UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the registrant (X)
Filed by a party other than the registrant ( )
Check the appropriate box:
(X) Preliminary proxy statement
( ) Confidential, for use of the Commission only
(as permitted by Rule 14a-6(e)(2))
( ) Definitive proxy statement
( ) Definitive additional materials
( ) Soliciting material pursuant to Rule 14a-12
CATSKILL FINANCIAL CORPORATION
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
( ) No fee required.
(X) Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies: Catskill
Financial Corporation Common Stock, par value $.01 per share
(2) Aggregate number of securities to which transaction applies: 3,737,519
shares of Common Stock (plus outstanding options to acquire 384,748 shares
of Common Stock).
(3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11: $23.00 per share of Catskill Financial
Corporation Common Stock and $23.00, less the exercise price, for
underlying options to purchase Catskill Financial Corporation Common Stock.
(4) Proposed maximum aggregate value of transaction: $ 89,923,541.00
(5) Total Fee Paid: $ 17,985.00
( ) Fee paid previously with preliminary materials.
( ) Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11 (a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the form or schedule
and the date of its filing.
(1) Amount previously paid: N/A
(2) Form, Schedule or Registration Statement No.: N/A
(3) Filing Party: N/A
(4) Date filed: N/A
CATSKILL FINANCIAL CORPORATION
341 Main Street
Catskill, New York 12414
September __, 2000
Dear Shareholder:
You are cordially invited to attend a special meeting of shareholders of
Catskill Financial Corporation, to be held at our main office located at 341
Main Street, Catskill, New York, on ______________, 2000 at __:__ _.m., local
time.
On June 7, 2000, Catskill Financial Corporation agreed to merge with Troy
Financial Corporation. IF THE MERGER IS COMPLETED, YOU WILL RECEIVE A CASH
PAYMENT OF $23.00 FOR EACH SHARE OF CATSKILL FINANCIAL CORPORATION STOCK THAT
YOU OWN. Upon completion of the merger, you will no longer own any stock or have
any interest in Catskill Financial Corporation, nor will you receive, as a
result of the merger, any stock of Troy Financial Corporation.
At the special meeting, you will be asked to approve and adopt the merger
agreement. A majority of the votes entitled to be cast at the special meeting
must vote for approval and adoption of the merger agreement for the merger to be
completed. If the merger agreement is approved, and all other conditions
described in the merger agreement have been met or waived, the merger is
expected to occur during the fourth quarter of 2000.
Your board of directors believes that the merger is in the best interests
of Catskill Financial Corporation shareholders and unanimously recommends that
you vote FOR the adoption of the merger agreement. Your board of directors has
received the opinion of Ryan Beck & Company, Inc. that the consideration to be
received by Catskill Financial Corporation's shareholders in the merger is fair
from a financial point of view.
This proxy statement provides you with detailed information about the
proposed merger and includes, as Appendix A, a complete text of the merger
agreement. I urge you to read the enclosed materials carefully for a complete
description of the merger. Please complete, sign and return the enclosed proxy
card as promptly as possible. We look forward to seeing you at the special
meeting.
Sincerely,
Wilbur J. Cross
Chairman of the Board, President, and Chief Executive Officer
This transaction has not been approved or disapproved by the Securities and
Exchange Commission, any state securities commission or the Federal Deposit
Insurance Corporation nor have any of these bodies passed upon the fairness or
merits of such transaction or upon the accuracy or adequacy contained in this
document. Any representation to the contrary is unlawful.
This document is dated ____, 2000 and was first mailed to shareholders on
______, 2000.
CATSKILL FINANCIAL CORPORATION
341 Main Street
Catskill, New York 12414
(518) 943-3600
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
A special meeting of shareholders of Catskill Financial Corporation will be
held on ____________, 2000, _:__ _.m., local time, at our main office located at
341 Main Street, Catskill, New York, for the following purposes:
1. To adopt the Agreement and Plan of Merger dated June 7, 2000 by
and among Troy Financial Corporation, Charlie Acquisition
Corporation and Catskill Financial Corporation
2. To transact such other business as may properly come before the
special meeting including a proposal to adjourn or postpone the
special meeting.
NOTE: The Board of Directors is not aware of any other business to
come before the special meeting.
You can vote at the special meeting if you owned Catskill Financial
Corporation common stock at the close of business on _________, 2000. A complete
list of shareholders entitled to vote at the special meeting will be available
at the main office of Catskill Financial Corporation during the ten days prior
to the special meeting and at the special meeting.
As a shareholder of Catskill Financial Corporation, you have the right to
dissent from the merger and obtain an appraisal of the fair value of your shares
of Catskill Financial Corporation common stock under applicable provisions of
Delaware law. In order to perfect dissenters' rights, you must not vote in favor
of the merger and must comply with the requirements of Delaware law. A copy of
the Delaware statutory provisions regarding dissenters' rights is included as
Appendix D to the accompanying proxy statement and a summary of these provisions
can be found under "PROPOSAL I -- ADOPTION OF THE MERGER AGREEMENT --
Dissenters' Appraisal Rights."
By Order of the Board of Directors
Wilbur J. Cross
Chairman of the Board, President and Chief
Executive Officer
Catskill, New York
_______________, 2000
- - - --------------------------------------------------------------------------------
Important: the prompt return of proxies will save Catskill Financial Corporation
the expense of further requests for proxies to ensure a quorum at the special
meeting. Please complete, sign and date the enclosed proxy and promptly mail it
in the enclosed envelope. You may revoke your proxy in the manner described in
the proxy statement at any time before it is voted.
- - - --------------------------------------------------------------------------------
Please do not send in any stock certificates at this time.
Table of Contents
Glossary ...........................................................................-12-
Questions and Answers
about the Troy Financial Corporation/Catskill Financial Corporation Merger.......-14-
Summary ...........................................................................-19-
The Companies ......................................................................-19-
The Merger..........................................................................-19-
The Meeting.........................................................................-20-
Catskill Financial's Reasons for Entering into the Merger...........................-20-
What You Will Receive for Your Shares of Common Stock...............................-21-
Record Date; Vote Required to Adopt the Merger Agreement............................-22-
Beneficial Ownership of Common Stock................................................-22-
Recommendation to Catskill Financial's Shareholders................................-22-
Opinion of Catskill Financial's Financial Advisor..................................-22-
Interests of Certain Persons in the Merger..........................................-22-
Dissenters' Rights of Appraisal.....................................................-23-
Taxable Transaction for Catskill Financial Shareholders...........................-23-
Historical Consolidated Financial Data
Catskill Financial...............................................................-24-
The Meeting.........................................................................-27-
General ...........................................................................-27-
Record Date; Voting Rights; Vote Required ..........................................-28-
Voting and Revocation of Proxies ...................................................-28-
Solicitation of Proxies ............................................................-29-
Participants in the ESOP ...........................................................-29-
Principal Holders of Catskill Financial Corporation Common Stock ...................-29-
Proposal I -- Adoption of the Merger Agreement .....................................-31-
The Parties to the Merger ..........................................................-32-
Overview of the Transaction.........................................................-32-
What You Will Receive in the Merger ................................................-32-
Taxable Transaction for Catskill Financial Shareholders............................-32-
Background of the Merger............................................................-33-
Catskill Financial's Reasons for the Merger and Recommendation
of the Board of Directors .......................................................-35-
Opinion of Catskill Financial's Financial Advisor..................................-36-
Overview of Valuation Methodology...................................................-37-
Analysis of Selected Publicly Traded Companies......................................-38-
Analysis of Selected Transactions...................................................-39-
Discounted Dividend Analysis........................................................-41-
Break-Even Analysis.................................................................-41-
Market..............................................................................-42-
Acquisition.........................................................................-42-
Dissenters' Appraisal Rights .......................................................-42-
Regulatory Approvals................................................................-45-
The Merger Agreement................................................................-46-
Terms of the Merger.................................................................-47-
When the Merger Will Be Completed...................................................-47-
Surrender of Certificates...........................................................-48-
Conduct of Business Pending the Merger..............................................-48-
Agreement Not to Solicit Other Offers...............................................-50-
Conditions to the Merger............................................................-50-
Securities Portfolio Sale...........................................................-51-
Termination of the Merger Agreement.................................................-51-
Break-up Fee ......................................................................-53-
Representations and Warranties Made by Catskill Financial Corporation
and Troy Financial Corporation in the Merger Agreement...........................-54-
Interests of Certain Persons in the Merger..........................................-54-
Employee Matters....................................................................-56-
Accounting Treatment ...............................................................-57-
Expenses ...........................................................................-57-
The Stock Option Agreement .........................................................-57-
General ...........................................................................-57-
Effect of the Option................................................................-57-
Exercise of the Stock Option........................................................-58-
Repurchase Election.................................................................-59-
Other Matters ......................................................................-59-
Shareholder Proposals ..............................................................-60-
Appendix A - Agreement and Plan of Merger...........................................-61-
Appendix B - Stock Option Agreement..................................................-2-
Appendix C - Fairness Opinion of Ryan, Beck & Company, Inc...........................-5-
Appendix D - Section 262 of the Delaware General Corporation Law.....................-9-
Exhibit __ - Proxy Card .............................................................-15-
GLOSSARY
The following terms are used in this Proxy Statement.
"Board of Directors" or "Board" means the board of directors of Catskill
Financial Corporation.
"Catskill Financial" means Catskill Financial Corporation.
"Catskill Savings" means Catskill Savings Bank, a wholly-owed subsidiary of
Catskill Financial.
"Common Stock" means the common stock of Catskill Financial, all of which will
be acquired by Troy Financial in the Merger.
The "ESOP" means the Catskill Financial Corporation Employee Stock Ownership
Plan, as amended.
The "Meeting" means the special meeting of Catskill Financial's shareholders to
be held on , 2000 and any adjournments or postponements of that special meeting,
at which Catskill Financial will present the Merger Agreement to its
shareholders for approval.
The "Merger" means the transaction in which Catskill Financial will merge into
Charlie Acquisition Corporation (a subsidiary of Troy Financial) and each
shareholder of Catskill Financial will be entitled to receive $23.00 for each
share of Catskill Financial common stock owned by the shareholder.
The "Merger Agreement" means the Agreement and Plan of Merger among Catskill
Financial, Troy Financial and Charlie Acquisition Corporation, dated June 7,
2000. A copy of the Merger Agreement is attached as Exhibit A to this Proxy
Statement.
The "MRP" means the Catskill Financial Corporation 1996 Management Recognition
Plan, as amended.
"RBC" means Ryan, Beck & Co. Incorporated, the financial advisor to Catskill
Financial.
The "Record Date" means , 2000, the date which Catskill Financial will use to
determine which Catskill Financial shareholders of record are entitled to vote
at the Meeting.
The "Stock Option Plan" means the Catskill Financial Corporation 1996 Stock
Option Plan, as amended.
"Troy Financial" means Troy Financial Corporation.
"Troy Savings" means Troy Savings Bank, a wholly-owned subsidiary of Troy
Financial.
QUESTIONS AND ANSWERS
ABOUT THE TROY FINANCIAL CORPORATION/CATSKILL FINANCIAL
CORPORATION MERGER
Q: WHY ARE THE TWO COMPANIES PROPOSING TO MERGE?
A: The Board of Directors believes that the Merger allows shareholders of
Catskill Financial, to realize a greater value for their shares of Common
Stock than they could have if Catskill Financial followed its existing
business plan, or considered other alternative strategies to maximize
shareholder value. Catskill Financial and Troy Financial share a commitment
to community banking, which emphasizes responsiveness to local markets and
the delivery of personalized services. The companies believe that the
Merger will provide customers and the local communities access to a wider
variety of quality products and services while continuing to receive the
high level of personal service they have come to expect.
Q: WHAT WILL CATSKILL FINANCIAL SHAREHOLDERS RECEIVE FOR THEIR SHARES OF
COMMON STOCK?
A: Catskill Financial shareholders will receive $23.00 in cash for each of
their shares of Common Stock. See the discussion under the caption "What
You Will Receive in the Merger" beginning at page __ for more information.
Q: IS THE AMOUNT OF CASH TO BE RECEIVED FOR EACH SHARE OF COMMON STOCK FAIR?
A: RBC has issued its opinion that the amount that will be paid to Catskill
Financial shareholders is fair from a financial point of view. See the
discussion under the caption "Opinion of Catskill Financial's Financial
Advisor" beginning at page __ for more information.
Q: CAN THE AMOUNT OF CASH THAT CATSKILL FINANCIAL SHAREHOLDERS WILL RECEIVE IN
THE MERGER CHANGE ?
A: In connection with the Merger, Catskill Financial determined to sell a
portion of its investment securities portfolio, consisting of corporate and
municipal bonds. The Merger Agreement requires Catskill Financial to have
completed the sale no later than July 7, 2000. If the aggregate pre-tax net
proceeds of the sale of the securities are less than $73.2 million, the per
share consideration to be received by Catskill Financial shareholders in
the Merger
would be reduced by a formula defined in the Merger Agreement. On June 13,
2000, Catskill Financial completed the sale of the securities portfolio.
The proceeds of the sale were $74.5 million. Accordingly, Catskill
Financial does not anticipate that the cash per share to be received by
Catskill Financial shareholders will be reduced. See the discussion under
the caption "Securities Portfolio Sale" beginning at page __ for more
information.
Q: WHAT CAN I DO IF I AM NOT SATISFIED WITH THE PAYMENT I WILL RECEIVE FOR MY
SHARES ?
A: Under Delaware law , if you are not satisfied with the amount you are
receiving in the Merger, you are legally entitled to have the value of your
shares judicially determined and to receive payment based on that
valuation. To exercise your dissenters' appraisal rights, you must deliver
a written objection to the Merger to Catskill Financial at or before the
Meeting and must not vote in favor of the Merger. Objections to the Merger
should be addressed to Catskill Financial at 341 Main Street, Catskill, New
York 12414, Attention: Corporate Secretary. If you don't follow exactly the
procedures specified under Delaware law, you will lose your dissenters'
appraisal rights. A copy of the dissenters' appraisal rights provisions of
Delaware law is provided as Appendix D to this proxy statement. See the
discussion under the caption "Dissenters' Appraisal Rights" beginning at
page __ for more information.
Q: WHAT ARE THE TAX CONSEQUENCES OF THE MERGER TO CATSKILL FINANCIAL'S
SHAREHOLDERS?
A: For United States federal income tax purposes, and perhaps for state and
local tax purposes, your exchange of shares of Common Stock for cash
generally will cause you to recognize a gain or loss measured by the
difference between the cash you receive in the Merger and your tax basis in
the shares of Common Stock. See the discussion under the caption "Taxable
Transaction for Catskill Financial Shareholders" beginning at page __ for
more information.
The tax consequences of the merger to you will depend on your own
situation. You should consult with your tax advisors for a full
understanding of the tax consequences of the merger to you.
Q. WILL CATSKILL FINANCIAL BE ABLE TO PAY DIVIDENDS BEFORE THE COMPLETION OF
THE MERGER ?
A. Under the Merger Agreement, Catskill Financial is permitted to pay regular
quarterly cash
dividends, not to exceed $.1325 per share, consistent with past practice,
during the period from June 7, 2000 (the date of the Merger Agreement),
until the date that the Merger becomes effective, but it may not pay more
than four such dividends during fiscal 2000. There can be no assurance
however, that Catskill Financial will pay any dividends during this period.
See the discussion under the caption "Conduct of Business Pending the
Merger - Conditions to the Merger" beginning at page , for more
information.
Q. HOW WILL MANAGEMENT BENEFIT FROM THE MERGER?
A. Officers and directors of Catskill Financial who have stock options and
restricted stock awards under Catskill Financial's stock benefit plans will
receive payments for their awards based upon the Merger price per share.
They and other employees will also receive other benefits from the Merger.
See the discussion under the caption "The Merger Agreement - Interests of
Certain Persons in the Merger" beginning at page __ for more information.
Q. WHAT DO I NEED TO DO NOW?
A. After you have carefully read this proxy statement, indicate on your proxy
card how you want your shares of Common Stock to be voted. Then sign, date
and mail your proxy card in the enclosed prepaid return envelope as soon as
possible. This will enable your shares to be represented and voted at the
Meeting.
Q. WHY IS MY VOTE IMPORTANT?
A. If you do not return your proxy card or vote in person at the Meeting, it
will be more difficult for Catskill Financial to obtain the necessary
quorum to hold the Meeting. The Merger Agreement must be approved by a
majority of the votes eligible to be cast at the Meeting.
Q. IF MY SHARES ARE HELD IN STREET NAME BY MY BROKER, WILL MY BROKER
AUTOMATICALLY VOTE MY SHARES OF COMMON STOCK FOR ME?
A. No. Your broker will not be able to vote your shares of Common Stock
without instructions from you. You should instruct your broker to vote your
shares, following the directions your broker provides.
Q. WHAT IF I FAIL TO INSTRUCT MY BROKER?
A. If you fail to instruct your broker to vote your shares of Common Stock and
the broker submits an unvoted proxy, that unvoted proxy will be the
equivalent of voting against the Merger.
Q. CAN I ATTEND THE MEETING AND VOTE MY SHARES OF COMMON STOCK IN PERSON?
A. Yes. All shareholders of Common Stock are invited to attend the Meeting.
Shareholders of record can vote in person at the Meeting. If a broker holds
your shares in street name, then you are not the shareholder of record and
you must ask your broker how you can vote at the Meeting.
Q. CAN I CHANGE MY VOTE?
A. Yes. If you have not voted through your broker, there are three ways you
can change your vote after you have sent in your proxy card.
- First, you may send a written notice to the person to whom
you submitted your proxy stating that you would like to
revoke your proxy.
- Second, you may complete a new proxy card. Any earlier proxy
will be revoked automatically.
- Third, you may attend the Meeting and vote in person. Any
earlier proxy will be revoked. However, simply attending the
Meeting without voting will not revoke your proxy.
If you have instructed your broker to vote your shares, you must follow
directions you receive from your broker to change your vote.
Q. SHOULD I SEND IN MY SHARE CERTIFICATES NOW?
A. No. You should not send in your Common Stock certificates at this time.
Instructions for exchanging Common Stock Certificates will be sent to you
after the Merger has been completed.
Q: WHEN DOES CATSKILL FINANCIAL EXPECT THE MERGER TO BE COMPLETED?
A: Catskill Financial hopes to complete the Merger in the fourth quarter of
2000. The Merger cannot occur unless Catskill Financial's shareholders
approve the Merger by a majority of the outstanding shares of Common Stock
and all federal and state regulatory approvals are received. See the
discussion under the caption "The Merger Agreement - Conditions to the
Merger" beginning at page __ for more information.
Q: WHO CAN HELP ANSWER MY QUESTIONS?
A: If you have more questions about the Merger, you should contact:
Catskill Financial Corporation
341 Main Street
Catskill, New York 12414
Attention: Wilbur J. Cross
Chairman, President and Chief Executive Officer
Telephone: (518) 943 - 3626 Ext. 22
SUMMARY
This brief summary highlights selected information contained in this proxy
statement. It does not contain all of the information that is important to you.
To fully understand the Merger, we urge you to carefully read the entire proxy
statement and the other documents to which we refer, including the Merger
Agreement. Catskill Financial has attached the Merger Agreement to this proxy
statement as Appendix A. We encourage you to read the Merger Agreement because
it is the legal document that governs the Merger.
o THE COMPANIES
TROY FINANCIAL CORPORATION
32 SECOND STREET
TROY, NEW YORK 12180
(518) 270-3274
Troy Financial, a Delaware corporation, is headquartered in Troy, New York
and is the parent of Troy Savings, a New York-chartered stock savings bank and
Charlie Acquisition Corporation, a Delaware corporation. Troy Savings operates
fourteen branch offices in the six New York counties of Albany, Saratoga,
Schenectady, Warren, Washington and Rensselaer .
At March 31, 2000, Troy Financial had consolidated assets of $910.1
million, net loans receivable of $596.3 million, deposits of $584.9 million and
shareholders' equity of $170.5 million.
CATSKILL FINANCIAL CORPORATION
341 MAIN STREET
CATSKILL, NEW YORK 12414
(518) 943-3600
Catskill Financial, a Delaware corporation, is headquartered in Catskill,
New York and is the parent of Catskill Savings, a federally chartered stock
savings bank.
At March 31, 2000, Catskill Financial had consolidated assets of $346.1
million, net loans of $162.8 million, deposits of $221.5 million and
shareholders' equity of $56.1 million.
Catskill Savings was organized in 1868. Catskill Savings has its main
offices in Catskill, New York, four branch offices in Greene County, New York
and one each in Albany County, New York and Schoharie County, New York.
o THE MERGER (PAGES __ THROUGH __)
If the Merger Agreement is adopted by Catskill Financial shareholders, the
Merger receives regulatory approval, and the parties meet the other conditions
of the Merger Agreement, Charlie Acquisition Corporation, a wholly-owned
subsidiary of Troy Financial, will be merged into Catskill Financial.
Immediately thereafter, Catskill Financial will merge into Troy Financial and
Catskill Financial will cease to exist as a separate corporation. Immediately
after Catskill Financial is merged into Troy Financial, Catskill Savings will be
merged into Troy Savings. The offices of Catskill Savings will be operated as
offices of Troy Savings immediately following the effective date of the Merger.
If the Merger Agreement is not adopted, Catskill Financial and Troy Financial
will continue as separate entities.
o THE MEETING (PAGES __THROUGH __)
The Meeting will be held on ____________, 2000, at the main office of
Catskill Financial located at 341 Main Street, Catskill, New York. At the
Meeting you will be asked to vote on the proposal to approve the Merger
Agreement. You can vote at the Meeting if you owned Common Stock on ______,
2000.
o CATSKILL FINANCIAL'S REASONS FOR ENTERING INTO THE MERGER (PAGE --)
Catskill Savings converted from the mutual to the stock form of ownership
and became a wholly-owned subsidiary of Catskill Financial on April 18, 1996.
The net proceeds from the sale of Common Stock in the conversion transaction
were $54.9 million. Following the conversion, Catskill Financial's management
sought to deploy the conversion proceeds and increase Catskill Financial's
assets and earnings by pursuing a number of strategies, including increased loan
production, the opening of new Catskill Savings branch offices and the
acquisition of other community-based financial institutions. Catskill Savings
opened four new branch offices and achieved moderate loan and deposit growth
through their operation. However, Catskill Financial's efforts to identify other
financial institutions in the Capital District and Hudson Valley regions of New
York that were interested in joining with it were unsuccessful. This impeded
Catskill Financial's ability to leverage the capital it raised in its stock
offering and sufficiently increase shareholder value.
As a result, the Board decided to pursue a strategy involving the
acquisition of Catskill Financial by another community-based financial
institution. The Board considered a number of factors in deciding to enter into
the Merger Agreement with Troy Financial, including the following:
o the Merger price exceeds the estimated value that could be realized by
Catskill Financial shareholders over the intermediate and long terms;
o the $23 per share to be received by the shareholders of Catskill
Financial represents a substantial premium to recent market prices and
book value of the Common Stock;
o attempts to grow Catskill Financial's franchise through acquisitions
of other institutions had been unproductive;
o the prospects for loan and deposit growth in Catskill Financial's
local market- without the investment of considerable additional
resources and the offering of new products and services- are limited;
o the Company's ability to increase earnings per share through Common
Stock repurchases cannot continue indefinitely;
o Catskill Financial's prospects for reaching a satisfactory return on
equity without significant asset growth are limited in the
intermediate term due to its high capital level;
o Catskill Financial's financial advisor, RBC, had given its opinion
that the transaction was fair to Catskill Financial's shareholders
from a financial point of view.
o like Catskill Financial, Troy Financial has a demonstrated commitment
to community banking; and
o Troy Financial has the resources to deliver expanded products and
services to Catskill Financial's existing customers.
Generally, the Board of Directors concluded that in the intermediate and
long terms, Catskill Financial could not produce shareholder value in excess of
the Merger price, and that the Merger price was fair, from a financial point of
view, to Catskill Financial's shareholders.
o WHAT YOU WILL RECEIVE FOR YOUR SHARES OF COMMON STOCK (PAGE --)
As a Catskill Financial shareholder, each of your shares of Common Stock
will automatically become exchangeable for $23.00 in cash. You will have to
surrender your Common Stock certificate(s) to receive this cash payment. Troy
Financial, or its exchange agent, will send
you written instructions for surrendering your certificates after the Merger is
completed. For more information on how this exchange procedure works, see
"PROPOSAL I -- ADOPTION OF THE MERGER AGREEMENT -- The Merger Agreement -- Terms
of the Merger" and "-- Surrender of Common Stock Certificates" on pages __and __
of this proxy statement.
The Common Stock is quoted on NASDAQ Stock Market under the symbol "CATB".
On June 7, 2000, which is the day the last trade occurred before the Merger was
announced, Common Stock was sold at $17.6875 per share.
Do not send your stock certificates at this time.
o RECORD DATE; VOTE REQUIRED TO ADOPT THE MERGER AGREEMENT (PAGE __)
You can vote at the Meeting if you owned stock at the close of business on
_______, 2000.
The Merger Agreement will be adopted if the holders of at least a majority
of the outstanding shares of Common Stock vote for it. A failure to vote, either
by not returning the enclosed proxy or by checking the "Abstain" box, will have
the same effect as a vote against the Merger Agreement.
o BENEFICIAL OWNERSHIP OF COMMON STOCK (PAGE __)
Directors and executive officers of Catskill Financial and their affiliates
beneficially owned an aggregate of ______, or approximately _____%, of the
shares of Common Stock outstanding on the Record Date. Each of the directors and
executive officers of Catskill Financial have executed an agreement with Troy
Financial pursuant to which each director and executive officer agreed to vote
his or her shares of Common Stock for the Merger Agreement.
o RECOMMENDATION TO CATSKILL FINANCIAL'S SHAREHOLDERS (PAGE __)
The Board of Directors believes that the Merger is fair to you and in your
best interests and unanimously recommends that you vote "FOR" the adoption of
the Merger Agreement.
o OPINION OF CATSKILL FINANCIAL'S FINANCIAL ADVISOR (PAGES __ THROUGH __)
RBC has delivered its written opinion to the Board of Directors, dated as
of June 7, 2000 and updated as of __________, 2000, that the consideration to be
received by the shareholders of
Catskill Financial in the Merger is fair from a financial point of view. This
opinion is attached as Appendix D to this proxy statement. You should read it
carefully for a description of the procedures followed, matters considered and
limitations on the reviews undertaken by RBC in providing its opinion.
o INTERESTS OF CERTAIN PERSONS IN THE MERGER (PAGES ___ THROUGH ----)
Some of Catskill Financial 's directors and officers have interests in the
Merger that are different from, or are in addition to their interests as
shareholders in Catskill Financial. The members of the Board of Directors knew
about these additional interests and considered them when they approved the
Merger Agreement and the Merger. These include:
1. the cancellation of existing vested and unvested options to
purchase Common Stock in exchange for a cash payment equal to the
difference between $23.00 per share and the option exercise
price;
2. payments for unvested shares of restricted Common Stock awarded
under the MRP at $23.00 per share;
3. the appointment of Catskill Financial's president, and chief
executive officer to the boards of directors of Troy Financial
and Troy Savings;
4. indemnification provisions in the Merger Agreement that protect
officers and directors for events that occurred prior to the
effective date of the Merger for a period of six years after the
Merger;
5. the appointment of each member of Catskill Financial's Board of
Directors to a Troy Savings Advisory Board for at least a
two-year period and the receipt by each member of that Troy
Savings Advisory Board of an annual retainer of $10,000 per year
except for the Chairman who will receive $50,000 per year; and
6. payments to certain officers pursuant to agreements between them
and Catskill Financial or Catskill Savings.
o DISSENTERS' RIGHTS OF APPRAISAL (PAGES __ THROUGH __)
Catskill Financial shareholders have dissenters' rights of appraisal under
Delaware law. If you want to exercise dissenter's rights, you must carefully
follow the procedures described at pages ___ through ___ of this document and
Appendix D.
o TAXABLE TRANSACTION FOR CATSKILL FINANCIAL SHAREHOLDERS (PAGE __)
For United States federal income tax, and possibly state and local tax,
purposes, your exchange of shares of Common Stock for cash generally will cause
you to recognize a gain or loss measured by the difference between the cash you
receive in the Merger and your tax basis in the shares of Common Stock. The tax
consequences of the merger to you will depend on your own situation. You should
consult with your tax advisors for a full understanding of the tax consequences
of the Merger to you.
HISTORICAL CONSOLIDATED FINANCIAL DATA
CATSKILL FINANCIAL
These tables show historical consolidated financial data for Catskill
Financial. The annual historical financial condition and operating data are
derived from Catskill Financial's consolidated financial statements audited by
their independent accountants. Financial amounts as of and for the six months
ended March 31, 2000 and 1999 are unaudited, however, Catskill Financial
believes such amounts reflect all normal recurring adjustments necessary for a
fair presentation of the results of operations and financial position for those
periods. You should not assume that the six- month results indicate results for
any future period.
SELECTED CONSOLIDATED FINANCIAL INFORMATION
At March 31, September 30
-------------------------- -------------------------------------------------------------------
2000 1999 1999 1998 1997 1996 1995
------------- ------------ ------------ ------------ ------------ ------------ ------------
(In thousands)
Selected Consolidated Financial Condition Data:
Total assets $346,102 $322,876 $338,796 $314,752 $289,619 $283,759 $230,102
Cash and cash equivalents 3,533 2,754 3,025 2,795 2,274 39,712 38,064
Loans receivable, net 160,663 143,236 150,821 137,785 124,337 122,533 118,364
Securities available for sale 156,557 159,468 165,833 164,983 148,114 97,041 ---
Securities held to maturity --- -- --- 2,060 8,055 19,077 67,090
Deposits 221,545 217,110 219,064 209,977 200,912 196,753 197,230
Borrowings 62,650 31,900 56,100 31,840 11,385 --- ---
Shareholders' equity 56,106 68,615 59,212 67,831 71,777 82,381 28,667
Book value per share 15.01 15.74 15.15 15.56 15.41 14.49 N/A
SELECTED CONSOLIDATED FINANCIAL INFORMATION - (Continued)
For the six months
ended March 31 Years ended September 30
------------------------- --------------------------------------------------------------
2000 1999 1999 1998 1997 1996 1995
------------ ----------- ----------- ----------- ----------- ----------- -----------
(In thousands)
Selected Consolidated Operating Data:
Interest income $11, 611 $10,633 $21,699 $21,132 $20,247 $17,962 $15,623
Interest expense 5,932 5,175 10,542 9,960 8,801 9,022 8,009
-------- --------- -------- ---------- --------- -------- ---------
Net interest income 5,679 5,458 11,157 11,172 11,446 8,940 7,614
Provision for loan losses 100 90 190 189 300 195 255
--------- ----------- ----------- ----------- ---------- --------- ----------
Net interest income after provisions
for loan losses 5,579 5,368 10,967 10,983 11,146 8,745 7,359
Non-interest income 455 411 866 580 482 966 231
Non-interest expense 3,200 3,007 6,184 5,662 5,187 4,258 4,665
-------- --------- ---------- ---------- --------- -------- --------
Income before taxes 2,834 2,772 5,649 5,901 6,441 5,453 2,925
Income tax expense 608 750 1,424 2,019 2,534 2,136 1,201
--------- ---------- ---------- ---------- --------- -------- ---------
Net income $2,226 $2,022 $4,225 $3,882 $3,907 $3,317 $1,724
======= ======== ======== ========= ======== ======== ========
Basic earnings per common share $.66 $.53 $1.13 $.95 $.84 $.38* *
Diluted earnings per common share $.66 $.52 $1.10 $.93 $.84 $.38* *
Cash dividends per common share $.2425 $.1850 $.405 $.333 $.21 --- ---
Divided payout ratio 36.74% 34.91.% 35.84% 35.05% 25.00% --- ---
* The Company completed its initial public offering on April 18, 1996, so
earnings per common share is not applicable to all periods prior to that date.
In calculating earnings per share for fiscal 1996, post conversion net income
and weighted average shares outstanding were used. Post conversion net income
during the fiscal year ended September 30, 1996 was approximately $2.0 million.
SELECTED CONSOLIDATED FINANCIAL INFORMATION - (Continued)
At or for the six
months ended
March 31 Years ended September 30
----------- ----------- ------------ ------------ ------------ ------------ ------------
2000 1999 1999 1998 1997 1996 1995
----------- ----------- ------------ ------------ ------------ ------------ ------------
Selected Financial Ratios and Other Data:
Performance Ratios:
Return on average assets 1.30% 1.27% 1.30% 1.30% 1.40% 1.25% .76%
Return on average equity 7.94 6.01 6.42 5.60 5.22 6.33 6.15
Net interest rate spread 3.16 2.97 3.09 2.91 2.95 2.54 2.99
Net interest margin (1) 3.86 3.91 3.94 4.00 4.18 3.44 3.47
Ratio of non-interest expense
to average total assets 1.87 1.89 1.90 1.90 1.86 1.60 1.77 (2)
Efficiency ratio (3) 46.87 47.25 47.08 46.32 43.80 45.56 51.05
Ratio of average interest-
earning assets to average
interest-bearing liabilities 119.68 127.00 124.90 131.97 138.60 125.79 112.97
Asset Quality Ratios:
Non-performing loans to total
loans at end of period .17% .52% .36% .42% .73% 1.10% .86%
Non-performing assets to total
assets at end of period .11 .25 .16 .20 .40 .61 .66
Allowance for loan losses to
non-performing loans 761.62 269.95 384.74 329.95 206.00 133.89 188.41
Allowance for loan losses to
total loans at end of period 1.33 1.40 1.37 1.40 1.50 1.47 1.61
Net charge-offs to average
loans .04 .01 .03 .10 .19 .26 .04
Capital Ratios:
Equity to total assets at end
of period 16.21% 21.25% 17.48% 21.55% 24.78% 29.03% 12.46%
Average equity to average
assets 16.34 21.20 20.19 23.20 26.86 19.73 12.44
(1) Net interest income on a tax equivalent basis divided by average
interest-earning assets.
(2) Excludes $660,000 provision for Nationar loss contingency.
(3) Efficiency ratio is non-interest expense/(non-interest income + net
interest income on a tax equivalent basis). For 1997 and 1996, excludes
Nationar recoveries included in non-interest income of $100,000, and
$560,000, respectively and for 1995 excludes $660,000 provision for
Nationar loss contingency included in non-interest expense.
In connection with the Merger, Catskill Financial determined to sell a
portion of its investment securities portfolio, consisting of corporate and
municipal bonds. The Merger Agreement requires Catskill Financial to have
completed the sale no later than July 7, 2000. On June 13, 2000, Catskill
Financial completed the sale of the securities portfolio. The proceeds of
the sale were $74.5 million.
Catskill Financial Common Stock
--------------------------------------------------
High Low Dividends
--------------------------------------------------
1997 Fiscal Year
- - - ----------------
First Quarter $14.50 $12.13
Second Quarter $16.50 $13.75 $.07
Third Quarter $16.50 $13.50 $.07
Fourth Quarter $17.25 $15.25 $.07
1998 Fiscal Year
- - - ----------------
First Quarter $19.63 $16.50 $.08
Second Quarter $19.00 $17.00 $.08
Third Quarter $18.50 $16.13 $.08
Fourth Quarter $17.50 $12.00 $.0925
1999 Fiscal Year
- - - ----------------
First Quarter $15.00 $11.25 $.0925
Second Quarter $15.75 $13.81 $.0925
Third Quarter $16.75 $14.06 $.11
Fourth Quarter $16.75 $14.13 $.11
2000 Fiscal Year
- - - ----------------
First Quarter $15.63 $12.63 $.11
Second Quarter $14.00 $ 9.50 $.1325
Third Quarter $22.06 $11.25 $.1325
On June 7, 2000, the last trading day prior to the joint announcement by
Troy Financial and Catskill Financial that they had entered into the Merger
Agreement, the closing sales price of Common Stock was $17.6875 per share. On
_________, 2000, which is the last practicable date prior to the printing of
this proxy statement, the closing price for Common Stock was $_______ per share.
As of , 2000, there were approximately ___ holders of record of Common
Stock. This number does not reflect the number of persons or entities who may
hold their Common Stock in nominee or "street" name through brokerage firms.
