preliminarydef14a.htm
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
PRELIMINARY14A
INFORMATION
Consent
Solicitation Statement Pursuant to Section 14(a)
of
the Securities Exchange Act of 1934
Filed
by the Registrant x
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Filed
by a Party other than the Registrant o
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Check the
appropriate box:
x
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Preliminary
Proxy Statement
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o
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Confidential,
for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
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Definitive
Proxy Statement
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o
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Definitive
Additional Materials
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o
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Soliciting
Material Pursuant to Section 240.14a-11c or Section
240.14a-12
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PATHFINDER
BANCORP INC.
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(Name
of Registrant as Specified In Its Charter)
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(Name
of Person(s) Filing Proxy Statement, if other than the
Registrant)
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Payment
of Filing Fee (Check the appropriate box):
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No
fee required.
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o
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Fee
computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
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(1)
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Title
of each class of securities to which transaction
applies:
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(2)
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Aggregate
number of securities to which transaction applies:
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(3)
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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)
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Proposed
maximum aggregate value of transaction:
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(5)
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Total
fee paid:
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o
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Fee
paid previously with preliminary materials.
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o
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Check
box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
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(1)
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Amount
Previously Paid:
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(2)
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Form,
Schedule or Registration Statement No.:
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(3)
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Filing
Party:
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(4)
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Date
Filed
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March 31,
2010
Dear
Shareholder:
We
cordially invite you to attend the Annual Meeting of Shareholders of Pathfinder
Bancorp, Inc. The Annual Meeting will be held at the Econolodge, 70 E. First
Street, Oswego, New York at 10:00 a.m., Eastern Time, on April 28,
2010.
The
enclosed Notice of Annual Meeting and Proxy Statement describe the formal
business to be transacted. During the Annual Meeting we will also report on our
operations. Directors and officers, as well as a representative of our
independent registered public accounting firm, will be present to respond to
questions that shareholders may properly present.
The
Annual Meeting is being held so that shareholders may consider the election of
three directors, the approval of the 2010 Stock Option Plan, an advisory
(non-binding) vote on executive compensation and the ratification of the
appointment of ParenteBeard LLC as our independent registered public accounting
firm for the year ending December 31, 2010.
For the
reasons set forth in the Proxy Statement, the Board of Directors unanimously
recommends a vote “FOR” the election of the nominated directors, the approval of
the 2010 Stock Option Plan, an advisory (non-binding) vote on executive
compensation and the ratification of the appointment of ParenteBeard LLC as our
independent registered public accounting firm.
On behalf
of the Board of Directors, we urge you to sign, date and return the enclosed
proxy card as soon as possible, even if you currently plan to attend the Annual
Meeting. This will not prevent you from voting in person, but will assure that
your vote is counted if you are unable to attend the meeting. Your vote is
important, regardless of the number of shares that you own.
Sincerely,
/s/ Thomas W. Schneider
Thomas W.
Schneider
President
and Chief Executive Officer
Pathfinder
Bancorp, Inc.
214
West First Street
Oswego,
New York 13126
(315)
343-0057
NOTICE
OF
ANNUAL
MEETING OF SHAREHOLDERS
To
Be Held On April 28, 2010
Notice is
hereby given that the Annual Meeting of Pathfinder Bancorp, Inc., will be held
at the Econolodge, 70 E. First Street, Oswego, New York on April 28, 2010 at
10:00 a.m., Eastern Time.
A Proxy
Card and a Proxy Statement for the Annual Meeting are enclosed.
The
Annual Meeting is for the purpose of considering and acting upon:
1)
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The
election of three directors
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2)
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The
approval of the 2010 Stock Option
Plan
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3)
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An
advisory (non binding) vote on executive
compensation
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4)
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The
ratification of the appointment of ParenteBeard LLC as our independent
registered public accounting firm for the year ending December 31, 2010;
and
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such
other matters as may properly come before the
Annual Meeting, or any adjournments thereof. The Board of Directors is not aware
of any other business to come before the Annual Meeting.
Any
action may be taken on the foregoing proposals at the Annual Meeting on the date
specified above, or on any date or dates to which the Annual Meeting may be
adjourned. Shareholders of record at the close of business on March 17, 2010 are
the shareholders entitled to vote at the Annual Meeting, and any adjournments
thereof.
EACH
SHAREHOLDER, WHETHER HE OR SHE PLANS TO ATTEND THE ANNUAL MEETING, IS REQUESTED
TO SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD WITHOUT DELAY IN THE ENCLOSED
POSTAGE-PAID ENVELOPE. ANY PROXY GIVEN BY THE SHAREHOLDER MAY BE REVOKED AT ANY
TIME BEFORE IT IS EXERCISED. A PROXY MAY BE REVOKED BY FILING WITH OUR CORPORATE
SECRETARY A WRITTEN REVOCATION OR A DULY EXECUTED PROXY BEARING A LATER DATE.
ANY SHAREHOLDER PRESENT AT THE ANNUAL MEETING MAY REVOKE HIS OR HER PROXY AND
VOTE PERSONALLY ON EACH MATTER BROUGHT BEFORE THE ANNUAL MEETING. HOWEVER, IF
YOU ARE A SHAREHOLDER WHOSE SHARES ARE NOT REGISTERED IN YOUR OWN NAME, YOU WILL
NEED ADDITIONAL DOCUMENTATION FROM YOUR RECORD HOLDER IN ORDER TO VOTE
PERSONALLY AT THE ANNUAL MEETING.
OUR PROXY
STATEMENT, ANNUAL REPORT TO SHAREHOLDERS AND PROXY CARD ARE AVAILABLE ON WWW.PATHFINDERBANK.COM/ANNUALREPORT. IF
YOU NEED DIRECTIONS TO ATTEND THE ANNUAL MEETING AND VOTE IN PERSON, PLEASE CALL
US AT 315-207-8036.
By Order of the Board of
Directors
/s/ Edward A.
Mervine
Edward A. Mervine
Secretary
March 31,
2010
IMPORTANT:
A SELF-ADDRESSED ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE. NO POSTAGE IS
REQUIRED IF MAILED WITHIN THE UNITED STATES.
PROXY
STATEMENT
Pathfinder
Bancorp, Inc.
214
West First Street
Oswego,
New York 13126
(315)
343-0057
ANNUAL
MEETING OF SHAREHOLDERS
April
28, 2010
This
proxy statement is furnished in connection with the solicitation of proxies on
behalf of the Board of Directors of Pathfinder Bancorp, Inc. (or the “Company”)
to be used at our annual meeting of shareholders, which will be held at the
Econolodge, 70 E. First Street, Oswego, New York on April 28, 2010, at 10:00
a.m., Eastern Time, and all adjournments of the annual meeting. The accompanying
notice of annual meeting of shareholders and this proxy statement are first
being mailed to shareholders on or about March 31, 2010.
Shareholders
who sign the proxies we are soliciting will retain the right to revoke them in
the manner described below. Unless so revoked, the shares represented by such
proxies will be voted at the annual meeting and all adjournments thereof.
Proxies solicited on behalf of the Board of Directors will be voted in
accordance with the directions given thereon. Where no instructions are
indicated, validly executed proxies will be voted “for” the proposals set forth
in this proxy statement. If any other matters are properly brought before the
annual meeting, the persons named in the accompanying proxy will vote the shares
as directed by a majority of the Board of Directors in attendance at the annual
meeting. We know of no additional matters that will be presented for
consideration at the annual meeting. If a shareholder who wishes to
bring a matter for shareholder consideration (other than a shareholder proposal)
fails to notify us in writing five days before the annual meeting, the matter
will not be placed on the annual meeting agenda. We are not aware of
any proposals for this year’s annual meeting.
Proxies
may be revoked by sending written notice of revocation to our Secretary, at the
address shown above, by delivering to us a duly executed proxy bearing a later
date or by attending the annual meeting and voting in person. The presence at
the annual meeting of any shareholder who had returned a proxy will not revoke
the proxy unless the shareholder delivers his or her ballot in person at the
annual meeting or delivers a written revocation to our Secretary prior to the
voting of the proxy. If you are a shareholder whose shares are not registered in
your name, you will need appropriate documentation from your record holder to
vote in person at the annual meeting.
VOTING
SECURITIES AND PRINCIPAL HOLDERS
THEREOF
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Holders
of record of our common stock, par value $0.01 per share, as of the close of
business on March 17, 2010, (the “Record Date”), are entitled to one vote for
each share they own. As of the Record Date, we had 2,484,832 shares of common
stock outstanding, of which 1,583,239 shares were held by our mutual holding
company Pathfinder Bancorp, M.H.C., and 901,593 of which were held by
shareholders other than Pathfinder Bancorp, M.H.C. The presence in
person or by proxy of a majority of the outstanding shares of common stock
entitled to vote is necessary to constitute a quorum at the annual meeting. If a
shareholder holds shares in street name (i.e., the shares are held in a stock
brokerage account or by a bank, trust, or other institution) and does not
provide voting instructions to the holder of the account, such shares will be
considered “Broker non-votes.” Broker non-votes and proxies marked abstain will
be counted for purposes of determining that a quorum is present.
As to the
election of directors, shareholders may cast their votes “For,” “Withheld” or
“For All Except” (designating the directors for whom a vote is being withheld).
As to the other proposals described herein, shareholders may cast their votes
“For,” “Against” or “Abstain”. Directors are elected by a plurality of votes
cast, without regard to either broker non-votes, or proxies as to which the
authority to vote for the nominees being proposed is withheld.
The
affirmative vote of (x) a majority of the shares issued and outstanding and
entitled to vote, and (y) a majority of the votes cast at the annual meeting by
stockholders other than by our majority stockholder, Pathfinder Bancorp, MHC is
required for the approval of the 2010 Stock Option Plan. For purposes
of the vote required in clause (x) above, shares as to which the “ABSTAIN” box
has been selected will be treated as votes cast and will have the same effect as
a vote against ratification. For purposes of the vote required in
clause (y) above, shares as to which the “ABSTAIN” box has been selected are not
considered votes cast for or against approval. Broker non-votes are
not considered represented at the annual meeting and are not considered votes
cast for or against approval of the 2010 Stock Option Plan.
In order
to approve the advisory (non-binding) vote on executive compensation, the
proposal must receive at least a majority of the votes cast, without regard to
broker non-votes or proxies as to which shareholders abstain, either in person
or by proxy in favor of such proposal.
The
affirmative vote of holders of a majority of the total votes cast at the annual
meeting in person or by proxy, without regard to broker non-votes or proxies as
to which shareholders abstain, is required for ratification of ParenteBeard LLC
as our independent registered public accounting firm (the
“Auditors”).
Persons
and groups who beneficially own in excess of five percent of the common stock
are required to file certain reports with the Securities and Exchange Commission
(the “SEC”) regarding such ownership. The following table sets forth, as of the
Record Date, the shares of common stock beneficially owned by directors
individually, by executive officers individually, by executive officers and
directors as a group and by each person who was the beneficial owner of more
than five percent of our outstanding shares of common stock. None of
the shares beneficially owned by directors, executive officers or nominees to
the board of directors have been pledged as security or collateral for any
loans.
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Amount
of Shares Owned
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and
Nature of
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Percentage
of Shares of
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Name
and Address of Beneficial Owners (1)
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Beneficial
Ownership
(2)
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Common
Stock Outstanding
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Directors
and Executive Officers
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Janette
Resnick
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3,430
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(4)
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0.14%
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Thomas
W. Schneider
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7,565
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(5)
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0.30%
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Chris
R. Burritt
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4,800
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(6)
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0.19%
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George
P. Joyce
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6,164
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0.25%
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Bruce
E. Manwaring
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12,815
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0.52%
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L.
William Nelson, Jr.
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26,950
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(7)
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1.08%
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Corte
J. Spencer
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14,500
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0.58%
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Steven
W. Thomas
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19,234
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0.77%
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Lloyd
"Buddy" Stemple
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7,939
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0.32%
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James
A. Dowd
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7,868
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0.32%
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Melissa
A. Miller
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3,518
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0.14%
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Edward
A. Mervine
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3,719
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0.15%
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Ronald
Tascarella
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9,000
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0.36%
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All
Directors and Executive Officers as
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127,502
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5.13%
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a
Group (13 persons)
(3)
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Principal
Shareholders:
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Pathfinder
Bancorp, M.H.C.
(3)
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1,583,239
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63.72%
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214
West First Street
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Oswego,
New York 13126
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Pathfinder
Bancorp, M.H.C. and all
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1,710,741
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68.85%
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Directors
and Executive Officers
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1)
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The
mailing address for each person listed is 214 West First Street, Oswego,
New York 13126.
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2)
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A
person is deemed to be the beneficial owner, for purposes of this table,
of any shares of common stock if he has shared voting or investment power
with respect to such security, or has a right to acquire beneficial
ownership at any time within 60 days from the Record Date. As used herein,
“voting power” is the power to vote or direct the voting of shares and
“investment power” is the power to dispose or direct the disposition of
shares. This table includes all shares held directly as well as
by spouses and minor children, in trust and other indirect ownership, over
which shares the named individuals effectively exercise sole or shared
voting and investment power. Unless otherwise indicated, the named
individual has sole voting and investment
power.
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3)
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All
of our directors are also directors of Pathfinder Bancorp, M.H.C. All of
our executive officers are also executive officers of the Pathfinder
Bancorp, M.H.C.
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4)
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Ms.
Resnick has sole voting power over 2,600 shares and shared voting and
investment power over 830 shares.
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5)
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Mr.
Schneider has sole voting and investment power over 7,265 shares and
shared voting and investment power over 300
shares.
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6)
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Mr.
Burritt has sole voting and investment power over 4,650 shares and shared
voting and investment power over 150
shares.
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7)
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Mr.
Nelson has sole voting and investment power over 8,470 shares and shared
voting and investment power over 18,480
shares.
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SMALLER
REPORTING COMPANY
The Company has elected to prepare this
Proxy and other annual and periodic reports as a “Smaller Reporting Company”
consistent with rules of the Securities and Exchange Commission effective
February 4, 2008.
In accordance with our bylaws, and by
action of the Board of Directors, the Chair of the Board will preside over the
annual meeting. The Chair of the Board has broad authority to ensure
the orderly conduct of the meeting. This includes discretion to
recognize shareholders who wish to speak, and the right to determine the extent
of discussion on each item of business. Rules governing the conduct
of the meeting have been established and will be available at the meeting along
with the agenda of the matters to be considered at the annual
meeting.
PROPOSAL
1 - ELECTION OF DIRECTORS
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Our Board
of Directors is composed of nine members. Our bylaws provide for three classes
as nearly equal in number as possible of directors, one class to be elected
annually. Directors are generally elected to serve for a three-year
period and until their respective successors shall have been elected and
qualify. The Board of Directors’ Nominating/Governance Committee has
nominated Steven W. Thomas, Corte J. Spencer and Janette Resnick, each for a
three-year term.
The table
below sets forth certain information regarding the composition of the Board of
Directors, including the terms of office of Board members. It is intended that
the proxies solicited on behalf of the Board of Directors (other than proxies in
which the vote is withheld as to one or more nominees) will be voted at the
annual meeting for the election of the nominees identified below. If the nominee
is unable to serve, the shares represented by all such proxies will be voted for
the election of such substitute as the Board of Directors may recommend. At this
time, the Board of Directors knows of no reason why any of the nominees would be
unable to serve if elected. Except as indicated herein, there are no
arrangements or understandings between any nominee and any other person pursuant
to which such nominee was selected. The Board of Directors unanimously
recommends a vote “FOR” each nominated Director.
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Name
(1)
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Age
(2)
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Position
Held
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Director
Since (3)
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Current
Term to Expire
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Nominees
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Janette
Resnick
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67
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Chair
of the Board
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1996
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2010
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Corte
J. Spencer
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67
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Director
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1984
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2010
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Steven
W. Thomas
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48
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Director
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2000
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2010
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Directors
Continuing in Office
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Chris
R. Burritt
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56
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Director
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1986
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2011
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George
P. Joyce
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59
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Director
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2000
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2011
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Bruce
E. Manwaring
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68
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Director
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1984
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2012
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L.
William Nelson, Jr.
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66
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Director
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1986
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2012
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Thomas
W. Schneider
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48
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President,
Chief Executive Officer
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2001
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2011
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Lloyd
"Buddy" Stemple
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49
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Director
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2005
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2012
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(1)
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The
mailing address for each person listed is 214 West First Street, Oswego,
New York 13126. Each of the persons listed is also a Director
of Pathfinder Bancorp, M.H.C., which owns the majority of our issued and
outstanding shares of common stock.
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(2)
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As
of March 31, 2010.
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(3)
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Dates
prior to 1995 reflect initial appointment to the Board of Trustees of the
mutual predecessor to Pathfinder
Bank.
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The
principal occupation during the past five years of each director and Executive
Officer is set forth below. All Directors and Executive Officers have held their
present positions for five years unless otherwise stated.
JANETTE
RESNICK is the Chair of the Board. She has been retired since
2004. Prior to her retirement, she was the Executive Director of Oswego County
Opportunities (“OCO”), a private, not for profit human services agency with
offices located in Oswego and Fulton, New York. Ms. Resnick has a
Master's Degree from the University of Pittsburgh. She has over
thirty (30) years experience in the human service area and has a keen
understanding of the needs of the Company’s retail customers. She
also has significant personnel and administrative experience, having managed
OCO’s annual operating budget of twenty five million
dollars. The Nominating/Governance Committee and the Board
believe that Ms. Resnick’s significant qualifications and contributions support
her continued service, and recommend that she be re-elected by the
Shareholders.
