictions on the exercise of stock appreciation rights, and
unnecessary restrictions in the procedures for determining the number of shares
available for future awards under the Stock Option Plan. They also permit the
Compensation Committee to provide that options and rights may be transferred if
the Compensation Committee so allows.
The one aspect of the 1998 Amendments approved by the Board of Directors and
requiring stockholder approval is described below. There follows a summary of
significant provisions of the Stock Option Plan as currently in effect.
Increase in Number of Shares Subject to the Stock Option Plan.
The Stock Option Plan, as in effect prior to approval by the Board of Directors
of the 1998 Amendments, provided that up to 2,000,000 authorized but unissued or
treasury shares of Common Stock could be issued or delivered upon the exercise
of stock options or stock appreciation rights. The Board of Directors believes
that the ability to make grants and awards under the Stock Option Plan has
enhanced the Company's ability to attract and retain qualified employees and
directors. Under the Stock Option Plan, the Company may grant stock options,
stock appreciation rights exercisable for Common Stock, and stock appreciation
rights exercisable for cash.
There are currently 2,000,000 shares of Common Stock authorized for issuance
pursuant to the Stock Option Plan. As of April 2, 1998, stock options and stock
appreciation rights, other than stock appreciation rights exercisable only for
cash, covering 1,993,273 shares of Common Stock had been granted under the Stock
Option Plan, 204,952 shares of Common Stock covering stock options previously
granted under the Stock Option Plan had become available for reissuance due to
the termination or expiration of previously granted stock options, and 1,022,556
shares of Common Stock had been issued. In addition to such stock options and
stock appreciation rights granted, stock options terminated or expired, and the
shares of Common Stock issued, 164,500 stock appreciation rights independent of
any option and exercisable only for cash had been granted under the Stock Option
Plan as of April 2, 1998. Under the Stock Option Plan, as administered, stock
appreciation rights independent of any option and exercisable only for cash have
been counted against the total shares of Common Stock issuable pursuant to the
Stock Option Plan in order for the issuance and
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exercise of such rights not to be subject to Section 16 of the Exchange Act.
Based upon the foregoing, 47,179 shares of Common Stock remain available for
future grants.
As a part of the Company's compensation policy, the base salaries of its
executive officers are targeted at or below the median of a comparative group of
banks, as hereinafter defined. See "COMPENSATION OF EXECUTIVE OFFICERS AND
DIRECTORS -- Compensation Committee Report on Executive Compensation."
Accordingly, stock options and stock appreciation rights are an important
component of an executive officer's total compensation, thereby allowing the
Company to attract and develop strong management. In light of the success of the
Stock Option Plan to date and in order to ensure that the Board of Directors
retains the flexibility to grant whichever instrument authorized under the Stock
Option Plan that it deems appropriate in furtherance of the purposes of the
Stock Option Plan, the Board of Directors believes it is in the best interests
of the Company that additional shares be made available for grants and awards
under the Stock Option Plan. These additional shares will allow the Company to
make additional grants and awards under the Stock Option Plan, and thereby
continue to develop strong management of the Company. Accordingly, the Board of
Directors has adopted an amendment to the Stock Option Plan increasing from
2,000,000 to 2,500,000 the number of shares of Common Stock reserved for
issuance pursuant to the Stock Option Plan.
Description of the Plan
The following summary is a brief description of the significant provisions of
the Stock Option Plan and does not purport to be a complete statement of the
terms and conditions of the Stock Option Plan, a copy of which, as amended and
restated, is attached to this Proxy Statement as Appendix A.
Shares Subject to Grant. The Company has acquired, and intends to continue to
acquire, as necessary, Common Stock in the open market to fulfill its
obligations under the Stock Option Plan and intends to distribute such shares
upon the exercise of options and rights under the Stock Option Plan, which are
exercisable in shares of the Common Stock. The Stock Option Plan and grants made
thereunder are subject to certain antidilution provisions.
Administration. The Stock Option Plan is administered by a committee consisting
of two or more disinterested members of the Board of Directors. The present
members of the committee, known as the Compensation Committee, are Messrs.
Pereira (Chairman), Baird and Brady. Subject to the provisions of the Stock
Option Plan, the Compensation Committee is authorized to determine eligibility,
to grant stock options and stock appreciation rights, and to otherwise
administer the Stock Option Plan.
The Company's Board of Directors may terminate the Stock Option Plan at any time
and may amend it in any respect, except that stockholder approval is required
for certain types of amendments, including the proposed amendment described
above to increase the number of shares of Common Stock subject to the Stock
Option Plan. The Stock Option Plan, as currently in effect, will terminate on
February 21, 2005. Approval of the 1998 Amendment to the Stock Option Plan will
result in extending the term of such plan
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to February 17, 2008. The Stock Option Plan will remain in effect after its
termination for the purpose of administering outstanding grants.
Eligibility. Stock options and stock appreciation rights may be granted only to
officers and other key employees of the Company and its subsidiaries and to
certain former trustees of The East New York Savings Bank ("East New York"), a
subsidiary of the Company that was merged with and into M&T Bank on May 24,
1997. Other directors who are not officers or employees, including members of
the Compensation Committee, are not eligible to receive grants. As of April 2,
1998, there were approximately 823 employees of the Company and its subsidiaries
and 7 former trustees of East New York potentially eligible to receive grants
under the Stock Option Plan, 7 of whom held only options, 284 of whom held
options with limited stock appreciation rights attached thereto, and 14 of whom
held stock appreciation rights exercisable for cash with limited stock
appreciation rights attached thereto. As of such date, the weighted average
exercise price of unexercised options and stock appreciation rights was $xxx.xx
per share. The market price of Common Stock on April 2, 1998 was $xxx.xx per
share (the closing price of a share of Common Stock on the American Stock
Exchange on such date). See "COMPENSATION OF EXECUTIVE OFFICERS AND
DIRECTORS--Stock Option Grants in 1997" for additional information regarding
grants made under the Stock Option Plan. Under the terms of the Stock Option
Plan, an officer or other key employee may not be granted in any fiscal year of
the Company stock options and/or stock appreciation rights covering more than
50,000 shares of Common Stock, except that a newly-hired executive officer of
the Company may receive an additional one-time grant of stock options and/or
stock appreciation rights covering up to 50,000 shares of Common Stock upon
commencement of employment with the Company.
Stock Options. Incentive stock options and nonstatutory stock options granted
under the Stock Option Plan permit optionees to purchase Common Stock from the
Company at exercise prices of not less than the fair market value of the
optioned stock at the date of grant. All options granted under the Stock Option
Plan expire not more than ten years after the date of grant (ten years and one
day in the case of nonstatutory stock options). An optionee may receive more
than one option. The amount of stock subject to incentive stock options granted
after 1986 to any optionee that may first become exercisable in any calendar
year is subject to limitations set forth in the Internal Revenue Code of 1986,
as amended (the "Internal Revenue Code").
The options that already have been granted under the Stock Option Plan generally
become exercisable in installments during the terms of the options. These
options, however, may become exercisable in full at any time in the event that
(i) either a tender or exchange offer is made which, if successful, would cause
the offeror to become the beneficial owner of 20% or more of the outstanding
Common Stock or any person acquires in excess of 30% of the outstanding Common
Stock, and (ii) the Compensation Committee does not determine that the option
should not be exercisable in full. If the tender offer or exchange offer is not
successful, the option would return to its original vesting schedule unless
already exercised.
The Compensation Committee is authorized to provide in its discretion for the
payment of the exercise price otherwise than in cash, including by delivery of
shares of Common Stock, valued at fair market value on the date of exercise, or
by a combination of both cash and Common Stock. The agreements for previously
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<PAGE>
granted options provide that no shares of Common Stock may be used for payment
of the exercise price unless they have been held by the optionee for a specified
holding period prior to the date of exercise.
Stock Appreciation Rights. Nonlimited stock appreciation rights and limited
stock appreciation rights provide alternative means by which optionees may be
able to realize the benefits of appreciation in the value of Common Stock.
Nonlimited stock appreciation rights may be granted in connection with the grant
of an incentive or nonstatutory stock option or of a limited stock appreciation
right, or by amendment of an outstanding nonstatutory stock option or limited
stock appreciation right ("related rights"). Nonlimited stock appreciation
rights also may be granted independently of any option or stock appreciation
right ("nonrelated rights"). Upon exercise, a nonlimited stock appreciation
right entitles the optionee to elect to receive in cash, Common Stock or a
combination thereof, or to receive only in cash if the nonlimited stock
appreciation right is exercisable only for cash, the excess of the market value
of a specified number of shares of Common Stock at the time of exercise over,
generally speaking, the market value of the same number of shares of Common
Stock at the time of grant. The consent of the Compensation Committee may be
required for an election to receive cash on the exercise of a stock appreciation
right.
Limited stock appreciation rights may be granted as related or nonrelated
rights, generally subject to the same rules as apply to related nonlimited stock
appreciation rights. Such rights may be exercised only in the event of a tender
or exchange offer for Common Stock which, if successful, would cause the offeror
to become the beneficial owner of 20% or more of the outstanding Common Stock.
The grants that already have been made require that, before a limited stock
appreciation right may be exercised, the Compensation Committee must determine
that consummation of the tender offer or exchange offer would result in a change
in control of the Company.
When a limited stock appreciation right is a related right to an incentive stock
option, the grantee is entitled, upon exercise, to receive in cash the excess of
the market value of a specified number of shares of Common Stock at the time of
exercise over, generally speaking, the market value of the same number of shares
of Common Stock at the time of grant. A limited stock appreciation right that is
not a related right to an incentive stock option entitles the optionee, upon
exercise, to receive in cash the excess of the "offer price" multiplied by a
specified number of shares of Common Stock, over the market value of the same
number of shares of Common Stock at the time of grant. The "offer price" is the
greater of the highest price paid by the offeror in the tender or exchange offer
during the ninety days prior to exercise or the highest market value of the
Common Stock during such period.
Summary of Certain Federal Income Tax Consequences
Incentive Stock Options. In general, an optionee will not recognize income at
the time of the grant or exercise of an incentive stock option. However, the
difference between the aggregate exercise price and the fair market value of the
shares of Common Stock received upon exercise is an adjustment item for purposes
of the alternative minimum tax. If an optionee does not exercise an incentive
stock option prior to
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termination of employment, an incentive stock option will be treated for tax
purposes as a nonqualified stock option, as described below.
In general, gain or loss from the sale or exchange of shares acquired upon
exercise of an incentive stock option will be taxed as capital gain or loss.
However, if certain holding period requirements with respect to the shares
acquired upon exercise of an incentive stock option are not satisfied, an
optionee will be required to recognize ordinary income at the time of
disposition. Any gain recognized on disposition in excess of the ordinary income
resulting therefrom will be capital gain, and any loss recognized will be a
capital loss.
If an optionee recognizes ordinary income upon exercise of an incentive stock
option or as the result of a disposition of shares prior to the expiration of
the applicable holding periods, the Company will be entitled to a deduction in
the same amount.
