SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
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Filed by a Party other than the Registrant |_|
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|_| Preliminary Proxy Statement
|_| Confidential, for Use of the Commission Only
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|X| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to ss.240.14a-11(c) or ss.240.14a-12
First Niagara Financial Group, 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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First Niagara Financial Group, Inc.
6950 South Transit Road
P.O. Box 514
Lockport, New York 14095-0514
March 28, 2001
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
First Niagara Financial Group, Inc. (the "Company"). Our Annual Meeting will be
held at Sean Patrick's Banquet Facility, 3480 Millersport Highway, Getzville,
New York, on Tuesday, May 1, 2001 at 10:00 a.m.
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 the operations of the Company. Directors and officers of the Company will be
present to respond to questions that stockholders may have. Also enclosed for
your review is our Annual Report to Stockholders, which contains detailed
information concerning the activities and operating performance of the Company.
The business to be conducted at the Annual Meeting consists of the
election of three directors, and the ratification of the appointment of
independent auditors for the year ending December 31, 2001. In addition, a
stockholder proposal has been submitted for consideration by stockholders. The
Board of Directors of the Company unanimously recommends a vote "FOR" the
election of directors, and "FOR" the ratification of the appointment of KPMG LLP
as the Company's independent auditors. For the reasons set forth in the Proxy
Statement, the Board of Directors unanimously recommends a vote "AGAINST" the
stockholder proposal.
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,
William E. Swan
Chairman, President and
Chief Executive Officer
First Niagara Financial Group, Inc.
6950 South Transit Road
P.O. Box 514
Lockport, New York 14095-0514
(716) 625-7500
NOTICE OF
ANNUAL MEETING OF STOCKHOLDERS
To Be Held On May 1, 2001
Notice is hereby given that the Annual Meeting of Stockholders of First
Niagara Financial Group, Inc. (the "Company") will be held at Sean Patrick's
Banquet Facility, 3480 Millersport Highway, Getzville, New York, on May 1, 2001
at 10:00 a.m., Eastern Daylight 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. The election of three directors;
2. The ratification of the appointment of KPMG LLP as independent
auditors for the Company for the year ending December 31, 2001;
3. A stockholder proposal to take whatever actions are necessary to
enhance stockholder value; and
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, including all adjournments of the Annual Meeting.
Stockholders of record at the close of business on March 19, 2001, are the
stockholders entitled to vote at the Annual Meeting, and any adjournments
thereof. A list of stockholders entitled to vote at the Annual Meeting will be
available at 6950 South Transit Road, Lockport, New York, for a period of ten
days prior to the Annual Meeting and will also be available for inspection at
the meeting itself.
EACH STOCKHOLDER, 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.
By Order of the Board of Directors
March 28, 2001 Robert N. Murphy
Lockport, New York Corporate Secretary
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IMPORTANT: THE PROMPT RETURN OF PROXIES WILL SAVE THE COMPANY THE EXPENSE OF
FURTHER REQUESTS FOR PROXIES. A SELF-ADDRESSED ENVELOPE IS ENCLOSED FOR YOUR
CONVENIENCE. NO POSTAGE IS REQUIRED IF MAILED WITHIN THE UNITED STATES.
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PROXY STATEMENT
First Niagara Financial Group, Inc.
6950 South Transit Road
P.O. Box 514
Lockport, New York 14095-0514
(716) 625-7500
ANNUAL MEETING OF STOCKHOLDERS
May 1, 2001
This Proxy Statement is furnished in connection with the solicitation of
proxies on behalf of the Board of Directors of First Niagara Financial Group,
Inc. (the "Company") to be used at the Annual Meeting of Stockholders of the
Company (the "Annual Meeting"), which will be held at Sean Patrick's Banquet
Facility, 3480 Millersport Highway, Getzville, New York, on May 1, 2001, at
10:00 a.m., Eastern Daylight Time, and all adjournments of the Annual Meeting.
First Niagara Financial Group, Inc. is the holding company of three community
banks, First Niagara Bank, Cayuga Bank and Cortland Savings Bank. The
accompanying Notice of Annual Meeting of Stockholders and this Proxy Statement
are first being mailed to stockholders on or about April 2, 2001.
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REVOCATION OF PROXIES
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Stockholders who execute proxies in the form solicited hereby 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 of
the Company will be voted in accordance with the directions given thereon. Where
no instructions are indicated, validly executed proxies will be voted "FOR"
Proposal 1 and Proposal 2, and "AGAINST" Proposal 3 set forth in this proxy
statement for consideration at the Annual Meeting.
A proxy may be revoked at any time prior to its exercise by the filing of
a written notice of revocation with the Secretary of the Company, by delivering
to the Company a duly executed proxy bearing a later date, or by attending the
Annual Meeting and voting in person. However, if you are a stockholder whose
shares are not registered in your own name, you will need appropriate
documentation from your record holder to vote personally at the Annual Meeting.
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VOTING SECURITIES
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Holders of record of the Company's common stock, par value $.01 per share
(the "Common Stock") as of the close of business on March 19, 2001 (the "Record
Date") are entitled to one vote for each share then held, except as described
below. As of the Record Date, the Company had 25,547,100 shares of Common Stock
issued and outstanding (exclusive of Treasury shares). The presence, in person
or by proxy, of at least a majority of the total number of shares of Common
Stock outstanding and entitled to vote is necessary to constitute a quorum at
this Annual Meeting. In the event there are not sufficient votes for a quorum,
or to approve or ratify any matter being presented, at the time of this Annual
Meeting, the Annual Meeting may be adjourned in order to permit the further
solicitation of proxies.
In accordance with the provisions of the Company's Certificate of
Incorporation, record holders of Common Stock who beneficially own in excess of
5% of the outstanding shares of Common Stock (the "Limit") are not entitled to
any vote with respect to the shares held in excess of the Limit. The Company's
Certificate of Incorporation authorizes the Board of Directors (i) to make all
determinations necessary to implement and apply the Limit, including determining
whether persons or entities are acting in concert, and (ii) to demand that any
person who is reasonably believed to beneficially own stock in excess of the
Limit supply information to the Company to enable the Board to implement and
apply the Limit. This Limit does not apply to shares of Common Stock held by
First Niagara Financial Group, MHC.
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VOTING PROCEDURES AND METHOD OF COUNTING VOTES
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As to the election of Directors, the proxy card being provided by the
Board of Directors enables a stockholder to vote FOR the election of the three
nominees proposed by the Board, or to WITHHOLD AUTHORITY to vote for the
nominees being proposed. Under Delaware law and the Company's Certificate of
Incorporation and Bylaws, Directors are elected by a plurality of votes cast,
without regard to either broker non-votes, or proxies as to which authority to
vote for the nominees being proposed is withheld.
As to the ratification of KPMG LLP as independent auditors of the Company,
by checking the appropriate box, a stockholder may: (i) vote FOR the item; (ii)
vote AGAINST the item; or (iii) ABSTAIN from voting on such item. Under the
Company's Certificate of Incorporation and Bylaws, the ratification of this
matter shall be determined by a majority of the votes cast, without regard to
broker non-votes, or proxies marked "ABSTAIN."
As to the approval of the stockholder proposal, by checking the
appropriate box, a stockholder may: (i) vote FOR the item; (ii) vote AGAINST the
item; or (iii) ABSTAIN from voting on such item. Under the Company's Certificate
of Incorporation and Bylaws, the approval of this matter shall be determined by
a majority of the votes cast, without regard to broker non-votes, or proxies
marked "ABSTAIN".
Proxies solicited hereby will be returned to the Company, and will be
tabulated by inspectors of election designated by the Board.
2
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
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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 March 19, 2001, the shares of Common Stock beneficially
owned by persons who beneficially own more than five percent of the Company's
outstanding shares of Common Stock, including shares owned by First Niagara
Financial Group, MHC and its directors and executive officers.
