CATSKILL
FINANCIAL CORPORATION
341 Main St.
Catskill, New York 12414
(518) 943-3600
January 20, 1998
Dear Fellow Stockholder:
On behalf of the Board of Directors and management of Catskill Financial
Corporation (the "Company"), we cordially invite you to attend our
Annual Meeting of Stockholders of the Company. The meeting will be
held at 7:00 p.m., New York time, on February 17, 1998 at the main
office of the Company located at 341 Main Street, Catskill, New York
12414.
At the meeting, stockholders will be asked to elect one director to
serve for a three year term. We urge you to exercise your rights as
a stockholder to vote and participate in this process. The Board of
Directors has nominated director Richard A. Marshall for the one available
seat on the Board. Your Board of Directors unanimously recommends
that you vote "For" this nominee.
Please read the enclosed Proxy Statement and then complete, sign and
date the enclosed proxy card and return it in the accompanying postage
prepaid return envelope as promptly as possible. We encourage you
to return the proxy card even if you plan to attend the meeting. This
will save the Company additional expense in soliciting proxies and
will ensure that your shares are represented at the meeting.
Sincerely,
/s/ Wilbur J. Cross
Wilbur J. Cross
President, Chairman of the Board and
Chief Executive Officer
(This page is intentionally left blank.)
CATSKILL
FINANCIAL CORPORATION
341 MAIN ST.
CATSKILL, NEW YORK 12414
(518) 943-3600
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To be Held on February 17, 1998
Notice is hereby given that the Annual Meeting of Stockholders (the
"Meeting") of Catskill Financial Corporation (the "Company") will
be held at the main office of the Company located at 341 Main Street,
Catskill, New York 12414, at 7:00 p.m., New York time, on February
17, 1998.
A Proxy Card and a Proxy Statement for the Meeting are included with
this notice.
The Meeting is for the purpose of considering and acting upon:
1. The election of one director to serve for a three year term and
until his successor has been duly elected and qualified;
2. The ratification of the appointment of KPMG Peat Marwick LLP as
auditors for the Company for the fiscal year ending September 30,
1998; and
3. Such other matters as may properly come before the Meeting or any
adjournments thereof. The Board of Directors is not aware of any other
business to come before the Meeting.
Any action may be taken on the foregoing proposals at the Meeting
on the date specified above, or on any date or dates to which the
Meeting may be adjourned. Stockholders of record at the close of business
on January 15, 1998 (the "Record Date") are the stockholders entitled
to vote at the Meeting and any adjournments thereof.
You are requested to complete and sign the enclosed form of proxy,
which is solicited on behalf of the Board of Directors, and to mail
it promptly in the enclosed envelope. The proxy will not be used if
you attend and vote at the Meeting in person.
BY ORDER OF THE BOARD OF DIRECTORS
Catskill, New York
January 20, 1998
IMPORTANT: THE PROMPT RETURN OF PROXIES WILL SAVE THE COMPANY THE
EXPENSE OF FURTHER REQUESTS FOR PROXIES TO ENSURE A QUORUM AT THE
MEETING. A SELF ADDRESSED ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE.
NO POSTAGE IS REQUIRED IF MAILED WITHIN THE UNITED STATES.
PROXY STATEMENT
CATSKILL FINANCIAL CORPORATION
ANNUAL MEETING OF STOCKHOLDERS
FEBRUARY 17, 1998
This Proxy Statement is furnished in connection with the solicitation
on behalf of the Board of Directors of Catskill Financial Corporation
(the "Company"), the parent company of Catskill Savings Bank (the
"Bank"), of proxies to be used at the Annual Meeting of Stockholders
of the Company (the "Meeting") which will be held at the main office
of the Company located at 341 Main Street, Catskill, New York 12414,
on February 17, 1998, at 7:00 p.m., New York time, and all adjournments
of the Meeting. The accompanying Notice of Meeting and this Proxy
Statement are first being mailed to stockholders on or about January
21, 1998.
At the Meeting, stockholders of the Company are being asked to consider
and vote upon the election of one director for a three year term and
the ratification of the appointment of KPMG Peat Marwick LLP as the
auditors of the Company for the fiscal year ending September 30, 1998.
The Board of Directors has fixed January 15, 1998 as the Record Date
for determining stockholders entitled to notice of and to vote at
the Meeting. As of the Record Date there were 4,630,243 shares of
Common Stock, par value $.01 per share, issued and outstanding.
Vote Required and Proxy Information
Each share of the Company's Common Stock, par value $.01 per share
(the "Common Stock"), is entitled to one vote on each matter to come
before the Meeting. Directors are elected by a plurality of the votes
cast at the Meeting. There is no cumulative voting in the election
of directors. The ratification of the appointment of KPMG Peat Marwick
LLP requires the affirmative vote of a majority of the votes cast.
Properly executed proxies in the form solicited by the Board of Directors
which are received prior to or at the Meeting, and not revoked, will
be voted in accordance with the instructions thereon. If no instructions
are indicated, such proxies will be voted in favor of the nominee
named herein and in favor of the ratification of auditors. The Company
does not know of any matters, other than those described in this Proxy
Statement, that are to come before the Meeting. If any other matters
are properly presented at the Meeting for action, including the adjournment
of the Meeting, the persons named in the enclosed form of proxy will
have the discretion to vote on such matters in accordance with their
best judgment.