Nonstatutory Stock Options and Stock Appreciation Rights. An optionee generally
will not recognize income on the grant of a nonstatutory stock option or a stock
appreciation right, but generally will recognize ordinary income on exercise of
either. The amount of income recognized on exercise of a nonstatutory stock
option generally will be measured by the excess, if any, of the fair market
value of the shares at the time of exercise over the exercise price, regardless
of whether the exercise price is paid in cash or stock. The amount of income
recognized on exercise of a stock appreciation right generally will be equal to
the amount of cash and the fair market value of any shares received at the time
of exercise plus the amount of any taxes withheld. Where ordinary income is
recognized by an optionee in connection with the exercise of a nonstatutory
stock option or stock appreciation right, the employer corporation will be
entitled to a deduction in the amount of ordinary income so recognized, subject
to satisfying tax withholding requirements.
Parachute Payments. Where payments to an employee that are contingent on a
change in control of the employer corporation exceed limits specified in the
Internal Revenue Code, the employee generally is liable for a 20% excise tax on,
and the employer corporation generally is not entitled to any deduction for, a
specified portion of such payments. If a change in control of the Company were
to occur, payments of cash upon exercise of limited stock appreciation rights,
and an acceleration of vesting of options pursuant to a change in control, would
be relevant in determining whether the excise tax and deduction disallowance
rules would be triggered.
General. The rules governing the tax treatment of options and stock appreciation
rights, and an optionee's receipt of stock or cash pursuant to the exercise
thereof are quite technical, so that the above description of tax consequences
is necessarily general in nature and does not purport to be complete. Moreover,
statutory provisions are, of course, subject to change, as are their
interpretations, and their application may vary in individual circumstances.
Finally, the tax consequences under applicable state or local law may not be the
same as under the federal income tax laws.
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Accounting Treatment
Under current accounting principles followed by the Company, neither the grant
nor the exercise of an incentive stock option or a nonstatutory stock option
under the Stock Option Plan with an exercise price not less than the fair market
value of Common Stock at the date of grant requires any charge against earnings.
However, under the guidance provided by Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation," issued in October
1995, the Company is required to disclose in a footnote to its financial
statements the pro forma effects of stock-based compensation arrangements on net
income and earnings per share, based on the estimated grant date fair value of
stock options that are expected to vest.
Stock appreciation rights require a charge against the earnings of the Company
each accounting period the value of such rights increases. The charge related to
stock appreciation rights will vary depending upon, among other factors, the
amount of stock appreciation rights granted, stock price changes above the grant
price, and the length of time that stock appreciation rights have been
outstanding. Such charge is based, generally speaking, on the difference between
the exercise price specified in the related right, or the market value of Common
Stock on the date of grant, and the current market price of Common Stock. In the
case of limited stock appreciation rights, such charge would not be made until
the time of the tender offer or exchange offer. In the event of a decline in the
market price of Common Stock subsequent to a charge against earnings related to
the estimated costs of stock appreciation rights, a reversal of prior charges is
made (but not to exceed aggregate prior charges).
Certain Other Information
For information concerning the compensation of directors and executive officers
of the Company, please refer to the information under the caption "COMPENSATION
OF EXECUTIVE OFFICERS AND DIRECTORS." Neither cash nor Common Stock received
upon exercise of an option or a stock appreciation right under the Stock Option
Plan will be treated as compensation under any employee benefit plan of the
Company.
The Board of Directors recommends a vote FOR
the proposed amendment to the Stock Option Plan.
PROPOSED AMENDMENT TO THE FIRST EMPIRE STATE CORPORATION
RESTATED CERTIFICATE OF INCORPORATION
Description of and Reasons for the Amendment
By resolution dated February 17, 1998, the Board of Directors of First Empire
declared it advisable and in the best interests of the Company and its
stockholders to amend the Company's Restated Certificate of Incorporation to
change the name of the Company from "First Empire State Corporation" to "M&T
Bank
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Corporation" and directed that the proposed amendment be submitted to a vote of
the stockholders at the Annual Meeting. If the proposed amendment is adopted,
Article FIRST of the Restated Certificate of Incorporation will be amended to
read as follows:
"FIRST: The name of this Corporation is M&T BANK CORPORATION."
The Board of Directors and management believe that it is in the best interests
of the Company and its stockholders to change the name of the Company. By
approving the proposed amendment, the Board of Directors and management seek to
strengthen and more firmly establish the "M&T" brand identity utilized by the
Company's banking subsidiaries, M&T Bank and M&T Bank, N.A., thereby increasing
customer awareness of the M&T identity. The amendment, if approved, will result
in a change on the stock exchange in the name under which the Common Stock is
listed and traded and will also change the name under which the Company will be
identified in the financial media and in reports, statements and other documents
filed with the SEC or the Company's regulators or issued to its stockholders.
The Board of Directors recommends a vote FOR
the proposed amendment to the Restated Certificate of Incorporation
STOCK OWNERSHIP BY DIRECTORS AND EXECUTIVE OFFICERS
Direct and indirect ownership of Common Stock by each of the directors and the
executive officers who are named in the Summary Compensation Table (the "Named
Executive Officers"), and by the directors and executive officers as a group is
set forth in the table below as of April 2, 1998, together with the percentage
of total shares outstanding represented by such ownership. (For purposes of this
table, beneficial ownership has been determined in accordance with the
provisions of Rule 13d-3 under the Exchange Act, under which, in general, a
person is deemed to be the beneficial owner of a security if he or she has or
shares the power to vote or to direct the voting of the security or the power to
dispose or to direct the disposition of the security, or if he or she has the
right to acquire the beneficial ownership of the security within 60 days.)
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Percent
Name of beneficial owner Number of shares of class
- ------------------------ ---------------- --------
William F. Allyn x,xxx (8)
Brent D. Baird 47,288 (8)
John H. Benisch 4,115 (1) (8)
Robert J. Bennett x,xxx (8)
C. Angela Bontempo 85 (2) (8)
Robert T. Brady 200 (8)
Patrick J. Callan 6,423 (1) (8)
Richard A. Garman 25,500 (8)
James V. Glynn 1,025 (8)
Roy M. Goodman - -
Patrick W.E. Hodgson 5,700 (3) (8)
Samuel T. Hubbard, Jr. 200 (4) (8)
Russell A. King x,xxx (8)
Lambros J. Lambros 6,000 (8)
Wilfred J. Larson 5,616 (8)
Peter J. O'Donnell x,xxx (8)
Jorge G. Pereira 320,400 (5) x.xx%
Raymond D. Stevens, Jr. 3,490 (8)
John L. Vensel x,xxx (8)
Herbert L. Washington 300 (8)
John L. Wehle, Jr. 200 (8)
Robert G. Wilmers 672,126 (1)(5)(6)(7) xx.xx%
Robert E. Sadler, Jr. 64,170 (1)(6) (8)
Adam C. Kugler 7,937 (1)(6) (8)
James L. Hoffman 31,284 (1)(6) (8)
John L. Pett 22,766 (1)(6) (8)
All directors and executive
officers as a group
(31 persons) 1,262,993 (1)(6) xx.xx%
- ----------
(1) Includes the following shares of Common Stock subject to options granted
under the Stock Option Plan which are currently exercisable or are
exercisable within 60 days after April 2, 1998: Mr. Benisch - 315 shares;
Mr. Callan - 823 shares; Mr. Wilmers - 96,000 shares; Mr. Sadler - 35,400
shares; Mr. Kugler - 6,300 shares; Mr. Hoffman - 12,850 shares; Mr. Pett -
7,500 shares; all directors and executive officers as a group - 195,738
shares.
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(2) Includes 15 shares held by a trust for which the director is a trustee and
in which the director has a pecuniary interest and investment power.
(3) Includes 600 shares of Common Stock held by a close relative for which
beneficial ownership is disclaimed. Also includes 4,500 shares of Common
Stock owned by a corporation controlled by Mr. Hodgson.
(4) The indicated shares are held by a trust for which the director is a
trustee and in which the director has a pecuniary interest and investment
power.
(5) See footnote (1) to the table set forth under the caption "PRINCIPAL
BENEFICIAL OWNERS OF SHARES."
(6) Includes the following shares of Common Stock through participation in the
First Empire State Corporation Retirement Savings Plan and Trust
("Retirement Savings Plan"): Mr. Wilmers - 3,392 shares; Mr. Sadler -
1,743 shares; Mr. Kugler - 825 shares; Mr. Hoffman - 23 shares; Mr. Pett -
1,766 shares; all directors and executive officers as a group - 7,816
shares.
(7) Includes 3,590 shares of Common Stock held by a close relative or the
estate of a close relative for which beneficial ownership is disclaimed.
(8) Less than 1%.
Section 16(a) Beneficial Ownership Reporting Compliance
Under Section 16(a) of the Exchange Act, the Company's directors and officers
and persons who are the beneficial owners of more than 10% of the Common Stock
are required to report their ownership of the Common Stock, options and stock
appreciation rights (other than certain cash-only rights) and any changes in
that ownership to the SEC and the American Stock Exchange. Specific due dates
for these reports have been established, and the Company is required to report
in this proxy statement any failure to file by these dates during 1997. The
Company believes that all of these filing requirements were satisfied by its
directors and officers and by the beneficial owners of more than 10% of the
Common Stock, except that Brent D. Baird and C. Angela Bontempo, directors of
the Company, and James L. Hoffman, an Executive Vice President of the Company,
each failed to file on a timely basis one report relating to one transaction
which each such director or executive officer subsequently filed one day late.
Messrs. Baird and Hoffman and Ms. Bontempo fully complied with First Empire's
internal reporting procedures designed to ensure that reports were filed in a
timely manner, but First Empire inadvertently failed to timely file reports on
their behalf. In addition, Mr. Washington, a director of the Company,
inadvertently failed to file on a timely basis one report relating to two
transactions. In making the foregoing statements, the Company has relied on
copies of the reporting forms received by it or on the written representations
from certain reporting persons that no Forms 5 (Annual Statements of Changes in
Beneficial Ownership) were required to be filed under the applicable rules of
the SEC.
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PERFORMANCE GRAPH
The graph which has been omitted from this filing contains a comparison of the
cumulative stockholder return on the Common Stock against the cumulative total
returns of the KBW 50 Index, compiled by Keefe, Bruyette & Woods, Inc., and the
S&P 500 Index, compiled by Standard & Poor's Corporation, for the five-year
period beginning on December 31, 1992 and ending on December 31, 1997. The KBW
50 Index is comprised of fifty American banking companies, including all
money-center and most major regional banks.
Comparison of Five-Year Cumulative Return*
[THIS SPACE INTENTIONALLY LEFT BLANK]
Stockholder Value at Year End*
- --------------------------------------------------------------------------
1992 1993 1994 1995 1996 1997
---- ---- ---- ---- ---- ----
First Empire $100 $106 $104 $169 $226 $368
KBW 50 Index $100 $106 $100 $160 $227 $332
S&P 500 Index $100 $110 $112 $153 $189 $252
- --------------------------------------------------------------------------
* Assumes a $100 investment on December 31, 1992 and reinvestment of all
dividends.
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COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS
Compensation Committee Report on Executive Compensation
A key objective of First Empire is to attract, develop and maintain strong
executive officers who are capable of maximizing the Company's performance for
the benefit of its stockholders. In furtherance of this objective, the
Compensation Committee has adopted a compensation strategy for executive
officers which utilizes reasonable salaries, while placing heavy emphasis on the
use of variable incentives such as awards of cash bonuses and grants of stock
options in order to reward longer-term contributions to the Company's success.
