SCHEDULE 14-A INFORMATION
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
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss.240.14a-11(c) or ss.240.14a-12
Pathfinder Bancorp, Inc.
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(Name of Registrant as Specified In Its Charter)
Alan Schick, Luse Lehman Gorman Pomerenk & Schick, PC
--------------------------------------------------------
(Name of Person(s) Filling Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
.......................................................................
2) Aggregate number of securities to which transaction applies:
.......................................................................
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
.......................................................................
4) Proposed maximum aggregate value of transaction:
.......................................................................
5) Total fee paid:
.......................................................................
[ ] Fee previously paid:
[ ] 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:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
March 30, 2001
Dear Shareholder:
We cordially invite you to attend the Annual Meeting of Shareholders of
Pathfinder Bancorp, Inc. (the "Company"). The Annual Meeting will be held at the
Econolodge, 70 East Bridge Street, Oswego, New York at 10:00 a.m., Eastern Time,
on April 25, 2001.
The enclosed Notice of Annual Meeting and Proxy Statement describe the formal
business to be transacted. During the Annual Meeting we will also report on the
operations of the Company. Directors and officers of the Company, as well as a
representative of our independent auditors, will be present to respond to any
questions that shareholders may have.
The Annual Meeting is being held so that shareholders may consider the election
of directors and the ratification of the appointment of PricewaterhouseCoopers,
LLP as the Company's auditors for fiscal year 2001. In addition, at the Annual
Meeting, shareholders will consider and vote on a Plan of Charter Conversion by
which the Company will convert its charter from a Delaware corporation regulated
by the New York Banking Department and the Board of Governors of the Federal
Reserve System, to a Federal corporation regulated by the Office of Thrift
Supervision.
For the reasons set forth in the Proxy Statement, the Board of Directors
unanimously recommends a vote "FOR" the election of directors, the ratification
of the appointment of PricewaterhouseCoopers, LLP as the Company's auditors and
the Plan of Conversion.
On behalf of the Board of Directors, we urge you to sign, date and return the
enclosed proxy card as soon as possible, even if you currently plan to attend
the Annual Meeting. This will not prevent you from voting in person, but will
assure that your vote is counted if you are unable to attend the meeting. Your
vote is important, regardless of the number of shares that you own.
Sincerely,
Thomas W. Schneider
President and Chief Executive Officer
Pathfinder Bancorp, Inc.
214 West First Street
Oswego, New York 13126
(315) 343-0057
NOTICE OF
ANNUAL MEETING OF SHAREHOLDERS
To Be Held On April 25, 2001
Notice is hereby given that the Annual Meeting of Pathfinder Bancorp,
Inc., (the "Company") will be held at the Econolodge, 70 East First Street,
Oswego, New York on April 25, 2001 at 10:00 a.m., Eastern Time.
A Proxy Card and a Proxy Statement for the Annual Meeting are enclosed.
The Annual Meeting is for the purpose of considering and acting upon:
1. The election of three Directors to the Board of Directors;
2. The approval of the Plan of Charter Conversion by which the
Company will convert its charter from a Delaware corporation
to a Federal corporation;
3. The ratification of the appointment of PricewaterhouseCoopers,
LLP as auditors for the Company for the fiscal year ending
December 31, 2001; and
such other matters as may properly come before the Annual Meeting, or any
adjournments thereof. The Board of Directors is not aware of any other business
to come before the Annual Meeting.
Any action may be taken on the foregoing proposals at the Annual
Meeting on the date specified above, or on any date or dates to which the Annual
Meeting may be adjourned. Shareholders of record at the close of business on
March 21, 2001, are the shareholders entitled to vote at the Annual Meeting, and
any adjournments thereof.
EACH SHAREHOLDER, WHETHER HE OR SHE PLANS TO ATTEND THE ANNUAL MEETING,
IS REQUESTED TO SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD WITHOUT DELAY IN
THE ENCLOSED POSTAGE-PAID ENVELOPE. ANY PROXY GIVEN BY THE SHAREHOLDER MAY BE
REVOKED AT ANY TIME BEFORE IT IS EXERCISED. A PROXY MAY BE REVOKED BY FILING
WITH THE SECRETARY OF THE COMPANY A WRITTEN REVOCATION OR A DULY EXECUTED PROXY
BEARING A LATER DATE. ANY SHAREHOLDER PRESENT AT THE ANNUAL MEETING MAY REVOKE
HIS OR HER PROXY AND VOTE PERSONALLY ON EACH MATTER BROUGHT BEFORE THE ANNUAL
MEETING. HOWEVER, IF YOU ARE A SHAREHOLDER WHOSE SHARES ARE NOT REGISTERED IN
YOUR OWN NAME, YOU WILL NEED ADDITIONAL DOCUMENTATION FROM YOUR RECORD HOLDER IN
ORDER TO VOTE PERSONALLY AT THE ANNUAL MEETING.
By Order of the Board of Directors
Melissa A. Miller
Secretary
March 30, 2001
IMPORTANT: A SELF-ADDRESSED ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE.
NO POSTAGE IS REQUIRED IF MAILED WITHIN THE UNITED STATES.
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PROXY STATEMENT
Pathfinder Bancorp, Inc.
214 West First Street
Oswego, New York 13126
(315) 343-0057
ANNUAL MEETING OF SHAREHOLDERS
April 25, 2001
This Proxy Statement is furnished in connection with the solicitation
of proxies on behalf of the Board of Directors of Pathfinder Bancorp, Inc. (the
"Company") to be used at the Annual Meeting of Shareholders of the Company (the
"Annual Meeting"), which will be held at the Econolodge, 70 East First Street,
Oswego, New York on April 25, 2001, at 10:00 a.m., Eastern Time, and all
adjournments of the Annual Meeting. The accompanying Notice of Annual Meeting of
Shareholders and this Proxy Statement are first being mailed to shareholders on
or about March 30, 2001.
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REVOCATION OF PROXIES
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Shareholders who execute proxies in the form solicited hereby retain
the right to revoke them in the manner described below. Unless so revoked, the
shares represented by such proxies will be voted at the Annual Meeting and all
adjournments thereof. Proxies solicited on behalf of the Board of Directors of
the Company will be voted in accordance with the directions given thereon. Where
no instructions are indicated, validly executed proxies will be voted "FOR" the
proposals set forth in this Proxy Statement. If any other matters are properly
brought before the Annual Meeting the persons named in the accompanying proxy
will vote the shares represented by such proxies on such matters in such manner
as shall be determined by a majority of the Board of Directors.
Proxies may be revoked by sending written notice of revocation to the
Secretary of the Company, at the address shown above, by delivering to the
Company a duly executed proxy bearing a later date, or by attending the Annual
Meeting and voting in person. The presence at the Annual Meeting of any
shareholder who had returned a proxy shall not revoke such proxy unless the
shareholder delivers his or her ballot in person at the Annual Meeting or
delivers a written revocation to the Secretary of the Company prior to the
voting of such proxy.
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VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
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Holders of record of the Company's common stock, par value $0.10 per
share (the "Common Stock") as of the close of business on March 21, 2001 (the
"Record Date") are entitled to one vote for each share then held. As of the
Record Date, the Company had 2,884,720 shares of Common Stock issued and
2,601,495 shares of Common Stock outstanding of which 1,578,239 were held by
Pathfinder Bancorp, M.H.C. (the "Mutual Holding Company"), and 1,023,256 of
which were held by shareholders other than the Mutual Holding Company ("Minority
Shareholders"). The presence in person or by proxy of a majority of the
outstanding shares of Common Stock entitled to vote is necessary to constitute a
quorum at the Annual Meeting. Directors are elected by a plurality of votes
cast, without regard to either broker non-votes, or proxies as to which the
authority to vote for the nominees being proposed is withheld. The affirmative
vote of holders of a majority of the total votes present at the Annual Meeting
in person or by proxy is required for ratification of PricewaterhouseCoopers,
LLP as the Company's auditors. The approval of the Plan of Charter Conversion
must be approved by a majority of the outstanding shares of Common Stock.
Consequently, broker non-votes or proxies marked "ABSTAIN" will have the same
effect as a vote against the Plan of Conversion. Management of the Company
anticipates that the Mutual Holding Company, the majority shareholder of the
Company, will vote all of its shares in favor of the Plan of Charter Conversion.
If the Mutual Holding Company votes all of its shares in favor of the Plan of
Charter Conversion, the approval of the Plan of Charter Conversion would be
assured.
1
Persons and groups who beneficially own in excess of five percent of
the Common Stock are required to file certain reports with the Securities and
Exchange Commission (the "SEC") regarding such ownership. The following table
sets forth, as of the Record Date, the shares of Common Stock beneficially owned
by Directors individually, by executive officers individually, by executive
officers and Directors as a group and by each person who was the beneficial
owner of more than five percent of the Company's outstanding shares of Common
Stock.
Amount of Shares
Owned and Nature Percent of Shares
Name and Address of of Beneficial of Common Stock
Beneficial Owners Ownership (1) (4) Outstanding
----------------------- ------------------- ------------------
Directors and Officers (2):
Chris C. Gagas 74,106 (5) 2.8%
Thomas W. Schneider 6,401 (6) 0.2
Chris R. Burritt 16,600 (7) 0.6
George P. Joyce 150 0.0
Raymond W. Jung 12,684 0.5
Bruce E. Manwaring 11,865 0.5
L. William Nelson, Jr. 23,550 (8) 0.9
Janette Resnick 5,400 (9) 0.2
Corte J. Spencer 10,800 (10) 0.4
Steven W. Thomas 6,200 0.2
W. David Schermerhorn 6,213 (11) 0.2
James A. Dowd 7,043 (12) 0.3
Gregory L. Mills 3,660 (13) 0.1
Melissa A. Miller 2,748 (14) 0.1
All Directors and Executive Officers 187,420 7.2
as a Group (14 persons) (3)
Principal Shareholders:
Pathfinder Bancorp, M.H.C. (3) 1,578,239 60.7
214 West First Street
Oswego, New York 13126
Pathfinder Bancorp, M.H.C. 1,759,309 67.6
and all Trustees and Executive
Officers of Pathfinder Bancorp,
MHC as a group (11 persons)
Pathfinder Bank (4) 91,098 3.5
Employee Stock Ownership Plan
214 West First Street
Oswego, New York 13126
Pathfinder Bank 15,750 0.6
Management Recognition and Retention Program
214 West First Street
Oswego, New York 13126
Jewelcor Management Consulting Corp. 158,714 6.1
100 N. Wilkes-Barre Boulevard
Wilkes-Barre, Pennsylvania 18702
- ---------------------------
(1) A person is deemed to be the beneficial owner for purposes of this table,
of any shares of Common Stock if he has shared voting or investment power
with respect to such security, or has a right to acquire beneficial
ownership at any time within 60 days from the Record Date. As used herein,
"voting power" is the power to vote or direct the voting of shares and
"investment power" is the power to dispose
(footnotes continued on next page)
2
or direct the disposition of shares. Includes all shares held directly as
well as by spouses and minor children, in trust and other indirect
ownership, over which shares the named individuals effectively exercise
sole or shared voting and investment power. Unless otherwise indicated, the
named individual has sole voting and investment power.
(2) The mailing address for each person listed is 214 West First Street, Oswego,
New York 13126.
(3) All but two of the Company's executive officers and directors are also
executive officers and trustees of the Mutual Holding Company.
(4) Includes 91,098 shares, of which 52,402 are unallocated and as to which
the Employee Stock Ownership Plan (the "ESOP") trustee has sole voting and
investment power and 38,696 of which are allocated and as to which the ESOP
trustee has shared voting and sole investment power.
(5) Mr. Gagas has sole voting and investment power over 70,553 shares and
shared voting and investment power over 3,533 shares. Also includes 24,000
shares underlying options which are exercisable within 60 days from the
record date.
(6) Mr. Schneider has sole voting and investment power over 6,101 shares and
shared voting and investment power over 300 shares. Also includes 3,000
shares underlying options which are exercisable within 60 days from the
record date.
(7) Mr. Burritt has sole voting and investment power over 16,450 shares and
shared voting and investment power over 150 shares. Also includes 3,750
shares underlying options which are exercisable within 60 days from the
record date.
(8) Mr. Nelson has sole voting and investment power over 5,070 shares and
shared voting and investment power over 18,480 shares. Also includes 3,750
shares underlying options which are exercisable within 60 days from the
record date.
(9) Ms. Resnick has sole voting power over 5,100 shares and shared voting and
investment power over 300 shares. Also includes 2,500 shares underlying
options which are exercisable within 60 days of the record date.
(10)Mr. Spencer has sole voting and investment power over 5,100 shares and
shared voting and investment power over 300 shares. Also includes 3,750
shares underlying options which are exercisable within 60 days of the
record date.
(11)Mr. Schermerhorn has sole voting and investment power over all shares
reported. Also includes 3,000 shares underlying options which are
exercisable within 60 days from the record date.
(12)Mr. Dowd has sole voting and investment power over all shares reported.
Also includes 1,500 shares underlying options which are exercisable within
60 days from the record date.
(13)Mr. Mills has sole voting and investment power over 3,620 shares and shared
voting and investment power over 40 shares. Also includes 1,500 shares
underlying options which are exercisable within 60 days from the record
date.
(14)Ms. Miller has sole voting and investment power over all shares reported.
Also includes 1,500 shares underlying options which are exercisable within
60 days from the record date.
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PROPOSAL 1--ELECTION OF DIRECTORS
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The Company's Board of Directors is currently composed of nine members. The
Company's bylaws provide that approximately one-third of the Directors are to be
elected annually. Directors of the Company are generally elected to serve for a
three-year period and until their respective successors shall have been elected
and shall qualify. Three Directors will be elected at the Annual Meeting to
serve for a three-year period and until their respective successors shall have
been elected and shall qualify. The Board of Directors has nominated to serve as
Directors, Steven W. Thomas, Corte J. Spencer and Janette Resnick who are
currently members of the Board of Directors.
The table below sets forth certain information regarding the composition of
the Company's Board of Directors, including the terms of office of Board
members. It is intended that the proxies solicited on behalf of the Board of
Directors (other than proxies in which the vote is withheld as to one or more
nominees) will be voted at the Annual Meeting for the election of the nominees
identified below. If the nominee is unable to serve, the shares represented by
all such proxies will be voted for the election of such substitute as the Board
of Directors may recommend. At this time, the Board of Directors knows of no
reason why any of the nominees would be unable to serve if elected. Except as
indicated herein, there are no arrangements or understandings between any
nominee and any other person pursuant to which such nominee was selected.