In order for any stockholder of the Company entitled to vote for the
election of directors to nominate a person to the Board of Directors
at the Meeting, such stockholder must deliver to David L. Guldenstern,
Corporate Secretary, at the Company's address, a notice of nomination
in writing. Such notice, which must set forth the name and address
of the stockholder, the class and number of shares of the Company's
capital stock beneficially owned by such stockholder and the name
of each person such stockholder proposes to nominate for director
and all other information required under the Securities and Exchange
Act of 1934, shall be delivered or mailed to and received at the principal
offices of the Company not less than 60 days prior to the date of
the Meeting. In the event that less than 40 days notice of the meeting
is given to the stockholders, a notice of nomination must be received
by the Company not later than the close of business on the tenth day
following the date on which such notice of meeting was mailed or public
announcement first made.
Proxies marked to abstain with respect to any matter and broker non-votes
will not affect the vote. One-third of the shares of the Company's
Common Stock, present in person or represented by proxy, shall constitute
a quorum for purposes of the Meeting. Abstentions and broker non-votes
are counted as present for purposes of determining a quorum.
A proxy given pursuant to this solicitation may be revoked at any
time before it is voted. Proxies may be revoked by: (i) filing with
the Secretary of the Company at or before the Meeting a written notice
of revocation bearing a later date than the proxy, (ii) duly executing
a subsequent proxy relating to the same shares and delivering it to
the Secretary of the Company at or before the Meeting, or (iii) attending
the Meeting and voting in person (although attendance at the Meeting
will not in and of itself constitute revocation of a proxy). Any written
notice revoking a proxy must be delivered to David L. Guldenstern,
Corporate Secretary, Catskill Financial Corporation, 341 Main Street,
Catskill, New York 12414.
ELECTION OF DIRECTORS
The Board of Directors of the Company currently consists of six members.
The Board of Directors is divided into three classes and the Company's
bylaws provide that directors are elected for three-year terms. One
director will be elected at the 1998 Annual Meeting to hold office
until the Annual Meeting of Stockholders in the year 2001 and until
his successor has been elected and qualified. There is only one directorship
up for election this year because of the death of a director prior
to the last annual meeting and a resulting decrease in the size of
the Board. The nominee named below has consented to being named herein
and to serve if elected. In case the nominee becomes unavailable for
election for any presently unforeseen reason, the persons authorized
to cast the votes represented by the enclosed proxy will have the
right to use their discretion to vote for a substitute.
INFORMATION CONCERNING THE BOARD OF
DIRECTORS AND EXECUTIVE OFFICERS
Set forth below is certain information, as of September 30, 1997,
with respect to the nominee for director, continuing directors in
office and executive officers who are not directors. There are no
arrangements or understandings pursuant to which any director was
selected to serve as such, and there are no family relationships between
any directors or executive officers of the Company.
<TABLE>
DIRECTOR NOMINATED FOR TERMS EXPIRING IN 2001
<CAPTION>
Company
Director Term as Director
Name and Age Position With the Company and the Bank Since Expires
<S> <C> <C> <C>
Richard A. Marshall, 57 Director of the Company and the Bank 1995 1998
</TABLE>
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
THAT STOCKHOLDERS VOTE IN FAVOR OF THIS NOMINEE
<TABLE>
CONTINUING DIRECTORS
<CAPTION>
Company
Director Term as Director
Name and Age Position With the Company and the Bank Since Expires
<S> <C> <C> <C>
Wilbur J. Cross, 55 Director, Chairman of the Board, 1995 1999
President and Chief Executive
Officer of the Company and the Bank
Allan D. Oren, 56 Director of the Company and the Bank 1995 1999
Edward P. Stiefel, Esq., 50 Director of the Company and the Bank 1995 1999
George P. Jones, 58, Director of the Company and the Bank 1995 2000
Hugh J. Quigley, 48 Director of the Company and the Bank 1995 2000
</TABLE>
Board of Directors--Biographical Information
Business experience for the directors listed below comprises experience
for at least the past five years.
Wilbur J. Cross. Mr. Cross is Chairman of the Board, President and
Chief Executive Officer of the Company and the Bank. He has been a
director of the Bank since 1979 and President and Chief Executive
Officer since 1984. Mr. Cross is also President of the Catskill Mountain
Housing Development Corp., a non-profit organization providing financial
counseling and housing to low to moderate income residents of Greene
County, New York, and Treasurer and Director of the Columbia-Greene
Community Foundation, Inc., which provides financial assistance to
college students from low to moderate income families.
George P. Jones. Mr. Jones is the President of STG Company, a real
estate development company located in Greenville, New York. Mr. Jones
also serves as Vice President of the Greenville Chamber of Commerce.
Mr. Jones has been a director of the Bank since 1988.
Richard A. Marshall. Mr. Marshall is the President of Marshall's
Garage, an automotive service station, and Marshall's Auto Exchange,
an automobile dealership, both of which are located in Ravena, New
York. He also is a member of the Capital District Automobile Dealers
Association, a philanthropic organization located in Albany, New York.
Mr. Marshall has been a director of the Bank since 1987.