First Empire periodically compares its compensation levels, practices and
financial performance to a select group of commercial banking institutions of
similar size, geographic market and business makeup to First Empire. The
Compensation Committee considered twenty-one commercial banking companies which
it believed were reasonably comparable to the Company's asset size and
performance and which were generally located in the northeast or midwest (the
"comparative group of banks"). Seventeen of the twenty-one commercial banking
companies forming the comparative group of banks considered by the Compensation
Committee were included in the KBW 50 Index compiled by Keefe, Bruyette & Woods,
Inc.
Base salaries of First Empire's executive officers are determined by
competitive, market-based pay practices, performance evaluations and expected
future contributions. In line with its strategy of emphasizing variable pay, the
Compensation Committee generally targets the salaries of First Empire's
executive officers at or below the median of the comparative group of banks,
while also considering the unique responsibilities and performance of each
executive officer. Overall, the Compensation Committee targets the total cash
compensation of First Empire's executive officers above the median of the
comparative group of banks.
First Empire's executive officers participate in an annual incentive
compensation plan ("Annual Incentive Plan"). The Annual Incentive Plan provides
for discretionary grants of cash awards to executive officers out of a fund
established annually by the Compensation Committee. In establishing this fund,
the Compensation Committee considers First Empire's profitability, as well as
the number of participants in the Annual Incentive Plan, and may establish a
minimum threshold of net operating earnings after taxes below which no fund will
be created. At the end of the year, the Compensation Committee may increase the
size of the established fund in its discretion by no more than 50% to take into
account its subjective assessment of management's contribution to First Empire's
profitability. First Empire's net operating earnings after taxes for 1997
exceeded the minimum threshold of profitability which had been previously
established by the Compensation Committee, thereby initiating the payment of
cash bonuses to its executive officers under the Annual Incentive Plan, but the
Compensation Committee did not exercise its discretion to increase the aggregate
size of the fund above the predetermined level.
The aggregate amount of the Annual Incentive Plan pool and 1997's awards to
First Empire's executive officers thereunder were reviewed and approved by the
Compensation Committee. The Compensation Committee considered, but did not
formally weight, a number of quantitative and qualitative performance factors to
evaluate the 1997 performance of executive officers and other employees under
the Annual
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Incentive Plan. The performance factors considered were: growth and composition
of earnings; achieving business plans; asset quality; market share; and
responsiveness to the economic environment. In determining its discretionary
evaluation of the Chief Executive Officer's performance, the Compensation
Committee considered, but did not formally weight, the following performance
factors: the Company's earnings growth; its asset quality relative to the
banking industry as a whole; and market share in key markets and service niches.
Another factor which the Compensation Committee considered in determining the
Chief Executive Officer's 1997 incentive award was its philosophy of providing
the Chief Executive Officer with greater long-term opportunities in the form of
stock options and placing a lesser emphasis on base salary and annual cash
incentives.
Consistent with its objective of attracting, developing and maintaining strong
executive management, First Empire provides potentially significant long-term
incentive opportunities to its executive officers through discretionary grants
of stock options under the Stock Option Plan, thereby emphasizing the potential
creation of long-term stockholder value and more closely aligning the interests
of First Empire's executive officers with those of its stockholders. Stock
options are considered effective long-term incentives by the Compensation
Committee because an executive can profit only if the value of the Common Stock
increases. In making these grants, the Compensation Committee considers its
subjective assessment of the Company's past financial performance and future
prospects, an executive officer's current level of ownership of the Common
Stock, the period during which an executive officer has been in a key position
with the Company, individual performance and competitive practices within the
comparative group of banks.
In 1997, the Compensation Committee considered, but did not formally weight, the
following factors in connection with the number of options granted to each
executive officer: the competitive practices within the comparative group of
banks; the individual executive officer's position and potential within First
Empire; and the level of past awards of stock options or stock appreciation
rights made to each executive officer. In the determination of the Chief
Executive Officer's 1997 stock option award, the Compensation Committee also
considered its philosophy of providing him with greater long-term opportunities
in the form of stock options and placing a lesser emphasis on base salary and
annual cash incentives.
The 1997 performance factors considered by the Compensation Committee in its
salary determinations and its annual incentive and stock option awards made to
the Company's executive officers exceeded predetermined objectives or, where no
predetermined level had been set, were deemed to be above industry averages or
otherwise exceeded the Compensation Committee's expectations. The Compensation
Committee believes that the total compensation provided to the Company's
executive officers is competitive and reflects the Company's performance. Also,
the Compensation Committee believes that the Company's compensation programs
have helped to focus First Empire's executive officers on increasing the
Company's performance and stockholder value.
Section 162(m) of the Internal Revenue Code generally denies a deduction to any
publicly held corporation for compensation paid to its chief executive officer
and its four other highest-paid executive officers to the extent that any such
individual's compensation exceeds $1 million, subject to certain exceptions,
including one for "performance-based compensation." The Compensation Committee
believes that none of the
21
<PAGE>
Company's executive officers received compensation in 1997 which was
nondeductible under Section 162(m) of the Internal Revenue Code.
This report was prepared by the Compensation Committee of the Board of
Directors:
Jorge G. Pereira, Chairman
Brent D. Baird
Robert T. Brady
Compensation Committee Interlocks and Insider Participation
Messrs. Pereira and Baird served as members of the Compensation Committee
throughout 1997, and are currently serving as such. Mr. Brady was appointed to
the Compensation Committee on April 15, 1997 and continues to so serve.
Mr. Pereira is vice chairman of First Empire and of M&T Bank, titular posts
without day-to-day managerial responsibilities which he has held since April 18,
1984. Mr. Baird served as chairman of the board of M&T Capital Corporation, the
venture capital subsidiary of M&T Bank, from August 4, 1983 to April 20, 1987.
Neither Mr. Pereira nor Mr. Baird has received additional compensation for
serving in such capacities.
Members of the Compensation Committee and their associates are, as they have
been in the past, customers of, and have had transactions with, the banking
subsidiaries of the Company; and additional transactions may be expected to take
place in the future between such persons and subsidiaries. Any loans from the
Company's subsidiary banks to such persons and their associates outstanding at
any time since the beginning of 1997 were made in the ordinary course of
business of the banks on substantially the same terms, including interest rates
and collateral, as those prevailing at the time for comparable transactions with
other persons, and did not involve more than normal risk of collectibility or
present other unfavorable features.
Executive Compensation
The following table contains information concerning the compensation received by
the Company's Chief Executive Officer and the four other most highly compensated
executive officers of the Company in the three fiscal years ended December 31,
1997.
22
<PAGE>
Summary Compensation Table
<TABLE>
<CAPTION>
Long-term
Compen-
Annual Compensation sation
------------------- ------
Awards
Securities All
Underlying Other
Options/ Compen-
Name and Principal Position Year Salary Bonus SARs sation
- ------------------------------ ---- -------- -------- ------ -------
($) ($) (#) ($)(*)
<S> <C> <C> <C> <C> <C>
Robert G. Wilmers
Chairman of the Board, 1997 $400,000 $400,000 10,000 $13,019
President and Chief 1996 400,000 350,000 10,000 12,718
Executive Officer of 1995 400,000 300,000 20,000 12,726
First Empire; Chairman of the
Board and Chief Executive
Officer of M&T Bank
Robert E. Sadler, Jr
President of M&T Bank; 1997 322,115 400,000 7,000 11,489
Executive Vice President 1996 300,000 375,000 8,000 11,130
of First Empire 1995 277,700 350,000 8,000 24,304
Adam C. Kugler
Executive Vice President and 1997 185,000 245,000 1,500 8,859
Treasurer of First Empire and 1996 184,500 235,000 2,500 8,473
M&T Bank 1995 178,500 225,000 1,500 8,203
James L. Hoffman
President of Hudson Valley 1997 200,000 225,000 3,500 11,217
Division of M&T Bank; 1996 200,000 205,000 5,000 10,916
Executive Vice President 1995 200,000 200,000 5,000 10,917
of First Empire and M&T Bank
John L. Pett
Executive Vice President and 1997 197,115 225,000 4,000 71,549
Chief Credit Officer of First 1996 173,077 190,000 4,000 9,266
Empire and M&T Bank 1995 150,000 175,000 2,000 25,906
</TABLE>
23
<PAGE>
(*) Includes a $7,200 contribution for each of Messrs. Wilmers, Sadler, Kugler,
Hoffman and Pett by the Company to the Retirement Savings Plan, a qualified
defined contribution plan providing for salary reduction contributions by
participants and matching contributions by the Company. Includes the
following 1997 credits by the Company under the Supplemental Savings Plan
(as hereinafter defined under the caption "Supplemental Benefit Plans") for
the benefit of the Named Executive Officers: Messrs. Wilmers and Sadler -
$3,412; Mr. Kugler - $1,125; Mr. Hoffman - $1,800; and Mr. Pett - $1,715.
Includes the following insurance premiums paid by the Company in 1997 in
respect of term life insurance for the benefit of the Named Executive
Officers: Mr. Wilmers - $2,106; Mr. Sadler - $575; Mr. Kugler - $234; Mr.
Hoffman - $1,916; and Mr. Pett - $1,652. Includes $60,982 of above-market
interest earned by Mr. Pett in 1997 in respect of bonus payments which he
deferred in prior years.
Stock Option Grants in 1997
The following table contains information with respect to the grants of stock
options under the Stock Option Plan during the fiscal year ended December 31,
1997 to the Named Executive Officers who are covered by the Summary Compensation
Table. No stock appreciation rights were granted under the Stock Option Plan in
1997 other than limited stock appreciation rights granted in tandem with stock
options.
Option/SAR Grants in the Last Fiscal Year
<TABLE>
<CAPTION>
Individual Grants
--------------------------------------------------------------
Number Percent
of of Total
Secur- Options/
ities SARs
Under- Granted to
lying Employees
Options in Exercise Expir- Grant Date
/SARs Fiscal or ation Present
Name Granted Year Base Price Date Value
- --------------------- ------- ---- ---------- ------- ---------
(#)(1) (4) ($/Share) ($)(5)
(2)(3)
<S> <C> <C> <C> <C> <C>
Robert G. Wilmers 10,000 6.7% $290.00 1/21/07 $792,600
Robert E. Sadler, Jr. 7,000 4.7 290.00 1/21/07 554,820
Adam C. Kugler 1,500 1.0 290.00 1/21/07 118,890
James L. Hoffman 3,500 2.3 290.00 1/21/07 277,410
John L. Pett 4,000 2.7 290.00 1/21/07 317,040
</TABLE>
24
<PAGE>
(1) Title of securities subject to grant: Common Stock.
(2) All grants to the Named Executive Officers include grants of an equal
number of related (or "tandem") limited stock appreciation rights. Limited
stock appreciation rights may be exercised only in the event of a tender
or exchange offer ("Offer") for the Common Stock (a) which, if successful,
would cause the offeror to become the beneficial owner of 20% or more of
the outstanding Common Stock, and (b) that the Compensation Committee
determines would result in a change in control of the Company, if
consummated. Upon exercise, a limited stock appreciation right granted in
tandem with a nonstatutory stock option entitles the holder to receive
cash in an amount equal to the excess of (a) the highest price paid
pursuant to the Offer during the 90 days prior to exercise, or (b) the
highest market value of a share of Common Stock during the 90 days prior
to exercise, whichever is greater, over the market value of a share of
Common Stock on the date of grant. A limited stock appreciation right
granted in tandem with an incentive stock option entitles the holder to
receive cash in an amount equal to the appreciation in the market value of
a share of Common Stock since the date of grant.