THE MEETING
GENERAL
This proxy statement is being furnished to you in connection with the
solicitation of proxies by the Board of Directors for use at the Meeting on
____________, 2000, at __:__ _m, local time, at Catskill Financial's main office
located at 341 Main Street, Catskill, New York 12414. At the Meeting, the
holders of Common Stock will consider and vote on:
o the proposal to approve and adopt the Merger Agreement, the Merger and
the other transactions contemplated by the Merger Agreement, and
o the transaction of such other business that may properly come before
the Meeting, including a proposal to adjourn or postpone the special
meeting.
RECORD DATE; VOTING RIGHTS; VOTE REQUIRED
The Board of Directors has fixed the close of business on , 2000 as the
record date for the determination of shareholders of Catskill Financial entitled
to receive notice of and to vote at the Meeting. On the Record Date, there were
____________ shares of Common Stock outstanding.
The proposal to approve the Merger Agreement must be approved by the
holders of a majority of the shares of Common Stock outstanding on the Record
Date. Accordingly, any nonvoted shares of Common Stock and abstentions with
regard to this proposal will have the same effect as votes against the proposal.
Each holder of Common Stock is entitled to one vote per share held of
record on the Record Date. The presence in person or by proxy at the Meeting of
the holders of a majority of the outstanding shares of Common Stock will
constitute a quorum.
As of the Record Date, directors and executive officers of Catskill
Financial and their affiliates beneficially owned an aggregate of ____________,
or approximately ______ %, of the outstanding shares of Common Stock. Members of
the Board of Directors and executive officers have entered into agreements with
Troy Financial to vote all shares of Common Stock held by them for the adoption
of the Merger Agreement.
The shareholders present at the Meeting, in person or by proxy, may by a
majority vote to adjourn the Meeting despite the absence of a quorum. If a
quorum is not obtained, or if fewer than a majority of shares of Common Stock
are voted in favor of approval and adoption of the Merger Agreement, it is
expected that the Meeting will be adjourned to allow additional time for
obtaining additional proxies.
VOTING AND REVOCATION OF PROXIES
Shares of Common Stock represented by a proxy properly signed and received
at or prior
to the Meeting, unless subsequently revoked, will be voted at the Meeting in
accordance with the instructions on the proxy. If a proxy is signed and returned
without indicating any voting instructions, shares of Common Stock represented
by the proxy will be voted "FOR" adoption of the Merger Agreement.
If your shares of Common Stock are held in street name by your broker, your
broker will not be able to vote your shares of Common Stock without instructions
from you. You should instruct your broker to vote your shares in accordance with
the procedure provided by your broker.
Any proxy given in connection with this solicitation may be revoked by the
person giving it at any time before the proxy is voted by filing either an
instrument revoking it or a duly executed proxy bearing a later date with the
Corporate Secretary of Catskill Financial prior to or at the Meeting or by
voting the shares of Common Stock subject to the proxy in person at the Meeting.
Attendance at the Meeting will not in and of itself constitute a revocation of a
proxy.
A proxy may indicate that all or a portion of the shares of Common Stock
represented by the proxy are not being voted with respect to a specific
proposal. This could occur, for example, when a broker is not permitted to vote
shares of Common Stock held in street name on certain proposals in the absence
of instructions from the beneficial owner. Shares of Common Stock that are not
voted with respect to a specific proposal will be considered as not present for
such proposal, even though such shares of Common Stock will be considered
present for purposes of determining a quorum and voting on other proposals.
Abstentions on a specific proposal will be considered as present for the purpose
of determining whether a quorum exists, but will not be counted as voting in
favor of such proposal.
SOLICITATION OF PROXIES
In addition to solicitation by mail, the directors, officers, employees and
agents of Catskill Financial may solicit proxies from Catskill Financial's
shareholders, either personally or by telephone or other form of communication.
None of these persons who solicit proxies will be specifically compensated for
such services. Nominees, fiduciaries and other custodians will be requested to
forward soliciting materials to beneficial owners. Catskill Financial will
reimburse such nominees, fiduciaries and other custodians for the reasonable
out-of-pocket expenses incurred by them in connection with this process. In
addition, Catskill Financial will bear its own expenses in connection with the
solicitation of its proxies for the Meeting. Catskill Financial has retained
_______________ to assist in soliciting proxies for the Meeting and to send
proxy materials to brokerage houses and other custodians, nominees and
fiduciaries for transmittal to their principals, at a cost of $______, including
out of pocket expenses.
PARTICIPANTS IN THE ESOP
If you participate in the ESOP, the proxy card represents a voting
instruction to the ESOP trustee as to the number of shares of Common Stock in
your plan account. Each participant in the ESOP may direct the trustee as to the
manner in which shares of Common Stock allocated to the
participant's plan account are to be voted. Allocated shares of Common Stock for
which no voting instructions are received will be voted by the trustee, subject
to the trustee's exercise of its fiduciary duties. Unallocated shares of Common
Stock held by the ESOP will be voted by the trustee in the same manner as
directed by the majority of participants who directed the trustee as to
allocated shares, subject to the trustee's exercise of its fiduciary
obligations.
PRINCIPAL HOLDERS OF CATSKILL FINANCIAL CORPORATION COMMON STOCK
Shareholders 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. The following
table sets forth information as of June 30, 2000, regarding share ownership of:
(i) those persons or entities which management believes 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, 1999, (the "Named
Officers"); and (iv) all directors and executive officers of the Company and the
Bank as a group. Management knows of no person, except as listed below, who
beneficially owned more than 5% of the Common Stock as of June 30, 2000.
Information set forth in the table with respect to persons or entities who own
beneficially more than five percent of the Common Stock is based upon filings
with the Securities and Exchange Commission (the "SEC") made pursuant to Section
13 of the Exchange Act and other sources believed by the Company to be reliable.
Shares Beneficially Percent Beneficial
Name Owned at June 30, 2000/1/ Ownership/2/
- - - ---- ------------------------- ------------------
Catskill Financial Corporation 375,342/3/ 9.5%
Employee Stock Ownership Plan
341 Main Street
Catskill, New York 12414
Thomson, Horstman & Bryant, Inc. 341,400/4/ 8.7%
Park 80 West, Plaza Two
Saddle Brook, New Jersey 07663
First Financial Fund, Inc. 226,500/4/ 5.7%
Gateway Center Three
100 Mulberry Street
Newark, New Jersey 07102
Wellington Management Company, LLP 226,500/4/ 5.7%
75 State Street
Boston, Massachusetts 02109
Shares Beneficially Percent Beneficial
Name Owned at June 30, 2000/1/ Ownership/2/
- - - ---- ------------------------- ------------------
Wilbur J. Cross 143,477/5/ 3.6%
Chairman, President & Chief
Executive Officer
David J. DeLuca 53,816/6/ 1.4%
Vice President & Chief
Financial Officer
Deborah S. Henderson 45,629/7/ 1.2%
Vice President & Senior Loan Officer
George P. Jones, Director 32,856/8/ *
Richard A. Marshall, Director 71,239/9/ 1.8%
Allan D. Oren, Director 77,935 2.0%
Hugh J. Quigley, Director 33,277/10/ *
Edward P. Stiefel, Esq , Director. 61,656 1.6%
Directors and executive officers of the 576,388/11/ 14.7%
Company and the Bank, as a group (
10 persons)
- - - ----------------------------------------
1 Amount includes shares held directly, as well as shares allocated to such
individuals under the ESOP, and other shares with respect to which a person
may be deemed to have sole voting and/or investment power. The table also
includes 4,551 shares awarded to each non-employee director pursuant to the
MRP which are not vested and cannot be voted at the Meeting. The table also
includes 17,058 shares subject to options granted to directors Jones,
Marshall and Quigley pursuant to the Stock Option Plan because they were
exercisable on the Record Date or within 60 days thereafter.
2 Based upon 3,931,992 shares outstanding on June 30, 2000, which includes
79,353 shares issued but unvested under the MRP and stock options for
194,473 shares exercisable on the Record Date or within 60 days thereafter.
An asterisk ("*") means a percentage held of less than 1%.
3 Excludes 77,547 shares allocated to ESOP participants. First Bankers Trust
Co., N.A., the trustee of the ESOP, may be deemed to own beneficially the
unallocated shares held by the ESOP. Unallocated shares and allocated
shares for which no voting instructions are received are voted in the same
proportion as allocated shares voted by participants.
4 Shares are beneficially owned by an investment advisory company on behalf
of certain of its clients. Amounts shown are based upon the most recent
available reports filed pursuant to Section 13 of the Exchange Act and may
not reflect actual beneficial ownership on the Record Date.
5 Includes 200 shares owned by Mr. Cross' wife, as to which he disclaims
beneficial ownership; 9,310 shares allocated to Mr. Cross in the ESOP;
22,748 unvested MRP shares, which cannot be voted at the Meeting; and
85,299 shares which Mr. Cross had the right to acquire on the Record Date
or within 60 days thereafter pursuant to the Stock Option Plan.
6 Includes 11,800 unvested MRP shares, which cannot be voted at the Meeting;
20,000 shares which Mr. DeLuca had the right to acquire on the Record Date
or within 60 days thereafter pursuant to the Stock Option Plan; and 4,316
shares allocated to Mr. DeLuca in the ESOP.
7 Includes 7,050 unvested MRP shares, which cannot be voted at the Meeting;
18,000 shares which Ms. Henderson had the right to acquire on the Record
Date or within 60 days thereafter pursuant to the Stock Option Plan; and
5,379 shares allocated to Ms. Henderson in the ESOP.
8 Includes 425 shares owned by Mr. Jones' daughter, as to which he disclaims
beneficial ownership.
9 Includes 12,000 shares owned by Mr. Marshall's wife and 3,000 shares owned
by Mr. Marshall's daughters, as to which he disclaims beneficial ownership.
10 Includes 980 shares owned by Mr. Quigley's wife's Individual Retirement
Account, as to which he disclaims beneficial ownership.
11 Includes 26,759 ESOP shares allocated to executive officers, 49,598
unvested MRP shares awarded to executive officers as a group and 22,755
unvested MRP shares awarded to non-employee directors, which MRP shares
cannot be voted at the Meeting. Also includes 143,299 stock options granted
to executive officers and 51,174 stock options granted to non-employee
directors, representing options exercisable on the Record Date or within 60
days thereafter.
PROPOSAL I -- ADOPTION OF THE MERGER AGREEMENT
The following discussion is qualified by reference to the Merger Agreement
which is attached as Appendix A to this proxy statement and incorporated herein
by reference. You are urged to read the Merger Agreement carefully in its
entirety. All information contained in this Proxy Statement with respect to Troy
Financial and its subsidiaries has been supplied by Troy Financial for inclusion
herein and has not been independently verified by Catskill Financial.
THE PARTIES TO THE MERGER
Troy Financial
Troy Financial is headquartered in Troy, New York and is the parent holding
company of Troy Savings, a New York-chartered stock savings bank. Troy Savings
operates fourteen branch offices in the six New York counties of Albany,
Saratoga, Schenectady, Warren, Washington and Rensselaer.
At March 31, 2000, Troy Financial had assets of $910.1 million, net loans
of $516.3 million, deposits of $560.7 million and shareholders' equity of $170.5
million.
Catskill Financial
Catskill Financial, a Delaware corporation, is headquartered in Catskill,
New York and is the parent of Catskill Savings, a federally chartered stock
savings bank.
At March 31, 2000, Catskill Financial had consolidated assets of $346.1
million, net loans of $162.8 million, deposits of $221.5 million and
shareholders' equity of $56.1 million. Since its incorporation, Catskill
Financial has not engaged in any significant activity other than holding the
stock of Catskill Savings.
Catskill Savings was organized in 1868 as a state chartered mutual savings
bank. In April, 1996 it converted to a stock savings bank. Catskill Savings is
regulated by OTS and its deposits are insured up to applicable limits under the
Bank Insurance Fund of the FDIC. Catskill Savings is primarily engaged in the
business of attracting deposits from the general public and using such deposits,
together with other funding sources, to invest in one- to- four family
residential mortgage loans and, to a significantly lesser extent, consumer
(including home equity lines of credit), commercial and multi-family loans.
Catskill Savings Bank also invests in mortgage-backed securities, U.S.
government and agency obligations and other permissible investments. At March
31, 2000, Catskill Savings' one-to-four family residential loan portfolio
totaled $123.4 million or 35.6 % of total assets and other loans totaled $39.4
million, or 4.3% of total assets.
OVERVIEW OF THE TRANSACTION
The boards of directors of Catskill Financial and Troy Financial each have
unanimously approved the Merger Agreement which provides that Charlie
Acquisition Corporation, a wholly-
owned subsidiary of Troy Financial will merge with and into Catskill Financial.
Immediately after that Merger, Catskill Financial will merge into Troy
Financial. Catskill Savings then will merge into Troy Savings, which will be the
surviving bank. Troy Savings intends to operate the offices of Catskill Savings
as branch offices of Troy Savings.
WHAT YOU WILL RECEIVE IN THE MERGER
Your shares of Common Stock will be converted into the right to receive a
cash payment of $23.00 per share. Upon completion of the Merger you will no
longer own any Common Stock or have an interest in Catskill Financial, nor will
you receive, as a result of the Merger, any stock of Troy Financial or Troy
Savings.
TAXABLE TRANSACTION FOR CATSKILL FINANCIAL SHAREHOLDERS
The following is a discussion of the material federal income tax
consequences of the Merger to certain holders of Common Stock. The discussion is
based upon the Internal Revenue Code (the "Code"), Treasury Regulations,
Internal Revenue Service rulings and judicial and administrative decisions in
effect as of the date of this proxy statement. This discussion assumes that the
Common Stock is generally held for investment. In addition, this discussion does
not address all of the tax consequences that may be relevant to you in light of
your particular circumstances or to Catskill Financial shareholders subject to
special rules, such as foreign persons, financial institutions, tax-exempt
organizations, dealers in securities or foreign currencies or insurance
companies.
The receipt of cash for Common Stock in connection with the Merger will be
a taxable transaction for federal income tax purposes to shareholders receiving
such cash, and may be a taxable transaction for state, local and foreign tax
purposes as well. You will recognize a gain or loss measured by the difference
between your tax basis for the Common Stock owned by you at the time of the
Merger and the amount of cash you receive for your Catskill Financial shares.
Your gain or loss will be a capital gain or loss if the Common Stock is a
capital asset to you.
The cash payments the holders of Common Stock will receive upon their
exchange of the Common Stock pursuant to the Merger generally will be subject to
"backup withholding" for federal income tax purposes unless certain requirements
are met. Under federal law, the third- party paying agent must withhold 31% of
the cash payments to holders of Common Stock to whom backup withholding applies,
and the federal income tax liability of these persons will be reduced by the
amount that is withheld. To avoid backup withholding, a holder of Common Stock
must provide the third-party exchange agent with his or her taxpayer
identification number and complete a form in which he or she certifies that he
or she has not been notified by the Internal Revenue Service that he or she is
subject to backup withholding as a result of a failure to report interest and
dividends. The taxpayer identification number of an individual is his or her
social security number.
Neither Troy Financial nor Catskill Financial has requested or will request
a ruling from the Internal Revenue Service as to any of the tax effects to
Catskill Financial's shareholders of the
transactions discussed in this proxy statement, and no opinion of counsel has
been or will be rendered to Catskill Financial's shareholders with respect to
any of the tax effects of the Merger to holders of Common Stock
The above summary of the material federal income tax consequences of the
Merger is not intended as a substitute for careful tax planning on an individual
basis. In addition to the federal income tax consequences discussed above,
consummation of the Merger may have significant state and local income tax
consequences that are not discussed in this proxy statement. Accordingly,
persons considering the Merger are urged to consult their tax advisors with
specific reference to the effect of their own particular facts and circumstances
on the matters discussed in this proxy statement.
BACKGROUND OF THE MERGER
Since the completion of Catskill Savings' conversion in 1996, the Board of
Directors and management have sought to retain and develop a community bank
franchise and build shareholder value. With these goals in mind, in October,
1999, the Board authorized Wilbur J. Cross, Catskill Financial's President and
Chief Executive Officer, to engage the services of an investment banking firm to
assist Catskill Financial in evaluating its strategic options.
In November, 1999, Mr. Cross and David J. DeLuca, Catskill Financial's Vice
President and Chief Financial Officer, met with representatives of RBC to
discuss Catskill Financial's business and strategic plan. On January 19, 2000,
RBC representatives met with the Board and reviewed the strategic options
available to Catskill Financial, the current market for financial institution
securities and approaches to the valuation of Catskill Financial. At this
meeting, the RBC representatives reviewed the probable results of several
alternative strategies for maximizing shareholder value, including remaining as
an independent institution with a focus on internal growth, seeking to acquire
other compatible financial institutions and seeking suitable candidates for a
business combination in which Catskill Financial would be the acquired
institution.
On February 15, 2000, the Board of Directors selected RBC to act as
Catskill Financial's exclusive financial advisor to assist it with its ongoing
evaluation of alternative courses of action to enhance long-term shareholder
value, including a possible merger or sale of Catskill Financial. During
February and March, RBC conducted a review of Catskill Financial's operations,
books and records and assisted Catskill Financial with the preparation of
confidential information and marketing materials to be provided to potentially
interested institutions if the Board decided to pursue a business combination.
In March, 2000, after further consideration of the alternative strategies
available to the Company, RBC was authorized to contact and solicit expressions
of interest in a business
combination from other institutions. Eleven such institutions, including
commercial banks, thrift institutions or their holding companies, were
contacted. Eight of these institutions executed confidentiality agreements and
received Catskill Financial's confidential information. In April, 2000, five of
them submitted indications of interest in acquiring Catskill Financial. Catskill
Financial's management, in consultation with RBC, concluded that: (i) three of
these informal offers - one from a commercial bank holding company and two from
thrift holding companies, were unacceptably low; and (ii) two of the offers -
from Troy Financial Corporation and a thrift holding company - merited further
exploration.
In early May, 2000, Mr. Cross, Mr. DeLuca, and RBC representatives met with
senior management of Troy Financial and the other institution, which, in April,
2000, had announced that it had entered into an agreement to acquire another
thrift holding company and its savings bank subsidiary. On May 8, 2000, Catskill
Financial received written, non-binding expressions of interest of $22.00 per
share from Troy Financial and $22.25 from the other institution. On May 12,
2000, Catskill Financial received an increased written, non-binding expression
of interest from Troy Financial of $23.00 per share. At a special meeting held
on May 15, 2000, RBC representatives and Catskill Financial's legal counsel
presented an analysis and comparison of the two offers. After considering all of
the relevant economic, legal and other factors identified by Catskill
Financial's advisors, including the amount of each offer and an assessment of
the ability of each institution to consummate and receive the required
regulatory approvals for a merger in a timely manner, the Board authorized the
negotiation of a definitive merger agreement with Troy Financial.
On May 17 and 18, 2000, Troy Financial and its advisors performed on-site
due diligence at the Company's offices. On May 26 and May 31, 2000, the Board
met to review the status of the negotiations. The Board also discussed a
possible sale of the Company's corporate and municipal bond portfolios and
concluded that such sale would facilitate the Merger. See "Securities Portfolio
Sale". The parties completed the negotiations between May 31 and June 7, 2000.
On June 7, 2000, after again considering all relevant factors and receiving
RBC's written opinion that the Merger is fair to Catskill Financial's
shareholders from a financial point of view, the Board concluded that the Merger
is in Catskill Financial's and its shareholders' best interests and approved the
Merger Agreement. On June 8, 2000, Catskill Financial and Troy Financial jointly
announced the signing of the Merger Agreement.
CATSKILL FINANCIAL'S REASONS FOR THE MERGER AND RECOMMENDATION OF THE BOARD OF
DIRECTORS
In forming its opinion to approve the Merger Agreement, the Board of
Directors considered a number of factors, including the following:
o the Merger price exceeds the estimated value that could be realized by
Catskill Financial shareholders over the intermediate and long terms;
o the $23 per share to be received by the shareholders of Catskill
Financial represents a substantial premium to recent market prices and
book value of the Common Stock;
o attempts to grow Catskill Financial's franchise through acquisitions
of other institutions had been unproductive;
o the prospects for loan and deposit growth in Catskill Financial's
local market- without the investment of considerable additional
resources and the offering of new products and services- are limited;
o the Company's ability to increase earnings per share through Common
Stock repurchases cannot continue indefinitely;
o Catskill Financial's prospects for reaching a satisfactory return on
equity without significant asset growth are limited in the
intermediate term due to its high capital level;
o Catskill Financial's financial advisor, RBC, had given its opinion
that the transaction was fair to Catskill Financial's shareholders
from a financial point of view;
o like Catskill Financial, Troy Financial has a demonstrated commitment
to community banking; and
o Troy Financial has the resources to deliver expanded products and
services to Catskill Financial's existing customers.
In making its determination, the Board considered the Merger transaction as
a whole and did not assign any relative or specific weights to the factors that
it considered.
Generally, the Board of Directors concluded that in the intermediate and
long terms Catskill Financial could not produce shareholder value in excess of
the Merger price, and that the Merger price was fair, from a financial point of
view, to Catskill Financial's shareholders. After careful and thorough
consideration of the Merger Agreement, the factors discussed above and the
opinion of RBC, the Board unanimously adopted the Merger Agreement as being in
the best
interests of Catskill Financial and its shareholders. ACCORDINGLY, THE BOARD OF
DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR THE ADOPTION OF THE MERGER
AGREEMENT.
OPINION OF CATSKILL FINANCIAL'S FINANCIAL ADVISOR
Catskill Financial retained RBC on March 23, 2000 to act as its exclusive
financial advisor in connection with services which have resulted in the Merger.
RBC agreed to assist Catskill Financial in soliciting indications of interest
and in analyzing, structuring, negotiating and effecting any transaction.
Catskill Financial selected RBC because it is a nationally recognized
investment-banking firm with substantial experience in transactions similar to
the Merger and is familiar with Catskill Financial and its business. As part of
its investment banking business, RBC is continually engaged in the valuation of
businesses and their securities in connection with mergers and acquisitions,
mutual to stock conversions, initial and secondary stock offerings and other
corporate transactions.
RBC participated in the negotiations with respect to the pricing and other
terms and conditions of the Merger. However, the Board of Directors ultimately
made the final decision as to the pricing of the Merger. RBC rendered a written
opinion to the Board on June 7, 2000 that based on and subject to the
assumptions, factors, and limitations as set forth in the attached opinion and
as described below, the Merger consideration is "fair" to Catskill Financial's
shareholders from a financial point of view. RBC updated its opinion as of the
date of this proxy statement. No limitations were imposed by the Board of
Directors upon RBC with respect to the investigations made or procedures
followed by it in arriving at its opinion.
The full text of RBC's opinion, which sets forth assumptions made and
matters considered, is attached as Exhibit C to this proxy statement.
Shareholders of Catskill Financial are urged to read the attached RBC opinion in
its entirety. The RBC opinion is directed only to the financial fairness of the
consideration and does not constitute a recommendation to any shareholder as to
how to vote at the Meeting. The summary of the RBC opinion in this proxy
statement is qualified in its entirety by reference to the full text of the RBC
opinion. In rendering its opinions, RBC does not admit that it is an expert
within the meaning of the term "expert" as used within the Securities Act of
1933 and the rules and regulations promulgated thereunder, or that its opinions
constitute a report or valuation within the meaning of Section 11 of the
Securities Act and the rules and regulations promulgated thereunder.
In connection with its opinion, RBC reviewed the following documents:
o the Merger Agreement and related documents;
o this proxy statement;
o Troy Financial's Annual Report to Shareholders and Annual Report on
Form 10-K for the
fiscal year ended September 30, 1999 and Troy Financial's Quarterly
Reports on form 10- Q for the periods ended March 31, 2000 December
31, 1999, June 30, 1999 and March 31, 1999;
o Troy Financial's Prospectus, dated February 12, 1999 with respect to
Troy Savings' conversion from mutual to stock form o organization;
o Catskill Financial's Annual Reports to Shareholders on Form 10-K for
the fiscal years ended September 30, 1999, 1998, 1997 and Catskill
Financial's Quarterly Reports on Form 10-Q for the periods ended March
31, 2000, December 31, 1999, June 30, 1999 and March 31, 1999;
o Catskill Financial's Proxy Statements dated January 14, 2000, January
7, 199 and January 20, 1998;
o certain operating and financial information provided to RBC by the
management of Catskill Financial relating to its business and
prospects;
o the publicly available financial data of thrift organizations which
RBC deemed generally comparable to Catskill Financial; and
o the terms of recent acquisitions of thrift organizations which RBC
deemed generally comparable in whole or part to Troy Financial's
acquisition of Catskill Financial.
Additionally, RBC:
o conducted or reviewed such other studies, analyses, inquiries and
examinations as it deemed appropriate;
o analyzed Troy Financial's ability to consummate the Merger;
o considered the future prospects of Catskill Financial in the event it
remained independent; and
o met with members of Catskill Financial senior management to discuss
Catskill Financial's operations, historical financial statements,
strategic plans and future prospects, including any potential
operating efficiencies and synergies that may arise from the Merger.
In connection with its review, RBC relied upon and assumed, without
independent verification, the accuracy and completeness of the financial and
other information regarding Catskill Financial and its subsidiaries provided to
RBC by Catskill Financial and its representatives. RBC is not an expert in
evaluating loan and lease portfolios for purposes of assessing the adequacy of
the allowances for losses. Therefore, RBC has not assumed any responsibility for
making an independent evaluation of the adequacy for the allowance for loan
losses set forth in the balance sheets of Troy Financial and Catskill Financial
at March 31, 2000, and RBC assumed such allowances were adequate and complied
fully with applicable law, regulatory policy, sound banking practice and
policies of the SEC as of the date of such financial
statements. RBC has reviewed certain historical financial data provided by
Catskill Financial. RBC reviewed certain operating forecasts and financial
projections (and the assumptions and bases therefor) provided by Catskill
Financial. RBC assumed that such forecasts and projections reflected the best
currently available estimates and judgments of Catskill Financial's management.
In certain instances, for the purposes of its analyses, RBC made adjustments to
such forecasts and projections that in RBC's judgment were appropriate under the
circumstances. RBC was not retained to nor did it make any independent
evaluation or appraisal of the assets or liabilities of Catskill Financial or
Troy Financial or their respective subsidiaries nor did RBC review any loan
files of Troy Financial or any of its subsidiaries. RBC also assumed that the
Merger in all respects is, and will be, undertaken and consummated in compliance
with all laws and regulations that are applicable to Troy Financial and Catskill
Financial.
OVERVIEW OF VALUATION METHODOLOGY
The preparation of a fairness opinion on a transaction such as the Merger
involves various determinations as to the most appropriate and relevant methods
of financial analysis and the application of those methods to the particular
circumstances. Therefore, RBC's opinion is not readily susceptible to summary
description. In arriving at its opinion, RBC performed a variety of financial
analyses. RBC believes that its analyses must be considered as a whole and the
consideration of portions of such analyses and the factors considered therein,
or any one method of analysis, without considering all factors and analyses,
could create an incomplete view of the analyses and the process underlying RBC's
opinion. No one method of analysis was assigned a greater significance than any
other.
The forecasts and projections furnished to RBC were prepared by the
management of Catskill Financial without input or guidance by RBC. Catskill
Financial does not publicly disclose internal management projections of the type
provided to RBC in connection with the review of the Merger. Such projections
were not prepared with a view toward public disclosure. The public disclosure of
such projections could be misleading since the projections were based on
numerous variables and assumptions that are inherently uncertain, including,
without limitation, factors related to general economic and competitive
conditions. Accordingly, actual results could vary significantly from those set
forth in such projections.
In its analyses, RBC made numerous assumptions with respect to industry
performance, general business and economic conditions, and other matters, many
of which are beyond the control of Catskill Financial. Any estimates contained
in RBC's analyses are not necessarily indicative of future results or values,
which may be significantly more or less favorable than such estimates. Estimates
of values of companies do not purport to be appraisals nor do they necessarily
reflect the prices at which companies or their securities may actually be sold.
The following is a brief summary of the analyses and procedures performed
by RBC in the
course of arriving at its opinion. The summary does not purport to be a complete
description, but is a brief summary of the material analyses and procedures
performed by RBC in the course of arriving at its opinion.
Analysis of Selected Publicly Traded Companies: RBC compared the financial
data for Catskill Financial as of or for the latest twelve months ended March
31, 2000 to a peer group of twenty-four selected thrifts. The criteria for the
peer group were thrifts located in the Mid- Atlantic and New England region of
the United States with assets between $250 million and $500 million for which
public trading and pricing information was available. RBC deemed this group to
be generally comparable to Catskill Financial. The following table compares
selected statistics of Catskill Financial with the average ratios and median
ratios for the twenty-four selected thrifts comprising the peer group:
Catskill Peer Group Peer Group
Financial Average Median
--------- ---------- ----------
Tangible Equity / Tangible Assets 16.21% 7.30% 7.34%
Non-Performing Loans / Loans 0.17 0.45 0.31
Loan Loss Reserves / NPLs 761.62 273.42 184.15
Loan Loss Reserves / Loans 1.33 1.06 0.99
Non-Performing Assets / Assets 0.11 0.36 0.28
Total Loans / Total Assets 47.05 65.88 68.45
Total Loans / Deposits 73.50 99.87 94.58
1-4 Family Loans / Total Loans 77.42 60.98 58.07
Other Real Estate Loans / Total Loans 5.11 18.49 14.01
Consumer Loans / Total Loans 14.46 6.94 1.72
Time Deposits > $100,000/Total Deposits 10.62 17.93 14.23
Core Deposits / Total Deposits 89.38 82.07 85.77
Return on Average Assets 1.31 0.79 0.87
Return on Average Equity 7.37 10.03 11.97
Net Interest Margin 3.51 3.45 3.52
Yield on Interest Earning Assets 7.00 7.58 7.49
Cost of Interest Bearing Liabilities 4.23 4.45 4.29
Non Interest Income / Average Assets 0.32 0.49 0.46
Non Interest Expense/Avg Assets 1.89 2.39 2.49
Efficiency Ratio 51.19 63.08 63.81
Price / LTM EPS 14.62x 9.07x 8.31x
Price / Tangible Book Value 120.75 107.01 105.79
Dividend Yield 2.92% 3.17% 3.17%
Relative to this peer group Catskill Financial's 1.31% return on assets was well
above the 0.79% peer group average, while its 7.37% return on equity was well
below the 11.97% peer group
median. Both return measures were significantly influenced by the amount of
Catskill Financial's tangible equity which, at 16.21% of tangible assets, was
more than twice that of the peer group. A slightly lower yield on earning assets
combined with a slightly lower cost of interest bearing liabilities, due to a
lower level of jumbo CD's and a higher level of core deposits, produces a net
interest margin comparable to that of the peer group. A substantially lower
efficiency ratio and superior asset quality also adds to the above average
return on assets. An above average percentage of loans in the 1-4 family
residential mortgages and consumer loan categories and a below average
percentage of other real estate loans contributes to Catskill Financial's asset
quality performance.
Analysis of Selected Transactions: RBC compared Catskill Financial's
financial data as of March 31, 2000 with that of a group of sixteen selected
thrift organizations being acquired in transactions announced since January 1,
1999 and for which pricing data pertaining to the transactions was publicly
available. RBC deemed these transactions generally comparable to Troy
Financial's acquisition of Catskill Financial. The criteria for the group were
thrifts which had a ratio of tangible equity to assets greater than 10% and
assets between $150 million and $600 million. The following table compares
selected statistics of Catskill Financial with the median ratios and average
ratios for the sixteen acquired thrifts in these transactions:
Catskill Peer Group Peer Group
Financial Median Average
---------- ----------- -----------
Total Assets ($000) 346,102 274,703 268,436
Tangible Equity/Tangible Assets 16.21% 13.91% 16.54%
YTD Return on Average Assets 1.31 1.04 1.10
YTD Return on Average Equity 7.37 6.80 7.26
Non-Performing Assets/Assets 0.11 0.30 0.32
LTM Operating Expenses/Assets 1.57 1.75 1.97
YTD Efficiency Ratio 51.19 55.33 53.35
At $23.00 per share, RBC calculated the transaction value as a multiple of
Catskill Financial's March 31, 2000 core book value, core tangible value, latest
twelve months core diluted earnings, and deposit premium on core capital as
follows:
Percentage of Core Book Value: 243.82%
Percentage of Core Tangible Book Value: 243.82%
Multiple of Core Earnings: 19.33x
Deposit Premium on Core Capital: 14.98%
Core ratios were defined to equal the ratios resulting from shareholders' equity
equal to 6% of assets with a dollar for dollar return of excess capital.
The average and median pricing ratios for the comparable transactions are
illustrated in the chart below:
Price/Core Deposit
Price/Core Tangible Price/Core Premium on
Book Value Book Value EPS Core Capital
------------ ------------ ------------ --------------
Peer Group Average 209.60% 215.96% 22.32x 16.30%
Peer Group Median 174.68 174.68 23.42 8.38
RBC then adjusted the peer group statistics to reflect the change in the Nasdaq
Bank Stock Index from the date of announcement of each stock transaction to the
closing value of the index on June 5, 2000. The adjusted average and median
pricing ratios for the comparable thrift transactions are illustrated in the
chart below:
Price/Core Deposit
Price/Core Tangible Premium on
Book Value Book Value Core EPS Core Capital
---------- ---------- -------- ------------
Peer Group Average 190.57% 196.99% 20.32x 14.91%
Peer Group Median 160.40% 170.45 19.63 7.86
Troy/Catskill 243.82 243.82 19.33 14.98
The imputed value of Catskill Financial, based upon the average and median
ratios of the comparable thrift transactions, when applied to Catskill
Financial's book value, tangible book value, latest twelve month earnings and
core deposits, results in the acquisition values of Catskill Financial shown in
the chart below:
Price/Core Deposit
Price/Core Tangible Price/ Premium on
Book Value Book Value Core EPS Core Capital
---------- ---------- -------- ------------
Average $20.04 $20.34 $24.18 $22.96
Median $18.37 $18.92 $23.37 $19.20
No company or transaction used in the Analysis of Selected Publicly Traded
Companies and Analysis of Selected Transactions sections is identical to
Catskill Financial or the Merger. Accordingly, an analysis of the results of the
foregoing is not mathematical; rather it involves complex considerations and
judgments concerning differences in financial and operating characteristics of
the companies involved, market areas in which the companies operate and other
factors that could affect the trading values of the securities of the company or
companies to which they are being compared.
Discounted Dividend Analysis: Using a discounted dividend analysis, RBC
estimated the present value of the future dividend stream that Catskill
Financial could produce in perpetuity. Projection ranges for Catskill
Financial's five-year balance sheet and income statement were provided by
Catskill Financial's management. Management's projections were based upon
various factors and assumptions, many of which are beyond the control of
Catskill Financial. These projections are, by their nature, forward-looking and
may differ materially from the actual future values or actual future results for
the reasons discussed above. The actual future values or results may be
significantly more or less favorable than suggested by such projections. In
producing a range of per share Catskill Financial values, RBC utilized the
following assumptions: an immediate dividend payout in an amount which would
bring Catskill Financial's tangible equity ratio to 6%, discount rates ranging
from 12% to 14 %, terminal price/earnings multiples ranging from 11x to 13x
(which, when applied to terminal year estimated earnings, produces a value which
approximates the net present value of the dividends in perpetuity, given certain
assumptions regarding growth rates and discount rates) and earnings that include
estimated savings in Catskill Financial's non-interest expense equal to 30% to
in the first year and 35.00% in the second year, with 5.00% growth thereafter.
The discounted dividend analysis produced the range of net present values per
share of Common Stock illustrated in the chart below:
Discount Rate: 12.00% 13.00% 14.00%
- - - -------------- ------ ------ ------
Terminal Year 11x $21.82 $21.34 $20.87
Multiple of
Earnings 12x $22.65 $22.13 $21.63
Adj. For Goodwill
Amortization 13x $23.48 $22.92 $22.39
These analyses do not purport to be indicative of actual values or expected
values or an appraisal range of shares of Common stock. The discounted dividend
analysis is a widely used valuation methodology, but RBC noted that it relies on
numerous assumptions, including expense savings levels, dividend payout rates,
terminal values and discount rates, the future values of which may be
significantly more or less than such assumptions. Any variation from these
assumptions would likely produce different results.
