SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. _____ )
FILED BY THE REGISTRANT [x]
FILED BY A PARTY OTHER THAN THE REGISTRANT [ ]
CHECK THE APPROPRIATE BOX:
[ ] PRELIMINARY PROXY STATEMENT
[X] DEFINITIVE PROXY STATEMENT
[ ] DEFINITIVE ADDITIONAL MATERIALS
[ ] SOLICITING MATERIAL PURSUANT TO RULE 14A-11(C) OR RULE 14A-12
NBT Bancorp Inc.
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(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Michael J. Chewens
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(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:
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(2) AGGREGATE NUMBER OF SECURITIES TO WHICH TRANSACTION APPLIES:
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(3) PER UNIT PRICE OR OTHER UNDERLYING VALUE OF TRANSACTION COMPUTED
PURSUANT TO EXCHANGE ACT RULE 0-11 (SET FORTH THE AMOUNT ON WHICH THE FILING FEE
IS CALCULATED AND STATE HOW IT WAS DETERMINED):
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(4) PROPOSED MAXIMUM AGGREGATE VALUE OF TRANSACTION:
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(5) TOTAL FEE PAID:
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[ ] FEE PAID PREVIOUSLY WITH PRELIMINARY MATERIALS
[ ] CHECK BOX IF ANY PART OF THE FEE IS OFFSET AS PROVIDED BY EXCHANGE
ACT RULE 0-11(A)(2) AND IDENTIFY THE FILING FOR WHICH THE OFFSETTING FEE WAS
PAID PREVIOUSLY. IDENTIFY THE PREVIOUS FILING BY REGISTRATION STATEMENT NUMBER,
OR THE FORM OR SCHEDULE AND THE DATE OF FILING.
(1) AMOUNT PREVIOUSLY PAID:
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(2) FORM, SCHEDULE OR REGISTRATION STATEMENT NO.:
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(3) FILING PARTY:
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(4) DATE FILED:
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NBT BANCORP INC.
52 SOUTH BROAD STREET
NORWICH, NEW YORK 13815
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
NBT Bancorp Inc., a Delaware corporation, will hold an annual meeting of
stockholders at the Route 23 Holiday Inn in Oneonta, NY on May 2, 2002 at 10:00
a.m. local time for the following purposes:
1. Election of Directors. To fix the number of directors at sixteen
and to elect the eight candidates listed in the proxy statement.
2. To transact such other business as may properly come before the NBT
annual meeting.
We have fixed the close of business on March 15, 2002 as the record date
for determining those stockholders of NBT entitled to vote at the NBT annual
meeting and any adjournments or postponements of the meeting. Only holders of
record of NBT common stock at the close of business on that date are entitled to
notice of and to vote at the NBT annual meeting.
The board of directors of NBT requests that you fill in and sign the
accompanying proxy card and mail it promptly in the enclosed postage-prepaid
envelope. You may revoke any proxy that you deliver prior to the annual meeting
by delivering a written notice to NBT stating that you have revoked your proxy
or by delivering a later dated proxy. Stockholders of record of NBT common
stock who attend the annual meeting may vote in person, even if they have
previously delivered a signed proxy.
By Order of the Board of Directors of
NBT Bancorp Inc.
/s/ Daryl R. Forsythe
Daryl R. Forsythe
Chairman, President and Chief Executive Officer
Norwich, New York
March 26, 2001
THE NBT ANNUAL MEETING OF STOCKHOLDERS
This proxy statement and accompanying proxy card are being sent to the
stockholders of NBT Bancorp Inc. (the "Company" or "NBT") in connection with the
solicitation of proxies on behalf of the Board of Directors to be used at the
annual meeting of stockholders. This proxy statement, together with the
enclosed proxy card, is being mailed to stockholders on or about March 26, 2002.
WHEN AND WHERE THE NBT ANNUAL MEETING WILL BE HELD
We will hold our annual meeting of stockholders at the Route 23 Holiday Inn
in Oneonta, NY on May 2, 2002 at 10:00 a.m. local time.
WHAT WILL BE VOTED ON AT THE NBT ANNUAL MEETING
At our annual meeting, our stockholders will be asked to consider and vote
upon the following proposal:
- In connection with the election of directors, to fix the number of
directors at sixteen and elect the eight candidates listed as nominees
in the proxy statement.
- To transact such other business as may properly come before our annual
meeting.
We may take action on the above matters at our annual meeting on May 2,
2002, or on any later date to which the annual meeting is postponed or
adjourned.
We are unaware of other matters to be voted on at our annual meeting. If
other matters do properly come before our annual meeting, including
consideration of a motion to adjourn the annual meeting to another time and/or
place for such purpose of soliciting additional proxies, we intend that the
persons named in this proxy will vote, or not vote, in their discretion the
shares represented by proxies in the accompanying form.
STOCKHOLDERS ENTITLED TO VOTE
We have set March 15, 2002, as the record date to determine which of our
stockholders will be entitled to vote at our annual meeting. Only those
stockholders who held their shares of record as of the close of business on that
date will be entitled to receive notice of and to vote at our annual meeting.
As of February 28, 2002, there were 33,198,072 outstanding shares of our common
stock. Each of our stockholders on the record date is entitled to one vote per
share, which the stockholder may cast either in person or by properly executed
proxy. Our Certificate of Incorporation does not permit stockholders to
cumulate their votes in the election of directors.
VOTE REQUIRED TO APPROVE THE PROPOSAL
The affirmative vote of a majority of the shares of our common stock
represented at our annual meeting, either in person or by proxy, and entitled to
vote at our annual meeting is required to set the number of directors at
sixteen.
A plurality of the shares of our common stock represented at our annual
meeting, either in person or by proxy, and entitled to vote at our annual
meeting will elect directors. This means that the nominees for each class who
receive the most votes will be elected to serve in that class.
Our Board urges our stockholders to complete, date and sign the
accompanying proxy and return it promptly in the enclosed postage-paid envelope.
Because the nominees for directors will be elected by a plurality vote,
abstentions and broker non-votes will not affect the vote on our proposal to
elect directors to be presented at our annual meeting.
2
NUMBER OF SHARES THAT MUST BE REPRESENTED FOR A VOTE TO BE TAKEN
In order to have a quorum, a majority of the total voting power of our
outstanding shares of common stock entitled to vote at our annual meeting must
be represented at the annual meeting either in person or by proxy. Abstentions
and broker non-votes are counted as present for the purpose of determining the
presence of a quorum for the transaction of business.
VOTING YOUR SHARES
Our Board is soliciting proxies from our stockholders. This will give you
an opportunity to vote at our annual meeting. When you deliver a valid proxy,
the shares represented by that proxy will be voted by a named agent in
accordance with your instructions. If you do not vote by proxy or attend the
annual meeting and vote in person, your votes will be counted as not present for
quorum purposes.
If you vote by proxy but make no specification on your proxy card that you
have otherwise properly executed, the named agent will vote the shares
represented by your proxy:
- FOR fixing the number of directors at sixteen and electing the eight
persons nominated by our Board as directors.
You may grant a proxy by dating, signing and mailing your proxy card. You
may also cast your vote in person at the meeting.
Mail. To grant your proxy by mail, please complete, sign and date your
proxy and return it in the enclosed envelope. To be valid, a returned proxy
card must be signed and dated.
In person. If you attend our annual meeting in person, you may vote your
shares by completing a ballot at the meeting.
CHANGING YOUR VOTE
Any of our stockholders giving a proxy may revoke the proxy at any time
before the vote at the annual meeting in one or more of the following ways:
- delivering a written notice of revocation to our Chief Executive
Officer bearing a later date than the proxy;
- submitting a later-dated proxy; or
- appearing in person and voting at our annual meeting. Attendance at
our annual meeting will not by itself constitute a revocation of a
proxy, unless you complete a ballot and vote that ballot.
You should send any written notice of revocation or subsequent proxy to 52
South Broad Street, Norwich, New York 13815, Attention: Chief Executive Officer,
or hand deliver the notice of revocation or subsequent proxy to the Chief
Executive Officer at or before the taking of the vote at our annual meeting.
3
SOLICITATION OF PROXIES AND COSTS
We will bear our own costs of soliciting of proxies. We will reimburse
brokerage houses, fiduciaries, nominees and others for their out-of-pocket
expenses in forwarding proxy materials to owners of shares of our common stock
held in their names. In addition to the solicitation of proxies by use of the
mails, we may solicit proxies from our stockholders by directors, officers and
employees acting on our behalf in person or by telephone, telegraph, facsimile
or other appropriate means of communications. We will not pay any additional
compensation, except for reimbursement of reasonable out-of-pocket expenses, to
our directors, officers and employees in connection with the solicitation. You
may direct any questions or requests for assistance regarding this proxy
statement to Michael J. Chewens, Senior Executive Vice President of NBT, by
telephone at (607) 337-6520.
REGARDLESS OF THE NUMBER OF SHARES YOU OWN, YOUR VOTE IS IMPORTANT TO US.
PLEASE COMPLETE, SIGN, DATE AND PROMPTLY RETURN THE ACCOMPANYING PROXY CARD IN
THE ENCLOSED POSTAGE-PAID ENVELOPE.
RECOMMENDATIONS OF NBT BOARD
Our Board has unanimously approved the fixing of the size of our Board at
sixteen members and the nomination of the eight persons named in this proxy
statement for our Board. Our Board recommends that our stockholders vote FOR
approval of our nominees for election as directors.
4
PROPOSAL 1
ELECTION OF DIRECTORS
Our bylaws provide that the number of directors authorized to serve until
the next annual meeting of our stockholders shall be the number designated at
our annual meeting and prior to the election of directors. Our Board is
presently comprised of fifteen directors. Our Board has proposed and is
requesting our stockholders to approve its proposal that the number of directors
be set at sixteen. Our Board has designated eight persons as nominees for
election at our annual meeting and is presenting these nominees to our
stockholders for election. As noted below our Board is a classified board with
three classes. We are nominating six of these persons to fill the class of
directors whose term will expire in 2005; and we are nominating two of these
persons to fill the class of five directors whose term will expire in 2003.
Two of our present board members, Messrs. J. Peter Chaplin and Bruce D.
Howe, who serve in the class of directors whose term expires in 2002, are
retiring as board members upon completion of their terms on May 2, 2002 and
after their respective successors are elected and qualified. A third board
member, Mr. John P. Woods, Jr., who serves in the class of directors whose term
expires in 2003, has determined to resign as a director as of May 2, 2002. Mr.