CHRIS R. BURRITT
is the president and general manager of R.M. Burritt Motors, Inc./Chris
Cross, Inc., an automobile dealership located in Oswego, New York. In
addition to his long term ownership and management of this well known local
business, Mr. Burritt is active in community affairs. He presently
serves as Vice-President of the Board of Directors of Oswego Hospital and also
as Chair of its Finance/Operations Committee. Mr. Burritt’s business
background and his service to the community led to his appointment to the
Board.
BRUCE E.
MANWARING has earned a Bachelor of Science Degree in
Accounting and has successfully passed the Uniform Public Accounting
examination. He retired effective March 1, 2007, as the Chamberlain
(Treasurer) for the City of Oswego. Prior to his appointment as Chamberlain, Mr.
Manwaring was the owner of Oswego Printing Co. located in Oswego, New
York. . Mr. Manwaring’s accounting background and
considerable experience in preparing and analyzing financial statements led to
his appointment as Chair of our Audit Committee.
L. WILLIAM
NELSON, Jr. has owned and operated Nelson Funeral Home located in Oswego,
New York for thirty five (35) years. He also owns and manages
residential rental property. As such, Mr. Nelson understands the
needs of the bank’s significant small business customer
base. He has also been very active with local charitable
organizations. Mr. Nelson’s business background and his service to the community
led to his appointment to the Board.
STEVEN W. THOMAS
is a licensed real estate broker and a developer. Mr. Thomas is involved
in numerous commercial development projects in Oswego County. Mr.
Thomas is also a member of Surelock Industries, LLC, a local wood floor
manufacturer. He has had extensive experience owning and managing
small businesses, including five Dunkin Donut franchises and two hotels.
.. The Nominating/Governance Committee and the Board believe
that Mr. Thomas’s significant qualifications and contributions support his
continued service, and recommend that he be re-elected by the
Shareholders.
GEORGE P.
JOYCE is the owner and operator of Laser Transit, Ltd.,
Lacona, New York, a Central New York logistics services provider. Mr. Joyce has
earned a Bachelor Degree in Economics from SUNY Oswego. He has been a
Controller for a transportation and warehousing firm, as well as a manager in an
IT consulting firm. He is also presently President of Intelliflex,
LLC a 3rd
party logistics firm performing freight forwarding and outsourced logistics
services for its customers. He has served as President and Chair of
the Board of Trustees for Oswego Hospital, Chair of the Board of Operation
Oswego County, Vice President of Seneca Hill Manor, Director of the Oswego
College Foundation and numerous other community organizations. Mr.
Joyce’s business experience and dedicated service to the community led to his
appointment to serve as a member of the Board.
CORTE J. SPENCER
retired effective January 1, 2007 as the Chief Executive Officer and
Administrator of Oswego Hospital and the managing director of Oswego Health,
Inc. located in Oswego, New York. Mr. Spencer has a Masters Degree
from the Cornell University School of Public and Business
Administration. He has extensive experience managing a relatively
large and complex organization including, among other things, supervising the
relationships with internal and external auditors. The
Nominating/Governance Committee and the Board believe that Mr. Spencer’s
significant qualifications and contributions require his continued support, and
recommend that he be re-elected by the Shareholders.
LLOYD “BUDDY”
STEMPLE, until he recently retired, was the Vice-President and
General Manager of Novelis Specialty Products, Novelis Inc. which has
manufacturing locations in Oswego, New York, Kingston, Ontario Canada and sales
offices in Cleveland, Ohio and Detroit, Michigan. Mr. Stemple has an
Engineering Degree and an MBA. His experience as manager of Novelis,
a billion dollar publicly traded company provides a unique perspective to our
Board of Directors and Audit Committee.
All of
the above Directors are members of the Board of Directors of Pathfinder Bancorp,
MHC, the owner of a majority of the shares of the Company, as well as the Board
of Pathfinder Bank, the Company’s wholly owned subsidiary, and Pathfinder
Commercial Bank, Pathfinder REIT and Whispering Oaks, all subsidiaries of
Pathfinder Bank.
EXECUTIVE
OFFICERS OF THE COMPANY WHO ARE DIRECTORS
THOMAS W.
SCHNEIDER is the President and Chief Executive Officer (“CEO”) of
Pathfinder Bancorp, Inc. and Pathfinder Bank. Prior to his appointment as
President in 2000, Mr. Schneider was the Executive Vice President and Chief
Financial Officer of Pathfinder Bancorp, Inc. and Pathfinder Bank. Mr. Schneider
is a member of the Board of Directors of Pathfinder Bancorp, MHC, the owner of a
majority of the shares of the Company, as well as the Board of Pathfinder Bank,
the Company’s wholly owned subsidiary, and Pathfinder Commercial Bank,
Pathfinder REIT and Whispering Oaks, all subsidiaries of Pathfinder
Bank.
INDEPENDENCE
AND DIVERSITY OF DIRECTORS
Our
common stock is listed on the Nasdaq Capital Market. The Board of Directors has
considered the Nasdaq listing requirements for “independence” of directors, and
although we may be exempt as a “controlled” Company pursuant to Nasdaq rules,
the Board of Directors has determined that all of its directors with the
exception of Mr. Schneider are “independent” pursuant to Nasdaq’s listing
requirements. Our independent directors will hold executive sessions no less
than twice a year. Shareholders who wish to communicate with the Chair or with
the independent directors as a group may do so by writing to our Corporate
Secretary at Pathfinder Bancorp, Inc., 214 West First Street, Oswego, New York
13126. The Corporate Secretary will forward said communication to the
independent directors or Chair as requested by the shareholder.
Pathfinder
Bank conducts its business primarily in Oswego and Onondaga counties and the
immediately contiguous counties in Upstate New York. Our Board
members are not, therefore, geographically diverse. Although the Nominating
Committee does not have a formal policy with regard to the consideration of
diversity in identifying a director nominee, the Nominating Committee has
strived to seek diversity of experience and opinion in its board
membership. Therefore, we have Board members representing both the
active and retired, the private sector and the public sector, male and female,
large and small employers, manufacturing and service industries. As
Board members retire, the Nominating Committee will continue to strive to
broaden our diversity.
TRANSACTIONS
WITH CERTAIN RELATED PERSONS
There
were no transactions or series of transactions since the beginning of the
Company’s last fiscal year or any currently proposed transaction where the
Company was or is a participant and the amount involved exceeds $120,000, and in
which any related person had or will have a direct or indirect material
interest.
The
Sarbanes-Oxley Act of 2002 generally prohibits an issuer from (i) extending or
maintaining credit; (ii) arranging for the extension of credit; or (iii)
renewing an extension of credit in the form of a personal loan for an officer or
director. There are several exceptions to this general prohibition, however, one
of which is applicable to us. This prohibition does not apply to loans made by a
depository institution that is insured by the FDIC and is subject to the insider
lending restrictions of the Federal Reserve Act. Pathfinder Bank has
made loans to each of the following Officers and/or Directors or their immediate
families: Steven W. Thomas, James Dowd, Bruce Manwaring, Chris Burritt, Melissa
Miller, George Joyce, L. William Nelson, Edward A Mervine, Thomas Schneider,
Corte Spencer and Lloyd Stemple. Each of these loans: were made in
the ordinary course of business; were made on substantially the same terms,
including interest rates and collateral, as those prevailing at the time for
comparable loans with persons not related to the Company; and did not involve
more than normal risk of collectability or present other unfavorable
features.
All
transactions between us and our executive officers, directors, holders of 10% or
more of the shares of the Company’s common stock and affiliates thereof, must be
approved by a majority of our independent outside directors of ours not having
any interest in the transaction, pursuant to our Code of Ethics.
EXECUTIVE
OFFICERS WHO ARE NOT DIRECTORS
JAMES A.
DOWD, CPA, age
42, has been employed by Pathfinder Bank since 1994 and is Senior Vice President
and Chief Financial Officer of Pathfinder Bancorp, Inc. and Pathfinder Bank. Mr.
Dowd is responsible for the accounting and finance departments.
MELISSA A.
MILLER, age 52, has been employed by Pathfinder Bank since 1976 and is
Senior Vice President and Chief Operating Officer of Pathfinder Bancorp, Inc.
and Pathfinder Bank. Ms. Miller is responsible for deposit operations, branch
administration and information services.
EDWARD A.
MERVINE, ESQ., age
53, is Senior Vice President, General Counsel and Corporate Secretary for
Pathfinder Bancorp, Inc. and Pathfinder Bank. Prior to joining us in 2002, Mr.
Mervine was a partner in the law firm of Bond Schoeneck & King,
LLC. Mr. Mervine is responsible for human resources, loss mitigation,
security and legal and regulatory compliance.
RONALD
TASCARELLA, age 51, is Senior Vice President and Chief Credit
Officer. Mr. Tascarella joined the Company in 2006. Prior
to joining, he was Senior Vice President of Oswego County National Bank, one of
the Company’s primary competitors. Mr. Tascarella is responsible for
Pathfinder Bank’s lending operations.
OWNERSHIP
REPORTS BY OFFICERS AND DIRECTORS
Our
common stock is registered with the SEC pursuant to Section 12(b) of the
Securities Exchange Act of 1934 (the “Exchange Act”). Our officers and directors
and beneficial owners of greater than 10% of our common stock (“10% beneficial
owners”) are required to file reports on Forms 3, 4 and 5 with the SEC
disclosing beneficial ownership and changes in beneficial ownership of the
common stock. SEC rules require disclosure in our Proxy Statement and Annual
Report on Form 10-K of the failure of an officer, director or 10% beneficial
owner of our common stock to file a Form 3, 4, or 5 on a timely basis. All of
our officers and directors filed these reports in a timely fashion.
LEADERSHIP
STRUCTURE AND RISK OVERSIGHT ROLE OF BOARD OF DIRECTORS
Our Board has a separate Chief
Executive Officer and Chair of the Board and has functioned with that separation
since the year 2000. Ms. Resnick, our Chair, is an independent
Director as defined by Nasdaq’s listing requirements. The Company has spent
significant time evaluating its leadership structure and has determined, under
the present circumstances, that separating the Chair and CEO positions is
appropriate. We believe this separation allows our CEO the time to
concentrate on executing policy and strategy and the Board to concentrate on
developing same.
As is more fully described in Item 1A
of our 10K, incorporated herein by reference, the primary risks facing the Bank,
as the operating subsidiary of Pathfinder Bancorp, Inc., are interest rate risk,
liquidity risk, investment risk, credit risk, risks associated with inadequate
allowance for loan losses, competitive risks and regulatory
risks. While the full Board is actively engaged in monitoring all
said risks, we have further assigned specific responsibilities to Board
Committees for detailed review. The Asset/Liability Committee, with
the assistance of professional consultants, constantly monitors interest rate
risk, investment risk and liquidity risk. The
Executive/Loan Committee monitors the credit risks and risks associated with
allowance for loan losses. The Audit/Compliance Committee monitors
regulatory risks. Finally, the Planning Committee monitors
competitive risks. Every member of our Board engages in continuing education in
an effort to stay abreast of risk management development issues so that they can
effectively engage in their oversight role.
MEETINGS
AND COMMITTEES OF THE BOARD OF DIRECTORS
The
business of the Board of Directors is conducted through meetings and activities
of the Board and its committees. During the year ended December 31, 2009, the
Board of Directors held twelve regular and two special meetings. During the year
ended December 31, 2009, no director attended fewer than 75% percent of the
total meetings of the Board of Directors and committees on which such director
served.
Compensation
Committee
The
Compensation Committee meets periodically to review the performance of officers
and employees and to determine compensation programs and adjustments. The entire
Board of Directors ratifies the recommendations of the Compensation Committee.
In the year ended December 31, 2009, the members of the Compensation Committee
were Directors Manwaring, Resnick, Spencer, Burritt and Nelson. All of these
directors are “independent” pursuant to Nasdaq listing requirements. The
Compensation Committee met four times during the year ended December 31,
2009. The Compensation Committee has a charter which is available at
our website at www.pathfinderbank.com.
The
Committee annually reviews the performance of the CEO and other executive
officers and recommends to the Board of Directors changes to base compensation,
as well as the amount of any bonus to be awarded. In
determining whether the base salary of an officer
should be increased, the Committee and the Board of Directors take into account
individual performance, performance of the Company and information regarding
compensation
paid to executives of peer group
institutions performing
similar duties in the Bank’s market area.
While the
Committee and the Board of Directors do not use strict numerical formulas to
determine changes in compensation for the CEO and Senior
Vice Presidents, and while they
weigh a variety of different factors in their deliberations, they have
emphasized, and will continue to emphasize, earnings, profitability, earnings
contribution to capital, capital strength, asset quality, and return on equity
as factors in setting the compensation of the CEO and Senior Vice
Presidents. Non-quantitative factors considered by the
Committee and the Board of Directors in 2009, included general management
oversight of the Company, the quality of communication with the Board of
Directors, and the productivity of employees and execution of the Bank’s
Strategic Plan. Finally, the Committee and the Board of Directors considered the
standing of the Company with customers and the community, as evidenced by
customer and community complaints, compliments and a customer survey completed
in 2009. While the Committee and the
Board of Directors
considered each of the quantitative and non-quantitative
factors described
above, such factors were not assigned a specific
weight in evaluating the
performance of the CEO and Senior
Vice Presidents.
The CEO
recommends to the Compensation Committee, compensation arrangements for the
Senior Vice Presidents. He does not recommend compensation
arrangements for himself or Board members.
Neither
the Compensation Committee, nor management, retained the services of
compensation consultants in 2009. During 2008, however, the
Compensation Committee retained the services of Amalfi Consulting, LLC to assist
the Committee in carrying out its obligations. For more
information regarding the scope of services of that assignment, see the 2009
Notice of Annual Meeting and Proxy.
Salary
increases for the Bank’s Named Executive Officers, including Mr. Schneider, for
2008 and 2009 are reflected in the Summary
Compensation Table. The following table shows the compensation
of Thomas W. Schneider, our principal executive officer, and the two most highly
compensated other executive officers (“Named Executive Officers”) that received
total compensation of $100,000 or more during the past fiscal year for services
to Pathfinder Bancorp, Inc. or any of its subsidiaries during the years ended
December 31, 2009 and 2008, respectively.
Summary
Compensation Table
|
|
|
|
|
Non-Qualified
|
|
|
|
|
|
|
Deferred
|
|
|
|
|
|
|
compensation
|
All
other
|
|
Name
and
|
|
Salary
|
Bonus
|
earnings
|
compensation
|
Total
|
Principal
Position
|
Year
|
($)
|
($)
(1)
|
($)
(2)
|
($)
(3)
|
($)
|
|
|
|
|
|
|
|
Thomas
W. Schneider,
|
2009
|
230,000
|
-
|
25,214
|
23,722
|
278,936
|
President
and Chief
|
2008
|
220,000
|
17,900
|
25,592
|
29,030
|
292,522
|
Executive
Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Edward
A. Mervine,
|
2009
|
142,000
|
-
|
-
|
7,075
|
149,075
|
Senior
Vice President,
|
2008
|
137,000
|
8,700
|
-
|
7,213
|
152,913
|
General
Counsel AND
|
|
|
|
|
|
|
Secretary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ronald
Tascarella
|
2009
|
115,000
|
-
|
-
|
5,876
|
120,876
|
Senior
Vice President
|
2008
|
111,000
|
9,800
|
-
|
5,847
|
126,647
|
and
Chief Credit Officer
|
|
|
|
|
|
|
(1)
|
Current
year performance-based bonus awards have not been determined, but are
expected to be determined prior to the annual meeting. When they are
determined, a Form 8-K will be filed. Prior year amounts represent annual
bonus awarded based on individual performance, paid in the first quarter
of 2009.
|
(2)
|
The
following table represents the non-qualified deferred compensation
earnings represents the above market or preferential earnings on
compensation that was deferred to the Second Executive Supplemental
Retirement Income Agreement and the Executive Deferred Compensation Plan
for each Named Executive/Officer.
|
|
|
|
Deferred
|
|
|
Supplemental
|
|
|
|
|
|
|
|
Compensation
|
|
|
Executive
Retirement
|
|
|
|
|
Named
Executive
|
Year
|
|
Earnings
|
|
|
Earnings
|
|
|
Total
|
|
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
|
|
|
|
|
|
|
|
|
|
Thomas
W. Schneider
|
2009
|
|
|
728 |
|
|
|
24,486 |
|
|
|
25,214 |
|
|
2008
|
|
|
1,438 |
|
|
|
24,154 |
|
|
|
25,592 |
|
Edward
A. Mervine
|
2009
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
2008
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Ronald
Tascarella
|
2009
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
2008
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
(3)
|
All
other compensation represents the following for each Named Executive
Officer.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee
Savings Plan
|
|
|
Automobile
Expense
|
|
|
Country
Club
|
|
|
Life
Insurance
|
|
|
|
|
Named
Executive
|
Year
|
|
Company
Contribution
|
|
|
Reimbursement
|
|
|
Dues
|
|
|
Premium
|
|
|
Total
|
|
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thomas
W. Schneider
|
2009
|
|
|
6,902 |
|
|
|
13,888 |
|
|
|
2,608 |
|
|
|
324 |
|
|
|
23,722 |
|
|
2008
|
|
|
6,837 |
|
|
|
19,288 |
|
|
|
2,560 |
|
|
|
345 |
|
|
|
29,030 |
|
Edward
A. Mervine
|
2009
|
|
|
6,779 |
|
|
|
- |
|
|
|
- |
|
|
|
296 |
|
|
|
7,075 |
|
|
2008
|
|
|
6,912 |
|
|
|
- |
|
|
|
- |
|
|
|
301 |
|
|
|
7,213 |
|
Ronald
Tascarella
|
2009
|
|
|
5,636 |
|
|
|
- |
|
|
|
- |
|
|
|
240 |
|
|
|
5,876 |
|
|
2008
|
|
|
5,604 |
|
|
|
- |
|
|
|
- |
|
|
|
243 |
|
|
|
5,847 |
|
Employment
Agreements. The Company and
its operating subsidiary, Pathfinder Bank (or “the
Bank”) entered into employment agreements with Thomas W. Schneider and Edward A
Mervine. The agreements have an initial term of three
years. Unless notice of non-renewal is provided, the agreements renew
annually. The agreements provide for the payment of a base salary,
which will be reviewed at least annually, and which may be
increased. Under the agreements, the 2009 base salaries for Messrs.