Amount of Shares
Owned and Nature Percent of Shares
Name and Address of of Beneficial of Common Stock
Beneficial Owners Ownership Outstanding
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First Niagara Financial Group, MHC 15,849,650 62.1%
6950 S. Transit Road
Lockport, New York 14094
First Niagara Financial Group, MHC 16,719,780 65.4%
and all Directors and Executive Officers
as a Group (16 persons)(1)
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(1) The Company's executive officers and directors are also executive
officers and directors of the Mutual Holding Company.
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PROPOSAL I - ELECTION OF DIRECTORS
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The Company's Board of Directors consists of eleven members. The Company's
Bylaws provide that approximately one-third of the Directors are to be elected
annually. Directors of the Company are generally elected to serve for a
three-year term or until their respective successors shall have been elected and
shall qualify. Three Directors will be elected at the Company's Annual Meeting
of Stockholders to serve for a three-year period and until their respective
successors shall have been elected and shall qualify. The Board of Directors has
nominated Messrs. Assad, Kaufman, and Swan for election as Directors.
The following table sets forth certain information, as of March 19, 2001,
regarding 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 the nominees)
will be voted at the Meeting for the election of the nominees identified below.
If the nominees are 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 the
nominees might be unable to serve, if elected. Except as indicated herein, there
are no arrangements or understandings between the nominees and any other person
pursuant to which such nominees were selected.
3
Shares
Position(s) Held With Director Expiration Beneficially Percent of
Name the Company Age Since(1) of Term Owned(2) Class
- ------------------- --------------------- --- -------- ---------- ------------ ----------
NOMINEES
Gordon P. Assad Director 52 1995 2004 30,575(3) *
Harvey D. Kaufman Director 65 2000(4) 2004 10,000 *
William E. Swan Chairman, President and 53 1996 2004 218,389(5) *
Chief Executive Officer
DIRECTORS CONTINUING IN OFFICE
John J. Bisgrove, Jr. Director 61 2000(6) 2002 -- *
James W. Currie Director 59 1987 2002 64,275(3) *
B. Thomas Mancuso Director 45 1990 2002 31,445(3) *
Robert G. Weber Director 63 1996 2002 48,375(3) *
Christa R. Caldwell Director 66 1986 2003 35,275(3) *
Gary B. Fitch Director 65 1981 2003 26,275(3) *
Daniel W. Judge Director 58 1992 2003 44,275(3) *
James Miklinski Director 57 1996 2003 50,825(3) *
EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS
Paul J. Kolkmeyer Executive Vice President 48 N/A N/A 126,105(7) *
Kathleen P. Monti Executive Vice President 52 N/A N/A 79,847(8) *
G. Gary Berner Executive Vice President 53 N/A N/A 76,606(9) *
Frank J. Polino Senior Vice President 42 N/A N/A 6,363(10) *
Daniel A. Dintino, Jr. Senior Vice President 38 N/A N/A 21,500(11) *
All directors and executive
officers as a group (16 persons) -- -- -- -- 870,130(12)(13) 3.41%
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* Less than 1%
(1) Reflects initial appointment to the Board of Directors of First Niagara
Bank or its predecessors, except as otherwise indicated.
(2) Unless otherwise indicated, each person effectively exercises sole (or
shared with spouse) voting and dispositive power as to the shares
reported.
(3) Includes 13,400 shares subject to options granted to each outside
director, which options are currently exercisable. Also includes 10,875
shares granted to each outside director under the RRP which are subject to
future vesting, but as to which voting may currently be directed.
(4) Mr. Kaufman was appointed to the Board in accordance with the agreement
and plan of merger between the Company and CNY Financial Corporation. Mr.
Kaufman also serves as a director of Cortland Savings Bank, a subsidiary
of the Company.
(5) Includes 89,400 shares subject to options which are currently exercisable
and 64,000 shares granted under the RRP which are subject to future
vesting, but as to which voting may currently be directed.
(6) Mr. Bisgrove was appointed to the Board in accordance with the agreement
and plan of merger between the Company and Iroquois Bancorp, Inc. Mr.
Bisgrove also serves as a director of Cayuga Bank, a subsidiary of the
Company.
(7) Includes 44,600 shares subject to options which are currently exercisable,
and 32,000 shares granted under the RRP which are subject to future
vesting, but as to which voting may currently be directed.
(8) Includes 32,000 shares subject to options which are currently exercisable,
and 22,800 shares granted under the RRP which are subject to future
vesting, but as to which voting may currently be directed.
(9) Includes 30,300 shares subject to options which are currently exercisable,
and 21,500 shares granted under the RRP which are subject to future
vesting, but as to which voting may currently be directed.
(10) Includes 1,650 shares subject to options which are currently exercisable.
(11) Includes 20,000 shares granted under the RRP which are subject to future
vesting, but as to which voting may currently be directed.
(12) Includes 309,150 shares subject to options which are currently
exercisable.
(13) Includes 8,373 shares of Common Stock allocated to the accounts of
executive officers under the ESOP and excludes the remaining 1,070,749
shares of Common Stock, or 4.2% of the shares of common stock outstanding,
owned by the ESOP for the benefit of the employees. The ESOP Committee
administers the ESOP. Under the terms of the ESOP, shares of Common Stock
allocated to the account of employees are voted in accordance with the
instructions of the respective employees. Unallocated shares are voted by
the ESOP Trustees in the manner calculated to most accurately reflect the
instructions they have received from the participants regarding the
allocated shares, unless their fiduciary duties require otherwise.
4
The business experience for the past five years of each of the Company's
directors and executive officers is as follows:
Gordon P. Assad is the President and Chief Executive Officer of Erie &
Niagara Insurance Association and has served in that position since 1972.
John J. Bisgrove, Jr. is retired and was the President of Red Star Express
Lines.
Christa R. Caldwell is retired and was the director of the Lockport Public
Library from 1967 to 1996.
James W. Currie is the President of Ag Pak, Inc., a manufacturer of
produce packaging machines, and has served in that position since 1974.
Gary B. Fitch is the Owner-Manager of Ontario Orchards, Inc., and has
served in that position since 1976. Mr. Fitch also serves as the Executive
Secretary of Agricultural Affiliates, Inc. and has served in that position since
1991.
Daniel W. Judge is the President of Dansam, Inc., a business management
services firm. He has been in that position since 1990. He is also Vice
President of CBY.com, LLC, an online marketplace for cooperatives.
Harvey D. Kaufman is retired and was the Superintendent for the Cortland
City School District.
B. Thomas Mancuso is the President of Joseph L. Mancuso & Sons, Inc., a
real estate development company.
James Miklinski is the General Manager of Niagara Milk Cooperative, and
has served in that position since 1990.
William E. Swan has served as President and Chief Executive Officer since
July 1989. In January 2001, Mr. Swan was also appointed Chairman of the Board.
Robert G. Weber is a retired Buffalo Office Managing Partner of KPMG LLP
where he served from 1959 to 1995.
Executive Officers Who Are Not Directors
Paul J. Kolkmeyer was elected Executive Vice President and Chief Banking
Officer in February 2001. He served as Executive Vice President and Chief
Operating Officer from May 2000 until February 2001. From 1995 to 2000, he
served as Executive Vice President and Chief Financial Officer of First Niagara
Bank.
Kathleen P. Monti was elected Executive Vice President and Chief
Administrative Officer in February 2001. Since 1999, she served as Executive
Vice President of Human Resources and Administration of First Niagara Bank. From
1995 to 1999 Ms. Monti served as Senior Vice President of Human Resources.