Break-Even Analysis: Using a break-even analysis, RBC estimated the
earnings per share growth rate necessary for the present value Catskill
Financial's future stock price to equal the $23.00 acquisition price. In
producing the earnings growth rate, RBC utilized the following assumptions: 2000
EPS estimate of $1.38, discount rates range from 12% to 18%, terminal
price/earnings multiples range from 10x to 20x, and a dividend payout ratio of
42.74%. The break-even analysis produced the range of five year earnings growth
rates illustrated in the chart below:
Discount Rates
Terminal
Year
Multiple of
Earnings 12% 14% 16% 18%
-------- --- --- --- ---
Market 10x 23.9% 26.5% 29.1% 31.8%
Multiple 12x 19.3% 21.9% 24.5% 27.0%
Acquisition 18x 9.3% 11.7% 14.1% 16.5%
Multiple 20x 6.8% 9.1% 11.5% 13.8%
RBC noted that Catskill Financial's strategic plan called for earnings
growth rates less than those indicated above. These analyses do not purport to
be indicative of actual values or expected values or an appraisal range of the
shares of Common Stock. The break-even analysis is a widely used valuation
methodology, but RBC noted that it relies on numerous assumptions, including
projected earnings, price/earnings multiples, discount rates, dividend payout
ratio and Troy Financial's $23.00 offer per share to Catskill Financial
shareholders, the future values of which may be significantly more or less than
such assumptions. Any variation from these assumptions would likely produce
different results.
RBC's opinion was based solely upon the information available to it and the
economic, market and other circumstances as they existed as of the date of the
opinion. Events occurring after such date could materially affect the
assumptions and conclusions contained in RBC's opinion. RBC has not undertaken
to reaffirm or revise its opinion or otherwise comment upon any events occurring
after the date of its opinion.
With regard to RBC's services in connection with the Merger, Catskill
Financial has agreed to pay RBC a transaction fee in connection with the Merger,
a portion of which is contingent upon the consummation of the Merger. Catskill
Financial has agreed to pay total fees of $1,024,000, of which $624,500 has been
paid and the remainder of which will be paid when the Merger is consummated. In
addition, Catskill Financial has agreed to reimburse RBC for its reasonable
out-of-pocket expenses, which shall not exceed $10,000 without the prior consent
of Catskill Financial. Catskill Financial has also agreed to indemnify RBC and
certain related persons against certain liabilities, including liabilities under
federal securities law, incurred in connection with its services. The amounts of
RBC's fees were determined by negotiation between Catskill Financial and RBC.
Prior to this engagement, RBC has not had an investment banking
relationship with Catskill Financial and RBC's research department does not
provide published investment analysis on Catskill Financial. However, RBC does
make a market in the Common Stock.
RBC has not had an investment banking relationship with Troy Financial and
RBC's research department does not provide published investment analysis on Troy
Financial. However, RBC does make a market in Troy Financial's common stock.
DISSENTERS' APPRAISAL RIGHTS
Under Delaware law, if you do not wish to accept the cash payment provided
for in the Merger Agreement, you have the right to dissent from the Merger and
to have an appraisal of the fair value of your shares conducted by the Delaware
Court of Chancery. Catskill Financial shareholders electing to exercise
dissenters' appraisal rights must comply with the provisions of section 262 of
the Delaware General Corporation Law in order to perfect their rights. Catskill
Financial will require strict compliance with the statutory procedures. A copy
of Section 262 is attached as Appendix D.
The following is intended as a brief summary of the material provisions of
the Delaware statutory procedures required to be followed by a Catskill
Financial shareholder in order to dissent from the Merger and perfect
dissenters' appraisal rights. This summary, however, is not a complete statement
of all applicable requirements and is qualified in its entirety by reference to
Section 262 of the Delaware General Corporation Law, the full text of which
appears in Appendix D of this proxy statement.
Section 262 requires that shareholders be notified not less than 20 days
before the Meeting to vote on the Merger that dissenters' appraisal rights will
be available. A copy of Section 262 must be included with such notice. This
proxy statement constitutes Catskill Financial's notice to its shareholders of
the availability of dissenters' appraisal rights in connection with the Merger
in compliance with the requirements of Section 262. If you wish to consider
exercising your dissenters' appraisal rights you should carefully review the
text of Section 262 contained in Appendix D because if you don't timely and
properly comply with the requirements of Section 262, you will lose your rights
under Delaware law.
If you elect to demand appraisal of your shares of Common Stock, you must
satisfy both of the following conditions:
1. You must deliver to Catskill Financial a written demand for appraisal
of your shares of Common Stock before the vote with respect to the
Merger is taken. This written demand for appraisal must be in addition
to and separate from any proxy or vote abstaining from or against the
merger. Voting against or failing to vote for the Merger by itself
does not constitute a demand for appraisal within the meaning of
Section 262.
2. You must not vote in favor of the Merger. An abstention or failure to
vote will satisfy this requirement, but a vote in favor of the Merger,
by proxy or in person, will constitute a waiver of your dissenters'
appraisal rights in respect of the shares of Common Stock so voted and
will nullify any previously filed written demands for appraisal.
If you fail to comply with either of these conditions and the Merger is
completed, you will be entitled to receive the cash payment for your shares of
Common Stock as provided for in the Merger Agreement but will have no
dissenters' appraisal rights with respect to your shares of Common Stock.
All demands for appraisal should be addressed to the Corporate Secretary,
Catskill Financial Corporation, 341 Main Street, Catskill, New York 12414,
before the vote on the Merger is taken at the Meeting, and should be executed
by, or on behalf of, the record holder of the shares of Common Stock. The demand
must reasonably inform Catskill Financial of the identity of the shareholder and
the intention of the shareholder to demand appraisal of his or her shares of
Common Stock.
To be effective, a demand for appraisal by a holder of Common Stock must be
made by or in the name of such registered shareholder, fully and correctly, as
the shareholder's name appears on his or her stock certificate(s) and cannot be
made by the beneficial owner if he or she does not also hold the shares of
record. The beneficial holder must, in such cases, have the registered owner
submit the required demand in respect of such shares.
If shares of Common Stock are owned of record in a fiduciary capacity, such
as by a trustee, guardian or custodian, execution of a demand for appraisal
should be made in such capacity; and if the shares of Common Stock are owned of
record by more than one person, as in a joint tenancy or tenancy in common, the
demand should be executed by or for all joint owners. An authorized agent,
including one for two or more joint owners, may execute the demand for appraisal
for a shareholder of record; however, the agent must identify the record owner
or owners and expressly disclose the fact that, in executing the demand, he or
she is acting as agent for the record owner. A record owner, such as a broker,
who holds shares of Common Stock as a nominee for others, may exercise his or
her right of appraisal with respect to the shares of Common Stock held for one
or more beneficial owners, while not exercising this right for other beneficial
owners. In such case, the written demand should state the number of shares of
Common Stock as to which appraisal is sought. Where no number of shares of
Common Stock is expressly mentioned, the demand will be presumed to cover all
shares of Common Stock held in the name of such record owner.
If you hold your shares of Common Stock in a brokerage account or in other
nominee form and you wish to exercise appraisal rights, you should consult with
your broker or such other nominee to determine the appropriate procedures for
the making of a demand for appraisal by such nominee.
Section 262 provides that within 10 days after the effective date of the
Merger, Troy Financial must give written notice that the Merger has become
effective to each Catskill Financial shareholder who has properly filed a
written demand for appraisal and who did not vote in favor of the Merger. Within
120 days after the effective date, either Troy Financial or any shareholder who
has complied with the requirements of Section 262 may file a petition in the
Delaware Court of Chancery demanding a determination of the fair value of the
shares held by all shareholders entitled to appraisal. Troy Financial does not
presently intend to file such a petition in the event there are dissenting
shareholders and has no obligation to do so. Accordingly, your failure to file
such a petition within the period specified could nullify your previously
written demand for appraisal.
At any time within 60 days after the effective date, any shareholder who
has demanded an appraisal has the right to withdraw the demand and to accept the
cash payment specified by the
Merger Agreement for his or her shares of Common Stock. If a petition for
appraisal is duly filed by a shareholder and a copy of the petition is delivered
to Troy Financial, Troy Financial will be obligated within 20 days after
receiving service of a copy of the petition to provide the Chancery Court with a
duly verified list containing the names and addresses of all shareholders who
have demanded an appraisal of their shares of Common Stock. After notice to
dissenting shareholders, the Chancery Court is empowered to conduct a hearing
upon the petition, to determine those shareholders who have complied with
Section 262 and who have become entitled to the appraisal rights provided
thereby. The Chancery Court may require the shareholders who have demanded
payment for their shares to submit their stock certificates to the Register in
Chancery for notation thereon of the pendency of the appraisal proceedings; and
if any shareholder fails to comply with such direction, the Court may dismiss
the proceedings as to such shareholder.
After determination of the shareholders entitled to appraisal of their
shares of Common Stock, the Chancery Court will appraise the shares, determining
their fair value exclusive of any element of value arising from the
accomplishment or expectation of the Merger, together with a fair rate of
interest. When the value is determined, the Chancery Court will direct the
payment of such value, with interest thereon accrued during the pendency of the
proceeding if the Chancery Court so determines, to the shareholders entitled to
receive the same, upon surrender by such holders of the certificates
representing such shares.
In determining fair value, the Chancery Court is required to take into
account all relevant factors. You should be aware that the fair value of the
shares of Common Stock as determined under Section 262 could be more, the same,
or less than the value that you are entitled to receive pursuant to the Merger
Agreement.
Costs of the appraisal proceeding may be imposed upon Troy Financial and
the shareholders participating in the appraisal proceeding by the Chancery Court
as the Chancery Court deems equitable in the circumstances. Upon the application
of a shareholder, the Chancery Court may order all or a portion of the expenses
incurred by any shareholder in connection with the appraisal proceeding,
including, without limitation, reasonable attorneys' fees and the fees and
expenses of experts, to be charged pro rata against the value of all shares of
Common Stock entitled to appraisal.
Any shareholder who demands appraisal rights will not, after the effective
date, be entitled to vote shares of Common Stock subject to such demand for any
purpose or to receive payments of dividends or any other distribution with
respect to such shares of Common Stock, other than with respect to payment as of
a record date prior to the effective date; however, if no petition for appraisal
is filed within 120 days after the effective date, or if such shareholder
delivers a written withdrawal of his or her demand for appraisal and an
acceptance of the Merger within 60 days after the effective date, then the right
of such shareholder to appraisal will cease and such
shareholder will be entitled to receive the cash payment for shares of his or
her Common Stock pursuant to the Merger Agreement. Any withdrawal of a demand
for appraisal made more than 60 days after the effective date of the Merger may
only be made with the written approval of Troy Financial and must, to be
effective, be made within 120 days after the effective date.
The requirements of Section 262 are technical and complex. Catskill
Financial shareholders who may wish to dissent from the Merger and pursue
appraisal rights should consult their legal advisors.
REGULATORY APPROVALS
Troy Savings' regulators, the FDIC and the New York Superintendent of
Banks, must approve the Merger. The Board of Governors of the Federal Reserve
System, which regulates Troy Financial because it is a bank holding company,
must also approve Troy Financial's acquisition of control of Catskill Financial
and Catskill Savings or grant a waiver from application requirements.
Applications for the approvals, and a request for a waiver of the approval
requirement from the Board of Governors, have been filed and are pending. The
Merger cannot be consummated unless and until these approvals and the waiver
have been obtained. The OTS, which regulates Catskill Financial and Catskill
Savings, has been notified of the Merger as required under applicable federal
law.
The FDIC and the Superintendent will consider several factors when
reviewing the merger of Catskill Savings into Troy Savings, including the
competitive effects of the transaction, the managerial and financial resources
and future prospects of the existing and resulting institutions, and the effect
of the transaction on the convenience and needs of the communities to be served.
The Community Reinvestment Act of 1977, ("CRA"), also requires that the FDIC, in
deciding whether to approve the merger of the two banks, assess their records of
performance in meeting the credit needs of the communities they serve, including
low and moderate income neighborhoods. Catskill Savings currently has a
satisfactory CRA rating from the OTS and Troy Savings currently has an
outstanding CRA rating from the FDIC. FDIC regulations provide for publication
of notice and an opportunity for public comment on the application for the
merger of Troy Savings and Catskill Savings. As part of the review process, it
is not unusual for the FDIC to receive protests and adverse comments from
community groups and others. The receipt by the FDIC of comments on the
application, or a decision to hold a meeting or hearing, as permitted under FDIC
regulations, could prolong the period during which the merger of the two banks
is subject to review by the FDIC. As of the date of this proxy statement,
Catskill Savings is not aware of any protests, adverse comments or requests for
a meeting or hearing filed with the FDIC concerning the merger of the banks. The
bank merger may not take place for a period of 15 to 30 days following FDIC
approval, during which time the Department of Justice has authority to challenge
the bank merger on antitrust grounds. The precise length of the period will be
determined by the FDIC in consultation with the Department of Justice. The
commencement of an antitrust action would stay the effectiveness of any approval
granted by the FDIC unless a court specifically orders otherwise.
Regulatory approval of an application means that it has satisfied the
statutory and regulatory standards required for such approval. It does not mean,
and should not be understood to imply, that the Merger or the price per share of
Common Stock that will be paid to Catskill Financial shareholders in the Merger,
is fair to them from a financial standpoint.
The Agreement provides that either Catskill Financial or Troy Financial may
terminate the Agreement: (i) upon written notice to the other party given thirty
days after the denial, or withdrawal at the request of a regulator, of a
regulatory application, unless an appeal of the denial or an amended application
is filed within thirty days; and (ii) if the Merger has not been consummated by
January 31, 2001. There can be no assurance as to the receipt or timing of any
of the required regulatory approvals, and consequently, there can be no
assurance that the Merger will be consummated by January 31, 2001. Further, if
regulatory approval is received after shareholder approval of the Merger and the
approval requires a material change in the terms of the Agreement, a
resolicitation of shareholders may be required.
THE MERGER AGREEMENT
The following is a brief description of material provisions of the Merger
Agreement. It does not purport to be complete and it is qualified by reference
to the Merger Agreement itself, which is attached as Appendix A and incorporated
into this proxy statement by reference. You should refer to the full text of the
Merger Agreement for details about the terms and conditions of the Merger
Agreement.
TERMS OF THE MERGER
The Merger Agreement provides for a business combination in which Charlie
Acquisition Corporation, which is a newly formed wholly owed subsidiary of Troy
Financial, will be merged into Catskill Financial. This transaction will result
in Catskill Financial becoming a wholly owned subsidiary of Troy Financial. When
this has been accomplished, Troy Financial intends that Catskill Financial will
immediately merge into Troy Financial, resulting in the assets and liabilities
of Catskill Financial becoming the assets and liabilities of Troy Financial and
in Catskill Financial ceasing to exist.
The Merger Agreement further provides that once the merger of Catskill
Financial into Troy Financial is complete, Catskill Savings will immediately
merge into Troy Savings. An agreement for such merger to occur has been entered
into. When it occurs, the assets and liabilities of Catskill Savings will become
assets and liabilities of Troy Savings, and Catskill Savings will cease to
exist.
The Merger Agreement provides that the officers and directors of Charlie
Acquisition Corporation before it is merged into Catskill Financial are to be
the officers and directors of Catskill Financial after the Merger, and that the
officers and directors of Troy Savings immediately prior to the bank merger are
to continue as officers and directors of Troy Savings after the bank merger.
The Merger will result, except as otherwise stated, in each outstanding
share of Common Stock being converted into to the right to receive a cash
payment in the amount of $23.00. The amount of such Merger consideration will be
equitably adjusted, however, if there should be a change in the capitalization
of Catskill Financial prior to the Merger as the result of a stock split, stock
dividend, reclassification, or recapitalization or similar transaction. Shares
of Common Stock that are held by Troy Financial or its subsidiaries and shares
of Catskill Financial held by Catskill Financial as treasury stock or otherwise
or held by any of its subsidiaries will be canceled and retired upon completion
of the Merger and no payment will be made for them. The shares of Common Stock
that are to be canceled will not include shares held in a fiduciary capacity or
in satisfaction of a debt previously contracted. In addition, holders of Common
Stock for which dissenters' appraisal rights have been exercised will be
entitled only to the rights granted by Section 262 of the Delaware General
Corporation Law.
Each outstanding and unexercised option for the purchase of Common Stock
under the Stock Option Plan that is outstanding and unexercised and has not
expired at the time of the Merger will be converted to a right to receive a cash
payment equal to the number of shares of Common Stock subject to the option
multiplied by the difference between $23.00 per share of Common Stock and the
exercise price of the option.
WHEN THE MERGER WILL BE COMPLETED
The closing of the Merger will take place three days after the satisfaction
or waiver of all of the conditions to the Merger contained in the Merger
Agreement, unless Troy Financial and Catskill Financial agree to another date.
On the date of the closing, a Certificate of Merger will be filed with the
Delaware Secretary of State. The Merger will become effective at the time stated
in the Certificate of Merger. Immediately after the effective time of the merger
of Catskill Financial into Troy Financial, Catskill Savings will be merged into
Troy Savings.
Catskill Financial expects to complete the Merger in the fourth quarter of
2000. However, Catskill Financial cannot guarantee when or if the required
approvals will be obtained. Furthermore, either party may terminate the Merger
Agreement if, among other reasons, the Merger has not been completed on or
before January 31, 2001, unless failure to complete the
Merger by that time is due to the breach of any representation, warranty or
covenant by the party seeking to terminate the Merger Agreement.
SURRENDER OF CERTIFICATES
As soon as practicable after the completion of the Merger, an exchange
agent designated by Troy Financial will mail to each former holder of record of
Common Stock a letter with instructions on how to exchange Common Stock
certificates for the cash Merger consideration.
Please do not send in your Common Stock certificates until you receive the
letter of transmittal and instructions from the exchange agent and have
completed the transmittal materials accordingly. Do not return your stock
certificates with the enclosed proxy.
After you mail the letter of transmittal and your Common Stock certificates
to the exchange agent, your check will be mailed to you. The Common Stock
certificate(s) you surrender will be canceled. You will not be entitled to
receive interest on any cash to be received in the Merger.
In the event of a transfer of ownership of any shares of Common Stock that
has not been registered in the transfer records of Catskill Financial, a check
for the cash to be received in the Merger may be issued to the person who holds
such shares of Common Stock if the certificate representing such shares of
Common Stock is presented to the exchange agent with documents that are
sufficient in the reasonable discretion of Troy Financial and the exchange
agent:
1. to evidence and effect such transfer, and
2. to evidence that all applicable stock transfer taxes have been paid.
After the completion of the Merger, there will be no further transfers of
Common Stock. Common Stock certificates presented for transfer after the
completion of the Merger will be canceled and exchanged for the Merger
consideration.
Any portion of the cash to be paid in the Merger or the proceeds of any
investments thereon that remains unclaimed by the shareholders of Catskill
Financial for six months after the effective date will be repaid by the exchange
agent to Troy Financial. If you have not complied with the exchange procedures
prior to six months after the Merger, you may only look to Troy Financial for
payment of the cash you are entitled to receive in exchange for your shares of
Common Stock and this payment will not include any interest.
If your Common Stock certificate(s) have been lost, stolen or destroyed,
you will only be entitled to receive the Merger consideration by making an
affidavit and, if required by Troy Financial or its exchange agent, by posting a
bond in an amount sufficient to protect Troy Financial against claims related to
your Common Stock.
CONDUCT OF BUSINESS PENDING THE MERGER
Pursuant to the Merger Agreement, Catskill Financial has agreed to use its
best efforts to preserve its business organization and that of each Catskill
Financial subsidiary intact, to maintain good relationships with employees and
to preserve the goodwill of customers and others with whom business
relationships exist. Catskill Financial and its subsidiaries have agreed to
conduct their respective business and to engage in transactions only in the
ordinary course of business, consistent with past practice, and except as
otherwise permitted by the Merger Agreement or as consented to by Troy
Financial, neither Catskill Financial or any of its subsidiaries will:
o declare any dividends or other distributions on Common Stock
other than regular quarterly cash dividends on the Common stock
and dividends by any Catskill Financial subsidiary to Catskill
Financial;
o split, combine or reclassify any Common Stock;
o repurchase, redeem or otherwise acquire (other than in a
fiduciary capacity to or to satisfy a debt incurred before the
signing of the Merger Agreement) any Common Stock or securities
than can be converted into Common Stock);
o issue, deliver or sell or authorize or propose the issuance,
delivery or sale of any securities, other than the issuance of
additional shares of Common Stock upon the exercise or
fulfillment of rights or options issued or existing under the
Stock Option Plan in accordance with its present terms or the
stock option granted to Troy Financial at the time the Merger
Agreement was signed;
o amend its certificate of incorporation or bylaws;
o make capital expenditures aggregating in excess of $20,000;
o enter any new line of business;
o acquire an equity interest in the assets of other business
organizations except in connection with foreclosures, settlements
or loan restructurings in the ordinary course of business
consistent with prudent banking practices;
o take any action that may or is intended to breach Catskill
Financial's representations and warranties in the Merger
Agreement, unless required by law;
o change its methods of accounting in effect at September 30, 1999,
except as required by changes in regulatory or generally accepted
accounting principles;
o adopt or amend any employment agreements between Catskill
Financial or its subsidiaries and their employees and directors
other than merit increases consistent with past business
practices, not to exceed 4% of base pay;
o enter into, modify or renewing any agreement or arrangement
providing for the payment to any director, officer or employer of
compensation or benefits;
o hire any new employee at an annual compensation in excess of
$24,000;
o incur any indebtedness for borrowed money or assuming the
obligations of a third party, except for short term (six months
or less) borrowings in the ordinary course consistent with past
practices;
o sell, purchase, lease, relocate, open or close any banking or
other office;
o make any equity investments in real estate, other than in
connection with foreclosures or settlements in lieu of
foreclosures in the ordinary course of business consistent with
past banking practices;
o make any new loans or modifying any existing loans with any
affiliated person of Catskill Financial;
o make any investment, or incurring any deposit liabilities, other
than in the ordinary course of business consistent with past
practice;
o purchase any loans or selling, purchasing or leasing any real
property other than consistent with past practices;
o originate any loans except in accordance with existing policies,
mortgage loans in excess of $150,000, unsecured consumer loans in
excess of $20,000, commercial business loans in excess of $50,000
as to any loan or $100,000 in the aggregate as to related loans
or to loans to related persons, commercial real estate loans in
excess of $150,000 as to any loan or $300,000 in the aggregate as
to related loans, loans for which the aggregate outstanding
principal balance exceeds the lesser of (1) the cash flow
received from prepayment and repayment, sale or interest and
penalties paid on any other loans or (2) $1 million per month;
o make any investment in other than Federal Funds or U.S.
Treasuries that have a maturity date beyond three months; or
o sell or purchase any mortgage loan servicing rights.
See Article V of the Merger Agreement, which is attached to this proxy
statement as Appendix A, for a more complete account of restrictions or the
conduct of business of Catskill Financial pending the Merger.
AGREEMENT NOT TO SOLICIT OTHER OFFERS
Catskill Financial has agreed not to seek to have an outside third party
try to buy a material interest in Catskill Financial or its subsidiaries.
Generally, an effort by Catskill Financial to obtain an offer to engage in a
merger or similar business combination, buy at least 15% of Catskill Financial's
assets or engage in a tender or exchange offer involving 15% of the Common
Stock, or a public announcement to enter into an agreement to do any of these
things, would violate this covenant. Despite Catskill Financial's agreement not
to solicit other offers, the Catskill Financial Board may generally enter into
discussions or negotiations with anyone who makes an unsolicited, written bona
fide proposal to acquire Catskill Financial that is a financially superior
proposal to that of Troy Financial prior to the date of the Meeting. A superior
proposal is defined in the Merger Agreement as a proposal to acquire more than
50% of the voting power of Common Stock or all or substantially all of the
assets of Catskill Financial, which the Board determines in good
faith to be more favorable than the Merger to Catskill Financial shareholders.
Before the Catskill Financial Board may enter into negotiations on a
superior proposal, it would have to first determine, after consultation with its
independent legal counsel, that a failure to take action would constitute a
breach of its fiduciary duty to shareholders. If Catskill Financial does enter
into negotiations with a third party regarding a superior proposal, it has to
notify Troy Financial and provide Troy Financial with information about the
other party and its proposal. The Catskill Financial Board may also withdraw or
modify its recommendation for the Merger and enter into a business combination
with a third party if, after consulting with independent legal counsel, the
Board determines in good faith that doing so is necessary for it to comply with
its fiduciary duties to shareholders.
CONDITIONS TO THE MERGER
The obligations of Troy Financial and Catskill Financial to consummate the
Merger are subject to the satisfaction or mutual waiver at or prior to the
effective date of the following conditions, among others:
1. the taking of all required corporate action;
2. the obligations and covenants required by the Merger Agreement to
be performed at or prior to the closing date shall have been
performed and complied with in all material respects;
3. each of the representations and warranties in the Merger
Agreement shall be true and correct in all material respects;
4. the receipt of all required regulatory approvals of the Merger
without the imposition of unduly burdensome conditions and the
expiration or termination of all notice and waiting periods
related to the approvals;
5. there is no order in effect that enjoins or prohibits
consummation of the Merger; and
6. the approval of the Merger Agreement by the requisite vote of
Catskill Financial's shareholders.
The obligations of Troy Financial under the Merger Agreement also are
subject to satisfaction of the condition that there shall not have occurred any
"material adverse effect", as defined in the Merger Agreement, on the assets,
loans, securities, deposit accounts, business, properties, financial condition
or results of operations of Catskill Financial.
The obligations of Catskill Financial under the Merger Agreement also are
subject to satisfaction of the condition that Troy Financial shall deposit with
the exchange agent an amount of cash equal to the total amount of cash that the
Catskill Financial shareholders will receive on the Merger effective date.
For a complete description of all of the conditions to the obligations of
the parties to effect the Merger, see Article VII of the Merger Agreement,
SECURITIES PORTFOLIO SALE
In the Merger Agreement, Catskill Financial disclosed that it had
determined to sell a portion of its investment securities portfolio, consisting
of corporate and municipal bonds. The Merger Agreement requires Catskill
Financial to complete the sale no later than 30 days after June 7, 2000, the
date of the signing of the Merger Agreement. At March 31, 2000, the aggregate
book value of these securities was approximately $86.2 million, or 52.2% of the
total investment securities portfolio, the total value of which was $165.0
million on that date. The Merger Agreement further provides that if the
aggregate pre-tax net proceeds of the sale of the securities are less than $73.2
million, the per share merger consideration to be received by Catskill Financial
shareholders in the Merger shall be reduced by an amount equal to the quotient,
the numerator of which is the after tax difference between $73.2 million and the
sale proceeds and the denominator of which is the sum of the number of shares of
Common Stock outstanding as of the date of the sale and the equivalent number of
shares of Common Stock subject to outstanding options, calculated using the
Treasury Stock Method (as defined in the Merger Agreement).
On June 13, 2000, Catskill Financial completed the sale of the securities
identified in the Merger Agreement. The proceeds of the sale were approximately
$74.5 million. Accordingly, Catskill Financial does not anticipate that the
amount of cash per share that will be received by Catskill Financial
shareholders will be reduced as a result of the sale of these securities.
TERMINATION OF THE MERGER AGREEMENT
The Merger Agreement may be terminated on or at any time prior to the
closing date by the mutual written consent of the parties and under the
following circumstances:
Termination by either party. The Merger Agreement may be terminated by Troy
Financial or Catskill Financial:
1. if there is a material breach of any representation, covenant or
other obligation under the Merger Agreement (including a breach
that causes a material adverse effect on the breaching party)
which could not be cured prior to closing of the Merger Agreement
or which is not cured within 30 days following receipt by the
breaching party of written notice of such breach by the other
party, provided that the terminating party is not itself in
breach of any representation, covenant or other obligation under
the Merger Agreement; or
2. if the closing date has not occurred before January 31, 2001,
unless the failure to close is because the party seeking to
terminate the Merger Agreement failed to perform or fulfill its
obligations under the Merger Agreement; or
3. if any request or application by Catskill Financial or Troy
Financial for regulatory approval has been denied or withdrawn at
the request or recommendation of a governmental authority, then
either party may terminate the agreement on 30 days written
notice to the other, unless a petition for rehearing or amended
application is filed within the 30 day period. A party shall not
have the right to terminate on these grounds if the failure to
obtain the regulatory approval was due to such party's own breach
of Merger Agreement; or
4. if Catskill Financial's shareholders fail to approve the Merger
Agreement at the Meeting, provided that Catskill Financial may
not terminate the Merger Agreement on this ground if it is in
breach of its own obligation under the Merger Agreement to
promptly call a meeting of shareholders and to recommend approval
of the Merger at the Meeting. However, Catskill Financial shall
not be in breach of its obligation to recommend such shareholder
approval if it should determine in accordance with the terms of
the Merger Agreement to approve a superior competing transaction.
Termination by Troy Financial. The Merger Agreement may be terminated by
Troy Financial if the Catskill Financial Board or its management fails to call
and hold a special shareholders meeting to consider and approve the Merger
Agreement within 35 days of the approval by the SEC of the proxy material for
use, fails to recommend approval of the Merger Agreement by the shareholders,
fails to oppose any third party proposal inconsistent with the Merger Agreement
or if Catskill Financial violates its obligation to not solicit other offers. If
Catskill Financial is not in violation of its obligations with respect to third
party proposals, but Catskill Financial did not give Troy Financial notice as
required by the Merger Agreement, Troy Financial may terminate the Merger
Agreement. Termination in the event of an agreement of Catskill Financial to
enter into a superior proposal shall not occur until Catskill Financial complies
with the expense reimbursement and break up fee payment requirements under the
Merger Agreement and gives the required written notice to Troy Financial that
the option granted pursuant to the option agreement between Catskill Financial
and Troy Financial may be exercised in accordance with its terms. See "Break-Up
Fee" and "Stock Option Agreement."
WAIVER AND AMENDMENT OF MERGER AGREEMENT
Either of the parties to the Merger agreement may, by a signed writing,
extend the time for performance of any of the obligations or other acts of the
other party, or waive any inaccuracies in the representations and warranties of
the other party or compliance by the other party with any of
the covenants or conditions contained in the Merger Agreement.
Generally, the Merger Agreement may be amended by the boards of directors
of both Catskill Financial or Troy Financial at any time before or after its
approval by Catskill Financial's shareholders. However, the approval of Catskill
Financial's shareholders is required for any amendment that would reduce the
amount or the form of the consideration to be received by shareholders in the
Merger.
BREAK-UP FEE
If the Merger Agreement is terminated in certain circumstances specified in
the Merger Agreement, Catskill Financial and Troy Financial have made provision
for one party to pay certain expenses of the other party, and to pay a fee to
compensate the other party for its efforts and costs:
o if either Troy Financial or Catskill Financial terminates the
Merger Agreement because there is a material uncured breach of
any representation, warranty or covenant of the other party under
the Merger Agreement, the breaching party shall pay to the
terminating party all documented, reasonable costs and expenses
incurred by the terminating party in connection with the Merger
Agreement and the transactions contemplated by the Merger
Agreement up to $500,000,
o if Troy Financial terminates the Merger Agreement because
Catskill Financial (a) fails to call the Meeting within 35 days
of the date these proxy materials were approved by the SEC for
use in this proxy solicitation, the date of which approval was
______________; (b) fails to recommend the approval of the Merger
Agreement to the shareholders of Catskill Financial; (c) fails to
oppose any third party proposal which is inconsistent with the
terms of the Merger Agreement; or (d) solicits other offers in
contravention of the terms of the Merger Agreement, Catskill
Financial shall pay to Troy Financial all its documented,
reasonable costs and expenses incurred in connection with the
Merger Agreement and the transactions contemplated by the Merger
Agreement up to $500,000;
o if the shareholders of Catskill Financial fail to adopt the
Merger Agreement at the Meeting, Catskill Financial shall pay to
Troy Financial all its documented, reasonable costs and expenses
incurred in connection with the Merger Agreement and the
transactions contemplated by the Merger Agreement up to $500,000,
plus a breakup fee of $1,500,000;
o if Troy Financial terminates the Merger Agreement because there
is a willful material uncured breach of any representation,
warranty or covenant of Catskill
Financial under the Merger Agreement, Catskill Financial shall
pay to Troy Financial all its documented, reasonable costs and
expenses incurred in connection with the Merger Agreement and the
transactions contemplated by the Merger Agreement up to $500,000,
plus a breakup fee of $1,500,000;
o if Catskill Financial terminates the Merger Agreement because
there is a willful material uncured breach of any representation,
warranty or covenant of Troy Financial under the Merger
Agreement, Troy Financial shall pay to Catskill Financial all its
documented, reasonable costs and expenses incurred in connection
with the Merger Agreement and the transactions contemplated by
the Merger Agreement up to $500,000, plus a breakup fee of
$2,500,000; or
o if Troy Financial terminates the Merger Agreement because
Catskill Financial has agreed to accept a financially superior
proposal which the Board of Directors has determined, in good
faith, to be more favorable than the Merger to Catskill Financial
shareholders, Catskill Financial shall pay to Troy Financial all
its documented, reasonable costs and expenses incurred in
connection with the Merger Agreement and the transactions
contemplated by the Merger Agreement up to $500,000, plus a
breakup fee of $1,500,000.
REPRESENTATIONS AND WARRANTIES MADE BY CATSKILL FINANCIAL CORPORATION AND TROY
FINANCIAL CORPORATION IN THE MERGER AGREEMENT
Both Troy Financial and Catskill Financial have made certain customary
representations and warranties to each other relating to their businesses. For
information on these representations and warranties, please refer to the Merger
Agreement.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Some of Catskill Financial's directors and officers may have interests in
the Merger that are in addition to, or different from the interests of
shareholders. The Catskill Financial Board was aware of these interests and
considered them in approving the Merger Agreement.
Stock Ownership. The directors and executive officers of Catskill
Financial, together with their affiliates, beneficially owned a total of _____
shares of Common Stock (representing ____% of all outstanding shares of the
Common Stock) as of the Record Date. The directors and executive officers will
receive the same consideration in the Merger for their shares as the other
Catskill Financial shareholders .
Indemnification of Directors and Officers Against Claims. After completion
of the
Merger, Troy Financial has agreed, to the fullest extent allowed under Delaware
law and Troy Financial's certificate of incorporation and bylaws as in effect on
June 7, 2000, to indemnify and hold harmless each person who is, has been or
before the completion of the Merger becomes, a director, officer or employee of
Catskill Financial, from liability and economic loss arising out of their
service as directors, officers, or employees of Catskill Financial, or matters
related to the Merger Agreement, whether occurring before or after the
consummation of the Merger. Troy Financial has also agreed to pay up to 150% of
the current annual premium to maintain directors' and officers' liability
insurance coverage for the benefit of Catskill Financial's directors and
officers for two years following consummation of the Merger.
Stock Option Plan. The Merger Agreement provides that each option to
purchase shares of Common Stock issued and outstanding pursuant to the Stock
Option Plan, whether or not such option is exercisable on the date the Merger is
completed, will be converted on that date into the right to receive in cash an
amount equal to the difference between $23.00 in cash and the exercise price of
each option multiplied by the number of shares of Common Stock subject to the
option. As of the Record Date, the directors and named officers of Catskill
Financial held options to purchase a total of 318,217 shares of Common Stock.
The following table reflects the number of options, the weighted average
exercise price of the options and the amounts payable to each director and named
officers upon cancellation of their stock options based on $23.00 per share.
Number of Weighted Average Amount Payable
Name Options Exercise Price Upon Cancellation
- - - ----------------------------------------------------------------------------------------------------
Wilbur J. Cross 142,168 $12.50 $1,492,764
Chairman, President & Chief
Executive Officer
David J. DeLuca 38,000 $13.52 $360,240
Vice President & Chief
Financial Officer
Deborah S. Henderson 30,000 $12.50 $315,000
Vice President & Senior
Loan Officer
George P. Jones, Director 28,433 $12.50 $298,547
Richard A. Marshall, Director 28,433 $12.50 $298,547
Allan D. Oren, Director 11,375 $12.50 $119,438
Hugh J. Quigley, Director 28,433 $12.50 $298,547
Edward P. Stiefel, Esq., Director 11,375 $12.50 $119,438
Management Recognition Plan. When the Merger is completed, each unvested
share awarded under the MRP will automatically vest and the holder will receive
$23.00 per share. As of the Record Date, the Company's directors and named
officers had been awarded 64,353 shares of unvested restricted Common Stock. The
following table shows the number of shares of restricted Common Stock held by
Catskill Financial's directors and named officers as of the Record Date and the
amounts payable to each director and named officer based on $23.00 per share.
