<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule 14a-
6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
BSB Bancorp, Inc.
________________________________________________________________________________
(Name of Registrant as Specified In Its Charter)
________________________________________________________________________________
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
______________________________________________________________________________
2) Aggregate number of securities to which transaction applies:
______________________________________________________________________________
3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
______________________________________________________________________________
4) Proposed maximum aggregate value of transaction:
______________________________________________________________________________
5) Total fee paid:
______________________________________________________________________________
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
____________________________________________________
2) Form, Schedule or Registration Statement No.:
______________________________
3) Filing Party:
_____________________________________________________________
4) Date Filed:
_________________________________________________________________
<PAGE>
BSB BANCORP, INC.
58-68 EXCHANGE STREET
BINGHAMTON, NEW YORK 13902
(607) 779-2492
----------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 27, 1998
----------------
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of BSB
Bancorp, Inc. (the "Company") will be held at Roberson Museum and Science
Center, 30 Front Street, Binghamton, New York 13905, on April 27, 1998, at
10:00 a.m., Eastern Time, and at any adjournment thereof, for the following
purposes, all of which are more completely set forth in the accompanying Proxy
Statement:
1. To elect four directors for a term of three years, or until their
successors have been elected and qualified;
2. To amend the Company's 1996 Long-Term Incentive and Capital
Accumulation Plan to increase the number of aggregate shares of Common
Stock for which options, stock appreciation rights and performance shares
may be granted under the Plan from 450,000 to 875,000;
3. To ratify the appointment of Coopers & Lybrand L.L.P. as the Company's
independent auditors for the fiscal year ending December 31, 1998; and
4. To transact such other business as may properly come before the Annual
Meeting. Except with respect to procedural matters incident to the conduct
of the meeting, the Board of Directors is not aware of any other matters
which may properly come before the Annual Meeting.
Shareholders of the Company of record at the close of business on March 5,
1998 are entitled to notice of and to vote at the Annual Meeting and at any
adjournment thereof.
By Order of the Board of Directors
/s/ Larry G. Denniston
Larry G. Denniston
Senior Vice President and Corporate
Secretary
Binghamton, New York
March 25, 1998
YOU ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING. IT IS IMPORTANT THAT
YOUR SHARES BE REPRESENTED REGARDLESS OF THE NUMBER YOU OWN. EVEN IF YOU PLAN
TO BE PRESENT, YOU ARE URGED TO COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED
PROXY PROMPTLY IN THE ENVELOPE PROVIDED. IF YOU ATTEND THE ANNUAL MEETING, YOU
MAY VOTE EITHER IN PERSON OR BY PROXY. ANY PROXY GIVEN MAY BE REVOKED BY YOU
IN WRITING OR IN PERSON AT ANY TIME PRIOR TO THE EXERCISE THEREOF.
<PAGE>
BSB BANCORP, INC.
58-68 EXCHANGE STREET
BINGHAMTON, NEW YORK 13902
----------------
PROXY STATEMENT
----------------
ANNUAL MEETING OF SHAREHOLDERS
APRIL 27, 1998
----------------
SOLICITATION, VOTING AND REVOCABILITY OF PROXIES
This Proxy Statement, which is first being mailed on or about March 25,
1998, is furnished to shareholders of BSB Bancorp, Inc. (the "Company") in
connection with the solicitation of proxies on behalf of the Board of
Directors to be used at the 1998 Annual Meeting of Shareholders (the "Annual
Meeting"). The Annual Meeting will be held at the Roberson Museum and Science
Center, 30 Front Street, Binghamton, New York 13905, on April 27, 1998 at
10:00 a.m., Eastern Time, and at any adjournment thereof. The Annual Meeting
has been called for the purposes set forth in the Notice of Annual Meeting.
The proxies solicited hereby, if properly signed and returned to the Company
and not revoked prior to their use, will be voted in accordance with the
instructions contained therein by a member of the law firm of Hinman, Howard &
Kattell, LLP, general counsel to the Company, which has been duly appointed by
the Board of Directors to vote such proxies. If no contrary instructions are
given, each proxy will be voted FOR the election of the nominees of the Board
of Directors as directors, FOR Amendment Number 1 to the Company's 1996 Long-
Term Incentive and Capital Accumulation Plan (the "1996 Incentive Plan") to
increase the number of aggregate shares of Common Stock for which options,
stock appreciation rights and performance shares may be granted under the Plan
from 450,000 to 875,000, FOR ratification of the appointment of Coopers &
Lybrand L.L.P. as the Company's independent auditors for the fiscal year
ending December 31, 1998, and, upon the transaction of such other business as
may properly come before the Annual Meeting, in accordance with the best
judgment of the person appointed as proxy.
Any shareholder giving a proxy has the power to revoke it any time before it
is exercised by (i) filing with the Corporate Secretary of the Company written
notice thereof (Larry G. Denniston, Senior Vice President and Corporate
Secretary, BSB Bancorp, Inc., 58-68 Exchange Street, Binghamton, New York
13902), (ii) submitting a duly executed proxy bearing a later date, or (iii)
appearing at the Annual Meeting and giving the Corporate Secretary notice of
his or her intention to vote in person. Proxies solicited hereby may be
exercised only at the Annual Meeting and any adjournment thereof and will not
be used for any other meeting.
The securities which can be voted at the Annual Meeting consist of shares of
the Company's common stock, par value $.01 per share (the "Common Stock"),
with each share entitling its owner to one vote on each matter presented. The
close of business on March 5, 1998 has been fixed by the Board of Directors as
the record date for determination of shareholders entitled to notice of and to
vote at the Annual Meeting. The number of shares of Common Stock outstanding
on March 5, 1998 was 8,588,378. The presence, in person or by proxy, of a
majority of the total number of outstanding shares of Common Stock entitled to
vote at the Annual Meeting is necessary to constitute a quorum at the Annual
Meeting. Shareholders' votes will be tabulated by the person appointed by the
Board of Directors to act as inspector of election of the Annual Meeting.
Under Delaware corporate law, directors are elected by a plurality of votes of
shares present (in person or by proxy) and entitled to vote. Unless otherwise
required by law or the Company's Certificate of Incorporation or Bylaws, any
other matter put to a shareholder vote will be decided by the affirmative vote
of a majority of the votes present and entitled to vote on the matter.
1
<PAGE>
Abstentions and broker non-votes will be treated as shares that are present,
or represented, and entitled to vote for purposes of determining the presence
of a quorum at the Annual Meeting. Broker non-votes will not be counted as a
vote cast or entitled to vote on any matter presented at the Annual Meeting.
Abstentions will not be counted in determining the number of votes cast in
connection with any matter presented at the Annual Meeting.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth information as of March 5, 1998 with respect
to the beneficial ownership of the Common Stock by any person or group as
defined in Section 13(d)(3) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act") who is known to the Company to be the beneficial owner of
more than 5% of the Common Stock and with respect to ownership of Common Stock
by each of the "named executive officers" (defined below) of the Company and
by all directors and executive officers of the Company as a group.
<TABLE>
<CAPTION>
AMOUNT AND NATURE PERCENT
TITLE OF OF BENEFICIAL OF
CLASS BENEFICIAL OWNER OWNERSHIP (1) CLASS
-------- ---------------- ----------------- -------
<C> <S> <C> <C>
First Union Corporation ("First
Common Union")
One First Union Center
Charlotte, NC 28288-0137............ 827,306(2) 9.63%
Common Beck, Mack & Oliver LLC ("BMO")
330 Madison Avenue
New York, NY 10017 ................. 651,315(3) 7.58%
Dimensional Fund Advisors, Inc.
Common ("DFA")
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401.............. 583,974(4) 6.80%
Common Alex S. DePersis.................... 63,763(5) 0.74%
Common Glenn R. Small...................... 72,525(6) 0.84%
Common Arthur C. Smith..................... 35,041(7) 0.41%
Common Edward R. Andrejko.................. 72,931(8) 0.85%
Common Fielding Simmons III................ 27,232(9) 0.32%
Common All directors and executive officers
of the
Company as a group (18 people)...... 1,139,134(10) 12.92%
</TABLE>
- --------
(1) Based on information provided by the respective beneficial owners and upon
the most recent Schedule 13D or 13G filed with the Securities and Exchange
Commission ("Commission") pursuant to the Exchange Act, unless otherwise
indicated. Beneficial ownership is direct except as otherwise indicated by
footnote. In accordance with Rule 13d-3 of the Exchange Act, a person is
deemed to be the beneficial owner of a security if he or she has or shares
voting power or investment power with respect to such security or has the
right to acquire such ownership within 60 days. Unless otherwise
indicated, shares beneficially owned by named executive officers are held
with sole voting and dispositive power.
(2) First Union claims sole voting power over 721,631 shares, sole dispositive
power over 721,796 shares and shared voting power and shared dispositive
power over 105,675 shares. First Union reports beneficial ownership of
such shares on behalf of its subsidiaries Evergreen Asset Management
Corporation, Lieber & Company, First Union National Bank, Charlotte, NC
and First Union National Bank, Avondale, PA. Evergreen Asset Management
Corporation and Lieber & Company are investment advisers registered under
the Investment Advisors Act of 1940; these subsidiaries are investment
advisers for mutual funds and other clients and the securities reported by
them are beneficially owned by such mutual funds or other clients. The
other First Union entities listed above hold the securities reported in a
fiduciary capacity for their respective customers.
2
<PAGE>
(3) BMO claims shared dispositive power over 651,315 shares owned by
investment advisory clients of BMO, none of which report ownership of
more than 5% of the outstanding Common Stock. BMO is an investment
advisor registered under the Investment Advisers Act of 1940.
(4) DFA claims sole voting power over 362,612 shares and sole dispositive
power over 583,974 shares. All of the 583,974 shares are held in
portfolios of DFA Investment Dimensions Group Inc., a registered open-end
investment company (the "Fund"), DFA Investment Trust Company, a Delaware
business trust and a registered open-end investment company (the
"Trust"), or the DFA Group Trust and DFA Participation Group Trust,
investment vehicles for qualified employee benefit plans, for all of
which DFA serves as investment manager. In its Schedule 13G, DFA reported
that persons who are officers of DFA also serve as officers of the Fund
and the Trust, and in their capacities as officers of the Fund and the
Trust, these persons vote 112,462 additional shares which are owned by
the Fund and 108,900 shares which are owned by the Trust. DFA is an
investment advisor registered under the Investment Advisors Act of 1940.
DFA reports that all securities reported in its Schedule 13G are owned by
advisory clients of DFA, no one of which, to the knowledge of DFA, owns
more than 5% of the class. DFA disclaims beneficial ownership of all such
shares.