Shares of
Common Stock
Beneficially
Position Director Current Term Owned on Percent
Name (1) Age Held Since (2) to Expire Record Date (3) Of Class
-------- --- ---- --------- --------- --------------- --------
NOMINEE
Steven W. Thomas 39 Director 2000 2001 6,200 0.2%
Corte J. Spencer 58 Director 1984 2001 10,800 0.4
Janette Resnick 59 Director 1996 2001 5,400 0.2
DIRECTORS CONTINUING IN OFFICE
Chris C. Gagas 70 Chairman of the Board 1966 2002 74,106 2.8
Chris R. Burritt 48 Director 1986 2002 16,600 0.6
Raymond W. Jung 71 Director 1978 2002 12,684 0.5
Bruce E. Manwaring 60 Director 1984 2003 11,865 0.5
L. William Nelson, Jr. 57 Director 1986 2003 23,550 0.9
George P. Joyce 50 Director 2000 2003 150 --
3
(1) The mailing address for each person listed is 214 West First Street,
Oswego, New York 13126. Each of the persons listed, with the exception of
Messrs. Joyce and Thomas, is also a Trustee of Pathfinder Bancorp, M.H.C.,
which owns the majority of the Company's issued and outstanding shares of
Common Stock.
(2) Dates prior to 1995 reflect initial appointment to the Board of Trustees of
the mutual predecessor to Pathfinder Bank.
(3) See definition of "beneficial ownership" in the table in "Voting Securities
and Principal Holders Thereof."
The principal occupation during the past five years of each Director
and Executive Officer is set forth below. All Directors and Executive Officers
have held their present positions for five years unless otherwise stated.
Chris C. Gagas is Chairman of the Company, and its principal
subsidiary, Pathfinder Bank ( the"Bank"). Until his retirement on January 14,
2000, Mr. Gagas was also President and Chief Executive Officer of the Company
and the Bank. Mr. Gagas had served as an officer of the Company since 1986.
Chris R. Burritt is the president and general manager of R.M. Burritt
Motors, Inc./Chris Cross, Inc., an automobile dealership located in Oswego,
New York.
Raymond W. Jung is retired. Previously Mr. Jung was the owner of
Raymond's Jewelers in Oswego, New York.
Bruce E. Manwaring is the Chamberlain for the City of Oswego. Prior to
his appointment in 1999, Mr. Manwaring was the owner of Oswego Printing Co.
located in Oswego, New York.
L. William Nelson, Jr. is the owner and manager of Nelson Funeral Home
located in Oswego, New York.
Steven W. Thomas is a licensed real estate broker and a developer.
Mr. Thomas owns and operates three Dunkin Donuts franchises and two hotels in
Oswego County. Mr. Thomas additionally is involved in numerous commercial
development projects in Oswego County and operates a number of businesses within
central New York.
George P. Joyce is the owner and operator of Laser Transit, Ltd.,
Lacona, NY, a key Central New York logistics services provider. Mr. Joyce is
also the general manager of Oswego Warehousing, Inc., Oswego, NY.
Janette Resnick is the Executive Director of Oswego County
Opportunities, a private, not for profit human services agency located in Oswego
and Fulton, New York.
Corte J. Spencer is the Chief Executive Officer and Administrator of
Oswego Hospital and the managing director of Oswego Health, Inc. located in
Oswego, New York.
Executive Officers of the Company who are not Directors.
Thomas W. Schneider is the President of the Company and the Bank.
Prior to his appointment as President in 2000, Mr. Schneider was the Executive
Vice President and Chief Financial Officer of the Company and the Bank.
W. David Schermerhorn is Executive Vice President and the Senior Loan
Officer of the Company and the Bank. Mr. Schermerhorn is responsible for the
credit administration, trust, and investment services.
James A. Dowd, CPA is a Vice President and the Treasurer of the Company
and the Bank. Mr. Dowd is responsible for the accounting, finance, and human
resources departments.
Gregory L. Mills is a Vice President of the Company and the Bank.
Mr. Mills is responsible for branch administration and marketing.
Melissa A. Miller is a Vice President and the Corporate Secretary of
the Company and the Bank. Ms. Miller is responsible for deposit operations,
security, and information services.
Ownership Reports by Officers and Directors
The Common Stock of the Company is registered with the SEC pursuant to
Section 12(g) of the Securities Exchange Act of 1934 (the "Exchange Act"). The
officers and directors of the Company and beneficial owners of
4
greater than 10% of the Company's Common Stock ("10% beneficial owners") are
required to file reports on Forms 3,4 and 5 with the SEC disclosing beneficial
ownership and changes in beneficial ownership of the Common Stock. SEC rules
require disclosure in the Company's Proxy Statement or Annual Report on Form
10-K of the failure of an officer, director or 10% beneficial owner of the
Company's Common Stock to file a Form 3, 4, or 5 on a timely basis. All of the
Company's officers and directors filed these reports on a timely basis.
Meetings and Committees of the Board of Directors
The business of the Board of Directors is conducted through meetings
and activities of the Board and its committees. During the year ended December
31, 2000, the Board of Directors held 13 regular and special meetings. During
the year ended December 31, 2000, no director attended fewer than 85% percent of
the total meetings of the Board of Directors and committees on which such
director served.
The Human Resources Committee meets periodically to review the
performance of officers and employees and to determine compensation programs and
adjustments. The entire Board of Directors ratifies the recommendations of the
Human Resources Committee. In the year ending December 31, 2000, the Human
Resources Committee consisted of directors Gagas, Spencer, Jung and Nelson.
The Human Resources Committee met two times during the year ended December
31, 2000.
The Nominating Committee meets once a year to nominate Directors to
fulfill the terms of the upcoming year. In the year ended December 31, 2000, the
nominating committee was comprised of Directors Joyce, Jung, Nelson and Thomas.
The Audit Committee consists of directors Jung, Resnick and Spencer
Manwaring. The Audit Committee meets on a quarterly basis with the internal
auditor to review audit programs and the results of audits of specific areas as
well as other regulatory compliance issues. In addition, the Audit Committee
meets with the independent auditors to review the results of the annual audit
and other related matters. Each member of the Audit Committee is "independent"
as defined in the listing standards of the National Association of Securities
Dealers. The Company's Board of Directors has adopted a written charter for the
Audit Committee, which is attached to this proxy statement as Exhibit A. The
Audit Committee met four times during the year ended December 31, 2000.
Audit Committee Report
The Company appointed PricewaterhouseCoopers, LLC ("PwC") as auditors
for the fiscal year ended December 31, 2000. The following is a discussion of
fees related to services provided by PwC to the Company:
Audit Fees
Aggregate fees billed for PwC's audit of the Company's 2000 annual
financial statements and Form 10Q filings were $72,950.
All Other Fees
Aggregate fees billed for other services rendered by PwC for the
Company during the fiscal year ended December 31, 2000 were as follows:
Recurring and non-recurring tax services $ 10,410
Actuarial service 3,000
Redesign of internal audit program 8,550
In accordance with rules recently established by the SEC, the Audit
Committee has prepared the following report for inclusion in this proxy
statement:
As part of its ongoing activities, the Audit Committee has:
o Reviewed and discussed with management the Company's audited
consolidated financial statements for the fiscal year ended
December 31, 2000;
5
o Discussed with the independent auditors the matters required
to be discussed by Statement on Auditing Standards No. 61,
Communications with Audit Committees, as amended; and
o Received the written disclosures and the letter from the
independent auditors required by Independence Standards Board
Standard No. 1, Independence Discussions with Audit
Committees, and has discussed with the independent auditors
their independence.
Based on the review and discussions referred to above, the Audit
Committee recommended to the Board of Directors that the audited consolidated
financial statements be included in the Company's Annual Report on Form 10- K
for the fiscal year ended December 31, 2000.
This report has been provided by the Audit Committee:
Messrs, Jung, Resnick, Spencer, Manwaring, and Nelson.
------------------
6
Performance Graph
Set forth hereunder is a performance graph comparing (a) the total
return on the Common Stock for the period beginning on January 1, 1996 through
December 31, 2000, (b) the cumulative total return on stocks included in the
Nasdaq Composite Index over such period, and (c) the yearly cumulative total
return on stocks included in the SNL Thrift Index over such period. The
cumulative total return on the Common Stock was computed assuming the
reinvestment of cash dividends during the fiscal year.
[GRAPHIC OMITTED]
Period Ending
INDEX 12/31/95 12/31/96 12/31/97 12/31/98 12/31/99 12/31/00
- --------------------------------------------------------------------------------
Pathfinder Bancorp,
Inc. 100.00 91.29 296.44 136.40 135.87 98.90
NASDAQ - Total US 100.00 123.04 150.69 212.51 394.92 237.62
SNL Thrift Index 100.00 130.30 221.71 195.00 159.29 254.35
There can be no assurance that the Common Stock's performance will continue in
the future with the same or similar trend depicted in the graph. The Company
will not make or endorse any predictions as to future stock performance.
Personnel Committee Interlocks and Insider Participation
The full Board of Directors of the Company determines the salaries to
be paid each year to the officers of the Company.
7
Report of the Board of Directors on Executive Compensation
Under SEC rules, the Company is required to disclose certain data and
information regarding compensation and benefits of its Chief Executive Officer
and other executive officers. The disclosure includes the use of tables and a
report explaining the rationale for and considerations that led to fundamental
executive compensation decisions affecting these individuals. In fulfilling of
this requirement, the Board of Directors of the Company has prepared the
following report for inclusion in this proxy statement.
The Board of Directors annually reviews the performance of the Chief
Executive Officer and other executive officers and approves changes to base
compensation as well as the amount of any bonus to be awarded. In determining
whether the base salary of an officer should be increased, the Board of
Directors takes into account individual performance, performance of the Company
and information regarding compensation paid to executives of peer group
institutions made to executives performing similar duties for financial
institutions in the Bank's market area.
While the Board of Directors does not use strict numerical formulas to
determine changes in compensation for the Chief Executive Officer and Vice
Presidents, and while it weighs a variety of different factors in its
deliberations, it has emphasized and will continue to emphasize earnings,
profitability, earnings contribution to capital, capital strength, asset
quality, and return on tangible equity as factors in setting the compensation of
the Chief Executive Officer and senior officers. Non-quantitative factors
considered by the Board of Directors in fiscal 2000 included general management
oversight of the Company, the quality of communication with the Board of
Directors, and the productivity of employees. Finally, the Board of Directors
considered the standing of the Company with customers and the community, as
evidenced by customer and community complaints and compliments. While the Board
of Directors considered each of the quantitative and non-quantitative factors
described above, such factors were not assigned a specific weight in evaluating
the performance of the Chief Executive Officer and Vice Presidents.
On January 15, 2000, Chris C. Gagas retired as President and Chief
Executive Officer of the Company and the Bank. Mr. Gagas remained as the
Chairman of the Board of the Company. Thomas Schneider was appointed by the
Board of Directors to serve as the new President and Chief Executive Officer of
the Company and the Bank. Previously, Mr. Schneider served as Executive Vice
President and Chief Financial Officer of the Company and the Bank. In April
2000, the Company implemented an early retirement program under which two
executive officers of the Company retired. With the retirement of these two
individuals, the remaining executive officers assumed the responsibilities that
Mr. Schneider had as Executive Vice President and Chief Financial Officer as
well as the responsibilities of the two retired executive officers. Based upon
its review of the above factors, the Board of Directors approved an increase in
the base salary of the President and each of the four remaining Vice Presidents.
Accordingly, the Board of Directors approved salary increases totaling $83,000
for the Company's and Bank's five executive officers including Mr. Schneider. As
a result of the various personnel changes the Board approved an increase in Mr.
Schneider's base salary to $120,000 per annum. The 2000 total base compensation
for all executive officers was $400,000, as compared to $642,000 in 1999 for the
compensation of eight executive officers.
This as been provided by the Board of Directors: Chris C. Gagas,
Chris R. Burritt, George P. Joyce, Raymond W. Jung, Bruce E. Manwaring,
L. William Nelson, Jr., Janette Resnick, Corte J. Spencer and Stephen W. Thomas.
Directors' Compensation
Each non-employee director receives an annual retainer fee of $6,000, a
meeting fee of $500 for each Board meeting attended and $300 for each committee
meeting attended. Employee directors do not receive monthly meeting fees. The
Bank paid a total of $141,000 in director fees during the year ending
December 31, 2000.
8
Executive Compensation
The following table sets forth for the year ended December 31, 2000,
certain information as to the total remuneration paid by the Company to Mr.
Schneider, the Company's chief executive officer. No other officer of the
Company received cash compensation exceeding $100,000 in 2000.
SUMMARY COMPENSATION TABLE
==========================================================================================================================
Annual Compensation Long-Term Compensation
Awards
Fiscal
Years Other Restricted
Ended Annual Stock Options/ All Other
Name and December Salary Bonus Compensation Award(s) SARs Compensation
Principal Position (1) 31 ($)(2) ($) ($)(3) ($)(4) (#)(5) Payouts ($)(3)
Thomas W. Schneider 2000 $120,000 -- -- $2,718 1,000 -- --
President and Chief
Executive Officer
====================== =========== =========== ========== ============== =========== ========== ==========================
(1) No other executive officer received salary and bonuses that in the aggregate
exceeded $100,000. Mr. Schneider became Chief Executive Officer in January
2000.
(2) Includes compensation deferred at the election of the named individual under
the Company's cafeteria plan.
(3) The aggregate amount of such benefits did not exceed the lesser of $50,000
or 10% of cash compensation for the named individuals.
(4) Amount represent compensation associated with the vested portion of stock
awards granted under the Management Recognition and Retention Plan.
(5) Amount represents the vested portion of option shares granted under the
Stock Option Plan.
Benefits
Medical and Life Insurance and Educational Assistance. The Company
provides full-time employees with medical and life and accidental death and
dismemberment insurance. In addition, the Company maintains a "cafeteria plan"
for employees, which permits qualifying employees to allocate a portion of their
compensation, on a pre-tax basis, for the payment of medical, dental and
dependent care expenses as well as the payment of certain insurance premiums.
The Company also offers educational assistance to full-time employees who have
worked for the Company for at least one year and who desire to take courses at
any accredited school of learning. The Company also provides long-term
disability income insurance for all employees equal to the lesser of $6,000 per
month or 60% of the employee's basic monthly earnings.
Defined Benefit Plan. The Company maintains a tax-qualified
noncontributory defined benefit plan ("Retirement Plan"). All employees age 21
or older who have worked for the Company for at least one year and have been
credited with 1,000 or more hours of employment with the Company during the year
are eligible to accrue benefits under the Retirement Plan. The Company
contributes annually to the Retirement Plan an amount necessary to satisfy the
actuarially determined minimum funding requirements in accordance with the
Employee Retirement Income Security Act of 1974 ("ERISA").