Woods was a director of CNB Financial Corp.; upon completion of the merger on
November 8, 2001 between NBT and CNB, Mr. Woods became one of our directors.
The merger agreement between NBT and CNB provides that, if after completion of
the merger any of the three former CNB directors who became NBT directors upon
completion of the merger becomes unable or unwilling to complete his specified
term on the NBT board, then the remaining former CNB directors may designate a
replacement for that individual to complete the specified term on the NBT board,
subject to the reasonable approval of NBT. In accordance with this provision,
the former CNB directors have chosen Mr. Michael H. Hutcherson to complete Mr.
Woods' term.
Under our bylaws, every director must be a citizen of the United States,
must have resided in the State of New York or within 200 miles of our principal
office for at least one year before election, and must own $1,000 aggregate book
value of our stock. Under our bylaws, no person is eligible for election or
re-election as a director if he or she has attained the age of 70.
The chairman of our annual meeting may disregard any nomination not made in
accordance with the procedures established by our bylaws.
Our bylaws permit our Board by a majority vote, between annual meetings of
the stockholders, to increase the number of directors by not more than three
members and to appoint qualified persons to fill the vacancies created by the
Board's actions. If, at the time of the next election of directors by our
stockholders, the term of office of any vacancy filled by the remaining
directors has not expired, then our stockholders shall fill that vacancy for the
remainder of the unexpired term.
Our bylaws provide for a classified Board of Directors. Our Board is
divided into three classes as equal in number as possible. Each class holds
office for a term of three years, but only one class comes up for election each
year (except in those cases where vacancies occur in other classes). Our Board
is proposing as nominees for directors the persons named in the following table
and in each case until their successors are elected and qualify. Following our
annual meeting of our stockholders, the class of directors whose term expires in
2003 will consist of five persons; the class of directors whose term expires in
2004 will consist of five persons; and the class of directors whose term expires
in 2005 will consist of six persons.
The persons named in the enclosed proxy intend to vote the shares of our
common stock represented by each proxy properly executed and returned to us FOR
election of the following nominees as directors, but if the nominees should be
unable to serve, they will vote such proxies for those substitute nominees as
our Board shall designate to replace those nominees who are unable to serve.
Our Board currently believes that each nominee will stand for election and will
serve if elected as a director. Assuming the presence of a quorum at the annual
meeting, directors will be elected by a plurality of the votes cast by the
shares of common stock entitled to vote at the annual meeting and present in
person or represented by proxy. There are no cumulative voting rights in the
5
election of directors. The names of the nominees for election for the term as
shown and our continuing directors and certain information as to each of them
are as follows:
Number of
Principal Occupation During Common Shares Percent
Past Five Years and Other Director Beneficially Owned of Shares
Name Age Directorships Since on 12/31/01 (a) Outstanding
------------------------ ------ -------------------------------------------- -------- ------------------- -----------
NOMINEES WITH TERMS EXPIRING IN 2005:
Richard Chojnowski 59 Electrical contractor (sole proprietorship) 2000 497(1) *
Directorships: 264,353(2) *
Pennstar Bank since 1994 600(3) *
Dr. Peter B. Gregory 66 Partner, Gatehouse Antiques 1987 125,823(1) *
Directorships: 7,957(1)(a) *
NBT Bank since 1978 25,787(2)(a) *
600(3) *
Paul O. Stillman 68 Chairman of Preferred 1986 25,346(1) *
Mutual Ins. Co. (c) 12,569(2)(a) *
Directorships: 600(3) *
Preferred Mutual Ins. Co.; 164,041(b) *
Leatherstocking Cooperative
Ins. Co;
NBT Bank since 1977
Joseph A. Santangelo 49 Administrator - Arkell 2001 7,860(1) *
Hall Foundation *
Directorships:
Central National Bank since 1991
Janet H. Ingraham 64 Professional Volunteer 4,319(1) *
Directorships: 43(2)(a) *
NBT Bank since 1996 200(3) *
Chase Memorial Nursing
Home Corp.
Paul D. Horger 64 Partner - Oliver, Price & 10,504(1) *
Rhodes, attorneys 200(3) *
Directorships:
Pennstar Bank since 1997
NOMINEES WITH TERMS EXPIRING IN 2003:
Michael H. Hutcherson 39 Area President - Arthur J. 801(2) *
Gallagher & Co. of NY, 2,532(2)(a) *
Insurance Services
Michael M. Murphy 40 President & Owner - 180(1) *
Red Line Towing Inc. 31,719(2) *
Directorships: 200(3) *
Pennstar Bank since 1999
CONTINUING DIRECTORS WITH TERMS EXPIRING IN 2004:
Daryl R. Forsythe 58 Chairman, CEO & President of NBT 1992 34,352(1) *
since April 2001; Chairman 8,819(1)(a) *
and CEO of NBT Bank since 8,097(2) *
September 1999; President and 1,511(2)(a) *
CEO of NBT and NBT Bank from 5,180(a)(c) *
January 1995 to April 2001/September 252,084(4) *
1999
Directorships:
Security Mutual Life Ins. Co. of NY;
NBT Bank since 1988
6
William C. Gumble 64 Retired attorney-at-law; County 2000 123,005(1) *
Solicitor and District Attorney 600(3) *
of Pike County, PA
Directorships:
Pennstar Bank since 1985
William L. Owens 52 Partner, Harris Beach LLP, 1999 3,304(1) *
Attorneys 600(3) *
Directorships:
Champlain Enterprises, Inc.;
Prim Hall Enterprises;
Mediquest, Inc.;
Community Providers, Inc.;
Adirondack Digital Imaging Inc.;
NBT Bank since 1995
Gene E. Goldenziel 53 Managing Partner, Needle, 2000 71,772(1) *
Goldenziel & Pascale, attorneys 39,233(2) *
Directorships: 600(3) *
Pennstar Bank since 1985
Van Ness D. Robinson 66 Chairman - New York Central 2001 892(1) *
Mutual Fire Insurance Co. (NYCM) 888,471(d) 2.68%
Directorships:
NYCM;
Basset Healthcare;
Bruce Hall Corporation
Central National Bank since 1997
CONTINUING DIRECTORS WITH TERMS EXPIRING IN 2003:
Andrew S. Kowalczyk, Jr. 66 Partner - Kowalczyk, Tolles, 1994 5,117(1) *
Deery & Johnston, attorneys 700(3) *
Directorships:
Trenton Technology Inc.;
NBT Bank since 1994
John C. Mitchell 51 President and CEO of 1994 13,358(1) *
I.L. Richer Co. 8,584(2) *
(agri. business) 700(3) *
Directorships: 164,041(b) *
Preferred Mutual Ins. Co.;
Leatherstocking Cooperative
Ins. Co.;
NBT Bank since 1993
Joseph G. Nasser 44 Accountant, Nasser & Co. 2000 7,875(1) *
Directorships: 26,511(1)(a) *
Pennstar Bank since 1999 11,449(2) *
600(3) *
7
Number of
Present Position Common Shares Percent
and Principal Beneficially Owned of Shares
Name Age Position Last Five Years on 12/31/01 (a) Outstanding
------------------ --- ---------------------------------------- ------------------- -----------
Michael J. Chewens 40 Senior Executive Vice President, Chief 240(1) *
Financial Officer of NBT and 4,513(1)(a) *
NBT Bank since January 55,240(4) *
2002; EVP of same 1999-2001;
Secretary of NBT and NBT Bank
since December 2000;
Senior Vice President Control Group,
1995-1999
Martin A. Dietrich 46 President and Chief Operating 5,222(1) *
Officer of NBT Bank since September 14,975(1)(a) *
1999; Executive Vice President of 8,306(2) *
Retail Banking 1998-1999; Senior 848(2)(a) *
Vice President of Retail Banking 75,677(4) *
1996-1998 7,000(e) *
David E. Raven 39 President and Chief Operating Officer 5,349(1) *
of Pennstar Bank Division since August 3,749(1)(a) *
2000; Senior Vice President of Sales and 25,943(4) *
Administration, September 1999 -
August 2000; Retail Sales Manager
1996 - 1999
All directors and executive officers as a group beneficially owned
3,329,409 shares as of March 15, 2002, which represented 10.04% of total shares
outstanding, including shares owned by spouses, minor children and trusts, as to
which beneficial ownership is disclaimed, and options exercisable within sixty
days. Based on currently available Schedules 13D and 13G filed with the SEC, we
do not know of any person who is the beneficial owner of more than 5% of our
common stock.
NOTES:
(a) The information under this caption regarding ownership of securities is
based upon statements by the individual nominees, directors, and officers
and includes shares held in the names of spouses, minor children and trusts
as to which beneficial ownership is disclaimed. These indirectly held
shares total 82,938 for the spouses, minor children and trusts. In the case
of officers and officers who are directors, shares of our stock held in NBT
Bancorp Inc. 401(k) and Employee Stock Ownership Plan as of December 31,
2001 totaling 32,056 are included.
(b) Preferred Mutual Insurance Company, of which Paul O. Stillman is Chairman
and Director, and John C. Mitchell is a Director, owns 164,041 shares;
Messrs. Stillman and Mitchell disclaim any beneficial ownership of these
shares.
(c) The Phyllis A. & Daryl R. Forsythe Foundation, of which Daryl R. Forsythe
is a Director, owns 5,180 shares. Mr. Forsythe disclaims any beneficial
ownership of these shares.
(d) New York Central Mutual Fire Insurance Company, of which Mr. Robinson
serves as Chairman of the Board, Secretary and C.E.O., owns 888,471 shares.
Mr. Robinson disclaims any beneficial ownership of these shares.
(e) Mr. Dietrich has power of attorney for his mother, who owns 7,000 shares.
Mr. Dietrich disclaims any beneficial ownership of these shares.
(1) Sole voting and investment authority.
(2) Shared voting and investment authority.
(3) Shares under option from the NBT 2001 Non-Employee Director, Divisional
Director and Subsidiary Director Stock Option Plan, which are exercisable
within sixty days of December 31, 2001.
(4) Shares under option from the NBT 1993 Stock Option Plan, which are
exercisable within sixty days of December 31, 2001.
* Less than 1%
OUR BOARD UNANIMOUSLY RECOMMENDS OUR STOCKHOLDERS VOTE FOR FIXING THE
NUMBER OF DIRECTORS AT SIXTEEN AND ELECTING THE EIGHT NOMINEES SELECTED BY OUR
BOARD NAMED IN THE PRECEDING TABLE. THE NAMED AGENTS WILL VOTE YOUR PROPERLY
EXECUTED PROXY FOR FIXING THE SIZE OF OUR BOARD AT SIXTEEN AND FOR ELECTION OF
THE NAMED NOMINEES FOR DIRECTOR UNLESS YOU SPECIFY OTHERWISE IN YOUR PROXY.
