<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended December 31, 1994.
OR
___ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from _______ to _______ .
Commission file number 0-14703
NBT BANCORP INC.
(Exact name of registrant as specified in its charter)
Delaware 16-1268674
(State of Incorporation)(I.R.S.Employer Identification No.)
52 South Broad Street
Norwich, New York 13815
(Address of principal executive offices)(Zip Code)
Registrant's Telephone Number, Including Area Code: 607-337-6000
Securities Registered Pursuant to Section 12(b) of the Act: None
Securities Registered Pursuant to Section 12(g) of the Act:
Common Stock, No Par, $1.00 Stated Value
Preferred Stock, No Par, $1.00 Stated Value
(Title of Class)
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of the Registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III
of this Form 10-K or any amendment to this Form 10-K. _X_.
There are no delinquent filers to the Registrant's knowledge.
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter periods
that the Registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
Yes _X_ No ___
As of February 28, 1995, there were 8,049,618 shares outstanding,
including 35,274 shares held in the treasury, of the Registrant's
common stock, No Par, Stated Value $1.00; of which 7,848,603 common
shares having a market value of $131,464,100 were held by nonaffiliates
of the Registrant. There were no shares of the Registrant's preferred
stock, No Par, Stated Value $1.00, outstanding at that date.
Documents Incorporated by Reference:
- Portions of the NBT BANCORP INC. 1994 Annual Report are
incorporated by reference into Parts I and II of this Form 10-K
as detailed therein.
- Portions of the Proxy Statement of NBT BANCORP INC. dated March
15, 1995 for the Annual Meeting of Stockholders to be held on
April 22, 1995 are incorporated by reference into Part III of
this Form 10-K as detailed therein.
1
<PAGE>
NBT BANCORP INC.
FORM 10-K Table of Contents
PART I
Item 1. Business
Description of Business
Statistical Disclosure by Bank Holding Companies
Item 2. Properties
Item 3. Legal Proceedings
Item 4. Submission of Matters to a Vote of Security Holders
PART II
Item 5. Market for Registrant's Common Stock and Related
Stockholder Matters
Item 6. Selected Financial Data
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Item 8. Financial Statements and Supplementary Data
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure
PART III
Item 10. Directors and Executive Officers of the Registrant
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and
Management
Item 13. Certain Relationships and Related Transactions
PART IV
Item 14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K
2
<PAGE>
PART I
Item 1 -- Description of Business
NBT BANCORP INC. (the "Registrant") is a bank holding company formed
in May 1986, under the laws of the State of Delaware. Its only
subsidiary is The National Bank and Trust Company (the "Bank"). The
Bank serves an eight county area in central and northern New York State
through thirty-five community banking offices. A full-service
commercial bank, it provides a broad range of financial products,
including demand and time deposits, mortgage, consumer, commercial and
agricultural loans, and trust services. The Bank also operates free
standing automated banking units.
Ten of the Bank's full-service community banking offices, in addition
to the main office, are located in Chenango County, six in Delaware
County, four each in Oneida and Broome Counties, three each in Fulton,
Essex, and Clinton Counties and one in Tioga County. Within these
counties, the Bank encounters intense competition in its banking
business from several other financial institutions offering comparable
products. These competitors include other commercial banks (both
locally-based independent banks and local offices of major New York
State metropolitan-based banks), as well as mutual and stock savings
banks, savings and loan associations and credit unions. In addition,
the Bank experiences competition in marketing many of its services from
the local operations of insurance companies, brokerage firms and
pension plans, as well as money market fund groups, governmental
lending agencies, finance companies, mortgage companies, and others.
In establishing competitive prices and levels of service, the Bank
monitors competitive conditions which have their origins in the New
York City money center banks. Many of these financial institutions
market services within the service area of the Bank or otherwise
influence the level of competition in the eight county service area.
There have been significant changes in the banking industry in recent
years which have increased competition. Much of the change has been
brought about by federal legislation intended to "deregulate" the
industry; significant changes in the industry may continue. Bills are
now pending or expected to be introduced in the United States Congress
that contain proposals for altering the structure, regulation, and
competitive relationships of the nation's financial institutions. If
enacted, these bills could increase or decrease the cost of doing
business, limit or expanded permissible activities (including
activities in the insurance and securities fields), or affect the
competitive balance among banks, savings associations, and other
financial institutions. Some of these bills would broaden the powers
of bank holding companies, regulate banks' sales of investment products
such as mutual fund shares, and realign the structure and jurisdiction
of various financial institution regulatory agencies. In addition,
other types of financial institutions, including mutual funds, security
brokerage firms, insurance companies and investment banking firms have
been given, and may continue to be given, powers to engage in
activities which generally have been engaged in only by banks. Such
changes would tend to place the Bank in more direct competition with
other banks and financial institutions.
3
<PAGE>
The Registrant, as a bank holding company, is regulated under the Bank
Holding Company Act of 1956, as amended (the "Act"), and is subject to
the supervision of the Board of Governors of the Federal Reserve System
(the "FRB"). Generally, the Act limits the business of bank holding
companies to banking, or managing or controlling banks, performing
certain servicing for subsidiaries, and engaging in such other
activities as the FRB may determine to be closely related to banking
and a proper incident thereto. The Registrant is a legal entity
separate and distinct from the Bank. The principal source of the
Registrant's income is the Bank's earnings, and the principal source
of its cash flow is dividends from the Bank. Federal laws impose
limitations on the ability of the Bank to pay dividends as discussed
in the Notes to Consolidated Financial Statements. FRB policy requires
bank holding companies to serve as a source of financial strength to
their subsidiary banks by standing ready to use available resources to
provided adequate capital funds to subsidiary banks during periods of
financial stress or adversity.
The Federal Deposit Insurance Corporation Improvement Act of 1991
("FDICIA"), enacted in December 1991, substantially revises the
depository institution regulatory and funding provisions of the Federal
Deposit Insurance Act and makes revisions to several other federal
banking statutes. Among other things, federal banking regulators are
required to take prompt corrective action in respect of depository
institutions that do not meet minimum capital requirements. FDICIA
identifies the following capital tiers for financial institutions: well
capitalized, adequately capitalized, significantly undercapitalized and
critically undercapitalized.
Under the final rules, an institution will be deemed to be: "well
capitalized" if the institution has a total risk-based capital ratio
of 10.0% or greater, a Tier I risk-based ratio of 6.0% or greater, and
a leverage ratio of 5.0% or greater and the institution is not subject
to an order, written agreement, capital directive, or prompt corrective
action directive to meet and maintain a specific level for any capital
measure. FDICIA imposes progressively more restrictive constraints on
operations, management and capital distributions, depending on the
capital category in which an institution is classified. At December
31, 1994, the Registrant and the Bank fell into the well capitalized
category based on the ratios and guidelines noted above. Various other
legislation, including proposals to overhaul the banking regulatory
system and to limit the investments that a depository institution may
make with insured funds, are from time to time introduced in Congress.
During 1994, the federal banking agencies and Congress have focused
attention on matters that include risk management and internal controls
related to derivative activity; sales of mutual fund shares and other
nondeposit, uninsured products; merger of the Bank and Savings
Association Insurance Funds; Federal Home Loan Bank system reform;
reform of the Community Reinvestment Act and fair lending law
enforcement. Whether and in what form any such legislative and
regulatory initiatives might be adopted cannot be predicted; therefore
the Registrant cannot determine the ultimate effect that any potential
legislation or regulatory changes, if enacted, would have upon its
financial condition or operations.
4
<PAGE>
Beginning on June 1, 1997, and earlier if expressly permitted by a
nondiscriminatory state law, an adequately capitalized and adequately
managed bank may apply for permission to merge with an out-of-state
bank and convert all branches of both parties into branches of a single
bank. States retain the authority to prohibit such mergers if between
September 29, 1994 and June 1, 1997 they enact a statute expressly
prohibiting them and that statute applies equally to all out-of-state
banks. Banks are also permitted to open newly-established branches in
any state that expressly permits all out-of-state banks to open newly-
established branches, if the law applies equally to all banks.
The Bank is subject to primary supervision, regulation, and examination
by the Office of the Comptroller of the Currency, (the "OCC"), whose
regulations are intended primarily for the protection of the Bank's
depositors and customers rather than holders of the Registrant's
securities. The Bank is subject to extensive federal statutes and
regulations that significantly affect its business and activities. The
Bank must file reports with its regulators concerning its activities
and financial condition and obtain regulatory approval to enter into
certain transactions. The Bank is also subject to periodic
examinations by the OCC to ascertain compliance with various regulatory
requirements. Other applicable statutes and regulations relate to
insurance of deposits, allowable investments, loans, acceptance of
deposits, trust activities, mergers, consolidations, payment of
dividends, capital requirements, reserves against deposits,
establishment of branches and certain other facilities, limitations on
loans to one borrower and loans to affiliated persons, and other
aspects of the business of banks. Recent federal legislation has
instructed federal agencies to adopt standards or guidelines governing
banks' internal controls, information systems, internal audit systems,
loan documentation, credit underwriting, interest rate exposure, asset
growth, compensation and benefits, asset quality, earnings and stock
valuation, and other matters. Legislation adopted in 1994 gives the
federal banking agencies greater flexibility in implementing standards
on asset quality, earnings, and stock valuation. Regulatory authori-
ties have broad authority to initiate proceedings designed to prohibit
banks from engaging in unsafe and unsound banking practices.
The deposits of the Bank are insured, up to applicable limits, by the
Federal Deposit Insurance Corporation, ("FDIC"); the Bank is therefore
subject to the regulations of the FDIC.
At March 3, 1995 the Registrant had 425 full-time and 113 part-time
employees.
5
<PAGE>
PART I (continued)
Statistical Disclosure by Bank Holding Companies
I. Distribution of Assets, Liabilities, and Stockholders' Equity;
Interest Rates and Interest Differential
Information required by this section of Securities Act Industry
Guide 3, or Exchange Act Industry Guide 3, ("Guide 3") is
presented in the Registrant's 1994 Annual Report in Management's
Discussion and Analysis of Financial Condition and Results of
Operations on pages 42 and 43 in the table of Average Balances,
Net Interest Income, Yields and Rates and on page 32 in the
table of Changes in Taxable Equivalent Net Interest Income -
Rate/Volume Analysis which portions are incorporated herein by
reference.
II. Securities Portfolio
A. Book Value of Securities
Information required by this section of Guide 3 is presented in
the Registrant's 1994 Annual Report in Notes to Consolidated
Financial Statements on page 19 in the Tables of the amortized
costs and estimated fair market values of the components of the
securities held to maturity and securities available for sale
portfolios at December 31, 1994 and 1993, which portions are
incorporated herein by reference.
Presented below are the amortized costs and estimated fair market
values of the components of the securities held to maturity and
securities available for sale portfolios at December 31, 1992.
<TABLE>
Securities
Available for Sale Held to Maturity
------------------------------------------------------------------------------
<CAPTION>
<S> <C> <C> <C> <C>
Amortized Market Amortized Market
December 31, 1992 Cost Value Cost Value
------------------------------------------------------------------------------
(in thousands)
U.S. Treasury $23,539 $23,980 $141,767 $145,957
Federal Agency - - 1,509 1,537
States and Political
Subdivisions - - 25,447 25,446
Mortgage-backed 13,351 13,260 42,521 41,980
Other Securities - - 4,271 4,211
------------------------------------------------------------------------------
Total $36,890 $37,240 $215,515 $219,131
------------------------------------------------------------------------------
</TABLE>
6
<PAGE>
B. Maturity Distribution of Investment Securities
Information required by this section of Guide 3 is presented in
the Registrant's 1994 Annual Report in Notes to Consolidated
Financial Statements on page 19 in the Table of Remaining
maturities of securities at December 31, 1994, which is herein
incorporated by reference.
In 1992, the Registrant sold in its entirety, the non-local
portion of its tax-exempt securities portfolio having a book
value of $22,291,000. The income generated by tax-exempt
securities was placing the Registrant in a position of being
potentially subject to the alternative minimum tax.
These securities had not been priced at purchase to cover either
the alternative minimum tax or the time value of funds required
to recoup the alternative minimum tax through future tax credits.
The Registrant decided to dispose of the non-local portion of its
tax-exempt securities portfolio so that it could ensure the
avoidance of the alternative minimum tax and continue to service
the needs of its local municipal customers. It was the
Registrant's opinion that local municipal customers would request
investment in their securities throughout 1993 and 1992. This
demand did not materialize as the availability of such tax-exempt
securities decreased due to the decline in interest rates and the
resulting negative arbitrage position for issuers who were, in
the past periods of higher rates, able to buy and sell similar
financial instruments in separate markets and benefit from price
differentials. It remains the Bank's practice to invest, subject
to availability and favorable federal income tax treatment, in
qualified and designated local municipal issues.
C. Investment Concentrations and Risk Characteristics
As of December 31, 1994 there were no securities of any single
issuer held by the Registrant aggregating more than ten percent
of the Registrant's stockholder's equity. However, as of
December 31, 1994, obligations of the State of New York and its
political subdivisions constituted 100% of the Bank's states and
political subdivisions portfolio. The portfolio did not include
any direct obligations of the State of New York. At that date,
100% of the states and political subdivisions portfolio was
comprised of non-rated investments in the local communities
within the twenty county market area served by the Bank's
Municipal Banking Department.
7
<PAGE>
III. Loan Portfolio
A. Composition of Loan Portfolio
Information required by this section of Guide 3 is presented in
the Registrant's 1994 Annual Report Management's Discussion and
Analysis on page 34 in the table of Composition of Loan Portfolio
which is incorporated herein by reference.
B. Maturities and Sensitivities of Loans to Changes in Interest
Rates
Information required by this section of Guide 3 is presented in
the Registrant's 1994 Annual Report Management's Discussion and
Analysis on page 37 in the table of Maturities and Sensitivities
of Loans to Changes in Interest Rates which is incorporated
herein by reference.
C.1. Risk Elements
<TABLE>
The following table sets forth information relating to assets
containing risk elements as of December 31 for the years 1994 through
1990.
<CAPTION>
<S> <C> <C> <C> <C> <C>
---------------------------------------------------------------------------------
December 31, 1994 1993 1992 1991 1990
---------------------------------------------------------------------------------
(in thousands)
Non-Accruing Loans:
Real estate mortgages $2,950 $ 365 $1,774 $2,561 $ 100
Commercial
and agricultural 1,415 3,693 1,578 716 2,185
Consumer 274 112 450 214 501
---------------------------------------------------------------------------------
Total 4,639 4,170 3,802 3,491 2,786
---------------------------------------------------------------------------------
Other loans past due 90 days or more and still accruing:
Real estate mortgages 523 1,085 1,881 1,430 1,241
Commercial
and agricultural - 410 - 397 469
Consumer 348 1,690 1,074 958 1,424
---------------------------------------------------------------------------------
Total 871 3,185 2,955 2,785 3,134
---------------------------------------------------------------------------------
Restructured loans, not
included above - - - - 59
---------------------------------------------------------------------------------
Other real estate owned 840 430 804 826 913
---------------------------------------------------------------------------------
Total Assets Containing
Risk Elements $6,350 $7,785 $7,561 $7,102 $6,892
---------------------------------------------------------------------------------
</TABLE>
8
<PAGE>
The following table sets forth the amounts of interest income not
recognized on non-accruing loans during each period (not
including the effect of loans charged-off during the period).
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
-------------------------------------------------------------------------
December 31, 1994 1993 1992 1991 1990
-------------------------------------------------------------------------
(in thousands)
Income that would have
been accrued at original
contract rates $465 $284 $276 $326 $403
Amount recognized as income 216 105 96 33 238
-------------------------------------------------------------------------
Interest income not accrued $249 $179 $180 $293 $165
-------------------------------------------------------------------------
</TABLE>
Non-Accruing Loans: The Bank's classification of a loan as a
non-accruing loan is based in part on bank regulatory guidelines
published by the OCC. Non-accrual classification does not mean
that the loan principal will not be collected; rather, that
timely collection of interest is doubtful. When, in the opinion
of management the collection of principal appears unlikely, the
loan balance is charged-off in total or in part.
Factors taken into consideration by management in monitoring the
status of the Bank's loan portfolio include internal loan
reviews, a continuing review of current and projected economic
conditions and comments by bank regulatory authorities. Loans are
transferred to a non-accruing basis generally when principal or
interest payments become ninety days delinquent, or when
management concludes circumstances indicate that collection of
interest is doubtful. When a loan is transferred to a
non-accrual status, any unpaid accrued interest is reversed and
charged against income. Interest income on non-accruing loans
is recognized on a cash basis, i.e., only when cash payments are
received which are not applied to principal. Non-accruing loans
are restored to an accrual status when, in the opinion of
management, the financial condition of the borrower has improved
significantly so that the collectibility of both interest and
principal appears assured and the loan is brought current.
9
<PAGE>
Loan Collateralization: Real estate loans may be issued for up
to ninety-five percent of the appraised value of the collateral
property; loans issued for more than eighty percent of the
appraised value require private mortgage insurance. Home equity
loans may be issued for up to seventy-five percent of the
appraised value of the collateral property. Commercial loans
collateralized by inventory and accounts receivable or equipment
may be issued for up to seventy-five or one hundred percent of
the value of the collateral depending on the nature of the
collateral, financial strength of the borrower, other guarantees
and the term of the loan. Consumer loans may be issued for up
to ninety-five or one hundred percent of the collateral value
depending on its type.
Restructured Loans: Restructured loans occur when a borrower
experiences financial difficulties and the loan is renegotiated
with terms significantly less favorable to the Bank than the
terms of the original loan agreement. Upon restructuring, a loan
would then be placed on a non-accrual basis until collectibility
of both interest and principal on the restructured loan appears
assured. At December 31, 1994 through 1991 the Bank had no
restructured loans and therefore no amount of such loans was on
a non-accruing basis. At December 31, 1990, $59,000 of total
loans had been restructured of which no amount was on a
non-accruing basis.
Other Real Estate Owned: Other real estate owned consists of
properties formerly pledged as collateral for loans and acquired
by the Bank by foreclosure proceedings or by deed in lieu of
foreclosure and, when applicable, in-substance foreclosure
whereby the debtor has little equity in the fair value of the
collateral, loan repayment proceeds can be expected only from the
operation or sale of the collateral and the debtor has
effectively abandoned control of the collateral to the Bank or
it is doubtful the debtor will be able to rebuild equity in the
collateral or otherwise repay the loan in the foreseeable future.
Loans related to properties that have been sold on contract, but
with substandard down payments and/or below market interest rates
are carried as other real estate owned and non-accruing under the
OCC's "Covered Transactions" regulations.
10
<PAGE>
These properties are recorded at the lower of the Bank's
investment or current market value, with any reduction of
carrying value being charged to the allowance for loan losses at
the time of acquisition. Any subsequent write-down, representing
a further, permanent decline in market value, is charged to
operations. Market values are established at acquisition, and
annually thereafter, by independent appraisers. Management's
policy is to dispose of the properties as soon as practicable;
other real estate is not held for investment purposes.
C.2. Potential Problem Loans
Criticized loans as defined by OCC regulations and determined by
the Registrant's internal loan review department, not on non-
accrual status, at December 31, 1994 and 1993, totalled
$26,329,000 and $23,329,000, respectively. A significant portion
of the outstanding balances are secured with various forms of
collateral. Such criticized loans represent approximately 4.6%
and 4.2% of outstanding loans, respectively, without considering
collateral values. In this regard, management has determined
that there are no material adverse trends, material potential
losses at that date not already considered in the allowance
calculation, nor indications of trends or events that would have
a material effect on the Registrant's operations, capital, or
liquidity.
The Bank's policy requires that all segments of the loan
portfolio be reviewed internally on at least an annual basis.
In addition, on a quarterly basis, Senior Management conducts a
review of all identified problem loans in conjunction with a
quarterly analysis of the adequacy of the allowance for loan
losses. All classified and non-performing assets are included
in this review. Charge offs of commercial loans are taken upon
determination that all or a portion of a loan is uncollectible.
Consumer loan charge offs are normally taken at the time a loan
is 120 days delinquent, unless deemed to be adequately secured
and in the process of collection.
Additionally, a substantial portion of the Bank's loans is
secured by real estate located in central and northern New York
State. Accordingly, the ultimate collectibility of a substantial
portion of the Bank's portfolio is susceptible to changes in
market conditions of those areas.
C.3. Foreign Outstandings
The Bank customarily does not make loans to foreign companies
and, at December 31, 1994, 1993 and 1992, there were no foreign
loans outstanding.
11
<PAGE>
C.4. Loan Concentrations
As of December 31, 1994, there were no concentrations of risks
in the Bank's portfolio by type or industry. As discussed
elsewhere, a substantial portion of the Bank's loans are secured
by real estate located in central and northern New York State.
Additionally, commercial loans to farmers constituted
approximately 7% of total loans outstanding at year end. This
portion of the Bank's portfolio continues to perform well.
IV. Summary of Loan Loss Experience
A. Analysis of the Allowance for Loan Losses
Information required by this section of Guide 3 is presented in
the Registrant's 1994 Annual Report Management's Discussion and
Analysis on page 34 in the table of Allowance for Loan Losses
which portions are incorporated herein by reference.
The allowance for loan losses has been established to provide an
allowance for the estimated potential loss related to the
collection of the Bank's loan portfolio. The allowance is
maintained at a level considered adequate to provide for loss
exposure, based on management's evaluation of potential losses
in the portfolio and past loan loss experience, as well as
prevailing and anticipated economic conditions. The levels of
risk for which allowances are established are based on estimates
of probable losses on larger specifically identified loans, and
on loan categories analyzed in total where, based on past
experience, risk factors can be assessed.
The Bank's Loan Review Department is responsible for reviewing
the Bank's loan portfolio on an ongoing basis and for a quarterly
assessment of the adequacy of the allowance for loan losses. In
addition, various regulatory agencies, as an integral part of
their examination process, periodically review the Bank's
allowance for loan losses. Such agencies may require the Bank
to recognize additions to the allowance based on their judgment
of information available to them at the time of their evaluation.
The allowance balance is increased by provisions for possible
loss charged to operations and is reduced by net charge-offs.
Any recoveries of previously charged-off loans are credited
directly to the allowance. Charge-offs are made when the
collectibility of loan principal within a reasonable time is
unlikely. The current status of non-accruing loans, past due
loans and potential problem loans is closely monitored by the
Bank's Loan Review and Credit Administration Departments, Senior
Management and the Board of Directors.
12
<PAGE>
B. Allocation of the Allowance for Loan Losses
Information required by this section of Guide 3 is presented in
the Registrant's 1994 Annual Report Management's Discussion and
Analysis on page 34 in the table of Allocation of the Allowance
for Loan Losses which is incorporated herein by reference.
V. Deposits
Information required by this section of Guide 3 is presented in
the Registrant's 1994 Annual Report Management's Discussion and
Analysis on pages 42 and 43 in the table of Average Balances, Net
Interest Income, Yields and Rates and on page 21 in the table
setting forth the maturity distribution of time certificates of
deposits of $100,000 or more, which portions are incorporated
herein by reference.
VI. Return on Equity and Assets
<TABLE>
The following table shows operating and capital ratios of the
Registrant for each of the last three years.
<CAPTION>
<S> <C> <C> <C>
------------------------------------------------------------------------------
Year Ended December 31, 1994 1993 1992
------------------------------------------------------------------------------
Return on Assets
Net Income/Average Total Assets 0.64% 0.93% 0.94%
Return on Equity
Net Income/Average Stockholders' Equity 6.53% 8.79% 8.89%
Dividend Payout Ratio
Cash Dividends Declared Per Share/
Net Income Per Share 56.13% 39.10% 36.61%
Equity to Assets Ratio
Average Stockholders' Equity/
Average Total Assets 9.88% 10.63% 10.62%
------------------------------------------------------------------------------
</TABLE>
VII. Short-Term Borrowings
Information required by this section of Guide 3 is presented in
the Registrant's 1994 Annual Report in Notes to Consolidated
Financial Statements, on page 21 in the table of details of
short-term borrowings, and is incorporated herein by reference.
13
<PAGE>
PART I (continued)
Item 2 -- Properties
<TABLE>
The Bank operates the following community banking offices:
<CAPTION>
<S> <C> <C> <C> <C>
Date Square
Name of Office Location County Established Footage
Home Office 52 S. Broad St., Norwich, NY Chenango 07-15-1856 73,000
Afton Main St., Afton, NY Chenango 09-01-1962 2,779
Bainbridge 9 N. Main St., Bainbridge, NY Chenango 12-07-1938 4,897
Deposit 105 Front St., Deposit, NY Broome 02-12-1971 3,550
Earlville 2 S. Main St., Earlville, NY Chenango 08-07-1937 1,222
Grand Gorge Rts. 23 & 30, Grand Gorge, NY Delaware 11-01-1957 3,000
Margaretville Main St., Margaretville, NY Delaware 09-03-1963 3,152
New Berlin 2 S. Main St., New Berlin, NY Chenango 12-21-1946 2,195
Sherburne 30 N. Main St., Sherburne, NY Chenango 08-07-1937 3,393
Otselic Valley Rt. 26, DeRuyter Rd.,S. Otselic, NY Chenango 10-01-1945 1,326
North Plaza Rts. 12 & 320, Norwich, NY Chenango 10-15-1986 1,849
South Plaza Rt. 12 S., Norwich, NY Chenango 08-20-1986 1,200
Newark Valley 2 N. Main St., Newark Valley, NY Tioga 10-01-1973 3,893
Maine 67 Main St., Maine NY Broome 10-01-1973 1,458
Hobart Maple Ave., Hobart, NY Delaware 06-28-1974 2,308
Sidney 13 Division St., Sidney, NY Delaware 12-31-1978 3,500
Oxford State St., Oxford, NY Chenango 08-01-1984 3,559
Greene 80 S. Chenango St., Greene, NY Chenango 12-15-1986 3,200
Hancock 1 E. Main St., Hancock, NY Delaware 10-01-1989 7,500
Hamden Rt. 10 Box 144, Hamden, NY Delaware 10-01-1989 1,250
Gloversville 2 N. Main St., Gloversville, NY Fulton 10-01-1989 18,000
Arterial Plaza Second Ave. Ext., Gloversville, NY Fulton 10-01-1989 3,200
Northville N. Main St., Northville, NY Fulton 10-01-1989 3,000
Vail Mills Rt. 30, Vail Mills, NY Fulton 10-01-1989 1,000
Clinton West Park Row, Clinton, NY Oneida 10-01-1989 7,960
New Hartford Par Tech Park, New Hartford, NY Oneida 10-01-1989 3,600
Rome Westgate Plaza, Rome, NY Oneida 10-01-1989 1,950
Lake Placid 81 Main St., Lake Placid, NY Essex 10-01-1989 8,500
Cold Brook Plaza Cold Brook Plaza, Lake Placid, NY Essex 10-01-1989 1,300
Saranac Lake Lake Flower Ave., Saranac Lake, NY Essex 10-01-1989 2,400
Binghamton 1250 Front St., Binghamton, NY Broome 03-29-1993 1,900
Plattsburgh 30 Brinkerhoff St., Plattsburgh, NY Clinton 05-28-1993 4,396
Plattsburgh North Rt. 9, Plattsburgh, NY Clinton 08-28-1993 3,000
Ellenburg Depot Rt.11, Main St., Ellenburg Depot, NY Clinton 08-28-1993 2,346
Vestal 450 Plaza Drive, Vestal, NY Broome 02-01-1994 1,250
Utica Business Pk 555 French Road, New Hartford, NY Oneida 10-01-1994 3,396
<FN>
The Gloversville office was closed January 13, 1995. The Otselic Valley, Binghamton, Vestal, Vail
Mills, Plattsburgh North, Rome, Utica Business Park and New Hartford Offices are leased. All other
banking premises are owned by the Bank. The Bank also has free-standing automated banking units.
</FN>
</TABLE>
14
<PAGE>
PART I (continued)
Item 3 -- Legal Proceedings
The Registrant and its principal subsidiary, The National Bank and
Trust Company (collectively "NBT"), initiated a suit in the Supreme
Court of the State of New York, Chenango County, on October 28, 1988
against Fleet/Norstar Financial Group, Inc., Fleet/Norstar New York,
Inc., and Norstar Bank of Upstate N.Y. (collectively "NORSTAR") for
tortious interference with NBT's contract rights and prospective
business relationship with Central National Bank, Canajoharie, New
York. NBT is seeking damages from NORSTAR for lost profits and special
and punitive damages. On June 20, 1989, the Court dismissed all three
counts of the complaint for failure to state a cause for action. On
March 29, 1990 the Appellate Division of the Supreme Court of New York
reversed the trial court's dismissal of NBT's third cause of action for
tortious interference with prospective business relations and affirmed
the dismissal of NBT's first two causes of action. The New York Court
of Appeals denied NBT's petition for review of the dismissal of the
first two causes of action on the ground that the order appealed from
did not finally determine the action. NBT's motion for reargument of
its petition for review was also denied and NBT's third cause of action
was remanded to the trial court. On March 9, 1994, NBT filed with the
trial court a Note of Issue indicating the amount demanded as
$74,212,288. On July 27, 1994, the trial court granted NORSTAR's motion
for summary judgment as to the third cause of action. NBT appealed this
order to the Appellate Division and oral argument was held in that
appeal on March 29, 1995.
Item 4 -- Submission of Matters to a Vote of Security Holders
This item is omitted since no matters were submitted for security
holder vote during the fourth quarter of 1994.
PART II
Item 5 -- Market for Registrant's Common Stock and Related Stockholder
Matters
Incorporated by reference is the table of Quarterly Common Stock and
Dividend Information on page 39 and the Stock Information on page 44
of the Registrant's 1994 Annual Report.
Item 6 -- Selected Financial Data
Incorporated by reference is the Registrant's 1994 Annual Report table
of Five Year Summary of Selected Financial Data, Page 30. Long-term
obligations consist of long-term debt included in the caption Short-
term borrowings and long-term debt and total $8,734,000, $14,457,000,
$10,320,000, $5,350,000, and $5,380,000 at December 31, 1994, 1993,
1992, 1991, and 1990, respectively.
15
<PAGE>
PART II (continued)
Item 7 -- Management's Discussion and Analysis of Financial Condition
and Results of Operations
Incorporated by reference is the Registrant's 1994 Annual Report
Management's Discussion and Analysis of Financial Condition and Results
of Operations, Pages 31-43.
Item 8 -- Financial Statements and Supplementary Data
Incorporated by reference are the following sections of the
Registrant's 1994 Annual Report:
Independent Auditors' Report, Page 29.
Consolidated Balance Sheets as of December 31, 1994 and 1993, Page
13.
Consolidated Statements of Income for the years ended December 31,
1994, 1993 and 1992, Page 14.
Statements of Consolidated Stockholders' Equity for the years ended
December 31, 1994, 1993 and 1992, Page 15.
Consolidated Statements of Cash Flows for the years ended December
31, 1994, 1993 and 1992, Page 16.
Notes to Consolidated Financial Statements at December 31, 1994 and
for the three years then ended, Pages 17-28.
Supplementary data is incorporated by reference from the Registrant's
1994 Annual Report page 28, Selected Quarterly Financial Data
(Unaudited).
Item 9 -- Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure
This item is omitted since it is not applicable.
PART III
Item 10 -- Directors and Executive Officers of the Registrant
Incorporated by reference are the following sections of the
Registrant's 1995 Proxy Statement Proposal Number 1:
Election of Directors
Executive Officers of NBT BANCORP INC. Other than Directors who are
Officers
Board Meetings and Committees of the Board
16
<PAGE>
PART III (continued)
Item 11 -- Executive Compensation
Incorporated by reference are the following sections of the
Registrant's 1995 Proxy Statement Proposal Number 1:
Compensation of Directors and Officers
Board of Directors Fees
Executive Compensation
Option Grants Information
Aggregate Option Exercises and Fiscal Year End Option Values
Retirement Plan
Employment Contracts and Termination of Employment
Change-In-Control Agreements
Supplemental Retirements Benefits
Daryl R. Forsythe Employment
Compensation Committee Interlocks and Insider Participation
Compensation Committee Report on Executive Compensation
Performance Graph
Employees' Stock Ownership Plan
401(k) Plan
Stock Option Plan
Executive Incentive Compensation Plan
Personal Benefits
Item 12 -- Security Ownership of Certain Beneficial Owners and
Management
Incorporated by reference are the following sections of the
Registrant's 1995 Proxy Statement:
Principal Beneficial Owners Of Common Stock
PROPOSAL NUMBER 1:
Election Of Directors
Executive Officers of NBT BANCORP INC. other than Directors who are
Officers
Item 13 -- Certain Relationships and Related Transactions
Incorporated by reference is the section of the Registrant's 1995 Proxy
Statement:
PROPOSAL NUMBER 1:
Related Party Transactions
Reference is also made to the Registrant's 1994 Annual Report Notes to
Consolidated Financial Statements, page 20 -- Related Party
Transactions, incorporated by reference into Part II, Item 8 of this
Form 10-K.
17
<PAGE>
PART IV
Item 14 -- Exhibits, Financial Statement Schedules and Reports on Form
8-K
Item 14(a)(1)
The consolidated financial statements of NBT BANCORP INC. and
Subsidiary at December 31, 1994 and for each of years in the three year
period ended are incorporated by reference into Part II, Item 8 of this
Form 10-K.
Independent Auditors' Report
Consolidated Balance Sheets as of December 31, 1994 and 1993.
Consolidated Statements of Income for the years ended December 31,
1994, 1993 and 1992.
Consolidated Statements of Stockholders' Equity for the years ended
December 31, 1994, 1993 and 1992.
Consolidated Statements of Cash Flows for the years ended December
31, 1994, 1993 and 1992.
Notes to Consolidated Financial Statements at December 31, 1994 and
for the three years then ended.
Item 14(a)(2)
Financial statement schedules are omitted from this Form 10-K since the
required information is not applicable.
Item 14(a)(3) -- Exhibit Index
An exhibits index follows the signature page to this FORM 10-K.
Item 14(b) -- Reports on Form 8-K
The Registrant filed three reports on Form 8-K during the quarter
ended December 31, 1994.
Form 8-K dated November 15, 1994, filed with the Commission on November
18, 1994, describes the Registrant's adoption of a Stockholders Rights
Plan (Plan). The Company currently is authorized to issue 2 million
shares of preferred stock, no par value, $1.00 stated value. The Board
of Directors is authorized to fix the particular designations,
preferences, rights, qualifications and restrictions for each series
of preferred stock issued. In November 1994, the Company adopted a
Plan designed to ensure that any potential acquiror of the Company
negotiate with the Board of Directors and that all Company stockholders
are treated equitably in the event of a takeover attempt. At that
time, the Company paid a dividend of one Preferred Share Purchase Right
(Right) for each outstanding share of common stock of the Company.
Similar Rights are attached to each share of the Company's common stock
issued after November 15, 1994, subject to adjustment. Under the Plan,
the Rights will not be exercisable until a person or group acquires
beneficial ownership of 20 percent or more of the Company's outstanding
common stock, begins a tender or exchange offer for 25 percent or more
of the Company's outstanding common stock, or an adverse person, as
declared by the Board of Directors, acquires 10 percent or more of the
Company's outstanding common stock. Additionally, until the occurrence
of such an event, the Rights are not severable from the Company's
common stock and, therefore, the Rights will be transferred upon the
transfer of shares of the Company's common stock. Upon the occurrence
of such events, each Right entitles the holder to purchase one one-
hundredth of a share of Series R Preferred Stock, no par value, and
$1.00 stated value per share of the Company at a price of $100.
18
<PAGE>
The Plan also provides that upon the occurrence of certain specified
events, the holders of Rights will be entitled to acquire additional
equity interests, in the Company or in the acquiring entity, such
interests having a market value of two times the Right's exercise price
of $100. The Rights, which expire November 14, 2004, are redeemable in
whole, but not in part, at the Company's option prior to the time they
are exercisable, for a price of $0.01 per Right.
Form 8-K dated December 22, 1994, filed with the Commission on December
23, 1994, describes changes in executive management. On December 22,
1994 Joseph J. Butare, Jr., president, chief executive officer, and
chairman of the board of directors of the Registrant and the Bank
submitted his resignation from those offices and from the board of
directors of the Registrant and the Bank, effective December 31, 1994.
Effective January 1, 1995, the Registrant elected Daryl R. Forsythe as
president and chief executive officer of the Registrant and the Bank
and Everett A. Gilmour as chairman of the board of the Registrant and
the Bank. Mr. Forsythe was been a director of the Registrant since 1992
and of the Bank since 1988. Mr. Forsythe was currently chairman of the
Registrant's and the Bank's Audit, Compliance and Loan Review Committee
and a member of the Compensation and Benefits Committee of the
Registrant and the Bank. Mr. Gilmour was a director of the Registrant
since 1986 and of the Bank since 1962 and was chairman of the board of
the Registrant from 1986 to 1988 and was president of the Bank from
1968 to 1972 and from 1977 to 1986.
Additionally, Form 8-K dated December 22, 1994, filed with the
Commission on January 6, 1995 describes costs related to the
resignation of Joseph J. Butare, Jr. A one-time pre-tax charge to
earnings in the fourth quarter of 1994 of approximately $855,000,
equating to approximately $513,000 after tax, in connection with the
discharge of severance obligations of the Registrant and the Bank under
the employment contract with Mr. Butare, was reported.
19
<PAGE>
Item 14(c) -- Exhibits
Refer to Item 14(a)(3) above.
Item 14(d) -- Financial Statement Schedules
Refer to Item 14(a)(2) above.
20
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report on
Form 10-K to be signed on its behalf by the undersigned, thereunto duly
authorized, this twenty-eighth day of March, 1995.
NBT BANCORP INC.
(Registrant)
By:
/s/ DARYL R. FORSYTHE
---------------------
Daryl R. Forsythe, President
and Chief Executive Officer
/s/ RICHARD I. LINHART
----------------------
Richard I. Linhart, Vice President
Treasurer and Chief
Financial Officer
/s/ Joe C. Minor
----------------
Joe C. Minor, Assistant
Treasurer and Chief
Accounting Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf
of the Registrant in the capacities and on the date indicated.
/s/ DARYL FORSYTHE March 28, 1995
------------------------------------- --------------
Daryl Forsythe, Director DATE
/s/ EVERETT A. GILMOUR March 28, 1995
------------------------------------- --------------
Everett A. Gilmour, Director DATE
/s/ PETER B. GREGORY March 28, 1995
------------------------------------- --------------
Peter B. Gregory, Director DATE
/s/ANDREW S. KOWALCZYK March 28, 1995
------------------------------------- --------------
Andrew S. Kowalczyk, Director DATE
/s/JOHN C. MITCHELL March 28, 1995
------------------------------------- --------------
John C. Mitchell, Director DATE
------------------------------------- --------------
Irwin B. Simon DATE
/s/ PAUL O. STILLMAN March 28, 1995
------------------------------------- --------------
Paul O. Stillman, Director DATE
21
<PAGE>
EXHIBIT INDEX
The following documents are attached as Exhibits to this Form 10-K or,
if annotated by the symbol *, are incorporated by reference as Exhibits
as indicated by the page number or exhibit cross-reference to the prior
filings of the Registrant with the Commission.
Form
10-K
Exhibit Filing
Number Method
3.1 Certificate of Incorporation of NBT BANCORP INC., as *
Amended through March 26, 1988.
Form 10-K for the year ended December 31, 1993, filed
March 30, 1994 -- Exhibit 3.1
3.2 Amendment dated April 27, 1992 to the Certificate of *
Incorporation of NBT BANCORP INC., as Amended through
March 26, 1988.
Form 10-K for the year ended December 31, 1992, filed
March 31, 1993 -- Exhibit 3.2
3.3 By-laws of NBT BANCORP INC., as amended and restated Herein
through November 15, 1995.
Document is attached as Exhibit 3.3
10.1 NBT BANCORP INC. Employee Stock Ownership Plan Amended Herein
and restated as of January 1, 1989, excluding amendments
adopted through December 31, 1994
Document is Attached as Exhibit 10.1
10.2 NBT BANCORP INC. Defined Benefit Pension Plan Amended and Herein
restated as of October 1, 1989, including Amendments
adopted through December 31, 1994
Document is attached as Exhibit 10.2
10.3 Employment Agreement between NBT Bancorp Inc., The National *
Bank and Trust Company and Joseph J. Butare, Jr.
Form 8-K, date of report April 19, 1991 -- Exhibit 10.1
10.4 NBT Bancorp Inc. Excess Benefit Plan for Joseph J. *
Butare, Jr.
Form 8-K, date of report April 19, 1991 -- Exhibit 10.2
10.5 NBT Bancorp Inc. Excess Benefit Trust for the Benefit of *
Joseph J.Butare, Jr.
Form 8-K, date of report April 19, 1991 -- Exhibit 10.3
10.6 Extension of Employment Agreement dated January 27, 1992 *
between NBT Bancorp Inc., The National Bank and Trust
Company and Joseph J. Butare, Jr.
Form 10-K for the year ended December 31, 1991, filed
March 30, 1992 -- Exhibit 10.12
10.7 Extension of Employment Agreement dated November 18, 1992 *
between NBT Bancorp Inc., The National Bank and Trust
Company and Joseph J. Butare, Jr.
Form 10-K for the year ended December 31, 1992, filed
March 31, 1993 -- Exhibit 10.16
22
<PAGE>
EXHIBIT INDEX (continued)
Form
10-K
Exhibit Filing
Number Method
10.8 Extension of Employment agreement between NBT Bancorp Inc. *
and Joseph J. Butare, Jr.
Proxy Statement dated March 15, 1994 for the annual
meeting to be held April 23, 1994, filed March 17, 1994;
Page 10, Employment Contracts and Termination of
Employment and Change-in-Control Arrangements.
10.9 NBT BANCORP INC. Stock Option Plan dated November 26, 1986, *
as amended through February 16, 1993.
Form 10-K for the year ended December 31, 1992, filed
March 31, 1993 -- Exhibit 10.17
10.10 Amendment dated April 24, 1993 to the NBT BANCORP INC. *
Stock Option Plan dated November 26, 1986, as amended
through February 16, 1993.
Proxy Statement dated March 15, 1993 for the annual
meeting to be held April 24, 1993, filed March 23,
1993 -- Annex A NBT BANCORP INC. 1993 Stock Option
Plan, Paragraph 22.
10.11 NBT BANCORP INC. 1993 Stock Option Plan. *
Proxy Statement dated March 15, 1993 for the annual
meeting to be held April 24, 1993, filed March 23,
1993 -- Annex A.
10.12 NBT BANCORP INC. Executive Incentive Compensation Plan. *
Proxy Statement dated March 15, 1995 for the annual
meeting to be held April 22, 1995, filed March 16, 1995;
Pages 12 and 17, Executive Incentive Compensation Plan.
10.13 Lease and Lease Extension of New Hartford Office. *
Form 10-K for the year ended December 31, 1993, filed
March 30, 1994 -- Exhibit 10.20
10.14 Lease of Binghamton Office. *
Form 10-K for the year ended December 31, 1993, filed
March 30, 1994 -- Exhibit 10.21
10.15 Lease of Vestal Office. *
Form 10-Q date of report June 31, 1994 -- Exhibit 10.22
10.16 Lease and Lease Extension of Vail Mills Office. *
Form 10-K for the year ended December 31, 1993, filed
March 30, 1994 -- Exhibit 10.23
10.17 Lease of Plattsburgh North Office. *
Form 10-K for the year ended December 31, 1993, filed
March 30, 1994 -- Exhibit 10.24
10.18 Lease of Rome Office. *
Form 10-K for the year ended December 31, 1993, filed
March 30, 1994 -- Exhibit 10.25
10.19 Lease and Lease Extensions of South Otselic Office. *
Form 10-K for the year ended December 31, 1993, filed
March 30, 1994 -- Exhibit 10.26
10.20 Lease of Utica Business Park. *
Form 10-Q date of report September 30, 1994 -- Exhibit
10.27
23
<PAGE>
EXHIBIT INDEX (continued)
Form
10-K
Exhibit Filing
Number Method
10.21 Change in control agreement with Daryl R. Forsythe Herein
Document is attached as Exhibit 10.21
10.22 Change in control agreement with Richard I. Linhart Herein
Document is attached as Exhibit 10.22
10.23 Change in control agreement with Frederick W. Weismann Herein
Document is attached as Exhibit 10.23
10.24 Supplemental retirements benefits plans NBT BANCORP INC. *
Proxy Statement dated March 15, 1995 for the annual meeting
to be held April 22, 1995 filed March 16, 1995; page 10
Supplemental Retirements Benefits.
10.25 NBT BANCORP INC. Executive Stock Ownership Plan. *
Proxy Statement dated March 15, 1995 for the annual
meeting to be held April 22, 1995, filed March 16, 1995;
Page 13, Stock Option Plan.
12 A computation of the Ratio of Earnings to Fixed Charges is Herein
attached as Exhibit 12.
13.1 All portions of pages 13-44 of NBT BANCORP INC. 1994 Herein
Annual Report that are incorporated herein by reference.
Document is attached as Exhibit 13.1
21 A list of the subsidiaries of the registrant is attached Herein
as Exhibit 21.
23 Consent of KPMG Peat Marwick LLP Herein
Document is attached as Exhibit 23
27 Financial Data Schedule Herein
Document is attached as Exhibit 27
24
EXHIBIT 3.3
By-laws of NBT BANCORP INC.
<PAGE>
BY-LAWS OF
NBT BANCORP INC.
(herein called the "Corporation")
ARTICLE I. OFFICES
Section 1. Principal Office. The principal office of the
Corporation shall be at:
52 South Broad Street
Norwich, New York 13815
or such other place as the Board of Directors may designate.
Section 2. Other Offices. In addition to its principal office,
the Corporation may have offices at such other places, within or
without the State of Delaware, as the Board of Directors may from time
to time appoint or as the business of the Corporation may require.
ARTICLE II. STOCKHOLDERS
Section 1. Annual Meetings. The annual meeting of the
stockholders of the Corporation, for the purpose of electing directors
for the ensuing year and for the transaction of such other business as
may properly come before the meeting, shall be held at such time as may
be specified by the Board of Directors.
Section 2. Special Meetings. A special meeting of the
stockholders may be called at any time by the Board of Directors or by
the Chairman of the Board of Directors, or, if there is none, by the
President, or by the holders of not less than one-half of all the
shares entitled to vote at such meeting.
Section 3. Place of Meetings. Each annual meeting of the
stockholders shall be held at the principal office of the Corporation,
or at such other place, within or without the State of Delaware, as the
Board of Directors may designate in calling such meeting.
Section 4. Notice of Meetings. Written notice of each annual and
each special meeting of the stockholders shall be given by or at the
direction of the officer or other persons calling the meeting. Such
notice shall state the purpose or purposes for which the meeting is
called, the time when and the place where it is to be held, and such
other information as may be required by law. Except as otherwise
required by law, a copy thereof shall be delivered personally, mailed
in a postage prepaid envelope or transmitted by telegraph, cable or
wireless, not less than ten (10) days, except if the purpose of the
meeting is to act on an amendment of the Articles of Incorporation or
on a reduction of stated capital or on a plan of merger or
consolidation, in which event such notice shall be mailed not less than
fifteen (15) days, nor more than sixty (60) days, before such meeting
to each stockholder of record entitled to vote at such meeting; and if
mailed, it shall be directed to such stockholder at his address as it
appears on the stock transfer books of the Corporation, unless he shall
have filed with the Secretary of the Corporation a written request that
notices intended for him be mailed to the address designated in such
request. Notwithstanding the foregoing, a waiver of any notice herein
or by law required, if in writing and signed by the person entitled to
such notice, whether before or after the time of the event for which
notice was required to be given, shall be the equivalent of the giving
of such notice. A stockholder who attends shall be deemed to have had
timely and proper notice of the meeting, unless he attends for the
express purpose of objecting to the transaction of any business because
the meeting is not lawfully called or convened. Notice of any
adjourned or recessed meeting need not be given.
Section 5. Quorum. Except as otherwise provided by law, at any
meeting of the stockholders of the Corporation, the presence in person
or by proxy of the holders of a majority of the total number of issued
and outstanding shares of Common Stock of the Corporation shall
constitute a quorum for the transaction of business. In the absence
of a quorum, a majority in voting power of the stockholders present in
person or represented by proxy and entitled to vote may adjourn the
meeting from time to time and from place to place until a quorum is
obtained. At any such adjourned meeting at which a quorum is present
any business may be transacted which might have been transacted at the
meeting as originally called.
Section 6. Organization. At every meeting of the stockholders,
the Chairman of the Board, or failing him the President, or, in the
absence of the Chairman of the Board and the President, a person chosen
by a majority vote of the stockholders present in person or by proxy
and entitled to vote, shall act as Chairman of the meeting. The
Secretary, or an Assistant Secretary, or, in the discretion of the
Chairman, any person designated by him, shall act as a secretary of the
meeting.
Section 7. Inspectors. The directors, in advance of any meeting,
may, but need not, appoint one or more inspectors of election to act
at the meeting or any adjournment thereof. If an inspector or
inspectors are not appointed, the person presiding at the meeting may,
but need not, appoint one or more inspectors. In case any person who
may be appointed as an inspector fails to appear or act, the vacancy
may be filled by appointment made by the directors in advance of the
meeting or at the meeting by the person presiding thereat. Each
inspector, if any, before entering upon discharge of his duties, shall
take and sign an oath to execute faithfully the duties of inspector at
such meeting with strict impartiality and according to the best of his
ability. The inspector or inspectors, if any, shall determine the
number of shares of stock outstanding and the voting power of each,
the shares of the stock represented at the meeting, the existence of
a quorum, the validity and effect of proxies, and shall receive votes,
ballots or consents, hear and determine all challenges and questions
arising in connection with the right to vote, count and tabulate all
votes, ballots or consents, determine the fairness to all stockholders.
On request of the Chairman of the meeting, the inspector or inspectors,
if any, shall make a report in writing of any challenge, question or
matter determined by him or them and execute a certificate of any fact
found by him or them.
Section 8. Business and Order of Business. At each meeting of
the stockholders such business may be transacted as may properly be
brought before such meeting, whether or not such business is stated in
the notice of meeting or in a waiver of notice thereof, except as
expressly provided otherwise by law or by these By-Laws. The order of
business at all meetings of stockholders shall be as follows:
1. Call to order.
2. Selection of secretary of the meeting.
3. Determination of quorum.
4. Appointment of voting inspectors.
5. Nomination and election of directors.
6. Other business.
Section 9. Voting. Except as otherwise provided by law or by
the Certificate of Incorporation, holders of Common Stock of the
Corporation shall be entitled to vote upon matters to be voted upon by
the stockholders. At each meeting of stockholders held for any
purpose, each stockholder of record of stock entitled to vote thereat
shall be entitled to vote the shares of such stock standing in his name
on the books of the Corporation on the date determined in accordance
with Section 11 of this Article II, each such share entitling him to
one vote.
If a quorum is present, the affirmative vote of the majority of
the shares represented at the meeting and entitled to vote on the
subject matter shall be the act of the stockholders, unless the vote
of a greater number is required by law or the Certificate of
Incorporation.
The voting shall be by voice or by ballot as the Chairman may
decide, except that upon demand for a vote by ballot on any question
or election, made by any stockholder or his proxy present and entitled
to vote on such question or election, such vote by ballot shall
immediately be taken.
Section 10. Voting List. The Secretary of the Corporation shall
make, at least ten (10) days before each meeting of stockholders, a
complete list of the stockholders entitled to vote at any such meeting
or any adjournment thereof, with the address of and the number of
shares held by each stockholder. Such list shall also be produced and
kept open at the time and place of the meeting and shall be subject to
inspection by any stockholder during the whole time of the meeting.
The original stock transfer books shall be PRIMA FACIE evidence as to
who are the stockholders entitled to examine such list or transfer
books or to vote at any meeting of stockholders.
If the requirements of this Section 10 have not been
substantially complied with, the meeting shall, on the demand of any
stockholder in person or by proxy, be adjourned until the requirements
are complied with.
Section 11. Record Dates. The Board of Directors may fix in
advance a date which shall not be more than fifty (50) nor less than
ten (10) days prior to the date of any meeting of stockholders, or the
date for payment of any dividend, or the date when any change or
conversion or exchange of capital stock shall go into effect, or in
connection with obtaining the consent of stockholders for any purpose,
as a record date for the determination of the stockholders entitled to
notice of, and to vote at, any such meeting and any adjournment
thereof, or entitled to receive payment of any such dividend, or to any
such allotment of rights, or to exercise the rights in respect of any
such change, conversion or exchange of capital stock, or to give such
consent; and in such case such stock-holders and only such stockholders
as shall be stockholders of record on the date so fixed shall be
entitled to such notice of, and to vote at, such meeting and any
adjournment thereof, or to receive payment of such dividend or to
receive such allotment of rights, or to exercise such rights, or given
such consent, as the case may be, notwithstanding any transfer of any
stock on the books of the Corporation after such record date fixed as
aforesaid.
If no record date is fixed for the determination of stockholders
entitled to notice of or to vote at a meeting of stockholders, or
stockholders entitled to receive payment of a dividend, the date on
which notice of the meeting is mailed or the date on which the
resolution of the Board of Directors declaring such dividend is
adopted, as the case may be, shall be the record date for such
determination of stockholders. When a determination of stockholders
entitled to vote at any meeting of stockholders has been made as herein
provided, such determination shall apply to any adjournment thereof.
Section 12. Adjournment. Any meeting of stockholders, annual
or special, may adjourn from time to time to reconvene at the same or
some other place, and notice need not be given of any such adjourned
meeting if the time and place thereof are announced at the meeting at
which the adjournment is taken. At the adjourned meeting, the
Corporation may transact any business which might have been transacted
at the original meeting. If the adjournment is for more than thirty
days, or if after the adjournment a new record date is fixed for the
adjourned meeting, a notice of the adjourned meeting shall be given to
each stockholder of record entitled to vote at the meeting.
Section 13. Action by Stockholders Without a Meeting. Whenever
the vote of stockholders at a meeting thereof is required or permitted
to be taken for or in connection with any corporate action by any
provisions of the statutes or of the Certificate of Incorporation or
these By-Laws, the meeting, notice of the meeting, and the vote of
stockholders may be dispensed with if stockholders owning stock having
not less than the minimum number of votes which, by statute, the
Certificate of Incorporation or these By-Laws, is required to authorize
such action at a meeting at which all shares entitled to vote thereon
were present and voted shall consent in writing to such corporate
action being taken; provided that prompt notice of the taking of such
action must be given to those stockholders who have not consented in
writing.
Section 14. Certificates of Stock. Every stockholder of the
Corporation shall be entitled to a certificate of certificates,
certifying the number and class of shares of the stock of the
Corporation owned by him. The Chairman of the Board of Directors, the
President or any Vice-President and the Secretary or an Assistant
Secretary, or any two officers of the Corporation designated by the
Board of Directors, shall sign such certificates.
Section 15. Lost Certificates. The Board of Directors may
direct a new certificate or certificates to be issued in place of any
certificate or certificates theretofore issued by the Corporation
alleged to have been lost, stolen or destroyed, upon the making of an
affidavit of that fact by the person claiming the certificate of stock
to be lost, stolen or destroyed. When authorizing such issue of a new
certificate or certificates, the Board of Directors may, in its
discretion and as a condition precedent to the issuance thereof,
require the owner of such lost, stolen or destroyed certificate or
certificates, or his legal representatives, to advertise the same in
such manner as it shall require and/or to give the Corporation a bond
in such sum as it may direct as indemnity against any claim that may
be made against the Corporation with respect to the certificate alleged
to have been lost, stolen or destroyed.
Section 16. Transfer of Stock. Upon surrender to the
Corporation or the transfer agent of the Corporation of a certificate
for shares duly endorsed or accompanied by proper evidence of
succession, assignment or authority to transfer, it shall be the duty
of the Corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate and record the transaction upon its
books.
Section 17. Proxies. At any meeting of the stockholders, each
stockholder entitled to vote thereat may vote either in person or by
proxy. Such proxy shall be in writing, subscribed by the stockholder
or his duly authorized attorney, but need not be sealed, witnessed or
acknowledged, and shall be filed with the Secretary at or before the
meeting; provided, however, that no proxy shall be voted or acted upon
after eleven months from its date, unless said proxy provides for a
longer period.
ARTICLE III. DIRECTORS
Section 1. General Powers. The business and affairs of the
Corporation shall be managed by the Board of Directors, and all
corporate powers shall be exercised by the Board of Directors, except
as otherwise expressly required by these By-Laws, by the Certificate
of Incorporation, or by law.
Section 2. Qualification, Number, Classification and Term of
Office. Every director must be a citizen of the United States and have
resided in the State of New York, or within one hundred miles of the
location of the principal office of the Corporation, for at least one
year immediately preceding his election, and must own $1,000.00
aggregate book value of Corporate Stock. The number of directors shall
be not less than five nor more than twenty-five. A Board of Directors
shall be elected in the manner provided in these By-Laws. Each
director shall have one vote at any directors' meeting.
The Board of Directors shall be divided into three classes: Class
1, Class 2 and Class 3, which shall be as nearly equal in number as
possible. Each director shall serve for a term ending on the date of
the third Annual Meeting of Shareowners following the Annual Meeting
at which such director was elected; provided, however, that each
initial director in Class 1 shall hold office until the Annual Meeting
of Shareowners in 1987; each initial director in Class 2 shall hold
office until the Annual Meeting of Shareowners in 1988; and each
initial director in Class 3 shall hold office until the Annual Meeting
of Shareowners in 1989.
In the event of any increase or decrease in the authorized number
of directors, (1) each director then serving as such shall nevertheless
continue as a director of the class of which he is a member until the
expiration of his current term, or his earlier resignation, removal
from office or death, and (2) the newly created or eliminated
directorships resulting from such increase or decrease shall be
apportioned by the Board of Directors among the three classes of
directors so as to maintain such classes as nearly equal as possible.
Notwithstanding any of the foregoing provisions of this Section
2, each director shall serve until his successor is elected and
qualified or until his earlier resignation, removal from office or
death.
This Article III, Section 2, shall not be altered, amended or
repealed except by an affirmative vote of at least eighty (80%) of the
total number of shareowners.
Section 3. Election of Directors. At each meeting of the
stockholders for the election of directors, a quorum being present, as
defined in Section 5 of Article II, the election shall proceed as
provided in these By-Laws and under applicable Delaware law. No
election need be by written ballot.
If the election of directors shall not be held on the day
designated for any annual meeting or at any adjournment of such
meeting, the Board of Directors shall cause the election to be held at
a special meeting of the stockholders as soon thereafter as may be
convenient.
Nominations of candidates for election as directors of the
Corporation must be made in writing and delivered to or received by the
President of the Corporation within ten days notice of any Shareowners'
meeting called for the election of directors. Such notification shall
contain the name and address of the proposed nominee, the principal
occupation of the proposed nominee, the number of shares of Common
Stock that will be voted for the proposed nominee by the notifying
shareowner, including shares to be voted by proxy, the name and
residence of the notifying shareowner and the number of shares of
Common Stock beneficially owned by the notifying shareowner.
No person except Everett A. Gilmour shall be eligible for
election or re-election as a director if he or she shall have attained
the age of 72 years. Everett A. Gilmour shall not be eligible for
election or re-election as director if he shall have attained the age
of 74 years.
Nominations not made in accordance herewith may be disregarded
by the Chairman of the meeting.
Section 4. Removal of Directors. Any director may be removed
at any time, either with or without cause, by the affirmative vote of
a majority in voting power of the stockholders of record entitled to
elect a successor, and present in person or by proxy at a special
meeting of such stockholders for which express notice of the intention
to transact such business was given and at which a quorum shall be
present.
Section 5. Organization. The Board of Directors, by majority
vote, may from time to time appoint a Chairman of the Board who shall
preside over its meetings. The period and terms of the appointment
shall be determined by the Board of Directors. The Secretary of the
Corporation, or an Assistant Secretary, or, in the discretion of the
Chairman, any person appointed by him, shall act as secretary of the
meeting.
Section 6. Place of Meeting, etc. The Board of Directors may
hold its meetings at such place or places within or without the State
of Delaware as the Board of Directors may from time to time, by
resolution determine, or (unless contrary to resolution of the Board
of Directors), at such place as shall be specified in the respective
notices or waivers of notice thereof. Unless otherwise restricted by
law or by the Certificate of Incorporation, members of the Board of
Directors or any committee thereof may participate in a meeting of the
Board of such committee by means of a conference telephone or similar
communications equipment by means of which all persons participating
in the meeting can hear each other, and participation in a meeting
pursuant to this Section 6 shall constitute presence at such meeting.
The Chairman or any person appointed by him shall act as secretary of
the meeting.
Section 7. Annual Meeting. The Board of Directors may meet,
without notice of such meeting, for the purpose of organization, the
election of officers and the transaction of other business, on the same
day as, at the place at which, and as soon as practicable after each
annual meeting of stockholders is held. Such annual meeting of
directors may be held at any other time or place specified in a notice
given as hereinafter provided for special meetings of the Board of
Directors, or in a waiver of notice thereof.
Section 8. Regular Meetings. Regular meetings of the Board of
Directors may be held at such times and places as may be fixed from
time to time by action of the Board of Directors. Unless required by
resolution of the Board of Directors, notice of any such meeting need
not be given.
Section 9. Special Meetings. Special meetings of the Board of
Directors shall be held whenever called by the Chief Executive Officer,
or by any three or more directors, or, at the direction of any of the
foregoing, by the Secretary. Notice of each such meeting shall be
mailed to each director, addressed to him at his residence or usual
place of business, not less than three (3) days before the date on
which the meeting is to be held; or such notice shall be sent to each
director at such place by telegraph, cable, telephone or wireless, not
less than twenty-four (24) hours before the time at which the meeting
is to be held. Every such notice shall state the time and place of the
meeting. Notice of any adjourned or recessed meeting of the directors
need not be given.
Section 10. Waivers of Notice of Meetings. Anything in these
By-Laws or in any resolution adopted by the Board of Directors to the
contrary notwithstanding, proper notice of any meeting of the Board of
Directors shall be deemed to have been given to any director if such
notice shall be waived by him in writing (including telegraph, cable
or wireless) before or after the meeting. A director who attends a
meeting shall be deemed to have had timely and proper notice thereof,
unless he attends for the express purpose of objecting to the
transaction of any business because the meeting is not lawfully called.
Section 11. Quorum and Manner of Acting. A majority of the
directors shall constitute a quorum for the transaction of business.
Except as may otherwise be expressly provided by these By-Laws, the act
of a majority of the directors present at any meeting at which a quorum
is present, shall be the act of the Board of Directors. In the absence
of a quorum, a majority of the directors present may adjourn the
meeting from time to time until a quorum be had. The directors shall
act only as a Board and the individual directors shall have no power
as such.
Section 12. Resignations Any director of the Corporation may
resign at any time, in writing, by notifying the Chief Executive
Officer, or the President or the Secretary of the Corporation. Such
resignation shall take effect at the time therein specified; and,
unless otherwise specified, the acceptance of such resignation shall
not be necessary to make it effective.
Section 13. Manner of Fixing the Number of Directors; Vacancies.
The number of directors authorized to serve until the next annual
meeting of stockholders of the Corporation shall be the number
designated, at the annual meeting and prior to the election of
directors, by the stockholders entitled to vote for the election of
directors, by the stockholders entitled to vote for the election of
directors at that meeting. Between annual meetings of the stockholders
of the Corporation, the Board of Directors shall have the power to
increase, by not more than three (3), the number of directors of the
Corporation.
Any vacancy in the Board of Directors, caused by death,
resignation, removal, disqualification, increase in the number of
directors, or any other cause (other than an increase by more than
three (3) in the number of directors), may be filled by the majority
vote of the remaining directors then in office, though less than a
quorum, at any regular meeting of the Board of Directors. If, at the
time of the next election of directors by the stockholders, the term
of office of any vacancy filled by the remaining directors has not
expired, then the stockholders shall fill such vacancy for the
remainder of the unexpired term. Any vacancy, including one caused by
an increase in the number of directors, may be filled at a meeting
called for such purpose, by vote of the stockholders.
Section 14. Committees. The Board of Directors may, by
resolution adopted by a vote of a majority of the number of directors
at the time fixed by these By-Laws, designate a number of directors
deemed appropriate in the aforesaid resolution to be a committee of
limited authority.
Regular meetings of any such committee, of which no notice shall
be necessary, may be held at such times and in such places as shall be
fixed by a majority of the committee. Special meetings of any such
committee may be called at the request of the Chairman of the committee
or any two (2) members of the committee. Notice of each special
meeting of such a committee shall be given by the persons calling the
same as provided by these By-Laws for special meetings of the full
Board.
The Chief Executive Officer will be voting member of all
Committees of the Board of Directors, except the Audit Committee.
A majority of any such committee shall constitute a quorum for
the transaction of business, and the act of a majority of those present
at any meeting at which a quorum is present shall be the act of the
committee. Members of any such committee shall act only as a committee
and the individual members shall have no power as such.
The Board of Directors shall have the power, at any time, to
change the members of, fill vacancies in, and discharge any such
committee, either with or without cause. The appointment of any
director to any such committee, if not sooner terminated, shall
automatically terminate upon the expiration of his term as a director
or upon the earlier cessation of his membership on the Board of
Directors.
Section 15. Directors' Action Without a Meeting. Unless
otherwise provided by the Certificate of Incorporation, any action
required to be taken at a meeting of the directors, or any action which
may be taken at a meeting of the directors or of a committee, may be
taken without a meeting if a consent in writing, setting forth the
action so taken, shall be signed before such action by all the
directors, or all the members of the committee, as the case may be.
Such consent shall have the same force and effect as a unanimous vote.
Section 16. Compensation. Directors, as such, shall not receive
any stated compensation for their services, but by resolution of the
Board of Directors a fixed sum and expenses of attendance, if any, may
be allowed for attendance at each meeting of the Board. Nothing in
this section shall be construed to preclude a Director from serving the
Corporation in any other capacity and receiving compensation therefor.
ARTICLE IV. OFFICERS
Section 1. Officers. The officers of the Corporation shall be
a Chairman of the Board of Directors, one or more Vice Chairmen of the
Board of Directors, a President, a Treasurer and a Secretary, and where
elected, on or more Vice-Presidents, and the holders of such other
offices as may be established in accordance with the provisions of
Section 3 of this Article. Any two or more offices may be held by the
same person; provided only, that the same person shall not hold the
offices of Chairman and Secretary.
Section 2. Election, Term of Office and Qualifications. The
officers shall be elected annually by the Board of Directors, as soon
as practicable after the annual election of directors in each year.
Each officer shall hold office until his successor shall have been duly
chosen and shall qualify, or until his death, resignation or removal
in the manner hereinafter provided.
Section 3. Subordinate Officers. The Board of Directors may
from time to time establish offices in addition to those designated in
Section 1 of this Article IV with such duties as are provided in these
By-Laws, or as they may from time to time determine.
Section 4. Removal. Any officer may be removed, either with or
without cause, by resolution declaring such removal to be in the best
interests of the Corporation and adopted at any regular or special
meeting of the Board of Directors by a majority of the directors then
in office. Any such removal shall be without prejudice to the recovery
of damages for breach of contract rights, if any, of the person
removed. Election of appointment of an officer or agent shall not of
itself, however, create contract rights.
Section 5. Resignations. Any officer may resign at any time by
giving written notice to the Board of Directors or the Chairman of the
Board of Directors, the President or the Secretary of the Corporation.
Any such resignation shall take effect at the date of receipt of such
notice or at any later time therein specified; and, unless otherwise
specified, the acceptance of such resignation shall not be necessary
to make it effective. However, not resignation hereunder, or the
acceptance thereof by the Board of Directors, shall prejudice the
contract or the rights, if any, of the Corporation with respect to the
person resigning.
Section 6. Vacancies. A vacancy in any office because of death,
resignation, removal, disqualification or any other cause shall be
filled for the unexpired portion of the term by the Board of Directors.
Section 7. Compensation. Salaries or other compensation of the
officers may be fixed from time to time by the Board of Directors or
in such manner as it shall determine. No officer shall be prevented
from receiving his salary by reason of the fact that he is also a
director of the Corporation.
Section 8. Chairman of the Board of Directors. Where there is
a Chairman of the Board of Directors he shall be an officer and a
director; and he may be the Chief Executive Officer of the Corporation
and as such may have general supervision of the business of the
Corporation, subject, however, to the control of the Board of Directors
and of any duly authorized committee of directors. The Chief Executive
Officer shall have full power and authority to cast any votes which the
Corporation is entitled to cast as a shareholder of another
corporation. Where there is no Chairman of the Board, or he is unable
to discharge his duties, the powers of the Chairman shall be vested in
the President. The Chairman of the Board shall preside at all meetings
of stockholders and of the Board of Directors at which he is present.