At the normal retirement age of 65 the plan is designed to provide a
life annuity. The retirement benefit provided is equal to 2% of a participant's
average monthly compensation based on the average of the three consecutive years
during the last 10 years of employment which provides the highest monthly
average compensation multiplied by the participant's years of credited service
(not to exceed 30 years) to the normal retirement date. Retirement benefits also
are payable upon retirement due to early and late retirement. Benefits also are
paid from the Retirement Plan upon a Participant's disability or death. A
reduced benefit is payable upon early retirement at or after age 60, or the
completion of 30 years of service with the Company. Upon termination of
employment other than as specified above, a participant who was employed by the
Company for a minimum of five years is eligible to receive his or her accrued
benefit reduced for early retirement or a deferred retirement benefit commencing
on such participant's normal retirement date. Benefits are payable in various
annuity forms. At December 31, 2000, the market value of the Retirement Plan
trust fund was approximately $3.2 million. For the plan year ended September 30,
2000, the Company made no contribution to the Retirement Plan.
9
The following table indicates the annual retirement benefit that would
be payable under the Retirement Plan upon retirement at age 65 in plan year
2000, expressed in the form of a single life annuity for the final average
salary and benefit service classification specified below.
YEARS OF BENEFIT SERVICE AT RETIREMENT
Final
Average Compensation 15 20 25 30
$28,333 $7,500 $10,000 $12,500 $15,000
$50,000 $15,000 $20,000 $28,333 $30,000
$75,000 $22,500 $30,000 $37,500 $45,000
$100,000 $30,000 $40,000 $50,000 $60,000
$150,000(1) $45,000 $60,000 $75,000 $90,000
====================== =========== =========== ============= ============
- ---------------------
(1) Under Section 401(a)(17) of the Code, the maximum amount of compensation
that may be taken into account under the Retirement Plan in the 2000 Plan
Year is $190,000.
As of December 31, 2000, Thomas W. Schneider had 12 years of credited
service (i.e., benefit service) under the Retirement Plan.
Employee Savings Plan. The Company maintains the Employee Savings Plan
which is a qualified, tax- exempt profit sharing plan with a cash or deferred
feature that is tax-qualified under Section 401(k) of the Internal Revenue Code
(the "401(k) Plan"). All employees who have attained age 21 and have completed
at least one year of employment during which they worked at least 1,000 hours
are eligible to participate.
Participants may contribute, and receive a deduction for, up to 15% of
compensation to the 401 (k) Plan. For these purposes, "compensation" includes
total compensation (including salary reduction contributions made under the
401(k) Plan or the flexible benefits plan sponsored by the Company), but does
not include compensation in excess of $160,000. The Company, in its discretion,
may match participants' salary reduction contributions based upon Company
profits for the current fiscal year. All employee contributions and earnings
thereon are fully and immediately vested. All employer matching contributions
vest at the rate of 20% per year beginning at the end of a participant's third
year of service with the Company until a participant is 100% vested after seven
years of service. Participants also will vest in employer matching contributions
when they reach the normal retirement age of 65 or later, or upon death or
disability regardless of years of service.
Plan benefits will be paid to each participant in a lump sum. At
December 31, 2000, the market value of the 401(k) Plan trust fund was
approximately $3,088,000. For the plan year ended December 31, 2000, the Company
made a contribution in the amount of $41,000 to the 401(k) Plan Trust of which
$1,200 was contributed on behalf of Mr. Schneider.
Executive Supplemental Retirement Income Master Agreement. The Company
maintains a non-tax-qualified executive supplemental retirement income master
agreement (the "Master Agreement") for qualifying executives of the Company. Two
executives and the Chairman of the Board are currently eligible to participate
in the Master Agreement. The Master Agreement provides a supplemental retirement
income benefit in an annual amount equal to highest average compensation
received by the executive during any 36 month period while employed by the
Company, multiplied by a wage replacement percentage designated in the
individual executive's joinder agreement, less the actual annual amount
available to the executive from the Company's other tax-qualified or
nonqualified plans. Benefits under the Master Agreement are payable to the
executive upon the benefit age designated in the individual executive's joinder
agreement. Benefits will be payable in monthly installments beginning on the
executive's benefit age and continuing for a period of months designated in the
individual executive's joinder agreement. Payments to an executive, or to his
beneficiary, may be made from the Master Agreement upon the executive's death,
total or permanent disability, or termination of service with the Company.
10
The Master Agreement is considered an unfunded plan for tax and ERISA
purposes. All obligations arising under the Master Agreement are payable from
the general assets of the Company. During the year ended December 31, 2000 a
contribution totaling $8,400 was made on behalf of Mr. Schneider.
Stock Option Plan. The Pathfinder Bank 1997 Stock Option Plan (the
"Stock Option Plan") authorizes the grant of stock options and limited rights to
purchase 132,251 shares of Common Stock. The Stock Option Plan authorizes grants
of (i) options intended to qualify as "incentive stock options," (ii) options
that do not qualify as incentive stock options ("non-statutory options") and
(iii) limited rights (described below) that are exercisable only upon a change
in control of the Bank (as defined). Non-employee directors are eligible to
receive only non-statutory options. No options were granted during the past
fiscal year.
Grants may be made by the Board of Directors of the Bank or a stock
benefits committee, established by the Bank consisting of at least two
non-employee members of the Board of Directors (the "Stock Benefits Committee").
In granting options, the Stock Benefits Committee considers factors such as
salary, length of employment with the Bank, and the employee's overall
performance. To the extent shares are available under the Stock Option Plan,
each newly appointed non-employee director shall receive a stock option grant to
purchase 7,500 shares of Common Stock. All stock options are exercisable in six
equal annual installments beginning January 24, 1999 and continuing each
anniversary date thereafter; provided, however, that all options are 100%
exercisable in the event the optionee terminates his service due to normal
retirement, death or disability, or in the event of a change in control of the
Bank. All options must be exercised within 10 years from the date of grant.
Stock options may be exercised up to one year following termination of service
or such later period as determined by the Stock Benefits Committee. The exercise
price of all options is at least 100% of the fair market value of the underlying
Common Stock at the time of the grant. Adjusted to reflect the three for two
split of the Common Stock, the option exercise price is $6.58 per share. The
exercise price may be paid in cash or Common Stock. Common Stock issued in
connection with the exercise of options may be from treasury shares or
authorized but unissued shares, in which case there will be dilution of the
Common Stock holdings of existing shareholders.
Incentive stock options may be granted only to employees of the Company
or the Bank. Non-employee directors will be granted non-statutory stock options.
No stock option granted in connection with the Stock Option Plan will be
eligible to be treated as an incentive stock option if it is exercised more than
three months after the date on which the optionee ceases to perform services for
the Company or the Bank, except that in the event of death or disability, a
stock option may be eligible to be treated as an incentive stock option if it is
exercised within one year; provided, however, that if an optionee ceases to
perform services for the Company or the Bank due to normal retirement or
following a change in control (as defined in the Stock Option Plan), any
incentive stock options exercised more than three months following the date the
optionee ceases to perform services will be treated as a non-statutory stock
option as described above.
Simultaneously with the grant of any stock option, the Committee may
grant a Dividend Equivalent Right with respect to all or some of the shares
covered by such stock option. The Dividend Equivalent Right provides the grantee
with a separate cash benefit equal to 100% of the amount of any extraordinary
dividend on shares of Common Stock subject to a stock option. Under the terms of
the Stock Option Plan, an extraordinary dividend is any dividend paid on shares
of Common Stock that exceeds the Company's weighted average cost of interest
bearing liabilities for the current and preceding three quarters. Upon the
payment of an extraordinary dividend, Dividend Equivalent Right will receive at
the time the related stock option vests cash or some other payment as determined
under the Stock Option Plan, equal to 100% of the extraordinary dividend paid on
shares of Common Stock plus any earnings thereon, minus any tax withholding
amounts. The Dividend Equivalent Right is transferrable only when the underlying
stock option is transferable and under the same conditions.
On December 19, 2000, the Board of Directors voluntarily returned their
unvested incentive stock options and non-statutory stock options under the
Pathfinder Bank 1997 Stock Option Plan. Accordingly, the options, which would
have been earned by participants in the years 2000, 2001, and 2002, will not be
vested. At December 31, 2000, the Stock Option Plan had 36,000 options available
for grant.
The voluntary rescission of the unvested (undistributed) portion of the
1997 stock option grants by officers and directors of the Company will reduce
expense charges under the plan by $121,000 in each of 2000, 2001, and 2002.
During the year ended December 31, 2000 a contribution totaling $8,400 was made
on behalf of Mr. Schneider.
11
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
========================================================================================================================
Number of Securities
Shares Acquired Value Underlying Unexercised Value of Unexercised In-
Name Upon Exercise Realized Options at The-Money Options at
Fiscal Year-End Fiscal Year-End(1)
Exercisable/Unexercisable Exercisable/Unexercisable
Thomas W. Schneider -- $-- 3,000/3,000 $0/$0
====================== ======================== ================== ========================= =========================
(1) The options had no value since the aggregate exercise price of such options
was greater than the aggregate fair market value of the shares of common
stock that would be received upon exercise, assuming such exercise occurred
on December 31, 2000.
The Board of Directors may amend, suspend or terminate the Stock Option
Plan except that such amendments may not impair awards previously granted.
Shareholders of the Company must approve any amendment to the Stock Option Plan
that would increase the number of options, decrease an option exercise price,
extend the term of the Stock Option Plan or any option, or change the persons or
category of persons eligible to be granted options. The exercise of options will
have a dilutive effect on the ownership interests of existing shareholders.
Further, the exercise of options may render more difficult or discourage a
merger, tender offer or other takeover attempt even if such transaction or event
would be beneficial to shareholders generally, the assumption of control by a
holder of a large block of the Company's securities, a proxy contest or the
removal of incumbent management.
Recognition and Retention Plan. The Board of Directors of the Bank has
adopted the 1997 Recognition and Retention Plan (the "Recognition Plan") as a
method of providing certain employees and non-employee directors of the Bank
with a proprietary interest in the Company and the Bank and to provide these
individuals with an incentive to increase the value of the Company and the Bank.
The Recognition Plan provides for the award of 52,901 shares at no cost to the
recipient. Under the Recognition Plan, shares of Common Stock have been awarded
in the following amounts to Named Executive Officers, executive officers as a
group, non-employee directors, and employees as a group. During the year ended
December 31, 2000 no awards were made under the Recognition Plan.
The Stock Benefits Committee, composed of the non-employee directors of
the Bank, administers the Recognition Plan, and makes awards to officers and
employees pursuant to the Recognition Plan. Awards to non- employee directors
are fixed by the terms of the Recognition Plan. Awards of Common Stock that have
not vested under the Recognition Plan ("Restricted Stock") are nontransferable
and nonassignable. Participants in the Recognition Plan become vested in shares
of Restricted Stock over a six-year period beginning on January 24, 1999;
provided, however, that the Stock Benefits Committee may accelerate or extend
the vesting rate on any awards made to officers and employees after the
effective date of the Recognition Plan. Awards to executive officers and outside
directors become fully vested upon termination of employment or service due to
normal retirement, death or disability, or following a termination of employment
or service in connection with a change in control (as defined therein) of the
Company or the Bank. Upon termination of employment or service for any other
reason, unvested shares are forfeited. When a participant's Restructured Stock
vests, the participant will recognize ordinary income equal to the fair market
value of the shares vested, unless the participant previously made an
irrevocable election to be taxed on the shares of Restricted Stock awarded to
him in the year of the award. The amount of income recognized by a participant
will be a deductible expense of the Company for Federal income tax purposes. A
participant is entitled to receive any cash dividends paid on the Restricted
Stock both before and after vesting of the Restricted Stock. Stock dividends
declared by the Company and paid on Restricted Stock that has not vested are
subject to the same restrictions as the Restricted Stock until such shares vest.
On December 19, 2000, the Board of Directors voluntarily returned their
unvested Restricted Stock Awards accepted under the Recognition Plan.
Accordingly, the shares, which would have been earned by participants in the
years 2000, 2001, and 2002, will not be issued and will be retained by the
Recognition Plan. At December 31, 2000 the Recognition Plan had 14,850 shares of
Common Stock available for grant.
12
As a result of the voluntary return of unvested shares by officers and
directors of the Company expense charges under the Recognition Plan will be
reduced by $82,500 in each of 2000, 2001, and 2002.
Transactions With Certain Related Persons
All transactions between the Company and its executive officers,
directors, holders of 10% or more of the shares of its Common Stock and
affiliates thereof, are on terms no less favorable to the Company than could
have been obtained by it in arm's-length negotiations with unaffiliated persons.
Such transactions must be approved by a majority of independent outside
directors of the Company not having any interest in the transaction.
- --------------------------------------------------------------------------------
PROPOSAL 2--PLAN OF CHARTER CONVERSION
- --------------------------------------------------------------------------------
General
On November 21, 2000, the Board of Directors of the Company unanimously
approved a Plan of Charter Conversion by which the Company would convert its
charter from a Delaware corporation to a Federal corporation chartered by the
Office of Thrift Supervision ("OTS"). This action was taken by the Board of
Directors after evaluating the advantages and disadvantages of being regulated
as (i) a bank holding company by both the Board of Governors of the Federal
Reserve System (the "Federal Reserve Board") and the New York Banking
Department, compared to (ii) a savings and loan holding company exclusively by
the OTS. This action also was taken in light of the decision by the Board of
Trustees of the Mutual Holding Company similarly to convert the Mutual Holding
Company from its current New York charter to a Federal mutual holding company
charter. In connection with the conversion of the Company and the Mutual Holding
Company to Federal charters, the Bank will make an election under Section 10(l)
of the Home Owners' Loan Act to have its holding companies chartered and
regulated by the OTS. However, the Bank itself will retain its New York state
savings bank charter.
The Company currently operates in what is commonly referred to as the
"two-tier" mutual holding company structure, whereby the Mutual Holding Company
owns approximately 60.7% of the Company's outstanding common stock and the
Company owns 100% of the outstanding common stock of the Bank. As a result, both
the Company and the Mutual Holding Company are regulated as mutual savings bank
holding companies under New York and Federal law. The Company has the choice of
being regulated as either (i) a mutual savings bank holding company by the
Federal Reserve Board and the New York Banking Department, or (ii) a mutual
savings and loan holding company by the OTS. OTS regulations, however, require
that if the Company chooses to be regulated as a mutual savings and loan holding
company, both the Company and the Mutual Holding Company must be chartered as
federal corporations. It is for this reason that we are asking shareholders to
approve the conversion of the Company's existing Delaware charter to a Federal
corporation pursuant to the Plan of Charter of Conversion.