8
VOTE REQUIRED
The directors to be elected at the annual meeting will be determined by a
plurality vote of the shares of our common stock represented at our annual
meeting in person or by proxy and entitled to vote on the election of directors.
This means that the nominees for each class who receive the most votes will be
elected to that class.
BOARD MEETINGS AND COMMITTEES OF THE BOARD
During 2001, there were eleven meetings of our Board. Each member attended
at least 75% of the meetings of the Board and those committees on which he
served.
NOMINATING, ORGANIZATION AND BOARD AFFAIRS COMMITTEE:
Chairman: Daryl R. Forsythe
Members: Andrew S. Kowalczyk, Jr.
J. Peter Chaplin
Bruce D. Howe
Gene E. Goldenziel
Williams L. Owens
Joseph A. Santangelo
This committee nominates directors for election for our company and our
subsidiaries. The committee also functions to insure a successful evolution of
management at the senior level. This committee met three times in 2001.
Our bylaws provide that nominations of candidates for election as our
directors must be made in writing and delivered to or received by our President
within ten days following the day on which public disclosure of the date of any
stockholders' meeting called for the election of directors is first given. Such
notification must contain the name and address of the proposed nominee, the
principal occupation of the proposed nominee, the number of shares of our common
stock that the notifying stockholder will vote for the proposed nominee,
including shares to be voted by proxy, the name and residence of the notifying
stockholder, and the number of shares of our common stock beneficially owned by
the notifying stockholder.
COMPENSATION AND BENEFITS COMMITTEE:
Chairman: Andrew S. Kowalczyk, Jr.
Members: Dr. Peter B. Gregory
John C. Mitchell
Paul O. Stillman
William L. Owens
William C. Gumble
Gene E. Goldenziel
Van Ness D. Robinson
This committee has the responsibility of reviewing the salaries and other
forms of compensation of the key executive personnel of NBT and our
subsidiaries. The committee administers our pension plan, 401(k) and employee
stock ownership plan, the directors and officers stock option plans and the
employee stock purchase plan. This committee met five times in 2001.
9
RISK MANAGEMENT COMMITTEE
Chairman: John C. Mitchell
Members: J. Peter Chaplin
Joseph G. Nasser
Richard Chojnowski
William C. Gumble
Bruce D. Howe
Joseph A. Santangelo
The Risk Management Committee, our audit committee, represents our Board in
fulfilling its statutory and fiduciary responsibilities for independent audits
of NBT including monitoring accounting and financial reporting practices and
financial information distributed to stockholders and the general public.
Further, the committee is responsible for determining that we operate within
prescribed procedures in accordance with adequate administrative, operating and
internal accounting controls. It also makes recommendations to our Board with
respect to the appointment of independent auditors for the following year. Our
Board has determined that each of the members of the Risk Management Committee
satisfies the requirements of NASDAQ as to independence, financial literacy and
experience. As an independent director of our Board of Directors, no member of
the Risk Management Committee is an officer or employee of our company or any of
our subsidiaries nor does any member have a relationship which, in the opinion
of our Board, would interfere with the exercise of independent judgment in
carrying out the responsibilities of a director. This committee met five times
in 2001.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Our Directors and Executive Officers must, under Section 16(a) of the
Securities Exchange Act of 1934, file certain reports of their initial ownership
of our common stock and of changes in beneficial ownership of our securities.
To our knowledge, all filing requirements under the Securities Exchange Act were
satisfied.
COMPENSATION OF DIRECTORS AND OFFICERS
BOARD OF DIRECTORS FEES
For 2001, members of our Board received a $3,000 annual retainer in the
form of restricted stock which vests over a three-year period and $600 in cash
for each Board meeting attended. Our Board members also received $600 in cash
for each committee meeting attended. Chairmen of the committees received $900
in cash for each committee meeting attended. Our officers who are also
directors do not receive any Board fees. For 2002, members of our Board will
receive an annual retainer in the amount of $9,000 which will be payable in the
form of restricted stock which will vest over a three-year period. Directors
will receive $900 in cash for each Board meeting attended. Our Board members
will also receive $600 in cash for each committee meeting attended. Chairmen of
the committees will receive $900 in cash for each committee meeting attended.
Our officers who are also directors do not receive any Board fees. Our Board
has adopted the NBT Non-Employee Director, Divisional Director and Subsidiary
Director Stock Option Plan. Under this plan, in 2002, we granted at the fair
market value per share on the date of the grant to each of our non-employee
directors an option to purchase 1,000 shares of our common stock multiplied by
the number of NBT Bancorp Board meetings attended in 2001 and divided by the
number of NBT Bancorp Board meetings held in 2001. Former CNB directors, who
are now on our Board, were granted 1,000 shares irregardless of attendance for
2001 only. In subsequent years we will grant, using this same formula, to each
of our non-employee directors an option to purchase up to 1,000 shares of our
common stock for their service on our Board. We also provide health insurance
for two directors of NBT; the premium for this insurance coverage totaled $8,258
and $6,352 for Messrs. Gene E. Goldenziel and Joseph G. Nasser, respectively, in
2001.
10
EXECUTIVE COMPENSATION
The following table sets forth information concerning our chief executive
officer and our three most highly compensated executive officers, other than the
chief executive officer, who were serving as executive officers at the end of
2001 and whose total annual salary and bonus exceeded $100,000 in 2001.
SUMMARY COMPENSATION TABLE
Long Term Compensation
------------------------
Annual Compensation
-------------------------------------- Awards
Securities
Name and Other Annual Underlying LTIP All Other
Principal Position Year Salary Bonus(1) Compensation Options(2) Payouts Compensation(3)
-------------------------------- ---- -------- -------------- ------------ ----------- ---------- ---------------
Daryl R. Forsythe, 2001 $350,000 $ 140,625 54,500 $ 0 $ 92,294
Chairman, President and 2000 303,854 200,000 50,400 -0- 167,337
Chief Executive Officer 1999 300,000 200,000 46,935 -0- 312,780
of NBT
Michael J. Chewens, 2001 217,092 49,871 25,600 -0- 40,870
Senior Executive Vice President, 2000 168,315 81,500 18,800 -0- 87,929
Chief Financial Officer 1999 113,846 65,000 9,660 -0- 112,508
and Secretary of NBT and
NBT Bank
Martin A. Dietrich, 2001 253,365 91,650 43,246 -0- 184,205
President and Chief 2000 231,604 147,500 38,600 -0- 165,666
Operating Officer 1999 184,231 155,000 15,540 -0- 15,009
of NBT Bank
David E. Raven, 2001 189,154 46,500 22,400 -0- 71,395
President and 2000 146,034 77,000 8,400 -0- 35,020
Chief Operating Officer of 1999 112,711 37,500 7,460 -0- 31,052
Pennstar Bank Division
NOTES:
(1) Represents discretionary amount paid in lieu of a bonus paid in 2001 and
bonuses under our Executive Incentive Compensation Plan earned in the
specified year and paid in January of the following year for 1999 and 2000.
(2)- Number of common stock option grants adjusted for the 5% stock dividend in
December 1999.
(3)- In 2000 and 1999, NBT made discretionary contributions of $266,225, and
$487,384, respectively, to NBT Bancorp Inc. 401(k) and Employee Stock
Ownership Plan ("401(k)/ESOP"). With these contributions, NBT Bank as
trustee of the 401(k)/ESOP purchased shares of our common stock at fair
market value on the dates of purchase and allocated these shares to the
accounts of the participants. The amount shown includes the amount
allocated to the named executive. There was no discretionary payout in
2001. An individual's maximum compensation eligible for the 401(k)/ESOP
contribution is $170,000 for 2001 and $200,000 for 2002. Includes payments
by us with respect to the death benefits agreement ($1,026 for Mr.
Forsythe) and disability agreement ($7,734 and $3,470 for Messrs. Forsythe
and Chewens, respectively). Matching contributions by us under our 401(k)
in the amount of $5,100 were made on behalf of each of Messrs. Forsythe,
Chewens, Dietrich and Raven. Compensation associated with Company owned
vehicles totaled $4,484, $4,189 and $3,209 for Messrs. Forsythe, Dietrich
and Raven in 2001. Moving Expenses incurred by Mr. Raven totaled $54,586.
Options exercised during 2001 had total values realized of $137,516 for Mr.
Dietrich. Contributions made to the Cash Balance Pension plans of Messrs.
Forsythe, Chewens, Dietrich and Raven were $73,950, $32,300, $37,400 and
$8,500 respectively.
OPTION GRANTS INFORMATION
The following table presents information concerning grants of stock options
made during 2001 to each of the named executive officers The potentially
realizable values are based solely on arbitrarily assumed rates of appreciation
required by applicable SEC regulations. Actual gains, if any, on option
exercises and common stockholdings are dependent on the future performance of
our common stock. There can be no assurance that the potential realizable
values shown in this table will be achieved.
11
OPTION GRANTS IN LAST FISCAL YEAR
Potential Realizable Value
at Assumed Annual Rates
of Stock Price Appreciation
Individual Grants for Option Term (2)
------------------------------- ---------------------------
# of
Securities % of Total
Underlying Options Granted Exercise
Options to Employees Price
Name Granted(1) in Fiscal Year ($/Sh) Expiration Date 5% 10%
---------------------- ----------- ---------------- ---------- --------------- --------- -----------
Daryl R. Forsythe 54,500 7.8% $ 16.0625 January 2011 $550,539 $1,395,172
Michael J. Chewens 25,600 3.6% 16.0625 January 2011 258,601 655,347
Martin A. Dietrich 38,900 5.5% 16.0625 January 2011 392,953 995,820
Martin A. Dietrich (3) 4,346 0.6% 16.2270 August 2011 44,351 112,395
David E. Raven 22,400 3.2% 16.0625 January 2011 226,276 573,429
NOTES:
(1) Nonqualified options have been granted at fair market value at the date of
grant. Options vest 40% after one year from grant date; an additional 20%
vest each following year.
(2) The potential realizable value of each grant of options, assuming that the
market price of the underlying security appreciates in value from the date
of grant to the end of the option term, at the specified annualized rates.
The assumed growth rates in price in our stock are not necessarily
indicative of actual performance that may be expected. The amounts exclude
the cost by the executive to exercise such options.
(3) These options were granted in accordance with the reload provisions of the
1993 Stock Option Plan upon the exercise of Mr. Dietrich of various
options.