Section 9. Vice Chairman of the Board of Directors. The Vice
Chairman shall be a director of the Corporation. In general, he shall
perform all duties incident to the office of Vice Chairman and such
other duties as may from time to time be designated to him by the Board
of Directors or by any duly authorized committee of directors, and
shall have such other powers and authorities as are conferred upon him
elsewhere in these By-Laws.
Section 10. President. The President shall be a director and
may be the Chief Executive Officer or the Chief Operating Officer of
the Corporation. In general, he shall perform all duties incident to
the office of the President and such other duties as may from time to
time be designated to him by the Board of Directors or by any duly
authorized committee of directors, and shall have such other powers and
authorities as are conferred upon him elsewhere in these By-Laws.
Section 11. The Vice-Presidents. The Vice-Presidents shall
perform such duties as from time to time may be assigned to them by the
Board of Directors, or by any duly authorized committee of directors
or by the President, and shall have such other powers and authorities
as are conferred upon them elsewhere in these By-Laws.
Section 12. Treasurer. Except as may otherwise be specifically
provided by the Board of Directors or any duly authorized committee
thereof, the Treasurer shall have the custody of, and be responsible
for, all funds and securities of the Corporation; receive and receipt
for money paid to the Corporation from any source whatsoever; deposit
all such monies in the name of the Corporation in such banks, trust
companies, or other depositories as shall be selected in accordance
with the provisions of these By-Laws; against proper vouchers, cause
such funds to be disbursed by check or draft on the authorized
depositories of the Corporation signed in such manner as shall be
determined in accordance with the provisions of these By-Laws;
regularly enter or cause to be entered in books to be kept by him or
under his direction, full and adequate accounts of all money received
and paid by him for account of the Corporation; in general, perform all
duties incident to the office of Treasurer and such other duties as
from time to time may be assigned to him by the Board of Directors, or
by any duly authorized committee of directors, or by the Chief
Executive Officer, and have such other powers and authorities as are
conferred upon him elsewhere in these By-Laws.
Section 13. Secretary. The Secretary shall act as Secretary of
all meetings of the stockholders and of the Board of Directors of the
Corporation; shall keep the minutes thereof in the proper books to be
provided for that purpose; shall see that all notices required to be
given by the Corporation are duly given and served; shall be the
custodian of the seal of the Corporation and shall affix the seal or
cause it to be affixed to all documents the execution of which on
behalf of the Corporation under its seal is duly authorized in
accordance with the provisions of these By-Laws; shall have charge of
the books, records and papers of the Corporation relating to its
organization and management as a corporation, and shall see that any
reports or statements relating thereto, required by law or otherwise,
are properly
kept and filed; shall, in general, perform all the duties incident to
the office of Secretary and such other duties as from time to time may
be assigned to him by the Board of Directors, or by any duly authorized
committee of directors or by the Chief Executive Officer, and shall
have such other powers and authorities as are conferred upon him
elsewhere in these By-Laws.
Section 14. Assistant Treasurers and Assistant Secretaries. The
Assistant Treasurers and Assistant Secretaries shall perform such
duties as shall be assigned to them by the Treasurer and by the
Secretary, respectively, or by the Board of Directors, or by any duly
authorized committee of directors, or by the Chief Executive Officer,
and shall have such other powers and authorities as are conferred upon
them elsewhere in these By-Laws.
ARTICLE V. SHARES OF STOCK
Section 1. Regulation. Subject to the terms of any contract of
the Corporation, the Board of Directors may make such rules and
regulations as it may deem expedient concerning the issue, transfer,
and registration of certificates for shares of the stock of the
Corporation, including the issue of new certificates for lost, stolen
or destroyed certificates and including the appointment of transfer
agents and registrars.
Section 2. Stock Certificates. Certificates for shares of the
stock of the Corporation shall be respectively numbered serially for
each class of shares, or series thereof and, as they are issued, shall
be impressed with the corporate seal or a facsimile thereof, and shall
be signed by the Chairman of the Board, the Vice Chairman, the
President or any Vice President and by the Secretary or any Assistant
Secretary, or any two officers of the Corporation designated by the
Board of Directors, provided that such signatures may be facsimiles on
any certificate countersigned by a transfer agent other than the
Corporation or its employee or by a registrar other than the
Corporation or its employee. Each certificate shall exhibit the name
of the Corporation, the class (or series of any class) and number of
shares represented thereby and the name of the holder. Each
certificate shall be otherwise in such form as may be prescribed by the
Board of Directors.
ARTICLE VI. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 1. The Corporation shall indemnify any person who was
or is a party or is threatened to be made a party to any threatened,
pending, or completed action, suit or proceeding, whether civil,
criminal, administrative, or investigative (other than an action by or
in the right of the Corporation), by reason of the fact that he is or
was a director or officer of the Corporation, or is or was serving at
the request of the Corporation as a director or officer of another
corporation, partnership, joint venture, trust, or other enterprise,
against expenses (including attorneys' fees), judgments, fines, and
amounts paid in settlement actually and reasonably incurred by him in
connection with such action, suit, or proceeding if he acted in good
faith and in a manner he reasonably believed to be in, or not opposed
to, the best interests of the Corporation, and with respect to any
criminal action or proceeding, had no reasonable cause to believe his
conduct was unlawful. The termination of any action, suit, or
proceeding by judgment, order, settlement, conviction, or upon a plea
of NOLO CONTENDERE or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner
which he reasonably believed to be in, or not opposed to, the best
interests of the Corporation, and with respect to any criminal action
or proceeding, the person had reasonable cause to believe that his
conduct was unlawful.
Section 2. The Corporation shall indemnify any person who was
or is a party or is threatened to be made a party to any threatened,
pending, or completed action, suit or proceeding by or in the right of
the Corporation to procure a judgment in its favor by reason of the
fact that he is or was a director or officer of the Corporation, or is
or was serving at the request of the Corporation as a director or
officer of another corporation, partnership, joint venture, trust, or
other enterprise, against expenses (including attorneys' fees) actually
and reasonably incurred by him in connection with defense or settlement
of such action or suit if he acted in good faith and in a manner he
reasonably believed to be in, or not opposed to, the best interest of
the Corporation, except that no indemnification shall be made in
respect of any claim, issue, or matter as to which such person shall
have been adjudged to be liable for negligence or misconduct in the
performance of his duty to the Corporation unless and only to the
extent that the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of liability
but in view of all the circumstances of the case, such person is fairly
and reasonably entitled to indemnity for such expenses which the court
shall deem proper.
Section 3. To the extent that a director or officer of the
Corporation has been successful on the merits or otherwise in defense
of any action, suit, or proceeding referred to in Sections 1 and 2 of
this Article VI, or in defense of any claim, issue or matter therein,
he shall be indemnified against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection therewith.
Section 4. Any indemnification under Section 1 and 2 of this
Article VI (unless ordered by a court) shall be made by the Corporation
only as authorized in the specific case upon a determination that
indemnification of the director or officer proper in the circumstances
because he has met the applicable standard of conduct set forth in
Sections 1 and 2 of this Article VI. Such determination shall be made
(1) by the Board of Directors by a majority vote of a quorum consisting
of directors who were not parties to such action, suit or proceeding,
or, (2) is such a quorum is not obtainable, or, even if obtainable, if
a quorum of disinterested directors so directs, by independent legal
counsel in a written opinion, or (3) by the stockholders.
Section 5. Expenses incurred by an officer or director in
defending a civil or criminal action, suit, or proceeding shall be paid
by the Corporation in advance of the final disposition of such action,
suit or proceeding as authorized by the Board of Directors in the
specific case upon receipt of an undertaking by or on behalf of such
officer or director to repay such amount unless it shall ultimately be
determined that he is entitled to be indemnified by the Corporation as
authorized in this Article VI.
Section 6. The indemnification provided by this Article VI shall
not be deemed exclusive of any other rights to which those seeking
indemnification may be entitled under any statutes, By-Laws,
agreements, vote of stockholders or disinterested directors, or
otherwise, both as to action in his official capacity and as to action
in another capacity while holding such office. The indemnification
provided by this Article VI shall continue as to a person who has
ceased to be director or officer and shall inure to the benefit of the
heirs, executors, and administrators of such a person.
Section 7. The corporation shall have power to purchase and
maintain insurance on behalf of any person who is or was a director or
officer of the Corporation, or is or was serving at the request of the
Corporation as a director or officer of another corporation,
partnership, joint venture, trust, or other enterprise against any
liability asserted against him and incurred by him in any such
capacity, or arising out of his status as such, whether or not the
Corporation would have the power to indemnify him against such
liability under the provisions of this Article VI.
ARTICLE VII. MISCELLANEOUS
Section 1. Seal. The corporate seal of the Corporation shall
contain the name of the Corporation, the year of its creation, and the
words "Corporate Seal, Delaware," and shall be in such form as may be
approved by the Board of Directors.
Section 2. Fiscal Year. The fiscal year of the Corporation
shall be as set by the Board of Directors.
Section 3. Loans. Any officer or officers or agent or agents
of the Corporation thereunto authorized by the Board of Directors or
by any duly authorized committee of directors may effect loans or
advances at any time for the Corporation, in the ordinary course of the
Corporation's business, from any bank, trust company or other
institution or from any firm, corporation or individual, and for such
loans and advances may make, execute and deliver promissory notes,
bonds or other certificates or evidences of indebtedness of the
Corporation, and when authorized to do so may pledge and hypothecate
or transfer any securities or other property of the Corporation as
security for any such loans or advances. Such authority conferred by
the Board of Directors or any duly authorized committee of directors
may be general or confined to specific instances.
Section 4. Checks, Drafts, Withdrawal of Securities, Safe
Deposit Boxes, etc. All checks, drafts and other orders for payment
of money out of the funds of the Corporation shall be signed on behalf
of the Corporation in such manner as shall from time to time be
determined by resolution of the Board of Directors or of any duly
authorized committee of directors. The Corporation shall furnish to
each depository, bank, custodian and entity providing safe deposit
boxes, a certified copy of its resolution regarding the authorization
of disbursements and the entry to safe deposit boxes or withdrawal of
securities from safe keeping.
Section 5. Deposits. The funds of the Corporation, not
otherwise employed, shall be deposited from time to time to the order
of the Corporation in such banks, trust companies or other depositories
as the Board of Directors or any duly authorized committee of directors
may from time to time select, or as may be selected by an officer or
officers, or agent or agents, of the Corporation to whom such power may
from time to time be delegated by the Board of Directors or any duly
authorized committee of directors.
Section 6. Contracts, etc., How Executed. The Chief Executive
Officer, and those officers who are designated by resolution of the
Board, shall be authorized to enter into any contract or execute and
deliver any instrument in the name and on behalf of the Corporation,
and such authority may be delegated in writing, in specific instances
to such other officers, employees or agents as such authorized officers
may designate.
Section 7. Inspection of Books. Any stockholder, in person or
by attorney or other agent, upon written demand stating the purpose
thereof, shall have the right to examine, in person or by agent or
attorney, at any reasonable time or times, for any proper purpose, the
Corporation's books and records of accounts, minutes and record of
stockholders, and to make extracts therefrom.
Section 8. Voting of Stock or Other Securities Held. Unless
otherwise provided by resolution of the Board of Directors, the Chief
Executive Officer may from time to time appoint an attorney or
attorneys or agent or agents of this Corporation, in the name and on
behalf of this Corporation to cast the votes which this Corporation may
be entitled to cast as a stockholder or otherwise in any other
corporation, any of whose stock or securities may be held by this
Corporation, at meetings of the holders of the stock or other
securities of such other Corporations, or to consent in writing to any
action by any such other corporation, and may instruct the person or
persons so appointed as to the manner of casting such votes or giving
such consent, and may executed or cause to be executed on behalf of
this Corporation and under its corporate seal, or otherwise, such
written proxies, consents, waivers or other instruments that they may
deem necessary or proper in the premises; or the Chief Executive
Officer may attend any meeting of the holders of stock or other
securities of any such other corporation and thereat vote or exercise
any or all other powers of this Corporation as the holder of such stock
or other securities of such other corporation.
Section 9. Notices. Whenever under the provision of the
statutes or of the Certificate of Incorporation or of these By-Laws,
notice is required to be given to any director or stockholder, it shall
not be construed to mean personal notice, but such notice may be given
in writing, by mail, by depositing the same in a post office or letter
box, in a post-paid sealed wrapper, or by delivery to a telegraph
company, addressed to such director or stockholder at such address as
appears on the books of the Corporation, or, in default of other
address, to such director or stockholder at the General Post Office in
the City of Norwich, New York, and such notice shall be deemed to be
given at the time when the same shall be thus mailed or delivered to
a telegraph company.
Section 10. Waivers of Notice. Whenever any notice is required
to be given under the provisions of the statutes or of the Certificate
of Incorporation, or of these By-Laws, a waiver thereof in writing
signed by the person or persons entitled to said notice, whether before
or after the time stated therein, shall be deemed equivalent thereto.
ARTICLE VIII. AMENDMENTS
Section 1. By the Directors. The Board of Directors by a
majority vote thereof shall have the power to make, alter, amend or
repeal the By-Laws of the Corporation at any regular or special meeting
of the Board of Directors. This power shall not be exercised by any
committee of the Board of Directors.
Section 2. By the Stockholders. All By-Laws shall be subject
to amendment, alteration or repeal by the vote of a majority of the
total number of issued and outstanding shares of Common Stock of the
Corporation entitled to vote at any annual or special meeting. The
stockholders, at any annual or special meeting, may provide that
certain By-Laws by them adopted, approved or designated may not be
amended, altered or repealed except by a certain specified percentage
in interest of the stockholders or by a certain specified percentage
in interest of a particular class of stockholders.
As amended through 11/15/94
EXHIBIT 10.1
NBT BANCORP INC. Employee Stock Ownership Plan Amended and Restated
<PAGE>
NBT BANCORP, INC.
EMPLOYEE STOCK OWNERSHIP PLAN
Amended and restated as of January 1, 1989,
including amendments adopted through December 31, 1994
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I - GENERAL PROVISIONS
1.01 Designation 1
1.02 Effective Date 1
1.03 Purpose 1
ARTICLE II - DEFINITIONS 2
ARTICLE III - ELIGIBILITY AND PARTICIPATION REQUIREMENTS
3.01 Eligibility 18
3.02 Becoming a Participant 18
3.03 Eligibility after Reemployment 18
3.04 Eligibility Based on Service in Ineligible Classification 19
ARTICLE IV - CONTRIBUTIONS
4.01 General Rules Regarding Contributions 20
4.02 Employer Contributions 21
ARTICLE V - ALLOCATIONS TO ACCOUNTS
5.01 Separate Accounts 22
5.02 Allocation of Contributions 22
5.03 Allocation of Forfeitures 22
5.04 Suspense Subfund 23
5.05 Release from Suspense Subfund. . . . . . . . . . . . . . . 23
5.06 Allocation of Shares Released from Suspense Subfund. . . . 23
5.07 Limitations on Allocations to Certain Participants . . . . 23
5.08 Stock Dividends, Splits, Recapitalizations, Etc. . . . . . 24
5.09 Voting Rights24
5.10 Cash Dividends24
ARTICLE VI - BENEFICIARIES
6.01 Designation of a Beneficiary 25
6.02 Spouse's Rights 25
6.03 Absence of a Designated Beneficiary 26
<PAGE>
TABLE OF CONTENTS (con't)
Page
6.04 Beneficiaries' Rights. . . . . . . . . . . . . . . . . . . 27
ARTICLE VII - VESTING AND FORFEITURES
7.01 Vesting Schedule 28
7.02 Years of Service for Vesting 29
7.03 Treatment of Prior Service after a Break in
Service 29
7.04 Forfeitures 30
7.05 Amendments Affecting Vesting Schedule 31
ARTICLE VIII - DISTRIBUTION OF BENEFITS
8.01 Normal Retirement Benefit 33
8.02 Early Retirement Benefit 33
8.03 Disability Retirement Benefit 34
8.04 Death Benefit 34
8.05 Benefits Following Termination of
Employment 36
ARTICLE IX - DISTRIBUTION REQUIREMENTS
9.01 Distribution Election 39
9.02 Distribution Amount 39
9.03 Form of Distribution 39
9.04 Distribution Commencement 41
9.05 Diversification Distributions 41
9.06 Compliance with Code Section 401(a)(9) 42
9.07 Required Distribution to Participant 42
9.08 Required Distribution to Beneficiary . . . . . . . . . . 43
9.09 Location of Participant or Beneficiary Unknown . . . . . . 44
9.10 Facility of Payment. . . . . . . . . . . . . . . . . . . . 44
9.11 TEFRA Election . . . . . . . . . . . . . . . . . . . . . . 45
9.12 Eligible Rollover Distributions. . . . . . . . . . . . . . 45
9.13 Tax Credit Shares. . . . . . . . . . . . . . . . . . . . . 46
9.14 Put Option on Distributed Shares . . . . . . . . . . . . . 46
<PAGE>
TABLE OF CONTENTS (con't)
Page
ARTICLE X - CLAIMS PROCEDURES
10.01 Claim for Benefits 48
10.02 Denial of Claim 48
10.03 Request for Review of Denial 48
10.04 Review Decision 49
ARTICLE XI - ADMINISTRATION
11.01 Plan Administrator . . . . . . . . . . . . . . . . . . . 50
11.02 Fiduciary and Administrative Duties. . . . . . . . . . . 50
11.03 General Powers and Discretion of Plan
Administrator. . . . . . . . . . . . . . . . . . . . . 51
11.04 Administration of the Trust Fund 52
11.05 Delegation of Powers 52
11.06 Appointment of Professional Assistants and
Investment Managers 52
11.07 Records 53
11.08 Notice of Rollover Treatment 53
11.09 Responsibility of Fiduciaries 53
11.10 Indemnity by Employer 53
11.11 Payment of Fees and Expenses 53
11.12 ERISA Reporting and Disclosure 54
11.13 Service of Legal Process 54
11.14 Funding Policy for Trust Fund 54
11.15 Allocation of Trust Fund Increases and Decreases . . . . . 54
ARTICLE XII - LIMITATIONS ON ALLOCATIONS
12.01 General Rules 56
12.02 Code Section 415 Limitations 56
12.03 Reduction of Allocations 57
12.04 Reduction of Excess Amounts 58
12.05 Adjustments for Multiple Defined Contribution
and Other Specified Plans 59
12.06 Adjustments for Participant in Defined
Benefit Plan 60
<PAGE>
TABLE OF CONTENTS (con't)
Page
ARTICLE XIII - DISCONTINUANCE OF CONTRIBUTIONS,
TERMINATION, AMENDMENT, AND MERGER
13.01 Discontinuance of Contributions 63
13.02 Termination of Plan and Trust 63
13.03 Benefits upon Termination or Discontinuance
of Contributions 63
13.04 Amendments 63
13.05 Merger, Consolidation, or Transfer of Assets 64
ARTICLE XIV - QUALIFIED DOMESTIC RELATIONS ORDERS
14.01 General 65
14.02 Required Provisions 65
14.03 Prohibited Provisions 65
14.04 Exception for Certain Payments Made after
Earliest Retirement Age 65
14.05 Plan Procedures with Respect to Domestic
Relations Orders 66
ARTICLE XV - TOP-HEAVY REQUIREMENTS
15.01 General Rules 68
15.02 Determination of Top-Heaviness 69
15.03 Top-Heavy Vesting Schedule 71
15.04 Minimum Required Contribution 72
15.05 Maximum Annual Addition under Super
Top-Heavy Plan 73
ARTICLE XVI - MISCELLANEOUS PROVISIONS
16.01 No Alienation or Assignment 74
16.02 Adoption of Plan by Another Employer 74
16.03 Status of Employment Relations 74
16.04 Benefits Payable by Trust 74
16.05 Finality of Contribution 74
16.06 Failure of Qualification 75
16.07 Control of Trades or Business
by Owner-Employer 75
<PAGE>
TABLE OF CONTENTS (con't)
Page
16.08 Headings Not Part of This Plan 76
16.09 Gender and Number 76
16.10 Applicable Law 76
<PAGE>
ARTICLE I
GENERAL PROVISIONS
1.01 Designation. This Plan, previously designated The National
Bank and Trust Company of Norwich Employee Stock Ownership Plan, is
designated the NBT BANCORP, INC. EMPLOYEE STOCK OWNERSHIP PLAN. The
Plan and Trust are intended to qualify as a stock bonus plan and
trust which are qualified and exempt from taxation under Code
Sections 401(a) and 501(a), and as an employee stock ownership plan
under Code Section 4975(e)(7), designated to invest primarily in
Shares.
1.02 Effective Date. This Plan originally became effective on
January 1, 1979. It was subsequently amended and restated as of
January 1, 1984. The Employer hereby amends and restates the Plan,
effective January 1, 1989 ("Effective Date"), unless a different
effective date is otherwise stated, in accordance with the following
terms and conditions. This restatement governs the rights of all
Employees who have an Hour of Service with the Employer on or after
the Effective Date. The rights of any former Employee who does not
have an Hour of Service on or after the Effective Date shall be
governed by the provisions of the Predecessor Plan in effect when he
terminated employment, unless otherwise provided in this Plan or
required by law.
1.03 Purpose. The purpose of this Plan is to provide benefits for
Participants and Beneficiaries (including any Alternate Payees).
Contributions to the Plan, and any income, shall be used for the
exclusive benefit of Participants and Beneficiaries and shall not be
used for, or diverted to, any other purpose.
<PAGE>
ARTICLE II
DEFINITIONS
The following terms shall have the following meanings in and for
this Plan.
2.01 Account or Accounts shall mean the recordkeeping account or
accounts of a Participant that are the subject of the Section in
which the term is being used. When not limited by the context,
"Accounts" means all accounts of a Participant.
2.02 Adjustment Factor shall mean the cost of living adjustment
factor prescribed by the Secretary of the Treasury under Code Sec-
tion 415(d).
2.03 Affiliated Employer shall mean (a) a member of a "controlled
group of corporations" or group of trades or businesses under common
control (as defined in Code Section 414(b) and (c)) of which the
Employer is a member, (b) a member of an affiliated service group
(as defined in Code Section 414(m)), which includes the Employer,
and (c) any other entity that must be aggregated with the Employer
pursuant to Code Section 414(o). The term "controlled group of
corporations" has the meaning given in Code Section 1563(a), but
determined without regard to Code Sections 1563(a)(4) and (e)(3)(C).
Further, for purposes of applying the Code Section 415 limitations
in Article XII, Code Section 1563(a)(1) shall be applied by sub-
stituting the phrase "more than 50 percent" for the phrase "at least
80 percent," each place that phrase appears. If an Affiliated
Employer is also an Employer maintaining the Plan, the provisions of
the Plan shall apply to that entity as an Employer, rather than only
as an Affiliated Employer.
2.04 Alternate Payee shall mean any spouse, former spouse, child
or other dependent of a Participant who is recognized by a Domestic
Relations Order as having a right to receive all, or a portion of, a
Participant's Benefit.
2.05 Annual Additions shall mean the total amounts that are
allocated to a Participant's Accounts for a Limitation Year under
this Plan, and any amounts allocated under any other tax-qualified
plans of the Employer on behalf of the Participant, as further
defined in Section 12.02.
2.06 Annuity Starting Date shall mean the first day of the first
period for which an amount is paid to a Participant in any form,
including the payment of disability retirement benefits.
2.07 Beneficiary shall mean any person properly designated by a
Participant pursuant to Article VI to receive any Benefits payable
after the Participant's death.
2.08 Benefit shall mean the benefit a Participant is eligible to
receive under this Plan upon the occurrence of specified events.
2.09 Board of Directors shall mean the Board of Directors of the
Employer.
2.10 Break in Service or One-Year Break in Service shall mean a
computation period during which a Participant is credited with less
than 501 Hours of Service.
2.11 Code shall mean the Internal Revenue Code of 1986, as amended
from time to time, and implementing Regulations and rulings.
References to any Section of the Code shall include any successor
provision.
2.12 Compensation shall mean remuneration paid for a Plan Year by
the Employer to a Participant in the form of base salary or wages,
commissions, overtime, and cash bonuses; provided that, for Plan
Years that begin prior to January 1, 1995, Compensation shall
include remuneration in the form of severance pay and for Plan Years
beginning before October 1, 1993, Compensation shall not include
remuneration in the form of commissions. For all years,
Compensation shall include any amount contributed by the Employer at
the direction of the Participant pursuant to a salary reduction
agreement, which amount is not includable in the Participant's gross
income under Code Section 125 (cafeteria plans) or Code Section
402(a)(8) ("401(k)" plans). Compensation shall not include any
other form of remuneration regardless of the manner calculated or
paid.
For the Plan Year in which an Employee first becomes a Participant,
the term "Compensation" shall mean only the Compensation he receives
after the date he satisfies the eligibility requirements to
participate in the Plan.
The annual Compensation of each Participant taken into account under
the Plan for any Plan Year beginning after December 31, 1988 and
before January 1, 1994 shall not exceed $200,000. Each January 1,
beginning in 1990 and ending in 1993, this amount shall be adjusted
by the Adjustment Factor, using 1989 as the base period. The
adjusted Compensation limitation shall be effective for Plan Years
beginning within the calendar year of the adjustment.
For Plan Years beginning on or after January 1, 1994, the annual
Compensation of each Employee taken into account under the Plan
shall not exceed $150,000, as adjusted by the Commissioner of the
Internal Revenue Service for increases in the cost of living in
accordance with Section 401(a)(17)(B) of the Code. The cost-of-
living adjustment in effect for a calendar year applies to any
period, not exceeding 12 months, over which Compensation is
determined (determination period) beginning in such calendar year.
If a determination period consists of fewer than 12 months, the
$150,000 limit will be multiplied by a fraction, the numerator of
which is the number of months in the determination period, and the
denominator of which is 12.
In applying the $200,000 and $150,000 limitations, the Compensation
of a Participant who is (i) a Five Percent Owner, or (ii) a Highly
Compensated Employee and one of the ten most Highly Compensated
Employees, ranked on the basis of compensation (within the meaning
of Code Section 414(q)(7)) paid by the Employer during the Plan
Year, shall be treated as including the Compensation of his Spouse
and any lineal descendants who have not attained age 19 before the
close of the Plan Year (but only if his Spouse or lineal descendant
also is an Employee). If, as a result of the application of such
rules, the $200,000 limitation or the $150,000 limitation is
exceeded, then (except for purposes of determining the portion of
Compensation included in "Covered Compensation" defined in Article
VII), the limitation shall be prorated among the affected
individuals, in proportion to each such individual's Compensation as
determined under this Section prior to the application of the
limitation.
2.13 Defined Benefit Dollar Limitation shall mean the dollar
limitation in effect under Code Section 415(b)(1)(A), specifically,
$90,000, as adjusted each January 1 by the Adjustment Factor. Any
adjusted limitation shall apply to Limitation Years ending with or
within the calendar year of the adjustment.
2.14 Defined Benefit Fraction shall mean the fraction defined in
Code Section 415(e)(2) that is used, with the Defined Contribution
Fraction, to determine the Maximum Annual Addition for a Participant
who also has participated in a Defined Benefit Plan of the Employer
or an Affiliated Employer.
2.15 Defined Benefit Plan shall mean any qualified retirement plan
under Code Section 401(a) that does not meet the definition of a
Defined Contribution Plan.
2.16 Defined Contribution Dollar Limitation shall mean $30,000,
or, if greater, 25 percent of the dollar limitation in effect under
Code Section 415(b)(1)(A). For Plan Years beginning prior to July
13, 1989, the Defined Contribution Dollar Limitation shall be
modified to the extent provided by Code Section 415(c)(6) (as in
effect for such years).
2.17 Defined Contribution Fraction shall mean the fraction defined
in Code Section 415(e)(3) that is used, with the Defined Benefit
Fraction, to determine the Maximum Annual Addition for a Participant
who also has participated in a Defined Benefit Plan of the Employer
or an Affiliated Employer.
2.18 Defined Contribution Plan shall mean a retirement plan that
provides individual accounts for each participant and benefits based
solely on (a) the amount contributed to a participant's accounts,
and (b) any income, expenses, gains, losses, and forfeitures of
accounts of other participants that are allocated to a participant's
accounts.
2.19 Determination Date shall mean, with respect to any Plan Year,
the last day of the preceding Plan Year. In the case of a first
Plan Year, the Determination Date shall be the last day of that Plan
Year.
2.20 Disability Retirement Date shall mean the date that the
Participant terminates employment with the Employer by reason of his
Total and Permanent Disability.
2.21 Domestic Relations Order shall mean any judgment, decree, or
order (including approval of a property settlement agreement) which
(a) relates to the provision of child support, alimony payments or
marital property rights to a spouse, child or other dependent of a
Participant, and (b) is made pursuant to a state domestic relations
law (including a community property law).
2.22 Early Retirement Age shall mean age 55.
2.23 Early Retirement Date shall mean the date of a Participant's
Retirement, before his Normal Retirement Date, on or after the date
he attains age 55 and completes ten (10) Years of Service.
2.24 Effective Date shall mean January 1, 1989.
2.25 Employee shall mean any person who receives compensation for
personal services, other than a retainer or fee under a contract,
from the Employer of the Employee. Any Leased Employees shall be
considered Employees solely for the purposes specified in Code
Section 414(n). Leased Employees shall not be eligible to
participate in the Plan.
2.26 Employer shall mean NBT Bancorp, Inc., The National Bank and
Trust Company (formerly known as The National Bank and Trust Company
of Norwich), and any Affiliated Employer that adopts this Plan.
Notwithstanding the preceding sentence, the term Employer means The
National Bank and Trust Company for purposes of Plan administration,
and NBT Bancorp, Inc. for purposes of Sections 13.02 and 13.04.
2.27 Employer Contribution shall mean any discretionary
contribution by the Employer that is made to the Plan if Sections
4.01 and 4.02 provide for such contributions to be made to the Plan.
"Employer Contribution Account" shall mean the Account maintained to
record Employer Contributions for a Participant.
2.28 Entry Date shall mean January 1, April 1, July 1, and October
1.
2.29 ERISA shall mean the Employee Retirement Income Security Act
of 1974, as amended from time to time, and implementing regulations
and rulings. References to any Section of ERISA shall include any
successor provision.
2.30 Exempt Loan shall mean any loan to the Trust not prohibited
by Code Section 4975, the proceeds of which are used to finance the
Trust's acquisition of Shares or to refinance such a loan.
2.31 Family Member shall mean, with respect to any Employee, the
Employee's Spouse, lineal ascendants and descendants and the spouses
of such lineal ascendants and descendants.
2.32 Fiscal Year shall mean the taxable year of the Employer, and
shall be the twelve month period beginning on January 1 and ending
on December 31.
2.33 Five Percent Owner shall mean, as further defined in Code
Section 416(i), any person who owns, or is considered as owning
under the constructive ownership rules of Code Section 318, more
than five percent of the outstanding stock of the Employer or stock
possessing more than five percent of the total combined voting power
of all stock of the Employer. However, the constructive ownership
rules in Code Section 318(a)(2)(C) shall be applied by substituting
"five percent" for "50 percent." If the Employer is not a corpora-
tion, any person who owns more than five percent of the capital or
profits interest in such organization is a Five Percent Owner.
2.34 Highly Compensated Employee shall mean a highly compensated
employee within the meaning of Code Section 414(q), for Plan Years
beginning after December 31, 1986. As set forth below, the term
"Highly Compensated Employee" includes highly compensated active
employees and highly compensated former employees. In the following
subsections, the term "determination year" means the current Plan
Year and the term "look-back year" means the twelve-month period
immediately preceding the determination year.
a. Highly Compensated Active Employee: A highly compensated
active employee includes any Employee who performs service for the
Employer during the determination year and who:
i. Received compensation in excess of $75,000, as adjusted
by the Adjustment Factor, during the look-back year;
ii. Received compensation in excess of $50,000, as adjusted
by the Adjustment Factor, during the look-back year,
and was a member of the top-paid group for such year
(generally, the top 20 percent of employees ranked on
the basis of compensation);
iii. Was an officer (as defined in Code Section 416(i)) of
the Employer and received compensation during the look-
back year that is greater than 50 percent of the
Defined Benefit Dollar Limitation in effect during the
year (if no officer has satisfied this compensation
requirement, the highest-paid officer shall be treated
as a Highly Compensated Employee);
iv. Is described in the above subsections if the term
"determination year" is substituted for the term "look-
back year", and the Employee is one of the 100
Employees who received the most compensation from the
Employer during the determination year; or
v. Was a Five Percent Owner at any time during the look-
back year or determination year.
b. Highly Compensated Former Employee: A highly compensated
former employee includes any Employee who separated from service (or
was deemed to have separated) prior to the determination year,
performs no service for the Employer during the determination year
and was a highly compensated active employee for either the
separation year or any determination year ending on or after the
Employee's 55th birthday.
c. Family Member Aggregation Rule: If an Employee is, during a
determination year or look-back year, a Family Member of either:
(i) a Five Percent Owner who is an active or former Employee or
(ii) a Highly Compensated Employee who is one of the ten most Highly
Compensated Employees ranked on the basis of compensation paid by
the Employer during such year, then the Family Member and the Five
Percent Owner or top-ten Highly Compensated Employee shall be
aggregated. In such case, the Family Member and Five Percent Owner
or top-ten Highly Compensated Employee shall be treated as a single
Employee receiving compensation and Plan contributions or benefits
equal to the sum of such compensation and contributions or benefits
of the Family Member and Five Percent Owner or top-ten Highly
Compensated Employee.
d. Incorporation of Section 414(q): The determination of who is
a Highly Compensated Employee under the above rules, including the
determinations of the number and identity of employees in the top-
paid group, the top 100 employees, the number of employees treated
as officers and the compensation that is considered, shall be made
in accordance with Code Section 414(q) and implementing Regulations,
which are hereby incorporated by reference.
2.35 Highly Compensated Participant shall mean a Highly
Compensated Employee who has satisfied the eligibility requirements
in Article III.
2.36 Hour of Service shall mean an hour determined in accordance
with the following provisions. In this definition, the term
"computation period" means the Plan Year, with the following
exception. To the extent that a "Year of Service" is defined as a
different period for eligibility purposes, that period shall be
considered a computation period in crediting Hours of Service for
eligibility.
a. General Rules for Crediting Hours: For all purposes under
the Plan, an Employee shall be credited with an Hour of Service for
all of the following:
i. Each hour for which the Employee is paid, or entitled
to payment, for the performance of duties for the
Employer. These hours will be credited to the Employee
for the computation period in which the duties are
performed.
ii. Each hour for which the Employee is paid, or entitled
to payment, by the Employer, on account of a period
during which no duties are performed (whether or not
the employment relationship has terminated), due to
vacation, holiday, illness, incapacity (including disa-
bility), layoff, jury duty, military duty or leave of
absence. No more than 501 Hours of Service shall be
credited under this subsection for any single,
continuous period, whether or not such period occurs in
a single computation period.
iii. Each hour for which back pay (irrespective of
mitigation of damages) is either awarded or agreed to
by the Employer. The same Hours of Service will not be
credited both under subsection (i) or (ii), whichever
is applicable, and this subsection (iii). Under this
subsection, Hours of Service will be credited to the
Employee for the computation period to which the award
or agreement pertains, rather than the computation
period in which the award, agreement or payment is
made.
Hours under this subsection shall be calculated and credited pursu-
ant to Department of Labor Regulation 2530.200b-2(b) and (c), which
is incorporated herein by reference.
b. Crediting Hours for Certain Leaves to Prevent Break in
Service: Solely to determine whether a Break in Service has
occurred, an Employee who is absent from work for maternity or
paternity reasons, or is on a leave of absence taken in accordance
with the Family and Medical Leave Act, shall receive credit for the
Hours of Service that would otherwise have been credited to the
Employee but for such absence. In any case in which such hours
cannot be determined, eight Hours of Service per day of such absence
shall be credited.
i. The Hours of Service credited under this subsection
shall be credited in the computation period in which
the absence begins, if necessary to prevent a Break in
Service in that period. In all other cases, the Hours
of Service shall be credited to the next computation
period.
ii. For purposes of this subsection, an absence from work
for maternity or paternity reasons means an absence by
reason of (A) the Employee's pregnancy, (B) the birth
of the Employee's child or the placement of a child
with the Employee in connection with the Employee's
adoption of the child, or (C) the Employee caring for
the child for a period immediately following such birth
or placement.
iii. In order to be credited with Hours of Service under
this subsection, the Employee must provide the Plan
Administrator with proof that the period of absence is
for a reason specified in subsection (ii) above.
c. An Employee for whom hours are not normally kept shall
receive credit for 45 Hours of Service for each weekly pay period
during which the Employee performs one Hour of Service under the
conditions described in subsection (a)(i) or (ii) above.
d. For eligibility and vesting purposes, Hours of Service shall
also be credited for employment with any Affiliated Employer.
e. For eligibility and vesting purposes hereunder, Hours of
Service shall include each hour for which an Employee, who was
employed by any banking institution or banking facility as of the
date immediately preceding the date of the Employer's acquisition of
that institution or facility (and which acquisition occurred on or
before December 31, 1994), was credited with an hour of service
under the terms of such former employer's tax-qualified retirement
plan as of the date immediately preceding the date of the Employer's
acquisition of the institution or facility.
f. Hours of Service shall be granted for eligibility and vesting
purposes during a period of military service which does not exceed
two years in duration. Hours of Service shall be credited on the
basis of the Employee's normal workweek when such leave commenced.
For purposes of this subsection (f), military service is service
with the Armed Forces of the United States during periods of war,
national emergency or conscription, subject to the condition that
the Employee returns to active employment with the Employer within
the period his reemployment rights are protected by applicable law.
g. Except to the extent required by subsection (a)(ii) above,
Hours of Service shall not be granted for any purpose under the Plan
as a result of an Employee's receipt of severance pay from the
Employer.
2.37 Investment Manager shall mean any party described in the
following sentence that is appointed as an Investment Manager
pursuant to Section 11.06, and that acknowledges in writing that it
is a fiduciary with respect to the Plan. An Investment Manager can
be a party that is either: (a) registered as an investment adviser
under the Investment Advisers Act of 1940; (b) a bank, as defined in
that Act; or (c) an insurance company qualified to manage, acquire
and dispose of Plan assets under the laws of more than one state.
2.38 Key Employee shall mean an employee within the meaning of
Code Section 416(i). As further set forth in that Code Section, any
employee or former employee or beneficiary will be considered a Key
Employee if, for the Plan Year that contains the Determination Date
or any of the four preceding Plan Years, the employee is:
a. An officer (within the meaning of Code Section 416(i)) having
"annual compensation" from the Employer greater than 50 percent of
the Defined Benefit Dollar Limitation for any such Plan Year;
b. An owner (or considered an owner under Code Section 318) of
one of the ten largest interests in the Employer, who has "annual
compensation" from the Employer greater than the dollar limitation
in effect under Code Section 415(c)(1)(A) (currently $30,000);
c. A Five Percent Owner; or
d. A One Percent Owner with "annual compensation" from the
Employer of more than $150,000.
For purposes of this definition, "annual compensation" means
Limitation Year Compensation, plus any amounts contributed by the
Employer pursuant to a salary reduction agreement which are
excludable from the Employee's gross income under Code Sections 125,
402(a)(8), 402(h) or 403(b).
2.39 Leased Employee shall mean any person (other than an Employee
of the recipient) who, pursuant to an agreement between the
recipient and any other person ("Leasing Organization") has
performed services for the recipient (or for the recipient and
related persons determined in accordance with Code Section
414(n)(6)) on a substantially full time basis for a period of at
least one year, and such services are of a type historically
performed by employees in the business field of the recipient
Employer. Contributions or benefits provided a Leased Employee by
the leasing organization which are attributable to services
performed for the recipient Employer shall be treated as provided by
the recipient Employer.
A Leased Employee shall not be considered an Employee of the
recipient Employer if: (a) such employee is covered by a money
purchase pension plan providing: (i) a nonintegrated employer
contribution rate of at least ten percent of compensation, as
defined in Code Section 415(c)(3), but including amounts contributed
pursuant to a salary reduction agreement which are excludable from
the employee's gross income under Code Sections 125, 402(a)(8),
402(h) or 403(b); (ii) immediate participation, and (iii) full and
immediate vesting; and (b) Leased Employees do not constitute more
than twenty percent of the recipient Employer's non-highly
compensated workforce.
2.40 Limitation Year shall mean the calendar year.
2.41 Limitation Year Compensation shall mean wages, salaries, and
fees for professional services and other amounts received (without
regard to whether or not an amount is paid in cash) for personal
services actually rendered in the course of employment with the
Employer to the extent that the amounts are includable in gross
income (including, but not limited to, commissions paid salesmen,
compensation for services on the basis of a percentage of profits,
commissions on insurance premiums, tips, bonuses, fringe benefits,
reimbursements, and expense allowances), and excluding the
following:
a. Employer contributions to a plan of deferred compensation,
which are not includable in the Employee's gross income for the
taxable year in which contributed, or Employer contributions under a
simplified employee pension plan to the extent such contributions
are deductible by the Employee, or any distributions from a plan of
deferred compensation;
b. Amounts realized from the exercise of a non-qualified stock
option, or when restricted stock (or property) held by the Employee
either becomes freely transferable or is no longer subject to a
substantial risk of forfeiture;
c. Amounts realized from the sale, exchange or other disposition
of stock acquired under a qualified stock option; and
d. Other amounts which received special tax benefits.
Notwithstanding the above definition, for a self-employed individual
that participates in the Plan (if any), Limitation Year Compensation
shall mean the net earnings from self-employment in the trade or
business with respect to which the Plan is established, for which
personal services of the individual are a material income-producing
factor. Net earnings will be determined without regard to items not
included in gross income and the deductions allocable to such items.
Net earnings are reduced by contributions by the Employer to a
qualified plan to the extent deductible under Code Section 404. Net
earnings shall be determined with regard to the deduction allowed to
the taxpayer by Code Section 164(f) for taxable years beginning
after December 31, 1989.
2.42 Maximum Annual Addition shall mean the greatest Annual
Addition that can be allocated to the Accounts of a Participant for
a Limitation Year.
2.43 Minimum Required Contribution shall mean the contribution
described in Article XV that must be provided to Non-Key Employees
if the Plan is Top-Heavy for a Plan Year.
2.44 Minimum Vesting Schedule shall mean the vesting schedule
required by Section 15.03 if the Plan becomes Top-Heavy for one or
more Plan Years.
2.45 Non-Highly Compensated Employee shall mean an Employee who is
not a Highly Compensated Employee.
2.46 Non-Highly Compensated Participant shall mean a Non-Highly
Compensated Employee who has satisfied the eligibility requirements
in Article III, and who is not a Family Member of a Highly
Compensated Participant.
2.47 Non-Key Employee shall mean an Employee who is not a Key
Employee.
2.48 Non-Vested Participant shall mean a Participant who is not a
Vested Participant.
2.49 Normal Retirement Age or Normal Retirement Date shall mean
the date upon which a Participant attains age 65.
2.50 One Percent Owner shall mean, as further defined in Code Sec-
tion 416(i), any person who owns, or is considered as owning under
the constructive ownership rules of Code Section 318, more than one
percent of the outstanding stock of the Employer or stock possessing
more than one percent of the total combined voting power of all
stock of the Employer. However, the constructive ownership rules in
Code Section 318(a)(2)(C) shall be applied by substituting "one
percent" for "50 percent." If the Employer is not a corporation,
any person who owns more than one percent of the capital or profits
interest in such organization is a One Percent Owner.
2.51 Participant shall mean an Employee who becomes a Participant
in the Plan as provided in Article III.
2.52 Permissive Aggregation Group shall mean a group of plans
maintained by the Employer and any Affiliated Employer which may be
aggregated in determining whether the Plan is Top-Heavy, as further
defined in Section 15.02 of the Plan.
2.53 Plan shall mean the NBT Bancorp, Inc. Employee Stock
Ownership Plan, as amended from time to time. Prior to January 1,
1995, the name of the Plan was The National Bank and Trust Company
of Norwich Employee Stock Ownership Plan.
2.54 Plan Administrator shall mean the person, committee or other
entity appointed to administer the Plan in accordance with Article
XI. The Plan Administrator shall be the "named fiduciary" for the
management, operation and administration of the Plan, within the
meaning of Section 402(a) of ERISA.
2.55 Plan Year shall mean the twelve-month period beginning on
January 1 and ending on December 31.
2.56 Predecessor Plan shall mean any prior statement (or
restatement) of the Plan that is being amended and restated by this
document.
2.57 Qualified Domestic Relations Order shall mean a Domestic
Relations Order that creates or recognizes the existence of an
Alternate Payee's right to, or assigns to an Alternate Payee the
right to, receive all or a portion of the Benefits that would
otherwise be payable with respect to a Participant under the Plan,
and that meets the requirements described in Article XIV.
2.58 Qualified Joint and Survivor Annuity shall mean an immediate
annuity for the life of the Participant with a survivor annuity for
the life of the Participant's Spouse, which is not less than fifty
percent (50%) nor more than one hundred percent (100%) of the amount
of the annuity payments payable during the joint lives of the
Participant and his Spouse, and which can be purchased with the
Participant's Vested Account balance pursuant to Section 9.03.
2.59 Qualified Preretirement Survivor Annuity shall mean an
annuity for the life of the Participant's Spouse following the
Participant's death prior to his Annuity Starting Date which is
actuarially equivalent to not less than fifty percent (50%) of the
Participant's Vested Account balance as of the date of his death
pursuant to Section 8.04.
2.60 Regulation(s) shall mean the Income Tax Regulations promul-
gated by the Secretary of the Treasury or his delegate, as amended
from time to time, including proposed and temporary Regulations.
References to any Section of the Regulations shall include any
successor provision.
2.61 Required Aggregation Group shall mean a group of plans main-
tained by the Employer and any Affiliated Employer which must be
aggregated in determining whether the Plan is Top-Heavy, as further
defined in Section 15.02 of the Plan.
2.62 Required Beginning Date shall mean the date when distribu-
tions must begin to a Participant, as further defined in Article IX
of the Plan.
2.63 Retirement shall mean voluntary termination of employment
with the Employer for a reason other than death, after a Participant
has fulfilled all requirements for a normal or early retirement
benefit.
2.64 Shares shall mean any common stock issued by the Employer (or
by a corporation which is a member of the same controlled group as
the Employer) having a combination of voting power and dividend
rights equal to or in excess of:
a. that class of common stock of the Employer (or of any
other corporation which is a member of the same controlled group as
the Employer) having the greatest voting power, and
b. that class of common stock of the Employer (or of any
other corporation which is a member of the same controlled group as
the Employer) having the greatest dividend rights.
2.65 Spouse or Surviving Spouse shall mean the lawful wife of a
male Participant or the lawful husband of a female Participant.
Notwithstanding the preceding sentence, a former spouse shall be
treated as the Spouse or Surviving Spouse, and a current spouse
shall not be treated as the Spouse or Surviving Spouse, to the
extent provided under a Qualified Domestic Relations Order.
2.66 Super Top-Heavy Plan shall mean a plan for which the Top-
Heavy Ratio exceeds 90 percent. As stated in Article XV, if the
Plan is Super Top-Heavy and the Employer has also maintained a
Defined Benefit Plan, the denominators in the Defined Benefit
Fraction and the Defined Contribution Fraction must be reduced when
calculating the Maximum Annual Addition for individuals who have
participated in both plans.
2.67 Suspense Subfund shall mean the subfund established as part
of the Trust Fund to hold shares purchased with the proceeds of an
Exempt Loan pending the allocation of such Shares to individual
Accounts.
2.68 Top-Heavy shall mean the status of the Plan when it is a Top-
Heavy Plan (or a Super Top-Heavy Plan).
2.69 Top-Heavy Plan shall mean a plan, for any plan years
beginning after December 31, 1983, if any of the following
conditions exist:
a. If the Top-Heavy Ratio for this Plan exceeds 60 percent and
this Plan is not part of a Required Aggregation Group or Permissive
Aggregation Group of plans;
b. If this Plan is a part of a Required Aggregation Group of
plans but not part of a Permissive Aggregation Group and the Top-
Heavy Ratio for the group of plans exceeds 60 percent; or
c. If this Plan is a part of a Required Aggregation Group and
part of a Permissive Aggregation Group of plans and the Top-Heavy
Ratio for the Permissive Aggregation Group exceeds 60 percent.
2.70 Top-Heavy Ratio shall mean:
a. If the Employer maintains one or more Defined Contribution
Plans (including any simplified employee pension plan) and the
Employer has not maintained any Defined Benefit Plan which during
the five year period ending on the Determination Date(s) has or has
had accrued benefits, the Top-Heavy Ratio for this Plan alone or for
the Required or Permissive Aggregation Group, as appropriate, is a
fraction, the numerator of which is the sum of the account balances
of all Key Employees as of the Determination Date(s) (including any
part of any Account balance distributed in the five year period
ending on the Determination Date(s)), and the denominator of which
is the sum of all account balances (including any part of any
account balance distributed in the five year period ending on the
Determination Date(s)), both computed in accordance with Code
Section 416 and the Regulations thereunder. Both the numerator and
denominator of the Top-Heavy Ratio are increased to reflect any
contribution not actually made as of the Determination Date, but
which is required to be taken into account on that date under Code
Section 416 and the Regulations thereunder.
b. If the Employer maintains one or more Defined Contribution
Plans (including any simplified employee pension plan) and the
Employer maintains or has maintained one or more Defined Benefit
Plans which during the five year period ending on the Determination
Date(s) has or has had any accrued benefits, the Top-Heavy Ratio for
any Required or Permissive Aggregation Group, as appropriate, is a
fraction, the numerator of which is the sum of the account balances
under the aggregated Defined Contribution Plan or plans for all Key
Employees, determined in accordance with (a) above, and the present
value of accrued benefits under the aggregated Defined Benefit Plan
or plans for all Key Employees as of the Determination Date(s), and
the denominator of which is the sum of the account balances under
the aggregated Defined Contribution Plan or plans for all Partici-
pants, determined in accordance with subsection (a) above, and the
present value of accrued benefits under the Defined Benefit Plan or
plans for all Participants as of the Determination Date(s), all
determined in accordance with Code Section 416 and the Regulations
thereunder. The accrued benefits under a Defined Benefit Plan in
both the numerator and denominator of the Top-Heavy Ratio are
increased for any distribution of an accrued benefit, made in the
five year period ending on the Determination Date.
c. For purposes of subsections (a) and (b) above, the value of
account balances and the present value of accrued benefits will be
determined as of the most recent valuation date that falls within or
ends with the twelve month period ending on the Determination Date,
except as provided in Code Section 416 and the Regulations
thereunder for the first and second plan years of a Defined Benefit
Plan. The account balances and accrued benefits of a Participant:
(i) who is not a Key Employee but who was a Key Employee in a prior
year, or (ii) who has not been credited with at least One Hour of
Service with any Employer maintaining the Plan at any time during
the five year period ending on the Determination Date will be
disregarded. The calculation of the Top-Heavy Ratio, and the extent
to which distributions, and any Rollover or Transfer Contributions
are taken into account will be made in accordance with Code Section
416 and the Regulations thereunder. If any deductible employee
contributions were made to the Plan, they will not be taken into
account for purposes of computing the Top-Heavy Ratio. When
aggregating plans, the value of account balances and accrued
benefits will be calculated with reference to the Determination
Dates that fall within the same calendar year.
The accrued benefit of a Participant other than a Key Employee shall
be determined under (i) the method, if any, that uniformly applies
for accrual purposes under all Defined Benefit Plans maintained by
the Employer; or (ii) if there is no such method, as if such benefit
accrued not more rapidly than the slowest accrual rate permitted
under the fractional rule of Code Section 411(b)(1)(C).
2.71 Top-Heavy Rules shall mean the rules under Code Section 416
and implementing Regulations that will be applicable if the Plan is
a Top-Heavy Plan for any Plan Year beginning after December 31,
1983.
2.72 Total and Permanent Disability or Totally and Permanently
Disabled shall mean the Participant's inability to engage in any
substantial gainful activity for the Employer by reason of any
medically determinable physical or mental impairment that can be
expected to result in death, or that has lasted, or can be expected
to last, for a continuous period of not less than 12 months. A
Participant shall be deemed Totally and Permanently Disabled if he
is receiving disability benefits under any long-term disability
insurance coverage provided by the Employer.
2.73 Trust shall mean the legal entity resulting from the Trust
Agreement between the Employer and the Trustee.
2.74 Trust Agreement shall mean the agreement between the Employer
and the Trustee, or any successor Trustee, establishing the Trust
and specifying the duties of the Trustee.
2.75 Trust Fund shall mean the total of all contributions made to
the Trust pursuant to the Plan, (a) as increased by profits, gains,
income and recoveries received, and (b) as decreased by losses,
depreciation, benefits paid and expenses incurred in the adminis-
tration of the Plan and the Trust. The Trust Fund includes all
assets acquired by investment and reinvestment which are held in the
Trust by the Trustee.
2.76 Trustee shall mean the trustee, or trustees, designated by
the Board of Directors.
2.77 Valuation Date shall mean June 30 and December 31, or such
other date(s) on which a special valuation is made pursuant to
Article XI, the terms of the Trust Agreement, or the requirements of
law. Prior to January 1, 1994, Valuation Date means December 31.
2.78 Vested Participant shall mean a Participant who has a
nonforfeitable (vested) interest in any Account or Accounts pursuant
to Section 7.01.
2.79 Year of Service shall mean a "computation period" during
which the Participant has completed 1000 Hours of Service.
a. The computation period for all Plan purposes shall be the
Plan Year, except as provided in subsection (b) below.
b. For eligibility to participate in the Plan, the first
eligibility computation period is the 12-consecutive-month period
that begins on the date the Employee first performs an Hour of
Service ("employment commencement date"). For this purpose,
succeeding 12-consecutive-month periods begin on each anniversary of
the employment commencement date.
<PAGE>
ARTICLE III
ELIGIBILITY AND PARTICIPATION REQUIREMENTS
3.01 Eligibility.
a. An Employee who is employed by the Employer on the Effective
Date shall be eligible to participate in the Plan on the Effective
Date, if he has satisfied the eligibility requirements in subsection
(b) below or if he was a Participant in the Predecessor Plan. In
determining previous participation, any provisions of the
Predecessor Plan which excluded Employees from participation based
on the attainment of a specified age shall not be applied after
December 31, 1987 to any Employee who performs an Hour of Service on
or after January 1, 1988.
b. After the Effective Date, an Employee employed by the Employer
shall be eligible to participate in the Plan as of the first Entry
Date that coincides with or next follows the date as of which he has
both attained age 21 and completed a Year of Service provided he is
employed by the Employer on that date.
c. In applying the above service requirement, an Employee's
service with any Affiliated Employer shall be taken into account.
d. Any person included in a unit of employees covered by a
collective bargaining agreement (as defined in Code Section 7701(a))
between Employee representatives and the Employer or an Affiliated
Employer shall not be eligible to participate in the Plan, unless
such collective bargaining agreement expressly provides for the
inclusion of such persons as Participants in the Plan.
3.02 Becoming a Participant. Once an Employee satisfies the
requirements in Section 3.01, he shall participate in the Plan
automatically. The Plan Administrator shall, no later than 90 days
after the Employee meets the eligibility requirements, advise the
Employee that he has become a Participant, and provide him with
information about the Plan.
3.03 Eligibility after Reemployment.
a. Reemployment before a Break in Service: Upon being
reemployed before a One-Year Break in Service has occurred, the
reemployed Employee shall be treated as follows:
i. A former Participant shall continue to participate in
the Plan as if his employment had not terminated.
ii. A former Employee who had not yet become a Participant
shall have the period of prior employment counted
toward satisfying the service requirement in Section
3.01 as if his employment had not terminated. The
Employee shall begin to participate in the Plan in
accordance with Sections 3.01 and 3.02, upon satisfying
the eligibility requirements.
b. Reemployment after a Break in Service: Upon being reemployed
after a Break in Service, the reemployed Employee shall participate
in the Plan as follows:
i. Participation shall be reinstated as of the date of
reemployment for: (A) a former Vested Participant and
(B) a former Non-Vested Participant whose consecutive
One-Year Breaks in Service did not exceed the greater
of five, or his number of Years of Service before the
Break in Service.
ii. A former Non-Vested Participant with a Break in Service
longer than provided in subsection (i), and a former
Employee who had not yet become a Participant when he
terminated employment, shall begin to participate in
the Plan as of the first Entry Date that coincides with
or next follows the date he again satisfies the
eligibility requirements in Section 3.01.
In applying the above provisions, the computation period shall be
the eligibility computation period specified in the definition of
"Year of Service" in Article II, as though the reemployment date
were the employment commencement date.
Notwithstanding the above provisions, prior service will be credited
for a Participant who received a distribution of his vested
benefits, only if the distribution is repaid as provided in Article
VII.
3.04 Eligibility Based on Service in Ineligible Classification.
a. If an Employee who had not been in an eligible class of
employees of the Employer or an Affiliated Employer becomes a member
of such a class, his eligibility to participate in the Plan shall be
determined in accordance with the above provisions of this Article,
counting service in the ineligible classification.
b. An individual who ceases to be a Participant because he is no
longer in an eligible class of employees shall become eligible to
participate in the Plan immediately upon returning to an eligible
class of employees.
<PAGE>
ARTICLE IV
CONTRIBUTIONS
4.01 General Rules Regarding Contributions.
a. Types: Only Employer Contributions shall be permitted to the
Plan. No Employee contributions, rollover contributions or transfer
contributions shall be permitted. Except as may otherwise be
provided in this Article, for Fiscal Years beginning after December
31, 1985, each contribution may be made whether or not the Employer
has current or accumulated profits for the Plan Year.
b. Modification of Contributions:
i. Notwithstanding the following provisions of this
Article, the contributions to the Plan shall, as
applicable, be subject to the limitation on Maximum
Annual Additions described in Article XII.
ii. Notwithstanding the following provisions of this
Article, the Employer shall make Minimum Required
Contributions for Non-Key Employees in accordance with
Article XV, if the Plan becomes Top-Heavy for one or
more Plan Years.
c. Contributions Limited by Deductibility: The aggregate
contributions by the Employer shall not exceed the maximum deduction
allowable to the Employer under Code Section 404. It applies
notwithstanding any other provision of the Plan, except that the
following contributions shall be made even if not deductible (and
even if subject to excise taxes):
i. Contributions that are required under subsection (d)
below in order to correct any inadvertent omissions;
ii. Contributions that are required in order to reinstate
Account balances in accordance with the terms of the
Plan; and
iii. Minimum Required Contributions that must be made for
Non-Key Employees if the Plan is Top-Heavy for a Plan
Year.
d. Correction of Contributions:
i. If the Employer erroneously omits a Participant when
making an Employer contribution (if any) for a Plan
Year, the Employer shall make the omitted contribution
as soon as administratively feasible after the error is
discovered, provided it is otherwise allowable under
the terms of the Plan and the Code. This contribution
shall be made whether or not it is deductible (or
subject to excise taxes) under the Code.
ii. If the Employer erroneously allocates any Employer
contribution to a Participant, the erroneous
contribution shall be treated as a forfeiture for the
Plan Year in which the error is discovered. Except as
allowed by Section 16.05, the Employer shall not be
entitled to recover the erroneous contribution, whether
or not it is deductible (or subject to excise taxes)
under the Code.
4.02 Employer Contributions.
a. The discretionary Employer Contribution for each Plan Year
shall be the amount, if any, determined by the Board of Directors in
accordance with subsection (b) below.
b. The Board of Directors shall determine, in its sole
discretion, whether an Employer Contribution shall be made for a
Plan Year and its amount.
c. If the Board of Directors determines that an Employer
Contribution shall be made for a Plan Year, the contribution may be
made in cash, in Shares, or in a combination of cash and Shares, as
determined by the Board of Directors.
<PAGE>
ARTICLE V
ALLOCATIONS TO ACCOUNTS
5.01 Separate Accounts. The Trustee shall establish and maintain
a separate Account for each Participant. To the extent required by
other provisions of the Plan, a Participant may have multiple
Accounts for accounting purposes only, and a segregation of Trust
Fund assets by Account is not required. As stated in Article XII,
any suspense account that is established to avoid excess Annual
Additions shall not share in earnings or losses of the Trust Fund.
5.02 Allocation of Contributions.
a. All contributions shall be deemed allocated to a
Participant's Account as of the last day of the Plan Year to which
they relate. The contributions must actually be paid to the Trustee
within the time prescribed by law, including any granted extensions,
for the Employer to file its Federal income tax return for the
Fiscal Year ending with or within the Plan Year to which the
contributions relate.
b. An Employer Contribution that is made for a Plan Year
pursuant to Section 4.02 shall be allocated among each Participant
who
i. completed 1,000 Hours of Service during the Plan Year
and is employed by the Employer on the last day of the
Plan Year;
ii. failed to satisfy the requirements of (i) above because
the Participant terminated employment during the Plan
Year due to Total and Permanent Disability, Retirement
or death; or
iii. for Plan Years that begin after December 31, 1989 and
only if necessary for the Plan to satisfy Code Section
410(b), either (A) is employed by the Employer on the
last day of the Plan Year, or (B) completed more than
500 Hours of Service during the Plan Year before
terminating employment with the Employer.
c. A Participant's allocation shall be the proportion of his
Compensation compared to the total Compensation of all Participants
entitled to an allocation for the Plan Year.
5.03 Allocation of Forfeitures.
a. As of each Valuation Date, any amounts that have been
forfeited pursuant to Article VII shall first be applied to the
reinstatement of any previously forfeited Account balances, when
reinstatement is required pursuant to other provisions of the Plan.
b. Any remaining forfeitures shall be used to reduce the
contributions of the Employer under Sections 4.01 and 4.02 for the
Plan Year in which the forfeitures occur.
5.04 Suspense Subfund. Shares acquired by the Trust Fund through
an Exempt Loan shall be added to and maintained in the Suspense
Subfund and shall thereafter be released from the Suspense Subfund
and allocated to Accounts of Participants as provided in Sections
5.05 and 5.06.
5.05 Release from Suspense Subfund.
a. Shares acquired for the Trust Fund with the proceeds of an
Exempt Loan shall be released from the Suspense Subfund as the
Exempt Loan is repaid in accordance with the requirements and
provisions of Treasury Regulation Sections 54.4975-7(b)(8) and
54.4975-11(c) and any successor Regulations thereto.
b. If at any time there is more than one Exempt Loan
outstanding, then separate accounts may be established under the
Suspense Subfund for each such Exempt Loan. Each Exempt Loan for
which a separate account is maintained may be treated separately for
purposes of the provisions governing the release of Shares from the
Suspense Subfund under this Section 5.05 and for purposes of the
provisions governing the application of Employer contributions to
repay an Exempt Loan.
c. All Shares released from the Suspense Subfund during any Plan
Year shall be allocated among Participants as prescribed by
Section 5.06.
5.06 Allocation of Shares Released from Suspense Subfund. Shares
released from the Suspense Subfund in accordance with Section 5.05
shall be held in the Trust Fund on an unallocated basis until
allocated by the Plan Administrator as of the last day of the Plan
Year in which the Shares are released from the Suspense Subfund.
Shares released from the Suspense Subfund shall be allocated to the
Accounts of such Eligible Employees of such Employer in the same
manner provided in Sections 5.02(b) and (c).
5.07 Limitations on Allocations to Certain Participants.
Notwithstanding any other provisions of this Article V:
a. If more than one-third of the total allocations to
Participants' Accounts with respect to a Plan Year would, pursuant
to Sections 5.02 and 5.06, be allocated, in the aggregate, to the
Accounts of Participants who are Highly Compensated Employees, then
the allocations to the Accounts of such Participants shall be
reduced, pro rata, in an amount sufficient to reduce the amounts
allocated to the Accounts of such Participants to an amount not in
excess of one-third of the total allocations to Participants'
Accounts with respect to such Plan Year; and
b. Any Shares which are prevented from being allocated due to
the restriction contained in Section 5.07(a) shall be allocated
pursuant to Sections 5.02 and 5.06 as though such highly compensated
Participants did not participate in the Plan.
5.08 Stock Dividends, Splits, Recapitalizations, Etc. Any Shares
received by the Trustee as a result of a stock split, dividend,
conversion, or as a result of a reorganization or other
recapitalization of the Employer shall be allocated as of the day on
which the Shares are received by the Trustee in the same manner as
the Shares to which they are attributable are then allocated.
5.09 Voting Rights. All voting rights of Shares held by the Trust
Fund shall be exercised by the Trustee as directed by the Plan
Administrator or Participants in accordance with the provisions of
the Trust Agreement.
5.10 Cash Dividends. Cash dividends on Shares allocated to a
Participant's account shall be distributed to the Participant within
90 days after the close of the Plan Year during which the dividends
are paid. Cash dividends on Shares held in the Suspense Subfund
shall be applied to repay the Exempt Loan to which such Shares
relate.
<PAGE>
ARTICLE VI
BENEFICIARIES
6.01 Designation of a Beneficiary.
a. Each Participant may designate one or more Beneficiaries (and
contingent Beneficiaries) by delivering a written designation to the
Plan Administrator, on a form provided by the Plan Administrator,
subject to the provisions of Section 6.02.
b. A Participant may also make a new designation at any time
(subject to the provisions of Section 6.02). Such a designation is
effective only upon receipt by the Plan Administrator, at which time
it supersedes all prior designations.
c. Upon the death of a Participant, his Beneficiaries shall be
entitled to benefits as provided in Articles VIII and IX of the
Plan.
d. A designation of a Beneficiary shall be effective only if the
designated Beneficiary survives the Participant.
e. Upon the legal dissolution of the marriage of a Participant,
any designation of the Participant's former Spouse as a Beneficiary
shall be treated as though the former Spouse had predeceased the
Participant, unless the Participant delivers a new designation to
the Plan Administrator after the dissolution that clearly names the
former Spouse as a Beneficiary. In any case arising under this
provision, no heirs or other beneficiaries of the former Spouse
shall receive benefits from the Plan as Beneficiaries, except as
otherwise provided in the Participant's beneficiary designation (or
if such individuals are deemed Beneficiaries of the Participant
under Section 6.03, independent of their relationship to the former
Spouse).
6.02 Spouse's Rights. The Spouse shall be the Participant's
Beneficiary, whether or not designated as such, unless one of the
following requirements in subsections (a) through (d) below is
satisfied.
a. Spouse's Consent to the Beneficiary: The Spouse waives the
right to be the Beneficiary in a consent which meets the
requirements of subsection (e). In this regard:
i. The Participant must designate a specific Beneficiary
that cannot be changed without a new spousal consent,
unless the Spouse executes a general consent, as
provided in subsection (e)(ii) below.
ii. Notwithstanding subsection (i) above, the Participant
may at any time revoke the designation of a non-spouse
Beneficiary and restore the Spouse as the Beneficiary,
without spousal consent.
b. Separation: The Participant is legally separated from his
Spouse or has been abandoned, within the meaning of local law, and
provides the Plan Administrator with a court order regarding the
applicable circumstances. (However, such a Spouse must be
considered the Spouse to the extent provided in a Qualified Domestic
Relations Order.)
c. Missing Spouse: The Participant establishes to the
satisfaction of the Plan Administrator that the Spouse cannot be
located. The Plan Administrator shall adopt procedures to implement
this provision, which shall be applied uniformly to all
Participants.
d. Unmarried Participant: The Participant is unmarried. This
"deemed" waiver of spousal rights for an unmarried Participant is
null and void if the Participant later marries.
e. Consent Requirement: The Spouse's consent to waive the death
benefit in favor of another Beneficiary is valid only if the
following requirements are satisfied:
i. The Spouse's consent must be in writing and signed,
must acknowledge the effect of the election, and must
be witnessed by a notary public.
ii. The Spouse's consent must either acknowledge the
specific non-spouse Beneficiary or must expressly
permit the Participant to alter the Beneficiary
designation without further spousal consent. For Plan
Years beginning after October 22, 1986, a consent that
permits further designations must also acknowledge (A)
that the Spouse has the right to limit consent to a
specific Beneficiary and (B) that the Spouse is
voluntarily relinquishing this right.
iii. The consent required by this subsection may be given by
the legal guardian of a legally incompetent Spouse.
This applies even if the Participant is the legal
guardian.
iv. A consent is only valid for the Spouse who gives the
consent (or for whom the consent is given by a legal
guardian).
A valid consent, once given, can be revoked; provided the revocation
occurs before the Annuity Starting Date.
6.03 Absence of a Designated Beneficiary. If no effective
Beneficiary designation exists at the Participant's death, the
Participant shall be deemed to have designated the following
Beneficiaries in the following order of priority: (a) the Spouse;
(b) children, including adopted children and step-children, in equal
shares; (c) parents, in equal shares, and (d) the Participant's
estate. This order of priority shall apply to individuals living at
the time of the Participant's death.