(5) Includes 15,805 shares held jointly with Mr. DePersis's wife, with
respect to which Mr. DePersis shares voting and dispositive power and
18,930 shares owned directly by Mr. DePersis's wife, with respect to
which Mr. DePersis has no voting or dispositive power. Also includes
6,000 shares with respect to which Mr. DePersis has the right to acquire
beneficial ownership of Common Stock through the exercise of options
granted pursuant to the Incentive Plan (as defined below) and the 1996
Incentive Plan.
(6) Includes 19,284 shares held jointly with Mr. Small's wife, with respect
to which Mr. Small shares voting and dispositive power. Also includes
36,179 shares with respect to which Mr. Small has the right to acquire
beneficial ownership of Common Stock through the exercise of options
granted pursuant to the Incentive Plan and the 1996 Incentive Plan.
(7) Includes 26,745 shares held jointly with Mr. Smith's wife, with respect
to which Mr. Smith shares voting and dispositive power. Also includes
8,296 shares with respect to which Mr. Smith has the right to acquire
beneficial ownership of Common Stock through the exercise of options
granted pursuant to the Incentive Plan and the 1996 Incentive Plan.
(8) Includes 38,354 shares held jointly with Mr. Andrejko's wife, with
respect to which Mr. Andrejko shares voting and dispositive power, 3,279
shares held jointly with another family member with respect to which Mr.
Andrejko shares voting and dispositive power and 1,521 shares held
directly by Mr. Andrejko's wife in an individual retirement account with
respect to which Mr. Andrejko has no voting or dispositive power. Also
includes 28,256 shares with respect to which Mr. Andrejko has the right
to acquire beneficial ownership of Common Stock through the exercise of
options granted pursuant to the Incentive Plan and the 1996 Incentive
Plan.
(9) Includes 13,563 shares held jointly with Mr. Simmons's wife, with respect
to which Mr. Simmons shares voting and dispositive power. Also includes
13,669 shares with respect to which Mr. Simmons has the right to acquire
beneficial ownership of Common Stock through the exercise of options
granted pursuant to the Incentive Plan and the 1996 Incentive Plan.
(10) Includes 226,460 shares as to which members of the group have the right
to acquire beneficial ownership of Common Stock through the exercise of
options. See "Information with Respect to Nominees for Director,
Directors Whose Terms Continue and Executive Officers." Excludes
approximately 150 shares with respect to which members of the group are
entitled to receive as a result of participation in the Company's
dividend reinvestment plan for a dividend declared on January 26, 1998,
which was payable March 10, 1998. Computation of the precise number of
shares involves unnecessary burden and expense due to the timetable for
preparation of this proxy statement.
3
<PAGE>
INFORMATION WITH RESPECT TO NOMINEES FOR DIRECTOR,
DIRECTORS WHOSE TERMS CONTINUE AND EXECUTIVE OFFICERS
(PROPOSAL ONE)
ELECTION OF DIRECTORS
The Company's Certificate of Incorporation states that the Board of
Directors shall consist of 14 members unless otherwise determined from time to
time by resolution of the Board of Directors. The Board of Directors currently
consists of 12 members. The Company's Certificate of Incorporation and Bylaws
provide that the directors shall be divided into three classes as nearly equal
in number as possible. The members of each class are to be elected for a term
of three years and until their successors are elected and qualified. One class
of directors is to be elected annually. In accordance with the Company's
Bylaws, Helen A. Gamble, one of the Company's directors, has informed the
Board of Directors that she will resign as a director effective as of the
Annual Meeting. Upon Mrs. Gamble's resignation, the Company will have one
vacancy on the Board of Directors.
Presently, all directors of the Company also are directors of the Company's
wholly owned subsidiary, BSB Bank & Trust Company (the "Bank").
THE NOMINEES
Unless otherwise directed, each proxy executed and returned by a shareholder
will be voted FOR the election of the four nominees listed below who are being
nominated for a three-year term. There are no arrangements or understandings
between the persons named and any other person pursuant to which such nominee
was selected. If any person named as nominee should be unable or unwilling to
stand for election at the time of the Annual Meeting, the proxy will nominate
and vote for a replacement nominee or nominees recommended by the Board of
Directors. At this time, the Board of Directors knows of no reason why any of
the nominees listed below may not be able to serve as a director if elected.
4
<PAGE>
NOMINEES FOR DIRECTOR WITH TERMS EXPIRING IN 2001
<TABLE>
<CAPTION>
COMPANY
COMMON STOCK
BENEFICIALLY OWNED
POSITION WITH THE COMPANY AND THE DIRECTLY OR
BANK AND PRINCIPAL OCCUPATION DIRECTOR INDIRECTLY AS OF
NAME AGE* DURING THE PAST FIVE YEARS SINCE (1) MARCH 5, 1998
---- ---- --------------------------------- --------- -----------------------
<C> <C> <S> <C> <C> <C>
Ferris G. Akel 65 President, Binghamton 1986 163,669(2) 1.90%
Giant Markets, Inc.
since 1959; Chairman,
Board of Directors, Dr.
G. Clifford and Florence
B. Decker Foundation;
Member, Boards of
Directors, Partnership
2000, United Health
Services, Inc.,
Professional Home Care,
Inc., Binghamton
University School of
Management Advisory
Board and Press & Sun-
Bulletin Business
Advisory Board; Member,
Business Community
Alliance and Physician
Volunteer Services
Committee.
William C. Craine 49 President and Chief 1976 87,387(3) 1.02%
Executive Officer, Mang
Group, Inc.; President
and Chief Executive
Officer, Craine &
Mirabito Insurance and
Mang Group, Inc. until
1996; Member, Boards of
Directors, Preferred
Mutual Insurance
Company, New Berlin, NY
and UHS Hospitals, Inc.,
Binghamton, NY; Member,
Board of Trustees,
Carleton College,
Northfield, MN.
Herbert R. Levine 69 Chairman of the Board, 1974 91,079(4) 1.06%
Van Cott Jeweler, Ltd.
since 1988; Past
President of American
Gem Society and Past
President of New York
State Jewelers
Association; Member of
Executive Committee,
Gulf Stream Council, Boy
Scouts of America.
William H. Rincker 67 Prior to retirement 1981 128,845(5) 1.50%
after year-end 1996,
Chairman of the Company
since 1995 and Chief
Executive Officer of the
Company since 1988;
President of the Company
from 1988 to 1995;
Chairman of the Bank
since 1995 and Chief
Executive Officer of the
Bank since December
1984; President of the
Bank from 1981 to 1995;
Chairman, Board of
Directors, United Health
Services, Inc. and The
Greater Broome Community
Foundation;
Secretary/Treasurer,
Hoyt Foundation Board;
Member, Board of
Directors, Partnership
2000.
</TABLE>
- --------
* Age as of Record Date, March 5, 1998.
(1) Includes service on the Board of Directors of the Bank including, where
applicable, service prior to the organization of the Company in 1988.
(2) Includes 2,362 shares held jointly with Mr. Akel's wife, with respect to
which Mr. Akel shares voting and dispositive power, 9,111 shares
beneficially owned as custodian for Mr. Akel's children and 130,176 shares
owned by Akel Wholesale Grocery Corporation. Also includes 13,500 shares
with respect to which Mr. Akel has the right to acquire beneficial
ownership of Common Stock through the exercise of options granted pursuant
to the Directors' Stock Option Plan.
(3) Includes 700 shares held directly by Mr. Craine's wife in an individual
retirement account with respect to which Mr. Craine has no voting and
dispositive power, and 2,337 shares held in a trust for Mr. Craine's
daughter with respect to which Mr. Craine has power to change the trustee
but not to manage the investments of the trust.
(4) Includes 22,932 shares held by Van Cott Jeweler, Ltd., of which Mr. Levine
is Chairman of the Board, 20,704 shares held directly by Mr. Levine's wife
in an individual retirement account with respect to which Mr. Levine has
no voting or dispositive power, 24,352 shares held in a trust for the
benefit of Mr. Levine with respect to which Mr. Levine has sole voting and
dispositive power, 4,725 shares in a profit sharing plan for Mr. Levine
with respect to which Mr. Levine shares voting and dispositive power with
his wife, and 13,866 shares held in a trust for the benefit of Mr.
Levine's wife, with respect to which Mr. Levine has no voting or
dispositive power. Also includes 4,500 shares with respect to which Mr.
Levine has the right to acquire beneficial ownership through the exercise
of options granted pursuant to the Directors' Stock Option Plan.
(5) Includes 101,291 shares held jointly with Mr. Rincker's wife, with respect
to which Mr. Rincker shares voting and dispositive power. Also includes
19,540 shares owned directly by Mr. Rincker's wife, with respect to which
Mr. Rincker has no voting or dispositive power. Also includes 2,250 shares
with respect to which Mr. Rincker has the right to acquire beneficial
ownership through the exercise of options granted pursuant to the
Directors' Stock Option Plan.
THE BOARD OF DIRECTORS RECOMMENDS THAT
THE NOMINEES BE ELECTED AS DIRECTORS
5
<PAGE>
DIRECTORS WITH TERMS EXPIRING IN 2000
<TABLE>
<CAPTION>
COMPANY
COMMON STOCK
BENEFICIALLY OWNED
POSITION WITH THE COMPANY AND THE DIRECTLY OR
BANK AND PRINCIPAL OCCUPATION DIRECTOR INDIRECTLY AS OF
NAME AGE* DURING THE PAST FIVE YEARS SINCE (1) MARCH 5, 1998**
---- ---- --------------------------------- --------- -----------------------
<C> <C> <S> <C> <C> <C>
Helen A. Gamble 70 Former Treasurer and 1976 31,256(2)
Board member of the
National Board YWCA;
Corporate member of
United Health Services
Foundation; Director,
Broome County Historical
Society; Member,
Advisory Council of
Decker School of
Nursing, Binghamton
University; Member,
Binghamton University
Foundation.
David A. Niermeyer 56 President and Chief 1994 14,625(3)
Executive Officer,
Stakmore Co., Inc. since
April 1980; Member,
Boards of Directors,
United Health Services,
Inc. and the Greater
Broome Community
Foundation; Founder and
Director of the
Niermeyer Foundation.
Mark T. O'Neil, Jr. 45 President and Chief 1994 15,536(4)
Executive Officer,
United Health Services,
Inc. since February
1993; President and
Chief Executive Officer,
UHS Hospitals from
August 1990 to February
1993; Past President,
Board of Directors,
Broome County United
Way; Past Chairman,
Board of Directors,
Broome County Chamber of
Commerce; Chairman,
Board of Directors
Iroquois Health Care
Alliance; Member,
Binghamton University
School of Management
Advisory Committee;
Member, Boards of
Directors, Partnership
2000 and Health Care
Association of New York
State.
Thomas L. Thorn 54 Private Investor since 1995 225,062(5) 2.62%
1997; Executive Vice
President and Treasurer,
Diamond Page
International
Corporation from
September 1978 to
December 1996.
