<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:
[_]Confidential, for Use of the
[_]Preliminary Proxy Statement 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 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 ActRule 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 13901
(607) 779-2406
----------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 26, 1999
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 26, 1999, 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 three 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 875,000 to 1,300,000 and to increase the
number of shares subject to options that may be granted under the Plan to
any employee in any Plan Year to 100,000;
3. To ratify the appointment of PricewaterhouseCoopers, LLP as the
Company's independent auditors for the fiscal year ending December 31,
1999; 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,
1999 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 24, 1999
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 13901
----------------
PROXY STATEMENT
----------------
ANNUAL MEETING OF SHAREHOLDERS
April 26, 1999
SOLICITATION, VOTING AND REVOCABILITY OF PROXIES
This Proxy Statement, which is first being mailed on or about March 24,
1999, 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 1999 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 26, 1999 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 2 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 875,000 to 1,300,000 and to increase the number of shares subject to
options that may be granted under the Plan to any employee in any Plan Year to
100,000, FOR ratification of the appointment of PricewaterhouseCoopers, LLP as
the Company's independent auditors for the fiscal year ending December 31,
1999, 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
13901), (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, 1999 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, 1999 was 8,669,455. 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 the
votes of the shares present (in person or represented by proxy) at the Annual
Meeting and entitled to vote at the Annual Meeting. 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 shares present (either in person or represented by proxy) at
the Annual Meeting and entitled to vote on the matter at the Annual Meeting.
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.
1
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth information as of March 5, 1999 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
Title Nature
of of Beneficial Percent
Class Name and Addresses of Beneficial Owners Ownership(1) of Class
----- --------------------------------------- ------------- --------
<C> <S> <C> <C>
Common First Union Corporation ("First Union")...... 842,084(2) 9.71%
One First Union Center
Charlotte, NC 28288-0137
Common Beck, Mack & Oliver LLC ("BMO").............. 627,741(3) 7.24%
330 Madison Avenue
New York, NY 10017
Common Dimensional Fund Advisors, Inc. ("DFA")...... 584,774(4) 6.75%
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
Common Alex S. DePersis............................. 79,815(5) *
Common Glenn R. Small............................... 85,938(6) *
Common Arthur C. Smith.............................. 46,969(7) *
Common Larry G. Denniston........................... 34,487(8) *
Common Fielding Simmons III......................... 32,645(9) *
Common All directors and executive officers of the
Company as a group (17 people).............. 1,106,425(10) 12.45%
</TABLE>
- --------
*Less than 1%.
(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 745,509 shares, sole
dispositive power over 733,299 shares, shared voting power over 96,575
shares and shared dispositive power over 99,950 shares. First Union
reports beneficial ownership of such shares on behalf of its subsidiaries
Evergreen Asset Management Corporation, Lieber & Company and First Union
National Bank. Evergreen Asset Management Corporation and Lieber &
Company are investment advisors for mutual funds and other clients; the
securities reported by these subsidiaries are beneficially owned by such
mutual funds or other clients. The other First Union entity listed above
holds the securities reported in a fiduciary capacity for their
respective customers.
(3) BMO claims shared dispositive power over 627,741 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 and sole dispositive power over 584,774 shares.
Dimensional Fund Advisors Inc. ("Dimensional"), an investment advisor
registered under Section 203 of the Investment Advisers Act of 1940,
furnishes investment advice to four investment companies registered under
the Investment Company Act of 1940, and serves as investment manager to
certain other investment vehicles, including commingled group trusts.
(These investment companies and investment vehicles are the
"Portfolios"). In its role as
2
<PAGE>
investment advisor and investment manager, Dimensional possesses both
voting and investment power over the securities of the Company described
in this schedule that are owned by the Portfolios. All securities reported
in this schedule are owned by the Portfolios, and Dimensional disclaims
beneficial ownership of such securities.
(5) Includes 20,430 shares owned directly by Mr. DePersis's wife, with respect
to which Mr. DePersis has no voting or dispositive power. Also includes
21,600 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 31,975
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 27,745 shares held jointly with Mr. Smith's wife, with respect to
which Mr. Smith shares voting and dispositive power. Also includes 19,224
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 2,680 shares held individually by Mr. Denniston's wife with
respect to which Mr. Denniston has no voting or dispositive power and 462
shares held by Mr. Denniston's wife as custodian for her daughter. Also
includes 24,694 shares with respect to which Mr. Denniston 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 12,563 shares held jointly with Mr. Simmons's wife, with respect
to which Mr. Simmons shares voting and dispositive power. Also includes
20,082 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 218,082 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 875 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 25, 1999,
which was payable March 10, 1999. 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 11 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, Herbert R. Levine, one of the Company's directors, has informed the
Board of Directors that he will resign as a director effective as of the
Annual Meeting.
