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:
( ) Preliminary proxy statement
( ) Confidential, for use of the Commission only
(as permitted by Rule 14a-6(e)(2)) (X) Definitive proxy statement ( )
Definitive additional materials ( ) Soliciting material pursuant to Rule 14a-12
CATSKILL FINANCIAL CORPORATION
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
( ) No fee required.
( X ) Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
Catskill Financial Corporation Common Stock, par value $.01 per share
(2) Aggregate number of securities to which transaction applies: 3,737,519
shares of Common Stock (plus outstanding options to acquire 384,748
shares of Common Stock).
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11: $23.00 per share of Catskill
Financial Corporation Common Stock and $23.00, less the exercise price,
for underlying options to purchase Catskill Financial Corporation
Common Stock.
(4) Proposed maximum aggregate value of transaction: $ 89,923,541.00
(5) Total Fee Paid: $ 17,985.00
( X ) Fee paid previously with preliminary materials.
( ) Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11 (a)(2) and identify the filing for
which the offsetting fee was paid previously. Identify the
previous filing by registration statement number, or the form
or schedule and the date of its filing.
(1) Amount previously paid: N/A
(2) Form, Schedule or Registration Statement No.: N/A
(3) Filing Party: N/A
(4) Date filed: N/A
<PAGE>
CATSKILL FINANCIAL CORPORATION
341 Main Street
Catskill, New York 12414
September 15, 2000
Dear Shareholder:
You are cordially invited to attend a special meeting of shareholders
of Catskill Financial Corporation, to be held at our main office located at 341
Main Street, Catskill, New York, on October 17, 2000 at 7:00 p.m., local time.
On June 7, 2000, Catskill Financial Corporation agreed to merge with
Troy Financial Corporation. IF THE MERGER IS COMPLETED, YOU WILL RECEIVE A CASH
PAYMENT OF $23.00 FOR EACH SHARE OF CATSKILL FINANCIAL CORPORATION STOCK THAT
YOU OWN. Upon completion of the merger, you will no longer own any stock or have
any interest in Catskill Financial Corporation, nor will you receive, as a
result of the merger, any stock of Troy Financial Corporation.
At the special meeting, you will be asked to approve and adopt the
merger agreement. A majority of the votes entitled to be cast at the special
meeting must vote for approval and adoption of the merger agreement for the
merger to be completed. If the merger agreement is approved, and all other
conditions described in the merger agreement have been met or waived, the merger
is expected to occur during the fourth quarter of 2000.
Your board of directors believes that the merger is in the best
interests of Catskill Financial Corporation shareholders and unanimously
recommends that you vote FOR the adoption of the merger agreement. Your board of
directors has received the opinion of Ryan Beck & Company, Inc. that the
consideration to be received by Catskill Financial Corporation's shareholders in
the merger is fair from a financial point of view.
This proxy statement provides you with detailed information about the
proposed merger and includes, as Appendix A, a complete text of the merger
agreement. I urge you to read the enclosed materials carefully for a complete
description of the merger. Please complete, sign and return the enclosed proxy
card as promptly as possible. We look forward to seeing you at the special
meeting.
Sincerely,
/s/ Wilbur J. Cross
-------------------
Wilbur J. Cross
Chairman of the Board, President, and Chief Executive Officer
This transaction has not been approved or disapproved by the Securities
and Exchange Commission, any state securities commission or the Federal Deposit
Insurance Corporation, nor have any of these bodies passed upon the fairness or
merits of such transaction or upon the accuracy or adequacy of the information
contained in this document. Any representation to the contrary is unlawful.
This document is dated September 15, 2000 and was first mailed to
shareholders on September 22, 2000.
<PAGE>
CATSKILL FINANCIAL CORPORATION
341 Main Street
Catskill, New York 12414
(518) 943-3600
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
A special meeting of shareholders of Catskill Financial Corporation
will be held on October 17, 2000, 7:00 p.m., local time, at our main office
located at 341 Main Street, Catskill, New York, for the following purposes:
1. To approve and adopt the Agreement and Plan of Merger dated June
7, 2000 by and among Troy Financial Corporation, Charlie
Acquisition Corporation and Catskill Financial Corporation; and
2. To transact such other business as may properly come before the
special meeting including a proposal to adjourn or postpone the
special meeting.
NOTE: The Board of Directors is not aware of any other business to
come before the special meeting.
You can vote at the special meeting if you owned Catskill Financial
Corporation common stock at the close of business on September 15, 2000. A
complete list of shareholders entitled to vote at the special meeting will be
available at the main office of Catskill Financial Corporation during the ten
days prior to the special meeting and at the special meeting.
As a shareholder of Catskill Financial Corporation, you have the right
to dissent from the merger and obtain an appraisal of the fair value of your
shares of Catskill Financial Corporation common stock under applicable
provisions of Delaware law. In order to perfect dissenters' rights, you must not
vote in favor of the merger and must comply with the requirements of Delaware
law. A copy of the Delaware statutory provisions regarding dissenters' rights is
included as Appendix D to the accompanying proxy statement and a summary of
these provisions can be found under "PROPOSAL I -- ADOPTION OF THE MERGER
AGREEMENT -- Dissenters' Appraisal Rights."
By Order of the Board of Directors
/s/ Wilbur J. Cross
-------------------
Wilbur J. Cross
Chairman of the Board, President and Chief
Executive Officer
Catskill, New York
September 15, 2000
--------------------------------------------------------------------------------
Important: the prompt return of proxies will save Catskill Financial Corporation
the expense of further requests for proxies to ensure a quorum at the special
meeting. Please complete, sign and date the enclosed proxy and promptly mail it
in the enclosed envelope. You may revoke your proxy in the manner described in
the proxy statement at any time before it is voted.
-------------------------------------------------------------------------------
Please do not send in any stock certificates at this time.
<PAGE>
TABLE OF CONTENTS
Page
GLOSSARY ...................................................................-12-
QUESTIONS AND ANSWERS ABOUT THE TROY FINANCIAL
CORPORATION/CATSKILL FINANCIAL CORPORATION MERGER..................-14-
SUMMARY ...................................................................-19-
The Companies .....................................................-19-
The Merger.........................................................-20-
The Meeting........................................................-20-
Catskill Financial's Reasons for Entering into the Merger..........-20-
What You Will Receive for Your Shares of Common Stock..............-21-
Record Date; Vote Required to Adopt the Merger Agreement...........-22-
Beneficial Ownership of Common Stock...............................-22-
Recommendation to Catskill Financial's Shareholders...............-22-
Opinion of Catskill Financial's Financial Advisor.................-22-
Interests of Certain Persons in the Merger.........................-23-
Dissenters' Rights of Appraisal....................................-23-
Taxable Transaction for Catskill Financial Shareholders..........-24-
HISTORICAL CONSOLIDATED FINANCIAL DATA CATSKILL FINANCIAL..................-25-
MARKET PRICE AND DIVIDEND DATA FOR CATSKILL FINANCIAL COMMON STOCK
..................................................................-28-
<PAGE>
THE MEETING.................................................................-29-
General ...........................................................-29-
Record Date; Voting Rights; Vote Required .........................-29-
Voting and Revocation of Proxies ..................................-30-
Solicitation of Proxies ...........................................-30-
Participants in the ESOP ..........................................-31-
Principal Holders of Catskill Financial Corporation Common Stock ..-31-
PROPOSAL I -- ADOPTION OF THE MERGER AGREEMENT .............................-34-
The Parties to the Merger .........................................-34-
Overview of the Transaction........................................-35-
What You Will Receive in the Merger ...............................-35-
Taxable Transaction for Catskill Financial Shareholders...........-35-
Background of the Merger...........................................-36-
Catskill Financial's Reasons for the Merger and Recommendation
of the Board of Directors ........................................-38-
Opinion of Catskill Financial's Financial Advisor.................-39-
Overview of Valuation Methodology..................................-41-
Analysis of Selected Publicly Traded Companies.....................-42-
Analysis of Selected Transactions..................................-43-
Discounted Dividend Analysis.......................................-45-
<PAGE>
Break-Even Analysis................................................-45-
Market.............................................................-46-
Acquisition........................................................-46-
Dissenters' Appraisal Rights ......................................-47-
Regulatory Approvals...............................................-50-
The Merger Agreement..............................................-52-
Terms of the Merger................................................-52-
When the Merger Will Be Completed..................................-53-
Surrender of Certificates..........................................-53-
Conduct of Business Pending the Merger.............................-54-
Agreement Not to Solicit Other Offers..............................-56-
Conditions to the Merger...........................................-57-
Securities Portfolio Sale..........................................-57-
Termination of the Merger Agreement................................-58-
Waiver and Amendment of Merger Agreement...........................-58-
Break-up Fee .....................................................-60-
Representations and Warranties Made by Catskill Financial
Corporation and Troy Financial Corporation in the
Merger Agreement...................................................-61-
Interests of Certain Persons in the Merger.........................-61-
Employee Matters...................................................-64-
Accounting Treatment ..............................................-65-
Expenses...........................................................-65-
<PAGE>
THE STOCK OPTION AGREEMENT .................................................-65-
General............................................................-65-
Effect of the Option...............................................-66-
Exercise of the Stock Option.......................................-66-
Repurchase Election................................................-69-
OTHER MATTERS ..............................................................-69-
SHAREHOLDER PROPOSALS ......................................................-69-
Appendix A - Agreement and Plan of Merger................................... A-1
Appendix B - Stock Option Agreement......................................... B-1
Appendix C - Fairness Opinion of Ryan, Beck & Co., Inc...................... C-1
Appendix D - Section 262 of the Delaware General Corporation Law ........... D-1
Appendix E- Proxy Card ..................................................... E-1
<PAGE>
GLOSSARY
The following terms are used in this Proxy Statement.
"Board of Directors" or "Board" means the board of directors of Catskill
Financial Corporation.
"Catskill Financial" means Catskill Financial Corporation.
"Catskill Savings" means Catskill Savings Bank, a wholly-owed subsidiary of
Catskill Financial.
"Common Stock" means the common stock of Catskill Financial, all of which will
be acquired by Troy Financial in the Merger.
The "ESOP" means the Catskill Financial Corporation Employee Stock Ownership
Plan, as amended.
The "Meeting" means the special meeting of Catskill Financial's shareholders to
be held on October 17, 2000 and any adjournments or postponements of that
special meeting, at which Catskill Financial will present the Merger Agreement
to its shareholders for approval.
The "Merger" means the transaction in which Catskill Financial will merge into
Charlie Acquisition Corporation (a subsidiary of Troy Financial) and each
shareholder of Catskill Financial will be entitled to receive $23.00 for each
share of Catskill Financial common stock owned by the shareholder.
The "Merger Agreement" means the Agreement and Plan of Merger among Catskill
Financial, Troy Financial and Charlie Acquisition Corporation, dated June 7,
2000. A copy of the Merger Agreement is attached as Appendix A to this Proxy
Statement.
The "MRP" means the Catskill Financial Corporation 1996 Management Recognition
Plan, as amended.
"RBC" means Ryan, Beck & Co., Inc., the financial advisor to Catskill Financial.
The "Record Date" means September 15, 2000, the date which Catskill Financial
will use to determine which Catskill Financial shareholders of record are
entitled to vote at the Meeting.
The "Stock Option Plan" means the Catskill Financial Corporation 1996 Stock
Option Plan, as amended.
-11-
<PAGE>
"Troy Financial" means Troy Financial Corporation.
"Troy Savings" means Troy Savings Bank, a wholly-owned subsidiary of Troy
Financial.
-12-
<PAGE>
QUESTIONS AND ANSWERS
ABOUT THE TROY FINANCIAL CORPORATION/CATSKILL FINANCIAL
CORPORATION MERGER
Q: WHY ARE THE TWO COMPANIES PROPOSING TO MERGE?
A: The Board of Directors believes that the Merger allows shareholders of
Catskill Financial to realize a greater value for their shares of
Common Stock than they could have if Catskill Financial followed its
existing business plan, or considered other alternative strategies to
maximize shareholder value. Catskill Financial and Troy Financial share
a commitment to community banking, which emphasizes responsiveness to
local markets and the delivery of personalized services. The companies
believe that the Merger will provide customers and the local
communities access to a wider variety of quality products and services
while continuing to receive the high level of personal service they
have come to expect.
Q: WHAT WILL CATSKILL FINANCIAL SHAREHOLDERS RECEIVE FOR THEIR
SHARES OF COMMON STOCK?
A: Catskill Financial shareholders will receive $23.00 in cash for each of
their shares of Common Stock. See the discussion under the caption
"What You Will Receive in the Merger" beginning at page 35 for more
information.
Q: IS THE AMOUNT OF CASH TO BE RECEIVED FOR EACH SHARE OF COMMON STOCK
FAIR?
A: RBC has issued its opinion that the amount that will be paid to
Catskill Financial shareholders is fair from a financial point of view.
See the discussion under the caption "Opinion of Catskill Financial's
Financial Advisor" beginning at page 39 for more information.
Q: CAN THE AMOUNT OF CASH THAT CATSKILL FINANCIAL SHAREHOLDERS RECEIVE IN
THE MERGER CHANGE ?
A: In connection with the Merger, Catskill Financial determined to sell a
portion of its investment securities portfolio, consisting of corporate
and municipal bonds. The Merger Agreement requires Catskill Financial
to have completed the sale no later than July 7, 2000. If the aggregate
pre-tax net proceeds of the sale of the securities are less than $73.2
million, the per share consideration to be received by Catskill
Financial shareholders in
-13-
<PAGE>
the Merger would be reduced by a formula defined in the Merger
Agreement. On June 13, 2000, Catskill Financial completed the sale of
the securities portfolio. The proceeds of the sale were $74.5 million.
Accordingly, Catskill Financial has determined that the cash per share
to be received by Catskill Financial shareholders will not be reduced.
See the discussion under the caption "Securities Portfolio Sale"
beginning at page 55 for more information.
Q: WHAT CAN I DO IF I AM NOT SATISFIED WITH THE PAYMENT I WILL
RECEIVE FOR MY SHARES ?
A: Under Delaware law, if you are not satisfied with the amount you are
receiving in the Merger, you are legally entitled to have the value of
your shares judicially determined and to receive payment based on that
valuation. To exercise your dissenters' appraisal rights, you must
deliver a written objection to the Merger to Catskill Financial at or
before the Meeting and must not vote in favor of the Merger. Objections
to the Merger should be addressed to Catskill Financial at 341 Main
Street, Catskill, New York 12414, Attention: Corporate Secretary. If
you don't follow exactly the procedures specified under Delaware law,
you will lose your dissenters' appraisal rights. A copy of the
dissenters' appraisal rights provisions of Delaware law is provided as
Appendix D to this proxy statement. See the discussion under the
caption "Dissenters' Appraisal Rights" beginning at page 47 for more
information.
Q: WHAT ARE THE TAX CONSEQUENCES OF THE MERGER TO CATSKILL
FINANCIAL'S SHAREHOLDERS?
A: For United States federal income tax purposes, and perhaps for state
and local tax purposes, your exchange of shares of Common Stock for
cash generally will cause you to recognize a gain or loss measured by
the difference between the cash you receive in the Merger and your tax
basis in the shares of Common Stock. See the discussion under the
caption "Taxable Transaction for Catskill Financial Shareholders"
beginning at page 35 for more information.
The tax consequences of the Merger to you will depend on your own
situation. You should consult with your tax advisors for a full
understanding of the tax consequences of the Merger to you.
-14-
<PAGE>
Q. WILL CATSKILL FINANCIAL BE ABLE TO PAY DIVIDENDS BEFORE THE
COMPLETION OF THE MERGER ?
A. Under the Merger Agreement, Catskill Financial is permitted to pay
regular quarterly cash dividends, not to exceed $.1325 per share,
consistent with past practice, during the period from June 7, 2000 (the
date of the Merger Agreement), until the date that the Merger becomes
effective, but it may not pay more than four such dividends during
fiscal 2000. There can be no assurance however, that Catskill Financial
will pay any dividends during this period. See the discussion under the
caption "Conduct of Business Pending the Merger - Conditions to the
Merger" beginning at page 55, for more information.
Q. HOW WILL MANAGEMENT BENEFIT FROM THE MERGER?
A. Officers and directors of Catskill Financial who have stock options and
restricted stock awards under Catskill Financial's stock benefit plans
will receive payments for their awards based upon the Merger price per
share. They and other employees will also receive other benefits from
the Merger. In addition, each of the directors will join an advisory
board of Troy Savings and Mr. Cross will become a director of Troy
Financial and Troy Savings. See the discussion under the caption "The
Merger Agreement - Interests of Certain Persons in the Merger"
beginning at page 61 for more information.
Q. WHAT DO I NEED TO DO NOW?
A. After you have carefully read this proxy statement, indicate on your
proxy card how you want your shares of Common Stock to be voted. Then
sign, date and mail your proxy card in the enclosed prepaid return
envelope as soon as possible. This will enable your shares to be
represented and voted at the Meeting.
Q. WHY IS MY VOTE IMPORTANT?
A. If you do not return your proxy card or vote in person at the Meeting,
it will be more difficult for Catskill Financial to obtain the
necessary quorum to hold the Meeting. The Merger Agreement must be
approved by a majority of the votes eligible to be cast at the Meeting.
-15-
<PAGE>
Q. IF MY SHARES ARE HELD IN STREET NAME BY MY BROKER, WILL MY
BROKER AUTOMATICALLY VOTE MY SHARES OF COMMON STOCK FOR ME?
A. No. Your broker will not be able to vote your shares of Common Stock
without instructions from you. You should instruct your broker how you
wish to vote your shares, following the directions your broker
provides.
Q. WHAT IF I FAIL TO INSTRUCT MY BROKER?
A. If you fail to instruct your broker to vote your shares of Common Stock
and the broker submits an unvoted proxy, that unvoted proxy will be the
equivalent of voting against the Merger.
Q. CAN I ATTEND THE MEETING AND VOTE MY SHARES OF COMMON STOCK IN
PERSON?
A. Yes. All shareholders of Common Stock are invited to attend the
Meeting. Shareholders of record can vote in person at the Meeting. If a
broker holds your shares in street name, then you are not the
shareholder of record and you must ask your broker how you can vote at
the Meeting.
Q. CAN I CHANGE MY VOTE?
A. Yes. If you have not voted through your broker, there are three ways
you can change your vote after you have sent in your proxy card.
o First, you may send a written notice to the person to
whom you submitted your proxy stating that you would like
to revoke your proxy.
o Second, you may complete a new proxy card. Any earlier
proxy will be revoked automatically.
o Third, you may attend the Meeting and vote in person. Any
earlier proxy will be revoked. However, simply attending
the Meeting without voting will not revoke your proxy.
If you have instructed your broker to vote your shares, you must follow
directions you receive from your broker to change your vote.
-16-
<PAGE>
Q. SHOULD I SEND IN MY SHARE CERTIFICATES NOW?
A. No. You should not send in your Common Stock certificates at this time.
Instructions for exchanging Common Stock certificates will be sent to
you after the Merger has been completed.
Q: WHEN DOES CATSKILL FINANCIAL EXPECT THE MERGER TO BE
COMPLETED?
A: Catskill Financial hopes to complete the Merger in the fourth quarter
of 2000. The Merger cannot occur unless Catskill Financial's
shareholders approve the Merger by a majority of the outstanding shares
of Common Stock and all federal and state regulatory approvals are
received. See the discussion under the caption "The Merger Agreement -
Conditions to the Merger" beginning at page 56 for more information.
Q: WHO CAN HELP ANSWER MY QUESTIONS?
A: If you have more questions about the Merger, you should contact:
Catskill Financial Corporation
341 Main Street
Catskill, New York 12414
Attention: Wilbur J. Cross
Chairman, President and Chief Executive Officer
Telephone: (518) 943 - 3626 Ext. 22
-17-
<PAGE>
SUMMARY
This brief summary highlights selected information contained in this proxy
statement. It does not contain all of the information that is important to you.