6.04 Beneficiaries' Rights. Whenever the rights of a Participant
are stated or limited in the Plan, his Beneficiaries shall be bound
thereby.
<PAGE>
ARTICLE VII
VESTING AND FORFEITURES
7.01 Vesting Schedule. Except as provided in Section 7.02 below,
a Participant's interest in his Account shall become vested in
accordance with the applicable schedule below.
a. An Employee who is credited with at least one Hour of Service
after the Effective Date, but who is not credited with at least one
Hour of Service after December 31, 1994, shall become vested in
accordance with the following schedule:
Years of Vesting Service Vested Percentages
Less than 3 years 0%
3 years but less than 4 years 20%
4 years but less than 5 years 40%
5 years but less than 6 years 60%
6 years but less than 7 years 80%
7 years or more 100%
b. An Employee who is credited with at least one Hour of Service
after December 31, 1994 shall become vested in accordance with the
following schedule:
Years of Vesting Service Vested Percentage
Less than 1 year 0%
1 year but less than 2 years 20%
2 years but less than 3 years 40%
3 years but less than 4 years 60%
4 years but less than 5 years 80%
5 years or more 100%
c. Notwithstanding the above schedule, the following rules shall
apply in determining a Participant's vested interest in his Account.
i. A Participant shall be 100 percent vested in that
portion of his Account attributable to Shares
contributed to the Plan by the Employer under the tax
credit employee stock ownership plan provisions of the
Code.
ii. In case of a change in the vesting schedule, the rules
in Section 7.05 shall be applied to Participants
affected by the change.
iii. The Minimum Vesting Schedule in Article XV shall become
applicable if the Plan is Top-Heavy for one or more
Plan Years. (The rules in Section 7.05 apply to any
change to or from the Minimum Vesting Schedule.)
iv. A Participant shall become 100 percent vested in his
Account upon (A) the Participant's attainment of Normal
Retirement Age while still actively employed by the
Employer, (B) the Participant's death at a time when he
is actively employed by the Employer, or (C) the
Participant's termination of employment due to Total
and Permanent Disability.
7.02 Years of Service for Vesting. In determining a Participant's
vested percentage in his Employer Contribution Account under the
schedule in Section 7.01, all service with the Employer and any
Affiliated Employers shall be taken into account in determining
Years of Service, except the following:
a. Service before age 18 (age 22 for Participants who fail to
complete at least one Hour of Service after December 31, 1984); and
b. Years of Service disregarded due to a Break in Service in
accordance with Section 7.03.
7.03 Treatment of Prior Service after a Break in Service.
a. Vested Participant: If a Vested Participant is reemployed
after a One-Year Break in Service, his prior Years of Service shall
be taken into account in determining his vested percentage in his
Employer Contribution Account as of the date he is reemployed.
Notwithstanding the preceding sentence, a Vested Participant who
receives a full distribution of his vested Account balances
following his termination of employment, shall receive credit for
the prior Years of Service only if he repays the distribution in
accordance with Section 7.04.
b. Non-Vested Participant:
i. If a Non-Vested Participant is reemployed after a One-
Year Break in Service, his prior Years of Service shall
not be taken into account in determining his vested
percentage in his Employer Contribution Account, if the
number of consecutive One-Year Breaks in Service equals
or exceeds the greater of: five; or the Participant's
Years of Service prior to the Break in Service. In
applying this provision, prior Years of Service shall
not include any service that was disregarded due to a
prior Break in Service.
ii. If the Non-Vested Participant has a shorter Break in
Service than that described in subsection (i) above, he
shall receive credit for his prior Years of Service in
the same manner as provided for a Vested Participant in
subsection (a) above.
c. When Post-Break Service Is Not Considered for Vesting in Pre-
Break Contributions: In the case of a Participant who has five
consecutive One-Year Breaks in Service, Years of Service after the
Break in Service shall not be taken into account in determining his
vested percentage in the portion of his Employer Contribution
Account that accrued before the Break in Service. Separate sub-
accounts of the Employer Contribution Account shall be maintained
for a Participant if this subsection applies.
7.04 Forfeitures.
a. Time of Forfeiture:
i. If a Participant terminates employment and receives the
vested balance in his Employer Contribution Account as
provided in Article VIII, any portion that is not
vested as of the Valuation Date coinciding with or next
following the distribution date shall be forfeited at
that Valuation Date. For purposes of the preceding
sentence, a Participant whose vested percentage in an
Account is zero shall be deemed to have received a
complete distribution of that non-vested amount. Once
forfeited, non-vested balances shall be restored only
as provided in subsection (c) below.
ii. If a Participant has a vested balance in his Employer
Contribution Account when he terminates employment, but
does not receive a distribution, any non-vested portion
shall be forfeited as of the final Valuation Date in
the Plan Year in which the Participant incurs five
consecutive One-Year Breaks in Service.
b. Use of Forfeitures: Any benefits forfeited pursuant to this
Section shall be applied in the manner described in Section 5.03.
c. Restoration of Forfeited Amounts: If a former Participant
who incurred a forfeiture under subsection (a)(i) above is
reemployed by the Employer before incurring five consecutive One-
Year Breaks in Service:
i. Amounts forfeited on the basis of a deemed distribution
shall be restored to his Employer Contribution Account,
as of the date of reemployment; and
ii. Amounts forfeited as a consequence of an actual dis-
tribution shall be restored to the Employer
Contribution Account, if the Participant repays the
distributed amount before the earlier of (A) five years
after the date he is reemployed or (B) the close of the
first period of five consecutive One-Year Breaks in
Service after the distribution was made.
d. Amounts Restored: Any forfeited amount that must be restored
under subsection (c) above must be restored in full, unadjusted by
any gains or losses of the Trust Fund occurring after the Valuation
Date on which the forfeiture occurred. The restored amounts shall
not be considered an Annual Addition.
i. The restoration shall occur within a reasonable time,
but not later than the final Valuation Date of the Plan
Year in which the Participant has both been reemployed
and made any necessary repayment.
ii. The sources for restoring the forfeited amount shall be
in the following order:
A. Any forfeitures occurring during the Plan Year,
as provided in Section 5.03(a);
B. Any Employer Contribution that is being made for
the Plan Year, before it is allocated in accor-
dance with Section 5.02; and
C. A contribution that is specifically authorized by
the Employer to restore the forfeited amount.
7.05 Amendments Affecting Vesting Schedule.
a. No amendment to the Plan shall be effective to the extent
that it has the effect of decreasing a Participant's Account
balance. Notwithstanding the preceding sentence, a Participant's
Account balance may be reduced to the extent permitted under Code
Section 412(c)(8). For purposes of this subsection, a Plan
amendment that has the effect of decreasing a Participant's Account
balance or eliminating an optional form of benefit, with respect to
benefits attributable to Years of Service before the amendment,
shall be treated as reducing an Account balance. In the case of an
Employee who is a Participant on (i) the date an amendment changing
the vesting schedule is adopted or (ii) if later, the date the
amendment is effective, the vested percentage of an Account balance
(determined as of the applicable date) shall not be less than the
percentage calculated under the terms of the Plan without regard to
the amendment.
b. If the vesting schedule in Section 7.01 is amended, or the
Plan is amended in any way that, directly or indirectly, adversely
affects the computation of a Participant's nonforfeitable percentage
in any Employer Contributions including an automatic change to or
from the Minimum Vesting Schedule if the Plan becomes Top-Heavy, a
Participant who is an Employee with at least three Years of Service
may elect to have the nonforfeitable percentage of his Employer
contributions determined without regard to the amendment. (For
Participants who do not have at least one Hour of Service in a Plan
Year beginning after December 31, 1988, the preceding sentence shall
be applied by substituting "five Years of Service" for "three Years
of Service.") In determining a Participant's Years of Service for
purposes of this subsection, exclusions (if any) under the Plan's
vesting rules shall not apply.
c. A Participant's right to make an election under
subsection (b) above shall be governed by the following:
i. The Plan Administrator shall provide each affected
Participant with written notice and an election form
regarding his right to elect to remain under the former
vesting schedule.
ii. The election period shall begin with the date the
amendment is adopted (or deemed to be made) and shall
end on the date that is the latest of: (A) 60 days
after the date the amendment is adopted; (B) 60 days
after the date the amendment becomes effective; or (C)
60 days after the date the notice described in
subsection (i) above is issued by the Plan
Administrator.
iii. A Participant who does not timely file a properly
completed election form shall be subject to the amended
vesting schedule.
<PAGE>
ARTICLE VIII
DISTRIBUTION OF BENEFITS
8.01 Normal Retirement Benefit.
a. A Participant shall be eligible to receive benefits upon
Retirement on or after reaching his Normal Retirement Date. As
stated in Section 7.01, an active Participant is always 100 percent
vested in all his Accounts upon reaching Normal Retirement Age.
b. Upon Retirement on or after his Normal Retirement Date, a
Participant may receive his benefits in any form allowed by
Article IX, or elect to defer distribution until a later date.
c. In order to defer distribution to a later date, the
Participant must submit a signed written statement to the Plan
Administrator, in which he elects a date and form of distribution.
The specified date must not be later than the dates described in
Article IX.
d. Unless the Participant elects deferral, his benefits shall be
distributed in accordance with an election made pursuant to
Article IX, but not more than 60 days after the close of the Plan
Year in which he has both reached his Normal Retirement Date and
retired.
i. Notwithstanding the foregoing, the failure of a
Participant and Spouse to consent to a distribution
while a benefit is "immediately distributable" shall be
deemed to be an election to defer commencement of
payment of any benefit sufficient to satisfy this
Section.
ii. For subsection (i) above, an Account balance is
"immediately distributable" if subsequent provisions of
this Article allow a Participant (or Surviving Spouse)
to elect a distribution before the Participant reaches
Normal Retirement Age.
8.02 Early Retirement Benefit.
a. Upon written notice to the Plan Administrator, a Participant
may elect to receive benefits upon Retirement on an Early Retirement
Date.
b. A Participant who terminates employment with vested benefits
after satisfying the service requirement for an early retirement
benefit, but before satisfying the age requirement, can elect early
retirement benefits when he later satisfies the age requirement.
c. The form and timing of payments to a Participant who elects
to receive benefits as of an Early Retirement Date shall be governed
by the rules in Section 8.01, reading references to "Normal
Retirement Date" as references to "Early Retirement Date."
8.03 Disability Retirement Benefit.
a. If a Participant terminates employment because he is Totally
and Permanently Disabled, before reaching his Normal Retirement
Date, he shall be eligible to receive a distribution of his Plan
benefit. As stated in Section 7.01, all Account balances become 100
percent vested for a Participant who terminates employment due to
Total and Permanent Disability.
b. A Participant must file a written distribution election form
with the Plan Administrator in accordance with Section 9.01 to
receive disability retirement benefits. Upon receiving an
application, the Plan Administrator shall determine whether the
Participant is under a Total and Permanent Disability.
c. Disability retirement benefits shall be paid in accordance
with Article IX, but in no event later than 60 days after the end of
the Plan Year in which the determination of Total and Permanent
Disability is made.
8.04 Death Benefit.
a. In General: Upon the death of a Participant, the vested
balance in his Accounts at death shall be distributed to his
designated Beneficiary (see Article VI) in accordance with the
following provisions. As stated in Section 7.01, all Account
balances become 100 percent vested for a Participant who dies while
actively employed by the Employer.
b. Qualified Preretirement Survivor Annuity: If a married Par-
ticipant dies before his Annuity Starting Date, the value of his
vested Account balances attributable to contributions made on or
before December 31, 1994 shall be paid as a Qualified Preretirement
Survivor Annuity for the life of the Surviving Spouse, which
payments will begin within a reasonable period after the Par-
ticipant's death, unless:
i. The Participant is unmarried or another exception to
spousal rights in Section 6.02 applies; or
ii. The Participant elects another form of benefit with
spousal consent in accordance with subsection (d)
below; or
iii. The Surviving Spouse elects another form of
distribution allowed by Article IX within 90 days after
the Participant's death.
c. Other Forms of Benefits: If benefits do not have to be paid
to the Spouse as a Qualified Preretirement Survivor Annuity, they
shall be paid to the Beneficiary designated by the Participant in a
single lump sum.
d. Waiver of Qualified Preretirement Survivor Annuity: A
Participant subject to the Qualified Preretirement Survivor Annuity
rule described in subsection (b) above may effectively waive the
Qualified Preretirement Survivor Annuity, and elect to have all
benefits paid in a single lump sum to the Spouse or another
Beneficiary as follows:
i. The election must be made in writing and delivered to
the Plan Administrator during the period that begins on
the first day of the Plan Year in which the Participant
attains age 35, and ends on the date of the
Participant's death. However, if a Participant
terminates employment before the first day of the Plan
Year in which he would attain age 35, the election
period shall begin on the termination date, with
respect to Account balances existing on that date.
ii. Notwithstanding the election period described in
subsection (i) above, a Participant who will not yet
attain age 35 as of the end of any current Plan Year
may make a special election, in the form and method
required by subsection (i), for the period that begins
on the date of such election and ends on the first day
of the Plan Year in which the Participant will attain
age 35. Such an election shall not be valid unless the
Participant receives a written explanation of the
Qualified Preretirement Survivor Annuity, as described
in subsection (iv) below. Qualified Preretirement
Survivor Annuity coverage automatically will be
reinstated as of the first day of the Plan Year in
which the Participant will attain age 35. Any new
waiver thereafter will be subject to all of the
requirements of this Article.
iii. The Participant's Spouse must consent to the election,
in a consent which satisfies the requirements in
Section 6.02(e).
iv. The election must be made after the Plan Administrator
provides the Participant with a notice regarding the
Qualified Preretirement Survivor Annuity that is
comparable to the notice regarding the Qualified Joint
and Survivor Annuity described in Section 9.03(c). The
Plan Administrator must provide this notice during
whichever of the following periods ends last:
A. The period beginning with the first day of the
Plan Year in which the Participant attains age 32
and ending with the close of the Plan Year
preceding the Plan Year in which the Participant
attains age 35;
B. A reasonable period ending after the Employee
becomes a Participant; or
C. A reasonable period ending after the Qualified
Preretirement Survivor Annuity requirements first
apply to a Participant.
Notwithstanding the foregoing, notice must be provided within
a reasonable period after termination of employment in the
case of a Participant who terminates employment with the
Employer before attaining age 35.
For purposes of this subsection, a reasonable period after a
specified event is the end of the two year period beginning
one year prior to the date the event occurs and ending one
year after that date. In the case of a Participant who
terminated employment before the Plan Year in which he
attains age 35, the notice shall be provided within the two-
year period beginning one year prior to termination and
ending one year after termination. If such a Participant
thereafter returns to employment with the Employer, his
notice period shall be redetermined.
e. The preceding provisions regarding the form and timing of
payment shall be applied in a manner that conforms with the
distribution rules described in Article IX.
f. The Plan Administrator shall require satisfactory proof of
the Participant's death before paying benefits under this Section.
The Plan Administrator shall also require whatever proof is
necessary, in the particular case, to establish the right of any
person to receive the benefit.
8.05 Benefits Following Termination of Employment. If a
Participant terminates employment at a time when he is not eligible
for benefits under any of the preceding Sections of this Article,
his benefits shall be distributed in accordance with the following
provisions.
a. Benefits Not in Excess of $3,500: If the value of a
Participant's vested Account balances derived from Employer Contri-
butions does not exceed $3,500, the entire vested amount shall be
paid to the Participant in a single lump sum. Payment shall be made
as soon as administratively feasible following the termination of
employment, but no later than 60 days after the close of the Plan
Year within which employment terminated. No consent is required for
this distribution. The amount of the distribution shall be
determined pursuant to Section 9.02.
b. Benefits in Excess of $3,500: If the value of a Par-
ticipant's vested Account balances exceeds $3,500, the distribution
of benefits will be determined as follows:
i. Consent to Immediate Distribution: If the Participant
consents in accordance with subsection (c) below, he
will receive an "immediate" distribution of his
benefits. The benefits will be paid in accordance with
Article IX. Any non-vested amount in his Accounts will
be forfeited as of the final Valuation Date of the year
of distribution. An "immediate" distribution means
the payment of Benefits as soon as administratively
feasible after the consent is received. In no event
shall this date be more than 60 days after the later of
(A) the close of the Plan Year in which the Participant
terminated employment, or (B) the close of the Plan
Year in which the Plan Administrator received the
consent.
ii. No Consent to Immediate Distribution: If the
Participant does not consent in accordance with
subsection (c) below, benefits will not be distributed
until the times provided by the preceding Sections of
this Article, subject to the commencement date
described in Article IX.
c. Consent: A valid consent for an immediate distribution under
subsection (b) above shall be made only in the following manner:
i. The Plan Administrator shall provide the Participant
with a written notice of his right to choose an
immediate distribution, or to defer distribution of his
benefits. The notice shall be provided no more than 90
days before the date when the Participant terminates
employment, and no less than 30 days before the
termination date. As an exception, the Plan
Administrator shall provide the notice within 30 days
of the date it learns of the termination, if this date
is less than 30 days before the termination date.
ii. The Participant's written consent shall be made only
after he receives the notice from the Plan
Administrator.
iii. If the Plan Administrator does not receive the Par-
ticipant's signed consent to an immediate distribution
within 90 days after sending the notice, the Par-
ticipant shall be deemed to have chosen to defer the
payment of benefits.
iv. Notwithstanding subsection (iii) above, a Participant
who is deemed to have elected deferral can at any later
time elect a distribution of his benefits, by properly
completing a written election as described in
Section 9.01. The Plan Administrator will pay benefits
as soon as administratively feasible after it receives
this election, and in no event more than 60 days after
the close of the Plan Year in which the election is
received. The amount of the distribution shall be
determined pursuant to Section 9.02.
<PAGE>
ARTICLE IX
DISTRIBUTION REQUIREMENTS
9.01 Distribution Election. Except as provided in Section 8.05(a)
(mandatory cashouts), Section 9.04 (distribution commencement) and
Sections 9.05 and 9.06 (payments on or after a Participant's
Required Beginning Date), no distributions will be made from the
Plan prior to the Plan Administrator's receipt of complete
distribution election forms. Distributions will be made as soon as
administratively feasible following the Plan Administrator's receipt
of complete distribution election forms, but in no event sooner than
30 days and not later than 90 days after the Plan Administrator's
receipt of such completed forms. As part of the distribution
election form, the Participant (or the Participant's Beneficiary, if
applicable) shall elect whether the distribution shall be made
entirely in cash, entirely in Shares, or in a combination of cash
and Shares; provided that any fractional Shares shall be paid in
cash.
9.02 Distribution Amount.
a. For distributions that commence on or after January 1, 1995,
the amount of the distribution shall be the value of the
Participant's Account, determined by the Trustee as of the date of
distribution.
b. For distributions that commence on or after January 1, 1994
and before January 1, 1995, the amount of the distribution shall be
the value of the Participant's account determined by the Trustee as
of the Valuation Date (June 30 or December 31) that immediately
precedes the date of distribution.
c. For distributions that occur on or after the Effective Date
and before January 1, 1994, the Trustee shall value the
Participant's Account as of the March 31 immediately following the
Plan Year during which the Participant became entitled to a
distribution, and the Trustees shall distribute amounts in
accordance with such valuation.
9.03 Form of Distribution.
a. Except as provided in subsection (b) below, all benefits will
be distributed in a single lump sum payment.
b. Notwithstanding the form of distribution described in
subsection (a) above, a Participant who is married on his Annuity
Starting Date shall receive the value of his vested Account balance
attributable to contributions made on or before December 31, 1994 in
the form of a Qualified Joint and Survivor Annuity, unless another
form of distribution is elected pursuant to subsections (c) and (d)
below. The other forms of distribution available to a Participant
described in this subsection are (i) a single lump sum payment, and
(ii) a series of payments over a specified period certain, which
period shall not be greater than the Participant's life expectancy
or the joint life expectancy of the Participant and his Beneficiary.
c. No less than 30 and no more than 90 days prior to the Annuity
Starting Date, the Plan Administrator shall furnish each married
Participant described in (b) above with a notice that explains:
i. The terms and conditions of the Qualified Joint and
Survivor Annuity;
ii. The Participant's right to make, and the effect of, an
election to waive the Qualified Joint and Survivor
Annuity;
iii. The rights of the Participant's Spouse;
iv. The right to revoke a previous election and the effect
of the revocation; and
v. The relative estimated values of the other forms of
benefits under the Plan.
d. If a married Participant described in subsection (b)
above wishes to receive his benefits attributable to contributions
made on or before December 31, 1994 in any form other than the
Qualified Joint and Survivor Annuity, the following procedures must
be followed:
i. An election must be made in writing and delivered to
the Plan Administrator during the 90-day period ending
on the Annuity Starting Date. The election must
specify the optional form of benefit elected.
ii. The election must be made after the Plan Administrator
provides the Participant with the notice described in
subsection (c) above.
iii. Unless an exception stated in Section 6.02 applies, the
Spouse of a Participant must consent to any election,
except a different percentage joint and survivor
annuity with the Spouse as the Beneficiary. The
Spouse's consent must satisfy the requirements in
Section 6.02(e), and must also agree to the specific
optional form of Benefits that the Participant elects.
Alternatively, the consent can authorize the
Participant to change the form of Benefits. With this
alternative, the consent, if executed on or after
October 22, 1986, must also acknowledge (A) that the
Spouse has the right to limit consent to a specific
form of payment, and (B) that the Spouse is voluntarily
relinquishing this right. Notwithstanding the preceding
provisions, the Participant may at any time revoke his
election and restore the Qualified Joint and Survivor
Annuity for the Spouse.
9.04 Distribution Commencement. Unless a different commencement
date is elected or required pursuant to Article VIII or Article IX,
distribution of a Participant's vested Account shall commence not
later than one year after the end of the Plan Year during which the
Participant terminates employment due to Retirement on or after
Normal Retirement Age, Total and Permanent Disability or death. If
the Participant terminates employment due to resignation or dismal,
unless otherwise elected or required, distribution of the
Participant's vested Account shall commence not later than one year
after the end of the fifth Plan Year following the Plan Year during
which the Participant terminates employment (unless the Employer
reemploys the Participant before the required commencement date).
9.05 Diversification Distributions.
a. Diversification Election. Each Participant (whether or not
he has terminated from service with the Employer) who attains age
fifty-five (55) and who has completed ten (10) years of
participation in the Plan shall be eligible to elect each Plan Year
during the "Election Period" (as herein defined) and for a period of
ninety (90) days following each such Plan Year in the Election
Period, to diversify a portion of the Participant's Account
consisting of Shares in accordance with the terms of this Section;
provided, however, that the fair market value, determined as of the
Valuation Date prior to the date the Participant first becomes
eligible to diversify, of Shares acquired by or contributed to the
Plan after December 31, 1986 and allocated to the Participant's
Account exceeds $500. Elections to diversify an Account shall be
implemented by distributing to the Participant the amount designed
by the Participant as provided in subsection (d) below.
b. Election Period. The Plan Administrator shall notify in
writing each Participant of his eligibility for a diversification
distribution prior to the "Election Period", which is the six
consecutive Plan Years beginning with the Plan Year during which the
Participant first becomes eligible to diversify.
c. Amount Subject to Election. The aggregate amount subject to
the Participant's diversification distribution election for any Plan
Year in the Election Period shall be equal to 25% of the Shares
acquired by or contributed to the Plan by the Employer after
December 31, 1986 and standing to the credit of the Participant's
Account as of the last day of the Plan Year. This percentage shall
be increased to 50% for the last Plan Year in the Election Period.
In any such year, the number of Shares subject to the election shall
be reduced by the number of Shares distributed pursuant to the
Participant's previous election(s) hereunder.
d. Manner of Election. A Participant's diversification
distribution election for any Plan Year during the Election Period
shall be exercised by the Participant, notifying the Plan
Administrator in writing of his election, during such Plan Year or
within 90 days after such Plan Year ends. Such election shall
specify the amount to be distributed to the Participant. A
Participant's direction to distribute amounts subject to
diversification hereunder shall require the consent of the
Participant's Spouse if the value of the Shares subject to the
diversification election for such year exceeds $3,500.
e. Distribution Value. Following the Plan Administrator's
receipt of a completed diversification distribution election
(including spousal consent, if applicable), the value of the Shares
subject to the election (determined as of the date of distribution)
shall be distributed to the Participant in cash in a single lump sum
payment. Distributions shall be made within 180 days following the
end of the Plan Year to which the election relates.
f. Modification or Revocation. A Participant may modify or
revoke his diversification distribution election or execute a new
election for any Plan Year in the Election Period at any time during
the Plan Year and within ninety (90) days following the end of the
Plan Year; provided that such modification, revocation or new
election is received by the Plan Administrator before the
diversification distribution is made.
9.06 Compliance with Code Section 401(a)(9).
a. Incorporation by Reference: Notwithstanding the general
distribution rules in Article VIII, Section 9.03, or any other Plan
provisions, all distributions shall be made in compliance with Code
Section 401(a)(9) and implementing Regulations, including the
minimum distribution incidental benefit requirement of proposed
Regulation 1.401(a)(9)-2. These Code and regulatory provisions are
hereby incorporated by reference.
b. Life Expectancies: In applying Code Section 401(a)(9) and
implementing Regulations:
i. Life expectancies of Participants and Beneficiaries
shall be calculated using the expected return multi-
plies in Tables V and VI of Regulation 1.72-9.
ii. The life expectancies of a Participant and his Spouse
shall not be redetermined pursuant to Code Section
401(a)(9)(D).
9.07 Required Distribution to Participant. As stated in Article
VIII, a Participant generally may elect to defer the receipt of
Benefits following Retirement. Notwithstanding this general rule,
the entire interest of a Participant must be distributed, or begin
to be distributed, no later than the Participant's Required
Beginning date, as defined below.
a. Age 70-1/2 on or after January 1, 1988: For a Participant
who attains age 70-1/2 on or after January 1, 1988, the Required
Beginning Date is April 1 of the calendar year following the
calendar year in which the Participant attains age 70-1/2, with the
following exception. For a Participant who attains age 70-1/2
during 1988 and has not retired as of January 1, 1989, the Required
Beginning Date is April 1, 1990.
b. Age 70-1/2 before January 1, 1988: For a Participant who
attains age 70-1/2 before January 1, 1988, the Required Beginning
Date shall be determined as follows:
i. For a Participant who is not a Five Percent Owner, the
Required Beginning Date is April 1 of the calendar year
following the calendar year in which the later of
Retirement or attainment of age 70-1/2 occurs.
ii. For a Participant who is a Five Percent Owner during
any year beginning after December 31, 1979, the
Required Beginning Date is April 1 following the later
of: (A) the calendar year in which the Participant
attains age 70-1/2, or (B) the earlier of the calendar
year with or within which ends the Plan Year in which
the Participant becomes a Five Percent Owner, or the
calendar year in which the Participant retires.
For purposes of this Section, a Participant shall be treated as a
Five Percent Owner if he is a Five Percent Owner at any time during
the Plan Year ending with or within the calendar year in which he
attains age 66-1/2 or any subsequent Plan Year. Once distributions
have begun to a Five Percent Owner, they must continue even if the
Participant ceases to be a Five Percent Owner in a subsequent year.
9.08 Required Distribution to Beneficiary. As provided in Article
VIII, the designated Beneficiary generally may elect to defer the
receipt of Benefits payable following the death of a Participant.
However, this right is subject to the following restrictions:
a. Distribution Beginning before Death: If a Participant dies
after he begins to receive Benefits, any Benefits that remain
undistributed at his death shall be distributed at least as rapidly
as under the method of distribution being used at the time of his
death. Notwithstanding the preceding sentence, if a Participant
dies before his Required Beginning Date, distributions to his
Beneficiary shall be governed by subsection (b) below, as though he
had not begun to receive Benefits, unless payments were being made
as an annuity.
b. Distribution Beginning after Death: If a Participant dies
before he begins to receive Benefits, the Benefits shall be
completely distributed by no later than December 31 of the calendar
year that contains the fifth anniversary of his death. As an
exception to this rule, a Participant may elect to have his
designated Beneficiary receive payments as follows:
i. A Spouse may elect to receive payments over a period
certain not greater than the Spouse's life expectancy,
beginning on or before the later of:
A. December 31 of the calendar year immediately
following the calendar year in which the
Participant died; or
B. December 31 of the calendar year in which the
Participant would have attained age 70-1/2.
ii. A designated Beneficiary other than the Spouse may
elect to receive payments over a period certain not
greater than the Beneficiary's life expectancy, for a
period that begins on or before December 31 of the
calendar year immediately following the calendar year
in which the Participant died.
If the Participant has not made the above election by the time of
his death, the designated Beneficiary may make the election. The
Beneficiary must make the election by the earlier of: (A) December
31 of the calendar year in which distributions would be required to
begin under subsection (i) or (ii) above, whichever is applicable;
or (B) December 31 of the calendar year that contains the fifth
anniversary of the Participant's death.
9.09 Location of Participant or Beneficiary Unknown.
a. When a distribution is payable to a Participant or
Beneficiary, the Plan Administrator shall make all reasonable
efforts to locate that person. These efforts shall include (i)
sending a registered letter, return receipt requested, to the
person's last known mailing address, and (ii) sending a written
request to any person shown in the Employer's records as a relative
or other person to contact, asking for information regarding the
whereabouts of the Participant or Beneficiary.
b. If the Plan Administrator is unable to locate the person
within six months from the date a certified letter was mailed to
him, the Plan Administrator shall direct the Trustee to maintain the
Participant as an inactive Participant. The Plan Administrator
shall continue to maintain the Participant in inactive status until
(i) the person entitled to the benefit makes an application for it,
or (ii) the benefit reverts by escheat to the State, whichever
occurs first.
9.10 Facility of Payment. If the Plan Administrator finds that
any person to whom a Benefit is payable from the Trust Fund is
unable to care for his affairs because of illness or accident, any
payment due may be paid to the Spouse, a child, a parent, or a
brother or sister, or to any person deemed by the Plan Administrator
to have incurred expense for the person, unless a prior claim for
the Benefit has been made by a duly appointed guardian, committee or
other legal representative. Any such payments will be a complete
discharge of any liability under the Plan.
9.11 TEFRA Election. Subject to the spousal consent requirements
of the Plan, the Code Section 401(a)(9) minimum distribution
requirements described in this Article, shall not apply to a
Participant who, prior to January 1, 1984, made a valid written
election (that has not been revoked) to have his Benefits paid in an
alternative method acceptable under Code Section 401(a) as in effect
prior to the enactment of the Tax Equity and Fiscal Responsibility
Act of 1982 ("TEFRA").
9.12 Eligible Rollover Distributions.
a. Application of Section. This Section applies to
distributions made on or after January 1, 1993. Notwithstanding any
provision of the Plan to the contrary that would otherwise limit a
distributee's election under this Section, a distributee may elect,
at the time and in the manner prescribed by the Plan Administrator,
to have any portion of an eligible rollover distribution paid
directly to an eligible retirement plan specified by the distributee
in a direct rollover.
b. Definitions.
i. Eligible Rollover Distribution: An eligible rollover
distribution is any distribution of all or any portion
of the balance to the credit of the distributee, except
that an eligible rollover distribution does not
include: any distribution that is one of a series of
substantially equal periodic payments (not less
frequently than annually) made for the life (or life
expectancy) of the distributee or the joint lives (or
joint life expectancies) of the distributee and the
distributee's designated Beneficiary, or for a
specified period of ten years or more; any distribution
to the extent such distribution is required under
Section 401(a)(9) of the Code; and the portion of any
distribution that is not includible in gross income
(determined without regard to the exclusion for net
unrealized appreciation with respect to employer
securities).
ii. Eligible Retirement Plan: An eligible retirement plan
is an individual retirement account described in
Section 408(a) of the Code, an individual retirement
annuity described in Section 408(b) of the Code, an
annuity plan described in Section 403(a) of the Code,
or a qualified trust described in Section 401(a) of the
Code, that accepts the distributee's eligible rollover
distribution. However, in the case of an eligible
rollover distribution to the Surviving Spouse, an
eligible retirement plan is an individual retirement
account or individual retirement annuity.
iii. Distributee: A distributee includes an Employee or
former Employee. In addition, the Employee's or former
Employee's Surviving Spouse and the Employee's or
former Employee's Spouse or former Spouse who is the
Alternate Payee under a Qualified Domestic Relations
Order, as defined in Section 414(p) of the Code, are
distributees with regard to the interest of the Spouse
or former Spouse.
iv. Direct Rollover: A direct rollover is a payment by the
Plan to the eligible retirement plan specified by the
distributee.
9.13 Tax Credit Shares. Shares contributed by the Employer prior
to 1987 under the tax credit employee stock ownership plan
provisions of the Code shall not be distributed from the Plan prior
to the end of the 84th month beginning after the month during which
such Shares are allocated under the Plan. The foregoing shall not
limit distribution of Shares following death, disability, separation
from service or termination of the Plan, or distributions pursuant
to Code Sections 401(a)(9) or 401(a)(28).
9.14 Put Option on Distributed Shares. If at the time of
distribution, Shares distributed from the Trust Fund are not treated
as "readily tradable on an established market" within the meaning of
Section 409(h) of the Code and the Regulations, such Shares shall be
subject to a put option in the hands of a Qualified Holder by which
such Qualified Holder may sell all or any part of the Shares
distributed to him by the Trust to the Employer. The put option
shall be subject to the following conditions:
a. The term "Qualified Holder" shall mean the Participant
or Beneficiary receiving the distribution of such Shares, any other
party to whom the Shares are transferred by gift or by reason of
death, and also any trustee of an individual retirement account (as
defined under Code Section 408) to which all or any portion of the
distributed Shares is transferred pursuant to a tax-free "rollover"
transaction satisfying the requirements of Sections 402 and 408 of
the Code;
b. During the 60-day period following any distribution of
such Shares, a Qualified Holder shall have the right to require the
Employer to purchase all or a portion of the distributed Shares held
by the Qualified Holder. The purchase price to be paid for any such
shares shall be their fair market value determined as of the date of
the exercise of the put option under this Section;
c. If a Qualified Holder shall fail to exercise his put
option right under this Section, the option right shall lapse
temporarily upon the expiration of the 60-day period. As soon as
practicable following the last day of the Plan Year in which the 60-
day option period expires, the Company shall notify the non-electing
Qualified Holder (if he is then a shareholder of record) of the
valuation of the Shares as of that date. During the 60-day period
following receipt of such valuation notice, the Qualified Holder
shall again have the right to require the Company to purchase all or
any portion of the distributed Shares. The purchase price to be
paid therefor shall be based on the valuation of the Shares as of
the date coinciding with the exercise of the option under this
subsection. The purchase price to be paid therefor shall be the
valuation of the Shares on such date; and
d. The foregoing put option shall be effective solely
against the Employer and shall not obligate the Plan or the Trust in
any manner. However, the Employer may give the Plan or the Trust
the right to elect to purchase any shares that otherwise must be
purchased by the Employer pursuant to a Qualified Holder's exercise
of any such option.
e. Except as provided in this Section, no Shares acquired
with the proceeds of an Exempt Loan may be subject to a put, call or
other option, or buy-sell or similar arrangements while held by or
distributed from the Plan. The rights and protections provided by
this Section are nonterminable.
<PAGE>
ARTICLE X
CLAIMS PROCEDURES
10.01 Claim for Benefits.
a. Any claim for Benefits by a Participant or Beneficiary shall
be made in writing to the Plan Administrator.
b. In this Article, Participants and Beneficiaries are
collectively referred to as claimants.
10.02 Denial of Claim.
a. If the Plan Administrator denies a claim in whole or in part,
it shall send the claimant a written notice of the denial.
b. The Plan Administrator shall send the denial notice within 90
days after the date it receives a claim, unless it needs additional
time to make its decision. In that case, the Plan Administrator may
authorize an extension of up to an additional 90 days, if it
notifies the claimant of the extension within the initial 90-day
period. The extension notice shall state the reasons for the
extension and the expected decision date.
c. The denial notice shall be written in a manner calculated to
be understood by the claimant and shall contain:
i. The specific reason or reasons for the denial of the
claim;
ii. Specific reference to pertinent Plan provisions on
which the denial is based;
iii. A description of any additional material or information
necessary to perfect the claim, with an explanation of
why the material or information is necessary; and
iv. An explanation of the review procedures provided by
Sections 10.03 and 10.04.
10.03 Request for Review of Denial.
a. Within 60 days after the claimant receives a denial notice,
he may file a request for review with the Plan Administrator. Any
such request must be made in writing.
b. A claimant who timely requests review shall have the right to
review pertinent documents, to submit additional information or
written comments, and to be represented.
10.04 Review Decision.
a. The Plan Administrator shall send the claimant a written
decision on any request for review that it receives.
b. The Plan Administrator shall send the review decision within
60 days after the date it receives a request for review, unless an
extension of time is needed, due to special circumstances. In that
case, the Plan Administrator may authorize an extension of up to an
additional 60 days, provided it notifies the claimant of the
extension within the initial 60-day period.
c. The review decision shall be written in a manner calculated
to be understood by the claimant and shall contain:
i. The specific reason or reasons for the decision; and
ii. Specific reference to the pertinent Plan provisions on
which the decision is based.
d. If the Plan Administrator does not send the claimant a review
decision within the applicable time period, the claim shall be
deemed denied on review.
e. The review decision (including a deemed decision) shall be
the final decision of the Plan.
<PAGE>
ARTICLE XI
ADMINISTRATION
11.01 Plan Administrator.
a. The Plan Administrator shall be the named fiduciary for the
Plan and shall be responsible for the management, operation and
administration of the Plan.
b. The Board of Directors shall have the authority to appoint an
individual or other entity, or a committee consisting of three
members to be the Plan Administrator, and to fill any vacancies
which occur, in its sole discretion. Any appointee is subject to
removal by the Board of Directors at any time, and may resign at his
own volition upon 10 days prior written notice to the Board. If at
any time there is no appointed Plan Administrator because vacancies
have not been filled, the Board of Directors shall be deemed the
Plan Administrator. Names of all current appointees shall be
available from the Secretary of the Employer.
c. If the Plan Administrator is a committee, any act which the
Plan authorizes or requires the Plan Administrator to do may be done
at a meeting of the committee by a majority of the members then
voting.
d. The Board of Directors will appoint a chairman and a
secretary and such other agents and representatives of the pension
committee as it may deem advisable (see Section 11.05). In its
relationship with the Trustee and any insurance company or companies
on any matter or thing included in this Plan, one member of the
committee may be authorized by it to sign or execute any document on
its behalf. The Chairman of the Board of Directors will certify to
the Trustee and to such insurance company or companies the name and
signature of the member of the committee who is so authorized.
e. The members of the committee will serve without compensation
for services as such, but all their expenses shall be paid by the
Employer (see Section 11.11).
f. The Board of Directors, in its sole discretion, may also
designate the Trustee as the Plan Administrator. Any such
designation shall be valid only if the Trustee acknowledges
responsibility for the management, operation and administration of
the Plan in writing. Thereafter, all references in the Plan and
Trust to the Plan Administrator shall mean the Trustee unless and
until the Board of Directors appoints a different Plan Administrator
in accordance with this Section.
11.02 Fiduciary and Administrative Duties. The Plan Administrator
shall have the following powers, duties, and responsibilities, which
it may retain or delegate among the below-mentioned bodies:
a. Powers, duties, and responsibilities of administration which
shall be delegable to an administrator;
b. Powers, duties, and responsibilities of custody and
disbursement of the assets of the Fund, which shall be delegable to
the Trustee, the administrator, or an insurance company, and
c. Powers, duties, and responsibilities of investment which
shall be delegable to the Trustee, an investment advisor, or an
insurance company.
The Plan Administrator may appoint an administrator, an investment
advisor, or an insurance company, and review or redelegate the
exercise of these powers, duties and responsibilities at any time.
11.03 General Powers and Discretion of Plan Administrator.
a. The Plan Administrator shall have all powers necessary to
administer the Plan in accordance with its terms, including the
power to construe the Plan and determine all questions that arise
under it.
b. Notwithstanding any other provision in the Plan, and to the
full extent permitted by ERISA and the Code, the Plan Administrator
shall have exclusive authority and discretion to construe any
uncertain or disputed term or provision in the Plan, including, but
not limited to, the following:
i. Determining whether any individual is eligible for any
Benefits under this Plan;
ii. Determining the amount of Benefits, if any, an
individual is entitled to under this Plan;
iii. Interpreting all of the provisions of this Plan; and
iv. Interpreting all of the terms used in this Plan.
c. The Plan Administrator's exercise of discretionary authority
to construe the terms of the Plan, and all its determinations and
interpretations, shall:
i. Be binding upon any individual claiming Benefits under
this Plan, including, but not limited to, the
Participant, the Participant's estate, any Beneficiary
of the Participant, and any Alternate Payee;
ii. Be given deference in all courts of law, to the
greatest extent allowed by applicable law; and
iii. Not be overturned or set aside by any court of law
unless found to be arbitrary and capricious, or made in
bad faith.
d. If discretionary authority must be exercised with respect to
a Plan Administrator as an Employee (or retiree), the authority
shall be exercised solely and exclusively by other Plan
Administrators. If there are none, the discretionary authority
shall be exercised by the Board of Directors, not including the
affected individual if he is also a member of the Board of
Directors.
e. Any discretionary actions of the Plan Administrator or Board
of Directors shall be taken in a manner that does not discriminate
in favor of Highly Compensated Employees.
11.04 Administration of the Trust Fund.
a. The Trustee shall be responsible for the management and
investment of the Trust Fund in accordance with the provisions of
the Trust Agreement.
b. Directives of the Plan Administrator to the Trustee shall be
delivered in writing, and properly signed.
11.05 Delegation of Powers.
a. The Plan Administrator may appoint assistants or
representatives, to the extent it deems them necessary for the
effective administration of the Plan. The Plan Administrator may
delegate to them any powers and duties, both ministerial and
discretionary, that it deems expedient or appropriate, except as
limited by Section 11.06.
b. Any appointment under this Section or Section 11.06 shall be
made pursuant to a signed, written instrument.
11.06 Appointment of Professional Assistants and Investment
Managers.
a. The Plan Administrator may engage accountants, attorneys,
physicians and such other professional personnel as it deems
necessary or advisable. The Plan Administrator may also appoint one
or more Investment Managers to manage all or any of the assets of
the Trust, including the power to acquire or dispose of assets.
However, the appointment of an Investment Manager must be approved
by the Board of Directors.
b. The functions of persons engaged under this Section shall be
limited to the specific services and duties for which they are
engaged. Such persons shall have no other duties, obligations or
responsibilities under the Plan or Trust, and shall exercise no
discretion regarding the management of the Plan. Unless engaged
specifically as an Investment Manager, such a person shall exercise
no authority or control respecting management or disposition of the
assets of the Trust.
c. The fees and costs of services under this Section are an
administrative expense of the Plan to be paid out of the Trust Fund,
except to the extent paid by the Employer.
11.07 Records. All acts and determinations with respect to the
Plan shall be duly recorded. All such records and other documents
that may be necessary for the administration of the Plan shall be
preserved in the custody of the Plan Administrator (or its appointed
assistants or representatives).
11.08 Notice of Rollover Treatment. Whenever it makes a qualifying
rollover distribution, within the meaning of Code Section 402(a),
the Plan Administrator shall provide a written explanation to the
recipient of:
a. The circumstances under which the distribution will not be
subject to tax if transferred to an eligible retirement plan (as
defined in Code Section 402(a)) within 60 days after the date on
which the recipient receives the distribution; and
b. If applicable, the income averaging provisions of Code
Section 402(e).
11.09 Responsibility of Fiduciaries. Any Plan Administrator and
any assistant or representative, other than any Investment Manager,
shall be free from all liability for acts and conduct in the
administration of the Plan and Trust, except for acts of willful
misconduct. However, the preceding sentence shall not relieve any
fiduciary from any responsibility, obligation or duty that the
fiduciary may have pursuant to ERISA.
11.10 Indemnity by Employer. To the extent not insured against by
an applicable insurance policy, and to the extent permitted by law,
the Employer shall indemnify and hold harmless the Plan
Administrator and its assistants and representatives from any and
all claims, demands, suits or proceedings in connection with the
Plan or Trust that may be brought against them, provided the
individual or entity being indemnified is/was an employee, or
committee of employees, of the Employer.
11.11 Payment of Fees and Expenses. To the extent consistent with
ERISA, the Plan Administrator, and assistants and representatives,
shall be entitled to payment from the Trust Fund for all reasonable
costs, charges and expenses incurred in the administration of the
Plan and Trust. This includes, but is not limited to, reasonable
fees for accounting, legal and other services, to the extent
incurred in the performance of duties under the Plan and Trust,
except to the extent that the fees and costs are paid by the Em-
ployer. Notwithstanding any other provision of the Plan or Trust,
no person who is a "disqualified person," within the meaning of Code
Section 4975(e)(2) and who receives full-time pay from the Employer
shall receive compensation from the Trust Fund, except for re-
imbursement of expenses properly and actually incurred.
11.12 ERISA Reporting and Disclosure. The Plan Administrator shall
be responsible for the performance of all reporting and disclosure
obligations under ERISA.
11.13 Service of Legal Process. The Plan Administrator shall be
the designated agent of the Plan for service of legal process.
11.14 Funding Policy for Trust Fund. The Plan Administrator shall
establish a funding policy and method consistent with the objectives
of the Plan and the requirements of Title I of ERISA. The Plan
Administrator shall review such funding policy and method at least
annually. In its actions, the Plan Administrator shall endeavor to
determine the Plan's short-term and long-term objectives and
financial needs, taking into account the need for liquidity to pay
Benefits and the need for investment growth. All actions under this
Section, including the supporting reasons, shall be recorded in
writing by the Plan Administrator and communicated to the Trustee
and Board of Directors.
11.15 Allocation of Trust Fund Increases and Decreases. As of each
Valuation Date, a share of any increase or decrease in the net fair
market value of the Trust Fund shall be allocated to the
nonsegregated Accounts of each Participant, and former Participant,
for whom there is an unpaid balance, in accordance with the
following provisions:
a. Valuation of the Trust Fund:
i. As of each Valuation Date, the Plan Administrator shall
direct the Trustee to determine the net fair market
value of the assets comprising the Trust Fund.
ii. Securities listed on a registered stock exchange shall
be valued at the last prices at which they were traded
on the Valuation Date, or on the last date on which
they were traded, if they were not traded on the
Valuation Date. Unlisted securities shall be valued at
the last bid price on the Valuation Date, as obtained
from a registered broker or investment banker. The
Trustee shall either appraise other assets itself or
employ appraisers for the purpose; provided that any
Employer securities held by the Trust and not readily
tradeable on an established market shall be valued by
an independent appraiser meeting requirements similar
to the requirements described under Code
Section 170(a)(1).
iii. In determining net fair market value, the Trustee shall
deduct: expenses for which the Trust Fund has not yet
been reimbursed by the Employer; contributions to be
allocated for the current Plan Year, even if already
paid; and amounts which are distributable for the Plan
Year pursuant to Article VIII or Article IX, although
not yet distributed.
b. Allocation: The increase or decrease, determined under sub-
section (a) above, shall be allocated to the Accounts of each
Participant (and former Participant) in the ratio of (i) the
cumulative amount in the nonsegregated Accounts of the Participant,
to (ii) the cumulative amount in the nonsegregated Accounts of all
Participants. Before establishing this ratio, the Accounts of all
Participants shall be increased by any balances reinstated pursuant
to Section 5.03(a), and decreased by amounts that either were
distributed during the Plan Year, or that were distributable
pursuant to a request made by the Participant although the
distribution has not yet been made.
c. Distribution Valuations. To the extent required by the
distribution provisions of Articles VIII and IX, the Trustee shall
value a Participant account as of the date on any distribution of
the Participant Account or such other date as may be required by
Section 9.02.
<PAGE>
ARTICLE XII
LIMITATIONS ON ALLOCATIONS
12.01 General Rules.
a. Incorporation of Code Section 415: In addition to the
specific provisions of this Article, the terms of Code Section 415
and implementing Regulations are hereby incorporated by reference
and shall govern in determining the allocations that can be made to
the Accounts of a Participant.
b. Aggregation of Employers and Plans: As further set forth in
this Article and Code Section 415, the Maximum Annual Addition is an
aggregate limitation that applies to this Plan and any other plans,
described below, that are maintained by the Employer or an
Affiliated Employer. Therefore, for this Article:
i. The term "Employer" includes any Affiliated Employers,
using the Code Section 415 definition of an Affiliated
Employer that is stated in Article II.
ii. All Defined Benefit Plans ever maintained by the
Employer shall be treated as one Defined Benefit Plan,
whether or not terminated. The same rule applies to
all Defined Contribution Plans ever maintained by the
Employer.
iii. The term "contribution", standing alone, refers both to
all employee nondeductible contributions and all
Employer contributions, including any forfeitures, to
the above plans.
12.02 Code Section 415 Limitations. For Limitation Years beginning
after December 31, 1986, the Annual Additions for a Participant
shall not exceed the Maximum Annual Addition for any Limitation
Year, as these terms are explained below.
a. Maximum Annual Addition: The Maximum Annual Addition for a
Limitation Year is the lesser of:
i. The Defined Contribution Dollar Limitation; or
ii. 25 percent of the Participant's Limitation Year
Compensation.
In applying the above formula, the limitation in subsection (ii)
above shall not apply to any allocation for medical benefits (within
the meaning of Code Section 401(h) or Code Section 419A(f)(2)) which
is otherwise treated as an Annual Addition under Code
Section 415(l)(1) or Code Section 419A(d)(2).
b. Annual Additions: Except as provided in Code Section
415(c)(6), the Annual Additions of a Participant are the sum of the
following amounts credited for the Limitation Year:
i. Employer contributions;
ii. Employee contributions;
iii. Forfeitures;
iv. Amounts allocated after March 31, 1984 to an individual
medical account, as defined in Code Section 415(l)(2)
which is part of a pension or annuity plan maintained
by the Employer; and
v. Amounts derived from contributions paid or accrued
after December 31, 1985, in taxable years ending after
such date, which are attributable to post-retirement
medical benefits, allocated to the separate account of
a Key Employee under a welfare benefit fund (as defined
in Code Section 419(e)) maintained by the Employer.
For purposes of this subsection, the definition of a
Key Employee in Article II is modified as provided in
Code Section 419A(d)(3).
In determining Annual Additions under the above definition, any
mandatory employee contributions to a Defined Benefit Plan shall be
treated as Annual Additions to a Defined Contribution Plan.
(However, Annual Additions for Limitation Years beginning before
January 1, 1987 shall not be recomputed to treat all such employee
contributions as Annual Additions.) Further, any excess amounts
that are allocated to Participant's Accounts pursuant to Sec-
tion 12.04 to reduce Employer Contributions will be considered
Annual Additions.
Contributions do not fail to be Annual Additions merely because
they are "excess aggregate contributions" within the meaning of Code
Section 401(m) and implementing Regulations. Further, excess
aggregate contributions do not fail to be Annual Additions because
corrected through distribution or recharacterization.
12.03 Reduction of Allocations. The Employer may reduce (or
eliminate) allocations for a Participant in order to satisfy Code
Section 415 as provided in this Section. If the Employer also
maintains any of the plans described in Section 12.05, the reduc-
tions in this Section shall be applied by taking the allocations for
the Participant under those plans into account, as stated in Section
12.05(b).
a. Estimated Compensation: The Employer may estimate Limitation
Year Compensation and limit allocations for a Participant below
those that would otherwise be made under the terms of the Plan.
Estimates shall be made in a reasonable and uniform manner for all
Participants.
b. Final Compensation: The Employer shall determine each
Participant's actual Limitation Year Compensation as soon as
administratively feasible after the close of the Plan Year, and take
whichever of the following actions is appropriate:
i. The Employer shall make any additional allocations,
called for by the terms of the Plan, that can be made
without exceeding the Maximum Annual Addition; or
ii. The Plan Administrator shall take actions in accordance
with Section 12.04 in order to avoid an excess
allocation, if amounts in excess of the Maximum Annual
Addition have been allocated to a Participant's
Accounts as a result of:
A. The allocation of forfeitures;
B. A reasonable error in estimating a Participant's
annual Limitation Year Compensation;
C. Any under facts and circumstances allowed under
Regulation 1.415-6(b)(6).
By these actions, the excess amounts will not be
considered Annual Additions and, therefore, the Maximum
Annual Addition will not be exceeded.
12.04 Reduction of Excess Amounts.
a. Return of Contributions: To the extent necessary to reduce
an excess amount, a distribution shall be made to the Participant of
(i) any elective deferrals (within the meaning of Code
Section 402(g)(3)) to any other plan the Employer may have, and (ii)
any nondeductible voluntary or mandatory employee contributions to
any other plan the Employer may have. The amounts distributed are
disregarded for purposes of Code Section 402(g). Notwithstanding
the preceding sentence, employee mandatory contributions shall not
be returned to the extent that the return would cause discrimination
in favor of Highly Compensated Employees. Other than the foregoing
distributions, no amounts shall be returned to Participants as a way
of complying with Code Section 415.
b. Reduction of Future Contributions and Suspense Accounts: Any
excess amount that remains after the amounts described in
subsection (a) above have been returned to Participants will be
disposed of in the following manner (after determining the excess
attributable to this Plan pursuant to Section 12.05(c), if
applicable):
i. If the Participant is covered by the Plan at the end of
the Limitation Year, the excess amount in his Accounts
will be used to reduce future allocations by the
Employer for him (including any allocation of for-
feitures) in the next Limitation Year, and each
succeeding Limitation Year, if necessary.
ii. If the Participant is not covered by the Plan at the
end of a Limitation Year, the excess amount will be
held unallocated in a suspense account. The suspense
account will be applied to reduce future contributions
by the Employer in making allocations for all remaining
Participants in the next Limitation Year, and each
succeeding Limitation Year, if necessary.
iii. Any suspense account that is in existence during a
Limitation Year will not participate in gains and
losses of the Trust Fund. All amounts in the suspense
account must be allocated and reallocated to
Participants' Accounts before any contribution can be
made to the Plan for that Limitation Year.
12.05 Adjustments for Multiple Defined Contribution and Other
Specified Plans.
a. Application of Section: This Section applies if the
Participant is covered under (i) another Defined Contribution Plan
maintained by the Employer, (ii) a welfare benefit fund, as defined
in Code Section 419(e), maintained by the Employer, or (iii) an
individual medical account, as defined in Code Section 415(l)(2),
maintained by the Employer, which provides an Annual Addition.
b. Reduction of Contributions: If the allocations that would
otherwise be made for a Participant under this Plan and other plans
specified in subsection (a) above would cause the Maximum Annual
Addition to be exceeded, allocations will be made to the other plans
only to the extent permissible after allocations have been made to
this Plan.
c. Disposition of Excess Amounts: If amounts that have already
been allocated for a Participant under this Plan and other plans
specified in subsection (a) above result in an excess amount for a
Limitation Year, the excess amount will be deemed to consist of the
Annual Additions last allocated, subject to the following
modifications:
i. Annual Additions attributable to a welfare benefit fund
or individual medical account will be deemed to have
been allocated first, regardless of the actual
allocation date.
ii. If an excess amount was allocated to a Participant
under this Plan and another plan on the same allocation
date, the excess amount attributed to this Plan will be
the product of:
A. The total excess amount allocated as of such
date; times
B. The ratio of (I) the Annual Additions allocated
to the Participant for the Limitation Year as of
such date under this Plan to (II) the total
Annual Additions allocated to the Participant for
the Limitation Year as of such date under this
and all other Defined Contribution Plans.
Any excess amount attributed to this Plan shall be disposed of by
following the rules in Section 12.04. As stated in Section 12.04,
this includes the fact that elective deferrals and employee
contributions under all plans will be returned to reduce the excess
amount under all plans, before other actions are taken.
12.06 Adjustments for Participant in Defined Benefit Plan.
a. Limitation: If a Participant is or has been covered by a
Defined Benefit Plan maintained by the Employer, the sum of the
Participant's Defined Benefit Fraction and Defined Contribution
Fraction, as defined below, shall not exceed 1.0 in any Limitation
Year.
b. Defined Benefit Fraction: The numerator of the Defined
Benefit Fraction is the sum of the Participant's "projected annual
benefits" under all Defined Benefit Plans of the Employer (whether
or not terminated). The denominator is the lesser of 1.25 times the
Defined Benefit Dollar Limitation ($90,000, as adjusted under Code
Section 415(b)), or 1.4 times the Participant's "highest average
compensation." In determining the Defined Benefit Fraction:
i. "Projected annual benefit" means the annual retirement
benefit (adjusted to an actuarially equivalent straight
life annuity, if such benefit is expressed in a form
other than a straight life annuity, or qualified joint
and survivor annuity) to which the Participant would be
entitled under the terms of the Plan, assuming that:
A. The Participant will continue employment until
Normal Retirement Age under the Plan (or current
age, if later), and
B. The Participant's Compensation for the current
Limitation Year and all other relevant factors
used to determine Benefits under the Plan will
remain constant for all future Limitation Years.
ii. "Highest average compensation" means the average
compensation for the three consecutive Years of Service
that produces the highest average.
iii. Notwithstanding the preceding provisions, if a Par-
ticipant was a Participant as of the first day of the
first Limitation Year beginning after December 31, 1986
in a Defined Benefit Plan maintained by the Employer
which was in existence on May 6, 1986, the denominator
of the fraction will not be less than 125 percent of
the sum of the annual benefits under such plans which
the Participant had accrued as of the close of the last
Limitation Year beginning before January 1, 1987,
disregarding any changes in the terms and conditions of
the Plan after May 5, 1986. The preceding sentence
applies only if any such Defined Benefit Plans,
individually and in the aggregate, satisfied the
requirements of Code Section 415 for all Limitation
Years beginning before January 1, 1987.
c. Defined Contribution Fraction: The numerator of the Defined
Contribution Fraction is the sum of the Annual Additions to the
Participant's Accounts under all Defined Contribution Plans (whether
or not terminated) maintained by the Employer for the current and
all prior Limitation Years. The denominator is the sum of the
"maximum aggregate amounts" for the current and all prior Limitation
Years of Service with the Employer regardless of whether a Defined
Contribution Plan was maintained by the Employer. In determining
the Defined Contribution Fraction:
i. "Maximum aggregate amount" means the lesser of (A) 125
percent of the Defined Benefit Dollar Limitation,
determined in accordance with Code Section 415(b) and
adjusted by the Adjustment Factor, or (B) 35 percent of
the Participant's Limitation Year Compensation for such
year.
ii. If the Participant was a Participant as of the end of
the first day of the first Limitation Year beginning
after December 31, 1986, in one or more Defined
Contribution Plans of the Employer which were in
existence on May 6, 1986, the numerator of the fraction
will be adjusted if the sum of this fraction and the
Defined Benefit Fraction would otherwise exceed 1.0
under the terms of this Plan. Under the adjustment, an
amount equal to the product of (A) the excess of the
sum of the fractions over 1.0 times (B) the denominator
of this fraction will be permanently subtracted from
the numerator of the fraction. The adjustment is
calculated using the fractions as they would be com-
puted as of the end of the last Limitation Year
beginning before January 1, 1987, and disregarding any
changes in the terms and conditions of the plan made
after May 5, 1986, but using the Code Section 415
limitation applicable to the first Limitation Year
beginning on or after January 1, 1987.
d. Adjustment: If the sum of the Defined Benefit Fraction and
the Defined Contribution Fraction exceeds 1.0 in any Limitation Year
for a Participant, the Plan Administrator shall adjust the numerator
of the Defined Benefit Fraction, so that the sum of the fractions
for the Participant does not exceed 1.0 in any Limitation Year.
e. Super Top-Heavy Rules: In applying the above rules, if the
Plan is a Super Top-Heavy Plan, the denominators of both the Defined
Benefit Fraction and the Defined Contribution Fraction shall be
adjusted as provided in Section 15.05.
<PAGE>
ARTICLE XIII
DISCONTINUANCE OF CONTRIBUTIONS,
TERMINATION, AMENDMENT, AND MERGER
13.01 Discontinuance of Contributions. Whenever the Employer
determines that it is impossible or inadvisable to make further
contributions as provided in the Plan, the Board of Directors may,
without terminating the Trust, adopt an appropriate resolution
permanently discontinuing all further contributions to the Plan. A
certified copy of the resolution shall be delivered to the Plan
Administrator and the Trustee. Thereafter, the Plan Administrator
and the Trustee shall continue to administer all the provisions of
the Plan that are necessary and remain in force, other than the
provisions relating to contributions. The Trust shall remain in
existence with respect to the Employer and all of the provisions of
the Trust Agreement shall remain in force.
13.02 Termination of Plan and Trust.
a. The Employer contemplates that the Plan shall be permanent
and that the Employer shall be able to make contributions to the
Plan. Nevertheless, in recognition of the fact that future
conditions and circumstances cannot now be entirely foreseen, the
Board of Directors of NBT Bancorp, Inc. reserves the right to ter-
minate either the Plan, or both the Plan and the Trust, at any time,
pursuant to written resolutions and written amendments.
b. If the Board of Directors of NBT Bancorp, Inc. makes a
determination to terminate the Plan and Trust, they shall be
terminated insofar as they are applicable to the Employer, as of the
date specified in certified copies of resolutions delivered to the
Plan Administrator and the Trustee.
c. Upon termination, all Accounts shall be adjusted, as provided
in Article V, Article XI and as otherwise required to reflect the
expenses of termination. After these adjustments, Participants
shall be entitled to receive all amounts credited to their Accounts.
13.03 Benefits upon Termination or Discontinuance of Contributions.
Upon the full or partial termination of the Plan, or discontinuance
of contributions, the rights of each affected Participant to amounts
credited to all his Accounts at that time shall become
nonforfeitable without any formal action on the part of the
Employer, the Plan Administrator or the Trustee.
13.04 Amendments. The Board of Directors of NBT Bancorp, Inc. may
amend the Plan at any time, and from time to time, pursuant to
written resolutions and written amendments. However, no amendment
shall have the effect of reducing the nonforfeitable percentage of
benefits of any Participant.
13.05 Merger, Consolidation, or Transfer of Assets. Neither the
Plan nor the Trust may be merged with any other plan or trust,
unless each Participant would receive a benefit immediately after
the merger, that is equal to or greater than the benefit he would
have been entitled to receive immediately before the merger, if the
Plan had then terminated. The provisions of the preceding sentence
shall also apply to a consolidation or transfer of assets.
<PAGE>
ARTICLE XIV
QUALIFIED DOMESTIC RELATIONS ORDERS
14.01 General. Notwithstanding the restriction against alienation
and assignment stated in Section 16.01, the Plan Administrator shall
comply with the terms of any Qualified Domestic Relations Order.
14.02 Required Provisions. A Domestic Relations Order is a
Qualified Domestic Relations Order only if it clearly specifies:
a. The name and the last known mailing address (if any) of the
Participant, and the name and mailing address of each Alternate
Payee covered by the order;
b. The amount or percentage of the Participant's Benefits that
the Plan shall pay to each Alternate Payee, or the manner in which
the amount or percentage is to be determined;
c. The number of payments or period to which the order applies;
and
d. Each plan to which the order applies.
Notwithstanding the preceding provisions, a Domestic Relations Order
that does not provide the specified address information can be a
Qualified Domestic Relations Order, if the Plan Administrator has
the necessary information from other sources.
14.03 Prohibited Provisions. A Domestic Relations Order is a
Qualified Domestic Relations Order only if it:
a. Does not require the Plan to provide any type or form of
benefit, or any option, not otherwise provided under the Plan, with
the exception stated in Section 14.04;
b. Does not require the Plan to provide increased benefits
determined on the basis of actuarial value; and
c. Does not require the payment of benefits to an Alternate
Payee that are required to be paid to another Alternate Payee under
an order previously determined to be a Qualified Domestic Relations
Order.
14.04 Exception for Certain Payments Made after Earliest Retirement
Age.
a. A Domestic Relations Order shall not be treated as failing to
meet the requirements of Section 14.03(a), solely because the order
requires payment to an Alternate Payee:
i. In the case of any payment before a Participant has
separated from service, on or after the date on which
the Participant attains (or would have attained) the
"earliest retirement age" as defined in subsection (b)
below;
ii. As if the Participant had retired on the date on which
payment is to begin under the order; and
iii. In any form in which Benefits may be paid under the
Plan to the Participant.
b. For purposes of this Section, the term "earliest retirement
age" means the earlier of:
i. The date on which the Participant is entitled to a
distribution under the Plan; or
ii. The later of:
A. The date the Participant attains age 50; or
B. The earliest date on which the Participant could
receive Plan Benefits if he separated from
service with the Employer.
14.05 Plan Procedures with Respect to Domestic Relations Orders.
a. The Plan Administrator shall apply the procedures in this
Article, and may adopt additional appropriate procedures, to
determine the qualified status of Domestic Relations Orders it
receives and to administer distributions under Qualified Domestic
Relations Orders.
b. The Plan Administrator shall promptly notify the Participant
and each Alternate Payee of the receipt of a Domestic Relations
Order, and provide them with copies of the procedures the Plan will
use in determining the qualified status of the order. If addresses
are not specified in the order, the Plan Administrator shall send
notices to the last known addresses of these parties. The
Participant and any Alternate Payee may designate a representative
to receive copies of future communications from the Plan
Administrator regarding the order, by submitting a written request
to the Plan Administrator.
c. Within a reasonable period after receiving a Domestic
Relations Order, the Plan Administrator shall determine whether it
is a Qualified Domestic Relations Order, and shall notify the
Participant, each Alternate Payee, and any designated represen-
tatives of the determination.
d. During the period in which the issue of qualified status is
being determined by the Plan Administrator, by a court of competent
jurisdiction or otherwise, the Plan Administrator shall separately
account for the amounts which would have been payable to the
Alternate Payee during the period if the order had been determined
to be a Qualified Domestic Relations Order. The separate accounting
is for recordkeeping and a segregation of Trust Fund assets is not
required. The separately accounted for amounts shall be treated in
the following manner:
i. If the Domestic Relations Order (or a modification of
it) is determined to be a Qualified Domestic Relations
Order within 18 months of the date on which the first
payment would be required to be made under the order,
the Plan Administrator shall pay the amounts (including
any interest) to the person or persons entitled to the
payment.
ii. If the Domestic Relations Order is determined not to be
a Qualified Domestic Relations Order or the issue is
not resolved within the 18-month period specified
above, the Plan Administrator shall pay the amounts
(including any interest) to the person or persons who
would have been entitled to the amounts if there had
been no order. In applying this provision, the Plan
Administrator may delay payments for the full 18-month
period, even if an earlier determination of non-
qualified status is made, if the Plan Administrator has
notice that the parties are attempting to remedy the
order's deficiencies.
iii. Any determination of qualified status that is made
after the close of the 18-month period shall be applied
prospectively only.
<PAGE>
ARTICLE XV
TOP-HEAVY REQUIREMENTS
15.01 General Rules.
a. Notwithstanding any other Plan provisions to the contrary,
the Top-Heavy Rules of this Article shall become effective for any
Plan Year beginning after December 31, 1983 in which the Plan is a
Top-Heavy Plan. The provisions of Code Section 416 and implementing
Regulations are hereby incorporated by reference and control the
application of this Article.
b. As stated in Article II in defining "Compensation", not more
than $200,000 of Compensation (adjusted by the Adjustment Factor) is
taken into account under the Plan for a Participant, for any Plan
Year beginning after December 31, 1988. This $200,000 limitation,
without any adjustment, shall also apply for any earlier Plan Year
in which the Plan is Top-Heavy.
c. As further set forth in this Article (and the Code and
Regulations), the Top-Heavy Rules mean that:
i. Whether the Plan is Top-Heavy, or Super Top-Heavy,
shall be determined by finding the Top-Heavy Ratio in
accordance with Section 15.02.
ii. If the Plan is Top-Heavy, or Super Top-Heavy, for a
Plan Year, Non-Key Employees must receive Minimum
Required Contributions and the Minimum Vesting Schedule
in Section 15.03 shall become applicable.
iii. If the Plan is Super Top-Heavy for a Plan Year, the
provisions of this Article regarding Maximum Annual
Additions under a Super Top-Heavy Plan shall be used in
applying Article XII if the Employer also maintains a
Defined Benefit Plan.
d. Notwithstanding the preceding provisions or any other
provisions of the Plan, any requirements regarding a Top-Heavy
vesting schedule and Minimum Required Contributions shall not apply
to Employees covered by a collective bargaining agreement. However,
the Accounts of these Employees are considered in determining the
Top-Heavy Ratio under Section 15.02.