(3) The stock options are exercisable in installments that provide vesting of
10% of the optioned stock after the first anniversary of the grant, an
additional 20% after the second anniversary, 30% more after the third
anniversary, and the remaining 40% after the fourth anniversary.
(4) Excludes shares of Common Stock subject to options granted under the Stock
Option Plan to directors who are not employees of the Company. See
"Directors' Fees."
(5) The Company used a binomial option pricing model to determine the grant
date present value of stock options granted in 1997 upon the belief that
such model is the most reasonable method of estimating the value of stock
options granted under the Stock Option Plan. The estimated value per
option is $79.26, which was calculated through the use of the following
assumptions: an option term, based on historical data since the inception
of the Stock Option Plan, of 6.5 years, representing the estimated period
between the grant dates of options under the Stock Option Plan and their
exercise dates; an interest rate that represents the yield on a
zero-coupon U.S. Treasury security with a maturity date corresponding to
that of the adjusted option term; volatility calculated using weekly stock
prices for the three-year (156-week) period prior to the grant date; and
an estimated dividend yield of .97%, the approximate annualized cash
dividend rate paid with respect to a share of the Common Stock on December
31, 1996. The Company also deducted 10% to reflect an estimate of the
probability of forfeiture prior to vesting, based on historical data since
the inception of the Stock Option Plan. The actual value an executive may
realize will depend upon the excess of the price of the Common Stock over
the exercise price on the date the option is exercised. Accordingly, there
is no assurance that the value ultimately realized by an executive
officer, if any, will approximate the value estimated by the model.
25
<PAGE>
Stock Options and Stock Appreciation Rights Exercised in 1997 and Year-End
Values
The following table reflects the number of stock options and stock appreciation
rights exercised by the Named Executive Officers in 1997, the total gain
realized upon exercise, the number of stock options and stock appreciation
rights held at the end of the year, and the realizable gain of the stock options
and stock appreciation rights that are "in-the-money." In-the-money stock
options and stock appreciation rights are stock options or stock appreciation
rights with exercise prices that are below the year-end stock price because the
stock value increased since the date of the grant.
Aggregated Option/SAR Exercises in Last Fiscal Year
and Fiscal Year-End Option/SAR Values
<TABLE>
<CAPTION>
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options/SARs at Options/SARs at
Fiscal Year-End Fiscal Year-End (2)
--------------- -------------------
Shares
Acquired Value
on Real- Exer- Un- Un-
Exer- ized cis- Exercis- Exercis- Exercis-
Name cise (1) able able able able
- --------------------- -------- ----------- -------- -------- ---------- ----------
(#) ($) (#) (#) ($) ($)
<S> <C> <C> <C> <C> <C> <C>
Robert G. Wilmers -- -- 114,000 41,000 43,171,875 11,190,000
Robert E. Sadler, Jr. -- -- 40,201 22,800 14,723,187 5,850,300
Adam C. Kugler -- -- 11,400 5,600 4,238,663 1,435,650
James L. Hoffman 5,000 1,241,875 11,300 12,700 3,989,775 3,283,600
John L. Pett -- -- 5,700 9,800 1,988,462 2,329,800
</TABLE>
- ----------
(1) Based upon the difference between the closing price of the Common Stock on
the American Stock Exchange on the date or dates of exercise and the
exercise price or prices for the stock options or stock appreciation
rights.
(2) Based upon the closing price of the Common Stock on the American Stock
Exchange on December 31, 1997 of $465.00 per share.
26
<PAGE>
Retirement Plan
The following table sets forth the annual retirement benefits under the regular
benefit formula of the First Empire State Corporation Retirement Plan
("Retirement Plan") payable upon retirement to persons within specified levels
of remuneration and years of service classifications assuming attainment of age
65 during 1998.
Pension Plan Table (1) (2)
Years of Service
-------------------------------------------------------
Remuneration 10 15 20 25 30
------------ ------ ------- ------- ------- -------
$150,000 23,944 35,915 47,887 59,859 71,831
250,000 40,944 61,415 81,887 102,359 122,831
350,000 57,944 86,915 115,887 144,859 173,831
450,000 74,944 112,415 149,887 187,359 224,831
550,000 91,944 137,915 183,887 229,859 275,831
- ----------
(1) The table assumes a straight-life annuity form of payment. The retirement
benefits provided under the regular benefit formula of the Retirement
Plan, as depicted in the table, are not subject to any deduction for
Social Security or other offset amounts.
(2) The amounts in the table have not been restricted to those within the
maximum annual retirement benefit which is currently permissible under
the Internal Revenue Code. That limit (the "IRS Benefit Limit") is
$130,000 for 1998. Also, in calculating a participant's benefit, annual
compensation in excess of a limit set annually by the Secretary of the
Treasury may not be considered. That limit (the "IRS Compensation Limit")
is $160,000 for 1998.
The compensation covered by the Retirement Plan benefits summarized in the above
table approximates an employee's base annual salary. The covered compensation
for each of the Named Executive Officers in the Summary Compensation Table would
approximate the highest average of the amounts shown in the "Salary" column of
that table which are paid during any five consecutive calendar year period in
the ten calendar years preceding retirement, subject to the applicable IRS
Compensation Limits. For 1997, covered compensation taken into account under the
Retirement Plan for each of the Named Executive Officers in the Summary
Compensation Table was as follows: Mr. Wilmers - $402,059; Mr. Sadler -
$321,433; Mr. Kugler - $182,548; Mr. Hoffman - $199,415; and Mr. Pett -
$195,680. For purposes of the Retirement Plan, such executive officers had the
following years of service at year end 1997: Mr. Wilmers - 15 years; Mr. Sadler
- - 14 years; Mr. Kugler - 8 years; Mr. Hoffman - 38 years and Mr. Pett - 20
years.
27
<PAGE>
Supplemental Benefit Plans
In addition to retirement benefits under the Retirement Plan, M&T Bank has
agreed, on an unfunded basis, to pay a supplemental retirement benefit to Mr.
Sadler in an amount equal to the difference between 55% of his average annual
compensation, as defined in the Retirement Plan, but without regard to the IRS
Benefit and Compensation Limits, and the amount, if any, payable to him from
such plan. The supplemental retirement benefit to be paid to Mr. Sadler is not
dependent upon his entitlement to retirement benefits under the Retirement Plan;
however, the supplemental benefit is reduced by payments which he will receive
from the retirement plan of his previous employer. Based on current actuarial
assumptions associated with his participation in the Retirement Plan, $105,418
would be payable to Mr. Sadler annually as supplemental retirement benefits
commencing at age 65. An actuarially reduced amount would be payable to him if
he elects early retirement.
Effective January 1, 1994, the Company adopted the First Empire State
Corporation Supplemental Pension Plan (the "Supplemental Pension Plan"). The
purpose of the Supplemental Pension Plan is to provide for the payment of
supplemental retirement benefits based on a maximum compensation level of
$235,840 to select management and highly compensated employees of certain First
Empire affiliates whose benefits payable under the Retirement Plan are limited
by the IRS Compensation Limit. The supplemental benefits are dependent upon a
participant's entitlement to benefits under the Retirement Plan. A participant's
supplemental benefit is equal to the excess of (a) the payment he would have
received under the Retirement Plan had compensation under that plan been capped
at $235,840 rather than at the IRS Compensation Limit, over (b) the payment
actually received under the Retirement Plan. Each of the Named Executive
Officers is eligible to participate in the Supplemental Pension Plan and, in
accordance with the terms of the Supplemental Pension Plan, M&T Bank has agreed,
on an unfunded basis, to pay retirement benefits under the Supplemental Pension
Plan to each of them. With respect to Mr. Sadler, the supplemental benefit under
the Supplemental Pension Plan is reduced by the supplemental retirement benefit
which M&T Bank has agreed to pay to him in accordance with the preceding
paragraph. Based on current actuarial assumptions associated with participation
in the Retirement Plan, Messrs. Wilmers, Kugler, Hoffman and Pett would receive
the following amounts payable to them annually if they retired at age 65: Mr.
Wilmers - $7,420; Mr. Kugler - $19,576; Mr. Hoffman - $6,031; and Mr. Pett -
$20,400. An actuarially reduced amount would be payable if the participant
elected early retirement. Based on current actuarial assumptions associated with
their participation in the Retirement Plan, Mr. Sadler would receive no benefit
under the Supplemental Pension Plan.
Also effective January 1, 1994, the Company adopted the First Empire State
Corporation Supplemental Retirement Savings Plan (the "Supplemental Savings
Plan"). The purpose of the Supplemental Savings Plan is to provide for the
payment of supplemental benefits to select management and highly compensated
employees of certain First Empire affiliates, contributions on whose behalf
under the Retirement Savings Plan are limited by the IRS Compensation Limit. To
participate in the Supplemental Savings Plan, the executive must make salary
reduction contributions to the Retirement Savings Plan of at least six percent
of compensation (up to the IRS Compensation Limit) and must have compensation in
excess of the IRS Compensation Limit. In such a case, the Company will credit to
the participant's account under the
28
<PAGE>
Supplemental Savings Plan an amount equal to the excess of (a) the matching
contribution that would have been made on his behalf by the Company under the
Retirement Savings Plan had compensation under that plan been capped at $235,840
rather than at the IRS Compensation Limit, over (b) the matching contribution
actually made on his behalf by the Company under the Retirement Savings Plan.
The Supplemental Savings Plan also permits a participant to elect to defer and
have credited to his account under the Supplemental Savings Plan an amount of
compensation in excess of the IRS Compensation Limit, but not in excess of
$235,840, equal to the percentage of compensation the participant has elected to
defer under the Retirement Savings Plan. A participant's account in the
Supplemental Savings Plan is credited with investment income or loss as if the
funds had been invested in the investment funds offered under the Retirement
Savings Plan, as elected by the participant. The amount of a participant's
account under the Supplemental Savings Plan will be paid at such time as the
participant elects irrevocably upon becoming a participant under the
Supplemental Savings Plan. Each of the Named Executive Officers is eligible to
participate in the Supplemental Savings Plan and, in accordance with the terms
of the Supplemental Savings Plan, M&T Bank has agreed, on an unfunded basis, to
pay benefits under the Supplemental Savings Plan to them. See the footnote to
the Summary Compensation Table for a listing of the credits made by the Company
in 1997 under the Supplemental Savings Plan on behalf of each of the Named
Executive Officers.
Employment Agreement
In connection with the execution of the merger agreement with ONBANCorp, Mr.
Bennett waived all of his rights under his employment agreement with ONBANCorp
in consideration for the execution of a new employment agreement with First
Empire and a cash hiring bonus from First Empire. Accordingly, First Empire has
entered into an employment agreement with Mr. Bennett which provides for his
employment commencing on April 1, 1998 and terminating on July 1, 2001. During
that time, Mr. Bennett will serve as chairman of the board of First Empire and
as a vice chairman of M&T Bank. Mr. Bennett received a cash hiring bonus of
$2,000,000 on April 1, 1998, and he will receive an annual base salary of not
less than $550,000, annual bonuses at least equal to those of the most highly
compensated executive officers of the Company, and equity- and non-equity-based
bonuses and awards at least equal to 70 percent of the amount of such awards
made to the most highly compensated executive officers of the Company. First
Empire will also pay to Mr. Bennett an additional $1,000,000 bonus on April 1,
1999.