</TABLE>
- --------
* Age as of Record Date, March 5, 1998.
** Unless otherwise indicated, holdings represent less than one percent (1%)
of the issued and outstanding shares of Common Stock.
(1) Includes service on the Board of Directors of the Bank including, where
applicable, service prior to the organization of the Company in 1988.
(2) Includes 13,500 shares with respect to which Mrs. Gamble has the right to
acquire beneficial ownership of Common Stock through the exercise of
options granted pursuant to the Directors' Stock Option Plan.
(3) Includes 9,750 shares with respect to which Mr. Niermeyer has the right to
acquire beneficial ownership of Common Stock through the exercise of
options granted pursuant to the Directors' Stock Option Plan.
(4) Includes 2,036 shares held jointly with Mr. O'Neil's wife, with respect to
which Mr. O'Neil shares voting and dispositive power. Also includes 13,500
shares with respect to which Mr. O'Neil has the right to acquire
beneficial ownership of Common Stock through the exercise of options
granted pursuant to the Directors' Stock Option Plan.
(5) Includes 11,250 shares with respect to which Mr. Thorn has the right to
acquire beneficial ownership of Common Stock through the exercise of
options granted pursuant to the Directors' Stock Option Plan.
6
<PAGE>
DIRECTORS WITH TERMS EXPIRING IN 1999
<TABLE>
<CAPTION>
COMPANY
POSITION WITH THE COMPANY COMMON STOCK
AND THE BENEFICIALLY OWNED
BANK AND PRINCIPAL DIRECTLY OR
OCCUPATION DIRECTOR INDIRECTLY AS OF
NAME AGE* DURING THE PAST FIVE YEARS SINCE (1) MARCH 5, 1998**
---- ---- -------------------------- --------- ------------------
<C> <C> <S> <C> <C>
Robert W. Al- 54 President and Chief 1987 27,631(2)
len Executive Officer,
Tuscan/Lehigh Dairies,
L.P., Lansdale, PA since
May 1997, President and
Chief Executive Officer,
Lehigh Valley Dairies,
Inc., Lansdale, PA from
April 1996 to May 1997;
Independent Consultant from
December 1995 to April
1996; Executive Vice
President, Borden Inc.,
Columbus, Ohio from
February 1995 to December
1995; President, Borden
Inc. Dairy Group from
September 1993 to December
1995; Chairman of the Board
and Chief Executive
Officer, Marigold Foods,
Inc., Minneapolis,
Minnesota from April 1992
to September 1993; Chairman
of the Board and Chief
Executive Officer, Crowley
Foods Inc. of Binghamton,
New York from January 1987
to September 1993;
Chairman, Board of
Directors Azon Corp.,
Johnson City, New York.
Alex S. 50 President and Chief 1996 63,763(3)
DePersis Executive Officer of the
Company and the Bank since
January 1, 1997; prior to
that, President and Chief
Operating Officer since
1995; Executive Vice
President of the Company
and the Bank from 1990 to
1995; Member, Boards of
Directors, Broome County
Chamber of Commerce, Broome
Community College
Foundation, Twin Tiers Home
Health and Community
Bankers Association of New
York State, Member, Board
of Regents, Robert Morris
Associates, Member, Board
of Trustees, Broome
Community College; Member,
Regional Loan Committee,
New York Business
Development Corporation.
Thomas F. 50 Vice President for External 1987 16,889(4)
Kelly Affairs, Binghamton
University, October 1991 to
present; Honorary Director,
United Methodist Homes for
the Aging of New York and
Pennsylvania; Alumni
Trustee, Guthrie Healthcare
System, Inc.; Member,
University Council and
Board of Sponsors of the
Business School, Wilkes
University; Member, Board
of Directors, Broome County
Council of Churches,
Member, Board of Ordained
Ministry, United Methodist
Wyoming Annual Conference
and Membership Committee,
The Binghamton Club.
John V. 59 President, Lockheed Martin 1991 17,510(5)
Sponyoe Electronics Platform
Integration Group, Owego,
NY (including its
predecessors Lockheed
Martin Federal Systems and
Loral Federal Systems)
since March 1994; Vice
President and Site General
Manager, Federal Systems
Company, IBM Corp., Owego,
New York, from May 1987 to
February 1994; Member of
Board of Directors and
Member of Board of Trustees
of Guthrie Healthcare
System, Inc.; Director, A M
& T and Partnership 2000,
Member, Management Advisory
Committee, SUNY-Binghamton
School of Management.
</TABLE>
- --------
*Age as of Record Date, March 5, 1998
** Unless otherwise indicated, holdings represent less than one percent (1%)
of the issued and outstanding shares of the Common Stock.
(1) Includes service on the Board of Directors of the Bank including, where
applicable, service prior to the organization of the Company in 1988.
(2) Includes 14,131 shares held jointly with Mr. Allen's wife, with respect to
which Mr. Allen shares voting and dispositive power. Also includes 13,500
shares with respect to which Mr. Allen has the right to acquire beneficial
ownership of Common Stock through the exercise of options granted pursuant
to the Directors' Stock Option Plan.
(3) Includes 15,805 shares held jointly with Mr. DePersis's wife, with respect
to which Mr. DePersis shares voting and dispositive power and 18,930
shares owned directly by Mr. DePersis's wife, with respect to which Mr.
DePersis has no voting or dispositive power. Also includes 6,000 shares
with respect to which Mr. DePersis has the right to acquire beneficial
ownership of Common Stock through the exercise of options granted pursuant
to the Incentive Plan and the 1996 Incentive Plan.
7
<PAGE>
(4) Includes 3,389 shares held jointly with Dr. Kelly's wife, with respect to
which Dr. Kelly shares voting and dispositive power. Also includes 13,500
shares with respect to which Dr. Kelly has the right to acquire beneficial
ownership of Common Stock through the exercise of options granted pursuant
to the Directors' Stock Option Plan.
(5) Includes 4,010 shares held jointly with Mr. Sponyoe's wife, and with
respect to which Mr. Sponyoe shares voting and dispositive power. Also
includes 13,500 shares with respect to which Mr. Sponyoe has the right to
acquire beneficial ownership of Common Stock through the exercise of
options granted pursuant to the Directors' Stock Option Plan.
SHAREHOLDER NOMINATIONS
Section 7.2(c) of the Company's Certificate of Incorporation provides that
nominations of candidates for election as directors at any annual meeting may
be made (i) by or at the direction of a majority of the Board of Directors or
(ii) by any shareholder entitled to vote at such annual meeting. Shareholders
may name nominees for election to the Board of Directors by submitting written
nominations to the Corporate Secretary of the Company not less than 20 days
prior to the date of the annual meeting; provided, however, that if less than
30 days' notice of the date of the scheduled annual meeting is given, notice
by the shareholder must be so delivered or received not later than the close
of business on the tenth day following the day on which such notice of annual
meeting was mailed, provided further that the notice by the shareholder must
be delivered or received no later than the close of business on the fifth day
preceding the date of the meeting. Such shareholder's notice must set forth
(a) as to each person whom the shareholder proposes to nominate for election
or reelection as a director and as to the shareholder giving notice: (i) the
name, age, business address and residence address of such person, (ii) the
principal occupation or employment of such person, (iii) the class and number
of shares of Common Stock which are beneficially owned by such person on the
date of such shareholder notice, and (iv) any other information relating to
such person that is required to be disclosed in solicitation of proxies with
respect to nominees for election of directors pursuant to Regulation 14A under
the Exchange Act; and (b) as to the shareholder giving the notice: (i) the
name and address, as they appear on the Company's books, of such shareholder
and any other shareholders known by such shareholder to be supporting such
nominees, and (ii) the class and number of shares of Common Stock which are
beneficially owned by such shareholder and any other shareholders known by
such shareholder to be supporting such nominees on the date of such
shareholder notice. If any shareholder nomination is properly and timely made,
ballots will be provided for use by shareholders at the Annual Meeting bearing
the name of such nominee or nominees.
BOARD MEETINGS AND COMMITTEES
The Board of Directors of the Company meets regularly each month and may
have additional special meetings. Each member of the Board of Directors of the
Company also serves as a director of the Bank. The Board of Directors of the
Company met 12 times during the year ended December 31, 1997. No incumbent
director attended fewer than 75% of the aggregate total number of meetings
held by the Board of Directors of the Company and all committees of the Board
on which such director served during the last fiscal year.
During 1997, the Board of Directors of the Company had a number of
committees, including the Executive Committee, a standing Audit Committee and
a Compensation Committee. In addition, during 1997 the Board of Directors of
the Bank had a number of committees, including the Executive Committee and a
standing Salary and Personnel Administration Committee, among others. The
entire Board of the Company serves as a Nominating Committee.
The Executive Committee of the Company consists of Messrs. Akel, Craine,
DePersis and Levine, and Mrs. Gamble and two rotating members. The Executive
Committee met seven times in 1997.
The Audit Committee meets with the Company's independent auditors and
reviews the scope and results of the audit performed by such auditors. The
Audit Committee also monitors and reviews the Company's system of internal
control and audit with management and the independent auditors. The Audit
Committee consists of Messrs. Akel, Kelly, Levine, Niermeyer and O'Neil, and
Mrs. Gamble. The Audit Committee met four times during 1997.
8
<PAGE>
The Company's Compensation Committee has the authority to grant options,
stock appreciation rights and performance shares and the Bank's Salary and
Personnel Administration Committee reviews both employee and executive
compensation and makes recommendations to the Board of Directors with regard
to executive compensation. Both committees consist of Messrs. Akel, Allen,
Levine and Sponyoe, and Mrs. Gamble. The Company's Compensation Committee met
two times during 1997. The Bank's Salary and Personnel Administration
Committee met five times during 1997.
The Nominating Committee selects nominees for election as directors of the
Company. The Nominating Committee will consider nominees recommended by
shareholders in accordance with the procedures set forth in the Company's
Certificate of Incorporation, as described above. The Committee consists of
all members of the Board of Directors, and in that capacity met one time
during 1997.
COMPENSATION OF DIRECTORS
Directors' Fees. Directors of the Company did not receive any fees for
attendance at meetings of the Board of the Company during 1997. In their
capacity as directors of the Bank, however, such persons received an annual
retainer of $12,000 plus $350 for each Board meeting attended. Also, committee
members received fees of $350 per meeting attended, except that members of the
Bank's Loan Committee received fees of $400 per meeting attended and the
Chairman of each of the Audit Committee, the Salary and Personnel
Administration Committee and the Trust Committee received fees of $400 per
meeting attended. In 1998 each non-rotating member of the Bank's Executive
Committee serving for the entire year will receive an annual retainer of
$2,400 except for the Chairman of the Committee, who will receive an annual
retainer of $4,800. Rotating members of the Committee will receive fees of
$350 per meeting attended. No director or committee fees were paid to officers
of the Company who are also directors. Directors may elect to defer the
receipt of all or a portion of their fees pursuant to a non-qualified deferred
compensation agreement. Interest is credited on the deferred amounts at a rate
equal to the Bank's earning asset yield (as defined). During 1997, Mr. Rincker
elected to defer fees under this arrangement.