Allan D. Oren. Mr. Oren is President of A. Oren & Sons Furniture
Stores headquartered in Catskill. Mr. Oren also serves as a Director
of the Quantum Fund, which provides low interest rate loans to small
businesses in the Greene County area, and Vice President of the
Columbia-Greene Community Foundation, Inc. Mr. Oren has been a director
of the Bank since 1973.
Hugh J. Quigley. Mr. Quigley is President of Dynabil Industries,
a company located in Greene County which manufactures aircraft and
aerospace parts. He also serves as Vice Chairman of the Greene County
Industrial Development Corp., which promotes industrial development
in Greene County, and is a member of the Columbia-Greene Community
Foundation, Inc. Mr. Quigley has been a director of the Bank since
1991.
Edward P. Stiefel, Esq. Mr. Stiefel is a principal in the law firm
of Stiefel & Winans, Catskill, New York and has been engaged in the
practice of law in Catskill since 1972. Mr. Stiefel also serves as
a Trustee of the Pioneer Insurance Company. From time to time, Stiefel
& Winans provides legal services to the Bank. Mr. Stiefel has been
a director of the Bank since 1976.
Executive Officers Who Are Not Directors
Executive officers are elected for one year terms and serve at the
pleasure of the Board of Directors. Provided below is certain information
regarding the executive officers of the Company and the Bank who are
not directors.
David J. DeLuca. Mr. DeLuca, age 45, has been Vice President and
Chief Financial Officer of the Company and the Bank since August 1996.
Mr. DeLuca was Senior Vice President and Corporate Controller of KeyCorp,
a bank holding company, from 1987 to 1994 and Senior Vice President
and Manager of Corporate Planning and Forecasting of KeyCorp from
1994 to 1996.
David L. Guldenstern. Mr. Guldenstern, age 54, is Vice President
and Secretary of the Bank, positions he has held since 1984. Mr. Guldenstern
is Vice President and Secretary of the Company. Mr. Guldenstern initially
joined the Bank in 1970.
Deborah S. Henderson. Ms. Henderson, age 44, has been employed by
the Bank since 1973 and has served as Vice President and Senior Loan
Officer since 1988.
William J. Moore. Mr. Moore, age 47, has been Vice President and
Treasurer of the Bank since 1993. Prior to such time, Mr. Moore served
as Treasurer and Internal Auditor. Mr. Moore joined the Bank in 1972.
Mr. Moore is Vice President and Treasurer of the Company.
Meetings of the Board of Directors and Certain Committees
The Company's Board of Directors held 8 meetings during the 1997 fiscal
year, being the period from October 1, 1996 through September 30,
1997. Each of the directors of the Company is also a director of the
Bank. The Board of Directors of the Company has an Examining (Audit)
Committee and a Stock Option Plan and Management Recognition Plan
("SOP and MRP") Committee. The entire Board of Directors acts as a
nominating committee. The Bank has a Compensation Committee and an
Executive Committee.
The Examining (Audit) Committee of the Company, which also serves
as the audit committee of the Bank, consists of directors Jones, and
Quigley and Stiefel. The Examining Committee (i) recommends and maintains
communications with the independent auditors; (ii) reviews the status
of the annual audit; and (iii) supervises the Bank's internal auditor.
The committee last met in August 1995. During fiscal 1997, in light
of the conversion of the Bank to the stock form of ownership and the
more comprehensive financial statement audit that was conducted in
connection therewith, the entire Board of Directors performed the
functions of the Examining Committee for fiscal 1997.
The SOP and MRP Committee consists of directors Marshall, Oren and
Stiefel. The committee is responsible for determining and approving
awards under the Company's Stock Option Plan and Management Recognition
Plan. The committee also establishes rules and standards applicable
to awards under those plans, as permitted by the plans. The committee
met 3 times during the 1997 fiscal year.
The Compensation Committee of the Bank consists of directors Marshall,
Oren and Stiefel. Mr. Cross is a non-voting ex officio member of the
committee but he does not participate in decisions regarding his own
compensation. The committee is responsible for determining officer
and employee compensation and addresses other personnel matters. The
committee met 10 times during the 1997 fiscal year.
The Executive Committee has the authority to approve security and
loan transactions and to exercise most powers of the Board of Directors
in the intervals between meetings of the Board. Any actions of this
committee are reported to the Board at its next meeting. The committee
met 16 times during the 1997 fiscal year.
The Board of Directors will consider nominees for directorships submitted
by stockholders. Any stockholder desiring to propose a person as a
possible director should submit in writing a detailed resume of such
person and a statement of such persons knowledge, expertise and experience
in banking and financial matters.
Voting Securities and Certain Holders Thereof
Stockholders of record as of the close of business on the Record Date
will be entitled to one vote for each share of Common Stock then held.
The following table sets forth information as of December 22, 1997
regarding share ownership of (i) those persons or entities known by
management to own beneficially more than five percent of the Common Stock,
(ii) each of the Company's directors, (iii) each officer of the Company
and the Bank who made in excess of $100,000 (salary and bonus) during
the fiscal year ended September 30, 1997 (the "Named Officers"); and (iv)
all directors and executive officers of the Company and the Bank as a group.
Except for ownership of shares of stock by the Company's Employee Stock
Ownership Plan, Keefe Managers, Inc. and Thomson Horstmann & Bryant, Inc.