If Mr. Bennett's employment is terminated either by First Empire or Mr. Bennett
prior to July 1, 2001, then under certain circumstances he will be entitled to
receive (1) the $1,000,000 cash bonus described above, if not previously paid,
(2) the total amount of the annual base salary and annual bonuses that would
have been paid to him through July 1, 2001, (3) a payment equal to the value of
an additional three years of service under the First Empire State Corporation
Retirement Savings Plan and Trust and the First Empire State Corporation
Retirement Plan, (4) a continuation of employee welfare benefits for up to three
years, and (5) outplacement consulting services upon Mr. Bennett's request.
29
<PAGE>
Directors' Fees
First Empire. Directors of First Empire who are not also salaried officers of
the Company or its subsidiaries receive an annual retainer of $10,000 plus $750
for each meeting of the Board of Directors attended. Such directors who are
members of a committee of the Board of Directors of First Empire receive $500
for each committee meeting attended. If a director's domicile is more than 100
miles from the location of a board or committee meeting, such director receives
an additional $375 for attending the board meeting and an additional $250 for
attending the committee meeting. The Board of Directors has established a
limitation on total compensation for services as a director of First Empire and
its subsidiaries of $40,000 per year.
Effective as of January 1, 1998, directors of First Empire will be paid one-half
of their annual compensation in Common Stock. The number of shares of Common
Stock to be paid will be determined by dividing the amount of such compensation
payable in shares of Common Stock by the closing price of a share of Common
Stock on the American Stock Exchange on the date immediately preceding the day
the compensation is payable. All directors of First Empire are entitled to
reimbursement for travel expenses incidental to their attendance at meetings.
In connection with its acquisition of East New York, the Company agreed to grant
to persons who became directors and advisory directors of First Empire and its
subsidiaries upon First Empire's acquisition of East New York and certain other
officers of East New York, on an annual basis, nonstatutory stock options to
purchase shares of the Common Stock having an aggregate fair market value on the
date of grant, in the case of an officer, equal to his or her then basic annual
compensation and, in the case of a non-officer director, equal to the aggregate
amount of his or her then annual retainer and his or her board and committee
meeting fees in the last full calendar year preceding the date of grant. During
1997, Messrs. Benisch and Callan each were granted options covering 137 shares,
each with an exercise price of $290.00 per share. As a result of the merger of
East New York with M&T Bank in May of 1997, the Company has also agreed, subject
to its fiduciary duties, to cause each East New York director to become a member
of the Directors Advisory Council of the New York City Division of M&T Bank
until the earlier of such director's 75th birthday or resignation and to cause
M&T Bank to hold the requisite number of meetings and to appoint such advisory
director to the requisite number of committees so that the advisory director
would receive compensation equivalent to the compensation received as a director
of East New York. Messrs. Benisch and Callan each serve as members of the
Directors Advisory Council of the New York City Division of M&T Bank under such
agreement and receive an annual retainer of $18,000, a fee of $750 for each
meeting attended and a fee of $500 for each committee meeting attended.
M&T Bank. Directors of First Empire who also serve as directors of M&T Bank or
its subsidiaries, if not salaried officers of the Company or its subsidiaries,
receive attendance fees for each board or committee meeting attended. Such
attendance fees are identical to the schedule of fees paid to directors of First
Empire for board and committee meetings attended. In addition, Mr. Baird, as a
member of the Directors Advisory Council of the New York City Division of M&T
Bank, receives an annual retainer of $10,000 and a fee of $1,125 for each
meeting attended. Mr. Hubbard receives a fee of $750 for each meeting of the
Directors Advisory Council of the Rochester Division of M&T Bank attended by
him. All such directors of M&T
30
<PAGE>
Bank and its subsidiaries are entitled to reimbursement for travel expenses
incidental to their attendance at meetings. An unfunded plan for the deferral of
that portion of board and committee fees payable in cash is available to the
directors of M&T Bank whereby a specific amount or percentage of such fees may
be deferred until the later of January 1st following the date the director
leaves the Board of Directors or the date the director reaches age 65. Quarterly
compounded interest is credited to the deferred fees at a rate equal to that
paid on M&T Bank's regular savings accounts.
TRANSACTIONS WITH DIRECTORS AND EXECUTIVE OFFICERS
Directors and executive officers of the Company and their associates are, as
they have been in the past, customers of, and have had transactions with, the
banking subsidiaries of the Company; and additional transactions may be expected
to take place in the future between such persons and subsidiaries. Any loans
from the Company's subsidiary banks to such persons and their associates
outstanding at any time since the beginning of 1997 were made in the ordinary
course of business of the banks on substantially the same terms, including
interest rates and collateral, as those prevailing at the time for comparable
transactions with other persons, and did not involve more than normal risk of
collectibility or present other unfavorable features.
BOARD OF DIRECTORS, COMMITTEES OF THE BOARD AND ATTENDANCE
The Board of Directors held five meetings during 1997. Each of the directors
attended at least 75% of the total number of meetings of the Board of Directors
and of the committees on which the director served, except for Messrs. Brady,
Callan, Goodman and Hubbard.
The Executive Committee of the Board of Directors is empowered to act in the
board's stead when the Board of Directors is not in session, during which time
the Executive Committee possesses all of the board's powers in the management of
the business and affairs of the Company except as otherwise limited by law. The
Executive Committee met once during 1997. Messrs. Wilmers (Chairman), Baird,
Garman and Wehle comprise the current membership of the Executive Committee.
The Audit Committee met four times during 1997 with representatives of the
Company's independent accountants. In addition to recommending the selection of
the independent accountants each year, the Audit Committee reviews the
activities of the examining committees of First Empire's subsidiary banks, the
audit plan and scope of work of the independent accountants, the results of the
annual audit and the limited reviews of quarterly financial information, the
recommendations of the independent accountants with respect to internal controls
and accounting procedures, and any other matters it deems appropriate. Messrs.
Larson (Chairman), Glynn, Hodgson and Lambros and Ms. Bontempo are the current
members of the Audit Committee.
The Compensation Committee is responsible for administering the Stock Option
Plan, including the making of grants thereunder, for administering the Annual
Incentive Plan and, in addition, for making such
31
<PAGE>
determinations and recommendations as the Compensation Committee deems necessary
or appropriate regarding the remuneration and benefits of employees of the
Company and its subsidiaries. The Compensation Committee met five times during
1997. Messrs. Pereira (Chairman), Baird and Brady currently serve as the members
of the Compensation Committee.
First Empire does not have a standing committee of its Board of Directors on
nominations, or any other committee performing similar functions.
NOTIFICATION OF BYLAW AMENDMENTS
Effective February 22, 1998, the New York Business Corporation Law (the "BCL")
was amended in a number of respects relating to corporate finance, proxies,
stockholder voting requirements and other corporate matters. In light of the
recent amendments to the BCL, on February 17, 1998 First Empire's Board of
Directors adopted amendments to the Company's Bylaws effective as of the date of
the 1998 Annual Meeting of Stockholders (the "1998 Bylaw Amendments") in order
to make the Company's Bylaws consistent with the BCL. Stockholder approval of
the 1998 Bylaw Amendments is not required.
The BCL requires that notice of any amendment of the Company's Bylaws pertaining
to the election of directors or the procedures for the calling and conduct of a
meeting of stockholders be given to stockholders in a manner reasonably
calculated to provide stockholders with sufficient time to respond to such an
amendment prior to the date of the next meeting of stockholders affected by such
amendment. A description of the 1998 Bylaw Amendments pertaining to the election
of directors or the procedures for the calling and conduct of a meeting of
stockholders is set forth below.
1. Notice of Meetings. Prior to the 1998 Bylaw Amendments, Article I,
Section 3 of the Company's Bylaws provided that notice of a meeting of
stockholders be given to each stockholder entitled to vote at the meeting at
least 10 but not more than 50 days prior to the date of the meeting. The 1998
Bylaw Amendments have changed this provision to increase from 50 to 60 days the
maximum interval between the giving of notice of a meeting of stockholders and
the date of the meeting. The 1998 Annual Meeting of Stockholders will not be
affected by this amendment as notice of the meeting is not being given more than
50 days prior to the meeting.
2. Proxies. Every stockholder entitled to vote at a meeting of
stockholders or to express consent or dissent without a meeting may authorize
another person or persons to act by proxy. Prior to the 1998 Bylaw Amendments,
Article I, Section 9 of the Company's Bylaws limited the manner in which proxies
could be submitted to the Company, generally requiring the submission of a
signed, written proxy. Under the amended Bylaw provision, the Company will
permit the signing of proxies by facsimile signature and will permit the
authorization of proxies by telegram, cablegram or other electronic
transmission. It is the Company's intention to accept paper-based proxies for
the 1998 Annual Meeting of Stockholders submitted by stockholders of record in
accordance with this provision.
32
<PAGE>
3. Inspectors of Election. Prior to the 1998 Bylaw Amendments, under
Article I, Section 10 of the Company's Bylaws the Company was not required to
appoint inspectors of election for a meeting of stockholders unless requested to
do so by a stockholder present at the meeting. As a result of the 1998 Bylaw
Amendments, the Company now will be required to appoint inspectors of election
for any meeting of stockholders. The 1998 Annual Meeting of Stockholders will
not be affected by this amendment since First Empire has historically appointed
inspectors of election to act at its annual meetings of stockholders and would
have elected to do so at the 1998 Annual Meeting of Stockholders.
4. Record Dates. Prior to the 1998 Bylaw Amendments, Article VI, Section
3 of the Company's Bylaws permitted the Company's Board of Directors to fix a
date for determining which stockholders would be entitled to notice of and to
vote at a meeting of stockholders. That date had to be at least 10 but not more
than 50 days prior to the date of the meeting. The 1998 Bylaw Amendments have
changed this provision to increase from 50 to 60 days the maximum interval
between the date for determining which stockholders are entitled to notice of
and to vote at a meeting of stockholders and the date of such meeting. The 1998
Annual Meeting of Stockholders will not be affected by this amendment as April
2, 1998, the date established for determining which stockholders are entitled to
notice of and to vote at the meeting, is not more than 50 days prior to the
meeting.
The preceding description is merely a summary of the amended Bylaw provisions
and is qualified in its entirety by reference to the full text of the amended
Bylaw provisions set forth in Appendix B to this Proxy Statement.
OTHER MATTERS
The Board of Directors of First Empire is not aware that any matters not
referred to in the form of proxy will be presented for action at the meeting. If
any other matters properly come before the meeting, it is the intention of the
persons named in the enclosed proxy to vote the shares represented thereby in
accordance with their best judgment.
INDEPENDENT PUBLIC ACCOUNTANTS
On the recommendation of the Audit Committee of the Board of Directors, the firm
of Price Waterhouse LLP, certified public accountants, has been selected as
First Empire's principal independent public accountants for the year 1998, a
capacity in which it has served since 1984. Representatives of Price Waterhouse
LLP are expected to be present at the Annual Meeting. The representatives may,
if they wish, make a statement and, it is expected, will be available to respond
to appropriate questions.
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SOLICITATION COSTS
The cost of soliciting proxies in the accompanying form will be borne by First
Empire. The solicitation is being made by mail, and may also be made by
telephone or in person using the services of a number of regular employees of
First Empire and its subsidiary banks at nominal cost. Banks, brokerage firms
and other custodians, nominees and fiduciaries will be reimbursed by the Company
for expenses incurred in sending proxy material to beneficial owners of the
Common Stock.