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
The following table presents information concerning the exercise of stock
options during 2001 by each of the named executive officers, and the value at
December 31, 2001, of unexercised options that are exercisable within sixty days
of December 31, 2001. These values, unlike the amounts set forth in the column
headed "Value Realized," have not been, and may never be, realized. All
information has been adjusted for stock dividends and splits. The underlying
options have not been, and may never be, exercised; and actual gains, if any, on
exercise will depend on the value of our common stock on the date of exercise.
There can be no assurance that these values will be realized.
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
Number of Securities Value of Unexercised
Underlying Unexercised In the Money Options
Options at FY End at FY End(2)
---------------------- ------------------------------
Shares Acquired Exercisable/ Exercisable/
Name on Exercise Value Realized(1) Unexercisable Unexercisable
------------------ ---------------------- ---------------------- --------------- --------------
Daryl R. Forsythe -0- $ -0- 312,232/252,084 $ 476,481/0
Michael J. Chewens -0- -0- 55,240/24,812 61,947/0
Martin A. Dietrich 21,146 137,516 75,677/46,235 35,790/0
David E. Raven -0- -0- 25,943/17,829 4,647/0
NOTES:
(1) Represents difference between the fair market value on the date of exercise
of the securities underlying the options and the exercise price of the
options.
(2) Represents difference between the fair market value of the securities
underlying the options and the exercise price of the options at December
31, 2001.
12
PENSION PLAN
Our executives participate in the NBT Bancorp Inc. Defined Benefit Pension
Plan. This plan is a noncontributory, tax-qualified pension plan. Eligible
employees are those who work at least 1,000 hours per year, have completed one
year of eligibility service and have attained age 21. The plan provides for
100% vesting after five years of qualified service. Prior to the amendment and
restatement of the plan effective January 1, 2000, the plan had received a
determination from the Internal Revenue Service that the plan was qualified
under Section 401(a) of the Internal Revenue Code. The plan, as amended and
restated effective January 1, 2000, was recently submitted to the Internal
Revenue Service for determination. The plan was converted to a cash balance
pension plan, effective January 1, 2000. Prior to that date the plan was a
traditional defined benefit pension plan.
Under a cash balance plan such as our plan, hypothetical account balances
are established for each participant and pension benefits are generally stated
as the lump-sum amount in that hypothetical account. Notwithstanding the
preceding sentence, since a cash balance plan is a defined benefit plan, the
annual retirement benefit payable at normal retirement (age 65) is an annuity,
which is the actuarial equivalent of the participant's account balance under the
cash balance plan. However, participants may elect, with the consent of their
spouses if they are married, to have the benefits distributed as a lump sum
rather than an annuity. Benefits under the plan for 2001 are computed using a
cash balance methodology that provides for pay-based credits to the
participants' hypothetical accounts equal to 5 to 43.5 percent (depending on age
and other factors) on the first $170,000 of annual eligible compensation.
Eligible compensation under the plan is defined as fixed basic annual salary or
wages, commissions, overtime, cash bonuses, and any amount contributed by us at
the direction of the participant pursuant to a salary reduction agreement and
excludible from the participant's gross income under Section 125 or Section
402(e)(3) of the Internal Revenue Code, but excluding any other form of
remuneration, regardless of the manner calculated or paid such as amounts
realized from the exercise of stock options, severance pay or our cost for any
public or private benefit plan, including this pension plan. In addition to the
pay-based service credits, monthly interest credits are made to the
participant's account balance based on the average annual yield on 30-year U.S.
Treasury securities for the November of the prior year. Each active participant
in the pension plan as of January 1, 2000 was given a one-time irrevocable
election to continue participating in the traditional defined benefit plan
design or to begin participating in the new cash balance plan design. All
employees who became participants after January 1, 2000 automatically
participated in the cash balance plan design. Each of our executives chose to
participate in the cash balance plan design. The opening account balance of
each participant in the plan on January 1, 2000, who made the one-time
irrevocable election to participate in the cash balance plan design, was
computed to be the greater of the following two amounts:
- 5% of the participant's final average earnings at January 1, 2000
(annual compensation for the three consecutive years of benefit
service, during the last ten years of benefit service before January
1, 2000, which produce the highest average), multiplied by the
participant's years of benefit service before January 1, 2000 (with no
limit on benefit service); or
- The lump sum present value of the participant's accrued benefit under
the traditional plan design as of December 31, 1999. The lump sum
present value was determined using the prevailing commissioners'
standard mortality table as of January 1, 2000 (a 50/50 blend of the
1983 Group Annuity Mortality Table for males and females), and a 6.15%
interest rate. The interest rate is equal to the 30-year U.S. Treasury
rate for November 1999.
The following table shows the estimated annual benefits payable upon
retirement at normal retirement age (NRA) for each of the named executive
officers.
EXECUTIVE ANNUITY BENEFIT AT NRA
---------------------- ----------------------
Mr. Forsythe $ 26,962
---------------------- ----------------------
Mr. Chewens $ 28,755
---------------------- ----------------------
Mr. Dietrich $ 43,412
---------------------- ----------------------
Mr. Raven $ 10,191
---------------------- ----------------------
13
Pension benefits under the plan are not subject to reduction for Social
Security benefits or other offset amounts. Section 415 of the Internal Revenue
Code places certain limitations on pension benefits that may be paid from the
trusts of tax-qualified plans, such as the plan. Because of these limitations
and in order to provide certain of our executives with adequate retirement
income, we have entered into supplemental retirement agreements which provide
retirement benefits to the named executives in the manner discussed below. It
should be noted that where applicable the amounts payable under the supplemental
retirement agreements, as discussed in the following section, are offset by
payments made under our pension plan, the annuitized employer portion of our
401(k)/ESOP and social security.
SUPPLEMENTAL RETIREMENT AGREEMENTS AND PLAN
We have entered into an agreement with Mr. Forsythe to provide him with
supplemental retirement benefits, revised most recently on January 28, 2002,
which we refer to as the "SERP." The SERP for the benefit of Mr. Forsythe
provides that his combined annual benefit at normal retirement, taking into
consideration (a) the annual benefit payable to Mr. Forsythe under our pension
plan, (b) the annual benefit that could be provided by contributions by us and
NBT Bank (other than Mr. Forsythe's elective deferrals) to our 401(k)/ESOP and
the earnings on those amounts if these contributions and earnings were converted
to a benefit payable under the agreement using the actuarial assumptions
provided under the agreement, the amount to be determined by an actuary selected
by us or NBT Bank, (c) his social security benefit and (d) the SERP, will be
equal to 75% of Mr. Forsythe's final average compensation (i.e., average annual
base salary, commissions, bonuses and elective deferrals not includible in Mr.
Forsythe's gross income under our 401(k)/ESOP and cafeteria plan for the five
years of benefit service under our pension plan out of the last ten years of
benefit service that produces the highest average, the ten years to be those
immediately preceding the date of retirement but without regard to any Internal
Revenue Code limitations on compensation applicable to tax-qualified plans).
Reduced amounts will be payable under the SERP in the event Mr. Forsythe takes
early retirement. If Mr. Forsythe becomes disabled before he attains age 62, he
will be treated for purposes of the SERP as if he had continued to be employed
by NBT Bank until he reached age 62, and then retired. If Mr. Forsythe dies,
his spouse will be entitled to an annual benefit for life equal to 50% of the
benefit payable to Mr. Forsythe and, if such death occurs before he retires, as
if he had retired and begun receiving his benefit before he died. Except in the
case of early retirement, disability or death, payment of benefits will commence
upon the first day of the month after Mr. Forsythe attains age 65. Assuming a
retirement age of 65, satisfaction of applicable SERP conditions, that he is
currently 65, and that his 2001 compensation were his final average compensation
as defined by the SERP, the estimated aggregate annual retirement benefit under
the SERP, our cash balance pension plan, the annuitized employer portion of our
401(k)/ESOP and social security to be paid to Mr. Forsythe would be $412,500.
The SERP provides that it will at all times be unfunded except that, in the
event of a change in control, NBT Bank will be required to transfer to a grantor
trust an amount sufficient to cover all potential liabilities under the SERP.
We have also entered into agreements with Messrs. Chewens and Dietrich and
we have adopted a Supplemental Executive Retirement Plan, in which they
participate, to provide them with SERP's. The SERP's for the benefit of Messrs.
Chewens and Dietrich provide that the combined annual supplemental benefit at
normal retirement, taking into consideration (a) the annual benefit payable to
the executive under our pension plan, (b) the annual benefit that could be
provided by contributions by us and NBT Bank (other than the executive's
elective deferrals) to our 401(k)/ESOP and the earnings on those amounts if
these contributions and earnings were converted to a benefit payable under the
agreement using the actuarial assumptions provided under the agreement, the
amount to be determined by an actuary selected by us or NBT Bank, (c) his social
security benefit and (d) the SERP, will be equal to the greater of (1) 50% of
the executive's final average compensation (i.e. average annual base salary,
commissions, bonuses and elective deferrals not includible in the executive's
gross income under our 401(k)/ESOP and cafeteria plan for the five years of
benefit service under our pension plan out of the last ten years of benefit
service that produces the highest average, the ten years to be those immediately
preceding the date of retirement but without regard to any Internal Revenue Code
limitations on compensation applicable to tax qualified plans) or (2) the sum of
the annual amount of the executive's benefit under our pension plan, calculated
without giving effect to limitations and restrictions imposed by the Internal
Revenue Code plus the annual benefit that could be provided by contributions by
us and NBT Bank (other than the executive's elective deferrals) to our
401(k)/ESOP and the earnings on those amounts, calculated by disregarding the
14
limitations and restrictions imposed by the Internal Revenue Code and using the
actuarial assumptions set out in our pension plan. Reduced amounts will be
payable under the SERP in the event Mr. Chewens or Mr. Dietrich takes early
retirement. If Mr. Chewens or Mr. Dietrich dies leaving a surviving spouse, his
spouse will be entitled to an annual benefit for life equal to the annual
survivor annuity benefit under our pension plan, calculated without giving
effect to limitations and restrictions imposed by the Internal Revenue Code,
reduced by the surviving spouse benefit actually payable under such plan, plus a
lump sum amount equal to contributions by us and NBT Bank (other than the
executive's elective deferrals) to our 401(k)/ESOP, calculated by disregarding
the limitations and restrictions imposed by the Internal Revenue Code, reduced
by the amounts actually contributed to our 401(k)/ESOP, plus the earnings on
such net amount. If the executive dies after attaining age 60 and after he has
retired, but before payment of benefits has commenced, the surviving spouse will
also receive an annual benefit equal to 50% of the excess, if any, of 50% of the
executive's final average compensation (as defined above) over the sum of (1)
the annual amount of the executive's benefit under our pension plan, calculated
without giving effect to limitations and restrictions imposed by the Internal
Revenue Code and (2) the annual benefit that could be provided by contributions
by us and NBT Bank (other than the executive's elective deferrals) to our
401(k)/ESOP and the earnings on those amounts, calculated by disregarding the
limitations and restrictions imposed by the Internal Revenue Code and using the
actuarial assumptions set out in our pension plan, and (c) the executive's
social security benefits. Except in the case of early retirement or death,
payment of benefits will commence upon the first day of the month after Mr.