(two investment advisory companies which each beneficially own shares of
the Company's common stock on behalf of its clients pursuant to Rule
13G filing under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), the Company is unaware of any person or group owning
five percent or more of the Common Stock as of the Record Date.
<TABLE>
<CAPTION>
Shares Beneficially Owned Percent
Beneficial Owner at December 22, 1997<F1> of Class<F2>
<S> <C> <C>
Catskill Financial Corporation Employee
Stock Ownership Plan<F3>
341 Main Street, Catskill, New York 12414 420,844 8.6%
Keefe Managers, Inc.<F4>
375 Park Avenue, New York, New York 10152 294,000 6.0%
Thomson Horstmann & Bryant, Inc.(F4>
Park 80 West, Plaza Two,
Saddle Brook, New Jersey 07663 344,000 7.0%
Wilbur J. Cross, President
Chairman of the Board and
Chief Executive Officer 86,232<F5> 1.8%
George P. Jones, Director 21,485<F6> *
Richard A. Marshall, Director 52,868<F7> 1.1%
Allan D. Oren, Director 66,564 1.4%
Hugh J. Quigley, Director 24,180<F8> *
Edward P. Stiefel, Esq., Director 41,785 *
David J. DeLuca, Vice President
and Chief Financial Officer 25,000<F9> *
Directors and executive officers of
the Company and the Bank,
as a group (10 persons) 384,443<F10> 7.9%
<FN>
<F1>Amount includes shares held directly, as well as shares allocated
to such individuals under the Catskill Financial Corporation Employee
Stock Ownership Plan ("ESOP"), and other shares with respect to which
a person may be deemed to have sole voting and/or investment power.
The table also includes 11,373 shares awarded to each non-employee
director pursuant to the Company's Management Recognition Plan (the
"MRP") which 80% are not vested and cannot be voted at the Meeting.
The table includes 20% of the options granted to directors pursuant
to the Company's Stock Option and Incentive Plan (the "Stock Option
Plan") (5,687 shares per director) because they were exercisable on
the Record Date or within 60 days thereafter.
<F2>Based upon 4,898,000 shares outstanding on December 22, 1997, which
includes 145,489 shares issued but unvested under the Company's MRP plan
and stock options for 75,669 shares exercisable on the Record Date
or within 60 days thereafter. An asterisk ("*") means less than 1%.
<F3>Excludes 34,096 shares allocated to ESOP participants. First Bankers
Trust Co., N.A., the trustee of the ESOP, may be deemed to own beneficially
the unallocated shares held by the ESOP. Unallocated shares and allocated
shares for which no voting instructions are received are voted in
the same proportion as allocated shares voted by participants.
<F4>Shares are beneficially owned by an investment advisory company
on behalf of certain of its clients and are estimated based upon Rule
13G or Rule 13D filings pursuant to the Exchange Act and other publicly
available information.
<F5>Includes 200 shares owned by Mr. Cross's wife, as to which he disclaims
beneficial ownership; 4,430 shares allocated to Mr. Cross in the ESOP;
51,867 MRP shares of which 6,373 are vested and can be voted; and
28,434 shares which Mr. Cross had the right to acquire on the Record
Date or within 60 days thereafter pursuant to the Stock Option Plan.
<F6>Includes 425 shares owned by Mr. Jones' daughter, as to which he
disclaims beneficial ownership.
<F7>Includes 5,000 shares owned by Mr. Marshall's wife and 3,000 shares
owned by Mr. Marshall's daughters, as to which he disclaims beneficial
ownership.
<F8>Includes 7,120 shares owned by Mr. Quigley's wife's Individual Retirement
Account, as to which he disclaims beneficial ownership.
<F9>Includes 18,000 MRP shares of which 3,100 are vested and can be
voted; and 7,000 shares which Mr. DeLuca had the right to acquire
on the Record Date or within 60 days thereafter pursuant to the Stock
Option Plan.
<F10>Includes 10,387 ESOP shares and 97,867 MRP shares allocated or awarded
to executive officers and 56,865 MRP shares awarded to directors.
Only vested MRP shares totaling 29,243 can be voted at the meeting.
Also includes 47,234 stock options granted to executive officers and
28,435 stock options granted to directors, representing options exercisable
on the Record Date or within 60 days thereafter.
</TABLE>
Director Compensation
The non-employee directors of the Bank are paid a fee of $1,000 for
each regular meeting of the Bank's Board. Non-employee directors also
receive $200 per meeting for attendance at Executive, Examining, and
Compensation Committee Meetings. Directors may defer their fees until
retirement, as defined in the deferral plan. The Company accrues a
liability for the deferred fees as they are earned. While no fees
are presently paid for attendance at meetings of the Board or committees
of the Company, such fees may be paid in the future.
Executive Compensation
The Company has not paid any compensation to its executive officers
since its formation. The Company does not presently anticipate paying
any compensation to such persons until it becomes actively involved
in the operation or acquisition of businesses other than the Bank
except for stock-based compensation pursuant to the Company's ESOP,
MRP and Stock Option Plan.
The following table sets forth information concerning the compensation
paid to the Named Officers for services in all capacities to the Bank
for the fiscal years ended September 30, 1997, 1996 and 1995.