Directors' Stock Option Plan. Pursuant to the Directors' Stock Option Plan
and as adjusted for a stock split in September 1997, Messrs. Akel, Allen,
Craine, Kelly, Levine, Niermeyer, O'Neil, Rincker, Sponyoe and Thorn, and Mrs.
Gamble each received a grant of a non-qualifying option, for 2,250 shares at
an exercise price of $18.667 per share on January 24, 1997, the fair market
value on the date of grant. To the extent shares remain available for grant
under the Directors' Stock Option Plan, each non-employee director shall
receive in January of each year an option to purchase 2,250 shares at the fair
market value on the date of grant. For 1998, the non-employee directors
received an option for 2,250 shares at an exercise price of $30.50 per share,
the fair market value on the date of grant, January 24, 1998.
The purposes of the Directors' Stock Option Plan are to enhance the
Company's ability to attract and retain highly qualified individuals to serve
as members of the Company's Board of Directors and to provide additional
incentives to non-employee directors to promote the success of the Company.
9
<PAGE>
EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS
The following information is supplied with respect to executive officers of
the Company who do not serve on the Board of Directors of the Company. There
are no arrangements or understandings between the Company and any person
pursuant to which such person has been elected as an officer.
<TABLE>
<CAPTION>
NAME AGE TITLE(S)
---- --- -------
<S> <C> <C>
Glenn R. Small............ 52 Executive Vice President
Arthur C. Smith........... 51 Executive Vice President
Edward R. Andrejko........ 57 Senior Vice President and Chief Financial Officer
Larry G. Denniston........ 52 Senior Vice President and Corporate Secretary
Fielding Simmons III...... 58 Senior Vice President and Treasurer
Douglas R. Johnson........ 55 Senior Vice President
</TABLE>
Glenn R. Small joined the Bank in 1982. He became Executive Vice President,
Senior Credit Officer of the Bank and Executive Vice President of the Company
in October 1996. He was Senior Vice President of the Bank from 1985 to October
1996 and of the Company upon its formation in 1988 until October 1996. Prior
to that time, he was Vice President--Commercial Loans of the Bank since 1982.
Arthur C. Smith joined the Bank in 1967. He became Executive Vice President,
Retail Banking Officer of the Bank and Executive Vice President of the Company
in October 1996. He was Senior Vice President of the Company and the Bank from
1994 to October 1996. Prior to that time, he was Vice President of the Bank
from 1987 and of the Company since its formation in 1988.
Edward R. Andrejko joined the Bank in 1962. He became Senior Vice President
and Chief Financial Officer of the Company and the Bank in 1991. Prior to that
time, he was Vice President and Chief Financial Officer of the Bank since 1985
and the Company since its formation in 1988.
Larry G. Denniston joined the Bank in 1983. He became Senior Vice President
and Corporate Secretary of the Company and the Bank in December 1996. He was
Vice President and Secretary of the Company and the Bank from 1990 to December
1996. Prior to that time, he was Vice President--Financial Services of the
Bank since 1985 and of the Company since its formation in 1988.
Fielding Simmons III joined the Bank in 1976. He became Senior Vice
President and Treasurer of the Company and the Bank in 1991. Prior to that
time, he was Vice President and Treasurer of the Bank since 1985 and the
Company since its formation in 1988.
Douglas R. Johnson joined the Bank in 1990. He became Senior Vice President
of the Company in January 1997. He has been Senior Vice President and Senior
Trust Officer of the Bank since December 1990.
10
<PAGE>
EXECUTIVE COMPENSATION AND OTHER INFORMATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table sets forth a summary of all compensation paid during the
last three fiscal years to the Company's chief executive officer and the
Company's four other most highly compensated executive officers for 1997 (the
"named executive officers"). All cash compensation has been paid by the Bank.
None of the named executive officers received any separate form of
compensation in their capacities as officers of the Company. As to each of the
named executive officers, the aggregate amount of perquisites and other
personal benefits was less than 10% of the total annual salary and bonus
reported for the periods indicated. The Company has not granted any stock
appreciation rights ("SARs"). Share data has been adjusted to reflect 3-for-2
stock splits in December 1995 and September 1997.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
---------------------
ANNUAL COMPENSATION AWARDS
--------------------- ---------------------
NAME AND PRINCIPAL SALARY SECURITIES UNDERLYING ALL OTHER
POSITION YEAR ($) BONUS ($)(1) OPTIONS/SARS (#) COMPENSATION ($)(2)
- ------------------ ---- -------- ------------ --------------------- -------------------
<S> <C> <C> <C> <C> <C>
Alex S. DePersis, ...... 1997 $185,000 $42,226 15,000 $5,549
President, Chief 1996 150,000 14,830 7,500 4,500
Executive Officer 1995 114,735 70,657 4,500 3,442
and a Director
Glenn R. Small, ........ 1997 113,163 25,829 11,250 3,395
Executive Vice Presi- 1996 100,877 7,013 4,500 3,026
dent 1995 93,139 64,284 4,500 2,794
Arthur C. Smith, ....... 1997 113,163 25,829 9,000 3,395
Executive Vice Presi- 1996 89,087 5,938 4,500 2,672
dent 1995 77,358 2,300 2,812 2,321
Edward R. Andrejko, .... 1997 97,500 22,254 6,000 2,925
Senior Vice President 1996 93,083 9,052 3,000 2,792
and Chief Financial 1995 89,503 62,063 2,812 2,685
Officer
Fielding Simmons III, .. 1997 97,500 22,254 6,000 2,925
Senior Vice President 1996 92,836 8,236 3,000 2,785
and Treasurer 1995 89,265 61,899 2,812 2,678
</TABLE>
- --------
(1) Bonuses for 1995 for Messrs. DePersis, Small, Andrejko and Simmons were
paid in accordance with the Bank's Three-Year Executive Plan, which became
effective in 1993. Although the performance measurements for bonuses
covered a three-year period, the ultimate determination of the bonus was
subject to the Board of Directors' discretion and approval, and therefore
is reported as annual compensation rather than long-term compensation. Mr.
Smith's bonus for 1995 was paid under the Bank's 1995 Stakeholder
Performance Plan. The bonuses for 1996 were paid under the Bank's 1996
Stakeholder Compensation Incentive Plan. The bonuses for 1997 were paid
under the Bank's 1997 Executive Incentive Plan. See "Company Compensation
Committee and Bank Salary and Personnel Administration Committee Report on
Executive Compensation."
(2) Consists of matching contributions under the Bank's defined contribution
plan and, with respect to Mr. DePersis, a contribution benefit amount of
$750 for 1997 under the Company's Supplemental Executive Retirement Plan.
11
<PAGE>
OPTIONS EXERCISES AND HOLDINGS
The following table sets forth information with respect to grants of stock
options to each of the named executive officers during 1997 and the potential
realized value by such individuals. All options were granted at current market
price on the date of grant.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL
REALIZED VALUE AT
ASSUMED ANNUAL
RATES OF STOCK
PRICE
APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM
------------------------------------------------- -----------------
% OF TOTAL
NUMBER OF OPTIONS/SARS
SECURITIES GRANTED TO
UNDERLYING EMPLOYEES EXERCISE OR
OPTIONS/SARS IN FISCAL BASE EXPIRATION
NAME GRANTED (#) YEAR PRICE ($/SH) DATE 5% ($) 10% ($)
- ---- ------------ ------------ ------------ ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Alex S. DePersis........ 15,000 11.4% $18.833 1/30/07 $177,663 $450,232
Glenn R. Small.......... 11,250 8.5 18.833 1/30/07 133,247 337,674
Arthur C. Smith......... 9,000 6.8 18.833 1/30/07 106,598 270,139
Edward R. Andrejko...... 6,000 4.5 18.833 1/30/07 71,065 180,093
Fielding Simmons III.... 6,000 4.5 18.833 1/30/07 71,065 180,093
</TABLE>
The following table sets forth information with respect to each of the named
executive officers concerning the exercise of stock options during the fiscal
year ended December 31, 1997 and the year-end value of all unexercised options
held by such individuals.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT YEAR-END (#) AT YEAR-END ($)(2)
------------------------- -------------------------
SHARES
ACQUIRED ON
EXERCISE VALUE
NAME (#) REALIZED ($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- --------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Alex S. DePersis........ 6,637 $109,227 18,930 24,000 $498,724 $440,125
Glenn R. Small.......... -- -- 31,117 18,000 883,203 334,875
Arthur C. Smith......... 3,375 67,219 4,640 14,484 108,020 266,112
Edward R. Andrejko...... 750 18,361 25,350 10,359 733,631 194,456
Fielding Simmons III.... 6,662 118,208 11,263 10,359 299,299 194,456
</TABLE>
- --------
(1) Difference between fair market value per share, or price per share if
sold, less exercise price per share times the number of shares.
(2)Market value of underlying securities at year-end, minus the exercise or
base price.
EMPLOYMENT AGREEMENTS
In November 1990, the Company and the Bank entered into a three-year
employment contract (the "Contract") with Alex S. DePersis. The DePersis
Contract was amended on December 18, 1995, December 30, 1996 and December 29,
1997. Also in November 1990, the Company and the Bank entered into a three-
year Change of Control Severance Agreement (a "Severance Agreement") with each
of Glenn R. Small, Edward R. Andrejko and Fielding Simmons III, which
Severance Agreements were amended on December 18, 1995. In January 1996, the
Company and the Bank entered into a Severance Agreement with Arthur C. Smith.
The Contract and the Severance Agreements provide that the term of each
agreement shall be automatically extended by one year on each anniversary date
of each agreement, unless the Boards of Directors of the Company and the Bank
(together, the "Employers"), or the executive provides contrary written
notice.
12
<PAGE>
The Employers may terminate the Contract for Cause (as defined), or for
other than Cause, in which case the Employers must pay Mr. DePersis the salary
which he would have been entitled to receive under the remaining term of a
Contract, except that such payments will cease at the earlier of (i) the end
of the term of a Contract, or (ii) if Mr. DePersis becomes employed, directly
or indirectly, by a financial institution or holding company located near the
Bank's home office. The Contract also provides for severance payments in the
amount of 2.99 times the highest annual compensation paid to Mr. DePersis for
any of the three calendar years ending with the year of termination, in the
event of involuntary termination of employment in connection with any Change
of Control (as defined). Mr. DePersis also would be entitled to payments under
any performance incentive plan in which he participates, when the other
participants are paid, subject to proration through his date of termination. A
similar severance payment will also be provided on a similar basis to Mr.