To fully understand the Merger, we urge you to carefully read the entire proxy
statement and the other documents to which we refer, including the Merger
Agreement. Catskill Financial has attached the Merger Agreement to this proxy
statement as Appendix A. We encourage you to read the Merger Agreement because
it is the legal document that governs the Merger.
o THE COMPANIES
TROY FINANCIAL CORPORATION
32 SECOND STREET
TROY, NEW YORK 12180
(518) 270-3274
Troy Financial, a Delaware corporation, is headquartered in Troy, New
York and is the parent of Troy Savings, a New York-chartered stock savings bank,
Troy Commercial Bank, a newly organized commercial bank and Charlie Acquisition
Corporation, a Delaware corporation. Troy Savings operates fourteen branch
offices in the six New York counties of Albany, Saratoga, Schenectady, Warren,
Washington and Rensselaer .
At June 30, 2000, Troy Financial had consolidated assets of $902.8
million, net loans receivable of $591.2 million, deposits of $560.7 million and
shareholders' equity of $166.4 million.
CATSKILL FINANCIAL CORPORATION
341 MAIN STREET
CATSKILL, NEW YORK 12414
(518) 943-3600
Catskill Financial, a Delaware corporation, is headquartered in
Catskill, New York and is the parent of Catskill Savings, a federally chartered
stock savings bank.
At June 30, 2000, Catskill Financial had consolidated assets of $316.2
million, net loans of $167.2 million, deposits of $221.4 million and
shareholders' equity of $53.5 million.
Catskill Savings was organized in 1868. Catskill Savings has its main
office in Catskill, New York, four branch offices in Greene County, New York
and one each in Albany County,
-18-
<PAGE>
New York and Schoharie County, New York.
o THE MERGER (PAGES 52 THROUGH 61)
If the Merger Agreement is approved and adopted by Catskill Financial
shareholders, the Merger receives regulatory approval, and the parties meet the
other conditions of the Merger Agreement, Charlie Acquisition Corporation, a
wholly-owned subsidiary of Troy Financial, will be merged into Catskill
Financial. Immediately thereafter, Catskill Financial will merge into Troy
Financial and Catskill Financial will cease to exist as a separate corporation.
Immediately after Catskill Financial is merged into Troy Financial, Catskill
Savings will be merged into Troy Savings. The offices of Catskill Savings will
be operated as offices of Troy Savings immediately following the effective date
of the Merger. If the Merger Agreement is not adopted, Catskill Financial and
Troy Financial will continue as separate entities.
o THE MEETING (PAGES 29 THROUGH 33)
The Meeting will be held on October 17, 2000, at the main office of
Catskill Financial located at 341 Main Street, Catskill, New York. At the
Meeting you will be asked to vote on the proposal to approve the Merger
Agreement. You can vote at the Meeting if you owned Common Stock on September
15, 2000.
o CATSKILL FINANCIAL'S REASONS FOR ENTERING INTO THE MERGER (PAGES 38
THROUGH 39)
Catskill Savings converted from the mutual to the stock form of
ownership and became a wholly-owned subsidiary of Catskill Financial on April
18, 1996. The net proceeds from the sale of Common Stock in the conversion
transaction were $54.9 million. Following the conversion, Catskill Financial's
management sought to deploy the conversion proceeds and increase Catskill
Financial's assets and earnings by pursuing a number of strategies, including
increased loan production, the opening of new Catskill Savings branch offices
and the acquisition of other community-based financial institutions. Catskill
Savings opened four new branch offices and achieved moderate loan and deposit
growth through their operation. However, Catskill Financial's efforts to
identify other financial institutions in the Capital District and Hudson Valley
regions of New York that were interested in joining with it were unsuccessful.
This impeded Catskill Financial's ability to leverage the capital it raised in
its stock offering and sufficiently increase shareholder value.
As a result, the Board decided to pursue a strategy involving the
acquisition of Catskill Financial by another community-based financial
institution. The Board considered a number of factors in deciding to enter into
the Merger Agreement with Troy Financial, including the
-19-
<PAGE>
following:
o the Merger price exceeds the estimated value that could be realized
by Catskill Financial shareholders over the intermediate and long
terms;
o the $23 per share to be received by the shareholders of Catskill
Financial represents a substantial premium to recent market prices
and book value of the Common Stock;
o attempts to grow Catskill Financial's franchise through
acquisitions of other institutions had been unproductive;
o the prospects for loan and deposit growth in Catskill Financial's
local market- without the investment of considerable additional
resources and the offering of new products and services are
limited;
o the Company's ability to increase earnings per share through Common
Stock repurchases cannot continue indefinitely;
o Catskill Financial's prospects for reaching a satisfactory return
on equity without significant asset growth are limited in the
intermediate term due to its high capital level;
o Catskill Financial's financial advisor, RBC, has given its opinion
that the transaction is fair to Catskill Financial's shareholders
from a financial point of view;
o like Catskill Financial, Troy Financial has a demonstrated
commitment to community banking; and
o Troy Financial has the resources to deliver expanded products and
services to Catskill Financial's existing customers.
Generally, the Board of Directors concluded that in the intermediate
and long terms, Catskill Financial could not produce shareholder value in excess
of the Merger price, and that the Merger price was fair, from a financial point
of view, to Catskill Financial's shareholders.
-20-
<PAGE>
o WHAT YOU WILL RECEIVE FOR YOUR SHARES OF COMMON STOCK (PAGE 35)
As a Catskill Financial shareholder, each of your shares of Common
Stock will automatically become exchangeable for $23.00 in cash. You will have
to surrender your Common Stock certificate(s) to receive this cash payment. Troy
Financial, or its exchange agent, will send you written instructions for
surrendering your certificates after the Merger is completed. For more
information on how this exchange procedure works, see "PROPOSAL I -- ADOPTION OF
THE MERGER AGREEMENT -- The Merger Agreement -- Terms of the Merger" and "--
Surrender of Common Stock Certificates" on pages 34, 52 and 34 of this Proxy
Statement.
The Common Stock is quoted on NASDAQ Stock Market under the symbol
"CATB". On June 7, 2000, which was the last full trading day before the Merger
was announced, the closing price for Common Stock was $17.6875 per share.
Do not send your stock certificates at this time.
o RECORD DATE; VOTE REQUIRED TO ADOPT THE MERGER AGREEMENT (PAGES 29
THROUGH 30)
You can vote at the Meeting if you owned Common Stock at the close of
business on September 15, 2000.
The Merger Agreement will be adopted if the holders of at least a
majority of the outstanding shares of Common Stock vote for it. A failure to
vote, either by not returning the enclosed proxy or by checking the "Abstain"
box, will have the same effect as a vote against the Merger Agreement.
o BENEFICIAL OWNERSHIP OF COMMON STOCK (PAGE 31)
Directors and executive officers of Catskill Financial and their
affiliates beneficially owned an aggregate of 654,451, or approximately 16.3%,
of the shares of Common Stock outstanding on the Record Date. Each of the
directors and executive officers of Catskill Financial have executed an
agreement with Troy Financial pursuant to which each director and executive
officer agreed to vote his or her shares of Common Stock for the Merger
Agreement.
o RECOMMENDATION TO CATSKILL FINANCIAL'S SHAREHOLDERS (PAGES 38 THROUGH
39)
-21-
<PAGE>
The Board of Directors believes that the Merger is fair to you and in
your best interests and unanimously recommends that you vote "FOR" the adoption
of the Merger Agreement.
-22-
<PAGE>
o OPINION OF CATSKILL FINANCIAL'S FINANCIAL ADVISOR (PAGES 39 THROUGH 47)
RBC has delivered its written opinion to the Board of Directors, dated
as of June 7, 2000 and updated as of September 15, 2000, that the consideration
to be received by the shareholders of Catskill Financial in the Merger is fair
from a financial point of view. This opinion is attached as Appendix C to this
proxy statement. You should read it carefully for a description of the
procedures followed, matters considered and limitations on the reviews
undertaken by RBC in providing its opinion.
o INTERESTS OF CERTAIN PERSONS IN THE MERGER (PAGES 61 THROUGH 63)
Some of Catskill Financial 's directors and officers have interests in
the Merger that are different from, or are in addition to their interests as
shareholders in Catskill Financial. The members of the Board of Directors knew
about these additional interests and considered them when they approved the
Merger Agreement and the Merger. These include:
1. the cancellation of existing vested and unvested options to
purchase Common Stock in exchange for a cash payment equal to the
difference between $23.00 per share and the option exercise price;
2. payments for unvested shares of restricted Common Stock awarded
under the MRP at $23.00 per share;
3. the appointment of Catskill Financial's president, and chief
executive officer to the boards of directors of Troy Financial and
Troy Savings;
4. indemnification provisions in the Merger Agreement that protect
officers and directors for events that occurred prior to the
effective date of the Merger for a period of six years after the
Merger;
5. the appointment of each member of Catskill Financial's Board of
Directors to a Troy Savings Advisory Board for at least a two-year
period and the receipt by each member of that Troy Savings Advisory
Board of an annual retainer of $10,000 per year except for the
Chairman who will receive $50,000 per year; and
6. payments to certain officers pursuant to agreements between them
and Catskill Financial or Catskill Savings.
o DISSENTERS' RIGHTS OF APPRAISAL (PAGES 47 THROUGH 51)
Catskill Financial shareholders have dissenters' rights of appraisal
under Delaware law. If you want to exercise dissenter's rights, you must
carefully follow the procedures described at pages 47 through 51 of this
document and Appendix D.
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<PAGE>
o TAXABLE TRANSACTION FOR CATSKILL FINANCIAL SHAREHOLDERS (PAGES 36
THROUGH 38)
For United States federal income tax, and possibly state and local tax,
purposes, your exchange of shares of Common Stock for cash generally will cause
you to recognize a gain or loss measured by the difference between the cash you
receive in the Merger and your tax basis in the shares of Common Stock. The tax
consequences of the Merger to you will depend on your own situation. You should
consult with your tax advisors for a full understanding of the tax consequences
of the Merger to you.
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<PAGE>
HISTORICAL CONSOLIDATED FINANCIAL DATA
CATSKILL FINANCIAL
These tables show historical consolidated financial data for Catskill
Financial. The annual historical financial condition and operating data are
derived from Catskill Financial's consolidated financial statements audited by
their independent accountants. Financial amounts as of and for the nine months
ended June 30, 2000 and 1999 are unaudited, however, Catskill Financial believes
such amounts reflect all normal recurring adjustments necessary for a fair
presentation of the results of operations and financial position for those
periods. In connection with the Merger, Catskill Financial determined to sell a
portion of its investment securities portfolio, consisting of corporate and
municipal bonds. The Merger Agreement requires Catskill Financial to have
completed the sale no later than July 7, 2000. On June 13, 2000, Catskill
Financial completed the sale of the securities portfolio. The proceeds of the
sale were $74.5 million. Catskill Financial realized a loss of approximately
$11.7 million from the securities sale which adversely impacted Catskill
Financial's operating performance for the nine months ended June 30, 2000. You
should not assume that the nine-month results indicate results for any future
period.
SELECTED CONSOLIDATED FINANCIAL INFORMATION
<TABLE>
<CAPTION>
At June 30, At September 30
------------- ------------ ------------ ------------ ------------ ------------ ------------
2000 1999 1999 1998 1997 1996 1995
------------- ------------ ------------ ------------ ------------ ------------ ------------
(dollars in thousands, except for per share)
Selected Consolidated Financial Condition Data:
<S> <C> <C> <C> <C> <C> <C> <C>
Total assets $316,243 $335,042 $338,796 $314,752 $289,619 $283,759 $230,102
Cash and cash equivalents 48,085 3,407 3,025 2,795 2,274 39,712 38,064
Loans receivable, net 167,196 145,834 150,821 137,785 124,337 122,533 118,364
Securities available for sale 75,944 167,706 165,833 164,983 148,114 97,041 ---
Securities held to maturity --- --- --- 2,060 8,055 19,077 67,090
Deposits 221,439 220,079 219,064 209,977 200,912 196,753 197,230
Borrowings 35,000 46,100 56,100 31,840 11,385 --- ---
Shareholders' equity 53,519 64,384 59,212 67,831 71,777 82,381 28,667
Book value per share 14.32 15.40 15.15 15.56 15.41 14.49 N/A
</TABLE>
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<PAGE>
SELECTED CONSOLIDATED FINANCIAL INFORMATION - (Continued)
<TABLE>
<CAPTION>
For the nine months Years ended September 30
ended June 30
2000 1999 1999 1998 1997 1996 1995
------------ ----------- ----------- ----------- ----------- ----------- -----------
(Dollars in thousands, except per share data)
Selected Consolidated Operating Data:
<S> <C> <C> <C> <C> <C> <C> <C>
Interest income $17,487 $16,030 $21,699 $21,132 $20,247 $17,962 $15,623
Interest expense 8,959 7,736 10,542 9,960 8,801 9,022 8,009
-------- --------- -------- ---------- --------- -------- ---------
Net interest income 8,528 8,294 11,157 11,172 11,446 8,940 7,614
Provision for loan losses 150 140 190 189 300 195 255
--------- ---------- ----------- ----------- ---------- --------- ----------
Net interest income after provision
for loan losses 8,378 8,154 10,967 10,983 11,146 8,745 7,359
Non-interest income (1) (10,944) 670 866 580 482 966 231
Non-interest expense (2) 4,976 4,584 6,184 5,662 5,187 4,258 4,665
-------- --------- ---------- ---------- --------- -------- --------
Income (loss) before taxes (benefit) (7,542) 4,240 5,649 5,901 6,441 5,453 2,925
Income tax expense (benefit) (3,309) 1,119 1,424 2,019 2,534 2,136 1,201
-------- ---------- ---------- ---------- --------- -------- ---------
Net income (loss) ($4,233) $3,121 $4,225 $3,882 $3,907 $3,317 $1,724
========= ======== ======== ========= ======== ======== ========
Basic earnings (loss) per common
share ($1.27) $.81 $1.13 $.95 $.84 $.38* *
Diluted earnings (loss) per common
share ($1.27) $.80 $1.10 $.93 $.84 $.38* *
Cash dividends per common share $.375 $.295 $.405 $.333 $.21 --- ---
Divided payout ratio N/A 36.42% 35.84% 35.05% 25.00% --- ---
</TABLE>
* The Company completed its initial public offering on April 18, 1996, so
earnings per common share is not applicable to all periods prior to that date.
In calculating earnings per share for fiscal 1996, post conversion net income
and weighted average shares outstanding were used. Post conversion net income
during the fiscal year ended September 30, 1996 was approximately $2.0 million.
(1) Non-interest income for the nine month period ended June 30, 2000 included
$11.7 million in losses from the Company's sale of its corporate and
municipal bond portfolios.
(2) Non-interest expense for the nine month period ended June 30, 2000 included
non-deductible Merger related transaction costs of $163,000.
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<PAGE>
SELECTED CONSOLIDATED FINANCIAL INFORMATION - (Continued)
<TABLE>
<CAPTION>
At or for the nine Years ended September 30
months ended
June 30
----------- ----------- ------------ ------------ ------------ ------------ ------------
2000 1999 1999 1998 1997 1996 1995
----------- ----------- ------------ ------------ ------------ ------------ ------------
Selected Financial Ratios and Other Data:
Performance Ratios:
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Return on average assets (1) 1.30% 1.30% 1.30% 1.30% 1.40% 1.25% .76%
Return on average equity (1) 8.03 6.19 6.42 5.60 5.22 6.33 6.15
Net interest rate spread 3.14 3.04 3.09 2.91 2.95 2.54 2.99
Net interest margin 3.86 3.95 3.94 4.00 4.18 3.44 3.47
Ratio of non-interest expense
to average total assets 1.94 1.91 1.90 1.90 1.86 1.60 1.77 (2)
Efficiency ratio (3) 46.95 47.09 47.08 46.32 43.80 45.56 51.05
Ratio of average interest-
earning assets to average
interest-bearing liabilities 119.51 126.20 124.90 131.97 138.60 125.79 112.97
Asset Quality Ratios:
Non-performing loans to total
loans at end of period .29% .41% .36% .42% .73% 1.10% .86%
Non-performing assets to total
assets at end of period .16 .19 .16 .20 .40 .61 .66
Allowance for loan losses to
non-performing loans 445.34 337.17 384.74 329.95 206.00 133.89 188.41
Allowance for loan losses to
total loans at end of period 1.30 1.39 1.37 1.40 1.50 1.47 1.61
Net charge-offs to average
loans .04 .04 .03 .10 .19 .26 .04
Capital Ratios:
Equity to total assets at end
of period 16.92% 19.22% 17.48% 21.55% 24.78% 29.03% 12.46%
Average equity to average
assets 16.18 20.99 20.19 23.20 26.86 19.73 12.44
</TABLE>
(1) Financial ratios for the nine month period ended June 30, 2000 excludes the
$11.7 million loss on the Company's sale of its corporate and municipal bond
portfolio, as well as the $163,000 in merger related transaction costs.
(2) Excludes $660,000 provision for Nationar loss contingency.
(3 Efficiency ratio is non-interest expense/(non-interest income + net interest
income on a tax equivalent basis). For the nine month period ended June 30,
2000 excludes the $11.7 million loss on the Company's sale of its corporate
and municipal bond portfolio, as well as the $163,000 in Merger related
transaction costs. Furthermore, for 1997 and 1996, excludes Nationar
recoveries included in non-interest income of $100,000, and $560,000,
respectively and for 1995 excludes $660,000 provision for Nationar loss
contingency included in non-interest expense.
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<PAGE>
MARKET PRICE AND DIVIDEND DATA FOR CATSKILL FINANCIAL COMMON
STOCK
Catskill Financial's Common Stock is quoted on the NASDAQ stock market
under the symbol "CATB". The following table shows high and low sale price as
well as dividends for the periods indicated.
Catskill Financial Common Stock
-----------------------------------------------------
High Low Dividends
-----------------------------------------------------
1997 Fiscal Year
First Quarter $14.50 $12.13
Second Quarter 16.50 13.75 $.07
Third Quarter 16.50 13.50 .07
Fourth Quarter 17.25 15.25 .07
1998 Fiscal Year
First Quarter $19.63 $16.50 $.08
Second Quarter 19.00 17.00 .08
Third Quarter 18.50 16.13 .08
Fourth Quarter 17.50 12.00 .0925
1999 Fiscal Year
First Quarter $15.00 $11.25 $.0925
Second Quarter 15.75 13.81 .0925
Third Quarter 16.75 14.06 .11
Fourth Quarter 16.75 14.13 .11
2000 Fiscal Year
First Quarter $15.63 $12.63 $.11
Second Quarter 14.00 9.50 .1325
Third Quarter 22.06 11.25 .1325
On June 7, 2000, the last trading day prior to the joint announcement
by Troy Financial and Catskill Financial that they had entered into the Merger
Agreement, the closing sales price of Common Stock was $17.6875 per share. On
September 15, 2000, which is the last practicable
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<PAGE>
date prior to the printing of this proxy statement, the closing price for Common
Stock was $22.4375 per share.
As of September 15, 2000, there were approximately 698 holders of
record of Common Stock. This number does not reflect the number of persons or
entities who may hold their Common Stock in nominee or "street" name through
brokerage firms.
THE MEETING
GENERAL
This proxy statement is being furnished to you in connection with the
solicitation of proxies by the Board of Directors for use at the Meeting on
October 17, 2000, at 7:00 p.m., local time, at Catskill Financial's main office
located at 341 Main Street, Catskill, New York 12414. At the Meeting, the
holders of Common Stock will consider and vote on:
o the proposal to approve and adopt the Merger Agreement, the Merger
and the other transactions contemplated by the Merger Agreement, and
o the transaction of such other business that may properly come before
the Meeting, including a proposal to adjourn or postpone the special
meeting.
RECORD DATE; VOTING RIGHTS; VOTE REQUIRED
The Board of Directors has fixed the close of business on September 15,
2000 as the record date for the determination of shareholders of Catskill
Financial entitled to receive notice of and to vote at the Meeting. On the
Record Date, there were 3,737,519 shares of Common Stock issued and outstanding,
except 77,953 of which are unvested shares issued under Catskill Financial's MRP
that cannot be voted at the Meeting.