Schneider and Mervine were $230,000 and $142,000, respectively. In
addition to the base salary, each agreement provides for, among other things,
participation in employee and welfare benefit plans and incentive compensation
and bonus plans applicable to senior executive employees, and reimbursement of
business expenses.
The
executives are entitled to severance payments and benefits in the event of
termination of employment under specified circumstances. In the event
their employment is terminated for reasons other than for cause, disability or
retirement, or in the event they resign during the term of the agreement
following:
|
(1)
|
the
failure to elect or reelect or to appoint or reappoint the executive to
his executive position;
|
|
|
|
|
(2)
|
a
material change in the executives’ functions, duties, or responsibilities,
which change would cause the executives’ position to become one of lesser
responsibility, importance or scope;
|
|
|
|
|
(3)
|
the
liquidation or dissolution of Pathfinder Bancorp, Inc. or Pathfinder Bank,
other than liquidations or dissolutions that are caused by reorganizations
that do not affect the status of the executives;
|
|
(4)
|
a
relocation of the executives’ principal place of employment by more than
30 miles from its location as of the date of the
agreements;
|
|
|
|
|
(5)
|
a
material breach of the agreements by Pathfinder Bancorp, Inc. or
Pathfinder Bank; or
|
|
|
|
|
(6)
|
solely
with respect to Mr. Schneider, a failure of to be nominated,
elected or re-elected to the Board,
|
|
|
|
the
executives will be entitled to a severance payment equal to three times the sum
of the their base salary and the highest rate of bonus awarded to them during
the prior three years, payable as a single cash lump sum distribution within 30
days following their date of termination. In addition, Pathfinder
Bancorp, Inc. or Pathfinder Bank will continue to provide the executives with
continued life insurance and non-taxable medical and dental coverage for 36
months.
If the executives voluntarily resign
(without the occurrence of the specified circumstances listed above) from their
employment with Pathfinder Bancorp, Inc. and Pathfinder Bank, the Board will
have the discretion to provide severance pay to the executives, provided,
however, that such amount does not exceed three times the average of the
executives’ three preceding years’ base salary, including bonuses, any other
cash compensation paid to the executives during such years, and the amount of
contributions made on behalf of the executives to any employee benefit plans
maintained by Pathfinder Bancorp, Inc. or Pathfinder Bank during such
years.
Upon the
occurrence of a change in control of Pathfinder Bancorp, Inc. or
Pathfinder Bank followed by the executives’ termination of employment for any
reason, other than for cause, they will be entitled to receive a single cash
lump distribution equal to 2.99 times their average base salary over the
previous five years, including bonuses, any other cash compensation paid to them
during such years, and the amount of contributions made on behalf of the
executives to any employee benefit plans maintained by Pathfinder Bancorp, Inc.
or Pathfinder Bank during such years. In addition, Pathfinder
Bancorp, Inc. or Pathfinder Bank will continue to provide the executives with
continued life insurance and non-taxable medical and dental coverage for 36
months. In the event payments made to the executives include an
“excess parachute payment,” as defined in Section 280G of the Internal Revenue
Code, the payments will be cutback by the minimum dollar amount necessary to
avoid this result.
Should
the executives become disabled, they would be entitled to receive their base
salary for one year, where the payment of base salary will commence within 30
days from the date the executives are determined to be disabled, and will be
payable in equal monthly installments.
Upon the
executives’ voluntary resignation from employment (without the occurrence of the
specified circumstances listed above) the executives agree not to compete with
Pathfinder Bancorp, Inc. or Pathfinder Bank for one year following their
resignation.
As a
result of Pathfinder Bancorp, Inc.’s participation in the United States
Department of the Treasury’s Capital Purchase Program (CPP) of the Troubled
Assets Relief Program (TARP), Mr. Schneider and Mr. Mervine are required to
forego any severance payments that are triggered under their employment
agreements while Pathfinder Bancorp, Inc. is participating in the
CPP. Mr. Schneider and Mr. Mervine signed waivers of their potential
severance payments on September 2, 2009 and September 3, 2009,
respectively.
Upon the
executives’ voluntary resignation from employment, the executives agree not to
compete with Pathfinder Bancorp, Inc. or Pathfinder Bank for one year following
their resignation.
Change of Control
Agreement. The Company and Pathfinder Bank have entered
into a Change of Control Agreement with Ronald Tascarella which provides certain
benefits to Mr. Tascarella should he be “dismissed” from employment within a
twelve month period following a change of control of the Company or the
Bank. Although “dismissal” does not include a termination for cause
or voluntary termination, it does include a voluntary resignation as a result
of:
·
|
a
material change in the executive’s functional duties or responsibilities
which would cause the executive’s position to become one of lesser
responsibility, importance of
scope.
|
·
|
A
relocation of the executive’s principal place of employment by more than
30 miles from its location as of the date of the
agreement.
|
·
|
A
material reduction in the benefits to the executive as of the date of the
agreement.
|
In the
event of such dismissal, the executive, or his beneficiary should he die
subsequent to the dismissal, is entitled to a lump sum payment equal to his most
recent annual base salary plus bonuses and any other cash compensation paid to
the executive within the most recent twelve (12) month period. The
executive is also entitled to continued life, medical and dental coverage for a
period of twelve months subsequent to the dismissal, and will become fully
vested in any stock option plans, deferred compensation plans, or restricted
stock plans in which he participates.
As a
result of Pathfinder Bancorp, Inc.’s participation in the CPP, Mr. Tascarella is
required to forego any change in control payments that are triggered under his
change in control agreement while Pathfinder Bancorp, Inc. is participating in
the CPP. Mr. Tascarella executed a waiver of such potential change of
control benefits on September 3, 2009, in connection with the Company’s
participation in the CPP.
Second
Supplemental Retirement Income Agreement. Pathfinder Bank
maintains an individual Second Supplemental Retirement Income Agreement with Mr.
Schneider. Pathfinder Bank satisfies its obligations under the
agreement by making annual contributions to a trust established by Mr.
Schneider. Such benefits are immediately taxable benefits to Mr.
Schneider. If Mr. Schneider exercises his withdrawal rights with
respect to contributions made to the trust, Pathfinder Bank will continue to
accrue “phantom contributions” to an accrued benefit account but will make no
further contributions to the trust on Mr. Schneider’s behalf. The
“phantom contributions” are not immediately taxable to Mr. Schneider and are
considered deferred compensation under the Internal Revenue Code.
Upon
attainment of age 65, Mr. Schneider will be entitled to receive his supplemental
retirement income benefit under the agreement, measured as of the date Mr.
Schneider attains age 65. This benefit may be payable in a lump
sum or in monthly installments over a 15-year period. If Mr.
Schneider does not exercise his withdrawal rights, he can elect the form of
payment of his benefit from his trust at any time. If Mr. Schneider
exercises his withdrawal rights, he was required to elect the form of payment of
his accrued benefit account on or before December 31, 2008. In
the event Mr. Schneider dies after attaining age 65 but prior to the
commencement or completion of all monthly payments due, Pathfinder Bank will pay
Mr. Schneider’s beneficiary the remaining payments that were due to Mr.
Schneider. The actual amount of Mr. Schneider’s supplemental
retirement income benefit will be a function of (i) the amount and timing of
contributions (or phantom contributions) to the trust (or an accrued benefit
account) and (ii) the actual investment experience of the contributions (or the
monthly compounding rate of phantom contributions).
If Mr.
Schneider does not exercise his withdrawal rights and is involuntarily
terminated for any reason, including a termination due to disability, voluntary
resignation for “good reason,” but excluding termination for cause, Pathfinder
Bank will be required to make an immediate lump sum contribution to Mr.
Schneider’s trust in an amount equal to the (i) full contribution required for
the plan year in which the involuntary termination occurs, if not yet made, plus
(ii) the present value of all remaining contributions that are required to be
made by Pathfinder Bank to Mr. Schneider’s trust, provided, however, that, if
necessary, an additional amount will be contributed to the trust in an amount
equal to the after-tax benefits Mr. Schneider would have received if
no trust had been implemented and the benefit obligation had been accrued under
applicable accounting guidance until Mr. Schneider reached age 65. If
Mr. Schneider previously exercised his withdrawal rights, Pathfinder Bank will
be required to record a final phantom contribution in his accrued benefit
account equal to (i) the full phantom contribution required for the plan year in
which such involuntary termination occurs, if not yet made, plus (ii) the
present value of all remaining phantom contributions that are required to be
accrued by Pathfinder Bank.
As a
result of Pathfinder Bancorp, Inc.’s participation in the CPP, Mr. Schneider is
not entitled to receive an employer contribution under the plan while Pathfinder
Bancorp, Inc. is participating in the CPP. Furthermore, in the event
that any unvested benefits under the plan are triggered as a result of Mr.
Schneider’s termination (other than due to death or disability) or a change in
control that occurs while Pathfinder Bancorp, Inc. is participating in the CPP,
such unvested benefits will be forfeited by Mr. Schneider.
Executive
Deferred Compensation Plan. Pathfinder Bank maintains an
Executive Deferred Compensation Plan for a select group of management
employees. A participant in the plan is eligible to defer, on a
monthly basis, a percentage of compensation received from Pathfinder Bank, up to
$750. The participant’s deferred compensation will be held by
Pathfinder Bank in a grantor trust subject to the claims of Pathfinder Bank’s
creditors in the event of Pathfinder Bank’s insolvency.
Upon the
earlier of the date on which the participant terminates employment with
Pathfinder Bank or attains his or her benefit age (as designated by the
participant upon joining the plan), the participant will be entitled to his or
her deferred compensation benefit, which will commence on the date the
participant attains his or her elected benefit age and will be payable in
monthly installments for 10 years. In the event of a change in
control of Pathfinder Bancorp, Inc. or Pathfinder Bank followed by the
participant’s termination of employment within 36 months thereafter, the
participant will receive a deferred compensation benefit calculated as if the
participant had made elective deferrals through his or her benefit
age. Such benefit will commence on the date the participant attains
his or her benefit age and will be payable in monthly installments for 10
years. If the participant dies after commencement of payment of the
deferred compensation benefit, Pathfinder Bank will pay the participant’s
beneficiary the remaining payments that were due. If the participant
dies after commencement of payment of the deferred compensation benefits,
Pathfinder Bank will pay the participant’s beneficiary the remaining payments
that were due.
In the
event the participant becomes disabled, the participant will be entitled to
receive the deferred compensation benefit as of the participant’s date of
disability. Such benefit will commence within 30 days following the
date on which the participant is disabled and will be payable in monthly
installments for 10 years. If the participant dies prior to the
commencement of payment of the deferred compensation benefit, the participant’s
beneficiary will be entitled to receive a survivor benefit.
As a
result of Pathfinder Bancorp, Inc.’s participation in the CPP, in the event that
any unvested benefits under the plan are triggered as a result of a
participant’s termination (other than due to death or disability) or a change in
control that occurs while Pathfinder Bancorp, Inc. is participating in the CPP,
such unvested benefits will be forfeited by the participant, provided that the
participant is considered a “senior executive officer” or any of the next five
“most highly compensated employees” in accordance with TARP executive
compensation restrictions issued under the CPP. In addition, Mr.
Schneider, as the most highly compensated employee of Pathfinder Bancorp, Inc.,
will be restricted in the amount of earnings received on his deferred
compensation under the plan during the period in which Pathfinder Bancorp, Inc.
is participating in the CPP.
Benefits
Medical And Life
Insurance And Educational Assistance. The Company
provides full-time employees with medical, life and accidental death and
dismemberment insurance. In addition, the Company maintains a
“cafeteria plan” for employees, which permits qualifying employees to allocate a
portion of their compensation, on a pre-tax basis, for the payment of
medical, dental and dependent care expenses as well as the payment of certain
insurance premiums. The Company also offers educational assistance to full-time
employees who have worked for the Company for at least one year and who desire
to take courses at any accredited school of learning. The Company
also provides long-term disability income insurance for all employees equal to
the lesser of $6,000 per month or 60% of the employee’s basic monthly
earnings.
Defined Benefit
Plan. Pathfinder Bank maintains a tax-qualified noncontributory defined
benefit plan (“Retirement Plan”). All salaried employees age 21 or older who
have worked for the Bank for at least one year and have been credited with 1,000
or more hours of employment with the Bank during the year are eligible to accrue
benefits under the Retirement Plan. The Bank contributes annually to the
Retirement Plan an amount necessary to satisfy the actuarially determined
minimum funding requirements in accordance with the Employee
Retirement Income Security Act of 1974 (“ERISA”).
At the
normal retirement age of 65, the Retirement Plan is designed to provide a life
annuity. The retirement benefit provided is equal to 1.5% of a
participant’s average monthly compensation for periods after May 1, 2004, and
2.0% of the participant’s average monthly compensation for credited service
prior to May 1, 2004 based on the average of the three consecutive years during
the last 10 years of employment which provides the highest monthly average
compensation multiplied by the participant’s years of credited service (not to
exceed 30 years) to the normal retirement date. Retirement benefits
also are payable upon retirement due to early and late
retirement. Benefits also are paid from the Retirement Plan upon a
Participant’s disability or death. A reduced benefit is payable upon early
retirement at or after age 60, or the completion of 30 years of service with the
Bank. Upon termination of employment other than as specified above, a
participant who was employed by the Bank for a minimum of five years is eligible
to receive his or her accrued benefit reduced or early retirement or a deferred
retirement benefit commencing on such participant’s normal retirement
date. Benefits are payable in various annuity forms. On
December 31, 2009, the market value of the Retirement Plan trust fund was
approximately $6,252,000. For the plan year ended September 30, 2009,
the Company made a contribution of $2,000,000 to the Retirement
Plan.
Employee Savings
Plan. The Bank maintains an Employee Savings Plan which is a
qualified, tax-exempt profit sharing plan with a cash or deferred feature that
is tax-qualified under Section 401(k) of the Internal Revenue Code (the “401(k)
Plan”). All employees who have attained age 21 and have completed 90
days of employment during which they worked at least 1,000 hours are eligible to
participate.
Participants
may elect to defer a percentage of their compensation each year instead of
receiving that amount in cash, in an amount up to 75% of their compensation to
the 401(k) Plan, provided that the amount deferred does not exceed $16,500 for
2009. In addition, for participants who are age 50 or older by the
end of any taxable year, the participant may elect to defer additional amounts
(called “catch-up contributions”) to the 401(k) Plan. The “catch-up
contributions” may be made regardless of any other limitations on the amount
that a participant may defer to the 401(k) Plan. The maximum
“catch-up contribution” that a participant can make in 2009 was
$5,500. For these purposes, “compensation” includes
total compensation (including salary reduction contributions
made under the 401(k) Plan or the flexible
benefits plan sponsored by the Bank), but does not include
compensation in excess of $245,000 for 2009. The Company, in its discretion,
may match participants’ salary reduction contributions based upon
Bank profits for the current fiscal
year. All employee contributions and earnings thereon are fully and immediately
vested. All employer matching contributions vest at the rate of 20% per year
beginning at the end of a participant’s second year of service with the Bank
until a participant is 100% vested after six years of service. Participants also
will vest in employer matching contributions when they reach the normal
retirement age of 65 or later, or upon death or
disability regardless of years of service.
Plan
benefits will be paid to each participant in a lump sum. At December 31, 2009,
the market value of the 401(k) Plan trust fund was approximately
$4,081,000. For the plan year ended December 31, 2009, the Bank
made a contribution in the amount of $188,000 to the 401(k)
Plan.
Employee Stock
Ownership Plan. Pathfinder Bank maintains an Employee Stock
Ownership Plan (“ESOP”). Employees who are at least 21 years old with
at least one year of employment with Pathfinder Bank are eligible to
participate. The ESOP had borrowed funds from Pathfinder Bancorp, Inc. and used
those funds to purchase shares of common stock for the
plan. Collateral for the loan was the common stock purchased by the
ESOP. The loan was fully repaid in 2005. The common stock
that was purchased with the loan was held in a suspense account and was
allocated to participants’ accounts in the ESOP as the loan was repaid. Since
the loan to the plan has been fully repaid, all common stock held in the
suspense account has been fully allocated. The Company has made an application
to its federal regulator, the Office of Thrift Supervision, to utilize shares it
holds in treasury to sell or to fund the ESOP so that shares can be allocated to
employees once again. Should the approval be obtained, the Board will
then decide whether to sell or fund and any such decision will be communicated
to shareholders by a timely Form 8-K filing.
Benefits
under the plan will become vested for an employee at the rate of 20% per year,
starting upon an employee’s completion of one year of credited service, and will
be fully vested upon completion of five years of credited
service. Participants’ interest in their account under the ESOP will
also fully vest in the event of termination of service due to their normal
retirement, death, disability, or upon a change in control (as defined in the
plan). Vested benefits will be payable generally upon the
participants’ termination of employment with Pathfinder Bank, and will be paid
in the form of common stock, or to the extent participants’ accounts contain
cash, benefits will be paid in cash. However, participants have the
right to elect to receive their benefits entirely in the form of cash or common
stock, or a combination of both.