5
G. Gary Berner was elected Executive Vice President and Chief Lending
Officer in February 2001. Prior to that, he served as Senior Vice President and
Chief Lending Officer of First Niagara Bank since 1992.
Frank J. Polino was elected Senior Vice President and Chief Information
Officer in February 2001. Mr. Polino joined First Niagara Bank in March 1999 as
the Vice President of Information Technology. Prior to joining the Company, he
was a Business Development Manager for IKON Technology Services, Inc. and Unisys
Corporation.
Daniel A. Dintino, Jr. has served as Senior Vice President and Chief
Financial Officer since October 2000. From 1999 to October 2000, he was Senior
Vice President - Performance Management at HSBC Bank. Prior to 1999, he served
as Senior Vice President - Mortgage Operations at HSBC Bank.
Meetings of the Board and Committees of the Board
The Board of Directors of the Company meets quarterly, or more often as
may be necessary. The Board of Directors of the Company has an executive
committee, an audit committee, a compensation committee and a governance
committee, formerly the nominating committee.
The Board of Directors of the Company met six times during 2000. No
Director attended fewer than 75% in the aggregate of the total number of Board
meetings held and the total number of committee meetings on which he or she
served during 2000, including Board and committee meetings of any subsidiary
bank in which he or she served.
The Executive Committee meets as necessary when the Board is not in
session to exercise general control and supervision in all matters pertaining to
the interests of First Niagara Financial Group, subject at all times to the
direction of the Board of Directors. The Executive Committee met ten times in
2000. Messrs. Weber (Chairman), Assad, Judge, Miklinski and Swan comprise the
current membership of the Executive Committee.
The Audit Committee meets at least quarterly to examine and approve the
Company's audit report, to review and recommend the appointment of independent
auditors, to review the internal audit function and internal accounting
controls, to review and approve audit policies and any other matters as deemed
appropriate. The Audit Committee met four times in 2000. Messrs. Currie,
Bisgrove, Fitch, Kaufman and Weber comprise the current membership of the Audit
Committee.
The Compensation Committee reviews and administers compensation, officer
promotions, benefits and other matters of personnel policy and practice. The
Compensation Committee met thirteen times during 2000. Messrs. Assad, Mancuso,
Judge and Weber comprise the current membership of the Compensation Committee.
The Governance Committee was formed for the purpose of identifying,
evaluating and recommending potential candidates for election to the Board.
During 2000, the Governance Committee met three times. In 2001, the
responsibilities of the Governance Committee were expanded to include reviewing
the effectiveness of board meetings and board committees and to
6
establish and review board governance guidelines. Messrs. Miklinski, Judge, Swan
and Weber and Ms. Caldwell currently serve as the members of the Governance
Committee.
Audit Committee Report
In accordance with rules recently established by the SEC, the Audit
Committee has prepared the following report for inclusion in the proxy
statement. Each member of the Audit Committee satisfies the definition of
independent director as established by the National Association of Securities
Dealers. The Board of Directors has adopted a written charter for the Audit
Committee, which is attached to this proxy statement as Appendix A.
As part of its ongoing activities, the Audit Committee has:
o Reviewed and discussed with management the Company's audited
consolidated financial statements for the fiscal year ended
December 31, 2000;
o Discussed with the independent auditors the matters required
to be discussed by Statement on Auditing Standards No. 61,
Communications with Audit Committees, as amended; and
o Received the written disclosures and the letter from the
independent auditors required by Independence Standards Board
Standard No. 1, Independence Discussions with Audit
Committees, and has discussed with the independent auditors
their 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 the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 2000 and be filed with the SEC.
This report shall not be deemed incorporated by reference by any general
statement incorporating by reference this proxy statement into any filing under
the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934,
as amended, except to the extent that the Company specifically incorporates this
information by reference, and shall not otherwise be deemed filed under such
Acts.
The Audit Committee
James W. Currie John J. Bisgrove, Jr.
Gary B. Fitch Harvey D. Kaufman
Robert G. Weber
7
Compensation of Directors
Fees. Directors of the Company receive a retainer fee of $8,000 ($10,000
for the Chairman of the Executive Committee), plus a fee of $700 per board
meeting attended and $400 per committee meeting attended. Directors who are also
employees do not receive board fees.
Deferred Fees Plan. The Directors' Deferred Fees Plan ("Deferred Fee
Plan") is a non-qualified deferred compensation plan into which a director can
defer up to 100% of his or her board retainer and fees earned during the
calendar year. All amounts deferred by a Director are fully vested at all times.
Amounts credited to a deferred fee account are invested in equity securities,
fixed income securities, money market accounts, and cash, at the sole discretion
of the Company. Upon cessation of a Director's service with the Company, the
Company will pay the director the amounts credited to his or her account. The
amounts will be paid in a number of substantially equal annual installments, as
selected by the Director at the time the deferral is made.
If the Director dies before all payments have been made, the remaining
payments will be made to the Director's designated beneficiary. In the event of
the Director's death prior to commencement of benefits, the Company shall pay
the director's beneficiary the amounts credited to the benefit of the Director
under the Deferred Fee Plan, in a single lump sum payment or in a number of
substantially equal annual installments as elected by the Director at the time
the election to defer was made. In the event of an unforeseeable emergency that
will result in a severe financial hardship, the Director may request a
distribution of all or part of his or her benefits or may request an
acceleration of benefits that are being paid, as applicable.
Stock Option Plan and Recognition and Retention Plan. Directors are
eligible to participate in the 1999 Stock Option Plan and the 1999 Recognition
and Retention Plan ("RRP"). On May 22, 2000, each Outside Director of the
Company was granted a non-qualified stock option to purchase 12,400 shares of
Common Stock. These options are scheduled to vest at the rate of 20% per year
over a five-year period and will become immediately exercisable upon the
director's death or disability. Similarly, on May 22, 2000, restricted stock
awards were granted to each director with respect to 4,175 shares of Common
Stock. These awards are also scheduled to vest in 20% increments over a
five-year period beginning on May 22, 2001, with accelerated vesting to occur in
the event of the director's death or disability.
8
Executive Compensation
The following table sets forth for the three years ended December 31,
2000, 1999 and 1998, certain information as to the total remuneration paid by
the Company to the Chief Executive Officer as well as the executive officers
other than the Chief Executive Officer who received total annual compensation in
excess of $100,000 (the "Named Executive Officers").
Annual Compensation Long-Term Compensation
- ------------------------------------------------------------- ---------------------------------------------------------------------
Awards Payouts
--------------------------- ---------------------------------------
Year Other Restricted
Name and Ended Annual Stock Options/ LTIP All Other
Principal Position 12/31 Salary Bonus(1) Compensation(2) Awards(3) SARS(#) Payouts Compensation(4)
- ------------------------ ---------- --------- --------- -------------- ---------- ---------- --------- ---------------
William E. Swan 2000 $343,212 $116,102 $ -- $253,750 83,000 $ -- $24,332
Chairman, President and 1999 329,002 133,575 -- 483,750 182,000 -- 87,167
Chief Executive Officer 1998 317,001 87,452 -- -- -- -- 82,242
Paul J. Kolkmeyer 2000 201,059 62,925 -- 126,875 41,000 -- 17,086
Executive Vice President 1999 165,369 55,961 -- 241,875 91,000 -- 44,613
1998 157,963 68,167 -- -- -- -- 41,811
Kathleen P. Monti 2000 139,797 45,162 -- 90,625 30,000 -- 25,899
Executive Vice President 1999 125,674 34,438 -- 172,000 65,000 -- 36,506
1998 115,753 27,404 -- -- -- -- 34,904
G. Gary Berner 2000 152,109 39,193 -- 86,094 28,000 -- 28,863
Executive Vice President 1999 144,809 39,678 -- 161,250 61,750 -- 44,256
1998 138,750 33,148 -- -- -- -- 42,275
Diane Allegro(5) 2000 119,108 -- -- 77,031 25,000 -- 5,943
Senior Vice President 1999 111,877 30,634 -- 150,500 55,250 -- 5,478
1998 106,859 32,527 -- -- -- -- 1,865
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(1) Includes payments under the Management Incentive Program and other
discretionary payments.