STOCKHOLDER PROPOSALS
A stockholder wishing to submit a proposal for consideration at the 1999 Annual
Meeting of Stockholders should do so not later than December 10, 1998.
By Order of the Board of Directors.
MARIE KING
Corporate Secretary
April 9, 1998
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APPENDIX A
FIRST EMPIRE STATE CORPORATION
1983 STOCK OPTION PLAN
(COMPOSITE COPY AS OF FEBRUARY 17, 1998)
1. Definitions
In this Plan, except where the context otherwise indicates, the
following definitions apply:
(a) "Agreement" means the written agreement implementing a grant of
an Option and/or Right.
(b) "Board" means the Board of Directors of the Company.
(c) "Code" means the Internal Revenue Code of 1986, as amended.
(d) "Committee" means the committee of the Board meeting the
standards of Rule 16b-3(d)(1) and Treasury Regulations ss. 1.162-27(c)(4), or
any similar successor rules or regulations, appointed by the Board to administer
this Plan. Unless otherwise determined by the Board, the Compensation Committee
of the Board shall be the Committee.
(e) "Common Stock" means the authorized but unissued or reacquired
Common Stock, par value $5.00 per share, of the Company.
(f) "Company" means First Empire State Corporation.
(g) "Date of Exercise" means the date on which the Company receives
notice pursuant to Article 8 of the exercise of an Option or Right.
(h) "Date of Grant" means the date on which an Option or Right is
granted by the action of the Committee or such later date as may be specified by
the Committee in taking such action.
(i) "Director" means any person who is a director of the Company or
any Subsidiary.
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(j) "Employee" means any person determined by the Committee to be an
employee of the Company or any Subsidiary.
(k) "Exchange Act" means the Securities and Exchange Act of 1934, as
amended.
(l) "Fair Market Value" of a share of Common Stock means the amount
equal to the closing price for a share of Common Stock on the American Stock
Exchange as reported by such source as the Committee may select, or, if such
price quotation for a share of Common Stock is not so reported, then the fair
market value of such stock as determined by the Committee pursuant to a
reasonable method adopted in good faith for such purpose, in each case subject
to adjustment under Article 10.
(m) "Grant Price" means (i) in the case of a Right that is not a
Related Right, the Fair Market Value per share on the Date of Grant of the
Right, (ii) in the case of a Right that is a Related Right to a Nonstatutory
Stock Option and not to another Right, either (A) the Option Price per share as
provided in the Related Option or (B) the Fair Market Value per share on the
Date of Grant of the Right, as designated by the Committee in the Agreement
granting the Right, (iii) in the case of a Right that is a Related Right to an
Incentive Stock Option, the Option Price per share as provided in the Related
Option, (iv) in the case of a Right that is a Related Right to another Right and
not to an Option, either (A) the Fair Market Value per share on the Date of
Grant of the Right or (B) the Fair Market Value per share on the Date of Grant
of its Related Right, as designated by the Committee in the Agreement granting
the Right, or (v) in the case of a Right that is a Related Right both to a
Nonstatutory Stock Option and to another Right, (A) the Option Price per share
as provided in the Related Option, (B) the Fair Market Value per share on the
Date of Grant of the Right, or (C) the Fair Market Value per share on the Date
of Grant of its Related Right, as designated by the Committee in the Agreement
granting the Right.
(n) "Incentive Stock Option" means an Option granted under the Plan
that qualifies as an incentive stock option under section 422 of the Code and
that the Company designates as such in the Agreement granting the Option.
(o) "Key Employee" means (i) an Employee who is an officer of the
Company or a Subsidiary, or who is determined by the Committee to be in a
managerial, professional, or other key position of the Company or a Subsidiary,
or (ii) a former trustee or officer of The East New York Savings Bank who, upon
closing of the acquisition by the Company of The East New York Savings Bank, was
granted nonstatutory stock options under the Plan pursuant to the terms of
Section 5(i) of the Merger Agreement by and between First Empire State
Corporation, The East New York Savings Bank and the incorporators of West
Interim Savings Bank.
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(p) "Limited Right" means a limited stock appreciation right granted
under the Plan.
(q) "Limited Right Period" means the period during which a Limited
Right may be exercised as provided in Paragraph 7(h) hereof.
(r) "Nonlimited Right" means a nonlimited stock appreciation right
granted under the Plan.
(s) "Nonlimited Right Period" means the period during which a
Nonlimited Right may be exercised as provided in Paragraph 7(g) hereof.
(t) "Nonstatutory Stock Option" means an Option granted under the
Plan which is not an Incentive Stock Option.
(u) "Offer" means any tender offer or exchange offer for the
Company's Common Stock made by an Offeror which might, if consummated pursuant
to its terms or pursuant to any power reserved in its terms, cause the Offeror
to become the beneficial owner of twenty percent or more of the outstanding
Common Stock. As used in this definition, "beneficial owner" shall have the
meaning ascribed to it from time to time under the rules and regulations
promulgated by the SEC under Section 13(d) of the Exchange Act, or in the event
of the repeal or alteration of such section, such meaning as may from time to
time be ascribed to "beneficial owner" under the rules and regulations
promulgated by the SEC under any similar federal law.
(v) "Offer Price per Share" with respect to the exercise of a
Limited Right means the greater of (i) the highest price per share of Common
Stock paid in any Offer which Offer is in effect at any time during the period
beginning on the ninetieth day prior to the Date of Exercise of such Limited
Right and ending on the Date of Exercise of such Limited Right or (ii) the
highest Fair Market Value per share of Common Stock during such period. Any
securities or property that is part or all of the consideration paid for shares
in the Offer shall be valued in determining the Offer Price per Share at the
higher of (A) the valuation placed on such securities or property by the
corporation, person or other entity making such Offer or (B) the valuation
placed on such securities or property by the Committee.
(w) "Offeror" means any person, other than the Company or any of its
Subsidiaries, who makes an Offer. As used in this definition, "person" shall
include any natural person, corporation, partnership, trust, association,
business entity, or any group of persons, whose ownership of Common Stock would
be required to be reported collectively pursuant to Section 13(d)
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of the Exchange Act and the rules and regulations promulgated by the SEC
thereunder, as from time to time in effect, or in the event of the repeal or
alteration of such section, such reporting requirements as may from time to time
be prescribed by any similar federal law.
(x) "Option" means an Incentive Stock Option or Nonstatutory Stock
Option granted under the Plan.
(y) "Option Period" means the period during which an Option may be
exercised.
(z) "Option Price" means the price per share at which an Option may
be exercised. The Option Price shall be determined by the Committee, but in no
event shall the Option Price be less than the greater of the Fair Market Value
of the Common Stock determined as of the Date of Grant or the par value of the
Common Stock, except that in connection with grants of Options to those Key
Employees who were granted Options upon the closing of the Company's acquisition
of The East New York Savings Bank as described in Section 1(o)(ii) hereof, the
Option Price of Options granted upon closing of the acquisition may not be less
than the price at which Common Stock was sold to the public pursuant to the
underwritten offering in connection with the Company's acquisition of The East
New York Savings Bank.
(aa) "Optionee" means a Key Employee to whom an Option or Right has
been granted.
(bb) "Plan" means the First Empire State Corporation 1983 Stock
Option Plan, as amended.
(cc) "Related Option" means an Option in connection with which, or
by amendment to which, a specified Right is granted.
(dd) "Related Right" means a Right granted in connection with, or by
amendment to, a specified Option or other Right.
(ee) "Right" means a Limited Right or Nonlimited Right granted under
the Plan.
(ff) "Rule 16b-3" means Rule 16b-3 of the rules and regulations as
promulgated and amended from time to time by the SEC under Section 16(b) of the
Exchange Act.
(gg) "SEC" means the Securities and Exchange Commission.
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(hh) "Subsidiary" means a corporation at least fifty percent of the
total combined voting power of all classes of stock of which is owned by the
Company, either directly or through one or more other Subsidiaries.
2. Purpose
This Plan is intended to aid in maintaining and developing strong
management through encouraging the ownership of Common Stock by Key Employees
and through stimulating their efforts by giving suitable recognition, in
addition to their other remuneration, to the ability and industry which
contribute materially to the success of the Company's business interests, and to
provide an incentive to the continued service of such Key Employees.
3. Administration
This Plan shall be administered by the Committee. In addition to any
other powers granted to the Committee, it shall have the following powers,
subject to the express provisions of the Plan:
(a) subject to the provisions of Articles 4, 6 and 7, to determine
in its discretion the Key Employees to whom Options or Rights shall be granted
under the Plan, the number of shares to be subject to each Option or Right, and
the terms upon which, the times at which, and the periods within which such
Options or Rights may be acquired and exercised;
(b) to determine all other terms and provisions of each Agreement,
which need not be identical;
(c) without limiting the foregoing, to provide in its discretion in
an Agreement:
(i) for an agreement by the Optionee to render services to the
Company or a Subsidiary upon such terms and conditions as may be
specified in the Agreement, provided that the Committee shall not
have the power to commit the Company or any Subsidiary to employ or
otherwise retain any Optionee;
(ii) for restrictions on the transfer, sale or other
disposition of the Common Stock issued to the Optionee upon the
exercise of an Option or Right;
(iii) for an agreement by the Optionee to resell to the
Company, under specified conditions, stock issued upon the exercise
of an Option or Right; and
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(iv) for the form of payment of the Option Price upon the
exercise of an Option, including without limitation in cash, by
delivery (including constructive delivery) of shares of Common Stock
valued at Fair Market Value on the Date of Exercise of the Option,
or by a combination of cash and Common Stock;
(d) to construe and interpret the Agreements and the Plan;
(e) to require, whether or not provided for in the pertinent
Agreement, of any person exercising an Option or Right granted under the Plan,
at the time of such exercise, the making of any representations or agreements
which the Committee may deem necessary or advisable in order to comply with the
securities laws of the United States or of any state;
(f) to provide for satisfaction of an Optionee's tax liabilities
arising in connection with the Plan through, without limitation, retention by
the Company of shares of Common Stock otherwise issuable on the exercise of a
Nonstatutory Stock Option or Nonlimited Right or through delivery of shares of
Common Stock to the Company by the Optionee under such terms and conditions as
the Committee deems appropriate; and
(g) to make all other determinations and take all other actions
necessary or advisable for the administration of the Plan.
Any determinations or actions made or taken by the Committee
pursuant to this Article shall be binding and final.
4. Eligibility
Options and Rights may be granted only to Key Employees, provided,
however, that the members of the Committee are not eligible to receive Options
or Rights under the Plan. A Key Employee who has been granted an Option or Right
may be granted additional Options and Rights.
5. Stock Subject to the Plan
(a) There is hereby reserved for issuance upon the exercise of
Options and Rights granted under this Plan an aggregate of 2,500,000 shares of
Common Stock, subject to the provisions of Article 10; provided, however, that
no Key Employee shall be granted in any fiscal year of the Company Options and
Rights (including Rights that may be exercised only for cash) for more than
50,000 shares, provided that a newly-hired Key Employee who will serve as an
executive officer of the Company may receive an additional one-time grant of
Options and/or Rights covering up to
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50,000 shares of the Common Stock upon commencement of employment with the
Company, and provided further that such limits shall be subject to such
adjustment, if any, as the Committee deems appropriate to reflect such events as
stock dividends, stock splits, recapitalizations, mergers, consolidations or
reorganizations of or by the Company; and
(b) Shares of Common Stock available under this Plan shall be
reduced by the sum of the aggregate number of shares of Common Stock which
become subject to outstanding Options and Rights. To the extent that shares of
Common Stock are not issued or delivered by reason of the settlement in cash (if
permitted in the applicable Agreement, expiration, termination, cancellation or
forfeiture of such Options or Rights, or by reason of the delivery or
withholding of shares of Common Stock to pay all or a portion of the exercise
price of an award, if any, or to satisfy all or a portion of the tax withholding
obligations relating to an award, then such shares of Common Stock shall again
be available under the Plan. The Committee is authorized to modify or amend this
Section 5(b) in such manner as the Committee deems appropriate for the
administration of the Plan.