15.02 Determination of Top-Heaviness.
a. Top-Heavy Plan: The Plan shall be considered a Top-Heavy
Plan for a Plan Year if the Top-Heavy Ratio exceeds 60 percent,
applying the principles in subsection (c) below.
b. Super Top-Heavy Plan: The Plan shall be considered a Super
Top-Heavy Plan for a Plan Year if the Top-Heavy Ratio exceeds 90
percent, applying the principles in subsection (c) below.
c. Top-Heavy Ratio: The Top-Heavy Ratio shall be determined in
accordance with the following principles:
i. Accounts: Except as provided below in subsection
(viii) below, all of a Participant's Accounts are
considered in determining the Top-Heavy Ratio.
ii. Determination Date: The Top-Heavy Ratio is determined
as of the Determination Date, which is the last day of
the preceding Plan Year (except for the first Plan
Year). For example, if the Top-Heavy Ratio exceeds 60
percent on the last day of the 1989 Plan Year, the Plan
is Top-Heavy for the 1990 Plan Year.
iii. Valuation Date: Account balances shall be valued as of
the most recent Valuation Date during the twelve-month
period ending on the Determination Date.
iv. Prior Distributions: Amounts in the Accounts of a
Participant include any distribution with respect to
the Participant during the five-year period ending on
the Determination Date. This includes distributions to
Beneficiaries and distributions before the 1984 Plan
Year when the Top-Heavy Rules became effective.
v. Key Employee Status: As defined in Article II, an
Employee is considered a Key Employee if he is a Key
Employee at any time during the Plan Year containing
the Determination Date or the four preceding Plan
Years. If a Key Employee ceases to be a Key Employee
but continues to be employed, he will be treated as a
Non-Key Employee after the last year in which he must
be considered a Key Employee under the preceding
sentence. As of that date, his Accounts will be
disregarded in computing the numerator and denominator
of the Top-Heavy Ratio.
vi. Required Aggregation of Plans: If the Plan is part of
a Required Aggregation Group, the Top-Heavy Ratio must
be determined by considering all plans in the group. A
Required Aggregation Group consists of all qualified
plans of the Employer and any Affiliated Employer that
include a Key Employee, plus any other plans that
enable a Plan with a Key Employee to satisfy the
nondiscrimination rules of Code Sections 401(a)(4) or
410.
A. Except as may otherwise be allowed under the
permissive aggregation rules in subsection (vii)
below, each plan in a Required Aggregation Group
shall be considered Top-Heavy if the Top-Heavy
Ratio for the group exceeds 60 percent.
Conversely, if the Top-Heavy Ratio is 60 percent
or less, no plan in the Required Aggregation
Group shall be considered Top-Heavy.
B. The Top-Heavy Ratio is determined by adding the
present value of the accrued benefits under all
Defined Benefit Plans and the account balances
under all Defined Contribution Plans in both the
numerator and denominator of the Top-Heavy Ratio.
If plans have different Determination Dates, the
Determination Dates within the same calendar year
are used in calculating the Top-Heavy Ratio. The
present value of the accrued benefits under a
Defined Benefit Plan shall be based only on the
interest and mortality rates specified in that
plan.
vii. Permissive Aggregation Group: The Employer may, but is
not required to, determine the Top-Heavy Ratio on the
basis of a Permissive Aggregation Group.
A. A Permissive Aggregation Group consists of all
plans in a Required Aggregation Group, plus other
plans that satisfy the nondiscrimination require-
ments of Code Sections 401(a)(4) and 410, when
considered with the Required Aggregation Group.
B. If the Top-Heavy Ratio for the Permissive
Aggregation Group is 60 percent or less, no plan
in the group is Top-Heavy. If the Top-Heavy
Ratio is greater than 60 percent, the Top-Heavy
Rules apply to those plans that are part of the
Required Aggregation Group, but not to the other
plans that were permissively aggregated.
viii. Rollover amounts and any plan-to-plan transfer amounts
held under this Plan or any other plan, shall be taken
into account in determining the Top-Heavy Ratio only if
required by the following rules:
A. If a transfer is initiated by the Employee and
made between plans maintained by different
employers, the transferring plan continues to
count the transferred amount under the rules for
counting distributions. The receiving plan does
not count the amount if accepted after
December 31, 1983, but does count the amount if
accepted prior to January 1, 1984.
B. If the transfer is not initiated by the Employee
or if it is made to a plan maintained by the same
employer, the transferring plan shall no longer
count the amount transferred and the receiving
plan shall count the amount transferred.
C. For purposes of this subsection, Affiliated
Employers shall be treated as the same employer.
15.03 Top-Heavy Vesting Schedule.
a. For any Plan Year that the Plan must be considered Top-Heavy,
a Participant's vested interest in his Employer Contribution Account
shall be determined in accordance with the following Minimum Vesting
Schedule rather than the vesting schedule in Section 7.01. As an
exception, the Participant shall remain under his previous vesting
schedule to the extent provided in Section 7.05. Any Minimum
Required Contribution (to the extent required to be nonforfeitable
under the Minimum Vesting Schedule) may not be forfeited under Code
Sections 411(a)(3)(B) or 411(a)(3)(D).
b. The Minimum Vesting Schedule is:
Years of Service Vested Percentage
Less than 1 year 0%
1 years but less than 2 years 20%
2 years but less than 3 years 40%
3 or more years 100%
c. Once applicable for a Plan Year, the Minimum Vesting Schedule
applies to amounts in the Employer Contribution Account, accrued
before or after the Plan became Top-Heavy. This includes accruals
before the 1984 Plan Year when the Top-Heavy Rules became effective.
Notwithstanding the preceding sentence:
i. Accounts of a Participant who does not have an Hour of
Service after the Plan becomes Top-Heavy shall not be
subject to the Minimum Vesting Schedule; and
ii. Account balances which were forfeited before the Plan
became Top-Heavy do not vest.
d. The vesting schedule in Section 7.01 shall again become
applicable for Employer Contributions that are made for Plan Years
after the Plan ceases to be Top-Heavy. However, if this change in
vesting schedule occurs:
i. The vested percentage of a Participant in amounts
allocated to his Employer Contribution Account before
the Plan ceased to be Top-Heavy shall not be reduced;
and
ii. Participants described in Section 7.05 shall be given
the option to remain under the Minimum Vesting
Schedule, even for Plan Years after the Plan is no
longer Top-Heavy, in accordance with the procedures
described in that Section.
15.04 Minimum Required Contribution.
a. In General: If the Plan is Top-Heavy for a Plan Year, each
Non-Key Employee described in subsection (b) below must receive the
Minimum Required Contribution described in subsection (c) below.
Further, such a minimum Required Allocation cannot be forfeited
under Code Section 411(a)(3)(B) (suspension of benefits to rehired
retiree) or Code Section 411(a)(3)(D) (forfeiture upon withdrawal of
mandatory Employee contributions), even if the rules of those Code
Sections would otherwise be applicable under other provisions of the
Plan.
b. Non-Key Employees: The Minimum Required Contribution shall
be made for each Non-Key Employee who has not separated from the
service of the Employer as of the last day of the Top-Heavy Plan
Year, provided he has satisfied the eligibility requirements in
Article III. Such an Employee shall require the Minimum Required
Contribution, without regard to his Hours of Service or Compensa-
tion, and whether or not he elects Employee Voluntary Contributions
(if any are permitted by the Plan), for the Plan Year.
c. Minimum Required Contribution:
i. Except as otherwise provided in subsection (d) below,
the Minimum Required Contribution for each Top-Heavy
Plan Year shall be the lesser of:
A. Three percent of Limitation Year Compensation; or
B. The highest percentage of Limitation Year Compen-
sation that is provided to any Key Employee as
contributions by the Employer.
The second alternative in the above formula cannot be used if
this Plan is used to enable a Defined Benefit Plan of the
Employer to satisfy Code Sections 401(a)(4) or 410(b).
ii. All Contributions by the Employer to the Accounts of
each Participant shall be considered in determining the
highest percentage that was contributed for a Key
Employee, and whether the Non-Key Employee has received
the Minimum Required Contribution.
iii. If the Non-Key Employee also participates in another
Defined Contribution Plan of the Employer (or an
Affiliated Employer) that is Top-Heavy for the Plan
Year, only one plan must provide the Minimum Required
Contribution. In such a case, the Minimum Required
Contribution shall be made under the other plan.
d. Non-Key Employee in Defined Benefit Plan: If a Non-Key
Employee participates in this Plan and a Defined Benefit Plan that
is included in a Required Aggregation Group that is Top-Heavy, the
Defined Benefit Plan shall provide the minimum benefit required by
Code Section 416. This shall be done as set forth in the Defined
Benefit Plan. Based on this action by the Defined Benefit Plan, no
Minimum Required Contribution will be made to this Plan.
15.05 Maximum Annual Addition under Super Top-Heavy Plan.
a. If the Plan is Super Top-Heavy for any Plan Year, then for
purposes of the Code Section 415 limitation described in
Article XII, the dollar limitations in the denominator of the
Defined Benefit Fraction and the Defined Contribution Fraction shall
each be multiplied by 1.0, not 1.25.
b. If the reduction to 1.0 under subsection (a) above would
cause a Participant to exceed the combined limit on contributions
and benefits under Code Section 415, the application of subsec-
tion (a) above will be suspended as to such Participant until he no
longer exceeds the combined limitation, as modified by subsec-
tion (a) above. During such a suspension period, the Participant
will not accrue benefits under any Defined Benefit Plan or receive
contributions (or forfeitures) under this or any other Defined
Contribution Plan of the Employer or an Affiliated Employer.
<PAGE>
ARTICLE XVI
MISCELLANEOUS PROVISIONS
16.01 No Alienation or Assignment. The right of any Participant or
Beneficiary to any Benefit under the Plan or Trust shall not be
subject to voluntary or involuntary transfer, alienation or
assignment. Further, to the fullest extent permitted by law, the
right shall not be subject to attachment, execution, garnishment,
sequestration or other legal or equitable process. In the event a
Participant or Beneficiary attempts to assign, transfer or dispose
of a right under the Plan, or if an attempt is made to subject the
right to such process, the assignment, transfer or disposition shall
be null and void.
16.02 Adoption of Plan by Another Employer. Any other employer,
whether an Affiliated Employer or not, may, with the approval of the
Board of Directors of NBT Bancorp, Inc., adopt this Plan pursuant to
appropriate written resolutions of its board of directors. The
adopting employer shall also execute such documents with the Trustee
as may be necessary to make the other employer a party to the Trust.
As part of its adopting resolutions, the other employer shall
delegate authority to amend and terminate the Plan to the Board of
Directors of NBT Bancorp, Inc. The National Bank and Trust Company,
by its adoption and execution of this document, is deemed to have
made the foregoing delegation.
16.03 Status of Employment Relations. The adoption and maintenance
of the Plan and Trust shall not be deemed to constitute a contract
between the Employer and its Employees or to be consideration for,
or an inducement or condition of, the employment of any person.
Nothing contained in the Plan shall be deemed (a) to give to any
Employee the right to be retained in the employ of the Employer, (b)
to affect the right of the Employer to discipline or discharge any
Employee at any time, (c) to give the Employer the right to require
any Employee to remain in its employ, or (d) to affect any
Employee's right to terminate his employment at any time.
16.04 Benefits Payable By Trust. All Benefits payable under the
Plan shall be paid or provided for solely from the Trust. The
Employer assumes no liability or responsibility for the payments.
16.05 Finality of Contribution.
a. All amounts that are contributed by the Employer to the
Trustee shall be irrevocable contributions, unless a contribution is
made to the Plan by the Employer by a mistake of fact. In that case
the amount erroneously contributed by the Employer shall be returned
to the Employer at the Employer's request within one year after the
payment. Any amounts returned to the Employer pursuant to this
subsection shall be decreased by any losses, but not increased by
any gains, incurred by the Trust Fund during the period the amounts
were held by the Trustee.
b. To the extent a contribution is conditioned upon its
deductibility under Code Section 404, then, to the extent the
deduction is disallowed, the Employer shall request that the
disallowed amount be returned to it. The request must be made
within one year after the disallowance of the deduction.
c. For purposes of this Section, the word "contribution" has the
meaning stated in Section 403(c) of ERISA.
16.06 Failure of Qualification.
a. The establishment of the Plan and Trust by the Employer is
contingent upon obtaining the initial approval of the Internal
Revenue Service. Notwithstanding any other provision of the Plan,
in the event that the Internal Revenue Service fails to approve the
Plan, the Trustee shall liquidate the Trust by paying all expenses
and returning all remaining assets to the Employer as soon as
administratively feasible. In no event shall this process be
completed later than one year after the date of the final denial of
qualification of the Plan, including the final resolution of any
appeals before the Internal Revenue Service or the courts. The
Trust shall terminate upon completion of these "wind up" procedures.
b. Contributions shall be returned to the Employer pursuant to
subsection (a) above, only if the request for an Internal Revenue
Service determination is made by the time prescribed by law for
filing the Employer's return for the taxable year in which the Plan
was adopted, or such later date as the Secretary of the Treasury may
prescribe.
16.07 Control of Trades or Business by Owner-Employee.
a. If this Plan provides contributions or benefits for one or
more Owner-Employees who control both the business for which this
Plan is established and one or more other trades or businesses, this
Plan and any plan established for other trades or businesses must,
when looked at as a single plan, satisfy Code Sections 401(a) and
(d) for the Employees of this and all other trades or businesses.
b. If the Plan provides contributions or benefits for one or
more Owner-Employees who control one ore more other trades or busi-
nesses, the employees of the other trades or businesses must be
included in a plan which satisfies Code Sections 401(a) and (d) and
which provides contributions and benefits not less favorable than
provided for Owner-Employees under this Plan.
c. If an individual is covered as an Owner-Employee under the
plans of two or more trades or businesses which are not controlled
and the individual controls a trade or business, then the
contributions or benefits of the employees under the plan of the
trades or businesses which are controlled must be as favorable as
those provided for him under the most favorable plan of the trade or
business which is not controlled.
d. For purposes of subparagraphs (a), (b) and (c) above, an
Owner-Employee, or two or more Owner-Employees, will be considered
to control a trade or business if the Owner-Employees, or two or
more Owner-Employees together:
i. own the entire interest in an unincorporated trade or
business, or
ii. in the case of a partnership, own more than 50 percent
of either the capital interest or the profits interest
in the partnership. For purposes of the preceding
sentence, an Owner-Employee, or two or more Owner-
Employees shall be treated as owning any interest in a
partnership which is owned, directly or indirectly by a
partnership which such Owner-Employee, or such two or
more owner-employees, are considered to control within
the meaning of the preceding sentence.
16.08 Headings Not Part of This Plan. Headings of Articles and
Sections are inserted only for convenience of reference, and shall
not be considered in construing the Plan.
16.09 Gender and Number. Unless the context clearly requires a
different meaning, the use of the masculine pronoun includes the
feminine gender, and the use of the singular number includes the
plural (and vice versa).
16.10 Applicable Law. The Plan and the Trust shall be construed,
regulated, interpreted and administered under and in accordance with
the laws of the State of New York, unless preempted by federal law.
<PAGE>
NBT Bancorp, Inc. and The National Bank and Trust Company
have caused this Plan to be signed by duly authorized officers on
this day of December 1994.
NBT BANCORP, INC.
By: /S/Richard I. Linhart
Title: Vice President, Chief Financial
Officer and Treasurer
THE NATIONAL BANK AND TRUST
COMPANY
By: /s/Richard I. Linhart
Title: Executive Vice President,
Chief Administrative and Financial
Officer and Treasurer
<PAGE>
EXHIBIT 10.2
NBT BANCORP INC. Defined Benefit Pension plan Amended and Restated
<PAGE>
NBT BANCORP, INC.
DEFINED BENEFIT PENSION PLAN
Amended and restated as of October 1, 1989, including
amendments adopted through December 31, 1994
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I - GENERAL PROVISIONS
1.01 Designation. . . . . . . . . . . . . . . . . . . . . 1
1.02 Effective Date . . . . . . . . . . . . . . . . . . . 1
1.03 Purpose. . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II - DEFINITIONS . . . . . . . . . . . . . . . . . . . . 2
ARTICLE III - ELIGIBILITY AND PARTICIPATION REQUIREMENTS
3.01 Eligibility. . . . . . . . . . . . . . . . . . . . . 17
3.02 Becoming a Participant . . . . . . . . . . . . . . . 17
3.03 Eligibility after Reemployment . . . . . . . . . . . 17
3.04 Eligibility Based on Service in Ineligible
Classification . . . . . . . . . . . . . . . . . . . . . . . . . . 18
ARTICLE IV - SERVICE CREDITING
4.01 Benefit Service. . . . . . . . . . . . . . . . . . . 20
4.02 Vesting Service. . . . . . . . . . . . . . . . . . . 20
4.03 Treatment of Prior Service after a Break in Service. 21
4.04 Retention of Service . . . . . . . . . . . . . . . . 21
4.05 Limitation of Service Credited . . . . . . . . . . . 22
ARTICLE V - VESTING AND FORFEITURES
5.01 Vesting Schedule . . . . . . . . . . . . . . . . . . 23
5.02 Exceptions to Vesting Schedule . . . . . . . . . . . 23
5.03 Forfeitures. . . . . . . . . . . . . . . . . . . . . 24
5.04 Amendments Affecting Vesting Schedule. . . . . . . . 25
ARTICLE VI - BENEFITS ELIGIBILITY
6.01 Normal Retirement Benefit. . . . . . . . . . . . . . 26
6.02 Early Retirement Benefit . . . . . . . . . . . . . . 26
6.03 Late Retirement Benefit. . . . . . . . . . . . . . . 27
6.04 Disability Retirement Benefit. . . . . . . . . . . . 27
6.05 Preretirement Death Benefit. . . . . . . . . . . . . 27
6.06 Benefits Following Termination of Employment . . . . 29
<PAGE>
TABLE OF CONTENTS (cont'd)
Page
ARTICLE VII - COMPUTATION OF BENEFITS
7.01 Normal Retirement Benefit. . . . . . . . . . . . . . 30
7.02 Early Retirement Benefit . . . . . . . . . . . . . . 31
7.03 Late Retirement Benefit. . . . . . . . . . . . . . . 31
7.04 Disability Retirement Benefit. . . . . . . . . . . . 31
7.05 Preretirement Death Benefit. . . . . . . . . . . . . 31
7.06 Deferred Vested Retirement Benefit . . . . . . . . . 32
7.07 Reemployment After Benefit Commencement. . . . . . . 33
ARTICLE VIII - BENEFICIARIES
8.01 Designation of a Beneficiary . . . . . . . . . . . . 34
8.02 Spouses's Rights . . . . . . . . . . . . . . . . . . 34
8.03 Absence of a Designated Beneficiary. . . . . . . . . 35
8.04 Beneficiaries' Rights. . . . . . . . . . . . . . . . 36
ARTICLE IX - DISTRIBUTION REQUIREMENTS
9.01 Form of Distribution . . . . . . . . . . . . . . . . 37
9.02 Compliance with Code Section 401(a)(9) . . . . . . . 39
9.03 Required Distribution to Participant . . . . . . . . 40
9.04 Limits on Distribution Periods . . . . . . . . . . . 41
9.05 Required Distribution to Beneficiary . . . . . . . . 41
9.06 Location of Participant or Beneficiary Unknown . . . 42
9.07 Facility of Payment. . . . . . . . . . . . . . . . . 42
9.08 Eligible Rollover Distributions. . . . . . . . . . . 42
ARTICLE X - FINANCING
10.01 Fund . . . . . . . . . . . . . . . . . . . . . . . . 44
10.02 Contributions to the Plan. . . . . . . . . . . . . . 44
10.03 Funding Policy . . . . . . . . . . . . . . . . . . . 44
10.04 Return of Employer Contributions . . . . . . . . . . 44
<PAGE>
TABLE OF CONTENTS (cont'd)
Page
ARTICLE XI - ADMINISTRATION
11.01 Plan Administrator . . . . . . . . . . . . . . . . . 46
11.02 Fiduciary and Administrative Duties. . . . . . . . . 47
11.03 General Powers and Discretion of Plan Administrator. 47
11.04 Administration of the Fund . . . . . . . . . . . . . 48
11.05 Delegation of Powers . . . . . . . . . . . . . . . . 48
11.06 Appointment of Professional Assistants and Investment
Managers . . . . . . . . . . . . . . . . . . . . . . 49
11.07 Records. . . . . . . . . . . . . . . . . . . . . . . 49
11.08 Notice of Rollover Treatment . . . . . . . . . . . . 49
11.09 Responsibility of Fiduciaries. . . . . . . . . . . . 49
11.10 Indemnity by Employer. . . . . . . . . . . . . . . . 50
11.11 Payment of Fees and Expenses . . . . . . . . . . . . 50
11.12 ERISA Reporting and Disclosure . . . . . . . . . . . 50
11.13 Service of Legal Process . . . . . . . . . . . . . . 50
11.14 Claim for Benefits . . . . . . . . . . . . . . . . . 50
11.15 Denial of Claim. . . . . . . . . . . . . . . . . . . 50
11.16 Request for Review of Denial . . . . . . . . . . . . 51
11.17 Review Decision. . . . . . . . . . . . . . . . . . . 51
ARTICLE XII - LIMITATIONS ON BENEFITS
12.01 General Rules. . . . . . . . . . . . . . . . . . . . 53
12.02 Code Section 415 Limitations . . . . . . . . . . . . 53
12.03 Deemed Satisfaction of Maximum Retirement Benefit
Limitation . . . . . . . . . . . . . . . . . . . . . 55
12.04 Maximum Retirement Benefit for Multiple Plans. . . . 56
12.05 Exceptions to the Maximum Retirement Benefit Limitation 58
ARTICLE XIII - QUALIFIED DOMESTIC RELATIONS ORDERS
13.01 General. . . . . . . . . . . . . . . . . . . . . . . 59
13.02 Required Provisions. . . . . . . . . . . . . . . . . 59
13.03 Prohibited Provisions. . . . . . . . . . . . . . . . 59
13.04 Exception for Certain Payments Made after Earliest
Retirement Age . . . . . . . . . . . . . . . . . . . 60
13.05 Plan Procedures with Respect to Domestic Relations
Orders . . . . . . . . . . . . . . . . . . . . . . . 60
<PAGE>
TABLE OF CONTENTS (cont'd)
Page
ARTICLE XIV - AMENDMENT, MERGER AND TERMINATION
14.01 Amendment. . . . . . . . . . . . . . . . . . . . . . 62
14.02 Termination of Plan and Trust. . . . . . . . . . . . 62
14.03 Benefits upon Termination and Partial Termination. . 62
14.04 Restriction of Benefits to Certain Highly Compensated
Employees. . . . . . . . . . . . . . . . . . . . . . 63
14.05 Merger, Consolidation or Transfer of Assets. . . . . 64
ARTICLE XV - TOP-HEAVY REQUIREMENTS
15.01 General Rules. . . . . . . . . . . . . . . . . . . . 65
15.02 Determination of Top-Heaviness . . . . . . . . . . . 66
15.03 Vesting in Employer Contributions under a Top-Heavy
Plan . . . . . . . . . . . . . . . . . . . . . . . . 68
15.04 Minimum Required Benefit . . . . . . . . . . . . . . 69
15.05 Maximum Annual Benefit under a Super Top-Heavy Plan. 71
ARTICLE XVI - MISCELLANEOUS PROVISIONS
16.01 No Alienation or Assignment. . . . . . . . . . . . . 72
16.02 Adoption of Plan by Another Employer . . . . . . . . 72
16.03 Status of Employment Relations . . . . . . . . . . . 72
16.04 Benefits Payable by Trust. . . . . . . . . . . . . . 72
16.05 Failure of Qualification . . . . . . . . . . . . . . 72
16.06 Increases in Social Security Benefits. . . . . . . . 73
16.07 Headings Not Part of This Plan . . . . . . . . . . . 73
16.08 Gender and Number. . . . . . . . . . . . . . . . . . 73
16.09 Applicable Law . . . . . . . . . . . . . . . . . . . 73
<PAGE>
ARTICLE I
GENERAL PROVISIONS
1.01 Designation. This Plan, previously designated The National
Bank and Trust Company of Norwich Employees' Defined Benefit Pension
Plan and Trust, is designated the NBT BANCORP, INC. DEFINED BENEFIT
PENSION PLAN. The Plan and Trust are intended to meet the
requirements of Sections 401(a) and 501(a) of the Internal Revenue
Code of 1986, as amended, and the Employee Retirement Income Secu-
rity Act of 1974, as amended. The Plan is intended to qualify as a
defined benefit plan.
1.02 Effective Date. This Plan originally became effective on
October 1, 1986, following the Employer's termination of its
participation in the Master Plan of the New York State Bankers
Retirement System. The Employer hereby amends and restates the Plan
effective October 1, 1989 ("Effective Date"), unless a different
effective date is otherwise stated. This restatement governs the
rights of all Employees who have an Hour of Service with the
Employer on or after the Effective Date. The rights of any former
Employee who does not have an Hour of Service on or after the
Effective Date shall be governed by the provisions of the
Predecessor Plan in effect when he terminated employment, unless
otherwise provided in this Plan or required by law.
1.03 Purpose. The purpose of this Plan is to provide benefits for
Participants and Beneficiaries (including any Alternate Payees).
Contributions to the Plan, and any income, shall be for the
exclusive benefit of Participants and Beneficiaries and shall not be
used for, or diverted to, any other purpose.
<PAGE>
ARTICLE II
DEFINITIONS
The following terms shall have the following meanings in and for
this Plan.
2.01 Accrued Benefit shall mean the amount that will be paid to
the Participant, under the formula in Section 7.01, expressed as an
annual benefit (straight life annuity) beginning at his Normal
Retirement Date. The Participant's accrued benefit as of a
determination date shall be the portion of the normal retirement
benefit accrued under that formula, based on years of Credited
Service through the determination date.
2.02 Actual Retirement Date shall mean the date on which a
Participant retires from service with the Employer, within the
meaning of "Retirement" in this Article of the Plan.
2.03 Actuarial Equivalent or Actuarially Equivalent shall mean a
benefit payable in a different form and/or at a different time than
a Participant's Accrued Benefit, but having the same value as that
benefit when computed using the following actuarial assumptions:
Mortality: 1984 Unisex Mortality Table
Interest: 7 percent per annum
a. Notwithstanding the preceding sentence, the present value of
any distribution (other than a nondecreasing life annuity payable
for a period not less than the life of the Participant or Surviving
Spouse) shall be determined using the Code Section 417(e)(3)
interest rate(s) described in subsection (b) below, if such rate(s)
would produce a greater benefit than the assumptions above.
b. The Code Section 417 interest rates are:
i. The Applicable Interest Rate if the present value of
the benefit (using such rate(s)) is not in excess of
$25,000; or
ii. 120 percent of the Applicable Interest Rate if the
present value of the benefit exceeds $25,000 (as
determined under subsection (i) above). In no event
shall the present value determined under this subsec-
tion (ii) be less than $25,000.
2.04 Adjustment Factor shall mean the cost of living adjustment
factor prescribed by the Secretary of the Treasury under Sec-
tion 415(d) of the Code.
2.05 Affiliated Employer shall mean (a) a member of a "controlled
group of corporations" or group of trades or businesses under common
control (as defined in Code Section 414(b) and (c)) of which the
Employer is a member, (b) a member of an affiliated service group
(as defined in Code Section 414(m)) which includes the Employer, or
(c) any other entity that must be aggregated with the Employer pur-
suant to Code Section 414(o). The term "controlled group of
corporations" has the meaning given in Code Section 1563(a), but
determined without regard to Code Sections 1563(a)(4) and (e)(3)(C).
Further, for purposes of applying the Code Section 415 limitations
on benefits, Code Section 1563(a)(1) shall be applied by
substituting the phrase "more than 50 percent" for the phrase "at
least 80 percent," each place that phrase appears. If an Affiliated
Employer is also an Employer maintaining the Plan, the provisions of
the Plan shall apply to that entity as an Employer, rather than only
as an Affiliated Employer.
2.06 Alternate Payee shall mean any spouse, former spouse, child
or other dependent of a Participant who is recognized by a Domestic
Relations Order as having a right to receive all, or a portion of,
the benefits payable under the Plan with respect to such
Participant.
2.07 Annual Benefit shall mean a benefit attributable to Employer
contributions payable in the form of a straight life annuity within
the meaning of Code Section 415(b)(2), as further described in
Article XII.
2.08 Annuity Starting Date shall mean the first day of the first
period for which an amount is paid to a Participant in any form.
2.09 Applicable Interest Rate shall mean the interest rate or
rates that would be used, as of the first day of the Plan Year that
contains the Annuity Starting Date, by the PBGC for purposes of
determining the present value of the Participant's benefits under
the Plan, if the Plan had terminated on that date with insufficient
assets to provide benefits guaranteed by the PBGC.
2.10 Beneficiary shall mean any person properly designated by a
Participant pursuant to Article VIII to receive any benefits payable
after the Participant's death.
2.11 Board of Directors shall mean the Board of Directors of the
Employer.
2.12 Break in Service or One-Year Break in Service shall mean a
Plan Year during which a Participant is not credited with more than
500 Hours of Service; provided that, for the Plan Year that begins
on October 1, 1994 and ends December 31, 1994, a Participant shall
not incur a Break in Service if the Participant is credited with at
least 125 Hours of Service during that Plan Year.
2.13 Code shall mean the Internal Revenue Code of 1986, as amended
from time to time, and implementing Regulations and rulings issued
by the Internal Revenue Service. References to any Section of the
Code shall include any successor provision.
2.14 Compensation shall mean remuneration paid by the Employer to
a Participant in the form of base salary or wages, commissions,
overtime, and cash bonuses; provided that, for Plan Years that begin
prior to January 1, 1995, Compensation shall include remuneration in
the form of severance pay and for Plan Years beginning before
October 1, 1993, Compensation shall not include remuneration in the
form of commissions. For all years, Compensation shall include any
amount contributed by the Employer at the direction of the
Participant pursuant to a salary reduction agreement, which amount
is not includable in the Participant's gross income under Code
Section 125 (cafeteria plans) or Code Section 402(a)(8) ("401(k)"
plans). Compensation shall not include any other form of
remuneration, regardless of the manner calculated or paid.
For the Plan Year in which an Employee first becomes a Participant,
the term "Compensation" shall mean only the Compensation he receives
after the date he satisfies the eligibility requirements to
participate in the Plan.
The annual Compensation of each Participant taken into account under
the Plan for any Plan Year beginning after December 31, 1988 and
before January 1, 1994 shall not exceed $200,000. Each January 1,
beginning in 1990 and ending in 1993, this amount shall be adjusted
by the Adjustment Factor, using 1989 as the base period. The
adjusted Compensation limitation shall be effective for Plan Years
beginning within the calendar year of the adjustment.
For Plan Years beginning on or after January 1, 1994, the annual
Compensation of each Employee taken into account under the Plan
shall not exceed $150,000, as adjusted by the Commissioner of the
Internal Revenue Service for increases in the cost of living in
accordance with Section 401(a)(17)(B) of the Code. The cost-of-
living adjustment in effect for a calendar year applies to any
period, not exceeding 12 months, over which Compensation is
determined (determination period) beginning in such calendar year.
If a determination period consists of fewer than 12 months, the
$150,000 limit will be multiplied by a fraction, the numerator of
which is the number of months in the determination period, and the
denominator of which is 12.
If Compensation for any prior determination period is taken into
account in determining an Employee's benefits accruing in the
current Plan Year, the Compensation for that prior determination
period is subject to the Compensation limit in effect for that prior
determination period. For this purpose, for determination periods
beginning before the first day of the first Plan Year beginning on
or after January 1, 1994, the limit is $150,000.
In applying the $200,000 and $150,000 limitations, the Compensation
of a Participant who is (i) a Five Percent Owner, or (ii) a Highly
Compensated Employee and one of the ten most Highly Compensated
Employees, ranked on the basis of compensation (within the meaning
of Code Section 414(q)(7)) paid by the Employer during the Plan
Year, shall be treated as including the Compensation of his Spouse
and any lineal descendants who have not attained age 19 before the
close of the Plan Year (but only if his Spouse or lineal descendant
also is an Employee). If, as a result of the application of such
rules, the $200,000 limitation or the $150,000 limitation is
exceeded, then (except for purposes of determining the portion of
Compensation included in "Covered Compensation" defined in Article
VII), the limitation shall be prorated among the affected
individuals, in proportion to each such individual's Compensation as
determined under this Section prior to the application of the
limitation.
2.15 Defined Benefit Dollar Limitation shall mean the dollar
limitation in effect under Code Section 415(b)(1)(A); specifically,
$90,000, as adjusted each January 1 by the Adjustment Factor. Any
adjusted limitation shall apply to Limitation Years ending with or
within the calendar year of the adjustment.
2.16 Defined Benefit Fraction shall mean the fraction defined in
Code Section 415(e)(2) that is used, with the Defined Contribution
Fraction, to determine the Maximum Retirement Benefit for a
Participant who also has participated in a defined contribution plan
of the Employer or an Affiliated Employer.
2.17 Defined Contribution Fraction shall mean the fraction defined
in Code Section 415(e)(3) that is used, with the Defined Benefit
Fraction, to determine the Maximum Retirement Benefit for a
Participant who also has participated in a defined contribution plan
of the Employer or an Affiliated Employer.
2.18 Determination Date shall mean, with respect to any Plan Year,
the last day of the preceding Plan Year. In the case of a first
Plan Year, the Determination Date shall be the last day of that Plan
Year.
2.19 Disability Retirement Date shall mean the date on which a
Participant terminates employment with the Employer because of a
Total and Permanent Disability.
2.20 Domestic Relations Order shall mean any judgment, decree, or
order (including approval of a property settlement agreement) which:
(a) relates to the provision of child support, alimony payments or
marital property rights to a spouse, child or other dependent of a
Participant, and (b) is made pursuant to a state domestic relations
law (including a community property law).
2.21 Earliest Retirement Age shall mean the earliest date on which
the Participant can elect to receive retirement benefits under the
Plan.
2.22 Early Retirement Date shall mean the date of a Participant's
Retirement, before the Normal Retirement Date, after the Participant
has attained age 55 and earned a "Vested Percentage" (described in
Article V) of 100 percent.
2.23 Effective Date shall mean October 1, 1989.
2.24 Employee shall mean any person who receives compensation for
personal services, other than a retainer or fee under a contract,
from the Employer of the Employee. Any Leased Employees shall be
considered Employees solely for the purposes specified in Code
Section 414(n). Leased Employees shall not be eligible to
participate in the Plan.
2.25 Employer shall mean NBT Bancorp, Inc., The National Bank and
Trust Company (formerly known as The National Bank and Trust Company
of Norwich), and any Affiliated Employer that adopts this Plan.
Notwithstanding the preceding sentence, the term Employer means The
National Bank and Trust Company for purposes of Plan administration,
and NBT Bancorp, Inc. for purposes of Sections 14.01 and 14.02.
2.26 ERISA shall mean the Employee Retirement Income Security Act
of 1974, as amended from time to time, and any implementing regula-
tions and rulings issued by the Department of Labor or the Internal
Revenue Service. References to any Section of ERISA shall include
any successor provision.
2.27 Final Average Compensation shall mean the average of the
Participant's annual Compensation for the five Years of Benefit
Service during the Participant's last ten Years of Benefit Service
that produces the highest average. If a Participant has less than
five Years of Benefit Service, the Participant's Final Average
Compensation shall be the average of his annual Compensation for his
total Years of Benefit Service. For Plan Years that begin prior to
October 1, 1993, Final Average Compensation shall be based upon the
Compensation received by the Participant for each applicable
calendar year. For Plan Years that begin after September 30, 1993,
Final Average Compensation shall be based upon the Compensation
received by the Participant for each applicable Plan Year.
2.28 Five Percent Owner shall mean, as further defined in Code
Section 416(i), any person who owns, or is considered as owning
under the constructive ownership rules of Code Section 318, more
than five percent of the outstanding stock of the Employer or stock
possessing more than five percent of the total combined voting power
of all stock of the Employer. However, the constructive ownership
rules in Code Section 318(a)(2)(C) shall be applied by substituting
"five percent" for "50 percent." If the Employer is not a
corporation, any person who owns more than five percent of the
capital or profits interest in such organization is a Five Percent
Owner.
2.29 Fund shall mean the assets of the Plan.
2.30 Highly Compensated Employee shall mean a highly compensated
employee within the meaning of Code Section 414(q), for Plan Years
beginning after December 31, 1986. As set forth below, the term
"Highly Compensated Employee" includes highly compensated active
employees and highly compensated former employees. In the following
subsections, the term "determination year" means the current Plan
Year and the term "look-back year" means the twelve-month period
immediately preceding the determination year.
a. Highly Compensated Active Employee: A highly compensated
active employee includes any employee who performs service for the
Employer during the determination year and who:
i. Received compensation in excess of $75,000, as adjusted
by the Adjustment Factor, during the look-back year;
ii. Received compensation in excess of $50,000, as adjusted
by the Adjustment Factor, during the look-back year,
and was a member of the top-paid group for such year
(generally, the top 20 percent of employees ranked on
the basis of compensation);
iii. Was an officer (as defined in Code Section 416(i)) of
the Employer and received compensation during the look-
back year that is greater than 50 percent of the
Defined Benefit Dollar Limitation in effect during the
year (if no officer has satisfied this compensation
requirement, the highest-paid officer shall be treated
as a Highly Compensated Employee);
iv. Is described in the above subsections if the term
"determination year" is substituted for the term "look-
back year", and the employee is one of the 100
employees who received the most compensation from the
Employer during the determination year; or
v. Was a Five Percent Owner at any time during the look-
back year or determination year.
b. Highly Compensated Former Employee: A highly compensated
former employee includes any employee who separated from service (or
was deemed to have separated) prior to the determination year,
performs no service for the Employer during the determination year
and was a highly compensated active employee for either the
separation year or any determination year ending on or after the
employee's 55th birthday.
c. Family Member Aggregation Rule: If an employee is, during a
determination year or look-back year, a Family Member of either (i)
a Five Percent Owner who is an active or former employee or (ii) a
Highly Compensated Employee who is one of the ten most Highly
Compensated Employees ranked on the basis of compensation paid by
the Employer during such year, then the Family Member and the Five
Percent Owner or top-ten Highly Compensated Employee shall be
aggregated. In such case, the Family Member and Five Percent Owner
or top-ten Highly Compensated Employee shall be treated as a single
employee receiving compensation and Plan contributions or benefits
equal to the sum of such compensation and contributions or benefits
of the Family Member and Five Percent Owner or top-ten Highly
Compensated Employee. For purposes of this Section, the term
"Family Member" includes the spouse, lineal ascendants and
descendants of the employee or former employee and the spouses of
such lineal ascendants and descendants.
d. Incorporation of Section 414(q): The determination of who is
a Highly Compensated Employee under the above rules, including the
determinations of the number and identity of employees in the top-
paid group, the top 100 employees, the number of employees treated
as officers and the compensation that is considered, shall be made
in accordance with Code Section 414(q) and implementing Regulations,
which are hereby incorporated by reference.
2.31 Hour of Service shall mean an hour determined in accordance
with the following provisions. In this definition, the term
"computation period" means the Plan Year, with the following
exception. To the extent that a "Year of Service" is defined as a
different period for eligibility purposes, that period shall be
considered a computation period in crediting Hours of Service for
eligibility.
a. General Rules for Crediting Hours: For all purposes under
the Plan, an Employee shall be credited with an Hour of Service for
all of the following:
i. Each hour for which the Employee is paid, or entitled
to payment, for the performance of duties for the
Employer. These hours will be credited to the Employee
for the computation period in which the duties are
performed.
ii. Each hour for which the Employee is paid, or entitled
to payment, by the Employer, on account of a period
during which no duties are performed (whether or not
the employment relationship has terminated), due to
vacation, holiday, illness, incapacity (including disa-
bility), layoff, jury duty, military duty or leave of
absence. Except as provided in Section 7.04 (relating
to disability), no more than 501 Hours of Service shall
be credited under this subsection for any single,
continuous period, whether or not such period occurs in
a single computation period.
iii. Each hour for which back pay (irrespective of
mitigation of damages) is either awarded or agreed to
by the Employer. The same Hours of Service will not be
credited both under subsection (i) or (ii), whichever
is applicable, and this subsection (iii). Under this
subsection, Hours of Service will be credited to the
Employee for the computation period to which the award
or agreement pertains, rather than the computation
period in which the award, agreement or payment is
made.
Hours under this subsection shall be calculated and credited pursu-
ant to Department of Labor Regulation 2530.200b-2(b) and (c), which
is incorporated herein by reference.
b. Crediting Hours for Maternity or Paternity Leave to Prevent
Break in Service: Solely to determine whether a Break in Service
has occurred, an Employee who is absent from work for maternity or
paternity reasons, or is on a leave of absence taken in accordance
with the Family and Medical Leave Act, shall receive credit for the
Hours of Service that would otherwise have been credited to the
Employee but for such absence. In any case in which such hours
cannot be determined, eight Hours of Service per day of such absence
shall be credited.
i. The Hours of Service credited under this subsection
shall be credited in the computation period in which
the absence begins, if necessary to prevent a Break in
Service in that period. In all other cases, the Hours
of Service shall be credited to the next computation
period.
ii. For purposes of this subsection, an absence from work
for maternity or paternity reasons means an absence by
reason of (A) the Employee's pregnancy, (B) the birth
of the Employee's child or the placement of a child
with the Employee in connection with the Employee's
adoption of the child, or (C) the Employee caring for
the child for a period immediately following such birth
or placement.
iii. In order to be credited with Hours of Service under
this subsection, the Employee must provide the Plan
Administrator with proof that the period of absence is
for a reason specified in subsection (ii) above.
c. Hours Not Kept: An Employee for whom hours are not normally
kept shall receive credit for 45 Hours of Service for each weekly
pay period during which the Employee performs one Hour of Service
under the conditions described in subsection (a)(i) or (ii) above.
d. Affiliated Employers: For eligibility and vesting purposes
(see Articles III and IV), Hours of Service shall also be credited
for employment with any Affiliated Employer.
e. For eligibility and vesting purposes hereunder, Hours of
Service shall include each hour for which an Employee, who was
employed by any banking institution or banking facility as of the
date immediately preceding the date of the Employer's acquisition of
that institution or facility (and which acquisition occurred on or
before December 31, 1994), was credited with an hour of service
under the terms of such former employer's tax-qualified retirement
plan as of the date immediately preceding the date of the Employer's
acquisition of the institution or facility.
f. Hours of Service shall be granted for eligibility and vesting
purposes during a period of military service which does not exceed
two years in duration. Hours of Service shall be credited on the
basis of the Employee's normal workweek when such leave commenced.
For purposes of this subsection (f), military service is service
with the Armed Forces of the United States during periods of war,
national emergency or conscription, subject to the condition that
the Employee returns to active employment with the Employer within
the period his reemployment rights are protected by applicable law.
g. Except to the extent required by subsection (a)(ii) above,
Hours of Service shall not be granted for any purpose under the Plan
as a result of an Employee's receipt of severance pay from the
Employer.
2.32 Joint and Survivor Annuity shall mean an immediate annuity
benefit payable monthly for life to a Participant, with a survivor
annuity for the life of the Beneficiary which is not less than 50
and not more than 100 percent of the amount of the annuity which is
payable during the joint lives of the Participant and the
Beneficiary.
2.33 Key Employee shall mean an employee within the meaning of
Code Section 416(i). As further set forth in that Code Section, any
Employee, former Employee or Beneficiary will be considered a Key
Employee if, for the Plan Year that contains the Determination Date
or any of the four preceding Plan Years, the employee is:
a. An officer (within the meaning of Code Section 416(i)) having
"annual compensation" from the Employer greater than 50 percent of
the Defined Benefit Dollar Limitation for any such Plan Year;
b. An owner (or considered an owner under Code Section 318) of
one of the ten largest interests in the Employer, who has "annual
compensation" from the Employer greater than the dollar limitation
in effect under Code Section 415(c)(1)(A) (currently $30,000);
c. A Five Percent Owner; or
d. A One Percent Owner with "annual compensation" from the
Employer of more than $150,000.
For purposes of this definition, "annual compensation" means
Limitation Year Compensation, plus any amounts contributed by the
Employer pursuant to a salary reduction agreement, which are
excludable from the Employee's gross income under Section 125, Sec-
tion 402(a)(8), Section 402(h) or Section 403(b) of the Code.
2.34 Leased Employee shall mean any person (other than one who is
an employee without regard to a leasing arrangement) who performs
services pursuant to an agreement between the Employer and a leasing
organization if:
a. The services have been performed for the Employer or for the
Employer and related persons (determined in accordance with Code
Section 414(n)(6)) on a substantially full-time basis for a period
of at least one year; and
b. The services are of a type historically performed by
employees in the business field of the Employer.
2.35 Limitation Year shall mean the calendar year.
2.36 Limitation Year Compensation shall mean wages, salaries, and
fees for professional services and other amounts received (without
regard to whether or not an amount is paid in cash) for personal
services actually rendered in the course of employment with the
Employer to the extent that the amounts are includable in gross
income (including, but not limited to, commissions paid salesmen,
compensation for services on the basis of a percentage of profits,
commissions on insurance premiums, tips, bonuses, fringe benefits,
reimbursements, and expense allowances), and excluding the fol-
lowing:
a. Employer contributions to a plan of deferred compensation,
which are not includable in the Employee's gross income for the
taxable year in which contributed, or Employer contributions under a
simplified employee pension plan (described in Code Section 408(k))
to the extent such contributions are not includible in the gross
income of the Employee, or any distributions from a plan of deferred
compensation;
b. Amounts realized from the exercise of a non-qualified stock
option, or when restricted stock (or property) held by the Employee
either becomes freely transferable or is no longer subject to a
substantial risk of forfeiture;
c. Amounts realized from the sale, exchange or other disposition
of stock acquired under a qualified stock option; and
d. Other amounts which received special tax benefits.
Notwithstanding the above definition, for a self-employed individual
that participates in the Plan (if any), Limitation Year Compensation
shall mean the net earnings from self-employment in the trade or
business with respect to which the Plan is established, for which
personal services of the individual are a material income-producing
factor. Net earnings will be determined without regard to items not
included in gross income and the deductions allocable to such items.
Net earnings are reduced by contributions by the Employer to a
qualified plan to the extent deductible under Code Section 404. Net
earnings shall be determined with regard to the deduction allowed to
the taxpayer by Code Section 164(f) for taxable years beginning
after December 31, 1989.
2.37 Maximum Retirement Benefit shall mean the maximum Annual
Benefit determined in accordance with Article XII of the Plan and
Section 415 of the Code.
2.38 Minimum Required Benefit shall mean the benefit described in
Article XV which must be provided to Non-Key Employees if the Plan
is Top-Heavy for a Plan Year.
2.39 Minimum Vesting Schedule shall mean the vesting schedule
required by Article XV if the Plan becomes Top-Heavy for one or more
Plan Years.
2.40 Non-Key Employee shall mean an Employee who is not a Key
Employee.
2.41 Non-Vested Participant shall mean a Participant who is not a
Vested Participant.
2.42 Normal Retirement Age shall mean the date upon which a
Participant attains age 65.
2.43 Normal Retirement Date shall mean the first day of the
calendar month coinciding with or next following a Participant's
Normal Retirement Age.
2.44 One Percent Owner shall mean, as further defined in Code Sec-
tion 416(i), any person who owns, or is considered as owning under
the constructive ownership rules of Code Section 318, more than one
percent of the outstanding stock of the Employer or stock possessing
more than one percent of the total combined voting power of all
stock of the Employer. However, the constructive ownership rules in
Code Section 318(a)(2)(C) shall be applied by substituting "one
percent" for "50 percent." If the Employer is not a corporation,
any person who owns more than one percent of the capital or profits
interest in such organization is a One Percent Owner.
2.45 Participant shall mean an Employee who becomes a Participant
in the Plan as provided in Article III.
2.46 PBGC shall mean the Pension Benefit Guaranty Corporation.
2.47 Permissive Aggregation Group shall mean a group of plans
maintained by the Employer and any Affiliated Employer, which may be
aggregated in determining whether the Plan is Top-Heavy, as further
defined in Article XV of the Plan.
2.48 Plan shall mean the NBT Bancorp, Inc. Defined Benefit Pension
Plan, as amended from time to time. Prior to January 1, 1995, the
name of the Plan was The National Bank & Trust Company of Norwich
Employees' Defined Benefit Pension Plan and Trust.
2.49 Plan Administrator shall mean the person, committee or other
entity appointed to administer the Plan in accordance with Article
XI. The Plan Administrator shall be the "named fiduciary" for the
management, operation and administration of the Plan, within the
meaning of Section 402(a) of ERISA.
2.50 Plan Year shall mean the twelve consecutive month period
beginning on October 1st and ending on September 30th; provided,
however, that (a) there shall be a short Plan Year beginning on
October 1, 1994 and ending on December 31, 1994, and (b) beginning
January 1, 1995, the Plan Year shall be the period beginning on
January 1st and ending on December 31st.
2.51 Predecessor Plan shall mean any prior statement (or
restatement) of the Plan that is being amended and restated by this
document.
2.52 Preretirement Survivor Annuity shall mean an annuity for the
life of the Spouse that is payable if a Participant dies before his
Annuity Starting Date, as provided in Articles VI and VII.
2.53 Qualified Domestic Relations Order shall mean a Domestic
Relations Order that creates or recognizes the existence of an
Alternate Payee's right to, or assigns to an Alternate Payee the
right to, receive all or a portion of the benefits that would
otherwise be payable with respect to a Participant under the Plan,
and that meets the requirements described in Article XIII.
2.54 Regulation(s) shall mean the Income Tax Regulations promul-
gated by the Secretary of the Treasury or his delegate, as amended
from time to time, including proposed and temporary Regulations.
References to any Section of the Regulations shall include any
successor provision.
2.55 Required Aggregation Group shall mean a group of plans main-
tained by the Employer and any Affiliated Employer, which must be
aggregated in determining whether the Plan is Top-Heavy, as further
defined in Article XV of the Plan.
2.56 Required Beginning Date shall mean the date when
distributions must begin to a Participant, as further defined in
Article IX of the Plan.
2.57 Retirement shall mean voluntary termination of employment
with the Employer for a reason other than death, after a Participant
has fulfilled all requirements for a normal, early or disability
retirement benefit.
2.58 Social Security Retirement Age shall mean the earliest age at
which an individual can collect full, unreduced Social Security
benefits. The Social Security Retirement Age is:
a. Age 65 for a Participant who attains age 62 before January 1,
2000 (i.e., born before January 1, 1938);
b. Age 66 for a Participant who attains age 62 after Decem-
ber 31, 1999, but before January 1, 2017 (i.e., born after
December 31, 1937, but before January 1, 1955); and
c. Age 67 for a Participant who attains age 62 after
December 31, 2016 (i.e., born after December 31, 1954).
2.59 Spouse or Surviving Spouse shall mean the lawful wife of a
male Participant or the lawful husband of a female Participant.
Notwithstanding the preceding sentence, a former spouse shall be
treated as the Spouse or Surviving Spouse (and a current spouse
shall not be treated as the Spouse or Surviving Spouse) to the
extent provided under a Qualified Domestic Relations Order.
2.60 Super Top-Heavy Plan shall mean a plan for which the Top-
Heavy Ratio exceeds 90 percent. As stated in Article XV, if the
Plan is Super Top-Heavy and the Employer has also maintained a
defined contribution plan, the denominators in the Defined Benefit
Fraction and the Defined Contribution Fraction must be reduced when
calculating the Maximum Retirement Benefit for individuals who have
participated in both plans.
2.61 Top-Heavy shall mean the status of the Plan when it is a Top-
Heavy Plan (or a Super Top-Heavy Plan).
2.62 Top-Heavy Plan shall mean a plan for which the Top-Heavy
Ratio exceeds 60 percent, including a Super Top-Heavy Plan unless
otherwise specified.
2.63 Top-Heavy Ratio shall mean the ratio of the Accrued Benefits
of Key Employees to the Accrued Benefits of all Employees,
considering this Plan and any plans included in a Required
Aggregation Group or Permissive Aggregation Group.
2.64 Top-Heavy Rules shall mean the rules under Code Section 416
and implementing Regulations that will be applicable if the Plan is
a Top-Heavy Plan for any Plan Year beginning after December 31,
1983.
2.65 Total and Permanent Disability or Totally and Permanently
Disabled. A Participant shall be considered Totally and Permanently
Disabled, if he is determined to be entitled to, and is in receipt
of, disability benefits under (a) Title II or XVI of the Social
Security Act, and (b) any long term disability income plan sponsored
by the Employer.
2.66 Trust shall mean the legal entity resulting from the Trust
Agreement between the Employer and the Trustee.
2.67 Trust Agreement shall mean the agreement between the Employer
and the Trustee, or any successor Trustee, establishing the Trust
and specifying the duties of the Trustee.
2.68 Trustee shall mean the trustee or trustees designated by the
Board of Directors.
2.69 Vested Participant shall mean a Participant who has a
nonforfeitable (vested) interest in his Accrued Benefit derived from
Employer contributions to the Plan.
2.70 Years of Benefit Service shall mean a period during which a
Participant participates in the Plan and is entitled to a benefit
accrual in accordance with Section 4.01.
2.71 Year of Eligibility Service shall mean a computation period
during which an Employee is credited with at least 1,000 Hours of
Service. The first eligibility computation period is the 12-
consecutive-month period that begins on the date the Employee first
performs an Hour of Service ("employment commencement date").
Succeeding 12-consecutive-month computation periods begin on each
anniversary of the employment commencement date.
2.72 Year of Vesting Service shall mean:
a. For Plan Years that begin on and after October 1, 1976, each
Plan Year during which an Employee completes at least 1,000 Hours of
Service, and makes any portion of the contribution required of him
under the provisions of the Plan then in effect; provided that, for
the Plan Year that begins on October 1, 1994 and ends on December
31, 1994, an Employee shall receive credit for a Year of Vesting
Service if the Employee completes at least 250 Hours of Services
during that Plan Year.
b. For Plan Years that begin prior to October 1, 1976, the
applicable of the following:
i. If a Participant on September 30, 1976, the sum of (A)
"creditable service" to which a Participant was
entitled on September 30, 1976 under the Plan as in
effect on such date, and (B) any uninterrupted service
in the employ of the Employer prior to his Plan
membership date which is not included in (A) above.
ii. If not a Participant on September 30, 1976, each period
of twelve consecutive months beginning on the date he
first performs an Hour of Service and each anniversary
thereof, during which he completed at least 1,000 Hours
of Service, but excluding any such period during which
such Employee could have been a participant had he
consented to make the contributions required of him in
order to become a Participant.
<PAGE>
ARTICLE III
ELIGIBILITY AND PARTICIPATION REQUIREMENTS
3.01 Eligibility.
a. An Employee who is employed by the Employer on the Effective
Date shall be eligible to participate in the Plan on the Effective
Date, if he has satisfied the eligibility requirements in subsection
(b) below or if he was a Participant in the Predecessor Plan. In
determining previous participation, any provisions of the
Predecessor Plan which excluded Employees from participation based
on the attainment of a specified age shall not be applied after
September 30, 1988 to any Employee who performs an Hour of Service
on or after October 1, 1988.
b. After the Effective Date, an Employee employed by the Employer
shall be eligible to participate in the Plan as of the first day of
the calendar month that coincides with or next follows the date as
of which he has both attained age 21 and completed a Year of
Eligibility Service provided he is employed by the Employer on that
date.
c. In applying the above service requirement, an Employee's
service with any Affiliated Employer shall be taken into account.
d. Any person included in a unit of employees covered by a
collective bargaining agreement (as defined in Code Section 7701(a))
between Employee representatives and the Employer or an Affiliated
Employer shall not be eligible to participate in the Plan, unless
such collective bargaining agreement expressly provides for the
inclusion of such persons as Participants in the Plan.
3.02 Becoming a Participant. Once an Employee satisfies the
requirements in Section 3.01, he shall participate in the Plan
automatically. The Plan Administrator shall, no later than 90 days
after the Employee meets the eligibility requirements, advise the
Employee that he has become a Participant, and provide him with
information about the Plan.
3.03 Eligibility after Reemployment.
a. Reemployment before a Break in Service: Upon being
reemployed before a One-Year Break in Service has occurred, the
reemployed Employee shall be treated as follows:
i. A former Participant shall continue to participate in
the Plan as if his employment had not terminated;
provided that, for Plan Years that begin prior to
January 1, 1995, the period during which the
Participant was absent from employment shall not be
included in the Participant's Years of Benefit Service.
ii. A former Employee who had not yet become a Participant
shall have the period of prior employment counted
toward satisfying the service requirement in Section
3.01 as if his employment had not terminated. The
Employee shall begin to participate in the Plan in
accordance with Sections 3.01 and 3.02, upon satisfying
the eligibility requirements.
b. Reemployment after a Break in Service: Upon being reemployed
after a Break in Service, the reemployed Employee shall participate
in the Plan as follows:
i. Participation shall be reinstated as of the date of
reemployment for: (A) a former Vested Participant and
(B) a former Non-Vested Participant whose consecutive
One-Year Breaks in Service did not exceed the greater
of five, or his number of Years of Vesting Service
before the Break in Service.
ii. A former Non-Vested Participant with a Break in Service
longer than provided in subsection (i), and a former
Employee who had not yet become a Participant when he
terminated employment, shall begin to participate in
the Plan as of the first day of the calendar month that
coincides with or next follows the date he again
satisfies the eligibility requirements in Section 3.01.
In applying the above provisions, the computation period shall be
the eligibility computation period specified in the definition of
"Year of Eligibility Service" in Article II, as though the
reemployment date were the employment commencement date.
Notwithstanding the above provisions, prior service will be credited
for a Participant who received a distribution of his vested
benefits, only if the distribution is repaid as provided in Article
V.
3.04 Eligibility Based on Service in Ineligible Classification.
a. If an Employee who had not been in an eligible class of
employees of the Employer or an Affiliated Employer becomes a member
of such a class, his eligibility to participate in the Plan shall be
determined in accordance with the above provisions of this Article,
counting service in the ineligible classification.
b. An individual who ceases to be a Participant because he is no
longer in an eligible class of employees shall become eligible to
participate in the Plan immediately upon returning to an eligible
class of employees.
<PAGE>
ARTICLE IV
SERVICE CREDITING
4.01 Benefit Service.
a. For service rendered prior to January 1, 1995, a Participant
shall be entitled to a Year of Benefit Service for each 12-month
period of service with the Employer, beginning on the later of
October 6, 1956 or the date the Participant first became a
Participant. To the extent not taken into account under the
preceding sentence, a Participant shall also receive credit for each
completed month (counted as 1/12th of a year) of service with the
Employer after the applicable date described in the preceding
sentence and before January 1, 1995.
b. Effective January 1, 1995, Years of Benefit Service shall be
measured by the Hours of Service performed by a Participant during a
Plan Year. A Participant shall receive credit for a Year of Benefit
Service for service rendered after December 31, 1994 only if the
Participant performs 1,000 Hours of Service in a Plan Year. No
partial Years of Benefit Service shall be granted.
c. In determining Years of Benefit Service, service with any of
the following listed banking institutions by a Participant who was
employed by any such institution as of September 29, 1989 shall be
considered service with the Employer to the extent the Employee's
service was recognized for benefit accrual purposes under such
former employer's qualified defined benefit pension plan as of
September 29, 1989. The banking institutions referred to are:
National Bank of Hancock, Hayes National Bank, Fulton County
National Bank and Trust, and Bank of Lake Placid. For an Employee
who was employed at the Key Bank of New York branches known as
Plattsburgh, Plattsburgh North or Ellenburg Depot as of the date
immediately preceding the date of the Employer's acquisition of
those branches, Years of Benefit Service also shall include the
Employee's service with Key Bank of New York to the extent such
service was recognized for benefit accrual purposes under such
former employer's qualified defined benefit plan as of the date
immediately preceding the date of the Employer's acquisition of
those branches.
4.02 Vesting Service.
a. An Employee shall be entitled to credit for a Year of Vesting
Service for purposes of determining his vested interest in his
Accrued Benefit derived from Employer contributions for all Years of
Vesting Service unless excluded by subsection (b) or Section 4.03.
b. For purposes of this Section, service shall not include the
following:
i. Service before age 22, if the Employee fails
to be credited with an Hour of Service after
September 30, 1985;
ii. Service with the Employer during any period for which
the Employer did not maintain this Plan or a predeces-
sor Plan; or
iii. Service for periods during which the Employee declined
to make any portion of required Employee contributions
to the Plan.
4.03 Treatment of Prior Service after a Break in Service.
a. Vested Participant: If a Vested Participant is reemployed
after a One-Year Break in Service, his prior Years of Vesting
Service and Years of Benefit Service shall be taken into account in
determining his vested percentage in his Accrued Benefit derived
from Employer contributions as of the date he is reemployed.
Notwithstanding the preceding sentence, a Vested Participant who
receives a full distribution of his vested Accrued Benefit following
his termination of employment, shall receive credit for the prior
Years of Vesting Service and Years of Benefit Service only if he
repays the distribution in accordance with Section 5.03.
b. Non-Vested Participant:
i. If a Non-Vested Participant is reemployed after a One-
Year Break in Service, his prior Years of Vesting
Service and Years of Benefit Service shall not be taken
into account, if the number of consecutive One-Year
Breaks in Service equals or exceeds the greater of: (i)
five or (ii) the Participant's Years of Vesting Service
prior to the Break in Service.
ii. If the Non-Vested Participant has a shorter Break in
Service than that described in subsection (i), he shall
receive credit for his prior Years of Vesting Service
and Years of Benefit Service in the same manner as
provided for a Vested Participant in subsection (a)
above.
c. Prior Break in Service: In applying the above provisions,
the aggregate number of Years of Vesting Service and Years of
Benefit Service before the Break in Service shall be deemed not to
include any Years of Vesting Service or Years of Benefit Service not
required to be taken into account under this Section by reason of
any prior Break in Service.
4.04 Retention of Service. A Participant's benefit accrual and
vested interest in benefits under the Plan up to the Effective Date
shall be determined according to the Predecessor Plan as in effect
immediately prior to the Effective Date. On the Effective Date and
thereafter, a Participant's benefit accrual and vested interest
shall not be reduced by termination of employment, Breaks in Service
or for any other reason, except as provided in the Plan.
4.05 Limitation of Service Credited. No more than one Year of
Vesting Service and one Year of Benefit Service shall be credited
with respect to any 12-month period. The foregoing sentence shall
not prevent the crediting of a full Year of Vesting Service for the
Plan Year that begins on October 1, 1994 and ends on December 31,
1994 for an Employee who completes at least 250 Hours of Service in
that Plan Year.
<PAGE>
ARTICLE V
VESTING AND FORFEITURES
5.01 Vesting Schedule. Except as provided in Section 5.02 below,
a Participant's Accrued Benefit shall become vested in accordance
with the applicable schedule below.
a. An Employee who is credited with at least one Hour of Service
after the Effective Date, but who is not credited with at least one
Hour of Service after December 31, 1994, shall become vested in
accordance with the following schedule:
Years of Vesting Service Vested Percentages
Less than 3 years 0%
3 years but less than 4 years 20%
4 years but less than 5 years 40%
5 years but less than 6 years 60%
6 years but less than 7 years 80%
7 years or more 100%
b. An Employee who is credited with Hours of Service only after
December 31, 1994 shall become vested in accordance with the
following schedule:
Years of Vesting Service Vested Percentage
Less than 5 years 0%
5 years or more 100%
c. An Employee who (i) is credited with at least one Hour of
Service during the period that begins on the Effective Date and ends
on December 31, 1994, and (ii) is credited with at least one Hour of
Service after December 31, 1994, shall become vested in accordance
with the schedule above that provides the greatest Vested Percentage
for the Employee.
5.02 Exceptions to Vesting Schedule. Notwithstanding the above
schedule, the following rules shall apply in determining a
Participant's vested interest in his Accrued Benefit:
a. In case of a change in the vesting schedule, the rules in
Section 5.04 shall be applied to Participants affected by the
change.
b. The Minimum Vesting Schedule in Article XV shall become
applicable if the Plan is Top-Heavy for one or more Plan Years.
(The rules in Section 5.04 apply to any change to or from the
Minimum Vesting Schedule.)
c. A Participant shall become 100 percent vested in his Accrued
Benefit upon (i) the Participant's attainment of Normal Retirement
Age while still actively employed by the Employer, (ii) the
Participant's death at a time when he is actively employed by the
Employer, or (iii) the Participant's termination of employment due
to Total and Permanent Disability.
5.03 Forfeitures. If a Participant terminates his employment with
the Employer at a time when he is not 100 percent vested in his
Accrued Benefit derived from Employer contributions, the nonvested
portion of the benefit shall be forfeited subject to the following
provisions:
a. Time of Forfeiture: If a Participant terminates employment
with the Employer and receives a distribution from the Plan, his
nonvested benefits shall be forfeited when the distribution is made.
If the Participant does not receive a distribution, his nonvested
benefits shall be forfeited as of the end of the Plan Year in which
he incurs five consecutive One-Year Breaks in Service. For purposes
of this subsection, if the present value of the Participant's vested
Accrued Benefit is zero, he shall be deemed to have received a
distribution of the Accrued Benefit when he terminated employment.
b. Use of Forfeiture: Any benefits forfeited pursuant to this
Section shall be used to reduce future Employer contributions to the
Plan. In no event shall the remaining Participants receive
additional benefits as a result of the forfeitures.
c. Restoration of Forfeited Amounts:
i. A Participant who forfeited benefits when he received a
distribution from the Plan shall have the right to
restore his Accrued Benefit to the extent forfeited,
provided that he resumes employment and repays to the
Plan the full amount of the distribution plus interest
(using the interest rates determined under Section
411(c)(2)(C) of the Code). Any repayment pursuant to
this subsection must be made before the earlier of (A)
five years after the first date on which the
Participant is subsequently reemployed by the Employer;
or (B) the close of the first period of five
consecutive One-Year Breaks in Service after the
distribution was made.
ii. If a Participant who was deemed to receive a
distribution pursuant to subsection (a) above resumes
employment with the Employer before incurring five
consecutive One-Year Breaks in Service, the amount of
the Accrued Benefit as of the date of the deemed
distribution shall be restored when he again
participates in the Plan (see Section 3.03).
5.04 Amendments Affecting Vesting Schedule.
a. In the case of an Employee who is a Participant on (i) the
date an amendment changing the vesting schedule is adopted, or (ii)
if later, the date the amendment is effective, the vested percentage
of his Accrued Benefit (determined as of the applicable date) shall
not be less than the percentage calculated under the terms of the
Plan without regard to the amendment.
b. If the vesting schedule in Section 5.01 is amended, or the
Plan is amended in any way that, directly or indirectly, adversely
affects the computation of a Participant's nonforfeitable percentage
in his future benefit accruals (including an automatic change to or
from the Minimum Vesting Schedule if the Plan becomes Top-Heavy), a
Participant who is an Employee with at least three Years of Service
may elect to have the nonforfeitable percentage of his Accrued
Benefit determined without regard to the amendment. For
Participants who do not have at least one Hour of Service in a Plan
Year beginning after December 31, 1988, the preceding sentence shall
be applied by substituting "five Years of Service" for "three Years
of Service." In determining a Participant's Years of Service for
purposes of this subsection, the exclusions set forth in Section
4.02 shall not apply.
c. A Participant's right to make an election under subsection
(b) shall be governed by the following:
i. The Plan Administrator shall provide each affected
Participant with written notice and an election form
regarding his right to elect to remain under the former
vesting schedule.
ii. The election period shall begin with the date the
amendment is adopted (or deemed to be made) and shall
end on the date which is the latest of: (A) 60 days
after the date the amendment is adopted; (B) 60 days
after the date the amendment becomes effective; or (C)
60 days after the date the notice described in
subsection (i) above is issued by the Plan
Administrator.
iii. A Participant who does not timely file a properly
completed election form shall be subject to the amended
vesting schedule.
<PAGE>
ARTICLE VI
BENEFITS ELIGIBILITY
6.01 Normal Retirement Benefit.
a. A Participant shall be eligible to receive benefits upon
Retirement on his Normal Retirement Date, provided he completes an
application in accordance with subsection (b).
b. To commence receipt of benefit payments, a Participant must
submit a signed written application to the Plan Administrator in
which he elects an Annuity Starting Date and form of distribution
(in compliance with Article IX). Upon proper application, the Plan
Administration shall begin to distribute benefits as soon as
administratively feasible.
c. If a Participant continues in employment after his Normal
Retirement Date for at least 40 Hours of Service monthly, the
Participant shall not receive any benefit payments during the period
of such employment. However, benefits shall continue to accrue, and
the Participant shall be eligible to receive a late retirement
benefit as provided in this Article and Article VII.
d. In the case of a Participant described in subsection (c), the
Plan Administrator shall establish procedures to give the
Participant the notice required by Department of Labor Regulation 29
C.F.R. 2530.203-3(b)(4) no later than the end of the first
calendar month or payroll period in which the Plan does not pay
benefits due to the continued employment. Benefit payments to the
Participant shall commence no later than the first day of the third
calendar month after the calendar month in which he ceases to be
employed at the level described in subsection (c).
e. Notwithstanding the above provisions, the payment of benefits
shall begin once a Participant has reached his Required Beginning
Date.