(2) Certain members of senior management are provided with the use of an
automobile, club membership dues, and certain other personal benefits. The
aggregate value of such personal benefits did not exceed the lesser of
$50,000 or 10% of the total annual salary and bonus reported for each
officer.
(3) Amounts reported in this column represent the fair value of the restricted
stock awards at the date of the award. Awards granted vest over a five
year period. Dividends paid with respect to all shares awarded are paid to
the recipient of the award. At December 31, 2000, an aggregate of 288,750
shares of restricted stock awards were held by directors and executive
officers which had a market value of $3,121,388
(4) Includes the following: contributions pursuant to the 401(k) Plan of
$5,100, $3,421, $5,100, $5,053 and $4,374 with respect to Messrs. Swan,
Kolkmeyer and Berner and Ms. Monti and Allegro, respectively; split dollar
life insurance premiums of $14,750, $9,875, $19,875, and $19,875 with
respect to Messrs. Swan, Kolkmeyer and Berner and Ms. Monti; income
imputed on group term life insurance in excess of $50,000 per employee of
$1,011, $430, $422, $371 and $$329 with respect to Messrs. Swan, Kolkmeyer
and Berner, and Ms. Monti and Allegro; and $3,471, $3,360, $3,466, $600
and $1,239 for Messrs. Swan, Kolkmeyer and Berner and Ms. Monti and
Allegro, respectively, relating to medical insurance premiums.
(5) Ms. Allegro left the Company's employ effective February 2001.
9
Report of the Compensation Committee on Executive Compensation
Under rules established by the SEC, the Company is required to provide
certain data and information in regard to the compensation and benefits provided
to its Chief Executive Officer and other executive officers. The disclosure
requirements for the Chief Executive Officer and other executive officers
include the use of tables and a report explaining the rationale and
considerations that led to fundamental executive compensation decisions
affecting those individuals.
The Compensation Committee annually reviews and recommends changes to the
compensation levels of the executive officers to the Board of Directors. It is
intended that the executive compensation program will enable the Company to
attract, develop and retain strong executive officers who are capable of
maximizing the Company's performance for the benefit of the stockholders. The
Committee has adopted a compensation strategy that seeks to provide competitive
compensation strongly aligned with the financial and stock performance of the
Company. The compensation program has three key elements: base salary, annual
incentives and long-term incentives.
In 2000, an independent review of the competitiveness of the total
compensation of the executive group was conducted by a nationally recognized
compensation consulting firm. Compensation levels were compared to other
comparably sized national and regional community banks. The review determined
that base salaries and the combination of base salaries and cash incentives
approximated median levels provided by similarly situated community banking
companies.
Base salary and changes to base salary reflect a variety of factors
including the results of the independent review of the competitiveness of the
total compensation program, contribution to the long-term goals of the Company,
and recent results. Each of the Named Executive Officers is a party to an
employment agreement providing for a minimum base salary, which may be
increased, but not decreased. Payouts under the annual incentive plan (the
management incentive plan, or "MIP") are determined by return on equity
performance relative to other similarly situated companies. Individual payouts
are a function of the Company's financial performance and the performance of the
individual executive. The Committee believes that this funding formula provides
a direct link between financial performance and actual compensation. The range
in incentive opportunities under the MIP for executives and all other officers
reflect opportunities that approximate the median of those provided for similar
positions by similarly situated community banks.
On May 18, 1999, the Company's stockholders adopted the Stock Option Plan
and Recognition and Retention Plan for outside directors, executives and other
employees. Awards of stock options and restricted stock were made to executive
officers during 2000. The options are exercisable and the shares vest at the
rate of 20% per year over a five-year period. The Committee believes that
long-term incentives are the most effective way of aligning executive rewards
with the creation of value for the stockholders through stock appreciation.
Stock options and restricted stock awards were allocated by the Committee based
upon the executive officer's level of responsibility and contributions to the
Company. Future awards will be dependent on the Company and individual
performance, as well as competitive market conditions.
10
In making determinations as to Mr. Swan's compensation, the Committee is
operating under the terms of the previously disclosed employment agreement
between Mr. Swan and the Company. Mr. Swan's base salary was increased to
$345,000 in 2000 and he was provided a cash bonus of $116,102, under the terms
of the MIP. During fiscal 2000, and as identified in the Summary Compensation
Table, Mr. Swan was granted 83,000 stock options and 28,000 restricted shares
under the Recognition and Retention Plan. The Compensation Committee determined
these awards based on: a study of other comparable institutions, its philosophy
on the importance of emphasizing equity participation, and its evaluation of the
CEO's long-term contribution to the Company's performance. The Committee took
these actions to recognize the CEO's accomplishments in successfully building an
institution and management team capable of leading a public company and his
ability to manage the ongoing transition and future direction of the Company.
The Compensation Committee
Gordon P. Assad B. Thomas Mancuso
Daniel W. Judge Robert G. Weber
Stock Performance Graph
Set forth hereunder is a stock performance graph comparing (a) the
cumulative total return on the Common Stock for the period beginning with the
last trade of the Company's stock on April 20, 1998, as reported by the Nasdaq
National Market, through December 31, 2000, (b) the cumulative total return on
stocks included in the Nasdaq Composite Index over such period, and (c) the
cumulative total return of publicly traded thrifts or thrift holding companies
in the mutual holding company structure over such period. Cumulative return
assumes the reinvestment of dividends, and is expressed in dollars based on an
assumed investment of $100.
Stock Price Performance
April 20, 1998 (Inception) -- December 31, 2000
[GRAPH OMITTED]
11
Employment Agreements
The Company has entered into employment agreements with each of Messrs.
Swan, Kolkmeyer and Berner and Ms. Monti. The employment agreements have terms
ranging from twenty-four to thirty-six months. On each anniversary date, an
employment agreement may be extended for an additional twenty-four months, so
that the remaining term shall be from twenty-four to thirty-six months. If the
agreement is not renewed, the agreement will expire at the end of its term.
Under the employment agreements, the 2001 base salary for Messrs. Swan,
Kolkmeyer and Berner and for Ms. Monti is $345,000, $215,000, $168,000, and
$151,000, respectively. The base salary may be increased but not decreased. The
employment agreements also provide that the executive is entitled to participate
in an equitable manner with other executive officers in discretionary bonuses
declared by the Board. In addition to base salary and bonus, the employment
agreements provide for, among other things, participation in retirement plans
and other employee and fringe benefits applicable to executive personnel. The
agreements provide for termination by the Company for cause at any time. In the
event the Company involuntarily terminates the executive's employment for
reasons other than for cause, the executive, or in the event of death, his or
her beneficiary would be entitled to severance pay in an amount equal to three
times base salary (in the case of Messrs. Swan and Kolkmeyer), or two times base
salary (in the case of Mr. Berner and Ms. Monti). For these purposes,
involuntary termination includes a constructive termination where the Company
(i) fails to appoint or reappoint the executive to his or her present position,
(ii) materially changes the executive's functions, duties or responsibilities,
which change would cause the executive's position to become one of lesser
responsibility, importance or scope, (iii) relocates the executive's place of
employment by more than 100 miles, (iv) liquidates or dissolves other than in
connection with a reorganization that does not affect the executive's status, or
(v) breaches the employment agreement. The Company will also continue the
executive's health coverage through the remaining term of the employment
agreement. In the event the payments to the executive would include an "excess
parachute payment" as defined by Code Section 280G (relating to payments made in
connection with a change in control), the payments would be reduced in order to
avoid having an excess parachute payment.