6. Options
(a) Pursuant to the terms of the Plan, the Committee is hereby
authorized to grant Nonstatutory Stock Options and Incentive Stock Options to
Key Employees.
(b) All Agreements granting Options shall contain a statement that
the Option is intended to be either (i) a Nonstatutory Stock Option or (ii) an
Incentive Stock Option.
(c) The Option Period shall be determined by the Committee and
specifically set forth in the Agreement, provided, however, that an Option shall
not be exercisable after ten years from the Date of Grant in the case of an
Incentive Stock Option and after ten years and one day from the Date of Grant in
the case of a Nonstatutory Stock Option.
(d) The aggregate Fair Market Value (determined as of the date an
Incentive Stock Option is granted) of the Common Stock with respect to which all
Incentive Stock Options granted to any one person at any time (under all stock
option plans of the person's employer corporation and its "parent" and
"subsidiary" corporations) may first become exercisable in any calendar year
shall not exceed $100,000. For purposes of this Paragraph (d), the terms
"parent" and "subsidiary" corporations shall have the respective meanings given
to them in section 424 of the Code.
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(e) All Incentive Stock Options granted under the Plan shall comply
with the provisions of the Code governing incentive stock options and with all
other applicable rules and regulations.
(f) All other terms of Options granted under this Plan shall be
determined by the Committee in its sole discretion.
7. Rights
(a) Pursuant to the terms of the Plan, the Committee is hereby
authorized to grant Rights.
(b) A Nonlimited Right may be granted under the Plan as follows:
(i) in connection with, and at the same time as, the grant of
an Option or a Limited Right under the Plan;
(ii) by amendment of an outstanding Nonstatutory Stock Option
or Limited Right granted under the Plan; or
(iii) independently of any Option or Limited Right granted
under the Plan.
(c) A Limited Right may be granted under the Plan as follows:
(i) in connection with, and at the same time as, the grant of
an Option or a Nonlimited Right under the Plan;
(ii) by amendment of an outstanding Nonstatutory Stock Option
or nonlimited Right granted under the Plan; or
(iii) independently of any Option or Nonlimited Right granted
under the Plan.
(d) A Related Right may apply, in the Committee's discretion, to all
or a portion of the Common Stock subject to its Related Right or Related Option.
(e) A Nonlimited Right granted under the Plan may be exercised in
whole or in part as provided in the Agreement and, subject to the provisions of
the Agreement and Paragraph
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(l) of this Article, entitles its Optionee to receive, without any payment to
the Company, either cash or that number of shares of Common Stock (up to the
highest whole number of shares), or a combination thereof, in the amount of or
having a Fair Market Value determined as of the Date of Exercise equal to the
number of shares of Common Stock subject to the portion of the Nonlimited Right
exercised multiplied by an amount equal to the excess of (i) the Fair Market
Value per share on the Date of Exercise of the Nonlimited Right over (ii) the
Grant Price of the Nonlimited Right.
(f) A Limited Right granted under the Plan may be exercised in whole
or in part as provided in the Agreement and entitles its Optionee to receive,
without any payment to the Company, cash in an amount equal to the number of
shares of Common Stock subject to the portion of the Limited Right exercised
multiplied by an amount equal to the excess of (i) in the case of a Limited
Right that is not a Related Right to an Incentive Stock Option, (A) the Offer
Price per Share over (B) the Grant Price of the Limited Right or (ii) in the
case of a Limited Right that is a Related Right to an Incentive Stock Option,
(A) the Fair Market Value per share on the Date of Exercise of such Limited
Right over (B) the Grant Price of the Limited Right.
(g) Subject to the provisions of Paragraph (i) of this Article, the
Nonlimited Right Period shall be determined by the Committee and set forth in
the Agreement.
(h) Subject to the provisions of Paragraph (i) of this Article, the
Limited Right Period shall be the period beginning on the first day following
the date of the first purchase of shares of Common Stock pursuant to any Offer
and ending on the date ninety days thereafter.
(i) Notwithstanding any other provision of this Plan or any
provision of any Agreement, the following rules shall apply:
(i) a Right will expire no later than the earlier of (A) ten
years from the Date of Grant or (B) in the case of a Related Right,
the expiration of its Related Right or Related Option;
(ii) a Right may be exercised only when the Fair Market Value
of a share of Common Stock on the Date of Exercise exceeds the Grant
Price of the Right;
(iii) a Right that is a Related Right to an Incentive Stock
Option may be exercised only when and to the extent the Related
Option is exercisable; and
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(iv) a Limited Right that is a Related Right to a Nonstatutory
Stock Option or to a Nonlimited Right may be exercised with respect
to all or any portion of the shares subject to the Limited Right
whether or not its Related Right or Related Option is then
exercisable to that extent.
(j) The Company intends that this Article shall comply with the
requirements of Rule 16b-3 during the term of this Plan. Should any provision of
this Article not be necessary to comply with the requirements of Rule 16b-3 or
should any additional provisions be necessary for this Article to comply with
the requirements of Rule 16b-3, the Board or the Committee may amend this Plan
to delete, add to or modify the provisions of the Plan accordingly. The
Company's failure for any reason whatsoever to comply with any requirements of
Rule 16b-3, and any resultant unavailability of Rule 16b-3 to Optionees shall
not impose any liability on the Company to any Optionee or to any other party.
(k) The exercise, in whole or in part, of a Related Right shall
cause a reduction in the number of shares of Common Stock subject to its Related
Right or Related Option equal to the number of shares of Common Stock with
respect to which the Right being exercised is exercised. Similarly, the
exercise, in whole or in part, of a Related Option shall cause a reduction in
the number of shares subject to the Related Right equal to the number of shares
with respect to which the Related Option is exercised.
(l) Subject to the limitations of the Agreement and this Paragraph
(l), an Optionee may (A) elect to receive cash upon exercise of a Right and
exercise such Right or (B) exercise a Right exercisable only for cash, and upon
such election and exercise or such exercise, the Company shall settle its
obligations arising out of the exercise of the Right by the payment of cash in
the amount set forth in Paragraph (e) of this Article if the Right is a
Nonlimited Right, or in the amount set forth in Paragraph (f) of this Article if
the Right is a Limited Right; provided, however, that the Committee shall have
the sole discretion to consent to or to disapprove the election of any Optionee
to receive cash in full or partial settlement of a Right.
Any election by an Optionee for settlement in cash must be made in
the notice of exercise of the Right. In cases where an election of settlement in
cash must be consented to by the Committee, the Committee may consent to, or
disapprove, such election at any time after such election, or within such period
for taking such action as is specified in the notice of exercise and election,
and failure to give such consent shall be disapproval. Such consent may be given
in whole or as to a portion of the Right surrendered by the Optionee. If such
election to receive cash is disapproved in whole or in part, the Right shall be
deemed to have been exercised for stock, or, if
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so specified in the notice of exercise and election, not to have been exercised,
to the extent such election to receive cash is disapproved.
8. Exercise
An Option or Right may be exercised, subject to the provisions of
the Agreement under which it was granted, in whole or in part by the delivery to
the Company of written notice of the exercise, in such form as the Committee may
prescribe, accompanied, in the case of an Option, by either (a) full payment for
the Common Stock with respect to which the Option is exercised; (b) delivery of
shares of Common Stock (including constructive delivery) having a Fair Market
Value on the date of surrender equal to the aggregate exercise price of the
Shares as to which said option shall be exercised; or (c) a properly executed
exercise notice and irrevocable instructions to a broker promptly to deliver to
the Company cash equal to the exercise price.
9. Nontransferability
Except as otherwise provided in an Agreement, Options and Rights
granted under the Plan shall not be transferable otherwise than by will or the
laws of descent and distribution, and an Option or Right may be exercised,
during the Optionee's lifetime, only by the Optionee or, in the event of the
Optionee's legal disability, by the Optionee's legal representative. A Related
Right is transferable only when its Related Right or Related Option is
transferable and only with its Related Right or Related Option and under the
same conditions.
10. Capital Adjustments
The number, class and Fair Market Value of shares subject to each
outstanding Option or Right, the Option Price and the aggregate number and class
of shares for which grants thereafter may be made shall be subject to such
adjustment, if any, as the Committee in its sole discretion deems appropriate to
reflect such events as stock dividends, stock splits, recapitalizations,
mergers, consolidations or reorganizations of or by the Company.
11. Termination or Amendment
The Board shall have the power to terminate the Plan and to amend it
in any respect, provided that after the Plan has been approved by the
stockholders of the Company, the Board may not amend the Plan, without the
approval of the stockholders of the Company, if such amendment would be required
to be approved by the stockholders of the Company under the laws of the State of
New York, in order for the Plan to continue to satisfy the conditions of Rule
16b-3, in order for
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Incentive Stock Options to qualify as such under section 422 of the Code, or
under the rules of any securities exchange on which shares of Common Stock are
listed. No termination or amendment of the Plan shall affect adversely the
rights or obligations of the holder of any Option or Right granted under the
Plan without the holder's consent.
12. Modification, Extension and Renewal of Options and Rights
Subject to the terms and conditions and within the limitations of
the Plan, the Committee may modify, extend or renew outstanding Options and
Rights granted under the Plan; or may accept the surrender of outstanding
Options and Rights (to the extent not exercised theretofore) granted under the
Plan, or outstanding options and rights (to the extent not exercised
theretofore) granted under any other stock option, stock purchase, stock
appreciation rights, or other stock-related plan of the Company or of a company
which has been merged or consolidated with the Company or a Subsidiary or which
has become a Subsidiary through the acquisition by the Company or by a
Subsidiary of stock or assets of the company, and authorize the granting of new
Options and Rights pursuant to the Plan in substitution therefor (to the extent
not exercised theretofore), and the substituted Options and Rights may specify
terms different than the surrendered options and rights or have any other
provisions which are authorized by the Plan; or may assume options and rights
granted by such other company, and such options and rights shall not reduce the
number of shares of Common Stock available for the grant of Options and Rights
under this Plan, except to the extent that such options and rights are granted
under this Plan pursuant to a provision of a plan or agreement of merger of such
other company with the Company, and to the extent that such options and rights,
if granted under this Plan, would reduce the number of shares of Common Stock
available pursuant to the provisions of Article 5. The Company may grant options
and rights otherwise than under the provisions of this Plan and may adopt other
stock option plans or stock purchase, stock appreciation rights, or other
stock-related plans, and such options and rights and the options, rights, and
stock granted or issued under such plans shall not reduce the number of shares
of Common Stock available for the grant of Options and Rights under this Plan.