DePersis in connection with a voluntary termination of employment for Good
Reason (as defined). Severance and other benefits payable pursuant to the
Contracts and other plans and arrangements of the Company and the Bank are
limited to the maximum amount which can be paid without constituting "excess
parachute payments" within the meaning of the Internal Revenue Code of 1986,
as amended (the "Code").
If an executive's employment under any Severance Agreement is terminated:
(i) for any reason prior to a Change in Control (as defined), or (ii) after a
Change in Control, by the Employers for Good Cause (as defined), or by the
voluntary action of the executive without Good Reason (as defined), the
executive shall continue to receive his base salary through the date of
termination, and the Employers shall have no further obligation to the
executive or his spouse under the Severance Agreement, except for certain
accrued benefits. The Severance Agreements also provide for a severance
payment during a period of up to two years at an annual rate equal to the
higher of the executive's base salary on the date of (i) the Change in
Control, or (ii) the date of termination of employment, and other benefits, in
the event of (a) involuntary termination of employment in connection with any
Change in Control, for other than Good Cause, or (b) voluntary termination for
Good Cause. As is the case with the Contract, severance and other benefits
payable pursuant to the Severance Agreements are limited to the maximum amount
payable without constituting "excess parachute payments." The Severance
Agreements do not contain any provision restricting the right to compete
against the Bank upon termination of employment.
Executive employees may elect to defer the receipt of compensation income
pursuant to a nonqualified deferred compensation agreement with the Bank.
Interest is credited on the deferred amounts at a rate equal to the Bank's
earning asset yield (as defined). During 1997, no executives elected to defer
compensation under this arrangement.
COMPANY COMPENSATION COMMITTEE AND BANK SALARY AND PERSONNEL ADMINISTRATION
COMMITTEE REPORT ON EXECUTIVE COMPENSATION
During 1997 no person received any separate form of compensation as an
officer of the Company. Accordingly, decisions on compensation of the
Company's executives, except with respect to stock options, are made by the
five-member Salary and Personnel Administration Committee of the Bank's Board
of Directors. The members of that committee are Messrs. Akel, Allen, Levine
and Sponyoe, and Mrs. Gamble. The same persons comprise the Compensation
Committee of the Board of Directors of the Company, which committee had the
authority to grant options, stock appreciation rights and performance shares
under the Company's Long-Term Incentive and Capital Accumulation Plan (the
"Incentive Plan") prior to 1996 and has the same authority for grants
beginning April 22, 1996 under the 1996 Incentive Plan. For purposes of this
Proxy Statement, the Salary and Personnel Administration Committee and the
Compensation Committee are together referred to as the "Committee." Each
member of the Committee is a non-employee director. All decisions by the
Committee relating to the compensation of the Company's executive officers are
reviewed by the full Board of Directors. Pursuant to rules adopted by the
Commission designed to enhance disclosure of policies toward executive
compensation, set forth below is a report submitted by the Committee,
addressing the Company's compensation policies for 1997 as they affected the
Company's executive officers, including the Chief Executive Officer and the
named executive officers.
13
<PAGE>
COMPENSATION POLICIES FOR EXECUTIVE OFFICERS. The Committee's executive
compensation policies are designed to provide competitive levels of
compensation and assist the Company in attracting and retaining qualified
executives. Target levels of executive officers' overall compensation are
intended to be consistent with banks in the northeastern United States with
assets between $1.0 billion and $5.0 billion. The Committee endorses the
position that stock ownership by management and stock-based plans are
beneficial in aligning management's and shareholders' interests in the
enhancement of shareholder value. The Committee also endorses the position
that cash bonuses tied to annual and long-term target levels of income
strengthen management's incentive to increase consolidated net income of the
Company.
RELATIONSHIP OF PERFORMANCE TO EXECUTIVE COMPENSATION. Compensation paid to
the Company's named executive officers in fiscal 1997 consisted of the
following components: base salary, bonuses under the Bank's 1997 Executive
Incentive Plan (the "Plan"), stock options under the Company's 1996 Incentive
Plan, benefits under the Bank's defined benefit retirement plan and defined
contribution plan, and certain other benefits.
Base Salary. The Committee reviews executive base salaries annually. Base
salaries for Messrs. Andrejko and Simmons for fiscal 1997 increased by an
average of 4.9% over 1996 levels. The base salary for Mr. DePersis increased
23.3% over the 1996 level, reflecting his promotion to President and Chief
Executive Officer at the beginning of 1997. Base salaries for Messrs. Small
and Smith increased by an average of 19.6% over the 1996 level, reflecting
their respective promotions to Executive Vice President, Senior Credit Officer
and Executive Vice President, Retail Banking Officer in October 1996. Base
salary levels for the executive officers are set within established salary
ranges which are based upon responsibility, experience and company
performance. Base salaries are also designed to be competitive with peer banks
in the northeastern United States with assets between $1.0 billion and $5.0
billion. Among the factors considered by the Committee in setting 1997
salaries were the following: individual performance in 1996; net income was
$15.2 million in 1996, a 20.7% increase over net income of $12.6 million in
1995; return on average equity was 13.49% in 1996, compared to 10.89% in 1995;
return on average assets in 1996 was 1.19% compared to 1.06% in 1995; and
earnings per share were $2.57 in 1996 compared to $1.98 in 1995.
Bonuses. The bonus component of compensation paid to the Company's named
executive officers for fiscal 1997 was paid under the Plan. The Plan provided
that the Bank would award bonuses to participating executive officers if the
Company met certain earnings per share levels in 1997 and the executive
officers met individual performance requirements. The earnings per share goals
were established by the Board of Directors at the beginning of the 1997 fiscal
year. The seven most senior officers of the Bank were participants in the
Plan. The maximum cash bonus that could be paid to a participant under the
Plan was 25% of base salary. No payout would be made unless the Company
declared and paid four quarterly dividends during 1997 and no payment would be
made under the Plan to a participant who terminated employment during the year
(other than because of disability, retirement or death) or who was rated
unsatisfactory on his or her individual performance evaluation, unless
otherwise determined by the Board or Compensation Committee, as applicable.
Stock Options. The Company's 1996 Incentive Plan provides long-term
incentives to key employees, including executive officers, through the grant
of stock options. The grant of stock options is intended to foster management
team cohesion and align management and shareholder interests. Stock option
grants provide an additional means to provide incentives for executive
officers. The Company believes that the grant of stock options can be used to
encourage performance that can result in enhanced shareholder value. Options
were granted under the Incentive Plan in 1995 and under the 1996 Incentive
Plan in 1996 and 1997. All options were granted at current market price on the
date of grant.
Other. In addition to the compensation paid to executive officers as
described above, executive officers receive, along with and on the same terms
as other employees, contributions by the Bank pursuant to the Bank's defined
benefit retirement plan and matching contributions under the Bank's defined
contribution plan. The executive officers also receive group term life
insurance on the same terms as other employees, and certain other perquisites.
14
<PAGE>
CHIEF EXECUTIVE OFFICER COMPENSATION. The base salary for Mr. DePersis as
CEO was increased in 1997 from $150,000 to $185,000 based on the Company's
performance in 1996. Mr. DePersis's salary was designed to be competitive with
the salaries of the CEOs of peer banks in the northeastern United States with
assets between $1.0 billion and $5.0 billion. Mr. DePersis's 1997 salary was
determined using the same factors noted above with respect to individual
performance in 1996, increases in net income, return on average equity, return
on average assets and earnings per share in 1996 as compared to 1995. Mr.
DePersis also participated in the Plan in 1997 under which his bonus for 1997
was 22.8% of his base salary based on the levels of achievement relative to
the key performance indicators of the Plan. Mr. DePersis also received a stock
option for 15,000 shares of Common Stock during 1997 pursuant to the Company's
1996 Incentive Plan.
COMPENSATION COMMITTEE OF COMPANY AND
SALARY AND PERSONNEL ADMINISTRATION COMMITTEE OF BANK
Ferris G. Akel
Robert W. Allen
Helen A. Gamble
Herbert R. Levine
John V. Sponyoe
COMPENSATION COMMITTEE AND SALARY AND PERSONNEL ADMINISTRATION COMMITTEE
INTERLOCKS ANDINSIDER PARTICIPATION
Each of the Compensation Committee and the Salary and Personnel
Administration Committee is comprised of Messrs. Akel, Allen, Levine and
Sponyoe, and Mrs. Gamble.
In fiscal 1997, the Bank had outstanding commercial real estate loans and
commercial loans secured by real estate to Parkway Plaza, L.L.C., Town Square
Mall Associates, L.L.C. and Newman Development Group, as well as a letter of
credit to Town Square Mall Associates, L.L.C., each of which was guaranteed by
Mr. Akel. Mr. Akel is a member of Parkway Plaza, L.L.C., Town Square Mall
Associates, L.L.C. and Newman Development Group. In fiscal 1997, the Bank had
commercial loans to Van Cott Jeweler, Ltd., of which Mr. Levine is Chairman of
the Board. As to the foregoing loans, and the guarantee by Mr. Akel, the Bank
believes that they were made in the ordinary course of business of the Bank on
substantially the same terms, including interest rates and collateral, as
those prevailing at the time for comparable transactions with other persons.
The Bank also believes the loans and the guarantee did not involve more than
the normal risk of collectability nor present any other unfavorable features.
Also, for the year ended December 31, 1997, the Bank paid an aggregate of
$160,290 to Binghamton Giant Markets, Inc., of which Mr. Akel is President and
a principal stockholder. Such payment reflects fees paid in connection with
transactions on the Bank's StoreTeller electronic facilities maintained at
food markets owned by Binghamton Giant Markets, Inc.
15
<PAGE>
COMPARATIVE COMPANY PERFORMANCE
The following line graph sets forth comparative information regarding the
Company's cumulative shareholder return on its Common Stock over the last five
fiscal years. Total shareholder return is measured by dividing total dividends
(assuming dividend reinvestment) plus share price change for a period by the
share price at the beginning of the measurement period. The Company's
cumulative shareholder return based on an investment of $100 at the beginning
of the five-year period beginning December 31, 1992 is compared to the
cumulative total return of The Nasdaq Stock Market (U.S. Companies) and SNL
Securities $1 billion to $5 billion Bank Index.