In the event of an executive's death while employed during the term of an
employment agreement, the Company will pay the executive's estate the
executive's salary through the end of the calendar month in which the executive
dies. If the executive becomes disabled (as defined in the Company's disability
plan), the employment agreement will remain in effect through the term of the
agreement, except that the executive's salary payments will be reduced by any
disability insurance payments made to the executive.
Deferred Compensation Plan
The Company has a deferred compensation plan for the benefit of certain
senior executives that it has designated to participate in the plan. Under the
Plan, the Company annually credits an executive's deferred compensation account
with an amount determined in the sole discretion of the Board. The amounts
credited to the executive's deferred compensation account are annually credited
with earnings, at a rate determined in the sole discretion of the Board. An
executive will vest in amounts credited to his account at the rate of 20% per
year, beginning in the sixth year of participation until the executive is fully
vested after 10 years of participation. For these purposes, an executive's years
of participation will be equal to the
12
executive's number of whole years of employment with the Company measured from
the date that an executive becomes a participant under the Plan. Notwithstanding
the above, an executive shall be fully vested in his deferred compensation
account upon attaining age 60 with five years of participation or in the event
of a change in control of the Company. Benefits are payable to the executive in
fifteen substantially equal annual payments commencing (i) 30 days after the
executive has attained age 60, or (ii) 30 days after the executive terminates
employment, if after age 60, or due to disability. In the event of the
executive's death after benefits commence, the Company will pay the remaining
benefits to the executive's beneficiary over the remainder of the payment term.
In the event of the executive's death after termination of employment but prior
to commencement of benefit payments, the Company will pay the executive's
benefit to the executive's beneficiary in fifteen substantially equal annual
payments commencing within 30 days of the executive's death. In the event of the
executive's death prior to termination of employment, the executive will forfeit
all benefits under the Plan. In the event of an unforeseeable emergency which
will result in a severe financial hardship, the executive may request a
distribution of all or part of his benefits or may request an acceleration of
benefits that are being paid to him, as applicable.
Messrs. Swan, Kolkmeyer, and Berner and Ms. Monti are participants in the
Non-qualified Plan. For the year ended December 31, 2000, Messrs. Swan,
Kolkmeyer, and Berner, and Ms. Monti, had $36,059, $14,508, $15,221 and $11,458,
respectively, credited to their deferred compensation accounts.
Defined Benefit Pension Plan
The Company maintains a qualified, tax-exempt defined benefit plan
("Retirement Plan"). Employees age 21 or older who have worked at the Company
for a period of one year and have been credited with 1,000 or more hours of
service with the Company during the year are eligible to accrue benefits under
the Retirement Plan, provided, however that leased employees, employees paid on
a contract basis, and employees employed off-site in connection with the
operation or maintenance of properties acquired through foreclosure or deed are
not eligible to participate. The Company contributes each year, if necessary, an
amount to the Retirement Plan to satisfy the actuarially determined minimum
funding requirements in accordance with the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"). For the plan year ended September 30, 2000,
no contribution was required to be made by the Company and the market value of
the trust fund equaled approximately $11.8 million.
In the event of retirement at normal retirement age (i.e., the later of
age 65 or the 5th anniversary of participation in the Retirement Plan), the plan
is designed to provide a single life annuity. For a married participant, the
normal form of benefit is an actuarially reduced joint and survivor annuity
where, upon the participant's death, the participant's spouse is entitled to
receive a benefit equal to 50% of that paid during the participant's lifetime.
Alternatively, a participant may elect (with proper spousal consent, if
necessary) a joint and 100% survivor annuity, or an annuity payable for a period
certain and life. All forms in which a participant's benefit may be paid will be
actuarially equivalent to the single life annuity. The retirement benefit
provided is an amount equal to (a) 2% of a participant's average annual earnings
multiplied by credited service prior to April 1, 1998 plus (b) 1.25% of a
participant's average annual earnings multiplied by the participant's years of
credited service thereafter, up to a maximum of 30 years. Retirement benefits
are also payable upon retirement due to early and
13
late retirement or death. A reduced benefit is payable upon early retirement at
age 60, at or after age 55 and the completion of 20 years of vested service, or
after completion of 30 years of vested service. Upon termination of employment
other than as specified above, a participant who has five years of vested
service after age 18 is eligible to receive his or her accrued benefit
commencing, generally, on such participant's normal retirement date.
The following table indicates the annual retirement benefit that would be
payable under the Retirement Plan upon retirement at age 65 in calendar year
2000, expressed in the form of a single life annuity for the final average
salary and benefit service classifications specified below.
Final Years of Service and Benefit Payable at Retirement
Average ---------------------------------------------------
Compensation 15 20 25 30
------------ -------- -------- -------- --------
$ 50,000 $ 13,969 $ 18,969 $ 23,969 $ 28,969
$ 75,000 $ 20,953 $ 28,453 $ 35,953 $ 43,453
$100,000 $ 27,938 $ 37,938 $ 47,938 $ 57,938
$125,000 $ 34,922 $ 47,422 $ 59,922 $ 72,422
$160,000 $ 44,700 $ 60,700 $ 76,700 $ 92,700
$170,000 and above $ 47,494 $ 64,494 $ 81,494 $ 98,494
As of December 31, 2000, Messrs. Swan, Kolkmeyer, Berner, and Ms. Monti,
had 13, 10, 9, and 7 years of credited service (i.e., benefit service) under the
Retirement Plan, respectively.
Stock Benefit Plans. The Board of Directors of the Company has adopted the
1999 Stock Option Plan for directors, officers and employees, which was approved
by stockholders at the 1999 Annual Meeting. The Board of Directors has also
adopted the 1999 Recognition and Retention Plan for directors, officers and
employees, which was approved by stockholders at the 1999 Annual Meeting.
Set forth below is certain information regarding options granted to
Executive Officers during 2000.
===============================================================================================================
OPTION GRANTS IN LAST FISCAL YEAR
===============================================================================================================
Individual Grants
- ---------------------------------------------------------------------------------------------------------------
Percent of Total
Options Granted to Exercise or Grant Date
Name Options Granted Employees in FY 2000 Base Price Expiration Date Present Value (1)
- ---------------------------------------------------------------------------------------------------------------
William E. Swan 83,000 25.3% $9.0625 5/22/10 $272,292
Paul J. Kolkmeyer 41,000 12.5% $9.0625 5/22/10 $134,506
Kathleen P. Monti 30,000 9.2% $9.0625 5/22/10 $ 98,419
G. Gary Berner 28,000 8.5% $9.0625 5/22/10 $ 91,858
Diane Allegro (2) 25,000 7.6% $9.0625 5/22/10 $ 82,016
===============================================================================================================
- ----------
(1) The grant date present value was derived using the Black-Scholes option
pricing model with the following assumptions: volatility of 31.3%; risk
free rate of return of 6.65%; dividend yield of 2.46%; and a 7.5 year
option life.
(2) Ms. Allegro left the Company's employ effective February 2001.
14
Set forth below is certain information concerning options outstanding to
Executive Officers at December 31, 2000. No options were exercised by Executive
Officers during 2000.