Number of
Name Unvested MRP Shares Amount Payable
- - - ---- ------------------- --------------
Wilbur J. Cross 22,748 $523,204
Chairman, President & Chief
Executive Officer
David J. DeLuca 11,800 $271,400
Vice President & Chief
Financial Officer
Deborah S. Henderson 7,050 $162,150
Vice President & Senior
Loan Officer
George P. Jones, Director 4,551 $104,673
Richard A. Marshall, Director 4,551 $104,673
Allan D. Oren, Director 4,551 $104,673
Hugh J. Quigley, Director 4,551 $104,673
Edward P. Stiefel, Esq., Director 4,551 $104,673
Employment and Severance Agreements. Catskill Financial has entered into an
employment agreement with Mr. Cross. Catskill Savings has also entered into
employment agreements with Mr. Cross, Mr. DeLuca, Ms. Henderson and Keith A.
Lampman and is a party to change of control severance agreements with David L.
Guldenstern and William J. Moore, Catskill Savings' Vice President/Secretary and
Vice President/Treasurer, respectively. Troy Financial has
agreed to honor each of these agreements. The Merger is a change of control
within the meaning of these agreements which will trigger Troy Financial's
obligation to make cash payments to each of these officers. The aggregate amount
of such payments will be approximately $1.8 million, including $838,782 to Mr.
Cross, who will receive payments in three equal annual installments. In addition
Mr. Cross will be indemnified for federal excise taxes to which he will be
subject under the Code if the payments to him will exceed three times his
average compensation for the last five years.
Advisory Board of Directors. Immediately before the completion of the
Merger, Troy Savings will establish an advisory board of directors comprised of
the current members of Catskill Financial's Board. The advisory board must be
maintained for at least two years after the completion of the Merger and will
meet quarterly. Mr. Cross will serve as Chairman of the advisory board and
receive an annual retainer of $50,000. The other members of the advisory board
will receive an annual retainer of $10,000.
Troy Savings and Troy Financial Boards of Directors. Upon the completion of
the Merger, Troy Financial and Troy Savings will increase the size of their
boards of directors by one member and appoint Mr. Cross to such boards, for a
term expiring at and coincident with, respectively, the 2003 annual shareholders
meeting of Troy Financial. If the Merger is not completed until after Troy
Financial's or Troy Savings' 2001 annual shareholder meeting, then Mr. Cross
will be appointed for terms expiring at or coincident with, respectively, the
2004 meetings of Troy Savings and Troy Financial. Mr. Cross will receive the fee
payable to directors of Troy Financial, which is currently $ 1,375 per meeting
attended.
EMPLOYEE MATTERS
Severance Plan. After the Merger becomes effective, any full time employee
of Catskill Financial or Catskill Savings (other than an employee who is a party
to a written employment or severance agreement) whose employment is terminated
involuntarily, other than for cause, will be provided with severance benefits
equal to two weeks of base salary for every year of service up to a maximum of
26 weeks salary.
Employee Benefit Plans. The Merger Agreement allows Troy Financial to
terminate or continue Catskill Financial's employee pension and welfare benefit
plans or consolidate them with Troy Financial's benefit plans. In the event of
consolidation or termination of any or all of the Catskill Financial or Catskill
Savings benefit plans, Catskill Financial and Catskill Savings employees who
continue to work for Troy Financial or Troy Savings will receive credit under
any Troy Financial benefit plan in which the continuing employee would be
eligible to enroll, for years of service with Catskill Financial or Catskill
Savings for purposes of eligibility and vesting, but not for benefit accrual
purposes. Generally, such employees will be eligible to receive employee
benefits on the same basis as is provided to other employees of Troy Financial
and for the purposes of these benefits, they will receive credit for
satisfaction of pre-existing condition, waiting period and evidence of
insurability limitations and requirements to the same extent that they would
have received such credit under the corresponding Catskill Financial or Catskill
Savings plan.
Employee Stock Ownership Plan. Promptly after the completion of the Merger,
the ESOP will be terminated and Troy Financial will cause the ESOP trustee to
repay the outstanding balance of its stock acquisition loan. Based on the number
of unallocated shares in the ESOP, and the current loan balance, the ESOP will
have approximately $4.2 million in surplus cash. Under the ESOP 's governing
documents, to the extent allowed under applicable law, surplus cash will be
allocated to the accounts of ESOP participants in proportion to their account
balances.
ACCOUNTING TREATMENT
Troy Financial will account for the Merger under the purchase method of
accounting. This means that Troy Financial and Catskill Financial will be
treated as one company as of the date of the Merger and Troy Financial will
record the fair value of Catskill Financial's assets and liabilities on its
financial statements. Troy Financial will record the excess of its purchase
price over the fair value of Catskill Financial's identifiable net assets as
goodwill.
EXPENSES
Whether or not the Merger is completed, Troy Financial and Catskill
Financial will each pay their own fees and expenses, except that in the event a
party violates a material provision of the merger agreement which remains
uncured, the violating party will be responsible for the costs and expenses
incurred by the other party in connection with the Merger.
THE STOCK OPTION AGREEMENT
The following summary of the Catskill Financial stock option agreement is
qualified by reference to the complete text of the agreement, which is
incorporated by reference and attached as Appendix B to the Merger Agreement.
GENERAL
At the same time that Catskill Financial and Troy Financial entered into
the Merger Agreement, and as an important inducement to Troy Financial entering
into the Merger Agreement, Catskill Financial and Troy Financial also entered
into a stock option agreement. Under the stock option agreement, Catskill
Financial granted Troy Financial an irrevocable option to purchase up to 19.9%
of the issued and outstanding Common Stock at a price per share of $19.00. The
exercise price and number of option shares are subject to certain anti-dilution
and other adjustments specified in the stock option agreement. The option is
exercisable in the circumstances described below.
EFFECT OF THE OPTION
The option is intended to make it more likely that the Merger will be
completed on the agreed terms and to compensate Troy Financial for its efforts
and costs in case the Merger is not completed under circumstances generally
involving a third party proposal for a business combination with Catskill
Financial. Among other effects, the option could prevent an alternative business
combination with Catskill Financial from being accounted for as a
"pooling-of-interests." The option may therefore discourage proposals for
alternative business combinations with Catskill Financial, even if a third party
were prepared to offer Catskill Financial shareholders consideration with a
higher market value than the $23.00 per share to be paid for Common Stock in the
Merger.
EXERCISE OF THE STOCK OPTION
Troy Financial can exercise the option in whole or in part at any time
after the occurrence of either a "preliminary purchase event" and a "purchase
event," and prior to termination of the option. Generally, the right to exercise
the option terminates upon the earliest of:
o completion of the Merger;
o 18 months after the termination of the Merger Agreement if the
termination follows the occurrence of a "preliminary purchase
event" as specified in the Catskill Financial stock option
agreement and summarized below;
o 18 months after the termination of the Merger Agreement if the
termination follows the occurrence of a "purchase event" as
specified in the Catskill Financial stock option agreement and
summarized below.
o 18 months after the termination of the Merger Agreement if the
termination follows the failure of the shareholders of Catskill
Financial to adopt the Merger Agreement at the Meeting;
o 18 months after the termination of the Merger Agreement if the
termination follows the occurrence of a material uncured breach
of a representation or warranty under the Merger Agreement by the
other party; and
o termination by Troy Financial of the Merger Agreement if Catskill
Financial has accepted, in accordance with the terms of the
Merger Agreement, a financially superior proposal which the Board
determines in good faith to be more favorable than the Merger to
Catskill Financial shareholders.
For purposes of the stock option agreement, an "preliminary purchase event"
means the occurrence of any of the following events or transactions:
o Catskill Financial, without having received Troy Financial's
prior written consent, enters into an agreement to engage in an
"acquisition transaction" with any person other than Troy
Financial or any of its subsidiaries or the Board recommends that
Catskill Financial shareholders approve or accept any acquisition
transaction other than the Merger or a merger with another
subsidiary of Troy Financial. For purposes of the stock option
agreement, "acquisition transaction" means (x) a merger or
consolidation, or any similar transaction, involving Catskill
Financial, (y) a purchase, lease or other acquisition of all or
any substantial part of the assets of Catskill Financial, or (z)
a purchase or other acquisition, including by way of merger,
consolidation, share exchange or otherwise, of securities
representing 20% or more of the voting power of Catskill
Financial or any person other than Troy Financial acquires
beneficial ownership or the right to acquire beneficial ownership
of 20% or more of the outstanding shares of Common Stock;
o Catskill Financial willfully breaches any covenant or obligation
contained in the Merger Agreement and following the breach Troy
Financial is entitled to terminate the Merger Agreement; or
o any person other than Troy Financial or any Troy Financial
subsidiary: (i) makes a bona fide proposal to Catskill Financial
or makes a public announcement or written communication that is
or becomes publicly disclosed to Catskill Financial's
shareholders prior to the Meeting, to engage in an acquisition
transaction, including a tender offer or exchange offer to
purchase Common Stock, as a result of which such person acquires
beneficial ownership of 20% or more of the then outstanding
shares of Common Stock and (ii) the shareholders of Catskill
Financial do not approve the Merger at the Meeting.
For purposes of the stock option agreement, a "purchase event" means the
occurrence of any of the following events or transactions:
o the acquisition by any person, other than Troy Financial or any
Troy Financial subsidiary, of beneficial ownership of 20% or more
of the then outstanding Common Stock; or
o the occurrence of the preliminary purchase event described in the
first bullet point of the description of purchase events.
o Troy Financial terminates the Merger Agreement because the Board
accepts a financially superior proposal which the Board
determines in good faith to be more favorable than the Merger to
Catskill Financial shareholders.
REPURCHASE ELECTION
The stock option agreement further provides that Catskill Financial, or its
successors, is required to repurchase the option if requested to do so by Troy
Financial or a subsequent holder of the option. Such a request can only be made
after the occurrence of a purchase event and prior to termination of the stock
option agreement. The repurchase price will be equal to the amount by which (i)
the market/offer price, as described in detail in the stock option agreement,
exceeds (ii) the purchase price of the option, multiplied by the number of
shares for which the Catskill Financial stock option may then be exercised. In
determining the market/offer price, the value of consideration other than cash
shall be determined by a nationally recognized investment banking firm elected
by the option holder.
OTHER MATTERS
The Board of Directors is not aware of any business to come before the
Meeting other than those matters described above in this proxy statement.
However, if any other matters should properly come before the Meeting, it is
intended that proxies will be voted in accordance with the judgment of the
person or persons voting the proxies.
SHAREHOLDER PROPOSALS
In the event that the Merger is not approved by shareholders at the
Meeting, Catskill Financial expects it would hold its 2001 annual meeting of
shareholders in February 20, 2001. Any proposal intended to be presented by any
shareholder for action at the 2001 annual meeting of shareholders must have been
received by the Corporate Secretary of Catskill Financial at Catskill
Financial's main office at 341 Main Street, Catskill, New York, 12414, no later
than __________, 200_ in order to be eligible for inclusion in Catskill
Financial's proxy materials for the 2001 annual meeting of shareholders. Any
such proposals shall be subject to the requirements of the proxy rules adopted
under the Securities Exchange Act of 1934, as amended.
In the event that the annual meeting is held before February 20, 2001 or
after __________, 2001, notice by the shareholder to be timely must be delivered
to Catskill Financial's main office located at 341 Main Street, Catskill, New
York 12414 by the close of business on the later of (i) the __th day prior to
such annual meeting or (ii) the close of business on the _____ day following the
day on which such notice of the date of the annual meeting was mailed or such
public disclosure was made. All shareholder proposals must also comply with
Catskill Financial's bylaws and Delaware law. Copies of the Certificate of
Incorporation and By-laws may be obtained from the Corporate Secretary of
Catskill Financial.
APPENDIX A - AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
TROY FINANCIAL CORPORATION,
CHARLIE ACQUISITION CORPORATION
AND
CATSKILL FINANCIAL CORPORATION
DATED AS OF
JUNE 7, 2000
TABLE OF CONTENTS
Page
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EXHIBITS
A Bank Plan of Merger
B Option Agreement
C Certificate of Merger
D Catskill Stockholder Agreement
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER, dated as of June 7, 2000 (this
"Agreement"), is entered into by and among Troy Financial Corporation ("Troy"),
Charlie Acquisition Corporation, a Delaware corporation and wholly-owned
subsidiary of Troy ("Merger Sub"), and Catskill Financial Corporation, a
Delaware corporation ("Catskill").
WHEREAS, the Boards of Directors of Troy, Merger Sub and Catskill have
determined that it is in the best interests of their respective companies and
shareholders to consummate the business combination transaction provided for
herein in which Merger Sub will, subject to the terms and conditions set forth
herein, merge (the "Merger") with and into Catskill, with Catskill being the
Surviving Corporation (as defined) and becoming a wholly owned subsidiary of
Troy and immediately following said Merger, Troy intends that the Surviving
Corporation will merge with and into Troy (the "Subsidiary Merger");
WHEREAS, prior to the consummation of the Merger, Troy and Catskill will
respectively cause Troy Savings Bank ("Troy Bank"), a New York-chartered savings
bank and wholly-owned subsidiary of Troy, and Catskill Savings Bank ("Catskill
Bank"), a federally chartered stock savings bank and wholly-owned subsidiary of
Catskill, to enter into a merger agreement, in the form attached hereto as
Exhibit A (the "Bank Merger Agreement"), providing for the merger (the "Bank
Merger") of Catskill Bank with and into Troy Bank, and it is intended that the
Bank Merger be consummated immediately after consummation of the Merger and the
Subsidiary Merger;
WHEREAS, as a condition and inducement to Troy and Merger Sub to enter into
this Agreement, Catskill will enter into a stock option agreement in the form
attached hereto as Exhibit B (the "Catskill Option Agreement"); and
WHEREAS, the parties desire to make certain representations, warranties and
agreements in connection with the Merger and also to prescribe certain
conditions to the Merger;
NOW, THEREFORE, in consideration of the mutual covenants, representations,
warranties and agreements contained herein, and intending to be legally bound
hereby, the parties agree as follows:
ARTICLE I
THE MERGER
1.1 The Merger.
Subject to the terms and conditions of this Agreement, in accordance with
the Delaware General Corporation Law (the "DGCL"), at the Effective Time (as
defined in Section 1.2 hereof), Merger Sub shall merge into Catskill, with
Catskill being the surviving corporation (hereinafter sometimes called the
"Surviving Corporation") in the Merger. Upon consummation of the Merger, the
corporate existence of Merger Sub shall cease and the Surviving Corporation
shall continue to exist as a Delaware corporation and a wholly-owned subsidiary
of Troy.
1.2 Effective Time.
The Merger shall become effective on the Closing Date (as defined in
Section 9.1 hereof), as set forth in the certificate of merger (the "Certificate
of Merger") in the form attached as Exhibit C hereto which shall be filed with
the Secretary of State of the State of Delaware on the Closing Date. The term
"Effective Time" shall be the date and time when the Merger becomes effective on
the Closing Date, as set forth in the Certificate of Merger.
1.3 Effects of the Merger.
At and after the Effective Time, the Merger shall have the effects set
forth in Sections 259 and 261 of the DGCL.
1.4 Conversion of Catskill Common Stock.
(a) At the Effective Time, subject to Sections 1.4(b), 1.4(e) and 2.2(c)
hereof, each share of Catskill common stock, par value $.01 per share ("Catskill
Common Stock") issued and outstanding prior to the Effective Time (excluding
shares held by stockholders who perfect their dissenters' rights of appraisal as
provided in Section 1.4(d) hereof) shall, by virtue of this Agreement and
without any action on the part of the holder thereof, be converted into the
right to receive an amount (the "Merger Consideration") equal to $23.00 in cash
(without interest), subject to adjustment as provided in Section 1.4(e) hereof.
(b) All of the shares of Catskill Common Stock exchanged for the Merger
Consideration pursuant to this Article I shall no longer be outstanding and
shall automatically be canceled and shall cease to exist, and each certificate
(each a "Certificate") previously representing any such shares of Catskill
Common Stock shall thereafter represent the right to receive the Merger
Consideration for each share of Common Stock represented by such Certificate.
Certificates previously representing shares of Catskill Common Stock shall be
exchanged for cash upon the surrender of such Certificates in accordance with
Section 2.2 hereof, without any interest thereon. If prior to the
Effective Time Catskill should split or combine its common stock, or pay a
dividend or other distribution in such common stock, then the Merger
Consideration shall be appropriately adjusted to reflect such split,
combination, dividend or distribution.
(c) At the Effective Time, all shares of Catskill Common Stock that are
owned by Catskill as treasury stock and all shares of Catskill Common Stock that
are owned directly or indirectly by Troy or Catskill or any of their respective
Subsidiaries (other than shares of Catskill Common Stock held directly or
indirectly in trust accounts, managed accounts and the like or otherwise held in
a fiduciary capacity that are beneficially owned by third parties (any such
shares, and shares of Troy Common Stock which are similarly held, whether held
directly or indirectly by Troy or Catskill, as the case may be, being referred
to herein as "Trust Account Shares") and other than any shares of Catskill
Common Stock held by Troy or Catskill or any of their respective Subsidiaries in
respect of a debt previously contracted (any such shares of Catskill Common
Stock, and shares of Troy Common Stock which are similarly held, whether held
directly or indirectly by Troy or Catskill being referred to herein as "DPC
Shares")) shall be canceled and shall cease to exist and no cash or other
consideration shall be delivered in exchange therefor. All shares of Troy Common
Stock that are owned by Catskill or any of its Subsidiaries (other than Trust
Account Shares and DPC Shares) shall become treasury stock of Troy.
(d) Any holder of shares of Catskill Common Stock who perfects such
holder's dissenters' rights in accordance with and as contemplated by Section
262 of the DGCL shall be entitled to receive such payments as may be determined
pursuant to such provision of Law; provided that no such payment shall be made
to any dissenting stockholder unless and until such dissenting stockholder has
complied with the applicable provisions of the DGCL. In the event that after the
Effective Time a dissenting stockholder of Catskill fails to perfect or
effectively withdraws or loses such holder's rights to appraisal and of payment
of such holder's shares of Catskill Common Stock, the Surviving Corporation
shall issue and deliver the consideration to which such holder of shares of
Catskill Common Stock is entitled under this Section 1.4 (without interest) upon
surrender of such holder's Certificate or Certificates.
(e) If the aggregate pre-tax net proceeds (such proceeds shall be all cash
proceeds, net of direct sales expenses, fees and commissions, as recognized
under GAAP (as defined in Section 3.6 below) and referred to herein as the "Sale
Proceeds") realized by Catskill in the Securities Portfolio Sale (as defined in
Section 3.25 below) are less than $73.2 million, then the per share Merger
Consideration shall be decreased by an amount equal to the quotient, the
numerator of which is the after-tax (using Catskill's statutory federal and New
York state tax rates) difference between $73.2 million and the Sale Proceeds;
and the denominator of which is the sum of (x) the number of shares of Catskill
Common Stock outstanding as of such date and (y) the equivalent number of shares
of Catskill Common Stock subject to options outstanding, calculated using the
"Treasury Stock Method," as of such date. For purposes of this Section 1.4(e),
"Treasury Stock Method" assumes the exercise of each option, warrant or other
right or instrument (each, an "instrument") granted by Catskill to purchase
shares of Catskill Common Stock and assumes that the net proceeds received upon
the exercise of any
such instrument will be used to purchase shares of Catskill Common Stock at the
fair market value on the date of exercise.
1.5 Options.
At the Effective Time, each option granted by Catskill to purchase shares
of Catskill Common Stock which is outstanding and unexercised immediately prior
thereto shall be converted automatically into a right to receive a payment of
cash from Troy in an amount determined as provided below (and otherwise subject
to the terms of the Catskill Financial Corporation 1996 Stock Option and
Incentive Plan (the "Catskill Stock Plan"):
The cash amount payable with respect to the option immediately after the
Effective Time shall be equal to the product of the number of shares of Catskill
Common Stock subject to the option immediately before the Effective Time,
multiplied by the difference between (a) the Merger Consideration, minus (b) the
exercise price per share of Catskill Common Stock under the option immediately
before the Effective Time.
1.6 Certificate of Incorporation.
At the Effective Time, the Certificate of Incorporation of Merger Sub, as
in effect at the Effective Time, shall be the Certificate of Incorporation of
the Surviving Corporation.
1.7 By-Laws.
At the Effective Time, the By-Laws of Merger Sub, as in effect immediately
prior to the Effective Time, shall be the By-Laws of the Surviving Corporation.
1.8 Directors and Officers.
At the Effective Time, the directors and officers of Merger Sub immediately
prior to the Effective Time shall be the directors and officers of the Surviving
Corporation. As of the Effective Time, Troy shall amend its bylaws to increase
the size of its Board of Directors by one member and cause Troy Bank to amend
its bylaws to increase the size of its Board of Directors by one member, and
thereupon appoint Wilbur J. Cross, President, Chief Executive Officer, and
Chairman of the Board of Catskill, to serve as an additional member (the "New
Member") of the Boards of Directors of Troy and Troy Bank in the class of
directors whose term expires at the 2003 annual meeting of Troy stockholders;
provided, however, that if the Closing shall occur after the 2001 annual meeting
of Troy stockholders, then the New Member shall be appointed to serve on the
Boards of Directors of Troy and Troy Bank until the 2004 annual meeting of Troy
stockholders; provided, further, that neither Troy nor Troy Bank shall have any
obligation to appoint the New Member to serve on either Troy's or Troy Bank's
Board if such person is not a member in good standing of the Catskill Board of
Directors immediately prior to closing. In addition, immediately prior to the
Effective Time, subject to applicable rules and regulations, Troy Bank shall
create an advisory board (the "Advisory Board") to be comprised of the
individuals identified at Section 1.8 of the Catskill Disclosure Schedule
(defined below) for a period to terminate no earlier than two years after the
Effective Time. For service on the Advisory Board, the Advisory Board members
identified at Section 1.8 of the Catskill Disclosure schedule shall be paid an
annual retainer of $10,000 per year, payable quarterly, except that Wilbur J.
Cross, as chairman of the Advisory Board, shall be paid an annual retainer of
$50,000 per year, payable quarterly, and shall be provided with an office.
Regular meetings of the Advisory Board shall be held quarterly and at a place in
the Catskill market area.
ARTICLE II
EXCHANGE PROCEDURES
2.1 Troy to Make Funds Available.
At or prior to the Effective Time, Troy shall deposit, or shall cause to be
deposited, with Troy's transfer agent, Registrar and Transfer Company, or such
other bank, trust company or transfer agent as Troy may select (the "Exchange
Agent"), for the benefit of the holders of Certificates, cash sufficient in the
aggregate for the Exchange Agent to make full payment of the Merger
Consideration pursuant to Section 1.4 (the "Exchange Fund"). There shall be a
written agreement between Troy and the Exchange Agent in which the Exchange
Agent expressly undertakes the obligation to pay the Merger Consideration as
provided herein. Catskill shall have the right to review the agreement with the
Exchange Agent prior to being finalized.
2.2 Exchange.
(a) As soon as practicable after the Effective Time, the Exchange Agent
shall mail to each holder of record of a Certificate or Certificates a form
letter of transmittal (which shall specify that delivery shall be effected, and
risk of loss and title to the Certificates shall pass, only upon delivery of the
Certificates to the Exchange Agent) and instructions for use in effecting the
surrender of the Certificates in exchange for payment of the Merger
Consideration pursuant to this Agreement. Upon surrender of a Certificate for
exchange and cancellation to the Exchange Agent, together with such letter of
transmittal, duly executed, the holder of such Certificate shall be entitled to
receive promptly in exchange therefor a check representing the amount of cash to
which such holder shall have become entitled pursuant to the provisions of
Article I hereof, and the Certificate so surrendered shall forthwith be
canceled. No interest will accrue or be paid to the holder of any outstanding
shares of Catskill Common Stock.
(b) As of the Effective Time, there shall be no transfers on the stock
transfer books of Catskill of the shares of Catskill Common Stock which were
issued and outstanding immediately prior to the Effective Time. If, after the
Effective Time, Certificates representing such shares are presented for transfer
to the Exchange Agent, they shall be canceled and exchanged for the Merger
Consideration as provided in this Article II.
(c) Any portion of the Exchange Fund that remains unclaimed by the
shareholders of Catskill six months after the Effective Time may be returned to
Troy. After such funds have been returned to Troy, any shareholders of Catskill
who have not theretofore complied with this Article II shall thereafter look
only to Troy for payment of the Merger Consideration deliverable in respect of
each share of Catskill Common Stock such shareholder holds as determined
pursuant to this Agreement, in each case, without any interest thereon.
Notwithstanding the foregoing, none of Troy, Merger Sub, Catskill, the Exchange
Agent or any other person shall be liable to any former holder of shares of
Catskill Common Stock for any amount properly delivered to a public official
pursuant to applicable abandoned property, escheat or similar laws.
(d) In the event any Certificate shall have been lost, stolen or destroyed,
upon the making of an affidavit of that fact by the person claiming such
Certificate to be lost, stolen or destroyed and, if required by Troy, the
posting by such person of a bond in such amount as Troy may reasonably direct as
indemnity against any claim that may be made against it with respect to such
Certificate, the Exchange Agent will issue in exchange for such lost, stolen or
destroyed Certificate a check representing the Merger Consideration deliverable
in respect thereof pursuant to this Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF CATSKILL
Catskill hereby makes the following representations and warranties to Troy
and Merger Sub as set forth in this Article III, each of which is being relied
upon by Troy and Merger Sub as a material inducement to enter into and perform
this Agreement. All of the disclosure schedules of Catskill referenced below and
thereby required of Catskill pursuant to this Agreement, which disclosure
schedules shall be cross-referenced to the specific sections and subsections of
this Agreement and delivered herewith, are referred to herein as the "Catskill
Disclosure Schedule."
3.1 Corporate Organization.
(a) Catskill is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware. Catskill has the corporate
power and authority to own or lease all of its properties and assets and to
carry on its business as it is now being conducted, and is duly licensed or
qualified to do business in each jurisdiction in which the nature of any
business conducted by it or the character or location of any properties or
assets owned or leased by it makes such licensing or qualification necessary.
Catskill is duly registered as a savings and loan holding company with the
Office of Thrift Supervision ("OTS") under the Home Owners' Loan Act, as amended
("HOLA"). The Certificate of Incorporation and By-Laws of Catskill, copies of
which are attached at Section 3.1(a) of the Catskill Disclosure Schedule, are
true, correct and complete copies of such documents as in effect as of the date
of this Agreement. Catskill Bank and Catskill Financial Services, Inc. ("CFSI")
are the only subsidiaries of Catskill and Catskill Bank, respectively, that
qualify as a "Significant Subsidiary" as such term is defined in Regulation S-X
promulgated by the Securities and Exchange Commission (the "SEC").
(b) Catskill Bank is a federally chartered stock savings bank duly
organized and validly existing and in good standing under the laws of the United
States. The deposit accounts of Catskill Bank are insured by the Federal Deposit
Insurance Corporation (the "FDIC") through the Bank Insurance Fund (the "BIF")
to the fullest extent permitted by law, and all premiums and assessments
required in connection therewith have been paid by Catskill Bank. Catskill Bank
has the corporate power and authority to own or lease all of its properties and
assets and to carry on its business as it is now being conducted and is duly
licensed or qualified to do business in each jurisdiction in which the nature of
any business conducted by it or the character or the location of any properties
or assets owned or leased by it makes such licensing or qualification necessary.
The Charter and By-Laws of Catskill Bank, copies of which are attached at
Section 3.1(b) of the Catskill Disclosure Schedule, are true, correct and
complete copies of such documents as in effect as of the date of this Agreement.
(c) CFSI is a business corporation duly organized, validly existing and in
good standing under the corporate laws of the State of New York, and is duly
licensed as an insurance agent by the New York Insurance Department. CFSI has
the corporate power and authority to own or lease
all of its properties and assets and to carry on its business as it is now being
conducted, and is duly licensed or qualified to do business in each jurisdiction
in which the nature of any material business conducted by it or the character or
location of any material properties or assets owned or leased by it makes such
licensing or qualification necessary. CFSI is not a "bank" as such term is
defined in the Bank Holding Company Act of 1956, as amended, ("BHCA"). The
Certificate of Incorporation and Bylaws of CFSI, copies of which are attached at
Section 3.1(c) of the Catskill Disclosure Schedule, are true, correct and
complete copies of such documents as in effect as of the date of this Agreement.
3.2 Capitalization.
(a) The authorized capital stock of Catskill consists of 15 million shares
of Catskill Common Stock and 5 million shares of preferred stock, par value $.01
per share (the "Catskill Preferred Stock"). As of the date hereof, there are (x)
3,737,519 shares of Catskill Common Stock issued and outstanding and 1,949,231
shares of Catskill Common Stock are held in Catskill's treasury, (y) no shares
of Catskill Common Stock reserved for issuance upon exercise of outstanding
stock options or otherwise, except for 519,090 shares of Catskill Common Stock
reserved for issuance pursuant to the Catskill Stock Plan (of which options for
384,748 shares are currently outstanding); (ii) 39,488 shares of Catskill Common
Stock reserved for issuance under the Catskill Management Recognition Plan; and
(iii) 743,766 shares of Catskill Common Stock reserved for issuance upon
exercise of the option to be issued to Troy pursuant to the Option Agreement,
and (z) no shares of Catskill's Preferred Stock issued or outstanding, held in
Catskill's treasury or reserved for issuance upon exercise of outstanding stock
options or otherwise. All of the issued and outstanding shares of Catskill
Common Stock have been duly authorized and validly issued and are fully paid,
nonassessable and free of preemptive rights, with no personal liability
attaching to the ownership thereof. Except for the Option Agreement, the
Catskill Management Recognition Plan and the Catskill Stock Plan, Catskill does
not have and is not bound by any outstanding subscriptions, options, warrants,
calls, commitments or agreements of any character calling for the purchase or
issuance of any shares of Catskill Common Stock or Catskill Preferred Stock or
any other equity security of Catskill or any securities representing the right
to purchase or otherwise receive any shares of Catskill Common Stock or any
other equity security of Catskill. The names of the optionees, the date of each
option to purchase Catskill Common Stock granted, the number of shares subject
to each such option, the expiration date of each such option, and the price at
which each such option may be exercised under the Catskill Stock Plan and the
Catskill Management Recognition Plan are set forth in Sections 3.2(a)(i) and
3.2(a)(ii) of the Catskill Disclosure Schedule. Except as set forth at Section
3.2(a)(iii) of the Catskill Disclosure Schedule, since September 30, 1999
Catskill has not issued any shares of its capital stock, including shares under
the Catskill Management Recognition Plan, or any securities convertible into or
exercisable for any shares of its capital stock, other than pursuant to the
exercise of director or employee stock options granted under the Catskill Stock
Plan.
(b) Section 3.2(b) of the Catskill Disclosure Schedule sets forth a true,
correct and complete list of all direct or indirect Subsidiaries of Catskill as
of the date of this Agreement. Except as set forth at Section 3.2(b) of the
Catskill Disclosure Schedule, Catskill owns, directly or indirectly, all of
the issued and outstanding shares of capital stock of each of its Subsidiaries,
free and clear of all liens, charges, encumbrances and security interests
whatsoever, and all of such shares are duly authorized and validly issued and
are fully paid, nonassessable and free of preemptive rights, with no personal
liability attaching to the ownership thereof. No Catskill Subsidiary has or is
bound by any outstanding subscriptions, options, warrants, calls, commitments or
agreements of any character calling for the purchase or issuance of any shares
of capital stock or any other equity security of such Subsidiary or any
securities representing the right to purchase or otherwise receive any shares of
capital stock or any other equity security of such Subsidiary.
3.3 Authority; No Violation.
(a) Each of Catskill and its Subsidiaries has full corporate power and
authority to execute and deliver this Agreement and the Option Agreement and,
subject to receipt of the required regulatory approvals specified herein, to
consummate the transactions contemplated hereby and thereby. The execution and
delivery of this Agreement and the Option Agreement and the consummation of the
transactions contemplated hereby and thereby have been duly and validly approved
by the Board of Directors of Catskill. The Board of Directors of Catskill has
directed that this Agreement and the transactions contemplated hereby be
submitted to Catskill's shareholders for approval at a special meeting of such
shareholders and, except for the adoption of this Agreement by the requisite
vote of Catskill's shareholders, no other corporate proceedings on the part of
Catskill (except for matters related to setting the date, time, place and record
date for the special meeting) are necessary to approve this Agreement or the
Option Agreement or to consummate the transactions contemplated hereby or
thereby. This Agreement has been, and the Option Agreement will be, duly and
validly executed and delivered by Catskill and (assuming due authorization,
execution and delivery by Troy of this Agreement and by Troy of the Option
Agreement) will constitute valid and binding obligations of Catskill,
enforceable against Catskill in accordance with their terms, except as
enforcement may be limited by general principles of equity whether applied in a
court of law or a court of equity and by bankruptcy, insolvency and similar laws
affecting creditors' rights and remedies generally.
(b) Catskill Bank has full corporate power and authority to execute and
deliver the Bank Merger Agreement and, subject to receipt of the required
regulatory approvals specified herein, to consummate the transactions
contemplated thereby. The execution and delivery of the Bank Merger Agreement
and the consummation of the transactions contemplated thereby have been duly and
validly approved by the Board of Directors of Catskill Bank and by Catskill as
the sole shareholder of Catskill Bank. No other corporate proceedings on the
part of Catskill Bank will be necessary to consummate the transactions
contemplated thereby. The Bank Merger Agreement, upon execution and delivery by
Catskill Bank, will be duly and validly executed and delivered by Catskill Bank
and will (assuming due authorization, execution and delivery by Troy Bank)
constitute a valid and binding obligation of Catskill Bank, enforceable against
Catskill Bank in accordance with its terms, except as enforcement may be limited
by general principles of equity whether applied in a court of law or a court of
equity and by bankruptcy, insolvency and similar laws affecting creditors'
rights and remedies generally.
(c) Neither the execution and delivery of this Agreement and the Option
Agreement by Catskill or the Bank Merger Agreement by Catskill Bank, nor the
consummation by Catskill or Catskill Bank, as the case may be, of the
transactions contemplated hereby or thereby, nor compliance by Catskill or
Catskill Bank with any of the terms or provisions hereof or thereof, will (i)
violate any provision of the Certificate of Incorporation or By-Laws of Catskill
and each of its Subsidiaries or (ii) assuming that the consents and approvals
referred to in Section 3.4 hereof are duly obtained, (x) violate any Laws (as
defined in Section 9.13) applicable to Catskill and each of its Subsidiaries, or
any of their respective properties or assets, or (y) violate, conflict with,
result in a breach of any provision of or the loss of any benefit under,
constitute a default (or an event which, with notice or lapse of time, or both,
would constitute a default) under, result in the termination of or a right of
termination or cancellation under, accelerate the performance required by, or
result in the creation of any lien, pledge, security interest, charge or other
encumbrance upon any of the respective properties or assets of Catskill and each
of its Subsidiaries under, any of the terms, conditions or provisions of any
note, bond, mortgage, indenture, deed of trust, license, lease, agreement or
other instrument or obligation to which Catskill and each of its Subsidiaries is
a party, or by which they or any of their respective properties or assets may be
bound or affected.
3.4 Consents and Approvals.
(a) Except for (i) the filing of applications, notices or waiver requests,
as applicable, as to the Merger and the Bank Merger with the Board of Governors
of the Federal Reserve System ("FRB") under the BHCA, the OTS under HOLA and the
OTS regulations, the FDIC under the Bank Merger Act, and the New York State
Banking Department ("NYSBD"), as well as any other applications and notices to
state officials related to the Merger or the Bank Merger (the "State Banking
Approvals"), and approval of the foregoing applications and notices, (ii) the
filing of any required applications or notices with the NYSBD and the FDIC as to
the subsidiaries of Catskill Bank which become subsidiaries of Troy Bank and
approval of such applications and notices, (iii) the filing with the SEC of
proxy materials to be used in soliciting the approval of Catskill's shareholders
at a special meeting to be held in connection with this Agreement and the
transactions contemplated hereby (the "Proxy Materials"), (iv) the approval of
this Agreement by the requisite vote of the shareholders of Catskill, (v) the
filing of the Certificate of Merger with the Secretary of State of Delaware
pursuant to the DGCL, (vi) the filings required by the Bank Merger Agreement,
(vii) such consents, approvals, orders, authorizations, registrations,
declarations and filings as may be required under applicable federal, foreign
and state securities (or related) laws and, if applicable, the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act"), and the
securities or antitrust laws of any foreign country, (viii) the filing of
applications or notices with the New York Insurance Department with respect to
the acquisition of CFSI and approval of such applications or notices and (ix)
such filings, authorizations or approvals as may be set forth in Section 3.4 of
the Catskill Disclosure Schedule, no consents or approvals of or filings or
registrations with any court, administrative agency or commission or other
governmental authority or instrumentality (each a "Governmental Entity"), or
with any third party are necessary in connection with (1) the execution and
delivery by Catskill of this Agreement and the Option Agreement, (2) the
consummation by Catskill of the Merger and the other transactions contemplated
hereby, (3) the execution and delivery by Catskill Bank of the Bank Merger
Agreement, (4) the consummation by Catskill of the Option Agreement, and (5) the
consummation by Catskill Bank of the Bank Merger and the transactions
contemplated thereby, except in each case, for such consents, approvals or
filings, the failure of which to obtain will not have a Material Adverse Effect
on the ability of Troy to consummate the transactions contemplated hereby.