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 three 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 2002
<TABLE>
<CAPTION>
Company
Position with the Company Common Stock
and the Bank and Beneficially Owned
Principal Occupation Directly or
During the Past Five Director Indirectly as of
Name Age* Years Since (1) March 5, 1999**
---- ---- ------------------------- --------- ------------------
<C> <C> <S> <C> <C>
Robert W. Allen 55 President and Chief 1987 30,707(2)
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,
Board of Directors, Azon
Corp., Johnson City, New
York; Member, Board of
Directors, Kids Peace,
Orefield, Pennsylvania.
Alex S. DePersis 51 President and Chief 1996 79,815(3)
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
Community College
Foundation, Broome County
Chamber of Commerce,
Community Bankers
Association of New York
State, New York State
Bankers Association,
United Way of Broome
County, Inc.; Member,
Dean's Cabinet,
Binghamton University
School of Management;
Member, Board of
Trustees, Broome
Community College;
Member, Regional Loan
Committee, New York
Business Development
Corporation; Member,
Partnership 2000.
Thomas F. Kelly 51 Vice President for 1987 19,313(4)
External Affairs and
Professor of Management,
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, Wilkes
University; Member, Board
of Directors, Broome
County Council of
Churches; Member,
Editorial Board, The
Journal of Business
Management.
</TABLE>
- --------
* Age as of Record Date, March 5, 1999.
** Unless otherwise indicated, holdings represent less than 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 14,957 shares held jointly with Mr. Allen's wife, with respect
to which Mr. Allen shares voting and dispositive power. Also includes
15,750 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 20,430 shares owned directly by Mr. DePersis's wife, with
respect to which Mr. DePersis has no voting or dispositive power. Also
includes 21,600 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.
(4) Includes 3,563 shares held jointly with Dr. Kelly's wife, with respect to
which Dr. Kelly shares voting and dispositive power. Also includes 15,750
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.
Required Vote
Directors will be elected by a plurality of the shares present, either in
person or represented by proxy, at the Annual Meeting and entitled to vote at
the Annual Meeting.
THE BOARD OF DIRECTORS RECOMMENDS THAT
THE NOMINEES BE ELECTED AS DIRECTORS
* * *
5
<PAGE>
Directors with Terms Expiring in 2001
<TABLE>
<CAPTION>
Company
Position with the Common Stock
Company and the Bank and Beneficially Owned
Principal Occupation Directly or
During the Past Five Director Indirectly as of
Name Age* Years Since (1) March 5, 1999
---- ---- ------------------------ --------- ------------------
<C> <C> <S> <C> <C>
Ferris G. Akel 66 President, Binghamton 1986 157,330(2) 1.81%
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,
Physician Volunteer
Services Committee and
Twin Tier Home Health,
Inc.
William C. Craine 50 Chairman, Granite 1976 87,485(3) 1.01%
Capital Holdings, Inc.,
November 1998 to
present; President and
Chief Executive Officer,
Mang Group, Inc. until
1998; 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(4) 70 Chairman of the Board, 1974 93,586(5) 1.08%
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 68 Prior to retirement 1981 131,547(6) 1.52%
after year-end 1996,
served as Chairman of
the Company since 1995
and Chief Executive
Officer of the Company
since 1988; former
President of the Company
from 1988 to 1995 and
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, The Greater
Broome Community
Foundation;
Secretary/Treasurer,
Hoyt Foundation Board;
Member, Boards of
Directors, United Health
Services, Inc.,
Partnership 2000 and FGS
Inc.
</TABLE>
- --------
* Age as of Record Date, March 5, 1999.
(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 2,884 shares held jointly with Mr. Akel's wife, with respect to
which Mr. Akel shares voting and dispositive power and 130,176 shares
owned by Akel Wholesale Grocery Corporation. Also includes 15,750 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, 1,585 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, 500 shares beneficially owned as
custodian for Mr. Craine's son, and 427 shares held by Mr. Craine's
daughter individually with respect to which Mr. Craine has no voting or
dispositive power. Also includes 2,250 shares with respect to which Mr.