Chewens or Mr. Dietrich attains age 62. Assuming a retirement age of 62,
satisfaction of applicable SERP conditions, that he is currently 62, and that
his 2001 compensation were his final average compensation as defined by the
SERP, the estimated aggregate annual retirement benefit under the SERP, our cash
balance pension plan, the annuitized employer portion of our 401(k)/ESOP and
social security to be paid to Mr. Chewens would be $152,867. Assuming a
retirement age of 62, satisfaction of applicable SERP conditions, that he is
currently 62, and that his 2001 compensation were his final average compensation
as defined by the SERP, the estimated aggregate annual retirement benefit under
the SERP, our cash balance pension plan, the annuitized employer portion of our
401(k)/ESOP and social security to be paid to Mr. Dietrich would be $200,433.
The SERP's for both Mr. Chewens and Mr. Dietrich provide that they will at all
times be unfunded except that, in the event of a change in control, NBT Bank
will be required to transfer to a grantor trust an amount sufficient to cover
all potential liabilities under the SERP.
EMPLOYMENT AGREEMENTS
Effective January 1, 2000, we entered into an employment agreement with Mr.
Forsythe, which was revised on January 22, 2001 and again on January 1, 2002.
The agreement provides that Mr. Forsythe will serve as our chairman, president
and chief executive officer until August 2, 2003, except that the term of
employment may be extended for one or two additional years by mutual agreement
of the parties. Mr. Forsythe's annual salary will be not less than $375,000
during 2002 and $425,000 during 2003 and, if applicable, thereafter. Mr.
Forsythe's salary in 2002 reflects his election to only take one half of the
contractual increase to which he was entitled. Mr. Forsythe will be eligible to
be considered for performance bonuses commensurate with his title and salary
grade in accordance with our compensation policies. The agreement also grants
Mr. Forsythe a right to stock options to be granted to him annually under our
1993 Stock Option Plan, computed using a formula approved by us that is
commensurate with his title and salary grade. The option exercise price will be
the fair market value of the stock at time of grant. The agreement also
provides to Mr. Forsythe paid vacation time in accordance with our policies as
they apply to officers of Mr. Forsythe's rank. In addition, Mr. Forsythe will
be excused from physical presence at our headquarters for the months of January,
February and March, except on an as-required basis as mutually agreed by our
board of directors. Under the agreement Mr. Forsythe will also receive other
benefits including use of an automobile, country club privileges, and
participation in our various employee benefits plans such as the pension plan,
the 401(k)/ESOP, and various health, disability, and life insurance plans. In
the event Mr. Forsythe's employment is terminated by us other than for "cause"
(as defined) or by Mr. Forsythe for "good reason" (as defined), Mr. Forsythe
will be entitled to receive his accrued and unpaid salary, his accrued rights
under our employee plans and arrangements, unpaid expense reimbursements, the
cash equivalent of his accrued annual and sick leave and severance payments
equal to his salary for two years. However, if such termination is covered by
his change in control agreement (discussed below), his severance payments will
be determined under that agreement.
15
Effective January 1, 2000, we also entered into an employment agreement
with Mr. Dietrich, which was revised on January 1, 2002. The agreement with Mr.
Dietrich provides that he will serve as the president, chief operating officer
and a director of NBT Bank through January 1, 2005, with automatic one-year
extensions occurring annually beginning January 1, 2003. Mr. Dietrich's salary
in 2002 is $260,000 and the agreement provides for minimum increases of 8
percent per annum. In 2002, Mr. Dietrich relinquished his right to an 8%
increase and accepted a 4% increase. Mr. Dietrich will be eligible to be
considered for performance bonuses commensurate with his title and salary grade
in accordance with our compensation policies. The agreement also grants Mr.
Dietrich a right to stock options to be granted to him annually under our 1993
Stock Option Plan, computed using a formula approved by us that is commensurate
with his title and salary grade. The option exercise price will be the fair
market value of the stock at time of grant. Under the agreement Mr. Dietrich
will also receive other benefits including use of an automobile, country club
privileges, and participation in our various employee benefits plans such as the
pension plan, the 401(k)/ESOP, and various health, disability, and life
insurance plans. In the event Mr. Dietrich's employment is terminated by us
other than for "cause" (as defined) or by Mr. Dietrich for "good reason" (as
defined), Mr. Dietrich will be entitled to receive his accrued and unpaid
salary, his accrued rights under our employee plans and arrangements, unpaid
expense reimbursements, the cash equivalent of his accrued annual and sick
leave, and severance payments equal to his salary until the later of January 1,
2005, the date to which the term of employment has been automatically extended
or 24 months after the termination date. However, if such termination is
covered by his change in control agreement (discussed below), his severance
payments will be determined under that agreement.
Effective June 1, 2000, we entered into an employment agreement with Mr.
Chewens, which was revised on January 1, 2002. The agreement with Mr. Chewens
provides that he will serve as a senior executive vice president of our Company,
our chief financial officer and a senior executive vice president and chief
financial officer of NBT Bank through January 1, 2005, with automatic one-year
extensions occurring annually beginning January 1, 2003. Mr. Chewens' salary in
2002 is $214,500 and the agreement provides for minimum increases of 8 percent
per annum. In 2002, Mr. Chewens relinquished his right to an 8% increase and
accepted a 4% increase. Mr. Chewens will be eligible to be considered for
performance bonuses commensurate with his title and salary grade in accordance
with our compensation policies. The agreement also grants Mr. Chewens a right
to stock options to be granted to him annually under our 1993 Stock Option Plan,
computed using a formula approved by us that is commensurate with his title and
salary grade. The option exercise price will be the fair market value of the
stock at time of grant. Under the agreement Mr. Chewens will also receive other
benefits including use of an automobile, country club privileges, and
participation in our various employee benefits plans such as the pension plan,
the 401(k)/ESOP, and various health, disability, and life insurance plans. In
the event Mr. Chewens' employment is terminated by us other than for "cause" (as
defined) or by Mr. Chewens for "good reason" (as defined), Mr. Chewens will be
entitled to receive his accrued and unpaid salary, his accrued rights under our
employee plans and arrangements, unpaid expense reimbursements, the cash
equivalent of his accrued annual and sick leave, a relocation payment if he
relocates outside the Binghamton area within 18 months and severance payments
equal to his salary until the later of January 1, 2005, the date to which the
term of employment has been automatically extended or 24 months after the
termination date. However, if such termination is covered by his change in
control agreement (discussed below), his severance payments will be determined
under that agreement.
Effective August 1, 2001, we entered into an employment agreement with Mr.
Raven, which was revised on January 1, 2002. The agreement with Mr. Raven
provides that he will serve as the president and chief operating officer of our
Pennstar Bank division through January 1, 2005, with automatic one-year
extensions occurring annually beginning January 1, 2003. Mr. Raven's annual
salary in 2002 is $200,000 and the agreement provides for minimum increases of 8
percent per annum. Mr. Raven will be eligible to be considered for performance
bonuses commensurate with his title and salary grade in accordance with our
compensation policies. The agreement also grants Mr. Raven a right to stock
options to be granted to him annually under our 1993 Stock Option Plan, computed
using a formula approved by us that is commensurate with his title and salary
grade. The option exercise price will be the fair market value of the stock at
time of grant. Under the agreement Mr. Raven will also receive other benefits
including use of an automobile, country club privileges, and participation in
our various employee benefits plans such as the pension plan, the 401(k)/ESOP,
and various health, disability, and life insurance plans. In the event Mr.
Raven's employment is terminated by us other than for "cause" (as defined) or by
Mr. Raven for "good reason" (as defined), Mr. Raven will be entitled to receive
16
his accrued and unpaid salary, his accrued rights under our employee plans and
arrangements, unpaid expense reimbursements, the cash equivalent of his accrued
annual and sick leave, a relocation payment if he relocates outside the Scranton
area within 18 months and severance payments equal to his salary until the later
of January 1, 2005, the date to which the term of employment has been
automatically extended or 24 months after the termination date. However, if
such termination is covered by his change in control agreement (discussed
below), his severance payments will be determined under that agreement.
CHANGE IN CONTROL AGREEMENTS
We have entered into a change in control agreement with each of Messrs.
Forsythe, Chewens, Dietrich and Raven most recently on July 23, 2001. The
agreements for Messrs. Forsythe, Chewens, Dietrich and Raven provide in general
that, in the event there is a change in control of us or NBT Bank and further,
if within 24 months from the date of such change in control, Mr. Forsythe's,
Chewens', Dietrich's or Raven's respective employment with us or NBT Bank is
terminated without cause or by the executive with good reason (as defined in the
agreement), or if within 12 months of such change in control, the executive
resigns, irrespective of the existence of good reason, Messrs. Forsythe,
Chewens, Dietrich or Raven will be entitled to receive 2.99 times the greater of
(1) the sum of his annualized salary for the calendar year in which the change
in control occurs, the maximum target bonus that could have been paid to him for
such year if all applicable targets and objectives had been achieved, or if no
formal bonus program is in effect, the largest bonus amount paid to him during
any of the three preceding calendar years, his income from the exercise of
nonqualified stock options during such year and other annualized amounts that
constitute taxable income to him from us for such year, without reduction for
salary reduction amounts that are excludible from taxable income or (2) his
average annual compensation includible in his gross income for federal income
tax purposes for the three years immediately preceding the year in which the
change in control occurs, including base salary, bonus and ordinary income
recognized with respect to stock options, without reduction for salary reduction
amounts that are excludible from taxable income, plus any gross-up amount
required to compensate for the imposition of any excise taxes under section 4999
of the Internal Revenue Code. Moreover, if the executive's employment with us
or NBT Bank is terminated without cause or by the executive with good reason (as
defined in the agreements) within 24 months of such change in control, or if the
executive resigns within 12 months of such change in control irrespective of the
existence of good reason, we or NBT Bank will maintain in effect, for the
continued benefit of the executive and his spouse and family, if applicable, for
three years after the executive's date of termination, or such longer period as
is provided in the appropriate plan, all noncash employee benefit plans,
programs, or arrangements (including pension and retirement plans and
arrangements, stock option plans, life insurance and health and accident plans
and arrangements, medical insurance plans, disability plans, and vacation plans)
in which the executive was entitled to participate immediately prior to the
executive's date of termination, as in effect at the date of termination, or, if
more favorable to the executive and his spouse and family, as applicable, at any
time thereafter with respect to executive employees of our company or any
successor; provided that the executive's continued participation is possible
after his termination under the general terms and provisions of the plans,
programs, and arrangements. However, if the executive becomes eligible to
participate in a benefit plan, program, or arrangement of another employer which
confers substantially similar benefits upon the executive, the executive will
cease to receive the benefits in respect of our plan, program, or arrangement.