The proposal to adopt the Merger Agreement must be approved by the
holders of a majority of the shares of Common Stock outstanding on the Record
Date. Accordingly, any nonvoted shares of Common Stock and abstentions with
regard to this proposal will have the same effect as votes against the proposal.
Each holder of Common Stock is entitled to one vote per share held of
record on the Record Date. The presence in person or by proxy at the Meeting of
the holders of a majority of the outstanding shares of Common Stock will
constitute a quorum.
As of the Record Date, directors and executive officers of Catskill
Financial and their affiliates beneficially owned an aggregate of 654,451, or
approximately 16.3%, of the outstanding shares of Common Stock. Members of the
Board of Directors and executive officers have entered into agreements with Troy
Financial to vote all shares of Common Stock they have the power to vote for the
adoption of the Merger Agreement.
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<PAGE>
The shareholders present at the Meeting, in person or by proxy, may, by
a majority vote, vote to adjourn the Meeting despite the absence of a quorum. If
a quorum is not obtained, or if fewer than a majority of shares of Common Stock
are voted in favor of approval and adoption of the Merger Agreement, it is
expected that the Meeting will be adjourned to allow additional time for
obtaining additional proxies.
VOTING AND REVOCATION OF PROXIES
Shares of Common Stock represented by a proxy properly signed and
received at or prior to the Meeting, unless subsequently revoked, will be voted
at the Meeting in accordance with the instructions on the proxy. If a proxy is
signed and returned without indicating any voting instructions, shares of Common
Stock represented by the proxy will be voted "FOR" adoption of the Merger
Agreement.
If your shares of Common Stock are held in street name by your broker,
your broker will not be able to vote your shares of Common Stock without
instructions from you. You should instruct your broker to vote your shares in
accordance with the procedure provided by your broker.
Any proxy given in connection with this solicitation may be revoked by
the person giving it at any time before the proxy is voted by filing either an
instrument revoking it or a duly executed proxy bearing a later date with the
Corporate Secretary of Catskill Financial prior to or at the Meeting or by
voting the shares of Common Stock subject to the proxy in person at the Meeting.
Attendance at the Meeting will not in and of itself constitute a revocation of a
proxy.
A proxy may indicate that all or a portion of the shares of Common
Stock represented by the proxy are not being voted with respect to a specific
proposal. This could occur, for example, when a broker is not permitted to vote
shares of Common Stock held in street name on certain proposals in the absence
of instructions from the beneficial owner. Shares of Common Stock that are not
voted with respect to a specific proposal will be considered as not present for
such proposal, even though such shares of Common Stock will be considered
present for purposes of determining a quorum and voting on other proposals.
Abstentions on a specific proposal will be considered as present for the purpose
of determining whether a quorum exists, but will not be counted as voting in
favor of such proposal.
SOLICITATION OF PROXIES
In addition to solicitation by mail, the directors, officers, employees
and agents of Catskill Financial may solicit proxies from Catskill Financial's
shareholders, either personally or by telephone or other form of communication.
None of these persons who solicit proxies will be specifically compensated for
such services. Nominees, fiduciaries and other custodians will be requested to
forward soliciting materials to beneficial owners. Catskill Financial will
reimburse such nominees, fiduciaries and other custodians for the reasonable
out-of-pocket expenses incurred by them in connection with this process. In
addition, Catskill Financial will bear its own expenses in connection with the
solicitation of its proxies for the Meeting. Catskill Financial has retained
Regan & Associates, Inc. to assist in soliciting proxies for the Meeting and to
send proxy
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<PAGE>
materials to brokerage houses and other custodians, nominees and fiduciaries for
transmittal to their principals, at a cost not to exceed $7,000, including out
of pocket expenses.
PARTICIPANTS IN THE ESOP
If you participate in the ESOP, the proxy card represents a voting
instruction to the ESOP trustee as to the number of shares of Common Stock in
your plan account. Each participant in the ESOP may direct the trustee as to the
manner in which shares of Common Stock allocated to the participant's plan
account are to be voted. Allocated shares of Common Stock for which no voting
instructions are received will be voted by the trustee, subject to the trustee's
exercise of its fiduciary duties. Unallocated shares of Common Stock held by the
ESOP will be voted by the trustee in the same manner as directed by the majority
of participants who directed the trustee as to allocated shares, subject to the
trustee's exercise of its fiduciary obligations.
PRINCIPAL HOLDERS OF CATSKILL FINANCIAL CORPORATION COMMON STOCK
Shareholders of record as of the close of business on the Record Date
will be entitled to one vote for each share of Common Stock then held. The
following table sets forth information as of September 15, 2000, regarding share
ownership of: (i) those persons or entities which management believes own
beneficially more than five percent of the Common Stock; (ii) each of the
Company's directors; (iii) each officer of the Company and the Bank who made in
excess of $100,000 (salary and bonus) during the fiscal year ended September 30,
1999, (the "Named Officers"); and (iv) all directors and executive officers of
the Company and the Bank as a group. Management knows of no person, except as
listed below, who beneficially owned more than 5% of the Common Stock as of
September 15, 2000. Information set forth in the table with respect to persons
or entities who own beneficially more than five percent of the Common Stock is
based upon filings with the Securities and Exchange Commission (the "SEC") made
pursuant to Section 13 of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") and other sources believed by the Company to be reliable.
<TABLE>
<CAPTION>
Shares Beneficially Percent Beneficial
Name Owned at September 15, 2000 1 Ownership 2
---- ----------------------------- -------------------
<S> <C> <C> <C>
Catskill Financial Corporation 375,342 3 9.4%
Employee Stock Ownership Plan
341 Main Street
Catskill, New York 12414
Wellington Management Company, LLP 226,500 4 5.6%
75 State Street
Boston, Massachusetts 02109
-31-
<PAGE>
Wilbur J. Cross 171,910 5 4.3%
Chairman, President & Chief
Executive Officer
David J. DeLuca 60,816 6 1.5%
Vice President & Chief
Financial Officer
Deborah S. Henderson 51,629 7 1.3%
Vice President & Senior Loan Officer
George P. Jones, Director 38,542 8 1.0%
Richard A. Marshall, Director 76,925 9 1.9%
Allan D. Oren, Director 83,621 2.1%
Hugh J. Quigley, Director 38,963 10 1.0%
Edward P. Stiefel, Esq , Director 67,342 1.7%
Directors and executive officers of the 654,451 11 16.3%
Company and the Bank, as a group (10 persons)
</TABLE>
-------------------------------
1 Amount includes shares held directly, as well as shares allocated to
such individuals under the ESOP, and other shares with respect to which
a person may be deemed to have sole voting and/or investment power. The
table also includes 4,551 shares awarded to each non-employee director
pursuant to the MRP which are not vested and cannot be voted at the
Meeting. The table also includes 22,744 shares subject to options
granted to directors Jones, Marshall and Quigley and 5,686 shares for
Mr. Oren and Mr. Stiefel pursuant to the Stock Option Plan because they
were exercisable on the Record Date or within 60 days thereafter.
2 Based upon 4,010,055 shares outstanding on September 15, 2000, which
includes 77,953 shares issued but unvested under the MRP and stock
options for 272,536 shares exercisable on the Record Date or within 60
days thereafter.
3 Excludes 77,547 shares allocated to ESOP participants. First Bankers
Trust Co., N.A., the trustee of the ESOP, may be deemed to own
beneficially the unallocated shares held by the ESOP. Unallocated
shares are voted in the same manner as directed by the majority of
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<PAGE>
participants who directed the trustee as to allocated shares. Allocated
shares for which no voting instructions are received will be voted by
the trustee, subject to the trustee's exercise of its fiduciary duties.
4 Shares are beneficially owned by an investment advisory company on
behalf of certain of its clients. Amounts shown are based upon the most
recent available reports filed pursuant to Section 13 of the Exchange
Act and may not reflect actual beneficial ownership on the Record Date.
5 Includes 200 shares owned by Mr. Cross' wife, as to which he disclaims
beneficial ownership; 9,310 shares allocated to Mr. Cross in the ESOP;
22,748 unvested MRP shares, which cannot be voted at the Meeting; and
113,732 shares which Mr. Cross had the right to acquire on the Record
Date or within 60 days thereafter pursuant to the Stock Option Plan.
6 Includes 10,400 unvested MRP shares, which cannot be voted at the
Meeting; 27,000 shares which Mr. DeLuca had the right to acquire on the
Record Date or within 60 days thereafter pursuant to the Stock Option
Plan; and 4,316 shares allocated to Mr. DeLuca in the ESOP.
7 Includes 7,050 unvested MRP shares, which cannot be voted at the
Meeting; 24,000 shares which Ms. Henderson had the right to acquire on
the Record Date or within 60 days thereafter pursuant to the Stock
Option Plan; and 5,379 shares allocated to Ms. Henderson in the ESOP.
8 Includes 425 shares owned by Mr. Jones' daughter, as to which he
disclaims beneficial ownership.
9 Includes 12,000 shares owned by Mr. Marshall's wife and 3,000 shares
owned by Mr. Marshall's daughters, as to which he disclaims beneficial
ownership.
10 Includes 980 shares owned by Mr. Quigley's wife's Individual Retirement
Account, as to which he disclaims beneficial ownership.
11 Includes 26,759 ESOP shares allocated to executive officers, 48,198
unvested MRP shares awarded to executive officers as a group and 22,755
unvested MRP shares awarded to non-employee directors, which MRP shares
cannot be voted at the Meeting. Also includes 192,932 stock options
granted to executive officers and 79,604 stock options granted to
non-employee directors, representing options exercisable on the Record
Date or within 60 days thereafter.
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<PAGE>
PROPOSAL I -- ADOPTION OF THE MERGER AGREEMENT
The following discussion is qualified by reference to the Merger
Agreement which is attached as Appendix A to this proxy statement and
incorporated herein by reference. You are urged to read the Merger Agreement
carefully in its entirety. All information contained in this Proxy Statement
with respect to Troy Financial and its subsidiaries has been supplied by Troy
Financial for inclusion herein and has not been independently verified by
Catskill Financial.
THE PARTIES TO THE MERGER
Troy Financial
Troy Financial is headquartered in Troy, New York and is the parent
holding company of Troy Savings and Troy Commercial Bank. Troy Savings operates
fourteen branch offices in the six New York counties of Albany, Saratoga,
Schenectady, Warren, Washington and Rensselaer. Troy Commercial Bank is a newly
organized commercial bank.
At June 30, 2000, Troy Financial had assets of $902.8 million, net
loans receivable of $591.2 million, deposits of $560.7 million and shareholders'
equity of $166.4 million.
Catskill Financial
Catskill Financial, a Delaware corporation, is headquartered in
Catskill, New York and is the parent of Catskill Savings, a federally chartered
stock savings bank.
At June 30, 2000, Catskill Financial had consolidated assets of $316.2
million, net loans of $167.2 million, deposits of $221.4 million and
shareholders' equity of $53.5 million. Since its incorporation, Catskill
Financial has not engaged in any significant activity other than holding the
stock of Catskill Savings.
Catskill Savings was organized in 1868 as a state chartered mutual
savings bank. In April, 1996 it converted to a stock savings bank. Catskill
Savings is regulated by the OTS and its deposits are insured up to applicable
limits under the Bank Insurance Fund of the FDIC. Catskill Savings is primarily
engaged in the business of attracting deposits from the general public and using
such deposits, together with other funding sources, to invest in one- to- four
family residential mortgage loans and, to a significantly lesser extent,
consumer (including home equity lines of credit), commercial and multi-family
loans. Catskill Savings also invests in mortgage-backed securities, U.S.
government and agency obligations and other permissible investments. At June 30,
2000, Catskill Savings' one-to-four family residential loan portfolio totaled
$123.9 million or 39.2 % of total assets and other loans totaled $45.5 million,
or 14.4% of total assets.
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<PAGE>
OVERVIEW OF THE TRANSACTION
The boards of directors of Catskill Financial and Troy Financial each
have unanimously approved the Merger Agreement which provides that Charlie
Acquisition Corporation, a wholly- owned subsidiary of Troy Financial, will
merge with and into Catskill Financial. Immediately after that merger, Catskill
Financial will merge into Troy Financial with Troy Financial being the surviving
corporation. Catskill Savings then will merge into Troy Savings, with Troy
Savings being the surviving bank. Troy Savings intends to operate the offices of
Catskill Savings as branch offices of Troy Savings.
WHAT YOU WILL RECEIVE IN THE MERGER
Your shares of Common Stock will be converted into the right to receive
a cash payment of $23.00 per share. Upon completion of the Merger you will no
longer own any Common Stock or have an interest in Catskill Financial, nor will
you receive, as a result of the Merger, any stock of Troy Financial or Troy
Savings.
TAXABLE TRANSACTION FOR CATSKILL FINANCIAL SHAREHOLDERS
The following is a discussion of the material federal income tax
consequences of the Merger to certain holders of Common Stock. The discussion is
based upon the Internal Revenue Code (the "Code"), Treasury Regulations,
Internal Revenue Service rulings and judicial and administrative decisions in
effect as of the date of this proxy statement. This discussion assumes that the
Common Stock is generally held for investment. In addition, this discussion does
not address all of the tax consequences that may be relevant to you in light of
your particular circumstances or to Catskill Financial shareholders subject to
special rules, such as foreign persons, financial institutions, tax-exempt
organizations, dealers in securities or foreign currencies or insurance
companies.
The receipt of cash for Common Stock in connection with the Merger will
be a taxable transaction for federal income tax purposes to shareholders
receiving such cash, and may be a taxable transaction for state, local and
foreign tax purposes as well. You will recognize a gain or loss measured by the
difference between your tax basis for the Common Stock owned by you at the time
of the Merger and the amount of cash you receive for your Catskill Financial
shares. Your gain or loss will be a capital gain or loss if the Common Stock is
a capital asset to you.
The cash payments the holders of Common Stock will receive upon their
exchange of the Common Stock pursuant to the Merger generally will be subject to
"backup withholding" for federal income tax purposes unless certain requirements
are met. Under federal law, the third- party paying agent must withhold 31% of
the cash payments to holders of Common Stock to whom backup withholding applies,
and the federal income tax liability of these persons will be reduced by the
amount that is withheld. To avoid backup withholding, a holder of Common Stock
must provide the third-party exchange agent with his or her taxpayer
identification number and complete a form in which he or she certifies that he
or she has not been notified by the Internal Revenue Service that he or she is
subject to backup withholding as a result of a failure to report
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<PAGE>
interest and dividends. The taxpayer identification number of an individual is
his or her social security number.
Neither Troy Financial nor Catskill Financial has requested or will
request a ruling from the Internal Revenue Service as to any of the tax effects
to Catskill Financial's shareholders of the transactions discussed in this proxy
statement, and no opinion of counsel has been or will be rendered to Catskill
Financial's shareholders with respect to any of the tax effects of the Merger to
holders of Common Stock
The above summary of the material federal income tax consequences of
the Merger is not intended as a substitute for careful tax planning on an
individual basis. In addition to the federal income tax consequences discussed
above, consummation of the Merger may have significant state and local income
tax consequences that are not discussed in this proxy statement. Accordingly,
persons considering the Merger are urged to consult their tax advisors with
specific reference to the effect of their own particular facts and circumstances
on the matters discussed in this proxy statement.
BACKGROUND OF THE MERGER
Since the completion of Catskill Savings' conversion in 1996, the Board
of Directors and management have sought to retain and develop a community bank
franchise and build shareholder value. With these goals in mind, in October,
1999, the Board authorized Wilbur J. Cross, Catskill Financial's President and
Chief Executive Officer, to engage the services of an investment banking firm to
assist Catskill Financial in evaluating its strategic options.
In November, 1999, Mr. Cross and David J. DeLuca, Catskill Financial's
Vice President and Chief Financial Officer, met with representatives of RBC to
discuss Catskill Financial's business and strategic plan. On January 19, 2000,
RBC representatives met with the Board and reviewed the strategic options
available to Catskill Financial, the current market for financial institution
securities and approaches to the valuation of Catskill Financial. At this
meeting, the RBC representatives reviewed the probable results of several
alternative strategies for maximizing shareholder value, including remaining as
an independent institution with a focus on internal growth, seeking to acquire
other compatible financial institutions and seeking suitable candidates for a
business combination in which Catskill Financial would be the acquired
institution.
On February 15, 2000, the Board of Directors selected RBC to act as
Catskill Financial's exclusive financial advisor to assist it with its ongoing
evaluation of alternative courses of action to enhance long-term shareholder
value, including a possible merger or sale of Catskill Financial. During
February and March, 2000 RBC conducted a review of Catskill Financial's
operations, books and records and assisted Catskill Financial with the
preparation of confidential information and marketing materials to be provided
to potentially interested institutions if the Board decided to pursue a business
combination.
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In March, 2000, after further consideration of the alternative
strategies available to the Company, RBC was authorized to contact and solicit
expressions of interest in a business combination from other institutions.
Eleven such institutions, including commercial banks, thrift institutions or
their holding companies, were contacted. Eight of these institutions executed
confidentiality agreements and received Catskill Financial's confidential
information. In April, 2000, five of them submitted indications of interest in
acquiring Catskill Financial. Catskill Financial's management, in consultation
with RBC, concluded that: (i) three of these informal offers - one from a
commercial bank holding company and two from thrift holding companies- were
unacceptably low; and (ii) two of the offers - from Troy Financial and a thrift
holding company - merited further exploration.
In early May, 2000, Mr. Cross, Mr. DeLuca, and RBC representatives met
with senior management of Troy Financial and the other institution, which, in
April, 2000, had announced that it had entered into an agreement to acquire
another thrift holding company and its savings bank subsidiary. On May 8, 2000,
Catskill Financial received written, non-binding expressions of interest of
$22.00 per share from Troy Financial and $22.25 from the other institution. On
May 12, 2000, Catskill Financial received an increased written, non-binding
expression of interest from Troy Financial of $23.00 per share. At a special
meeting held on May 15, 2000, RBC representatives and Catskill Financial's legal
counsel presented an analysis and comparison of the two offers. After
considering all of the relevant economic, legal and other factors identified by
Catskill Financial's advisors, including the amount of each offer and an
assessment of the ability of each institution to consummate and receive the
required regulatory approvals for a merger in a timely manner, the Board
authorized the negotiation of a definitive merger agreement with Troy Financial.
On May 17 and 18, 2000, Troy Financial and its advisors performed
on-site due diligence at the Company's offices. On May 26 and May 31, 2000, the
Board met to review the status of the negotiations. The Board also discussed a
possible sale of the Company's corporate and municipal bond portfolios and
concluded that such sale would facilitate the Merger. See "Securities Portfolio
Sale". The parties completed the negotiations between May 31 and June 7, 2000.
On June 7, 2000, after again considering all relevant factors and receiving
RBC's written opinion that the Merger is fair to Catskill Financial's
shareholders from a financial point of view, the Board concluded that the Merger
is in Catskill Financial's and its shareholders' best interests and approved the
Merger Agreement. On June 8, 2000, Catskill Financial and Troy Financial jointly
announced the signing of the Merger Agreement.
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CATSKILL FINANCIAL'S REASONS FOR THE MERGER AND RECOMMENDATION OF
THE BOARD OF DIRECTORS
In forming its opinion to approve the Merger Agreement, the Board of
Directors considered a number of factors, including the following:
o the Merger price exceeds the estimated value that could be
realized by Catskill Financial shareholders over the
intermediate and long terms;
o the $23 per share to be received by the shareholders of Catskill
Financial represents a substantial premium to recent market
prices and book value of the Common Stock;
o attempts to grow Catskill Financial's franchise through
acquisitions of other institutions had been unproductive;
o the prospects for loan and deposit growth in Catskill
Financial's local market- without the investment of considerable
additional resources and the offering of new products and
services are limited;
o the Company's ability to increase earnings per share through
Common Stock repurchases cannot continue indefinitely;
o Catskill Financial's prospects for reaching a satisfactory
return on equity without significant asset growth are limited in
the intermediate term due to its high capital level;
o Catskill Financial's financial advisor, RBC, has given its
opinion that the transaction is fair to Catskill Financial's
shareholders from a financial point of view;
o like Catskill Financial, Troy Financial has a demonstrated
commitment to community banking; and
o Troy Financial has the resources to deliver expanded products
and services to Catskill Financial's existing customers.
