CATSKILL
FINANCIAL CORPORATION
341 Main St.
Catskill, New York 12414
(518) 943-3600
January 14, 1997
Dear Fellow Stockholder:
On behalf of the Board of Directors and management of Catskill
Financial Corporation (the "Company"), we cordially invite you to attend
our first Annual Meeting of Stockholders of the Company. The meeting will
be held at 7:00 p.m., New York time, on February 11, 1997 at the main
office of the Company located at 341 Main Street, Catskill, New York
12414.
At the meeting, stockholders will be asked to elect two directors to
serve for three year terms. We urge you to exercise your rights as a
stockholder to vote and participate in this process. The Board of
Directors has nominated directors George P. Jones and Hugh J. Quigley for the
two available seats on the Board. Your Board of Directors unanimously
recommends that you vote "For" the two nominees.
Please read the enclosed Proxy Statement and then complete, sign and
date the enclosed proxy card and return it in the accompanying postage
prepaid return envelope as promptly as possible. We encourage you to
return the proxy card even if you plan to attend the meeting. This will
save the Company additional expense in soliciting proxies and will ensure
that your shares are represented at the meeting.
Sincerely,
/s/ Wilbur J. Cross
Wilbur J. Cross
Chairman of the Board, President,
and Chief Executive Officer
Catskill Financial Corporation
341 Main Street
Catskill, New York 12414
(518) 943-3600
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To be Held on February 11, 1997
Notice is hereby given that the Annual Meeting of Stockholders (the
"Meeting") of Catskill Financial Corporation (the "Company") will be held
at the main office of the Company located at 341 Main Street, Catskill,
New York 12414, at 7:00 p.m., Catskill New York time, on February 11,
1997.
A Proxy Card and a Proxy Statement for the Meeting are included with
this notice.
The Meeting is for the purpose of considering and acting upon:
1. The election of two directors, each to serve for a three year term
and until his or her successor has been duly elected and qualified;
2. The ratification of the appointment of KPMG Peat Marwick LLP as
auditors for the Company for the fiscal year ending September 30, 1997;
and
3. Such other matters as may properly come before the Meeting, or any
adjournments thereof. The Board of Directors is not aware of any other
business to come before the Meeting.
Any action may be taken on the foregoing proposals at the Meeting on
the date specified above, or on any date or dates to which the Meeting may
be adjourned. Stockholders of record at the close of business on January
10, 1997 (the "Record Date") are the stockholders entitled to vote at the
Meeting and any adjournments thereof.
You are requested to complete and sign the enclosed form of proxy,
which is solicited on behalf of the Board of Directors, and to mail it
promptly in the enclosed envelope. The proxy will not be used if you
attend and vote at the Meeting in person.
BY ORDER OF THE BOARD OF DIRECTORS
Catskill, New York
January 14, 1997
IMPORTANT: THE PROMPT RETURN OF PROXIES WILL SAVE THE COMPANY THE EXPENSE
OF FURTHER REQUESTS FOR PROXIES TO ENSURE A QUORUM AT THE MEETING. A SELF
ADDRESSED ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE. NO POSTAGE IS
REQUIRED IF MAILED WITHIN THE UNITED STATES.
PROXY STATEMENT
Catskill Financial Corporation
ANNUAL MEETING OF STOCKHOLDERS
February 11, 1997
This Proxy Statement is furnished in connection with the solicitation
on behalf of the Board of Directors of Catskill Financial Corporation (the
"Company"), the parent company of Catskill Savings Bank (the "Bank"), of
proxies to be used at the Annual Meeting of Stockholders of the Company
(the "Meeting") which will be held at the main office of the Company
located at 341 Main Street, Catskill, New York 12414, on February 11,
1997, at 7:00 p.m., New York time, and all adjournments of the Meeting.
The accompanying Notice of Meeting and this Proxy Statement are first
being mailed to stockholders on or about January 14, 1997.
At the Meeting, stockholders of the Company are being asked to
consider and vote upon the election of two directors for three year terms
and the ratification of the appointment of KPMG Peat Marwick LLP as the
auditors of the Company for the fiscal year ending September 30, 1997.
The Board of Directors has fixed January 10, 1997 as the Record Date for
determining stockholders entitled to notice of and to vote at the Meeting.
Vote Required and Proxy Information
Each share of the Company's Common Stock, par value $.01 per share
(the "Common Stock"), is entitled to one vote on each matter to come
before the Meeting. Directors are elected by a plurality of the votes
cast at the Meeting. There is no cumulative voting in the election of
directors. The ratification of the appointment of KPMG Peat Marwick LLP
requires the affirmative vote of a majority of the votes cast. Properly
executed proxies in the form solicited by the Board of Directors which are
received prior to or at the Meeting, and not revoked, will be voted in
accordance with the instructions thereon. If no instructions are
indicated, such proxies will be voted in favor of the nominees named
herein and in favor of the ratification of auditors. The Company does not
know of any matters, other than those described in this Proxy Statement,
that are to come before the Meeting. If any other matters are properly
presented at the Meeting for action, including the adjournment of the
Meeting, the persons named in the enclosed form of proxy will have the
discretion to vote on such matters in accordance with their best judgment.