============================================================================================================
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
- ------------------------------------------------------------------------------------------------------------
Number of Value of
Shares Options at In-The-Money Options
Acquired Year-End at Year-End (1)
Upon Value ---------------------------- ----------------------------
Name Exercise Realized Exercisable/Unexercisable(#) Exercisable/Unexercisable($)
- ------------------------------------------------------------------------------------------------------------
William E. Swan 0 $ -- 36,400/228,600 $2,948/$154,464
Paul J. Kolkmeyer 0 $ -- 18,200/113,800 $1,474/$76,357
Kathleen P. Monti 0 $ -- 13,000/82,000 $1,053/$55,791
G. Gary Berner 0 $ -- 12,350/77,400 $1,000/$52,126
Diane Allegro (2) 0 $ -- 11,050/69,200 $ 895/$46,547
============================================================================================================
- ----------
(1) Equals the difference between the aggregate exercise price of such options
and the aggregate fair market value of the shares of Common Stock that
would be received upon exercise, assuming such exercise occurred on
12/31/00, at which date the last trade price of the Common Stock as quoted
on the NASDAQ National Market was $10.813.
(2) Ms. Allegro left the Company's employ effective February 2001.
Ownership Reports by Officers and Directors
The Common Stock of the Company is registered with the SEC pursuant to
Section 12(g) of the Securities Exchange Act of 1934 (the "Exchange Act"). The
officers and Directors of the Company and beneficial owners of greater than 10%
of the Company's Common Stock 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 the Company's Proxy
Statement or Annual Report on Form 10-K of the failure of an officer, director
or 10% beneficial owner of the Company's Common Stock to file a Form 3, 4, or 5
on a timely basis. Based on the Company's review of ownership reports, no
officer or director failed to file ownership reports on a timely basis for the
year ended December 31, 2000, except as follows: the initial reports of stock
ownership on Form 3 for each of Mr. Bisgrove, Kaufman and Dintino, which had no
shares to report as owned, were filed late.
Transactions With Certain Related Persons
Federal law and regulations generally require that all loans or extensions
of credit to executive officers and directors be made on substantially the same
terms, including interest rates and collateral, as those prevailing at the time
for comparable transactions with the general public and must not involve more
than the normal risk of repayment or present other unfavorable features.
However, recent regulations now permit executive officers and directors to
participate in loan programs that are widely available to other employees, as
long as the director or executive officer is not given preferential treatment
compared to the other participating employees. Pursuant to such a program, loans
have been extended to directors and executive officers, which loans are on
substantially the same terms as those prevailing at the time for comparable
transaction with the general public, except as to the interest rate charged,
which rate is the same as available to all employees. These loans do not involve
more than the normal risk of repayment or present other unfavorable features.
15
- --------------------------------------------------------------------------------
PROPOSAL II - RATIFICATION OF THE APPOINTMENT OF AUDITORS
- --------------------------------------------------------------------------------
The Company's independent auditors for the year ended December 31, 2000
were KPMG LLP. The Board of Directors of the Company has approved the engagement
of KPMG LLP to be the Company's auditors for the year ending December 31, 2001,
subject to the ratification of the engagement by the Company's stockholders at
this Annual Meeting.
Set forth below is certain information concerning aggregate fees billed
for professional services rendered by KPMG LLP during 2000:
Audit Fees $161,200
Financial Information Systems
Design and Implementation Fees $ --
All Other Fees $114,500
The Audit Committee has considered whether the provision of non-audit
services, which relate primarily to tax services rendered, is compatible with
maintaining KPMG LLP's independence. The Audit Committee concluded that
performing such services does not affect KPMG LLP's independence in performing
its function as auditor of the Company.
A representative of KPMG LLP is expected to attend the Meeting to respond
to appropriate questions and to make a statement if he so desires.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE
RATIFICATION OF KPMG LLP AS AUDITORS FOR THE COMPANY FOR THE
EAR ENDING DECEMBER 31, 2001.
- --------------------------------------------------------------------------------
PROPOSAL III - STOCKHOLDER PROPOSAL
- --------------------------------------------------------------------------------
A stockholder has submitted the following proposal:
"RESOLVED, that the stockholders assembled in person and by proxy,
recommend that the Board of Directors of First Niagara Financial Group, Inc.
take whatever actions are necessary to enhance stockholder value. These actions
should encourage the stock price to trade at or above the offering price. These
actions would include among others: the continuing repurchasing of stock if
permitted by law; and the active consideration of a second stage conversion
offering if permitted by law.
Supporting Statement
This resolution and supporting statement were written with the facts
available to this writer as of November 16, 2000. On November 16, 2000, the
stock closed at $9.00 per share.
The Company's performance is good but the stock continues to trade below
the initial offering price of $10.00 per share. Since the stock was issued in
1998, it has traded below its offering price for substantial parts of 1998, 1999
and 2000.
16
The stockholders Return Performance Presentation on page 11 of the proxy
statement dated March 27, 1999 shows that $100.00 invested in First Niagara
Financial Group, Inc. from April 20, 1998 to December 31, 1999 decreased to
$64.07. A similar poor relative price performance is anticipated for the year
ended December 31, 2000 if the stock price remains below the December 31, 1999
closing price of $10.25.
Management should continue to focus its efforts on improved corporate
performance. This effort, in addition to active repurchasing stock as permitted
by law, should help increase the stock price to or above the offering price. The
purchase of only 30,000 treasury shares in the third quarter is inadequate, not
a wise use of the Company's excess capital.
The stock price would also probably increase if management would
demonstrate its confidence in their Company by making significant open market
purchases of the stock."
The name and address and the number of shares owned by the stockholder
will be provided promptly upon an oral or written request to the Corporate
Secretary.
-----------------------------------------
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE
"AGAINST" PROPOSAL 3 FOR THE FOLLOWING REASONS:
Your Company has taken numerous steps since the initial public offering
(IPO) in April 1998 to enhance the value of your investment. We have made three
bank and four non-bank, financial services company acquisitions that are
designed to strengthen our competitive position, increase our level of
non-interest income, and improve our current and future earnings.
Unfortunately, during much of this period community bank stocks in general
have been out of favor on Wall Street, and the trading price of our common
stock, like many of our peers, has languished. Recognizing the value inherent in
the Company's financial condition, we have been active purchasers of the common
stock, pursuant to several, publicly announced stock repurchase programs. Since
April 1998, we have repurchased more than 4.1 million shares of common stock at
a total expenditure of $43.9 million!
During the second half of the year 2000, we closed on two bank
acquisitions that required in excess of $169 million of funding. Accordingly,
our repurchases of common stock have slowed considerably, as capital has been
utilized to expand the Company's strategic and competitive positions in the
retail banking market.
We note that since the submission of the stockholder proposal on November
16, 2000, the trading price of the common stock has appreciated by more than 26%
(through March 27, 2001). We believe that this, to some degree, reflects the
market's appreciation for the steps that your Board and management have taken to
enhance stockholder value, including its share repurchase activities. We also
recognize that the trading prices for community bank stocks have recovered in
general in the most recent period.
We will continue taking those steps that will enhance value for all
stockholders and that will enhance the strategic and operational value of the
Company. Although we cannot control trading prices, we are confident that
long-term value is being created.
17
In conclusion, we do not believe that any valid purpose will be served by
voting for this stockholder proposal.
YOUR BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE
"AGAINST" THE STOCKHOLDER PROPOSAL
- --------------------------------------------------------------------------------
STOCKHOLDER PROPOSALS
- --------------------------------------------------------------------------------
In order to be eligible for inclusion in the proxy materials for next
year's Annual Meeting of Stockholders, any stockholder proposal to take action
at such meeting must be received at the Company's executive office, 6950 South
Transit Road, P.O. Box 514, Lockport, New York 14095-0514, no later than
November 28, 2001. Any such proposals shall be subject to the requirements of
the proxy rules adopted under the Exchange Act.