In making its determination, the Board considered the Merger
transaction as a whole and did not assign any relative or specific weights to
the factors that it considered.
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Generally, the Board of Directors concluded that in the intermediate
and long terms Catskill Financial could not produce shareholder value in excess
of the Merger price, and that the Merger price was fair, from a financial point
of view, to Catskill Financial's shareholders. After careful and thorough
consideration of the Merger Agreement, the factors discussed above and the
opinion of RBC, the Board unanimously adopted the Merger Agreement as being in
the best interests of Catskill Financial and its shareholders. ACCORDINGLY, THE
BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR THE ADOPTION OF THE
MERGER AGREEMENT.
OPINION OF CATSKILL FINANCIAL'S FINANCIAL ADVISOR
Catskill Financial retained RBC on March 23, 2000 to act as its
exclusive financial advisor in connection with services which have resulted in
the Merger. RBC agreed to assist Catskill Financial in soliciting indications of
interest and in analyzing, structuring, negotiating and effecting any
transaction. Catskill Financial selected RBC because it is a nationally
recognized investment-banking firm with substantial experience in transactions
similar to the Merger and is familiar with Catskill Financial and its business.
As part of its investment banking business, RBC is continually engaged in the
valuation of businesses and their securities in connection with mergers and
acquisitions, mutual to stock conversions, initial and secondary stock offerings
and other corporate transactions.
RBC participated in the negotiations with respect to the pricing and
other terms and conditions of the Merger. However, the Board of Directors
ultimately made the final decision as to the pricing of the Merger. RBC rendered
a written opinion to the Board on June 7, 2000 that based on and subject to the
assumptions, factors, and limitations as set forth in the attached opinion and
as described below, the Merger consideration is "fair" to Catskill Financial's
shareholders from a financial point of view. RBC updated its opinion as of the
date of this proxy statement. No limitations were imposed by the Board of
Directors upon RBC with respect to the investigations made or procedures
followed by it in arriving at its opinion.
The full text of RBC's opinion, which sets forth assumptions made and
matters considered, is attached as Appendix C to this proxy statement.
Shareholders of Catskill Financial are urged to read the attached RBC opinion in
its entirety. The RBC opinion is directed only to the financial fairness of the
consideration and does not constitute a recommendation to any shareholder as to
how to vote at the Meeting. The summary of the RBC opinion in this proxy
statement is qualified in its entirety by reference to the full text of the RBC
opinion. In rendering its opinions, RBC does not admit that it is an expert
within the meaning of the term "expert" as used within the Securities Act of
1933 and the rules and regulations promulgated thereunder, or that its opinions
constitute a report or valuation within the meaning of Section 11 of the
Securities Act of 1933, as amended (the "Securities Act") and the rules and
regulations promulgated thereunder.
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In connection with its opinion, RBC reviewed the following documents:
o the Merger Agreement and related documents;
o this proxy statement;
o Troy Financial's Annual Report to Shareholders and Annual Report on
Form 10-K for the fiscal year ended September 30, 1999 and Troy
Financial's Quarterly Reports on Form 10-Q for the periods ended
June 30, 2000, March 31, 2000, December 31, 1999, June 30, 1999 and
March 31, 1999;
o Troy Financial's Prospectus, dated February 12, 1999 with respect to
Troy Savings' conversion from mutual to stock form of organization;
o Catskill Financial's Annual Reports to Shareholders on Form 10-K for
the fiscal years ended September 30, 1999, 1998, 1997 and Catskill
Financial's Quarterly Reports on Form 10-Q for the periods ended
June 30, 2000, March 31, 2000, December 31, 1999, June 30, 1999 and
March 31, 1999;
o Catskill Financial's Proxy Statements dated January 14, 2000,
January 7, 1999 and January 20, 1998;
o certain operating and financial information provided to RBC by the
management of Catskill Financial relating to its business and
prospects;
o the publicly available financial data of thrift organizations which
RBC deemed generally comparable to Catskill Financial; and
o the terms of recent acquisitions of thrift organizations which RBC
deemed generally comparable in whole or part to Troy Financial's
acquisition of Catskill Financial.
Additionally, RBC:
o conducted or reviewed such other studies, analyses, inquiries and
examinations as it deemed appropriate;
o analyzed Troy Financial's ability to consummate the Merger;
o considered the future prospects of Catskill Financial in the event
it remained independent; and
o met with members of Catskill Financial's senior management to
discuss Catskill Financial's operations, historical financial
statements, strategic plans and future prospects, including any
potential operating efficiencies and synergies that may arise from
the Merger.
In connection with its review, RBC relied upon and assumed, without
independent verification, the accuracy and completeness of the financial and
other information regarding Catskill Financial and its subsidiaries provided to
RBC by Catskill Financial and its representatives. RBC is not an expert in
evaluating loan and lease portfolios for purposes of
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<PAGE>
assessing the adequacy of the allowances for losses. Therefore, RBC has not
assumed any responsibility for making an independent evaluation of the adequacy
for the allowance for loan losses set forth in the balance sheets of Troy
Financial and Catskill Financial at June 30, 2000, and RBC assumed such
allowances were adequate and complied fully with applicable law, regulatory
policy, sound banking practice and policies of the SEC as of the date of such
financial statements. RBC has reviewed certain historical financial data
provided by Catskill Financial. RBC reviewed certain operating forecasts and
financial projections (and the assumptions and bases therefor) provided by
Catskill Financial. RBC assumed that such forecasts and projections reflected
the best currently available estimates and judgments of Catskill Financial's
management. In certain instances, for the purposes of its analyses, RBC made
adjustments to such forecasts and projections that in RBC's judgment were
appropriate under the circumstances. RBC was not retained to nor did it make any
independent evaluation or appraisal of the assets or liabilities of Catskill
Financial or Troy Financial or their respective subsidiaries nor did RBC review
any loan files of Troy Financial or any of its subsidiaries. RBC also assumed
that the Merger in all respects is, and will be, undertaken and consummated in
compliance with all laws and regulations that are applicable to Troy Financial
and Catskill Financial.
OVERVIEW OF VALUATION METHODOLOGY
The preparation of a fairness opinion on a transaction such as the
Merger involves various determinations as to the most appropriate and relevant
methods of financial analysis and the application of those methods to the
particular circumstances. Therefore, RBC's opinion is not readily susceptible to
summary description. In arriving at its opinion, RBC performed a variety of
financial analyses. RBC believes that its analyses must be considered as a whole
and the consideration of portions of such analyses and the factors considered
therein, or any one method of analysis, without considering all factors and
analyses, could create an incomplete view of the analyses and the process
underlying RBC's opinion. No one method of analysis was assigned a greater
significance than any other.
The forecasts and projections furnished to RBC were prepared by the
management of Catskill Financial without input or guidance by RBC. Catskill
Financial does not publicly disclose internal management projections of the type
provided to RBC in connection with the review of the Merger. Such projections
were not prepared with a view toward public disclosure. The public disclosure of
such projections could be misleading since the projections were based on
numerous variables and assumptions that are inherently uncertain, including,
without limitation, factors related to general economic and competitive
conditions. Accordingly, actual results could vary significantly from those set
forth in such projections.
In its analyses, RBC made numerous assumptions with respect to industry
performance, general business and economic conditions, and other matters, many
of which are beyond the control of Catskill Financial. Any estimates contained
in RBC's analyses are not necessarily
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indicative of future results or values, which may be significantly more or less
favorable than such estimates. Estimates of values of companies do not purport
to be appraisals nor do they necessarily reflect the prices at which companies
or their securities may actually be sold.
The following is a brief summary of the analyses and procedures
performed by RBC in the course of arriving at its opinion. The summary does not
purport to be a complete description, but is a brief summary of the material
analyses and procedures performed by RBC in the course of arriving at its
opinion.
Analysis of Selected Publicly Traded Companies: RBC compared the
financial data for Catskill Financial as of or for the latest twelve months
ended March 31, 2000 to a peer group of twenty-four selected thrifts. The
criteria for the peer group were thrifts located in the Mid- Atlantic and New
England regions of the United States with assets between $250 million and $500
million for which public trading and pricing information was available. RBC
deemed this group to be generally comparable to Catskill Financial. The
following table compares selected statistics of Catskill Financial with the
average ratios and median ratios for the twenty-four selected thrifts comprising
the peer group:
<TABLE>
<CAPTION>
Peer
Catskill Peer Group Group
Financial Average Median
--------- ------- -------
<S> <C> <C> <C>
Tangible Equity / Tangible Assets 16.21% 7.30% 7.34%
Non-Performing Loans / Loans 0.17 0.45 0.31
Loan Loss Reserves / NPLs 761.62 273.42 184.15
Loan Loss Reserves / Loans 1.33 1.06 0.99
Non-Performing Assets / Assets 0.11 0.36 0.28
Total Loans / Total Assets 47.05 65.88 68.45
Total Loans / Deposits 73.50 99.87 94.58
1-4 Family Loans / Total Loans 77.42 60.98 58.07
Other Real Estate Loans / Total Loans 5.11 18.49 14.01
Consumer Loans / Total Loans 14.46 6.94 1.72
Time Deposits > $100,000/Total Deposits 10.62 17.93 14.23
Core Deposits / Total Deposits 89.38 82.07 85.77
Return on Average Assets 1.31 0.79 0.87
Return on Average Equity 7.37 10.03 11.97
Net Interest Margin 3.51 3.45 3.52
Yield on Interest Earning Assets 7.00 7.58 7.49
Cost of Interest Bearing Liabilities 4.23 4.45 4.29
Non Interest Income / Average Assets 0.32 0.49 0.46
Non Interest Expense/Avg Assets 1.89 2.39 2.49
Efficiency Ratio 51.19 63.08 63.81
Price / LTM EPS 14.62x 9.07x 8.31 x
Price / Tangible Book Value 120.75 107.01 105.79
Dividend Yield 2.92 % 3.17 % 3.17%
</TABLE>
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Relative to this peer group Catskill Financial's 1.31% return on assets was well
above the 0.79% peer group average, while its 7.37% return on equity was well
below the 11.97% peer group median. Both return measures were significantly
influenced by the amount of Catskill Financial's tangible equity which, at
16.21% of tangible assets, was more than twice that of the peer group. A
slightly lower yield on earning assets combined with a slightly lower cost of
interest bearing liabilities, due to a lower level of jumbo CD's and a higher
level of core deposits, produces a net interest margin comparable to that of the
peer group. A substantially lower efficiency ratio and superior asset quality
also adds to the above average return on assets. An above average percentage of
loans in the 1-4 family residential mortgages and consumer loan categories and a
below average percentage of other real estate loans contributes to Catskill
Financial's asset quality performance.
Analysis of Selected Transactions: RBC compared Catskill Financial's
financial data as of March 31, 2000 with that of a group of sixteen selected
thrift organizations being acquired in transactions announced since January 1,
1999 and for which pricing data pertaining to the transactions was publicly
available. RBC deemed these transactions generally comparable to Troy
Financial's acquisition of Catskill Financial. The criteria for the group were
thrifts which had a ratio of tangible equity to assets greater than 10% and
assets between $150 million and $600 million. The following table compares
selected statistics of Catskill Financial with the median ratios and average
ratios for the sixteen acquired thrifts in these transactions:
<TABLE>
<CAPTION>
Catskill Peer Group Peer Group
Financial Median Average
----------------- ----------------- -------------
<S> <C> <C> <C>
Total Assets ($000) 346,102 274,703 268,436
Tangible Equity/Tangible Assets 16.21% 13.91% 16.54%
YTD Return on Average Assets 1.31 1.04 1.10
YTD Return on Average Equity 7.37 6.80 7.26
Non-Performing Assets/Assets 0.11 0.30 0.32
LTM Operating Expenses/Assets 1.57 1.75 1.97
YTD Efficiency Ratio 51.19 55.33 53.35
</TABLE>
At $23.00 per share, RBC calculated the transaction value as a multiple of
Catskill Financial's March 31, 2000 core book value, core tangible value, latest
twelve months core diluted earnings, and deposit premium on core capital as
follows:
Percentage of Core Book Value: 243.82%
Percentage of Core Tangible Book Value: 243.82%
Multiple of Core Earnings: 19.33x
Deposit Premium on Core Capital: 14.98%
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Core ratios were defined to equal the ratios resulting from shareholders' equity
equal to 6% of assets with a dollar for dollar return of excess capital.
The average and median pricing ratios for the comparable transactions are
illustrated in the chart below:
<TABLE>
<CAPTION>
Price/Core Deposit
Price/Core Tangible Price/Core Premium on
Book Value Book Value EPS Core Capital
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Peer Group Average 209.60% 215.96% 22.32x 16.30%
Peer Group Median 174.68 174.68 23.42 8.38
</TABLE>
RBC then adjusted the peer group statistics to reflect the change in the Nasdaq
Bank Stock Index from the date of announcement of each stock transaction to the
closing value of the index on June 5, 2000. The adjusted average and median
pricing ratios for the comparable thrift transactions are illustrated in the
chart below:
<TABLE>
<CAPTION>
Price/Core Deposit
Price/Core Tangible Premium on
Book Value Book Value Core EPS Core Capital
----------------- ---------------------------------- -----------------
<S> <C> <C> <C> <C>
Peer Group Average 190.57% 196.99% 20.32x 14.91%
Peer Group Median 160.40 170.45 19.63 7.86
Troy/Catskill 243.82 243.82 19.33 14.98
</TABLE>
The imputed value of Catskill Financial, based upon the average and median
ratios of the comparable thrift transactions, when applied to Catskill
Financial's book value, tangible book value, latest twelve month earnings and
core deposits, results in the acquisition values of Catskill Financial shown in
the chart below:
Price/Core Deposit
Price/Core Tangible Price/ Premium on
Book Value Book Value Core EPS Core Capital
----------------------------------------------------------------
Average $20.04 $20.34 $24.18 $22.96
Median 18.37 18.92 23.37 19.20
No company or transaction used in the Analysis of Selected Publicly Traded
Companies and Analysis of Selected Transactions sections is identical to
Catskill Financial or the Merger. Accordingly, an analysis of the results of the
foregoing is not mathematical; rather it involves complex considerations and
judgments concerning differences in financial and operating characteristics of
the companies involved, market areas in which the companies operate and other
factors that could affect the trading values of the securities of the company or
companies to which they are being compared.
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Discounted Dividend Analysis: Using a discounted dividend analysis, RBC
estimated the present value of the future dividend stream that Catskill
Financial could produce in perpetuity. Projection ranges for Catskill
Financial's five-year balance sheet and income statement were provided by
Catskill Financial's management. Management's projections were based upon
various factors and assumptions, many of which are beyond the control of
Catskill Financial. These projections are, by their nature, forward-looking and
may differ materially from the actual future values or actual future results for
the reasons discussed above. The actual future values or results may be
significantly more or less favorable than suggested by such projections. In
producing a range of per share Catskill Financial values, RBC utilized the
following assumptions: an immediate dividend payout in an amount which would
bring Catskill Financial's tangible equity ratio to 6%, discount rates ranging
from 12% to 14 %, terminal price/earnings multiples ranging from 11x to 13x
(which, when applied to terminal year estimated earnings, produces a value which
approximates the net present value of the dividends in perpetuity, given certain
assumptions regarding growth rates and discount rates) and earnings that include
estimated savings in Catskill Financial's non-interest expense equal to 30% to
in the first year and 35.00% in the second year, with 5.00% growth thereafter.
The discounted dividend analysis produced the range of net present values per
share of Common Stock illustrated in the chart below:
Discount Rate: 12.00% 13.00% 14.00%
--------------
Terminal Year 11x $21.82 $21.34 $20.87
Multiple of
Earnings 12x $22.65 $22.13 $21.63
Adj. For Goodwill
Amortization 13x $23.48 $22.92 $22.39
These analyses do not purport to be indicative of actual values or expected
values or an appraisal range of shares of Common Stock. The discounted dividend
analysis is a widely used valuation methodology, but RBC noted that it relies on
numerous assumptions, including expense savings levels, dividend payout rates,
terminal values and discount rates, the future values of which may be
significantly more or less than such assumptions. Any variation from these
assumptions would likely produce different results.
Break-Even Analysis: Using a break-even analysis, RBC estimated the
earnings per share growth rate necessary for the present value of Catskill
Financial's future stock price to equal the $23.00 acquisition price. In
producing the earnings growth rate, RBC utilized the following assumptions: 2000
EPS estimate of $1.38, discount rates range from 12% to 18%, terminal
price/earnings multiples range from 10x to 20x, and a dividend payout ratio of
42.74%. The break-even analysis produced the range of five year earnings growth
rates illustrated in the chart below:
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Discount Rates
--------------
Terminal
Year
Multiple of
Earnings 12% 14% 16% 18%
-------- --- --- --- ---
Market 10x 23.9% 26.5% 29.1% 31.8%
Multiple 12x 19.3 21.9 24.5 27.0
Acquisition 18x 9.3 11.7 14.1 16.5
Multiple 20x 6.8 9.1 11.5 13.8
RBC noted that Catskill Financial's strategic plan called for earnings
growth rates less than those indicated above. These analyses do not purport to
be indicative of actual values or expected values or an appraisal range of the
shares of Common Stock. The break-even analysis is a widely used valuation
methodology, but RBC noted that it relies on numerous assumptions, including
projected earnings, price/earnings multiples, discount rates, dividend payout
ratio and Troy Financial's $23.00 offer per share to Catskill Financial
shareholders, the future values of which may be significantly more or less than
such assumptions. Any variation from these assumptions would likely produce
different results.
RBC's opinion was based solely upon the information available to it and
the economic, market and other circumstances as they existed as of the date of
the opinion. Events occurring after such date could materially affect the
assumptions and conclusions contained in RBC's opinion. RBC has not undertaken
to reaffirm or revise its opinion or otherwise comment upon any events occurring
after the date of its opinion.
With regard to RBC's services in connection with the Merger, Catskill
Financial has agreed to pay RBC a transaction fee in connection with the Merger,
a portion of which is contingent upon the consummation of the Merger. Catskill
Financial has agreed to pay total fees of $1,024,000, of which $624,500 has been
paid and the remainder of which will be paid when the Merger is consummated. In
addition, Catskill Financial has agreed to reimburse RBC for its reasonable
out-of-pocket expenses, which shall not exceed $10,000 without the prior consent
of Catskill Financial. Catskill Financial has also agreed to indemnify RBC and
certain related persons against certain liabilities, including liabilities under
federal securities law, incurred in connection with its services. The amounts of
RBC's fees were determined by negotiation between Catskill Financial and RBC.
Prior to this engagement, RBC has not had an investment banking
relationship with Catskill Financial and RBC's research department does not
provide published investment analysis on Catskill Financial. However, RBC does
make a market in the Common Stock.
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RBC has not had an investment banking relationship with Troy Financial
and RBC's research department does not provide published investment analysis on
Troy Financial. However, RBC does make a market in Troy Financial's common
stock.
DISSENTERS' APPRAISAL RIGHTS
Under Delaware law, if you do not wish to accept the cash payment
provided for in the Merger Agreement, you have the right to dissent from the
Merger and to have an appraisal of the fair value of your shares conducted by
the Delaware Court of Chancery. Catskill Financial shareholders electing to
exercise dissenters' appraisal rights must comply with the provisions of section
262 of the Delaware General Corporation Law in order to perfect their rights.
Catskill Financial will require strict compliance with the statutory procedures.
A copy of Section 262 is attached as Appendix D.