Proxies marked to abstain with respect to any matter and broker
non-votes will not affect the vote. One-third of the shares of the Company's
Common Stock, present in person or represented by proxy, shall constitute
a quorum for purposes of the Meeting. Abstentions and broker non-votes
are counted for purposes of determining a quorum.
A proxy given pursuant to this solicitation may be revoked at any
time before it is voted. Proxies may be revoked by: (i) filing with the
Secretary of the Company at or before the Meeting a written notice of
revocation bearing a later date than the proxy, (ii) duly executing a
subsequent proxy relating to the same shares and delivering it to the
Secretary of the Company at or before the Meeting, or (iii) attending the
Meeting and voting in person (although attendance at the Meeting will not
in and of itself constitute revocation of a proxy). Any written notice
revoking a proxy must be delivered to David L. Guldenstern, Corporate
Secretary, Catskill Financial Corporation, 341 Main Street, Catskill, New
York 12414.
ELECTION OF DIRECTORS
The Board of Directors of the Company currently consists of six
members. The Board of Directors is divided into three classes and the
Company's bylaws provide that directors are elected for three-year terms.
Two directors will be elected at the 1997 Annual Meeting to hold office
until the Annual Meeting of Stockholders in the year 2000 and until their
successors have been elected and qualified. Each nominee named below has
consented to being named herein and to serve if elected. In case any
nominee becomes unavailable for election for any presently unforeseen
reason, the persons authorized to cast the votes represented by the
enclosed proxy will have the right to use their discretion to vote for a
substitute or to vote for the remaining nominees.
INFORMATION CONCERNING THE BOARD OF
DIRECTORS AND EXECUTIVE OFFICERS
Set forth below is certain information, as of September 30, 1996,
with respect to the nominees for director, directors continuing in office
and executive officers. There are no arrangements or understandings
pursuant to which any director was selected to serve as such, and there
are no family relationships between any directors or executive officers of
the Company.
DIRECTORS NOMINATED FOR TERMS EXPIRING IN 2000
Director Term as Director
Name and Age Position With the Company and the Bank Since Expires
George P. Jones, 57 Director of the Company and the Bank 1995 1997
Hugh J. Quigley, 47 Director of the Company and the Bank 1995 1997
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
THAT STOCKHOLDERS VOTE IN FAVOR OF THESE NOMINEES
CONTINUING DIRECTORS
Director Term as Director
Name and Age Position With the Company and the Bank Since Expires
Wilbur J. Cross, 54 Director, Chairman of the Board, 1995 1999
President and Chief Executive
Officer of the Company and the Bank
Richard A. Marshall, 56 Director of the Company and the Bank 1995 1998
Allan D. Oren, 55 Director of the Company and the Bank 1995 1999
Edward P. Steifel, Esq., 49 Director of the Company and the Bank 1995 1999
Board of Directors - Biographical Information
Business experience for the directors listed below comprises
experience for at least the past five years.
Wilbur J. Cross. Mr. Cross is Chairman of the Board, President and
Chief Executive Officer of the Company and the Bank. He has been a
director of the Bank since 1979 and President and Chief Executive Officer
since 1984. Mr. Cross is also President of the Catskill Mountain Housing
Development Corp., a non-profit organization providing financial
counseling and housing to low to moderate income residents of Greene
County, New York, and Treasurer and Director of the Columbia-Greene
Community Foundation, Inc., which provides financial assistance to college
students from low to moderate income families.
George P. Jones. Mr. Jones is the President of STG Company, a real
estate development company located in Greenville, New York. Mr. Jones also
serves as Vice President of the Greenville Chamber of Commerce. Mr. Jones
has been a director of the Bank since 1988.
Richard A. Marshall. Mr. Marshall is the President of Marshall's
Garage, an automotive service station, and Marshall's Auto Exchange, an
automobile dealership, both of which are located in Ravena, New York. He
also is a member of the Capital District Automobile Dealers Association, a
philanthropic organization located in Albany, New York. Mr. Marshall has
been a director of the Bank since 1987.
Allan D. Oren. Mr. Oren is President of A. Oren & Sons Furniture
Store headquartered in Catskill. Mr. Oren also serves as a Director of
the Quantum Fund, which provides low interest rate loans to small
businesses in the Greene County area, and Vice President of the
Columbia-Greene Community Foundation, Inc. Mr. Oren has been a director of
the Bank since 1973.