<TABLE>
Summary Compensation Table
<CAPTION>
Long-Term
Annual Compensation Compensation Awards
Options/Stock
Restricted Appreciation
Name and Other Annual Stock Rights All Other
Principal Position Year Salary($) Bonus($) Compensation($)<F1> Awarded($)<F2> ("SARs")(#)<F3> Compensation($)<F4>
<S> <C> <C> <C> <C> <C> <C> <C>
Wilbur J. Cross, 1997 $182,876 None None $710,838 142,168 $5,617
President, 1996 $156,353 $10,000 None None None $5,161
Chairman of 1995 $140,000 None None None None $4,411
the Board
and Chief
Executive Officer
David J. DeLuca, 1997 $120,327 None None $234,688 45,000 $ 36
Vice President 1996 $ 18,577<F5> None None None None $ 8
and Chief
Financial Officer
<FN>
<F1>Neither Mr. Cross nor Mr. DeLuca received additional benefits or
perquisites which in the aggregate exceeded 10% of his respective
salary and bonus.
<F2>On September 30, 1997, Mr. Cross had 56,867 shares of restricted
stock with a value of $959,631 and Mr. DeLuca had 18,000 shares with
a value of $303,750, based upon a market price of $16.875 on that
date. The 56,867 shares of restricted stock awarded Mr. Cross, and
15,500 of the shares awarded to Mr. DeLuca, vested 20% on October
24, 1997, and an equal amount will vest on each of October 24, 1998,
1999, 2000 and 2001. The remaining 2,500 shares awarded to Mr. DeLuca
will vest 20% on August 19, 1998 and an equal amount will vest on
each of August 19, 1999, 2000, 2001 and 2002.
<F3>Pursuant to the Stock Option Plan, the Company granted Mr. Cross
options to purchase 142,168 shares of common stock on October 24,
1996. Also pursuant to the Stock Option Plan, the Company granted
Mr. DeLuca on October 24, 1996 and August 19, 1997, options to purchase
35,000 shares and 10,000 shares, respectively, of common stock.
<F4>Amount includes Company matching contribution accrued to Mr. Cross's
accounts under the Bank's 401(k) Plan of $5,418, $4,950 and $4,200
and life insurance premiums of $199, $211 and $211 for the 1997, 1996
and 1995 fiscal years, respectively, Mr. DeLuca received no 401(k)
Plan contributions but received a benefit of $36 and $8 in life insurance
premiums for the 1997 and 1996 fiscal years.
<F5>Mr. DeLuca's employment commenced on August 1, 1996.
</TABLE>
<TABLE>
OPTIONS GRANTS IN LAST FISCAL YEAR
<CAPTION>
Potential Realizable
Value at Assumed
Annual Rates of Stock
Price Appreciation
Individual Grants for Option Term<F1>
Percent of Total
Options Granted
Options Granted to Employees in Exercise or
(#)<F2> Fiscal Year Base Price Expiration Date 5% 10%
<S> <C> <C> <C> <C> <C> <C>
Wilbur J. Cross 142,168 50.0% $12.500 10/24/06 $1,117,608 $2,832,239
David J. DeLuca 35,000 12.3% $12.500 10/24/06 $ 275,141 $ 697,262
David J. DeLuca 10,000 3.5% $16.375 08/19/07 $ 102,981 $ 260,975
<FN>
<F1>Based upon the market price on the date of grant and an annual appreciation
at the rate stated (compounded annually) of such market price through
the expiration date of such options. The 5% and 10% appreciation rates
are set in Securities and Exchange Commission regulations and therefore
are not intended to forecast possible future appreciation, if any,
of the Company's stock price.
<F2>Options were granted ten years prior to the expiration dates shown.
On each of the first five anniversaries following the respective dates
of grant, 20% of the options granted will vest and become exercisable.
</TABLE>
<TABLE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<CAPTION>
Number of Securities Value of Unexercised In-The-Money
Underlying Unexercised Options Options at Fiscal Year End<F1>
Shares Acquired
Name on Exercise (#) Value Realized ($) Exercisable Unexercisable Exercisable Unexercisable
<S> <C> <C> <C> <C> <C> <C>
Wilbur J. Cross None -- 28,433 113,735 $124,394 $497,591
David J. DeLuca None -- 7,000 28,000 $ 30,625 $122,500
David J. DeLuca None -- None 10,000 -- $ 5,000
<FN>
<F1>Represents the difference between the market price of the Company's
common stock on September 30, 1997 and the exercise price for such
options.
</TABLE>
Employment Agreement and Severance Arrangements
The Bank has entered into an employment agreement with Wilbur J. Cross,
with an initial term of three years commencing on April 1, 1996 which
provides for annual extensions, subject to a performance evaluation
by disinterested members of the Board of Directors of the Bank having
no interest in any such agreements. Effective April 1, 1997, the agreement
with Mr. Cross was extended to expire March 31, 2000. The employment
agreement requires the payment of the employee's annual salary, bonus
and benefits by the Company and the Bank for the remaining term of
the contract unless the employee dies, voluntarily resigns or is terminated
for cause prior thereto.