Craine has the right to acquire beneficial ownership of Common Stock
through the exercise of options granted pursuant to the Directors' Stock
Option Plan.
(4) Mr. Levine will resign as a director effective as of the Annual Meeting.
(5) Includes 20,016 shares held by Van Cott Jeweler, Ltd., of which Mr. Levine
is Chairman of the Board, 21,321 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, 4,864 shares in a profit sharing plan for
Mr. Levine with respect to which Mr. Levine shares voting and dispositive
power with his wife, and 37,164 shares held in trust accounts 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.
(6) 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 4,500 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.
6
<PAGE>
Directors with Terms Expiring in 2000
<TABLE>
<CAPTION>
Company
Position with the Common Stock
Company and the Bank and Beneficially Owned
Principal Occupation Directly or
During the Past Five Director Indirectly as of
Name Age* Years Since (1) March 5, 1999 **
---- ---- ------------------------ -------- ------------------
<C> <C> <S> <C> <C>
Diana J. Bendz 53 IBM Endicott Senior 1998 --
Location Executive and
Director,
Environmentally
Conscious Products,
Corporate
Operations, July 1996 to
present; Director of
Integrated
Safety Technology,
Technical Operations
Staff, IBM,
1993-1996; Member,
Boards of Directors,
AM&T (Alliance
for Manufacturing &
Technology); Broome
County
Community Charities;
Partnership 2000;
Physicians
Volunteer Services;
Roberson Museum &
Science Center;
United Health Services,
Inc. and United Way of
Broome
County, Inc.
David A. Niermeyer 57 President and Chief 1994 16,875(2)
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. 46 President and Chief 1994 18,070(3)
Executive Officer,
United Health
Services, Inc. since
February 1993; Past
President, Board
of Directors, Broome
County United Way; Past
Chairman,
Boards of Directors,
Broome County Chamber of
Commerce,
Iroquois Health Care
Alliance; Member,
Binghamton
University School of
Management Advisory
Committee;
Member, Boards of
Directors, Partnership
2000, Health
Care Association of New
York State and Health
Care
Underwriters Mutual
Insurance Company;
Member,
Advisory Board, Liberty
Mutual Insurance
Company.
Thomas L. Thorn 55 Private Investor since 1995 225,100(4) 2.60%
1997; Executive Vice
President and
Treasurer, Diamond Page
International
Corporation from
September 1978 to
December 1996.
</TABLE>
- --------
* Age as of Record Date, March 5, 1999.
** Unless otherwise indicated, holdings represent less than 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 2,250 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.
(3) Includes 3,320 shares held jointly with Mr. O'Neil's wife, with respect to
which Mr. O'Neil shares voting and dispositive power. Also includes 14,750
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.
(4) Includes 2,250 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.
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
7
<PAGE>
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, 1998. 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 1998, 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 1998 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. Craine
(Chairman), Akel, DePersis and Levine, and two rotating members. Mrs. Gamble
was a member prior to her retirement in April 1998 and attended one meeting.
The Executive Committee met nine times in 1998.
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 consisted of Dr. Kelly (Chairman) and Messrs. Akel, Levine,
Niermeyer and O'Neil through July 1998. Mrs. Gamble was a member prior to her
retirement in April 1998 and attended two meetings. Beginning in August 1998,
the Audit Committee consisted of Dr. Kelly and Messrs. O'Neil, Sponyoe and
Thorn. Mr. Sponyoe remained on the Audit Committee until his resignation from
the Board of Directors in late August 1998. Mrs. Bendz was named to the Audit
Committee in January 1999. The Audit Committee met four times during 1998.
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. Messrs. Allen (Chairman), Akel, Levine and Sponyoe
were members of both committees through August 1998. Mrs. Gamble was a member
prior to her retirement in April 1998 and attended two meetings. Mr. Niermeyer
became a member of both committees in April 1998. In August 1998 the
membership of both committees was reconstituted to include Messrs. Allen
(Chairman), Akel, Niermeyer and O'Neil. The Company's Compensation Committee
met three times during 1998. The Bank's Salary and Personnel Administration
Committee met four times during 1998.
8
<PAGE>
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 Nominating Committee
consists of all members of the Board of Directors, and in that capacity met
one time during 1998.