Hugh J. Quigley. Mr. Quigley is President of Dynabil Industries, a
company located in Greene County which manufactures aircraft and aerospace
parts. He also serves as Vice Chairman of the Greene County Industrial
Development Corp., which promotes industrial development in Greene County,
Trustee of Columbia-Greene Community College and is an emeritus member of
the Columbia-Greene Community Foundation, Inc. Mr. Quigley has been a
director of the Bank since 1991.
Edward P. Steifel, Esq. Mr. Steifel is a principal in the law firm
of Steifel & Winans, Catskill, New York and has been engaged in the
practice of law in Catskill since 1972. From time to time, Steifel &
Winans provides legal services to the Bank. Mr. Steifel has been a
director of the Bank since 1976.
Executive Officers Who Are Not Directors
Executive officers are elected for one year terms and serve at the
pleasure of the Board of Directors. Provided below is certain information
regarding the executive officers of the Company and the Bank who are not
directors.
David J. DeLuca. Mr. DeLuca, age 44, has been Vice President and
Chief Financial Officer of the Company and the Bank since August 1996.
Mr. DeLuca was Senior Vice President and Corporate Controller of KeyCorp,
a bank holding company, from 1987 to 1994 and Senior Vice President and
Manager of Corporate Planning and Forecasting of KeyCorp from 1994 to
1996.
David L. Guldenstern. Mr. Guldenstern, age 53, is Vice President and
Secretary of the Bank, positions he has held since 1984. Mr. Guldenstern
is Vice President and Secretary of the Company. Mr. Guldenstern initially
joined the Bank in 1970.
Deborah S. Henderson. Ms. Henderson, age 43, has been employed by
the Bank since 1973 and has served as Vice President and Senior Loan
Officer since 1988.
William J. Moore. Mr. Moore, age 46, has been Vice President and
Treasurer of the Bank since 1993. Prior to such time, Mr. Moore served as
Treasurer and Internal Auditor. Mr. Moore joined the Bank in 1972. Mr.
Moore is Vice President and Treasurer of the Company.
Meetings of the Board of Directors and Certain Committees
The Company's Board of Directors held six meetings during the
1995/1996 fiscal year. Each of the directors of the Company is also a
director of the Bank. The Board of Directors of the Company has an
Examining (Audit) Committee and a Stock Option Plan and Management
Recognition Plan ("SOP and MRP") Committee. The entire Board of Directors
acts as a nominating committee. The Bank has a Personnel and Salary
Committee.
The Examining (Audit) Committee of the Company, which also serves as
the audit committee of the Bank, consists of directors Jones and Quigley.
The Examining Committee (i) recommends and maintains communications with
the independent auditors; (ii) reviews the status of the annual audit; and
(iii) supervises the Bank's internal auditor. The Committee last met in
August 1995. During fiscal 1996, in light of the conversion of the Bank
to the stock form of ownership and the more comprehensive financial
statement audit that was conducted in connection therewith, the entire
Board of Directors performed the functions of the Examining Committee for
fiscal 1996.
The SOP and MRP Committee consists of directors Marshall, Oren and
Steifel. The committee is responsible for determining and approving
awards under the Company's Stock Option Plan and Management Recognition
Plan. The committee also establishes rules and standards applicable to
awards under those plans, as permitted by the plans. The committee did
not meet during the 1995/1996 fiscal year.
The Personnel and Salary Committee of the Bank consists of directors
Marshall, Oren and Steifel. Mr. Cross is a non-voting ex officio member
of the committee but he does not participate in decisions regarding his
own compensation. The committee is responsible for determining officer
and employee compensation and addresses other personnel matters. The
committee met ten times during the 1995/1996 fiscal year.
The Board of Directors will consider nominees for directorships
submitted by stockholders. Any stockholder desiring to propose a person
as a possible director should submit in writing a detailed resume of such
person and a statement of such persons knowledge, expertise and experience
in banking and financial matters.
Voting Securities and Certain Holders Thereof
Stockholders of record as of the close of business on the Record Date
will be entitled to one vote for each share of Common Stock then held. As
of that date, the Company had 5,361,482 shares of Common Stock issued and
outstanding. The following table sets forth information regarding share
ownership of (i) those persons or entities known by management to own
beneficially more than five percent of the Common Stock, (ii) each of the
Company's directors, (iii) each officer of the Company and the Bank who
made in excess of $100,000 (salary and bonus) during the fiscal year ended
September 30, 1996 (the "Named Officers"); and (iv) all directors and
executive officers of the Company and the Bank as a group. Except for
ownership of shares of stock by the Company's Employee Stock Ownership
Plan, the Company is unaware of any person or group owning five percent or
more of the Common Stock as of the Record Date.