The following is intended as a brief summary of the material provisions
of the Delaware statutory procedures required to be followed by a Catskill
Financial shareholder in order to dissent from the Merger and perfect
dissenters' appraisal rights. This summary, however, is not a complete statement
of all applicable requirements and is qualified in its entirety by reference to
Section 262 of the Delaware General Corporation Law, the full text of which
appears in Appendix D of this proxy statement.
Section 262 requires that shareholders be notified not less than 20
days before the Meeting to vote on the Merger that dissenters' appraisal rights
will be available. A copy of Section 262 must be included with such notice. This
proxy statement constitutes Catskill Financial's notice to its shareholders of
the availability of dissenters' appraisal rights in connection with the Merger
in compliance with the requirements of Section 262. If you wish to consider
exercising your dissenters' appraisal rights you should carefully review the
text of Section 262 contained in Appendix D because if you don't timely and
properly comply with the requirements of Section 262, you will lose your rights
under Delaware law.
If you elect to demand appraisal of your shares of Common Stock, you
must satisfy both of the following conditions:
1. You must deliver to Catskill Financial a written demand for
appraisal of your shares of Common Stock before the vote with
respect to the Merger is taken. This written demand for appraisal
must be in addition to and separate from any proxy or vote
abstaining from or against the Merger. Voting against or failing
to vote for the Merger by itself does not constitute a demand for
appraisal within the meaning of Section 262.
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<PAGE>
2. You must not vote in favor of the Merger. An abstention or failure
to vote will satisfy this requirement, but a vote in favor of the
Merger, by proxy or in person, will constitute a waiver of your
dissenters' appraisal rights in respect of the shares of Common
Stock so voted and will nullify any previously filed written
demands for appraisal.
If you fail to comply with either of these conditions and the Merger is
completed, you will be entitled to receive the cash payment for your shares of
Common Stock as provided for in the Merger Agreement but will have no
dissenters' appraisal rights with respect to your shares of Common Stock.
All demands for appraisal should be addressed to the Corporate
Secretary, Catskill Financial Corporation, 341 Main Street, Catskill, New York
12414, before the vote on the Merger is taken at the Meeting, and should be
executed by, or on behalf of, the record holder of the shares of Common Stock.
The demand must reasonably inform Catskill Financial of the identity of the
shareholder and the intention of the shareholder to demand appraisal of his or
her shares of Common Stock.
To be effective, a demand for appraisal by a holder of Common Stock
must be made by or in the name of such registered shareholder, fully and
correctly, as the shareholder's name appears on his or her stock certificate(s)
and cannot be made by the beneficial owner if he or she does not also hold the
shares of record. The beneficial holder must, in such cases, have the registered
owner submit the required demand in respect of such shares.
If shares of Common Stock are owned of record in a fiduciary capacity,
such as by a trustee, guardian or custodian, execution of a demand for appraisal
should be made in such capacity; and if the shares of Common Stock are owned of
record by more than one person, as in a joint tenancy or tenancy in common, the
demand should be executed by or for all joint owners. An authorized agent,
including one for two or more joint owners, may execute the demand for appraisal
for a shareholder of record; however, the agent must identify the record owner
or owners and expressly disclose the fact that, in executing the demand, he or
she is acting as agent for the record owner. A record owner, such as a broker,
who holds shares of Common Stock as a nominee for others, may exercise his or
her right of appraisal with respect to the shares of Common Stock held for one
or more beneficial owners, while not exercising this right for other beneficial
owners. In such case, the written demand should state the number of shares of
Common Stock as to which appraisal is sought. Where no number of shares of
Common Stock is expressly mentioned, the demand will be presumed to cover all
shares of Common Stock held in the name of such record owner.
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If you hold your shares of Common Stock in a brokerage account or in
other nominee form and you wish to exercise appraisal rights, you should consult
with your broker or such other nominee to determine the appropriate procedures
for the making of a demand for appraisal by such nominee.
Section 262 provides that within 10 days after the effective date of
the Merger, Troy Financial must give written notice that the Merger has become
effective to each Catskill Financial shareholder who has properly filed a
written demand for appraisal and who did not vote in favor of the Merger. Within
120 days after the effective date of the Merger, either Troy Financial or any
shareholder who has complied with the requirements of Section 262 may file a
petition in the Delaware Court of Chancery demanding a determination of the fair
value of the shares held by all shareholders entitled to appraisal. Troy
Financial does not presently intend to file such a petition in the event there
are dissenting shareholders and has no obligation to do so. Accordingly, your
failure to file such a petition within the period specified could nullify your
previously written demand for appraisal.
At any time within 60 days after the effective date of the Merger, any
shareholder who has demanded an appraisal has the right to withdraw the demand
and to accept the cash payment specified by the Merger Agreement for his or her
shares of Common Stock. If a petition for appraisal is duly filed by a
shareholder and a copy of the petition is delivered to Troy Financial, Troy
Financial will be obligated within 20 days after receiving service of a copy of
the petition to provide the Chancery Court with a duly verified list containing
the names and addresses of all shareholders who have demanded an appraisal of
their shares of Common Stock. After notice to dissenting shareholders, the
Chancery Court is empowered to conduct a hearing upon the petition, to determine
those shareholders who have complied with Section 262 and who have become
entitled to the appraisal rights provided thereby. The Chancery Court may
require the shareholders who have demanded payment for their shares to submit
their stock certificates to the Register in Chancery for notation thereon of the
pendency of the appraisal proceedings; and if any shareholder fails to comply
with such direction, the Court may dismiss the proceedings as to such
shareholder.
After determination of the shareholders entitled to appraisal of their
shares of Common Stock, the Chancery Court will appraise the shares, determining
their fair value exclusive of any element of value arising from the
accomplishment or expectation of the Merger, together with a fair rate of
interest. When the value is determined, the Chancery Court will direct the
payment of such value, with interest thereon accrued during the pendency of the
proceeding if the Chancery Court so determines, to the shareholders entitled to
receive the same, upon surrender by such holders of the certificates
representing such shares.
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In determining fair value, the Chancery Court is required to take into
account all relevant factors. You should be aware that the fair value of the
shares of Common Stock as determined under Section 262 could be more, the same,
or less than the value that you are entitled to receive pursuant to the Merger
Agreement.
Costs of the appraisal proceeding may be imposed upon Troy Financial
and the shareholders participating in the appraisal proceeding by the Chancery
Court as the Chancery Court deems equitable in the circumstances. Upon the
application of a shareholder, the Chancery Court may order all or a portion of
the expenses incurred by any shareholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorneys' fees and the
fees and expenses of experts, to be charged pro rata against the value of all
shares of Common Stock entitled to appraisal.
Any shareholder who demands appraisal rights will not, after the
effective date of the Merger, be entitled to vote shares of Common Stock subject
to such demand for any purpose or to receive payments of dividends or any other
distribution with respect to such shares of Common Stock, other than with
respect to payment as of a record date prior to the effective date of the
Merger; however, if no petition for appraisal is filed within 120 days after the
Effective date of the Merger, or if such shareholder delivers a written
withdrawal of his or her demand for appraisal and an acceptance of the Merger
within 60 days after the effective date of the Merger, then the right of such
shareholder to appraisal will cease and such shareholder will be entitled to
receive the cash payment for shares of his or her Common Stock pursuant to the
Merger Agreement. Any withdrawal of a demand for appraisal made more than 60
days after the effective date of the Merger may only be made with the written
approval of Troy Financial and must, to be effective, be made within 120 days
after the effective date of the Merger.
The requirements of Section 262 are technical and complex. Catskill
Financial shareholders who may wish to dissent from the Merger and pursue
appraisal rights should consult their legal advisors.
REGULATORY APPROVALS
Troy Savings' regulators, the FDIC and the New York Superintendent of
Banks, must approve the Merger. The Board of Governors of the Federal Reserve
System, which regulates Troy Financial because it is a bank holding company,
must also approve Troy Financial's acquisition of control of Catskill Financial
and Catskill Savings or grant a waiver from application requirements.
Applications for the approvals have been filed and are pending. The waiver of
the approval requirement from the Board of Governors was granted on August 3,
2000. The Merger cannot be consummated unless and until these approvals and the
waiver have been obtained. The OTS, which regulates Catskill Financial and
Catskill Savings, has been notified of the Merger as required under applicable
federal law.
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The FDIC and the Superintendent will consider several factors when
reviewing the merger of Catskill Savings into Troy Savings, including the
competitive effects of the transaction, the managerial and financial resources
and future prospects of the existing and resulting institutions, and the effect
of the transaction on the convenience and needs of the communities to be served.
The Community Reinvestment Act of 1977 ("CRA"), also requires that the FDIC, in
deciding whether to approve the merger of the two banks, assess their records of
performance in meeting the credit needs of the communities they serve, including
low and moderate income neighborhoods. Catskill Savings currently has a
satisfactory CRA rating from the OTS and Troy Savings currently has an
outstanding CRA rating from the FDIC. FDIC regulations provide for publication
of notice and an opportunity for public comment on the application for the
merger of Troy Savings and Catskill Savings. As part of the review process, it
is not unusual for the FDIC to receive protests and adverse comments from
community groups and others. The receipt by the FDIC of comments on the
application, or a decision to hold a meeting or hearing, as permitted under FDIC
regulations, could prolong the period during which the merger of the two banks
is subject to review by the FDIC. As of the date of this proxy statement,
Catskill Savings is not aware of any protests, adverse comments or requests for
a meeting or hearing filed with the FDIC concerning the merger of the banks. The
bank merger may not take place for a period of 15 to 30 days following FDIC
approval, during which time the Department of Justice has authority to challenge
the bank merger on antitrust grounds. The precise length of the period will be
determined by the FDIC in consultation with the Department of Justice. The
commencement of an antitrust action would stay the effectiveness of any approval
granted by the FDIC unless a court specifically orders otherwise.
Regulatory approval of an application means that it has satisfied the
statutory and regulatory standards required for such approval. It does not mean,
and should not be understood to imply, that the Merger or the price per share of
Common Stock that will be paid to Catskill Financial shareholders in the Merger,
is fair to them from a financial standpoint.
The Agreement provides that either Catskill Financial or Troy Financial
may terminate the Agreement: (i) upon written notice to the other party given
thirty days after the denial, or withdrawal at the request of a regulator, of a
regulatory application, unless an appeal of the denial or an amended application
is filed within thirty days; and (ii) if the Merger has not been consummated by
January 31, 2001. There can be no assurance as to the receipt or timing of any
of the required regulatory approvals, and consequently, there can be no
assurance that the Merger will be consummated by January 31, 2001. Further, if
regulatory approval is received after shareholder approval of the Merger and the
approval requires a material change in the terms of the Agreement, a
resolicitation of shareholders may be required.
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THE MERGER AGREEMENT
The following is a brief description of material provisions of the
Merger Agreement. It does not purport to be complete and it is qualified by
reference to the Merger Agreement itself, which is attached as Appendix A and
incorporated into this proxy statement by reference. You should refer to the
full text of the Merger Agreement for details about the terms and conditions of
the Merger Agreement.
TERMS OF THE MERGER
The Merger Agreement provides for a business combination in which
Charlie Acquisition Corporation, which is a newly formed wholly owed subsidiary
of Troy Financial, will be merged into Catskill Financial. This transaction will
result in Catskill Financial becoming a wholly owned subsidiary of Troy
Financial. When this has been accomplished, Troy Financial intends that Catskill
Financial will immediately merge into Troy Financial, resulting in the assets
and liabilities of Catskill Financial becoming the assets and liabilities of
Troy Financial and in Catskill Financial ceasing to exist.
The Merger Agreement further provides that once the merger of Catskill
Financial into Troy Financial is complete, Catskill Savings will immediately
merge into Troy Savings. An agreement for such merger to occur has been entered
into. When it occurs, the assets and liabilities of Catskill Savings will become
assets and liabilities of Troy Savings, and Catskill Savings will cease to
exist.
The Merger Agreement provides that the officers and directors of
Charlie Acquisition Corporation before it is merged into Catskill Financial are
to be the officers and directors of Catskill Financial after the Merger, and
that the officers and directors of Troy Savings immediately prior to the bank
merger are to continue as officers and directors of Troy Savings after the bank
merger.
The Merger will result, except as otherwise stated, in each outstanding
share of Common Stock being converted into to the right to receive a cash
payment in the amount of $23.00. The amount of such Merger consideration will be
equitably adjusted, however, if there should be a change in the capitalization
of Catskill Financial prior to the Merger as the result of a stock split, stock
dividend, reclassification, or recapitalization or similar transaction. Shares
of Common Stock that are held by Troy Financial or its subsidiaries and shares
of Catskill Financial held by Catskill Financial as treasury stock or otherwise
or held by any of its subsidiaries will be canceled and retired upon completion
of the Merger and no payment will be made for them. The shares of Common Stock
that are to be canceled will not include shares held in a fiduciary capacity or
in satisfaction of a debt previously contracted. In addition, holders of Common
Stock for which
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dissenters' appraisal rights have been exercised will be entitled only to the
rights granted by Section 262 of the Delaware General Corporation Law.
Each outstanding and unexercised option for the purchase of Common
Stock under the Stock Option Plan that is outstanding and unexercised and has
not expired at the time of the Merger will be converted to a right to receive a
cash payment equal to the number of shares of Common Stock subject to the option
multiplied by the difference between $23.00 per share of Common Stock and the
exercise price of the option.
WHEN THE MERGER WILL BE COMPLETED
The closing of the Merger will take place three days after the
satisfaction or waiver of all of the conditions to the Merger contained in the
Merger Agreement, unless Troy Financial and Catskill Financial agree to another
date. On the date of the closing, a Certificate of Merger will be filed with the
Delaware Secretary of State. The Merger will become effective at the time stated
in the Certificate of Merger. Immediately after the effective time of the merger
of Catskill Financial into Troy Financial, Catskill Savings will be merged into
Troy Savings.
Catskill Financial expects to complete the Merger in the fourth quarter
of 2000. However, Catskill Financial cannot guarantee when or if the required
approvals will be obtained. Furthermore, either party may terminate the Merger
Agreement if, among other reasons, the Merger has not been completed on or
before January 31, 2001, unless failure to complete the Merger by that time is
due to the breach of any representation, warranty or covenant by the party
seeking to terminate the Merger Agreement.
SURRENDER OF CERTIFICATES
As soon as practicable after the completion of the Merger, an exchange
agent designated by Troy Financial will mail to each holder of Common Stock on
the Record Date a letter with instructions on how to exchange Common Stock
certificates for the cash Merger consideration.
Please do not send in your Common Stock certificates until you receive
the letter of transmittal and instructions from the exchange agent and have
completed the transmittal materials accordingly. Do not return your stock
certificates with the enclosed proxy.
After you mail the letter of transmittal and your Common Stock
certificates to the exchange agent, your check will be mailed to you. The Common
Stock certificate(s) you surrender will be canceled. You will not be entitled to
receive interest on any cash to be received in the Merger.
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In the event of a transfer of ownership of any shares of Common Stock
that has not been registered in the transfer records of Catskill Financial, a
check for the cash to be received in the Merger may be issued to the person who
holds such shares of Common Stock if the certificate representing such shares of
Common Stock is presented to the exchange agent with documents that are
sufficient in the reasonable discretion of Troy Financial and the exchange
agent:
1. to evidence and effect such transfer, and
2. to evidence that all applicable stock transfer taxes have been paid.
After the completion of the Merger, there will be no further transfers
of Common Stock. Common Stock certificates presented for transfer after the
completion of the Merger will be canceled and exchanged for the Merger
consideration.
Any portion of the cash to be paid in the Merger or the proceeds of any
investments thereon that remains unclaimed by the shareholders of Catskill
Financial for six months after the effective date of the Merger will be repaid
by the exchange agent to Troy Financial. If you have not complied with the
exchange procedures prior to six months after the Merger, you may only look to
Troy Financial for payment of the cash you are entitled to receive in exchange
for your shares of Common Stock and this payment will not include any interest.
If your Common Stock certificate(s) have been lost, stolen or
destroyed, you will only be entitled to receive the Merger consideration by
making an affidavit and, if required by Troy Financial or its exchange agent, by
posting a bond in an amount sufficient to protect Troy Financial against claims
related to your Common Stock.
CONDUCT OF BUSINESS PENDING THE MERGER
Pursuant to the Merger Agreement, Catskill Financial has agreed to use
its best efforts to preserve its business organization and that of each Catskill
Financial subsidiary intact, to maintain good relationships with employees and
to preserve the goodwill of customers and others with whom business
relationships exist. Catskill Financial and its subsidiaries have agreed to
conduct their respective business and to engage in transactions only in the
ordinary course of business, consistent with past practice, and except as
otherwise permitted by the Merger Agreement or as consented to by Troy
Financial, neither Catskill Financial or any of its subsidiaries will:
o declare any dividends or other distributions on Common Stock
other than regular quarterly cash dividends on the Common Stock
and dividends by any Catskill Financial subsidiary to Catskill
Financial;
o split, combine or reclassify any Common Stock;
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o repurchase, redeem or otherwise acquire (other than in a
fiduciary capacity to or to satisfy a debt incurred before the
signing of the Merger Agreement) any Common Stock or securities
than can be converted into Common Stock);
o issue, deliver or sell or authorize or propose the issuance,
delivery or sale of any securities, other than the issuance of
additional shares of Common Stock upon the exercise or
fulfillment of rights or options issued or existing under the
Stock Option Plan in accordance with its present terms or the
stock option granted to Troy Financial at the time the Merger
Agreement was signed;
o amend its certificate of incorporation or bylaws;
o make capital expenditures aggregating in excess of $20,000;
o enter any new line of business;
o acquire an equity interest in the assets of other business
organizations except in connection with foreclosures,
settlements or loan restructurings in the ordinary course of
business consistent with prudent banking practices;
o take any action that may or is intended to breach Catskill
Financial's representations and warranties in the Merger
Agreement, unless required by law;
o change its methods of accounting in effect at September 30,
1999, except as required by changes in regulatory or generally
accepted accounting principles;
o adopt or amend any employment agreements between Catskill
Financial or its subsidiaries and their employees and directors
other than merit increases consistent with past business
practices, not to exceed 4% of base pay;
o enter into, modify or renew any agreement or arrangement
providing for the payment to any director, officer or employee
of compensation or benefits;
o hire any new employee at an annual compensation in excess of
$24,000;
o incur any indebtedness for borrowed money or assume the
obligations of a third party, except for short term (six months
or less) borrowings in the ordinary course consistent with past
practices;
o sell, purchase, lease, relocate, open or close any banking or
other office;
o make any equity investments in real estate, other than in
connection with foreclosures or settlements in lieu of
foreclosures in the ordinary course of business consistent with
past banking practices;
o make any new loans or modify any existing loans with any
affiliated person of Catskill Financial;
o make any investment, or incur any deposit liabilities, other
than in the ordinary course of business consistent with past
practice;
o purchase any loans or sell, purchase or lease any real property
other than consistent with past practices;
o originate any loans except in accordance with existing policies,
mortgage loans in excess of $150,000, unsecured consumer loans
in excess of $20,000, commercial
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business loans in excess of $50,000 as to any loan or $100,000
in the aggregate as to related loans or to loans to related
persons, commercial real estate loans in excess of $150,000 as
to any loan or $300,000 in the aggregate as to related loans,
originate loans, the outstanding principal balance of which in
the aggregate exceed the lesser of (1) the cash flow received
from prepayment and repayment, sale or interest and penalties
paid on any other loans or (2) $1 million per month;
o make any investment in other than Federal Funds or U.S.
Treasuries that have a maturity date beyond three months; or
o sell or purchase any mortgage loan servicing rights.
See Article V of the Merger Agreement, which is attached to this proxy
statement as Appendix A, for a more complete account of restrictions or the
conduct of business of Catskill Financial pending the Merger.
AGREEMENT NOT TO SOLICIT OTHER OFFERS
Catskill Financial has agreed not to seek to have an outside third
party try to buy a material interest in Catskill Financial or its subsidiaries.