- --------------------------------------------------------------------------------
ADVANCE NOTICE OF BUSINESS TO BE CONDUCTED
AT AN ANNUAL MEETING
- --------------------------------------------------------------------------------
The Bylaws of the Company provide an advance notice procedure for certain
business, or nominations to the Board of Directors, to be brought before an
annual meeting. In order for a stockholder to properly bring business before an
annual meeting, or to propose a nominee to the Board, the stockholder must give
written notice to the Secretary of the Company not less than ninety (90) days
before the date fixed for such meeting; provided, however, that in the event
that less than one hundred (100) days notice or prior public disclosure of the
date of the meeting is given or made, notice by the stockholder to be timely
must be received not later than the close of business on the tenth day following
the day on which such notice of the date of the annual meeting was mailed or
such public disclosure was made. The notice must include the stockholder's name,
record address, and number of shares owned by the stockholder, describe briefly
the proposed business, the reasons for bringing the business before the annual
meeting, and any material interest of the stockholder in the proposed business.
In the case of nominations to the Board, certain information regarding the
nominee must be provided. Nothing in this paragraph shall be deemed to require
the Company to include in its proxy statement and proxy relating to an annual
meeting any stockholder proposal that does not meet all of the requirements for
inclusion established by the SEC in effect at the time such proposal is
received.
The date on which next year's annual meeting of stockholders is expected
to be held is May 7, 2002. Accordingly, advance written notice for certain
business, or nominations to the Board of Directors, to be brought before the
next Annual Meeting must be given to the Company by February 6, 2002. If notice
is received after February 6, 2002, it will be considered untimely, and the
Company will not be required to present the matter at the stockholders meeting.
- --------------------------------------------------------------------------------
OTHER MATTERS
- --------------------------------------------------------------------------------
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 in accordance with their best
judgment.
18
- --------------------------------------------------------------------------------
MISCELLANEOUS
- --------------------------------------------------------------------------------
The cost of solicitation of proxies will be borne by the Company. The
Company 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,
directors, officers and regular employees of the Company may solicit proxies
personally or by telephone without additional compensation. The Company has
retained Georgeson Shareholder Communications, Inc., a proxy solicitation firm,
to assist the Company in the solicitation of proxies for the Annual Meeting, for
a fee of $4,500, plus out-of-pocket expenses.
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED
DECEMBER 31, 2000, WILL BE FURNISHED WITHOUT CHARGE TO STOCKHOLDERS AS OF THE
RECORD DATE UPON WRITTEN OR TELEPHONIC REQUEST TO DANIEL J. DINTINO, JR., SENIOR
VICE PRESIDENT AND CHIEF FINANCIAL OFFICER, 6950 SOUTH TRANSIT ROAD, P.O. BOX
514, LOCKPORT, NEW YORK, 14095-0514 OR CALL (716) 625-7643.
BY ORDER OF THE BOARD OF DIRECTORS
Robert N. Murphy
Corporate Secretary
Lockport, New York
March 28, 2001
19
FIRST NIAGARA FINANCIAL GROUP, INC. Appendix A
AUDIT COMMITTEE CHARTER
- --------------------------------------------------------------------------------
I. PURPOSE
The primary function of the Audit Committee (the Committee) is to assist the
Board of Directors (the Board) in fulfilling its oversight responsibilities of
First Niagara Financial Group, Inc. and subsidiaries (collectively, the Company)
by reviewing:
o Financial reports and other financial information provided by the
Company to any governmental body or the public;
o The Company's systems of internal controls regarding asset/liability
management, lending, finance, deposit services, legal compliance and
ethics; and
o The Company's auditing, accounting and financial reporting
processes.
Consistent with this function, the Committee should encourage continuous
improvement of, and foster adherence to, the Company's policies, procedures and
practices at all levels. More specifically, the Committee's primary duties and
responsibilities are to:
o Serve as an independent and objective party to monitor the Company's
financial reporting process and internal control system;
o Review and appraise the audit efforts of the Company's independent
accountants and internal audit department; and
o Provide an open avenue of communication among the independent
accountants, senior management, the internal audit department, and
the Board.
The Committee will primarily fulfill these responsibilities by carrying out the
activities enumerated in Section IV of this Charter.
II. COMPOSITION
The Committee shall be comprised of four or more directors as determined by the
Board, each of whom shall be independent directors and free from any
relationship that, in the opinion of the Board, would interfere with the
exercise of his or her independent judgment as a member of the Committee.
Members of the Committee shall be considered independent if they have no
relationship that may interfere with the exercise of their independence from
management and the Company. Examples of relationships that could interfere with
independence include:
o A director being employed by the Company or any of its affiliates
for the current year or any of the past three years;
- --------------------------------------------------------------------------------
November 2000 A-1
FIRST NIAGARA FINANCIAL GROUP, INC. Appendix A
AUDIT COMMITTEE CHARTER
- --------------------------------------------------------------------------------
o A director accepting any compensation from the Company or any of its
affiliates other than compensation for Board service;
o A director being a member of the immediate family of an individual
who is employed by the Company or any of its affiliates as an
executive officer;
o A director being a partner in, or a controlling shareholder or an
executive officer of, any for-profit business organization to which
the Company made, or from which the Company received, payments
(other than dividends or interest) that are or have been significant
to the Company or business organization in any of the past five
years; or
o A director being employed as an executive of another company where
any of the Company's executives serves on that company's
compensation committee.
A director who has one or more of these relationships may be appointed to the
Committee if the Board, under exceptional and limited circumstances, determines
that membership on the Committee by the individual is required by the best
interests of the Company and its shareholders.
All members of the Committee shall have a working familiarity with basic finance
and accounting practices, and at least one member of the
Committee shall have accounting or related financial management expertise.
Committee members may enhance their familiarity with finance and accounting by
participating in educational programs conducted by the Company or an outside
consultant.
The members of the Committee shall be elected by the Board at the annual meeting
of the Board or until their successors shall be duly elected and qualified. The
chairman of the Audit Committee shall be elected by the full Board of Directors.
III. MEETINGS
The Committee shall meet at least four times annually or more frequently as
circumstances dictate.
The Committee should meet quarterly with management, the independent
accountants, and the Internal Auditor in separate executive sessions to discuss
any matters that the Committee or each of these groups believes should be
discussed privately.
The Chairman of the Committee should report quarterly to the Board on
significant results of the foregoing activities.
- --------------------------------------------------------------------------------
November 2000 A-2
FIRST NIAGARA FINANCIAL GROUP, INC. Appendix A
AUDIT COMMITTEE CHARTER
- --------------------------------------------------------------------------------
IV. RESPONSIBILITIES AND DUTIES
To fulfill its responsibilities and duties (by major area of oversight
responsibility), the Audit Committee shall:
Documents/Reports Review
o Review the Company's quarterly and annual financial statements with
management, the independent accountants, and the internal auditing
department;
o Review reports or other financial information prior to submission to
governmental body, or the public, including certification, report,
opinion, or review rendered by the independent accountants, as
deemed necessary and appropriate;
o Review with the independent accountants and the Internal Auditor the
coordination of audit efforts to assure completeness of coverage,
reduction of redundant efforts, and the effective use of audit
resources;
o Review the internal audit function of the Company, including the
independence and authority of its reporting obligations and the
annual audit plan. Periodically review the progress of internal
audit relating to the audit plan and ensure that necessary
adjustments to the audit plan are made as the business of the
Company changes throughout the year;
o Review internal audit reports to management prepared by the internal
audit department and management's response;
o Review and concur in the appointment, replacement, reassignment or
dismissal of the Internal Auditor when circumstances warrant; and
o Review and update this Charter, at least annually, or as conditions
dictate.