Stock Option
Plan. The
Pathfinder Bancorp, Inc. 1997 Stock Option Plan (the “Stock Option Plan”)
authorizes the grant of stock options and limited rights to purchase 132,249
shares of Common Stock. The Stock Option Plan authorizes grants
of (i) options intended to qualify as
“incentive stock options,” (ii) options
that do not qualify as incentive
stock options (“non-statutory options”) and
(iii) limited rights (described below) that are
exercisable only upon a change in control of Pathfinder
Bancorp, Inc. (as defined). Non-employee directors are eligible to receive only
non-statutory options. No options were granted during the past year
as the options have been fully allocated. . In addition,
we are seeking shareholder approval to accept the 2010 Stock Option Plan, which
will authorize the issuance of up to 150,000 shares of common stock pursuant to
grants of stock option awards to our employees and outside directors, provided
the plan is approved by the Office of Thrift Supervision or the Office of Thrift
Supervision provides it non-objection to the plan.
During
the year, neither Mr. Schneider nor any of the Named Executive Officers acquired
any stock through the exercise of options. As of December 31, 2009, no
in-the-money unexercised options were held by Mr. Schneider.
The Board
of Directors may amend, suspend or terminate the Stock Option Plan except that
such amendments may not impair awards previously granted. Shareholders of
Pathfinder Bancorp, Inc. must approve any amendment to the Stock Option Plan
that would increase the number of options, decrease an option
exercise price, extend the term of the Stock Option Plan or any option, or
change the persons or
category of persons eligible to be
granted options. The exercise of options will have a dilutive effect
on the ownership interests of existing shareholders. Further, the exercise of
options may render more difficult or discourage a merger, tender offer or other
takeover attempt even if such transaction or event would be beneficial to
shareholders generally, the assumption of control by a holder of a large block
of Pathfinder Bancorp, Inc.’s securities, a proxy contest or the removal of
incumbent management. Outstanding
Equity Awards at Year-End. There are no outstanding stock
option or restricted awards as of December 31, 2009 for the Named Executive
Officers.
Nominating/Governance
Committee
The
Nominating/Governance Committee met four times in the year ended December 31,
2009 to address issues concerning corporate governance, succession planning, and
to nominate directors to fulfill the terms of the upcoming year. In the year
ended December 31, 2009, the Nominating/Governance Committee was comprised of
directors Manwaring, Joyce, Thomas and Resnick, all of whom are “independent”
pursuant to the Nasdaq listing requirements. The Nominating/Governance Committee
has a charter in the form of governance guidelines which is available at our
website at www.pathfinderbank.com.
Among
other things, the functions of the Nominating/Governance Committee include the
following:
·
|
to
lead the search for individuals qualified to become members of the Board
and to select director nominees to be presented for shareholder
approval;
|
·
|
to
review and monitor compliance with the requirements for board
independence; and
|
·
|
to
review the committee structure and make recommendations to the Board
regarding committee membership.
|
The
Nominating/Governance Committee identifies nominees by first evaluating the
current members of the Board of Directors willing to continue in service.
Current members of the Board with skills and experience that are relevant to our
business and who are willing to continue in service are first considered for
re-nomination, balancing the value of continuity of service by existing members
of the Board with that of obtaining a new perspective. If any member of the
Board does not wish to continue in service, or if the Nominating/Governance
Committee or the Board decides not to re-nominate a member for re-election, or
if the size of the Board is increased, the Nominating/Governance Committee would
solicit suggestions for director candidates from all Board members. In addition,
the Nominating/Governance Committee is authorized by its charter to engage a
third party to assist in the identification of director nominees. The
Nominating/Governance Committee would seek to identify a candidate who, at a
minimum, satisfies the following criteria:
·
|
has
personal and professional ethics and integrity and whose values are
compatible with ours;
|
·
|
has
had experiences and achievements that have given him or her the ability to
exercise and develop good business
judgment;
|
·
|
is
willing to devote the necessary time to the work of the Board and its
committees, which includes being available for Board and committee
meetings;
|
·
|
is
familiar with the communities in which we operate and/or is actively
engaged in community activities;
|
·
|
is
involved in other activities or interests that do not create a conflict
with his or her responsibilities to us and our shareholders;
and
|
·
|
has
the capacity and desire to represent the balanced, best interest of our
shareholders as a group, and not primarily a special interest group or
constituency.
|
The
Nominating/Governance Committee will also take into account whether a candidate
satisfies the criteria for “independence” under the Nasdaq corporate governance
listing standards and, if a nominee is sought for service on the Audit
Committee, the financial and accounting expertise of a candidate, including
whether an individual qualifies as an Audit Committee Financial
Expert.
The
Nominating/Governance Committee will consider candidates for the Board of
Directors recommended by shareholders. In order to make a recommendation to the
Board of Directors, a shareholder must own no less than 500 shares of the
Company. Shareholders who are so qualified may send their recommendations to our
Corporate Secretary for forwarding to the Nominating/Governance Committee. In
light of the due diligence required to evaluate recommendations, said
recommendations for candidates for the 2011 annual meeting must be received by
the Nominating/Governance Committee by June 30, 2010.
Shareholders
may submit the names of candidates to be considered by writing to our Corporate
Secretary, at 214 West First Street, Oswego, New York 13126. The submission must
include the following information:
·
|
the
name and address of the shareholder as it appears on our books, and number
of shares of our common stock that are owned beneficially by such
shareholder (if the shareholder is not a holder of record, appropriate
evidence of the shareholder’s ownership will be
required).
|
·
|
the
name, address and contact information for the candidate, and the number of
shares of our common stock that are owned by the candidate (if the
candidate is not a holder of record, appropriate evidence of the
shareholder’s ownership should be
provided).
|
·
|
a
statement of the candidate’s business and educational
experience.
|
·
|
such
other information regarding the candidate as would be required to be
included in the proxy statement pursuant to SEC Regulation
14A.
|
·
|
a
statement detailing any relationship between us and the
candidate.
|
·
|
a
statement detailing any relationship between the candidate and any of our
customers, suppliers or
competitors.
|
·
|
detailed
information about any relationship or understanding between the proposing
shareholder and the candidate and
|
·
|
a
statement that the candidate is willing to be considered and willing to
serve as a director if nominated and
elected.
|
The
Nominating/Governance Committee will consider shareholder recommendations made
in accordance with the above similarly to any other nominee proposed by any
other source. We have not paid a fee to any third party to identify or evaluate
any potential nominees. Moreover, the Nominating/Governance Committee has not
received within the last year a recommended nominee from a shareholder who
beneficially owned more than 5% of the Company’s common stock, or from a group
of shareholders owning more than 5% percent of the common
stock.
Audit
Committee
The Audit
Committee consists of Directors Manwaring, Nelson, Spencer, Stemple and Joyce.
The Audit Committee meets on a periodic basis with the internal auditor to
review audit programs and the results of audits of specific areas, on regulatory
compliance issues, as well as to review information to further their financial
literacy skills. The Audit Committee meets with the Auditors to review quarterly
and annual filings, the results of the annual audit and other related matters.
The Chairman of the Audit Committee may meet with the Auditors on quarterly
filing issues in lieu of the entire committee. The Audit Committee met six times
in 2009. Each member of the Audit Committee is “independent” as defined in the
listing standards of Nasdaq and SEC Rule 10A-3. Our Board of Directors has
adopted a written charter for the Audit Committee which is available on our
website at www.pathfinderbank.com.
The Audit
Committee maintains an understanding of our key areas of financial risk and
assesses the steps management takes to minimize and manage such risks; selects
and evaluates the qualifications and performance of the Auditors; ensures that
the internal and external auditors maintain no relationship with management
and/or us that would impede their ability to provide independent judgment;
oversees the adequacy of the systems of internal control; reviews the nature and
extent of any significant changes in accounting principles; and oversees that
management has established and maintained processes reasonably calculated to
ensure our compliance with all applicable law, regulations, corporate policies
and other matters contained in our Code of Ethics which is available on our
website at www.pathfinderbank.com.
The Audit Committee has established procedures for the confidential, anonymous
submission by employees of concerns regarding accounting or auditing
matters.
The Board
of Directors of Pathfinder Bancorp, Inc. has determined that Bruce E. Manwaring,
chairman of the Audit Committee in 2007, 2008, and 2009 qualifies as an Audit
Committee financial expert serving on the committee. Mr. Manwaring meets the
criteria established by the Securities and Exchange Commission.
The Board
of Directors has also determined that Mr. Manwaring and all of the Audit
Committee members meet the definition of “Independent” as prescribed by the
Nasdaq listing requirements, and are all financially literate.
Audit
And Related Fees
ParenteBeard
LLC billed us a total of $105,099 for the audit of our 2009 annual financial
statements and for the review of the related Forms 10-Q. During the
fiscal year ended December 31, 2008, Beard Miller Company LLC, as predecessor to
ParenteBeard, billed us a total of $100,095 for the audit of our 2008 annual
financial statements and its review of the related Forms 10-Q.
The Audit
Committee considered whether the provision of non-audit services was compatible
with maintaining the independence of its Auditors. The Audit Committee concluded
that performing such services in 2009 did not affect the auditors’ independence
in performing their function as independent registered public accounting
firm.
All
Other Fees
Aggregate
fees billed for non-audit and audit related fees rendered by ParenteBeard LLC
during the years ended December 31, 2009 and 2008 were as follows:
|
2009
|
2008
|
Recurring
and non-recurring tax services
|
$ 18,900
|
$ 18,000
|
Employee
benefit plans audit
|
9,975
|
9,500
|
All
other fees
|
-
|
-
|
Recurring and non-recurring tax
services include assistance in connection with the New York State Franchise tax
examination.
Policy
On Audit Committee Pre-Approval Of Audit And Non-Audit Services Of The
Independent Registered Public Accounting Firm
The Audit
Committee’s policy is to pre-approve all audit and non-audit services provided
by the Auditors. These services may include audit services, audit-related
services, tax services and other services. Pre-approval is generally provided
for up to one year and any pre-approval is detailed as to particular service or
category of services and is generally subject to a specific budget. The Audit
Committee has delegated pre-approval authority to its Chairman when expedition
of services is necessary. The Auditors and management are required to
periodically report to the full Audit Committee regarding the extent of services
provided by the Auditors in accordance with this pre-approval, and the fees for
the services performed to date. All of the non-audit fees incurred in 2009 and
2008 were, in fact, preapproved pursuant to our policy.
Audit
Committee Report
In
accordance with rules established by the SEC, the Audit Committee has prepared
the following report for inclusion in this proxy statement:
As part
of its ongoing activities, the Audit Committee has:
·
|
Reviewed
and discussed with management our audited consolidated financial
statements for the year ended December 31,
2009;
|
·
|
Discussed
with the Auditors the matters required to be discussed by Statement on
Auditing Standards No. 61, Communications with Audit Committees, as
amended;
|
·
|
Received
the written disclosures and the letter from the Auditors required by
Independence Standards Board Standard No. 1, Independence Discussions with
Audit Committees, and has discussed with the Auditors their independence;
and
|
·
|
Considered
the compatibility of non-audit services described above with maintaining
auditor independence.
|
Based on
the review and discussions referred to above, the Audit Committee recommended to
the Board of Directors that the audited consolidated financial statements be
included in our Annual Report on Form 10-K for the year ended December 31, 2009.
The Audit Committee appointed ParenteBeard LLC as Auditors for 2010, which
appointment the shareholders will be asked to ratify at the Annual
Meeting.
This
report has been provided by the Audit Committee:
Messrs.
Manwaring, Nelson, Spencer, Stemple and Joyce
DIRECTORS’
COMPENSATION
Each
non-employee director receives an annual retainer of $9,500, a meeting fee of
$500 for each Board meeting attended and $300 for each committee meeting
attended. The Board Chair receives an additional retainer of
$10,000. The Audit Committee Chairman receives an additional retainer
of $5,000 and the chairman of all other committees receives an additional $100
for each committee meeting in which they serve in the capacity of committee
chairman. Employee directors do not receive monthly meeting
fees. We paid a total of $191,000 in director fees during the year
ended December 31, 2009.
Set forth
below is director compensation for each of our non-employee directors for the
year ended December 31, 2009.
|
|
|
|
|
|
Director
Compensation
|
|
|
|
Non-qualified
|
|
|
|
|
|
deferred
|
|
|
|
|
Fees
earned
|
compensation
|
All
other
|
|
|
|
or
paid in
|
earnings
|
compensation
|
Total
|
Name
|
Year
|
cash
($)
|
($)
(1)
|
($) (2)
|
($)
|
Chris
R. Burritt
|
2009
|
20,700
|
20,113
|
-
|
40,813
|
George
P. Joyce
|
2009
|
22,200
|
1,311
|
-
|
23,511
|
Bruce
E. Manwaring
|
2009
|
28,700
|
28,366
|
-
|
57,066
|
L.
William Nelson, Jr.
|
2009
|
23,400
|
33,425
|
-
|
56,825
|
Janette
Resnick
|
2009
|
36,400
|
-
|
-
|
36,400
|
Corte
J. Spencer
|
2009
|
17,500
|
7,258
|
-
|
24,758
|
Lloyd
"Buddy" Stemple
|
2009
|
19,500
|
911
|
-
|
20,411
|
Steven
W. Thomas
|
2009
|
22,600
|
1,311
|
-
|
23,911
|
(1)
|
The
non-qualified deferred compensation earnings represents the above market
or preferential earnings on compensation that was deferred by each named
director to the Trustee Deferred Fee
Plan
|
(2)
|
No
named director received perquisites and any other personal benefits that
exceeded, in the aggregate,
$10,000.
|
Director
fees are reviewed annually by the Compensation Committee for recommendation to
the Board of Directors. The committee reviews relevant peer group
data similar to that used in the executive compensation review. The
Committee believes that an appropriate compensation is critical to attracting,
retaining and motivating directors who have the qualities necessary to direct
the Company.
Trustee Deferred
Fee Plan. Pathfinder Bank maintains the Trustee Deferred Fee
Plan for members of the Board of Pathfinder Bank, Pathfinder Bancorp, Inc., or
Pathfinder Bancorp M.H.C. A participant in the plan is eligible to
defer, on a monthly basis, the lesser of (i) $750 or (ii) 100% of the monthly
fees the participant would be entitled to receive each month. The
participant’s deferred fees will be held by Pathfinder Bank in a grantor trust
subject to the claims of Pathfinder Bank’s creditors in the event of Pathfinder
Bank’s insolvency.
Upon the
earlier of the date on which the participant’s services are terminated or the
participant attains his or her benefit age (as designated by the participant
upon joining the plan), the participant will be entitled his or her deferred
compensation benefit, which will commence on the date the participant attains
his or her elected benefit age and will be payable in monthly installments for
10 years. In the event of a change in control of Pathfinder Bancorp,
Inc. or Pathfinder Bank followed by the participant’s termination of services
within 36 months thereafter, the participant will receive a deferred
compensation benefit calculated as if the participant had made elective
deferrals through his or her benefit age. Such benefit will
commence on the date the participant attains his or her benefit age and will be
payable in monthly installments for 10 years. If the participant dies
after commencement of payment of the deferred compensation benefit, Pathfinder
Bank will pay the participant’s beneficiary the remaining payments that were
due.
In the
event the participant becomes disabled, the participant will be entitled to
receive the deferred compensation benefit as of the date of the participant’s
disability. Such benefit will commence within 30 days following the
date on which the participant is determined to be disabled and will be payable
in monthly installments for 10 years. If the participant dies prior
to the commencement of payment of the deferred compensation benefit, the
participant’s beneficiary will be entitled to receive a survivor
benefit.
SHAREHOLDER
COMMUNICATIONS
The Board
of Directors has established a process for shareholders to send communications
to a director by either United States mail or electronic mail. Any shareholder
who desires to communicate directly with our directors should send their
communication to Board of Directors, Pathfinder Bancorp, Inc., 214 West First
Street, Oswego, New York 13126 or by email to directors@pathfinderbank.com.
The communication should indicate that the author is a shareholder and if shares
are not held of record, should include appropriate evidence of stock ownership.
Depending on the subject matter, management will:
·
|
Forward
the communication to the director or directors to whom it is
addressed;
|
·
|
Attempt
to handle the inquiry directly, for example where it is a request for
information about us or it is a stock-related matter;
or
|
·
|
Not
forward the communication if it is primarily commercial in nature, relates
to an improper or irrelevant topic, or is unduly hostile, threatening,
illegal or otherwise inappropriate.
|
At each
Board meeting, management shall present a summary of all communications received
since the last meeting that were not forwarded and make those communications
available to the directors.
ATTENDANCE
AT ANNUAL MEETINGS
The Company does not have a policy
regarding the attendance of Board members at the Annual Meeting, although all
are encouraged to attend. All of the Company’s nine directors
attended the 2009 Annual Meeting.
CODE
OF ETHICS
We have
adopted a Code of Ethics that is applicable to our officers, directors and
employees, including our principal executive officer, principal financial
officer, principal accounting officer or controller, or persons performing
similar functions. The Code of Ethics is available on our website at www.pathfinderbank.com.
Amendments to and waivers from the Code of Ethics will also be disclosed on our
website.