6.02 Early Retirement Benefit.
a. Upon written notice to the Plan Administrator, a Participant
may elect to receive benefits upon Retirement on an Early Retirement
Date. The payment of benefits shall be effective as of the first
day of the month coinciding with or next following the elected Early
Retirement Date.
b. A Participant who terminates employment with a nonforfeitable
right to an Accrued Benefit after satisfying the service requirement
for an early retirement benefit, but before satisfying the age
requirement, may elect to receive early retirement benefits when he
later satisfies the age requirement.
6.03 Late Retirement Benefit. A Participant who delays his
Retirement until after his Normal Retirement Date shall continue to
accrue benefits and shall be eligible to receive a late retirement
benefit as of the earlier of (a) the first day of the month
coinciding with or next following his Actual Retirement Date, or (b)
his Required Beginning Date.
6.04 Disability Retirement Benefit.
a. A Participant who terminates employment because he is Totally
and Permanently Disabled, before reaching his Normal Retirement
Date, shall be eligible to receive benefits commencing on the
Participant's Normal Retirement Date.
b. A Participant must file a written application with the Plan
Administrator to receive disability retirement benefits. Upon
receiving an application, the Plan Administrator shall determine
whether the Participant is Totally and Permanently Disabled as
defined in Article II.
6.05 Preretirement Death Benefit. Effective as of January 1,
1995, if a Participant dies before the Annuity Starting Date, death
benefits shall be provided in accordance with this Section and the
provisions of Article VII regarding preretirement death benefits.
If a Participant dies prior to January 1, 1995 and prior to the
Annuity Starting Date, only the Preretirement Survivor Annuity shall
be payable and shall be payable only to the Surviving Spouse. If
the Participant is unmarried at the time of death (prior to the
Annuity Starting Date and prior to January 1, 1995), no
preretirement death benefit shall be payable.
a. The Participant's Accrued Benefit shall be paid as a
Preretirement Survivor Annuity for the life of the Surviving Spouse,
as provided in Article VII, unless:
i. The Participant is unmarried or another exception to
spousal rights in Section 8.02 applies; or
ii. The Participant waives the Preretirement Survivor
Annuity with spousal consent in accordance with
subsection (c) below.
b. If benefits are not being paid as a Preretirement Survivor
Annuity pursuant to subsection (a), the Participant's designated
Beneficiary shall receive preretirement death benefits as provided
in Article VII.
c. Waiver of Preretirement Survivor Annuity: A Participant may
effectively waive the Preretirement Survivor Annuity, and elect to
have the other preretirement death benefit paid to another Benefic-
iary as follows:
i. The election must be made in writing and delivered to
the Plan Administrator during the period that begins on
the first day of the Plan Year in which the Participant
attains age 35, and ends on the date of the
Participant's death. However, if a Participant
terminates employment before the first day of the Plan
Year in which he would attain age 35, the election
period shall begin on the termination date.
ii. The Participant's Spouse must consent to the election,
in a consent which satisfies the requirements in
Section 8.02(e).
iii. The election must be made after the Plan Administrator
provides the Participant with a notice regarding the
Preretirement Survivor Annuity that is comparable to
the notice regarding the Joint and Survivor Annuity
described in Section 9.01. The Plan Administrator must
provide this notice during whichever of the following
periods ends last:
A. The period beginning with the first day of the
Plan Year in which the Participant attains age 32
and ending with the close of the Plan Year
preceding the Plan Year in which the Participant
attains age 35;
B. A reasonable period ending after the Employee
becomes a Participant; or
C. A reasonable period ending after the
Preretirement Survivor Annuity requirements first
apply to a Participant.
Notwithstanding the foregoing, notice must be provided
within a reasonable period after termination of
employment in the case of a Participant who terminates
employment with the Employer before attaining age 35.
For purposes of this subsection, a reasonable period
after a specified event is the end of the two year
period beginning one year prior to the date the event
occurs and ending one year after that date. In the
case of a Participant who terminated employment before
the Plan Year in which he attains age 35, the notice
shall be provided within the two-year period beginning
one year prior to termination and ending one year after
termination. If such a Participant thereafter returns
to employment with the Employer, his notice period
shall be redetermined.
iv. Notwithstanding the election period described in
subsection (i), a Participant who will not yet attain
age 35 as of the end of any current Plan Year may make
a special election, in the form and method required by
subsection (i), for the period that begins on the date
of such election and ends on the first day of the Plan
Year in which the Participant will attain age 35. Such
an election shall not be valid unless the Spouse
consents and the Participant receives a written
explanation of the Preretirement Survivor Annuity, as
described in subsections (ii) and (iii). Preretirement
Survivor Annuity coverage automatically will be
reinstated as of the first day of the Plan Year in
which the Participant will attain age 35. Any new
waiver thereafter will be subject to all of the
requirements of this Article.
Notwithstanding the preceding provisions, a revocation of a prior
waiver of the Preretirement Survivor Annuity may be made by a
Participant without the consent of the Spouse at any time prior to
the commencement of benefits. The number of revocations shall not
be limited.
d. The Plan Administrator shall require satisfactory written
proof of the Participant's death before paying benefits under this
Section. The Plan Administrator shall also require whatever proof
is necessary, in the particular case, to establish the right of any
person to receive the benefit.
6.06 Benefits Following Termination of Employment. If a Vested
Participant terminates employment at a time when he is not eligible
for benefits under any of the preceding Sections of this Article,
his benefits shall be distributed in accordance with the following
provisions and the provisions of Article VII regarding deferred
vested retirement benefits.
a. Benefits Not in Excess of $3,500: If the value of
Participant's vested Accrued Benefit does not exceed $3,500, the
entire vested amount shall be paid to the Participant in a single
lump sum. Payment shall be made as soon as administratively
feasible following the termination of employment, but no later than
60 days after the close of the Plan Year within which employment
terminated. No consent is required for this distribution.
b. Benefits in Excess of $3,500: If the present value of a
Participant's vested Accrued Benefit derived from Employer (and any
Employee) contributions exceeds (or at the time of any prior
distribution exceeded) $3,500, he will be entitled to a deferred
vested benefit. This means that benefits will only be distributed
at times when the Participant or his Beneficiary is eligible to
receive benefits under the preceding Sections of this Article.
<PAGE>
ARTICLE VII
COMPUTATION OF BENEFITS
7.01 Normal Retirement Benefit.
a. The annual normal retirement benefit of a Participant who
becomes eligible for benefits under Section 6.01 shall equal the sum
of the amounts described in (i), (ii) and (iii) below, with that sum
then reduced by the amount described in (iv) below.
i. The Participant's accrued benefit under the Predecessor
Plan as of September 30, 1989.
ii. For Years of Benefit Service earned after September 30,
1989 and before January 1, 1995, the of sum if (A) 1.60
percent of the Participant's Final Average Compensation
for each such Year of Benefit Service, plus (B) .60
percent of the Participant's Final Average Compensation
that is in excess of Covered Compensation for each such
Year of Benefit Service.
iii. For Years of Benefit Service earned after December 31,
1994, the sum of (A) 1.25 percent of the Participant's
Final Average Compensation for each such Year of
Benefit Service, plus (B) .60 percent of the
Participant's Final Average Compensation that is in
excess of Covered Compensation for each such Year of
Benefit Service.
iv. The annual normal retirement benefit payable to the
Participant from the Retirement Plan of Irving Bank
Corporation and Affiliated Companies, or any successor
plan, as a result of the Participant's employment with
National Bank of Hancock, Hayes National Bank, Fulton
County National Bank and Trust, and/or Bank of Lake
Placid through September 29, 1989.
In applying the foregoing formula, the Plan shall at all times
satisfy the overall permitted disparity limit of Regulation
1.401(l)-5.
b. For purposes of this Section, "Covered Compensation" means
the amounts prescribed in tables published by the Commissioner of
the Internal Revenue Service pursuant to Regulation 1.401(l)-
1(c)(7)(ii).
c. For purposes of this Section 7.01, the number of Years of
Benefit Service taken into account under the Plan shall be limited
to the greater of (i) 30, or (ii) the number of Years of Benefit
Service completed by the Participant as of December 31, 1994 (up to
a maximum of 40). For purposes of this subsection (c), Years of
Benefit Service completed by the Participant through September 30,
1989 shall be taken into account.
7.02 Early Retirement Benefit. The early retirement benefit of a
Participant who becomes eligible for benefits under Article VI shall
be calculated as provided in Section 7.01, based on the
Participant's service up to his Early Retirement Date, and then
reduced by three percent per year for each year by which the
Participant's Early Retirement Date precedes the Participant's
Normal Retirement Date.
7.03 Late Retirement Benefit.
a. The late retirement benefit of a Participant who becomes
eligible for benefits under Article VI shall be determined
Compensation and as provided in Section 7.01, based on the Par-
ticipant's Compensation and service up to his Actual Retirement
Date.
b. The benefit provided under subsection (a) for a Participant
who earns Years of Benefit Service after the Participant's Normal
Retirement Date shall be redetermined annually in accordance with
Section 7.07.
c. Notwithstanding the preceding provisions, the accrual of a
Participant's benefit for a Plan Year shall be reduced (but not
below zero) by the Actuarial Equivalent of any distributions made
from the Plan to the Participant by the close of the Plan Year
pursuant to Article IX of the Plan. The reduction shall be deter-
mined in accordance with Section 7.07.
7.04 Disability Retirement Benefit. The disability retirement
benefit of a Participant who becomes eligible for benefits under
Article VI shall be determined as provided in Section 7.01, based on
(a) the Participant's Final Average Compensation as of the
Disability Retirement Date, and (b) the benefit formula in effect
under the Plan on the date the Participant ceased active employment.
For purposes of determining an eligible Participant's benefit under
this Section 7.04, the Participant will be given credit for a Year
of Benefit Service for each year between the Participant's
Disability Retirement Date and Normal Retirement Date that the
Participant remains Totally and Permanently Disabled.
7.05 Preretirement Death Benefit.
a. Effective as of January 1, 1995, the survivor annuity
described in subsection (b) or (c), as applicable, shall be payable
to the Beneficiary, if the Participant dies before the Annuity
Starting Date. If a Participant dies prior to January 1, 1995 and
prior to the Annuity Starting Date, only the Preretirement Survivor
Annuity shall be payable and shall be payable only to the Surviving
Spouse. If a Participant is unmarried at the time of death (prior
to the Annuity Starting Date and prior to January 1, 1995), no
preretirement death benefit shall be payable.
b. If the Participant dies after his Earliest Retirement Age,
the Beneficiary shall receive the same benefit that would be payable
if the Participant had retired with a Joint and Survivor Annuity on
the day before his death.
c. If the Participant dies on or before his Earliest Retirement
Age, the Beneficiary shall receive the same benefit that would be
payable if the Participant had:
i. Separated from service on the date of death (or actual
date of separation from service, if earlier);
ii. Survived to the Earliest Retirement Age, and retired on
that date with an immediate Joint and Survivor Annuity;
and
iii. Died on the day after the Earliest Retirement Age.
d. Payment of the preretirement death benefit described in
subsections (b) and (c) shall commence as soon as administratively
feasible (but not later than one year) after the date of the
Participant's death; provided that, if the Beneficiary is the
Surviving Spouse, the Surviving Spouse may elect to defer the
commencement of payments to the first day of any month before
December 31 of the calendar year in which the Participant would have
attained age 70 1/2. If the payment of benefits commences as of a date
other than the Participant's Earliest Retirement Age, the benefits
paid shall be the Actuarial Equivalent of the benefits that would
have been paid at the Participant's Earliest Retirement Age.
e. Notwithstanding the preceding provisions, if the present
value of the preretirement death benefit described in subsections
(b) and (c) does not exceed $3,500, the full vested amount shall be
paid to the designated Beneficiary in a single lump sum. The
payment shall be made as soon as administratively feasible following
the Participant's death, but no later than 60 days after the close
of the Plan Year in which the Plan Administrator is provided with
proof of the Participant's death.
7.06 Deferred Vested Retirement Benefit.
a. The deferred vested retirement benefit of a Participant who
becomes eligible for benefits under Article VI shall be the
Participant's Accrued Benefit up to his termination of employment,
multiplied by the applicable vesting percentage set forth in Article
V.
b. The benefit provided by subsection (a) shall be payable at
the Participant's Normal Retirement Date or, if the Participant so
elects, at an Early Retirement Date if the Participant meets the
pertinent requirements set forth in Article VI.
7.07 Reemployment After Benefit Commencement. A Participant in
receipt of benefit payments under the Plan who returns to active
service with the Employer as an Employee, or, in the case of an
active Participant employed after his Required Beginning Date, who
continues in active service as an Employee, shall have his allowance
recalculated as of the end of each Plan Year as follows:
a. First, the Participant's benefit as of the end of the
Plan Year will be calculated without regard to the fact
that the Participant is receiving benefits.
b. The Participant's benefit in effect as of the
Participant's original Annuity Starting Date will then
be subtracted from the benefit determined pursuant to
(a) above to determine the extent of any additional
accrual.
c. Any additional accrual determined pursuant to (b) above
shall then be reduced (but not below zero) by the
Actuarial Equivalent value of Plan benefit payments
received by the Participant through the end of the Plan
Year.
d. Any additional accrual determined pursuant to (c) above
shall be converted to the form of payment selected by
the Participant as of the Participant's original
Annuity Starting Date, using the ages of the
Participant and the Participant's Beneficiary (if
applicable) at the time of recalculation and
conversion.
e. Payment of the recalculated benefit, including any
increase, shall be effective as of the first day of the
ensuing Plan Year.
<PAGE>
ARTICLE VIII
BENEFICIARIES
8.01 Designation of a Beneficiary.
a. Each Participant may designate one or more Beneficiaries (and
contingent Beneficiaries) by delivering a written designation to the
Plan Administrator on a form provided by the Plan Administrator, in
compliance with the provisions of Section 8.02.
b. A Participant may also make a new designation at any time (in
accordance with Section 8.02). Such a designation is effective only
upon receipt by the Plan Administrator, at which time it supersedes
all prior designations.
c. Upon the death of a Participant, his Beneficiaries shall be
entitled to the benefits described in Articles VII and IX.
d. A designation of a Beneficiary shall be effective only if the
designated Beneficiary survives the Participant.
e. Upon the legal dissolution of the marriage of a Participant,
any designation of the Participant's former Spouse as a Beneficiary
shall remain valid, unless otherwise provided in a Qualified
Domestic Relations Order, or unless the Participant delivers a new
designation to the Plan Administrator or is remarried.
8.02 Spouses's Rights. The Spouse of a married Participant shall
be the Participant's Beneficiary, whether or not designated as such,
unless one of the following requirements in subsections (a) through
(d) below is satisfied.
a. Spouse's Consent to the Beneficiary: The Spouse waives the
right to be the Beneficiary in a consent which meets the
requirements of subsection (e). In this regard:
i. The Participant must designate a specific Beneficiary
that cannot be changed without a new spousal consent,
unless the Spouse executes a general consent, as
provided in subsection (e)(ii) below.
ii. Notwithstanding subsection (i) above, the Participant
may at any time revoke the designation of a non-spouse
Beneficiary and restore the Spouse as the Beneficiary,
without spousal consent.
b. Separation: The Participant is legally separated from his
Spouse or has been abandoned, within the meaning of local law, and
provides the Plan Administrator with a court order regarding the
applicable circumstance. (However, such a Spouse must be considered
the Spouse to the extent provided in a Qualified Domestic Relations
Order.)
c. Missing Spouse: The Participant establishes to the
satisfaction of the Plan Administrator that the Spouse cannot be
located. The Plan Administrator shall adopt procedures to implement
this provision, which shall be applied uniformly to all
Participants.
d. Unmarried Participant: The Participant is unmarried. This
"deemed" waiver of spousal rights for an unmarried Participant is
null and void if the Participant later marries.
e. Consent Requirement: The Spouse's consent to waive survivor
benefits in favor of another Beneficiary is valid only if the
following requirements are satisfied:
i. The Spouse's consent must be in writing and signed,
must acknowledge the effect of the election, and must
be witnessed by a notary public.
ii. The Spouse's consent must either acknowledge the
specific non-spouse Beneficiary or must expressly
permit the Participant to alter the Beneficiary
designation without further spousal consent. For Plan
Years beginning after October 22, 1986, a consent that
permits further designations must also acknowledge (A)
that the Spouse has the right to limit consent to a
specific Beneficiary and (B) that the Spouse is
voluntarily relinquishing this right.
iii. The consent required by this subsection may be given by
the legal guardian of a legally incompetent Spouse.
This applies even if the Participant is the legal
guardian.
iv. A consent is only valid for the Spouse who gives the
consent (or for whom the consent is given by a legal
guardian).
A valid consent, once given, can be revoked; provided the revocation
occurs before the Annuity Starting Date.
8.03 Absence of a Designated Beneficiary. If no effective
Beneficiary designation exists at the Participant's death, the
Participant shall be deemed to have designated the following
Beneficiaries in the following order of priority: (a) the Spouse;
(b) children, including adopted children and step-children, in equal
shares; (c) parents, in equal shares, and (d) the Participant's
estate. This order of priority shall apply to individuals living at
the time of the Participant's death.
8.04 Beneficiaries' Rights. Whenever the rights of a Participant
are stated or limited in the Plan, his Beneficiaries shall also be
bound by the Plan provisions.
<PAGE>
ARTICLE IX
DISTRIBUTION REQUIREMENTS
9.01 Form of Distribution.
a. Normal Forms: The normal form of benefit for a Participant
who is married on his Annuity Starting Date is a 50 percent Joint
and Survivor Annuity with the Spouse as Beneficiary, which is the
Actuarial Equivalent of the benefit that would be payable to the
Participant if the Participant was not married on his Annuity
Starting Date. The normal form of benefit for a Participant who is
not married on his Annuity Starting Date is a straight life annuity,
payable in monthly installments, for the life of the Participant;
provided, however, that if the Participant shall die before having
received 60 monthly payments, such monthly payments shall be
continued to his Beneficiary until the total number of monthly
payments to such Participant and Beneficiary equals 60. If the
Participant and Beneficiary die before having received a total of 60
monthly payments, the Actuarial Equivalent value of the balance of
such monthly payments shall be paid in a single sum to the estate of
the survivor of the Participant and Beneficiary.
b. Optional Forms of Payment: Unless the mandatory cash-out
provisions of Section 6.06(a) apply, a Participant may elect to
receive his Plan benefit in one of the optional forms of payment
described below, provided the Participant and form of payment
satisfy the other requirements of this Article IX.
i. A reduced retirement benefit payable during the
Participant's lifetime, with the provision that after
his death the same benefit shall be paid during the
life of such contingent annuitant (Beneficiary) as the
Participant shall have nominated by written designation
duly acknowledged and filed with the Plan Administrator
prior to the time payment is to commence. If both the
Participant and the contingent annuitant die before 60
monthly payments have been made since the benefit
commencement date, the Actuarial Equivalent value of
the balance of such 60 monthly payments shall be paid
in a single sum to the estate of the survivor of the
Participant and contingent annuitant. Participants who
elect to commence receipt of benefit payments on or
after January 1, 1995 may elect this optional form of
payment with 120 monthly payments guaranteed.
ii. A reduced retirement benefit payable during the
Participant's life with the provision that after such
period a benefit of one-half of the benefit payable
during the Participant's life shall be continued during
the life of such contingent annuitant (Beneficiary) as
the Participant shall have nominated by written
designation duly acknowledged and filed with the Plan
Administrator prior to the time payment is to commence.
If both the Participant and the contingent annuitant
die before 60 monthly payments have been made since the
benefit commencement date, the Actuarial Equivalent
value of the balance of such 60 monthly payments shall
be paid in a single sum to the estate of the survivor
of the Participant and contingent annuitant.
Participants who elect to commence receipt of benefit
payments on or after January 1, 1995 may elect this
optional form of payment with 120 monthly payments
guaranteed.
iii. Effective for benefit payments that commence on or
after January 1, 1995, a reduced retirement benefit
payable during the Participant's life, with no benefit
payable after his death; provided, however, that if the
Participant shall die before having received 120
monthly payments, such monthly payments shall continue
to be paid to his Beneficiary until the total number of
payments to the Participant and the Beneficiary equals
120. If the Participant and Beneficiary both die
before having received a total of 120 monthly payments,
the Actuarial Equivalent value of the balance of unpaid
monthly payments shall be paid in a single sum to the
estate of the survivor of the Participant and
Beneficiary.
iv. An increased retirement benefit payable during the
Participant's life, with no other benefit payable after
his death.
c. Election and Consent Requirements
A Participant may effectively waive his normal form of
benefit and elect any of the other forms provided in subsection (b)
only as follows:
i. The election must be made in writing and delivered to
the Plan Administrator during the 90-day period ending
on the Annuity Starting Date. For Plan Years beginning
after December 31, 1986, the election must specify the
optional form of benefit elected.
ii. The election must be made after the Plan Administrator
provides the Participant with the notice described in
subsection (d) below.
iii. Unless an exception stated in Section 8.02 applies, the
Spouse of a married Participant must consent to any
election, except a different-percentage Joint and
Survivor Annuity with the Spouse as the Beneficiary.
The Spouse's consent must satisfy the requirements in
Section 8.02(e), and, for Plan Years beginning after
December 31, 1986, must also agree to the specific
optional form of benefits that the Participant elects.
Notwithstanding the preceding provisions, the
Participant may at any time prior to the commencement
of benefits revoke an election and restore the 50
percent Joint and Survivor Annuity for the Spouse. The
number of revocations shall not be limited; provided,
however, that the form of payment in effect on the
Annuity Starting Date may not be changed after the
Annuity Starting Date.
d. Notice: No less than 30 and no more than 90 days prior to
the Annuity Starting Date, the Plan Administrator shall furnish each
Participant with a written notice that explains:
i. The terms and conditions of the 50 percent Joint and
Survivor Annuity;
ii. The Participant's right to make, and the effect of, an
election to waive the 50 percent Joint and Survivor
Annuity;
iii. The rights of the Participant's Spouse;
iv. The right to revoke a previous election and the effect
of the revocation; and
v. The relative values of the other forms of payment
described in subsection (b).
e. Amount: The amount payable under any optional form of
benefit shall be the Actuarial Equivalent of the benefit payable as
a straight life annuity.
f. Annuity Contracts: Benefits to be paid in the form of any
type of annuity may be provided through a nontransferable annuity
contract issued by a reputable insurance company and purchased by
the Trustee, or by direct payment from the Trust, as determined by
the Plan Administrator. The terms of any annuity contract purchased
and distributed by the Trustee to a Participant or Beneficiary shall
comply with the required distribution rules under this Article, and
Code Section 401(a)(9) and implementing Regulations.
9.02 Compliance with Code Section 401(a)(9).
a. Incorporation by Reference: Distributions shall be made in
compliance with Code Section 401(a)(9) and implementing Regulations,
including the minimum distribution incidental benefit requirement of
proposed Regulation 1.401(a)(9)-2. These Code and regulatory
provisions are hereby incorporated by reference, and shall take
precedence over any inconsistent provisions of the plan. (However,
the Section 401(a)(9) rules will not extend the period for making a
distribution, if other provisions of the Plan require an earlier
distribution.) These rules are summarized in this Section and
Sections 9.03 through 9.05 below.
b. Life Expectancies: In applying Code Section 401(a)(9) and
implementing Regulations:
i. Life expectancies of Participants and Beneficiaries
shall be calculated using the expected return
multiplies in Tables V and VI of Regulation 1.72-9.
ii. The life expectancies of a Participant and his Spouse
shall not be redetermined pursuant to Code Section
401(a)(9)(D).
9.03 Required Distribution to Participant. As stated in Article
VI, a Participant generally may elect to defer the receipt of
benefits following Retirement. Notwithstanding this general rule,
the entire interest of a Participant must be distributed, or begin
to be distributed, no later than the Participant's Required
Beginning Date, as defined below.
a. Age 70-1/2 on or after January 1, 1988: For a Participant who
attains age 70-1/2 on or after January 1, 1988, the Required
Beginning Date is April 1 of the calendar year following the
calendar year in which the Participant attains age 70-1/2, with the
following exception. For a Participant who attains age 70-1/2
during 1988 and has not retired as of January 1, 1989, the Required
Beginning Date is April 1, 1990.
b. Age 70-1/2 before January 1, 1988: For a Participant who
attains age 70-1/2 before January 1, 1988, the Required Beginning
Date shall be determined as follows:
i. For a Participant who is not a Five Percent Owner, the
Required Beginning Date is April 1 of the calendar year
following the calendar year in which the later of
Retirement or attainment of age 70-1/2 occurs.
ii. For a Participant who is a Five Percent Owner during
any year beginning after December 31, 1979, the
Required Beginning Date is April 1 following the later
of: (A) the calendar year in which the Participant
attains age 70-1/2, or (B) the earlier of the calendar
year with or within which ends the Plan Year in which
the Participant becomes a Five Percent Owner, or the
calendar year in which the Participant retires.
For purposes of this Section, a Participant shall be treated as a
Five Percent Owner if he is a Five Percent Owner at any time during
the Plan Year ending with or within the calendar year in which he
attains age 66-1/2 or any subsequent Plan Year. Once distributions
have begun to a Five Percent Owner, they must continue even if the
Participant ceases to be a Five Percent Owner in a subsequent year.
9.04 Limits on Distribution Periods.
a. As of the first "distribution calendar year," distributions,
if not made in a single sum, may be made only over one of the
following periods (or a combination thereof):
i. The life of the Participant;
ii. The life of the Participant and a Beneficiary;
iii. A period certain not extending beyond the life expec-
tancy of the Participant; or
iv. A period certain not extending beyond the joint and
last survivor expectancy of the Participant and a
designated Beneficiary.
b. For distributions beginning before the Participant's death,
the first "distribution calendar year" is the calendar year
immediately preceding the calendar year which contains the Par-
ticipant's Required Beginning Date.
c. For distributions beginning after the Participant's death,
the first "distribution calendar year" is the calendar year in which
distributions are required to begin pursuant to Section 9.05(b).
9.05 Required Distribution to Beneficiary. As provided in Article
VII, the designated Beneficiary generally may elect to defer the
receipt of benefits payable following the death of a Participant.
However, this right is subject to the following restrictions:
a. Distribution Beginning before Death: If the Participant dies
after he begins to receive benefits, any benefits that remain
undistributed at his death shall be distributed at least as rapidly
as the method of distribution being used at the time of his death.
b. Distribution Beginning after Death: If the Participant dies
before he begins to receive benefits, payment of the survivor
benefit shall commence no later than one year after the date of the
Participant's death. As an exception to this rule, if the
designated Beneficiary is the Surviving Spouse, the Surviving Spouse
may elect to have payments commence on or before December 31 of the
calendar year in which the Participant would have attained age 70-
1/2.
9.06 Location of Participant or Beneficiary Unknown.
a. When a distribution is payable to a Participant or Benefici-
ary, the Plan Administrator shall make all reasonable efforts to
locate that person. These efforts shall include (i) sending a
registered letter, return receipt requested, to the person's last
known mailing address, and (ii) sending a written request to any
person shown in the Employer's records as a relative or other person
to contact, asking for information regarding the whereabouts of the
Participant or Beneficiary.
b. If the Plan Administrator is unable to locate the person
within six months from the date a certified letter was mailed to
him, the Plan Administrator shall direct the Trustee to maintain the
Participant as an inactive Participant. The Plan Administrator
shall continue to maintain the Participant in inactive status until
(i) the person entitled to the benefit makes an application for it,
or (ii) the benefit reverts by escheat to the State, whichever
occurs first.
9.07 Facility of Payment. If the Plan Administrator finds that
any person to whom a benefit is payable from the Fund is unable to
care for his affairs because of illness or accident, any payment due
may be paid to the Spouse, a child, a parent, or a brother or
sister, or to any person deemed by the Plan Administrator to have
incurred expense for the person, unless a prior claim for the
benefit has been made by a duly appointed guardian, committee or
other legal representative. Any such payments will be a complete
discharge of any liability under the Plan.
9.08 Eligible Rollover Distributions.
a. Application of Section. This Section applies to
distributions made on or after January 1, 1993. Notwithstanding any
provision of the Plan to the contrary that would otherwise limit a
distributee's election under this Section, a distributee may elect,
at the time and in the manner prescribed by the Plan Administrator,
to have any portion of an eligible rollover distribution paid
directly to an eligible retirement plan specified by the distributee
in a direct rollover.
b. Definitions.
i. Eligible Rollover Distribution: An eligible rollover
distribution is any distribution of all or any portion
of the balance to the credit of the distributee, except
that an eligible rollover distribution does not
include: any distribution that is one of a series of
substantially equal periodic payments (not less
frequently than annually) made for the life (or life
expectancy) of the distributee or the joint lives (or
joint life expectancies) of the distributee and the
distributee's designated Beneficiary, or for a
specified period of ten years or more; any distribution
to the extent such distribution is required under
Section 401(a)(9) of the Code; and the portion of any
distribution that is not includable in gross income
(determined without regard to the exclusion for net
unrealized appreciation with respect to employer
securities).
ii. Eligible Retirement Plan: An eligible retirement plan
is an individual retirement account described in
Section 408(a) of the Code, an individual retirement
annuity described in Section 408(b) of the Code, an
annuity plan described in Section 403(a) of the Code,
or a qualified trust described in Section 401(a) of the
Code, that accepts the distributee's eligible rollover
distribution. However, in the case of an eligible
rollover distribution to the Surviving Spouse, an
eligible retirement plan is an individual retirement
account or individual retirement annuity.
iii. Distributee: A distributee includes an Employee or
former Employee. In addition, the Employee's or former
Employee's Surviving Spouse and the Employee's or
former Employee's Spouse or former Spouse who is the
Alternate Payee under a Qualified Domestic Relations
Order, as defined in Section 414(p) of the Code, are
distributees with regard to the interest of the Spouse
or former Spouse.
iv. Direct Rollover: A direct rollover is a payment by the
Plan to the eligible retirement plan specified by the
distributee.
<PAGE>
ARTICLE X
FINANCING
10.01 Fund. The funding of the Plan and payment of benefits shall
be provided for through the medium of the Fund held by the Trustee
under the provisions of the Trust Agreement, which is deemed to form
a part of the Plan. All rights or benefits which may accrue to any
person under the Plan shall be subject to the Trust Agreement. The
names of the current Trustees are available from the Secretary of
the Employer. The contributions of the Employer, together with any
income, gains, or profits, less distributions and losses, shall
constitute the Fund. The Employer shall determine the form and
terms of any such Trust Agreement, and may modify the Trust
Agreement from time to time to accomplish the purposes of the Plan,
and may remove any Trustee.
10.02 Contributions to the Plan. The Employer intends to make,
from time to time, such contributions to the Fund as determined by
the Plan Administrator. Expenses of the Plan, unless paid by the
Employer, shall be paid out of the assets of the Fund. There are no
Employee contributions to the Plan.
10.03 Funding Policy. The Plan Administrator shall establish a
written funding policy and method consistent with the objectives of
the Plan and the requirements of Title I of ERISA. The Plan
Administrator shall review such funding policy and method at least
annually. In its actions, the Plan Administrator shall endeavor to
determine the Plan's short-term and long-term objectives and
financial needs, taking into account the need for liquidity to pay
benefits and the need for investment growth. All actions under this
Section, including the supporting reasons, shall be recorded in
writing by the Plan Administrator and communicated to the Trustee
and Board of Directors.
10.04 Return of Employer Contributions. Contributions shall be
returned to the Employer by the Trustee, if the Plan Administrator
certifies in writing to the Trustee that one or more of the
following circumstances exists:
a. If the Employer made a contribution by mistake of fact, the
contribution shall be returned to the Employer within one year after
its payment to the Trustee.
b. If the Employer made the contribution conditioned on the
qualification of the Plan under the Code, and if the Plan receives
an adverse determination with respect to its initial qualification,
the contribution shall be returned to the Employer within one year
after such final determination as described in Section 16.05(a), but
only if the application for the determination is made by the time
prescribed by law for filing the Employer's tax return for the
taxable year in which the Plan was adopted, or such later date as
the Secretary of the Treasury may prescribe.
c. To the extent that a deduction for a contribution under
Section 404 of the Code is disallowed, the contribution shall be
returned to the Employer within one year after the disallowance (or
within one year after the date a court decision upholding the
disallowance becomes final).
With respect to the return of contributions occasioned by the
circumstances listed in subsections (a) and/or (c) above, the amount
which shall be returned to the Employer is the excess of the amount
contributed over the amount that would have been contributed had
there not occurred a mistake of fact or a mistake in determining the
deduction. Earnings attributable to the excess contribution shall
not be returned to the Employer, but losses attributable to the
contribution must reduce the amount to be returned.
<PAGE>
ARTICLE XI
ADMINISTRATION
11.01 Plan Administrator.
a. The Plan Administrator shall be the named fiduciary for the
Plan and shall be responsible for the management, operation and
administration of the Plan.
b. The Board of Directors shall have the authority to appoint an
individual or other entity, or a committee consisting of three
members to be the Plan Administrator, and to fill any vacancies
which occur, in its sole discretion. Any appointee is subject to
removal by the Board of Directors at any time, and may resign at his
own volition upon 10 days prior written notice to the Board of
Directors. If at any time there is no appointed Plan Administrator
because vacancies have not been filled, the Board of Directors shall
be deemed the Plan Administrator. Names of all current appointees
shall be available from the Secretary of the Employer.
c. If the Plan Administrator is a committee, any act that this
Plan authorizes or requires the Plan Administrator to do may be done
at a meeting of the committee by a majority of the members then
voting.
d. The Board of Directors will appoint a chairman and a
secretary and such other agents and representatives of the pension
committee as it may deem advisable (see Section 11.05). In its
relationship with the Trustee and any insurance company or companies
on any matter or thing included in this Plan, one member of the
committee may be authorized by it to sign or execute any document on
its behalf. The Chairman of the Board of Directors will certify to
the Trustee and to such insurance company or companies the name and
signature of the member of the committee who is so authorized.
e. The Plan Administrator will serve without compensation for
services as such, but all the Plan Administrator's expenses shall be
paid by the Employer (see Section 11.11).
f. The Board of Directors, in its sole discretion, may also
designate the Trustee as the Plan Administrator. Any such
designation shall be valid only if the Trustee acknowledges
responsibility for the management, operation and administration of
the Plan in writing. Thereafter, all references in the Plan and
Trust to the Plan Administrator shall mean the Trustee unless and
until the Board of Directors appoints a different Plan Administrator
in accordance with this Section.
11.02 Fiduciary and Administrative Duties
a. The Plan Administrator shall have the following powers,
duties, and responsibilities, which it may retain or delegate among
the below-mentioned bodies:
i. Powers, duties, and responsibilities of administration
which shall be delegable to an administrator;
ii. Powers, duties, and responsibilities of custody and
disbursement of the assets of the Fund, which shall be
delegable to the Trustee, the administrator, or an
insurance company, and
iii. Powers, duties, and responsibilities of investment
which shall be delegable to the Trustee, an investment
advisor, or an insurance company.
The Plan Administrator may appoint an administrator, an investment
advisor, or an insurance company, and review or redelegate the
exercise of these powers, duties and responsibilities at any time.
b. As provided in Section 10.03, the Plan Administrator will
prescribe a funding policy for the Plan.
11.03 General Powers and Discretion of Plan Administrator.
a. The Plan Administrator shall have all powers necessary to
administer the Plan in accordance with its terms, including the
power to construe the Plan and determine all questions that arise
under it.
b. Notwithstanding any other provision in the Plan, and to the
full extent permitted by ERISA and the Code, the Plan Administrator
shall have exclusive authority and discretion to construe any
uncertain or disputed term or provision in the Plan, including, but
not limited to, the following:
i. Determining whether any individual is eligible for any
benefits under this Plan;
ii. Determining the amount of benefits, if any, an
individual is entitled to under this Plan;
iii. Interpreting all of the provisions of this Plan; and
iv. Interpreting all of the terms used in this Plan.
c. The Plan Administrator's exercise of discretionary authority
to construe the terms of the Plan, and all its determinations and
interpretations, shall:
i. Be binding upon any individual claiming benefits under
this Plan, including, but not limited to, the
Participant, the Participant's estate, any Beneficiary
of the Participant, and any Alternate Payees;
ii. Be given deference in all courts of law, to the
greatest extent allowed by applicable law; and
iii. Not be overturned or set aside by any court of law
unless found to be arbitrary and capricious, or made in
bad faith.
d. If the discretionary authority in subsection (c) is exercised
with respect to an individual who is a member of the pension
committee, the authority shall be exercised solely and exclusively
by the other members. If the individual is the only Plan
Administrator at the time, the discretionary authority shall be
exercised by the Board of Directors, not including the affected
individual if he is also a member of the Board of Directors.
e. Any discretionary actions of the Plan Administrator
or Board of Directors shall be taken in a manner that does not
discriminate in favor of Highly Compensated Employees.
11.04 Administration of the Fund.
a. The Trustee shall be responsible for the management and
investment of the Fund in accordance with the provisions of the
Trust agreement.
b. Directives of the Plan Administrator to the Trustee shall be
delivered in writing, and properly signed.
11.05 Delegation of Powers.
a. When the Plan Administrator appoints assistants or
representatives, it may delegate to them any powers and duties, both
ministerial and discretionary, as it deems expedient or appropriate
(except as provided in Section 11.06).
b. Any appointment under this Section or Section 11.06 shall be
made pursuant to a signed, written instrument.
11.06 Appointment of Professional Assistants and Investment
Managers.
a. The Plan Administrator may engage accountants, attorneys,
physicians and such other professional personnel as it deems
necessary or advisable. The Plan Administrator may also appoint one
or more investment managers to manage all or any of the assets of
the Trust, including the power to acquire or dispose of assets.
However, the appointment of an investment manager must be approved
by the Board of Directors, and the investment manager must
acknowledge in writing that it is a fiduciary with respect to the
Plan. An investment manager can only be a party that is either (i)
registered as an investment adviser under the Investment Advisers
Act of 1940, (ii) a bank, as defined in that Act, or (iii) an
insurance company qualified to manage, acquire and dispose of Plan
assets under the laws of more than one State.
b. The functions of persons engaged under this Section shall be
limited to the specific services and duties for which they are
engaged. Such persons shall have no other duties, obligations or
responsibilities under the Plan or Trust, and shall exercise no
discretion regarding the management of the Plan. Unless engaged
specifically as an investment manager, such a person shall exercise
no authority or control respecting management or disposition of the
assets of the Trust.
c. The fees and costs of services under this Section are an
administrative expense of the Plan to be paid out of the Fund,
except to the extent paid by the Employer.
11.07 Records. All acts and determinations with respect to the
Plan shall be duly recorded. All such records and other documents
that may be necessary for the administration of the Plan shall be
preserved in the custody of the Plan
Administrator (or its appointed assistants or representatives).
11.08 Notice of Rollover Treatment. When making a qualifying
rollover distribution within the meaning of Code Section 402(a), the
Plan Administrator shall provide to the recipient a written
explanation of:
i. The circumstances under which such distribution will
not be subject to tax if transferred to an eligible
retirement plan (as defined in Code Section 402(a))
within 60 days after the date on which the recipient
receives the distribution; and
ii. If applicable, the income averaging provisions of Code
Section 402(e).
11.09 Responsibility of Fiduciaries. The Plan Administrator and
any assistant or representative, other than any Investment Manager,
shall be free from all liability for acts and conduct in the
administration of the Plan and Trust, except for acts of willful
misconduct. However, the preceding sentence shall not relieve any
fiduciary from any responsibility, obligation or duty that the
fiduciary may have pursuant to ERISA.
11.10 Indemnity by Employer. To the extent not insured against by
an applicable insurance policy, and to the extent permitted by law,
the Employer shall indemnify and hold harmless the Plan
Administrator and its assistants and representatives from any and
all claims, demands, suits or proceedings in connection with the
Plan or Trust that may be brought against them, provided the
individual or entity being indemnified is/was an employee, or
committee of employees, of the Employer.
11.11 Payment of Fees and Expenses. To the extent consistent with
ERISA, the Plan Administrator and assistants and representatives,
shall be entitled to payment from the Fund for all reasonable costs,
charges and expenses incurred in the administration of the Plan and
Trust. This includes, but is not limited to, reasonable fees for
accounting, legal and other services, to the extent incurred in the
performance of duties under the Plan and Trust, except to the extent
that the fees and costs are paid by the Employer. Notwithstanding
any other provision of the Plan or Trust, no person who is a
"disqualified person," within the meaning of Code Section 4975(e)(2)
and who receives full-time pay from the Employer shall receive
compensation from the Trust Fund, except for reimbursement of
expenses properly and actually incurred.
11.12 ERISA Reporting and Disclosure. The Plan Administrator
shall be responsible for the performance of all reporting and
disclosure obligations under ERISA.
11.13 Service of Legal Process. The Plan Administrator shall be
the designated agent of the Plan for service of legal process.
11.14 Claim for Benefits. Any claim for benefits by a Participant
or Beneficiary shall be made in writing to the Plan Administrator.
11.15 Denial of Claim.
a. If the Plan Administrator denies a claim in whole or in part,
it shall send the Participant or Beneficiary ("claimant") a written
notice of the denial.
b. The Plan Administrator shall send the denial notice within 90
days after the date it receives a claim, unless it needs additional
time to make its decision. In that case, the Plan Administrator may
authorize an extension of up to an additional 90 days, if it
notifies the claimant of the extension within the initial 90-day
period. The extension notice shall state the reasons for the
extension and the expected decision date.
c. The denial notice shall be written in a manner calculated to
be understood by the claimant and shall contain:
i. The specific reason or reasons for the denial of the
claim;
ii. Specific reference to pertinent Plan provisions on
which the denial is based;
iii. A description of any additional material or information
necessary to perfect the claim, with an explanation of
why the material or information is necessary; and
iv. An explanation of the review procedures provided by
sections 11.16 and 11.17.
11.16 Request for Review of Denial.
a. Within 60 days after the claimant receives a denial notice,
he may file a request for review with the Plan Administrator. Any
such request must be made in writing.
b. A claimant who timely requests review shall have the right to
review pertinent documents, to submit additional information and
written comments, and to be represented.
11.17 Review Decision.
a. The Plan Administrator shall send the claimant a written
decision on any request for review that it receives.
b. The Plan Administrator shall send the review decision within
60 days after the date it receives a request for review, unless an
extension of time is needed, due to special circumstances. In that
case, the Plan Administrator may authorize an extension of up to an
additional 60 days, provided it notifies the claimant of the
extension within the initial 60-day period.
c. The review decision shall be written in a manner calculated
to be understood by the claimant and shall contain:
i. The specific reason or reasons for the decision; and
ii. Specific reference to the pertinent Plan provisions on
which the decision is based.
d. If the Plan Administrator does not send the claimant a review
decision within the applicable time period, the claim shall be
deemed denied on review.
e. The review decision (including a deemed decision) shall be
the final decision of the Plan.
<PAGE>
ARTICLE XII
LIMITATIONS ON BENEFITS
12.01 General Rules.
a. Incorporation of Code Section 415: In addition to the
specific provisions of this Article, the terms of Code Section 415
and implementing Regulations are hereby incorporated by reference
and shall govern the determination of the Maximum Retirement
Benefits of all Participants.
b. Aggregation of Employers and Plans: As further set forth in
this Article and Code Section 415, the Maximum Retirement Benefit is
an aggregate limitation that applies to this Plan and any other
plans, described below, that are maintained by the Employer or an
Affiliated Employer. Therefore, for purposes of this Article, all
qualified defined benefit plans, whether terminated or not, ever
maintained by the Employer shall be treated as one defined benefit
plan, and all qualified defined contribution plans, whether
terminated or not, ever maintained by the Employer shall be treated
as one defined contribution plan. Any required employee contribu-
tions to a defined benefit plan shall be treated as annual additions
to a defined contribution plan. However, the annual additions for
Limitation Years beginning before January 1, 1987 shall not be
recomputed to treat all employee contributions as annual additions.
12.02 Code Section 415 Limitations. For Limitation Years
beginning after December 31, 1986, the Annual Benefit payable to a
Participant shall not exceed the Maximum Retirement Benefit for any
Limitation Year. If the benefit a Participant would otherwise
accrue would produce an Annual Benefit in excess of the Maximum
Retirement Benefit, the rate of accrual will be reduced so that the
Annual Benefit will equal the Maximum Retirement Benefit.
a. Annual Benefit means a retirement benefit under the Plan that
is payable annually in the form of a straight life annuity.
i. The Annual Benefit does not include any benefits
attributable to employee contributions.
ii. A benefit payable in a form other than a straight life
annuity must be adjusted to an Actuarially Equivalent
straight life annuity before applying the limitations
of this Article. The interest rate assumption used to
determine Actuarial Equivalence shall be the greater of
five percent or the interest rate specified in Section
2.04 of the Plan.
b. Maximum Retirement Benefit means the lesser of:
i. The Defined Benefit Dollar Limitation; or
ii. The Participant's highest average compensation. For
purposes of the preceding sentence, "highest average
compensation" means the average Limitation Year
Compensation for the three consecutive Limitation Years
that produces the highest average for the Participant.
The actual number of Limitation Years shall be used for
Participants who have been employed for less than three
consecutive Limitation Years.
c. Actuarial Increase of Defined Benefit Dollar Limitation: In
the case of a benefit that begins after the Participant attains his
Social Security Retirement Age, the Defined Benefit Dollar
Limitation, as reduced under subsection (e) if necessary, shall be
actuarially increased, using an interest rate that is the lesser of
five percent or the interest rate specified in the first paragraph
of Section 2.03.
d. Actuarial Decrease of Defined Benefit Dollar Limitation:
i. If the Annual Benefit of the Participant commences
before the Participant's Social Security Retirement
Age, but on or after age 62, the Defined Benefit Dollar
Limitation as reduced under subsection (e) if
necessary, shall be determined as follows:
A. If a Participant's Social Security Retirement Age
is 65, the dollar limitation for benefits
commencing on or after age 62 is determined by
reducing the Defined Benefit Dollar Limitation by
5/9 of one percent for each month by which
benefits commence before the month in which the
Participant attains age 65.
B. If a Participant's Social Security Retirement Age
is greater than 65, the dollar limitation for
benefits commencing on or after age 62 is
determined by reducing the Defined Benefit Dollar
Limitation by 5/9 of one percent for each of the
first 36 months and 5/12 of one percent for each
of the additional months (up to 24 months) by
which benefits commence before the month of the
Participant's Social Security Retirement Age.
ii. If the Annual Benefit of a Participant commences prior
to age 62, the Defined Benefit Dollar Limitation shall
be the actuarial equivalent of an Annual Benefit
beginning at age 62, as determined above, reduced for
each month by which benefits commence before the month
in which the Participant attains age 62. To determine
actuarial equivalence, the interest rate assumption
shall be the greater of the rate specified in the first
paragraph of Section 2.03 or five percent. Any
decrease in the Defined Benefit Dollar Limitation
determined in accordance with this subsection (ii)
shall not reflect the mortality decrement to the extent
that benefits will not be forfeited upon the death of
the Participant.
e. Reduction of Maximum Retirement Benefit:
i. If a Participant has less than ten Years of
Participation, the Defined Benefit Dollar Limitation
shall be reduced by one-tenth for each Year of
Participation less than ten, including partial years.
To the extent provided in Regulations or other guidance
issued by the Internal Revenue Service, the preceding
sentence shall be applied separately with respect to
each change in the benefit structure of the Plan.
ii. If the Participant has less than ten Years of Service,
the compensation limitation in subsection (b)(ii) shall
be reduced by one-tenth for each Year of Service (or
part thereof) less than ten.
iii. The adjustments of this subsection (e) shall be applied
in the denominator of the Defined Benefit Fraction
based upon Years of Service. Years of Service shall
include future years occurring before the Participant's
Normal Retirement Age. Such future years shall include
the year which contains the date the Participant
reaches Normal Retirement Age, only if it can
reasonably be anticipated that the Participant will
receive a Year of Service for such year.
12.03 Deemed Satisfaction of Maximum Retirement Benefit
Limitation.
i. The Maximum Retirement Benefit limitation shall be
deemed satisfied if the aggregate Annual Benefits
payable to a Participant under this Plan and all other
defined Benefit plans of the Employer do not exceed
$10,000.
ii. This deeming provision shall apply to a Participant if
he has not at any time participated in a defined
contribution plan maintained by the Employer (or in a
welfare benefit plan under Code Section 419(e) or an
individual medical account under Code Sec-
tion 415(l)(2)). For purposes of this subsection, a
defined benefit plan that provides for employee contri-
butions, which are treated as annual additions, does
not constitute the maintenance of a separate defined
contribution plan maintained by the Employer.
12.04 Maximum Retirement Benefit for Multiple Plans.
a. Multiple Defined Benefit Plans: If a Participant has ever
been covered under more than one defined benefit plan maintained by
the Employer, the sum of the Participant's Annual Benefits from all
such plans shall not exceed the Maximum Retirement Benefit. The
Employer shall reduce and, if necessary, freeze the accrual of
benefits under this Plan to the extent necessary to meet this
limitation.
b. Defined Benefit Plan and Defined Contribution Plan: If a
Participant is or has been covered by a defined contribution plan
maintained by the Employer (including a welfare benefit fund, as
defined in Code Section 419(e) or an individual medical account as
defined in Code Section 415(l)(2)), the sum of the Participant's
Defined Benefit Fraction and Defined Contribution Fraction, as
defined below, shall not exceed 1.0 in any Limitation Year.
i. Defined Benefit Fraction: The numerator of the Defined
Benefit Fraction is the sum of the Participant's
"projected annual benefits" under all defined benefit
plans of the Employer (whether or not terminated). The
denominator is the lesser of 1.25 times the dollar
limitation determined for the Limitation Year under
Sections 415(b) and (d) of the Code and in accordance
with Section 12.02(e) above, or 1.4 times the Partici-
pant's "highest average compensation," including any
adjustments under Section 415(b) of the Code. In
determining the Defined Benefit Fraction:
A. "Projected annual benefit" means the annual
retirement benefit (adjusted to an actuarially
equivalent straight life annuity, if such benefit
is expressed in a form other than a straight life
annuity, or qualified joint and survivor annuity)
to which the Participant would be entitled under
the terms of the Plan, assuming that: (1) The
Participant will continue employment until Normal
Retirement Age under the Plan (or current age, if
later), and (2) The Participant's Compensation
for the current Limitation Year and all other
relevant factors used to determine benefits under
the Plan will remain constant for all future
Limitation Years.
B. "Highest average compensation" means the average
compensation for the three consecutive Years of
Service that produces the highest average.
C. Notwithstanding the preceding provisions, if a
Participant was a Participant as of the first day
of the first Limitation Year beginning after
December 31, 1986 in a defined benefit plan
maintained by the Employer which was in existence
on May 6, 1986, the denominator of the fraction
will not be less than 125 percent of the sum of
the annual benefits under such plan, which the
Participant had accrued as of the close of the
last Limitation Year beginning before January 1,
1987, disregarding any changes in the terms and
conditions of the Plan after May 5, 1986. The
preceding sentence applies only if any such
defined benefit plans, individually and in the
aggregate, satisfied the requirements of Code
Section 415 for all Limitation Years beginning
before January 1, 1987.
ii. Defined Contribution Fraction: The numerator of the
Defined Contribution Fraction is the sum of the annual
additions to the Participant's accounts under all
defined contribution plans (whether or not terminated)
maintained by the Employer for the current and all
prior Limitation Years. The denominator is the sum of
the "maximum aggregate amounts" for the current and all
prior Limitation Years of Service with the Employer
regardless of whether a defined contribution plan was
maintained by the Employer. In determining the Defined
Contribution Fraction:
A. "Maximum aggregate amount" means the lesser of
(1) 125 percent of the Defined Benefit Dollar
Limitation, determined in accordance with Code
Section 415(b) and adjusted by the Adjustment
Factor, or (2) 35 percent of the Participant's
Limitation Year Compensation for such year.
B. If the Participant was a Participant as of the
first day of the first Limitation Year beginning
after December 31, 1986, in one or more defined
contribution plans of the Employer, which were in
existence on May 6, 1986, the numerator of the
fraction will be adjusted if the sum of this
fraction and the Defined Benefit Fraction would
otherwise exceed 1.0 under the terms of this
Plan. Under the adjustment, an amount equal to
the product of (1) the excess of the sum of the
fractions over 1.0 times (2) the denominator of
this fraction will be permanently subtracted from
the numerator of the fraction. The adjustment is
calculated using the fractions as they would be
computed as of the end of the last Limitation
Year beginning before January 1, 1987, and
disregarding any changes in the terms and
conditions of the plan made after May 5, 1986,
but using the Code Section 415 limitation
applicable to the first Limitation Year beginning
on or after January 1, 1987.
iii. Adjustment: If the sum of the Defined Benefit Fraction
and the Defined Contribution Fraction exceeds 1.0 in
any Limitation Year for a Participant, the Plan
Administrator shall adjust the numerator of the Defined
Benefit Fraction, so that the sum of the fractions for
the Participant does not exceed 1.0 in any Limitation
Year.
iv. Super Top-Heavy Rules: In applying the above rules, if
the Plan is a Super Top-Heavy Plan, the denominators of
both the Defined Benefit Fraction and the Defined
Contribution Fraction shall be adjusted as provided in
Article XV.
12.05 Exceptions to the Maximum Retirement Benefit Limitation.
a. The Maximum Retirement Benefit of a Participant, who was a
Participant in one or more defined benefit plans of the Employer on
July 1, 1982, shall not be less than the Participant's Accrued
Benefit as of the end of the last Plan Year beginning prior to
January 1, 1983.
b. The Maximum Retirement Benefit for a Participant, who was a
Participant in one or more defined benefit plans of the Employer as
of the first day of the first Limitation Year beginning after
December 31, 1986, shall not be less than the Participant's "Current
Accrued Benefit," as defined in subsection (c) below. The preceding
sentence applies only if such defined benefit plans met the
requirements of Section 415 of the Code, for all Limitation Years
beginning before January 1, 1987.
c. "Current Accrued Benefit" means a Participant's Accrued
Benefit, determined as if the Participant had separated from service
as of the close of the last Limitation Year beginning before
January 1, 1987, when expressed as an Annual Benefit. In
determining the amount of a Participant's Current Accrued Benefit,
changes in the Plan and cost-of-living adjustments that occur after
May 5, 1986 shall be disregarded.
<PAGE>
ARTICLE XIII
QUALIFIED DOMESTIC RELATIONS ORDERS
13.01 General. Notwithstanding the restriction against alienation
and assignment stated in Article XVI, the Plan Administrator shall
comply with the terms of any Qualified Domestic Relations Order.
13.02 Required Provisions. A Domestic Relations Order is a
Qualified Domestic Relations Order only if it clearly specifies:
a. The name and the last known mailing address (if any) of the
Participant and the name and mailing address of each Alternate Payee
covered by the order;
b. The amount or percentage of the Participant's benefits that
the Plan shall pay to each Alternate Payee, or the manner in which
the amount or percentage is to be determined;
c. The number of payments or period to which the order applies;
and
d. Each plan to which the order applies.
Notwithstanding the preceding provisions, a Domestic Relations Order
that does not provide the specified address information can be a
Qualified Domestic Relations Order, if the Plan Administrator has
the necessary information from other sources.
13.03 Prohibited Provisions. A Domestic Relations Order is a
Qualified Domestic Relations Order only if it:
a. Does not require the Plan to provide any type or form of
benefit, or any option, not otherwise provided under the Plan,
except as stated in Section 13.04 below;
b. Does not require the Plan to provide increased benefits
determined on the basis of actuarial value; and
c. Does not require the payment of benefits to an Alternate
Payee that are required to be paid to another Alternate Payee under
an order previously determined to be a Qualified Domestic Relations
Order.
13.04 Exception for Certain Payments Made after Earliest
Retirement Age.
a. A Domestic Relations Order shall not be treated as failing to
meet the requirements of Section 13.03(a), solely because the order
requires payment to an Alternate Payee:
i. In the case of any payment before a Participant has
separated from service, on or after the date on which
the Participant attains (or would have attained) the
"earliest retirement age" as defined in subsection (b)
below;
ii. As if the Participant had retired on the date on which
payment is to begin under the order; and
iii. In any form in which benefits may be paid under the
Plan to the Participant.
b. For purposes of this Section, the term "earliest retirement
age" means the earlier of:
i. The date on which the Participant is entitled to a
distribution under the Plan; or
ii. The later of:
A. The date the Participant attains age 50; or
B. The earliest date on which the Participant could
receive Plan benefits if he had separated from
service with the Employer.
13.05 Plan Procedures with Respect to Domestic Relations Orders.
a. The Plan Administrator shall apply the procedures in this
Article, and may adopt additional appropriate procedures, to
determine the qualified status of Domestic Relations Orders it
receives and to administer distributions under Qualified Domestic
Relations Orders.
b. The Plan Administrator shall promptly notify the Participant
and each Alternate Payee of the receipt of the Domestic Relations
Order, and provide them with copies of the procedures the Plan will
use in determining the qualified status of the order. If addresses
are not specified in the order, the Plan Administrator shall send
notices to the last known addresses of these parties. The
Participant and any Alternate Payee may designate a representative
to receive copies of future communications from the Plan
Administrator regarding the order, by submitting a written request
to the Plan Administrator.
c. Within a reasonable period after receiving a Domestic
Relations Order, the Plan Administrator shall determine whether it
is a Qualified Domestic Relations Order and shall notify the
Participant, each Alternate Payee and any designated representatives
of the determination.
d. During the period in which the issue of qualified status is
being determined by the Plan Administrator, by a court of competent
jurisdiction, or otherwise, the Plan Administrator shall separately
account for the amounts which would have been payable to the
Alternate Payee during the period if the order had been determined
to be a Qualified Domestic Relations Order. The separate accounting
is for recordkeeping and a segregation of Fund assets is not requir-
ed. The separately accounted amounts shall be treated in the
following manner:
i. If the Domestic Relations Order (or a modification of
it) is determined to be a Qualified Domestic Relations
Order within 18 months of the date on which the first
payment would be required to be made under the order,
the Plan Administrator shall pay the amounts (including
any interest) to the person or persons entitled to the
payment.
ii. If the Domestic Relations Order is determined not to be
a Qualified Domestic Relations Order or the issue is
not resolved, within the 18-month period specified
above, the Plan Administrator shall pay the amounts
(including any interest) to the person or persons who
would have been entitled to the amounts if there had
been no order. In applying this provision, the Plan
Administrator may delay payments for the full 18-month
period, even if an earlier determination of non-
qualified status is made, if the Plan Administrator has
notice that the parties are attempting to remedy the
order's deficiencies.
iii. Any determination of qualified status that is made
after the close of the 18-month period shall be applied
prospectively only.
<PAGE>
ARTICLE XIV
AMENDMENT, MERGER AND TERMINATION
14.01 Amendment.
a. The Board of Directors of NBT Bancorp, Inc. may amend the
Plan at any time, and from time to time, pursuant to written resolu-
tions and written amendments. However, no amendment shall have the
effect of reducing the Accrued Benefit of any Participant, except to
the extent permitted under Section 412(c)(8) of the Code.
b. For purposes of this Section, a Plan amendment that has the
effect of (i) eliminating or reducing an early retirement benefit or
a retirement-type subsidy, or (ii) eliminating an optional form of
benefit, with respect to benefits attributable to service before the
amendment, shall be treated as reducing Accrued Benefits.
c. In the case of a retirement-type subsidy, subsection (b)
shall apply only with respect to a Participant who satisfies (either
before or after the amendment) the preamendment conditions for the
subsidy. In general, a retirement-type subsidy is a subsidy that
continues after retirement, but does not include qualified
disability benefits, a medical benefit, a Social Security
supplement, or a death benefit (including life insurance).
d. No amendment to the Plan shall have the effect of decreasing
a Participant's vested interest determined without regard to such
amendment as of the later of the date such amendment is adopted, or
becomes effective.
14.02 Termination of Plan and Trust.
a. The Employer contemplates that the Plan shall be permanent
and that the Employer shall be able to make contributions to the
Plan. Nevertheless, in recognition of the fact that future
conditions and circumstances cannot now be entirely foreseen, the
Board of Directors of NBT Bancorp, Inc. reserves the right to
terminate either the Plan, or both the Plan and the Trust, at any
time, pursuant to written resolutions and written amendments.
b. If the Board of Directors of NBT Bancorp, Inc. makes a
determination to terminate the Plan and Trust, they shall be
terminated as of the date specified in certified copies of
resolutions delivered to the Plan Administrator and the Trustee.
14.03 Benefits upon Termination and Partial Termination. In the
event of a termination or partial termination of the Plan, any
affected Participant's Accrued Benefit shall be nonforfeitable as of
the date of such event to the extent funded. On termination of the
Plan, the Trustee will liquidate the assets held in the Fund. After
payment of all expenses of liquidation, the Plan Administrator shall
allocate the remainder of the Fund assets among Participants and
Beneficiaries entitled to benefits, and cause them to be distributed
by the Trustee, in accordance with Section 4044 and other applicable
provisions of ERISA. Any residual assets of the Plan remaining
after the above allocation and distribution shall revert to the
Employer, provided that all liabilities of the Plan have been
satisfied.
14.04 Restriction of Benefits to Certain Highly Compensated
Employees.
a. In General: In the event of Plan termination, the benefit of
any Highly Compensated Employee shall be limited to a benefit that
is nondiscriminatory under Code Section 401(a)(4).
b. Before January 1, 1992: For Plan Years beginning before
January 1, 1992, Employer contributions to the Plan shall be
restricted, pursuant to subsection (c) below, if:
(i) The contributions may be used to benefit any of the 25
Highly Compensated Employees with the greatest
Limitation Year Compensation, whose anticipated Annual
Benefit exceeds $1,500, and
(ii) Within 10 years of its establishment, (A) the Plan is
terminated or (B) the benefits of any Highly
Compensated Employee, described in (i) above, become
payable.
c. Restriction: As required by subsection (b) above, Employer
contributions shall not exceed the greater of (i) $20,000 or (ii) 20
percent of the first $50,000 of the Highly Compensated Employee's
Compensation times (A) the number of years from the date the Plan
was established until, (B) the date the Plan is terminated or the
date the benefits become payable under subsection (b)(ii)(B) above,
whichever is applicable.
d. After December 31, 1991: Except as provided in (i) and (ii)
below, for Plan Years beginning on or after January 1, 1992, the
annual payments to a Participant who is one of the 25 Highly
Compensated Employees with the greatest Limitation Year Compensation
are restricted to an amount equal to the payments that would be made
on behalf of the Participant under a single life annuity that is the
Actuarial Equivalent of the sum of the Participant's Accrued Benefit
and other Plan benefits, within the meaning of Regulation
1.401(a)(4)-5(b)(3). However, benefits need not be restricted if:
(i) After payment of all benefits to the group of Highly
Compensated Employees described in subsection (b)
above, the value of the Plan assets equals or exceeds
110 percent of the value of current liabilities, as
defined in Code Section 412(l)(7); or
(ii) The value of the benefits for said group of Highly
Compensated Employees is less than one percent of the
value of current liabilities.
For purposes of this Section, "benefit" includes loans in excess of
the amount set forth in Code Section 72(p)(2)(A), any periodic
income, any withdrawal values payable to a living Employee, and any
death benefits not provided for by insurance on the Employee's life.
e. Notwithstanding the restrictions in subsection (b), an
Employee's benefit may be distributed in full upon his depositing
with an acceptable depository, property having a fair market value
equal to 125 percent of the amount which would be repayable had the
Plan terminated on the date of the distribution. If the fair market
value of the property held by the depository falls below 110 percent
of the amount which would be repayable if the Plan were then to
terminate, additional property necessary to bring the value of the
property held by the depository up to 125 percent of such amount
shall be deposited.
14.05 Merger, Consolidation or Transfer of Assets. Neither the
Plan nor the Trust may be merged with any other plan or trust unless
each Participant would receive a benefit immediately after the
merger that is equal to or greater than the benefit he would have
been entitled to receive immediately before the merger, if the Plan
had then terminated. The preceding sentence shall also apply to a
consolidation or transfer of assets.
<PAGE>
ARTICLE XV
TOP-HEAVY REQUIREMENTS
15.01 General Rules.
a. Notwithstanding any other Plan provisions to the contrary,
the Top-Heavy Rules of this Article shall become effective for any
Plan Year beginning after December 31, 1983 in which the Plan is a
Top-Heavy Plan. The provisions of Section 416 of the Code and
implementing Regulations are hereby incorporated by reference and
control the application of this Article.
b. As stated in Article II in defining "Compensation," not more
than $200,000 of Compensation (adjusted by the Adjustment Factor) is
taken into account under the Plan for a Participant, for any Plan
Year beginning after December 31, 1988. This $200,000 limitation,
without any adjustment, shall also apply for any earlier Plan Year
in which the Plan is Top-Heavy.
c. As further set forth in this Article (and the Code and
Regulations), the Top-Heavy Rules mean that:
i. Whether the Plan is Top-Heavy, or Super Top-Heavy shall
be determined by finding the Top-Heavy Ratio in accor-
dance with Section 15.02.
ii. If the Plan is Top-Heavy or Super Top-Heavy for a Plan
Year, the Minimum Vesting Schedule in Section 15.03
shall become applicable and Non-Key Employees must
accrue a Minimum Required Benefit as provided in
Section 15.04.
iii. If the Plan is Super Top-Heavy for a Plan Year, the
provisions of Section 15.05 shall apply in determining
the Maximum Retirement Benefit under Article XII if the
Employer also maintains a defined contribution plan.
d. Notwithstanding the preceding provisions or any other
provisions of the Plan, the requirements in Sections 15.03 and 15.04
shall not apply to Employees covered by a collective bargaining
agreement.
15.02 Determination of Top-Heaviness.
a. Top-Heavy Plan: The Plan shall be considered a Top-Heavy
Plan for a Plan Year if the Top-Heavy Ratio exceeds 60 percent,
applying the principles in subsection (c).
b. Super Top-Heavy Plan: The Plan shall be considered a Super
Top-Heavy Plan for a Plan Year if the Top-Heavy Ratio exceeds 90
percent, applying the principles in subsection (c).
c. Top-Heavy Ratio: The Top-Heavy Ratio shall be determined in
accordance with the following principles.
i. Determination Date: The Top-Heavy Ratio is determined
as of the Determination Date, which is the last day of
the preceding Plan Year (except for the first Plan
Year). For example, if the Top-Heavy Ratio exceeds 60
percent on the last day of the 1989 Plan Year, the Plan
is Top-Heavy for the 1990 Plan Year.
ii. Valuation Date: Benefits shall be valued as of the
most recent valuation date during the twelve-month per-
iod ending on the Determination Date.
iii. Prior Distributions: The present value of an Accrued
Benefit includes any distribution with respect to the
Participant during the five-year period ending on the
Determination Date. This includes distributions to
Beneficiaries and distributions before the 1984 Plan
Year when the Top-Heavy Rules became effective.
iv. Key Employee Status: As defined in Article II, an
Employee is considered a Key Employee if he is a Key
Employee at any time during the Plan Year containing
the Determination Date or the four preceding Plan
Years. If a Key Employee ceases to be a Key Employee
but continues to be employed, he will be treated as a
Non-Key Employee after the last year in which he must
be considered a Key Employee under the preceding
sentence. As of that date, his Accrued Benefits will
be disregarded in computing the numerator and
denominator of the Top-Heavy Ratio.
v. Required Aggregation of Plans: If the Plan is part of
a Required Aggregation Group, the Top-Heavy Ratio must
be determined by considering all plans in the group. A
Required Aggregation Group consists of all qualified
plans of the Employer and any Affiliated Employer in
which at least one Key Employee participates or
participated at anytime during the determination period
(regardless of whether the plan has terminated), and
any other plans that enable a plan with a Key Employee
to satisfy the nondiscrimination rules of Section
401(a)(4) or Section 410 of the Code.
A. Except as may otherwise be allowed under the
permissive aggregation rule of subsection (vi)
below, each plan in the group shall be considered
Top-Heavy if the Top-Heavy Ratio for the group
exceeds 60 percent. Conversely, if the Top-Heavy
Ratio is 60 percent or less, no plan in the
Required Aggregation Group shall be considered
Top-Heavy.