The charter conversion will be accomplished substantially as follows or
in any other manner acceptable to the Board of Directors and applicable bank
regulatory authorities: (i) the Mutual Holding Company will organize a Federal
corporation as a federal mid-tier stock holding company subsidiary; (ii) the
Company will merge with and into the Federal corporation with the Federal
corporation as the surviving entity; and (iii) in connection with the merger in
step (ii) above, all of the issued and outstanding shares of Company common
stock will be canceled and converted into and become an equal number of shares
of common stock of the Federal corporation, by operation of law. The agreement
by which the merger referred to in step (ii) will occur is attached to this
proxy statement as Exhibit D. The description of the charter conversion herein
is qualified in its entirety by reference to this agreement.
The Company and the Mutual Holding Company have made application to the
OTS, the chartering authority for mutual holding companies, for approval of the
charter conversions. However, this application is still under review by the OTS
and has not yet been approved. Consummation of the charter conversions, even if
approved by shareholders of the Company, will be subject to approval by the OTS.
If the Company and the Mutual Holding Company fail to receive OTS approval or if
OTS approval is made subject to conditions that the Board of Directors deems
unacceptable, the charter conversions will not be consummated.
Set forth below is a discussion of the reasons for the charter
conversion, the impact of the charter conversion on the Company, and a
comparison of regulatory differences and differences in shareholders' rights
that will result from the charter conversion. The following discussion includes
a discussion of the material differences between the Company's current Delaware
Certificate of Incorporation and Bylaws and the Company's proposed Federal
Charter and Bylaws. The following discussion is qualified in its entirety by
reference to these corporate documents.
13
Shareholders are urged to review these documents for additional details. The
proposed Federal Charter and Bylaws are attached to this proxy statement as
Exhibits B and C, respectively.
Reasons for the Charter Conversion of the Company
The Board of Directors believes that the charter conversion of the
Company is advisable and in the best interests of the Company and its
shareholders. Among the factors considered by the Board of Directors in
approving the Plan of Charter Conversion were the following:
o The OTS has recently adopted final rules that the Board of
Directors believes enhance the attractiveness of the federal
mutual holding company charter and will benefit the Company
and its shareholders. The new OTS rules will permit the
Mutual Holding Company to waive the receipt of dividends paid
by the Company without causing dilution to the ownership
interests of Minority Shareholders in the event of a conversion
of the Mutual Holding Company to stock form. By contrast, the
Federal Reserve Board has not, as a matter of policy, permitted
mutual holding companies to waive the receipt of dividends and
management of the Company does not believe that this policy of
the Federal Reserve Board will change in the foreseeable
future. The Board of Directors believes that it is important
for the Mutual Holding Company to be able to waive the receipt
of dividends if it has no immediate need for additional
capital. A waiver of dividends by the Mutual Holding Company
of dividends will enable the Company to retain capital that can
be more beneficially invested by the Company or the Bank for
the benefit of all shareholders. Moreover, if the Mutual
Holding Company waives the receipt of dividends from the
Company, there will be no tax payable on the waived dividends.
This will save cash resources of the Company and will increase
the amount of cash available for investments, including
contributing additional capital to the Bank as market
conditions require.
o The OTS also has proposed new rules regarding the regulation
and operation of mutual holding companies that, if adopted,
would significantly enhance the mutual holding company
structure. In particular, the OTS has proposed rules that
would facilitate ongoing operations, capital raising,
acquisition flexibility and stock benefits in order to make
mutual holding companies more competitive with stock holding
companies. Even if the proposed OTS rules are not adopted in
final form, the OTS has expressed its interest generally in
making the mutual holding company charter a charter of choice
for mutual institutions considering converting to stock form.
o The Board of Directors of the Company also believes that the
OTS, among regulators, has the greatest expertise in
regulating mutual holding companies and in processing mutual
holding company transactions, which typically raise more
complex issues than transactions by stock holding companies.
The Board of Directors wishes to take advantage of this
expertise so that the Company and the Bank may pursue
potential transactions with a higher level of certainty.
However, there are no such transactions that are currently
contemplated by the Company.
o Under current OTS regulations, a federally chartered holding
company has no consolidated capital requirements, which
enhances the flexibility to leverage its balance sheet and
finance acquisitions. By contrast, the Company currently is
subject to capital adequacy guidelines for bank holding
companies.
o The federal mutual holding company charter has been modernized
and improved under recently enacted financial modernization
legislation. Specifically, federal mutual holding companies
now have all of the powers of financial holding companies,
plus certain additional enumerated powers.
o The charter conversion will result in the Company and the
Mutual Holding Company being regulated by the OTS only.
Currently, the Mutual Holding Company and the Company are
regulated by both the Federal Reserve Board and the New York
Banking Department.
o As a Delaware corporation, the Company currently is subject to
annual Delaware franchise taxes. Following its conversion to a
Federal charter, the Company would no longer be subject to
such annual taxes, thereby reducing the Company's annual
non-interest expense.
14
The Board of Directors of the Company also considered the potential
disadvantages of the charter conversion. Among the potential disadvantages is a
proposed amendment by the OTS to its mutual-to-stock conversion regulations that
would require a converting institution (including the Mutual Holding Company) to
demonstrate in its business plan that it would have a return on equity that is
acceptable to the OTS without regard to dividends or stock repurchases. If
adopted, the new rule would give the OTS considerable discretion to deny stock
conversion applications by well- capitalized institutions. There can be no
assurance that this proposed rule will be adopted in final form, nor can the
Company draw any conclusions as to how any regulation might be applied either
generally or specifically to the Mutual Holding Company in the event of a
"second-step conversion." The Company and the Mutual Holding Company have no
current plans to undertake a second-step conversion.
Conditions to the Charter Conversion
The charter conversion will not be completed unless: (i) the Plan of
Charter Conversion is approved by a majority of the outstanding shares of common
stock of the Company; (ii) the Company receives a favorable opinion of counsel
as to the federal income tax consequences of the charter conversion; and (iii)
the charter conversion is approved by the OTS.
The Mutual Holding Company, which owns a majority of the outstanding
shares of common stock of the Company, intends to vote its shares in favor of
the Plan of Charter Conversion. In addition, members of the Board of Directors
and management of the Company intend to vote their shares in favor of the Plan
of Charter Conversion. As of the Record Date, the Mutual Holding Company
beneficially owned approximately 60.7% and directors and management of the
Company beneficially owned approximately 7.2% of the outstanding shares of the
Company. If the Mutual Holding Company votes all of its shares in favor of the
Plan of Charter Conversion, the approval of the Plan of Charter Conversion would
be assured.
Impact of the Charter Conversion on Operations
The charter conversion will have no impact on the daily operations of
the Company, the Bank, or the Mutual Holding Company. The Bank is retaining its
New York savings bank charter and will continue its operations at the same
locations, with the same management, and subject to all the rights, obligations
and liabilities of the Bank existing immediately prior to the charter
conversion. The charter conversion is not expected to result in any material
increased expenses or regulatory burden to the Mutual Holding Company, the
Company or the Bank. Following the charter conversion, the Company will continue
to file periodic reports and proxy materials with the Securities and Exchange
Commission (the "SEC").
Holding Company Powers and Regulation
The following is a description of the powers and regulation of mutual
bank holding companies regulated by the Federal Reserve Board and mutual savings
and loan holding companies regulated by the OTS. This description does not
purport to be complete and is qualified in its entirety by reference to the
applicable laws and regulations.
Regulatory Authority. Currently, the Company is regulated as a bank
holding company by the Federal Reserve Board under the Bank Holding Company Act
and the regulations of the Federal Reserve Board. The Federal Reserve Board also
has extensive enforcement authority over bank holding companies, including,
among other things, the ability to assess civil money penalties, to issue cease
and desist or removal orders and to require that a holding company divest
subsidiaries (including its bank subsidiaries). In general, enforcement actions
may be initiated for violations of law and regulations and for unsafe or unsound
practices.
Following the charter conversion, the Company will be regulated as a
mutual savings and loan holding company under the Home Owners' Loan Act, and
will be required to register with and be subject to OTS examination and
supervision, as well as certain OTS reporting requirements. Among other things,
this authority permits the OTS to restrict or prohibit activities that are
determined to be a serious risk to the Bank.
Permissible Activities. The Bank Holding Company Act generally
prohibits a bank holding company (including a mutual savings bank holding
company) from engaging directly or indirectly in activities other than those
directly related to or incidental to banking, managing or controlling banks, or
providing services for its subsidiaries. The principal exceptions to these
prohibitions involve certain non-bank activities which, by statute or Federal
Reserve Board regulation or order, have been identified as activities closely
related to the business of banking or managing
15
or controlling banks. The list of activities permitted by the Federal Reserve
Board includes, among other things: owning a savings association, mortgage
company, finance company, credit card company or factoring company; performing
certain data processing operations; providing certain investment and financial
advice; underwriting and acting as an insurance agent for certain types of
credit-related insurance; leasing property on a full payout, non- operating
basis; selling money orders, travelers' checks and United States savings bonds;
appraising real estate and personal property; providing tax planning and
preparation services; and, subject to certain limitations, providing securities
brokerage services for customers. The recently enacted Gramm-Leach-Bliley Act
has expanded the permissible activities of bank holding companies that elect to
be regulated as "financial holding companies." Financial holding companies are
companies that elect to be so treated and that meet certain safety and soundness
requirements, and have a "satisfactory" rating under the Community Reinvestment
Act. Financial holding companies have authority to engage in activities that are
determined to be "financial in nature" or complementary or incidental to such
activities, including insurance and securities underwriting activities. The
Company has not elected to be regulated as a financial holding company.
Under the Home Owners' Loan Act and OTS regulations, a federal mutual
holding company is permitted to, among other things: (i) own a savings
association or savings bank; (ii) acquire a mutual institution; (iii) merge with
or acquire another mutual holding company, one of whose subsidiaries is a
savings institution; (iv) acquire non- controlling amounts of the stock of
savings institutions and savings institution holding companies, subject to
certain restrictions; (v) invest in any corporation that a savings association
may invest in under federal law or under the law of any state where the savings
association has its home office; (vi) furnish or perform management services for
a savings institution subsidiary; (vii) hold, manage or liquidate assets owned
or acquired from a savings institution subsidiary of such company; (viii) hold
or manage properties used or occupied by a savings institution subsidiary of
such company; and (ix) act as a trustee under deed or trust. In addition, a
federal mutual holding company may engage in any other activity that is
permissible for bank holding companies under the Bank Holding Company Act, or in
which multiple savings and loan companies may engage. Finally, under recently
enacted financial modernization legislation, federal mutual holding companies
may engage in any activity in which a financial holding company may engage,
including maintaining an insurance agency, escrow business and underwriting
securities and insurance. Moreover, a federal mutual holding company may engage
in the activities of a financial holding company without having to make the
financial holding company election that is applicable to bank holding companies.
Holding Company Regulatory Capital Requirements. As a savings bank
holding company, the Company currently is subject to the Federal Reserve Board's
capital adequacy guidelines on a consolidated basis. Under Federal Reserve Board
policy, a bank holding company must serve as a source of strength for its
subsidiary bank. Under this policy, the Federal Reserve Board may require, and
has required in the past, a holding company to contribute additional capital to
an undercapitalized savings bank. Following the charter conversion, the Company
would be regulated as a mutual savings and loan holding company, and mutual
savings and loan holding companies do not have any regulatory capital
requirements. Accordingly, after the charter conversion, the Company would not
be subject to the capital requirements of the Federal Reserve Board.
Mergers and Acquisitions. As a savings bank holding company, the
Company currently is required to obtain the approval of the Federal Reserve
Board before: (i) acquiring, directly or indirectly, the ownership or control of
any voting securities of another bank or bank holding company if, after such
acquisition, it would own or control more than 5% of such shares; (ii) acquiring
all or substantially all of the assets of another bank or bank holding company;
or (iii) merging or consolidating with another bank holding company. The Bank
Holding Company Act also prohibits a bank holding company, with certain
exceptions, from acquiring direct or indirect ownership or control of more than
5% of the voting shares of any company that is not a bank or bank holding
company. The Home Owners' Loan Act prohibits a savings and loan holding company
from, directly or indirectly, acquiring more than 5% of the voting stock of
another savings association or savings and loan holding company, or from
acquiring such an institution or company by merger, consolidation, or purchase
of its assets, without the prior written approval of the OTS. In evaluating
applications by holding companies to acquire other financial institutions, both
the OTS and the Federal Reserve Board consider the financial and managerial
resources and future prospects of the acquiror and the merging institution, the
convenience and needs of the community and competitive factors.
Payment of Cash Dividends. The Federal Reserve Board has issued a
policy statement on payment of cash dividends by bank holding companies that
states that a bank holding company should pay cash dividends only to the extent
that the holding company's net income for the past year is sufficient to cover
both the cash dividends and a rate of earnings retention that is consistent with
the holding company's capital needs, asset quality and overall financial
condition. The Federal Reserve Board has also indicated that it would be
inappropriate for a company experiencing
16
serious financial problems to borrow funds to pay dividends. Furthermore, under
the prompt corrective action regulations adopted by the Federal Reserve Board,
the Federal Reserve Board may prohibit a bank holding company from paying any
dividends if the holding company's bank subsidiary is classified as
"under-capitalized." OTS regulations generally do not restrict the ability of a
savings and loan holding company to pay dividends.
Stock Repurchases. A bank holding company is required to give the
Federal Reserve Board prior written notice of any purchase or redemption of its
outstanding equity securities if the gross consideration for the purchase or
redemption, when combined with the net consideration paid for all such purchases
or redemptions during the preceding 12 months, is equal to 10% or more of its
consolidated net worth. The Federal Reserve Board may disapprove such a purchase
or redemption if it determines that the proposal would constitute an unsafe or
unsound practice or would violate any law, regulation, Federal Reserve Board
order, or any condition imposed by, or written agreement with, the Federal
Reserve Board. This notification requirement does not apply to any company that
meets the well-capitalized standard for commercial banks, has a safety and
soundness examination rating of at least a "2" and is not subject to any
unresolved supervisory issues. The FDIC restricts stock repurchases by recently
converted holding companies of savings institutions or mutual holding companies
to 5% of their outstanding shares during the first year after a mutual-to-stock
conversion, with no restrictions thereafter. The OTS restricts stock repurchases
by holding companies of recently converted savings institutions or mutual
holding companies to 5% of their outstanding shares during the first year after
a conversion. However, following the first year anniversary of the conversion,
the OTS imposes no restrictions on stock repurchases.