(b) Catskill hereby represents to Troy that it has no knowledge of any
reason why approval or effectiveness of any of the applications, notices or
filings referred to in Section 3.4(a) cannot be obtained or granted on a timely
basis.
3.5 Loan Portfolio; Reports.
(a) Except as set forth at Section 3.5(a) of the Catskill Disclosure
Schedule, as of September 30, 1999 and thereafter through and including the date
of this Agreement, none of Catskill, nor any of its Subsidiaries is a party to
any written or oral loan agreement, note or borrowing arrangement (including,
without limitation, leases, credit enhancements, commitments, guarantees and
interest-bearing assets) (collectively, "Loans"), with any director, officer or
five percent or greater shareholder of Catskill or any of its Subsidiaries, or
any Affiliated Person (as defined in Section 9.13) of the foregoing.
(b) Catskill, Catskill Bank and CFSI have timely filed all reports,
registrations and statements, together with any amendments required to be made
with respect thereto, that they were required to file since September 30, 1999
with (i) the OTS; (ii) the FDIC, (iii) the NYSBD (iv) the New York Insurance
Department and any other state banking commissions or any other state regulatory
authority (each a "State Regulator"), (v) the SEC and (vi) any other
self-regulatory organization ("SRO") (collectively "Regulatory Agencies").
Except for normal examinations conducted by a Regulatory Agency in the regular
course of the business of Catskill and its Subsidiaries, to Catskill's knowledge
no Governmental Entity is conducting, or has conducted, any proceeding or
investigation into the business or operations of Catskill or any of its
Subsidiaries since September 30, 1999.
3.6 Financial Statements; Exchange Act Filings; Books and Records.
Catskill has previously delivered to Troy true, correct and complete copies
of the consolidated statements of condition of Catskill and its Subsidiaries as
of September 30 for the fiscal years 1998 and 1999 and the related consolidated
statements of income, shareholders' equity and cash flows for the fiscal years
1997 through 1999, inclusive, as reported in Catskill's Annual Report on Form
10-K for the fiscal year ended September 30, 1999 filed with the SEC under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), in each case
accompanied by the audit report of KPMG LLP, independent public accountants with
respect to Catskill, and the interim financial statements of Catskill as of and
for the six months ended March 31, 2000 and 1999, as included in the Catskill
quarterly report on Form 10-Q for the period ended March 31, 2000 as filed with
the SEC. The financial statements referred to in this Section 3.6 (including the
related notes, where applicable) fairly present, and the financial statements
referred to in Section 6.7 hereof will fairly present (subject, in the case of
the unaudited statements, to recurring audit adjustments normal in nature and
amount), the results of the consolidated operations and consolidated financial
condition of Catskill and its Subsidiaries for the respective fiscal periods or
as of the respective dates therein set forth; each of such statements (including
the related notes, where applicable) comply, and the financial statements
referred to in Section 6.7 hereof will comply, with applicable accounting
requirements and with the published rules and regulations of the SEC with
respect thereto and each of such statements (including the related notes, where
applicable) has been, and the financial statements referred to in Section 6.7
hereof will be prepared in accordance with generally accepted accounting
principles consistently applied during the periods involved ("GAAP"), except in
each case as indicated in such statements or in the notes thereto or, in the
case of unaudited statements, as permitted by Form 10-Q. Catskill's Annual
Report on Form 10-K for the fiscal year ended September 30, 1999 and all reports
filed under Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act since
September 30, 1999 comply in all material respects with the appropriate
requirements for such reports under the Exchange Act, and Catskill has
previously delivered or made available to Troy true, correct and complete copies
of such reports. The books and records of Catskill and Catskill Bank have been,
and are being, maintained in all material respects in accordance with GAAP and
any other applicable legal and accounting requirements.
3.7 Broker's Fees.
Neither Catskill nor any Catskill Subsidiary nor any of their respective
officers or directors has employed any broker or finder or incurred any
liability for any broker's fees, commissions or finder's fees in connection with
any of the transactions contemplated by this Agreement or the Option Agreement,
except that Catskill has engaged, and will pay a fee or commission to Ryan, Beck
& Co. ("Ryan Beck") in accordance with the terms of a letter agreement between
Ryan Beck and Catskill, dated March 23, 2000, a true, complete and correct copy
of which is attached at Section 3.7 of the Catskill Disclosure Schedule.
3.8 Absence of Certain Changes or Events.
(a) Except as set forth at Section 3.8 of the Catskill Disclosure Schedule,
or as disclosed in Catskill's Annual Report on Form 10-K for the fiscal year
ended September 30, 1999, since September 30, 1999 (i) neither Catskill nor any
of its Subsidiaries has incurred any material liability, except as contemplated
by the Agreement or in the ordinary course of their business consistent with
their past practices, and (ii) no event has occurred which has had, or is likely
to have, individually or in the aggregate, a Material Adverse Effect (as defined
in Section 9.13) on Catskill.
(b) Since September 30, 1999 Catskill and its Subsidiaries have carried on
their respective businesses in the ordinary and usual course consistent with
their past practices.
3.9 Legal Proceedings.
(a) Except as set forth at Section 3.9 of the Catskill Disclosure Schedule,
neither Catskill nor any of its Subsidiaries is a party to any, and there are no
pending or to the knowledge of Catskill, threatened, legal, administrative,
arbitration or other proceedings, claims, actions or governmental or regulatory
investigations of any nature against Catskill or any of its Subsidiaries in
which, to the knowledge of Catskill, there is a reasonable probability of any
material recovery against or other material effect upon Catskill or any of its
Subsidiaries or which challenge the validity or propriety of the transactions
contemplated by this Agreement, the Bank Merger Agreement or the Option
Agreement.
(b) There is no injunction, order, judgment, decree, or regulatory
restriction imposed upon Catskill, any of its Subsidiaries or the assets of
Catskill or any of its Subsidiaries.
3.10 Taxes and Tax Returns.
(a) Each of Catskill and its Subsidiaries has duly filed all Tax Returns
required to be filed by it on or prior to the date hereof (all such returns
being accurate and complete in all material respects) and has duly paid or made
provision on the financial statements referred to in Sections 3.6 and 6.7 hereof
in accordance with GAAP for the payment of all material Taxes which have been
incurred or are due or claimed to be due from it by Taxing Authorities on or
prior to the date hereof other than Taxes (a) which (x) are not yet delinquent
or (y) are being contested in good faith and set forth in Section 3.10 of the
Catskill Disclosure Schedule and (b) which have not been finally determined. All
liability with respect to the Tax Returns of Catskill and its Subsidiaries has
been satisfied for all years to and including 1998. The Internal Revenue Service
("IRS") has not notified Catskill of, or otherwise asserted, that there are any
material deficiencies with respect to the federal income Tax Returns of
Catskill. There are no material disputes pending, or claims asserted for, Taxes
or assessments upon Catskill or any of its Subsidiaries, nor has Catskill or any
of its Subsidiaries been requested to give any currently effective waivers
extending the statutory period of limitation applicable to any federal or state
income Tax Return for any period. In addition, Tax Returns which are accurate
and complete in all material respects have been filed by Catskill and its
Subsidiaries for all periods for which returns were due with respect to income
tax withholding, Social Security and unemployment taxes and the amounts shown on
such Tax Returns to be due and payable have been paid in full or adequate
provision therefor in accordance with GAAP has been included by Catskill in the
financial statements referred to in Sections 3.6 and 6.7 hereto. All Catskill
Tax Returns have been examined by the relevant Taxing Authorities, or closed
without audit by applicable statutes of limitations, and all deficiencies
proposed as a result of such examinations have been paid or settled, for all
periods before and including the taxable year ended 1995. Neither Catskill nor
any of its Subsidiaries has consented to any waiver or extension of any statute
of limitations with respect to any Tax. Neither Catskill nor any Catskill
Subsidiary has made an election under Section 341(f) of the Internal Revenue
Code of 1986, as amended (the "Code" or "IRC"). Catskill has provided or made
available to Troy complete and correct copies of its Tax Returns and all
material correspondence and documents, if any, relating directly or indirectly
to taxes for each taxable year or other relevant period as to which the
applicable statute of limitations has not run on the date hereof. For this
purpose, "correspondence and documents" include, without limitation, amended Tax
Returns, claims for refunds, notices from Taxing Authorities of proposed changes
or adjustments to Taxes or Tax Returns, consents to assessment or collection of
Taxes, acceptances of proposed adjustments, closing agreements, rulings and
determination letters and requests therefor, and all other written
communications to or from Taxing Authorities relating to any material Tax
liability of Catskill or any Catskill Subsidiary. Catskill will not be a
"foreign person" as that term is used in ss. 1.1445-2 of the Treasury
Regulations promulgated under the IRC. Catskill Bank is not a "United States
real property holding corporation" within meaning of ss. 897 of the IRC and was
not a "United States real property holding corporation" on any "determination
date" (as defined in ss. 1.897-2(c) of such Regulations) that occurred during
any relevant period.
(b) For purposes of this Agreement:
"Tax" means any tax (including any income tax, capital gains tax, payroll
tax, value-added tax, sales tax, property tax, gift tax, or estate tax), levy,
assessment, tariff, duty (including any customs duty), deficiency, or other fee,
and any related charge or amount (including any fine, penalty, interest, or
addition to tax), imposed, assessed, or collected by or under the authority of
any Taxing Authority or payable pursuant to any tax-sharing agreement or any
other contract relating to the sharing or payment of any such tax, levy,
assessment, tariff, duty, deficiency, or fee.
"Tax Return" means any return (including any information return), report,
statement, schedule, notice, form, or other document or information filed with
or submitted to, or required to be filed with or submitted to, any Taxing
Authority in connection with the determination, assessment, collection, or
payment of any Tax or in connection with the administration, implementation, or
enforcement of or compliance with any law, regulation or other legal requirement
relating to any Tax.
"Taxing Authority" means any:
(i) nation, state, county, city, town, village, district, or other
jurisdiction of any nature;
(ii) federal, state, local, municipal, foreign, or other government;
(iii) governmental or quasi-governmental authority of any nature (including
any governmental agency, branch, department, official, or entity and any court
or other tribunal);
(iv) multi-national organization or body; or
(v) body exercising, or entitled to exercise, any administrative,
executive, judicial, legislative, police, regulatory, or taxing authority or
power of any nature.
3.11 Employee Plans.
(a) Section 3.11(a) of the Catskill Disclosure Schedule sets forth a true
and complete list of each employee benefit plan (within the meaning of Section
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")), arrangement or agreement that is maintained or contributed to as of
the date of this Agreement, or that has within the last six years been
maintained or contributed to, by Catskill or any of its Subsidiaries or any
other entity which together with Catskill would be deemed a "single employer"
within the meaning of Section 4001 of ERISA or Code Sections 414(b), (c) or (m)
or under which Catskill or any such Subsidiary has any liability (collectively,
the "Plans").
(b) Catskill has heretofore delivered or made available to Troy true,
correct and complete copies of each of the Plans and all related documents,
including but not limited to (i) the actuarial report for such Plan (if
applicable) for each of the last five years, (ii) the most recent determination
letter from the IRS (if applicable) for such Plan, (iii) the current summary
plan description and any summaries of material modification, (iv) all annual
reports (Form 5500 series) for each Plan filed for the preceding five plan
years, (v) all agreements with fiduciaries and service providers relating to the
Plan, and (vi) all substantive correspondence relating to any such Plan
addressed to or received from the Internal Revenue Service, the Department of
Labor, the Pension Benefit Guaranty Corporation or any other governmental
agency.
(c) Except as set forth at Section 3.11(c) of the Catskill Disclosure
Schedule, (i) Each of the Plans has been operated and administered in all
material respects in compliance with applicable Laws, including but not limited
to ERISA and the Code, (ii) each of the Plans intended to be "qualified" within
the meaning of Section 401(a) of the Code is so qualified, any trust created
pursuant to any such Plan is exempt from federal income tax under Section 501(a)
of the Code, each such Plan has received from the Internal Revenue Service a
favorable determination letter to such effect upon which Catskill or a
Subsidiary is entitled to rely as to such matters and which is currently
applicable, and neither Catskill nor any Subsidiary is aware of any circumstance
or event which would jeopardize the tax-qualified status of any such Plan or the
tax-exempt status of any related trust, or which would cause the imposition of
any liability, penalty or tax under ERISA or the Code with respect to any Plan,
(iii) with respect to each Plan which is subject to Title IV of ERISA, the
present value of accrued benefits under such Plan, based upon the actuarial
assumptions used for funding purposes in the most recent actuarial report
prepared by such Plan's actuary with respect to such Plan, did not, as of its
latest valuation date, exceed the then current value of the assets of such Plan
allocable to such accrued benefits, (iv) no Plan provides benefits, including,
without limitation, death or medical benefits (whether or not insured), with
respect to current or former employees of Catskill or any Catskill Subsidiary
beyond their retirement or other termination of service, other than (w) coverage
mandated by applicable Law, (x) death benefits or retirement benefits under a
Plan that is an "employee pension plan," as that term is defined in Section 3(2)
of ERISA, (y) deferred compensation benefits under a Plan that are accrued as
liabilities on the books of Catskill or any Catskill Subsidiary, or (z) benefits
the full cost of which is borne by the current or former employee (or his
beneficiary), (v) no liability under Title IV of ERISA has been incurred by
Catskill or any Catskill Subsidiary that has not been satisfied in full, and no
condition exists that presents a material risk of Catskill or any Catskill
Subsidiary incurring a material liability thereunder, (vi) no Plan is a
"multiemployer pension plan," as such term is defined in Section 3(37) of ERISA,
(vii) all contributions or other amounts payable by Catskill or any Catskill
Subsidiary as of the Effective Time with respect to each Plan and all other
liabilities of each such entity with respect to each Plan, in respect of current
or prior plan years have been paid or accrued in accordance with generally
accepted accounting practices and Section 412 of the Code, (viii) neither
Catskill nor any Catskill Subsidiary has engaged in a transaction in connection
with which Catskill or any Catskill Subsidiary could be subject to either a
civil penalty assessed pursuant to Section 409 or 502(i) of ERISA or a tax
imposed pursuant to Section 4975 or 4976 of the Code, (ix) to the knowledge of
Catskill, there are no pending, threatened or anticipated claims (other than
routine claims for benefits) by, on behalf of or against any of the plans or any
trusts related thereto, and (x) all Plans could be terminated as of the
Effective Time without material liability in excess of the amount accrued with
respect to such Plan in the financial statements referred to in Sections 3.6 and
6.8 hereto;
(xi) no Plan, program, agreement or other arrangement, either individually or
collectively, provides for any payment by Catskill or any Catskill Subsidiary
that would not be deductible under Code Sections 162(a)(1), 162(m) or 404 or
that would constitute a "parachute payment" within the meaning of Code Section
280G after giving effect to the transactions contemplated by this Agreement nor
would the transactions contemplated by this Agreement accelerate the time of
payment or vesting, or increase the amount of compensation due to any employee;
(xii) no "accumulated funding deficiency" as defined in Section 302(a)(2) of
ERISA or Section 412 of the Code, whether or not waived, and no "unfunded
current liability" as determined under Section 412(l) of the Code exists with
respect to any Plan; and (xiii) no Plan has experienced a "reportable event" (as
such term is defined in Section 4043(b) of ERISA) that is not subject to an
administrative or statutory waiver from the reporting requirement; (xiv) all
reports and information required to be filed with the Department of Labor, IRS
and Pension Benefit Guaranty Corporation or provided to plan participants and
their beneficiaries with respect to each Plan have been filed or provided, as
applicable, and all annual reports (including Form 5500 series) of such Plans
were certified without qualification by each Plan's accountants and actuaries;
and (xv) any bond required under ERISA with respect to any Plan has been
obtained and is in full force and effect and no funds held by or under the
control of Catskill or any Subsidiary are plan assets of any Plan
3.12 Certain Contracts.
(a) Except as set forth at Section 3.12 of the Catskill Disclosure
Schedule, neither Catskill nor any of its Subsidiaries is a party to or bound by
any contract, arrangement or commitment (i) with respect to the employment of
any directors, officers, employees or consultants, (ii) which, upon the
consummation of the transactions contemplated by this Agreement or the Bank
Merger Agreement will (either alone or upon the occurrence of any additional
acts or events) result in any payment (whether of severance pay or otherwise)
becoming due from Troy, Catskill, or any of their respective Subsidiaries to any
director, officer or employee thereof, (iii) which materially restricts the
conduct of any line of business by Catskill or any of its Subsidiaries, (iv)
with or to a labor union or guild (including any collective bargaining
agreement) or (v) except as set forth on Section 3.12(a)(v) of the Catskill
Disclosure Schedule, any of the benefits of which will be increased, or the
vesting of the benefits of which will be accelerated by the occurrence of any of
the transactions contemplated by this Agreement, or the value of any of the
benefits of which will be calculated on the basis of any of the transactions
contemplated by this Agreement (including as to this clause (v), any stock
option plan, stock appreciation rights plan, restricted stock plan or stock
purchase plan). Except as set forth at Section 3.12 of the Catskill Disclosure
Schedule, there are no employment, consulting and deferred compensation
agreements to which Catskill or any of its Subsidiaries is a party. Section
3.12(a) of the Catskill Disclosure Schedule sets forth a list of all material
contracts (as defined in Item 601(b)(10) of Regulation S-K) of Catskill and its
Subsidiaries. Each contract, arrangement or commitment of the type described in
this Section 3.12(a), whether or not set forth in Section 3.12(a) of the
Catskill Disclosure Schedule, is referred to herein as a "Catskill Contract,"
and neither Catskill nor any of its Subsidiaries has received notice of, nor do
any executive officers of such entities know of, any violation of any Catskill
Contract.
(b) (i) Each Catskill Contract is valid and binding and in full force and
effect, (ii) Catskill and each of its Subsidiaries has in all material respects
performed all obligations required to be performed by it to date under each
Catskill Contract, and (iii) no event or condition exists which constitutes or,
after notice or lapse of time or both, would constitute, a material default on
the part of Catskill or any of its Subsidiaries under any such Catskill
Contract.
3.13 Agreements with Regulatory Agencies.
None of Catskill, CFSI, or Catskill Bank is subject to any cease-and-desist
or other order issued by, or is a party to any written agreement, consent
agreement or memorandum of understanding with, or has adopted any board
resolutions at the request of (each, whether or not set forth on Section 3.13 of
the Catskill Disclosure Schedule, a "Regulatory Agreement"), any Governmental
Entity that restricts the conduct of its business or that in any manner relates
to its capital adequacy, its credit policies, its management or its business,
nor has Catskill, CFSI, or Catskill Bank been advised by any Governmental Entity
that it is considering issuing or requesting any Regulatory Agreement.
3.14 State Takeover Laws; Certificate of Incorporation.
The Board of Directors of Catskill has approved the offer of Troy to enter
into this Agreement, the Bank Merger Agreement and the Option Agreement, and has
approved Catskill entering into this Agreement, the Bank Merger Agreement and
the Option Agreement, and the transactions contemplated thereby, such that under
applicable law and Catskill's Certificate of Incorporation the only vote of
Catskill shareholders necessary to consummate the transactions contemplated
hereby is the approval of at least a majority of the outstanding shares of
Catskill Common Stock entitled to vote.
3.15 Environmental Matters.
(a) Each of Catskill and the Subsidiaries is in compliance with all
applicable federal and state laws and regulations relating to pollution or
protection of the environment (including without limitation, laws and
regulations relating to emissions, discharges, releases and threatened releases
of Hazardous Materials (as hereinafter defined), or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Hazardous Materials;
(b) There is no suit, claim, action, proceeding, investigation or notice
pending or, to the knowledge of Catskill, CFSI and Catskill Bank, threatened (or
past or present actions or events that could form the basis of any such suit,
claim, action, proceeding, investigation or notice), in which Catskill or any
Catskill Subsidiary has been or, with respect to threatened suits, claims,
actions, proceedings, investigations or notices may be, named as a defendant (x)
for alleged material noncompliance (including by any predecessor), with any
environmental law, rule or regulation or (y) relating to any material release or
threatened release into the environment of any Hazardous Material, occurring at
or on a site owned, leased or operated by Catskill or any Catskill Subsidiary,
or to the knowledge of Catskill, relating to any material release or threatened
release into the environment of any Hazardous Material, occurring at or on a
site not owned, leased or operated by Catskill or any Catskill Subsidiary;
(c) During the period of Catskill's or any Catskill Subsidiary's ownership
or operation of any of its properties, there has not been any material release
of Hazardous Materials in, on, under or affecting any such property.
(d) To the knowledge of Catskill, CFSI and Catskill Bank, neither Catskill
nor any Catskill Subsidiary has made or participated in any loan to any person
who is subject to any suit, claim, action, proceeding, investigation or notice,
pending or threatened, with respect to (i) any alleged material noncompliance as
to any property securing such loan with any environmental law, rule or
regulation, or (ii) the release or the threatened release into the environment
of any Hazardous Material at a site owned, leased or operated by such person on
any property securing such loan.
(e) For purposes of this section 3.15, the term "Hazardous Material" means
any hazardous waste, petroleum product, polychlorinated biphenyl, chemical,
pollutant, contaminant, pesticide, radioactive substance, or other toxic
material, or other material or substance (in each such case, other than small
quantities of such substances in retail containers) regulated under any
applicable environmental or public health statute, law, ordinance, rule or
regulation.
3.16 Reserves for Losses.
All reserves or other allowances for possible losses reflected in
Catskill's most recent financial statements referred to in Section 3.6 complied
with all Laws and are adequate under GAAP. None of Catskill, CFSI or Catskill
Bank has been notified by the FDIC, the OTS, the NYSBD the New York Insurance
Department or Catskill's independent auditor, in writing or otherwise, that such
reserves are inadequate or that the practices and policies of Catskill, CFSI or
Catskill Bank in establishing such reserves and in accounting for delinquent and
classified assets generally fail to comply with applicable accounting or
regulatory requirements, or that the FDIC, the OTS, the NYSBD or Catskill's
independent auditor believes such reserves to be inadequate or inconsistent with
the historical loss experience of Catskill, CFSI or Catskill Bank. Catskill has
previously furnished Troy with a complete list of all extensions of credit and
other real estate owned ("OREO") that have been classified by any bank or trust
examiner (regulatory or internal) as other loans specially mentioned, special
mention, substandard, doubtful, loss, classified or criticized, credit risk
assets, concerned loans or words of similar import. Catskill agrees to update
such list no less frequently than monthly after the date of this Agreement until
the earlier of the Closing Date or the date that this Agreement is terminated in
accordance with Section 8.1. All OREO held by Catskill, CFSI or Catskill Bank is
being carried net of reserves at the lower of cost or net realizable value.
3.17 Properties and Assets.
Section 3.17 of the Catskill Disclosure Schedule lists (i) all real
property owned by Catskill and each Catskill Subsidiary; (ii) each real property
lease, sublease or installment purchase arrangement to which Catskill or any
Catskill Subsidiary is a party; (iii) a description of each contract for the
purchase, sale, or development of real estate to which Catskill or any Catskill
Subsidiary is a party; and (iv) all items of Catskill's or any Catskill
Subsidiary's tangible personal property and equipment with a book value of
$25,000 or more or having any annual lease payment of $10,000 or more. Except
for (a) items reflected in Catskill's consolidated financial statements as of
September 30, 1999 referred to in Section 3.6 hereof, (b) exceptions to title
that do not interfere materially with Catskill's or any Catskill Subsidiary's
use and enjoyment of owned or leased real property (other than OREO), (c) liens
for current real estate taxes not yet delinquent, or being contested in good
faith, properly reserved against (and reflected on the financial statements
referred to in Section 3.6 above), and (d) items listed in Section 3.17 of the
Catskill Disclosure Schedule, Catskill and each Catskill Subsidiary have good
and, as to owned real property, marketable and insurable title to all their
properties and assets, free and clear of all liens, claims, charges and other
encumbrances. Catskill and each Catskill Subsidiary, as lessees, have the right
under valid and subsisting leases to occupy, use and possess all property leased
by them, and neither Catskill nor any Catskill Subsidiary has experienced any
material uninsured damage or destruction with respect to such properties since
September 30, 1999. All properties and assets used by Catskill and each Catskill
Subsidiary are in good operating condition and repair suitable for the purposes
for which they are currently utilized and comply in all material respects with
all Laws relating thereto now in effect or scheduled to come into effect.
Catskill and each Catskill Subsidiary enjoy peaceful and undisturbed possession
under all leases for the use of all property under which they are the lessees,
and all leases to which Catskill or any Catskill Subsidiary is a party are valid
and binding obligations in accordance with the terms thereof. Neither Catskill
nor any Catskill Subsidiary is in material default with respect to any such
lease, and there has occurred no default by Catskill or any Catskill Subsidiary
or event which with the lapse of time or the giving of notice, or both, would
constitute a material default under any such lease. There are no Laws,
conditions of record, or other impediments which interfere with the intended use
by Catskill or any Catskill Subsidiary of any of the property owned, leased, or
occupied by them.
3.18 Insurance.
Section 3.18 of the Catskill Disclosure Schedule contains a true, correct
and complete list of all insurance policies and bonds maintained by Catskill and
any Catskill Subsidiary, including the name of the insurer, the policy number,
the type of policy and any applicable deductibles, and all such insurance
policies and bonds (or other insurance policies and bonds that have, from time
to time, in respect of the nature of the risks insured against and amount of
coverage provided, been substantially similar in kind and amount to that
customarily carried by parties similarly situated who own properties and engage
in businesses substantially similar to that of Catskill and any Catskill
Subsidiary) are in full force and effect and have been in full force and effect
since their respective dates of inception. As of the date hereof, neither
Catskill nor any Catskill Subsidiary has received any notice of cancellation or
amendment of any such policy or bond or is in default under any such policy or
bond, no coverage thereunder is being disputed and all material claims
thereunder have been filed in a timely fashion. The existing insurance carried
by Catskill and Catskill Subsidiaries is and will continue to be, in respect of
the nature of the risks insured against and the amount of coverage provided,
sufficient for compliance by Catskill and the Catskill Subsidiaries with all
requirements of Law and agreements to which Catskill or any of the Catskill
Subsidiaries is subject or is party, and is, to Catskill's knowledge,
substantially similar in kind and amount to that customarily carried by parties
similarly situated who own properties and engage in businesses substantially
similar to that of Catskill and the Catskill Subsidiaries. True, correct and
complete copies of all such policies and bonds reflected at Section 3.18 of the
Catskill Disclosure Schedule, as in effect on the date hereof, have been
delivered to Troy.
3.19 Compliance with Applicable Laws.
Each of Catskill and any Catskill Subsidiary has complied in all material
respects with all Laws applicable to it or to the operation of its business.
Neither Catskill nor any Catskill Subsidiary has received any notice of any
material alleged or threatened claim, violation, or liability under any such
Laws that has not heretofore been cured and for which there is no remaining
liability.
3.20 Loans.
As of the date hereof:
(a) All loans owned by Catskill or any Catskill Subsidiary, or in which
Catskill or any Catskill Subsidiary has an interest, comply in all material
respects with all Laws, including, but not limited to, applicable usury
statutes, underwriting and recordkeeping requirements and the Truth in Lending
Act, the Equal Credit Opportunity Act, and the Real Estate Settlement Procedures
Act, and other applicable consumer protection statutes and the regulations
thereunder.
(b) All loans owned by Catskill or any Catskill Subsidiary, or in which
Catskill or any Catskill Subsidiary has an interest, have been made or acquired
by Catskill in accordance with board of director-approved loan policies and all
of such loans are collectable, except to the extent reserves have been made
against such loans in Catskill's consolidated financial statements at March 31,
2000 referred to in Section 3.6 hereof. Each of Catskill and each Catskill
Subsidiary holds mortgages contained in its loan portfolio for its own benefit
to the extent of its interest shown therein; such mortgages evidence liens
having the priority indicated by the terms of such mortgages, including
the associated loan documents, subject, as of the date of recordation or filing
of applicable security instruments, only to such exceptions as are discussed in
attorneys' opinions regarding title or in title insurance policies in the
mortgage files relating to the loans secured by real property or are not
material as to the collectability of such loans; and all loans owned by Catskill
and each Catskill Subsidiary are with full recourse to the borrowers (except as
set forth at Section 3.20(b) of the Catskill Disclosure Schedule), and each of
Catskill and any Catskill Subsidiary has taken no action which would result in a
waiver or negation of any rights or remedies available against the borrower or
guarantor, if any, on any loan. All applicable remedies against all borrowers
and guarantors are enforceable except as may be limited by bankruptcy,
insolvency, moratorium or other similar laws affecting creditors' rights and
except as may be limited by the exercise of judicial discretion in applying
principles of equity. Except as set forth at Section 3.20(b) of the Catskill
Disclosure Schedule, all loans purchased or originated by Catskill or any
Catskill Subsidiary and subsequently sold by Catskill or any Catskill Subsidiary
have been sold without recourse to Catskill or any Catskill Subsidiary and
without any liability under any yield maintenance or similar obligation. True,
correct and complete copies of loan delinquency reports as of April 30, 2000
prepared by Catskill and each Catskill Subsidiary, which reports include all
loans delinquent or otherwise in default, have been furnished to Troy. True,
correct and complete copies of the currently effective lending policies and
practices of Catskill and each Catskill Subsidiary also have been furnished to
Troy.
(c) Except as set forth at Schedule 3.20(c) each outstanding loan
participation sold by Catskill or any Catskill Subsidiary was sold with the risk
of non-payment of all or any portion of that underlying loan to be shared by
each participant (including Catskill or any Catskill Subsidiary) proportionately
to the share of such loan represented by such participation without any recourse
of such other lender or participant to Catskill or any Catskill Subsidiary for
payment or repurchase of the amount of such loan represented by the
participation or liability under any yield maintenance or similar obligation.
Catskill and any Catskill Subsidiary have properly fulfilled in all material
respects its contractual responsibilities and duties in any loan in which it
acts as the lead lender or servicer and has complied in all material respects
with its duties as required under applicable regulatory requirements.
(d) Catskill and each Catskill Subsidiary have properly perfected or caused
to be properly perfected all security interests, liens, or other interests in
any collateral securing any loans made by it.
(e) Section 3.20(e) of the Catskill Disclosure Schedule sets forth a list
of all loans or other extensions of credit to all directors, officers and
employees, or any other person covered by Regulation O of the FRB.
3.21 Affiliates.
Each director, executive officer and other person who is an "affiliate"
(for purposes of Rule 145 under the Securities Act of 1933, as amended (the
"Securities Act")) of Catskill is listed at Section 3.21 of the Catskill
Disclosure Schedule, and except as indicated thereon each such person has
delivered to Troy, concurrently with the execution of this Agreement, a
stockholder agreement in the form of Exhibit D hereto (the "Catskill Stockholder
Agreement"). The Catskill Stockholder Agreement has been duly and validly
executed and delivered by each person that is a party thereto and, assuming due
authorization, execution and delivery by Troy, constitutes the valid and binding
obligation of such person, enforceable against such person in accordance with
their terms, except as enforcement may be limited by general principles of
equity whether applied in a court of law or a court of equity and by bankruptcy,
insolvency and similar laws affecting creditors' rights and remedies generally.
3.22 Ownership of Troy Common Stock.
Except as set forth at Section 3.22 of the Catskill Disclosure Schedule,
neither Catskill nor any of its directors, executive officers or affiliates (as
used above in Section 3.21) (i) beneficially own, directly or indirectly, or
(ii) is a party to any agreement, arrangement or understanding for the purpose
of acquiring, holding, voting or disposing of, in each case, any shares of
outstanding capital stock of Troy (other than those agreements, arrangements or
understandings specifically contemplated hereby).
3.23 Fairness Opinion.
Catskill has received an opinion from Ryan Beck to the effect that, in its
opinion, the consideration to be paid to shareholders of Catskill hereunder is
fair to such shareholders from a financial point of view (the "Fairness
Opinion"), and Ryan Beck has consented to the inclusion of the Fairness Opinion
in the Proxy Materials.
3.24 Catskill Information.
The information relating to Catskill and its Subsidiaries provided by
Catskill herein and to be provided by Catskill to be contained in the Proxy
Materials do not and will not contain any untrue statement of a material fact or
omit to state a material fact necessary to make the statements herein or
therein, in light of the circumstances in which they are made, not misleading.
The Proxy Materials (except for the portions thereof relating solely to Troy or
any of its Subsidiaries, as to which Catskill makes no representation or
warranty) will comply in all material respects with the provisions of the
Exchange Act and the rules and regulations thereunder.
2.25 Sale of Securities Portfolio.
Catskill Bank has determined to sell the portfolio of securities listed on
Schedule 3.25 hereto (the "Securities Portfolio Sale").
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF TROY
Troy, on behalf of itself and its wholly-owned subsidiary, Troy Bank hereby
makes the following representations and warranties to Catskill as set forth in
this Article IV, each of which is being relied upon by Catskill as a material
inducement to enter into and perform this Agreement.
4.1 Corporate Organization.
(a) Troy is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware. Troy has the corporate power
and authority to own or lease all of its properties and assets and to carry on
its business as it is now being conducted, and is duly licensed or qualified to
do business in each jurisdiction in which the nature of the business conducted
by it or the character or location of the properties and assets owned or leased
by it makes such licensing or qualification necessary. Troy is duly registered
as a bank holding company under the BHCA. The Certificate of Incorporation and
By-Laws of Troy, copies of which have previously been made available to
Catskill, are true, correct and complete copies of such documents as in effect
as of the date of this Agreement.
(b) Troy Bank is a New York-chartered savings bank duly organized and
validly existing and in good standing under the laws of the State of New York.
Troy Bank has the corporate power and authority to own or lease all of its
properties and assets and to carry on business as is now being conducted, and is
duly licensed or qualified to do business in each jurisdiction in which the
nature of the business conducted by it or the character or location of the
properties and assets owned or leased by it makes such licensing or
qualification necessary. The Charter and By-Laws of Troy Bank, copies of which
have previously been made available to Catskill, are true, correct and complete
copies of such documents as in effect as of the date of this Agreement.
4.2 Authority; No Violation.
(a) Troy has full corporate power and authority to execute and deliver this
Agreement and the Option Agreement and to consummate the transactions
contemplated hereby and thereby. The execution and delivery of this Agreement
and the Option Agreement, subject to receipt of the required regulatory
approvals specified herein, and the consummation of the transactions
contemplated hereby have been duly and validly approved by the Board of
Directors of Troy. No other corporate proceedings on the part of Troy are
necessary to approve this Agreement or the Option Agreement or to consummate the
transactions contemplated hereby or thereby. This Agreement has been, and the
Option Agreement will be, duly and validly executed and delivered by Troy and
(assuming due authorization, execution and delivery by Catskill) will constitute
valid and binding obligations of Troy, enforceable against Troy in accordance
with their terms, except as enforcement may be limited by general principles of
equity whether applied in a court of law or a court of equity and by bankruptcy,
insolvency and similar law affecting creditors' rights and remedies generally.
(b) Troy Bank has full corporate power and authority to execute and deliver
the Bank Merger Agreement and, subject to receipt of the required regulatory
approvals specified herein, to
consummate the transactions contemplated thereby. The execution and delivery of
the Bank Merger Agreement and the consummation of the transactions contemplated
thereby have been duly and validly approved by the Board of Directors of Troy
Bank and by Troy as the sole shareholder of Troy Bank. All corporate proceedings
on the part of Troy Bank necessary to consummate the transactions contemplated
thereby have been taken. The Bank Merger Agreement, upon execution and delivery
by Troy Bank, will be duly and validly executed and delivered by Troy Bank and
will (assuming due authorization, execution and delivery by Catskill Bank)
constitute a valid and binding obligation of Troy Bank, enforceable against Troy
Bank in accordance with its terms, except as enforcement may be limited by
general principles of equity whether applied in a court of law or a court of
equity and by bankruptcy, insolvency and similar laws affecting creditors'
rights and remedies generally.