B. If the Employer (or an Affiliated Employer)
maintains one or more defined benefit plans and
the Employer (or an Affiliated Employer)
maintains or has maintained one or more defined
contribution plans (including any simplified
employee pension plan) which during the five-year
period ending on the Determination Date(s) has or
has had any account balances, the Top-Heavy Ratio
for any Required or Permissive Aggregation Group
as appropriate is a fraction, the numerator of
which is the sum of the present value of accrued
benefits under the aggregated defined benefit
plan or plans for all Key Employees, determined
as above, and the sum of account balances under
the aggregated defined contribution plan or plans
for all Key Employees as of the Determination
Date(s), and the denominator of which is the sum
of the present value of accrued benefits under
the defined benefit plan or plans for all
Participants, determined as above, and the
account balances under the aggregated defined
contribution plan or plans for all Participants
as of the Determination Date(s), all determined
in accordance with Code Section 416 and the
Regulations thereunder. The account balances
under a defined contribution plan in both the
numerator and denominator of the Top-Heavy Ratio
are increased for any distribution of an account
balance made in the five-year period ending on
the Determination Date. Actuarial assumptions
must be identical for all defined benefit plans
tested for Top-Heavy purposes.
C. For Top-Heavy purposes, the accrued benefit of a
Participant other than a Key Employee shall be
determined under (I) the method, if any, that
uniformly applies for accrual purposes under all
defined benefit plans maintained by the Employer
(or an Affiliated Employer), or (II) if there is
no such method, as if such benefit accrued not
more rapidly than the slowest accrual rate
permitted under the fractional rule of Code
Section 411(b)(1)(C).
vi. Permissive Aggregation Group: The Employer may, but is
not required to, determine the Top-Heavy Ratio on the
basis of a Permissive Aggregation Group.
A. A Permissive Aggregation Group consists of all
plans in a Required Aggregation Group, plus other
plans that satisfy the nondiscrimination
requirements of Code Sections 401(a)(4) and 410,
when considered with the Required Aggregation
Group.
B. If the Top-Heavy Ratio for the Permissive
Aggregation Group is 60 percent or less, no plan
in the group is Top-Heavy. If the Top-Heavy
Ratio is greater than 60 percent, the Top-Heavy
Rules apply to those plans that are part of the
Required Aggregation Group, but not to the other
plans which were permissively aggregated.
vii. Transfer Amounts: Rollover amounts and any plan-to-
plan transfer amounts held under any other plan, shall
be taken into account in determining the Top-Heavy
Ratio only if required by the following rules:
A. If a transfer is initiated by the Employee and
made between plans maintained by different
employers, the transferring plan continues to
count the transferred amount under the rules for
counting distributions. The receiving plan does
not count the amount if accepted after December
31, 1983, but does count the amount if accepted
prior to January 1, 1984.
B. If the transfer is not initiated by the Employee
or if it is made to a plan maintained by the same
employer, the transferring plan shall no longer
count the amount transferred and the receiving
plan shall count the amount transferred.
C. For purposes of this subsection, Affiliated
Employers shall be treated as the same employer.
15.03 Vesting in Employer Contributions under a Top-Heavy Plan.
a. Except as provided in Section 15.01(d), for any Plan Year
that the Plan must be considered Top-Heavy, a Participant's vested
interest in his Accrued Benefit derived from Employer contributions
shall be determined in accordance with the following Minimum Vesting
Schedule rather than the vesting schedule in Article V. As an
exception, the Participant shall remain under his previous vesting
schedule to the extent provided in Article V.
b. The Minimum Vesting Schedule is:
Years of Service Vested Percentage
Less than 3 years 0%
3 years or more 100%
c. Once applicable for a Plan Year, the Minimum Vesting Schedule
applies to benefits accrued before and after the Plan became Top-
Heavy (including benefits that accrued before the 1984 Plan Year
when the Top-Heavy Rules became effective). Notwithstanding the
preceding sentence:
i. Accrued Benefits of a Participant who does not have an
Hour of Service after the Plan becomes Top-Heavy shall
not be subject to the Minimum Vesting Schedule; and
ii. Accrued Benefits which were forfeited before the Plan
became Top-Heavy do not vest.
d. The vesting schedule in Article V shall again become
applicable for benefits that accrue during Plan Years after the Plan
ceases to be Top-Heavy. However, if this change in vesting schedule
occurs:
i. The vested percentage of a Participant in benefits that
accrued before the Plan ceased to be Top-Heavy shall
not be reduced; and
ii. Participants described in Section 5.04 shall be given
the option to remain under the Minimum Vesting
Schedule, even for Plan Years after the Plan is no
longer Top-Heavy, in accordance with the procedures
described in that Article.
15.04 Minimum Required Benefit.
a. In General: Except as provided in Section 15.01(d),
if the Plan becomes Top-Heavy, the Accrued Benefit derived from
Employer contributions of a Non-Key Employee must at least equal the
Minimum Required Benefit described in this Section.
For a Top-Heavy Plan Year, the requirement applies to each Non-Key
Employee with 1000 or more Hours of Service in the Accrual
Computation Period, even though the Non-Key Employee would not
otherwise have received an accrual, or would have received a lesser
accrual because (i) his Compensation is less than a specified level,
or (ii) he is not employed on the last day of the Plan Year.
b. Minimum Required Benefit Formula: The Minimum Required
Benefit is a benefit, provided solely by Employer contributions (and
not integrated with Social Security benefits) which, when expressed
as a life annuity commencing at Normal Retirement Age, equals the
lesser of:
i. Two percent of the Participant's Top-Heavy Average
Compensation multiplied by the Participant's Top-Heavy
Years of Service; or
ii. 20 percent of the Participant's Top-Heavy Average
Compensation.
c. Definitions: In applying the formula in subsection (b):
i. Top-Heavy Years of Service means Years of Service, but
disregarding any Vesting Year of Service completed in a
Plan Year beginning before 1984, or any Vesting Year of
Service if the Plan was not Top-Heavy for any Plan Year
ending during that Vesting Year of Service.
ii. Top-Heavy Average Compensation means Limitation Year
Compensation, averaged over the period of five consecu-
tive calendar years (or fewer if the total years which
can be considered under this subsection is less than
five) which produces the highest average. To determine
this period, the following are excluded:
A. Years for which the Non-Key Employee did not earn
a Vesting Year of Service;
B. Years ending within a Plan Year beginning before
January 1, 1984;
C. Years excluded from Top-Heavy Years of Service;
and
D. Years beginning after the close of the last Plan
Year in which the Plan was Top-Heavy.
d. Employer-Derived Benefits: All accruals of benefits derived
from Employer contributions, whether or not attributable to Plan
Years for which the Plan is Top-Heavy shall be considered in
determining whether a Non-Key Employee has an Accrued Benefit which
equals the Minimum Required Benefit.
e. Non-Key Employee in Defined Contribution Plan: If a Non-Key
Employee participates in this Plan and a defined contribution plan
included in a Required Aggregation Group that is Top-Heavy, the
Minimum Required Benefit shall be provide under this Plan. For any
Plan Year when the Plan is Top-Heavy, but not Super Top-Heavy, the
Minimum Required Benefit for such Non-Key Employee shall be
determined by substituting three percent for two percent, and 30
percent for 20 percent, in the formula in subsection (b) above.
15.05 Maximum Annual Benefit under a Super Top-Heavy Plan.
a. If the Plan is Super Top-Heavy for any Plan Year, then for
purposes of the Code Section 415 limitation, described in
Article XII, the dollar limitations in the denominators of the
Defined Benefit Plan Fraction and the Defined Contribution Fraction
shall each be multiplied by 1.0, not 1.25.
b. If the reduction to 1.0 under subsection (a) would cause a
Participant to exceed the combined limit on contributions and
benefits under Code Section 415, the application of subsection (a)
shall be suspended as to such Participant until such time as he no
longer exceeds the combined limitation, as modified by
subsection (a). During such a suspension period, the Participant
will not accrue any benefits under this or any other defined benefit
plan of the Employer and or receive contributions (or forfeitures)
under any defined contribution plan of the Employer or an Affiliated
Employer.
<PAGE>
ARTICLE XVI
MISCELLANEOUS PROVISIONS
16.01 No Alienation or Assignment. The right of any Participant
or Beneficiary to any benefit or payment under the Plan or Trust
shall not be subject to voluntary or involuntary transfer,
alienation or assignment. Further, to the fullest extent permitted
by law, the right shall not be subject to attachment, execution,
garnishment, sequestration or other legal or equitable process. In
the event a Participant or Beneficiary attempts to assign, transfer
or dispose of a right under the Plan, or if any attempt is made to
subject the right to such process, the assignment, transfer or
disposition shall be null and void.
16.02 Adoption of Plan by Another Employer. Any other employer,
whether an Affiliated Employer or not, may, with the approval of the
Board of Directors of NBT Bancorp, Inc., adopt this Plan pursuant to
appropriate written resolutions of its board of directors. The
adopting employer shall also execute such documents with the Trustee
as may be necessary to make the other employer a party to the Trust.
As part of its adopting resolutions, the other employer shall
delegate authority to amend and terminate the Plan to the Board of
Directors of NBT Bancorp, Inc. The National Bank and Trust Company,
by its adoption and execution of this document, is deemed to have
made the foregoing delegation.
16.03 Status of Employment Relations. The adoption and
maintenance of the Plan and Trust shall not be deemed to constitute
a contract between the Employer and its Employees or to be
consideration for, or an inducement or condition of, the employment
of any person. Nothing contained in the Plan shall be deemed (a) to
give to any Employee the right to be retained in the employ of the
Employer, (b) to affect the right of the Employer to discipline or
discharge any Employee at any time, (c) to give the Employer the
right to require any Employee to remain in its employ, or (d) to
affect any Employee's right to terminate his employment at any time.
16.04 Benefits Payable by Trust. All Benefits payable under the
Plan shall be paid or provided for solely from the Trust. The
Employer assumes no liability or responsibility for the payments.
16.05 Failure of Qualification.
a. The establishment of the Plan and Trust by the Employer is
contingent upon obtaining the initial approval of the Internal
Revenue Service. Notwithstanding any other provision of the Plan,
in the event that the Internal Revenue Service fails to approve the
Plan, the Trustee shall liquidate the Trust by paying all expenses
and returning all remaining assets to the Employer as soon as
administratively feasible. In no event shall this process be
completed later than one year after the date of the final denial of
qualification of the Plan, including the final resolution of any
appeals before the Internal Revenue Service or the courts. The
Trust shall terminate upon completion of these "wind up" procedures.
b. Contributions shall be returned to the Employer pursuant to
Section 10.04(b).
16.06 Increases in Social Security Benefits. Increases in Social
Security benefits or the taxable wage base subsequent to a
Participant's termination of employment or Retirement shall not
cause a reduction in benefits under the Plan.
16.07 Headings Not Part of This Plan. Headings of Articles and
Sections are inserted only for convenience of reference, and shall
not be considered in construing the Plan.
16.08 Gender and Number. Unless the context clearly requires a
different meaning, the use of the masculine pronoun includes the
feminine gender, and the singular number includes the plural (and
vice versa).
16.09 Applicable Law. The Plan and Trust shall be construed,
regulated, interpreted and administered under and in accordance with
the laws of the State of New York, unless preempted by federal law.
<PAGE>
NBT Bancorp, Inc. and The National Bank and Trust Company
have caused this Plan to be signed by duly authorized officers on
this day of December 1994.
NBT BANCORP, INC.
By: /s/ Richard I. Linhart
Title: Vice President, Chief Financial
Officer and Treasurer
THE NATIONAL BANK AND
TRUST COMPANY
By: /s/ Richard I. Linhart
Title: Executive Vice President,
Chief Administravive and
Financial Officer
30569
<PAGE>
EXHIBIT 10.21
Change in Control Agreement for Daryl R. Forsythe
<PAGE>
NBT BANCORP INC.
Norwich, New York 13815
607/337-6000
------------------------
February 21, 1995
Mr. Daryl R. Forsythe
13 Concord Street
Sidney, New York 13838
Dear Mr. Forsythe:
NBT Bancorp Inc. (which, together with its wholly-owned
subsidiary, The National Bank and Trust Company, is referred to
as the "Company") considers the stability of its key management
group to be essential to the best interests of the Company and
its shareholders. The Company recognizes that, as is the case
with many publicly-held corporations, the possibility of a change
in control may arise and that the attendant uncertainty may
result in the departure or distraction of key management
personnel to the detriment of the Company and its shareholders.
Accordingly, the Board of Directors of the Company (the
"Board") has determined that appropriate steps should be taken to
encourage members of the Company's key management group to
continue as employees notwithstanding the possibility of a change
in control of the Company.
The Board also believes it important that, in the event of a
proposal for transfer of control of the Company, you be able to
assess the proposal and advise the Board without being influenced
by the uncertainties of your own situation.
In order to induce you to remain in the employ of the
Company, this Agreement, which has been approved by the Board,
sets forth the severance compensation which the Company agrees
will be provided to you in the event your employment with the
Company is terminated subsequent to a "change in control" of the
Company under the circumstances described below.
1. Agreement to Provide Services; Right to Terminate.
(a) Termination Prior to Certain Offers. Except as otherwise
provided in paragraph (b) below, or in any written employment
agreement between you and the Company, the Company or you may
terminate your employment at any time. If, and only if, such
termination occurs after a change in control of the Company (as
defined in Section 6), the provisions of this Agreement regarding
the payment of severance compensation and benefits shall apply.
(b) Termination Subsequent to Certain Offers. In the event a
tender offer or exchange offer is made by a person (as defined in
Section 6) for more than 30 percent of the combined voting power
of the Company's outstanding securities ordinarily having the
right to vote at elections of directors ("Voting Securities"),
including shares of common stock, no par value, of the Company
(the "Company Shares"), you agree that you will not leave the
employ of the Company (other than as a result of Disability as
such term is defined in Section 6) and will render services to
the Company in the capacity in which you then serve until such
tender offer or exchange offer has been abandoned or terminated
or a change in control of the Company has occurred as a result of
such tender offer or exchange offer. If, during the period you
are obligated to continue in the employ of the Company pursuant
to this Section 1(b), the Company reduces your compensation, your
obligations under this Section 1(b) shall thereupon terminate.
2. Term of Agreement. This Agreement shall commence on the
date hereof and shall continue in effect until December 31, 1997;
provided, however, that commencing December 31, 1995, and each
December 31 thereafter, the remaining term of this Agreement
shall automatically be extended for one additional year (to a
total of three years) unless at least 90 days prior to such
December 31, the Company or you shall have given notice that this
Agreement shall not be extended; and provided, however, that if a
change in control of the Company shall occur while this Agreement
is in effect, this Agreement shall automatically be extended for
24 months from the date the change in control occurs. This
Agreement shall terminate if you or the Company terminates your
employment prior to a change in control of the Company but
without prejudice to any remedy the Company may have for breach
of your obligations, if any, under Section 1(b).
3. Severance Payment and Benefits If Termination Occurs
Following Change in Control for Disability, Without Cause, or
With Good Reason. If, within 24 months from the date of
occurrence of any event constituting a change in control of the
Company (it being recognized that more than one such event may
occur in which case the 24-month period shall run from the date
of occurrence of each such event), your employment with the
Company is terminated (i) by the Company for Disability, (ii) by
the Company without Cause, or (iii) by you with Good Reason (as
defined in Section 6), you shall be entitled to a severance
payment and other benefits as follows:
(a) Disability. If your employment with the Company is
terminated for Disability, your benefits shall thereafter be
determined in accordance with the Company's long-term disability
income insurance plan. If the Company's long-term disability
income insurance plan is modified or terminated following a
change in control, the Company shall substitute such a plan with
benefits applicable to you substantially similar to those
provided by such plan prior to its modification or termination.
During any period that you fail to perform your duties hereunder
as a result of incapacity due to physical or mental illness, you
shall continue to receive your full base salary at the rate then
in effect until your employment is terminated by the Company for
Disability.
(b) Termination Without Cause or With Good Reason. If your
employment with the Company is terminated without Cause by the
Company or with Good Reason by you, then the Company shall pay to
you, upon demand, the following amounts (net of applicable
payroll taxes):
(1) Your full base salary plus year-to-date accrued
vacation through the Date of Termination at the rate in effect on
the date the change in control occurs.
(ii) As severance pay, an amount equal to the product of
your "Base Amount" multiplied by the number 2.99. As used in the
previous sentence, your "Base Amount" is your average annual
compensation includible in your gross income for federal income
tax purposes for the five years immediately preceding the year in
which the change in control occurs (or, if you shall have been
employed by the Company for less than those five years, for the
number of those years during which you shall have been employed
by the Company, with any partial year annualized), including base
salary, non-deferred amounts under annual incentive, long-term
performance, and profit-sharing plans, distributions of
previously deferred amounts under such plans, and ordinary income
recognized with respect to stock options.
(c) Related Benefits. Unless you die or your employment is
terminated by the Company for Cause or Disability, or by you
other than for Good Reason, the Company shall maintain in full
force and effect, for the continued benefit of you for one year
after the Date of Termination, all noncash employee benefit
plans, programs, or arrangements (including, without limitation,
pension and retirement plans and arrangements, stock option
plans, life insurance and health and accident plans and
arrangements, medical insurance plans, disability plans, and
vacation plans) in which you were entitled to participate
immediately prior to the Date of Termination provided that your
continued participation is possible after Termination under the
general terms and provisions of such plans, programs, and
arrangements; provided, however, that if you become eligible to
participate in a benefit plan, program, or arrangement of another
employer which confers substantially similar benefits upon you,
you shall cease to receive benefits under this subsection in
respect of such plan, program, or arrangement. In the event that
your participation in any such plan, program, or arrangement is
barred, the Company shall arrange to provide you with benefits
substantially similar to those which you are entitled to receive
under such plans, programs and arrangements.
4. Payment If Termination Occurs Following Change In Control,
Because of Death, For Cause, or Without Good Reason. If your
employment shall be terminated following any event constituting a
change in control of the Company because of your death, or by the
Company for Cause, or by you other than for Good Reason, the
Company shall pay you your full base salary plus year-to-date
accrued vacation through the Date of Termination at the rate in
effect on the date of the change in control occurs. The Company
shall have no further obligations to you under this Agreement.
5. No Mitigation. You shall not be required to mitigate the
amount of any payment provided for in this Agreement by seeking
other employment or otherwise, nor, except as expressly set forth
herein, shall the amount of any payment provided for in this
Agreement be reduced by any compensation earned by you as the
result of employment by another employer after the Date of
Termination, or otherwise.
6. Definitions of Certain Terms. For the purpose of this
Agreement, the terms defined in this Section 6 shall have the
meanings assigned to them herein.
(a) Cause. Termination of your employment by the Company for
"Cause" shall mean termination because, and only because, you
committed an act of fraud, embezzlement, or theft constituting a
felony or an act intentionally against the interests of the
Company which causes the Company material injury.
Notwithstanding the foregoing, you shall not be deemed to have
been terminated for Cause unless and until there shall have been
delivered to you a copy of a resolution duly adopted by the
affirmative vote of not less than three-quarters of the entire
membership of the Board at a meeting of the Board called and held
for the purpose (after reasonable notice to you and an
opportunity for you, together with your counsel, to be heard
before the Board), finding that in the good faith opinion of the
Board you were guilty of conduct constituting Cause as defined
above and specifying the particulars thereof in detail.
(b) Change in Control. A "Change in Control" of the Company
shall mean:
(i) A change in control of a nature that would be required
to be reported in response to Item 6(e) of Schedule 14A of
Regulation 14A as in effect on the date hereof pursuant to the
Securities Exchange Act of 1934 (the "Exchange Act"); provided
that, without limitation, such a change in control shall be
deemed to have occurred at such time as any Person hereafter
becomes the "Beneficial Owner" (as defined in Rule 13d-3 under
the Exchange Act), directly or indirectly, of 30 percent or more
of the combined voting power of the Company's Voting Securities;
or
(ii) During any period of two consecutive years, individuals
who at the beginning of such period constitute the Board cease
for any reason to constitute at least a majority thereof unless
the election, or the nomination for election by the Company's
shareholders, of each new director was approved by a vote of at
least two-thirds of the directors then still in office who were
directors at the beginning of the period; or
(iii) There shall be consummated (x) any consolidation or
merger of the Company in which the Company is not the continuing
or surviving corporation or pursuant to which Voting Securities
would be converted into cash, securities, or other property,
other than a merger of the Company in which the holders of Voting
Securities immediately prior to the merger have the same
proportionate ownership of common stock of the surviving
corporation immediately after the merger, or (y) any sale, lease,
exchange, or other transfer (in one transaction or a series of
related transactions) of all, or substantially all of the assets
of the Company, provided that any such consolidation, merger,
sale, lease, exchange or other transfer consummated at the
insistence of an appropriate banking regulatory agency shall not
constitute a change in control; or
(iv) Approval by the shareholders of the Company of any plan
or proposal for the liquidation or dissolution of the Company.
(c) Date of Termination. "Date of Termination" shall mean (i)
if your employment is terminated by the Company for Disability,
30 days after Notice of Termination is given (provided that you
shall not have returned to the performance of your duties on a
full-time basis during such 30-day period), and (ii) if your
employment is terminated for any other reason, the date on which
a Notice of Termination is given; provided that if within 30 days
after any Notice of Termination is given the party receiving such
Notice of Termination notifies the other party that a dispute
exists concerning the termination, the Date of Termination shall
be the date on which the dispute is finally determined, either by
mutual written agreement of the parties or by a final judgment,
order, or decree of a court of competent jurisdiction (the time
for appeal therefrom having expired and no appeal having been
perfected). The term of this Agreement shall be extended until
the Date of Termination.
(d) Disability. Termination of your employment by the Company
for "Disability" shall mean termination because of your absence
from your duties with the Company on a full-time basis for 180
consecutive days as a result of your incapacity due to physical
or mental illness and your failure to return to the performance
of your duties on a full-time basis during the 30-day period
after Notice of Termination is given.
(e) Good Reason. Termination by you of your employment for
"Good Reason" shall mean termination based on any of the
following:
(i) A change in your status or position(s) with the
Company, which in your reasonable judgment, does not represent a
promotion from your status or position(s) as in effect
immediately prior to the change in control, or a change in your
duties or responsibilities which, in your reasonable judgment, is
inconsistent with such status or position(s), or any removal of
you from, or any failure to reappoint or reelect you to, such
position(s), except in connection with the termination of your
employment for Cause or Disability or as a result of your death
or by you other than for Good Reason.
(ii) A reduction by the Company in your base salary as in
effect immediately prior to the change in control.
(iii) The failure by the Company to continue in effect any
Plan (as hereinafter defined) in which you are participating at
the time of the change in control of the Company (or Plans
providing you with at least substantially similar benefits) other
than as a result of the normal expiration of any such Plan in
accordance with its terms as in effect at the time of the change
in control, or the taking of any action, or the failure to act,
by the Company which would adversely affect your continued
participation in any of such Plans on at least as favorable a
basis to you as is the case on the date of the change in control
or which would materially reduce your benefits in the future
under any of such Plans or deprive you of any material benefit
enjoyed by you at the time of the change in control.
(iv) The failure by the Company to provide and credit you
with the number of paid vacation days to which you are then
entitled in accordance with the Company's normal vacation policy
as in effect immediately prior to the change in control.
(v) The Company's requiring you to be based anywhere other
than where your office is located immediately prior to the change
in control except for required travel on the Company's business
to an extent substantially consistent with the business travel
obligations which you undertook on behalf of the Company prior to
the change in control.
(vi) The failure by the Company to obtain from any successor
the assent to this Agreement contemplated by Section 8 hereof.
(vii) Any purported termination by the Company of your
employment which is not effected pursuant to a Notice of
Termination satisfying the requirements of this Agreement; and
for purposes of this Agreement, no such purported termination
shall be effective.
(viii) Any refusal by the Company to continue to allow you
to attend to matters or engage in activities not directly related
to the business of the Company which, prior to the change in
control, you were permitted by the Board to attend to or engage
in.
For purposes of this subsection, "Plan" shall mean any
compensation plan such as an incentive or stock option plan or
any employee benefit plan such as a thrift, pension, profit
sharing, medical, disability, accident, life insurance plan, or a
relocation plan or policy or any other plan, program, or policy
of the Company intended to benefit employees.
(f) Notice of Termination. A "Notice of Termination" of your
employment given by the Company shall mean a written notice given
to you of the termination of your employment which shall indicate
the specific termination provision in this Agreement relied upon,
and shall set forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of your
employment under the provision so indicated.
(g) Person. The term "Person" shall mean and include any
individual, corporation, partnership, group, association, or
other "person," as such term is used in Section 14(d) of the
Exchange Act, other than the Company or any employee benefit
plan(s) sponsored by the Company.
7. Notice. For the purposes of this Agreement, notices and all
other communications provided for in the Agreement shall be in
writing and shall be deemed to have been duly given when
delivered or mailed by United States certified or registered
mail, return receipt requested, postage prepaid, addressed to the
respective addresses set forth on the first page of this
Agreement, provided that all notices to the Company shall be
directed to the attention of the Chief Executive Officer of the
Company with a copy to the Secretary of the Company, or to such
other address as either party may have furnished to the other in
writing in accordance herewith, except that notices of change of
address shall be effective only upon receipt.
8. Successors; Binding Agreement.
(a) This Agreement shall inure to the benefit of, and be
binding upon, any corporate or other successor or assignee of the
Company which shall acquire, directly or indirectly, by merger,
consolidation or purchase, or otherwise, all or substantially all
of the business or assets of the Company. The Company shall
require any such successor, by an agreement in form and substance
satisfactory to you, expressly to assume and agree to perform
this Agreement in the same manner and to the same extent as the
Company would be required to perform if no such succession had
taken place.
(b) This Agreement shall inure to the benefit of and be
enforceable by your personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and
legatees. If you should die while any amount would still be
payable to you hereunder if you had continued to live, all such
amounts, unless otherwise provided herein, shall be paid in
accordance with the terms of this Agreement to your devisee,
legatee, or other designee or, if there is no such designee, to
your estate.
9. Increased Severance Payments Upon Application of Excise Tax.
(a) Adjustment of Payment. In the event any payments or
benefits you become entitled to pursuant to the Agreement or any
other payments or benefits received or to be received by you in
connection with a change in control of the Company or your
termination of employment (whether pursuant to the terms of any
other agreement, plan, or arrangement, or otherwise, with the
Company, any person whose actions result in a change in control
or any person affiliated with the Company or such person)
(collectively the "Severance Payments") will be subject to the
tax (the "Excise Tax") imposed by Section 4999 of the Internal
Revenue Code of 1986, as amended (the "Code"), the Company shall
pay you an additional amount (the "Gross-Up Payment") so that the
net amount retained by you, after deduction of the Excise Tax
(but before deduction for any federal, state or local income tax)
on the Severance Payments and after deduction for the aggregate
of any federal, state, or local income tax and Excise Tax upon
the gross-Up Payment, shall be equal to the Severance Payments.
For purposes of determining whether any of the Severance Payments
will be subject to the Excise Tax and the amount of such Excise
Tax, (i) the entire amount of the Severance Payments shall be
treated as "parachute payments" within the meaning of Section
280G(b)(2) of the Code and as subject to the Excise Tax, unless
and to the extent, in the written opinion of outside tax counsel
selected by the Company's independent accountants and reasonably
acceptable to you, such payments (in whole or in part) are not
subject to the Excise Tax; and (ii) the value of any noncash
benefits or any deferred payment or benefit (constituting a part
of the Severance Payments) shall be determined by the Company's
independent auditors in accordance with the principles of
Sections 280G(d)(3) and (4) of the Code. For purposes of
determining the amount of the Gross-Up Payment, you shall be
deemed to pay federal income taxes at the highest marginal rate
of the federal income taxation applicable to individuals (without
taking into account surtaxes or loss or reduction of deductions)
for the calendar year in which the Gross-Up Payment is to be made
and state and local income taxes at the highest marginal rates of
taxation in the state and locality of your residence on the date
of Termination. In the event that the amount of Excise Tax you
are required to pay is subsequently determined to be less than
the amount taken into account hereunder, you shall repay to the
Company promptly after the time that the amount of such reduction
in Excise Tax is finally determined the amount of the reduction,
together with interest on the amount of such reduction at the
rate of 6 percent per annum from the date of the Gross-Up
Payment, plus, if in the written opinion of outside tax counsel
selected by the Company's independent accountants and reasonably
acceptable to you, such payment (or a portion thereof) was not
taxable income to you when reported or is deductible by you for
federal income tax purposes, the net federal income tax benefit
you actually realize as a result of making such payment pursuant
to this sentence. In the event that the amount of Excise Tax you
are required to pay is subsequently determined to exceed the
amount taken into account hereunder, the Company shall make an
additional Gross-Up Payment in the manner set forth above in
respect of such excess (plus any interest, additions to tax, or
penalties payable by you with respect to such excess) promptly
after the time that the amount can be reasonably determined.
(b) Time of Payment: Estimated Payment. The payments provided
for in subsection (a) above, shall be made not later than the
fifth business day following the Date of Termination; provided,
however, that if the amounts of such payments cannot be finally
determined on or before such day, the Company shall pay to you on
such day an estimate, as determined in good faith by the Company,
of the minimum amount of such payments, and shall pay the
remainder of such payments (together with interest at the rate of
6 percent per annum) as soon as the amount thereof can be
determined. In the event that the amount of the estimated
payments exceeds the amount subsequently determined to have been
due, such excess shall constitute a loan by the Company to you,
payable on the fifth day after demand by the Company (together
with interest at the rate of 6 percent per annum).
10. Miscellaneous. No provision of this Agreement may be
modified, waived, or discharged unless such modification, waiver,
or discharge is agreed to in a writing signed by you and the
Chief Executive Officer or President of the Company. No waiver
by either party hereto at any time of any breach by the other
party hereto of, or of compliance with, any condition or
provision of this Agreement to be performed by such other party
shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same, or at any prior or subsequent, time. No
agreements or representations, oral or otherwise, express or
implied, with respect to the subject matter hereof have been made
by either party which are not expressly set forth in this
Agreement. The validity, interpretation, construction, and
performance of this Agreement shall be governed by laws of the
State of New York without giving effect to the principles of
conflict of laws thereof.
11. Legal Fees and Expenses. The Company shall pay or reimburse
any reasonable legal fees and expenses you may incur in
connection with any legal action to enforce your rights under, or
to defend the validity of, this Agreement. The Company will pay
or reimburse such legal fees and expenses on a regular, periodic
basis upon presentation by you of a statement or statements
prepared by your counsel in accordance with its usual practices.
12. Validity. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement, which
shall remain in full force and effect.
13. Payments During Controversy. Notwithstanding the pendency
of any dispute or controversy, the Company will continue to pay
you your full compensation in effect when the notice giving rise
to the dispute was given (including, but not limited to, base
salary and installments of incentive compensation) and continue
you as a participant in all compensation, benefit, and insurance
plans in which you were participating when the notice giving rise
to the dispute was given, until the dispute is finally resolved
in accordance with Section 7(c). Amounts paid under this Section
are in addition to all other amounts due under this Agreement and
shall not be offset against or reduce any other amounts due under
this Agreement. You shall be entitled to seek specific
performance of your right to be paid until the Date of
Termination during the pendency of any dispute or controversy
arising under or in connection with this Agreement.
<PAGE>
If this letter correctly sets forth our agreement on the
subject matter hereof, kindly sign and return to the Company the
enclosed copy of this letter, which will then constitute our
agreement on this subject.
Very truly yours,
NBT BANCORP INC.
By: /s/ Paul O. Stillman
-------------------------
AGREED TO:
/s/ Daryl R. Forsythe
----------------------
<PAGE>
EXHIBIT 10.22
Change in Control Agreement for Richard I. Linhart
<PAGE>
NBT BANCORP INC.
Norwich, New York 13815
607/337-6000
------------------------
May 17, 1994
Mr. Richard I. Linhart
Chenango Lake Road
Norwich, New York 13815
Dear Mr. Linhart:
NBT Bancorp Inc. (which, together with its wholly-owned
subsidiary, The National Bank and Trust Company, is referred to
as the "Company") considers the stability of its key management
group to be essential to the best interests of the Company and
its shareholders. The Company recognizes that, as is the case
with many publicly-held corporations, the possibility of a change
in control may arise and that the attendant uncertainty may
result in the departure or distraction of key management
personnel to the detriment of the Company and its shareholders.
Accordingly, the Board of Directors of the Company (the
"Board") has determined that appropriate steps should be taken to
encourage members of the Company's key management group to
continue as employees notwithstanding the possibility of a change
in control of the Company.
The Board also believes it important that, in the event of a
proposal for transfer of control of the Company, you be able to
assess the proposal and advise the Board without being influenced
by the uncertainties of your own situation.
In order to induce you to remain in the employ of the
Company, this Agreement, which has been approved by the Board,
sets forth the severance compensation which the Company agrees
will be provided to you in the event your employment with the
Company is terminated subsequent to a "change in control" of the
Company under the circumstances described below.
1. Agreement to Provide Services; Right to Terminate.
(a) Termination Prior to Certain Offers. Except as
otherwise provided in paragraph (b) below, or in any written
employment agreement between you and the Company, the Company or
you may terminate your employment at any time. If, and only if,
such termination occurs after a change in control of the Company
(as defined in Section 6), the provisions of this Agreement
regarding the payment of severance compensation and benefits
shall apply.
(b) Termination Subsequent to Certain Offers. In the event
a tender offer or exchange offer is made by a person (as defined
in Section 6) for more than 30 percent of the combined voting
power of the Company's outstanding securities ordinarily having
the right to vote at elections of directors ("Voting
Securities"), including shares of common stock, no par value, of
the Company (the "Company Shares"), you agree that you will not
leave the employ of the Company (other than as a result of
Disability as such term is defined in Section 6) and will render
services to the Company in the capacity in which you then serve
until such tender offer or exchange offer has been abandoned or
terminated or a change in control of the Company has occurred as
a result of such tender offer or exchange offer. If, during the
period you are obligated to continue in the employ of the Company
pursuant to this Section 1(b), the Company reduces your
compensation, your obligations under this Section 1(b) shall
thereupon terminate.
2. Term of Agreement. This Agreement shall commence on the
date hereof and shall continue in effect until December 31, 1996;
provided, however, that commencing December 31, 1994, and each
December 31 thereafter, the term remaining this Agreement shall
automatically be extended for one additional year (to a total of three
years) unless at least 90 days prior to such December 31, the Company or
you shall have given notice that this Agreement shall not be extended;
and provided, however, that if a change in control of the Company
shall occur while this Agreement is in effect, this Agreement
shall automatically be extended for 24 months from the date the
change in control occurs. This Agreement shall terminate if you
or the Company terminate your employment prior to a change in
control of the Company but without prejudice to any remedy the
Company may have for breach of your obligations, if any, under
Section 1(b).
3. Severance Payment and Benefits If Termination Occurs
Following Change in Control for Disability, Without Cause, or
With Good Reason. If, within 24 months from the date of
occurrence of any event constituting a change in control of the
Company (it being recognized that more than one such event may
occur in which case the 24-month period shall run from the date
of occurrence of each such event), your employment with the
Company is terminated (i) by the Company for Disability, (ii) by
the Company without Cause, or (iii) by you with Good Reason (as
defined in Section 6), you shall be entitled to a severance
payment and other benefits as follows:
(a) Disability. If your employment with the Company is
terminated for Disability, your benefits shall thereafter be
determined in accordance with the Company's long-term disability
income insurance plan. If the Company's long-term disability
income insurance plan is modified or terminated following a
change in control, the Company shall substitute such a plan with
benefits applicable to you substantially similar to those
provided by such plan prior to its modification or termination.
During any period that you fail to perform your duties hereunder
as a result of incapacity due to physical or mental illness, you
shall continue to receive your full base salary at the rate then
in effect until your employment is terminated by the Company for
Disability.
(b) Termination Without Cause or With Good Reason. If your
employment with the Company is terminated without Cause by the
Company or with Good Reason by you, then the Company shall pay to
you, upon demand, the following amounts (net of applicable
payroll taxes):
(1) Your full base salary plus year-to-date accrued vacation
through the Date of Termination at the rate in effect on the date
the change in control occurs.
(ii) As severance pay, an amount equal to the product of your
"Base Amount" multiplied by the number 2. As used in the previous sentence,
your "Base Amount" is your average annual compensation includible in your
gross income for federal income tax purposes for the five years immediately
preceding the year in which the change in control occurs (or, if you shall
have been employed by the Company for less than those five years, for the
number of those years during which you shall have been employed by the
Company, with any partial year annualized), including base salary,
non-deferred amounts under annual incentive, long-term performance, and
profit-sharing plans, distributions of previously deferred amounts under such
plans, and ordinary income recogniqed with respect to stock options.
(c) Related Benefits. Unless you die or your employment is
terminated by the Company for Cause or Disability, or by you
other than for Good Reason, the Company shall maintain in full
force and effect, for the continued benefit of you for one year
after the Date of Termination, all noncash employee benefit
plans, programs, or arrangements (including, without limitation,
pension and retirement plans and arrangements, stock option
plans, life insurance and health and accident plans and
arrangements, medical insurance plans, disability plans, and
vacation plans) in which you were entitled to participate
immediately prior to the Date of Termination provided that your
continued participation is possible after Termination under the
general terms and provisions of such plans, programs, and
arrangements; provided, however, that if you become eligible to
participate in a benefit plan, program, or arrangement of another
employer which confers substantially similar benefits upon you,
you shall cease to receive benefits under this subsection in
respect of such plan, program, or arrangement. In the event that
your participation in any such plan, program, or arrangement is
barred, the Company shall arrange to provide you with benefits
substantially similar to those which you are entitled to receive
under such plans, programs and arrangements.
4. Payment If Termination Occurs Following Change In Control,
Because of Death, For Cause, or Without Good Reason. If your
employment shall be terminated following any event constituting a
change in control of the Company because of your death, or by the
Company for Cause, or by you other than for Good Reason, the
Company shall pay you your full base salary plus year-to-date
accrued vacation through the Date of Termination at the rate in
effect on the date of the change in control occurs. The Company
shall have no further obligations to you under this Agreement.
5. No Mitigation. You shall not be required to mitigate the
amount of any payment provided for in this Agreement by seeking
other employment or otherwise, nor, except as expressly set forth
herein, shall the amount of any payment provided for in this
Agreement be reduced by any compensation earned by you as the
result of employment by another employer after the Date of
Termination, or otherwise.
6. Definitions of Certain Terms. For the purpose of this
Agreement, the terms defined in this Section 6 shall have the
meanings assigned to them herein.
(a) Cause. Termination of your employment by the Company for
"Cause" shall mean termination because, and only because, you
committed an act of fraud, embezzlement, or theft constituting a
felony or an act intentionally against the interests of the
Company which causes the Company material injury.
Notwithstanding the foregoing, you shall not be deemed to have
been terminated for Cause unless and until there shall have been
delivered to you a copy of a resolution duly adopted by the
affirmative vote of not less than three-quarters of the entire
membership of the Board at a meeting of the Board called and held
for the purpose (after reasonable notice to you and an
opportunity for you, together with your counsel, to be heard
before the Board), finding that in the good faith opinion of the
Board you were guilty of conduct constituting Cause as defined
above and specifying the particulars thereof in detail.
(b) Change in Control. A "Change in Control" of the Company
shall mean:
(i) A change in control of a nature that would be required
to be reported in response to Item 6(e) of Schedule 14A of
Regulation 14A as in effect on the date hereof pursuant to the
Securities Exchange Act of 1934 (the "Exchange Act"); provided
that, without limitation, such a change in control shall be
deemed to have occurred at such time as any Person hereafter
becomes the "Beneficial Owner" (as defined in Rule 13d-3 under
the Exchange Act), directly or indirectly, of 30 percent or more
of the combined voting power of the Company's Voting Securities;
or
(ii) During any period of two consecutive years, individuals
who at the beginning of such period constitute the Board cease
for any reason to constitute at least a majority thereof unless
the election, or the nomination for election by the Company's
shareholders, of each new director was approved by a vote of at
least two-thirds of the directors then still in office who were
directors at the beginning of the period; or
(iii) There shall be consummated (x) any consolidation or
merger of the Company in which the Company is not the continuing
or surviving corporation or pursuant to which Voting Securities
would be converted into cash, securities, or other property,
other than a merger of the Company in which the holders of Voting
Securities immediately prior to the merger have the same
proportionate ownership of common stock of the surviving
corporation immediately after the merger, or (y) any sale, lease,
exchange, or other transfer (in one transaction or a series of
related transactions) of all, or substantially all of the assets
of the Company, provided that any such consolidation, merger,
sale, lease, exchange or other transfer consummated at the
insistence of an appropriate banking regulatory agency shall not
constitute a change in control; or
(iv) Approval by the shareholders of the Company of any plan
or proposal for the liquidation or dissolution of the Company.
(c) Date of Termination. "Date of Termination" shall mean (i)
if your employment is terminated by the Company for Disability,
30 days after Notice of Termination is given (provided that you
shall not have returned to the performance of your duties on a
full-time basis during such 30-day period), and (ii) if your
employment is terminated for any other reason, the date on which
a Notice of Termination is given; provided that if within 30 days
after any Notice of Termination is given the party receiving such
Notice of Termination notifies the other party that a dispute
exists concerning the termination, the Date of Termination shall
be the date on which the dispute is finally determined, either by
mutual written agreement of the parties or by a final judgment,
order, or decree of a court of competent jurisdiction (the time
for appeal therefrom having expired and no appeal having been
perfected). The term of this Agreement shall be extended until
the Date of Termination.
(d) Disability. Termination of your employment by the Company
for "Disability" shall mean termination because of your absence
from your duties with the Company on a full-time basis for 180
consecutive days as a result of your incapacity due to physical
or mental illness and your failure to return to the performance
of your duties on a full-time basis during the 30-day period
after Notice of Termination is given.
(e) Good Reason. Termination by you of your employment for
"Good Reason" shall mean termination based on any of the
following:
(i) A change in your status or position(s) with the
Company, which in your reasonable judgment, does not represent a
promotion from your status or position(s) as in effect
immediately prior to the change in control, or a change in your
duties or responsibilities which, in your reasonable judgment, is
inconsistent with such status or position(s), or any removal of
you from, or any failure to reappoint or reelect you to, such
position(s), except in connection with the termination of your
employment for Cause or Disability or as a result of your death
or by you other than for Good Reason.
(ii) A reduction by the Company in your base salary as in
effect immediately prior to the change in control.
(iii) The failure by the Company to continue in effect
any Plan (as hereinafter defined) in which you are participating
at the time of the change in control of the Company (or Plans
providing you with at least substantially similar benefits) other
than as a result of the normal expiration of any such Plan in
accordance with its terms as in effect at the time of the change
in control, or the taking of any action, or the failure to act,
by the Company which would adversely affect your continued
participation in any of such Plans on at least as favorable a
basis to you as is the case on the date of the change in control
or which would materially reduce your benefits in the future
under any of such Plans or deprive you of any material benefit
enjoyed by you at the time of the change in control.
(iv) The failure by the Company to provide and credit you
with the number of paid vacation days to which you are then
entitled in accordance with the Company's normal vacation policy
as in effect immediately prior to the change in control.
(v) The Company's requiring you to be based anywhere
other than where your office is located immediately prior to the
change in control except for required travel on the Company's
business to an extent substantially consistent with the business
travel obligations which you undertook on behalf of the Company
prior to the change in control.
(vi) The failure by the Company to obtain from any successor
the assent to this Agreement contemplated by Section 8 hereof.
(vii) Any purported termination by the Company of your
employment which is not effected pursuant to a Notice of
Termination satisfying the requirements of this Agreement; and
for purposes of this Agreement, no such purported termination
shall be effective.
(viii) Any refusal by the Company to continue to allow you
to attend to matters or engage in activities not directly related
to the business of the Company which, prior to the change in
control, you were permitted by the Board to attend to or engage
in.
For purposes of this subsection, "Plan" shall mean any
compensation plan such as an incentive or stock option plan or
any employee benefit plan such as a thrift, pension, profit
sharing, medical, disability, accident, life insurance plan, or a
relocation plan or policy or any other plan, program, or policy
of the Company intended to benefit employees.
(f) Notice of Termination. A "Notice of Termination" of your
employment given by the Company shall mean a written notice given
to you of the termination of your employment which shall indicate
the specific termination provision in this Agreement relied upon,
and shall set forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of your
employment under the provision so indicated.
(g) Person. The term "Person" shall mean and include any
individual, corporation, partnership, group, association, or
other "person," as such term is used in Section 14(d) of the
Exchange Act, other than the Company or any employee benefit
plan(s) sponsored by the Company.
7. Notice. For the purposes of this Agreement, notices and all
other communications provided for in the Agreement shall be in
writing and shall be deemed to have been duly given when
delivered or mailed by United States certified or registered
mail, return receipt requested, postage prepaid, addressed to the
respective addresses set forth on the first page of this
Agreement, provided that all notices to the Company shall be
directed to the attention of the Chief Executive Officer of the
Company with a copy to the Secretary of the Company, or to such
other address as either party may have furnished to the other in
writing in accordance herewith, except that notices of change of
address shall be effective only upon receipt.
8. Successors; Binding Agreement.
(a) This Agreement shall inure to the benefit of, and be binding
upon, any corporate or other successor or assignee of the Company
which shall acquire, directly or indirectly, by merger,
consolidation or purchase, or otherwise, all or substantially all
of the business or assets of the Company. The Company shall
require any such successor, by an agreement in form and substance
satisfactory to you, expressly to assume and agree to perform
this Agreement in the same manner and to the same extent as the
Company would be required to perform if no such succession had
taken place.
(b) This Agreement shall inure to the benefit of and be
enforceable by your personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and
legatees. If you should die while any amount would still be
payable to you hereunder if you had continued to live, all such
amounts, unless otherwise provided herein, shall be paid in
accordance with the terms of this Agreement to your devisee,
legatee, or other designee or, if there is no such designee, to
your estate.
9. Increased Severance Payments Upon Application of Excise Tax.
(a) Adjustment of Payment. In the event any payments or
benefits you become entitled to pursuant to the Agreement or any
other payments or benefits received or to be received by you in
connection with a change in control of the Company or your
termination of employment (whether pursuant to the terms of any
other agreement, plan, or arrangement, or otherwise, with the
Company, any person whose actions result in a change in control
or any person affiliated with the Company or such person)
(collectively the "Severance Payments") will be subject to the
tax (the "Excise Tax") imposed by Section 4999 of the Internal
Revenue Code of 1986, as amended (the "Code"), the Company shall
pay you an additional amount (the "Gross-Up Payment") so that the
net amount retained by you, after deduction of the Excise Tax
(but before deduction for any federal, state or local income tax)
on the Severance Payments and after deduction for the aggregate
of any federal, state, or local income tax and Excise Tax upon
the gross-Up Payment, shall be equal to the Severance Payments.
For purposes of determining whether any of the Severance Payments
will be subject to the Excise Tax and the amount of such Excise
Tax, (i) the entire amount of the Severance Payments shall be
treated as "parachute payments" within the meaning of Section
280G(b)(2) of the Code and as subject to the Excise Tax, unless
and to the extent, in the written opinion of outside tax counsel
selected by the Company's independent accountants and reasonably
acceptable to you, such payments (in whole or in part) are not
subject to the Excise Tax; and (ii) the value of any noncash
benefits or any deferred payment or benefit (constituting a part
of the Severance Payments) shall be determined by the Company's
independent auditors in accordance with the principles of
Sections 280G(d)(3) and (4) of the Code. For purposes of
determining the amount of the Gross-Up Payment, you shall be
deemed to pay federal income taxes at the highest marginal rate
of the federal income taxation applicable to individuals (without
taking into account surtaxes or loss or reduction of deductions)
for the calendar year in which the Gross-Up Payment is to be made
and state and local income taxes at the highest marginal rates of
taxation in the state and locality of your residence on the date
of Termination. In the event that the amount of Excise Tax you
are required to pay is subsequently determined to be less than
the amount taken into account hereunder, you shall repay to the
Company promptly after the time that the amount of such reduction
in Excise Tax is finally determined the amount of the reduction,
together with interest on the amount of such reduction at the
rate of 6 percent per annum from the date of the Gross-Up
Payment, plus, if in the written opinion of outside tax counsel
selected by the Company's independent accountants and reasonably
acceptable to you, such payment (or a portion thereof) was not
taxable income to you when reported or is deductible by you for
federal income tax purposes, the net federal income tax benefit
you actually realize as a result of making such payment pursuant
to this sentence. In the event that the amount of Excise Tax you
are required to pay is subsequently determined to exceed the
amount taken into account hereunder, the Company shall make an
additional Gross-Up Payment in the manner set forth above in
respect of such excess (plus any interest, additions to tax, or
penalties payable by you with respect to such excess) promptly
after the time that the amount can be reasonably determined.
(b) Time of Payment: Estimated Payment. The payments provided
for in subsection (a) above, shall be made not later than the
fifth business day following the Date of Termination; provided,
however, that if the amounts of such payments cannot be finally
determined on or before such day, the Company shall pay to you on
such day an estimate, as determined in good faith by the Company,
of the minimum amount of such payments, and shall pay the
remainder of such payments (together with interest at the rate of
6 percent per annum) as soon as the amount thereof can be
determined. In the event that the amount of the estimated
payments exceeds the amount subsequently determined to have been
due, such excess shall constitute a loan by the Company to you,
payable on the fifth day after demand by the Company (together
with interest at the rate of 6 percent per annum).
10. Miscellaneous. No provision of this Agreement may be
modified, waived, or discharged unless such modification, waiver,
or discharge is agreed to in a writing signed by you and the
Chief Executive Officer or President of the Company. No waiver
by either party hereto at any time of any breach by the other
party hereto of, or of compliance with, any condition or
provision of this Agreement to be performed by such other party
shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same, or at any prior or subsequent, time. No
agreements or representations, oral or otherwise, express or
implied, with respect to the subject matter hereof have been made
by either party which are not expressly set forth in this
Agreement. The validity, interpretation, construction, and
performance of this Agreement shall be governed by laws of the
State of New York without giving effect to the principles of
conflict of laws thereof.
11. Legal Fees and Expenses. The Company shall pay or reimburse
any reasonable legal fees and expenses you may incur in
connection with any legal action to enforce your rights under, or
to defend the validity of, this Agreement. The Company will pay
or reimburse such legal fees and expenses on a regular, periodic
basis upon presentation by you of a statement or statements
prepared by your counsel in accordance with its usual practices.
12. Validity. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement, which
shall remain in full force and effect.
13. Payments During Controversy. Notwithstanding the pendency
of any dispute or controversy, the Company will continue to pay
you your full compensation in effect when the notice giving rise
to the dispute was given (including, but not limited to, base
salary and installments of incentive compensation) and continue
you as a participant in all compensation, benefit, and insurance
plans in which you were participating when the notice giving rise
to the dispute was given, until the dispute is finally resolved
in accordance with Section 7(c). Amounts paid under this Section
are in addition to all other amounts due under this Agreement and
shall not be offset against or reduce any other amounts due under
this Agreement. You shall be entitled to seek specific
performance of your right to be paid until the Date of
Termination during the pendency of any dispute or controversy
arising under or in connection with this Agreement.
<PAGE>
If this letter correctly sets forth our agreement on the
subject matter hereof, kindly sign and return to the Company the
enclosed copy of this letter, which will then constitute our
agreement on this subject.
Very truly yours,
NBT BANCORP INC.
By: /s/Joseph J. Butare, Jr.
-------------------------
Joseph J. Butare, Jr.
Chairman, President &
Chief Executive Officer
By: /s/Shirley M. Walsh
--------------------------
Shirley M. Walsh
Assistant Secretary
AGREED TO:
/s/ Richard I. Linhart
----------------------
Richard I. Linhart
<PAGE>
EXHIBIT 10.23
Change in Control Agreement for Frederick H. Weismann
<PAGE>
NBT BANCORP INC.
Norwich, New York 13815
607/337-6000
------------------------
May 17, 1994
Mr. Frederick H. Weismann
P. O. Box 496
Norwich, New York 13815
Dear Mr. Weismann:
NBT Bancorp Inc. (which, together with its wholly-owned
subsidiary, The National Bank and Trust Company, is referred to
as the "Company") considers the stability of its key management
group to be essential to the best interests of the Company and
its shareholders. The Company recognizes that, as is the case
with many publicly-held corporations, the possibility of a change
in control may arise and that the attendant uncertainty may
result in the departure or distraction of key management
personnel to the detriment of the Company and its shareholders.
Accordingly, the Board of Directors of the Company (the
"Board") has determined that appropriate steps should be taken to
encourage members of the Company's key management group to
continue as employees notwithstanding the possibility of a change
in control of the Company.
The Board also believes it important that, in the event of a
proposal for transfer of control of the Company, you be able to
assess the proposal and advise the Board without being influenced
by the uncertainties of your own situation.
In order to induce you to remain in the employ of the
Company, this Agreement, which has been approved by the Board,
sets forth the severance compensation which the Company agrees
will be provided to you in the event your employment with the
Company is terminated subsequent to a "change in control" of the
Company under the circumstances described below.
1. Agreement to Provide Services; Right to Terminate.
(a) Termination Prior to Certain Offers. Except as otherwise
provided in paragraph (b) below, or in any written employment
agreement between you and the Company, the Company or you may
terminate your employment at any time. If, and only if, such
termination occurs after a change in control of the Company (as
defined in Section 6), the provisions of this Agreement regarding
the payment of severance compensation and benefits shall apply.
(b) Termination Subsequent to Certain Offers. In the event a
tender offer or exchange offer is made by a person (as defined in
Section 6) for more than 30 percent of the combined voting power
of the Company's outstanding securities ordinarily having the
right to vote at elections of directors ("Voting Securities"),
including shares of common stock, no par value, of the Company
(the "Company Shares"), you agree that you will not leave the
employ of the Company (other than as a result of Disability as
such term is defined in Section 6) and will render services to
the Company in the capacity in which you then serve until such
tender offer or exchange offer has been abandoned or terminated
or a change in control of the Company has occurred as a result of
such tender offer or exchange offer. If, during the period you
are obligated to continue in the employ of the Company pursuant
to this Section 1(b), the Company reduces your compensation, your
obligations under this Section 1(b) shall thereupon terminate.
2. Term of Agreement. This Agreement shall commence on the
date hereof and shall continue in effect until December 31, 1996;
provided, however, that commencing December 31, 1994, and each
December 31 thereafter, the remaining term of this Agreement shall
automatically be extended for one additional year (to a total of three
years) unless at least 90 days prior to such December 31, the Company or
you shall have given notice that this Agreement shall not be extended; and
provided, however, that if a change in control of the Company
shall occur while this Agreement is in effect, this Agreement
shall automatically be extended for 24 months from the date the
change in control occurs. This Agreement shall terminate if you
for the Company terminate your employment prior to a change in
control of the Company but without prejudice to any remedy the
Company may have or breach of your obligations, if any, under
Section 1(b).
3. Severance Payment and Benefits If Termination Occurs
Following Change in Control for Disability, Without Cause, or
With Good Reason. If, within 24 months from the date of
occurrence of any event constituting a change in control of the
Company (it being recognized that more than one such event may
occur in which case the 24-month period shall run from the date
of occurrence of each such event), your employment with the
Company is terminated (i) by the Company for Disability, (ii) by
the Company without Cause, or (iii) by you with Good Reason (as
defined in Section 6), you shall be entitled to a severance
payment and other benefits as follows:
(a) Disability. If your employment with the Company is
terminated for Disability, your benefits shall thereafter be
determined in accordance with the Company's long-term disability
income insurance plan. If the Company's long-term disability
income insurance plan is modified or terminated following a
change in control, the Company shall substitute such a plan with
benefits applicable to you substantially similar to those
provided by such plan prior to its modification or termination.
During any period that you fail to perform your duties hereunder
as a result of incapacity due to physical or mental illness, you
shall continue to receive your full base salary at the rate then
in effect until your employment is terminated by the Company for
Disability.
(b) Termination Without Cause or With Good Reason. If your
employment with the Company is terminated without Cause by the
Company or with Good Reason by you, then the Company shall pay to
you, upon demand, the following amounts (net of applicable
payroll taxes):
(1) Your full base salary plus year-to-date accrued
vacation through the Date of Termination at the rate in effect on
the date the change in control occurs.
(ii) As severance pay, an amount equal to the product of your
"Base Amount" multiplied by the number 2. As used in the previous sentence,
your "Base Amount" is your average annual compensation includible in your
gross income for federal income tax purposes for the five years immediately
preceding the year in which the change in control occurs (or,if you shall
have been employed by the Company for less than those five years, for the
number of those years during which you shall have been employed by the
Company, with any partial year annualized), including base salary,
non-deferred amounts under annual incentive, long-term performance, and
profit-sharing plans, distributions of previously deferred amounts under
such plans, and ordinary income recognized with respect to stock options.
(c) Related Benefits. Unless you die or your employment is
terminated by the Company for Cause or Disability, or by you
other than for Good Reason, the Company shall maintain in full
force and effect, for the continued benefit of you for one year
after the Date of Termination, all noncash employee benefit
plans, programs, or arrangements (including, without limitation,
pension and retirement plans and arrangements, stock option
plans, life insurance and health and accident plans and
arrangements, medical insurance plans, disability plans, and
vacation plans) in which you were entitled to participate
immediately prior to the Date of Termination provided that your
continued participation is possible after Termination under the
general terms and provisions of such plans, programs, and
arrangements; provided, however, that if you become eligible to
participate in a benefit plan, program, or arrangement of another
employer which confers substantially similar benefits upon you,
you shall cease to receive benefits under this subsection in
respect of such plan, program, or arrangement. In the event that
your participation in any such plan, program, or arrangement is
barred, the Company shall arrange to provide you with benefits
substantially similar to those which you are entitled to receive
under such plans, programs and arrangements.
4. Payment If Termination Occurs Following Change In Control,
Because of Death, For Cause, or Without Good Reason. If your
employment shall be terminated following any event constituting a
change in control of the Company because of your death, or by the
Company for Cause, or by you other than for Good Reason, the
Company shall pay you your full base salary plus year-to-date
accrued vacation through the Date of Termination at the rate in
effect on the date of the change in control occurs. The Company
shall have no further obligations to you under this Agreement.
5. No Mitigation. You shall not be required to mitigate the
amount of any payment provided for in this Agreement by seeking
other employment or otherwise, nor, except as expressly set forth
herein, shall the amount of any payment provided for in this
Agreement be reduced by any compensation earned by you as the
result of employment by another employer after the Date of
Termination, or otherwise.
6. Definitions of Certain Terms. For the purpose of this
Agreement, the terms defined in this Section 6 shall have the
meanings assigned to them herein.
(a) Cause. Termination of your employment by the Company for
"Cause" shall mean termination because, and only because, you
committed an act of fraud, embezzlement, or theft constituting a
felony or an act intentionally against the interests of the
Company which causes the Company material injury.
Notwithstanding the foregoing, you shall not be deemed to have
been terminated for Cause unless and until there shall have been
delivered to you a copy of a resolution duly adopted by the
affirmative vote of not less than three-quarters of the entire
membership of the Board at a meeting of the Board called and held
for the purpose (after reasonable notice to you and an
opportunity for you, together with your counsel, to be heard
before the Board), finding that in the good faith opinion of the
Board you were guilty of conduct constituting Cause as defined
above and specifying the particulars thereof in detail.
(b) Change in Control. A "Change in Control" of the Company
shall mean:
(i) A change in control of a nature that would be required
to be reported in response to Item 6(e) of Schedule 14A of
Regulation 14A as in effect on the date hereof pursuant to the
Securities Exchange Act of 1934 (the "Exchange Act"); provided
that, without limitation, such a change in control shall be
deemed to have occurred at such time as any Person hereafter
becomes the "Beneficial Owner" (as defined in Rule 13d-3 under
the Exchange Act), directly or indirectly, of 30 percent or more
of the combined voting power of the Company's Voting Securities;
or
(ii) During any period of two consecutive years, individuals
who at the beginning of such period constitute the Board cease
for any reason to constitute at least a majority thereof unless
the election, or the nomination for election by the Company's
shareholders, of each new director was approved by a vote of at
least two-thirds of the directors then still in office who were
directors at the beginning of the period; or
(iii) There shall be consummated (x) any consolidation or
merger of the Company in which the Company is not the continuing
or surviving corporation or pursuant to which Voting Securities
would be converted into cash, securities, or other property,
other than a merger of the Company in which the holders of Voting
Securities immediately prior to the merger have the same
proportionate ownership of common stock of the surviving
corporation immediately after the merger, or (y) any sale, lease,
exchange, or other transfer (in one transaction or a series of
related transactions) of all, or substantially all of the assets
of the Company, provided that any such consolidation, merger,
sale, lease, exchange or other transfer consummated at the
insistence of an appropriate banking regulatory agency shall not
constitute a change in control; or
(iv) Approval by the shareholders of the Company of any plan
or proposal for the liquidation or dissolution of the Company.
(c) Date of Termination. "Date of Termination" shall mean (i)
if your employment is terminated by the Company for Disability,
30 days after Notice of Termination is given (provided that you
shall not have returned to the performance of your duties on a
full-time basis during such 30-day period), and (ii) if your
employment is terminated for any other reason, the date on which
a Notice of Termination is given; provided that if within 30 days
after any Notice of Termination is given the party receiving such
Notice of Termination notifies the other party that a dispute
exists concerning the termination, the Date of Termination shall
be the date on which the dispute is finally determined, either by
mutual written agreement of the parties or by a final judgment,
order, or decree of a court of competent jurisdiction (the time
for appeal therefrom having expired and no appeal having been
perfected). The term of this Agreement shall be extended until
the Date of Termination.
(d) Disability. Termination of your employment by the Company
for "Disability" shall mean termination because of your absence
from your duties with the Company on a full-time basis for 180
consecutive days as a result of your incapacity due to physical
or mental illness and your failure to return to the performance
of your duties on a full-time basis during the 30-day period
after Notice of Termination is given.
(e) Good Reason. Termination by you of your employment for
"Good Reason" shall mean termination based on any of the
following:
(i) A change in your status or position(s) with the Company,
which in your reasonable judgment, does not represent a promotion
from your status or position(s) as in effect immediately prior to
the change in control, or a change in your duties or
responsibilities which, in your reasonable judgment, is
inconsistent with such status or position(s), or any removal of
you from, or any failure to reappoint or reelect you to, such
position(s), except in connection with the termination of your
employment for Cause or Disability or as a result of your death
or by you other than for Good Reason.
(ii) A reduction by the Company in your base salary as in
effect immediately prior to the change in control.
(iii) The failure by the Company to continue in effect any
Plan (as hereinafter defined) in which you are participating at
the time of the change in control of the Company (or Plans
providing you with at least substantially similar benefits) other
than as a result of the normal expiration of any such Plan in
accordance with its terms as in effect at the time of the change
in control, or the taking of any action, or the failure to act,
by the Company which would adversely affect your continued
participation in any of such Plans on at least as favorable a
basis to you as is the case on the date of the change in control
or which would materially reduce your benefits in the future
under any of such Plans or deprive you of any material benefit
enjoyed by you at the time of the change in control.
(iv) The failure by the Company to provide and credit you
with the number of paid vacation days to which you are then
entitled in accordance with the Company's normal vacation policy
as in effect immediately prior to the change in control.
(v) The Company's requiring you to be based anywhere other
than where your office is located immediately prior to the change
in control except for required travel on the Company's business
to an extent substantially consistent with the business travel
obligations which you undertook on behalf of the Company prior to
the change in control.
(vi) The failure by the Company to obtain from any successor
the assent to this Agreement contemplated by Section 8 hereof.
(vii) Any purported termination by the Company of your
employment which is not effected pursuant to a Notice of
Termination satisfying the requirements of this Agreement; and
for purposes of this Agreement, no such purported termination
shall be effective.
(viii) Any refusal by the Company to continue to allow you
to attend to matters or engage in activities not directly related
to the business of the Company which, prior to the change in
control, you were permitted by the Board to attend to or engage
in.
For purposes of this subsection, "Plan" shall mean any
compensation plan such as an incentive or stock option plan or
any employee benefit plan such as a thrift, pension, profit
sharing, medical, disability, accident, life insurance plan, or a
relocation plan or policy or any other plan, program, or policy
of the Company intended to benefit employees.
(f) Notice of Termination. A "Notice of Termination" of your
employment given by the Company shall mean a written notice given
to you of the termination of your employment which shall indicate
the specific termination provision in this Agreement relied upon,
and shall set forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of your
employment under the provision so indicated.
(g) Person. The term "Person" shall mean and include any
individual, corporation, partnership, group, association, or
other "person," as such term is used in Section 14(d) of the
Exchange Act, other than the Company or any employee benefit
plan(s) sponsored by the Company.
7. Notice. For the purposes of this Agreement, notices and all
other communications provided for in the Agreement shall be in
writing and shall be deemed to have been duly given when
delivered or mailed by United States certified or registered
mail, return receipt requested, postage prepaid, addressed to the
respective addresses set forth on the first page of this
Agreement, provided that all notices to the Company shall be
directed to the attention of the Chief Executive Officer of the
Company with a copy to the Secretary of the Company, or to such
other address as either party may have furnished to the other in
writing in accordance herewith, except that notices of change of
address shall be effective only upon receipt.
8. Successors; Binding Agreement.
(a) This Agreement shall inure to the benefit of, and be binding
upon, any corporate or other successor or assignee of the Company
which shall acquire, directly or indirectly, by merger,
consolidation or purchase, or otherwise, all or substantially all
of the business or assets of the Company. The Company shall
require any such successor, by an agreement in form and substance
satisfactory to you, expressly to assume and agree to perform
this Agreement in the same manner and to the same extent as the
Company would be required to perform if no such succession had
taken place.
(b) This Agreement shall inure to the benefit of and be
enforceable by your personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and
legatees. If you should die while any amount would still be
payable to you hereunder if you had continued to live, all such
amounts, unless otherwise provided herein, shall be paid in
accordance with the terms of this Agreement to your devisee,
legatee, or other designee or, if there is no such designee, to
your estate.
9. Increased Severance Payments Upon Application of Excise Tax.
(a) Adjustment of Payment. In the event any payments or
benefits you become entitled to pursuant to the Agreement or any
other payments or benefits received or to be received by you in
connection with a change in control of the Company or your
termination of employment (whether pursuant to the terms of any
other agreement, plan, or arrangement, or otherwise, with the
Company, any person whose actions result in a change in control
or any person affiliated with the Company or such person)
(collectively the "Severance Payments") will be subject to the
tax (the "Excise Tax") imposed by Section 4999 of the Internal
Revenue Code of 1986, as amended (the "Code"), the Company shall
pay you an additional amount (the "Gross-Up Payment") so that the
net amount retained by you, after deduction of the Excise Tax
(but before deduction for any federal, state or local income tax)
on the Severance Payments and after deduction for the aggregate
of any federal, state, or local income tax and Excise Tax upon
the gross-Up Payment, shall be equal to the Severance Payments.
For purposes of determining whether any of the Severance Payments
will be subject to the Excise Tax and the amount of such Excise
Tax, (i) the entire amount of the Severance Payments shall be
treated as "parachute payments" within the meaning of Section
280G(b)(2) of the Code and as subject to the Excise Tax, unless
and to the extent, in the written opinion of outside tax counsel
selected by the Company's independent accountants and reasonably
acceptable to you, such payments (in whole or in part) are not
subject to the Excise Tax; and (ii) the value of any noncash
benefits or any deferred payment or benefit (constituting a part
of the Severance Payments) shall be determined by the Company's
independent auditors in accordance with the principles of
Sections 280G(d)(3) and (4) of the Code. For purposes of
determining the amount of the Gross-Up Payment, you shall be
deemed to pay federal income taxes at the highest marginal rate
of the federal income taxation applicable to individuals (without
taking into account surtaxes or loss or reduction of deductions)
for the calendar year in which the Gross-Up Payment is to be made
and state and local income taxes at the highest marginal rates of
taxation in the state and locality of your residence on the date
of Termination. In the event that the amount of Excise Tax you
are required to pay is subsequently determined to be less than
the amount taken into account hereunder, you shall repay to the
Company promptly after the time that the amount of such reduction
in Excise Tax is finally determined the amount of the reduction,
together with interest on the amount of such reduction at the
rate of 6 percent per annum from the date of the Gross-Up
Payment, plus, if in the written opinion of outside tax counsel
selected by the Company's independent accountants and reasonably
acceptable to you, such payment (or a portion thereof) was not
taxable income to you when reported or is deductible by you for
federal income tax purposes, the net federal income tax benefit
you actually realize as a result of making such payment pursuant
to this sentence. In the event that the amount of Excise Tax you
are required to pay is subsequently determined to exceed the
amount taken into account hereunder, the Company shall make an
additional Gross-Up Payment in the manner set forth above in
respect of such excess (plus any interest, additions to tax, or
penalties payable by you with respect to such excess) promptly
after the time that the amount can be reasonably determined.