[GRAPHIC APPEARS HERE]
<TABLE>
<CAPTION>
PERIOD ENDING
-----------------------------------------------------
INDEX 12/31/92 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97
- ----- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
BSB Bancorp, Inc.......... 100.00 133.63 166.40 219.81 246.06 508.73
NASDAQ--Total US.......... 100.00 114.80 112.21 158.70 195.19 239.53
SNL $1B-5B Bank Index..... 100.00 120.19 126.54 170.16 220.59 367.88
</TABLE>
16
<PAGE>
EMPLOYEE DEFINED BENEFIT PLAN
The following table illustrates current annual pension benefits under the
Company's defined benefit retirement plan for retirement in 1997 at age 65
under the most advantageous provisions available for various levels of
compensation, years of service, and full Social Security benefits. Pension
benefits are currently subject to a statutory maximum of $125,000, subject to
cost-of-living adjustments. Additionally, annual compensation in excess of
$160,000 (subject to cost of living increases) may not be used in calculation
of retirements.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF SERVICE
ANNUAL -------------------------------------------------------
COMPENSATION 5 10 15 20 25 30 35
- ----------------------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 75,000.............. $ 7,500 $15,000 $22,500 $30,000 $37,500 $45,000 $45,000
100,000.............. 10,000 20,000 30,000 40,000 50,000 60,000 60,000
125,000.............. 12,500 25,000 37,500 50,000 62,500 75,000 75,000
150,000.............. 15,000 30,000 45,000 60,000 75,000 90,000 90,000
160,000.............. 16,000 32,000 48,000 64,000 80,000 96,000 96,000
</TABLE>
A participant's normal retirement benefit is equal to 2% of average annual
earnings, multiplied by the number of years and fraction thereof of creditable
service. Average annual earnings represents payment made during the 36
consecutive calendar months of highest earnings during the final 120 calendar
months of the employee's creditable service. Mr. DePersis's annual pension
benefit is $35,800 based on his average annual earnings in effect as of
December 31, 1997 and all Code limits. In no event, however, may the normal
retirement benefit exceed 60% of average annual earnings. Pension allowances
are based on 2% of the employee's average basic annual earnings excluding
overtime, bonus, or other special payments. Pension benefits are computed on a
straight life annuity benefit.
The years of creditable service as of December 31, 1997 for Messrs.
DePersis, Small, Smith, Andrejko and Simmons were 12, 15, 30, 35 and 21,
respectively.
In 1995, the Board of Directors of the Bank adopted a Supplemental Executive
Retirement Plan (the "SERP") to be effective on January 1, 1995 and to permit
designated employees of the Bank to receive supplemental retirement benefits
from the Bank which amounts would be due under the benefit and contribution
formulas in the Bank's defined benefit retirement plan and its defined
contribution plan but which cannot be paid under those plans due to reductions
and other limitations imposed on such plans pursuant to the Code. Mr. DePersiS
was the only participant in the SERP in 1997. The SERP is an unfunded, non-
qualified deferred compensation plan and benefits thereunder will be paid from
the general assets of the Bank. As of December 31, 1997, Mr. DePersis's
accrued annual supplemental defined benefit amount under the SERP was $19,015
payable as a straight life annuity.
CERTAIN RELATIONSHIPS
Directors, officers and employees of the Company or the Bank are permitted
to borrow from the Bank to the extent permitted by New York law and the
regulations of the Board of Governors of the Federal Reserve System. Under
applicable New York law, the Bank may make first or second mortgage loans to
officers provided that each such loan is secured by the officer's primary
residence and is authorized in writing by the Board of Directors. In addition,
the Bank makes consumer loans and commercial real estate and commercial
business loans to officers and directors and related persons consistent with
applicable law. Except as described below, all loans made by the Bank to
directors and executive officers or their associates and related entities have
been made in the ordinary course of business, on substantially the same terms,
including interest rates and collateral, as those prevailing at the time for
comparable transactions with other persons. It is the belief of management
that, at the time of origination, these loans neither involved more than the
normal risk of collectability nor presented any
17
<PAGE>
other unfavorable features. Effective as of August 25, 1997, the Bank adopted
a policy permitting all employees, including directors and executive officers,
to obtain loans at preferential interest rates and to obtain discounted
processing fees. Messrs. Andrejko, DePersis and Smith, each of whom is an
executive officer of the Company and the Bank, were extended home equity lines
of credit by the Bank in November 1997 of $72,000, $50,000 and $60,000,
respectively, with preferential terms pursuant to this policy. The largest
aggregate amount of indebtedness outstanding at any time under these lines of
credit and the amount of indebtedness as of March 5, 1998, respectively, are
as follows: with respect to Mr. Andrejko, $12,821 and $12,231; with respect to
Mr. DePersis, $35,548 and $8,356; and with respect to Mr. Smith, $51,846 and
$50,326. For each of these lines of credit, the interest rate for indebtedness
up to $30,000 was prime plus 1/2% and for indebtedness of more than $30,000,
the prime rate. Dr. Kelly, a director of the Company and the Bank, refinanced
a single-family residential mortgage loan in February 1998, which refinancing
was made in the ordinary course of business, on substantially the same terms,
including interest rate and collateral, as those prevailing at the time for
comparable transactions with other persons, and at the time of origination,
did not involve more than the usual risk of collectability nor present any
other unfavorable features. However, under the Bank's policy of permitting
discounted processing fees to employees and directors, it is expected that Dr.
Kelly will obtain a discount on the processing fee for this loan consistent
with the Bank's policy. The interest rate on the 15-year maturity loan to Dr.
Kelly is 6.875%. The largest aggregate amount of indebtedness outstanding at
any time under the loan and the amount of indebtedness as of March 5, 1998
were $64,000.
For a description of certain transactions regarding Mr. Akel, Mr. Levine and
the Bank, see "Compensation Committee and Salary and Personnel Administration
Committee Interlocks and Insider Participation."
18
<PAGE>
AMENDMENT NUMBER 1 TO THE COMPANY'S
1996 LONG-TERM INCENTIVE AND CAPITAL ACCUMULATION PLAN
(PROPOSAL TWO)
In 1996, the Board of Directors of the Company adopted and the shareholders
of the Company approved the 1996 Incentive Plan for the benefit of officers
and other employees of the Company and its subsidiaries, whether or not
directors of the Company. Directors of the Company who are not officers or
employees of the Company or a subsidiary are not eligible to receive grants
under the 1996 Incentive Plan. As of March 5, 1998, approximately 70 officer
employees of the Company and its subsidiaries and 357 non-officer employees
were eligible to participate in the 1996 Incentive Plan. Although under the
terms of the 1996 Incentive Plan all employees are eligible for grants, the
Board of Directors presently intends to award grants under the 1996 Incentive
Plan primarily as part of the Company's officer compensation program.
The Board of Directors has voted to amend the 1996 Incentive Plan, subject
to shareholder approval at the Annual Meeting, to increase the aggregate
number of shares of Common Stock reserved for issuance under the 1996
Incentive Plan from 450,000 (as adjusted for the 3-for-2 stock split in
September 1997) to 875,000. The number of shares reserved for issuance is
subject to adjustment upon the occurrence of certain events as described
below. See "Description of the 1996 Incentive Plan."
The Board of Directors of the Company believes that stock options and other
forms of equity-based incentive compensation are important to attract and to
encourage the continued service of officers and other key employees by
facilitating their acquisition of a stock interest in the Company. As of March
5, 1998, 64,575 shares remain for future grants under the 1996 Incentive Plan.
Approval of the proposed amendment will increase the number of shares
available for issuance under the 1996 Incentive Plan by 425,000 shares, which
equals 4.95% of the Company's outstanding Common Stock as of March 5, 1998.
The Board of Directors has concluded that it is advisable that the Company
and its shareholders continue to have the incentive of stock options, stock
appreciation rights and performance shares available as a means of attracting
and retaining officers and key employees. This objective is served by amending
the 1996 Incentive Plan to increase the number of available shares.
The amendment to the 1996 Incentive Plan is subject to approval by the
holders of at least a majority of the votes present and entitled to vote at
the Annual Meeting. By submitting the amendment for shareholder approval at
the Annual Meeting, the Company intends to continue to comply with the plan
requirements pertaining to options qualifying as "incentive stock options" for
federal income tax purposes and to the deduction for such purposes of the full
amount to which the Company is entitled with respect to awards made under the
1996 Incentive Plan. See "Federal Income Tax Consequences" below.
PURPOSES OF THE 1996 INCENTIVE PLAN
The Committee endorses the position that stock ownership by management and
stock-based plans are beneficial in aligning management's and shareholders'
interests in the enhancement of shareholder value. The purposes of the 1996
Incentive Plan are to enhance performance and to encourage the ownership of
the Company's Common Stock.
DESCRIPTION OF THE 1996 INCENTIVE PLAN
The 1996 Incentive Plan provides for the grant of incentive stock options
and non-statutory options (each as defined below), stock appreciation rights
and performance shares to officers and other employees of the Company and its
subsidiaries.
The 1996 Incentive Plan is being administered by a committee composed of the
Compensation Committee of the Company (the "Plan Administrators"), who are
given absolute discretion to select the persons to whom
19
<PAGE>
rights will be granted and determine the number of rights to be granted to
each. The current Plan Administrators are Messrs. Akel, Allen, Levine and
Sponyoe, and Mrs. Gamble. Four kinds of rights are authorized under the 1996
Incentive Plan and are available for grant: incentive stock options, non-
statutory options, stock appreciation rights and performance share awards.
If the outstanding shares of Common Stock are increased or decreased or
changed into or exchanged for a different number or kind of shares or
securities of the Company, by reason of merger, consolidation, reorganization,
recapitalization, reclassification, stock split-up, combination of shares,
exchange of shares, stock dividend or other distribution payable in capital
stock, or other increase or decrease in such shares without receipt of
consideration by the Company, an appropriate and proportionate adjustment will
be made in the number and kinds of shares subject to the 1996 Incentive Plan,
and in the number, kinds, and per share exercise price of shares subject to
the unexercised portion of options and stock appreciation rights granted prior
to any such change. Any such adjustment in an outstanding option or stock
appreciation right, however, will be made without a change in the total price
applicable to the unexercised portion of the option or stock appreciation
right but with a corresponding adjustment in the per share option or stock
appreciation right price.
The 1996 Incentive Plan will remain in effect for a term of 10 years from
February 26, 1996, unless sooner terminated in accordance with its terms. The
Board may amend or terminate the 1996 Incentive Plan except that without
approval of shareholders no amendment may change the maximum number of shares
that may be issued under the 1996 Incentive Plan, change the class of eligible
employees or materially increase the benefits accruing to eligible individuals
thereunder.
The amendment to the 1996 Incentive Plan must be approved by shareholders
within one year of the date of adoption of the amendment. No grants will be
made pursuant to the amendment unless and until such approval is obtained.
OPTIONS UNDER THE 1996 INCENTIVE PLAN
One or more options may be granted under the 1996 Incentive Plan to any
eligible person, provided that in any calendar year, no one may be granted
options for more than 15,000 shares (as adjusted for the 3-for-2 stock split
in September 1997) and the aggregate fair market value (determined at the time
the options are granted) of the stock for which options qualifying as
incentive options first become exercisable in a year may not exceed $100,000.