(c) Neither the execution and delivery of this Agreement or the Option
Agreement by Troy or the Bank Merger Agreement by Troy Bank, nor the
consummation by Troy, of the transactions contemplated hereby or thereby, nor
compliance by Troy or Troy Bank with any of the terms or provisions hereof or
thereof, will (i) violate any provision of the Certificate of Incorporation or
Bylaws of Troy or the Charter or By-Laws of Troy Bank, as the case may be, or
(ii) assuming that the consents and approvals referred to in Section 4.3 are
duly obtained, (x) violate any Laws applicable to Troy, Troy Bank or any of
their respective properties or assets, or (y) violate, conflict with, result in
a breach of any provision of or the loss of any benefit under, constitute a
default (or an event which, with notice or lapse of time, or both, would
constitute a default) under, result in the termination of or a right of
termination or cancellation under, accelerate the performance required by, or
result in the creation of any lien, pledge, security interest, charge or other
encumbrance upon any of the respective properties or assets of Troy or Troy Bank
under any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, deed of trust, license, lease, agreement or other instrument or
obligation to which Troy or Troy Bank is a party, or by which they or any of
their respective properties or assets may be bound or affected.
4.3 Regulatory Approvals.
(a) Except for (i) the filing of applications, notices or waiver requests,
as applicable, as to the Merger and the Bank Merger with the FRB under the BHCA,
the OTS under HOLA and the OTS regulations, the FDIC under the Bank Merger Act,
the NYSBD and approval of such applications and notices, (ii) the filing of any
required applications or notices with the NYSBD and the FDIC as to the
subsidiaries of Catskill Bank which become subsidiaries of Troy Bank and
approval of such applications and notices, (iii) the State Banking Approvals,
(iv) the filing of the Proxy Materials with the SEC, (v) the approval of this
Agreement by the requisite vote of the shareholders of Catskill, (vi) the filing
of the Certificate of Merger with the Secretary of State of Delaware pursuant to
the DGCL, (vii) such consents, approvals, orders, authorizations, registrations,
declarations and filings as may be required under applicable federal, foreign
and state securities (or related) laws and, if applicable, the HSR Act, and the
securities or antitrust laws of any foreign country, (viii) the filing of
applications or notices with the New York Insurance Department with respect to
the acquisition of CFSI and approval of such applications or notices and (ix)
the filings required by the Bank Merger Agreement, no consents or approvals of
or filings or registrations with any Governmental Entity or with any third party
are necessary in connection with (1) the execution and delivery by Troy of this
Agreement and the Option Agreement, (2) the consummation by Troy of the Merger
and the other transactions contemplated hereby, (3) the execution and delivery
by Troy Bank of the Bank Merger Agreement, and (4) the consummation by Troy Bank
of the transactions contemplated by the Bank Merger Agreement except for such
consents, approvals or filings the failure of which to obtain will not have a
material adverse effect on the ability of Catskill to consummate the
transactions contemplated thereby.
(b) Troy hereby represents to Catskill that it has no knowledge of any
reason why approval or effectiveness of any of the applications, notices or
filings referred to in Section 4.3(a) cannot be obtained or granted on a timely
basis.
4.4 Troy Information.
The information relating to Troy and its Subsidiaries to be provided by
Troy to be contained in the Proxy Materials will not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements therein, in light of the circumstances in which they are made,
not misleading. The Proxy Materials (except for the portions thereof relating
solely to Catskill or any of its Subsidiaries, as to which Troy makes no
representation or warranty) will comply in all material respects with the
provisions of the Securities Act, Exchange Act and the rules and regulations
thereunder.
3.5 Adequate Resources.
As of the Closing Date, Troy will have the funds available and will be able
to meet its financial obligations under, and to timely consummate the
transactions contemplated by, this Agreement.
ARTICLE V
COVENANTS RELATING TO CONDUCT OF BUSINESS
5.1 Covenants of Catskill
During the period from the date of this Agreement and continuing until the
Effective Time, except as expressly contemplated or permitted by this Agreement,
the Bank Merger Agreement or the Option Agreement or with the prior written
consent of Troy, Catskill and each Catskill Subsidiary shall carry on their
respective businesses in the ordinary course consistent with past practices and
consistent with prudent banking practices. Catskill will use its best efforts to
(x) preserve its business organization and that of each Catskill Subsidiary
intact, (y) keep available to itself and Troy the present services of the
employees of Catskill and each Catskill Subsidiary and (z) preserve for itself
and Troy the goodwill of the customers of Catskill and each Catskill Subsidiary
and others with whom business relationships exist. Without limiting the
generality of the foregoing, and except as set forth in the Catskill Disclosure
Schedule or as otherwise contemplated by this Agreement or consented to by Troy
in writing, Catskill shall not, and shall not permit any Catskill Subsidiary to:
(a) declare or pay any dividends on, or make other distributions in respect
of, any of its capital stock (except for the payment of regular quarterly cash
dividends by Catskill not to exceed $.1325 per share on the Catskill Common
Stock with declaration, record and payment dates corresponding to the quarterly
dividends paid by Catskill during its fiscal year ended September 30, 1999 and
except that any Catskill Subsidiary may declare and pay dividends and
distributions to Catskill); provided, however, that under no circumstances shall
Catskill declare, set aside or pay any dividends if it would result in the
holders of Catskill Common Stock receiving more than four cash dividend payments
in fiscal 2000;
(b) (i) split, combine or reclassify any shares of its capital stock or
issue, authorize or propose the issuance of any other securities in respect of,
in lieu of or in substitution for shares of its capital stock except upon the
exercise or fulfillment of rights or options issued or existing pursuant to the
Catskill Stock Plan in accordance with their present terms, all to the extent
outstanding and in existence on the date of this Agreement, and except pursuant
to the Option Agreement, or (ii) repurchase, redeem or otherwise acquire (except
for the acquisition of Trust Account Shares and DPC Shares, as such terms are
defined in Section 1.4(c) hereof), any shares of the capital stock of Catskill
or any Catskill Subsidiary, or any securities convertible into or exercisable
for any shares of the capital stock of Catskill or any Catskill Subsidiary;
(c) issue, deliver or sell, or authorize or propose the issuance, delivery
or sale of, any shares of its capital stock or any securities convertible into
or exercisable for, or any rights, warrants or options to acquire, any such
shares, or enter into any agreement with respect to any of the foregoing, other
than (i) the issuance of Catskill Common Stock pursuant to stock options or
similar rights to acquire Catskill Common Stock granted pursuant to the Catskill
Stock Plan and outstanding prior to the date of this Agreement, in each case in
accordance with their present terms and (ii) pursuant to the Option Agreement;
(d) amend its Certificate of Incorporation, By-Laws or other similar
governing documents;
(e) directly or indirectly, and will instruct its officers, directors,
employees, accountants, consultants, legal counsel, investment bankers,
advisors, agents and other representatives, (collectively, "Representatives")
not to, directly or indirectly, initiate, solicit or encourage (including by way
of furnishing information or assistance), or take any other action to
facilitate, any inquiries or the making of any proposal that constitutes, or
reasonably may be expected to lead to, any Competing Proposal (as defined in
Section 9.13 hereof), or enter into or maintain discussions or negotiate with
any person in furtherance of or relating to such inquiries or to obtain a
Competing Proposal, or agree to or endorse any Competing Proposal, or authorize
or permit any Representative of Catskill or any of its subsidiaries to take any
such action, and Catskill shall use its reasonable best efforts to cause the
Representatives of Catskill and the Catskill Subsidiaries not to take any such
action, and Catskill shall promptly notify Troy if any such inquiries or
proposals are made regarding a Competing Proposal, and Catskill shall keep Troy
informed, on a current basis, of the status and terms of any such proposals;
provided, however, that prior to such time as the stockholders of Catskill shall
have adopted and approved this Agreement in accordance with Delaware Law,
nothing contained in this Section 5.1(e) shall prohibit the Board of Directors
of Catskill from (i), in connection with a Superior Competing Transaction (as
defined in Section 9.13 hereof), furnishing information to, or entering into
discussions or negotiations with, any person that makes an unsolicited bona fide
proposal to acquire Catskill pursuant to a merger, consolidation, share
exchange, business combination or other similar transaction, if, and only to the
extent that, (A) the Board of Directors of Catskill, after consultation with and
based upon the advice of independent legal counsel, determines in good faith
that such action is required for the Board of Directors of Catskill to comply
with its fiduciary duties to stockholders imposed by Delaware Law, (B) prior to
furnishing such information to, or entering into discussions or negotiations
with, such person, Catskill provides written notice to Troy to the effect that
it is furnishing information to, or entering into discussions or negotiations
with, such person, (C) prior to furnishing such information to such person,
Catskill receives from such person an executed confidentiality agreement with
terms no less favorable to Catskill than those contained in the Confidentiality
Agreement by and between Troy and Catskill, dated as of March 27, 2000 (the
Confidentiality Agreement"), and (D) Catskill keeps Troy informed, on a current
basis, of the status and details of any such discussions or negotiations; or
(ii) complying with Rule 14e-2 promulgated under the Exchange Act;
(f) make capital expenditures aggregating in excess of $20,000;
(g) enter into any new line of business;
(h) acquire or agree to acquire, by merging or consolidating with, or by
purchasing an equity interest in or the assets of, or by any other manner, any
business or any corporation, partnership, association or other business
organization or division thereof or otherwise acquire any assets, other than in
connection with foreclosures, settlements in lieu of foreclosure or troubled
loan or debt restructurings, or in the ordinary course of business consistent
with prudent banking practices;
(i) take any action that is intended or may reasonably be expected to
result in any of its representations and warranties set forth in this Agreement
being or becoming untrue or in any of the conditions to the Merger set forth in
Article VII not being satisfied, or in a violation of any provision of this
Agreement or the Bank Merger Agreement, except, in every case, as may be
required by applicable law;
(j) change its methods of accounting in effect at September 30, 1999 except
as required by changes in GAAP or regulatory accounting principles;
(k) (i) except as required by applicable law or this Agreement or to
maintain qualification pursuant to the Code, adopt, amend, renew or terminate
any Plan or any agreement, arrangement, plan or policy between Catskill or any
Catskill Subsidiary and one or more of its current or former directors or
officers, (ii) increase in any manner the compensation of any director,
executive officer or other employee who is a party to a contract relating to
employment or severance referenced in Section 3.12 of this Agreement, or pay any
benefit not required by any plan or agreement as in effect as of the date hereof
(including, without limitation, the granting of stock options, stock
appreciation rights, restricted stock, restricted stock units or performance
units or shares), (iii) enter into, modify or renew any contract, agreement,
commitment or arrangement providing for the payment to any director, executive
officer or employee who is a party to a contract relating to employment or
severance referenced in Section 3.12 of this Agreement of compensation or
benefits, (iv) enter into, modify or renew any contract, agreement, commitment
or arrangement providing for the payment to any employee who is not a director
or executive officer or who is not a party to a contract relating to employment
or severance referenced in Section 3.12 of this Agreement of compensation or
benefits, other than normal annual cash increases in pay, consistent with past
practice and not exceeding 4% of such employee's base salary or wage, (v) hire
any new employee at an annual compensation in excess of $24,000, (v) pay
expenses of any employees or directors for attending conventions or similar
meetings which conventions or meetings are held after the date hereof, (vi)
promote to a rank of vice president or more senior any employee, or (vii) pay
any retention or other bonuses to any employees;
(l) except for short-term borrowings with a maturity of six months or less
in the ordinary course of business consistent with past practices, incur any
indebtedness for borrowed money (other than deposit liabilities), assume,
guarantee, endorse or otherwise as an accommodation become responsible for the
obligations of any other individual, corporation or other entity, except for
accepting, negotiating and paying checks and payment orders in the ordinary
course of its banking business;
(m) sell, purchase, enter into a lease, relocate, open or close any banking
or other office, or file an application pertaining to such action with any
Governmental Entity;
(n) make any equity investment or commitment to make such an investment in
real estate or in any real estate development project, other than in connection
with foreclosure, settlements in lieu of foreclosure, or troubled loan or debt
restructuring, in the ordinary course of business consistent with past banking
practices;
(o) make any new loans to, modify the terms of any existing loan to, or
engage in any other transactions (other than routine banking transactions) with,
any Affiliated Person of Catskill or any Catskill Subsidiary;
(p) incur deposit liabilities, other than in the ordinary course of
business consistent with past practices, including deposit pricing policies, and
which would not change the risk profile of Catskill Bank based on its existing
deposit and lending policies;
(q) purchase any loans or sell, purchase or lease any real property, except
for the sale of real estate that is the subject of a casualty loss or
condemnation or the sale of OREO on a basis consistent with past practices;
(r) originate (i) any loans except in accordance with existing Catskill
Bank lending policies, (ii) residential mortgage loans in excess of $150,000,
(iii) 30 year residential mortgage loans whose interest rate, terms, appraisal,
and underwriting do not make them immediately available for sale in the
secondary market, (iv) unsecured consumer loans in excess of $20,000, (v)
commercial business loans in excess of $50,000 as to any loan or $100,000 in the
aggregate as to related loans or loans to related persons, (vi) commercial real
estate first mortgage loans in excess of $150,000 as to any loans or $300,000 in
the aggregate as to related loans or loans to related borrowers, (vii)
modifications and/or extensions of any commercial business or commercial real
estate loans in the amounts set forth in (v) and (vi) above, or (viii) loans,
the outstanding principal balance of which, in the aggregate, exceed the lesser
of (1) the cash flow received from prepayment and repayment, sale or interest
and penalties paid on any other loans or (2) $1 million per month.
(s) make any investments other than in [Federal Funds and US Treasuries]
that have a maturity date that does not exceed three months; provided, however,
the maturity date shall not extend beyond January 31, 2001 or, with respect to
investments made or committed to after the parties have agreed on the Closing
Date (as defined in Section 9.1 hereof), beyond such Closing Date.
(t) sell or purchase any mortgage loan servicing rights; or
(u) agree or commit to do any of the actions set forth in (a) - (t) above.
The consent of Troy to any action by Catskill or any Catskill Subsidiary that is
not permitted by any of the preceding paragraphs shall be evidenced by a writing
signed by the President or any Senior Vice President of Troy.
5.2 Merger Covenants.
Notwithstanding that Catskill believes that it has established all reserves
and taken all provisions for possible loan losses required by GAAP and
applicable laws, rules and regulations, Catskill recognizes that Troy may have
adopted different loan, accrual and reserve policies (including loan
classifications and levels of reserves for possible loan losses). In that
regard, and in general, from and after the date of this Agreement to the
Effective Time, Catskill and Troy shall consult and cooperate with each other in
order to formulate the plan of integration for the Merger, including, among
other things, with respect to conforming, based upon such consultation,
Catskill's loan, accrual and reserve policies to those policies of Troy to the
extent appropriate.
5.3 Compliance with Antitrust Laws.
Each of Troy and Catskill shall use its reasonable best efforts to resolve
objections, if any, which may be asserted with respect to the Merger under
antitrust laws, including, without limitation, the HSR Act. In the event a suit
is threatened or instituted challenging the Merger as violative of antitrust
laws, each of Troy and Catskill shall use its reasonable best efforts to avoid
the filing of, or resist or resolve such suit. Troy and Catskill shall use their
reasonable best efforts to take such action as may be required: (a) by the
Antitrust Division of the Department of Justice or the Federal Trade Commission
in order to resolve such objections as either of them may have to the Merger
under antitrust laws, or (b) by any federal or state court of the United States,
in any suit brought by a private party or governmental entity challenging the
Merger as violative of antitrust laws, in order to avoid the entry of, or to
effect the dissolution of, any injunction, temporary restraining order, or other
order which has the effect of preventing the consummation of the Merger.
Reasonable best efforts shall not include, among other things and to the extent
Troy so desires, the willingness of Troy to accept an order agreeing to the
divestiture, or the holding separate, of any assets of Troy or Catskill.
4.4 Securities Portfolio Sale.
Catskill shall complete the Securities Portfolio Sale as soon as practical
after the date hereof, but in no event later than 30 days after the date of this
Agreement.
ARTICLE VI
ADDITIONAL AGREEMENTS
6.1 Regulatory Matters.
(a) Within 30 calendar days from the date hereof, Catskill shall prepare
and file, subject to the review and consent of Troy, with the SEC, Proxy
Materials for soliciting the approval of this Agreement and the Merger by the
shareholders of Catskill. Catskill will use its reasonable best efforts to have
the Proxy Materials approved for use by the SEC as soon as possible after the
filing. The parties shall cooperate in responding to and considering any
questions or comments from the SEC staff regarding the information contained in
the Proxy Materials. If at any time after the Proxy Materials are filed with the
SEC, and prior to the Closing Date, any event relating to Catskill is discovered
by Catskill which should be set forth in an amendment of, or a supplement to,
the Proxy Materials, Catskill shall promptly cause an appropriate amendment to
the Proxy Materials to be filed with the SEC. Upon the approval of such
amendment, Catskill (if prior to the meeting of shareholders pursuant to Section
6.3 hereof) will take all necessary action as promptly as practicable to permit
an appropriate amendment or supplement to be transmitted to its shareholders
entitled to vote at such meeting. If at any time after the Proxy Materials are
filed with the SEC, and prior to the Closing Date, any event relating to Troy is
discovered by Troy which should be set forth in an amendment of, or a supplement
to, the Proxy Materials, Troy shall promptly inform Catskill, and Catskill shall
promptly cause an appropriate amendment to the Proxy Materials to be filed with
the SEC. Upon the approval of such amendment, each of Troy and Catskill (if
prior to the meeting of shareholders pursuant to Section 6.3 hereof) will take
all necessary action as promptly as practicable to permit an appropriate
amendment or supplement to be transmitted to its shareholders entitled to vote
at such meeting.
(b) Troy will prepare and file all necessary documentation, to effect all
applications, notices, petitions and filings, and to obtain as promptly as
practicable all permits, consents, approvals and authorizations of all third
parties and Governmental Entities which are necessary or advisable to consummate
the transactions contemplated by this Agreement (including without limitation
the Merger and the Bank Merger). Catskill shall cooperate with Troy to effect
the foregoing. Catskill and Troy shall have the right to review in advance, and
to the extent practicable each will consult the other on, in each case subject
to applicable laws relating to the exchange of information, all the information
relating to Catskill or Troy, as the case may be, which appears in any filing
made with, or written materials submitted to, any third party or any
Governmental Entity in connection with the transactions contemplated by this
Agreement; provided, however, that nothing contained herein shall be deemed to
provide either party with a right to review any information provided to any
Governmental Entity on a confidential basis in connection with the transactions
contemplated hereby. In exercising the foregoing right, each of the parties
hereto shall act reasonably and as promptly as practicable. The parties hereto
agree that they will consult with each other with respect to the obtaining of
all permits, consents, approvals and authorizations of all third parties and
Governmental Entities necessary or advisable to
consummate the transactions contemplated by this Agreement and each party will
keep the other apprised of the status of matters relating to contemplation of
the transactions contemplated herein.
(c) Troy shall, upon request, furnish Catskill with all information
concerning Catskill and its directors, officers and shareholders and such other
matters as may be reasonably necessary in connection with the Proxy Materials or
any other statement, filing, notice or application made by or on behalf of
Catskill to any Governmental Entity in connection with the Merger or the other
transactions contemplated by this Agreement.
(d) Troy and Catskill shall promptly advise each other upon receiving any
communication from any Governmental Entity whose consent or approval is required
for consummation of the transactions contemplated by this Agreement which causes
such party to believe that there is a reasonable likelihood that any Requisite
Regulatory Approval (defined in Section 7.1(c) hereof) will not be obtained or
that the receipt of any such approval will be materially delayed.
6.2 Access to Information.
(a) Upon reasonable notice and subject to applicable Laws relating to the
exchange of information, Catskill shall accord to the officers, employees,
accountants, counsel and other representatives of Troy, access, during normal
business hours during the period prior to the Effective Time, to all its, CFSI's
and Catskill Bank's properties, books, contracts, commitments and records and,
during such period, Catskill shall make available to Troy (i) a copy of each
report, schedule, registration statement and other document filed or received by
it (including CFSI and Catskill Bank) during such period pursuant to the
requirements of federal securities laws or federal or state banking laws and
(ii) all other information concerning its (including CFSI and Catskill Bank)
business, properties and personnel as Troy may reasonably request. Troy shall
receive notice of all meetings of the Catskill, CFSI and Catskill Bank Board of
Directors and any committees thereof, and of any management committees (in all
cases, at least as timely as all Catskill, CFSI and Catskill Bank, as the case
may be, representatives to such meetings are required to be provided notice). A
representative of Troy shall be permitted to attend all meetings of the Board of
Directors (except for the portion of such meetings which relate to the Merger or
a Superior Competing Transaction ("Confidential Matters") of Catskill, CFSI or
Catskill Bank, as the case may be) and such meetings of committees of the Board
of Directors and management of Catskill, CFSI and Catskill Bank which Troy
desires. Troy will hold all such information in confidence to the extent
required by, and in accordance with, the provisions of the Confidentiality
Agreement.
(b) No investigation by either of the parties or their respective
representatives shall affect the representations and warranties of the other set
forth herein.
(c) Catskill shall provide Troy with true, correct and complete copies of
all financial and other information provided to directors of Catskill, CFSI and
Catskill Bank in connection with meetings of their Boards of Directors or
committees thereof.
6.3 Shareholder Meeting.
Catskill shall take all steps necessary to duly call, give notice of,
convene and hold a meeting of its shareholders within 35 days after the Proxy
Materials are approved for use for the purpose of voting upon the approval of
this Agreement and the Merger (the "Special Meeting"). Management and the Board
of Directors of Catskill shall recommend to Catskill's shareholders approval of
this Agreement, including the Merger, and the transactions contemplated hereby,
together with any matters incident thereto, and shall oppose any third party
proposal or other action that is inconsistent with this Agreement or the
consummation of the transactions contemplated hereby; provided, however, that
Catskill shall not be obligated to recommend or oppose, as the case may be, if
the Board of Directors of Catskill determines in accordance with the terms of
this Agreement to enter into a Superior Competing Transaction; provided further,
however, that notwithstanding anything to the contrary in the foregoing,
Catskill shall hold its Special Meeting in accordance with the time period
specified in the first sentence of this Section 6.3.
6.4 Legal Conditions to Merger.
Each of Troy and Catskill shall use their reasonable best efforts (a) to
take, or cause to be taken, all actions necessary, proper or advisable to comply
promptly with all legal requirements which may be imposed on such party with
respect to the Merger and, subject to the conditions set forth in Article VII
hereof, to consummate the transactions contemplated by this Agreement and (b) to
obtain (and to cooperate with the other party to obtain) any consent,
authorization, order or approval of, or any exemption by, any Governmental
Entity and any other third party which is required to be obtained by Catskill or
Troy in connection with the Merger and the other transactions contemplated by
this Agreement.
6.5 Employees.
(a) To the extent permissible under the applicable provisions of the Code
and ERISA, for purposes of crediting periods of service for eligibility to
participate, entitlement to benefits and vesting, but not for pension benefit
accrual purposes, under employee pension benefit plans (within the meaning of
ERISA Section 3(2)) and employee welfare plans (within the meaning of ERISA
Section 3(1) maintained by Troy or Troy Bank, as applicable (other than Troy's
Employee Stock Ownership Plan), individuals who are employees of Catskill or any
Catskill Subsidiary at the Effective Time and who become eligible to participate
in such plans will be credited with periods of service with Catskill or any
Catskill Subsidiary (or with any predecessor to Catskill or any Catskill
Subsidiary, to the extent such service is credited for such purposes under the
corresponding Plan) before the Effective Time as if such service had been with
Troy or Troy Bank, as applicable.
(b) If required by Troy in writing delivered to Catskill not less than five
business days before the Closing Date, Catskill and each Catskill Subsidiary, as
applicable, shall, on or before the day immediately preceding the Closing Date,
terminate the Catskill Bank 401(k) Plan and any other Plan
that includes a qualified cash or deferred arrangement within the meaning of
Code Section 401(k) (collectively, the "401(k) Plans") and no further
contributions shall be made to any 401(k) Plan after such termination. Catskill
shall provide to Troy (i) certified copies of resolutions adopted by the Board
of Directors of Catskill or such Catskill Subsidiary, as applicable, authorizing
such termination and (ii) an executed amendment to each 401(k) Plan in form and
substance reasonably satisfactory to Troy to conform the plan document for such
Plan with all applicable requirements of the Code and regulations thereunder
relating to the tax-qualified status of such Plan. Troy and Troy Bank will not
be obligated to make any matching or other employer contributions to any 401(k)
Plan after the Merger.
(c) Promptly following the Effective Time, as a result of the transactions
contemplated hereby, the Catskill Employee Stock Ownership Plan (the "Catskill
ESOP") will be terminated and the obligations of Troy or any of its Subsidiaries
shall be limited to those actions which are necessary to terminate the ESOP.
Troy or its Subsidiaries, as applicable, will take commercially reasonable
actions consistent with the Catskill ESOP (i) to cause the trustee of the
Catskill ESOP to repay the outstanding balance of its stock acquisition loan
with the proceeds received by the Catskill ESOP hereunder with respect to
unallocated shares of Catskill Common Stock and (ii) to terminate the Catskill
ESOP, subject to receipt of a favorable determination letter from the IRS
concerning the qualified status of the Catskill ESOP and the adoption of any
amendments to the Catskill ESOP that may be necessary in order to obtain such
determination letter. No employee of Catskill or any Catskill Subsidiary shall
be eligible to become a participant in the Catskill ESOP after the Effective
Time.
(d) After the Effective Time, except to the extent that Troy or its
Subsidiaries continues Plans in effect, employees of Catskill or its
Subsidiaries who become employed by Troy or any of its Subsidiaries will be
eligible for employee benefits that Troy or such Subsidiary, as the case may be,
provides to its employees generally and, except as otherwise required by this
Agreement, on substantially the same basis as is applicable to such employees,
provided that nothing in this Agreement shall require any duplication of
benefits. Troy will or will cause Troy Bank to (i) give credit to employees of
Catskill and its Subsidiaries, with respect to the satisfaction of the
limitations as to pre-existing condition exclusions, evidence of insurability
requirements and waiting periods for participation and coverage that are
applicable under the employee welfare benefit plans (within the meaning of
Section 3(1) of ERISA) of Troy or Troy Bank, equal to the credit that any such
employee had received as of the Effective Time towards the satisfaction of any
such limitations and waiting periods under the comparable employee welfare
benefit plans of Catskill or its Subsidiaries and to waive preexisting condition
limitations to the same extent waived under the corresponding Plan.
(e) After the Subsidiary Merger and the Bank Merger, Troy and each relevant
Troy Subsidiary will honor, without modification, and perform the obligations of
Catskill and Catskill Bank under, the contracts, plans and arrangements listed
in Section 6.5(e) of the Catskill Disclosure Schedule.
(f) After the Effective Time, Troy and each relevant Troy Subsidiary will
provide a severance benefit to each full-time employee of Catskill or any
Catskill Subsidiary immediately before the Effective Time (other than any such
employee who is a party to any written agreement relating to employment or
severance described in Section 3.12(a) hereof) and whose employment is
terminated involuntarily, other than for "Cause" (as defined below), by Troy or
such Troy Subsidiary as of the Effective Time or within three months thereafter.
The severance benefit shall consist of continuation of such employee's base
salary or wages for a period equal to (i) two weeks multiplied by (ii) the
number of full years of continuous service completed by such employee with
Catskill or any Catskill Subsidiary, up to a maximum of 26 weeks, as if such
employee had continued to be employed on a full-time basis by Troy or such Troy
Subsidiary during such period, subject to applicable tax withholding. For
purposes of this Section 6.5(f), "Cause" shall mean the employee's personal
dishonesty, willful misconduct, breach of fiduciary duty involving personal
profit, failure to perform stated duties, violation of any law, rule, or
regulation (other than traffic violations or similar offenses) or final
cease-and-desist order.
6.6 Indemnification.
(a) In the event of any threatened or actual claim, action, suit,
proceeding or investigation, whether civil, criminal or administrative, in which
any person who is now, or has been at any time prior to the date of this
Agreement, or who becomes prior to the Effective Time, a director or officer or
employee of Catskill (the "Indemnified Parties") is, or is threatened to be,
made a party based in whole or in part on, or arising in whole or in part out
of, or pertaining to (i) the fact that he is or was a director, officer or
employee of Catskill or any of their respective predecessors or (ii) this
Agreement or any of the transactions contemplated hereby, whether in any case
asserted or arising before or after the Effective Time, the parties hereto agree
to cooperate and defend against and respond thereto to the extent permitted by
applicable law and the Certificate of Incorporation and Bylaws of Catskill as in
effect on the date hereof. It is understood and agreed that after the Effective
Time, Troy shall indemnify and hold harmless, as and to the fullest extent
permitted by applicable law and the Certificate of Incorporation and Bylaws of
Troy as in effect on the date hereof (subject to change as required by law),
each such Indemnified Party against any losses, claims, damages, liabilities,
costs, expenses (including reasonable attorney's fees and expenses in advance of
the final disposition of any claim, suit, proceeding or investigation to each
Indemnified Party to the fullest extent permitted by law upon receipt of any
undertaking required by applicable law), judgments, fines and amounts paid in
settlement in connection with any such threatened or actual claim, action, suit,
proceeding or investigation, and in the event of any such threatened or actual
claim, action, suit, proceeding or investigation (whether asserted or arising
before or after the Effective Time), the Indemnified Parties may retain counsel
reasonably satisfactory to Troy; provided, however, that (1) Troy shall have the
right to assume the defense thereof and upon such assumption Troy shall not be
liable to any Indemnified Party for any legal expenses of other counsel or any
other expenses subsequently incurred by any Indemnified Party in connection with
the defense thereof, except that if Troy elects not to assume such defense or
counsel for the Indemnified Parties reasonably advises the Indemnified Parties
that there are issues which raise conflicts of interest between Troy and the
Indemnified Parties, the Indemnified Parties may retain counsel reasonably
satisfactory to Troy, and Troy shall pay the reasonable fees and expenses of
such counsel for the Indemnified Parties, (2) Troy shall be obligated pursuant
to this paragraph to pay for only one firm of counsel for each Indemnified
Party, (3) Troy shall not be liable for any settlement effected without its
prior written consent (which consent shall not be unreasonably withheld or
delayed), and (4) Troy shall not be obligated pursuant to this paragraph to the
extent that a final judgment determines that any such losses, claims, damages,
liabilities, costs, expenses, judgments, fines and amounts paid in settlement
are as a result of the gross negligence, willful misconduct or malfeasance of
the Indemnified Party. Troy shall have no obligation to advance expenses
incurred in connection with a threatened or pending action, suit or preceding in
advance of final disposition of such action, suit or proceeding, unless (i) Troy
would be permitted to advance such expenses pursuant to the DGCL and Troy's
Certificate of Incorporation or Bylaws, and (ii) Troy receives an undertaking by
the Indemnified Party to repay such amount if it is determined that such party
is not entitled to be indemnified by Troy pursuant to the DGCL and Troy's
Certificate of Incorporation or Bylaws. Any Indemnified Party wishing to claim
indemnification under this Section 6.6, upon learning of any such claim, action,
suit, proceeding or investigation, shall notify
Troy thereof; provided, however, that the failure to so notify shall not affect
the obligations of Troy under this Section 6.6 except to the extent such failure
to notify materially prejudices Troy. Troy's obligations under this Section 6.6
continue in full force and effect for a period of six years from the Effective
Time; provided, however, that all rights to indemnification in respect of any
claim asserted or made within such period shall continue until the final
disposition of such claim. Troy shall require any successor to expressly assume
its obligations under this Section 6.6(a).
(b) Troy shall purchase for the benefit of the persons serving as executive
officers and directors of Catskill immediately prior to the Effective Time and
who are, as of the date of this Agreement, individually covered by a directors'
and officers' liability insurance policy, a similar directors' and officers'
liability insurance coverage for at least two years after the Effective Time,
under either Catskill's policy in existence on the date hereof, or under a
policy of similar coverage and amounts containing terms and conditions which are
generally not less advantageous than Troy's current policy, and in either case,
with respect to acts or omissions occurring prior to the Effective Time which
were committed by such executive officers and directors in their capacity as
such ("Tail Insurance"); provided however, that in no event shall Troy be
required to expend pursuant to this Section 6.6(b) more than the amount equal to
150% of the current annual amount expended by Catskill to maintain or procure
insurance coverage pursuant hereto. In connection with the foregoing, Catskill
agrees to provide such insurer or substitute insurer with such representations
as such insurer may reasonably request with respect to the reporting of any
prior claims.
6.7 Subsequent Interim and Annual Financial Statements.
As soon as reasonably available, but in no event more than 45 days after
the end of each fiscal quarter (other than the fourth fiscal quarter, as to
which the time period shall be 90 days), Catskill will deliver to Troy its
Quarterly Reports on Form 10-Q and Annual Reports on Form 10-K, as filed with
the SEC under the Exchange Act. Catskill shall also deliver to Troy any Current
Reports on Form 8-K promptly after filing such reports with the SEC.
6.8 Additional Agreements.
In case at any time after the Effective Time any further action is
necessary or desirable to carry out the purposes of this Agreement, or to vest
the Surviving Corporation or the Surviving Bank with full title to all
properties, assets, rights, approvals, immunities and franchises of any of the
parties to the Merger, or the constituent banks to the Bank Merger, as the case
may be, the proper officers and directors of each party to this Agreement and
Troy's and Catskill's Subsidiaries shall take all such necessary action as may
be reasonably requested by Troy.
6.9 Advice of Changes.
Troy and Catskill shall promptly advise the other party of any change or
event that, individually or in the aggregate, has or would be reasonably likely
to have a Material Adverse Effect on it or to cause or constitute a material
breach of any of its representations, warranties or covenants contained herein.
From time to time prior to the Effective Time, each party will promptly
supplement or amend its disclosure schedule delivered in connection with the
execution of this Agreement to reflect any matter which, if existing, occurring
or known at the date of this Agreement, would have been required to be set forth
or described in such disclosure schedule or which is necessary to correct any
information in such disclosure schedule which has been rendered inaccurate
thereby. No supplement or amendment to such disclosure schedule shall have any
effect for the purpose of determining satisfaction of the conditions set forth
in Sections 7.2(a) or 7.3(a) hereof, as the case may be, or the compliance by
Catskill with the covenants set forth in Section 5.1 hereof.
6.10 Current Information.
During the period from the date of this Agreement to the Effective Time,
Catskill will cause one or more of its designated representatives to confer on a
regular and frequent basis (not less than monthly) with representatives of Troy
and to report the general status of the ongoing operations of Catskill. Catskill
will promptly notify Troy of any material change in the normal course of
business or in the operation of the properties of Catskill and of any
governmental complaints, investigations or hearings (or communications
indicating that the same may be contemplated), or the institution or the threat
of litigation involving Catskill, and will keep Troy fully informed of such
events.
5.11 Execution and Authorization of Bank Merger Agreement.
Prior to the Effective Time, (a) Troy and Catskill each shall execute and
deliver the Certificate of Merger substantially in the form at Exhibit C, and
(b) Troy and Catskill each shall cause Troy Bank and Catskill Bank,
respectively, to execute and deliver the Bank Merger Agreement, in substantially
the form at Exhibit A.
6.12 Transaction Expenses of Catskill.
(a) For Troy's planning purposes, Catskill shall, within 15 days from the
date hereof, provide Troy with its estimated budget of transaction-related
expenses reasonably anticipated to be payable by Catskill in connection with
this transaction, including the fees and expenses of counsel, accountants,
investment bankers and other professionals. Catskill shall promptly notify Troy
if or when it determines that it will expect to exceed its budget.
(b) Promptly after the execution of this Agreement, Catskill shall ask all
of its attorneys and other professionals to render current and correct invoices
for all unbilled time and
disbursements. Catskill shall accrue and/or pay all of such amounts which are
actually due and owing as soon as possible. \
(c) Catskill shall advise Troy monthly of all out-of-pocket expenses which
Catskill has incurred in connection with this transaction.
(d) Catskill, in reasonable consultation with Troy, shall make all
arrangements with respect to the printing and mailing of the Proxy Materials.
Catskill shall, if Troy reasonably deems necessary, also engage a proxy
solicitation firm to assist in the solicitation of proxies for its Special
Meeting. Catskill agrees to cooperate as to such matters.