(b) Time of Payment: Estimated Payment. The payments provided
for in subsection (a) above, shall be made not later than the
fifth business day following the Date of Termination; provided,
however, that if the amounts of such payments cannot be finally
determined on or before such day, the Company shall pay to you on
such day an estimate, as determined in good faith by the Company,
of the minimum amount of such payments, and shall pay the
remainder of such payments (together with interest at the rate of
6 percent per annum) as soon as the amount thereof can be
determined. In the event that the amount of the estimated
payments exceeds the amount subsequently determined to have been
due, such excess shall constitute a loan by the Company to you,
payable on the fifth day after demand by the Company (together
with interest at the rate of 6 percent per annum).
10. Miscellaneous. No provision of this Agreement may be
modified, waived, or discharged unless such modification, waiver,
or discharge is agreed to in a writing signed by you and the
Chief Executive Officer or President of the Company. No waiver
by either party hereto at any time of any breach by the other
party hereto of, or of compliance with, any condition or
provision of this Agreement to be performed by such other party
shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same, or at any prior or subsequent, time. No
agreements or representations, oral or otherwise, express or
implied, with respect to the subject matter hereof have been made
by either party which are not expressly set forth in this
Agreement. The validity, interpretation, construction, and
performance of this Agreement shall be governed by laws of the
State of New York without giving effect to the principles of
conflict of laws thereof.
11. Legal Fees and Expenses. The Company shall pay or reimburse
any reasonable legal fees and expenses you may incur in
connection with any legal action to enforce your rights under, or
to defend the validity of, this Agreement. The Company will pay
or reimburse such legal fees and expenses on a regular, periodic
basis upon presentation by you of a statement or statements
prepared by your counsel in accordance with its usual practices.
12. Validity. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement, which
shall remain in full force and effect.
13. Payments During Controversy. Notwithstanding the pendency
of any dispute or controversy, the Company will continue to pay
you your full compensation in effect when the notice giving rise
to the dispute was given (including, but not limited to, base
salary and installments of incentive compensation) and continue
you as a participant in all compensation, benefit, and insurance
plans in which you were participating when the notice giving rise
to the dispute was given, until the dispute is finally resolved
in accordance with Section 7(c). Amounts paid under this Section
are in addition to all other amounts due under this Agreement and
shall not be offset against or reduce any other amounts due under
this Agreement. You shall be entitled to seek specific
performance of your right to be paid until the Date of
Termination during the pendency of any dispute or controversy
arising under or in connection with this Agreement.
<PAGE>
If this letter correctly sets forth our agreement on the
subject matter hereof, kindly sign and return to the Company the
enclosed copy of this letter, which will then constitute our
agreement on this subject.
Very truly yours,
NBT BANCORP INC.
By: /s/ Joseph J. Butare, Jr.
-------------------------
Joseph J. Butare, Jr.
Chairman, President & CEO
AGREED TO:
/s/ Frederick H. Weismann
-------------------------
Frederick H. Weismann
<PAGE>
EXHIBIT 12
Ratio of Earnings to Fixed Charges
<PAGE>
<TABLE>
STATEMENT OF COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
<CAPTION>
<S> <C> <C> <C> <C> <C>
---------------------------------------------------------------------------------------------------------------------
December 31, 1994 1993 1992 1991 1990
---------------------------------------------------------------------------------------------------------------------
(In thousands of dollars)
Fixed Charges
Amortization of Debt Expense $ 4 $ 4 $ 4 $ 4 $ 4
Interest Expense on Long Term Debt 908 853 595 576 579
---------------------------------------------------------------------------------------------------------------------
Total Fixed Charges for Ratio
excluding Interest Charges on
Deposits and Short-Term
Borrowings 912 857 599 580 583
Interest Charges on Deposits and
Short-Term Borrowings 24,834 22,347 26,600 37,718 42,190
---------------------------------------------------------------------------------------------------------------------
Total Fixed Charges for Ratio
including Interest Charges on
Deposits and Short-Term
Borrowings 25,746 23,204 27,199 38,298 42,773
---------------------------------------------------------------------------------------------------------------------
Earnings
Income from Continuing Operations
before Provision for Income Taxes 9,990 13,859 13,562 10,307 11,048
Fixed Charges excluding Interest
Charges on Deposits and Short-Term
Borrowings 912 857 599 580 583
---------------------------------------------------------------------------------------------------------------------
Total Earnings for Ratio excluding
Interest Charges on Deposits and
Short-Term Borrowings 10,902 14,716 14,161 10,887 11,631
Interest Charges on Deposits and
Short-Term Borrowings 24,834 22,347 26,600 37,718 42,190
---------------------------------------------------------------------------------------------------------------------
Total Earnings for Ratio including
Interest Charges on Deposits and
Short-Term Borrowings $35,736 $37,063 $40,761 $48,605 $53,821
---------------------------------------------------------------------------------------------------------------------
Ratio of Earnings to Fixed Charges
Excluding Interest Charges on Deposits
and Short-Term Borrowings 39.2x 43.2x 68.0x 83.8x 92.3x
---------------------------------------------------------------------------------------------------------------------
Including Interest Charges on Deposits
and Short-Term Borrowings 1.4x 1.6x 1.5x 1.3x 1.3x
---------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
EXHIBIT 13.1
All Portions of PAGES 13-44 OF NBT BANCORP INC. 1994 Annual Report
Incorporated by Reference
<PAGE>
<TABLE>
NBT Bancorp Inc. and Subsidiary Consolidated Balance Sheets
<CAPTION>
<S> <C> <C>
------------------------------------------------------------------------------------
December 31, 1994 1993
------------------------------------------------------------------------------------
(in thousands, except per share amounts)
ASSETS
Cash and due from banks $ 42,110 $ 31,268
Federal funds sold - 3,000
Loans available for sale 10,921 10,003
Securities available for sale 109,777 209,687
Securities held to maturity
(market value-$261,913 and $111,049) 272,466 108,077
Loans:
Commercial and agricultural 215,380 206,837
Real estate mortgage 129,275 136,103
Consumer 230,063 216,920
------------------------------------------------------------------------------------
Total loans 574,718 559,860
Less allowance for loan losses 9,026 8,652
------------------------------------------------------------------------------------
Net loans 565,692 551,208
Premises and equipment, net 15,383 15,688
Goodwill and other intangibles, net 9,862 13,084
Other assets 18,346 11,892
------------------------------------------------------------------------------------
Total Assets $1,044,557 $953,907
------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Interest bearing $ 669,007 $695,070
Noninterest bearing 122,436 112,158
------------------------------------------------------------------------------------
Total deposits 791,443 807,228
Short-term borrowings 140,587 26,701
Long-term debt 8,734 14,457
Other liabilities 5,486 4,413
------------------------------------------------------------------------------------
Total liabilities 946,250 852,799
Commitments and contingencies
Stockholders' equity:
Preferred stock, no par, stated value
$1.00; authorized 2,000,000 shares - -
Common stock, no par, stated value
$1.00; authorized 10,000,000 shares;
issued 8,049,618 and 8,051,398 8,050 7,668
Capital surplus 69,669 64,518
Retained earnings 25,446 28,431
Unrealized gain (loss) on securities
available for sale, net of income tax effect (4,273) 769
Common stock in treasury, at cost
(36,130 and 15,675 shares) (585) (278)
------------------------------------------------------------------------------------
Total stockholders' equity 98,307 101,108
------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $1,044,557 $953,907
------------------------------------------------------------------------------------
See notes to consolidated financial statements
</TABLE>
13
<PAGE>
<TABLE>
NBT Bancorp Inc. and Subsidiary Consolidated Statements of Income
<CAPTION>
<S> <C> <C> <C>
----------------------------------------------------------------------------------------------------------
Year ended December 31, 1994 1993 1992
----------------------------------------------------------------------------------------------------------
(in thousands, except per share amounts)
Interest and fee income:
Loans $48,815 $50,043 $53,039
Securities held to maturity--taxable 11,878 10,223 13,443
Securities held to maturity--tax exempt 1,160 1,070 1,906
Assets available for sale 8,564 5,300 -
Other 21 321 820
----------------------------------------------------------------------------------------------------------
Total interest and fee income 70,438 66,957 69,208
----------------------------------------------------------------------------------------------------------
Interest expense:
Deposits 21,483 21,738 25,935
Short-term borrowings 3,351 609 595
Long-term debt 908 853 664
----------------------------------------------------------------------------------------------------------
Total interest expense 25,742 23,200 27,194
----------------------------------------------------------------------------------------------------------
Net interest income 44,696 43,757 42,014
Provision for loan losses 3,071 2,281 2,362
----------------------------------------------------------------------------------------------------------
Net interest income after provision for loan losses 41,625 41,476 39,652
Noninterest income:
Trust income 2,511 2,983 3,001
Service charges on deposit accounts 3,032 2,998 3,105
Securities gains 555 1,573 1,108
Other income 941 2,127 2,789
----------------------------------------------------------------------------------------------------------
Total noninterest income 7,039 9,681 10,003
----------------------------------------------------------------------------------------------------------
Noninterest expense:
Salaries and employee benefits 16,157 16,202 15,730
Net occupancy expense 2,295 2,102 2,018
Equipment expense 2,033 2,528 2,663
FDIC insurance 1,829 1,706 1,638
Amortization of goodwill and other intangibles 3,222 4,243 4,309
Restructuring expense 2,264 - -
Other operating expense 10,874 10,517 9,735
----------------------------------------------------------------------------------------------------------
Total noninterest expense 38,674 37,298 36,093
----------------------------------------------------------------------------------------------------------
Income before income taxes 9,990 13,859 13,562
Income taxes 3,482 5,354 5,519
----------------------------------------------------------------------------------------------------------
Net income $ 6,508 $ 8,505 $ 8,043
----------------------------------------------------------------------------------------------------------
Net income per common share $0.80 $1.05 $1.02
----------------------------------------------------------------------------------------------------------
Average common shares outstanding 8,108 8,070 7,920
----------------------------------------------------------------------------------------------------------
See notes to consolidated financial statements
</TABLE>
14
<PAGE>
<TABLE>
NBT Bancorp Inc. and Subsidiary Consolidated Statements of Stockholders' Equity
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
-----------------------------------------------------------------------------------------------------------------------------------
Unrealized
Gain(Loss)
On
Securities
Common Capital Retained Available Treasury
Stock Surplus Earnings For Sale Stock Total
-----------------------------------------------------------------------------------------------------------------------------------
(in thousands, except per share amounts)
Balance at December 31, 1991 $ 7 $58,331 $29,488 $ - $ - $ 87,826
Net income 8,043 8,043
Change in par value
(par value $0.001 to $1.00 stated value) 6,807 (6,807) -
5% stock dividend 342 4,612 (4,954) -
Cash dividends - $0.376 per share (2,971) (2,971)
Payment in lieu of fractional shares (10) (10)
Common stock issued for stock options exercised 13 162 175
Common stock issued to dividend
reinvestment and other stock plans 44 897 941
Purchase of 33,201 treasury shares (453) (453)
Sale of 33,201 treasury shares to dividend
reinvestment plan 8 453 461
-----------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1992 7,213 57,203 29,596 - - 94,012
Net income 8,505 8,505
5% stock dividend 363 5,993 (6,356) -
Cash dividends - $0.413 per share (3,302) (3,302)
Payment in lieu of fractional shares (12) (12)
Common stock issued for stock options exercised 56 771 827
Common stock issued to dividend
reinvestment and other stock plans 36 546 582
Purchase of 73,182 treasury shares (1,259) (1,259)
Sale of 57,507 treasury shares to dividend
reinvestment and other stock plans 5 981 986
Unrealized gain on securities
available for sale net of tax effect of $552 769 769
-----------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1993 7,668 64,518 28,431 769 (278) 101,108
Net income 6,508 6,508
5% stock dividend 380 5,508 (5,888) -
Cash dividends - $0.449 per share (3,594) (3,594)
Payment in lieu of fractional shares (11) (11)
Common stock issued to dividend
reinvestment and other stock plans 2 29 31
Purchase of 210,911 treasury shares (3,555) (3,555)
Sale of 190,456 treasury shares to dividend
reinvestment and other stock plans (386) 3,248 2,862
Unrealized (loss) on securities available
for sale, net of tax effect of $3,503 (5,042) (5,042)
-----------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1994 $8,050 $69,669 $25,446 $(4,273) $( 585) $98,307
-----------------------------------------------------------------------------------------------------------------------------------
See notes to consolidated financial statements
</TABLE>
15
<PAGE>
<TABLE>
NBT Bancorp Inc. and Subsidiary Consolidated Statements of Cash Flows
<CAPTION>
<S> <C> <C> <C>
-----------------------------------------------------------------------------------------------------------
Year Ended December 31, 1994 1993 1992
-----------------------------------------------------------------------------------------------------------
(in thousands)
Operating Activities:
Net income $ 6,508 $ 8,505 $ 8,043
Adjustments to reconcile net income to the cash
provided by operating activities:
Provision for loan losses 3,071 2,281 2,362
Depreciation and amortization 1,636 1,730 1,789
Amortization of premiums and accretion of
discounts on securities 402 1,768 990
Amortization of goodwill and other intangibles 3,222 4,243 4,309
Provision (credit) for deferred income taxes (194) (691) 635
Provisions for restructuring charges 2,264 - -
Proceeds from sale of loans originated for sale 12,358 19,535 9,350
Loans originated for sale (13,921) (26,695) (12,050)
Realized gains on sales of securities (555) (1,573) (1,108)
(Increase) decrease in interest receivable (2,137) 147 737
Increase (decrease) in interest payable 175 (240) (1,392)
Other, net (638) (4,735) 2,127
-----------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 12,191 4,275 15,792
-----------------------------------------------------------------------------------------------------------
Investing Activities:
Securities available for sale:
Proceeds from maturities 21,504 32,730 -
Proceeds from sales 70,258 57,080 -
Purchases (1,001) (147,950) -
Securities held to maturity:
Proceeds from maturities 30,468 31,512 87,024
Proceeds from sales - - 43,654
Purchases (194,650) (37,625) (175,334)
Net increase in loans (17,555) (20,577) (20,006)
Proceeds from sales of portfolio loans - - 5,072
Purchase of premises and equipment, net (2,034) (1,784) (841)
Other investing activities - 119 764
-----------------------------------------------------------------------------------------------------------
Net cash used in investing activities (93,010) (86,495) (59,667)
-----------------------------------------------------------------------------------------------------------
Financing Activities:
Net increase (decrease) in deposits (15,785) 66,479 17,929
Net increase (decrease) in short-term borrowings
with original maturities of three months or less 128,886 (4,717) 68
Proceeds from issuance of other short-term borrowings - 15,000 -
Repayments of other short-term borrowings (15,000) - -
Proceeds from issuance of long-term debt - 5,171 5,000
Repayments of long-term debt (5,723) (1,034) (30)
Common stock issued, including treasury shares reissued 2,893 2,395 1,577
Purchase of treasury stock (3,555) (1,259) (453)
Cash dividends and payment for fractional shares (3,605) (3,314) (2,981)
-----------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 88,111 78,721 21,110
-----------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents 7,292 (3,499) (22,765)
Cash and cash equivalents at beginning of year 36,118 39,617 62,382
-----------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $ 43,410 $ 36,118 $ 39,617
-----------------------------------------------------------------------------------------------------------
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Interest $ 25,567 $23,440 $28,587
Income taxes 3,941 7,385 4,724
Noncash investing activity:
Transfer of securities held to maturity to
securities available for sale - 112,635 36,890
-----------------------------------------------------------------------------------------------------------
See notes to consolidated financial statements
</TABLE>
16
<PAGE>
NBT Bancorp Inc. and Subsidiary Notes to Consolidated Financial
Statements
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NBT Bancorp Inc. (Company) is a financial services company primarily
in the business of consumer, commercial, and agricultural banking
providing a wide range of banking, fiduciary, and financial services
to corporate, institutional, municipal, and individual customers.
The accounting policies of the Company conform with generally
accepted accounting principles and with general practices in the
banking industry.
BASIS OF PRESENTATION The consolidated financial statements include
the accounts of the Company and its wholly-owned subsidiary, The
National Bank and Trust Company (Bank). All significant
intercompany transactions have been eliminated in consolidation.
Certain amounts previously reported in the financial statements have
been reclassified to conform with the current presentation.
BUSINESS The Bank provides loan and deposit services to its
customers, primarily in its eight county service area. Its only
business segment is domestic commercial banking and the Bank is
subject to competition from other financial institutions. The Bank
and the Company are subject to the regulations of certain federal
agencies and undergo periodic examinations by those regulatory
agencies.
TRUST Assets held by the Bank in a fiduciary or agency capacity for
its customers are not included in the accompanying consolidated
balance sheets, since such assets are not assets of the Bank. Trust
income is recognized on the accrual method based on contractual
rates applied to the balances of trust accounts.
CASH AND CASH EQUIVALENTS The Company considers cash on hand,
amounts due from correspondent banks, cash items in process of
collection, and federal funds sold, as well as federal mutual funds
classified as other short-term securities available for sale, to be
"cash and cash equivalents".
SECURITIES The Company adopted Financial Accounting Standards Board
(FASB) Statement of Financial Accounting Standards No. 115 (SFAS
115) entitled, "Accounting for Certain Investments in Debt and
Equity Securities" on December 31, 1993. SFAS 115 establishes
classifications of investments into three categories: held to
maturity, trading, and available for sale. Debt securities that a
company has the positive intent and ability to hold to maturity are
to be classified as held to maturity securities and reported at
amortized cost. Debt and equity securities, if any, that are bought
and held principally for the purpose of sale in the near term are to
be classified as trading securities and reported at fair value, with
unrealized gains and losses included in earnings. Debt and equity
securities not classified as either held to maturity securities or
trading securities are to be classified as available for sale
securities and reported at fair value, with unrealized gains and
losses excluded from earnings and reported as a separate component
of stockholders' equity, net of related taxes. As required by SFAS
115, financial statements for years prior to adoption were not
restated.
Securities available for sale are carried at fair value. The
Company does not hold any securities considered to be trading.
Securities held to maturity are carried at cost adjusted for
amortization of premiums and accretion of discounts computed using
the level-yield method, adjusted for estimated prepayments. Gains
and losses on sales of securities are computed using the specific
identification method.
LOANS AND LOANS AVAILABLE FOR SALE Loans are recorded at their
current unpaid principal balance, net of unearned income. Loans
classified as available for sale, primarily fixed rate real estate
mortgages and higher education loans, are carried at the lower of
aggregate cost or estimated fair value.
Interest income on loans is primarily accrued based on the
principal amount outstanding. Accrual of interest is discontinued,
and accrued but unpaid interest on a loan is reversed and charged to
income generally when a loan becomes ninety-days delinquent unless
the loan is well secured and in the process of collection, or when
management concludes that circumstances indicate that borrowers may
be unable to meet contractual principal or interest payments.
Thereafter, payments received are first applied to principal.
Depending on management's assessment of the ultimate collectiblity
of the loan, interest income may be recognized on a cash basis.
Loans are returned to accrual status when management determines that
the loan status has improved to the extent that both principal and
interest are deemed collectible. Fees related to lending activities
and direct costs associated with originating the loans are deferred
and recognized using the level-yield method.
ALLOWANCE FOR LOAN LOSSES The allowance for loan losses is the
amount which, in the opinion of management, is necessary to absorb
potential losses in the loan portfolio when taken as a whole. The
allowance is determined by reference to the market area the Bank
serves, local economic conditions, the growth and composition of its
loan portfolio with respect to the mix between the various types of
loans and their related risk characteristics, a review of the value
of collateral supporting the loans, and the result of comprehensive
reviews of the loan portfolio by the Loan Review staff and
management.
17
<PAGE>
BANK PREMISES AND EQUIPMENT Bank premises and equipment are stated
at cost, less accumulated depreciation. Depreciation of premises
and equipment is determined using the straight-line method over the
estimated useful lives of the respective assets. Expenditures for
maintenance, repairs, and minor replacements are charged to expense
as incurred. Gains and losses on the disposal of bank premises and
equipment are included in the results of current operations.
OTHER REAL ESTATE OWNED Other real estate owned (OREO) consists of
properties acquired through foreclosure or by acceptance of a deed
in lieu of foreclosure and, when applicable, in-substance
foreclosure whereby the debtor has little equity in the fair value
of the collateral, loan repayment proceeds can be expected only from
the operation or sale of the collateral, and the debtor has
effectively abandoned control of the collateral to the Bank or it is
doubtful the debtor will be able to rebuild equity in the collateral
or otherwise repay the loan in the foreseeable future. These assets
are recorded at the lower of cost or appraised fair value, less
costs of disposal. Loan losses arising from the acquisition of such
assets are charged to the allowance for loan losses and any
subsequent valuation write-downs are charged to other expense.
GOODWILL AND OTHER INTANGIBLES Certain identified intangible
assets, including a covenant not to compete and core deposit
intangible assets are carried at appraised fair values, net of
accumulated amortization, and are being amortized by the straight-
line method in amounts sufficient to write-off those fair values
over their estimated useful lives; such fair values and useful lives
were determined for the Company by an independent appraisal company.
The excess of cost over the fair value of the net assets acquired
was also recorded and is being amortized over twenty-five years on
the straight-line method.
TREASURY STOCK Treasury stock acquisitions are recorded at cost.
Subsequent sales of treasury stock are recorded on an average cost
basis with the difference between proceeds and cost recognized as an
adjustment of capital surplus.
POSTRETIREMENT BENEFITS In 1993 the Company adopted Statement of
Financial Accounting Standards No.106 (SFAS 106), "Employers
Accounting for Postretirement Benefits Other Than Pensions". The
Company uses actuarial based accrual accounting for its
postretirement health care plans, electing to recognize the
transition obligation in the statement of financial position and
income on a delayed basis over the plan participants' future service
periods, estimated to be twenty years. Postretirement benefit costs
prior to 1993, which were recorded on a cash basis, have not been
restated.
INCOME TAXES The Company and its subsidiary file a consolidated tax
return on the accrual basis. The Company prospectively adopted
Statement of Financial Accounting Standards No. 109 (SFAS 109)
entitled, "Accounting for Income Taxes", effective January 1, 1993.
The cumulative effect of adopting SFAS 109 for 1993 has been
included in the 1993 tax provision because it did not have a
material impact on the results of operations or financial position
of the Company and had no impact on cash flow or liquidity. SFAS
109 required a change from the deferred method under Accounting
Principles Board Opinion No. 11 (APB 11) to the asset and liability
method of accounting for income taxes. Under the asset and
liability method, deferred income taxes are recognized for the
future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and
liabilities and their respective tax bases. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply
to taxable income in the years in which those temporary differences
are expected to be recovered or settled. Under SFAS 109, the effect
on deferred taxes of a change in tax rates is recognized in income
in the period that includes the enactment date.
Pursuant to the deferred method under APB 11, which was applied
for 1992 and prior years, the tax effects of transactions were
recognized in the year in which they enter into the determination of
income, regardless of when they were recognized for tax purposes.
Deferred taxes are recognized for timing differences between items
of income and expense reported for financial reporting purposes and
those reported for Federal income tax purposes using the tax rate
applicable for the year of calculation. Under the deferred method,
deferred taxes were not adjusted for subsequent changes in tax
rates.
PER SHARE AMOUNTS Net income per common share is computed on the
basis of the weighted average number of common shares and common
share equivalents outstanding during each period after giving
retroactive effect to stock dividends and stock splits.
FEDERAL RESERVE BOARD REQUIREMENT
The Bank is required to maintain a reserve balance with the Federal
Reserve Bank of New York. The required average total reserve for
the 14-day maintenance period ending December 22, 1994, was $16
million of which $7 million was required to be on deposit with the
Federal Reserve Bank and the remaining $9 million was represented by
cash on hand.
18
<PAGE>
<TABLE>
SECURITIES
The amortized cost, estimated fair market value and unrealized gains
and losses of securities available for sale are as follows:
<CAPTION>
<S> <C> <C> <C> <C>
--------------------------------------------------------------------------------------------
Amortized Unrealized Market
(in thousands) Cost Gains Losses Value
--------------------------------------------------------------------------------------------
December 31, 1994
--------------------------------------------------------------------------------------------
U.S. Treasury $ 33,085 $ 36 $ 207 $ 32,914
State & Municipal 991 - 79 912
Mortgage-backed 80,695 - 7,119 73,576
Other securities 930 145 - 1,075
Other short-term securities 1,300 - - 1,300
--------------------------------------------------------------------------------------------
Total $117,001 $181 $7,405 $109,777
--------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------
December 31, 1993
--------------------------------------------------------------------------------------------
U.S. Treasury $ 66,226 $1,441 $ 19 $ 67,648
State & Municipal 1,030 - 6 1,024
Mortgage-backed 138,330 309 519 138,120
Other securities 930 115 - 1,045
Other short-term securities 1,850 - - 1,850
--------------------------------------------------------------------------------------------
Total $208,366 $1,865 $544 $209,687
--------------------------------------------------------------------------------------------
<PAGE>
The amortized cost, estimated fair market value, and unrealized gains and losses of securities
held to maturity are as follows:
<CAPTION>
<S> <C> <C> <C> <C>
--------------------------------------------------------------------------------------------
Amortized Unrealized Market
(in thousands) Cost Gains Losses Value
--------------------------------------------------------------------------------------------
December 31, 1994
--------------------------------------------------------------------------------------------
U.S. Treasury $170,757 $33 $ 7,871 $162,919
Federal Agency 9,984 - 858 9,126
State & Municipal 37,292 - 51 37,241
Mortgage-backed 43,632 - 1,805 41,827
Other securities 10,801 - 1 10,800
--------------------------------------------------------------------------------------------
Total $272,466 $33 $10,586 $261,913
--------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------
December 31, 1993
--------------------------------------------------------------------------------------------
U.S. Treasury $ 66,458 $2,896 $- $ 69,354
State & Municipal 25,770 - - 25,770
Mortgage-backed 9,937 80 3 10,014
Other securities 5,912 - 1 5,911
--------------------------------------------------------------------------------------------
Total $108,077 $2,976 $4 $111,049
--------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
REMAINING MATURITIES OF SECURITIES AT DECEMBER 31, 1994
----------------------------------------------------------------------------------------------------------------------------------
After One Year After Five Years
Within One But Within But Within After Ten Total
Year Five Years Ten Years Years Portfolio
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
(in thousands) Amount Yield Amount Yield Amount Yield Amount Yield Amount Yield
----------------------------------------------------------------------------------------------------------------------------------
Securities available for sale:
U.S. Treasury $32,084 5.71% $1,001 6.50% $ - -% $ - -% $ 33,085 5.73%
State & Municipal - - 991 5.21 - - - - 991 5.22
Mortgage-backed - - - - 33,583 6.30 47,112 6.24 80,695 6.27
Other securities - - - - - - 930 1.52 930 1.52
Other short-term securities 1,300 5.53 - - - - - - 1,300 5.53
----------------------------------------------------------------------------------------------------------------------------------
Amortized cost $33,384 5.70% $1,992 5.86% $33,583 6.30% $48,042 6.15% $117,001 6.07%
----------------------------------------------------------------------------------------------------------------------------------
Market value $33,232 $1,894 $30,922 $43,729 $109,777
----------------------------------------------------------------------------------------------------------------------------------
Securities held to maturity:
U.S. Treasury $ 9,972 4.26% $160,785 5.78% $ - -% $ - -% $170,757 5.69%
Federal Agency 9,984 6.71 - - - - - - 9,984 6.71
State & Municipal 30,808 6.07 5,393 7.19 640 8.99 451 8.32 37,292 6.25
Mortgage-backed - - 6,866 6.69 - - 36,766 6.66 43,632 6.66
Other securities 5 5.50 - - - - 10,796 6.70 10,801 6.68
---------------------------------------------------------------------------------------------------------------------------------
Amortized cost $50,769 5.84% $173,044 5.86% $ 640 8.99% $48,013 6.68% $272,466 6.00%
---------------------------------------------------------------------------------------------------------------------------------
Market value $49,706 $165,024 $ 640 $46,543 $261,913
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Gross realized gains and gross proceeds on the sale of
securities available for sale were $0.6 million and $70.3 million,
respectively, in 1994, and $1.6 million and $57.1 million in 1993.
Prior to the Company's adoption of a methodology to classify certain
securities as available for sale, gross proceeds from the sales of
securities were $43.7 million in 1992 with gross gains realized of
$1.1 million.
At December 31, 1994 and 1993, securities with amortized costs
totalling $223 million and $215 million, respectively, were pledged
to secure public deposits and for other purposes required or
permitted by law.
During 1993 and 1992 securities with amortized costs of $112.6
million and $36.9 million and estimated fair market values of $115.9
million and $37.2 million, respectively, were transferred to
securities available for sale. No such transfers were made in 1994.
In the tables setting forth the maturity distribution and
weighted average taxable equivalent yield of securities at December
31, 1994, yields on amortized cost have been calculated based on
effective yields weighted for the scheduled maturity of each
security using the marginal federal tax rate of 35%. Approximately
$9.5 million of mortgage-backed debt securities have adjustable
interest rate provisions and have been included in the tables based
upon the period that relates to their adjustable characteristics.
19
<PAGE>
LOANS AVAILABLE FOR SALE
The Company carries loans available for sale at the lower of
aggregate book or estimated fair market value. At December 31,
1994, the aggregate book value and estimated fair market value of
loans available for sale were $11.4 million and $10.9 million,
respectively, while at December 31, 1993 aggregate book and
estimated market value were $10.0 million. The Company generally
sells all fixed rate residential real estate mortgages it
originates. It is the Company's practice to sell its' higher
education loans to the Student Loan Marketing Association at the
Company's cost after the student leaves school. During 1994, $3
million of such loans were sold. During 1994, $9 million in
mortgage loans were sold with servicing retained, recognizing $0.01
million loss on sales.
At December 31, 1994, the Company serviced $23 million of real
estate mortgages on behalf of other financial intermediaries; such
loans are not reflected in the Company's balance sheet.
<PAGE>
<TABLE>
ALLOWANCE FOR LOAN LOSSES
Changes in the allowance for loan losses for the three years ended December 31,
1994, are summarized as follows:
<CAPTION>
<S> <C> <C> <C>
---------------------------------------------------------------------
1994 1993 1992
(in thousands)
---------------------------------------------------------------------
Balance at January 1 $ 8,652 $ 9,245 $ 9,845
Provision 3,071 2,281 2,362
Recoveries on loans 1,025 786 921
---------------------------------------------------------------------
12,748 12,312 13,128
Loans charged off 3,722 3,660 3,883
---------------------------------------------------------------------
Balance at December 31 $ 9,026 $ 8,652 $ 9,245
---------------------------------------------------------------------
</TABLE>
NONPERFORMING ASSETS
The Bank's concentrations of credit risk are reflected in the
balance sheet. The concentrations of credit risk with standby
letters of credit, committed lines of credit and commitments to
originate new loans generally follow the loan classifications. A
substantial portion of the Bank's loans are secured by real estate
located in central and northern New York. Accordingly, the ultimate
collectiblity of a substantial portion of the Bank's portfolio is
susceptible to changes in market conditions of those areas.
Management is not aware of any other material concentrations of
credit to any industry or individual borrowers. Nonperforming
assets at December 31, 1994 and 1993 are as follows:
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
--------------------------------------------------------------
December 31, 1994 1993
--------------------------------------------------------------
(in thousands)
Non-accrual loans $4,639 $4,170
Other real estate owned 840 430
--------------------------------------------------------------
Total nonperforming assets $5,479 $4,600
--------------------------------------------------------------
As a percent of loans plus OREO 0.95% 0.82%
--------------------------------------------------------------
</TABLE>
There were no loans with modified payment terms because of
borrowers' financial difficulties at December 31, 1994 and 1993.
The effect of nonaccrual loans on interest income for the years
ended December 31, 1994, 1993, and 1992 was not material. The Bank
is not committed to advance additional funds to these borrowers.
RELATED PARTY TRANSACTIONS
In the ordinary course of business, the Bank has made loans at
prevailing rates and terms to directors, officers, and other related
parties. In management's opinion, such loans did not present more
than the normal risk of collectiblity or incorporate other
unfavorable features. The aggregate amount of loans outstanding to
qualifying related parties at January 1, 1994, was $4.1 million.
During 1994, $1.8 million of new loans were made and repayments
totaled $2.6 million, resulting in an aggregate balance of loans
outstanding to related parties at December 31, 1994, of $3.3
million.
<TABLE>
PREMISES AND EQUIPMENT
A summary of premises and equipment follows:
<CAPTION>
<S> <C> <C>
----------------------------------------------------------------------------
December 31, 1994 1993
----------------------------------------------------------------------------
(in thousands)
Bank premises $18,176 $17,184
Equipment 15,099 14,736
----------------------------------------------------------------------------
33,275 31,920
Accumulated depreciation and valuation allowance 17,892 16,232
----------------------------------------------------------------------------
Total premises and equipment $15,383 $15,688
</TABLE>
Depreciation and amortization of premises and equipment totaled
$1.6 million, $1.7 million and $1.8 million in 1994, 1993 and
1992, respectively. In 1994 a valuation allowance was recognized
related to the impairment of long-lived assets whose recorded values
exceeded undiscounted expected future cash flows from the assets.
As the Bank restructured its branch operations, $0.7 million was
charged to restructuring expense related to the valuation allowance.
Rental expense included in operating expense amounted to $0.3
million in 1994, $0.4 million in 1993, and $0.2 million in 1992.
The future minimum commitments as of December 31, 1994, for
noncancellable operating leases were as follows: 1995--$0.3 million;
1996--$0.3 million; 1997--$0.2 million; 1998--$0.1 million; 1999--
$0.1 million; 2000 and beyond--$0.1 million.
20
<PAGE>
<TABLE>
GOODWILL AND OTHER INTANGIBLE ASSETS
The table below presents significant balances, amortization and the respective periods of
amortization:
<CAPTION>
<S> <C> <C> <C>
----------------------------------------------------------------------------------
December 31, 1994 1993 1992
----------------------------------------------------------------------------------
(in thousands)
Excess cost over fair value of assets acquired (25 yrs.):
Beginning balance $6,875 $ 7,206 $ 7,537
Amortization (331) (331) (331)
----------------------------------------------------------------------------------
Ending balance 6,544 6,875 7,206
----------------------------------------------------------------------------------
Covenant not to compete (5 yrs.):
Beginning balance 1,335 3,115 4,895
Amortization (1,335) (1,780) (1,780)
----------------------------------------------------------------------------------
Ending balance - 1,335 3,115
----------------------------------------------------------------------------------
Core deposit intangible assets (3-12 yrs.):
Beginning balance 4,874 7,006 9,204
Amortization (1,556) (2,132) (2,198)
----------------------------------------------------------------------------------
Ending balance 3,318 4,874 7,006
----------------------------------------------------------------------------------
Total goodwill and other intangibles $9,862 $13,084 $17,327
----------------------------------------------------------------------------------
</TABLE>
<PAGE>
DEPOSITS
Time deposits of $100,000 or more aggregated $101 million at December 31, 1994
and $66.9 million at December 31, 1993. Interest expense on such deposits was
approximately $3.5 million, $1.9 million, and $2.0 million for 1994, 1993,
and 1992, respectively.
<TABLE>
The following table sets forth the maturity distribution of time certificates of deposit
of $100,000 or more:
<CAPTION>
<S> <C> <C>
-----------------------------------------------------------------
December 31, 1994 1993
-----------------------------------------------------------------
(in thousands)
Within three months $ 79,778 $48,330
After three but within six months 6,594 8,074
After six but within twelve months 5,546 4,023
After twelve months 9,058 6,515
-----------------------------------------------------------------
Total $100,976 $66,942
-----------------------------------------------------------------
</TABLE>
<PAGE>
SHORT-TERM BORROWINGS
Short-term borrowings consist of Federal funds purchased and
securities sold under repurchase agreements, which generally
represent overnight borrowing transactions, and other short-term
borrowings, primarily Federal Home Loan Bank ("FHLB") advances, with
original maturities of one year or less. The Bank has unused lines
of credit available for short-term financing of $38 million and $200
million for Federal funds purchased and repurchase agreements,
respectively, as well as the capacity for additional FHLB advances
of $92 million at December 31, 1994.
<TABLE>
The details of short-term borrowings are as follows:
<CAPTION>
<S> <C> <C> <C>
------------------------------------------------------------------------------------------------
(dollars in thousands) 1994 1993 1992
------------------------------------------------------------------------------------------------
FEDERAL FUNDS PURCHASED
Balance at year-end $80,000 $ - $ 5,000
Average during the year 30,158 7,337 3,536
Maximum month-end balance 87,000 35,000 27,000
Weighted average rate during the year 4.94% 3.37% 3.39%
Weighted average rate at December 31 5.64% - 3.38%
------------------------------------------------------------------------------------------------
SECURITIES SOLD UNDER REPURCHASE AGREEMENTS
Balance at year-end $10,587 $11,701 $11,418
Average during the year 24,418 10,088 14,622
Maximum month-end balance 61,370 14,489 24,846
Weighted average rate during the year 4.19% 3.11% 3.73%
Weighted average rate at December 31 4.83% 2.17% 3.09%
-------------------------------------------------------------------------------------------------
OTHER SHORT-TERM BORROWINGS
Balance at year-end $50,000 $15,000 -
Average during the year 18,507 1,274 -
Maximum month-end balance 50,000 15,000 -
Weighted average rate during the year 4.53% 3.84% -
Weighted average rate at December 31 6.13% 3.84% -
-------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
LONG-TERM DEBT
Long-term debt consists of obligations having an original maturity at issuance of more
than one year. A summary of long-term debt follows:
<CAPTION>
<S> <C> <C> <C> <C>
------------------------------------------------------------------------------------------------------
Maturity Interest Year-end outstanding
(dollars in thousands) Date Rate 1994 1993
Company:
Promissory notes 1993-1999 10.89% $3,571 $ 4,286
Bank:
FHLB advance 1993-2008 5.33 163 171
FHLB advance 1994 5.27 - 5,000
FHLB advance 1995 4.20 5,000 5,000
------------------------------------------------------------------------------------------------------
Total $8,734 $14,457
------------------------------------------------------------------------------------------------------
</TABLE>
The promissory notes require annual principal repayments of
$0.714 million. The FHLB advances are collateralized by the FHLB
stock owned by the Bank and certain of its real estate mortgage
loans.
21
<PAGE>
INCOME TAXES
The Company prospectively adopted the provisions of SFAS 109 in the
first quarter of 1993. Prior years' financial statements have not
been restated. The adoption of the new standard did not have a
material impact on the Company's consolidated financial condition or
results of operations. Pursuant to the provisions of SFAS 109
applied for 1994 and for 1993, deferred income taxes are recognized
for temporary differences between the financial statement carrying
amount and tax basis of assets and liabilities. Under the
provisions of APB 11, applied for 1992 and years prior, deferred
income taxes were recognized for timing differences in the
recognition of income and expense for tax purposes as compared to
financial reporting purposes.
<TABLE>
Total income taxes were allocated as follows:
<CAPTION>
<S> <C> <C> <C>
----------------------------------------------------------------------------------------------
Year ended December 31, 1994 1993 1992
----------------------------------------------------------------------------------------------
(in thousands)
Income before income taxes $3,482 $5,354 $5,519
Capital surplus, for stock options exercised (147) (101) -
Stockholders' equity, for unrealized gain
(loss) on securities (3,503) 552 -
----------------------------------------------------------------------------------------------
Total $ (168) $5,805 $5,519
----------------------------------------------------------------------------------------------
The significant components of income taxes attributable to income before income taxes
are as follows:
<CAPTION>
<S> <C> <C> <C>
------------------------------------------------------------------------------------
Year ended December 31, 1994 1993 1992
------------------------------------------------------------------------------------
(In thousands)
Current:
Federal $2,926 $4,841 $3,974
State 750 1,204 910
------------------------------------------------------------------------------------
3,676 6,045 4,884
Deferred:
Federal (171) (571) 249
State (23) (120) 386
------------------------------------------------------------------------------------
(194) (691) 635
------------------------------------------------------------------------------------
Total $3,482 $5,354 $5,519
------------------------------------------------------------------------------------
<PAGE>
The tax effects of temporary differences that give rise to significant portions
of the deferred tax assets and deferred tax liabilities are as follows:
<CAPTION>
<S> <C> <C>
-------------------------------------------------------------------------------------
December 31, 1994 1993
-------------------------------------------------------------------------------------
(in thousands)
Deferred tax assets:
Allowance for loan losses $3,528 $3,388
Unrealized depreciation of
securities available for sale 2,951 -
Deferred compensation 310 303
Postretirement benefit obligation 224 106
Other 214 275
-------------------------------------------------------------------------------------
Total gross deferred tax assets 7,227 4,072
-------------------------------------------------------------------------------------
Deferred tax liabilities:
Premises and equipment, primarily due
to accelerated depreciation and valuation allowances 313 504
Differences in assigned values and tax bases of
assets recognized in a purchase business combination 385 726
Unrealized appreciation of securities available for sale - 552
Securities discount accretion 265 77
Other 375 21
-------------------------------------------------------------------------------------
Total gross deferred tax liabilities 1,338 1,880
-------------------------------------------------------------------------------------
Net deferred tax assets $5,889 $2,192
-------------------------------------------------------------------------------------
</TABLE>
Realization of deferred tax assets is dependent upon the
generation of future taxable income or the existence of sufficient
taxable income within the carry back period. A valuation allowance
is provided when it is more likely than not that some portion of the
deferred tax asset will not be realized. Based on available
evidence, gross deferred tax assets will ultimately be realized and
a valuation allowance was not deemed necessary.
<PAGE>
<TABLE>
The following is a reconciliation of the provision for income taxes to the
amount computed by applying the applicable Federal statutory rate of 35% for 1994
and 1993 and 34% for 1992, to income before taxes:
<CAPTION>
<S> <C> <C> <C>
-----------------------------------------------------------------------------------------
Year ended December 31, 1994 1993 1992
-----------------------------------------------------------------------------------------
(in thousands)
Federal income tax at
statutory rate $3,497 $4,851 $4,611
Benefit of federal tax rates below
statutory rate (100) (100) -
Tax exempt income (428) (370) (686)
Non-deductible expenses 212 186 208
State taxes, net of
federal tax benefit 468 705 855
Tax effect of intangible
amortization not currently
recorded for financial _ - 335
reporting purposes
Other, net (167) 82 196
------------------------------------------------------------------------------------------
Income taxes $3,482 $5,354 $5,519
------------------------------------------------------------------------------------------
</TABLE>
22
<PAGE>
<TABLE>
Significant components of deferred income tax provisions in thousands of
dollars, as previously required under APB 11 for the year ended December 31,
1992, are as follows:
<CAPTION>
<S> <S>
-----------------------------------------------
Adjustment to cash basis
for tax reporting $150
Leasing income (37)
Accelerated depreciation (51)
Provision for loan losses 46
Deferred compensation 41
Tax effect of intangible amortization
not currently recorded for financial
reporting purposes 449
Other, net 37
-----------------------------------------------
Deferred income taxes $635
-----------------------------------------------
NONINTEREST EXPENSE
Included in the other operating expense category are supplies,
communication and promotional expense of $2.6 million, $2.9 million,
and $2.8 million; and professional fees of $3.0 million, $3.0
million, and $3.3 million, in years 1994, 1993, and 1992,
respectively.
In 1993 the Company outsourced its data processing functions
and entered into a five year contract for data processing services
which includes a minimum base dollar amount and a variable portion
determined by the number of transactions in excess of a specified
level. Included in the other operating expense category are data
processing fees of $1.1 million and $0.2 million, in years 1994 and
1993, respectively. No such fees were incurred in 1992. The future
minimum annual commitments as of December 31, 1994 were as follows;
1995--$1.2 million, 1996--$1.2 million, 1997--$1.1 million, and
1998--$0.7 million. The Company will require similar services after
the existing contract expires in August, 1998.
RESTRUCTURING EXPENSE
In 1994, the Company implemented a restructuring plan that included
a reduction in the work force and the closing of three offices. A
charge of $1.2 million, related to the termination benefits for 35
employees who were terminated during 1994 after the adoption of the
exit plan in branches and consolidations relating to headquarter
functions, was recognized. Exit costs relating to the closure of
three offices and professional fees relating to the terminations
totalled $1.1 million, including $0.7 million for the impairment of
long-lived assets. One office has been closed and disposed of, the
second has been converted to an automated facility in order to allow
a limited level of service to the community, and the third is
scheduled for closure in January 1995, with disposition to occur as
expediently as possible thereafter.
During 1994, termination benefits of $0.3 million and exit
costs totalling $0.1 million were paid and charged to the liability
under the restructuring plan. Long-lived assets were disposed of at
a loss of $0.2 million which was charged to the valuation allowance
related to the restructuring. No adjustments have been made to
either the restructuring liability or the valuation allowance
related to the impairment of long-lived assets due to the
restructuring.
COMMITMENTS AND CONTINGENT LIABILITIES
The Bank is a party to financial instruments with off-balance sheet
risk in the normal course of business to meet the financing needs of
its customers. These financial instruments include commitments to
extend credit and standby letters of credit. These instruments
involve, to varying degrees, elements of credit and interest rate
risk in excess of the amount recognized in the consolidated balance
sheet.
The Bank's exposure to credit loss in the event of
nonperformance by the other party to the commitments to extend
credit and standby letters of credit is represented by the
contractual amount of those instruments. The Bank uses the same
credit standards in making commitments and conditional obligations
as it does for on-balance sheet instruments. At December 31, 1994,
off-balance sheet commitments to extend credit amounted to $85.5
million secured by $52.9 million in collateral value. The amount of
standby letters of credit at December 31, 1994, amounted to $2.5
million secured by $.2 million in cash.
At December 31, 1994 and 1993, the Company holds no off-balance
sheet derivative financial instruments such as interest rate swaps,
forward contracts, futures, options on financial futures, or
interest rate caps and floors, and was not subject to the market
risk associated with such derivative financial instruments. As
discussed previously, the Company's only financial instruments with
off-balance sheet risk are commitments to extend credit and standby
letters of credit. These off-balance sheet items are shown in the
Company's consolidated balance sheet upon funding.
In the normal course of business there are various outstanding
legal proceedings. In the opinion of management, the aggregate
amount involved in such proceedings is not material to the financial
condition or results of operations of the Company.
STOCKHOLDERS' EQUITY
The Company has a Dividend Reinvestment Plan for stockholders under
which 1,704 shares of common stock were issued in 1994 and 35,721
were issued in 1993. There were 134,003 shares of common stock
reserved for future issuance under the plan at December 31, 1994.
Certain restrictions exist regarding the ability of the Bank to
transfer funds to the Company in the form of cash dividends. The
approval of the Comptroller of the Currency is required to pay
dividends in excess of the Bank's earnings retained in the current
year plus retained net profits for the preceding two years or when
the Bank fails to meet certain minimum regulatory capital standards.
At December 31, 1994, the Bank has the ability to pay $9.0 million
in dividends to the Company without obtaining prior regulatory
approval. Under the State of Delaware Business Corporation Law, the
Company may declare and pay dividends either out of accumulated net
retained earnings or capital surplus.
23
<PAGE>
Under various regulatory guidelines, the Bank and the Company
are required to maintain certain minimum regulatory capital ratios
referred to as Tier 1 Capital Ratio, Total Risk-Based Capital Ratio,
and Tier 1 Leverage Ratio. The minimum Tier 1 Capital Ratio and
Total Risk-Based Capital Ratio regulatory guidelines required at
December 31, 1994 are 4% and 8%, respectively. The Tier 1 Leverage
Ratio regulatory guideline is 4%. The Bank and the Company are
substantially in excess of these guidelines at December 31, 1994.
The Company currently is authorized to issue 2 million shares
of preferred stock, no par value, $1.00 stated value. The Board of
Directors is authorized to fix the particular designations,
preferences, rights, qualifications, and restrictions for each
series of preferred stock issued. In November 1994, the Company
adopted a Stockholder Rights Plan (Plan) designed to ensure that any
potential acquiror of the Company negotiate with the Board of
Directors and that all Company stockholders are treated equitably in
the event of a takeover attempt. At that time, the Company paid a
dividend of one Preferred Share Purchase Right (Right) for each
outstanding share of common stock of the Company. Similar Rights
are attached to each share of the Company's common stock issued
after November 15, 1994, subject to adjustment. Under the Plan, the
Rights will not be exercisable until a person or group acquires
beneficial ownership of 20 percent or more of the Company's
outstanding common stock, begins a tender or exchange offer for 25
percent or more of the Company's outstanding common stock, or an
adverse person, as declared by the Board of Directors, acquires 10
percent or more of the Company's outstanding common stock.
Additionally, until the occurrence of such an event, the Rights are
not severable from the Company's common stock and, therefore, the
Rights will be transferred upon the transfer of shares of the
Company's common stock. Upon the occurrence of such events, each
Right entitles the holder to purchase one one-hundredth of a share
of Series R Preferred Stock, no par value, and $1.00 stated value
per share of the Company at a price of $100.
The Plan also provides that upon the occurrence of certain
specified events, the holders of Rights will be entitled to acquire
additional equity interests, in the Company or in the acquiring
entity, such interests having a market value of two times the
Right's exercise price of $100. The Rights, which expire November
14, 2004, are redeemable in whole, but not in part, at the Company's
option prior to the time they are exercisable, for a price of $0.01
per Right.
PENSION AND OTHER EMPLOYEE BENEFIT PLANS
PENSION PLAN
The Company has a qualified, noncontributory pension plan covering
substantially all employees. Benefits paid from the plan are based
on age, years of service, compensation prior to retirement, social
security benefits, and are determined in accordance with defined
formulas. The Company's policy is to fund the pension plan in
accordance with ERISA standards. The net pension expense and the
funded status of the plan are as follows:
<PAGE>
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
--------------------------------------------------------------------------------
Year ended December 31, 1994 1993 1992
--------------------------------------------------------------------------------
(in thousands)
Service cost $ 609 $ 496 $ 406
Interest cost 736 732 717
Actual return on plan assets 25 (763) (1,519)
Net amortization and deferral (1,189) (350) 527
Administrative cost - - 20
--------------------------------------------------------------------------------
Net pension cost $ 181 $ 115 $ 151
--------------------------------------------------------------------------------
<CAPTION>
<S> <C> <C>
-------------------------------------------------------------------------
December 31, 1994 1993
-------------------------------------------------------------------------
(in thousands)
Plan assets, fair value of primarily
listed stocks and fixed income securities $12,139 $12,229
-------------------------------------------------------------------------
Actuarial present value of benefits for
services rendered to date:
Accumulated benefit obligation,
including vested benefits of $8,435
in 1994 and $9,414 in 1993 8,532 9,596
Additional benefits based on estimated
future salary levels 833 655
-------------------------------------------------------------------------
Projected benefit obligation 9,365 10,251
-------------------------------------------------------------------------
Excess of plan assets over
projected benefit obligation 2,774 1,978
Unrecognized net actuarial gain (1,886) (1,378)
Unamortized prior service cost 1,053 1,109
Unamortized transition asset (1,631) (1,740)
-------------------------------------------------------------------------
Prepaid (accrued) pension cost included
in other assets (liabilities) $ 310 $ (31)
-------------------------------------------------------------------------
Weighted average discount rate 8.75% 7.50%
Assumed increase in future salary 4.00% 4.00%
Expected rate of return on plan assets 9.00% 9.00%
-------------------------------------------------------------------------
</TABLE>
24
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
In 1993 the Company adopted Statement of Financial Accounting
Standards No. 106, "Employers' Accounting for Postretirement
Benefits Other Than Pensions" (SFAS 106), which requires the accrual
of nonpension benefits over the employees' active service period,
defined as the date of employment up to the date of the employees'
eligibility for such benefits. The Company provides certain health
care benefits for retired employees. The health care plans are
contributory for participating retirees and also requires them to
absorb deductibles and coinsurance with contributions adjusted
annually to reflect cost-sharing provisions and benefit limitations.
Substantially all of the employees may become eligible for these
benefits if they reach normal retirement age while working for the
Company or its subsidiaries. The benefits are provided through
self-insured plans administered by insurance companies, whose
premiums are based on the claims paid during the year. The Company
funds the cost of post retirement health care as benefits are paid.
As permitted by SFAS 106, the Company elected to recognize the
transition obligation in the statements of financial position and
income on a delayed basis over the plan participant's future service
periods, estimated to be twenty years. The net postretirement
health benefits expense and funded status are as follows:
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
------------------------------------------------------------------------------
Year ended December 31, 1994 1993
------------------------------------------------------------------------------
(in thousands)
Service cost $ 102 $ 55
Interest cost 178 179
Actual return on plan assets - -
Amortization of transition obligation 105 105
Net, other - (79)
------------------------------------------------------------------------------
Net postretirement benefit cost $ 385 $ 260
------------------------------------------------------------------------------
<CAPTION>
<S> <C> <C>
------------------------------------------------------------------------------
December 31, 1994 1993
------------------------------------------------------------------------------
(in thousands)
Fair value of plan assets $ - $ -
------------------------------------------------------------------------------
Accumulated postretirement benefit obligation:
Retired participants 1,090 1,031
Fully eligible participants 213 548
Other active participants 840 679
------------------------------------------------------------------------------
Projected postretirement benefit obligation 2,143 2,258
------------------------------------------------------------------------------
Unrecognized net actuarial gain 297 -
Unrecognized prior service cost - -
Unrecognized transition obligation (1,893) (1,998)
------------------------------------------------------------------------------
Liability for postretirement benefit cost
included in other liabilities $ 547 $ 260
------------------------------------------------------------------------------
Weighted average discount rate 8.75% 8.50%
------------------------------------------------------------------------------
</TABLE>
The Company will use a health care trend rate in calculating
its postretirement benefit obligation of 10.5% for 1995, grading
down uniformly to 5.5% for 2005 and thereafter.
The effect of a one-percentage-point increase in the assumed
health care cost trend rates for each future year on the aggregate
of the service and interest cost components of net periodic
postretirement health care benefit cost and the accumulated
postretirement benefit obligation for health care benefits would
increase these amounts for 1994 by 13%, to $0.3 million, and by 10%,
to $2.4 million, respectively.
EMPLOYEE STOCK OWNERSHIP PLAN
The Company has a qualified Employee Stock Ownership Plan for
employees who meet certain age and service requirements under which
contributions are made by the Bank to a separate trust for the
benefit of participating employees. Provisions for contributions to
the Plan amounted to $0.5 million in 1994, $0.6 million in 1993, and
$0.7 million in 1992.
STOCK OPTION PLANS
The Company has two stock option plans. At December 31, 1994, there
are 769,915 shares of the Company's common stock reserved for
issuance under the plans. The 1993 Stock Option Plan amended the
prior Stock Option Plan, so that no further options or stock
appreciation rights (SARs) could be granted under the earlier plan.
Additionally, the amendment provided for the dissolution of the in-
tandem feature of previously granted options and SARs, the
cancellation of previously granted SARs, and granting of replacement
options in a ratio of seven-tenths of an option for each SAR
surrendered. During 1993 all of the in-tandem SARs outstanding were
exchanged for options on 93,773 shares. Accrued SARs compensation
expense was $-0- in 1994, $-0- in 1993, and $0.1 million in 1992.
Under the terms of the Stock Option Plans, options were granted
to key employees to purchase shares of the Company's common stock
at a price equal to the fair market value of the common stock on the
date of the grant. Under the plans, options may be designated as
Incentive Stock Options or as Nonqualified Stock Options. Options
granted terminate eight or ten years from the date of the grant.
<PAGE>
<TABLE>
Changes in options and shares under options are:
<CAPTION>
<S> <C> <C> <C>
------------------------------------------------------------------------------------------------------------------
No. of No. of Price
Shares SARs per Share
------------------------------------------------------------------------------------------------------------------
Shares under option at:
December 31, 1994 355,667 - $ 9.46-$16.90
December 31, 1993 395,466 - $ 9.46-$15.54
December 31, 1992 293,497 148,643 $ 9.46-$13.06
Options granted and SARs granted and SARs exchanged:
1994 79,485 - $14.94-$16.90
1993 181,412 (140,727) $ 9.46-$15.54
1992 93,131 46,565 $ 9.71-$ 9.93
Options and SARs exercised:
1994 89,332 - $ 9.46-$13.06
1993 67,407 7,916 $ 9.46-$13.06
1992 15,011 1,408 $ 9.93-$12.44
Options and SARs lapsed:
1994 29,951 - $ 9.93-$16.90
1993 11,994 - $ 9.93-$13.06
1992 23,087 18,211 $ 9.93-$13.06
------------------------------------------------------------------------------------------------------------------
</TABLE>
25
<PAGE>
<TABLE>
PARENT COMPANY FINANCIAL INFORMATION
CONDENSED BALANCE SHEETS
<CAPTION>
<S> <C> <C>
---------------------------------------------------------------------------------------------------
December 31, (in thousands) 1994 1993
---------------------------------------------------------------------------------------------------
ASSETS
Cash $ 24 $ 24
Due from subsidiary bank 67 15
Short-term securities available for sale 1,300 1,850
Securities available for sale 7,041 7,051
Loans 54 -
Investment in subsidiary bank 93,434 96,504
Other assets 119 118
---------------------------------------------------------------------------------------------------
Total assets $102,039 $105,562
---------------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Other liabilities $ 161 $ 168
Long-term debt 3,571 4,286
---------------------------------------------------------------------------------------------------
Total liabilities 3,732 4,454
Stockholders' equity 98,307 101,108
---------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $102,039 $105,562
---------------------------------------------------------------------------------------------------
<CAPTION>
CONDENSED STATEMENTS OF INCOME
<S> <C> <C> <C>
-----------------------------------------------------------------------------------------------------------------------
Year ended December 31, 1994 1993 1992
-----------------------------------------------------------------------------------------------------------------------
(in thousands)
Interest and dividends on securities $ 291 $ 349 $ 348
Gains on sale of securities available for sale - 185 -
Income from subsidiary bank:
Current year income of subsidiary bank:
Distributed 5,000 5,000 4,250
Undistributed 1,975 3,674 4,028
-----------------------------------------------------------------------------------------------------------------------
72,266 9,208 8,626
Interest expense 447 527 545
Operating expense 617 270 184
-----------------------------------------------------------------------------------------------------------------------
Income before income taxes 6,202 8,411 7,897
Credit for income taxes (306) (94) (146)
-----------------------------------------------------------------------------------------------------------------------
NET INCOME $ 6,508 $ 8,505 $ 8,043
-----------------------------------------------------------------------------------------------------------------------
<PAGE>
<CAPTION>
CONDENSED STATEMENTS OF CASH FLOWS
<S> <C> <C> <C>
-----------------------------------------------------------------------------------------------------------------------
Year ended December 31, (in thousands) 1994 1993 1992
-----------------------------------------------------------------------------------------------------------------------
OPERATING ACTIVITIES:
Net income $ 6,508 $ 8,505 $ 8,043
Adjustments to reconcile net income to
net cash provided by operating activities:
Amortization of premiums and accretion of discounts on securities 13 11 -
Realized gains on sale of securities available for sale - (185) -
(Increase) decrease in other assets (6) (13) 5
Increase (decrease) in other liabilities (8) (2) 12
Undistributed net income of subsidiary bank (1,975) (3,674) (4,028)
Other 1 (43) -
-----------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 4,533 4,599 4,032
Investing Activities:
Securities available for sale:
Proceeds from maturities 1,000 1,000 500
Proceeds from sales of securities - 4,896 -
Purchases (1,001) (9,775) -
Other, net (49) - -
-----------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) investing activities (50) (3,879) 500
Financing Activities:
Repayment of long-term debt (714) (714) -
Net sales of common stock and treasury stock (662) 1,136 1,124
Cash dividends and payment for fractional shares (3,605) (3,314) (2,981)
-----------------------------------------------------------------------------------------------------------------------
Net cash used in financing activities (4,981) (2,892) (1,857)
-----------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents (498) (2,172) 2,675
Cash and cash equivalents at beginning of year 1,889 4,061 1,386
-----------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $ 1,391 $ 1,889 $ 4,061
-----------------------------------------------------------------------------------------------------------------------
</TABLE>
26
<PAGE>
FAIR VALUES OF FINANCIAL INSTRUMENTS
A financial instrument is defined as cash, evidence of an
ownership interest in an entity, or a contract that imposes the
obligation to deliver, receive, or exchange cash or other financial
instruments between willing entities on potentially favorable or
unfavorable terms. The Company held no off-balance sheet derivative
financial instruments at December 31, 1994 and 1993. The following
methods and assumptions were used to estimate the fair value of each
class of financial instruments.
CASH AND DUE FROM BANKS AND FEDERAL FUNDS SOLD For these short-term
instruments, carrying value approximates fair value.
SECURITIES Fair values for securities are based on quoted market
prices or dealer quotes, where available. Where quoted market
prices are not available, fair values are based on quoted market
prices of comparable instruments.
LOANS For variable-rate loans that reprice frequently and have no
significant credit risk, fair values are based on carrying values.
The fair values for fixed-rate loans are estimated through
discounted cash flow analyses using interest rates currently being
offered for loans with similar terms and credit quality. The fair
value of loans available for sale on an aggregate basis, are based
on quoted market prices.
Nonperforming loans are valued based upon recent loss history
for similar loans.
ACCRUED INTEREST RECEIVABLE AND PAYABLE For these short-term
instruments, carrying value approximates fair value.
DEPOSITS The fair values disclosed for savings accounts, money
market accounts and noninterest bearing accounts are, by
definition, equal to their carrying values at the reporting date.
The fair value of fixed maturity certificates of deposit is
estimated using a discounted cash flow analysis that applies
interest rates currently being offered on certificates to a schedule
of aggregated expected monthly maturities on time deposits.
SHORT-TERM BORROWINGS For short-term borrowings, carrying value
approximates fair value.
LONG-TERM DEBT The fair value of long-term debt has been estimated
using discounted cash flow analyses that apply interest rates
currently being offered for notes with similar terms.
COMMITMENTS TO EXTEND CREDIT AND STANDBY LETTERS OF CREDIT The fair
value of commitments to extend credit and standby letters of credit
are estimated using fees currently charged to enter into similar
agreements, taking into account the remaining terms of the
agreements and the present creditworthiness of the counterparts.
<PAGE>
<TABLE>
ESTIMATED FAIR VALUES OF THE COMPANY'S FINANCIAL INSTRUMENTS
<CAPTION>
<S> <C> <C> <C> <C>
---------------------------------------------------------------------------------------------------------------
December 31, 1994 1993
---------------------------------------------------------------------------------------------------------------
Carrying Fair Carrying Fair
(in thousands) Amount Value Amount Value
---------------------------------------------------------------------------------------------------------------
Financial Assets
Cash and due from banks $ 42,110 $ 42,110 $ 31,268 $ 31,268
Federal funds sold - - 3,000 3,000
Loans available for sale 10,921 10,921 10,003 10,003
Securities available for sale 109,777 109,777 209,687 209,687
Securities held to maturity 272,466 261,913 108,077 111,049
Loans
Commercial, financial and agricultural 215,380 208,650 206,837 205,510
Real estate mortgage 129,275 126,588 136,103 137,704
Consumer 230,063 227,933 216,920 218,131
---------------------------------------------------------------------------------------------------------------
Total loans 574,718 563,171 559,860 561,345
Less: allowance for loan losses 9,026 - 8,652 -
---------------------------------------------------------------------------------------------------------------
Net loans 565,692 563,171 551,208 561,345
Accrued interest receivable 9,417 9,417 7,285 7,285
---------------------------------------------------------------------------------------------------------------
FINANCIAL LIABILITIES
Deposits
Interest bearing:
Savings and money market 369,456 369,456 418,395 418,395
Certificates of deposit 299,551 298,054 276,675 278,881
Noninterest bearing 122,436 122,436 112,158 112,158
---------------------------------------------------------------------------------------------------------------
Total deposits 791,443 789,946 807,228 809,434
Short-term borrowings 140,587 140,587 26,701 26,701
Long-term debt 8,734 8,841 14,457 15,576
Accrued interest payable 1,754 1,754 1,579 1,579
---------------------------------------------------------------------------------------------------------------
Unrecognized Financial Instruments:
Commitments to extend credit 85,484 86,308 76,052 76,771
Standby letters of credit $ 2,504 $ 2,534 $ 2,083 $ 2,108
---------------------------------------------------------------------------------------------------------------
</TABLE>
Fair value estimates are made at a specific point in time,
based on relevant market information and information about the
financial instrument. These estimates are subjective in nature and
involve uncertainties and matters of significant judgment and,
therefore, cannot be determined with precision. Changes in
assumptions could significantly affect the estimates.
27
<PAGE>
<TABLE>
SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
Selected quarterly financial data for the two years ended December 31, 1994 is summarized
as follows:
<CAPTION>
<S> <C> <C> <C> <C>
-----------------------------------------------------------------------------------------------------------------
1994 First Second Third Fourth
-----------------------------------------------------------------------------------------------------------------
(in thousands,except per share data)
Interest and fee income $16,445 $17,304 $18,283 $18,406
Interest expense 5,617 6,142 6,708 7,275
Net interest income 10,828 11,162 11,575 11,131
Provision for loan losses 810 942 872 447
Noninterest income excluding
securities gains 1,881 1,884 1,808 911
Securities gains 555 - - -
Noninterest expense 9,495 9,156 10,967 9,056
Net income 1,803 1,814 1,002 1,889
Net income per common share $ 0.22 $ 0.22 $ 0.13 $ 0.23
Return on average assets 0.76% 0.72% 0.38% 0.73%
Return on average equity 7.24% 7.32% 4.00% 7.59%
Average common shares outstanding 8,162 8,132 8,072 8,066
-----------------------------------------------------------------------------------------------------------------
1993 First Second Third Fourth
-----------------------------------------------------------------------------------------------------------------
Interest and fee income $16,748 $16,469 $16,921 $16,819
Interest expense 5,753 5,770 5,848 5,829
Net interest income 10,995 10,699 11,073 10,990
Provision for loan losses 879 628 492 282
Noninterest income excluding
securities gains 1,874 2,053 2,145 2,036
Securities gains - 228 758 587
Noninterest expense 8,618 8,965 10,001 9,714
Net income 2,160 2,010 2,171 2,164
Net income per common share $ 0.27 $ 0.25 $ 0.26 $ 0.27
Return on average assets 1.01% 0.91% 0.93% 0.90%
Return on average equity 9.29% 8.41% 8.82% 8.67%
Average common shares outstanding 7,999 8,073 8,118 8,084
-----------------------------------------------------------------------------------------------------------------
</TABLE>
28
<PAGE>
MANAGEMENT'S STATEMENT OF RESPONSIBILITY
Responsibility for the integrity, objectivity, consistency, and
fair presentation of the financial information presented in this
Annual Report rests with NBT Bancorp Inc. management. The
accompanying financial statements and related information have been
prepared in conformity with generally accepted accounting principles
consistently applied and include, where required, amounts based on
informed judgments and management's best estimates.
Management maintains a system of internal controls and
accounting policies and procedures to provide reasonable assurance
of the accountability and safeguarding of Company assets and of the
accuracy of financial information. These procedures include
management evaluations of asset quality and the impact of economic
events, organizational arrangements that provide an appropriate
segregation of responsibilities and a program of internal audits to
evaluate independently the adequacy and application of financial and
operating controls and compliance with Company policies and
procedures.
The Board of Directors has appointed an Audit Committee
composed entirely of directors who are not employees of the Company.
The Audit Committee is responsible for recommending to the Board the
independent accounting firm to be retained for the coming year,
subject to stockholder ratification. The Audit Committee meets
periodically, both jointly and privately, with the independent
public accountants, with our internal auditors, as well as with
representatives of management, to review accounting, auditing,
internal control structure and financial reporting matters. The
Committee reports to the Board on its activities and findings.
/s/Daryl R. Forsythe
--------------------
Daryl R. Forsythe
President and Chief Executive Officer
/s/Richard I. Linhart
---------------------
Richard I. Linhart
Vice President,
Chief Financial Officer and Treasurer
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
NBT Bancorp Inc.:
We have audited the accompanying consolidated balance sheets of
NBT Bancorp Inc. and subsidiary as of December 31, 1994 and 1993,
and the related consolidated statements of income, stockholders'
equity and cash flows for each of the years in the three-year period
ended December 31, 1994. These consolidated financial statements
are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred
to above present fairly, in all material respects, the financial
position of NBT Bancorp Inc. and subsidiary as of December 31, 1994
and 1993, and the results of their operations and their cash flows
for each of the years in the three-year period ended December 31,
1994, in conformity with generally accepted accounting principles.
As discussed in the notes to the consolidated financial
statements, the Company changed its method of accounting for
securities to adopt the provisions of Statement of Accounting
Standards No. 115, "Accounting for Certain Investments in Debt and
Equity Securities" at December 31, 1993. Also, as discussed in the
notes to the consolidated financial statements, the Company changed
its method of accounting for postretirement benefits other than
pensions to adopt the provisions of Statement of Accounting
Standards No. 106, "Employers' Accounting for Postretirement
Benefits Other Than Pensions" at January 1, 1993.