The employment agreement also includes severance provisions, and provides
that Mr. Cross will be paid an amount equal to 299% of his compensation
and will be provided with continued health benefits for the remaining
term of the agreement in the event that his employment terminates
involuntarily in connection with a "change in control" of the Bank
or the Company, as defined in such agreement, or within twelve months
thereafter. For the purposes of the employment agreement, a "change
in control" is defined to include, among other things, any event which
would require the filing of an application for acquisition of control
or notice of change in control pursuant to 12 C.F.R. 574.3 or 4.
Such events are generally triggered upon the acquisition of control
of 10% of the Company's common stock. Based on his current salary,
if the employment of Mr. Cross had been involuntarily terminated as
of October 1, 1997, under circumstances entitling him to severance
pay as described above, he would have been entitled to receive a cash
payment of not more than $568,100.
On August 13, 1996, the Bank entered into a severance agreement with
David J. DeLuca with an initial term of two years. The agreement,
which provides for annual extensions, was extended for an additional
one year period on August 13, 1997. In the event of a "change in control,"
Mr. DeLuca will be entitled to receive a severance payment equal to
200% of his compensation. Based on his current salary, if the employment
of Mr. DeLuca had been involuntarily terminated as of October 1, 1997,
for circumstances entitling him to severance pay, he would have received
a cash severance payment of not more than $250,000. The severance
agreement does not guaranty a minimum period of employment with the
Bank and the Bank does not have any other employment agreement with
Mr. DeLuca.
The Bank does not currently have a supplemental retirement agreement
with Mr. Cross, Mr. DeLuca or any other officer providing additional
post-retirement benefits above those provided to employees generally
as described below. The Bank may decide to provide such additional
benefits in the future upon terms not now determined.
Retirement Income Plan. The Bank sponsors a defined benefit pension
plan for its employees (the "Pension Plan"). The Pension Plan is funded
solely through contributions made by the Bank.
The following table sets forth information showing the annual benefit
payable under the Pension Plan based upon average annual compensation
("Remuneration" in the table) and years of service calculated as shown
above. The Pension Plan also provides for disability and death benefits.
<TABLE>
Pension Plan Table
<CAPTION>
Years of Credited Service
Remuneration 15 20 25 30
<S> <C> <C> <C> <C>
$ 75,000 $22,500 $30,000 $37,500 $45,000
100,000 30,000 40,000 50,000 60,000
125,000 37,500 50,000 62,500 75,000
150,000 48,000 64,000 80,000 96,000
175,000 48,000 64,000 80,000 96,000
200,000 48,000 64,000 80,000 96,000
225,000 48,000 64,000 80,000 96,000
</TABLE>
The benefit provided to a participant at normal retirement age (generally
age 65) is based on the participant's average annual compensation
during the 36 consecutive months within the final 120 months of service
affording the highest such average ("average annual compensation").
Compensation for this purpose is the participant's base annual salary,
including any contributions through a salary reduction arrangement
to a cash or deferred plan under Section 401(k) of the Code, but exclusive
of overtime, bonuses or any other special payments. Compensation in
excess of $160,000 in the 1997 plan year may not be used to determine
average annual compensation. The annual benefit provided to a participant
who retires at age 65 is equal to 2% of average annual compensation
for each year of service, not to exceed 30 years. Pension benefits
are computed on a straight life annuity basis.
The annual benefit provided to participants (i) at "early retirement
age" (generally age 60) with at least five years of service who elect
to defer the payment of their benefits to normal retirement age, (ii)
at early retirement age with at least 30 years of service who elect
to receive payment of their benefits prior to normal retirement age,
or (iii) who commence receipt of their benefits beyond normal retirement
age, are calculated basically in the same way as the benefits for
normal retirement age, with average annual compensation being multiplied
by 2% for each year of such individual's actual years of service,
not to exceed 30 years. A participant eligible for early retirement
benefits who does not meet the requirements set forth above will have
his or her benefits adjusted as further described in the Pension Plan.
Mr. Cross had 35 years of service under the Pension Plan and Mr. DeLuca
had one month of service under the Pension Plan at September 30, 1997.
Employee Stock Ownership Plan. The Company established an Employee
Stock Ownership Plan (the "ESOP"), effective as of April 1996, which
invests primarily in common stock of the Company, and is designed
to qualify as a stock bonus plan under Section 401(a) of the Code
and also to meet the requirements of Section 4975(e)(7) of the Code
and Section 407(d)(6) of the Employee Retirement Income Security Act
of 1974 ("ERISA"). The ESOP was initially funded with a loan from
the Company (the "ESOP Loan") and the ESOP used the proceeds of that
loan to acquire 454,940 shares of stock of the Company in the Company's
initial public offering.
For the fiscal year ended September 30, 1997, the Bank contributed
$405,661 to the ESOP which was used to pay interest and principal
on the ESOP Loan. As a result, 22,722 shares of Common Stock were
released from the lien of the ESOP Loan and were available for allocation
to the accounts of individual participants. Of the shares allocated,
2,912 shares were allocated to Mr. Cross, and 3,877 shares were allocated
to the other executive officers of the Company and the Bank as a group.
Mr. DeLuca did not meet the minimum service requirements of the plan,
an therefore was ineligible to receive any shares thereunder in fiscal
1997.