Qualified Thrift Lender Test. In order for the Company to be regulated
as a savings and loan holding company by the OTS (rather than as a bank holding
company by the Federal Reserve Board), the Bank must qualify as a "qualified
thrift lender" under OTS regulations or satisfy the "domestic building and loan
association" test under the Internal Revenue Code. Under the qualified thrift
lender test, a savings institution is required to maintain at least 65% of its
"portfolio assets" (total assets less: (i) specified liquid assets up to 20% of
total assets; (ii) intangibles, including goodwill; and (iii) the value of
property used to conduct business) in certain "qualified thrift investments"
(primarily residential mortgages and related investments, including certain
mortgage-backed and related securities) in at least nine months out of each 12
month period. The Bank currently maintains the majority of its portfolio assets
in qualified thrift investments and would have met the qualified thrift lender
test in each of the last 12 months had the Bank been subject to this test. The
Bank will be required to continue to focus primarily on residential real estate
lending so long as its holding companies are regulated by the OTS.
Federal Securities Laws. The Company's common stock currently is
registered with the SEC under the Securities Exchange Act of 1934. The Company
currently observes the information, proxy solicitation, insider trading
restrictions and other requirements under this act. The charter conversion will
not change the registration of the common stock under this act, as the Company
will continue to comply with the requirements of this act following the charter
conversion.
Indemnification of Officers and Directors and Limitation of Liability
The Company's current Certificate of Incorporation and Bylaws seek to
ensure that the ability of directors and executive officers to exercise their
best business judgment in managing corporate affairs, subject to their
continuing fiduciary duties of loyalty to the Company and its shareholders, is
not unreasonably impeded by exposure to the potentially high personal costs or
other uncertainties of litigation. The Certificate of Incorporation provides
that a director or officer of the Company while serving as such shall be
indemnified and held harmless by the Company to the fullest extent authorized by
the Delaware General Corporation Law against all expense, liability and loss
(including attorneys' fees or penalties and amounts paid in settlement)
reasonably incurred or suffered by such persons. The right to indemnification
includes the right to be paid by the Company the expenses incurred in defending
any such proceeding in advance of its final disposition; provided, however, if
required under the Delaware General Corporation Law, any such advancement of
expenses is subject to the indemnified person's undertaking to repay all amounts
so advanced if a final judicial decision finds that the person was not entitled
to be indemnified. Generally, under the Delaware General Corporation Law, an
individual may not be indemnified (i) in connection with a proceeding by or in
the right of the Company in which the individual was adjudged liable to the
Company, or (ii) in connection with any other proceeding charging improper
personal benefit to him in which he was adjudged liable on the basis that
personal benefit was improperly received by him, unless a court determines he is
fairly and reasonably entitled to indemnification in view of all the relevant
circumstances.
17
In addition, the Company's current Certificate of Incorporation
provides that a director will not be personally liable to the Company or its
shareholders for monetary damages for breach of fiduciary duty except for
liability (i) for any breach of his duty of loyalty to the Company or its
shareholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) arising from certain
unlawful distributions, or (iv) for any transaction from which the director
derived an improper personal benefit.
The proposed federal mid-tier holding company Charter and Bylaws do not
similarly provide for indemnification of directors and executive officers or for
limitation of liability of these persons. However, the OTS has indicated that as
a matter of policy, mid-tier stock holding companies are subject to the same
regulations with respect to indemnification to which federal savings banks are
subject. OTS regulations require a federal savings bank to indemnify its
directors, officers and employees against legal and other expenses incurred in
defending lawsuits brought or threatened against them by reason of their
performance as directors, officers, or employees. Indemnification may be made
only if final judgment on the merits is in the person's favor or in case of (i)
settlement, (ii) final judgment against the person, or (iii) final judgment in
such person's favor, other than on the merits, if a majority of the
disinterested directors of the savings bank determine that the person was acting
in good faith within the scope of such person's employment or authority as such
person could reasonably have perceived it under the circumstances and for a
purpose such person could have reasonably believed under the circumstances was
in the best interests of the savings bank or its shareholders. If a majority of
the disinterested directors of the savings bank concludes that in connection
with an action any person ultimately may become entitled to indemnification, the
directors may authorize payment of reasonable costs and expenses arising from
defense or settlement of such action. A savings bank is required to give the OTS
at least sixty (60) days notice of its intention to make indemnification and no
indemnification shall be made if the OTS objects to the savings bank in writing.
To the best of management's knowledge, there is currently no pending or
threatened litigation for which indemnification may be sought.
Comparison of Stockholder Rights and Certain Anti-Takeover Provisions
As a result of the charter conversion, holders of the Company's common
stock, whose rights are presently governed by the Certificate of Incorporation
and Bylaws of the Company as a Delaware corporation, will become shareholders of
the Company whose rights will be governed by the Federal Charter and Bylaws of
the Company.
Capital Stock. The Company's Delaware Certificate of Incorporation
authorizes the Company to issue 9 million shares of common stock, par value $.10
per share, and does not authorize the issuance of preferred stock. The Company's
Federal Charter would authorize the Company to issue __ million shares of common
stock, par value $.10 per share, as well as one million shares of preferred
stock. As of the Record Date, the Company had _________ shares outstanding, and
the Federal Charter would permit the Company to issue one million shares of
preferred stock and __ million shares of common stock without prior stockholder
approval, unless such approval is required by a securities exchange.
Cumulative Voting. Neither the Company's Delaware Certificate of
Incorporation or the Company's Federal Charter provide for cumulative voting.
The absence of cumulative voting means that the holders of a majority of the
shares voted at a meeting of shareholders may elect all the directors of the
Company, thereby precluding minority stockholder representation on the Board of
Directors.
Preemptive Rights. Under both the Company's Delaware Certificate of
Incorporation and the Company's Federal Charter, holders of common stock will
not be entitled to preemptive rights with respect to any shares that may be
issued.
Vacancies on the Board of Directors. Under the Company's Delaware
Certificate of Incorporation, a majority vote of directors then in office may
appoint new directors to fill vacancies on the Board and directors so chosen
shall hold office for a term expiring at the annual meeting of shareholders at
which the term of office of the class to which they have been chosen expires. In
contrast, the Company's Federal Charter provides that any director appointed by
a majority of the remaining directors to fill a vacancy shall serve for a term
of office continuing only until the next election of directors by shareholders.
Number and Term of Directors. The Company's Delaware Certificate of
Incorporation provides that the number of directors shall be fixed from time to
time exclusively by the Board of Directors and that the directors shall
18
be divided into three classes. The Bylaws provide that the number of directors
shall be not less than seven or more than 20. The Company's Federal Charter
provides that the number of directors shall be not fewer than five nor more than
15, unless the OTS approves a greater or lesser number. The Company's Federal
Bylaws specify that the number of directors shall be seven. The Federal Bylaws
also provide for the Board of Directors to be classified into three classes as
nearly equal in number as possible.
Presentation of New Business or Nominations for Director at Meetings of
Shareholders. The Company's Delaware Bylaws generally provide that for a
stockholder to properly bring business before an annual meeting of shareholders
or make a nomination to the Board of Directors, he must deliver notice not less
than 90 days prior to the date of the Company's proxy statement released to
shareholders in connection with the previous year's annual meeting.
The Company's Federal Bylaws provide that any new business to be taken
up at an annual meeting of shareholders must be filed with the Secretary of the
Company at least five days prior to the date of the annual meeting. Such Bylaws
also provide that no nominations for directors by shareholders shall be
considered at an annual meeting unless made by shareholders in writing and
delivered to the Secretary of the Company at least five days prior to the date
of the annual meeting.
Amendment of Chartering Instrument and Bylaws. Amendments to the
Company's Delaware Certificate of Incorporation must be approved by a majority
vote of its Board of Directors and also by a majority of the outstanding shares
of its voting stock, provided, however, that an affirmative vote of at least 80%
of the outstanding voting stock entitled to vote (after giving effect to the
provision limiting voting rights of certain persons owning in excess of 5% of
the outstanding shares, described below) is required to amend or repeal certain
provisions of the Certificate of Incorporation, including the provisions
limiting voting rights, the provisions relating to approval of certain business
combinations, provisions relating to the calling of special meetings of
shareholders, the number and classification of directors, and director and
officer indemnification by the Company. The Company's current Delaware Bylaws
may be amended by its Board of Directors or by a vote of 80% of the total votes
eligible to be voted at a duly constituted meeting of shareholders.
The Company's Federal Charter may be amended if such amendment is
proposed by the Board of Directors and approved by shareholders by a majority of
the votes eligible to be cast, unless a higher vote is required by the OTS. The
Company's Federal Bylaws may be amended upon approval by a majority vote of the
authorized Board of Directors or by a majority vote of the votes cast by
shareholders of the Company (and upon receipt of approval by the OTS, if
applicable).
Evaluation of Offers. The Company's Delaware Certificate of
Incorporation provides that the Board of Directors, when evaluating any offer to
(i) make a tender or exchange offer for any equity securities of the Company,
(ii) merge or consolidate the Company with another corporation or entity, or
(iii) purchase or otherwise acquire all or substantially all of the properties
and assets of the Company, may, in connection with the exercise of its judgment
in determining what is in the best interests of the Company and its
shareholders, give due consideration to all relevant factors, including without
limitation, the social and economic effect of acceptance of the offer on the
Company's present and future customers and employees and those of its
subsidiaries; on the communities in which the Company and its subsidiaries
operate or are located; on the ability of the Company to fulfill its corporate
objectives as a savings bank holding company; and on the ability of its
subsidiary savings bank to fulfill the objectives of a stock savings bank under
applicable statutes and regulations. The Company's proposed Federal Charter has
no similar provision.
Limitation on Voting Rights. The Company's current Certificate of
Incorporation provides that no person who beneficially owns, directly or
indirectly, in excess of 5% of the then outstanding shares of common stock of
the Company (the "Limit") shall be entitled or permitted to vote in respect of
the shares held in excess of the Limit (except that this restriction and
limitation shall not apply to the Mutual Holding Company or any tax qualified
employee stock benefit plan established by the Company). The proposed Federal
Charter does not contain a similar provision regarding voting of shares in
excess of the Limit.
19
Optional Exchange of Stock Certificates
After the charter conversion, stock certificates evidencing shares of
common stock of the Company under its Delaware Certificate of Incorporation and
Bylaws will represent, by operation of law, the same number of shares of Company
common stock under the Federal Charter. Holders of common stock will not be
required to exchange their existing stock certificates for new stock
certificates of the Company as a Federal corporation, but will have the option
to do so. DO NOT SEND YOUR STOCK CERTIFICATES TO THE COMPANY AT THIS TIME.
Tax Consequences
The Company has received an opinion of its special counsel, Luse Lehman
Gorman Pomerenk & Schick, P.C., Washington, D.C., that the charter conversion
constitutes a reorganization under Section 368 of the Internal Revenue Code, and
that no gain or loss will be recognized by Company shareholders as a result of
the charter conversion. It should be noted that this opinion of counsel is not
binding upon the Internal Revenue Service. Each Company stockholder should
consult his own tax counsel as to specific federal, state and local tax
consequences of the charter conversion, if any, to such stockholder.
Accounting Treatment
The charter conversion will be accounted for in the same manner as a
pooling-of-interests transaction.
Amendment or Termination of the Plan of Charter Conversion
The Board of Directors of the Company may cause the Plan of Charter
Conversion to be amended or terminated if the Board determines for any reason
that such amendment or termination would be advisable. However, no such
amendment may be made to the Plan of Charter Conversion after stockholder
approval if such amendment is deemed to be materially adverse to the
shareholders of the Company.
THE BOARD OF DIRECTORS OF THE COMPANY BELIEVES THAT THE CHARTER CONVERSION IS IN
THE BEST INTERESTS OF THE COMPANY AND ITS STOCKHOLDERS AND RECOMMENDS A VOTE
"FOR" THE PLAN OF CHARTER CONVERSION.
- --------------------------------------------------------------------------------
PROPOSAL 3--RATIFICATION OF APPOINTMENT OF AUDITORS
- --------------------------------------------------------------------------------
The Board of Directors of the Company has approved the engagement of
PricewaterhouseCoopers, LLP, to be the Company's auditors for the 2001 fiscal
year, subject to the ratification of the engagement by the Company's
shareholders. At the Annual Meeting, shareholders will consider and vote on the
ratification of the engagement of PricewaterhouseCoopers, LLP, for the Company's
fiscal year ending December 31, 2001. A representative of
PricewaterhouseCoopers, LLP, is expected to attend the Meeting to respond to
appropriate questions and to make a statement if he so desires.
In order to ratify the selection of PricewaterhouseCoopers, LLP, as the
auditors for the 2001 fiscal year, the proposal must receive at least a majority
of the votes cast, either in person or by proxy, in favor of such ratification.
The Board of Directors recommends a vote "FOR" the ratification of
PricewaterhouseCoopers, LLP, as auditors for the 2001 fiscal year.
- --------------------------------------------------------------------------------
SHAREHOLDER PROPOSALS
- --------------------------------------------------------------------------------
In order to be eligible for inclusion in the proxy materials for next
year's Annual Meeting of Shareholders, any shareholder proposal to take action
at such meeting must be received at the Company's executive office, 214 West
First Street, Oswego, New York 13126, no later than December 1, 2001. Any such
proposals shall be subject to the requirements of the proxy rules adopted under
the Securities Exchange Act of 1934.
20
- --------------------------------------------------------------------------------
OTHER MATTERS
- --------------------------------------------------------------------------------
The Board of Directors is not aware of any business to come before the
Annual Meeting other than the matters described above in the Proxy Statement.
However, if any matters should properly come before the Annual Meeting, it is
intended that holders of the proxies will act as directed by a majority of the
Board of Directors, except for matters related to the conduct of the Annual
Meeting, as to which they shall act in accordance with their best judgment. The
Board of Directors intends to exercise its discretionary authority to the
fullest extent permitted under the Securities Exchange Act of 1934.
The Bylaws of the Company provide an advance notice procedure for
certain business or nominations to the Board of Directors to be brought before
an annual meeting. In order for a shareholder to properly bring business before
an annual meeting, or to propose a nominee to the Board, the shareholder must
give written notice to the Secretary of the Company not less than 90 days before
the date fixed for such meeting; provided, however, that in the event that less
than 100 days notice or prior public disclosure of the date of the meeting is
given or made, notice by the shareholder to be timely must be received not later
than the close of business on the tenth day following the day on which such
notice of the date of the annual meeting was mailed or such public disclosure
was made. The notice must include the shareholder's name, record address, and
number of shares owned by the shareholder, describe briefly the proposed
business, the reasons for bringing the business before the annual meeting, and
any material interest of the shareholder in the proposed business. In the case
of nominations to the Board, certain information regarding the nominee must be
provided. Nothing in this paragraph shall be deemed to require the Company to
include in its proxy statement and proxy relating to an annual meeting any
shareholder proposal which does not meet all of the requirements for inclusion
established by the SEC in effect at the time such proposal is received.