Shares Beneficially Owned Percent
Beneficial Owner at December 23, 1996<F1> of class<F2>
Catskill Financial Corporation Employee Stock Ownership Plan<F3>
341 Main Street, Catskill, New York 12414 443,566 8.27%
Wilbur J. Cross, President
Chairman of the Board and Chief Executive Officer 59,864<F4> 1.12%
George P. Jones, Director 15,798<F5> *
Richard A. Marshall, Director 47,181<F6> *
Allan D. Oren, Director 60,877 1.14%
Hugh J. Quigley, Director 18,493<F7> *
Edward P. Steifel, Esq., Director 36,098 *
Directors and executive officers of the Company and the Bank,
as a group (10 persons) 305,933<F8> 5.71%
<FN>
<F1> Amount includes shares held directly, as well as shares allocated to such individuals under the Catskill Financial
Corporation Employee stock Ownership Plan ("ESOP"), shares held jointly with family members, shares held in retirement
accounts, shares held in a fiduciary capacity or by certain family members, with respect to which shares the group
members may be deemed to have sole voting and/or investment power. As to each non-employee director, amounts include
11,373 shares awarded to such director pursuant to the Company's Management Recognition Plan (the "MRP"). These MRP
shares are not yet vested and cannot be voted at the Meeting. Options granted pursuant to the Company's Stock Option and
Incentive Plan (the "Stock Option Plan") are excluded from the table because none are exercisable within the next 60 days.
<F2> Based upon 5,361,482 shares outstanding on December 23, 1996. An asterisk ("*") means less than 1%.
<F3> The amount reported represents shares held by the ESOP, excluding the 11,374 shares which have been allocated to
accounts of participants. First Bankers Trust Co., N.A. the trustee of the ESOP, may be deemed to own beneficially the
shares held by the ESOP which have not been allocated to accounts of participants. Unallocated shares held by the ESOP or
allocated shares for which no voting instructions are received are voted by the trustee in the same proportion as
allocated shares voted by participants.
<F4> Includes 200 shares owned by Mr. Cross's wife, as to which he disclaims beneficial ownership, 1,496 shares allocated
to Mr. Cross in the ESOP and 56,867 MRP shares which are not vested and cannot be voted.
<F5> Includes 425 shares owned by Mr. Jones' daughter, as to which he disclaims beneficial ownership.
<F6> Includes 5,000 shares owned by Mr. Marshall's wife and 3,000 shares owned by Mr. Marshall's daughters, as to which
he disclaims beneficial ownership.
<F7> Includes 7,120 shares owned by Mr. Quigley's wife's Individual Retirement Account, as to which he disclaims
beneficial ownership.
<F8> Includes 3,546 ESOP shares and 101,867 MRP shares allocated or awarded to executive officers and 56,865 MRP shares
awarded to non-employee directors. The MRP shares cannot be voted at the meeting because they are not yet vested.
Director Compensation
The non-employee directors of the Bank are paid a fee of $1,000 for
each regular meeting of the Bank's Board. Non-employee directors also
receive $200 per meeting for attendance at Finance, Examining, and
Personnel and Salary Committee Meetings. Directors may defer their fees
until retirement, as defined in the deferral plan. The Company accrues a
liability for the deferred fees as they are earned. While no fees are
presently paid for attendance at meetings of the Board or committees of
the Company, such fees may be paid in the future.
Executive Compensation
The Company has not paid any compensation to its executive officers
since its formation. The Company does not presently anticipate paying any
compensation to such persons until it becomes actively involved in the
operation or acquisition of businesses other than the Bank.
The following table sets forth information concerning the
compensation paid to the Named Officers for services in all capacities to
the Company for the fiscal years ended September 30, 1995 and 1996.
Summary Compensation Table
Annual Compensation Long-Term Compensation Awards
Options/Stock
Restricted Appreciation
Name and Other Annual Stock Rights All Other
Principal Position Year<F9> Salary($) Bonus($) Compensation($)<F10> Award($)<F11> ("SARs")(#)<F12> Compensation($)<F13>
Wilbur J. Cross, 1996 $156,353 $10,000 none none none $5,161
Chairman of the 1995 $140,000 none none none none $4,411
Board, President
and Chief
Executive Officer
<FN>
<F9> In accordance with the revised rules on executive officer and director compensation disclosure adopted by the
Securities and Exchange Commission. Summary Compensation information is excluded for the year ended September 30, 1994 as
neither the Bank nor the Company were public companies during such periods.
<F10> Mr. Cross did not receive additional benefits or perquisites which, in the aggregate, exceed 10% of his salary
and bonus.
<F11> Pursuant to the MRP, the Company granted to Mr. Cross 56,867 shares of restricted stock on October 25, 1996. See
"Benefit Plans-Management Recognition Plan" below.
<F12> Pursuant to the Option Plan, the Company granted Mr. Cross options to purchase 142,168 shares of common stock on
October 25, 1996. See "Benefit Plans-Stock Option Plan" below.