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 1998. 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 received an annual retainer of $2,400
except for the Chairman of the Executive Committee, who received an annual
retainer of $4,800. Rotating members of the Executive Committee received fees
of $350 per meeting attended. In 1999, all Board and Executive Committee
retainer fees will remain unchanged. The fees for all Board and committee
meetings will increase to $500 per meeting, except for the fees of the
chairmen of each of the Audit, Salary and Trust Committees, which will
increase to $600 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 1998, Mr. Rincker and Mr. Thorn elected to defer fees under
this arrangement.
Directors' Stock Option Plan. Pursuant to the Directors' Stock Option Plan,
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 $30.50 per share on January
24, 1998, the fair market value on the date of grant. Mrs. Bendz received a
non-qualifying option for 6,750 shares at an exercise price of $32.50, upon
her election as a director on December 28, 1998. 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 1999, the non-
employee directors received an option for 2,250 shares at an exercise price of
$28.75 per share, the fair market value on the date of grant, January 24,
1999.
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.
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> <C> <C>
Glenn R. Small.......... 53 Executive Vice President
Arthur C. Smith......... 52 Executive Vice President
Rexford C. Decker....... 46 Senior Vice President and Chief Financial Officer
Larry G. Denniston...... 53 Senior Vice President and Corporate Secretary
Fielding Simmons III.... 59 Senior Vice President and Treasurer
Douglas R. Johnson...... 56 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
9
<PAGE>
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.
Rexford C. Decker joined the Bank in 1982. He became Senior Vice President
and Chief Financial Officer of the Bank and the Company in February, 1999.
Prior to that time, with the Bank, he was Administrative Vice President and
Controller since December 1996, Vice President and Controller from December
1991 to 1996, and Controller from December 1985 to 1991.
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.
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 1998 (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 a 3-for-
2 stock split in September 1997.
Summary Compensation Table
<TABLE>
<CAPTION>
Long Term
Compensation
----------------
Awards
----------------
Annual Compensation Securities
----------------------- Underlying All Other
Name and Principal Year Salary ($) Bonus ($)(1) Options/SARs (#) Compensation ($)(2)
Position ---- ---------- ------------ ---------------- -------------------
<S> <C> <C> <C> <C> <C>
Alex S. DePersis....... 1998 $214,038 $170,100 15,000 $6,300
President, Chief
Executive Officer 1997 185,000 42,226 15,000 5,549
and a Director 1996 150,000 14,830 7,500 4,500
Glenn R. Small......... 1998 127,404 56,250 13,000 3,822
Executive Vice
President 1997 113,163 25,829 11,250 3,395
1996 100,877 7,013 4,500 3,026
Arthur C. Smith........ 1998 121,288 53,550 11,000 3,638
Executive Vice
President 1997 113,163 25,829 9,000 3,395
1996 89,087 5,938 4,500 2,672
Larry G. Denniston..... 1998 104,981 46,350 9,000 2,100
Senior Vice President
and 1997 90,292 20,609 6,000 1,806
Corporate Secretary 1996 78,292 7,741 3,000 1,566
Fielding Simmons III... 1998 104,981 46,350 8,000 3,149
Senior Vice President
and 1997 97,500 22,254 6,000 2,925
Treasurer 1996 92,836 8,236 3,000 2,785
</TABLE>
- --------
(1) The bonuses for 1996 were paid under the Bank's 1996 Stakeholder
Compensation Incentive Plan. The bonuses for 1997 and 1998 were paid under
the Bank's 1997 Executive Incentive Plan and 1998 Executive Incentive
Plan, respectively. 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 and $1,500 for 1997 and 1998, respectively under the Company's
Supplemental Executive Retirement Plan.
11
<PAGE>
Options Exercises and Holdings
The following table sets forth information with respect to grants of stock
options to each of the named executive officers during 1998 and the potential
realized value by such individuals. All options were granted at current market
price on the date of grant.
Option/SAR Grants in Last Fiscal Year
<TABLE>
<CAPTION>
Individual Grants
---------------------------------------------------
Potential
Realizable
Value at Assumed
Annual Rates of
Stock
Number of % of Total Price
Securities Options/SARs Appreciation
Underlying Granted to Exercise or for Option Term
Options/SARs Employees Base Expiration -----------------
Name Granted (#) in Fiscal Year Price ($/Sh) Date 5%($) 10%($)
- ---- ------------ -------------- ----------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Alex S. DePersis........ 15,000 9.9% $29.625 1/26/08 $279,465 $708,219
Glenn R. Small.......... 13,000 8.6 29.625 1/26/08 242,203 613,790
Arthur C. Smith......... 11,000 7.3 29.625 1/26/08 204,941 519,361
Larry G. Denniston...... 9,000 6.0 29.625 1/26/08 167,679 424,932
Fielding Simmons III.... 8,000 5.3 29.625 1/26/08 149,048 377,717
</TABLE>
The following table sets forth information with respect to each of the named
executive officers concerning the exercise of stock options during the fiscal
year ended December 31, 1998 and the year-end value of all unexercised options
held by such individuals.