The date on which the Annual Meeting of Shareholders is expected to be
held is April 24, 2002. Accordingly, advance written notice of business or
nominations to the Board of Directors to be brought before the 2002 Annual
Meeting of Shareholders must be given to the Company no later than January
_____, 2002.
- --------------------------------------------------------------------------------
MISCELLANEOUS
- --------------------------------------------------------------------------------
The cost of solicitation of proxies will be borne by the Company. The
Company will reimburse brokerage firms and other custodians, nominees and
fiduciaries for reasonable expenses incurred by them in sending proxy materials
to the beneficial owners of Common Stock. In addition to solicitations by mail,
directors, officers and regular employees of the Company may solicit proxies
personally or by telegraph or telephone without additional compensation.
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR
ENDED DECEMBER 31, 2000, WILL BE FURNISHED WITHOUT CHARGE TO SHAREHOLDERS AS OF
THE RECORD DATE UPON WRITTEN OR TELEPHONIC REQUEST TO MELISSA A. MILLER,
CORPORATE SECRETARY, PATHFINDER BANCORP, INC., 214 WEST FIRST STREET, OSWEGO,
NEW YORK 13126, OR CALL AT 315/243-0057.
BY ORDER OF THE BOARD OF DIRECTORS
Melissa A. Miller
Corporate Secretary
Oswego, New York
March 30, 2001
21
EXHIBIT A
Pathfinder Bancorp, Inc.
Pathfinder Bank
Audit Committee of the Board of Directors'
Charter
(1) Purpose
The primary function of the Audit Committee is to assist the Board of
Directors in fulfilling its oversight responsibilities by reviewing:
the financial reports and other financial information provided by
Pathfinder Bancorp. Inc. ("the Company") to any governmental body or
the public: the Company's systems of internal controls regarding
finance, accounting, and compliance that management and the Board have
established; and the Company's auditing, accounting and financial
reporting processes generally. Consistent with this function, the Audit
Committee should encourage continuous improvement of, and should foster
adherence to, the Company's policies, procedures and practices at all
levels. The Audit Committee's primary duties and responsibilities are
to:
o Serve as an independent and objective party to monitor the
Company's financial reporting process and internal control
system.
o Review and appraise the audit efforts of the Company's
independent accountant and internal auditing department.
o Provide an open avenue of communication among the independent
accountants, financial and senior management, the internal
auditing department, and the Board of Directors.
The Audit Committee will primarily fulfill these responsibilities by
carrying out the activities enumerated in Section N of this Charter.
(2) Composition
The Audit Committee shall be comprised of three or more directors as
determined by the Board, each of whom shall be independent directors,
and free from any relationship that, in the opinion of the Board, would
interfere with the exercise of his or her independent judgement as a
member of the Committee. In order to be independent the member shall
not:
o Have been employed by the Company in the preceding three years
o Have received compensation in excess of $60,000 during the
previous year other than for director's fees or benefits under
a tax-qualified retirement plan
o Be an immediate family member of an executive officer who is
employed by or has been employed by the Company in the last
three years.
o Be a partner or controlling shareholder of a for-profit
business to which the Company made or received significant
payments in the last three years. Payments arising from
dividends on the Company's stock are exempt. Significant
payments are defined as the higher of 5% of the Company's
revenues or $200,000.
o Serve as executive officer of another company where any
Pathfinder corporate executive serves on that company's
compensation committee.
The Board may elect to override the independence requirements for one
director unless the director is a current employee or an immediate
family member of an executive officer.
A-1
All members of the Committee shall have a working familiarity with
basic finance and accounting practices, and at least one member of the
Committee shall have accounting or related financial management
expertise. Committee members may enhance their familiarity with finance
and accounting by participating in educational programs conducted by
the Company, an outside consultant, trade group or other provider.
The members of the Committee shall be elected by the Board at the
annual organizational meeting of the Board or until their successors
shall be duly elected and qualified. Unless a Chair is elected by the
full Board, the members of the Committee may designate a Chair by
majority vote of the full Committee membership.
III. Meetings
The Committee shall meet at least four times annually, or more
frequently as circumstances dictate. As part of its job to foster open
communication, the Committee should meet at least annually with
management, the internal auditor and the independent accountants in
separate executive sessions to discuss any matters that the Committee
or each of these groups believe should be discussed privately.
(4) Responsibilities and Duties
To fulfill its responsibilities and duties the Audit Committee shall:
Documents/Reports Review
------------------------
1. Review and update this Charter periodically, at least annually,
as conditions dictate.
2. Review the organization's annual financial statements and any
reports or other financial information submitted to any
governmental body, or the public, including any
certifications, report, opinion, or review rendered by the
independent accountants.
3. Review the regular internal reports to management prepared by
the internal auditing department and management's response.
4. Review with financial management the quarterly earnings of the
Company prior to its filing or prior to the release of
earnings. The Chair of the Committee or the full Board may
represent the Committee for purposes of this review.
Independent Accountants
-----------------------
5. Recommend to the Board of Directors the selection of the
independent accountants, considering independence and
effectiveness and approve the fees and other compensation to
be paid to the independent accountants. On an annual basis,
the Committee should review and discuss with accountants all
significant relationships the accountants have with the
Company to determine the accountants' independence.
6. Review the performance of the independent accountants and
approve any proposed discharge of the independent accountants
when circumstances warrant.
7. Periodically consult with the independent accountants out of
the presence of management about internal controls and the
fullness and accuracy of the organization's financial
statements.
A-2
Financial Reporting Process
---------------------------
8. In consultation with the independent accountants and the
internal auditors, review the integrity of the organization's
financial reporting processes, both internal and external.
9. Consider the independent accountants' judgements about the
quality and appropriateness of the Company's accounting
principles as applied in its financial reporting.
10. Consider and approve, if appropriate major changes to the
Company's auditing and accounting principles and practices as
suggested by the independent accountants, management, or the
internal auditing department.
Process improvements
--------------------
11. Establish regular and separate systems of reporting to the
Audit Committee by each of management, the independent
accountants and the internal auditors regarding any
significant judgements made in management's preparation of the
financial statements and the view of each as to
appropriateness of such judgements.
12. Following completion of the annual audit, review separately
with each of management, the independent accountants and the
internal auditing department any significant difficulties
encountered during the course of the audit, including any
restrictions on the scope of work or access to required
information.
13. Review any significant disagreement among management and the
independent accountants or the internal auditing department in
connection with the preparation of the financial statements.
14. Review with the independent accountants, the internal auditing
department and management the extent to which changes or
improvements in financial or accounting practices, as approved
by the Audit Committee, have been implemented. (This review
should be conducted at an appropriate of time subsequent to
implementation of changes or improvements, as decided by the
Committee.)
Internal Audit and Compliance
-----------------------------
15. Review activities, organizational structure, and qualifications
of the internal audit department.
16. Review the internal audit function of the corporation
including the independence and authority of its reporting
obligations, the proposed audit plans for the coming year, and
the coordination of such plans with the independent auditors.
17. Receive prior to each meeting, a summary of findings from
completed internal audits and a progress report on the proposed
internal audit plan, with explanations for any deviations from
the original plan
18. Review, with the organization's counsel, and legal matter that
could have a significant impact on the organization's financial
statements.
19. Perform any other activities consistent with this Charter, the
Company's By-laws and governing law, as the Committee or the
Board deems necessary or appropriate.
A-3
EXHIBIT B
PATHFINDER BANCORP, INC.
STOCK HOLDING COMPANY CHARTER
Section 1. Corporate Title. The full corporate title of the Mutual
Holding Company subsidiary holding company is Pathfinder Bancorp, Inc. (the
"Company").
Section 2. Domicile. The domicile of the Company shall be located in
the City of Oswego in the State of New York.
Section 3. Duration. The duration of the Company is perpetual.
Section 4. Purpose and Powers. The purpose of the Company is to pursue
any or all of the lawful objectives of a federal mutual holding company
chartered under Section 10(o) of the Home Owners' Loan Act, 12 U.S.C. 1467a(o),
and to exercise all of the express, implied, and incidental powers conferred
thereby and by all acts amendatory thereof and supplemental thereto, subject to
the Constitution and laws of the United States as they are now in effect, or as
they may hereafter be amended, and subject to all lawful and applicable rules,
regulations, and orders of the Office of Thrift Supervision (the "Office").
Section 5. Capital Stock. The total number of shares of all classes of
the capital stock which the Company has authority to issue is _______________ of
which ______________ shares shall be common stock, par value $0.01 per share,
and of which ______________ shares shall be serial preferred stock. The shares
may be issued from time to time as authorized by the board of directors without
the approval of its shareholders, except as otherwise provided in this Section 5
or to the extent that such approval is required by governing law, rule, or
regulation. The consideration for the issuance of the shares shall be paid in
full before their issuance and shall not be less than the par value. Neither
promissory notes nor future services shall constitute payment or part payment
for the issuance of shares of the Company. The consideration for the shares
shall be cash, tangible or intangible property (to the extent direct investment
in such property would be permitted to the Company), labor, or services actually
performed for the Company, or any combination of the foregoing. In the absence
of actual fraud in the transaction, the value of such property, labor, or
services, as determined by the board of directors of the Company, shall be
conclusive. Upon payment of such consideration, such shares shall be deemed to
be fully paid and nonassessable. In the case of a stock dividend, that part of
the retained earnings of the Company that is transferred to common stock or paid
in capital accounts upon the issuance of shares as a stock dividend shall be
deemed to be the consideration for their issuance.
Except for shares issued in the initial organization of the Company, no
shares of capital stock (including shares issuable upon conversion, exchange, or
exercise of other securities) shall be issued, directly or indirectly, to
officers, directors, or controlling persons (except for shares issued to the
parent mutual holding company) of the Company other than as part of a general
public offering or as qualifying shares to a director, unless their issuance or
the plan under which they would be issued has been approved by a majority of the
total votes eligible to be cast at a legal meeting.
Nothing contained in this Section 5 (or in any supplementary sections
hereto) shall entitle the holders of any class or series of capital stock to
vote as a separate class or series or to more than one vote per share, and there
shall be no cumulation of votes for the election of directors. Provided, that
this restriction on voting separately by class or series shall not apply:
(i) To any provision which would authorize the holders of
preferred stock, voting as a class or series, to
elect some members of the board of directors, less
than a majority thereof, in the event of default in
the payment of dividends on any class or series of
preferred stock;
B-1
(ii) To any provision which would require the holders of
preferred stock, voting as a class or series, to
approve the merger or consolidation of the Company
with another corporation or the sale, lease, or
conveyance (other than by mortgage or pledge) of
properties or business in exchange for securities
of a corporation other than the Company if the
preferred stock is exchanged for securities of such
other corporation: Provided, that no provision may
require such approval for transactions undertaken
with the assistance or pursuant to the direction
of the Office or the Federal Deposit Insurance
Corporation;
(iii) To any amendment which would adversely change the
specific terms of any class or series of capital
stock as set forth in this Section 5 (or in any
supplementary sections hereto), including any
amendment which would create or enlarge any class or
series ranking prior thereto in rights and
preferences. An amendment which increases the
number of authorized shares of any class or series of
capital stock, or substitutes the surviving Company
in a merger or consolidation for the Company, shall
not be considered to be such an adverse change.
A description of the different classes and series of the Company's
capital stock and a statement of the designations, and the relative rights,
preferences and limitations of the shares of each class of and series of capital
stock are as follows:
A. Common Stock. Except as provided in this Section 5 (or in any
supplementary sections thereto) the holders of common stock shall exclusively
possess all voting power. Each holder of shares of common stock shall be
entitled to one vote for each share held by such holder, except as to the
cumulation of votes for the election of directors, unless the charter otherwise
provides there shall be no such cumulative voting.
Whenever there shall have been paid, or declared and set aside for
payment, to the holders of the outstanding shares of any class of stock having
preference over the common stock as to payment of dividends, the full amount of
dividends and of sinking fund, retirement fund or other retirement payments, if
any, to which such holders are respectively entitled in preference to the common
stock, then dividends may be paid on the common stock and on any class or series
of stock entitled to participate therewith as to dividends out of any assets
legally available for the payment of dividends.
In the event of any liquidation, dissolution, or winding up of the
Company, the holders of the common stock (and the holders of any class or series
of stock entitled to participate with the common stock in the distribution of
assets) shall be entitled to receive, in cash or in kind, the assets of the
Company available for distribution remaining after: (i) payment or provision for
payment of the Company's debts and liabilities; (ii) distributions or provision
for distributions in settlement of its liquidation account; and (iii)
distributions or provisions for distributions to holders of any class or series
of stock having preference over the common stock in the liquidation,
dissolution, or winding up of the Company. Each share of common stock shall have
the same relative rights as and be identical in all respects with all the other
shares of common stock.
B. Preferred Stock. The Company may provide in supplementary sections
to its charter for one or more classes of preferred stock, which shall be
separately identified. The shares of any class may be divided into and issued in
series, with each series separately designated so as to distinguish the shares
thereof from the shares of all other series and classes. The terms of each
series shall be set forth in a supplementary section to the charter. All shares
of the same class shall be identical, except as to the following relative rights
and preferences, as to which there may be variations between different series:
(a) The distinctive serial designation and the number of shares
constituting such series;
(b) The dividend rate or the amount of dividends to be paid on the
shares of such series, whether dividends shall be cumulative and,
if so, from which date(s), the payment date(s) for dividends,
and the participating or other special rights, if any, with
respect to dividends;
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(c) The voting powers, full or limited, if any, of shares of such
series;
(d) Whether the shares of such series shall be redeemable and, if so,
the price(s) at which, and the terms and conditions on which, such
shares may be redeemed;
(e) The amount(s) payable upon the shares of such series in the event
of voluntary or involuntary liquidation, dissolution, or winding
up of the Company;
(f) Whether the shares of such series shall be entitled to the benefit
of a sinking or retirement fund to be applied to the purchase
or redemption of such shares, and if so entitled, the amount of
such fund and the manner of its application, including the
price(s) at which such shares may be redeemed or purchased
through the application of such fund;
(g) Whether the shares of such series shall be convertible into, or
exchangeable for, shares of any other class or classes of stock of
the Company and, if so, the conversion price(s) or the rate(s)
of exchange, and the adjustments thereof, if any, at which such
conversion or exchange may be made, and any other terms and
conditions of such conversion or exchange;
(h) The price or other consideration for which the shares of such
series shall be issued; and
(i) Whether the shares of such series which are redeemed or converted
shall have the status of authorized but unissued shares of serial
preferred stock and whether such shares may be reissued as shares
of the same or any other series of serial preferred stock.
Each share of each series of serial preferred stock shall have the same
relative rights as and be identical in all respects with all the other shares of
the same series.
The board of directors shall have authority to divide, by the adoption
of supplementary charter sections, any authorized class of preferred stock into
series and, within the limitations set forth in this section and the remainder
of this charter, fix and determine the relative rights and preferences of the
shares of any series so established.