PROPOSAL
2 — APPROVAL OF THE PATHFINDER BANCORP, INC. 2010 STOCK OPTION
PLAN
General
Subject
to stockholder approval at the annual meeting and approval or non-objection from
the Office of Thrift Supervision, we have established the Pathfinder Bancorp,
Inc. 2010 Stock Option Plan (the “Stock Option Plan”). Under the
Stock Option Plan, options to purchase up to 150,000 shares of common stock may
be granted to our employees and directors. As of March 17, 2010, the
record date, the market value of our shares of common stock was $_____ per
share. Our Board of Directors believes that it is appropriate to
adopt a flexible and comprehensive stock option plan that permits the granting
of a variety of long-term incentive awards to directors and officers as a means
of enhancing and encouraging the recruitment and retention of those individuals
on whom the continued success of Pathfinder Bank and Pathfinder Bancorp, Inc.
most depends. The complete text of the Stock Option Plan is attached
as Appendix A to this proxy statement. The principal features of the
Stock Option Plan are summarized below.
Principal
Features of the Stock Option Plan
The Stock Option Plan provides for
awards in the form of stock options. Each award shall be on such
terms and conditions, consistent with the Stock Option Plan, as the committee
administering the Stock Option Plan may determine. The Stock Option
Plan, including the awards permitted under the Stock Option Plan, and the terms
and conditions of the Stock Option Plan, are subject to the approval or
non-objection of the Office of Thrift Supervision. See “Amendment and
Termination” for a description of how the Stock Option Plan can be amended
following stockholder approval.
The term of stock options generally
will not exceed ten years from the date of grant. Stock options
granted under the Stock Option Plan may be either “Incentive Stock Options” as
defined under Section 422 of the Code or stock options not intended to qualify
as such (“non-qualified stock options”). No stock option awards have
been granted to date under the Stock Option Plan.
Subject to approval or non-objection
from the Office of Thrift Supervision, shares issued upon the exercise of a
stock option under the Stock Option Plan shall be shares previously or
subsequently acquired by Pathfinder Bancorp, Inc. in open market purchases or
issued from Treasury. Any shares subject to an award that expires or
is terminated unexercised will remain available for issuance under the Stock
Option Plan. Generally, at the discretion of the Board of Directors,
all or any vested non-qualified stock options granted under the Stock Option
Plan may be transferable by the participant but only to the persons or classes
of persons determined by the Board. No other award or any right or
interest therein is assignable or transferable except under certain limited
exceptions set forth in the Stock Option Plan.
The Stock Option Plan will be
administered by not less than [three] members of Pathfinder
Bancorp, Inc.’s Compensation Committee who are “disinterested directors” (as
defined in the Stock Option Plan), or the entire Board of
Directors. Pursuant to the terms of the Stock Option Plan, directors
and employees of Pathfinder Bank or Pathfinder Bancorp, Inc. are eligible to
participate. As of March 17, 2010, there were eight non-employee
directors eligible to participate in the Stock Option Plan. Subject
to the provisions of the Stock Option Plan, the Committee will determine to whom
the awards will be granted, in what amounts, and the period over which such
awards will vest. Unless otherwise determined by the Committee, the
vesting amount may not be more than 20% per year. Generally, the
aggregate amount of the awards granted to all directors may not exceed 30% of
the shares in the Stock Option Plan. Subject to the terms of the
Stock Option Plan, the maximum number of shares of common stock that may be
subject to stock options granted to any one participant during any calendar year
shall be 150,000. The Committee may accelerate the time period for
exercising options.
In granting awards under the Stock
Option Plan, the Committee will consider, among other things, position and years
of service, individual performance evaluations and the value of the individual’s
services to Pathfinder Bank and Pathfinder Bancorp, Inc. The exercise
price of stock options will be at least the fair market value of the underlying
common stock at the time of the grant. Once granted, stock options
may not be re-priced (i.e., the exercise price may not be changed other than
adjustments for stock splits, stock dividends and similar
events). The exercise price may be paid in cash, common stock, or via
a broker-assisted “cashless exercise” (as defined in the Stock Option
Plan).
Stock
Options. Incentive Stock Options can only be granted to
employees of Pathfinder Bank, Pathfinder Bancorp, Inc. or an “affiliate” (i.e.,
a parent or subsidiary corporation of Pathfinder Bank or Pathfinder Bancorp,
Inc.). Outside directors will be granted non-qualified stock
options. No option granted to an officer in connection with the Stock
Option Plan will be exercisable as an Incentive Stock Option subject to
incentive tax treatment if exercised more than three months after the date on
which the optionee terminates employment with Pathfinder Bank and/or Pathfinder
Bancorp, Inc., except as set forth below. In the event a participant
ceases to maintain continuous service with Pathfinder Bancorp, Inc. or an
affiliate by reason of death, disability, following a change in control, or
normal retirement, options still subject to restrictions will vest and be free
of these restrictions and, except following a change in control, can be
exercised for the remainder of the options’ original term. Incentive
Stock Options exercised more than three months following the date the optionee
terminates employment shall be treated as a non-qualified stock option as
described above; provided, however, that in the event of death or disability,
Incentive Stock Options may be exercised and receive incentive tax treatment for
up to at least one year following termination of employment, subject to the
requirements of the Internal Revenue Code. In the event a participant
ceases to maintain continuous service for any other reason, the participant will
forfeit all nonvested options. The participant’s vested options will
remain exercisable for up to three months.
Effect of
Adjustments. Shares as to which awards may be granted under
the Stock Option Plan, and shares then subject to awards, will be adjusted by
the Committee in the event of any merger, consolidation, reorganization,
recapitalization, stock dividend, stock split, combination or exchange of shares
or other change in the corporate structure of Pathfinder Bancorp, Inc. without
receipt of payment or consideration by Pathfinder Bancorp, Inc.
In the case of any merger,
consolidation or combination of Pathfinder Bancorp, Inc. with or into another
holding company or other entity, whereby holders of common stock will receive
cash for each share of common stock exchanged in the transaction, any individual
with exercisable options will receive an amount equal to the difference between
(i) the cash payment times the number of shares of common stock subject to such
options and (ii) the aggregate exercise price of all surrendered
options.
Amendment and
Termination. The Board of Directors may at any time amend,
suspend or terminate the Stock Option Plan or any portion thereof, provided,
however, that no such amendment, suspension or termination shall impair the
rights of any individual, without his consent, in any award made pursuant to the
plan. In addition, no amendment may (i) materially increase the
benefits accruing to participants under the Stock Option Plan;
(ii) materially increase the aggregate number of securities that may be
issued under the Stock Option Plan, other than pursuant to corporate transactions
described in the Stock Option Plan, or (iii) materially modify the
requirements for participation in the Stock Option Plan, unless the amendment
under (i), (ii) or (iii) above is approved by our
stockholders. However, the Committee may make any amendment to the
Stock Option Plan or an award agreement to conform the Stock Option Plan or the
award agreement to applicable law or regulation, to revise the Plan in response
to amendments required by any bank regulatory agency, or to avoid accounting
treatments that would materially affect the financial condition or results of
operations of Pathfinder Bancorp, Inc. The Stock Option Plan will
remain in effect as long as any awards under it are outstanding; however, no
awards may be granted under the Stock Option Plan on or after the ten-year
anniversary of the effective date of the Stock Option Plan.
Federal Income Tax
Consequences. The following brief description of the tax consequences of
stock option grants under the Stock Option Plan is based on federal income tax
laws currently in effect and does not purport to be a complete description of
such federal income tax consequences.
The exercise of a stock option that is
an “Incentive Stock Option” within the meaning of Section 422 of the Code will
generally not, by itself, result in the recognition of taxable income to the
individual nor entitle Pathfinder Bancorp, Inc. to a deduction at the time of
such exercise. However, the difference between the exercise price and
the fair market value of the option shares on the date of exercise is an
adjustment to alternative minimum taxable income which may, in certain
situations, trigger the alternative minimum tax. The alternative
minimum tax is incurred only when it exceeds the regular income
tax. The sale of an Incentive Stock Option share prior to the end of
the applicable holding period, i.e., the longer of two years from the date of
grant or one year from the date of exercise, will cause any gain to be taxed at
ordinary income tax rates, with respect to the spread between the exercise price
and the fair market value of the share on the date of exercise and at applicable
capital gains rates with respect to any post exercise appreciation in the value
of the share.
The exercise of a non-qualified stock
option will result in the recognition of ordinary income on the date of exercise
in an amount equal to the difference between the exercise price and the fair
market value of the shares on the date of exercise.
We will be allowed a deduction at the
time, and in the amount of, any ordinary income recognized by the individual
under the various circumstances described above, provided that we meet our
federal withholding tax obligations.
The
affirmative vote of (x) a majority of the shares issued and outstanding and
entitled to vote, and (y) a majority of the votes cast at the annual meeting by
stockholders other than by our majority stockholder, Pathfinder Bancorp, MHC is
required for the approval of the Stock Option Plan. For purposes of
the vote required in clause (x) above, shares as to which the “ABSTAIN” box has
been selected will be treated as votes cast and will have the same effect as a
vote against ratification. For purposes of the vote required in
clause (y) above, shares as to which the “ABSTAIN” box has been selected are not
considered votes cast for or against approval. The Board of Directors unanimously
recommends a vote “FOR” the approval of the 2010 Stock Option
Plan.
PROPOSAL
3 — ADVISORY (NON-BINDING) VOTE ON EXECUTIVE COMPENSATION
The
American Recovery and Reinvestment Act of 2009, signed into law on February 17,
2009, includes a provision requiring Capital Purchase Program participants,
during the period in which any obligation arising from assistance provided under
the Capital Purchase Program remains outstanding, to permit a separate
stockholder vote to approve the compensation of executives as disclosed pursuant
to the compensation rules of the Securities and Exchange
Commission. This requirement applies to any proxy, consent, or
authorization for an annual or other meeting of the participant’s
stockholders. Under this legislation, the stockholder vote is not
binding on the Board of Directors of the Capital Purchase Program participant,
and many not be construed as overruling any decision by the participant’s Board
of Directors.
As noted
previously, the Company is a participant in the CPP, therefore, stockholders are
being given the opportunity to vote on an advisory (non-binding) resolution at
the Annual Meeting to approve our executive compensation policies and procedures
as described above under “Compensation Committee” and tabular disclosure of
entitled Summary Compensation Table in the 2010 proxy statement and related
material. This proposal, commonly known as a “say-on-pay” proposal, gives
stockholders the opportunity to endorse or not endorse our executive pay
program.
The
purpose of our compensation policies and procedures is to attract and retain
experienced, highly qualified executives critical to our long-term success and
enhancement of stockholder value. The Board of Directors believes our
compensation policies and procedures achieve this objective, and therefore
recommend stockholders vote “For” the proposal. Stockholders are asked to
approve the following resolution:
“Resolved,
that the stockholders approve the overall executive pay-for-performance
compensation policies and procedures employed by Pathfinder Bancorp, Inc., as
described under Compensation Committee and the tabular disclosure entitled
Summary Compensation Table (together with the accompanying narrative disclosure)
in this Proxy Statement.”
This is
an advisory vote only, and neither Pathfinder Bancorp, Inc. nor the Board of
Directors will be bound to take action based upon the outcome. The
Compensation Committee will consider the vote of the stockholders when
considering future executive compensation arrangements.
In order
to approve Proposal 3, the proposal must receive at least a majority of the
votes cast, without regard to broker non-votes, either in person or by proxy, in
favor of such proposal. The Board unanimously recommends that
stockholders vote “FOR” this proposal.
PROPOSAL
4 -RATIFICATION OF APPOINTMENT OF
AUDITORS
|
The Audit
Committee has approved the engagement of ParenteBeard LLC to be our independent
registered public accounting firm for 2010. At the Annual Meeting,
shareholders will consider and vote on the ratification of the engagement of
ParenteBeard LLC, for the year ending December 31, 2010. A representative of
ParenteBeard LLC is expected to attend the Annual Meeting to respond to
appropriate questions and to make a statement if he so desires.
In order
to ratify the selection of ParenteBeard LLC, as our independent registered
public accounting firm for 2010 the proposal must receive at least a majority of
the votes cast, either in person or by proxy, in favor of such ratification.
The Audit Committee and the
Board of Directors recommends a vote “FOR” the ratification of ParenteBeard LLC,
as Auditors for 2010.
In order
to be eligible for inclusion in the proxy materials for next year’s Annual
Meeting of Shareholders, any shareholder proposal to take action at such meeting
must be received at our executive office, 214 West First Street, Oswego, New
York 13126, no later than December 5, 2010. Any such proposals shall be subject
to the requirements of the proxy rules adopted under the Securities Exchange Act
of 1934.
The Board
of Directors is not aware of any business to come before the Annual Meeting
other than the matters described above in the Proxy Statement. However, if any
matters should properly come before the Annual Meeting, it is intended that
holders of the proxies will act as directed by a majority of the Board of
Directors, except for matters related to the conduct of the Annual Meeting, as
to which they shall act in accordance with their best judgment. The Board of
Directors intends to exercise its discretionary authority to the fullest extent
permitted under the Securities Exchange Act of 1934.
The cost
of solicitation of proxies will be borne by us. We will reimburse brokerage
firms and other custodians, nominees and fiduciaries for reasonable expenses
incurred by them in sending proxy materials to the beneficial owners of common
stock. In addition to solicitations by mail, our directors, officers and regular
employees may solicit proxies personally or by telegraph or telephone without
additional compensation.
BY ORDER OF THE BOARD OF
DIRECTORS
/s/ Edward A.
Mervine
Edward A.
Mervine
Secretary
Oswego,
New York
March 31,
2010
Important Notice Regarding the
Availability of Proxy Materials for the Annual Meeting: The
Notice and Proxy Statement, [Annual Report and Form 10-K] and [Proxy Card] are
available at www.pathfinderbank.com/annual
meeting.
AS IN
THIS EXAMPLE
| X
|
REVOCABLE
PROXY
PATHFINDER
BANCORP, INC.
ANNUAL
MEETING OF SHAREHOLDERS
April 28,
2010
The
undersigned hereby appoints the full Board of Directors, with full powers of
substitution to act as attorneys and proxies for the undersigned to vote all
shares of Common Stock of the Company which the undersigned is entitled to vote
at the Annual Meeting of Shareholders (“Meeting”) which will be held at the
Econolodge, 70 E. First Street, Oswego, New York on April 28, 2010 at 10:00
a.m., Eastern Time. The Board of Directors is authorized to cast all votes to
which the undersigned is entitled as follows:
1) The
election as directors of all nominees listed below (except as marked to the
contrary below)
For
All
For Withhold Except
|__| |__| |__|
Janette
Resnick (three-year
term) Corte
J. Spencer (three-year term)
Steven W.
Thomas (three-year term)
INSTRUCTION:
To withhold your vote for one or more nominees, write the name of the nominee(s)
on the lines below.
__________________________________ ___________________________
__________________________________ ___________________________
2) The
approval of the Pathfinder Bancorp, Inc. 2010 Stock Option Plan.
For Against Abstain
|__| |__| |__|
3) The
Advisory (Non-Binding) Vote on Executive Compensation.
For Against Abstain
|__| |__| |__|
|
4)
|
The
ratification of the appointment of ParenteBeard LLC as independent
auditors for the year ending December 31,
2010.
|
For Against Abstain
|__| |__| |__|
PLEASE
CHECK BOX IF YOU PLAN TO ATTEND THE MEETING |__|
THE BOARD
OF DIRECTORS RECOMMENDS A VOTE “FOR” EACH OF THE LISTED PROPOSALS.
THIS
PROXY IS SOLICITED BY THE BOARD OF DIRECTORS. THIS PROXY WILL BE VOTED AS
DIRECTED, BUT IF NO INSTRUCTIONS ARE SPECIFIED, THIS PROXY WILL BE VOTED FOR THE
PROPOSITIONS STATED ABOVE. IF ANY OTHER BUSINESS IS PRESENTED AT SUCH MEETING,
THIS PROXY WILL BE VOTED BY THE ABOVE-NAMED PROXIES AT THE DIRECTION OF A
MAJORITY OF THE BOARD OF DIRECTORS. AT THE PRESENT TIME, THE BOARD OF DIRECTORS
KNOWS OF NO OTHER BUSINESS TO BE PRESENTED AT THE MEETING.
PLEASE BE
SURE TO SIGN AND DATE THIS PROXY IN THE BOX BELOW.
DATE
SHAREHOLDER
SIGN ABOVE_________CO-HOLDER (IF ANY) SIGN ABOVE
DETACH
ABOVE CARD, SIGN, DATE AND MAIL IN POSTAGE PAID ENVELOPE PROVIDED.
PATHFINDER BANCORP, INC.
Should
the undersigned be present and elect to vote at the Meeting or at any
adjournment thereof and after notification to the Secretary of the Company at
the Annual Meeting of the shareholder’s decision to terminate this proxy, then
the power of said attorneys and proxies shall be deemed terminated and of no
further force and effect. This proxy may also be revoked by sending written
notice to the Secretary of the Company at the address set forth on the Notice of
Annual Meeting of Shareholders, or by the filing of a later proxy statement
prior to a vote being taken on a particular proposal at the
Meeting.
The
above signed acknowledges receipt from the Company prior to the execution of
this proxy of Notice of the Meeting, Annual Report containing financial
statements, and a proxy statement dated March 31, 2010.
Please
sign exactly as your name appears on this card. When signing as attorney,
executor, administrator, trustee or guardian, please give full title. If shares
are held jointly, each should sign.
PLEASE COMPLETE AND DATE
THIS PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED
POSTAGE-PREPAID ENVELOPE.
IF YOUR ADDRESS HAS
CHANGED, PLEASE CORRECT THE ADDRESS IN THE SPACE PROVIDED
BELOW AND RETURN THIS PORTION WITH THE PROXY IN THE ENVELOPE
PROVIDED.
----------------------------
----------------------------
Important Notice Regarding the
Availability of Proxy Materials for the Annual Meeting: The
Notice and Proxy Statement, [Annual Report and Form 10-K] and [Proxy Card] are
available at www.pathfinderbank.com/annual
meeting.