Non-statutory stock options may also be granted under the 1996 Incentive Plan.
As described below, the tax treatment differs substantially with respect to
both types of options.
An incentive option is defined in the Code as an option granted to an
employee in connection with his or her employment to purchase stock that
satisfies certain conditions. An incentive option must be granted pursuant to
a plan specifying the aggregate number of shares to be issued and the
employees, or class of employees, eligible to receive such options. A non-
statutory option is an option that does not meet certain specified conditions
in the Code or that is designated at the time of grant as not constituting an
incentive option.
The exercise price of options granted under the 1996 Incentive Plan may not
be less than the greater of the book value or the fair market value of the
stock at the date of the grant (110 percent of such value in the case of an
incentive option granted to an employee who owns more than 10 percent of the
outstanding stock of the Company) and no option may be granted more than 10
years from the date of adoption of the 1996 Incentive Plan. No option may be
exercised after 10 years from the date it is granted (five years in the case
of an incentive option granted to an employee who owns more than 10 percent of
the outstanding stock of the Company). Options are not transferable, except by
will and by the laws of descent and distribution, and must be exercised only
by the optionee during his or her lifetime.
Options are exercisable during the period specified in each option agreement
although no expiration date will be later than the tenth anniversary of the
date on which the option was granted. Unless otherwise specified in an option
agreement, options will become exercisable to the extent of 25 percent of the
shares covered by the option at the end of each of the first four years after
the date of grant, except that a minimum of 250 shares (or
20
<PAGE>
the remaining number of shares subject to the option, if less) will become
exercisable each year if the option covers fewer than 1,000 shares. Except as
otherwise provided in an option agreement, in the event of an actual or
threatened change in control of the Company (as defined), or if any optionee's
employment is terminated for disability (as defined) or if he or she dies
while employed by or in the service of the Company or a subsidiary, all
options previously granted would become immediately exercisable (except that
exercisability of options will not be accelerated automatically to the extent
that such acceleration would cause the optionee to be liable for the excise
tax imposed on "excess parachute payments" under the Code). If employment is
terminated by reason of death, the person or persons to whom the optionee's
rights under the option pass by will or by the laws of descent and
distribution will also have one year to exercise the options. If the
employment of an optionee terminates for any other reason, his or her options
will be exercisable for three months following termination of employment to
the extent exercisable on the date of termination, unless otherwise provided
in the option agreement. In no event, however, will the exercise period extend
beyond the original expiration date of the option.
Payment for shares purchased under the 1996 Incentive Plan may be made
either in cash or by exchanging shares of Common Stock of the Company with a
fair market value of up to not less than the total option price plus cash for
any difference. The 1996 Incentive Plan also permits "cashless" exercises of
options through a broker reasonably acceptable to the Company.
Upon any dissolution or liquidation of the Company, or upon a
reorganization, merger or consolidation in which the Company is not the
surviving corporation, or upon the sale of all or substantially all of the
property of the Company to another corporation, or upon any transaction
(including, without limitation, a merger or reorganization in which the
Company is the surviving corporation) approved by the Board that results in
any person or entity owning 80 percent or more of the total combined voting
power of all classes of stock of the Company, the 1996 Incentive Plan and the
options issued thereunder will terminate, unless provision is made in
connection with such transaction for the continuation of the plan and/or the
assumption of the options or for the substitution for such options of new
options covering the stock of a successor employer corporation or a parent or
subsidiary thereof, with appropriate adjustments as to the number and kinds of
shares and the per share exercise price. In the event of such termination, all
outstanding options shall be exercisable in full during such period
immediately prior to the occurrence of such termination as the Board of
Directors in its discretion shall determine (except that the exercisability of
an option shall not be accelerated automatically to the extent that the option
would be subject to the excise tax imposed on "excess parachute payments" as a
result of such acceleration).
The granting of an option does not confer upon the optionee any right to
remain in the employ of the Company. The optionee will have no dividend or
voting rights to the shares until the exercise price has been paid in full
upon exercise.
STOCK APPRECIATION RIGHTS UNDER THE 1996 INCENTIVE PLAN
Under the 1996 Incentive Plan, the Plan Administrators may, at their
discretion but subject to applicable laws and regulations, accept surrender of
the right to exercise any incentive option or non-statutory option by an
optionee in return for payment by the Company to the optionee of cash or
Common Stock of the Company (valued at the fair market value thereof) or a
combination of cash and Common Stock in an amount equal to the excess of the
fair market value of the shares of Common Stock subject to the option at the
time over the option price of such shares. An optionee may exercise such stock
appreciation rights only during the period beginning on the third business day
following the release of certain quarterly or annual financial information and
ending on the twelfth business day following such date.
Upon the exercise of a stock appreciation right, the stock option to which
it relates terminates with respect to the number of shares as to which the
right is so exercised. Conversely, upon the exercise of a stock option, any
related stock appreciation right shall terminate as to any number of shares
subject to the right that exceeds the total number of shares for which the
stock option remains unexercised.
21
<PAGE>
Stock appreciation rights may be granted concurrently with the stock options
to which they relate or, in the case of a non-statutory option, at any time
thereafter before the exercise or expiration of such options.
PERFORMANCE SHARES UNDER THE 1996 INCENTIVE PLAN
Employees of the Company may also receive performance share awards pursuant
to the 1996 Incentive Plan. The granting of performance shares gives the
recipient thereof the right to receive a specified number of shares of Common
Stock of the Company contingent upon the achievement of specified performance
objectives within a specified award period (which may not be less than 12
months). The performance objectives under the 1996 Incentive Plan will be
based on one or more of the following performance standards: profits, growth
in revenues, earnings per share, stockholders' return on equity or return on
assets of the Company or the Bank. The performance objectives will be
established by the Plan Administrators not later than 90 days after the
beginning of the award period. In lieu of some or all of such shares and
subject to applicable laws and regulations, the Plan Administrators may
distribute cash in an amount equal to the fair market value thereof on the
business day next preceding the date of payment. No amounts will be paid and
no shares will be issued unless the Plan Administrators certify in writing
that the performance objectives have been achieved. If a participating
individual dies, becomes disabled or retires, he or she will be deemed to have
earned a pro rata portion of the performance shares, based on the number of
days of employment completed during the award period, as if he or she had been
employed at the end of the plan year. If an employee terminates his or her
position with the Company prior to the close of an award period for any other
reason, any performance share granted to him or her for the period is
forfeited.
PLAN BENEFITS
As of March 5, 1998, options to purchase 366,113 shares of Common Stock were
outstanding under the 1996 Incentive Plan. The option exercise price under the
1996 Incentive Plan may not be less than 100% of the fair market value of the
Common Stock on the date of grant of the option (or 110% in the case of an
incentive stock option granted to an optionee beneficially owning more than
10% of the outstanding Common Stock). The table below provides certain
information regarding stock options granted to date under the 1996 Incentive
Plan to the Chief Executive Officer and each of the other four most highly
compensated officers of the Company serving at December 31, 1997, to all
executive officers of the Company as a group, and to all employees of the
Company and its subsidiaries as a group (including officers who are not
executive officers). No stock appreciation rights or performance shares have
been granted under the 1996 Incentive Plan and the Company does not anticipate
making any such awards before the Annual Meeting. Non-employee directors of
the Company are not eligible for awards under the 1996 Incentive Plan.
22
<PAGE>
PLAN BENEFITS
<TABLE>
<CAPTION>
1996 INCENTIVE
PLAN
---------------------
EXERCISE NUMBER OF
NAME AND POSITION PRICE OPTIONS
- ----------------- -------- ---------
<S> <C> <C>
Alex S. DePersis........................................ $17.167 7,500(1)
President, Chief Executive 18.833 15,000(2)
Officer and a Director 29.625 15,000(3)
Glenn R. Small.......................................... $17.167 4,500(1)
Executive Vice President 18.833 11,250(2)
29.625 13,000(3)
Arthur C. Smith......................................... $17.167 4,500(1)
Executive Vice President 18.833 9,000(2)
29.625 11,000(3)
Edward R. Andrejko...................................... $17.167 3,000(1)
Senior Vice President and 18.833 6,000(2)
Chief Financial Officer 29.625 8,000(3)
Fielding Simmons III.................................... $17.167 3,000(1)
Senior Vice President and 18.833 6,000(2)
Treasurer 29.625 8,000(3)
Executive Officer Group, including the five executive
officers named above
(seven persons)........................................ $23.321(4) 157,750
Non-Executive Officer Employee Group (61 persons)....... $21.589(5) 228,800
</TABLE>
- --------
(1) Option will become exercisable in full on June 24, 2006.
(2) Option will become exercisable in full on January 30, 2007.
(3) Option will become exercisable in full on January 26, 2008.
(4) Weighted average exercise price of options granted to executive officers.
(5) Weighted average exercise price of options granted to non-executive
officer employees.
Based on the closing sales price of the Company's Common Stock on March 5,
1998 of $31.8125, the aggregate market value of the shares underlying the
options to purchase 489,575 shares reserved under the 1996 Incentive Plan is
$15,574,605, assuming shareholder approval of Proposal Two.
FEDERAL INCOME TAX CONSEQUENCES
The federal income tax treatment of incentive options and non-statutory
options is substantially different. As regards incentive options, an optionee
will not recognize income at the time the option is granted or at the time the
option is exercised, except that the excess of the fair market value of the
stock acquired upon the exercise of an incentive option over the option
exercise price will be includible in the optionee's alternative minimum
taxable income for the year of exercise. However, the date on which fair
market value is determined for purposes of the minimum tax may be later if the
optionee is subject to certain limitations under the securities laws with
respect to the sale of the stock at the time the option is exercised, unless
the optionee makes a special tax election within 30 days after exercise.
Provided the holding periods described below are met, when the shares of stock
received pursuant to the exercise of an incentive option are sold or otherwise
disposed of in a taxable transaction, gain or loss, measured by the difference
between the exercise price and the amount realized, will be recognized to the
optionee as a long-term capital gain or loss.
In order for an optionee to receive this favorable tax treatment, he or she
must make no disposition of the shares within two years from the date the
incentive option was granted nor within one year from the date such option was
exercised and the shares transferred to him or her. In addition, the optionee
must, with the exceptions
23
<PAGE>
noted below with respect to death or disability, be an employee of the entity
granting the option (or of a parent or subsidiary of such entity) at all times
within the period beginning on the date of the grant and ending on a date
within three months before the date of exercise. In the case of an optionee
who is disabled (as defined by the Code) or who dies while employed, the three
month period for exercise following termination of employment is extended to
one year.
If all of the requirements for an incentive option are met except for the
holding period rules set forth above, the optionee will be required, at the
time of the disposition of the stock, to treat the lesser of the gain realized
or the difference between the exercise price and the fair market value of the
stock at the date of exercise as ordinary income and the excess, if any, as
capital gain. At that time, the Company generally will be allowed a
corresponding business expense deduction to the extent of the amount of the
optionee's ordinary income.