Compensation Committee Report on Executive Compensation
In fulfillment of Securities and Exchange Commission's requirements
for disclosure in proxy materials of the Compensation Committee's
policies regarding compensation of executive officers, the Committee
has prepared the following report for inclusion in this proxy statement.
General Policy Considerations. The Board of Directors of the Bank
has delegated to the Compensation Committee the responsibility and
authority to oversee the general compensation policies of the Bank
and to establish compensation plans and specific compensation levels
for executive officers. The SOP and MRP Committee of the Company has
been delegated the responsibility and authority to oversee the implementation
of, and approve grants and awards under, the Company's Stock Option
and Incentive Plan and Management Recognition Plan. Because the SOP
and MRP Committee is composed of the same directors as the Compensation
Committee (other than Mr. Cross who is a non-voting ex officio member
of the Compensation Committee), decisions of the two committees should
be viewed together, and for the purposes of this discussion they will
be referred to as the "Compensation Committees". From time to time,
the Board of Directors as a whole participates in decisions regarding
executive compensation and benefit plans.
The Compensation Committees have developed an executive compensation
policy designed to: (i) offer competitive compensation to attract,
motivate, retain and reward executive officers who are crucial to
the long-term success of the Company; and (ii) encourage decision-making
that maximizes long-term stockholder value. The Compensation Committees
have sought to consider a multitude of factors in establishing appropriate
levels of compensation for executive officers, with no one factor
clearly overshadowing all the others.
The compensation package provided to the executive officers of the
Bank is composed principally of base salary and, recently, stock-based
incentive awards. Executive officers also participate in other benefit
plans available to all eligible employees including the ESOP.
The Compensation Committees consider a variety of factors in determining
executive compensation. These factors generally fall into two categories,
those that relate to the specific work performed and expected of the
officer and those that relate to the Company, the Bank, the local
business economic conditions and other general matters. In the former
category, the Committees consider, among other factors, the level
of responsibility of each officer; the expertise and skill level required
to perform the position; satisfaction of prior period goals and objectives;
length of service; the complexity of work that may be required in
connection with strategic plans or special projects; and prior compensation
history. In the latter category, the Committees consider, among other
factors, the Bank's earnings, capital and asset size; the results
of government regulatory examinations; the Bank's regulatory ratings
on safety and soundness as well as Community Reinvestment Act examinations;
and performance and compensation programs of peer group banks.
Employee benefit plans represent an important component of any compensation
package. The defined benefit pension plan and health insurance benefits
available to all employees, including executive officers, provide
competitive benefits comparable to those available at other institutions.
Stock-based compensation plans, including the ESOP, the Stock Option
Plan and the MRP, provide employees, including executive officers,
with an additional equity-based incentive to maximize long-term shareholder
value.
The Compensation Committees' decisions are discretionary and are based
upon subjective factors. No mathematical or similar objective formula
is utilized to determine any compensation package. The Compensation
Committee believes that a competitive employee benefit package is
essential to achieving the goals of attracting and retaining highly
qualified employees.
Chief Executive Officer Compensation. Total annual compensation paid
to Wilbur J. Cross, Chief Executive Officer, for fiscal 1997 was $182,876,
as detailed in the above compensation table, and reflects a 9.9% increase
from fiscal 1996. In determining total compensation paid to the Chief
Executive Officer, the Compensation Committee considered the factors
discussed above and also considered a number of specific matters including
stock-based compensation awarded to chief executive officers of other
newly-converted thrift institutions, the successful transition of
the Bank from a mutual institution to the subsidiary of a publicly-traded
holding company, and efforts to satisfactorily deploy the resulting
new capital. Mr. Cross does not participate in decisions regarding
his own compensation.
This report is included herein at the direction of the Compensation
Committee members, directors Wilbur J. Cross (ex officio), Richard
A. Marshall, Allan D. Oren, and Edward P. Stiefel.
Shareholder Return Performance Graph
Set forth below is a line graph comparing the cumulative total
shareholder return on Catskill Financial Corporation Common Stock
with the cumulative total shareholder return of (i) the total return
industry index for SNL All Thrift stocks and (ii) the total return for
the NASDAQ U.S. Stock Market commencing as of April 18, 1996, the
date on which the Company's Common Stock commenced public
trading. In accordance with SEC guidelines, the stock price of the
Company on April 18, 1996 which was used to establish the initial
point in the following performance graph was $10.375, representing
the closing price on that date. If the offering price of $10.00 were
used, the cumulative shareholder return index would have been 171
at September 30, 1997. Total return assumes the reinvestment of
cash dividends.
<TABLE>
<CAPTION>
Catskill Financial Corporation SNL All Thrift Index NASDAQ Market
<S> <C> <C> <C>
4/18/96 100.00 100.00 100.00
6/30/96 98.22 103.83 104.72
9/30/96 115.66 114.55 108.45
12/31/96 134.94 129.64 113.78
3/31/97 158.54 141.37 107.61
6/30/97 150.74 168.06 127.34
9/30/97 164.82 199.05 148.86
</TABLE>
Compensation Committee Interlocks and Insider Participation
The Compensation Committee of the Bank and the SOP and MRP Committee
of the Company consist of Richard A. Marshall, Allan D. Oren and Edward
P. Stiefel, all of whom are directors of the Company and the Bank
but none of whom are or have been officers or employees of the Company
or the Bank. Wilbur J. Cross, who is President, Chairman and Chief
Executive Officer of the Company and the Bank, is an ex officio non-voting
member of the Compensation Committee.