Prior to the issuance of any preferred shares of a series established
by a supplementary charter section adopted by the board of directors, the
Company shall file with the Secretary to the Office a dated copy of that
supplementary section of this charter establishing and designating the series
and fixing and determining the relative rights and preferences thereof.
Section 6. Preemptive Rights. Holders of the capital stock of the
Company shall not be entitled to preemptive rights with respect to any shares of
the Company which may be issued.
Section 7. Directors. The Company shall be under the direction of a
board of directors. The authorized number of directors, as stated in the
Company=s bylaws, shall not be fewer than five nor more than fifteen except when
a greater or lesser number is approved by the Director of the Office, or his or
her delegate.
Section 8. Amendment of Charter. Except as provided in Section 5, no
amendment, addition, alteration, change or repeal of this charter shall be made,
unless such is proposed by the board of directors of the Company, approved by
the shareholders by a majority of the votes eligible to be cast at a legal
meeting, unless a higher vote is otherwise required, and approved or preapproved
by the Office.
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PATHFINDER BANCORP, INC.
ATTEST:
--------------------------------------------------------------
____________________, Corporate Secretary
By:
--------------------------------------------------------------
Thomas W. Schneider, President and Chief Executive Officer
OFFICE OF THRIFT SUPERVISION
ATTEST:
--------------------------------------------------------------
Secretary of Office of Thrift Supervision
By:
--------------------------------------------------------------
Director of Office of Thrift Supervision
Effective Date:
--------------------------------------------------------------
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EXHIBIT C
PATHFINDER BANCORP, INC.
BYLAWS
ARTICLE I - Home Office
The home office of Pathfinder Bancorp, Inc. (the "Company") shall be
214 West First Street, Oswego, New York 13126-2547.
ARTICLE II - Shareholders
Section 1. Place of Meetings. All annual and special meetings of
shareholders shall be held at the home office of the Company or at such other
convenient place as the Board of Directors may determine.
Section 2. Annual Meeting. A meeting of the shareholders of the Company
for the election of directors and for the transaction of any other business of
the Company shall be held annually within 150 days after the end of the
Company's fiscal year on the _____________, if not a legal holiday, and if a
legal holiday, then on the next day following which is not a legal holiday, at
_______ __.m., or at such other date and time within such 150-day period as the
Board of Directors may determine.
Section 3. Special Meetings. Special meetings of the shareholders for
any purpose or purposes, unless otherwise prescribed by the regulations of the
Office of Thrift Supervision (the AOffice@), may be called at any time by the
chairman of the board, the president, or a majority of the Board of Directors,
and shall be called by the chairman of the board, the president, or the
secretary upon the written request of the holders of not less than one-tenth of
all of the outstanding capital stock of the Company entitled to vote at the
meeting. Such written request shall state the purpose or purposes of the meeting
and shall be delivered to the home office of the Company addressed to the
chairman of the board, the president or the secretary.
Section 4. Conduct of Meetings. Annual and special meetings shall be
conducted in accordance with the most current edition of Robert=s Rules of Order
unless otherwise prescribed by regulations of the Office or these bylaws or the
Board of Directors adopts another written procedure for the conduct of meetings.
The Board of Directors shall designate, when present, either the chairman of the
board or president to preside at such meetings.
Section 5. Notice of Meetings. Written notice stating the place, day,
and hour of the meeting and the purpose(s) for which the meeting is called shall
be delivered not fewer than 20 nor more than 50 days before the date of the
meeting, either personally or by mail, by or at the direction of the chairman of
the board, the president, the secretary or the directors calling the meeting, to
each shareholder of record entitled to vote at such meeting. If mailed, such
notice shall be deemed to be delivered when deposited in the mail, addressed to
the shareholder at the address as it appears on the stock transfer books or
records of the Company as of the record date prescribed in Section 6 of this
Article II with postage prepaid. When any shareholders meeting, either annual or
special, is adjourned for 30 days or more, notice of the adjourned meeting shall
be given as in the case of an original meeting. It shall not be necessary to
give any notice of the time and place of any meeting adjourned for less than 30
days or of the business to be transacted at the meeting, other than an
announcement at the meeting at which such adjournment is taken.
Section 6. Fixing of Record Date. For the purpose of determining
shareholders entitled to notice of or to vote at any meeting of shareholders or
any adjournment, or shareholders entitled to receive payment of any dividend, or
in order to make a determination of shareholders for any other proper purpose,
the Board of Directors shall fix in advance a date as the record date for any
such determination of shareholders. Such date in any case shall be not more than
60 days and, in case of a meeting of shareholders, not fewer than 10 days prior
to the date on which the particular action, requiring such determination of
shareholders, is to be taken. When a determination of shareholders entitled to
vote at any
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meeting of shareholders has been made as provided in this section, such
determination shall apply to any adjournment.
Section 7. Voting List. At least 20 days before each meeting of the
shareholders, the officer or agent having charge of the stock transfer books for
shares of the Company shall make a complete list of the shareholders of record
entitled to vote at such meeting, or any adjournment, arranged in alphabetical
order, with the address and the number of shares held by each. This list of
shareholders shall be kept on file at the home office of the Company and shall
be subject to inspection by any shareholder of record or the shareholder=s agent
at any time during usual business hours for a period of 20 days prior to such
meeting. Such list also shall be produced and kept open at the time and place of
the meeting and shall be subject to inspection by any shareholder of record or
the shareholder=s agent during the entire time of the meeting. The original
stock transfer book shall constitute prima facie evidence of the shareholders
entitled to examine such list or transfer books or to vote at any meeting of
shareholders.
In lieu of making the shareholder list available for inspection by
shareholders as provided in the preceding paragraph, the Board of Directors may
elect to follow the procedures described in ' 552.6(d) of the Office's
regulations as now or hereafter in effect.
Section 8. Quorum. A majority of the outstanding shares of the Company
entitled to vote, represented in person or by proxy, shall constitute a quorum
at a meeting of shareholders. If less than a majority of the outstanding shares
is represented at a meeting, a majority of the shares so represented may adjourn
the meeting from time to time without further notice. At such adjourned meeting
at which a quorum shall be present or represented, any business may be
transacted which might have been transacted at the meeting as originally
notified. The shareholders present at a duly organized meeting may continue to
transact business until adjournment, notwithstanding the withdrawal of enough
shareholders to constitute less than a quorum. If a quorum is present the
affirmative vote of the majority of the shares represented at the meeting and
entitled to vote on the subject matter shall be the act of the shareholders,
unless the vote of a greater number of shareholders voting together or voting by
classes is required by law or the charter. Directors, however, are elected by a
plurality of the votes cast at an election of directors.
Section 9. Proxies. At all meetings of shareholders, a shareholder may
vote by proxy executed in writing by the shareholder or by his or her duly
authorized attorney in fact. Proxies may be given telephonically or
electronically as long as the holder uses a procedure for verifying the identity
of the shareholder. Proxies solicited on behalf of the management shall be voted
as directed by the shareholder or, in the absence of such direction, as
determined by a majority of the Board of Directors. No proxy shall be valid more
than eleven months from the date of its execution except for a proxy coupled
with an interest.
Section 10. Voting of Shares in the Name of Two or More Persons. When
ownership stands in the name of two or more persons, in the absence of written
directions to the Company to the contrary, at any meeting of the shareholders of
the Company any one ore more of such shareholders may cast, in person or by
proxy, all votes to which such ownership is entitled. In the event an attempt is
made to cast conflicting votes, in person or by proxy, by the several persons in
whose names shares of stock stand, the vote or votes to which those persons are
entitled shall be cast as directed by a majority of those holding such and
present in person or by proxy at such meeting, but no votes shall be cast for
such stock if a majority cannot agree.
Section 11. Voting of Shares of Certain Holders. Shares standing in the
name of another corporation may be voted by any officer, agent, or proxy as the
bylaws of such corporation may prescribe, or, in the absence of such provision,
as the Board of Directors of such corporation may determine. Shares held by an
administrator, executor, guardian, or conservator may be voted by him or her,
either in person or by proxy, without a transfer of such shares into his or her
name. Shares standing in the name of a trustee may be voted by him or her,
either in person or by proxy, but no trustee shall be entitled to vote shares
held by him or her without a transfer of such shares into his name. Shares held
in trust in an IRA or Keogh Account, however, may be voted by the Company if no
other instructions are received. Shares standing in the name of a receiver may
be voted by such receiver, and shares held by or under the control
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of a receiver may be voted by such receiver without the transfer into his or her
name if authority to do so is contained in an appropriate order of the court or
other public authority by which such receiver was appointed.
A shareholder whose shares are pledged shall be entitled to vote such
shares until the shares have been transferred into the name of the pledgee, and
thereafter the pledgee shall be entitled to vote the shares so transferred.
Neither treasury shares of its own stock held by the Company nor shares
held by another corporation, if a majority of the shares entitled to vote for
the election of directors of such other corporation are held by the Company,
shall be voted at any meeting or counted in determining the total number of
outstanding shares at any given time for purposes of any meeting.
Section 12. Cumulative Voting. Stockholders may not cumulate their
votes for election of directors.
Section 13. Inspectors of Election. In advance of any meeting of
shareholders, the Board of Directors may appoint any person other than nominees
for office as inspectors of election to act at such meeting or any adjournment.
The number of inspectors shall be either one or three. Any such appointment
shall not be altered at the meeting. If inspectors of election are not so
appointed, the chairman of the board or the president may, or on the request of
not fewer than 10 percent of the votes represented at the meeting shall, make
such appointment at the meeting. If appointed at the meeting, the majority of
the votes present shall determine whether one or three inspectors are to be
appointed. In case any person appointed as inspector fails to appear or fails or
refuses to act, the vacancy may be filled by appointment by the Board of
Directors in advance of the meeting or at the meeting by the chairman of the
board or the president.
Unless otherwise prescribed by regulations of the Office, the duties of
such inspectors shall include: determining the number of shares and the voting
power of each share, the shares represented at the meeting, the existence of a
quorum, and the authenticity, validity and effect of proxies; receiving votes,
ballots, or consents; hearing and determining all challenges and questions in
any way arising in connection with the rights to vote; counting and tabulating
all votes or consents; determining the result; and such acts as may be proper to
conduct the election or vote with fairness to all shareholders.
Section 14. Nominating Committee. The Board of Directors shall act as a
nominating committee for selecting the management nominees for election as
directors. Except in the case of a nominee substituted as a result of the death
or other incapacity of a management nominee, the nominating committee shall
deliver written nominations to the secretary at least 20 days prior to the date
of the annual meeting. Upon delivery, such nominations shall be posted in a
conspicuous place in each office of the Company. No nominations for directors
except those made by the nominating committee shall be voted upon at the annual
meeting unless other nominations by shareholders are made in writing and
delivered to the secretary of the Company at least five days prior to the date
of the annual meeting. Upon delivery, such nominations shall be posted in a
conspicuous place in each office of the Company. Ballots bearing the names of
all persons nominated by the nominating committee and by shareholders shall be
provided for use at the annual meeting. However, if the nominating committee
shall fail or refuse to act at least 20 days prior to the annual meeting,
nominations for directors may be made at the annual meeting by any shareholder
entitled to vote and shall be voted upon.
Section 15. New Business. Any new business to be taken up at the annual
meeting shall be stated in writing and filed with the secretary of the Company
at least five days prior to the date of the annual meeting, and all business so
stated, proposed, and filed shall be considered at the annual meeting; but no
other proposal shall be acted upon at the annual meeting. Any shareholder may
make any other proposal at the annual meeting and the same may be discussed and
considered, but unless stated in writing and filed with the secretary at least
five days before the meeting, such proposal shall be laid over for action at an
adjourned, special or annual meeting of the shareholders taking place 30 days or
more thereafter. This provision shall not prevent the consideration and approval
or disapproval at the annual meeting of reports
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of officers, directors, and committees; but in connection with such reports, no
new business shall be acted upon at such annual meeting unless stated and filed
as herein provided.
Section 16. Informal Action by Shareholders. Any action required to be
taken at a meeting of the shareholders, or any other action which may be taken
at a meeting of shareholders, may be taken without a meeting if consent in
writing, setting forth the action to be taken, shall be given by all of the
shareholders entitled to vote with respect to the subject matter.
ARTICLE III - Board of Directors
Section 1. General Powers. The business and affairs of the Company
shall be under the direction of its Board of Directors. The Board of Directors
shall annually elect a chairman of the board and a president from among its
members and shall designate, when present, either the chairman of the board or
the president to preside at its meetings.
Section 2. Number and Term. The Board of Directors shall consist of
_____ members and shall be divided into three classes as nearly equal in number
as possible. The members of each class shall be elected for a term of three
years and until their successors are elected and qualified. One class shall be
elected by ballot annually.
Section 3. Regular Meetings. A regular meeting of the Board of
Directors shall be held without other notice than this bylaw following the
annual meeting of shareholders. The Board of Directors may provide, by
resolution, the time and place for the holding of additional regular meetings
without notice other than such resolution. Directors may participate in a
meeting by means of a conference telephone or similar communications device
through which all persons participating can hear each other at the same time.
Participation by such means shall constitute presence in person for all
purposes.
Section 4. Qualification. Each director shall at all times be the
beneficial owner of not less than 100 shares of capital stock of the Company
unless the company is a wholly-owned subsidiary of a holding company.
Section 5. Special Meetings. Special meetings of the Board of Directors
may be called by or at the request of the chairman of the board, the president
or one-third of the directors. The persons authorized to call special meetings
of the Board of Directors may fix any place, within the Company's normal lending
territory, as the place for holding any special meeting of the Board of
Directors called by such persons.
Members of the Board of Directors may participate in special meetings
by means of conference telephone or similar communications equipment by which
all persons participating in the meeting can hear each other. Such participation
shall constitute presence in person for all purposes.
Section 6. Notice. Written notice of any special meeting shall be given
to each director at least 24 hours prior thereto when delivered personally or by
telegram or at least five days prior thereto when delivered by mail at the
address at which the director is most likely to be reached. Such notice shall be
deemed to be delivered when deposited in the mail so addressed, with postage
prepaid if sent by mail, when delivered to the telegraph company if sent by
telegram or when the Company receives notice of delivery if electronically
transmitted. Any director may waive notice of any meeting by a writing filed
with the secretary. The attendance of a director at a meeting shall constitute a
waiver of notice of such meeting, except where a director attends a meeting for
the express purpose of objecting to the transaction of any business because the
meeting is not lawfully called or convened. Neither the business to be
transacted at, nor the purpose of, any meeting of the Board of Directors need be
specified in the notice of waiver of notice of such meeting.
Section 7. Quorum. A majority of the number of directors fixed by
Section 2 of this Article III shall constitute a quorum for the transaction of
business at any meeting of the Board of Directors; but if less than such
majority is present at a meeting, a majority of the directors present may
adjourn the meeting
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from time to time. Notice of any adjourned meeting shall be given in the same
manner as prescribed by Section 5 of this Article III.