With respect to the non-statutory options, upon exercise, the difference
between the fair market value on the date of exercise (or, if the optionee is
subject to certain restrictions under the securities law at the time of
exercise, when such restrictions expire, unless the optionee makes a special
tax election within 30 days following exercise) and the option exercise price
will be treated as compensation income. If the Company satisfies applicable
information reporting requirements, it will be entitled to a deduction for
federal income tax purposes in the same amount. On a subsequent sale or
exchange of the shares acquired pursuant to the exercise of the non-statutory
option, the optionee may have taxable gain or loss, measured by the difference
between the amount realized on the disposition and the tax basis of such
shares. Tax basis will, in general, be the amount paid for the shares plus the
amount treated as compensation income at the time the shares are acquired.
Provided that the shares have been held for the one-year statutory holding
period, such gain or loss would constitute long-term capital gain or loss.
Generally, if an optionee tenders to the Company shares of stock held by him
or her in payment of the exercise price of an option, the transaction will be
viewed as a tax-free exchange of such shares and the rules summarized above
generally will apply with respect to the tax treatment of the exercise
transaction (except that the basis of a number of shares equal to the number
of shares exchanged will be determined by reference to the basis of such
exchanged shares). However, if shares acquired through the exercise of an
incentive or other qualified option are exchanged to pay the exercise price of
an incentive option and the applicable holding period requirements with
respect to such exchanged shares were not completed, the transaction will be
treated as a taxable disqualifying disposition of those shares.
No federal income tax consequences are incurred by the holder at the time a
stock appreciation right is granted. However, upon the exercise of a stock
appreciation right, the holder will realize ordinary income for federal income
tax purposes equal to the amount received by him or her, whether in cash,
shares of Common Stock, or both. The Company will be entitled to a deduction
for federal income tax purposes, generally at the same time and in the same
amount.
No federal income tax consequences are incurred by the Company or the
participating employee at the time a performance share is granted, except that
the employee may make a special tax election within 30 days after the date of
grant to report the value of the performance shares as ordinary income for tax
purposes. Absent such an election, if the specified performance objectives are
met, the individual will realize ordinary income at the end of the award
period equal to the amount of cash or the fair market value of the stock
received by him or her. If an employee makes the special tax election and
subsequently forfeits the shares because of failure to achieve the performance
objectives or termination of employment, the employee will not be entitled to
a deduction or other tax benefit for the amount reported as income with
respect to the grant. If an employee who has made the special tax election
satisfies the performance objectives and subsequently sells the shares, any
gain or loss on such sale will be capital gain or loss. The Company intends
that performance shares granted under the 1996 Incentive Plan will satisfy the
rules under Code pertaining to "qualified performance-based compensation."
Therefore, the Company should be entitled to a deduction for income tax
purposes for the amount that is includible in the employee's taxable income,
generally for the year in which the amount is taxable to the employee.
24
<PAGE>
The foregoing is a brief summary of the principal federal income tax
consequences of awards under the 1996 Incentive Plan. Recipients of options
and other grants should consult with their own personal tax advisors with
respect to such grants and transactions in stock acquired under the 1996
Incentive Plan.
REQUIRED VOTE
The affirmative vote of the holders of at least a majority of the votes
present and entitled to vote at the Annual Meeting is required for approval of
this proposal.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ADOPTION OF AMENDMENT NUMBER
1 TO THE COMPANY'S
1996 LONG-TERM INCENTIVE AND CAPITAL ACCUMULATION PLAN
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
(PROPOSAL THREE)
The Board of Directors of the Company has appointed Coopers & Lybrand L.L.P.
as independent auditors of the Company for the year ending December 31, 1998,
and has further directed that the selection of such auditors be submitted for
ratification by the shareholders at the Annual Meeting. The Company has been
advised by Coopers & Lybrand L.L.P. that neither that firm nor any of its
associates has any relationship with the Company or its subsidiaries other
than the usual relationship that exists between independent certified public
accountants and clients. Coopers & Lybrand L.L.P. will have a representative
at the Annual Meeting who will have an opportunity to make a statement, if he
or she so desires, and who will be available to respond to appropriate
questions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR
THE RATIFICATION OF THE APPOINTMENT OF
COOPERS & LYBRAND L.L.P. AS INDEPENDENT AUDITORS FOR FISCAL 1998
SHAREHOLDER PROPOSALS
Any proposal which a shareholder wishes to have presented at the next annual
meeting of shareholders and included in the proxy materials of the Company
must be received at the main office of the Company, 58-68 Exchange Street,
Binghamton, New York 13902, no later than November 25, 1998. If such proposal
is in compliance with all of the requirements of Rule 14a-8 of the Exchange
Act, it will be included in the Proxy Statement and set forth on the form of
proxy issued for the next annual meeting of shareholders. It is urged that any
such proposals be sent by certified mail, return receipt requested.
ANNUAL REPORT AND FINANCIAL STATEMENTS
A copy of the Company's Annual Report to Shareholders for the year ended
December 31, 1997 accompanies this Proxy Statement.
UPON RECEIPT OF A WRITTEN REQUEST, THE COMPANY WILL FURNISH TO ANY
SHAREHOLDER WITHOUT CHARGE A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 1997 AND THE EXHIBITS THERETO REQUIRED TO BE
FILED WITH THE COMMISSION UNDER THE EXCHANGE ACT. SUCH WRITTEN REQUEST SHOULD
BE DIRECTED TO LARRY G. DENNISTON, SENIOR VICE PRESIDENT AND CORPORATE
SECRETARY, BSB BANCORP, INC. 58-68 EXCHANGE STREET, BINGHAMTON, NEW YORK
13902. THE FORM 10-K IS NOT PART OF THE PROXY SOLICITATION MATERIALS.
25
<PAGE>
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's officers and
directors, and persons who beneficially own more than ten percent of a
registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the Commission.
Based solely on its review of the reports submitted to the Company, or
written representations from certain reporting persons that no Forms 5 were
required for those persons, the Company believes that during fiscal 1997 all
filing requirements applicable to its officers, directors and greater than
ten-percent beneficial owners were complied with except with respect to two
persons. Mr. Levine, a director of the Company, did not file Form 4s for each
of seven purchases of shares of the Company's Common Stock by his wife's IRA
account. Mr. Johnson, an executive officer of the Company, filed a Form 3 on a
timely basis which did not include options to purchase shares of the Company's
Common Stock granted to Mr. Johnson in prior years. Mr. Johnson subsequently
filed an amendment to his Form 3 that reflected these options.
OTHER MATTERS
Management is not aware of any business to come before the Annual Meeting
other than those matters described above in this Proxy Statement. However, if
any other matters should properly come before the Annual Meeting, it is
intended that proxies solicited hereby will be voted with respect to those
other matters in accordance with the judgment of the persons voting the
proxies.
The cost of solicitation of proxies will be borne by the Company. The
Company has retained Morrow & Co., Inc., a professional proxy solicitation
firm, to assist in the solicitation of proxies. The fee arrangement with such
firm is $5,000, plus reimbursement for out-of-pocket expenses. The Company
will reimburse brokerage firms and other custodians, nominees and fiduciaries
for reasonable expenses incurred by them in sending proxy material to the
beneficial owners of the Common Stock. In addition to solicitations by mail,
directors, officers and employees of the Company may solicit proxies
personally or by telephone without additional compensation.
26
<PAGE>
REVOCABLE PROXY
BSB BANCORP, INC.
58-68 EXCHANGE STREET
BINGHAMTON, NEW YORK 13902
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR USE ONLY AT THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON
APRIL 27, 1998, AND AT ANY ADJOURNMENT THEREOF
The undersigned, being a shareholder of BSB Bancorp, Inc. (the "Company"),
hereby appoints a member of the Company's general counsel, Hinman, Howard &
Kattell, LLP of Binghamton, New York, as proxy, such person being duly appointed
by the Board of Directors with the power to appoint an appropriate substitute,
and hereby authorizes such proxy to represent the undersigned at the Annual
Meeting of Shareholders of the Company to be held at the Roberson Museum and
Science Center, 30 Front Street, Binghamton, New York 13905 on April 27, 1998 at
10:00 a.m., Eastern Time, and at any adjournment of said meeting, and thereat to
act with respect to all votes that the undersigned would be entitled to cast, if
then personally present, in accordance with the instructions on the reverse
side.
CONTINUED AND TO BE DATED AND SIGNED ON REVERSE SIDE
<PAGE>
[X] PLEASE MARK YOUR
VOTES AS IN THIS DO NOT PRINT IN
EXAMPLE USING THIS AREA
DARK INK ONLY
- --------------------------------------------------------------------------------
1. Proposal to elect four nominees for Director for a three-year
term:
WITHHOLD
FOR AUTHORITY
all nominees to vote for all nominees
listed below. listed below.
[_] [_]
(except as marked to the contrary below)
Nominees for terms expiring at the 2001 Annual Meeting who will
stand for election: Ferris G. Akel, William C. Craine, Herbert
R. Levine and William H. Rincker.
INSTRUCTIONS: The undersigned shareholder may withhold authority
to vote for any nominee(s) by lining through or otherwise
striking out the name of the nominee(s) above.
- -
DO NOT PRINT
IN THIS AREA
- -
2. Proposal to amend the Company's 1996 Long-Term Incentive and
Capital Accumulation Plan.
FOR [_] AGAINST [_] ABSTAIN [_]
3. Proposal to ratify the appointment of Coopers & Lybrand L.L.P.
as the Company's independent auditors for the fiscal year ending
December 31, 1998.
FOR [_] AGAINST [_] ABSTAIN [_]
4. To vote, in its discretion, upon any other business that may
properly come before the Annual Meeting or any adjournment
thereof. Except with respect to procedural matters incident to
the conduct of the meeting, management is not aware of any other
matters which should come before the Annual Meeting.
The undersigned hereby acknowledges receipt of a Notice of Annual
Meeting of Shareholders of BSB Bancorp, Inc., called for April 27, 1998,
and a Proxy Statement prior to signing this Proxy.
Signature ______________________________
Signature ______________________________
Date: __________________________, 1998
Note: Please sign exactly as your name appears on this proxy. Only one signature
is required where the stock is held jointly. When signing in a representative
capacity, please give title.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE ABOVE-SIGNED SHAREHOLDER. IF NO DIRECTION IS OTHERWISE MADE, THIS PROXY
WILL BE VOTED FOR PROPOSALS 1, 2 AND 3 AT THE DISCRETION OF THE PROXY. THIS
PROXY MAY BE REVOKED AT ANY TIME PRIOR TO THE TIME IT IS VOTED AT THE ANNUAL
MEETING.