PATHFINDER BANCORP,
INC.
2010 STOCK OPTION
PLAN
ARTICLE 1 —
GENERAL
Section 1.1 Purpose,
Effective Date and Term. The purpose of this 2010 Stock Option Plan (this
“Plan”) is to promote the long-term financial success of Pathfinder Bancorp,
Inc., a federal mid-tier holding company (the “Company”), and its Subsidiaries,
including Pathfinder Bank (the “Bank”), by providing a means to attract, retain
and reward individuals who contribute to the success of the Company and the Bank
and to further align their interests with those of the Company’s stockholders.
The “Effective Date” of this Plan is April 28, 2010, if approved by the
Company’s stockholders, and/or such later date pursuant to which the Plan may be
approved by the Office of Thrift Supervision or the Office of Thrift Supervision
provides its non-objection to the Plan. This Plan shall remain in effect as long
as any awards under it are outstanding; provided, however, that no
awards may be granted under this Plan after the day before the ten-year
anniversary of the Effective Date.
Section 1.2 Administration.
This Plan shall be administered by a committee of the Company’s Board of
Directors (the “Committee”), in accordance with Section 5.1.
Section 1.3 Participation.
Each Employee or Director of the Company or any Subsidiary of the Company or of
the Company’s mutual holding company parent (the “MHC”) who is granted an award
in accordance with the terms of this Plan shall be a “Participant” in this Plan.
Awards under this Plan shall be limited to Employees and Directors of the
Company, any Subsidiary or the MHC.
Section 1.4 Definitions.
Capitalized terms used in this Plan are defined as set forth in Article 8
and elsewhere in this Plan.
ARTICLE 2
— AWARDS
Section 2.1 General.
Each award under this Plan shall be subject to the terms and conditions of this
Plan and such additional terms, conditions, limitations and restrictions as the
Committee shall provide with respect to such award and/or as may be required by
the Office of Thrift Supervision and as evidenced in the Award Agreement.
Subject to the provisions of Section 2.5, an award may be granted as an
alternative to or replacement of an existing award under this Plan or any other
stock benefit plan of the Company or any Subsidiary or as the form of payment
for grants or rights earned or due under any other compensation plan or
arrangement of the Company or its Subsidiaries, including without limitation the
stock benefit or other compensation plan of any entity acquired by the Company
or any Subsidiary.
Only
stock options may be granted under this Plan. A stock option means a
grant under Section 2.2. that represents the right to purchase shares of
Stock at an Exercise Price established by the Committee. Any stock option may be
either an incentive stock option (an “ISO”) that is intended to
satisfy the requirements applicable to an “incentive stock option” described in
Code Section 422(b), or a Non-Qualified Option that is not intended to be
an ISO, provided,
however, that no ISOs may be: (i) granted after the day before the
ten-year anniversary of the Effective Date; or (ii) granted to a
non-Employee. Unless otherwise specified in the Award Agreement or prohibited by
statute, a stock option awarded to an Employee shall be an ISO. Any ISO granted
under this Plan that does not qualify as an ISO for any reason (whether at the
time of grant or as the result of a subsequent event) shall be deemed to be a
Non-Qualified Option. In addition, any ISO granted under this Plan may be
unilaterally modified by the Committee to disqualify such stock option from ISO
treatment such that it shall become a Non-Qualified Option.
Section 2.2 Stock
Options. (a) Grant of
Stock Options. Each stock option shall be evidenced by an Award Agreement
that shall: (i) specify the number of stock options covered by the award;
(ii) specify the date of grant of the stock option; (iii) specify the
vesting period; and (iv) contain such other terms and conditions not
inconsistent with this Plan, including the effect of termination of a
Participant’s employment or Service with the Company as the Committee may, in
its discretion, prescribe. In addition, the Committee, in its sole discretion,
may condition the vesting or exercise of an award on the requirement that the
Participant not compete with the Company during the period that an award is
outstanding and such requirement shall be set forth in the Award Agreement
executed by the Participant and an authorized officer of the
Company.
(b) Terms and Conditions. A stock
option shall be exercisable in accordance with such terms and conditions and
during such periods as may be established by the Committee. In no event,
however, shall a stock option be exercised later than ten (10) years after
the date of its grant (or five (5) years with respect to ISOs granted to an
Employee who is a 10% Stockholder). The “Exercise Price” of each stock option
shall not be less than 100% of the Fair Market Value of a share of Stock on the
date of grant (or, if greater, the par value of a share of Stock); provided, however, that the
Exercise Price of an ISO shall not be less than 110% of the Fair Market Value of
a share of Stock on the date of grant if granted to a 10% Stockholder; and,
provided further, that
the Exercise Price may be higher or lower in the case of stock options granted
in replacement of existing awards held with respect to an acquired entity. The
payment of the Exercise Price of a stock option shall be by cash or, subject to
limitations imposed by applicable law, by such other means as the Committee may
from time to time permit, including: (a) by tendering, either actually or
constructively by attestation, shares of Stock valued at Fair Market Value as of
the day of exercise, including for this purpose, tendering shares that would be
received upon exercise of the stock option, e.g., a net settlement of stock
options; (b) by irrevocably authorizing a third party, acceptable to the
Committee, to sell shares of Stock (or a sufficient portion of the shares)
acquired upon exercise of the stock option and to remit to the Company a
sufficient portion of the sale proceeds to pay the entire Exercise Price and any
tax withholding resulting from such exercise; (c) by personal, certified or
cashiers’ check; (d) by other property deemed acceptable by the Committee;
or (e) by any combination thereof. The total number of shares that may be
acquired upon the exercise of a stock option shall be rounded down to the
nearest whole share.
Section 2.3 Vesting
of Awards. If
the right to become vested in an award under this Plan (including the right to
exercise a stock option) is conditioned on the completion of a specified period
of Service with the Company or its Subsidiaries, without it being granted in
lieu of, or in exchange for, other compensation, then, unless otherwise
determined by the Committee and evidenced in the Award Agreement, the required
period of Service for full vesting shall be five (5) years (subject to
acceleration of vesting, to the extent permitted by the Committee, including in
the event of the Participant’s death, Disability, Retirement, or Involuntary
Termination of Employment following a Change in Control). Unless otherwise
determined by the Committee and evidenced in the Award Agreement, the required
period of Service for full vesting with respect to an award granted to Directors
also shall be five (5) years (subject to acceleration in such similar
events as applied to Employee Participants, and provided that Service as a
director emeritus or advisory director shall constitute Service for purposes of
vesting).
Section 2.4 Deferred
Compensation. If any award would be considered “deferred compensation” as
defined under Code Section 409A (“Deferred Compensation”), the Committee
reserves the absolute right (including the right to delegate such right) to
unilaterally amend this Plan or the Award Agreement, without the consent of the
Participant, to maintain exemption from, or to comply with, Code
Section 409A. Any amendment by the Committee to this Plan or an Award
Agreement pursuant to this Section 2.4 shall maintain, to the extent
practicable, the original intent of the applicable provision without violating
Code Section 409A. A Participant’s acceptance of any award under this Plan
constitutes acknowledgement and consent to such rights of the Committee, without
further consideration or action. Any discretionary authority retained by the
Committee pursuant to the terms of this Plan or pursuant to an Award Agreement
shall not be applicable to an award that is determined to constitute Deferred
Compensation, if such discretionary authority would contravene Code
Section 409A.
Section 2.5 Prohibition
Against Stock Option Repricing. Except for adjustments pursuant to
Section 3.4, and reductions of the Exercise Price approved by the Company’s
stockholders, neither the Committee nor the Board shall have the right or
authority to make any adjustment or amendment that reduces or would have
the
effect of
reducing the Exercise Price of a stock option previously granted under this
Plan, whether through amendment, cancellation (including cancellation in
exchange for a cash payment in excess of the stock option’s in-the-money value)
or replacement grants, or other means.
Section 2.6. Effect of
Termination of Service on Awards. The Committee shall establish the
effect of a Termination of Service on the continuation of rights and benefits
available under an award or this Plan and, in so doing, may make distinctions
based upon, among other things, the cause of Termination of Service and type of
award. Unless the Committee shall specifically state otherwise at the time an
award is granted, all awards to an Employee or Director shall vest immediately
upon such individual’s death, Disability or Retirement Unless otherwise provided
in an Award Agreement, the following provisions shall apply to each award
granted under this Plan:
(a) Upon a Participant’s
Termination of Service for any reason other than Disability, Retirement, death
or termination for Cause, stock options shall be exercisable only as to those
shares that were immediately exercisable by such Participant at the date of
termination, and stock options may be exercised only for a period of three
months following termination (or the remaining term, if less).
(b) In the event of a
Termination of Service for Cause, all stock options granted to a Participant
under this Plan not exercised or vested shall expire and be
forfeited.
(c) Upon Termination of
Service for reason of Disability, Retirement or death, all stock options shall
be exercisable as to all shares subject to an outstanding award, whether or not
then exercisable, at the date of Termination of Service, and stock options may
be exercised for the remaining term of the Award, provided, however, that no
stock option shall be eligible for treatment as an ISO in the event such stock
option is exercised more than one year following termination of employment due
to Disability and, provided
further, that in order to obtain ISO treatment for stock options
exercised by heirs or devisees of an optionee, the optionee’s death must have
occurred while employed or within three (3) months after termination of
employment.
(d) The effect of a Change in
Control on the vesting/exercisability of stock options is as set forth in
Article 4.
ARTICLE 3
— SHARES SUBJECT TO PLAN
Section 3.1 Available
Shares. Subject to approval or non-objection from the Office of Thrift
Supervision, the shares of Stock with respect to which awards may be made under
this Plan shall be shares currently authorized but unissued, currently held or,
to the extent permitted by applicable law, subsequently acquired by the Company
as treasury shares, including shares purchased in the open market or in private
transactions.
Section 3.2 Share
Limitations.
(a) Share Reserve. Subject to the
following provisions of this Section 3.2, the maximum number of shares of
Stock that may be delivered to Participants and their beneficiaries under this
Plan shall be 150,000. The aggregate number of shares available for grant under
this Plan and the number of shares of Stock subject to outstanding awards shall
be subject to adjustment as provided in Section 3.4.
(b) Computation of Shares Available.
For purposes of this Section 3.2 and in connection with the granting
of a stock option, shares of Stock covered by an award shall only be counted as
used to the extent they are actually issued. Any shares of Stock related to
awards that terminate by expiration, forfeiture, cancellation, or otherwise
without the issuance of such shares, that are settled in cash in lieu of shares
of Stock, or that are exchanged with the Committee’s permission, prior to the
issuance of shares, for awards not involving shares of Stock, shall be available
again for grant under this Plan.
Section 3.3 Limitations
on Grants to Individuals.
(a) Stock Options. The maximum
number of shares of Stock that may be subject to stock option awards under this
Plan shall be 150,000, all of which may be designated as ISOs. The maximum
number of shares of Stock that may be subject to stock options granted to any
one Participant during any calendar year shall be 150,000.
(b) Director Awards. The maximum
number of shares of stock that may be covered by awards granted to all
non-Employee Directors, in aggregate, shall be thirty percent (30%) of all
shares of Stock to be granted pursuant to Section 2.1. The foregoing
limitations shall not apply to cash-based Director fees that a non-Employee
Director elects to receive in the form of shares of Stock or with respect to
enticement awards made to new Directors.
Section 3.4 Corporate
Transactions.
(a) General. In the event any
recapitalization, forward or reverse stock split, reorganization, merger,
consolidation, spin-off, combination, repurchase, or exchange of shares of Stock
or other securities, stock dividend or other special and nonrecurring dividend
or distribution (whether in the form of cash, securities or other property),
liquidation, dissolution, or other similar corporate transaction or event,
affects the shares of Stock such that an adjustment is appropriate in order to
prevent dilution or enlargement of the rights of Participants under this Plan
and/or under any award granted under this Plan, then the Committee shall, in an
equitable manner, adjust any or all of (i) the number and kind of
securities deemed to be available thereafter for grants of stock options in the
aggregate to all Participants and individually to any one Participant,
(ii) the number and kind of securities that may be delivered or deliverable
in respect of outstanding stock options, and (iii) the Exercise Price of
stock options. In addition, the Committee is authorized to make adjustments in
the terms and conditions of, and the criteria included in, stock options
(including, without limitation, cancellation of stock options in exchange for
the in-the-money value, if any, of the vested portion thereof, or substitution
of stock options using stock of a successor or other entity) in recognition of
unusual or nonrecurring events (including, without limitation, events described
in the preceding sentence) affecting the Company or any parent or Subsidiary or
the financial statements of the Company or any parent or Subsidiary, or in
response to changes in applicable laws, regulations, or accounting
principles.
(b) Merger in which Company is Not
Surviving Entity. In the event of any merger, consolidation, or other
business reorganization (including, but not limited to, a Change in Control) in
which the Company is not the surviving entity, unless otherwise determined by
the Committee at any time at or after grant and prior to the consummation of
such merger, consolidation or other business reorganization, any stock options
granted under this Plan that remain outstanding shall be converted into stock
options to purchase voting common equity securities of the business entity that
survives such merger, consolidation or other business reorganization having
substantially the same terms and conditions as the outstanding stock options
under this Plan and reflecting the same economic benefit (as measured by the
difference between the aggregate Exercise Price and the value exchanged for
outstanding shares of Stock in such merger, consolidation or other business
reorganization), all as determined by the Committee prior to the consummation of
such merger, provided, however, that the Committee may, at any time prior to the
consummation of such merger, consolidation or other business reorganization,
direct that all, but not less than all, outstanding stock options be canceled as
of the effective date of such merger, consolidation or other business
reorganization in exchange for a cash payment per share of Stock equal to the
excess (if any) of the value exchanged for an outstanding share of Stock in such
merger, consolidation or other business reorganization over the Exercise Price
of the stock option being canceled.
(c) The Committee may make
adjustments in the terms and conditions of, and the criteria included in, Awards
in recognition of unusual or nonrecurring events, other than those described
above, affecting the Company or the financial statements of the Company or of
changes in applicable laws, regulations, or accounting principles, whenever the
Committee determines that such adjustments are appropriate in order to prevent
unintended dilution or enlargement of the benefits or potential benefits
intended to be made available under this Plan. The determination of the
Committee as to the foregoing adjustments, if any, shall be conclusive and
binding on the Participants under this Plan.
Section 3.5 Delivery
of Shares. Delivery of shares of Stock or other amounts under this Plan
shall be subject to the following:
(a) Compliance with Applicable Laws.
Notwithstanding any other provision of this Plan, the Company shall have
no obligation to deliver any shares of Stock or make any other distribution of
benefits under this Plan unless such delivery or distribution complies with all
applicable laws (including, the requirements of the Securities Act), and the
applicable requirements of any securities exchange or similar
entity.
(b) Certificates. To the extent
that this Plan provides for the issuance of shares of Stock, the issuance may be
affected on a non-certificated basis, to the extent not prohibited by applicable
law or the applicable rules of any stock exchange.
ARTICLE 4
— CHANGE IN CONTROL
Section 4.1 Consequence
of a Change in Control. Subject to the provisions of Section 3.4
(relating to the adjustment of shares), and except as otherwise provided in this
Plan or as determined by the Committee and set forth in the terms of any Award
Agreement:
(a) At the time of an
Involuntary Termination of Employment (as defined in Section 8.1) (or as to
a Director, Termination of Service as a Director) following a Change in Control,
all stock options then held by the Participant shall become fully exercisable
and shall be exercisable for the remaining unexpired term of the
award.
(b) In the event of a Change
in Control, any performance measure attached to an award under this Plan shall
be deemed satisfied as of the date of the Change in Control.
Section 4.2 Definition
of Change in Control. For purposes of this Plan, unless otherwise
provided in an Award Agreement, a “Change in Control” shall be deemed to have
occurred upon the earliest to occur of the following:
(a) any “person,” as such term
is used in Sections 13(d) and 14(d) of the Exchange Act (a “Person”), is or
becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange
Act), directly or indirectly, of securities of the Company representing
twenty-five percent (25%) or more of the combined voting power of the Company’s
then outstanding Voting Securities, provided that, notwithstanding the foregoing
and for all purposes of this Plan: (i) the term “Person” shall not include
(A) the MHC, the Company or any of its Subsidiaries, (B) an employee
benefit plan of the Company or any of its Subsidiaries (including this Plan),
and any trustee or other fiduciary holding securities under any such plan (but
only with respect to securities held under any such plan), or (C) a
corporation or other entity owned, directly or indirectly, by the stockholders
of the Company in substantially the same proportions as their ownership of Stock
of the Company; (ii) no Person shall be deemed the beneficial owner of any
securities acquired by such Person in an Excluded Transaction; and (iii) no
Director or officer of the Company or any direct or indirect Subsidiary of the
Company (or any affiliate of any such Director or officer) shall, by reason of
any or all of such Directors or officers acting in their capacities as such, be
deemed to beneficially own any securities beneficially owned by any other such
Director or officer (or any affiliate thereof); or
(b) the Incumbent Directors
cease, for any reason, to constitute a majority of the Whole Board;
or
(c) a plan of reorganization,
merger, consolidation or similar transaction involving the Company and one or
more other corporations or entities is consummated, other than a plan of
reorganization, merger, consolidation or similar transaction that is an Excluded
Transaction, or the stockholders of the Company approve a plan of complete
liquidation of the Company, or a sale, liquidation or other disposition of all
or substantially all of the assets of the Company or any bank Subsidiary of the
Company is consummated; or
(d) a tender offer is made for
25% or more of the outstanding Voting Securities of the Company and the
stockholders owning beneficially or of record 25% or more of the outstanding
Voting Securities of the Company have tendered or offered to sell their shares
pursuant to such tender offer and such tendered shares have been accepted by the
tender offeror.