In the event that the executive's participation in any such plan, program, or
arrangement is barred, we or NBT Bank will arrange to provide the executive with
benefits substantially similar to those which the executive is entitled to
receive under such plans, programs and arrangements or alternatively, pay an
amount equal to the reasonable value of substantially similar benefits. In
addition, each executive's benefit under any SERP shall be fully vested and his
benefit thereunder will be determined as if his employment had continued for
three additional years (or such lesser period after which the maximum benefit is
attained), at an annual compensation equal to the amount determined for purposes
of calculating his severance amount. Moreover, under certain circumstances we
or NBT Bank or the acquiring entity will provide the executive with health
coverage for the maximum period after termination of employment for which COBRA
continuation coverage is available. The agreements are effective until December
31, 2003, and are automatically renewed for one additional year commencing at
December 31, 2001 and each December 31 of following years, and will be
automatically extended for 24 months from the date of such a change in control.
17
DARYL R. FORSYTHE EMPLOYMENT
In addition to the employment agreement and supplemental retirement
agreement between Mr. Forsythe and us described above, we and Mr. Forsythe have
entered into a wage continuation plan which provides that during the first three
months of disability Mr. Forsythe will receive 100% of his regular wages reduced
by any benefits received under social security, workers' compensation, state
disability plan or any other similar government plan or other program, such as
group coverage, paid for by us. Additionally, if the disability extends beyond
three months, Mr. Forsythe will receive payments of $7,000 per month under an
insurance policy with the New England Mutual Life Insurance Company. The annual
cost of the policy is $7,734, which is reflected in the Summary Compensation
Table above. We and Mr. Forsythe have entered into a death benefits agreement,
which was amended most recently on January 28, 2002. The policy is a
split-dollar life insurance policy on Mr. Forsythe's life in the face amount of
$800,000. We are the owner of the policy and have the right to designate
another officer or employee as the insured under the policy upon termination of
the agreement. Upon Mr. Forsythe's death, his named beneficiary will receive
$600,000 from the policy's proceeds, while we will receive the remainder of the
policy's proceeds. Upon termination of the death benefits agreement (e.g., upon
termination of Mr. Forsythe's employment), Mr. Forsythe is required to transfer
all of his right, title, and interest in the policy to us. We pay the premium
on the policy, of which an actuarially determined amount is attributable to Mr.
Forsythe and is reflected in the Summary Compensation Table above. In addition,
we entered into a split dollar agreement with Mr. Forsythe on January 28, 2002,
with respect to a life insurance policy on Mr. Forsythe's life in the amount of
$1,500,000. We are the owner of the policy and have the right to designate
another officer or employee as the insured under the policy upon termination of
the agreement. Upon Mr. Forsythe's death, his named beneficiary will receive
$1,000,000 from the policy's proceeds, while we will receive the remainder of
the policy's proceeds. We pay the premium on the policy, of which an
actuarially determined amount is attributable to Mr. Forsythe.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
In fiscal 2001, the following directors served as members of our Compensation
and Benefits Committee: Andrew S. Kowalczyk, Jr., Dr. Peter B. Gregory, John C.
Mitchell, Paul O. Stillman, William L. Owens, William C. Gumble, Gene E.
Goldenziel and Van Ness D. Robinson. None of the persons who served on this
committee in 2001 served as an officer or employee of NBT or any of its
subsidiaries. The law firm of Kowalczyk, Tolles, Deery and Johnston, of which
Director Andrew S. Kowalczyk, Jr., Chairman of the Compensation and Benefits
Committee, is a partner, provides legal services to us and NBT Bank from time to
time as does the law firm of Harris Beach LLP, of which Director William L.
Owens, a member of the Compensation and Benefits Committee, is a partner. These
services occur in the ordinary course of business and at the same terms as those
prevailing for comparable transactions with other law firms. From time to time
NBT Bank makes loans to its directors and executive officers and related persons
or entities. It is the belief of management that these loans are made in the
ordinary course of business, are made on substantially the same terms, including
interest rates and collateral, as those prevailing at the time for comparable
transactions with other persons, and neither involve more than normal risk of
collectability nor present other unfavorable features.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The primary responsibility of the Compensation and Benefits Committee is to
design, implement, and administer all facets of our compensation and benefits
programs for all employees. The committee is composed entirely of outside,
non-employee directors. The committee approves participants who are eligible
for the Executive Incentive Compensation Plan, sets the compensation plan
targets for each year and approves payouts under the plan, awards director and
officer stock option grants, approves the annual contribution to the NBT Bancorp
Inc. 401(k) and Employee Stock Ownership Plan for all employees, approves
executive compensation, annually reviews the performance of the CEO and
recommends the CEO compensation package to our Board. The committee presents
its actions to our Board for approval. The objective of our executive
compensation program is to develop and maintain executive reward programs, which
contribute to the enhancement of shareholder value, while attracting and
retaining key executives who are critical to our long-term success. It is
expected that total compensation will vary annually, based on the company's and
individual performance.
18
The compensation committee retained the services of an executive salary and
benefits consultant, who is independent and unassociated with NBT, the CEO, or
any member of our Board or management, to assist in setting the total
compensation package of senior management. To assist the committee in
fulfilling its responsibilities, the independent consultant has provided advice
and guidance directed toward ensuring that our Board's practices are consistent
within the industry, consistent with and in support of our goals and objectives
and fairly applied throughout our company.
The committee believes it is critical to our ongoing success that its
executives continue to be among the most highly qualified and talented available
to lead the organization in the creation of shareholder value. In support of
this objective, the philosophy of the committee in approving and recommending
executive compensation is based upon the following criteria:
- Design a total compensation package that includes a base salary, an
annual incentive plan that is linked to stockholder interests, and a
stock option plan that encourages share ownership and is also linked
with stockholder interests.
- Set base salaries that are commensurate with each individual's
responsibility, experience, and contribution to us.
- Ensure that salaries are competitive within the industry so as to be
able to attract and retain highly qualified executives.
- Promote a pay for performance culture.
Our executive compensation program, discussed in detail below, is made up
of both fixed (base salary) and variable (incentive) compensation elements.
Variable compensation consists of annual cash incentives and stock option
grants. The committee and our management believe that variable compensation
should be based both on short-term and long-term measurements and be directly
and visibly tied to our performance, so that, while introducing appropriate risk
in the payout levels, such compensation will promote a pay for performance
culture within the executive team.
In reviewing executive compensation, the committee considers a variety of
factors including past performance and our Board's expectations for improvement
in the future. The CEO and senior executive management review executive
compensation throughout the year. The CEO presents recommendations for
compensation for the Executive Management Team to the committee each year prior
to year-end for their approval. The committee annually reviews the CEO's
performance against pre-established goals and with respect to our performance.
The committee considers improvements in historical measures such as ROA, ROE,
profit levels, non-performing assets to total assets and net non-interest
expense to total expense in its assessment of performance.
BASE SALARY. Although not specifically weighted, the committee considered the
performance of each executive, the level of responsibility, and current
inflationary indices in establishing base salaries for executive officers. The
committee has established salary ranges with the assistance of the salary and
benefits consultant; salary ranges are based upon responsibility, experience,
and individual performance. Mr. Forsythe receives an annual salary of $375,000
for 2002. In determining Mr. Forsythe's salary, the committee took into
consideration the salaries of CEOs of similar-sized companies, the performance
of NBT, and the recommendations of the salary consultant.
CEO COMPENSATION. The Compensation Committee, in determining the compensation
for Mr. Forsythe, considered the Company's size and complexity, financial
condition and results, including progress in meeting strategic objectives. Mr.
Forsythe's 2001 salary was $350,000, an increase of 15%, compared to $303,854 in
2000. Annually the Company retains an independent compensation consultant to
obtain an opinion regarding the reasonableness of total compensation in
comparison to the total compensation provided by similarly situated
publicly-traded financial institutions. The Compensation Committee also sought
the advice of that consultant in connection with the grant of options. For
2001, the Compensation Committee intended that total compensation for Mr.
Forsythe to be reasonable in comparison to similarly situated publicly-traded
financial institutions.
19
EXECUTIVE INCENTIVE COMPENSATION PLAN. The committee, working with an outside
salary and benefits consultant, designed the current incentive plan that links
the payout with stockholder interests. The committee reviews the compensation
plan annually. The compensation plan, as it now exists, has three components
which determine the potential award within such plan: return on assets, return
on equity, and a net income goal. The compensation plan has a minimum net
income requirement before any payout is possible. There are participative
levels within the compensation plan which range from the maximum payout being
75% of salary for the CFO, and presidents of our NBT Bank and Pennstar Bank
divisions. Beginning in 2001, each level has a corporate performance component
while various levels incorporate a division component and/or an individual
performance component. The corporate component is 80% for the CFO and 20% for
the division presidents while the CFO's individual performance component is 20%
and the division component is 80% for the division presidents. The committee
sets "stretch" targets under the plan.
The compensation plan requires that the Chief Executive Officer will have
purchased such number of shares of our common stock as will equal at the end of
the five years beginning in 1999, an amount twice his or her current base
salary.
No bonuses were paid under the executive incentive compensation plan with
respect to 2001, however there was a supplemental payment in lieu of a bonus
made to substantially all employees of the Company as described below.
SUPPLEMENTAL PAYMENTS IN LIEU OF A BONUS. The Compensation and Benefits
Committee evaluated the performance of the named executive officers and other
employees in light of NBT's merger and acquisition activity during 2001 and
other factors and determined to pay supplemental cash payments in lieu of
bonuses to the named executive officers and other employees. The amounts of
such payments to the named executive officers are included in the Summary
Compensation Table under the heading "Bonus".