Aggregated Option Exercises in Last Fiscal Year
and Year-End Option Values
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money
Options/SARs Options/SARs
Shares At Fiscal Year End(#) At Fiscal Year End($)(2)
Acquired on Value ------------------------- -------------------------
Name Exercise(#) Realized($)(1) Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- -------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Alex S. DePersis........ 18,930 $423,004 7,875 31,125 $130,953 $288,922
Glenn R. Small.......... 8,437 196,709 28,867 24,813 666,128 219,367
Arthur C. Smith......... 1,000 22,458 8,421 20,703 151,759 180,433
Larry G. Denniston...... 600 16,464 17,321 15,703 397,395 130,558
Fielding Simmons III.... 2,780 75,680 12,139 14,703 251,453 127,308
</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, Larry G. Denniston and Fielding Simmons
III, which Severance Agreements were amended on December 18, 1995. Mr.
Andrejko will retire effective May 1, 1999. In January 1996, the Company and
the Bank entered into a Severance Agreement with Arthur C. Smith. In February
1999, the Company and the Bank
12
<PAGE>
entered into a Severance Agreement with Rexford C. Decker. 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.
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 1998, Douglas R. Johnson elected to
defer his bonus under this arrangement.
Company Compensation Committee and Bank Salary and Personnel Administration
Committee Report on Executive Compensation
During 1998 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. Messrs. Allen (Chairman), Akel, Levine and Sponyoe were members
of the Salary and Personnel Administration Committee through August 1998. Mrs.
Gamble was a member prior to her retirement in April 1998 and attended two
meetings. Mr. Niermeyer became a member in April 1998. In August 1998 the
membership was reconstituted to include Messrs. Allen (Chairman), Akel,
Niermeyer and O'Neil. The same persons comprise the Compensation Committee of
the Board of Directors of the Company, which 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
13
<PAGE>
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 1998 as
they affected the Company's executive officers, including the Chief Executive
Officer and the named executive officers.
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 1998 consisted of the
following components: base salary, bonuses under the Bank's 1997 Executive
Incentive Plan (the "1997 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. The
1998 base salary for Mr. DePersis increased 15.7% over the 1997 level. The
base salary for Mr. Small rose by 12.6% over the 1997 level. The Base Salary
for Messrs. Smith and Simmons rose by 7.2% and 7.7% respectively for 1998
compared to the respective 1997 levels. The 1998 base salary for Mr. Denniston
increased by 16.3% compared to 1997, reflecting new responsibility as planning
officer. Base salaries 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 1998
salaries were the following: individual performance in 1997; net income was
$17.0 million in 1997, an 11.7% increase over net income of $15.2 in 1996;
return on average equity was 14.65% in 1997, compared to 13.49% in 1996; and
diluted earnings per share in 1997 were $1.93 in 1997, an increase of 15.6%
compared to $1.67 in 1996.
Bonuses. The bonus component of compensation paid to the Company's named
executive officers for fiscal 1998 was paid under the 1998 Executive Incentive
Plan (the "1998 Plan"). The Plan provided that the Bank would award bonuses to
participating executive officers if the Company met certain earnings per share
levels in 1998 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 1998 fiscal year. The seven most senior
officers of the Bank were participants in the Plan. The maximum cash bonus
that could be paid to Mr. DePersis was 81% of base salary. The maximum that
could be paid to any of the other participants was 45%. No payout would be
made unless the Company declared and paid four quarterly dividends during 1998
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 1996 Incentive Plan in 1996, 1997, 1998 and 1999. All
options were granted at current market price on the date of grant.
14
<PAGE>
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 and certain other perquisites.
Chief Executive Officer Compensation. The base salary for Mr. DePersis as
CEO was increased for 1998 from $185,000 to $214,038 based on the Company's
performance in 1997 and on his individual performance. Mr. DePersis's 1998
salary was determined using the same factors noted above with respect to
individual performance in 1997, increases in net income, return on average
equity and diluted earnings per share in 1997 as compared to 1996. Mr.