Independent Accountants
o Recommend to the Board of Directors the selection of the independent
accountants, considering independence and effectiveness;
o Approve the fees and other compensation to be paid to the
independent accountants;
o On an annual basis, review and discuss with the independent
accountants all significant relationships the independent
accountants have with the Company to determine independence;
- --------------------------------------------------------------------------------
November 2000 A-3
FIRST NIAGARA FINANCIAL GROUP, INC. Appendix A
AUDIT COMMITTEE CHARTER
- --------------------------------------------------------------------------------
Independent Accountants - cont'd
o Periodically consult with the independent accountants and the
internal audit department without the presence of management about
internal controls and the completeness and accuracy of the Company's
financial statements. The Committee should consider the independent
accountant's judgement about the quality and appropriateness of the
Company's accounting principles as applied in the Company's
financial reporting; and
o Ensure that the independent accountants are accountable to the Board
of Directors and the Committee.
Financial Reporting Process
o In consultation with the independent accountants and the Internal
Auditor, review the integrity of the Company's financial reporting
processes, both internal and external. (The review should include
the adequacy and effectiveness of the accounting and financial
controls of the Company, and should set forth recommendations for
the improvement of such internal control procedures or particular
areas where new or more detailed controls or procedures are
desirable);
o Inquire of management, the independent accountants, and the Internal
Auditor about significant risks or exposures and assess the steps
management has taken to minimize such risks;
o Inquire as to the independent accountants views about whether
management's choices of accounting principles are conservative,
moderate, or aggressive from the perspective of income, asset, and
liability recognition, and whether those principles are in
accordance with generally accepted accounting principles; and
o Consider and approve, if appropriate, major changes to the Company's
auditing and accounting principles and practices as suggested by the
independent accountants, management or internal audit.
Process Improvement
o Establish regular and separate systems of reporting to the Audit
Committee by management, the independent accountants and internal
audit regarding any significant judgements made in management's
preparation of the financial statements and the appropriateness of
such judgments;
o Following completion of the annual audit, review separately with
management, the independent accountants and internal audit any
significant difficulties encountered during the course of the audit,
including any restrictions on the scope of work or access to
required information; and
- --------------------------------------------------------------------------------
November 2000 A-4
FIRST NIAGARA FINANCIAL GROUP, INC. Appendix A
AUDIT COMMITTEE CHARTER
- --------------------------------------------------------------------------------
Process Improvement - cont'd
o Review any significant disagreement among management, the
independent accountants and internal audit in connection with the
preparation of the financial statements.
Ethical and Legal Compliance
o Review the Company's "Conflict of Interest Code of Conduct" and
"Code of Ethics" and ensure that management has established a system
to monitor and enforce such codes;
o Ensure that management has the proper review system in place to
assure that the Company's financial statements, reports and other
financial information that are disseminated to government
organizations and the public satisfy all legal requirements;
o Review legal and regulatory matters that may have a material impact
on the Company's financial statements, related Company compliance
policies, and programs and reports received from regulators;
o Review policies and procedures with respect to officers' expense
accounts and perquisites, including their use of corporate assets,
and consider the results of any review of these areas by internal
audit or the independent accountants; and
o Perform any other activities consistent with this Charter, the
Company's By-laws and governing law, as the Committee or the Board
deems necessary or appropriate.
- --------------------------------------------------------------------------------
November 2000 A-5
Please mark
your votes as |X|
indicated in
this example
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
Please complete and date this proxy and return it promptly in the
enclosed postage-paid envelope.
The Board of Directors recommends a vote "FOR" Proposals 1 and 2.
1. The election as a director of the nominees listed below (except as marked
to the contrary below) for a three-year term:
01 Gordon P. Assad 02 Harvey D. Kaufman 03 William E. Swan
FOR WITHHELD
|_| |_|
(INSTRUCTION: To withhold your vote for any individual nominee, write that
nominee's name on the space provided below.)
________________________________________________________________________________
2. The ratification of the appointment of KPMG LLP as auditors for the year
ending December 31, 2001.
FOR AGAINST ABSTAIN
|_| |_| |_|
The Board of Directors recommends a vote "AGAINST" Proposal 3.
3. A shareholder proposal to take whatever actions are necessary to enhance
shareholder value.
FOR AGAINST ABSTAIN
|_| |_| |_|
I consent to future access of the Annual Reports and Proxy Statements
electronically via the Internet. I understand that the Company may no longer
distribute printed materials to me for any future shareholder meeting until such
consent is revoked. I understand that I may revoke my consent at any time. |_|
Check Box if You Plan to Attend Meeting |_|
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 meeting of stockholder'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 Stockholders, or by the filing of a later dated proxy statement prior
to a vote being taken from a particular proposal at the Meeting.
The undersigned acknowledges receipt from the Company prior to the execution of
this proxy of a Notice of the Meeting, and of a Proxy Statement, dated March 20,
2001.
Signature_________________________ Signature______________________ Date_________
Please sign exactly as your name appears on this card. When signing as attorney,
executor, administrator, trustee or guardian, please give your full title. If
shares are held jointly, each holder should sign.
- --------------------------------------------------------------------------------
^ FOLD AND DETACH HERE ^
Vote by Internet or Telephone or Mail
24 Hours a Day, 7 Days a Week
Your telephone or Internet vote authorizes the named proxies to vote your
shares in the same manner as if you marked, signed and returned your proxy card.
--------------------------------------------------------
Internet
http://www.proxyvoting.com/FNFG
Use the Internet to vote your proxy. Have your proxy
card in hand when you access the web site. You will be
prompted to enter your control number, located in the
box below, to create and submit an electronic ballot.
--------------------------------------------------------
OR
--------------------------------------------------------
Telephone
1-800-840-1208
Use any touch-tone telephone to vote your proxy. Have
your proxy card in hand when you call. You will be
prompted to enter your control number, located in the
box below, and then follow the directions given.
--------------------------------------------------------
OR
--------------------------------------------------------
Mail
Mark, sign and date
your proxy card
and
return it in the
enclosed postage-paid
envelope.
--------------------------------------------------------
If you vote your proxy by Internet or by telephone,
you do NOT need to mail back your proxy card.
You can view the Annual Report and Proxy Statement
on the internet at: www.firstniagarafinancial.com
FIRST NIAGARA FINANCIAL GROUP, INC.
ANNUAL MEETING OF STOCKHOLDERS
MAY 1, 2001
The undersigned hereby appoints the official proxy committee of the Board
of Directors of First Niagara Financial Group, Inc. (the "Company"), with full
powers of substitution to act as attorneys and proxies for the undersigned to
vote all shares of common stock of the Company that the undersigned is entitled
to vote at the Annual Meeting of Stockholders ("Annual Meeting") to be held at
Sean Patrick's Banquet Facility, 3480 Millersport Highway, Getzville, New York
on May 1, 2001, at 10:00 a.m. The official proxy committee is authorized to cast
all votes to which the undersigned is entitled as follows:
THIS PROXY WILL BE VOTED AS DIRECTED ON THE REVERSE SIDE, BUT IF NO INSTRUCTIONS
ARE SPECIFIED, THIS PROXY WILL BE VOTED FOR PROPOSALS 1 AND 2 AND AGAINST
PROPOSAL 3. IF ANY OTHER BUSINESS IS PRESENTED AT SUCH MEETING, THIS PROXY WILL
BE VOTED BY THE COMMITTEE IN ITS DISCRETION. AT THE PRESENT TIME, THE BOARD OF
DIRECTORS KNOWS OF NO OTHER BUSINESS TO BE PRESENTED AT THE MEETING.
(Continued, and to be signed, on the other side)
- --------------------------------------------------------------------------------
^ FOLD AND DETACH HERE ^
YOUR VOTE IS IMPORTANT!
You can vote in one of three ways:
1. Vote by internet at our Internet Address: http://www.proxyvoting.com/FNFG
or
2. Call toll free 1-800-840-1208 on a Touch-Tone Telephone.
or
3. By mail - by promptly returning your completed proxy card in the enclosed
envelope.
If you wish to access future Annual Reports and Proxy Statements electronically
via the Internet and no longer receive the printed materials please provide your
consent with your proxy vote.