401(K) AND EMPLOYEE STOCK OWNERSHIP PLAN
Effective January 1, 2002, we amended the 401(k) and Employee Stock
Ownership Plan generally effective January 1, 2001, to incorporate the merger of
the Central National Bank 401(k) Plan, First National Bank of Northern New York
Employee Stock Ownership Plan, and First National Bank of Northern New York
Employee Profit Sharing Plan. In addition, the Plan has been amended effective
January 1, 2002 to incorporate certain provisions of the Economic Growth and Tax
Relief Reconciliation Act of 2001, ("EGTRRA"). The Plan is administered by us.
Discretionary and matching contributions are invested primarily in our common
stock. The investment of employee salary reduction contributions is
participant-directed. At December 31, 2001, the Plan owned 1,175,059 shares of
our common stock, 3% of total shares outstanding.
All of our employees and those of NBT Bank and effective January 1, 2002,
the employees First National Bank of Northern New York and Central National
Bank, are eligible to participate in the Plan on the first day of the month
coinciding with or next following their attainment of age 21 and the completion
of one year of service (i.e., the completion of 1,000 hours of service during
the 12-month eligibility computation period). The Plan provides for partial
vesting of an employee's interest in the plan at 20% per year with 100% vesting
being achieved after five years of qualified service, other than (1) former
participants in the Pioneer American Bank, N.A. 401(k) Plan who vest at the rate
of 20% per year for the first two years of service and become 100% vested after
the completion of three years of service and (2) former participants in the M.
Griffith, Inc. Employee Savings Plan who vest at the rate of 0% for the first
year of service and become 100% vested after the completion of two years of
service.
Employees are eligible to make salary reduction contributions on the first
day of the month coinciding with or next following their date of hire if they
are scheduled to work at an annual rate of 1,000 hours. The Plan provides that
an eligible employee may elect to defer up to the Internal Revenue Code Section
402(g) limit, of his or her salary for retirement (subject to a maximum
limitation for 2002 of $11,000), and that we will provide a matching
contribution of 100% of the first 3% of the employee's deferred amount. In
addition, we may make an additional discretionary matching contribution on
behalf of participants who are employed on the last day of the plan year and who
completed a year of service during the plan year. In 2001, we provided a
20
matching contribution of $5,100 to each of Messrs. Forsythe, Chewens, Dietrich,
and Raven. These payments are reflected in the Summary Compensation Table.
In addition to the discretionary matching contributions discussed in the
preceding paragraph, we make discretionary contributions as determined annually
by our Board to the Plan for benefit of the participants in the Plan, provided
they have completed a year of service during the plan year and are employed on
the last day of the plan year. Annual contributions may not exceed amounts
deductible from federal income tax purposes and are subject to the limitations
of Section 415 of the Internal Revenue Code. Employer contributions described
under this paragraph are allocated among all participants in the proportion that
each participant's compensation (as limited below) for the plan year bears to
the total compensation (as limited below) of all participants for the plan year
(compensation under the plan is defined as a participant's remuneration for the
plan year paid in the form of base salary or wages, commissions, overtime and
cash bonuses but excluding distributions from non-qualified plans, income for
the exercise of stock options, and severance payments but including salary
reduction contributions not includible in the participant's gross income under
the plan and any other 401(k) plan of any of our subsidiaries and under our
cafeteria plan). Compensation taken into account under the Plan cannot exceed
$200,000 for 2002. Our Board may amend or terminate the Plan at any time.
The value of a participant's plan account is the total of allocated
employer contributions, employee salary deferrals, plus the earnings on those
contributions and deferrals, plus or minus any gain or loss on the investment of
the contributions and deferrals.
Normal retirement age under the plan is 65. The Plan also provides for
early retirement at age 55 provided the participant has completed at least five
years of service (the early retirement date of participants who were
participants in the LA Bank, N.A. 401(k) Profit Sharing Plan on December 31,
2000 is the first day of the month coinciding with or next following the date
the participant attains age 60) and disability retirement at any age. In the
event a participant dies before retiring under the Plan, the value of his or her
account in the Plan will be paid to his or her beneficiary.
A participant's retirement benefit under the Plan is the value of his or
her account at the date of retirement. Effective May 1, 2001, distributions are
generally made in one lump sum payment, subject to the provisions of the Plan.
However, participants who formerly participated in the First National Bank of
Northern New York Employee Stock Ownership Plan, and First National Bank of
Northern New York Employee Profit Sharing Plan may receive a distribution in any
form available under their prior plan document through March 31, 2002.
As a qualified plan (under current law) employer contributions and employee
salary deferrals are not currently taxed to employees; and retirement benefits
will be taxable to employees when received from the Plan.
In 2001 no discretionary contributions were made to the Plan.
1993 STOCK OPTION PLAN. In order to attract and retain outstanding key
management employees, further our growth, development and financial success by
recognizing and awarding those key employees who are responsible for our growth
and success, and to provide an incentive to, and to encourage share ownership in
our company by those employees who are responsible for the policies and
operations of our company and our subsidiaries, we have a non-qualified stock
option plan, that is, a plan that does not meet the requirements of incentive
stock option treatment under the Internal Revenue Code. The committee believes
that stock options, which provide value to participants only when our
stockholders benefit from stock price appreciation, are an important component
of our executive compensation program. The number of options currently held by
an officer is not a factor in determining individual grants. The "value" of
stock options granted in 2001 ranged from 250% of base compensation at the CEO
level down to 200 shares for selected officers. This was changed for 2002 and
is now maximized at 200%. "Value" is determined by multiplying the number of
options granted by the fair market value of our common stock which underlies
such options on the date of the grant. With respect to the options granted in
2001 to the CEO and to all other selected officers, the committee in making the
awards considered the various factors referred to above, especially our growth,
financial condition, and profitability. The committee did not apply any
specific weighting to the factors considered. The number of options which the
21
committee granted to the officers was based upon individual performance and
level of responsibility, subject to committee-imposed restrictions. The
committee determined that the award level must be sufficient in size to provide
a strong incentive for participants to work for our long-term business
interests, thereby creating additional stockholder value resulting from the
appreciation of our stock, and to become significant owners of us. Options are
granted at the fair market value of our stock at the time of grant. Under the
1993 Stock Option Plan, options vest at the rate of 40% one year after the date
of grant and an additional 20% each year thereafter. Since an option gives the
officer only the right to buy these shares at a fixed price over a future
period, the compensation value is derived by the incentive to increase
shareholder value in the future; hence, the motivation to improve our
performance. The Summary Compensation Table reflects grants made to our named
executive officers under the plan.
MEMBERS OF THE COMPENSATION AND BENEFITS COMMITTEE:
Chairman: Andrew S. Kowalczyk, Jr.
Members: Dr. Peter B. Gregory
John C. Mitchell
Paul O. Stillman
William L. Owens
William C. Gumble
Gene E. Goldenziel
Van Ness D. Robinson
RELATED PARTY TRANSACTIONS
From time to time NBT Bank makes loans to its directors and executive
officers and related persons or entities. It is the belief of management that
these loans are made in the ordinary course of business, are made on
substantially the same terms, including interest rates and collateral, as those
prevailing at the time for comparable transactions with other persons, and
neither involve more than normal risk of collectability nor present other
unfavorable features.
The law firm of Kowalczyk, Tolles, Deery and Johnston, of which Director
Andrew S. Kowalczyk, Jr., is a partner, provides legal services to us and NBT
Bank from time to time as does the law firm of Harris Beach LLP, of which
Director William L. Owens is a partner. The law firm of Needle, Goldenziel and
Pascale, of which Director Gene Goldenziel is a partner, provides legal services
to us from time to time as does the law firm of Oliver, Price & Rhodes of which
Director Paul Horger is a partner.
PERFORMANCE GRAPH The following graph compares the cumulative total
shareholder return (i.e., price change, reinvestment of cash dividends and stock
dividends received) on our common stock against the cumulative total return of
the NASDAQ Stock Market (U.S. Companies) Index and the Index for NASDAQ
Financial Stocks. The stock performance graph assumes that $100 was invested on
December 31, 1996. The graph further assumes the reinvestment of dividends into
additional shares of the same class of equity securities at the frequency with
which dividends are paid on such securities during the relevant fiscal year.
The yearly points marked on the horizontal axis correspond to December 31 of
that year. We calculate each of the referenced indices in the same manner. All
are market-capitalization-weighted indices, so companies judged by the market to
be more important (i.e., more valuable) count for more in all indices.
22
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN AMONG NBT BANCORP INC., THE
INDEX FOR NASDAQ FINANCIAL STOCKS, AND THE NASDAQ STOCK MARKET (U.S. COMPANIES)
INDEX.
FIVE YEAR CUMULATIVE TOTAL RETURN
[GRAPHIC OMITTED]
Ticker 1996 1997 1998 1999 2000 2001
---------------- ----- ------- ------- ------- ------- -------
NBTB 1Q $109.17 $168.59 $180.92 $137.34 $166.43
---------------- -- ----- ------- ------- ------- ------- -------
NBTB 2Q $151.29 $204.74 $179.14 $102.84 $194.18
---------------- -- ----- ------- ------- ------- ------- -------
NBTB 3Q $149.44 $186.95 $152.77 $117.11 $145.58
---------------- -- ----- ------- ------- ------- ------- -------
NBTB 4Q $ 100 $161.59 $200.95 $145.12 $144.39 $149.25
---------------- -- ----- ------- ------- ------- ------- -------
NDF 1Q $103.94 $163.91 $149.81 $135.90 $150.78
---------------- -- ----- ------- ------- ------- ------- -------
NDF 2Q $121.23 $158.58 $162.54 $124.40 $169.75
---------------- -- ----- ------- ------- ------- ------- -------
NDF 3Q $141.44 $131.51 $136.90 $151.93 $163.40
---------------- -- ----- ------- ------- ------- ------- -------
NDF 4Q $ 100 $156.70 $154.32 $143.20 $162.55 $171.65
---------------- -- ----- ------- ------- ------- ------- -------
CCMP 1Q $ 94.68 $142.91 $192.33 $358.14 $144.47
---------------- -- ----- ------- ------- ------- ------- -------
CCMP 2Q $111.93 $147.65 $210.05 $310.75 $169.80
---------------- -- ----- ------- ------- ------- ------- -------
CCMP 3Q $130.95 $132.14 $214.89 $287.90 $117.87
---------------- -- ----- ------- ------- ------- ------- -------
CCMP 4Q $ 100 $122.14 $171.20 $318.59 $193.78 $153.50
---------------- -- ----- ------- ------- ------- ------- -------
NBTB - NBT Bancorp Inc.