Generally, an effort by Catskill Financial to obtain an offer to engage in a
merger or similar business combination, or buy at least 15% of Catskill
Financial's assets or engage in a tender or exchange offer involving 15% of the
Common Stock, or a public announcement to enter into an agreement to do any of
these things, would violate this covenant. Despite Catskill Financial's
agreement not to solicit other offers, the Catskill Financial Board may
generally enter into discussions or negotiations with anyone who makes an
unsolicited, written bona fide proposal to acquire Catskill Financial that is a
financially superior proposal to that of Troy Financial prior to the date of the
Meeting. A superior proposal is defined in the Merger Agreement as a proposal to
acquire more than 50% of the voting power of Common Stock or all or
substantially all of the assets of Catskill Financial, which the Board
determines in good faith to be more favorable than the Merger to Catskill
Financial shareholders.
Before the Catskill Financial Board may enter into negotiations on a
superior proposal, it would have to first determine, after consultation with its
independent legal counsel, that a failure to take action would constitute a
breach of its fiduciary duty to shareholders. If Catskill Financial does enter
into negotiations with a third party regarding a superior proposal, it has to
notify Troy Financial and provide Troy Financial with information about the
other party and its proposal. The Catskill Financial Board may also withdraw or
modify its recommendation for the Merger and enter into a business combination
with a third party if, after consulting with independent legal counsel, the
Board determines in good faith that doing so is necessary for it to comply with
its fiduciary duties to shareholders.
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CONDITIONS TO THE MERGER
The obligations of Troy Financial and Catskill Financial to consummate
the Merger are subject to the satisfaction or mutual waiver at or prior to the
effective date of the Merger of the following conditions, among others:
o the taking of all required corporate action;
o the obligations and covenants required by the Merger Agreement
to be performed at or prior to the closing date shall have been
performed and complied with in all material respects;
o each of the representations and warranties in the Merger
Agreement shall be true and correct in all material respects;
o the receipt of all required regulatory approvals of the Merger
without the imposition of unduly burdensome conditions and the
expiration or termination of all notice and waiting periods
related to the approvals;
o there is no order in effect that enjoins or prohibits
consummation of the Merger; and
o the approval of the Merger Agreement by the requisite vote of
Catskill Financial's shareholders.
The obligations of Troy Financial under the Merger Agreement also are
subject to satisfaction of the condition that there shall not have occurred any
"material adverse effect", as defined in the Merger Agreement, on the assets,
loans, securities, deposit accounts, business, properties, financial condition
or results of operations of Catskill Financial.
The obligations of Catskill Financial under the Merger Agreement also
are subject to satisfaction of the condition that Troy Financial shall deposit
with the exchange agent an amount of cash equal to the total amount of cash that
the Catskill Financial shareholders will receive on the Merger effective date.
For a complete description of all of the conditions to the obligations
of the parties to effect the Merger, see Article VII of the Merger Agreement,
SECURITIES PORTFOLIO SALE
In the Merger Agreement, Catskill Financial disclosed that it had
determined to sell a portion of its investment securities portfolio, consisting
of corporate and municipal bonds. The Merger Agreement requires Catskill
Financial to complete the sale no later than 30 days after June 7, 2000, the
date of the signing of the Merger Agreement. At March 31, 2000, the aggregate
book
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value of these securities was approximately $86.2 million, or 52.2% of the total
investment securities portfolio, the total value of which was $165.0 million on
that date. The Merger Agreement further provides that if the aggregate pre-tax
net proceeds of the sale of the securities are less than $73.2 million, the per
share merger consideration to be received by Catskill Financial shareholders in
the Merger shall be reduced by an amount equal to the quotient, the numerator of
which is the after tax difference between $73.2 million and the sale proceeds
and the denominator of which is the sum of the number of shares of Common Stock
outstanding as of the date of the sale and the equivalent number of shares of
Common Stock subject to outstanding options, calculated using the Treasury Stock
Method (as defined in the Merger Agreement).
On June 13, 2000, Catskill Financial completed the sale of the
securities identified in the Merger Agreement. The proceeds of the sale were
approximately $74.5 million. Accordingly, Catskill Financial has determined that
the amount of cash per share that will be received by Catskill Financial
shareholders will not be reduced as a result of the sale of these securities.
TERMINATION OF THE MERGER AGREEMENT
The Merger Agreement may be terminated on or at any time prior to the
closing date by the mutual written consent of the parties and under the
following circumstances:
Termination by either party. The Merger Agreement may be terminated by
Troy Financial or Catskill Financial:
o if there is a material breach of any representation, covenant or
other obligation under the Merger Agreement (including a breach
that causes a material adverse effect on the breaching party)
which could not be cured prior to closing of the Merger
Agreement or which is not cured within 30 days following receipt
by the breaching party of written notice of such breach by the
other party, provided that the terminating party is not itself
in breach of any representation, covenant or other obligation
under the Merger Agreement; or
o if the closing date has not occurred before January 31, 2001,
unless the failure to close is because the party seeking to
terminate the Merger Agreement failed to perform or fulfill its
obligations under the Merger Agreement; or
o if any request or application by Catskill Financial or Troy
Financial for regulatory approval has been denied or withdrawn
at the request or recommendation of a governmental authority,
then either party may terminate the agreement on 30 days written
notice to the other, unless a petition for rehearing or amended
application is filed within the 30 day period. A party shall not
have the right to terminate on
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these grounds if the failure to obtain the regulatory approval
was due to such party's own breach of the Merger Agreement; or
o if Catskill Financial's shareholders fail to approve the Merger
Agreement at the Meeting, provided that Catskill Financial may
not terminate the Merger Agreement on this ground if it is in
breach of its own obligation under the Merger Agreement to
promptly call a meeting of shareholders and to recommend
approval of the Merger at the Meeting. However, Catskill
Financial shall not be in breach of its obligation to recommend
such shareholder approval if it should determine in accordance
with the terms of the Merger Agreement to approve a superior
competing transaction.
Termination by Troy Financial. The Merger Agreement may be terminated
by Troy Financial if the Catskill Financial Board or its management fails to
call and hold a special shareholders meeting to consider and approve the Merger
Agreement within 35 days of the approval by the SEC of the proxy material for
use, fails to recommend approval of the Merger Agreement by the shareholders,
fails to oppose any third party proposal inconsistent with the Merger Agreement
or if Catskill Financial violates its obligation to not solicit other offers. If
Catskill Financial is not in violation of its obligations with respect to third
party proposals, but Catskill Financial did not give Troy Financial notice as
required by the Merger Agreement, Troy Financial may terminate the Merger
Agreement. Termination in the event of an agreement of Catskill Financial to
enter into a superior proposal shall not occur until Catskill Financial complies
with the expense reimbursement and break up fee payment requirements under the
Merger Agreement and gives the required written notice to Troy Financial that
the option granted pursuant to the option agreement between Catskill Financial
and Troy Financial may be exercised in accordance with its terms. See "Break-Up
Fee" and "Stock Option Agreement."
WAIVER AND AMENDMENT OF MERGER AGREEMENT
Either of the parties to the Merger agreement may, by a signed writing,
extend the time for performance of any of the obligations or other acts of the
other party, or waive any inaccuracies in the representations and warranties of
the other party or compliance by the other party with any of the covenants or
conditions contained in the Merger Agreement.
Generally, the Merger Agreement may be amended by the boards of
directors of both Catskill Financial or Troy Financial at any time before or
after its approval by Catskill Financial's shareholders. However, the approval
of Catskill Financial's shareholders is required for any amendment that would
reduce the amount or the form of the consideration to be received by
shareholders in the Merger.
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BREAK-UP FEE
If the Merger Agreement is terminated in certain circumstances
specified in the Merger Agreement, Catskill Financial and Troy Financial have
made provision for one party to pay certain expenses of the other party, and to
pay a fee to compensate the other party for its efforts and costs:
o if either Troy Financial or Catskill Financial terminates the
Merger Agreement because there is a material uncured breach of
any representation, warranty or covenant of the other party
under the Merger Agreement, the breaching party shall pay to the
terminating party all documented, reasonable costs and expenses
incurred by the terminating party in connection with the Merger
Agreement and the transactions contemplated by the Merger
Agreement up to $500,000,
o if Troy Financial terminates the Merger Agreement because
Catskill Financial (a) fails to call the Meeting within 35 days
of the date these proxy materials were approved by the SEC for
use in this proxy solicitation; (b) fails to recommend the
approval of the Merger Agreement to the shareholders of Catskill
Financial; (c) fails to oppose any third party proposal which is
inconsistent with the terms of the Merger Agreement; or (d)
solicits other offers in contravention of the terms of the
Merger Agreement, Catskill Financial shall pay to Troy Financial
all its documented, reasonable costs and expenses incurred in
connection with the Merger Agreement and the transactions
contemplated by the Merger Agreement up to $500,000;
o if the shareholders of Catskill Financial fail to adopt the
Merger Agreement at the Meeting, Catskill Financial shall pay to
Troy Financial all its documented, reasonable costs and expenses
incurred in connection with the Merger Agreement and the
transactions contemplated by the Merger Agreement up to
$500,000, plus a breakup fee of $1,500,000;
o if Troy Financial terminates the Merger Agreement because there
is a willful material uncured breach of any representation,
warranty or covenant of Catskill Financial under the Merger
Agreement, Catskill Financial shall pay to Troy Financial all
its documented, reasonable costs and expenses incurred in
connection with the Merger Agreement and the transactions
contemplated by the Merger Agreement up to $500,000, plus a
breakup fee of $1,500,000;
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o if Catskill Financial terminates the Merger Agreement because
there is a willful material uncured breach of any
representation, warranty or covenant of Troy Financial under the
Merger Agreement, Troy Financial shall pay to Catskill Financial
all its documented, reasonable costs and expenses incurred in
connection with the Merger Agreement and the transactions
contemplated by the Merger Agreement up to $500,000, plus a
breakup fee of $2,500,000; or
o if Troy Financial terminates the Merger Agreement because
Catskill Financial has agreed to accept a financially superior
proposal which the Board of Directors has determined, in good
faith, to be more favorable than the Merger to Catskill
Financial shareholders, Catskill Financial shall pay to Troy
Financial all its documented, reasonable costs and expenses
incurred in connection with the Merger Agreement and the
transactions contemplated by the Merger Agreement up to
$500,000, plus a breakup fee of $1,500,000.
REPRESENTATIONS AND WARRANTIES MADE BY CATSKILL FINANCIAL
CORPORATION AND TROY FINANCIAL CORPORATION IN THE MERGER
AGREEMENT
Both Troy Financial and Catskill Financial have made certain customary
representations and warranties to each other relating to their businesses. For
information on these representations and warranties, please refer to the Merger
Agreement.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Some of Catskill Financial's directors and officers may have interests
in the Merger that are in addition to, or different from the interests of
shareholders. The Catskill Financial Board was aware of these interests and
considered them in approving the Merger Agreement.
Stock Ownership. The directors and executive officers of Catskill
Financial, together with their affiliates, beneficially owned a total of 654,451
shares of Common Stock (representing 16.3% of all outstanding shares of the
Common Stock) as of the Record Date. The directors and executive officers will
receive the same consideration in the Merger for their shares as the other
Catskill Financial shareholders.
Indemnification of Directors and Officers Against Claims. After
completion of the Merger, Troy Financial has agreed, to the fullest extent
allowed under Delaware law and Troy Financial's certificate of incorporation and
bylaws as in effect on June 7, 2000, to indemnify and hold harmless each person
who is, has been or before the completion of the Merger becomes, a
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director, officer or employee of Catskill Financial, from liability and economic
loss arising out of their service as directors, officers, or employees of
Catskill Financial, or matters related to the Merger Agreement, whether
occurring before or after the consummation of the Merger. Troy Financial has
also agreed to pay up to 150% of the current annual premium to maintain
directors' and officers' liability insurance coverage for the benefit of
Catskill Financial's directors and officers for two years following consummation
of the Merger.
Stock Option Plan. The Merger Agreement provides that each option to
purchase shares of Common Stock issued and outstanding pursuant to the Stock
Option Plan, whether or not such option is exercisable on the date the Merger is
completed, will be converted on that date into the right to receive in cash an
amount equal to the difference between $23.00 in cash and the exercise price of
each option multiplied by the number of shares of Common Stock subject to the
option. As of the Record Date, the directors and named officers of Catskill
Financial held options to purchase a total of 318,217 shares of Common Stock.
The following table reflects the number of options, the weighted average
exercise price of the options and the amounts payable to each director and named
officer upon cancellation of their stock options based on $23.00 per share.
<TABLE>
<CAPTION>
Number of Weighted Average Amount Payable
Name Options Exercise Price Upon Cancellation
--------------------------------------------------------------------------------------
<S> <C> <C> <C>
Wilbur J. Cross 142,168 $ 12.50 $1,492,764
Chairman, President & Chief
Executive Officer
David J. DeLuca 38,000 13.52 360,240
Vice President & Chief
Financial Officer
Deborah S. Henderson 30,000 12.50 315,000
Vice President & Senior
Loan Officer
George P. Jones, Director 28,433 12.50 298,547
Richard A. Marshall, Director 28,433 12.50 298,547
Allan D. Oren, Director 11,375 12.50 119,438
Hugh J. Quigley, Director 28,433 12.50 298,547
Edward P. Stiefel, Esq., Director 11,375 12.50 119,438
</TABLE>
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<PAGE>
Management Recognition Plan. When the Merger is completed, each
unvested share awarded under the MRP will automatically vest and the holder will
receive $23.00 per share. As of the Record Date, the Company's directors and
named officers had been awarded 62,953 shares of unvested restricted Common
Stock. The following table shows the number of shares of restricted Common Stock
held by Catskill Financial's directors and named officers as of the Record Date
and the amounts payable to each director and named officer based on $23.00 per
share.
Number of
Name Unvested MRP Shares Amount Payable
-----------------------------------------
Wilbur J. Cross 22,748 $523,204
Chairman, President & Chief
Executive Officer
David J. DeLuca 10,400 239,200
Vice President & Chief
Financial Officer
Deborah S. Henderson 7,050 162,150
Vice President & Senior
Loan Officer
George P. Jones, Director 4,551 104,673
Richard A. Marshall, Director 4,551 104,673
Allan D. Oren, Director 4,551 104,673
Hugh J. Quigley, Director 4,551 104,673
Edward P. Stiefel, Esq., Director 4,551 104,673
Employment and Severance Agreements. Catskill Financial has entered
into an employment agreement with Mr. Cross. Catskill Savings has also entered
into employment agreements with Mr. Cross, Mr. DeLuca, Ms. Henderson and Keith
A. Lampman and is a party to change of control severance agreements with David
L. Guldenstern and William J. Moore, Catskill Savings' Vice President/Secretary
and Vice President/Treasurer, respectively. Troy Financial has agreed to honor
each of these agreements. The Merger is a change of control within the meaning
of these agreements which will trigger Troy Financial's obligation to make cash
payments to each of these officers. The aggregate amount of such payments will
be approximately
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$1.8 million, including $838,782 to Mr. Cross, who will receive payments in
three equal annual installments. In addition Mr. Cross will be indemnified on an
after tax basis for federal excise taxes to which he will be subject under the
Code if the payments to him and vesting of his options and MRP shares constitute
excess parachute payments.
Advisory Board of Directors. Immediately before the completion of the
Merger, Troy Savings will establish an advisory board of directors comprised of
the current members of Catskill Financial's Board. The advisory board must be
maintained for at least two years after the completion of the Merger and will
meet quarterly. Mr. Cross will serve as Chairman of the advisory board and
receive an annual retainer of $50,000. The other members of the advisory board
will receive an annual retainer of $10,000.
Troy Savings and Troy Financial Boards of Directors. Upon the
completion of the Merger, Troy Financial and Troy Savings will increase the size
of their boards of directors by one member and appoint Mr. Cross to such boards,
for a term expiring at and coincident with, respectively, the 2003 annual
shareholders meeting of Troy Financial. If the Merger is not completed until
after Troy Financial's or Troy Savings' 2001 annual shareholder meeting, then
Mr. Cross will be appointed for terms expiring at or coincident with,
respectively, the 2004 meetings of Troy Savings and Troy Financial. Mr. Cross
will receive the fee payable to directors of Troy Financial, which is currently
$1,375.00 per meeting attended.
EMPLOYEE MATTERS
Severance Plan. After the Merger becomes effective, any full time
employee of Catskill Financial or Catskill Savings (other than an employee who
is a party to a written employment or severance agreement) whose employment is
terminated involuntarily, other than for cause, as of the effective date of the
Merger or within the next three months thereafter, will be provided with
severance benefits equal to two weeks of base salary for every year of service
up to a maximum of 26 weeks salary.
Employee Benefit Plans. The Merger Agreement allows Troy Financial to
terminate or continue Catskill Financial's employee pension and welfare benefit
plans or consolidate them with Troy Financial's benefit plans. In the event of
consolidation or termination of any or all of the Catskill Financial or Catskill
Savings benefit plans, Catskill Financial and Catskill Savings employees who
continue to work for Troy Financial or Troy Savings will receive credit under
any Troy Financial benefit plan in which the continuing employee would be
eligible to enroll, for years of service with Catskill Financial or Catskill
Savings for purposes of eligibility and vesting, but not for benefit accrual
purposes. Generally, such employees will be eligible to receive employee
benefits on the same basis as is provided to other employees of Troy Financial
and for the purposes of these benefits, they will receive credit for
satisfaction of pre-existing condition,
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waiting period and evidence of insurability limitations and requirements to the
same extent that they would have received such credit under the corresponding
Catskill Financial or Catskill Savings plan.
Employee Stock Ownership Plan. As a result of the Merger, the ESOP will
be terminated and the ESOP trustee will repay the outstanding balance of its
stock acquisition loan. Based on the number of unallocated shares in the ESOP,
the $23.00 per share price to be paid by Troy for the Common Stock and the
current loan balance, the ESOP will have approximately $4.1 million in surplus
cash. Under the ESOP 's governing documents, to the extent allowed under
applicable law, surplus cash will be allocated to the accounts of ESOP
participants in proportion to their account balances.
ACCOUNTING TREATMENT
Troy Financial will account for the Merger under the purchase method of
accounting. This means that Troy Financial and Catskill Financial will be
treated as one company as of the date of the Merger and Troy Financial will
record the fair value of Catskill Financial's assets and liabilities on its
financial statements. Troy Financial will record the excess of its purchase
price over the fair value of Catskill Financial's identifiable net assets as
goodwill.
EXPENSES
Whether or not the Merger is completed, Troy Financial and Catskill
Financial will each pay their own fees and expenses, except that in the event a
party violates a material provision of the Merger Agreement which remains
uncured, the violating party will be responsible for the costs and expenses
incurred by the other party in connection with the Merger.
THE STOCK OPTION AGREEMENT
The following summary of the Catskill Financial stock option agreement
is qualified by reference to the complete text of the agreement, which is
incorporated by reference and attached as Appendix B to the Merger Agreement.
GENERAL
At the same time that Catskill Financial and Troy Financial entered
into the Merger Agreement, and as an important inducement to Troy Financial
entering into the Merger Agreement, Catskill Financial and Troy Financial also
entered into a stock option agreement. Under the stock option agreement,
Catskill Financial granted Troy Financial an irrevocable option to purchase up
to 19.9% of the issued and outstanding Common Stock at a price per share of
$19.00. The exercise price and number of option shares are subject to certain
anti-dilution and other adjustments specified in the stock option agreement. The
option is exercisable in the circumstances described below.
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EFFECT OF THE OPTION
The option is intended to make it more likely that the Merger will be
completed on the agreed terms and to compensate Troy Financial for its efforts
and costs in case the Merger is not completed under circumstances generally
involving a third party proposal for a business combination with Catskill
Financial. Among other effects, the option could prevent an alternative business
combination with Catskill Financial from being accounted for as a
"pooling-of-interests." The option may therefore discourage proposals for
alternative business combinations with Catskill Financial, even if a third party
were prepared to offer Catskill Financial shareholders consideration with a
higher market value than the $23.00 per share to be paid for Common Stock in the
Merger.