DePersis also participated in the 1998 Plan under which his bonus for 1998 was
79.4% of his base salary based on the levels of achievement relative to the
key performance indicators of the Plan. Mr. DePersis also received stock
options for 15,000 shares of Common Stock during 1998 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(1)
Herbert R. Levine(2)
David A. Niermeyer(3)
Mark T. O'Neil, Jr.(4)
John V. Sponyoe(5)
- --------
(1) Mrs. Gamble retired in April, 1998.
(2) Mr. Levine served until August, 1998.
(3) Mr. Niermeyer became a member of the Committee in April, 1998.
(4) Mr. O'Neil became a member of the Committee in August, 1998.
(5) Mr. Sponyoe resigned in August, 1998.
Compensation Committee and Salary and Personnel Administration Committee
Interlocks and Insider Participation
Each of the Compensation Committee and the Salary and Personnel
Administration Committee is currently comprised of Messrs. Akel, Allen,
Niermeyer and O'Neil.
In fiscal 1998, 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., Newman Development Group, Vestal Plaza, L.L.C.,
Apalachin Development, Newman Development Group of Batavia, L.L.C. and Newman
Development Group of C/P, L.L.C., 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 1998, 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, 1998, the Bank paid an aggregate of
$162,516 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, 1993 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.
BSB Bancorp, Inc.
Total Return Performance
[GRAPH]
<TABLE>
<CAPTION>
Period Ending
-----------------------------------------------------
Index 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98
- ----- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
BSB Bancorp, Inc.......... 100.00 124.53 164.49 184.14 380.70 360.85
NASDAQ--Total US.......... 100.00 97.75 138.26 170.01 208.58 293.21
SNL $1B-5B Bank Index..... 100.00 105.28 141.58 183.54 306.09 305.38
</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 1998 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 $130,000, 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 $42,910 based on his average annual earnings in effect as of
December 31, 1998 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, 1998 for Messrs.
DePersis, Small, Smith, Denniston and Simmons were 13, 16, 31, 15 and 22,
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 1998. 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, 1998, Mr. DePersis's
accrued annual supplemental defined benefit amount under the SERP was $7,654
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 other unfavorable features.
17
<PAGE>
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. Alex
DePersis, the President and Chief Executive Officer of the Company and the
Bank, was indebted to the Bank during fiscal 1998 in excess of $60,000. The
Bank extended Mr. DePersis a home equity line of credit in November 1997, with
preferential terms pursuant to the above policy. The largest aggregate amount
of indebtedness outstanding at any time under this line of credit during
fiscal 1998 and as of March 5, 1998, was $25,747 and $1,396, respectively. The
interest rate for this line of credit is prime plus 1/2% for indebtedness up
to $30,000 and prime for indebtedness of more than $30,000. Mr. DePersis also
had an outstanding mortgage loan during fiscal 1998, which the Bank originated
in April 1993 in the amount of $81,900. The interest rate on this 15-year
mortgage loan is 7.375%. The largest aggregate amount of indebtedness
outstanding during fiscal 1998 and as of March 5, 1999 was $65,595 and
$60,490, respectively. The mortgage loan to Mr. DePersis 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. The Bank also extended William Rincker, a director of
the Company and the Bank, a home equity line of credit in January, 1997, with
preferential terms. The largest aggregate amount of indebtedness outstanding
at any time under this line of credit during fiscal 1998 and as of March 5,
1998, was $100,722 and $100,000, respectively. The interest rate for this line
of credit was prime plus 1/2% for indebtedness up to $30,000 and prime for
indebtedness of more than $30,000. 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, Dr. Kelly has obtained 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 during fiscal 1998 and as of March 5, 1999 was
$64,000 and $61,472, respectively.
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."
* * *
AMENDMENT NUMBER 2 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, 1999, approximately 77 officer
employees of the Company and its subsidiaries and 372 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 875,000 to 1,300,000. 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."
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<PAGE>
The Board of Directors has also voted to amend the 1996 Incentive Plan,
subject to shareholder approval at the Annual Meeting, to increase the number
of shares of Common Stock subject to options that may be granted under the
1996 Incentive Plan to any employee in any Plan Year from 15,000 to 100,000.
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, 1999, 306,475 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 4.90% of the Company's outstanding Common Stock as of March 5, 1999.