Notwithstanding
the foregoing, a Change in Control shall not be deemed to occur solely because
any Person (the “Subject Person”) acquired beneficial ownership of more than the
permitted amount of the then outstanding common stock or Voting Securities as a
result of the acquisition of Stock or Voting Securities by the Company, which by
reducing the number of shares of Stock or Voting Securities then outstanding,
increases the proportional number of shares beneficially owned by the Subject
Person; provided, however,
that if a Change in Control would occur (but for the operation of this
sentence) as a result of the acquisition of Stock or Voting Securities by the
Company, and after such share acquisition by the Company the Subject Person
becomes the beneficial owner of any additional Stock or Voting Securities that
increases the percentage of the then outstanding Stock or Voting Securities
beneficially owned by the Subject Person, then a Change in Control shall occur.
In addition, and notwithstanding the foregoing, a Change in Control shall not be
deemed to occur as a result of or in connection with a second-step conversion of
the MHC, unless otherwise provided in the Award Agreement. In the event that an
award constitutes Deferred Compensation, and the settlement of, or distribution
of benefits under, such award is to be triggered solely by a Change in Control,
then with respect to such award, a Change in Control shall be defined as
required under Code Section 409A, as in effect at the time of such
transaction.
ARTICLE 5
— COMMITTEE
Section 5.1 Administration.
This Plan shall be administered by the Committee, which shall be comprised of
the members of the Compensation Committee of the Board of Directors of the
Company, and which shall also be comprised of not less than three Disinterested
Board Members. If the Committee consists of fewer than three Disinterested Board
Members, then the Board shall appoint to the Committee such additional
Disinterested Board Members as shall be necessary to provide for a Committee
consisting of at least three Disinterested Board Members. Any members of the
Committee who do not qualify as Disinterested Board Members shall abstain from
participating in any discussion to make or administer awards that are made to
Participants who at the time of consideration for such award (i) are
persons subject to Section 16 of the Exchange Act, or (ii) are
reasonably anticipated to be Covered Employees during the term of the award. The
Board (or those members of the Board who are “independent directors” under the
corporate governance statutes of any national securities exchange on which the
Company lists its securities) may, in its discretion, take any action and
exercise any power, privilege or discretion conferred on the Committee under
this Plan with the same force and effect under this Plan as if done or exercised
by the Committee.
Section 5.2 Powers of
Committee. The Committee’s administration of this Plan shall be subject
to the following:
(a) Subject to the provisions
of this Plan, the Committee will have the authority and discretion to select
from among the Company’s and its Subsidiaries’ Employees and Directors those
persons who shall receive awards, to determine the time or times of receipt, to
determine the types of awards and the number of shares covered by the awards, to
establish the terms, conditions, performance criteria, restrictions (including
without limitation, provisions relating to non-competition, non-solicitation and
confidentiality), and other provisions of such awards (subject to the
restrictions imposed by Article 6), to cancel or suspend awards and to
reduce, eliminate or accelerate any restrictions or vesting requirements
applicable to an award at any time after the grant of the award.
(b) The Committee will have
the authority and discretion to interpret this Plan, to establish, amend and
rescind any rules and regulations relating to this Plan, and to make all other
determinations that may be necessary or advisable for the administration of this
Plan.
(c) The Committee will have
the authority to define terms not otherwise defined herein.
(d) Any interpretation of this
Plan by the Committee and any decision made by it under this Plan is final and
binding on all persons.
(e) In controlling and
managing the operation and administration of this Plan, the Committee shall take
action in a manner that conforms to the charter and bylaws of the Company and
applicable corporate law.
Section 5.3 Delegation
by Committee. Except to the extent prohibited by applicable law, the
applicable rules of a stock exchange or this Plan, or as necessary to comply
with the exemptive provisions of Rule 16b-3 promulgated under the Exchange
Act or Code Section 162(m), the Committee may allocate all or any portion
of its responsibilities and powers to any one or more of its members and may
delegate all or any part of its responsibilities and powers to any person or
persons selected by it, including: (a) delegating to a committee of one or
more members of the Board who are not “outside directors” within the meaning of
Code Section 162(m), the authority to grant awards under this Plan to
eligible persons who are not persons with respect to whom the Company wishes to
comply with Code Section 162(m); or (b) delegating to a committee of
one or more members of the Board who are not “non-employee directors,” within
the meaning of Rule 16b-3, the authority to grant awards under this Plan to
eligible persons who are not then subject to Section 16 of the Exchange Act. The
acts of such delegatees shall be treated hereunder as acts of the Committee and
such delegatees shall report regularly to the Committee regarding the delegated
duties and responsibilities and any awards so granted. Any such allocation or
delegation may be revoked by the Committee at any time.
Section 5.4 Information
to be Furnished to Committee. As may be permitted by applicable law, the
Company and its Subsidiaries shall furnish the Committee such data and
information as the Committee determines may be required for it to discharge its
duties. The records of the Company and its Subsidiaries as to a Participant’s
employment, termination of employment, leave of absence, reemployment and
compensation shall be conclusive on all persons unless determined by the
Committee to be manifestly incorrect. Subject to applicable law, Participants
and other persons entitled to benefits under this Plan must furnish the
Committee such evidence, data or information as the Committee considers
desirable to carry out the terms of this Plan.
Section 5.5 Committee
Action. The
Committee shall hold such meetings, and may make such administrative rules and
regulations, as it may deem proper. A majority of the members of the Committee
shall constitute a quorum, and the action of a majority of the members of the
Committee present at a meeting at which a quorum is present, as well as actions
taken pursuant to the unanimous written consent of all of the members of the
Committee without holding a meeting, shall be deemed to be actions of the
Committee. All actions of the Committee shall be final and conclusive and shall
be binding upon the Company, Participants and all other interested parties. Any
person dealing with the Committee shall be fully protected in relying upon any
written notice, instruction, direction or other communication signed by a member
of the Committee or by a representative of the Committee authorized to sign the
same in its behalf.
ARTICLE 6
— AMENDMENT AND TERMINATION
Section 6.1 General.
The Board may, as permitted by law, at any time, amend or terminate this Plan,
and may amend any Award Agreement, provided that no amendment or termination
(except as provided in Section 2.4, Section 3.4 and Section 6.2)
may cause the award to violate Code Section 409A or, in the absence of
written consent to the change by the affected Participant (or, if the
Participant is not then living, the affected beneficiary), adversely impair the
rights of any Participant or beneficiary under any award granted under this Plan
prior to the date such amendment is adopted by the Board; provided, however that, no
amendment may (a) materially increase the benefits accruing to Participants
under this Plan; (b) materially increase the aggregate number of securities
that may be issued under this Plan, other than pursuant to Section 3.4; or
(c) materially modify the requirements for participation in this Plan, unless
the amendment under (a), (b) or (c) above is approved by the Company’s
stockholders.
Section 6.2 Amendment
to Conform to Law, Accounting Changes and Bank Regulation.
Notwithstanding any provision in this Plan or any Award Agreement to the
contrary, the Committee may amend this Plan or an Award Agreement, to take
effect retroactively or otherwise, as deemed necessary or advisable for the
purpose of (i) conforming this Plan or the Award Agreement to any present
or future law or regulation relating to plans of this or similar nature
(including, but not limited to, Code Section 409A), (ii) revising this
Plan in response to amendments required by any bank regulatory agency, or
(iii) avoiding an accounting treatment resulting from an accounting
pronouncement or interpretation thereof issued by the SEC or Financial
Accounting Standards Board subsequent to the adoption of this Plan or the making
of the award affected thereby, which, in the sole discretion of the Committee,
may materially and adversely affect the financial condition or results of
operations of the Company. By accepting an award under this Plan, each
Participant agrees and consents to any amendment made pursuant to this
Section 6.2 or Section 2.4 to any award granted under this Plan
without further consideration or action.
ARTICLE 7
— GENERAL TERMS
Section 7.1 No
Implied Rights.
(a) No Rights to Specific Assets.
Neither a Participant nor any other person shall by reason of
participation in this Plan acquire any right in or title to any assets, funds or
property of the Company or any Subsidiary whatsoever, including any specific
funds, assets, or other property that the Company or any Subsidiary, in its sole
discretion, may set aside in anticipation of a liability under this Plan. A
Participant shall have only a contractual right to the shares of Stock or
amounts, if any, payable or distributable under this Plan, unsecured by any
assets of the Company or any Subsidiary, and nothing contained in this Plan
shall constitute a guarantee that the assets of the Company or any Subsidiary
shall be sufficient to pay any benefits to any person.
(b) No Contractual Right to Employment
or Future Awards. This Plan does not constitute a contract of employment,
and selection as a Participant will not give any participating Employee the
right to be retained in the employ of the Company or any Subsidiary or any right
or claim to any benefit under this Plan, unless such right or claim has
specifically accrued under the terms of this Plan. No individual shall have the
right to be selected to receive an award under this Plan, or, having been so
selected, to receive a future award under this Plan.
(c) No Rights as a Stockholder.
Except as otherwise provided in this Plan, no award under this Plan shall confer
upon the holder thereof any rights as a stockholder of the Company prior to the
date on which the individual fulfills all conditions for receipt of such
rights.
Section 7.2 Transferability.
Except as otherwise so provided by the Committee, ISOs under this Plan are not
transferable except (i) as designated by the Participant by will or by the
laws of descent and distribution, (ii) to a trust established by the
Participant, if under Code Section 671 and applicable state law, the
Participant is considered the sole beneficial owner of the stock option while
held in the trust, or (iii) between spouses incident to a divorce or
pursuant to a domestic relations order, provided, however, in the case of a
transfer within the meaning of this sub-section (iii), the stock option shall
not qualify as an ISO as of the day of such transfer. The Committee shall have
the discretion to permit the transfer of Non-Qualified Options under this Plan;
provided, however, that
such transfers shall be limited to Immediate Family Members of Participants,
trusts and partnerships established for the primary benefit of such family
members or to charitable organizations, and; provided, further, that such
transfers are not made for consideration to the Participant.
Section 7.3 Designation
of Beneficiaries. A Participant hereunder may file with the Company a
written designation of a beneficiary or beneficiaries under this Plan and may
from time to time revoke or amend any such designation (“Beneficiary
Designation”). Any designation of beneficiary under this Plan shall be
controlling over any other disposition, testamentary or otherwise (unless such
disposition is pursuant to a domestic relations order); provided, however, that if
the Committee is in doubt as to the entitlement of any such beneficiary to any
award, the Committee may determine to recognize only the legal representative of
the Participant, in which case the Company, the Committee and the members
thereof shall not be under any further liability to anyone.
Section 7.4 Non-Exclusivity.
Neither the adoption of this Plan by the Board nor the submission of this Plan
to the stockholders of the Company for approval shall be construed as creating
any limitations on the power of the Board or the Committee to adopt such other
incentive arrangements as either may deem desirable,
including,
without limitation, the granting of restricted stock or stock options otherwise
than under this Plan or an arrangement that is or is not intended to qualify
under Code Section 162(m), and such arrangements may be either generally
applicable or applicable only in specific cases.
Section 7.5 Award
Agreement. Each award granted under this Plan shall be evidenced by an
Award Agreement signed by the Participant to whom the award was granted. A copy
of the Award Agreement, in any medium chosen by the Committee, shall be provided
(or made available electronically) to the Participant.
Section 7.6 Form and
Time of Elections. Unless otherwise specified herein, each election
required or permitted to be made by any Participant or other person entitled to
benefits under this Plan, and any permitted modification, or revocation thereof,
shall be filed with the Company at such times, in such form, and subject to such
restrictions and limitations, not inconsistent with the terms of this Plan, as
the Committee shall require.
Section 7.7 Evidence.
Evidence required of anyone under this Plan may be by certificate, affidavit,
document or other information that the person acting on it considers pertinent
and reliable, and signed, made or presented by the proper party or
parties.
Section 7.8 Tax
Withholding. Where a Participant is entitled to receive shares of Stock
upon the vesting or exercise of an award, the Company shall have the right to
require such Participant to pay to the Company the amount of any tax that the
Company is required to withhold with respect to such vesting or exercise, or, in
lieu thereof, to retain, or to sell without notice, a sufficient number of
shares of Stock to cover the minimum amount required to be withheld. To the
extent determined by the Committee and specified in an Award Agreement, a
Participant shall have the right to direct the Company to satisfy the minimum
required federal, state and local tax withholding by reducing the number of
shares of Stock subject to the stock option (without issuance of such shares of
Stock to the option holder) by a number equal to the quotient of (i) the
total minimum amount of required tax withholding divided by (ii) the excess
of the Fair Market Value of a share of Stock on the exercise date over the
Exercise Price per share of Stock. Provided there are no adverse accounting
consequences to the Company (a requirement to have liability classification of
an award under Statement of Financial Accounting Standards 123(R), “Share-Based
Payment,” is an adverse consequence), a Participant who is not required to have
taxes withheld may require the Company to withhold in accordance with the
preceding sentence as if the award were subject to minimum tax withholding
requirements.
Section 7.9 Action by
Company or Subsidiary. Any action required or permitted to be taken by
the Company or any Subsidiary shall be by resolution of its board of directors,
or by action of one or more members of the Board (including a committee of the
Board) who are duly authorized to act for the Board, or (except to the extent
prohibited by applicable law or applicable rules of any stock exchange) by a
duly authorized officer of the Company or such Subsidiary.
Section 7.10 Successors.
All obligations of the Company under this Plan shall be binding upon and inure
to the benefit of any successor to the Company, whether the existence of such
successor is the result of a direct or indirect purchase, merger, consolidation
or otherwise, of all or substantially all of the business, stock, and/or assets
of the Company.
Section 7.11 Indemnification.
To the fullest extent permitted by law and the Company’s governing documents,
each person who is or shall have been a member of the Committee, or of the
Board, or an officer of the Company to whom authority was delegated in
accordance with Section 5.3, or an Employee of the Company shall be
indemnified and held harmless by the Company against and from any loss
(including amounts paid in settlement), cost, liability or expense (including
reasonable attorneys’ fees) that may be imposed upon or reasonably incurred by
him or her in connection with or resulting from any claim, action, suit, or
proceeding to which he or she may be a party or in which he or she may be
involved by reason of any action taken or failure to act under this Plan and
against and from any and all amounts paid by him or her in settlement thereof,
with the Company’s approval, or paid by him or her in satisfaction of any
judgment in any such action, suit, or proceeding against him or her, provided he
or she shall give the Company an opportunity, at its own expense, to handle and
defend the same before he or she undertakes to handle and defend it on his or
her own behalf, unless such loss, cost, liability, or expense is a result of his
or her own willful misconduct or except as expressly provided by statute. The
foregoing right of indemnification shall not be exclusive of any other rights of
indemnification to which such persons may be entitled under the Company’s
charter or bylaws, as a matter of law, or otherwise, or any power that the
Company may have to indemnify them or hold them harmless.
Section 7.12 No
Fractional Shares. Unless otherwise permitted by the Committee, no
fractional shares of Stock shall be issued or delivered pursuant to this Plan or
any award. The Committee shall determine whether cash or other property shall be
issued or paid in lieu of fractional shares or whether such fractional shares or
any rights thereto shall be forfeited or otherwise eliminated.
Section 7.13 Governing
Law. This Plan, all awards granted hereunder, and all actions taken in
connection herewith shall be governed by and construed in accordance with the
laws of the State of New York without reference to principles of conflict of
laws, except as superseded by applicable federal law. The federal and state
courts located in Oswego County, New York, shall have exclusive jurisdiction
over any claim, action, complaint or lawsuit brought under the terms of this
Plan. By accepting any award under this Plan, each Participant, and any other
person claiming any rights under this Plan, agrees to submit himself, and any
such legal action as he shall bring under this Plan, to the sole jurisdiction of
such courts for the adjudication and resolution of any such
disputes.
Section 7.14 Benefits
Under Other Plans. Except as otherwise provided by the Committee or as
otherwise set forth in a Qualified Retirement Plan, awards to a Participant
(including the grant and the receipt of benefits) under this Plan shall be
disregarded for purposes of determining the Participant’s benefits under, or
contributions to, any Qualified Retirement Plan, non-qualified plan and any
other benefit plans maintained by the Participant’s employer. The term
“Qualified Retirement Plan” means any plan of the Company or a Subsidiary that
is intended to be qualified under Code Section 401(a).
Section 7.15 Validity.
If any provision of this Plan is determined to be illegal or invalid for any
reason, said illegality or invalidity shall not affect the remaining parts
hereof, but this Plan shall be construed and enforced as if such illegal or
invalid provision has never been included herein.
Section 7.16 Notice.
Unless otherwise provided in an Award Agreement, all written notices and all
other written communications to the Company provided for in this Plan, any Award
Agreement, shall be delivered personally or sent by registered or certified
mail, return receipt requested, postage prepaid (provided that international
mail shall be sent via overnight or two-day delivery), or sent by facsimile,
electronic mail or prepaid overnight courier to the Company at its principal
executive office. Such notices, demands, claims and other communications shall
be deemed given:
(a) in the case of delivery by
overnight service with guaranteed next day delivery, the next day or the day
designated for delivery;
(b) in the case of certified
or registered U.S. mail, three (3) days after deposit in the U.S. mail;
or
(c) in the case of facsimile
or electronic mail, the date upon which the transmitting party received
confirmation of receipt; provided, however, that in no
event shall any such communications be deemed to be given later than the date
they are actually received, provided they are actually received. In the event a
communication is not received, it shall only be deemed received upon the showing
of an original of the applicable receipt, registration or confirmation from the
applicable delivery service. Communications that are to be delivered by the U.S.
mail or by overnight service to the Company shall be directed to the attention
of the Company’s Chief Operating Officer and to the Corporate
Secretary.