EXERCISE OF THE STOCK OPTION
Troy Financial can exercise the option in whole or in part at any time
after the occurrence of either a "preliminary purchase event" and a "purchase
event," and prior to termination of the option. Generally, the right to exercise
the option terminates upon the earliest of:
o completion of the Merger;
o 18 months after the termination of the Merger Agreement if the
termination follows the occurrence of a "preliminary purchase
event" as specified in the Catskill Financial stock option
agreement and summarized below;
o 18 months after the termination of the Merger Agreement if the
termination follows the occurrence of a "purchase event" as
specified in the Catskill Financial stock option agreement and
summarized below.
o 18 months after the termination of the Merger Agreement if the
termination follows the failure of the shareholders of Catskill
Financial to adopt the Merger Agreement at the Meeting;
o 18 months after the termination of the Merger Agreement if the
termination follows the occurrence of a material uncured breach
of a representation or warranty under the Merger Agreement by
the other party; and
o termination by Troy Financial of the Merger Agreement if
Catskill Financial has accepted, in accordance with the terms of
the Merger Agreement, a financially superior proposal which the
Board determines in good faith to be more favorable than the
Merger to Catskill Financial shareholders.
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<PAGE>
For purposes of the stock option agreement, a "preliminary
purchase event" means the occurrence of any of the following
events or transactions:
o Catskill Financial, without having received Troy Financial's
prior written consent, enters into an agreement to engage in an
"acquisition transaction" with any person other than Troy
Financial or any of its subsidiaries or the Board recommends
that Catskill Financial shareholders approve or accept any
acquisition transaction other than the Merger or a merger with
another subsidiary of Troy Financial. For purposes of the stock
option agreement, "acquisition transaction" means (x) a merger
or consolidation, or any similar transaction, involving Catskill
Financial, (y) a purchase, lease or other acquisition of all or
any substantial part of the assets of Catskill Financial, or (z)
a purchase or other acquisition, including by way of merger,
consolidation, share exchange or otherwise, of securities
representing 20% or more of the voting power of Catskill
Financial or any person other than Troy Financial acquires
beneficial ownership or the right to acquire beneficial
ownership of 20% or more of the outstanding shares of Common
Stock;
o Catskill Financial willfully breaches any covenant or obligation
contained in the Merger Agreement and following the breach Troy
Financial is entitled to terminate the Merger Agreement; or
o any person other than Troy Financial or any Troy Financial
subsidiary: (i) makes a bona fide proposal to Catskill Financial
or makes a public announcement or written communication that is
or becomes publicly disclosed to Catskill Financial's
shareholders prior to the Meeting, to engage in an acquisition
transaction, including a tender offer or exchange offer to
purchase Common Stock, as a result of which such person acquires
beneficial ownership of 20% or more of the then outstanding
shares of Common Stock and (ii) the shareholders of Catskill
Financial do not approve the Merger at the Meeting.
For purposes of the stock option agreement, a "purchase event" means the
occurrence of any of the following events or transactions:
o the acquisition by any person, other than Troy Financial or any
Troy Financial subsidiary, of beneficial ownership of 20% or
more of the then outstanding Common Stock; or
o the occurrence of the preliminary purchase event described in
the first bullet point of the description of preliminary
purchase events.
o Troy Financial terminates the Merger Agreement because the Board
accepts a financially superior proposal which the Board
determines in good faith to be more favorable than the Merger to
Catskill Financial shareholders.
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REPURCHASE ELECTION
The stock option agreement further provides that Catskill Financial, or
its successors, is required to repurchase the option if requested to do so by
Troy Financial or a subsequent holder of the option. Such a request can only be
made after the occurrence of a purchase event and prior to termination of the
stock option agreement. The repurchase price will be equal to the amount by
which (i) the market/offer price, as described in detail in the stock option
agreement, exceeds (ii) the purchase price of the option, multiplied by the
number of shares for which the Catskill Financial stock option may then be
exercised. In determining the market/offer price, the value of consideration
other than cash shall be determined by a nationally recognized investment
banking firm elected by the option holder.
OTHER MATTERS
The Board of Directors is not aware of any business to come before the
Meeting other than those matters described above in this proxy statement.
However, if any other matters should properly come before the Meeting, it is
intended that proxies will be voted in accordance with the judgment of the
person or persons voting the proxies.
SHAREHOLDER PROPOSALS
If Catskill Financial's shareholders do not approve and adopt the
Merger Agreement at the Meeting, the Board of Directors will establish the date
for the 2001 annual meeting of shareholders. Under SEC regulations, for a
shareholder to be entitled to have a shareholder proposal included in Catskill
Financial's proxy statement for the 2001 annual meeting, the proposal must be
received by Catskill Financial at its main office located at 341 Main Street,
Catskill, New York 12414, not less than 120 days in advance of the date in 2001
which corresponds to the date in 2000 on which the proxy materials for the 2000
annual meeting were first mailed to shareholders. A shareholder who submits a
proposal must also comply with the other requirements of SEC Rule 14a-8.
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APPENDIX A - AGREEMENT AND PLAN OF MERGER
A-1
<PAGE>
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
TROY FINANCIAL CORPORATION,
CHARLIE ACQUISITION CORPORATION
AND
CATSKILL FINANCIAL CORPORATION
DATED AS OF
JUNE 7, 2000
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<PAGE>
TABLE OF CONTENTS
Page
----
Article I The Merger............................................... ........ A-5
Article II Exchange Procedures............................................. A-8
Article III Representations and Warranties of Catskill.................... A-10
Article IV Representations and Warranties of Troy......................... A-29
Article V Covenants Relating to Conduct of Business....................... A-32
Article VI Additional Agreements.......................................... A-37
Article VII Conditions Precedent.......................................... A-45
Article VII Termination and Amendment..................................... A-48
Article IX General Provisions............................................. A-50
EXHIBITS
A Bank Plan of Merger
B Option Agreement
C Certificate of Merger
D Catskill Stockholder Agreement
A-3
<PAGE>
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER, dated as of June 7, 2000 (this
"Agreement"), is entered into by and among Troy Financial Corporation ("Troy"),
Charlie Acquisition Corporation, a Delaware corporation and wholly-owned
subsidiary of Troy ("Merger Sub"), and Catskill Financial Corporation, a
Delaware corporation ("Catskill").
WHEREAS, the Boards of Directors of Troy, Merger Sub and Catskill have
determined that it is in the best interests of their respective companies and
shareholders to consummate the business combination transaction provided for
herein in which Merger Sub will, subject to the terms and conditions set forth
herein, merge (the "Merger") with and into Catskill, with Catskill being the
Surviving Corporation (as defined) and becoming a wholly owned subsidiary of
Troy and immediately following said Merger, Troy intends that the Surviving
Corporation will merge with and into Troy (the "Subsidiary Merger");
WHEREAS, prior to the consummation of the Merger, Troy and Catskill
will respectively cause Troy Savings Bank ("Troy Bank"), a New York-chartered
savings bank and wholly-owned subsidiary of Troy, and Catskill Savings Bank
("Catskill Bank"), a federally chartered stock savings bank and wholly-owned
subsidiary of Catskill, to enter into a merger agreement, in the form attached
hereto as Exhibit A (the "Bank Merger Agreement"), providing for the merger (the
"Bank Merger") of Catskill Bank with and into Troy Bank, and it is intended that
the Bank Merger be consummated immediately after consummation of the Merger and
the Subsidiary Merger;
WHEREAS, as a condition and inducement to Troy and Merger Sub to enter
into this Agreement, Catskill will enter into a stock option agreement in the
form attached hereto as Exhibit B (the "Catskill Option Agreement"); and
WHEREAS, the parties desire to make certain representations, warranties and
agreements in connection with the Merger and also to prescribe certain
conditions to the Merger;
NOW, THEREFORE, in consideration of the mutual covenants,
representations, warranties and agreements contained herein, and intending to be
legally bound hereby, the parties agree as follows:
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ARTICLE I
THE MERGER
1.1 The Merger.
Subject to the terms and conditions of this Agreement, in accordance
with the Delaware General Corporation Law (the "DGCL"), at the Effective Time
(as defined in Section 1.2 hereof), Merger Sub shall merge into Catskill, with
Catskill being the surviving corporation (hereinafter sometimes called the
"Surviving Corporation") in the Merger. Upon consummation of the Merger, the
corporate existence of Merger Sub shall cease and the Surviving Corporation
shall continue to exist as a Delaware corporation and a wholly-owned subsidiary
of Troy.
1.2 Effective Time.
The Merger shall become effective on the Closing Date (as defined in
Section 9.1 hereof), as set forth in the certificate of merger (the "Certificate
of Merger") in the form attached as Exhibit C hereto which shall be filed with
the Secretary of State of the State of Delaware on the Closing Date. The term
"Effective Time" shall be the date and time when the Merger becomes effective on
the Closing Date, as set forth in the Certificate of Merger.
1.3 Effects of the Merger.
At and after the Effective Time, the Merger shall have the effects set
forth in Sections 259 and 261 of the DGCL.
1.4 Conversion of Catskill Common Stock.
(a) At the Effective Time, subject to Sections 1.4(b), 1.4(e) and
2.2(c) hereof, each share of Catskill common stock, par value $.01 per share
("Catskill Common Stock") issued and outstanding prior to the Effective Time
(excluding shares held by stockholders who perfect their dissenters' rights of
appraisal as provided in Section 1.4(d) hereof) shall, by virtue of this
Agreement and without any action on the part of the holder thereof, be converted
into the right to receive an amount (the "Merger Consideration") equal to $23.00
in cash (without interest), subject to adjustment as provided in Section 1.4(e)
hereof.
(b) All of the shares of Catskill Common Stock exchanged for the Merger
Consideration pursuant to this Article I shall no longer be outstanding and
shall automatically be canceled and shall cease to exist, and each certificate
(each a "Certificate") previously representing any such shares of Catskill
Common Stock shall thereafter represent the right to receive the Merger
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<PAGE>
Consideration for each share of Common Stock represented by such Certificate.
Certificates previously representing shares of Catskill Common Stock shall be
exchanged for cash upon the surrender of such Certificates in accordance with
Section 2.2 hereof, without any interest thereon. If prior to the Effective Time
Catskill should split or combine its common stock, or pay a dividend or other
distribution in such common stock, then the Merger Consideration shall be
appropriately adjusted to reflect such split, combination, dividend or
distribution.
(c) At the Effective Time, all shares of Catskill Common Stock that are
owned by Catskill as treasury stock and all shares of Catskill Common Stock that
are owned directly or indirectly by Troy or Catskill or any of their respective
Subsidiaries (other than shares of Catskill Common Stock held directly or
indirectly in trust accounts, managed accounts and the like or otherwise held in
a fiduciary capacity that are beneficially owned by third parties (any such
shares, and shares of Troy Common Stock which are similarly held, whether held
directly or indirectly by Troy or Catskill, as the case may be, being referred
to herein as "Trust Account Shares") and other than any shares of Catskill
Common Stock held by Troy or Catskill or any of their respective Subsidiaries in
respect of a debt previously contracted (any such shares of Catskill Common
Stock, and shares of Troy Common Stock which are similarly held, whether held
directly or indirectly by Troy or Catskill being referred to herein as "DPC
Shares")) shall be canceled and shall cease to exist and no cash or other
consideration shall be delivered in exchange therefor. All shares of Troy Common
Stock that are owned by Catskill or any of its Subsidiaries (other than Trust
Account Shares and DPC Shares) shall become treasury stock of Troy.
(d) Any holder of shares of Catskill Common Stock who perfects such
holder's dissenters' rights in accordance with and as contemplated by Section
262 of the DGCL shall be entitled to receive such payments as may be determined
pursuant to such provision of Law; provided that no such payment shall be made
to any dissenting stockholder unless and until such dissenting stockholder has
complied with the applicable provisions of the DGCL. In the event that after the
Effective Time a dissenting stockholder of Catskill fails to perfect or
effectively withdraws or loses such holder's rights to appraisal and of payment
of such holder's shares of Catskill Common Stock, the Surviving Corporation
shall issue and deliver the consideration to which such holder of shares of
Catskill Common Stock is entitled under this Section 1.4 (without interest) upon
surrender of such holder's Certificate or Certificates. (e) If the aggregate
pre-tax net proceeds (such proceeds shall be all cash proceeds, net of direct
sales expenses, fees and commissions, as recognized under GAAP (as defined in
Section 3.6 below) and referred to herein as the "Sale Proceeds") realized by
Catskill in the Securities Portfolio Sale (as defined in Section 3.25 below) are
less than $73.2 million, then the per share Merger Consideration shall be
decreased by an amount equal to the quotient, the numerator of which
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<PAGE>
is the after-tax (using Catskill's statutory federal and New York state tax
rates) difference between $73.2 million and the Sale Proceeds; and the
denominator of which is the sum of (x) the number of shares of Catskill Common
Stock outstanding as of such date and (y) the equivalent number of shares of
Catskill Common Stock subject to options outstanding, calculated using the
"Treasury Stock Method," as of such date. For purposes of this Section 1.4(e),
"Treasury Stock Method" assumes the exercise of each option, warrant or other
right or instrument (each, an "instrument") granted by Catskill to purchase
shares of Catskill Common Stock and assumes that the net proceeds received upon
the exercise of any such instrument will be used to purchase shares of Catskill
Common Stock at the fair market value on the date of exercise.
1.5 Options.
At the Effective Time, each option granted by Catskill to purchase
shares of Catskill Common Stock which is outstanding and unexercised immediately
prior thereto shall be converted automatically into a right to receive a payment
of cash from Troy in an amount determined as provided below (and otherwise
subject to the terms of the Catskill Financial Corporation 1996 Stock Option and
Incentive Plan (the "Catskill Stock Plan"):
The cash amount payable with respect to the option immediately after
the Effective Time shall be equal to the product of the number of shares of
Catskill Common Stock subject to the option immediately before the Effective
Time, multiplied by the difference between (a) the Merger Consideration, minus
(b) the exercise price per share of Catskill Common Stock under the option
immediately before the Effective Time.
1.6 Certificate of Incorporation.
At the Effective Time, the Certificate of Incorporation of Merger Sub,
as in effect at the Effective Time, shall be the Certificate of Incorporation of
the Surviving Corporation.
1.7 By-Laws.
At the Effective Time, the By-Laws of Merger Sub, as in effect
immediately prior to the Effective Time, shall be the By-Laws of the Surviving
Corporation.
A-7
<PAGE>
1.8 Directors and Officers.
At the Effective Time, the directors and officers of Merger Sub
immediately prior to the Effective Time shall be the directors and officers of
the Surviving Corporation. As of the Effective Time, Troy shall amend its bylaws
to increase the size of its Board of Directors by one member and cause Troy Bank
to amend its bylaws to increase the size of its Board of Directors by one
member, and thereupon appoint Wilbur J. Cross, President, Chief Executive
Officer, and Chairman of the Board of Catskill, to serve as an additional member
(the "New Member") of the Boards of Directors of Troy and Troy Bank in the class
of directors whose term expires at the 2003 annual meeting of Troy stockholders;
provided, however, that if the Closing shall occur after the 2001 annual meeting
of Troy stockholders, then the New Member shall be appointed to serve on the
Boards of Directors of Troy and Troy Bank until the 2004 annual meeting of Troy
stockholders; provided, further, that neither Troy nor Troy Bank shall have any
obligation to appoint the New Member to serve on either Troy's or Troy Bank's
Board if such person is not a member in good standing of the Catskill Board of
Directors immediately prior to closing. In addition, immediately prior to the
Effective Time, subject to applicable rules and regulations, Troy Bank shall
create an advisory board (the "Advisory Board") to be comprised of the
individuals identified at Section 1.8 of the Catskill Disclosure Schedule
(defined below) for a period to terminate no earlier than two years after the
Effective Time. For service on the Advisory Board, the Advisory Board members
identified at Section 1.8 of the Catskill Disclosure schedule shall be paid an
annual retainer of $10,000 per year, payable quarterly, except that Wilbur J.
Cross, as chairman of the Advisory Board, shall be paid an annual retainer of
$50,000 per year, payable quarterly, and shall be provided with an office.
Regular meetings of the Advisory Board shall be held quarterly and at a place in
the Catskill market area.
ARTICLE II
EXCHANGE PROCEDURES
2.1 Troy to Make Funds Available.
At or prior to the Effective Time, Troy shall deposit, or shall cause
to be deposited, with Troy's transfer agent, Registrar and Transfer Company, or
such other bank, trust company or transfer agent as Troy may select (the
"Exchange Agent"), for the benefit of the holders of Certificates, cash
sufficient in the aggregate for the Exchange Agent to make full payment of the
Merger Consideration pursuant to Section 1.4 (the "Exchange Fund"). There shall
be a written agreement between Troy and the Exchange Agent in which the Exchange
Agent expressly undertakes the obligation to pay the Merger Consideration as
provided herein. Catskill shall have the right to review the agreement with the
Exchange Agent prior to being finalized.
A-8
<PAGE>
2.2 Exchange.
(a) As soon as practicable after the Effective Time, the Exchange Agent
shall mail to each holder of record of a Certificate or Certificates a form
letter of transmittal (which shall specify that delivery shall be effected, and
risk of loss and title to the Certificates shall pass, only upon delivery of the
Certificates to the Exchange Agent) and instructions for use in effecting the
surrender of the Certificates in exchange for payment of the Merger
Consideration pursuant to this Agreement. Upon surrender of a Certificate for
exchange and cancellation to the Exchange Agent, together with such letter of
transmittal, duly executed, the holder of such Certificate shall be entitled to
receive promptly in exchange therefor a check representing the amount of cash to
which such holder shall have become entitled pursuant to the provisions of
Article I hereof, and the Certificate so surrendered shall forthwith be
canceled. No interest will accrue or be paid to the holder of any outstanding
shares of Catskill Common Stock.
(b) As of the Effective Time, there shall be no transfers on the stock
transfer books of Catskill of the shares of Catskill Common Stock which were
issued and outstanding immediately prior to the Effective Time. If, after the
Effective Time, Certificates representing such shares are presented for transfer
to the Exchange Agent, they shall be canceled and exchanged for the Merger
Consideration as provided in this Article II.
(c) Any portion of the Exchange Fund that remains unclaimed by the
shareholders of Catskill six months after the Effective Time may be returned to
Troy. After such funds have been returned to Troy, any shareholders of Catskill
who have not theretofore complied with this Article II shall thereafter look
only to Troy for payment of the Merger Consideration deliverable in respect of
each share of Catskill Common Stock such shareholder holds as determined
pursuant to this Agreement, in each case, without any interest thereon.
Notwithstanding the foregoing, none of Troy, Merger Sub, Catskill, the Exchange
Agent or any other person shall be liable to any former holder of shares of
Catskill Common Stock for any amount properly delivered to a public official
pursuant to applicable abandoned property, escheat or similar laws.
(d) In the event any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
such Certificate to be lost, stolen or destroyed and, if required by Troy, the
posting by such person of a bond in such amount as Troy may reasonably direct as
indemnity against any claim that may be made against it with respect to such
Certificate, the Exchange Agent will issue in exchange for such lost, stolen or
destroyed Certificate a check representing the Merger Consideration deliverable
in respect thereof pursuant to this Agreement.
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<PAGE>
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF CATSKILL
Catskill hereby makes the following representations and warranties to
Troy and Merger Sub as set forth in this Article III, each of which is being
relied upon by Troy and Merger Sub as a material inducement to enter into and
perform this Agreement. All of the disclosure schedules of Catskill referenced
below and thereby required of Catskill pursuant to this Agreement, which
disclosure schedules shall be cross-referenced to the specific sections and
subsections of this Agreement and delivered herewith, are referred to herein as
the "Catskill Disclosure Schedule."
3.1 Corporate Organization.
(a) Catskill is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware. Catskill has the
corporate power and authority to own or lease all of its properties and assets
and to carry on its business as it is now being conducted, and is duly licensed
or qualified to do business in each jurisdiction in which the nature of any
business conducted by it or the character or location of any properties or
assets owned or leased by it makes such licensing or qualification necessary.