<F13> Amount includes Company Matching contributions accrued to Mr. Cross's accounts under Bank's 401(k) Plan of $4,200
and $4,950 and life insurance premiums of $211 and $211 for the 1995 and 1996 fiscal years, respectively.
Employment Agreements
The Bank has entered into an employment agreement with Wilbur J.
Cross. The agreement was filed with and approved by the office of Thrift
Supervision (the "OTS") as part of the application of the Company to
become a savings and loan holding company. The agreement has an initial
term of three years commencing on April 1, 1996 and provides for annual
extensions, subject to a performance evaluation by disinterested members
of the Board of Directors of the Bank. The employment agreement requires
the payment of the employee's annual salary, bonus and benefits by the
Company and the Bank for the remaining term of the contract unless the
employee dies, voluntarily resigns or is terminated for cause.
The employment agreement provides that Mr. Cross will be paid an
amount equal to 299% of his compensation and will be provided with
continued health benefits for the remaining term of the agreement in the
event that his employment terminates involuntarily in connection with a
"change in control" of the Bank or the Company as defined in such
agreement or within twelve months thereafter. For the purposes of the
employment agreement, a "change in control" is defined to include, among
other things, any event which would require the filing of an application
for acquisition of control or notice of change in control pursuant to 12
C.F.R. 574.3 or 4. Such events are generally triggered upon the
acquisition of control of 10% of the Company's common stock. Based on his
current salary, if the employment of Mr. Cross had been involuntarily
terminated as of October 1, 1996, under circumstances entitling him to
severance pay as described above, he would have been entitled to receive a
cash payment of not more than $480,000.
The Bank does not currently have a supplemental retirement agreement
with Mr. Cross or any other officer providing additional post-retirement
benefits above those provided to employees generally as described below.
The Bank may determine to provide such additional benefits in the future
upon terms not now determined.
Benefit Plans
Profit Sharing and 401(k) Plan. The Bank has a qualified, tax-exempt
savings and profit sharing plan (the "401(k) Plan") qualifying under
Section 401(k) of the Internal Revenue Code of 1986 (the "Code"). All
full-time salaried employees who have attained age 21 and completed one
year of employment, during which they worked at least 1,000 hours, are
eligible to participate.
Participants are permitted to make salary reduction contributions to
the 401(k) Plan of between 1% and 6% of the participant's annual salary up
to a maximum of $9,500 for the 1996 plan year. Each participant's salary
reduction contribution may be matched by the Bank in an amount set by the
Board of Directors. In addition, the Bank may make an annual profit
sharing contribution to each employee's account in an amount determined
annually by the Board of Directors. All participant contributions and
earnings are fully and immediately vested. All matching contributions are
vested at a rate of 20% per year over a five year period. However, in the
event of retirement, disability or death, a participant will automatically
become 100% vested in the value of all matching contributions and earnings
thereon.
For the plan year ended December 31, 1996, the Bank's contribution to
the 401(k) Plan on behalf of Mr. Cross was $4,750.
Retirement Income Plan. The Bank sponsors a defined benefit pension
plan for its employees (the "Pension Plan"). Full-time salaried employees
are eligible to participate in the Pension Plan following the completion
of one year of service (1,000 hours worked during a continuous 12-month
period) and attainment of 21 years of age. A participant must reach five
years of service before attaining a vested interest in his or her
retirement benefits, after which such participant is 100% vested. The
Pension Plan is funded solely through contributions made by the Bank.
The benefit provided to a participant at normal retirement age
(generally age 65) is based on the participant's average annual
compensation during the 36 consecutive months within the final 120 months
of service affording the highest such average ("average annual
compensation"). Compensation for this purpose is the participant's basic
annual salary, including any contributions through a salary reduction
arrangement to a cash or deferred plan under Section 401(k) of the Code,
but exclusive of overtime, bonuses or any other special payments.
Compensation in excess of $150,000 in the 1996 plan year may not be used
to determine average annual compensation. The annual benefit provided to
a participant who retires at age 65 is equal to 2% of average annual
compensation for each year of service, not to exceed 30 years.
The annual benefit provided to participants (i) at "early retirement
age" (generally age 60) with at least five years of service who elect to
defer the payment of their benefits to normal retirement age, (ii) at
early retirement age with at least 30 years of service who elect to
receive payment of their benefits prior to normal retirement age, or (iii)
who commence receipt of their benefits beyond normal retirement age, are
calculated basically in the same way as the benefits for normal retirement
age, with average annual compensation being multiplied by 2% for each year
of such individual's actual years of service, not to exceed 30 years. A
participant eligible for early retirement benefits who does not meet the
requirements set forth above will have his or her benefits adjusted as
further described in the Pension Plan.
The following table sets forth information showing the annual benefit
payable under the Pension Plan based upon average annual compensation
("Remuneration" in the table) and years of service calculated as shown
above. The Pension Plan also provides for disability and death benefits.