6.13 Further Actions of Catskill.
Upon the written request of Troy, Catskill shall, within 5 business days of
the date of such written request, demand payment of, or cause Catskill Bank to
demand payment of, any and all loans (to the extent identified by Troy) of
Catskill or Catskill Bank, as the case may be, which loans are (or should have
been) set forth at Sections 3.5(a) or 3.20(e) of the Catskill Disclosure
Schedule, and which loans are secured or collateralized in any way by Catskill
Common Stock.
ARTICLE VII
CONDITIONS PRECEDENT
7.1 Conditions to Each Party's Obligation To Effect the Merger.
The respective obligation of each party to effect the Merger shall be
subject to the satisfaction at or prior to the Effective Time of the following
conditions:
(a) Shareholder Approvals.
This Agreement, including the Certificate of Merger, and the
Merger shall have been approved and adopted by the affirmative vote of the
holders of at least a majority of the outstanding shares of Catskill Common
Stock entitled to vote thereon.
(b) Other Approvals.
All regulatory approvals required to consummate the transactions
contemplated hereby shall have been obtained and shall remain in full force and
effect and all statutory waiting periods in respect thereof shall have expired
(all such approvals and the expiration of all such waiting periods being
referred to herein as the "Requisite Regulatory Approvals"). No Requisite
Regulatory Approval shall contain a non-customary condition that Troy reasonably
determines to be burdensome or otherwise alter the benefits for which it
bargained in this Agreement.
(c) Proxy Materials.
The Proxy Materials shall have approved for use under the
Exchange Act, and no stop order suspending the approval of the Proxy Materials
shall have been issued and no proceedings for that purpose shall have been
initiated or threatened by the SEC.
(d) No Injunctions or Restraints; Illegality.
No order, injunction or decree issued by any court or agency of
competent jurisdiction or other legal restraint or prohibition preventing the
consummation of the Merger or any of the other transactions (an "Injunction")
contemplated by this Agreement or the Certificate of Merger shall be in effect.
No statute, rule, regulation, order, injunction or decree shall have been
enacted, entered, promulgated or enforced by any Governmental Entity which
prohibits, restricts or makes illegal consummation of the Merger.
7.2 Conditions to Obligations of Troy.
The obligation of Troy to effect the Merger is also subject to the
satisfaction or waiver by Troy at or prior to the Effective Time of the
following conditions:
(a) Representations and Warranties.
The representations and warranties of Catskill set forth in this
Agreement shall be true and correct in all material respects as of the date of
this Agreement and (except to the extent such representations and warranties
speak as of an earlier date) as of the Closing Date as though made on and as of
the Closing Date. Troy shall have received a certificate signed on behalf of
Catskill by each of the President and Chief Executive Officer and the Chief
Financial Officer of Catskill to the foregoing effect.
(b) Performance of Covenants and Agreements of Catskill
Catskill shall have performed in all material respects all
covenants and agreements required to be performed by it under this Agreement at
or prior to the Closing Date. Troy shall have received a certificate signed on
behalf of Catskill by each of the President and Chief Executive Officer and the
Chief Financial Officer of Catskill to such effect.
(c) Consents under Agreements.
(i) The consent, approval or waiver of each person (other than
the Governmental Entities referred to in Section 7.1(b) hereof) whose consent or
approval shall be required in order to permit the succession by the Surviving
Corporation pursuant to the Merger to any obligation, right or interest of
Catskill under any loan or credit agreement, note, mortgage, indenture, lease,
license or other agreement or instrument shall have been obtained except for
those, the failure of which to obtain, will not result in a Material Adverse
Effect on Catskill or the Surviving Corporation.
(ii) The consent, approval or waiver of each person (other than
the Governmental Entities referred to in Section 7.1(b) hereof) whose consent or
approval shall be required in order to permit the succession by the Surviving
Bank pursuant to the Bank Merger to any obligation, right or interest of
Catskill Bank under any loan or credit agreement, note, mortgage, indenture,
lease, license or other agreement or instrument shall have been obtained except
for those, the failure of which to obtain, will not result in a Material Adverse
Effect on Catskill Bank or the Surviving Bank.
(d) No Pending Governmental Actions.
No proceeding initiated by any Governmental Entity seeking an
Injunction shall be pending.
(e) No Material Adverse Change.
There shall have been no changes, other than changes contemplated
by this Agreement, in the business, operations, condition (financial or
otherwise), assets or liabilities of Catskill or any Catskill Subsidiary
(regardless of whether or not such events or changes are inconsistent with the
representations and warranties given herein) that individually or in the
aggregate has had or would have a Material Adverse Effect on Catskill
(f) Accountant's Comfort Letter.
Catskill shall have caused to be delivered on the respective
dates thereof to Troy "comfort letters" from KPMG L.L.P., Catskill's independent
public accountants, dated the date on which the Proxy Materials or last
amendment thereto shall be approved for use, and dated the date of the Closing
(defined in Section 9.1 hereof), and addressed to Troy and Catskill, with
respect to Catskill's financial data presented in the Proxy Materials, which
letters shall be based upon Statements on Auditing Standards Nos. 72 and 76.
(g) Repayment of Loans.
Any and all loans of Catskill and Catskill Bank as to which Troy
has requested that Catskill or Catskill Bank make demand for payment in
accordance with Section 6.13 above, shall have been paid in full, with no waiver
or negation of any rights or remedies available against the borrower thereunder.
7.3 Conditions to Obligations of Catskill
The obligation of Catskill to effect the Merger is also subject to the
satisfaction or waiver by Catskill at or prior to the Effective Time of the
following conditions:
(a) Representations and Warranties.
The representations and warranties of Troy set forth in this
Agreement shall be true and correct as of the date of this Agreement and (except
to the extent such representations and warranties speak as of an earlier date)
as of the Closing Date as though made on and as of the Closing Date. Catskill
shall have received a certificate signed on behalf of Troy by each of the
President and the Chief Financial Officer of Troy to the foregoing effect.
(b) Performance of Covenants and Agreements of Troy.
Troy shall have performed in all material respects all covenants
and agreements required to be performed by it under this Agreement at or prior
to the Closing Date. Catskill shall have received a certificate signed on behalf
of Troy by each of the President and the Chief Financial Officer of Troy to such
effect.
(c) Consents under Agreements.
The consent or approval or waiver of each person (other than the
Governmental Entities referred to in Section 7.1(b)) whose consent or approval
shall be required in connection with the transactions contemplated hereby under
any loan or credit agreement, note, mortgage, indenture, lease, license or other
agreement or instrument to which Troy is a party or is otherwise bound shall
have been obtained.
(d) No Pending Governmental Actions.
No proceeding initiated by any Governmental Entity seeking an
Injunction shall be pending.
ARTICLE VIII
TERMINATION AND AMENDMENT
8.1 Termination.
This Agreement may be terminated at any time prior to the Effective Time,
whether before or after approval of the matters presented in connection with the
Merger by the shareholders of Catskill:
(a) by mutual consent of Troy and Catskill in a written instrument, if
the Board of Directors of each so determines by a vote of a majority of the
members of its entire Board;
(b) by either Troy or Catskill upon written notice to the other party
(i) 30 days after the date on which any request or application for a Regulatory
Approval shall have been denied or withdrawn at the request or recommendation of
the Governmental Entity which must grant such Regulatory Approval, unless within
the 30-day period following such denial or withdrawal the parties agree to file,
and have filed with the applicable Governmental Entity, a petition for rehearing
or an amended application, provided, however, that no party shall have the right
to terminate this Agreement pursuant to this Section 8.1(b), if such denial or
request or recommendation for withdrawal shall be due to the failure of the
party seeking to terminate this Agreement to perform or observe the covenants
and agreements of such party set forth herein;
(c) by either Troy or Catskill if the Merger shall not have been
consummated on or before January 31, 2001, unless the failure of the Closing to
occur by such date shall be due to the failure of the party seeking to terminate
this Agreement to perform or observe the covenants and agreements of such party
set forth herein;
(d) by either Troy or Catskill (provided that the terminating party is
not in breach of its obligations under Section 6.3 hereof) if the approval of
the shareholders of Catskill hereto required for the consummation of the Merger
shall not have been obtained by reason of the failure to obtain the required
vote at a duly held meeting of shareholders or at any adjournment or
postponement thereof;
(e) by either Troy or Catskill (provided that the terminating party is
not then in breach of any representation, warranty, covenant or other agreement
contained herein that, individually or in the aggregate, would give the other
party the right to terminate this Agreement) if there shall have been a breach
of any of the representations or warranties set forth in this Agreement on the
part of the other party, if such breach, individually or in the aggregate, has
had or is likely to have a Material Adverse Effect on the breaching party, and
such breach shall not have been cured within 30 days following receipt by the
breaching party of written notice of such breach from the other party hereto or
such breach, by its nature, cannot be cured prior to the Closing;
(f) by either Troy or Catskill (provided that the terminating party is
not then in breach of any representation, warranty, covenant or other agreement
contained herein that, individually or in the aggregate, would give the other
party the right to terminate this Agreement) if there shall have been a material
breach of any of the covenants or agreements set forth in this Agreement on the
part of the other party, and such breach shall not have been cured within 30
days following receipt by the breaching party of written notice of such breach
from the other party hereto or such breach, by its nature, cannot be cured prior
to the Closing;
(g) by Troy, if the management of Catskill or its Board of Directors,
for any reason, (i) fails to call and hold within 35 days of the approval for
use of the Proxy Materials a special meeting of Catskill's shareholders to
consider and approve this Agreement and the transactions contemplated hereby,
(ii) fails to recommend to shareholders the approval of this Agreement and the
transactions contemplated hereby, (iii) fails to oppose any third party proposal
that is inconsistent with the transactions contemplated by this Agreement or
(iv) violates Section 5.1(e) of this Agreement;
(h) by Troy if Catskill has complied with Section 5.1(e) above, and has
given written notice to Troy that Catskill has agreed to enter into a Superior
Competing Transaction; provided, however, that such termination under this
Section 8.1(h) shall not be effective unless and until Catskill shall have
complied with the expense and breakup fee provisions of Section 9.3 below, and
shall have acknowledged in the written notice to be provided in accordance
herewith that the Option granted pursuant to the Option Agreement shall then be
exercisable in accordance with terms thereof.
(i) by Catskill in the event of a Catastrophic Market Event (as defined
below) and that, if the Securities Portfolio Sale has not been completed,
results in Catskill's inability to obtain Sale Proceeds in excess of $73.2
million. For purposes of this subsection (i), "Catastrophic Market Event" shall
mean (i) a decline of more than 10% in the Bond Buyer 20 Index and a decline of
more than 10% in the Merrill Lynch Corporate Bond Index, as quoted in the Wall
Street Journal from the level on the date hereof until 30 days after the date
hereof or (ii) if the values for the Bond Buyer 20 Index and Merrill Lynch
Corporate Bond Index are not published for 3 consecutive business days because
of financial market conditions in the United States.
8.2 Effect of Termination.
In the event of termination of this Agreement by either Troy or Catskill as
provided in Section 8.1 hereof, this Agreement shall forthwith become void and
have no effect except (i) the last sentence of Section 6.2(a) and Sections 8.2,
9.2 and 9.3 hereof shall survive any termination of this Agreement, and (ii)
notwithstanding anything to the contrary contained in this Agreement, no party
shall be relieved or released from any liabilities or damages arising out of its
willful or intentional breach of any provision of this Agreement.
8.3 Amendment.
Subject to compliance with applicable law, this Agreement may be amended by
the parties hereto, by action taken or authorized by their respective Board of
Directors, at any time before or after approval of the matters presented in
connection with the Merger by the shareholders of Catskill; provided, however,
that after any approval of the transactions contemplated by this Agreement by
Catskill's shareholders, there may not be, without further approval of such
shareholders, any amendment of this Agreement which reduces the amount or
changes the form of the consideration to be delivered to Catskill shareholders
hereunder other than as contemplated by this Agreement. This Agreement may not
be amended except by an instrument in writing signed on behalf of each of the
parties hereto.
8.4 Extension; Waiver.
At any time prior to the Effective Time, the parties hereto, by action
taken or authorized by their respective Boards of Directors, may, to the extent
legally allowed, (a) extend the time for the performance of any of the
obligations or other acts of the other parties hereto, (b) waive any
inaccuracies in the representations and warranties contained herein or in any
document delivered pursuant hereto, and (c) waive compliance with any of the
agreements or conditions contained herein. Any agreement on the part of a party
hereto to any such extension or waiver shall be valid only if set forth in a
written instrument signed on behalf of such party, but such extension or waiver
or failure to insist on strict compliance with an obligation, covenant,
agreement or condition shall not operate as a waiver of, or estoppel with
respect to, any subsequent or other failure.
ARTICLE IX
GENERAL PROVISIONS
9.1 Closing.
Subject to the terms and conditions of this Agreement, the closing of the
Merger (the "Closing") will take place at 10:00 a.m. at the offices of Hogan &
Hartson L.L.P., counsel to Troy, on a date and place specified by the Parties,
which shall be no later than three business days after the satisfaction or
waiver (subject to applicable law) of all conditions precedent specified under
Article VII hereof (other than those conditions that by their nature are to be
satisfied at the Closing, but subject to the fulfillment or waiver of those
conditions), or on such other date, place and time as the parties may agree in
writing (the "Closing Date").
9.2 Nonsurvival of Representations, Warranties and Agreements.
None of the representations, warranties, covenants and agreements in this
Agreement or in any instrument delivered pursuant to this Agreement (other than
pursuant to the Option Agreement, which shall terminate in accordance with its
terms) shall survive the Effective Time, except for those covenants and
agreements contained herein and therein which by their terms apply in whole or
in part after the Effective Time.
9.3 Expenses; Breakup Fee.
All costs and expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party incurring such
expense. Except as set forth herein, in the event that this Agreement is
terminated by either Troy or Catskill by reason of a material breach pursuant to
Sections 8.1(e) or (f) hereof or by Troy pursuant to Section 8.1(g) hereof, Troy
or Catskill, as applicable, shall pay all documented, reasonable costs and
expenses up to $500,000 incurred by the terminating party in connection with
this Agreement and the transactions contemplated hereby. In the event that this
Agreement is terminated by Troy under Section 8.1(d) by reason of Catskill
shareholders not having given any required approval, or in the event this
Agreement is terminated by Troy by reason of a willful material breach pursuant
to Sections 8.1(e) or (f) hereof, Catskill shall pay all documented, reasonable
costs and expenses up to $500,000 incurred by Troy in connection with this
Agreement and the transactions contemplated hereby, plus a breakup fee of $1.5
million. In the event that this Agreement is terminated by Catskill by reason of
a willful material breach pursuant to Sections 8.1(e) or (f) hereof, Troy shall
pay all documented, reasonable costs and expenses up to $500,000 incurred by
Catskill in connection with this Agreement and the transactions contemplated
hereby, plus a breakup fee of $2.5 million. In the event that this Agreement is
terminated by Troy under Section 8.1(h) by reason of Catskill having agreed to
enter into an Superior Competing Transaction, Catskill shall pay all documented,
reasonable costs and expenses up to $500,000 incurred by Troy in connection with
this Agreement and the transactions contemplated hereby, plus a breakup fee of
$1.5 million.
9.4 Notices.
All notices and other communications hereunder shall be in writing and
shall be deemed given if delivered personally, mailed by registered or certified
mail (return receipt requested) or delivered by an express courier (with
confirmation) to the parties at the following addresses (or at such other
address for a party as shall be specified by like notice):
(a) if to Troy, to:
Troy Financial Corporation
32 Second Street
Troy, NY 12180
Attn.: Mr. Daniel J. Hogarty, Jr.
with a copy (which shall not constitute notice) to:
Hogan & Hartson L.L.P.
Columbia Square
555 Thirteenth Street, N.W.
Washington, DC 20004-1109
Attn.: Stuart G. Stein, Esq.
and
(b) if to Catskill, to:
Catskill Financial Corporation
341 Main Street
Catskill, NY 12414-1450
Attn.: Mr. Wilbur J. Cross
with a copy (which shall not constitute notice) to:
Hinman, Howard & Kattell, LLP
700 Security Mutual Building
Binghamton, NY 13902-5250
Attn.: Clifford S. Weber, Esq.
9.5 Interpretation.
When a reference is made in this Agreement to Sections, Exhibits or
Schedules, such reference shall be to a Section of or an Exhibit or Schedule to
this Agreement unless otherwise indicated. The table of contents and headings
contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement. Whenever the words
"include", "includes" or "including" are used in this Agreement, they shall be
deemed to be followed by the words "without limitation".
9.6 Counterparts.
This Agreement may be executed in counterparts, all of which shall be
considered one and the same agreement and shall become effective when
counterparts have been signed by each of the parties and delivered to the other
parties, it being understood that all parties need not sign the same
counterpart.
9.7 Entire Agreement.
This Agreement (including the disclosure schedules, documents and the
instruments referred to herein) constitutes the entire agreement and supersedes
all prior agreements and understandings, both written and oral, among the
parties with respect to the subject matter hereof, other than the
Confidentiality Agreement, the Certificate of Merger, the Option Agreement and
the Catskill Stockholder Agreement.
9.8 Governing Law.
This Agreement shall be governed and construed in accordance with the laws
of the State of Delaware, without regard to any applicable conflicts of law
rules.
9.9 Enforcement of Agreement.
The parties hereto agree that irreparable damage would occur in the event
that the provisions of this Agreement were not performed in accordance with its
specific terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to an injunction or injunctions to prevent breaches of
this Agreement and to enforce specifically the terms and provisions thereof in
any court of the United States or any state having jurisdiction, this being in
addition to any other remedy to which they are entitled at law or in equity.
9.10 Severability.
Any term or provision of this Agreement which is invalid or unenforceable
in any jurisdiction shall, as to that jurisdiction, be ineffective to the extent
of such invalidity or unenforceability without rendering invalid or
unenforceable the remaining terms and provisions of this Agreement or affecting
the validity or enforceability of any of the terms or provisions of this
Agreement in any other jurisdiction. If any provision of this Agreement is so
broad as to be unenforceable, the provision shall be interpreted to be only so
broad as is enforceable.
9.11 Publicity.
Except as otherwise required by law or the rules of the Nasdaq Stock Market
National Market System (or such other exchange on which the Troy Common Stock
may become listed), so long as this Agreement is in effect, neither Troy nor
Catskill shall, or shall permit any of Troy's or Catskill's Subsidiaries to,
issue or cause the publication of any press release or other public announcement
with respect to, or otherwise make any public statement concerning, the
transactions contemplated by this Agreement, the Certificate of Merger, the
Option Agreement or the Catskill Stockholder Agreement without the consent of
the other party, which consent shall not be unreasonably withheld. Troy and
Catskill shall cooperate to prepare a joint press release announcing the signing
of this Agreement and the transactions contemplated hereunder.
9.12 Assignment; Limitation of Benefits.
Neither this Agreement nor any of the rights, interests or obligations
hereunder shall be assigned by any of the parties hereto (whether by operation
of law or otherwise) without the prior written consent of the other parties.
Subject to the preceding sentence, this Agreement will be binding upon, inure to
the benefit of and be enforceable by the parties and their respective successors
and assigns. Except as otherwise specifically provided in Section 6.6 hereof,
this Agreement (including the documents and instruments referred to herein) is
not intended to confer upon any person other than the parties hereto any rights
or remedies hereunder, and the covenants, undertakings and agreements set out
herein shall be solely for the benefit of, and shall be enforceable only by, the
parties hereto and their permitted assigns.
9.13 Additional Definitions.
In addition to any other definitions contained in this Agreement, the
following words, terms and phrases shall have the following meanings when used
in this Agreement.
"Affiliated Person": any director, officer or 5% or greater shareholder,
spouse or other person living in the same household of such director, officer or
shareholder, or any company, partnership or trust in which any of the foregoing
persons is an officer, 5% or greater shareholder, general partner or 5% or
greater trust beneficiary.
"Competing Proposal": any of the following involving Catskill or any
Catskill Subsidiary: any inquiry, proposal or offer from any person relating to
any direct or indirect acquisition or purchase by such person of Catskill, any
Catskill Subsidiary or any business line of Catskill that constitutes 15% or
more of the net revenues, net income or assets of Catskill and its subsidiaries,
taken as a whole, or 15% or more of any class of equity securities of Catskill
or any of its subsidiaries, any tender offer or exchange offer that if
consummated would result in any person beneficially owning 15% or more of any
class of equity securities of Catskill or any of its subsidiaries, any merger,
consolidation, business combination, recapitalization, liquidation, dissolution
or similar transaction involving Catskill or any of its subsidiaries, other than
the transactions contemplated by this Agreement.
"Knowledge": with respect to any entity, refers to the actual knowledge of
such entity's directors and officers in the ordinary course of their duties in
such positions.
"Laws": any and all statutes, laws, ordinances, rules, regulations, orders,
permits, judgments, injunctions, decrees, case law and other rules of law
enacted, promulgated or issued by any Governmental Entity.
"Material Adverse Effect": with respect to Troy or Catskill, as the case
may be, means a condition, event, change or occurrence, other than the
Securities Portfolio Sale, that is reasonably likely to have a material adverse
effect upon (A) the financial condition, results of operations, loans,
securities, deposit accounts, business or properties of Troy or Catskill (other
than as a result of (i) changes in laws or regulations or accounting rules of
general applicability or interpretations thereof, or (ii) decreases in capital
under Financial Accounting Standards No. 115 attributable to general
changes in interest rates), or (B) the ability of Troy or Catskill to perform
its obligations under, and to consummate the transactions contemplated by, this
Agreement, the Certificate of Merger and, in the case of Catskill, the Option
Agreement, but shall not include Catskill's obligations under the Catskill Stock
Plan, the Catskill Management Recognition Plan or any employment or severance
agreement set forth in Section 3.12 of the Catskill Disclosure Schedule.
"Subsidiary": with respect to any party means any corporation, partnership
or other organization, whether incorporated or unincorporated, which is
consolidated with such party for financial reporting purposes.
"Superior Competing Transaction": any of the following involving Catskill
or any Catskill Subsidiary: any proposal made by a third party to acquire,
directly or indirectly, including pursuant to a tender offer, exchange offer,
merger, consolidation, business combination, recapitalization, liquidation,
dissolution or similar transaction, for consideration consisting of cash and/or
securities, more than 50% of the combined voting power of the shares of Catskill
Common Stock then outstanding or all or substantially all the assets of
Catskill, and otherwise on terms which the Board of Directors of Catskill,
determines in its good faith judgment (based on the opinion of Ryan, Beck & Co.,
or another financial advisor of nationally recognized reputation) to be more
favorable to its stockholders than the Merger and for which financing, to the
extent required, is then committed or which if not committed is, in the good
faith judgment of its Board of Directors, reasonably capable of being obtained
by such third party.
[SIGNATURES PAGE FOLLOWS]
IN WITNESS WHEREOF, Troy, Merger Sub and Catskill have caused this
Agreement to be executed and delivered by their respective officers thereunto
duly authorized as of the date first above written.
TROY FINANCIAL CORPORATION
ATTEST:
By: /s/ Kevin M. OBryan By: /s/ Daniel J. Hogarty, Jr.
-------------------------------- -------------------------------
Name: Kevin M. O'Bryan Name: Daniel J. Hogarty, Jr.
Title: Senior Vice President and Title: Chairman, President and
Secretary Chief Executive Officer
CATSKILL FINANCIAL CORPORATION
ATTEST:
By: /s/ Allan Oren By: /s/ Wilbur J. Cross
-------------------------------- --------------------------------
Name: Allen Oren Name: Wilbur J. Cross
Title: Director Title: Chairman, President and
Chief Executive Officer
CHARLIE ACQUISITION CORPORATION
ATTEST:
By: /s/ Kevin M. O'Bryan By: /s/ Daniel J. Hogarty, Jr.
------------------------ -------------------------------
Name: Kevin M. O'Bryan Name: Daniel J. Hogarty, Jr.
Title: Secretary Title: President and Chief
Executive Officer
APPENDIX B - STOCK OPTION AGREEMENT
CATSKILL FINANCIAL CORPORATION STOCK OPTION AGREEMENT
THE TRANSFER OF THE OPTION GRANTED
BY THIS AGREEMENT IS SUBJECT TO RESALE RESTRICTIONS.
This STOCK OPTION AGREEMENT, dated as of June 7, 2000 (this "Agreement"),
is entered into between Catskill Financial Corporation, a Delaware corporation
("Issuer"), and Troy Financial Corporation, a Delaware corporation ("Grantee").
WITNESSETH:
WHEREAS, Grantee, Charlie Acquisition Corporation, a Delaware corporation,
and Issuer have entered into an Agreement and Plan of Merger, dated as of even
date with this Agreement (the "Plan"), which was executed by the parties thereto
prior to the execution of this Agreement; and
WHEREAS, as a condition and inducement to Grantee's entering into the Plan
and in consideration therefor, Issuer has agreed to grant Grantee the Option (as
defined below).
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements set forth herein and in the Plan, the parties hereto agree as
follows:
SECTION 1. Issuer hereby grants to Grantee an irrevocable option (the
"Option") to purchase, subject to the terms hereof, up to a number of fully paid
and nonassessable shares of common stock, par value $0.01 per share of Issuer
("Issuer Common Stock") equal to 19.9% of the total of the number of issued and
outstanding shares of Issuer Common Stock as of the first date that the Option
becomes exercisable, at a price per share equal to $19.00 (the "Option Price").
SECTION 2. (a) Grantee may exercise the Option, in whole or part, at any
time and from time to time following the occurrence of a Purchase Event (as
defined below); provided, however, that the Option shall terminate and be of no
further force and effect upon the earliest to occur of the following events
(which are collectively referred to as an "Exercise Termination Event"):
(i) The time immediately prior to the Effective Time (as defined
in the Plan);
(ii) 18 months after the first occurrence of a Purchase Event;
(iii) 18 months after the termination of the Plan following the
occurrence of a Preliminary Purchase Event (as defined below);
(iv) upon the valid termination of the Plan, if no Purchase Event
or Preliminary Purchase Event has occurred prior to such termination,
by Issuer pursuant to Sections 8.1(e) or 8.1(f) of the Plan as a
result of a breach by Grantee, both parties pursuant to Section 8.1(a)
of the Plan, or by either party pursuant to Sections 8.1(b) or 8.1(c)
of the Plan;
(v) 18 months after the termination of the Plan, by either party
pursuant to Section 8.1(d) of the Plan based on the required vote of
Issuer's stockholders not being obtained at a duly called meeting of
the stockholders of the Issuer, if no Purchase Event or Preliminary
Purchase Event has occurred prior to the meeting of Issuer's
stockholders (or any adjournment or postponement thereof) held to vote
on the Plan; or
(vi) 18 months after the termination of the Plan, by Grantee
pursuant to Sections 8.1(e) or 8.1(f) thereof as a result of a breach
by Issuer, or by Grantee pursuant to Sections 8.1(g) or (h) of the
Plan.
(b) The term "Preliminary Purchase Event" shall mean any of the following
events or transactions occurring on or after the date hereof and prior to an
Exercise Termination Event:
(i) Issuer without having received Grantee's prior written
consent, shall have entered into any letter of intent or definitive
agreement to engage in an Acquisition Transaction (as defined below)
with any person (as defined below) other than Grantee or any of its
subsidiaries (each a "Grantee Subsidiary") or the Board of Directors
of Issuer shall have recommended that the stockholders of Issuer
approve or accept any Acquisition Transaction with any Person (as the
term "person" is defined in Sections 3(a)9 and 13(d)(3) of the
Exchange Act and the rules and regulations thereunder) other than
Grantee or any Grantee Subsidiary. For purposes of this Agreement,
"Acquisition Transaction" shall mean (x) a merger, consolidation or
other business combination involving Issuer, (y) a purchase, lease or
other acquisition of all or substantially all of the assets of Issuer,
(z) a purchase or other acquisition (including by way of merger,
consolidation, share exchange or otherwise) of Beneficial Ownership
(as the term "beneficial ownership" is defined in Regulation 13d-3(a)
of the Exchange Act) of securities representing 20% or more of the
voting power of Issuer; provided, however, that "Acquisition
Transaction" shall not include a transaction entered into after the
termination of the Plan in which the Issuer is the surviving entity,
if in connection with such transaction, no person acquires Beneficial
Ownership of 20% or more of the total voting power of the Issuer to be
outstanding after giving effect to such transaction and in which the
aggregate voting power of Issuer acquired by all persons is less than
33% of the total voting power of Issuer;
(ii) Any Person (other than Grantee, any Grantee Subsidiary or
any current affiliate of Issuer) shall have acquired Beneficial
Ownership of 20% or more of the outstanding shares of Issuer Common
Stock;
(iii) (a) Any Person (other than Grantee or any Grantee
Subsidiary) shall have made a bona fide proposal to Issuer or, by a
public announcement or written communication that is or becomes the
subject of public disclosure, to Issuer's stockholders prior to the
Catskill Stockholders' Meeting to engage in an Acquisition Transaction
(including, without limitation, any situation in which any Person
other than Grantee or any Grantee Subsidiary shall have commenced (as
such term is defined in Rule 14d-2 promulgated under the Exchange Act
of 1934, as amended (the "Exchange Act"), or shall have filed a
registration statement under the Securities Act of 1933, as amended
(the "Securities Act"), with respect to a tender offer or exchange
offer to purchase any shares of Issuer Common Stock such that, upon
consummation of such offer, such person would have Beneficial
Ownership of 20% or more of the then outstanding shares of Issuer
Common Stock (such an offer being referred to herein as a "Tender
Offer" or an "Exchange Offer", respectively) and (b) the stockholders
of Issuer do not approve the Merger, as defined in the Plan, at a
meeting of the Issuer's stockholders;
(iv) There shall exist a willful or intentional breach under the
Plan by Issuer and such breach would entitle Grantee to terminate the
Plan; or
(v) The meeting of the Issuer's stockholders to be held for the
purpose of voting on the Plan shall not have been held pursuant to the
Plan or shall have been canceled prior to termination of the Plan, or
for any reason whatsoever Issuer's Board of Directors shall have
failed to recommend, or shall have withdrawn or modified in a manner
adverse to Grantee the recommendation of Issuer's Board of Directors,
that Issuer's stockholders approve the Plan, or if Issuer or Issuer's
Board of Directors fails to oppose any proposal of the type described
at Section 2(b)(iii)(a) above by any Person (other than Grantee or any
Grantee Subsidiary).
(c) The term "Purchase Event" shall mean any of the following events or
transactions occurring on or after the date hereof and prior to an Exercise
Termination Event:
(i) The acquisition by any Person (other than Grantee or any
Grantee Subsidiary) of Beneficial Ownership (other than on behalf of
the Issuer) of 20% or more of the then outstanding Issuer Common
Stock;
(ii) The occurrence of a Preliminary Purchase Event described in
Section 2(b)(i); or
(iii) The termination of the Plan by Grantee pursuant to Section
8.1(h) thereof.
(d) Issuer shall notify Grantee promptly in writing of the occurrence of
any Preliminary Purchase Event or Purchase Event known to Issuer; provided,
however, that the giving of such notice by Issuer shall not be a condition to
the right of Grantee to exercise the Option.
(e) In the event that Grantee is entitled to and wishes to exercise the
Option, it shall send to Issuer a written notice (the "Option Notice," the date
of which being hereinafter referred to as the "Notice Date") specifying (i) the
total number of shares of Issuer Common Stock it will purchase pursuant to such
exercise and (ii) the time (which shall be on a business day that is not less
than three nor more than 10 business days from the Notice Date) on which the
closing of such purchase shall take place (the "Closing Date"); such closing to
take place at the principal office of the Issuer; provided, however, that if
prior notification to or approval of the Board of Governors of the Federal
Reserve System ("FRB"), Office of the Comptroller of the Currency ("OCC"), the
Office of Thrift Supervision ("OTS"), the New York State Banking Department
("NYSBD"), the Federal Trade Commission (the "FTC"), the Antitrust Division of
the Department of Justice ("DOJ") or any other Governmental Authority is
required in connection with such purchase (each, a "Notification" or an
"Approval," as the case may be), at Grantee's sole expense, (a) Grantee shall
promptly file the required notice or application for approval
("Notice/Application"), (b) Grantee shall expeditiously process the
Notice/Application and (c) for the purpose of determining the Closing Date
pursuant to clause (ii) of this sentence, the period of time that otherwise
would run from the Notice Date shall instead run from the later of (x) in
connection with any Notification, the date on which any required notification
periods have expired or been terminated and (y) in connection with any Approval,
the date on which such approval has been obtained and any requisite waiting
period or periods shall have expired. For purposes of Section 2(a) hereof, any
exercise of the Option shall be deemed to occur on the Notice Date relating
thereto. Prior to the Closing Date, Grantee shall have the right to revoke its
exercise of the Option by written notice to the Issuer given not less than three
business days prior to the Closing Date.
(f) At the closing referred to in Section 2(e) hereof, Grantee shall pay to
Issuer the aggregate purchase price for the number of shares of Issuer Common
Stock specified in the Option Notice in immediately available funds by wire
transfer to a bank account designated by Issuer; provided, however, that failure
or refusal of Issuer to designate such a bank account shall not preclude Grantee
from exercising the Option.
(g) At such closing, simultaneously with the delivery of immediately
available funds as provided in Section 2(f) hereof, Issuer shall deliver to
Grantee a certificate or certificates representing the number of shares of
Issuer Common Stock specified in the Option Notice and, if the Option should be
exercised in part only, a new Option evidencing the rights of Grantee thereof to
purchase the balance of the shares of Issuer Common Stock purchasable hereunder.
(h) Certificates for Issuer Common Stock delivered at a closing hereunder
shall be endorsed with a restrictive legend substantially as follows:
THE TRANSFER OF THE SHARES REPRESENTED BY THIS CERTIFICATE
IS SUBJECT TO RESALE RESTRICTIONS ARISING UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, AND APPLICABLE STATE SECURITIES LAWS.
It is understood and agreed that the reference to the resale restrictions of the
Securities Act in the above legend shall be removed by delivery of substitute
certificate(s) without such reference if Grantee shall have delivered to Issuer
a copy of a letter from the staff of the Securities and Exchange Commission (the
"SEC") or Governmental Authority responsible for administering any applicable
state securities laws or an opinion of counsel to the effect that such legend is
not required for purposes of the Securities Act or applicable state securities
laws. In addition such certificates shall bear any other legend as may be
required by law.
(i) Upon the giving by Grantee to Issuer of an Option Notice and the tender
of the applicable purchase price in immediately available funds on the Closing
Date, unless prohibited by applicable law, Grantee shall be deemed to be the
holder of record of the number of shares of Issuer Common Stock specified in the
Option Notice, notwithstanding that the stock transfer books of Issuer shall
then be closed or that certificates representing such shares of Issuer Common
Stock shall not then actually be delivered to Grantee. Issuer shall pay all
expenses and other charges that may be payable in connection with the
preparation, issuance and delivery of stock certificates under this Section 2 in
the name of Grantee.
SECTION 3. Issuer agrees: (i) that it shall at all times until the
termination of this Agreement have reserved for issuance upon the exercise of
the Option that number of authorized and reserved shares of Issuer Common Stock
equal to the maximum number of shares of Issuer Common Stock at any time and
from time to time issuable hereunder, all of which shares will, upon issuance
pursuant hereto, be duly authorized, validly issued, fully paid, non-assessable,
and delivered free and clear of all claims, liens, encumbrances and security
interests and not subject to any preemptive rights; (ii) that it will not, by
amendment of its certificate of incorporation or through reorganization,
consolidation, merger, dissolution or sale of assets, or by any other voluntary
act, avoid or seek to avoid the observance or performance of any of the
covenants, stipulations or conditions to be observed or performed hereunder by
Issuer; (iii) promptly to take all reasonable action as may from time to time be
requested by Grantee, at Grantee's expense (including (x) complying with all
premerger notification, reporting and waiting period requirements specified in
15 U.S.C. ss. 18a and regulations promulgated thereunder and (y) in the event
prior approval of or notice to the FRB, OCC, FTC, DOJ or any other Governmental
Authority, under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, the Bank Holding Company Act, the Change in Bank Control Act, the Home
Owners' Loan Act of 1933, as amended, or any other applicable federal or state
law, is necessary before the Option may be exercised), cooperating with Grantee
in preparing such applications or notices and providing such information to each
such Governmental Authority as it may require in order to permit Grantee to
exercise the Option and Issuer duly and effectively to issue shares of Issuer
Common Stock pursuant hereto; and (iv) to take all action provided herein to
protect the rights of Grantee against dilution.