Section 7.17 Forfeiture
Events.
(a) The Committee may specify
in an Award Agreement that the Participant’s rights, payments, and benefits with
respect to an award shall be subject to reduction, cancellation, forfeiture or
recoupment upon the occurrence of certain specified events, in addition to any
otherwise applicable vesting or performance conditions of an award. Such events
include, but shall not be limited to, termination of employment for cause,
termination of the Participant’s provision of Services to the Company or any
Subsidiary, violation of material Company or Subsidiary policies, breach of
noncompetition, confidentiality, or other restrictive covenants that may apply
to the Participant, or other conduct of the Participant that is detrimental to
the business or reputation of the Company or any Subsidiary.
(b) If the Company is required
to prepare an accounting restatement due to the material noncompliance of the
Company, as a result of misconduct, with any financial reporting requirement
under the securities laws, any Participant who is subject to automatic
forfeiture under Section 304 of the Sarbanes-Oxley Act of 2002 shall
reimburse the Company the amount of any payment in settlement of an award earned
or accrued during the twelve (12)-month period following the first public
issuance or filing with the SEC (whichever just occurred) of the financial
document embodying such financial reporting requirement. In addition, in the
event of an accounting restatement, the Committee in its sole and exclusive
discretion may require that any Participant reimburse the Company for all or any
part of the amount of any payment in settlement of any award granted
hereunder.
ARTICLE 8
— DEFINED TERMS; CONSTRUCTION
Section 8.1 In addition
to the other definitions contained herein, unless otherwise specifically
provided in an Award Agreement, the following definitions shall
apply:
(a) “10% Stockholder” means an
individual who, at the time of grant, owns stock possessing more than ten
percent (10%) of the total combined voting power of all classes of stock of the
Company.
(b) “Award Agreement” means
the document (in whatever medium prescribed by the Committee) that evidences the
terms and conditions of an award under this Plan. Such document is referred to
as an agreement regardless of whether Participant signature is
required.
(c) “Board” means the Board of
Directors of the Company.
(d) “Cause” means (i) the
conviction of the Participant of a felony or of any lesser criminal offense
involving moral turpitude; (ii) the willful commission by the Participant
of a criminal or other act that, in the judgment of the Board, will likely cause
substantial economic damage to the Company or any Subsidiary or substantial
injury to the business reputation of the Company or any Subsidiary;
(iii) the commission by the Participant of an act of fraud in the
performance of his duties on behalf of the Company or any Subsidiary;
(iv) the continuing willful failure of the Participant to perform his
duties to the Company or any Subsidiary (other than any such failure resulting
from the Participant’s incapacity due to physical or mental illness) after
written notice thereof; or (v) an order of a federal or state regulatory
agency or a court of competent jurisdiction requiring the termination of the
Participant’s Service with the Company. Notwithstanding the foregoing, if the
Participant is subject to a written employment agreement (or other similar
written agreement) with the Company or a Subsidiary that provides a definition
of termination for “Cause,” then, for purposes of this Plan, the term “Cause”
shall have meaning set forth in such agreement.
(e) “Change in Control” has
the meaning ascribed to it in Section 4.2.
(f) “Code” means the Internal
Revenue Code of 1986, as amended, and any rules, regulations and guidance
promulgated thereunder, as modified from time to time.
(g) “Code Section 409A”
means the provisions of Section 409A of the Code and any rules, regulations
and guidance promulgated thereunder, as modified from time to time.
(h) “Committee” means the
Committee acting under Article 5.
(i) “Covered Employee” has the
meaning given the term in Code Section 162(m), and shall also include any
other Employee who may become a Covered Employee prior to the vesting date of an
award, as the Committee may determine in its sole discretion.
(j) “Director” means a member
of the Board of Directors of the Company or a Subsidiary, and also includes
advisory directors and directors emeritus.
(k) “Disability” or “Disabled”
means that a Participant: (i) is unable to engage in any substantial
gainful activity by reason of any medically determinable physical or mental
impairment which can be expected to result in death or can be expected to last
for a continuous period of not less than twelve (12) months; or
(ii) is, by reason of any medically determinable physical or mental
impairment which can be expected to result in death or can be expected to last
for a continuous period of not less than twelve (12) months, receiving
income replacement benefits for a period of not less than three (3) months
under an accident and health plan covering the Company’s Employees.
Notwithstanding the foregoing, if the Participant is subject to a written
employment agreement (or other similar written agreement) with the Company or a
Subsidiary that provides a definition of “Disability” or “Disabled,” then for
purposes of this Plan, the terms “Disability” or “Disabled” shall have meaning
set forth in such agreement. Except to the extent prohibited under Code
Section 409A, if applicable, the Committee shall have discretion to
determine if a termination due to Disability has occurred.
(l) “Disinterested Board
Member” means a member of the Board who: (i) is not a current Employee of
the Company or a Subsidiary, (ii) is not a former employee of the Company
who receives compensation for prior services (other than benefits under a
tax-qualified retirement plan) during the taxable year, (iii) has not been
an officer of the Company, (iv) does not receive remuneration from the
Company or a Subsidiary, either directly or indirectly, in any capacity other
than as a Director except in an amount for which disclosure would not be
required pursuant to Item 404 of SEC Regulation S-K in accordance with
the proxy solicitation rules of the SEC, as amended or any successor provision
thereto, and (v) does not possess an interest in any other transaction, and
is not engaged in a business relationship for which disclosure would be required
pursuant to Item 404(a) of SEC Regulation S-K under the proxy solicitation
rules of the SEC, as amended or any successor provision thereto. The term
Disinterested Board Member shall be interpreted in such manner as shall be
necessary to conform to the requirements of section 162(m) of the Code, Rule
16b-3 promulgated under the Exchange Act and the corporate governance standards
imposed on compensation committees under the listing requirements imposed by any
national securities exchange on which the Company lists or seeks to list its
securities.
(m) “Employee” means any
person employed by the Company or any Subsidiary. Directors who are also
employed by the Company or a Subsidiary shall be considered Employees under this
Plan.
(n) “Exchange Act” means the
Securities Exchange Act of 1934, as amended from time to time.
(o) “Excluded Transaction”
means (i) a plan of reorganization, merger, consolidation or similar
transaction that would result in the Voting Securities of the Company
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into Voting Securities of the
surviving corporation or any parent thereof) at least 50% of the combined voting
power of the Voting Securities of the entity surviving the plan of
reorganization, merger, consolidation or similar transaction (or the parent of
such surviving entity) immediately after such plan of reorganization, merger,
consolidation or similar transaction; and (ii) a second-step conversion of
the MHC.
(p) “Exercise Price” means the
price established with respect to a stock option pursuant to
Section 2.2.
(q) “Fair Market Value” means,
with respect to a share of Stock on a specified date:
(i) the final reported sales
price on the date in question (or if there is no reported sale on such date, on
the last preceding date on which any reported sale occurred) as reported in the
principal consolidated reporting system with respect to securities listed or
admitted to trading on the principal United States securities exchange on which
the shares of Stock are listed or admitted to trading, as of the close of the
market in New York City and without regard to after-hours trading activity;
or
(ii) if the shares of Stock are
not listed or admitted to trading on any such exchange, the closing bid
quotation with respect to a share of Stock on such date, as of the close of the
market in New York City and without regard to after-hours trading activity, or,
if no such quotation is provided, on another similar system, selected by the
Committee, then in use; or
(iii) if (i) and
(ii) are not applicable, the Fair Market Value of a share of Stock as the
Committee may determine in good faith and in accordance with Code
Section 422 and the applicable requirement of Code Section 409A and
the regulations promulgated thereunder. For purposes of the exercise of a stock
option, Fair Market Value on such date shall be the date a notice of exercise is
received by the Company, or if not a day on which the market is open, the next
day that it is open.
(r) Following a Change in
Control, a termination of employment by an Employee Participant shall be deemed
a termination of employment for “Good Reason” as a result of the Participant’s
resignation from the employ of the Company or any Subsidiary upon the occurrence
of any of the following events: (i) the failure of the Company or
Subsidiary to appoint or re-appoint or elect or re-elect the Employee
Participant to the position(s) with the Company or Subsidiary held immediately
prior to the Change in Control; (ii) a material change in the functions,
duties or responsibilities of the Employee Participant compared to those
functions, duties or responsibilities in effect immediately prior to a Change in
Control; (iii) any reduction of the rate of the Employee Participant’s base
salary in effect immediately prior to the Change in Control; (iv) any
failure (other than due to reasonable administrative error that is cured
promptly upon notice) to pay any portion of the Employee Participant’s
compensation as and when due; (v) any change in the terms and conditions of
any compensation or benefit program in which the Employee Participant
participated immediately prior to the Change in Control which, either
individually or together with other changes, has a material adverse effect on
the aggregate value of his total compensation package; or (vi) a change in
the Employee Participant’s principal place of employment, without his consent,
to a place that is both more than twenty-five (25) miles away from the
Employee Participant’s principal residence and more than fifteen (15) miles
away from the location of the Employee Participant’s principal executive office
prior to the Change in Control.
(s) “Immediate Family Member”
means with respect to any Participant: (i) any of the Participant’s
children, stepchildren, grandchildren, parents, stepparents, grandparents,
spouses, former spouses, siblings, nieces, nephews, mothers-in-law,
fathers-in-law, sons-in-law, daughters-in-law, brothers-in-law or
sisters-in-law, including relationships created by adoption; (ii) any
natural person sharing the Participant’s household (other than as a tenant or
employee, directly or indirectly, of the Participant); (iii) a trust in
which any combination of the Participant and persons described in section
(i) and (ii) above own more than fifty percent (50%) of the beneficial
interests; (iv) a foundation in which any combination of the Participant
and persons described in sections (i) and (ii) above control
management of the assets; or (v) any other corporation, partnership,
limited liability company or other entity in which any combination of the
Participant and persons described in sections (i) and (ii) above
control more than fifty percent (50%) of the voting interests.
(t) “Incumbent Directors”
means:
(i) the individuals who,
on the date hereof, constitute the Board; and
(ii) any new Director
whose appointment or election by the Board or nomination for election by the
Company’s stockholders was approved or recommended: (A) by the vote of at
least two-thirds of the Whole Board, with at least two-thirds of the Incumbent
Directors then in office voting in favor of such approval or recommendation; or
(B) by a Nominating Committee of the Board whose members were appointed by
the vote of at least two-thirds of the Whole Board, with at least two-thirds of
the Incumbent Directors then in office voting in favor of such
appointments
(u) “Involuntary Termination
of Employment” means the Termination of Service by the Company or Subsidiary
other than a termination for Cause, or termination of employment by a
Participant Employee for Good Reason.
(v) “ISO” has the meaning
ascribed to it in Section 2.1(a).
(w) “MHC” means Pathfinder
Bancorp, MHC.
(x) “Non-Qualified Option”
means the right to purchase shares of stock that is either (i) granted to a
Participant who is not an Employee, or (ii) granted to an Employee who is
either not designated by the Committee to be an ISO or does not satisfy the
requirements of Section 422 of the Code.
(y) “Participant” means any
individual who has received, and currently holds, an outstanding award under
this Plan.
(z) “Retirement” means
retirement from employment as an Employee or Service as a Director on or after
the occurrence of any of the following:
(i) attainment
of age 65; or
(ii) attainment
of age 55 with 15 years of Service; or
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(iii)
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with
respect to a Director only, the attainment of age 60 with 10 continuous
Years of Service.
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Years of
employment as an Employee or Service as a Director shall be aggregated for the
purposes of this definition for any years of employment as an Employee or
Service as a Director that did not occur simultaneously.
(aa) “SEC” means the
Securities and Exchange Commission.
(bb) “Securities Act” means
the Securities Act of 1933, as amended from time to time.
(cc) “Service” means service
as an Employee or non-employee Director of the Company or a Subsidiary, as the
case may be, and shall include service as a director emeritus or advisory
director.
(dd) “Stock” means the common
stock of the Company, $0.10 par value per share.
(ee) “Subsidiary” means any
corporation, affiliate, bank or other entity that would be a subsidiary
corporation with respect to the Company as defined in Code Section 424(f) and,
other than with respect to an ISO, shall also mean any partnership or joint
venture in which the Company and/or other Subsidiary owns more than fifty
percent (50%) of the capital or interests in the profits.
(ff) “Termination of Service”
means the first day occurring on or after a grant date on which the Participant
ceases to be an Employee or Director of the Company or any Subsidiary,
regardless of the reason for such cessation, subject to the
following:
(i) The
Participant’s cessation as an Employee shall not be deemed to occur by reason of
the transfer of the Participant between the Company and a Subsidiary or between
two Subsidiaries.
(ii) The Participant’s cessation
as an Employee shall not be deemed to occur by reason of the Participant’s being
on a bona fide leave of absence from the Company or a Subsidiary approved by the
Company or Subsidiary otherwise receiving the Participant’s services, provided
such leave of absence does not exceed six months, or if longer, so long as the
Employee retains a right to reemployment with the Company or Subsidiary under an
applicable statute or by contract. For these purposes, a leave of absence
constitutes a bona fide leave of absence only if there is a reasonable
expectation that the Employee will return to perform services for the Company or
Subsidiary. If the period of leave exceeds six (6) months and the Employee
does not retain a right to reemployment under an applicable statute or by
contract, the employment relationship is deemed to terminate on the first day
immediately following such six (6) month period. For purposes of this
sub-section (hh), to the extent applicable, an Employee’s leave of absence shall
be interpreted by the Committee in a manner consistent with Treasury
Regulation Section 1.409A-1(h)(1). The employment relationship of a
Participant shall be treated as continuing intact for any period that the
Participant is on military or sick leave or other bona fide leave of absence,
provided that such leave does not exceed ninety (90) day as, or if longer,
as long as the Employee’s right to reemployment is guaranteed either by statute
or contract.
(iii) If, as a result of a sale or
other transaction, the Subsidiary for whom Participant is employed (or to whom
the Participant is providing services) ceases to be a Subsidiary, and the
Participant is not, following the transaction, an Employee of the Company or an
entity that is then a Subsidiary, then the occurrence of such transaction shall
be treated as the Participant’s Termination of Service caused by the Participant
being discharged by the entity for whom the Participant is employed or to whom
the Participant is providing services.
(iv) Except to the extent Code
Section 409A may be applicable to an Award, and subject to the foregoing
paragraphs of this sub-section (hh),the Committee shall have discretion to
determine if a Termination of Service has occurred and the date on which it
occurred. In the event that any award under this Plan constitutes Deferred
Compensation (as defined in Section 2.5 hereof), the term Termination of
Service shall be interpreted by the Committee in a manner consistent with the
definition of “Separation from Service” as defined under Code Section 409A
and under Treasury Regulation Section 1.409A-1(h)(ii). For purposes of
this Plan, a “Separation from Service” within the meaning of Code
Section 409A shall have occurred if the Bank and Participant reasonably
anticipate that no further Services will be performed by the Participant after
the date of the Termination of Service (whether as an employee or as an
independent contractor) or the level of further Services performed will not
exceed 49% of the average level of bona fide Services in the 36 months
immediately preceding the Termination of Service. If a Participant is a
“Specified Employee,” as defined in Code Section 409A and any payment to be
made hereunder shall be determined to be subject to Code Section 409A, then
if required by Code Section 409A, such payment or a portion of such payment
(to the minimum extent possible) shall be delayed and shall be paid on the first
day of the seventh month following Participant’s Separation from
Service.
(v) With respect to a Participant
Director, cessation as a Director will not be deemed to have occurred if the
Participant continues as a director emeritus or advisory director.
(gg) “Voting Securities” means
any securities that ordinarily possess the power to vote in the election of
directors without the happening of any pre-condition or
contingency.
(hh) “Whole Board” means the
total number of Directors that the Company would have if there were no vacancies
on the Board at the time the relevant action or matter is presented to the Board
for approval.
Section 8.2 In this Plan,
unless otherwise stated or the context otherwise requires, the following uses
apply:
(a) actions permitted under
this Plan may be taken at any time and from time to time in the actor’s
reasonable discretion;
(b) references to a statute
shall refer to the statute and any successor statute, and to all regulations
promulgated under or implementing the statute or its successor, as in effect at
the relevant time;
(c) in computing periods from
a specified date to a later specified date, the words “from” and “commencing on”
(and the like) mean “from and including,” and the words “to,” “until” and
“ending on” (and the like) mean “to, but excluding”;
(d) references to a
governmental or quasi-governmental agency, authority or instrumentality shall
also refer to a regulatory body that succeeds to the functions of the agency,
authority or instrumentality;
(e) indications of time of day
mean Eastern Standard Time;
(f) “including” means
“including, but not limited to”;
(g) all references to
sections, schedules and exhibits are to sections, schedules and exhibits in or
to this Plan unless otherwise specified;
(h) all words used in this
Plan will be construed to be of such gender or number as the circumstances and
context require;
(i) the captions and headings
of articles, sections, schedules and exhibits appearing in or attached to this
Plan have been inserted solely for convenience of reference and shall not be
considered a part of this Plan nor shall any of them affect the meaning or
interpretation of this Plan or any of its provisions;
(j) any reference to a
document or set of documents in this Plan, and the rights and obligations of the
parties under any such documents, shall mean such document or documents as
amended from time to time, and any and all modifications, extensions, renewals,
substitutions or replacements thereof; and
(k) all accounting terms not
specifically defined herein shall be construed in accordance with generally
accepted accounting principles (GAAP).