Pension Plan Table
Years of Credited Service
Remuneration 15 20 25 30
$ 75,000 $22,500 $30,000 $37,500 $45,000
100,000 30,000 40,000 50,000 60,000
125,000 37,500 50,000 62,500 75,000
150,000 45,000 60,000 75,000 90,000
175,000 45,000 60,000 75,000 90,000
200,000 45,000 60,000 75,000 90,000
225,000 45,000 60,000 75,000 90,000
Employee Stock Ownership Plan. Effective as of April 18, 1996, the
Company established an Employee Stock Ownership Plan (the "ESOP"). The
ESOP, which invests primarily in common stock of the Company, is designed
to qualify as a stock bonus plan under Section 401 (a) of the Code and
also to meet the requirements of Section 4975(e)(7) of the Code and
Section 407(d)(6) of the Employee Retirement Income Security Act of 1974
("ERISA"). The ESOP was initially funded with a loan from the Company
(the "ESOP Loan") and the ESOP used the proceeds of that loan to acquire
454,940 shares of stock of the Company in the Company's initial public
offering.
The Bank intends to make annual contributions to the ESOP in an
amount to be determined annually by its Board of Directors, but not less
than the amount needed to pay the obligations on the loan to the ESOP. As
the ESOP Loan is repaid, the 454,940 shares are gradually released as
security for the loan and then allocated to participants' accounts
generally based upon each participant's pro rata share of the compensation
of all participants during the year for which the allocation is made.
Participants' interests in the ESOP become fully vested upon each
participant completing five years of service. The vested portion of a
participant's account will be distributed upon termination of employment.
Participating employees are entitled to instruct the trustee of the
ESOP as to how to vote the shares of common stock held in their account.
Unallocated shares held by the ESOP or allocated shares for which no
voting instructions are received are voted by the trustee in the same
proportion as allocated shares voted by participants. Because the voting
of ESOP shares is controlled by officers and employees, the ESOP could
make it more difficult for a third party to acquire control of the Company
and therefore could have the effect of discouraging offers to acquire the
Company which are viewed by stockholders who are not officers or employees
as being in their best interest.
For the year ended September 30, 1996, the Bank contributed $202,848
to the ESOP which was used to pay interest and principal on the ESOP Loan.
As a result, 11,374 shares of Common Stock were released from the lien of
the ESOP Loan and were available for allocation to the accounts of
individual participants. Of the shares allocated, 1,496 shares were
allocated to Mr. Cross and 3,546 shares were allocated to the five
executive officers of the Company and the Bank as a group.
The Stock Option Plan. The Company's Stock Option and Incentive Plan
(the "Stock Option Plan") was approved by Stockholders at a special
meeting held on October 24, 1996. The Stock Option Plan provides for
awards in the form of stock options, stock appreciation rights ("SARs")
and limited stock appreciation rights ("LSARs") for up to 568,675 shares
of Common Stock, subject to adjustment on the event of merger, stock
dividend, recapitalization or other similar event. Generally, awards are
not transferrable and vest at a rate of one-fifth of the initial award per
year, subject to the participant maintaining continuous service with the
Company or its subsidiaries from the date of grant. Vesting is
accelerated under certain circumstances, such as death of the participant.
The Stock Option Plan is administered by the SOP and MRP Committee.
All directors, officers and employees of the Company and its affiliates
are eligible to participate. No options were granted during the fiscal
year ended September 30, 1996. Upon the approval of the Stock Option Plan
by stockholders, each non-employee director received an option to purchase
28,433 share of stock pursuant to the Stock Option Plan. At the same
time, the SOP and MRP Committee granted options to purchase 142,168 shares
to Mr. Cross, options to purchase 236,168 shares, in the aggregate, to the
five executive officers of the Company and the Bank, and options to
purchase 38,000 shares to three non-employee directors. All these options
have an exercise price of $ 12.50, a term of ten years, and they vest 20%
per year over a period of five years. No SARs or LSARs have been granted.
The Management Recognition Plan. The Company's Management
Recognition Plan (the "MRP") was approved by the stockholders at a special
meeting held on October 24, 1996. The MRP provides for the award of
restricted stock ("MRP Shares") to give directors, officers and employees
a proprietary interest in the Company in a manner designed to encourage
such individuals to remain with the Company and the Bank. Pursuant to the
MRP, 227,470 shares of Common Stock are available for awards. During
November and December of 1996, the Company repurchased 227,470 shares of
the Company's common stock, representing 4% of the total shares
outstanding, to be held to fund awards under the MRP. Generally, awards
of MRP shares vest 20% per year over a five-year vesting period.