SECTION 4. This Agreement (and the Option granted hereby) are exchangeable,
without expense, at the option of Grantee, upon presentation and surrender of
this Agreement at the principal office of Issuer, for other agreements providing
for Options of different denominations entitling the holder thereof to purchase,
on the same terms and subject to the same conditions as are set forth herein, in
the aggregate the same number of shares of Issuer Common Stock purchasable
hereunder. The terms "Agreement" and "Option" as used herein include any
agreements and related options for which this Agreement (and the Option granted
hereby) may be exchanged. Upon receipt by Issuer of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of this
Agreement, and (in the case of loss, theft or destruction) of reasonably
satisfactory indemnification, and upon surrender and cancellation of this
Agreement, if mutilated, Issuer will execute and deliver a new Agreement of like
tenor and date.
SECTION 5. The number of shares of Issuer Common Stock purchasable upon the
exercise of the Option shall be subject to adjustment from time to time as
follows:
(a) In the event of any change in the type or number of shares of Issuer
Common Stock by reason of stock dividends, split-ups, mergers,
recapitalizations, combinations, subdivisions, conversions, exchanges of shares
or other issuances of additional shares (other than pursuant to the exercise of
the Option), the type and number of shares of Issuer Common Stock purchasable
upon exercise hereof shall be appropriately adjusted and proper provision shall
be made so that, in the event that any additional shares of Issuer Common Stock
are to be issued or otherwise become outstanding as a result of any such change
(other than pursuant to an exercise of the Option), the number of shares of
Issuer Common Stock that remain subject to the Option shall be increased or
decreased (as applicable) so that, after such issuance and together with the
shares of Issuer Common Stock previously issued pursuant to the prior partial
exercise of the Option (as adjusted on account of any of the foregoing changes
in the Issuer Common Stock), such number of shares shall equal the sum of 19.9%
of the total of the number of shares of Issuer Common Stock issued and
outstanding on the date the Option first becomes exercisable.
(b) Whenever the number of shares of Issuer Common Stock purchasable upon
exercise hereof is adjusted as provided in this Section 5, the Option Price
shall be adjusted by multiplying the Option Price by a fraction, the numerator
of which shall be equal to the number of shares of Issuer Common Stock
purchasable prior to the adjustment and the denominator of which shall be equal
to the number of shares of Issuer Common Stock purchasable after the adjustment.
SECTION 6. (a) Upon the occurrence of a Purchase Event that occurs prior to
an Exercise Termination Event, Issuer shall, at the request of Grantee (whether
on its own behalf or on behalf of any subsequent holder of the Option (or part
thereof) or of any of the shares of Issuer Common Stock issued pursuant hereto),
promptly prepare, file and keep current a shelf registration statement with the
SEC, under the Securities Act covering any shares issued and issuable pursuant
to the Option and shall use its reasonable best efforts to cause such
registration statement to become effective, and to remain current and effective
for a period not in excess of 180 days from the day such registration statement
first becomes effective, in order to permit the sale or other disposition of any
shares of Issuer Common Stock issued upon total or partial exercise of the
Option ("Option Shares") in accordance with any plan of disposition requested by
Grantee. Grantee shall have the right to demand two such registrations, which
demand right shall be transferable but in no event shall Issuer be required to
effect more than two registrations in the aggregate pursuant to this Option or
any subdivision hereof. Grantee shall provide all information reasonably
requested by Issuer for inclusion in any registration statement to be filed
hereunder. In connection with any such registration statement, Issuer and
Grantee shall provide each other with representations, warranties, indemnities
and other agreements customarily given in connection with such registration. If
requested by Grantee in connection with such registration, Issuer and Grantee
shall become a party to any underwriting agreement relating to the sale of such
shares, but only to the extent of obligating themselves in respect of
representations, warranties, indemnities and other agreements customarily
included in such underwriting agreements and reasonably acceptable to Issuer.
Notwithstanding the foregoing, if Grantee revokes any exercise notice or fails
to exercise any Option with respect to any exercise notice pursuant to Section
2(e) hereof, Issuer shall not be obligated to continue any registration process
with respect to the sale of Option Shares issuable upon the exercise of such
Option and Grantee shall not be deemed to have demanded registration of Option
Shares. If Issuer withdraws a registration statement which has been declared
effective at the request of Grantee, or any subsequent holder, then such filing
shall be deemed an effective registration for all purposes hereunder. The Issuer
will not be required to file any such registration statement during any period
of time (not to exceed 30 days in the case of clauses (A) or (C) below or 45
days in the case of clause (B) below) when (A) the Issuer is in possession of
material non-public information which it reasonably believes would be
detrimental to be disclosed at such time and such information would have to be
disclosed if a registration statement were filed at that time; (B) the Issuer is
required under the Securities Act and the rules and regulations thereunder to
include audited financial statements for any period in such registration
statement and such financial statements are not yet available for inclusion in
such registration statement; or (C) the Issuer reasonably determines that such
registration would interfere with any financing, acquisition or material
transaction involving the Issuer. The registration rights set forth in this
Section 6 are subject to the condition that the Grantee or subsequent holder
shall provide the Issuer with such information with respect to the holder's
securities, the plan for distribution thereof, and such other information with
respect to the holder that is required under applicable securities laws to
enable the Issuer to include in a registration statement all material facts
required to be disclosed with respect to a registration thereunder, including
the identity of the holder and the holder's plan of distribution. The Grantee
shall not be able to exercise its registration rights hereunder if Grantee can
rely on Rule 144 promulgated under the Securities Act to sell such number of
shares of Issuer Common Stock that the Grantee otherwise would seek to register.
(b) Concurrently with the preparation and filing of a registration
statement under Section 6(a) hereof, Issuer shall also make all filings required
to comply with state securities laws in such number of states as Grantee may
reasonably request; provided, that Issuer shall not be required to qualify to do
business in, or consent to service of process in, any jurisdiction by reason of
this provision.
SECTION 7. (a) Upon the occurrence of a Purchase Event that occurs prior to
an Exercise Termination Event, at the request (the date of such request being
the "Option Repurchase Request Date") of Grantee, Issuer shall repurchase,
subject to compliance with applicable law and out of funds legally available
therefor, the Option from Grantee at a price (the "Option Repurchase Price")
equal to the amount by which (A) the market/offer price (as defined below)
exceeds (B) the Option Price, multiplied by the number of shares for which the
Option may then be exercised. The term "market/offer price" shall mean the
highest of (i) the price per share of Issuer Common Stock at which a tender
offer or exchange offer therefor has been made after the date hereof and on or
prior to the Option Repurchase Request Date (ii) the price per share of Issuer
Common Stock paid or to be paid by any third party pursuant to an agreement with
Issuer (whether by way of a merger, consolidation or otherwise), (iii) the
average of the 20 highest last sale prices for shares of Issuer Common Stock as
reported within the 90-day period ending on the Option Repurchase Request Date,
and (iv) in the event of a sale of all or substantially all of Issuer's assets,
the sum of the price paid in such sale for such assets and the current market
value of the remaining assets of Issuer as determined by an investment banking
firm selected by Grantee and reasonably acceptable to Issuer, divided by the
number of shares of Issuer Common Stock outstanding at the time of such sale. In
determining the market/offer price, the value of consideration other than cash
shall be the value determined by an investment banking firm selected by Grantee
and reasonably acceptable to Issuer. The investment banking firm's determination
shall be conclusive and binding on all parties.
(b) Grantee may exercise its right to require Issuer to repurchase the
Option pursuant to this Section 7 by surrendering for such purpose to Issuer, at
its principal office, a copy of this Agreement, accompanied by a written notice
or notices stating that Grantee elects to require Issuer to repurchase the
Option in accordance with the provisions of this Section 7. As promptly as
practicable, and in any event within 30 business days after the surrender of the
Option and the receipt of such notice or notices relating thereto, Issuer shall
deliver or cause to be delivered to Grantee the Option Repurchase Price.
(c) Issuer hereby undertakes to use its reasonable best efforts to obtain
all required regulatory, shareholder and legal approvals and to file any
required notices as promptly as practicable in order to accomplish any
repurchase contemplated by this Section 7. Nonetheless, to the extent that
Issuer is prohibited under applicable law or regulation from repurchasing the
Option in full, Issuer shall promptly so notify Grantee and thereafter deliver
or cause to be delivered, from time to time, to Grantee the portion of the
Option Repurchase Price that it is no longer prohibited from delivering, within
five business days after the date on which Issuer is no longer so prohibited;
provided, however, that if Issuer at any time after delivery of a notice of
repurchase pursuant to Section 7(b) hereof is prohibited as referred to above,
from delivering to Grantee the Option Repurchase Price in full, Grantee may
revoke its notice of repurchase of the Option either in whole or in part
whereupon, in the case of a revocation in part, Issuer shall promptly (i)
deliver to Grantee that portion of the Option Purchase Price that Issuer is not
prohibited from delivering after taking into account any such revocation and
(ii) deliver, as appropriate, to Grantee, a new Agreement evidencing the right
of Grantee to purchase that number of shares of Issuer Common Stock equal to the
number of shares of Issuer Common Stock purchasable immediately prior to the
delivery of the notice of repurchase less the number of shares of Issuer Common
Stock covered by the portion of the Option repurchased.
(d) Issuer shall not enter into any agreement with any Person (other than
Grantee or a Grantee Subsidiary) for an Acquisition Transaction unless the other
Person assumes all the obligations of Issuer pursuant to this Section 7 in the
event that Grantee elects, in its sole discretion, to require such other Person
to perform such obligations.
SECTION 8. Notwithstanding Sections 2 and 6 hereof, if Grantee has given
the notice referred to in one or more of such Sections, the exercise of the
rights specified in any such Section shall be extended (a) if the exercise of
such rights requires obtaining regulatory approvals (including any required
waiting periods) to the extent necessary to obtain all regulatory approvals for
the exercise of such rights, and (b) to the extent necessary to avoid liability
under Section 16(b) of the Exchange Act by reason of such exercise; provided,
that in no event shall any closing date occur more than 12 months after the
related notice date, and, if the closing date shall not have occurred within
such period due to the failure to obtain any required approval by the FRB, OCC,
OTS, FTC, DOJ or any other Governmental Authority despite the reasonable best
efforts of Grantee and Issuer to obtain such approvals, the exercise of the
rights shall be deemed to have been rescinded as of the related notice date. In
the event (a) Grantee receives official notice that an approval of the FRB, OCC,
FTC, DOJ or any other Governmental Authority required for the purchase and sale
of the Option Shares will not be issued or granted or (b) a closing date has not
occurred within 12 months after the related notice date due to the failure to
obtain any such required approval, Grantee shall be entitled to exercise the
Option in connection with the concurrent resale of the Option Shares pursuant to
a registration statement as provided in Section 6 hereof.
SECTION 9. Issuer hereby represents and warrants to Grantee as follows:
(a) Issuer has the requisite corporate power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly approved by the Board of
Directors of Issuer and no other corporate proceedings on the part of Issuer are
necessary to authorize this Agreement or to consummate the transactions so
contemplated. This Agreement has been duly executed and delivered by, and
constitutes a valid and binding obligation of, Issuer, enforceable against
Issuer in accordance with its terms, subject to any required Governmental
Approval, and except as enforceability thereof may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium and other similar laws
affecting the enforcement of creditors' rights generally and general principles
of equity.
(b) Issuer has taken all necessary corporate action to authorize and
reserve and to permit it to issue, and at all times from the date hereof through
the termination of this Agreement in accordance with its terms will have
reserved for issuance upon the exercise of the Option, that number of shares of
Issuer Common Stock equal to the maximum number of shares of Issuer Common Stock
at any time and from time to time issuable hereunder, and all such shares, upon
issuance pursuant hereto, will be duly authorized, validly issued, fully paid,
non- assessable, and will be delivered free and clear of all claims, liens,
encumbrances and security interests and not subject to any preemptive rights.
SECTION 10. (a) Neither of the parties hereto may assign any of its rights
or delegate any of its obligations under this Agreement or the Option created
hereunder to any other Person without the express written consent of the other
party, except that Grantee may assign this Agreement to a wholly owned
subsidiary of Grantee and Grantee may assign its rights hereunder in whole or in
part after the occurrence of a Preliminary Purchase Event. The term "Grantee" as
used in this Agreement shall also be deemed to refer to Grantee's permitted
assigns.
(b) Any assignment of rights of Grantee to any permitted assignee of
Grantee hereunder shall bear the restrictive legend at the beginning thereof
substantially as follows:
THE TRANSFER OF THE OPTION REPRESENTED BY THIS ASSIGNMENT AND THE
RELATED OPTION AGREEMENT IS SUBJECT TO RESALE RESTRICTIONS ARISING
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND APPLICABLE STATE
SECURITIES LAWS AND TO CERTAIN PROVISIONS OF AN AGREEMENT BETWEEN
CATSKILL FINANCIAL CORPORATION AND TROY FINANCIAL CORPORATION
("TROY"), DATED AS OF JUNE 7, 2000. A COPY OF SUCH AGREEMENT IS ON
FILE AT THE PRINCIPAL OFFICE OF TROY, AND WILL BE PROVIDED TO ANY
PERMITTED ASSIGNEE OF THE OPTION WITHOUT CHARGE UPON RECEIPT OF A
WRITTEN REQUEST THEREFOR.
SECTION 11. Each of Grantee and Issuer will use its reasonable efforts to
make all filings with, and to obtain consents of, all third parties including,
if applicable, the FRB, OCC, FTC, DOJ and other Governmental Authorities
necessary to the consummation of the transactions contemplated by this
Agreement.
SECTION 12. The parties hereto acknowledge that damages would be an
inadequate remedy for a breach of this Agreement by either party hereto and that
the obligations of the parties hereto shall be enforceable by either party
hereto through injunctive or other equitable
relief. Both parties further agree to waive any requirement for the securing or
posting of any bond in connection with the obtaining of any such equitable
relief and that this provision is without prejudice to any other rights that the
parties hereto may have for any failure to perform this Agreement.
SECTION 13. If any term, provision, covenant or restriction contained in
this Agreement is held by a court or a federal or state regulatory agency of
competent jurisdiction to be invalid, void or unenforceable, the remainder of
the terms, provisions and covenants and restrictions contained in this Agreement
shall remain in full force and effect, and shall in no way be affected, impaired
or invalidated. If for any reason such court or regulatory agency determines
that Grantee is not permitted to acquire or Issuer is not permitted to
repurchase pursuant to Section 7 hereof, the full number of shares of Issuer
Common Stock provided in Section 1 hereof (as adjusted pursuant hereto), it is
the express intention of Issuer to allow Grantee to acquire or to require Issuer
to repurchase such lesser number of shares as may be permissible without any
amendment or modification hereof.
SECTION 14. All notices, requests, claims, demands and other communications
hereunder shall be deemed to have been duly given when delivered in the manner
and at the respective addresses of the parties set forth in the Plan.
SECTION 15. This Agreement, the rights and obligations of the parties
hereto, and any claims or disputes relating thereto shall be governed by and
construed in accordance with the laws of the State of Delaware (but not
including the choice of law rules thereof).
SECTION 16. This Agreement may be executed in counterparts, each of which
shall be deemed to be an original, but all of which shall constitute one and the
same agreement and shall be effective at the time of execution and delivery.
SECTION 17. Except as otherwise expressly provided herein, each of the
parties hereto shall bear and pay all costs and expenses incurred by it or on
its behalf in connection with the transactions contemplated hereunder.
SECTION 18. Except as otherwise expressly provided herein or in the Plan,
this Agreement contains the entire agreement between the parties with respect to
the transactions contemplated hereunder and supersedes all prior arrangements or
understandings with respect thereof, written or oral. The terms and conditions
of this Agreement shall inure to the benefit of and be binding upon the parties
hereto and their respective successors and permitted assigns. Nothing in this
Agreement, expressed or implied, is intended to confer upon any party, other
than the parties hereto, and their respective successors except as assigns, any
rights, remedies, obligations or liabilities under or by reason of this
Agreement, except as expressly provided herein.
SECTION 19. Capitalized terms used in this Agreement and not defined herein
but defined in the Plan shall have the meanings assigned therein.
SECTION 20. Nothing contained in this Agreement shall be deemed to
authorize or require Issuer or Grantee to breach any provision of the Plan or
any provision of law applicable to the Grantee or Issuer.
SECTION 21. In the event that any selection or determination is to be made
by Grantee or a subsequent holder hereunder and at the time of such selection or
determination there is more than one Grantee or holders, such selection shall be
made by a majority in interest of such Grantees or holders.
SECTION 22. In the event of any exercise of the option by Grantee, Issuer
and such Grantee shall execute and deliver all other documents and instruments
and take all other action that may be reasonably necessary in order to
consummate the transactions provided for by such exercise.
SECTION 23. Except to the extent Grantee exercises the Option, Grantee
shall have no rights to vote or receive dividends or have any other rights as a
shareholder with respect to shares of Issuer Common Stock covered hereby.
[SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF, each of the parties has caused this Option Agreement to
be executed and delivered on its behalf by their respective officers thereunto
duly authorized, all as of the date first above written.
CATSKILL FINANCIAL CORPORATION
By: /s/ Wilbur J. Cross
-------------------------------
Name: Wilbur J. Cross
Title: Chairman, President and
Chief Executive Officer
TROY FINANCIAL CORPORATION
By: /s/ Daniel J. Hogarty, Jr.
-------------------------------
Name: Daniel J. Hogarty, Jr.
Title: Chairman, President and
Chief Executive Officer
APPENDIX C - FAIRNESS OPINION OF RYAN, BECK & COMPANY, INC.
June 7, 2000
The Board of Directors
Catskill Financial Corporation
341 Main Street
Catskill, NY 12414
Members of the Board:
You have requested our opinion as investment bankers that the consideration to
be received in the Merger (the "Merger") between Catskill Financial Corporation
("Catskill") and an acquisition subsidiary of Troy Financial Corporation
("Troy"), the holding company for Troy Savings Bank, pursuant to the Agreement
and Plan of Merger dated May 30, 2000 ("Merger Agreement") is fair to the
holders of Catskill Common Stock from a financial point of view.
Pursuant to the Merger Agreement, at the Effective Time, Catskill Acquisition
Corp., a Delaware corporation and wholly-owned subsidiary of Troy to be formed
in connection with the contemplated transactions, shall merge with and into
Catskill with Catskill as the surviving corporation. Each share of Catskill's
issued and outstanding shares of common stock will be converted into the right
to receive $23.00 in cash. Simultaneous with or as soon as practicable after the
Merger, Catskill, as the surviving corporation in the Merger, shall be merged
with and into Troy.
Ryan, Beck & Co., Inc. as a customary part of its investment banking business,
is engaged in the valuation of financial institutions and their securities in
connection with mergers and acquisitions and other corporate transactions. In
conducting our investigation and analysis of the Merger, we have met with
members of senior management of Catskill to discuss Catskill's operations,
historical financial statements, strategic plans and future prospects. We have
reviewed and analyzed material prepared in connection with the Merger, including
but not limited to the following: (i) the Merger Agreement and related
documents; (ii) Troy's Annual Reports to Shareholders and Annual Reports on Form
10-K for the fiscal year ended September 30, 1999 and Troy's Quarterly Reports
on Form 10-Q for the periods ended March 31, 2000, December 31, 1999, June 30,
1999 and March 31, 1999; (iii) Troy's Prospectus, dated February 12, 1999 with
respect to Troy's conversion from mutual to stock form of organization; (iv)
Catskill's Annual Reports to Shareholders on Form 10-K for the fiscal years
ended September 30, 1999, 1998, 1997 and Catskill's Quarterly Reports on
Form10-Q for the periods ended March 31, 2000, December 31, 1999, June 30, 1999
and March 31, 1999; (v) Catskill's Proxy Statements dated January 14, 2000,
January 7, 1999, January 20, 1998; (vi) certain operating and financial
information provided to Ryan, Beck by the management of Catskill relating to its
business and prospects; (vii) the
publicly available financial data of thrift organizations which Ryan, Beck
deemed generally comparable to Catskill; and (viii) the terms of recent
acquisitions of commercial bank and thrift organizations which Ryan, Beck deemed
generally comparable in whole or in part to Catskill. We also conducted or
reviewed such other studies, analyses, inquiries and examinations as we deemed
appropriate.
While we have taken care in our investigation and analyses, we have relied upon
and assumed the accuracy, completeness and fairness of the financial and other
information provided to us by the respective institutions or which was publicly
available and have not assumed any responsibility for independently verifying
such information. We have also relied upon the management of Catskill as to the
reasonableness and achievability of the financial and operating forecasts and
projections (and the assumptions and bases therefor) provided to us and in
certain instances we have made certain adjustments to such financial and
operating forecasts which in our judgment were appropriate under the
circumstances. In addition, we have assumed with your consent that such
forecasts and projections reflect the best currently available estimates and
judgments of management. Ryan, Beck is not an expert in evaluating loan and
lease portfolios for purposes of assessing the adequacy of the allowances for
losses. Therefore, Ryan, Beck has not assumed any responsibility for making an
independent evaluation of the adequacy of the allowance for loan losses set
forth in the balance sheets of Troy and Catskill at March 31, 2000, and Ryan,
Beck assumed such allowances were adequate and complied fully with applicable
law, regulatory policy, sound banking practice and policies of the Securities
and Exchange Commission as of the date of such financial statements. We also
assumed that the Merger in all respects is, and will be consummated in
compliance with all laws and regulations applicable to Troy and Catskill. We
have not made or obtained any independent evaluations or appraisals of the
assets and liabilities of either Troy or Catskill or their respective
subsidiaries, nor have we reviewed any individual loan files of Troy or Catskill
or their respective subsidiaries.
In conducting our analysis and arriving at our opinion as expressed herein, we
have considered such financial and other factors as we have deemed appropriate
in the circumstances. Our opinion is necessarily based on economic, market and
other conditions and projections as they exist and can be evaluated on the date
hereof.
We have been retained by the Board of Directors of Catskill as an independent
contractor to act as financial advisor to Catskill with respect to the Merger
and will receive a fee for our services, a significant portion of which is
contingent upon consummation of the Merger. We have also received a fee for
rendering this opinion. Ryan Beck has not had an investment banking relationship
with Troy and our research department does not provide published investment
analysis on Troy. However, Ryan Beck does make a market in Troy's common stock.
Prior to this engagement, Ryan, Beck has not had an investment banking
relationship with Catskill and Ryan, Beck's research department does not provide
published investment analysis on Catskill. However, Ryan, Beck does make a
market in Catskill's common stock.
In the ordinary course of our business as a broker-dealer, we may actively trade
equity securities of Catskill and Troy for our own account and the account of
our customers and, accordingly, may at any time hold a long or short position in
such securities.
Our opinion is directed to the Board of Directors of Catskill and does not
constitute a recommendation to any shareholder of Catskill as to how such
shareholder should vote at any shareholder meeting held in connection with the
Merger. Our opinion may not be used or circulated for any purpose or used in any
proxy statement without our consent.
Based upon and subject to the foregoing it is our opinion as investment bankers
that the consideration in the Merger as provided and described in the Merger
Agreement is fair to the holders of Catskill common stock from a financial point
of view.
Very truly yours,
/s/ Ryan, Beck & Co., Inc.
Ryan, Beck & Co., Inc.
APPENDIX D-- SECTION 262 OF THE DELAWARE GENERAL CORPORATION LAW
APPENDIX D
TEXT OF SECTION 262 OF THE DELAWARE GENERAL CORPORATION LAW
262 APPRAISAL RIGHTS. - (a) Any shareholder of a corporation of this State
who holds shares of stock on the date of the making of a demand pursuant to
subsection (d) of this section with respect to such shares, who continuously
holds such shares through the effective date of the merger or consolidation, who
has otherwise complied with subsection (d) of this section and who has neither
voted in favor of the merger or consolidation nor consented thereto in writing
pursuant to Section 228 of this title shall be entitled to an appraisal by the
Court of Chancery of the fair value of the stockholder's shares of stock under
the circumstances described in subsections (b) and (c) of this section. As used
in this section, the word "stockholder" means a holder of record of stock in a
stock corporation and also a member of record of a nonstock corporation; the
words "stock" and "share" mean and include what is ordinarily meant by those
words and also membership or membership interest of a member of a nonstock
corporation; and the words "depository receipt" mean a receipt or other
instrument issued by a depository representing an interest in one or more
shares, or fractions thereof, solely of stock of a corporation, which stock is
deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to Section 251 (other than a merger effected pursuant to
Section 251(g) of this title), Section 252, Section 254, Section 257, Section
258, Section 263 or Section 264 of this title:
(1) Provided, however, that no appraisal rights under this section shall be
available for the shares of any class or series of stock, which stock, or
depository receipts in respect thereof, at the record date fixed to determine
the stockholders entitled to receive notice of and to vote at the meeting of
stockholders to act upon the agreement of merger or consolidation, were either
(I) listed on a national securities exchange or designated as a national market
system security on an interdealer quotation system by the National Association
of Securities Dealers, Inc. or (ii) held of record by more than 2,000 holders;
and further provided that no appraisal rights shall be available for any shares
of stock of the constituent corporation surviving a merger if the merger did not
require for its approval the vote of the stockholders of the surviving
corporation as provided in subsection (f) of Section251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights
under this section shall be available for the shares of any class or series of
stock of a constituent corporation if the holders thereof are required by the
terms of an agreement of merger or consolidation pursuant to Sections 251, 252,
254, 257, 258, 263 and 264 of this title to accept for such stock anything
except:
a. Shares of stock of the corporation surviving or resulting from such
merger or consolidation, or depository receipts in respect thereof;
b. Shares of stock of any other corporation, or depository receipts in
respect thereof, which shares of stock (or depository receipts in respect
thereof) or depository receipts at the effective date of the merger or
consolidation will be either listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or held of record
by more than 2,000 holders;
c. Cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a. and b. of this paragraph; or
d. Any combination of the shares of stock, depository receipts and cash in
lieu of fractional shares or fractional depository receipts described in the
foregoing subparagraphs a., b. and c. of this paragraph.
(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under Section 253 of this title is not owned by the
parent corporation immediately prior to the merger, appraisal rights shall be
available for the shares of the subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets of
the corporation. If the certificate of incorporation contains such a provision,
the procedures of this section, including those set forth in subsections (d) and
(e) of this section, shall apply as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights are
provided under this section is to be submitted for approval at a meeting of
stockholders, the corporation, not less than 20 days prior to the meeting, shall
notify each of its stockholders who was such on the record date for such meeting
with respect to shares for which appraisal rights are available pursuant to
subsections (b) or (c) hereof that appraisal rights are available for any or all
of the shares of the constituent corporations, and shall include in such notice
a copy of this section. Each stockholder electing to demand the appraisal of his
shares shall deliver to the corporation, before the taking of the vote on the
merger or consolidation, a written demand for appraisal of his shares. Such
demand will be sufficient if it reasonably informs the corporation of the
identity of the stockholder and that the stockholder intends thereby to demand
the appraisal of his shares. A proxy or vote against the merger or consolidation
shall not constitute such a demand. A stockholder electing to take such action
must do so by a separate written demand as herein provided. Within 10 days after
the effective date of such merger or consolidation, the surviving or resulting
corporation shall notify each stockholder of each constituent corporation who
has complied with this subsection and has not voted in favor of or consented to
the merger or consolidation of the date that the merger or consolidation has
become effective; or
(2) If the merger or consolidation was approved pursuant to Section 228 or
Section 253 of this title, each constituent corporation, either before the
effective date of the merger or consolidation or within ten days thereafter,
shall notify each of the holders of any class or series of stock of such
constituent corporation who are entitled to appraisal rights of the approval of
the merger or consolidation and that appraisal rights are available for any or
all shares of such class or series of stock of such constituent corporation, and
shall include in such notice a copy of this section; provided that, if the
notice is given on or after the effective date of the merger or consolidation,
such notice shall be given by the surviving or resulting corporation to all such
holders of any class or series of stock of a constituent corporation that are
entitled to appraisal rights. Such notice may, and, if given on or after the
effective date of the merger or consolidation, shall, also notify such
stockholders of the effective date of the merger or consolidation. Any
stockholder entitled to appraisal rights may, within 20 days after the date of
mailing of such notice, demand in writing from the surviving or resulting
corporation the appraisal of such holder's shares. Such demand will be
sufficient if it reasonably informs the corporation of the identity of the
stockholder and that the stockholder intends thereby to demand the appraisal of
such holder's shares. If such notice did not notify stockholders of the
effective date of the merger or consolidation, either (I) each such constituent
corporation shall send a second notice before the effective date of the merger
or consolidation notifying each of the holders of any class or series of stock
of such constituent corporation that are entitled to appraisal rights of the
effective date of the merger or consolidation or (ii) the surviving or resulting
corporation shall send such a second notice to all such holders on or within 10
days after such effective date; provided, however, that if such second notice is
sent more than 20 days following the sending of the first notice, such second
notice need only be sent to each stockholder who is entitled to appraisal rights
and who has demanded appraisal of such holder's shares in accordance with this
subsection. An affidavit of the secretary or assistant secretary or of the
transfer agent of the corporation that is required to give either notice that
such notice has been given shall, in the absence of fraud, be prima facie
evidence of the facts stated therein. For purposes of determining the
stockholders entitled to receive either notice, each constituent corporation may
fix, in advance, a record date that shall be not more than 10 days prior to the
date the notice is given, provided, that if the notice is given on or after the
effective date of the merger or consolidation, the record date shall be such
effective date. If no record date is fixed and the notice is given prior to the
effective date, the record date shall be the close of business on the day next
preceding the day on which the notice is given.
(e) Within 120 days after the effective date of the merger or
consolidation, the surviving or resulting corporation or any stockholder who has
complied with subsections (a) and (d) hereof and who is otherwise entitled to
appraisal rights, may file a petition in the Court of Chancery
demanding a determination of the value of the stock of all such stockholders.
Notwithstanding the foregoing, at any time within 60 days after the effective
date of the merger or consolidation, any stockholder shall have the right to
withdraw his demand for appraisal and to accept the terms offered upon the
merger or consolidation. Within 120 days after the effective date of the merger
or consolidation, any stockholder who has complied with the requirements of
subsections (a) and (d) hereof, upon written request, shall be entitled to
receive from the corporation surviving the merger or resulting from the
consolidation a statement setting forth the aggregate number of shares not voted
in favor of the merger or consolidation and with respect to which demands for
appraisal have been received and the aggregate number of holders of such shares.
Such written statement shall be mailed to the stockholder within 10 days after
his written request for such a statement is received by the surviving or
resulting corporation or within 10 days after expiration of the period for
delivery of demands for appraisal under subsection (d) hereof, whichever is
later.
(f) Upon the filing of any such petition by a stockholder, service of a
copy thereof shall be made upon the surviving or resulting corporation, which
shall within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the addresses
therein stated. Such notice shall also be given by 1 or more publications at
least 1 week before the day of the hearing, in a newspaper of general
circulation published in the City of Wilmington, Delaware or such publication as
the Court deems advisable. The forms of the notices by mail and by publication
shall be approved by the Court, and the costs thereof shall be borne by the
surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled to
appraisal rights. The Court may require the stockholders who have demanded an
appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as to
such stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any element
of value arising from the accomplishment or expectation of the merger or
consolidation, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. In determining such fair value, the
Court shall take into account all relevant factors. In determining the fair rate
of interest, the Court may consider all relevant factors, including the rate of
interest which the surviving or
resulting corporation would have had to pay to borrow money during the pendency
of the proceeding. Upon application by the surviving or resulting corporation or
by any stockholder entitled to participate in the appraisal proceeding, the
Court may, in its discretion, permit discovery or other pretrial proceedings and
may proceed to trial upon the appraisal prior to the final determination of the
stockholder entitled to an appraisal. Any stockholder whose name appears on the
list filed by the surviving or resulting corporation pursuant to subsection (f)
of this section and who has submitted his certificates of stock to the Register
in Chancery, if such is required, may participate fully in all proceedings until
it is finally determined that he is not entitled to appraisal rights under this
section.
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to the
stockholders entitled thereto. Interest may be simple or compound, as the Court
may direct. Payment shall be so made to each such stockholder, in the case of
holders of uncertificated stock forthwith, and the case of holders of shares
represented by certificates upon the surrender to the corporation of the
certificates representing such stock. The Court's decree may be enforced as
other decrees in the Court of Chancery may be enforced, whether such surviving
or resulting corporation be a corporation of this State or of any state.
(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded his appraisal rights as provided in subsection (d)
of this section shall be entitled to vote such stock for any purpose or to
receive payment of dividends or other distributions on the stock (except
dividends or other distributions payable to stockholders of record at a date
which is prior to the effective date of the merger or consolidation); provided,
however, that if no petition for an appraisal shall be filed within the time
provided in subsection (e) of this section, or if such stockholder shall deliver
to the surviving or resulting corporation a written withdrawal of his demand for
an appraisal and an acceptance of the merger or consolidation, either within 60
days after the effective date of the merger or consolidation as provided in
subsection (e) of this section or thereafter with the written approval of the
corporation, then the right of such stockholder to an appraisal shall cease.
Notwithstanding the foregoing, no appraisal proceeding in the Court of Chancery
shall be dismissed as to any stockholder without the approval of the Court, and
such approval may be conditioned upon such terms as the Court deems just.
(l) The shares of the surviving or resulting corporation to which the
shares of such objecting stockholders would have been converted had they
assented to the merger or consolidation shall have the status of authorized and
unissued shares of the surviving or resulting corporation.
EXHIBIT __ - PROXY CARD
REVOCABLE PROXY
CATSKILL FINANCIAL CORPORATION
SPECIAL MEETING OF SHAREHOLDERS
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___________, 2000
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The undersigned hereby appoints the Board of Directors of Catskill
Financial Corporation with full powers of substitution, as attorneys and proxies
for the undersigned, to vote all shares of common stock of Catskill Financial
Corporation which the undersigned is entitled to vote at a special meeting of
shareholders, to be held at our main office located at 341 Main Street,
Catskill, New York, on _______, 2000, at _____ _.m., local time, and at any and
all adjournments thereof, as follows:
FOR AGAINST ABSTAIN
A: To approve the adoption of the Agreement [ ] [ ] [ ]
and Plan of Merger dated June 7, 2000
between Troy Financial Corporation,
Charlie Acquisition Corporation and
Catskill Financial Corporation.
2. In their discretion, upon such other [ ] [ ] [ ]
matters as may properly come before
the meeting, including a proposal to
adjourn or postpone the special meeting
for the purpose of soliciting additional
proxies in favor of Proposal 1.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ADOPTION OF THE MERGER
AGREEMENT.
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THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS ARE SPECIFIED, THIS
PROXY WILL BE VOTED FOR THE PROPOSITION STATED. THIS PROXY CARD WILL ALSO BE
USED TO PROVIDE VOTING INSTRUCTIONS TO THE TRUSTEE FOR ANY SHARES OF COMMON
STOCK OF CATSKILL FINANCIAL CORPORATION ALLOCATED TO PARTICIPANTS UNDER THE
CATSKILL FINANCIAL CORPORATION EMPLOYEE STOCK OWNERSHIP PLAN. IF ANY OTHER
BUSINESS IS PRESENTED AT SUCH MEETING, THIS PROXY WILL BE VOTED AS DIRECTED BY A
MAJORITY OF THE BOARD OF DIRECTORS. AT THE PRESENT TIME, THE BOARD OF DIRECTORS
KNOWS OF NO OTHER BUSINESS TO BE PRESENTED AT THE MEETING.
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THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
Should the undersigned be present and elect to vote at the special meeting
or at any adjournment thereof and after notification to the Secretary of
Catskill Financial Corporation at the Meeting of the shareholder's decision to
terminate this proxy, then the power of said attorneys and proxies shall be
deemed terminated and of no further force and effect.
The undersigned acknowledges receipt from Catskill Financial Corporation
prior to the execution of this proxy of notice of the special meeting, and proxy
statement dated ________, 2000.
Dated: __________, 2000
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PRINT NAME OF SHAREHOLDER PRINT NAME OF SHAREHOLDER
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SIGNATURE OF SHAREHOLDER SIGNATURE OF SHAREHOLDER
Please sign exactly as your name appears on this proxy card. When signing as
attorney, executor, administrator, trustee or guardian, please give your full
title. If shares are held jointly, each holder should sign.
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PLEASE COMPLETE, DATE, SIGN AND MAIL THIS PROXY PROMPTLY IN THE ENCLOSED
POSTAGE-PREPAID ENVELOPE.
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