Edward Stiefel, Esq., is a partner in the law firm of Stiefel & Winans.
That firm was retained by the Bank to provide legal services and received
legal fees aggregating $34,925 during fiscal 1997 from the Company
and the Bank, and $52,541 representing fees paid directly by borrowers
on loan closings in which the firm represented the Bank.
Transactions with Directors and Officers
Some of the directors and executive officers of the Bank, as well
as firms and companies with which they are associated, are and have
been customers of the Bank. All of the Bank's transactions with such
persons and entities were completed in the ordinary course of business
and were on substantially the same terms as those prevailing at the
time for comparable transactions with the general public.
In addition to such normal customer relationships, none of the directors
or executive officers of the Company (or members of their immediate
families) maintained, directly or indirectly, any significant business
or personal relationship with the Company or the Bank during the 1997
fiscal year, other than as might arise by virtue of a position with
or ownership interest in the Company, except as set forth in the preceding
section.
RATIFICATION OF APPOINTMENT OF AUDITORS
The Company's Board of Directors appointed KPMG Peat Marwick LLP as
independent public accountants to audit the books of the Company for
the fiscal year ended September 30, 1998, subject to ratification
by the stockholders at the Meeting. KPMG Peat Marwick LLP has been
employed regularly by the Company since it was formed in 1996 and
by the Bank for more than twenty years to examine their books and
accounts and for other purposes.
Representatives of KPMG Peat Marwick LLP are expected to be present
at the Annual Meeting and will have an opportunity to make such statements
as they may desire. Such representatives are expected to be available
to respond to appropriate questions from stockholders.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
THAT STOCKHOLDERS VOTE IN FAVOR OF THE
RATIFICATION OF THE APPOINTMENT OF AUDITORS
OTHER BUSINESS
The management has no reason to believe that any other business will
be presented at the Annual Meeting, but if any other business shall
be presented. The proxies will vote on such matters in accordance
with their judgment in the best interests of the Company.
In order for a stockholder of the Company to properly bring business
before an annual meeting, such stockholder must first deliver notice
thereof in writing to David Guldenstern, Secretary, at the Company's
address, not less than 60 days prior to the anniversary of the preceding
year's annual meeting. In the event that the date of the annual meeting
is advanced by more than twenty days, or delayed by more than 60 days
from such anniversary date, notice by the stockholder must be delivered
to the Company not later than the close of business on the later of
the 60th day prior to such annual meeting or the tenth day following
the day on which the notice of the meeting was mailed or public announcement
made. The notice must set forth, in addition to the name of such stockholder
and the class and number of shares of the Company stock owned by such
stockholder, a brief description of the business desired to be brought,
the reasons therefor and any material interest such stockholder has
in such business.
GENERAL
The Company's Annual Report to its Stockholders for the fiscal year
ended September 30, 1997, including financial statements, is being
concurrently furnished with this Proxy Statement to stockholders of
record on the Record Date. The Annual Report is not part of the proxy
solicitation material.
All shares represented by valid proxies sent to the Company to be
voted at the Meeting will be voted if received in time. Each proxy
will be voted in accordance with the directions of the stockholder
executing such proxy. If no directions are given, such proxy will
be voted "FOR" the nominee presented herein and "FOR" the ratification
of the appointment of auditors.
The cost of soliciting proxies relating to the Meeting will be borne
by the Company. In addition, directors, officers and regular employees
of the Company and the Bank may solicit proxies personally, by telephone
or by other means without additional compensation. In addition, the
Company will, upon the request of brokers, dealers, banks and voting
trustees, and their nominees, who were holders of record of shares
of the Company's capital stock or participants in depositories on
the Record Date, bear their reasonable expenses for mailing copies
of this Proxy Statement, the form of proxy and the Notice of the Annual
Meeting, to the beneficial owners of such shares.
1999 ANNUAL MEETING
The Company's Board of Directors will establish the date for the 1999
Annual Meeting of Stockholders. In order for a stockholder to be entitled,
under the regulations of the Securities and Exchange Commission, to
have a stockholder proposal included in the Company's Proxy Statement
for the 1999 meeting, the proposal must be received by the Company
at its principal executive offices, 341 Main Street, Catskill, New
York 12414, Attention: David Guldenstern, Secretary, not less than
120 days in advance of the date in 1999 which corresponds to the date
in 1998 on which these proxy materials are released to stockholders.
The stockholder must also satisfy the other requirements of SEC Rule
14a-8.
THE COMPANY WILL FURNISH, WITHOUT CHARGE TO ANY STOCKHOLDER SUBMITTING
A WRITTEN REQUEST, A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K
FOR 1997 REQUIRED TO BE FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.
SUCH WRITTEN REQUEST SHOULD BE DIRECTED TO DAVID GULDENSTERN, SECRETARY,
AT THE COMPANY'S ADDRESS STATED HEREIN. THE FORM 10-K REPORT IS NOT
A PART OF THE PROXY SOLICITATION MATERIALS.
PLEASE SIGN, DATE AND MAIL YOUR PROXY NOW
Catskill, New York
January 20, 1998
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