The MRP is administered by the SOP and MRP Committee. The SOP and
MRP Committee selects the recipients and terms of awards pursuant to the
MRP. In determining to whom and in what amount to grant awards, the SOP
and MRP Committee considers the position and responsibilities of eligible
individuals, the value of their services to the Company and the Bank and
other factors it deems relevant. Directors, officers and employees of the
Company or its affiliates are eligible to participate in the MRP.
Holders of MRP Shares may not vote, sell, assign, transfer, pledge or
otherwise encumber any of the MRP Shares until they are vested. In
addition, all dividends declared and paid on MRP Shares still subject to
restrictions will be deferred and held for the account of the participant
thereof until the earlier to lapse of the restrictions on such shares or
the death or disability of the participant and will be credited with
interest at a rate set by the SOP and MRP Committee.
Upon approval of the MRP by stockholders, 11,373 MRP Shares were
awarded to each director who is not a full-time employee of the Company.
At the same time, the SOP and MRP Committee awarded 56,867 MRP Shares to
Mr. Cross, 101,867 MRP Shares to the five executive officers as a group
and 20,000 MRP Shares to non-executive officers.
MRP Shares awarded under the MRP will be adjusted by the SOP and MRP
Committee in the event of a reorganization, recapitalization, stock split,
stock dividend, combination or exchange of shares, merger, consolidation
or other change in corporate structure or the Common Stock of the Company.
Personnel and Salary Committee Report on Executive Compensation
In fulfillment of Securities and Exchange Commission's requirements
for disclosure in proxy materials of the Personnel and Salary Committee's
policies regarding compensation of executive officers, the Committee has
prepared the following report for inclusion in this proxy statement.
General Policy Considerations. The Board of Directors of the Bank
has delegated to the Personnel and Salary Committee the responsibility and
authority to oversee the general compensation policies of the Bank and to
establish compensation plans and specific compensation levels for
executive officers. The SOP and MRP Committee of the Company has been
delegated the responsibility and authority to oversee implementation of,
and approve grants and awards under, the Company's Stock Option and
Incentive Plan and the Company's Management Recognition Plan. Because the
SOP and MRP Committee is composed of the same directors as the Personnel
and Salary Committee (other than Mr. Cross who is a non-voting ex officio
member of the Personnel and Salary Committee), decisions of the two
committees should be viewed together, and for the purposes of this
discussion they will be referred to as the Compensation Committees. From
time to time, the Board of Directors as a whole participates in decisions
regarding executive compensation and benefit plans.
The Compensation Committees have developed an executive compensation
policy designed to: (i) offer competitive compensation to attract,
motivate, retain and reward executive officers who are crucial to the
long-term success of the Company; and (ii) encourage decision-making that
maximizes long-term stockholder value. The Compensation Committees have
sought to consider a multitude of factors in establishing appropriate
levels of compensation for executive officers, with no one factor clearly
overshadowing all the others.
The compensation package provided to the executive officers of the
Bank is composed principally of base salary and, recently, stock-based
incentive awards. Executive officers also participate in other benefit
plans available to all eligible employees including the ESOP.
The Compensation Committees consider a variety of factors in
determining executive compensation. These factors generally fall into two
categories, those that relate to the specific work performed and expected
of the officer and those that relate to the Company, the Bank, the local
business climate and other general matters.
In the former category, the Committees consider, among other factors,
the level of responsibility of each officer; the expertise and skill level
required to perform the position; satisfaction of prior period goals and
objectives; length of service; the complexity of work that may be required
in connection with strategic plans or special projects; and prior
compensation history. In the latter category, the Committees consider,
among other factors, the Bank's earnings, capital and asset size; the
results of government regulatory examinations; the Bank's regulatory
ratings on safety and soundness as well as Community Reinvestment Act
examinations; and performance and compensation programs of peer group
banks.
Employee benefit plans represent an important component of any
compensation package. The defined benefit pension plan and health
insurance benefits available to all employees, including executive
officers, provide competitive benefits comparable to those available at
other institutions. Stock-based compensation plans, including the ESOP,
the Stock Option Plan and the MRP, provide employees, including executive
officers, with an additional equity-based incentive to maximize long-term
shareholder value.
The Compensation Committees's decisions are discretionary and no
mathematical or similar formula is utilized to determine any compensation
package. The Compensation Committee believes that a competitive employee
benefit package is essential to achieving the goals of attracting and
retaining highly qualified employees.
Chief Executive Officer Compensation. Total compensation paid to the
Chief Executive Officer for fiscal 1996 was $171,514, as detailed in the
above compensation table, and reflects an 18.8% increase from fiscal 1995.
In determining total compensation paid to the Chief Executive Officer, the
Personnel and Salary Committee considered the factors discussed above and
also considered a number of specific matters including the efforts
required to assure the successful completion of the Bank's conversion to
stock form and the careful handling of the Nationar crisis in a manner
which allowed the Bank to continue to operate without disruption when its
principal correspondent bank was closed by the New York Superintendent of
Banks. Mr. Cross does not participate in decisions regarding his own
compensation.