Section 8. Manner of Acting. The act of the majority of the directors
present at a meeting at which a quorum is present shall be the act of the Board
of Directors, unless a greater number is prescribed by regulation of the Office
or by these bylaws.
Section 9. Action Without a Meeting. Any action required or permitted
to be taken by the Board of Directors at a meeting may be taken without a
meeting if a consent in writing, setting forth the action so taken, shall be
signed by all of the directors.
Section 10. Resignation. Any director may resign at any time by sending
a written notice of such resignation to the home office of the Company addressed
to the chairman of the board or the president. Unless otherwise specified, such
resignation shall take effect upon receipt by the chairman of the board or the
president. More than three consecutive absences from regular meetings of the
Board of Directors, unless excused by resolution of the Board of Directors,
shall automatically constitute a resignation, effective when such resignation is
accepted by the Board of Directors.
Section 11. Vacancies. Any vacancy occurring on the Board of Directors
may be filled by the affirmative vote of a majority of the remaining directors
although less than a quorum of the Board of Directors. A director elected to
fill a vacancy shall be elected to serve until the next election of directors by
the shareholders. Any directorship to be filled by reason of an increase in the
number of directors may be filled by election by the Board of Directors for a
term of office continuing only until the next election of directors by the
shareholders.
Section 12. Compensation. Directors, as such, may receive a stated
salary for their services. By resolution of the Board of Directors, a reasonable
fixed sum, and reasonable expenses of attendance, if any, may be allowed for
actual attendance at each regular or special meeting of the Board of Directors.
Members of either standing or special committees may be allowed such
compensation for actual attendance at committee meetings as the Board of
Directors may determine.
Section 13. Presumption of Assent. A director of the Company who is
present at a meeting of the Board of Directors at which action on any Company
matter is taken shall be presumed to have assented to the action taken unless
his or her dissent or abstention shall be entered in the minutes of the meeting
or unless he or she shall file a written dissent to such action with the person
acting as the secretary of the meeting before the adjournment thereof or shall
forward such dissent by registered mail to the secretary of the Company within
five days after the date a copy of the minutes of the meeting is received. Such
right to dissent shall not apply to a director who voted in favor of such
action.
Section 14. Removal of Directors. At a meeting of shareholders called
expressly for that purpose, any director may be removed for cause by a vote of
the holders of a majority of the shares then entitled to vote at an election of
directors. Whenever the holders of the shares of any class are entitled to elect
one or more directors by the provisions of the charter or supplemental sections
thereto, the provisions of this section shall apply, in respect to the removal
of a director or directors so elected, to the vote of the holders of the
outstanding shares of that class and not to the vote of the outstanding shares
as a whole.
ARTICLE IV - Executive And Other Committees
Section 1. Appointment. The Board of Directors, by resolution adopted
by a majority of the full board, may designate the chief executive officer and
two or more of the other directors to constitute an executive committee. The
designation of any committee pursuant to this Article IV and the delegation of
authority shall not operate to relieve the Board of Directors, or any director,
of any responsibility imposed by law or regulation.
Section 2. Authority. The executive committee, when the Board of
Directors is not in session, shall have and may exercise all of the authority of
the Board of Directors except to the extent, if any, that
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such authority shall be limited by the resolution appointing the executive
committee; and except also that the executive committee shall not have the
authority of the Board of Directors with reference to: the declaration of
dividends; the amendment of the charter or bylaws of the Company or recommending
to the shareholders a plan of merger, consolidation, or conversion; the sale,
lease, or other disposition of all or substantially all of the property and
assets of the Company otherwise than in the usual and regular course of its
business; a voluntary dissolution of the Company; a revocation of any of the
foregoing; or the approval of a transaction in which any member of the executive
committee, directly or indirectly, has any material beneficial interest.
Section 3. Tenure. Subject to the provisions of Section 8 of this
Article IV, each member of the executive committee shall hold office until the
next regular annual meeting of the Board of Directors following his or her
designation and until a successor is designated as a member of the executive
committee.
Section 4. Meetings. Regular meetings of the executive committee may be
held without notice at such times and places as the executive committee may fix
from time to time by resolution. Special meetings of the executive committee may
be called by any member thereof upon not less than one days notice stating the
place, date, and hour of the meeting, which notice may be written or oral. Any
member of the executive committee may waive notice of any meeting and no notice
of any meeting need be given to any member thereof who attends in person. The
notice of a meeting of the executive committee need not state the business
proposed to be transacted at the meeting.
Section 5. Quorum. A majority of the members of the executive committee
shall constitute a quorum for the transaction of business at any meeting
thereof, and action of the executive committee must be authorized by the
affirmative vote of a majority of the members present at a meeting at which a
quorum is present.
Section 6. Action Without a Meeting. Any action required or permitted
to be taken by the executive committee at a meeting may be taken without a
meeting if a consent in writing, setting forth the action so taken, shall be
signed by all of the members of the executive committee.
Section 7. Vacancies. Any vacancy in the executive committee may be
filled by a resolution adopted by a majority of the full Board of Directors.
Section 8. Resignations and Removal. Any member of the executive
committee may be removed at any time with or without cause by resolution adopted
by a majority of the full Board of Directors. Any member of the executive
committee may resign from the executive committee at any time by giving written
notice to the president or secretary of the Company. Unless otherwise specified,
such resignation shall take effect upon its receipt; the acceptance of such
resignation shall not be necessary to make it effective.
Section 9. Procedure. The executive committee shall elect a presiding
officer from its members and may fix its own rules of procedure which shall not
be inconsistent with these bylaws. It shall keep regular minutes of its
proceedings and report the same to the Board of Directors for its information at
the meeting held next after the proceedings shall have occurred.
Section 10. Other Committees. The Board of Directors may by resolution
establish an audit, loan, or other committee composed of directors as they may
determine to be necessary or appropriate for the conduct of the business of the
Company and may prescribe the duties, constitution, and procedures thereof.
ARTICLE V - Officers
Section 1. Positions. The officers of the Company shall be a president,
one or more vice presidents, a secretary and a treasurer, each of whom shall be
elected by the Board of Directors. The Board of Directors also may designate the
chairman of the board as an officer. The president shall be the chief executive
officer, unless the Board of Directors designates the chairman of the board as
chief
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executive officer. The president shall be a director of the Company. The offices
of the secretary and treasurer may be held by the same person and a vice
president also may be either the secretary or the treasurer. The Board of
Directors may designate one or more vice presidents as executive vice president
or senior vice president. The Board of Directors also may elect or authorize the
appointment of such other officers as the business of the Company may require.
The officers shall have such authority and perform such duties as the Board of
Directors may from time to time authorize or determine. In the absence of action
by the Board of Directors, the officers shall have such powers and duties as
generally pertain to their respective offices.
Section 2. Election and Term of Office. The officers of the Company
shall be elected annually at the first meeting of the Board of Directors held
after each annual meeting of the shareholders. If the election of officers is
not held at such meeting, such election shall be held as soon thereafter as
possible. Each officer shall hold office until a successor has been duly elected
and qualified or until the officers death, resignation, or removal in the manner
hereinafter provided. Election or appointment of an officer, employee, or agent
shall not of itself create contractual rights. The Board of Directors may
authorize the Company to enter into an employment contract with any officer in
accordance with regulations of the Office; but no such contract shall impair the
right of the Board of Directors to remove any officer at any time in accordance
with Section 3 of this Article V.
Section 3. Removal. Any officer may be removed by the Board of
Directors whenever in its judgment the best interests of the Company will be
served thereby, but such removal, other than for cause, shall be without
prejudice to any contractual rights of the person so removed.
Section 4. Vacancies. A vacancy in any office because of death,
resignation, removal, disqualification, or otherwise may be filled by the Board
of Directors for the unexpired portion of the term.
Section 5. Remuneration. The remuneration of the officers shall be
fixed from time to time by the Board of Directors.
ARTICLE VI - Contracts, Loans, Checks, and Deposits
Section 1. Contracts. To the extent permitted by regulations of the
Office, and except as otherwise prescribed by these bylaws with respect to
certificates for shares, the Board of Directors may authorize any officer,
employee or agent of the Company to enter into any contract or execute and
deliver any instrument in the name of and on behalf of the Company. Such
authority may be general or confined to specific instances.
Section 2. Loans. No loans shall be contracted on behalf of the
Company and no evidence of indebtedness shall be issued in its name unless
authorized by the Board of Directors. Such authority may be general or confined
to specific instances.
Section 3. Checks, Drafts, etc. All checks, drafts, or other orders for
the payment of money, notes, or other evidences of indebtedness issued in the
name of the Company shall be signed by one or more officers, employees, or
agents of the Company in such manner as shall from time to time be determined by
the Board of Directors.
Section 4. Deposits. All funds of the Company not otherwise employed
shall be deposited from time to time to the credit of the association in any
duly authorized depositors as the Board of Directors may select.
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ARTICLE VII - Certificates for Shares and Their Transfer
Section 1. Certificates for Shares. Certificates representing shares of
capital stock of the Company shall be in such form as shall be determined by the
Board of Directors and approved by the Office. Such certificates shall be signed
by the chief executive officer or by any other officer of the Company authorized
by the Board of Directors, attested by the secretary or an assistant secretary,
and sealed with the corporate seal or a facsimile thereof. The signature of such
officers upon a certificate may be facsimiles if the certificate is manually
signed on behalf of a transfer agent or a registrar other than the Company
itself or one of its employees. Each certificate for shares of capital stock
shall be consecutively numbered or otherwise identified. The name and address of
the person to whom the shares are issued, with the number of shares and date of
issue, shall be entered on the stock transfer books of the Company. All
certificates surrendered to the Company for transfer shall be canceled and no
new certificate shall be issued until the former certificate for a like number
of shares has been surrendered and canceled, except that in the case of a lost
or destroyed certificate, a new certificate may be issued upon such terms and
indemnity to the Company as the Board of Directors may prescribe.
Section 2. Transfer of Shares. Transfer of shares of capital stock of
the Company shall be made only on its stock transfer books. Authority for such
transfer shall be given only by the holder of record or by his or her legal
representative, who shall furnish proper evidence of such authority, or by his
or her attorney authorized by a duly executed power of attorney and filed with
the Company. Such transfer shall be made only on surrender for cancellation of
the certificate for such shares. The person in whose name shares of capital
stock stand on the books of the Company shall be deemed by the Company to be the
owner for all purposes.
ARTICLE VIII - Fiscal Year; Annual Audit
The fiscal year of the Company shall end on the last day of December of
each year. The Company shall be subject to an annual audit as of the end of its
fiscal year by independent public accountants appointed by and responsible to
the Board of Directors.
ARTICLE IX - Dividends
Subject only to the terms of the Company's charter and the regulations
and orders of the Office, the Board of Directors may, from time to time declare,
and the Company may pay, dividends on its outstanding shares of capital stock.
ARTICLE X - Corporate Seal
The Board of Directors shall provide a Company seal which shall be two
concentric circles between which shall be the name of the Company. The year of
incorporation or an emblem may appear in the center.
ARTICLE XI - Amendments
These bylaws may be amended in a manner consistent with regulations of
the Office and shall be effective after: (i) approval of the amendment by a
majority vote of the authorized Board of Directors, or by a majority vote of the
votes cast by the shareholders of the Company at any legal meeting; and (ii)
receipt of any applicable regulatory approval. When a Company fails to meet its
quorum requirements, solely due to vacancies on the board, then the affirmative
vote of a majority of the sitting board will be required to amend the bylaws.
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REVOCABLE PROXY
PATHFINDER BANCORP, INC.
ANNUAL MEETING OF SHAREHOLDERS
April 25, 2001
The undersigned hereby appoints the official proxy committee consisting
of the Board of Directors with full powers of substitution to act as attorneys
and proxies for the undersigned to vote all shares of Common Stock of the
Company which the undersigned is entitled to vote at the Annual Meeting of
Shareholders ("Annual Meeting") to be held at the Econolodge, 90 East Bridge
Street, Oswego, New York on April 25, 2001, at 10:00 a.m. The official proxy
committee is authorized to cast all votes to which the undersigned is entitled
as follows:
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VOTE
FOR WITHHELD
--- --------
(except as
marked to
the contrary
1. The election as Directors of all nominees listed below)
below each to serve for a three-year term _ _
|_| |_|
Steven W. Thomas
Corte J. Spencer
Janette Resnick
INSTRUCTION: To withhold your vote for one or more
nominees, write the name of the nominee(s) on the line(s) below.
------------------------------
------------------------------
FOR AGAINST ABSTAIN
2. The approval of the Plan of Charter Conversion --- ------- -------
by which the Company will convert its charter _ _ _
from a Delaware corporation to a Federal |_| |_| |_|
corporation.
FOR AGAINST ABSTAIN
3. The ratification of PricewaterhouseCoopers, LLP --- ------- -------
as the Company's independent auditor for the _ _ _
fiscal year ended December 31, 2001. |_| |_| |_|
The Board of Directors recommends a vote "FOR" Proposal 1, Proposal 2 and
Proposal 3.
THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS ARE SPECIFIED, THIS
PROXY WILL BE VOTED FOR THE SPECIFIED PROPOSALS. IF ANY OTHER BUSINESS IS
PRESENTED AT SUCH ANNUAL 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 ANNUAL MEETING.
- --------------------------------------------------------------------------------
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
Should the undersigned be present and elect to vote at the Annual Meeting or at
any adjournment thereof and after notification to the Secretary of the Company
at the Annual Meeting of the shareholder's decision to terminate this proxy,
then the power of said attorneys and proxies shall be deemed terminated and of
no further force and effect. This proxy may also be revoked by sending written
notice to the Secretary of the Company at the address set forth on the Notice of
Annual Meeting of Shareholders, or by the filing of a later proxy prior to a
vote being taken on a
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particular proposal at the Annual Meeting.
The undersigned acknowledges receipt from the Company prior to the execution of
this proxy of notice of the Annual Meeting, a proxy statement dated March 30,
2001, and audited financial statements.
Dated: _________________________ --- Check Box if You Plan
--- to Attend Annual Meeting
- ------------------------------- -----------------------------------
PRINT NAME OF SHAREHOLDER PRINT NAME OF SHAREHOLDER
- ------------------------------- -----------------------------------
SIGNATURE OF SHAREHOLDER SIGNATURE OF SHAREHOLDER
Please sign exactly as your name appears on this card. When signing as attorney,
executor, administrator, trustee or guardian, please give your full title.
- --------------------------------------------------------------------------------
Please complete and date this proxy and return it promptly
in the enclosed postage-prepaid envelope.
- --------------------------------------------------------------------------------
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