NDF - NASDAQ Financial Stocks Index
23
CCMP - NASDAQ Composite Index
RISK MANAGEMENT COMMITTEE REPORT
Our Risk Management Committee, which functions as our Audit Committee,
comprises seven directors who are not officers or employees of NBT. The Risk
Management Committee held five meetings during 2001. The meetings were designed
to facilitate and encourage private communication between the Risk Management
Committee, the internal auditors and our independent public accountants, KPMG
LLP.
The Risk Management Committee has prepared a report regarding the
preparation of our consolidated financial statements as of and for the three
years ended December 31, 2001. The Risk Management Committee has
- reviewed and discussed the audited consolidated financial statements
with NBT management;
- discussed with KPMG, our independent auditors, the matters required to
be discussed by Statements on Auditing Standards (SAS) 61
(Codification of Statements on Auditing Standards, AU Sec. 380);
- received the written disclosures and the letter from KPMG required by
Independence Standards Board Standard No. 1 (Independence Discussions
with Audit Committees) and has discussed with KPMG its independence.
On the basis of its review and discussions referred to in this section of
the proxy statement, the Risk Management Committee has recommended to our Board
that the audited consolidated financial statements be included in our Annual
Report Form 10-K for the year ended December 31, 2001 for filing with the SEC.
MEMBERS OF THE RISK MANAGEMENT COMMITTEE
John C. Mitchell, Chairman of the Risk Management Committee
J. Peter Chaplin
Richard Chojnowski
William C. Gumble
Bruce D. Howe
Joseph G. Nasser
Joseph A. Santangelo
Our Risk Management Committee acts under a written charter adopted and
approved by our Board. Our Board established the committee to assist our Board
in fulfilling its fiduciary responsibilities to our company. In furtherance of
its duties, the committee has met and held discussions with management and the
independent auditors. Under the charter, the committee's primary duties and
responsibilities are to:
- Monitor the integrity of our company's financial reporting process and
systems of internal control regarding finance, accounting and legal
compliance;
- Monitor the independence and performance of our company's independent
auditors and Risk Management personnel;
- Provide an avenue of communications among the independent auditors, our
management, the Risk Management Division, and our Board.
Among other things, the committee is responsible to our Board for the
following:
- Review our management's annual assertion with respect to the system of
internal controls at certain banking subsidiaries and review the
independent auditors' reports and attestations regarding the controls;
24
- Advise our Board with respect to our company's policies and procedures
regarding compliance with applicable laws and regulations and with our Code
of Ethics;
- Provide governance, guidance and oversight of our internal control
structure;
- Review all regulatory examination reports and required management
responses;
- Review the internal audit function including coordination of plans with the
independent auditors; approve the annual internal audit plan; and review
audit reports issued and management responses received or updated since the
previous meeting;
- Review with the compliance officer the results of completed compliance
assessments;
- Ensure that the independent auditors are ultimately accountable to our
Board and the committee;
- Recommend for stockholder approval the retention and when necessary the
termination or replacement of the independent auditors;
- Prior to and during their annual review, meet with and evaluate the
independent auditors; and review significant non-audit services performed
or planned and the fees for these services;
- On an annual basis, review and discuss with the independent auditors all
significant relationships they have with our company, which could impair
the auditors' independence;
- Review our company's annual audited consolidated financial statements prior
to their filing with the SEC and discuss with our management and the
independent auditors significant issues regarding accounting principles and
judgments;
- Meet at least annually with our management, our Risk Management Division
personnel and the independent auditors to review our company's major
financial risk exposures and the steps management has taken to monitor and
control those exposures.
Our management is responsible for our company's financial reporting
process, including our system of internal control, and for the preparation of
consolidated financial statements in accordance with generally accepted
accounting principles. Our company's independent auditors are responsible for
auditing those financial statements. The committee's responsibility is to
monitor and review these processes. It is not the committee's duty or
responsibility to conduct auditing or accounting reviews or procedures.
Therefore, the committee has relied, without independent verification, on
management's representation that the financial statements have been prepared
with integrity and objectivity and in conformity with accounting principles
generally accepted in the United States, and on the representations of our
company's independent auditors included in their report on our company's
financial statements. The committee's oversight does not provide it with an
independent basis to determine that management has maintained appropriate
accounting and financial reporting principles or policies, or appropriate
internal controls and procedures designed to assure compliance with accounting
standards and applicable laws and regulations. Furthermore, the committee's
deliberations and discussions with management and our company's independent
auditors do not assure that our company's financial statements are presented in
accordance with generally accepted accounting principles, that the audit of our
company's financial statements has been carried out in accordance with generally
accepted auditing standards, or that our company's independent auditors are, in
fact, independent of our company and management.
Our Board has adopted a written charter for the Risk Management Committee.
Each of the members of the Risk Management Committee is an independent director
under Rule 4200(a)(15) of the National Association of Securities Dealers listing
standards.
NBT'S INDEPENDENT AUDITORS
25
Our Board upon the recommendation of the Risk Management Committee has
appointed KPMG LLP as our independent auditors to audit our financial statements
for the fiscal year ending December 31, 2002. KPMG LLP has served as our
independent auditors since 1987. We expect representatives of KPMG LLP to be
present at our annual meeting. Those representatives will have an opportunity to
make a statement if they desire to do so and will also be available to respond
to appropriate questions.
AUDIT FEES AND NON-AUDIT FEES The following table presents fees for
professional audit services rendered by KPMG LLP for the audit of the Company's
consolidated financial statements as of and for the year ended December 31,
2001, and fees billed for other services rendered by KPMG:
Audit fees, including the reviews of our interim
consolidated financial statements included in our
quarterly reports on form 10-Q for 2001 $ 326,900
============
Financial information systems design and implementation $ -
============
All other fees:
Audit related fees (1) $ 1,285,784
Other non-audit services (2) 591,500
------------
Total other fees $ 1,877,284
============
(1) Audit related fees includes audits of employee benefit plans including
plans for recently acquired companies; review of, and assistance with, SEC
registration statements and other filings; issuance of various reports,
consents and letters related to various mergers and acquisitions; due
diligence assistance; assistance to internal loan review; general
assistance and research of accounting and financial reporting items,
including tax financial reporting matters.
(2) Other non-audit services include tax compliance services, including federal
and various state jurisdictions and other tax related services; research
and assistance on various compensation and benefits, e-business assessment
and mortgage banking matters.
AUDIT COMMITTEE REVIEW. Our Risk Management Committee has considered
whether KPMG's provision of the non-audit services summarized in the preceding
section is compatible with maintaining KPMG's independence.
OTHER MATTERS
STOCKHOLDER PROPOSALS FOR ANNUAL MEETINGS
Stockholder proposals submitted pursuant to Rule 14a-8 of the Exchange Act
for inclusion in our proxy statement for the 2003 Annual Meeting of Stockholders
must be received by NBT by November 26, 2002. Each proposal must comply with the
requirements as to form and substance established by the SEC for such a proposal
to be included in the proxy statement and form of proxy. SEC rules set forth
standards as to what stockholder proposals corporations must include in a proxy
statement for an annual meeting.
In addition, the proxy solicited by the Board of Directors for the 2003
Annual Meeting of Stockholders will confer discretionary authority on the agents
named on the proxy card to vote on any stockholder proposal presented at the
meeting (rather than included in our proxy statement), unless we are provided
with notice of the proposal no later than February 8, 2003. The persons named as
proxies intend to vote or not vote in accordance with the recommendation of our
management and our Board.
26
OTHER MATTERS
As of the date of this proxy statement, our Board knows of no matters that
will be presented for consideration at our meeting other than as described in
this proxy statement. If any other matters should properly come before our
meeting and be voted upon, the enclosed proxies will be deemed to confer
discretionary authority on the individuals named as proxies to vote the shares
represented by those proxies as to those matters. The persons named as proxies
intend to vote or not to vote in accordance with the recommendation of our
management and our Board.
Upon receipt of a written request, the Company will furnish to any
stockholder without charge a copy of the Company's Annual Report on form 10-K
for the year ended December 31, 2001 and exhibits thereto required to be filed
with the Commission under the Securities Exchange Act of 1934. Such written
request should be directed to:
Michael J. Chewens
Senior Executive Vice President, Chief Financial Officer and Secretary
NBT Bancorp Inc.
52 South Broad Street
Norwich, NY 13815
27
NBT BANCORP INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Joseph Benenati and Gary Cummings, and
either of them, with full power of substitution, proxies to represent the
undersigned at the Annual Meeting of Stockholders of NBT Bancorp Inc. to be held
at the Route 23 Holiday Inn in Oneonta, NY on May 2, 2002 at 10:00 a.m. local
time, or at any adjournment or postponement of the meeting, with all power which
the undersigned would possess if personally present, and to vote all shares of
NBT's common stock which the undersigned may be entitled to vote at the meeting
upon the following proposals described in the accompanying proxy statement, in
accordance with the following instructions and, at their discretion, upon any
other matters that may properly come before the meeting. THIS PROXY, WHEN
PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED BY THE UNDERSIGNED. IF NO DIRECTION
IS INDICATED, A PROPERLY EXECUTED PROXY WILL BE VOTED TO FIX THE NUMBER OF
DIRECTORS AT SIXTEEN AND FOR THE ELECTION OF THE NOMINEES FOR DIRECTOR LISTED
BELOW.
1. Election of Directors. To fix the number of directors at sixteen and elect
the eight nominees listed below:
[_] FOR ALL NOMINEES [_] WITHHOLD FROM ALL NOMINEES
Janet H. Ingraham Michael M. Murphy Michael H. Hutcherson
Paul D. Horger Richard Chojnowski Peter B. Gregory
Joseph A. Santangelo Paul O. Stillman
IF YOU DO NOT WISH YOUR SHARES VOTED FOR A PARTICULAR NOMINEE, DRAW A LINE
THROUGH THAT PERSON'S NAME ABOVE.
2. The proxies are authorized to vote in their discretion upon such other
business that may properly come before the meeting.
X Please mark your votes as in this example.
[_] Check here for address change and note change below
[_] Check here if you plan to attend the meeting
New address:
Date: Signature(s)
-------------------
Please sign here exactly as name(s) appear(s) on
the left. When signing as attorney, executor,
administrator, trustee, guardian, or in any other
fiduciary capacity, give full title. If more than
one person acts as trustee, all should sign. All
joint owners must sign.