The Board of Directors has concluded that it is advisable for the Company
and its shareholders to 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 and the
number of shares that may be granted to an employee in any Plan Year.
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 rights will be granted
and determine the number of rights to be granted to each. The current Plan
Administrators are Messrs. Akel, Allen, Niermeyer and O'Neil. 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
19
<PAGE>
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% 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 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. The Company has also granted
options with alternative vesting periods. 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
20
<PAGE>
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.
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
21
<PAGE>
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.
22
<PAGE>
Plan Benefits
As of March 5, 1999, options to purchase 543,186 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, 1998, 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.
Plan Benefits
<TABLE>
<CAPTION>
1996 Incentive Plan
----------------------
Exercise Number
Name and Position Price of Options
----------------- -------- ----------
<S> <C> <C>
Alex S. DePersis................................... $17.1670 7,500(1)
President, Chief Executive 18.8330 15,000(2)
Officer and a Director 29.6250 15,000(3)
27.0625 15,000(4)
Glenn R. Small..................................... $17.1670 4,500(1)
Executive Vice President 18.8330 11,250(2)
29.6250 13,000(3)
27.0625 15,000(4)
Arthur C. Smith.................................... $17.1670 4,500(1)
Executive Vice President 18.8330 9,000(2)
29.6250 11,000(3)
27.0625 15,000(4)
Larry G. Denniston................................. $17.1670 3,000(1)
Senior Vice President and 18.8330 6,000(2)
Corporate Secretary 29.6250 9,000(3)
27.0625 13,000(4)
Fielding Simmons III............................... $17.1670 3,000(1)
Senior Vice President and Treasurer 18.8330 6,000(2)
29.6250 8,000(3)
27.0625 11,000(4)
Executive Officer Group, including the five
executive officers named above (seven persons).... $ 24.641(5) 243,750
Non-Executive Officer Employee Group (70 persons).. $ 23.593(6) 326,650
</TABLE>
- --------
(1) Option will become exercisable in full on June 24, 2000.
(2)Option will become exercisable in full on January 30, 2001.
(3)Option will become exercisable in full on January 26, 2002
(4)Option will become exercisable in full on January 27, 2001.
(5)Weighted average exercise price of options granted to executive officers.
(6)Weighted average exercise price of options granted to non-executive officer
employees.
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<PAGE>
Based on the closing sales price of the Company's Common Stock on March 5,
1999 of $26.0625, the aggregate market value of the shares underlying the
options to purchase 731,475 shares reserved under the 1996 Incentive Plan is
$19,064,067 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 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.
24
<PAGE>
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.
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 shares
present, either in person or represented by proxy, at the Annual Meeting 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 2 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 PricewaterhouseCoopers,
LLP as independent auditors of the Company for the year ending December 31,
1999, 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 PricewaterhouseCoopers, LLP 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. PricewaterhouseCoopers, LLP 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
PRICEWATERHOUSECOOPERS, LLP AS INDEPENDENT AUDITORS FOR FISCAL 1999
* * *
25
<PAGE>
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 13901, no later than November 24, 1999. 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.
The proxy being solicited hereby provides discretionary authority to vote on
any matter if the Company did not receive notice of such matter prior to
February 7, 1999. No notice of any such matter was received by the Company by
such date.
ANNUAL REPORT AND FINANCIAL STATEMENTS
A copy of the Company's Annual Report to Shareholders for the year ended
December 31, 1998 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, 1998 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 13901
The Form 10-K is not part of the proxy solicitation materials.
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 10% 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 1998 all
filing requirements applicable to its officers, directors and greater than 10%
beneficial owners were complied with, except that Mr. Levine did not file
Forms 4 for each of three purchases of shares of the Company's Common Stock by
his wife in her IRA account.
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 13901
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 26, 1999, 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 26, 1999 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 three 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 2002 Annual Meeting who will
stand for election: Robert W. Allen, Alex S. DePersis and Thomas
F. Kelly.
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 PricewaterhouseCoopers,
LLP as the Company's independent auditors for the fiscal year
ending December 31, 1999.
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 26, 1999,
and a Proxy Statement prior to signing this Proxy.
PLEASE MARK, DATE AND SIGN AS YOUR NAME APPEARS ON THIS PROXY AND RETURN
IN THE ENCLOSED ENVELOPE.
Signature ______________________________
Signature ______________________________
Date: __________________________, 1999
Note: 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.