This report is included herein at the direction of the Personnnel and
Salary Committee members, directors Wilbur J. Cross (ex officio), Richard
A. Marshall, Allan D. Oren, and Edward P. Steifel.
Stock Performance Presentation
The Company completed its initial public offering of common stock at
a price of $10.00 per share on April 18, 1996. Accordingly, at this time
it is not possible to provide a performance graph comparing the yearly
percentage change in cumulative total stockholder return with broad market
indices, industry indices or any other relevant indices. The last
reported sale price of the Common Stock as reported on the Nasdaq National
Market on December 23, 1996, was $14.00 per share.
Transactions with Directors and Officers
Some of the directors and executive officers of the Bank, as well as
firms and companies with which they are associated, are and have been
customers of the Bank. All of the Bank's transactions with such persons
and entities were completed in the ordinary course of business and were on
substantially the same terms as those prevailing at the time for
comparable transactions with the general public.
In addition to such normal customer relationships, none of the
directors or executive officers of the Company (or members of their
immediate families) maintained, directly or indirectly, any significant
business or personal relationship with the Company or the Bank during the
1995/1996 fiscal year, other than as might arise by virtue of a position
with or ownership interest in the Company, except that director Edward
Steifel, Esq., is a partner in the law firm of Steifel & Winans. That
firm was retained by the Bank to provide legal services and received legal
fees aggregating $37,970 during fiscal 1996 from the Company and the
Bank, and $62,040 representing fees paid directly by borrowers on loan
closings in which the firm represented the Bank.
RATIFICATION OF APPOINTMENT OF AUDITORS
The Company's Board of Directors appointed KPMG Peat Marwick LLP as
independent public accountants to audit the books of the Company for the
fiscal year ended September 30, 1997, subject to ratification by the
stockholders at the Meeting. KPMG Peat Marwick LLP has been employed
regularly by the Company since it was formed in 1996 and by the Bank for
more than twenty years to examine their books and accounts and for other
purposes.
Representatives of KPMG Peat Marwick LLP are expected to be present
at the Annual Meeting and will have an opportunity to make such statements
as they may desire. Such representatives are expected to be available to
respond to appropriate questions from stockholders.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
THAT STOCKHOLDERS VOTE IN FAVOR OF THE
RATIFICATION OF THE APPOINTMENT OF AUDITORS
GENERAL
The Company's Annual Report to its Stockholders for the fiscal year
ended September 30, 1996, including financial statements, is being
concurrently furnished with this Proxy Statement to stockholders of record
on the Record Date. The Annual Report is not part of the proxy
solicitation material.
All shares represented by valid proxies sent to the Company to be
voted at the Meeting will be voted if received in time. Each proxy will
be voted in accordance with the directions of the stockholder executing
such proxy. If no directions are given, such proxy will be voted "FOR"
the nominees presented herein and "FOR" the ratification of the
appointment of auditors.
The cost of soliciting proxies relating to the Meeting will be borne
by the Company. In addition, directors, officers and regular employees of
the Company and the Bank may solicit proxies personally, by telephone or
by other means without additional compensation. In addition, the Company
will, upon the request of brokers, dealers, banks and voting trustees, and
their nominees, who were holders of record of shares of the Company's
capital stock or participants in depositories on the Record Date, bear
their reasonable expenses for mailing copies of this Proxy Statement, the
form of proxy and the Notice of the Annual Meeting, to the beneficial
owners of such shares.
1998 ANNUAL MEETING
The Company's Board of Directors will establish the date for the 1998
Annual Meeting of Stockholders. In order for a stockholder to be
entitled, under the regulations of the Securities and Exchange Commission,
to have a stockholder proposal included in the Company's Proxy Statement
for the 1998 meeting, the proposal must be received by the Company at its
principal executive offices, 341 Main Street, Catskill, New York 12414,
Attention: David Guldenstern, Secretary, not less than 120 days in advance
of the date in 1998 which corresponds to the date in 1997 on which these
proxy materials are released to stockholders. The stockholder must also
satisfy the other requirements of SEC Rule 14a-8.
THE COMPANY WILL FURNISH, WITHOUT CHARGE TO ANY STOCKHOLDER SUBMITTING A
WRITTEN REQUEST, A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR
1996 REQUIRED TO BE FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.
SUCH WRITTEN REQUEST SHOULD BE DIRECTED TO DAVID GULDENSTERN, SECRETARY,
AT THE COMPANY'S ADDRESS STATED HEREIN. THE FORM 10-K REPORT IS NOT A
PART OF THE PROXY SOLICITATION MATERIALS.
PLEASE SIGN, DATE AND MAIL YOUR PROXY NOW
Catskill, New York
January 14, 1997