Neither the adoption or amendment of this Plan nor the submission of the Plan or
amendments for stockholder approval shall be deemed to impose any limitation on
the powers of the Company to grant or assume options or rights otherwise than
under this Plan or to adopt other stock option plans or stock purchase, stock
appreciation rights, or other stock-related plans, nor shall they be deemed to
impose any requirement of stockholder approval upon the same. Notwithstanding
the foregoing, however, no modification of an Option or Right granted under the
Plan shall alter or impair the rights or obligations of the holder of such
Option or Right without the consent of the holder.
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13. Effectiveness of the Plan
The Plan and any amendments which require stockholder approval
pursuant to Article 11 are subject to approval by vote of the stockholders of
the Company within twelve months after their adoption by the Board. Subject to
such approval, the Plan and any amendments are effective on the date on which
they are adopted by the Board. Options and Rights may be granted prior to
stockholder approval of the Plan or amendments, but each such Option or Right
granted shall be subject to the approval, if required, of the Plan or amendments
by the stockholders. Except as otherwise required to satisfy the requirements of
Rule 16b-3, the day on which any Option or Right granted prior to required
stockholder approval of the Plan or amendments is granted shall be the Date of
Grant for all purposes as if the Option or Right had not been subject to such
approval. No Option or Right granted may be exercised prior to such required
stockholder approval.
14. Term of the Plan
Unless sooner terminated by the Board pursuant to Article 11, the
Plan shall terminate ten years from the date on which the Board approves the
most recent amendment to the Plan that changes either the aggregate number of
shares of Common Stock that may be issued under the Plan or the class of persons
eligible to receive Options or Rights under the Plan, and which amendment
subsequently is approved by the stockholders of the Company. No Options or
Rights may be granted after termination. Termination of the Plan shall not
affect the validity of any Option or Right outstanding on the date of
termination.
15. Indemnification of Committee
In addition to such other rights of indemnification as they may have
as Directors or as members of the Committee, the members of the Committee shall
be indemnified by the Company against the reasonable expenses, including
attorneys' fees, actually and reasonably incurred in connection with the defense
of any action, suit or proceeding, or in connection with any appeal therein, to
which they or any of them may be a party by reason of any action taken or
failure to act under or in connection with the Plan or any Option or Right
granted hereunder, and against all amounts reasonably paid by them in settlement
thereof or paid by them in satisfaction of a judgment in any such action, suit
or proceeding, if such members acted in good faith and in a manner which they
believed to be in, and not opposed to, the best interests of the Company.
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16. General Provisions
(a) The establishment of the Plan shall not confer upon any Employee
or Key Employee any legal or equitable right against the Company, any Subsidiary
or the Committee except as expressly provided in the Plan.
(b) The Plan does not constitute inducement or consideration for the
employment of any Employee, nor is it a contract between the Company or any
Subsidiary and any Employee or Key Employee. Participation in the Plan shall not
give any Employee or Key Employee any right to be retained in the service or
employ of the Company or any Subsidiary. The Company and its Subsidiaries retain
the right to hire and discharge any Employee at any time, with or without cause,
as if the Plan never had been adopted.
(c) The interests of any Optionee under the Plan are not subject to
the claims of creditors and may not be assigned, alienated or encumbered in any
way.
(d) The Plan shall be governed, construed and administered in
accordance with the laws of the State of New York and the intention of the
Company that Incentive Stock Options granted under the Plan qualify as such
under section 422 of the Code.
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<PAGE>
APPENDIX B
BYLAW PROVISIONS AFFECTING THE
ELECTION OF DIRECTORS AND THE CALLING AND CONDUCT
OF MEETINGS OF STOCKHOLDERS
Article I, Section 3. Notice of Meetings: Written notice of each meeting
of the stockholders shall be given, personally or by mail, not less than
10 nor more than 60 days before the date of the meeting, to each
stockholder entitled to vote at such meeting. If mailed, such notice shall
be deposited in the United States mail, with first-class postage thereon
prepaid, directed to the stockholder at his address as it appears on the
record of stockholders, or, if he shall have filed with the Secretary of
the Corporation a written request that notices to him be mailed to some
other address, then directed to him at such other address. The notice
shall state the place, date and hour of the meeting, the purpose or
purposes for which the meeting is called and, unless it is the annual
meeting, indicate that the notice is being issued by or at the direction
of the person calling the meeting. The notice need not refer to the
approval of minutes or to other matters normally incident to the conduct
of the meeting. Except for such matters, the business which may be
transacted at the meeting shall be confined to business which is related
to the purpose or purposes set forth in the notice. If, at any meeting,
action is proposed to be taken which would, if taken, entitle dissenting
stockholders to receive payment for their shares, the notice of such
meeting shall include a statement of that purpose and to that effect.
Article I, Section 9. Voting; Proxies: Each stockholder of record shall be
entitled at every meeting of stockholders to one vote for each share
having voting power standing in his name on the record of stockholders of
the Corporation on the record date fixed pursuant to Section 3 of Article
VI of these Bylaws. Each stockholder entitled to vote at a meeting of
stockholders may vote in person, or may authorize another person or
persons to act for him by proxy. Any proxy may be signed by such
stockholder or his duly authorized attorney-in-fact, including by
facsimile signature, and shall be delivered to the Secretary of the
meeting, or may be authorized by telegram, cablegram or other electronic
transmission provided that it can be reasonably determined from such
telegram, cablegram or other electronic transmission that such proxy was
authorized by the stockholder. The signature of a stockholder on any
proxy, including without limitation a telegram, cablegram or other
electronic transmission, may be printed, stamped or written, or provided
by other reliable reproduction, provided such signature is executed or
adopted by the stockholder with intention to authenticate the proxy. No
proxy shall be valid after the expiration of 11 months
B-1
<PAGE>
from the date of its execution unless otherwise provided in the proxy.
Every proxy shall be revocable at the pleasure of the stockholder
executing it, except as otherwise provided by law.
Directors elected at any meeting of the stockholders shall, except as
otherwise provided by law or the certificate of incorporation, be elected
by a plurality of the votes cast in favor or against such action. All
other corporate action to be taken by vote of the stockholders shall,
except as otherwise provided by law, the certificate of incorporation or
these Bylaws, be authorized by a majority of the votes cast in favor or
against such action. The vote for directors, or upon any question before a
meeting of stockholders, shall not be by ballot unless the person
presiding at such meeting shall so direct or any stockholder, present in
person or by proxy and entitled to vote thereon, shall so demand.
Article I, Section 10. Appointment of Inspectors of Election: The board of
directors shall appoint one or more inspectors to act at the meeting or
any adjournment thereof, and may appoint one or more persons as alternate
inspectors to replace any inspector who fails to appear or act. If no
inspector or alternate has been appointed, or in case any inspector or
alternate inspector appointed fails to appear or act, the vacancy shall be
filled by appointment made by the person presiding thereat. Each
inspector, before entering upon the discharge of his duties, shall take
and sign an oath faithfully to execute the duties of inspector at such
meeting with strict impartiality and according to the best of his ability.
No person who is a candidate for the office of director of the Corporation
shall act as an inspector at any meeting of the stockholders at which
directors are elected.
Article VI, Section 3. Fixing of Record Time: The board of directors may
fix, in advance, a day and hour not more than 60 days nor less than 10
days before the date on which any meeting of the stockholders is to be
held, as the time as of which stockholders entitled to notice of and to
vote at such meeting and at all adjournments thereof shall be determined;
and, in the event such record date and time are fixed by the board of
directors, no one other than the holders of record on such date and time
of shares entitled to notice of and to vote at such meeting shall be
entitled to notice of or to vote at such meeting or any adjournment
thereof. If a record date and time shall not be fixed by the board of
directors for the determination of stockholders entitled to notice of and
to vote at any meeting of the stockholders, stockholders of record at the
close of business on the day next preceding the day on which notice of
such meeting is given, and no others, shall be entitled to notice of and
to vote at such meeting or any adjournment thereof; provided, however,
that if no notice of such meeting is given, stockholders of record at the
close of business on the day next
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<PAGE>
preceding the day on which such meeting is held, and no others, shall be
entitled to vote at such meeting or any adjournment thereof.
B-3
<PAGE>
P FIRST EMPIRE STATE CORPORATION
R
O ANNUAL MEETING OF STOCKHOLDERS - MAY 19, 1998 AT 11:00 A.M.
X
Y THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Gregory J. Fitzpatrick, Richard C. Fox,
and D.J. Pat Whiting, Jr. as Proxies and authorizes said Proxies, or any one of
them, to represent and to vote all of the shares of common stock of First Empire
State Corporation which the undersigned may be entitled to vote at the Annual
Meeting of Stockholders to be held on May 19, 1998 and any adjournments thereof
(i) as designated on the item set forth on the reverse side and (ii) at the
discretion of said Proxies, or any one of them, on such other matters as may
properly come before the meeting.
(MARK, SIGN AND DATE ON REVERSE SIDE)
-----------
SEE REVERSE
SIDE
-----------
<PAGE>
Please mark
|X| vote as in
this example
1. ELECTION OF DIRECTORS
Nominees: William F. Allyn, Brent D. Baird, John H. Benisch, William J.
Bennett, C. Angela Bontempo, Robert T. Brady, Patrick J. Callan, Richard
E. Garman, James V. Glynn, Roy M. Goodman, Patrick W.E. Hodgson, Samuel T.
Hubbard, Jr., Russell A. King, Lambros J. Lambros, Wilfred J. Larson, .
Peter J. O'Donnell, Jorge G. Pereira, John L. Vensel, Herbert L.
Washington, John L. Wehle, Jr. and Robert G. Wilmers
FOR WITHHELD
|_| ALL |_| FROM ALL
NOMINEES NOMINEES
For, except vote withheld from the following nominee(s):
|_|
---------------------------------------------
- --------------------------------------------------------------------------------
IF PROPERLY EXECUTED, THIS PROXY WILL BE VOTED AS SPECIFIED OR, IF NOT
SPECIFIED, WILL BE VOTED FOR ALL NOMINEES, FOR APPROVAL OF THE AMENDMENT TO THE
FIRST EMPIRE STATE CORPORATION 1983 STOCK OPTION PLAN AND FOR APPROVAL OF THE
AMENDMENT TO THE FIRST EMPIRE STATE CORPORATION RESTATED CERTIFICATE OF
AMENDMENT. A VOTE FOR ALL NOMINEES, FOR THE APPROVAL OF THE 1983 STOCK OPTION
PLAN AMENDMENT AND FOR THE APPROVAL OF THE AMENDMENT TO THE RESTATED CERTIFICATE
OF INCORPORATION IS RECOMMENDED.
- --------------------------------------------------------------------------------
2. 1983 STOCK OPTION PLAN AMENDMENT
To approve the amendment to the FOR AGAINST ABSTAIN
First Empire State Corporation
1983 Stock Option Plan described |_| |_| |_|
in the accompanying Proxy
Statement
Mark here for Mark here if Mark here to
address you plan discontinue
change and |_| to attend |_| duplicate annual |_|
note change the meeting and quarterly
at left reports
3. AMENDMENT TO THE RESTATED CERTIFICATE OF INCORPORATION
FOR AGAINST ABSTAIN
To approve the amendment to the
Restated Certificate of |_| |_| |_|
Incorporation described in the
accompanying Proxy Statement
Please mark, date and sign below exactly as name appears hereon and return this
proxy in the envelope provided. Persons signing as executors, administrators,
trustees, etc. should so indicate. If a joint account, all should sign.
Signature:____________________________________________ Date:______________
Signature:____________________________________________ Date:______________