/s/KPMG Peat Marwick LLP
------------------------
KPMG Peat Marwick LLP
Syracuse, New York
January 20, 1995
29
<PAGE>
<TABLE>
FIVE YEAR SUMMARY OF SELECTED FINANCIAL DATA
<CAPTION>
<S> <C> <C> <C> <C> <C>
------------------------------------------------------------------------------------------------------------------------
(in thousands,except per share data) 1994 1993 1992 1991 1990
------------------------------------------------------------------------------------------------------------------------
Year ended December 31
Interest and fee income $ 70,438 $ 66,957 $ 69,208 $ 78,628 $ 82,949
Interest expense 25,742 23,200 27,194 38,294 42,769
Net interest income 44,696 43,757 42,014 40,334 40,180
Provision for loan losses 3,071 2,281 2,362 3,282 2,181
Noninterest income excluding
securities gains 6,484 8,108 8,895 7,311 7,238
Securities gains 555 1,573 1,108 475 2
Noninterest expense 38,674 37,298 36,093 34,531 34,191
Income before income taxes 9,990 13,859 13,562 10,307 11,048
Net income 6,508 8,505 8,043 7,179 7,540
------------------------------------------------------------------------------------------------------------------------
PER COMMON SHARE*
Net income $ 0.80 $ 1.05 $ 1.02 $ 0.92 $ 0.97
Cash dividends declared $ 0.449 $ 0.413 $ 0.376 $ 0.355 $ 0.338
Book value at year end $12.27 $ 12.58 $ 11.82 $ 11.18 $ 10.62
Tangible book value $11.04 $ 10.95 $ 9.64 $ 8.43 $ 7.26
Average common shares outstanding 8,108 8,070 7,920 7,804 7,786
------------------------------------------------------------------------------------------------------------------------
STOCK INFORMATION
Stock dividends distributed 5% 5% 5% 5% 5%
Stock splits distributed None None None None 3 for 2
------------------------------------------------------------------------------------------------------------------------
AT DECEMBER 31
Assets available for sale $ 120,698 $219,690 $ 39,590 - -
Securities held to maturity 272,466 108,077 215,515 207,991 215,400
Loans 574,718 559,860 539,283 527,755 524,250
Allowance for loan losses 9,026 8,652 9,245 9,845 10,483
Total assets 1,044,557 953,907 868,616 838,884 849,942
Deposits 791,443 807,228 740,749 722,820 748,363
Short-term borrowings and long-term debt 149,321 41,158 26,738 21,700 12,076
Total stockholders' equity 98,307 101,108 94,012 87,826 82,405
------------------------------------------------------------------------------------------------------------------------
KEY RATIOS
Return on average assets 0.64% 0.93% 0.94% 0.85% 0.91%
Return on average equity 6.53% 8.79% 8.89% 8.45% 9.42%
Net interest margin 4.81% 5.26% 5.52% 5.64% 5.71%
Tier 1 leverage ratio
(Regulatory guideline 4%) 9.05% 9.24% 9.01% 7.92% 6.70%
Tier 1 risk-based capital ratio
(Regulatory guideline 4%) 16.09% 15.40% 15.30% 14.12% 12.66%
Total risk-based capital ratio
(Regulatory guideline 8%) 17.35% 16.66% 16.61% 14.12% 12.66%
------------------------------------------------------------------------------------------------------------------------
*All per share data has been restated to give retroactive effect to stock dividends and splits.
</TABLE>
30
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
PERFORMANCE OVERVIEW
In December 1994, NBT distributed a 5% stock dividend for the
thirty-fifth consecutive year. Throughout this discussion, amounts per
common share and common shares outstanding have been retroactively
adjusted to reflect these stock dividends.
Net income was $6.5 million for 1994, $8.5 million for 1993, and
$8.0 million for 1992. Net income per share was $0.80 for 1994,
compared to $1.05 for 1993, and $1.02 for 1992.
Return on average assets was 0.64%, 0.93%, and 0.94% for the years
ended December 31, 1994, 1993, and 1992, respectively. Return on
average equity for the same periods was 6.53%, 8.79%, and 8.89%,
respectively.
In 1994, NBT recognized that its ongoing overhead structure was
misaligned with its present level of business. In response to divergent
opportunities and market forces, a number of initiatives were taken to
improve earnings prospects through a cost cutting and market
repositioning plan that reallocates resources to streamline operations
and adjust spending and employment levels to remain competitive. During
the second half of 1994, the Company announced and implemented
restructuring plans which included branch closures and reduced hours
resulting in a reduction in the work force of approximately 10%, 60
full-time equivalent positions, of which 35 were terminations. The plan
resulted in the closing of the Proctor, Wilmington and Gloversville
downtown offices in conjunction with enhancements at nearby offices or
conversion to automated facilities. The restructuring involved charges
to earnings for the year ended December 31, 1994, of $2.3 million pre-
tax, $1.3 million after-tax.
NBT has continued its strategy of gaining strength through
geographic diversification. Since the start of 1993, the Company has
added five community banking offices to its network. Included are a
business banking center established in Binghamton in the first quarter
of 1993, and converted to a full-service banking office in the second
quarter of 1994, one office acquired in the Plattsburgh market in the
second quarter of 1993, two offices acquired in the Plattsburgh market
in the third quarter of 1993, and a new business banking center
established in Vestal, opened in April 1994. In October 1994, the Utica
Business Park office was opened, serving as the Oneida County regional
headquarters and a business banking center.
The Bank has a strong community reinvestment focus and follows the
practice of reinvesting funds, generated by the communities it serves,
within these same communities, lending only within its market area and
viewing such loans as community investments. In response to the needs
of these communities in 1994, NBT committed to a program of targeted
community lending extending over a five year period. Funds totalling
$40 million have been made available as three separate programs for
qualified projects. The funds are allocated within all geographic areas
NBT serves and are alloted $15 million to an affordable housing
program, $10 million for a property improvement program, and $15
million for a small business loan program.
NET INTEREST INCOME AND NET INTEREST MARGIN
Net interest income is the difference between interest and fees
earned on loans, securities and short-term investments, and the
interest paid on deposits and borrowed funds. Net interest income is
affected by a number of factors including the volume, pricing, and
maturity of earning assets and interest bearing liabilities, interest
rate fluctuations, and asset quality. In the following discussion,
interest income is presented on a fully taxable equivalent (FTE) basis
applying the statutory Federal income tax rate of 35% for 1994 and
1993, and 34% for 1990 through 1992.
FTE net interest income achieved a record level for 1994. Between
1994 and 1993, FTE net interest income increased 2% to $45.4 million.
This increase occurred despite the decline in net interest margin to
4.81% for 1994, from 5.26% for 1993, and 5.52% for 1992. A strong net
interest margin, FTE net interest income as a percentage of average
earnings assets, is critical to the ability to cover operating expenses
and produce an acceptable return on assets. The change in net interest
margin reflects the sustained low interest rate environment the U.S.
economy has experienced, starting in 1991 and continuing until the
increase in rates which began in February 1994, and continued through
the year. During this extended declining and low interest rate period,
various assets matured or were paid down and new loans and investment
purchases were made at lower rates. Additionally, increased
competitiveness in the financial services industry effected the pricing
of loans. This decline, which was partially offset by an 12% increase
in earning assets funded primarily by short-term borrowings, put
pressure on net interest income, the difference in interest income on
earning assets and interest expense on deposits and borrowings, and
compressed net interest margin, the return on earning assets.
The Company manages its exposure to economic loss from fluctuations
in interest rates (interest rate risk) through an active program of asset-
liability management within guidelines established by its Asset-Liability
Management Committee (ALCO). The ALCO has the responsibility for approving
the asset-liability strategy of the Company, approving changes in the balance
xheet that would result form strategic decisions, approving strategies to
improve balance sheet positioning and earnigns, and reviewing the interest
rate sensitivity position of the Company. Through its asset-liability
management process, the ALCO monitors the rate sensitivity of the balance
sheet closely during the year. In 1994 it was determined that the balance
sheet had excess asset sensitiviey which would have a negative effect on the
net interest margin as rates decline.
31
<PAGE>
[PIE CHART APPEARS HERE]
<TABLE>
1994 AVERAGE EARNING ASSETS MIX
<CAPTION>
<S> <S>
Category Percent of Total
-------- ----------------
Loans 61.0%
Securities available for sale 14.5%
Securities held to maturity 24.5%
1994 FUNDING MIX OF AVERAGE LIABILITIES
[PIE CHART APPEARS HERE]
<CAPTION>
<S> <S>
Category Percent of Total
-------- ----------------
Interest-bearing deposits 77.3%
Noninterest-bearing deposits 13.1%
Borrowings 9.6%
</TABLE>
During 1994, the ALCO undertook several strategic actions to
improve net interest income, and reduce the level of sensitivity,
employing strategies which, because of the rate environment and
portfolio maturities of higher yielding funds purchased previously,
would not necessarily improve net interest margin. Remaining well
within its established liquidity guidelines, the Bank utilized $60
million of its access to lower cost funds to purchase securities to be
held to maturity yielding a higher rate than its incremental borrowing
rate and improving net interest income. This leveraging of the balance
sheet had a positive impact on net interest income.
In 1993, FTE net interest income was $44.4 million, up 3% from the
1992 amount of $43.1 million. Several strategic transactions were made
during 1992 and 1993, whereby shorter term U.S. treasury securities
were sold and reinvested in longer term government agency mortgage
backed securities at then current lower yields. This strategy was
implemented to sustain the continued yield stream at levels anticipated
to be greater than those in effect when the sold securities would have
matured. Interest rates paid on deposits from 1991 through 1993 were
adjusted downward commensurate with the general overall interest rate
environment to better match the cost of funds with their potential
reinvestment rates. The combination of adjusting deposit rates and
changing the composition and extending the maturity in the investment
portfolio allowed the Company to maintain a net interest margin of
approximately 5.26% for 1993, compared to 5.52% for 1992.
The most significant impact on the Company's net income between
periods is derived from the interaction of changes in the volume of and
rates earned on interest earning assets and paid on interest bearing
liabilities. The volume of earning securities and loans, compared to
the volume of interest bearing liabilities represented by deposits and
borrowings, combined with interest rate spread, produces the changes
in the net interest income between periods. The table of Changes in
Taxable Equivalent Net Interest Income - Rate/Volume Analysis presents
the relative contribution of changes in average interest rates and
average volume of interest earning assets and interest bearing
liabilities on FTE net interest income for 1994 compared with 1993, and
1993 compared with 1992. Changes in interest income and expense arising
from the combination of rate and volume variances, which cannot be
segregated, are allocated proportionally to rate and volume based on
their relative absolute magnitudes. For both comparative periods
presented, the growth in FTE net interest income can be attributed
almost totally to the growth in the volume of earning assets.
<PAGE>
<TABLE>
CHANGES IN TAXABLE EQUIVALENT NET INTEREST INCOME - RATE/VOLUME ANALYSIS
---------------------------------------------------------------------------------------------------
Increase (Decrease) Increase (Decrease)
1994 over 1993 1993 over 1992
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
----------------------------------------------------------------------------------------------------------------------------
(in thousands) Volume Rate Total Volume Rate Total
----------------------------------------------------------------------------------------------------------------------------
Interest-bearing deposits $ 2 $ 4 $ 6 $ 2 $ - $ 2
Federal funds sold (12) - (12) (3) (3) (6)
Other short-term investments
available for sale (259) 54 (205) (323) (172) (495)
Securities available for sale 2,629 222 2,851 4,958 - 4,958
Loans available for sale 190 139 329 342 - 342
Securities held to maturity:
Taxable 2,389 (734) 1,655 (2,554) (666) (3,220)
Tax-exempt 270 (135) 135 (410) (832) (1,242)
Loans 1,312 (2,546) (1,234) 2,163 (5,161) (2,998)
----------------------------------------------------------------------------------------------------------------------------
Total interest income 6,521 (2,996) 3,525 4,175 (6,834) (2,659)
----------------------------------------------------------------------------------------------------------------------------
Money market deposit accounts (276) (436) (712) (43) (1,041) (1,084)
NOW accounts 91 (254) (163) 209 (672) (463)
Savings accounts 256 (513) (257) 904 (958) (54)
Certificates of deposit 1,235 (358) 877 314 (2,910) (2,596)
Short-term borrowings 2,405 337 2,742 19 (75) (56)
Long-term debt 187 (132) 55 445 (186) 259
----------------------------------------------------------------------------------------------------------------------------
Total interest expense 3,898 (1,356) 2,542 1,848 (5,842) (3,994)
----------------------------------------------------------------------------------------------------------------------------
Change in net interest income $2,623 $(1,640) $ 983 $ 2,327 $ (992) $ 1,335
----------------------------------------------------------------------------------------------------------------------------
</TABLE>
32
<PAGE>
PROVISION AND ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses has been established to provide for
the estimated potential loss related to the collection of the Bank's
loan portfolio. The allowance is maintained at a level considered
adequate to provide for loss exposure based on management's estimate
of potential future losses considering an evaluation of portfolio risk,
prevailing and anticipated economic factors, and past loss experience.
Management determines the provision and allowance for loan losses based
on a number of factors including a comprehensive in-house loan review
program conducted throughout the year. The loan portfolio is
continually evaluated in order to identify potential problem loans,
credit concentration, and other risk factors such as current and
projected economic conditions locally and nationally. The levels of
risk for which allowances are established are based on estimates of
probable losses on larger specifically identified loans, and on loan
categories analyzed in total where, based on past experience, risk
factors can be assessed. General economic trends can greatly affect
loan losses and there are no assurances that further changes to the
loan loss allowance may not be significant in relation to the amount
provided during a particular period. Management does, however,
consider the allowance for loan losses to be adequate for the reporting
periods based on evaluation and analysis of the loan portfolio.
Accompanying tables reflect the five years history of net charge-
offs and the allocation of the allowance by loan category. The
provision for loan losses was $3,071,000 for 1994, compared to
$2,281,000 for 1993. Charge-offs increased 1.7% in 1994 to $3,722,000,
and recoveries increased 30.4% to $1,025,000. This resulted in the
allowance for loan losses increasing $374,000 or 4.3% to $9,026,000 at
December 31, 1994, from $8,652,000 at December 31, 1993. The allowance
for loan losses at December 31, 1994, represents 1.57% of year-end
loans and 165% of non-performing assets. In the opinion of management,
asset quality remains high, with non-performing assets totaling
$5,480,000 (0.95% of loans) at December 31, 1994, compared with
$4,600,000 (0.82% of loans) at December 31, 1993.
<PAGE>
<TABLE>
ALLOWANCE FOR LOAN LOSSES
<CAPTION>
<S> <C> <C> <C> <C> <C>
--------------------------------------------------------------------------------------------------------------------------
(in thousands) 1994 1993 1992 1991 1990
--------------------------------------------------------------------------------------------------------------------------
Balance at beginning of year $8,652 $9,245 $9,845 $10,483 $10,604
Loans charged off:
Real estate mortgages 154 43 34 170 6
Commercial
and agricultural 1,409 1,222 1,742 1,968 846
Consumer 2,159 2,395 2,107 2,307 2,047
--------------------------------------------------------------------------------------------------------------------------
Total loans charged off 3,722 3,660 3,883 4,445 2,899
Recoveries:
Real estate mortgages - 2 5 26 1
Commercial
and agricultural 291 267 355 81 184
Consumer 734 517 561 418 412
--------------------------------------------------------------------------------------------------------------------------
Total recoveries 1,025 786 921 525 597
--------------------------------------------------------------------------------------------------------------------------
Net loans charged off 2,697 2,874 2,962 3,920 2,302
Provision for loan losses 3,071 2,281 2,362 3,282 2,181
--------------------------------------------------------------------------------------------------------------------------
Balance at end of year $9,026 $8,652 $9,245 $9,845 $10,483
--------------------------------------------------------------------------------------------------------------------------
Allowance for loan losses as a percent
of loans outstanding at end of year 1.57% 1.55% 1.71% 1.87% 2.00%
Allowance for loan losses
as a percent of nonperforming loans 195% 207% 243% 282% 376%
Allowance for loan losses
as a percent of nonperforming assets 165% 188% 201% 228% 279%
Nonperforming loans to total loans 0.81% 0.74% 0.71% 0.66% 0.54%
Nonperforming assets to total assets 0.52% 0.48% 0.53% 0.52% 0.44%
Net charge-offs as a percentage of
average loans outstanding 0.48% 0.52% 0.55% 0.74% 0.44%
--------------------------------------------------------------------------------------------------------------------------
</TABLE>
33
<PAGE>
<TABLE>
ALLOCATION OF THE ALLOWANCE FOR LOAN LOSSES
---------------------------------------------------------------------------------------------------------------------------------
December 31, 1994 1993 1992 1991 1990
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
---------------------------------------------------------------------------------------------------------------------------------
Category Category Category Category Category
Percent Percent Percent Percent Percent
(in thousands) Allowance of Loans Allowance of Loans Allowance of Loans Allowance of Loans Allowance of Loans
---------------------------------------------------------------------------------------------------------------------------------
Real estate
mortgages $ 630 22.5% $ 206 24.3% $ 394 29.2% $ 365 16.7% $ 2,525 48.4%
Commercial
and agricultural 3,726 37.5% 3,699 36.9% 2,788 30.9% 3,416 48.5% 5,143 12.8%
Consumer 3,538 40.0% 3,767 38.8% 3,887 39.9% 3,829 34.8% 2,815 37.7%
Leases - - - - - - - - - 0.1%
Loans to
depository institutions - - - - - - - - - 1.0%
Unallocated 1,132 - 980 - 2,176 - 2,235 - - -
---------------------------------------------------------------------------------------------------------------------------------
Total $9,026 100.0% $8,652 100.0% $9,245 100.0% $9,845 100.0% $10,483 100.0%
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
ASSET QUALITY
NBT has maintained its focus on sound credit quality in the loan
portfolio, reflecting conservative lending practices and policies. The
measurement of asset quality is the responsibility of the Company's
loan review function which also determines the adequacy of the
allowance for loan losses. Loan review utilizes a seven category loan
rating system to rate substantially all of its loans based on risks
which include internal loan classifications, historical analysis of
prior period charge-offs, and evaluation of expected losses on
internally classified credits. Loan ratings are continually reviewed
to determine their propriety. The banking and credit function is
responsible for lending credit policy, systems and procedures,
collections, recovery,and workout policies and systems. Based on the
portfolio review, the allowance for loan losses was increased to 1.57%
of total loans at December 31, 1994, from 1.55% at December 31, 1993,
and 1.71% at year end 1992. The allowance has been allocated based on
identified problem credits or categorical trends. After allocation,
the "Unallocated" portion at December 31, 1994, was approximately $1
million. The unallocated portion is available for further unforeseen
or unexpected losses or unidentified problem credits. Management will
continue to target and maintain a minimum allowance equal to the
allocated requirement plus an unallocated portion, as appropriate.
Loans ninety days past due and still on accrual status totalled
$0.9 million, $3.2 million, and $3.0 million at December 31, 1994,
1993, and 1992; comprising 0.2%, 0.6%, and 0.5% of loans, respectively.
The Company did not hold any restructured loans (loans which because
of the borrower's financial difficulties, repayment criteria was
renegotiated to less than the original agreement terms) at December 31,
1994, 1993, or 1992.
Loan review's seven rating grade classifications segregate the
portfolio assets into three major components: pass, special mention,
and classified. The pass category represents a level of credit quality
which contains no well-defined deficiency or weakness; this category
includes three grades: superior, satisfactory, and watch. The special
mention category, as well as grade, does not contain current exposure
to a sufficient degree of risk to warrant an adverse classification,
but does possess a correctable deficiency or potential weakness
deserving management's close attention. The classified category
includes three grades: substandard, doubtful, and loss. Substandard
assets have a well-defined weakness and the potential for some loss if
the weakness is not corrected. Doubtful assets have the added
characteristic that collection in full is highly questionable. The loss
grade represents assets which are considered uncollectible and of such
little value that continuance as an asset, without the establishment
of a specific allowance, is not warranted. Classified and special
mention loans, not on non-accrual status totalled $26.3 million, $23.3
million, and $21.1 million, 4.6%, 4.2%, and 3.9% of outstanding loans,
at December 31, 1994, 1993 and 1992, respectively. A significant
portion of the outstanding balances are secured with various forms of
collateral. In this regard, management has determined that there are
no material adverse trends or material potential losses not already
considered in the allowance calculation, nor indications of trends or
events that would have a material effect on the Company's operations,
capital or liquidity. The Company does not have any material loans
classified as doubtful or loss and the loan portfolio does not contain
any highly leveraged or foreign loans. A substantial portion of the
Company's loans are secured by real estate located in central and
northern New York State. Accordingly, the ultimate collectibility of
a substantial portion of the Company's portfolio is susceptible to
changes in real estate market conditions in those areas.
Nonperforming assets (NPA) increased to $5.5 million at December
31, 1994, from $4.6 million at December 31, 1993 and the ratio of NPA
to loans plus OREO increased to 0.95% from 0.82% for the respective
periods. The change was attributable to increased real estate loans in
a nonaccrual status and increased OREO related to real estate
foreclosures.
NONINTEREST INCOME
Noninterest income decreased $2.6 million, 27.3%, to $7.0 million
in 1994, following a $0.3 million decrease to $9.7 million in 1993.
Trust income decreased $0.5 million for 1994, compared to 1993, due to
decreased personal agency account fees and estate fees. Service charges
on deposit accounts of $3 million changed little over the three year
period of 1994, 1993 and 1992. During 1994 the Company sold securities
carried in its available for sale portfolio at gains totalling $0.6
million as part of its asset-liability management strategy; this was
below the level of gains from securities sales for 1993 of $1.6
million.
Other income decreased $1.2 million, 57.1%, to $0.9 million in
1994, following a $0.7 million decrease to $2.1 million in 1993. Loan
fees included in other income decreased $0.3 million, 90%, in 1994,
compared to 1993, as loan growth slowed. Gains and losses on the sale
of real estate loans held for resale reflected a $0.5 million market
value loss in 1994, there were no such losses in prior years presented.
As credit card processing agents were changed with a different fee
structure, merchant credit receipt processing fees decreased $0.5
million in 1994; however, expenses included in other operating expense
related to the processing declined as well by $0.4 million, resulting
in a net decrease in merchant credit receipt processing income of $0.1
million.
34
<PAGE>
The 1993 decrease, as compared to 1992, is attributable to a $0.7
million decrease in other income offset by a $0.5 million increase in
securities gains. The decline in other income in 1993 from 1992 was
primarily attributable to the 1992 sale of the credit card portfolio
which resulted in a one time net gain of $0.8 million. In 1992, the
Company began utilizing contemporary asset-liability management
techniques, implementing processes such as simulation, matched funding
matrices, duration, and rate-shock. Analyses in 1993 continued to show
the excess asset sensitivity of the Company. Therefore, asset-liability
management strategies resulted in the continued lengthening of average
maturities in the securities portfolio which was the principal factor
resulting in the $1.6 million gain on sales of securities in 1993, and
the $1.1 million gain in 1992. Sales of securities in 1993 were made
from the "available for sale" category.
NONINTEREST EXPENSE
Noninterest expense for 1994 was $38.7 million compared with
$37.3 million in 1993, an increase of $1.4 million or 3.7%. This
follows the $1.2 million, 3.3%, increase between 1993 and 1992.
In 1994, the Company recorded restructuring charges of $2.3
million pre-tax, $1.3 million after tax, as previously discussed,
contributing to increased expense. Noninterest expense includes the
pre-tax charge.
Employee related expenses decreased for 1994 from 1993. Salaries,
wages, and benefits are the second largest expense after interest
expense. Full time equivalent employees declined throughout 1994, and
the December 1994, closing level of full time equivalent employees was
541, the lowest level since 1989. Occupancy expense increased for 1994,
compared to 1993, due to increased costs for utilities, property taxes
and depreciation related to the finishing of available space and its
placement in service during the year at the Norwich headquarters
location. These increases affecting occupancy expense were partially
offset by reduced depreciation expense on branch facilities being
restructured as they were written down to fair market value upon
managements' commitment to the restructuring plan. Equipment expense
fell for 1994, compared to 1993, as data processing equipment was
disposed of and depreciation ceased; and by reduced depreciation
expense on equipment at branch locations being restructured as they
were written down to fair market value, as previously mentioned.
FDIC insurance expense increased in 1994, as deposits acquired
in the later portion of 1993 were insured for the full year in 1994.
The FDIC is currently assessing the possibility of decreasing its rates
during 1995, as the Bank Insurance Fund attains congressionally
mandated reserve goals, established during the deposit crisis that
began in the prior decade. In addition to cutting assessment rates, the
FDIC has proposed increasing the spread in premiums between the
healthiest and weakest banks. The Bank is well capitalized and
positioned to benefit from such a decrease, should it occur. In the
event that the rate reductions do not take place, it is anticipated
that FDIC insurance rates for the Bank will continue in 1995 at the
same level as 1994 and 1993.
Other operating expense increased for 1994, compared to 1993, as
advertising expense rose $0.2 million, 78%, due to recent marketing
efforts. Loan collection and OREO costs increased $0.3 million, 47%,
as loan initiation costs fell $0.2 million, 31%. Changes in these items
were experienced due to the ongoing soft economic conditions. Increased
outside service costs of $0.7 million, 21%, were incurred in 1994.
These increases were due to the third quarter 1993 outsourcing of data
processing operations, the 1994 outsourcing of trust tax return
preparation, and increased legal fees generated by non-recoverable
trust legal costs. As a result of the outsourcing of data processing,
the Company established a technology platform to provide the capacity
for growth and offer superior customer service on a more cost effective
basis. Partially offsetting these increased costs was decreased
merchant credit card processing costs as discussed previously.
Additionally, in 1993 a loss was incurred on the sale of data
processing equipment that did not recur in 1994.
Intangible amortization expense declined throughout 1994, as some
components of intangibles acquired in the acquisition of four
commercial banks in 1989 reached the point at which they were fully
amortized. A comparison of the intangible amortization expense can be
seen in the Notes to Consolidated Financial Statements and such
amortization expense is anticipated to decrease to $1.3 million for
1995.
Several factors contributed to the $1.2 million increase in 1993
expense. The Company added three branches in the Plattsburgh area.
Also, the Company converted and outsourced its data processing systems
in the third quarter of 1993 and additional costs were incurred in a
variety of areas to implement the conversion to new state-of-the-art
integrated systems as well as some overlap in costs during the
conversion. Significant annual savings resulted from this change, but
only a portion was realized in 1993 as the staff reductions resulting
from the outsourcing were implemented late in the third quarter and
severance costs associated with the reductions were recorded in 1993.
The Company committed additional resources to its loan origination
function to develop the loan portfolio in the current period of general
low interest rates and soft loan demand. Loan related expense included
in other expense increased $0.5 million from 1992 to 1993.
35
<PAGE>
Salaries, wages, and benefits increased $0.5 million, 3.0%, in
1993 from 1992. Salaries, wages, and benefits decreased $0.7 million
in 1992 reflecting the effect of a cost efficiency program in 1992.
Total staffing, on a full-time equivalent basis, declined from 649 at
the beginning of 1992 to 571 at the end of 1992. Staffing increased to
616 at the end of 1993 as a result of the branch additions and
resources committed to loan origination as previously discussed.
Occupancy expense remained stable between 1993 and 1992, at
approximately $2 million. Equipment expense was $2.5 million for 1993,
down from $2.6 million for 1992, primarily due to reduced data
processing equipment expense as the company outsourced its data
processing operations. FDIC insurance expense increased 4.2% to $1.7
million in 1993, from $1.6 million in 1992 due to increased deposits.
Outside professional services were $3.0 million for 1993 and $3.3
million in 1992. There were significant increases in 1992, some of
which continued in 1993. The Company has incurred legal fees in
defense of litigation by its former CEO. Legal expenses increased as
a result of this and other successful defenses. However, none of these
pending litigations have resulted, or are expected to result, in
material losses. Also, in 1992, the Company employed an outside
consultant at a cost of $0.5 million to evaluate the operating
efficiency of the Company and assist in evaluating the outsourcing of
the data processing operations. Additionally, in 1992, the Company ran
a special program to develop Home Equity loans, the cost of which
approximated $0.3 million.
Advertising, supplies, and communication expense amounted to $2.9
million in 1993, comparable with $2.8 million for 1992. All other
noninterest expense amounted to $4.1 millon for 1993 and $3.6 million
in 1992.
The expense ratio is computed as total noninterest expense
(excluding nonrecurring changes) less noninterest income (excluding net
securities gains and losses and nonrecurring income) divided by total
average assets. This ratio indicates the cost of supporting the asset
base, for this ratio a decrease indicates improvement as expense
changes are less than proportional to the asset base. The efficiency
ratio is computed as total noninterest expense (excluding nonrecurring
charges) divided by FTE net interest income plus noninterest income
(excluding net securities gains and losses and nonrecurring income).
The overhead ratio is calculated as total noninterest expense
(excluding nonrecurring charges) less noninterest income (excluding net
securities gains and losses and nonrecurring income) divided by FTE net
interest income. The efficiency and overhead ratios indicate the cost
of income production, for these ratios a decrease indicates improvement
as expense changes are less than proportional to income changes.
Average assets per average full-time equivalent employee measures the
staffing level to support the asset base; therefore, an increased ratio
reflects improvement indicating increased assets managed by each
employee. Since salaries, wages, and benefits, are the second largest
expense after interest expense, it is critical to monitor this
measurement of productivity. As can be seen in the table following,
expense productivity measurements have improved for 1994 as a result
of asset growth and increased net interest income.
<TABLE>
EXPENSE PRODUCTIVITY MEASUREMENTS
<CAPTION>
<S> <C> <C> <C>
------------------------------------------------------------------------------------------
Year ended December 31, 1994 1993 1992
------------------------------------------------------------------------------------------
Expense ratio 2.96% 3.21% 3.19%
Efficiency ratio 70.22% 71.05% 69.48%
Overhead ratio 65.96% 65.77% 63.18%
Average full-time equivalent
employees 576 605 620
Period-end full-time
equivalent employees 541 616 571
Average assets per average full time
equivalent employee (millions) $1.8 $1.5 $1.4
------------------------------------------------------------------------------------------
</TABLE>
PROVISION FOR INCOME TAXES
The effective tax rate (provision for income taxes as a percentage of
income before taxes) was 34.9%, 38.6%, and 40.7% for 1994, 1993, and
1992, respectively. The 1994 provision for income taxes decreased from
1993 primarily due to decreased net income before taxes. During the
first quarter of 1993, the Company adopted the provisions of SFAS 109,
"Accounting for Income Taxes". The adoption of this standard did not
have a material effect on the Company's financial condition or results
of operations. The provision for income taxes for 1993 decreased from
1992, despite increased income before taxes. SFAS 109 requires that,
upon adoption, temporary tax differences be recorded for assets and
liabilities acquired in a purchase business combination whose book
values differ from their tax bases and be reversed as they enter into
the computation of taxable income. Under the requirements of APB 11
such differences were recognized in provisions for taxes in the year
in which they entered into the computation of taxable income. In 1992
$0.4 million relating to such differences was included in the provision
for income taxes; such amounts were not required for subsequent years
upon the adoption of SFAS 109 as the amounts were removed from deferred
tax liabilities.
LOANS AND LOANS AVAILABLE FOR SALE
Modest loan growth continued into 1994 with year-end volume reflecting
an increase of $15 million, 3%, over the December 31, 1993 balance.
This follows $20 million, 4%, loan growth in 1993. The Northeast U.S.
economy remains stagnant, and the soft loan demand in the Company's
rural New York market mirrors the region. The 1993 entry into two new
major markets, Binghamton, NY and Plattsburgh, NY and increased
emphasis in Utica, NY, contributed to commercial loan growth and
expanded dealer generated consumer loans in both 1994 and 1993. Real
estate loans have decreased as the volume of mortgage refinancing has
diminished in response to interest rate increases. The historically low
interest rate environment during most of 1994, and all of 1993 and
1992, provided obstacles to increasing real estate loan balances
because of the Bank's practice of originating for portfolio only
adjustable-rate loans. Fixed-rate loans originated were sold in order
to minimize interest rate risk, and fixed-rate loans are typically more
popular to borrowers during periods of low interest rates such as
experienced in recent years.
36
<PAGE>
In 1993, the Company increased activities in originating fixed-rate
mortgage loans for sale in the secondary market In response to the
decreased market demand for mortgage loans in 1994, the Company reduced
the level of its activities in this product. During 1994 and 1993, $9
million and $11 million in mortgage loans were sold with servicing
retained. A $0.01 million loss was recognized upon sales of mortgage
loans in 1994, compared to a $0.1 million gain on sales in 1993. At
December 31, 1994, loans available for sale of $11 million include $5.3
million in mortgage loans and $5.7 million in higher education loans.
The Company's cost of loans available for sale exceeds their aggregate
estimated fair market value at December 31, 1994, and a $0.5 million
valuation allowance to record these loans at the lower of cost or fair
market value was recorded and is included in the aforementioned
balances.
<TABLE>
-----------------------------------------------------------------------------------------------------------------------------
COMPOSITION OF LOAN PORTFOLIO
<CAPTION>
<S> <C> <C> <C> <C> <C>
------------------------------------------------------------------------------------------------------------------------------
December 31, 1994 1993 1992 1991 1990
------------------------------------------------------------------------------------------------------------------------------
(in thousands)
Real estate mortgages $125,385 $132,941 $156,457 $146,726 $198,378
Commercial real estate
mortgages 71,631 88,487 82,509 78,632 31,506
Real estate construction
and development 3,890 3,162 7,067 7,015 2,872
Commercial
and agricultural 143,632 118,143 87,103 87,690 67,782
Consumer loans 201,359 187,179 175,214 183,482 197,672
Home equity loans 28,704 29,741 30,636 23,823 20,563
Lease financing 117 207 297 387 477
Loans to depository
institutions - - - - 5,000
------------------------------------------------------------------------------------------------------------------------------
Total loans $574,718 $559,860 $539,283 $527,755 $524,250
------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Shown in the following table are the maturities of the loan
portfolio and the sensitivity of loans to interest rate fluctuations
at December 31, 1994. Maturities are based on the earlier of
contractual maturities or rate repricing.
<TABLE>
MATURITIES AND SENSITIVITIES OF LOANS TO CHANGES IN INTEREST RATES
<CAPTION>
<S> <C> <C> <C> <C>
-----------------------------------------------------------------------------------------------------------
After One Year
Remaining Maturity at Within But Within After
December 31, 1994 One Year Five Years Five Years Total
-----------------------------------------------------------------------------------------------------------
(in thousands)
Floating/adjustable rate:
Commercial and agricultural $153,722 $ 588 $ - $154,310
Lease financing 117 - - 117
Real estate mortgages 100,463 1,689 - 102,152
Consumer 34,138 - - 34,138
-----------------------------------------------------------------------------------------------------------
Total floating rate loans 288,440 2,277 - 290,717
Fixed Rate:
Commercial and agricultural 9,236 32,082 19,635 60,953
Real estate mortgages 2,433 7,510 17,180 27,123
Consumer 67,871 119,897 8,157 195,925
-----------------------------------------------------------------------------------------------------------
Total fixed-rate 79,540 159,489 44,972 284,001
-----------------------------------------------------------------------------------------------------------
Total loans $367,980 $161,766 $44,972 $574,718
-----------------------------------------------------------------------------------------------------------
</TABLE>
37
<PAGE>
SECURITIES
The total balance of securities available for sale and held to maturity
for 1994, $382 million, increased $64 million, or 20%, from $318
million at December 31, 1993. This increase occurred for two reasons:
the lack of high loan demand required the liquidity of the Company be
invested in the securities portfolios, and the ALCO strategy employed
$60 million of the Company's access to lower cost funds to purchase
securities to be held to maturity yielding a higher rate than its
incremental borrowing rate, thus improving net interest income.
Throughout 1994, a substantial portion of new security purchases has
been classified as held to maturity leading to the relative increase
in the balance of the held to maturity portfolio. During 1993,
securities were transferred from the held to maturity classification
to available for sale classification and a substantial portion of new
security purchases were classified as available for sale in
anticipation of liquidity needs. Securities available for sale are part
of the Company's interest rate risk management strategy and may be sold
in response to changes in interest rates, changes in pre-payment risk,
liquidity management, and other factors.
At December 31, 1993, the Company adopted the provisions of SFAS 115,
as discussed in the Notes to Consolidated Financial Statements. At that
date the fair market value of securities available for sale exceeded
their amortized cost of $208 million by $2 million in market
appreciation. At December 31, 1994, the amortized cost of securities
available for sale, $117 million, exceeded their fair market value by
$7 million of market depreciation due to increases in short-term
interest rates precipitated by the actions of the Federal Reserve Open
Market Committee beginning in February 1994.
Tax-exempt securities averaged $30 million and $26 million for 1994
and 1993, respectively, an increase of $4 million or 19%. Tax-exempt
securities comprised 8% of the average securities portfolio for 1994
and 9% for 1993. The percentage decline reflects the overall growth
in the portfolio balances. It remains the Bank's practice to invest,
subject to availability, in qualified and designated local municipal
issues which receive favorable federal income tax treatment. The Bank
highly values its business relationships with a variety of
municipalities within its local service area and meeting their funding
needs through investment in their security issues is a meaningful way
to develop such business relationships.
DEPOSITS
Average total deposits for 1994 increased $41 million or 5% from 1993.
The increase was spread throughout all components of the portfolio with
the exception of money market demand deposits. Deposits at December 31,
1994, $791 million, decreased $16 million or 2%, from December 31,
1993. Recent trends indicate that retail depositor funds carried in
savings, NOW, and MMDA accounts during the previously discussed lower
interest rate periods, are being moved outside of this financial
institution, as rates trend upward.
Approximately 35% of the portfolio for 1994 consisted of time deposits,
22% savings deposits, 18% money market demand deposits, 11% interest
bearing NOW checking deposits, and 14% non interest bearing demand
deposits. Comparable 1993 portfolio percentages were 33%, 22%, 22%,
11%, and 14%, respectively.
In May and August 1993, the Company acquired, in two separate
transactions, a total of three community banking offices in the
Plattsburgh area from the former National Savings Bank and Key Bank of
New York. The assets acquired and liabilities assumed consisted
primarily of cash and deposits totalling $84 million. No premium was
paid to acquire the aforementioned deposits.
BORROWED FUNDS
Short-term borrowings include federal funds purchased, securities sold
under agreements to repurchase, and other short-term borrowings, which
consist primarily of FHLB advances with an original maturity of one
year or less. Total borrowed funds, including long-term debt, have
increased. The increase in 1994 was due to borrowings originated in the
form of short-term borrowings due to favorable borrowing and potential
reinvestment rates. The increase from 1992 to 1993 was due to
borrowings originated in the fourth quarter of 1993 in the form of
short-term borrowings and long-term debt from the FHLB for similar
reasons. The Company continues to remain well within acceptable
liquidity guidelines.
CAPITAL AND DIVIDENDS
Stockholders' equity of $98 million represented 9.4% of total assets
at December 31, 1994 compared with $101 million, or 10.6%, at December
31, 1993. The decrease in the percentage relationship is due primarily
to increased total assets and the mark to market effect of the
securities available for sale portfolio. The decrease in dollar amount
is due to additional shares held in the treasury and the decline in the
current market value of the securities available for sale portfolio for
which unrealized loss is reflected, net of taxes, in stockholders'
equity. The unrealized loss would only be recognized in income if
securities available for sale were, in fact, actually sold. It is
highly unlikely that the Company would require such a sale to meet its
liquidity needs. Both book and tangible book value have been affected
by the aforementioned decline in the current market value of the
securities available for sale portfolio; however, tangible book value
has increased due to the offsetting decrease in intangible assets
through amortization.
On a per share basis, cash dividends declared have been increased four
times since the second quarter of 1993. In November 1994, the Company
declared a 5% stock dividend followed by a 10% increase in the cash
dividend to $0.12 per share. This was the thirty-fifth consecutive year
that the Company declared a stock dividend. In November 1993, the cash
dividend increased 5% following a 5% stock dividend and in August 1993,
the Company increased its quarterly cash dividend per share 4%, from
$0.10 to $0.104. These dividend increases reflect the Company's
earnings and capital strength. The dividend payout ratio, total cash
dividends paid as a percentage of net income was 55.2% for 1994 and
38.8% for 1993. The Company does not have a target dividend payout
ratio, rather the Board of Directors considers the Company's earnings
position and earnings potential when making dividend decisions.
The accompanying table, "Quarterly Common Stock and Dividend
Information," sets forth the high, low and closing sales price for the
common stock as reported on the NASDAQ National Market System, and cash
dividends declared per share of common stock. At December 31, 1994, the
total market capitalization of NBT's common stock was approximately
$132 million compared with $139 million at December 31, 1993. The
change in market capitalization is due to increased numbers of shares
held in the treasury and changes in the market price, adjusted for
stock dividends, of the Company's common stock. NBT's price to book
value ratio was 1.34, 1.38, and 1.11 at December 31, 1994, 1993 and
1992, respectively. NBT's price was 20, 16, and 13 times earnings for
December 31, 1994, 1993 and 1992, respectively.
38
<PAGE>
<TABLE>
Quarterly Common Stock and Dividend Information
--------------------------------------------------------------------------------------------------------------
(restated to give retroactive effect to stock dividends)
<CAPTION>
1994 1993
--------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Cash Cash
Dividends Dividends
Quarter Ending High Low Close Declared High Low Close Declared
--------------------------------------------------------------------------------------------------------------
March 31 $17.62 $16.67 $16.67 $0.109 $15.87 $12.02 $15.19 $0.100
June 30 17.02 14.52 15.71 0.110 16.33 14.74 15.19 0.100
September 30 15.71 14.29 15.24 0.110 15.87 14.97 15.87 0.104
December 31 17.00 15.00 16.50 0.120 17.62 15.65 17.38 0.109
--------------------------------------------------------------------------------------------------------------
For the year $17.62 $14.29 $16.50 $0.449 $17.62 $12.02 $17.38 $0.413
--------------------------------------------------------------------------------------------------------------
</TABLE>
Capital is an important factor in ensuring the safety of
depositors' accounts. During 1994, the Bank earned the highest
possible national safety and soundness rating from two national bank-
rating services, Bauer Financial Services and Veribanc, Inc. Their
ratings are based on capital levels, loan portfolio quality, and
security portfolio strength.
The Company remains well capitalized with capital ratios that are
significantly in excess of regulatory guidelines. The Company's Tier
1 and Total Risk Based Capital ratios at December 31, 1994 were 16.1%
and 17.4%, respectively, compared with 15.4% and 16.7% at December 31,
1993. Both ratios were well in excess of the minimum Regulatory
guidelines of 4% and 8%, respectively. The Tier 1 Risk-Based Capital
Ratio and Total Risk-Based Capital Ratio measure the amount of capital
in relation to the degree of risk perceived in assets and off-balance
sheet exposure. This concept recognizes that certain higher-risk assets
require more capital to support them as compared with lower-risk
assets. Both capital and the degree of risk used to weight assets and
off-balance sheet items are defined by bank holding company regulatory
agencies. As defined, capital may exclude most intangible assets as
well as a portion of the allowance for loan losses in excess of
delineated percentages of loan balances, unrealized gains and losses
on securities available for sale included in stockholders' equity, net
of the tax effect, for financial reporting purposes are excluded from
capital for the computation of capital adequacy ratios. There are
limitations for the amount of the allowance for loan losses that can
be considered for capital ratios and there are limitations for the
amount of deferred tax assets that can be used to meet capital
requirements. For all years presented the Company was permitted to
include all of its deferred tax assets in its capital ratio
computations. Risk factors used to weight assets and off-balance sheet
items range from 0% for cash, amounts due from the Federal Reserve and
securities issued by the U.S. Treasury to 100% for certain types of
loans and securities. Regulations promulgated by bank and bank holding
company regulatory agencies are intended primarily for the protection
of the Bank's depositors and customers rather than the holders of the
Company's securities.
The Tier 1 Leverage Ratio compares capital, as defined for
regulatory purposes, to average assets without regard to risk weights
and certain intangible assets. This ratio measures the utilization of
capital to support the balance sheet. The Company's Tier 1 Leverage
Ratio at December 31, 1994 and 1993, was 9.1% and 9.2%, respectively,
well in excess of the minimum Regulatory guideline of greater than 4%.
LIQUIDITY AND INTEREST RATE SENSITIVITY MANAGEMENT
The primary objectives of asset and liability management are to
provide for the safety of depositor and investor funds, assure adequate
liquidity, and maintain an appropriate balance between interest
sensitive earning assets and interest-bearing liabilities. Liquidity
management involves the ability to meet the cash flow requirements of
customers who may be depositors wanting to withdraw funds or borrowers
needing assurance that sufficient funds will be available to meet their
credit needs. Liquidity must also provide the flexibility to implement
appropriate strategies and tactical actions. Liquidity requirements change
as loans grow, deposits and securities mature, and payments on borrowings
are made. Interest rate sensitivity management seeks to avoid widely
fluctuating net interest margins and to ensure consistent net interest
income through periods of changing economic conditions.
Given the above, liquidity to NBT is defined as the ability to
raise cash quickly at a reasonable cost without principal loss. The
primary liquidity measurement NBT utilizes is called the Basic Surplus
which captures the adequacy of its access to reliable sources of cash
relative to the stability of its funding mix of average liabilities,
depicted previously in this discussion. This approach recognizes the
importance of balancing levels of cash flow liquidity from short and
long-term securities with the availability of dependable borrowing
sources which can be accessed when necessary. Accordingly, NBT has
established borrowing facilities with other banks (federal funds), the
Federal Home Loan Bank of New York (short and long-term borrowings
which are denoted as Advances), and repurchase agreements with
investment companies.
39
<PAGE>
This Basic Surplus approach enables the Bank to adequately manage
liquidity from both tactical and contingency perspectives. By
tempering the need for cash flow liquidity with reliable borrowing
facilities, NBT is able to operate with a more fully invested and,
therefore, higher interest income generating, securities portfolio.
The makeup and term structure of the securities portfolio is, in part,
impacted by the overall interest rate sensitivity of the balance sheet
as discussed below. Investment decisions and deposit pricing
strategies are impacted by the liquidity position.
At December 31, 1994 and 1993, NBT's Basic Surplus ratios (net
access to cash and secured borrowings as a percentage of total assets)
were approximately 4% and 26%, respectively, compared to the present
internal minimum guideline range of 5% to 7%. During 1994, NBT took
steps to absorb its substantial capacity to support income yielding
assets, utilizing, and therefore reducing, its Basic Surplus ratio.
This was achieved through development of the loan portfolio and
management of the securities portfolio, funded by borrowings available
to the Bank. The December 31, 1994 Basic Surplus ratio fell below the
minimum guideline as the Company drew upon short-term borrowing lines
in December. This borrowing was necessary to replace seasonal outflows
of municipal deposits during the fourth quarter. These municipal funds
flow into the Bank as taxes are collected and flow out as the
municipalities make payments over time. Such deposits began to grow
once again subsequent to December 31, 1994. The Bank has unused lines
of credit available totalling $330 million to meet its short-term
liquidity needs and considers the Basic Surplus adequate to meet
liquidity needs.
Interest rate risk is determined by the relative sensitivities
of earning asset yields and interest-bearing liability costs to changes
in interest rates. Overnight federal funds on which rates change daily
and loans which are tied to the prime rate differ considerably from
long-term investment securities and fixed-rate loans. Similarly, time
deposits over $100,000 and money market deposit accounts are much more
interest sensitive than NOW and savings accounts.
The method by which banks evaluate interest rate risk is to look
at the interest sensitivity "gap", the difference between interest
sensitive assets and interest sensitive liabilities repricing during
the same period, measured at a specific point in time. The funding
matrix depicted in the accompanying table is utilized as a primary tool
in managing interest rate risk. The matrix arrays repricing
opportunities along a time line for both assets and liabilities. The
time line for sources of funds (liabilities and equity) is depicted on
the left hand side of the matrix. The longest-term, most fixed-rate
sources, are presented in the upper left hand corner while the shorter-
term, most variable rate items, are at the lower left. Similarly, uses
of funds (assets) are arranged across the top moving from left to
right.
The body of the matrix is derived by allocating the longest
fixed-rate funding sources to the longest fixed-rate assets (upper left
corner) and shorter-term variable sources to shorter-term variable uses
(lower right corner). The result is a graphical depiction of the time
periods over which the bank is expected to experience exposure to
rising or falling rates. Since the scales of the liability (left) and
asset (top) sides are identical, all numbers in the matrix would fall
within the diagonal lines if the bank was "perfectly matched" across
all repricing/maturity time frames. Numbers outside the diagonal lines
represent two general types of mismatches: i) liability sensitive,
where rate sensitive liabilities exceed the amount of rate sensitive
assets repricing or maturing within applicable time frames (items to
the left of/below the diagonal lines) and ii) asset sensitive, where
rate sensitive assets exceed the amount of rate sensitive liabilities
repricing or maturing within applicable time frames (items to the right
of/above the diagonal lines).
Generally, the lower the amount of this gap, the less sensitive
are earnings to interest rate changes. The matrix indicates that NBT
is structurally asset sensitive and supports management's contention
that the Company is positioned to benefit from a higher interest rate
environment. The nature and timing of the bendfit will be initially
impacted by the extent to which core deposit and borrowing rates are
increased as rates rise.
While the static gap evaluation of interest rate sensitivity is
useful, it is not indicative of the impact of fluctuating interest
rates on net interest income. Once the Company determines the extent
of gap sensitivity, the next step is to quantify the potential impact
of the interest sensitivity on net interest income. NBT runs various
earnings simulation scenarios used to evaluate the effect on net
interest income in a rising or declining rate environment over an
extended time horizon. At December 31, 1994, a 200 basis point gradual
increase or decline in interest rates was estimated to have less than
a 6.4% impact on net interest income relative to a flat rate
environment over the next twelve month period.
[MATRIX GRAPH INSERTED HERE(The diagonals run from the upper left corner to
the lower right corner encompassing all amounts with the same top and left
axis captions. A shaded box encompasses the upper left amounts for the
thirteen through over 60 month captions. The terms long liabilities, short
assets and long assets, short liabilities as appear in the upper right and
lower left of the matrix, respectively.)]
<TABLE>
SUMMARY STATIC GAP FUNDING MATRIX
(millions)
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
---------------------------------------------------------------------------------------------------------------------------
(ASSETS) OVER 60 37-60 25-36 13-24 7-12 4-6
-USES- MONTHS MONTHS MONTHS MONTHS MONTHS MONTHS MAR 95 FEB 95 JAN 95 ONE DAY TOTALS
---------------------------------------------------------------------------------------------------------------------------
LIABILITIES TOTALS 144 180 94 121 154 74 35 27 214 2 1,045
-SOURCES-
---------------------------------------------------------------------------------------------------------------------------
OVER 60 450 144 180 94 32 450
MONTHS
37-60 15 15 15
MONTHS
25-36 13 13 13
MONTHS
13-24 33 33 33
MONTHS
7-12 84 28 56 84
MONTHS
4-6 52 52 52
MONTHS
MAR 95 144 46 74 24 144
FEB 95 35 11 24 35
JAN 95 136 3 133 136
ONE DAY 83 81 2 83
--------------------------------------------------------------------------------------------------------------------------
TOTALS 1,045 144 180 94 121 154 74 35 27 214 2 1,045
--------------------------------------------------------------------------------------------------------------------------
</TABLE>
40
<PAGE>
FOURTH QUARTER RESULTS
Net income of $1.9 million ($0.23 per share) was realized in the
fourth quarter of 1994, representing a 13% decrease from fourth quarter
1993 net income of $2.2 million ($0.27 per share). The earnings include
a fourth quarter restructuring charge of $0.9 million pre-tax, $0.5
million after-tax, related to the non-renewal of the contract between
the Company and its former CEO. Excluding this charge, net income for
the fourth quarter of 1994 would have been $2.4 million ($0.30 per
share), the highest quarterly level since the first quarter of 1990.
Annualized return on average assets and equity were 0.73% and
7.59%, respectively, for the fourth quarter of 1994, compared to 0.90%
and 8.67%, respectively, for the fourth quarter of 1993. These measures
reflect the effect of reduced net income and the increased asset base
of the Company. Increased net interest income and reduced noninterest
expenses were offset by increased provisions for loan losses and
reduced noninterest income, including the restructuring charge, as the
major contributing factors for the decrease in net income.
FTE net interest income increased 1% or $0.2 million reflecting
a 9% increase in the level of average earning assets offset in part by
a decrease in net interest margin to 4.64% for the fourth quarter of
1994 compared to 4.99% for the comparable period of 1993. The increased
provision for loan losses for the fourth quarter of 1994, as compared
to the fourth quarter of 1993, partially reflects the increase in the
allowance for loan losses to 1.57% of year end outstanding loans as
compared to 1.55% for 1993.
Fourth quarter noninterest income for 1994 totalled $0.9 million,
a decrease of $1.1 million, 55%, from the fourth quarter of 1993.
Trust fees decreased $0.4 million, 62%, in the fourth quarter of 1994
as compared to the comparable period of 1993 due to lower fees on
estates and personal agency accounts. Included in other income during
the fourth quarter of 1994 is a $0.5 million charge to record real
estate loans available for sale at market value as previously
discussed, there was no comparable provision in 1993. In the fourth
quarter of 1993, $6 million fixed-rate real estate loans available for
sale were sold at a $0.1 million gain, there were no comparable gains
in 1994. In December 1993, U.S. Treasury and collateralized mortgage
obligations carried in the available for sale portfolio with amortized
costs totalling $20 million were sold yielding a securities gain of
$0.6 million as part of ALCO strategy, the Company's balance sheet
asset sensitivity suggested the need to lengthen the asset lives. There
were no similar securities transactions during the comparable period
of 1994.
Noninterest expense decreased $0.7 million, 7%, in the fourth
quarter of 1994 as compared to the fourth quarter of 1993, despite the
previously discussed fourth quarter 1994 restructuring charge included
in noninterest expense. All measures of expense productivity showed
improvement for the fourth quarter of 1994. The efficiency, overhead,
and expense ratios were 66.7%, 64.1%, and 2.8%, respectively, for the
fourth quarter of 1994, compared to 73.7%, 68.9%, and 3.2%, for the
comparable quarter of 1993.
Employee related expenses decreased $0.4 million, 10%, for the
quarter ended December 31, 1994, from the comparable period of 1993.
Full-time equivalent employees have fallen to 541 at December 31, 1994,
from 616 a year ago and average assets per average full-time equivalent
employee have increased to $1.9 million from $1.5 million.
Additionally, intangible amortization expense has fallen throughout
1994. During the fourth quarter of 1994, the amortization of
intangibles decreased $0.7 million as some components reached the point
at which they were fully amortized.
Initiatives were taken during 1994 to improve earnings prospects
through the improvement of net interest income as well as control of
staffing levels and expenses, these yielded positive results during the
fourth quarter. As market interest rates increase from their extended
decline the ALCO will carefully monitor the composition of and
repricing of interest sensitive assets and liabilities to enhance net
interest margin, utilizing the Company's strong asset quality and
capital base.
RECENT ACCOUNTING PRONOUNCEMENTS AND DEVELOPMENTS
In May 1993, the FASB issued Statement of Financial Accounting
Standards No. 114, "Accounting by Creditors for Impairment of a Loan"
(SFAS 114). SFAS 114 requires the creation of a valuation allowance for
impaired loans based on the present value of expected future cash flows
discounted at the loan's effective interest rate or based on the loan's
observable market price or fair value of the collateral, if the loan
is collateral-dependent. As a practical expedient, valuation of an
impaired loan may be based on the loan's observable market price or the
fair value of the collateral if the loan is collateral-dependent. For
purposes of SFAS 114, a loan is impaired when, based on current
information and events, it is probable that a creditor will be unable
to collect all contractual interest and principal payments according
to the terms of the loan agreement. SFAS 114 must be adopted January
1, 1995 on a prospective basis, with earlier application permitted.
However, the Company believes that adoption of this standard at
December 31, 1994, would only have resulted in an allocation of a
portion of its existing allowance for loan losses to a specific
valuation allowance for impaired loans, with no resulting impact at
that date on the Company's net income, stockholders' equity, or total
assets.
41
<PAGE>
IMPACT OF INFLATION AND CHANGES IN MARKET VALUE
Since most of the assets and liabilities of a financial institution
are monetary in nature, changes in interest rates have a more
significant impact on the Company's performance and the market or
fair value of its assets and liabilities than the effects of general
levels of inflation. Interest rates do not necessarily move in the same
direction or of the same magnitude as the prices of goods and services.
Accordingly, management will continue to emphasize its efforts to
manage the Company's net interest margin, liquidity, and the rate
sensitivity of its assets and liabilities in order to maintain and
improve profitability.
Many of the tables shown elsewhere in this Annual Report present
information related to how the Company is positioned to react to
changing interest rates. In particular, the summary of net interest
income, the maturity distributions, the composition of the loan and
securities portfolios, and the interest rate sensitivity tables address
the significant aspects of the Company's financial position when
analyzed for a changing interest rate environment.
Since period end balances presented in the balance sheet can be
distorted by one-day fluctuations, average balances are presented when
appropriate to give a better indication of balance sheet trends. The
table, "Average Balances, Net Interest Income, Yields And Rates",
depicts daily average balances for the major distribution of assets,
liabilities, and stockholders' equity. Amounts are calculated on an FTE
basis, are before reserve requirements, and are based on amortized
cost. Interest earned on non-accruing loans is included in the interest
earned on loans only when collected, however, the average balances of
non accruing are included in the average balances of loans.
<PAGE>
<TABLE>
AVERAGE BALANCES, NET INTEREST INCOME, YIELDS AND RATES
(dollars in thousands)
<CAPTION>
1994
----------------------------------------------
<S> <C> <C> <C>
ASSETS AVERAGE YIELD/
BALANCE INTEREST RATES
------- -------- ------
Interest-bearing deposits $ 171 $ 8 4.68%
Federal funds sold 414 13 3.14
Other Short-term investments
available for sale 2,441 89 3.65
Securities available for sale,
taxable 134,488 7,809 5.81
Loans available for sale 9,457 671 7.10
Securities held to maturity:
Taxable 200,501 11,878 5.92
Tax-exempt 30,101 1,781 5.92
----------- -------
Total Securities held to maturity 230,602 13,659 5.92
Loans:
Commercial 212,007 18,528 8.74
Real estate mortgage 131,615 9,555 7.26
Consumer 221,794 20,778 9.37
----------- -------
Total Loans 565,416 48,861 8.64
----------- -------
Total earning assets 942,989 71,110 7.54
-------
Cash and due from banks 35,076
Securities available for sale
valuation allowance (3,018)
Allowance for loan losses (8,863)
Premises and equipment 15,807
Other assets 27,581
-----------
TOTAL ASSETS $1,009,572
-----------
<PAGE>
LIABILITIES AND STOCKHOLDERS' EQUITY
Money market deposit accounts $148,341 3,818 2.57
NOW accounts 87,041 1,407 1.62
Savings deposits 177,015 4,707 2.66
Certificates of deposit 286,818 11,551 4.03
----------- -------
Total interest-bearing deposits 699,215 21,483 3.07
Short-term borrowings 73,083 3,351 4.59
Long-term debt 13,846 908 6.56
----------- -------
Total Interest-bearing Liabilities 786,144 25,742 3.27%
-------
Demand deposits 118,186
Other liabilities 5,532
Stockholders' equity 99,710
-----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $1,009,572
-----------
NET INTEREST INCOME $45,368
-------
NET INTEREST MARGIN 4.81%
-----
Taxable equivalent adjustment $ 672
-------
<PAGE>
<CAPTION>
1993 1992
--------------------------------------------------- -------------------------------------------------
<C> <C> <C> <C> <C> <C>
Average Yield/ Average Yield/
Balance Interest Rates Balance Interest Rates
------- -------- ------ ------- -------- ------
$ 97 $ 2 2.06% $ - $ - -%
810 25 3.09 896 31 3.46
9,831 294 2.99 19,449 789 4.06
89,069 4,958 5.57 - - -
6,458 342 5.30 - - -
160,805 10,223 6.36 200,525 13,443 6.70
25,655 1,646 6.42 30,503 2,888 9.46
--------- ------- --------- -------
186,460 11,869 6.37 231,028 16,331 7.07
178,503 14,680 8.22 168,589 14,417 8.55
156,967 12,366 7.88 150,034 14,274 9.51
215,272 23,049 10.71 209,944 24,402 11.62
--------- ------- --------- -------
550,742 50,095 9.10 528,567 53,093 10.04
--------- ------- --------- -------
843,467 67,585 8.01 779,940 70,244 9.01
------- -------
34,013 35,189
- -
(9,205) (9,659)
15,911 16,335
25,570 30,396
--------- ---------
$909,756 $852,201
--------- ---------
<PAGE>
$158,365 4,530 2.86 $159,589 5,614 3.52
82,084 1,570 1.91 73,802 2,033 2.75
168,041 4,964 2.95 140,202 5,018 3.58
256,370 10,674 4.16 250,324 13,270 5.30
--------- ------- --------- -------
664,860 21,738 3.27 623,917 25,935 4.16
18,699 609 3.26 18,158 665 3.66
11,161 853 7.64 5,755 594 10.32
--------- ------- --------- -------
694,720 23,200 3.34% 647,830 27,194 4.20%
------- -------
111,193 106,789
7,121 7,107
96,722 90,475
--------- ---------
$909,756 852,201
--------- ---------
$44,385 $43,050
------- -------
5.26% 5.52%
----- -----
$ 628 $ 1,036
------- -------
<PAGE>
<CAPTION>
1991 1990
--------------------------------------------------- -------------------------------------------------
<C> <C> <C> <C> <C> <C>
Average Yield/ Average Yield/
Balance Interest Rates Balance Interest Rates
------- -------- ------ ------- -------- ------
$ 1,065 $ 89 8.36% $ 2,000 $ 192 9.60%
1,213 49 4.04 6,360 530 8.33
35,436 2,069 5.84 25,102 1,971 7.85
- - - - - -
- - - - - -
119,828 9,594 8.01 124,323 10,066 8.10
79,954 7,721 9.66 66,789 6,525 9.77
--------- ------- --------- -------
199,782 17,315 8.67 191,112 16,591 8.68
158,444 16,735 10.56 86,707 10,177 11.74
147,152 15,588 10.59 214,556 24,187 11.27
221,445 29,534 13.34 217,803 31,547 14.48
--------- ------- --------- -------
527,041 61,857 11.74 519,066 65,911 12.70
--------- ------- --------- -------
764,537 81,379 10.64 743,640 85,195 11.46
------- -------
36,018 39,507
- -
(10,272) (10,405)
17,048 17,505
36,259 42,208
--------- ---------
$843,590 $832,455
--------- ---------
<PAGE>
$143,183 7,237 5.05 $145,256 7,353 5.06
63,480 2,745 4.32 52,614 2,817 5.35
106,795 5,111 4.79 105,886 5,072 4.79
324,209 22,253 6.86 331,134 26,442 7.99
--------- ------- --------- -------
637,667 37,346 5.86 634,890 41,684 6.57
6,199 373 6.02 6,054 507 8.37
5,362 575 10.72 5,392 578 10.72
--------- ------- --------- -------
649,228 38,294 5.90% 646,336 42,769 6.62%
------- -------
102,012 97,657
7,426 8,387
84,924 80,075
--------- ---------
$843,590 $832,455
--------- ---------
$43,085 $42,426
------- -------
5.64% 5.71%
----- -----
$ 2,751 $ 2,246
------- -------
</TABLE>
43
<PAGE>
CORPORATE INFORMATION
CORPORATE HEADQUARTERS
NBT Bancorp Inc.
52 South Broad Street
Norwich, NY 13815
(607) 337-6000
DESCRIPTION OF BUSINESS
NBT Bancorp Inc. is a bank holding company formed in May 1986 under the
laws of the State of Delaware. Its principal subsidiary is The
National Bank and Trust Company, which serves an eight-county area in
central and northern New York from 35 community banking offices. The
bank is a full-service financial institution which provides a broad
range of financial products, including demand and time deposits,
mortgage, consumer, commercial, and agricultural loans, and it offers
a full complement of business and personal trust services.
FOR INFORMATION
For general information about the company you may contact:
Martin J. Doorey
Corporate Communications
52 South Broad Street
Norwich, NY 13815
STOCK INFORMATION
NBT Bancorp Inc. shares are traded on the NASDAQ National Market System
under the symbol NBTB. Several member firms of the New York Stock
Exchange and market makers in various listed securities act as
principals of NBT BANCORP INC. stock. Principal market makers include:
Advest; Cowen & Co.; Dean, Witter, Reynolds; First Albany Corp.; Guilford
Securities; Herzog, Heine, Geduld, Inc.; Huntleigh Securities, Inc.;
Moors & Cabot, Inc.; Ryan Beck & Co.,Inc.; and M.A. Schapiro & Co. Inc.
As of December 31, 1994, NBT Bancorp Inc. had 3,877 stockholders of
record
Requests for Financial Information, including our Form 10-K filed each
year with the Securities and Exchange Commission, should be directed
to the addressee below. Copies of exhibits to documents filed with the
Securities and Exchange Commission are available upon payment of
reproduction costs.
Richard I. Linhart,
Vice President, Chief Financial Officer and Treasurer
52 South Broad Street
Norwich, NY 13815.
607-337-6552
For stockholders who receive more than one copy of reports and
communications from the company, and who wish to help us control our
mailing costs, we encourage you to contact us with changes.
STOCK REGISTRAR AND TRANSFER AGENT
American Stock Transfer and Trust Company
40 Wall Street
New York, NY 10005
ANNUAL MEETING
The Annual Meeting of stockholders will be held at 11 a.m. Saturday,
April 22, 1995 at Norwich High School, Midland Drive, Norwich, NY
13815. Stockholders are invited and encouraged to actively participate
in the meeting, either in person, or by proxy.
44
<PAGE>
EXHIBIT 21
List of Subsidiaries of the Registrant
<PAGE>
SUBSIDIARIES OF THE REGISTRANT
NBT BANCORP INC. has one subsidiary, which is wholly-owned:
The National Bank and Trust Company
52 South Broad Street
Norwich, New York 13815
Telephone: (607) 337-6000
E.I.N. 15-0395735
<PAGE>
EXHIBIT 23
Consent of KPMG Peat Marwick LLP
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
NBT Bancorp Inc.:
We consent to incorporation by reference in the registration statements on Form
S-3 (File No. 33-12247) and Form S-8 (File Nos. 33-18976 and 33-77410) of NBT
Bancorp Inc. of our report dated January 20, 1995, relating to the consolidated
balance sheets of NBT Bancorp Inc. and subsidiary as of December 31, 1994 and
1993, and the related consolidated statements of income, stockholders' equity,
and cash flows for each of the years in the three-year period ended
December 31, 1994, which report has been incorporated by reference in the
December 31, 1994 annual report on Form 10-K of NBT Bancorp Inc. Our report
refers to changes in accounting for securities and postretirement benefits
other than pensions, in 1993.
Syracuse, New York
March 28, 1995
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM NBT BANCORP
INC.'S 1994 ANNUAL REPORT, PAGES 13-44, AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER>1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<CASH> 41,487
<INT-BEARING-DEPOSITS> 623
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 109,777
<INVESTMENTS-CARRYING> 272,466
<INVESTMENTS-MARKET> 261,913
<LOANS> 574,718
<ALLOWANCE> 9,026
<TOTAL-ASSETS> 1,044,557
<DEPOSITS> 791,443
<SHORT-TERM> 140,587
<LIABILITIES-OTHER> 5,486
<LONG-TERM> 8,734
<COMMON> 8,050
0
0
<OTHER-SE> 90,257
<TOTAL-LIABILITIES-AND-EQUITY> 1,044,557
<INTEREST-LOAN> 48,815
<INTEREST-INVEST> 13,038
<INTEREST-OTHER> 8,585
<INTEREST-TOTAL> 70,438
<INTEREST-DEPOSIT> 21,483
<INTEREST-EXPENSE> 4,259
<INTEREST-INCOME-NET> 44,696
<LOAN-LOSSES> 3,071
<SECURITIES-GAINS> 555
<EXPENSE-OTHER> 38,674
<INCOME-PRETAX> 9,990
<INCOME-PRE-EXTRAORDINARY> 6,508
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,508
<EPS-PRIMARY> 0.80
<EPS-DILUTED> 0.80
<YIELD-ACTUAL> 0.048
<LOANS-NON> 4,639
<LOANS-PAST> 871
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 26,329
<ALLOWANCE-OPEN> 8,652
<CHARGE-OFFS> 3,722
<RECOVERIES> 1,025
<ALLOWANCE-CLOSE> 9,026
<ALLOWANCE-DOMESTIC> 7,894
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 1,132
</TABLE>