Catskill is duly registered as a savings and loan holding company with the
Office of Thrift Supervision ("OTS") under the Home Owners' Loan Act, as amended
("HOLA"). The Certificate of Incorporation and By-Laws of Catskill, copies of
which are attached at Section 3.1(a) of the Catskill Disclosure Schedule, are
true, correct and complete copies of such documents as in effect as of the date
of this Agreement. Catskill Bank and Catskill Financial Services, Inc. ("CFSI")
are the only subsidiaries of Catskill and Catskill Bank, respectively, that
qualify as a "Significant Subsidiary" as such term is defined in Regulation S-X
promulgated by the Securities and Exchange Commission (the "SEC").
(b) Catskill Bank is a federally chartered stock savings bank duly
organized and validly existing and in good standing under the laws of the United
States. The deposit accounts of Catskill Bank are insured by the Federal Deposit
Insurance Corporation (the "FDIC") through the Bank Insurance Fund (the "BIF")
to the fullest extent permitted by law, and all premiums and assessments
required in connection therewith have been paid by Catskill Bank. Catskill Bank
has the corporate power and authority to own or lease all of its properties and
assets and to carry on its business as it is now being conducted and is duly
licensed or qualified to do business in each jurisdiction in which the nature of
any business conducted by it or the character or the location of any properties
or assets owned or leased by it makes such licensing or qualification necessary.
The Charter and By-Laws of Catskill Bank, copies of which are attached at
Section 3.1(b) of the Catskill
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Disclosure Schedule, are true, correct and complete copies of such documents as
in effect as of the date of this Agreement. (c) CFSI is a business corporation
duly organized, validly existing and in good standing under the corporate laws
of the State of New York, and is duly licensed as an insurance agent by the New
York Insurance Department. CFSI has the corporate power and authority to own or
lease all of its properties and assets and to carry on its business as it is now
being conducted, and is duly licensed or qualified to do business in each
jurisdiction in which the nature of any material business conducted by it or the
character or location of any material properties or assets owned or leased by it
makes such licensing or qualification necessary. CFSI is not a "bank" as such
term is defined in the Bank Holding Company Act of 1956, as amended, ("BHCA").
The Certificate of Incorporation and Bylaws of CFSI, copies of which are
attached at Section 3.1(c) of the Catskill Disclosure Schedule, are true,
correct and complete copies of such documents as in effect as of the date of
this Agreement.
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3.2 Capitalization.
(a) The authorized capital stock of Catskill consists of 15 million
shares of Catskill Common Stock and 5 million shares of preferred stock, par
value $.01 per share (the "Catskill Preferred Stock"). As of the date hereof,
there are (x) 3,737,519 shares of Catskill Common Stock issued and outstanding
and 1,949,231 shares of Catskill Common Stock are held in Catskill's treasury,
(y) no shares of Catskill Common Stock reserved for issuance upon exercise of
outstanding stock options or otherwise, except for 519,090 shares of Catskill
Common Stock reserved for issuance pursuant to the Catskill Stock Plan (of which
options for 384,748 shares are currently outstanding); (ii) 39,488 shares of
Catskill Common Stock reserved for issuance under the Catskill Management
Recognition Plan; and (iii) 743,766 shares of Catskill Common Stock reserved for
issuance upon exercise of the option to be issued to Troy pursuant to the Option
Agreement, and (z) no shares of Catskill's Preferred Stock issued or
outstanding, held in Catskill's treasury or reserved for issuance upon exercise
of outstanding stock options or otherwise. All of the issued and outstanding
shares of Catskill Common Stock have been duly authorized and validly issued and
are fully paid, nonassessable and free of preemptive rights, with no personal
liability attaching to the ownership thereof. Except for the Option Agreement,
the Catskill Management Recognition Plan and the Catskill Stock Plan, Catskill
does not have and is not bound by any outstanding subscriptions, options,
warrants, calls, commitments or agreements of any character calling for the
purchase or issuance of any shares of Catskill Common Stock or Catskill
Preferred Stock or any other equity security of Catskill or any securities
representing the right to purchase or otherwise receive any shares of Catskill
Common Stock or any other equity security of Catskill. The names of the
optionees, the date of each option to purchase Catskill Common Stock granted,
the number of shares subject to each such option, the expiration date of each
such option, and the price at which each such option may be exercised under the
Catskill Stock Plan and the Catskill Management Recognition Plan are set forth
in Sections 3.2(a)(i) and 3.2(a)(ii) of the Catskill Disclosure Schedule. Except
as set forth at Section 3.2(a)(iii) of the Catskill Disclosure Schedule, since
September 30, 1999 Catskill has not issued any shares of its capital stock,
including shares under the Catskill Management Recognition Plan, or any
securities convertible into or exercisable for any shares of its capital stock,
other than pursuant to the exercise of director or employee stock options
granted under the Catskill Stock Plan.
(b) Section 3.2(b) of the Catskill Disclosure Schedule sets forth a
true, correct and complete list of all direct or indirect Subsidiaries of
Catskill as of the date of this Agreement. Except as set forth at Section 3.2(b)
of the Catskill Disclosure Schedule, Catskill owns, directly or indirectly, all
of the issued and outstanding shares of capital stock of each of its
Subsidiaries, free and clear of all liens, charges, encumbrances and security
interests whatsoever, and all of such shares are duly authorized and validly
issued and are fully paid, nonassessable and free of preemptive rights, with no
personal liability attaching to the ownership thereof. No Catskill Subsidiary
has or is bound by any
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outstanding subscriptions, options, warrants, calls, commitments or agreements
of any character calling for the purchase or issuance of any shares of capital
stock or any other equity security of such Subsidiary or any securities
representing the right to purchase or otherwise receive any shares of capital
stock or any other equity security of such Subsidiary.
3.3 Authority; No Violation.
(a) Each of Catskill and its Subsidiaries has full corporate power and
authority to execute and deliver this Agreement and the Option Agreement and,
subject to receipt of the required regulatory approvals specified herein, to
consummate the transactions contemplated hereby and thereby. The execution and
delivery of this Agreement and the Option Agreement and the consummation of the
transactions contemplated hereby and thereby have been duly and validly approved
by the Board of Directors of Catskill. The Board of Directors of Catskill has
directed that this Agreement and the transactions contemplated hereby be
submitted to Catskill's shareholders for approval at a special meeting of such
shareholders and, except for the adoption of this Agreement by the requisite
vote of Catskill's shareholders, no other corporate proceedings on the part of
Catskill (except for matters related to setting the date, time, place and record
date for the special meeting) are necessary to approve this Agreement or the
Option Agreement or to consummate the transactions contemplated hereby or
thereby. This Agreement has been, and the Option Agreement will be, duly and
validly executed and delivered by Catskill and (assuming due authorization,
execution and delivery by Troy of this Agreement and by Troy of the Option
Agreement) will constitute valid and binding obligations of Catskill,
enforceable against Catskill in accordance with their terms, except as
enforcement may be limited by general principles of equity whether applied in a
court of law or a court of equity and by bankruptcy, insolvency and similar laws
affecting creditors' rights and remedies generally.
(b) Catskill Bank has full corporate power and authority to execute and
deliver the Bank Merger Agreement and, subject to receipt of the required
regulatory approvals specified herein, to consummate the transactions
contemplated thereby. The execution and delivery of the Bank Merger Agreement
and the consummation of the transactions contemplated thereby have been duly and
validly approved by the Board of Directors of Catskill Bank and by Catskill as
the sole shareholder of Catskill Bank. No other corporate proceedings on the
part of Catskill Bank will be necessary to consummate the transactions
contemplated thereby. The Bank Merger Agreement, upon execution and delivery by
Catskill Bank, will be duly and validly executed and delivered by Catskill Bank
and will (assuming due authorization, execution and delivery by Troy Bank)
constitute a valid and binding obligation of Catskill Bank, enforceable against
Catskill Bank in accordance with its terms, except as enforcement may be limited
by general principles of equity whether applied in a
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court of law or a court of equity and by bankruptcy, insolvency and similar laws
affecting creditors' rights and remedies generally.
(c) Neither the execution and delivery of this Agreement and the Option
Agreement by Catskill or the Bank Merger Agreement by Catskill Bank, nor the
consummation by Catskill or Catskill Bank, as the case may be, of the
transactions contemplated hereby or thereby, nor compliance by Catskill or
Catskill Bank with any of the terms or provisions hereof or thereof, will (i)
violate any provision of the Certificate of Incorporation or By-Laws of Catskill
and each of its Subsidiaries or (ii) assuming that the consents and approvals
referred to in Section 3.4 hereof are duly obtained, (x) violate any Laws (as
defined in Section 9.13) applicable to Catskill and each of its Subsidiaries, or
any of their respective properties or assets, or (y) violate, conflict with,
result in a breach of any provision of or the loss of any benefit under,
constitute a default (or an event which, with notice or lapse of time, or both,
would constitute a default) under, result in the termination of or a right of
termination or cancellation under, accelerate the performance required by, or
result in the creation of any lien, pledge, security interest, charge or other
encumbrance upon any of the respective properties or assets of Catskill and each
of its Subsidiaries under, any of the terms, conditions or provisions of any
note, bond, mortgage, indenture, deed of trust, license, lease, agreement or
other instrument or obligation to which Catskill and each of its Subsidiaries is
a party, or by which they or any of their respective properties or assets may be
bound or affected.
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3.4 Consents and Approvals.
(a) Except for (i) the filing of applications, notices or waiver
requests, as applicable, as to the Merger and the Bank Merger with the Board of
Governors of the Federal Reserve System ("FRB") under the BHCA, the OTS under
HOLA and the OTS regulations, the FDIC under the Bank Merger Act, and the New
York State Banking Department ("NYSBD"), as well as any other applications and
notices to state officials related to the Merger or the Bank Merger (the "State
Banking Approvals"), and approval of the foregoing applications and notices,
(ii) the filing of any required applications or notices with the NYSBD and the
FDIC as to the subsidiaries of Catskill Bank which become subsidiaries of Troy
Bank and approval of such applications and notices, (iii) the filing with the
SEC of proxy materials to be used in soliciting the approval of Catskill's
shareholders at a special meeting to be held in connection with this Agreement
and the transactions contemplated hereby (the "Proxy Materials"), (iv) the
approval of this Agreement by the requisite vote of the shareholders of
Catskill, (v) the filing of the Certificate of Merger with the Secretary of
State of Delaware pursuant to the DGCL, (vi) the filings required by the Bank
Merger Agreement, (vii) such consents, approvals, orders, authorizations,
registrations, declarations and filings as may be required under applicable
federal, foreign and state securities (or related) laws and, if applicable, the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), and the securities or antitrust laws of any foreign country, (viii) the
filing of applications or notices with the New York Insurance Department with
respect to the acquisition of CFSI and approval of such applications or notices
and (ix) such filings, authorizations or approvals as may be set forth in
Section 3.4 of the Catskill Disclosure Schedule, no consents or approvals of or
filings or registrations with any court, administrative agency or commission or
other governmental authority or instrumentality (each a "Governmental Entity"),
or with any third party are necessary in connection with (1) the execution and
delivery by Catskill of this Agreement and the Option Agreement, (2) the
consummation by Catskill of the Merger and the other transactions contemplated
hereby, (3) the execution and delivery by Catskill Bank of the Bank Merger
Agreement, (4) the consummation by Catskill of the Option Agreement, and (5) the
consummation by Catskill Bank of the Bank Merger and the transactions
contemplated thereby, except in each case, for such consents, approvals or
filings, the failure of which to obtain will not have a Material Adverse Effect
on the ability of Troy to consummate the transactions contemplated hereby.
(b) Catskill hereby represents to Troy that it has no knowledge of any
reason why approval or effectiveness of any of the applications, notices or
filings referred to in Section 3.4(a) cannot be obtained or granted on a timely
basis.
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3.5 Loan Portfolio; Reports.
(a) Except as set forth at Section 3.5(a) of the Catskill Disclosure
Schedule, as of September 30, 1999 and thereafter through and including the date
of this Agreement, none of Catskill, nor any of its Subsidiaries is a party to
any written or oral loan agreement, note or borrowing arrangement (including,
without limitation, leases, credit enhancements, commitments, guarantees and
interest-bearing assets) (collectively, "Loans"), with any director, officer or
five percent or greater shareholder of Catskill or any of its Subsidiaries, or
any Affiliated Person (as defined in Section 9.13) of the foregoing.
(b) Catskill, Catskill Bank and CFSI have timely filed all reports,
registrations and statements, together with any amendments required to be made
with respect thereto, that they were required to file since September 30, 1999
with (i) the OTS; (ii) the FDIC, (iii) the NYSBD (iv) the New York Insurance
Department and any other state banking commissions or any other state regulatory
authority (each a "State Regulator"), (v) the SEC and (vi) any other
self-regulatory organization ("SRO") (collectively "Regulatory Agencies").
Except for normal examinations conducted by a Regulatory Agency in the regular
course of the business of Catskill and its Subsidiaries, to Catskill's knowledge
no Governmental Entity is conducting, or has conducted, any proceeding or
investigation into the business or operations of Catskill or any of its
Subsidiaries since September 30, 1999.
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3.6 Financial Statements; Exchange Act Filings; Books and Records.
Catskill has previously delivered to Troy true, correct and complete
copies of the consolidated statements of condition of Catskill and its
Subsidiaries as of September 30 for the fiscal years 1998 and 1999 and the
related consolidated statements of income, shareholders' equity and cash flows
for the fiscal years 1997 through 1999, inclusive, as reported in Catskill's
Annual Report on Form 10-K for the fiscal year ended September 30, 1999 filed
with the SEC under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), in each case accompanied by the audit report of KPMG LLP,
independent public accountants with respect to Catskill, and the interim
financial statements of Catskill as of and for the six months ended March 31,
2000 and 1999, as included in the Catskill quarterly report on Form 10-Q for the
period ended March 31, 2000 as filed with the SEC. The financial statements
referred to in this Section 3.6 (including the related notes, where applicable)
fairly present, and the financial statements referred to in Section 6.7 hereof
will fairly present (subject, in the case of the unaudited statements, to
recurring audit adjustments normal in nature and amount), the results of the
consolidated operations and consolidated financial condition of Catskill and its
Subsidiaries for the respective fiscal periods or as of the respective dates
therein set forth; each of such statements (including the related notes, where
applicable) comply, and the financial statements referred to in Section 6.7
hereof will comply, with applicable accounting requirements and with the
published rules and regulations of the SEC with respect thereto and each of such
statements (including the related notes, where applicable) has been, and the
financial statements referred to in Section 6.7 hereof will be prepared in
accordance with generally accepted accounting principles consistently applied
during the periods involved ("GAAP"), except in each case as indicated in such
statements or in the notes thereto or, in the case of unaudited statements, as
permitted by Form 10-Q. Catskill's Annual Report on Form 10-K for the fiscal
year ended September 30, 1999 and all reports filed under Sections 13(a), 13(c),
14 or 15(d) of the Exchange Act since September 30, 1999 comply in all material
respects with the appropriate requirements for such reports under the Exchange
Act, and Catskill has previously delivered or made available to Troy true,
correct and complete copies of such reports. The books and records of Catskill
and Catskill Bank have been, and are being, maintained in all material respects
in accordance with GAAP and any other applicable legal and accounting
requirements.
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3.7 Broker's Fees.
Neither Catskill nor any Catskill Subsidiary nor any of their
respective officers or directors has employed any broker or finder or incurred
any liability for any broker's fees, commissions or finder's fees in connection
with any of the transactions contemplated by this Agreement or the Option
Agreement, except that Catskill has engaged, and will pay a fee or commission to
Ryan, Beck & Co. ("Ryan Beck") in accordance with the terms of a letter
agreement between Ryan Beck and Catskill, dated March 23, 2000, a true, complete
and correct copy of which is attached at Section 3.7 of the Catskill Disclosure
Schedule.
3.8 Absence of Certain Changes or Events.
(a) Except as set forth at Section 3.8 of the Catskill Disclosure
Schedule, or as disclosed in Catskill's Annual Report on Form 10-K for the
fiscal year ended September 30, 1999, since September 30, 1999 (i) neither
Catskill nor any of its Subsidiaries has incurred any material liability, except
as contemplated by the Agreement or in the ordinary course of their business
consistent with their past practices, and (ii) no event has occurred which has
had, or is likely to have, individually or in the aggregate, a Material Adverse
Effect (as defined in Section 9.13) on Catskill.
(b) Since September 30, 1999 Catskill and its Subsidiaries have carried
on their respective businesses in the ordinary and usual course consistent with
their past practices.
3.9 Legal Proceedings.
(a) Except as set forth at Section 3.9 of the Catskill Disclosure
Schedule, neither Catskill nor any of its Subsidiaries is a party to any, and
there are no pending or to the knowledge of Catskill, threatened, legal,
administrative, arbitration or other proceedings, claims, actions or
governmental or regulatory investigations of any nature against Catskill or any
of its Subsidiaries in which, to the knowledge of Catskill, there is a
reasonable probability of any material recovery against or other material effect
upon Catskill or any of its Subsidiaries or which challenge the validity or
propriety of the transactions contemplated by this Agreement, the Bank Merger
Agreement or the Option Agreement.
(b) There is no injunction, order, judgment, decree, or regulatory
restriction imposed upon Catskill, any of its Subsidiaries or the assets of
Catskill or any of its Subsidiaries.
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3.10 Taxes and Tax Returns.
(a) Each of Catskill and its Subsidiaries has duly filed all Tax
Returns required to be filed by it on or prior to the date hereof (all such
returns being accurate and complete in all material respects) and has duly paid
or made provision on the financial statements referred to in Sections 3.6 and
6.7 hereof in accordance with GAAP for the payment of all material Taxes which
have been incurred or are due or claimed to be due from it by Taxing Authorities
on or prior to the date hereof other than Taxes (a) which (x) are not yet
delinquent or (y) are being contested in good faith and set forth in Section
3.10 of the Catskill Disclosure Schedule and (b) which have not been finally
determined. All liability with respect to the Tax Returns of Catskill and its
Subsidiaries has been satisfied for all years to and including 1998. The
Internal Revenue Service ("IRS") has not notified Catskill of, or otherwise
asserted, that there are any material deficiencies with respect to the federal
income Tax Returns of Catskill. There are no material disputes pending, or
claims asserted for, Taxes or assessments upon Catskill or any of its
Subsidiaries, nor has Catskill or any of its Subsidiaries been requested to give
any currently effective waivers extending the statutory period of limitation
applicable to any federal or state income Tax Return for any period. In
addition, Tax Returns which are accurate and complete in all material respects
have been filed by Catskill and its Subsidiaries for all periods for which
returns were due with respect to income tax withholding, Social Security and
unemployment taxes and the amounts shown on such Tax Returns to be due and
payable have been paid in full or adequate provision therefor in accordance with
GAAP has been included by Catskill in the financial statements referred to in
Sections 3.6 and 6.7 hereto. All Catskill Tax Returns have been examined by the
relevant Taxing Authorities, or closed without audit by applicable statutes of
limitations, and all deficiencies proposed as a result of such examinations have
been paid or settled, for all periods before and including the taxable year
ended 1995. Neither Catskill nor any of its Subsidiaries has consented to any
waiver or extension of any statute of limitations with respect to any Tax.
Neither Catskill nor any Catskill Subsidiary has made an election under Section
341(f) of the Internal Revenue Code of 1986, as amended (the "Code" or "IRC").
Catskill has provided or made available to Troy complete and correct copies of
its Tax Returns and all material correspondence and documents, if any, relating
directly or indirectly to taxes for each taxable year or other relevant period
as to which the applicable statute of limitations has not run on the date
hereof. For this purpose, "correspondence and documents" include, without
limitation, amended Tax Returns, claims for refunds, notices from Taxing
Authorities of proposed changes or adjustments to Taxes or Tax Returns, consents
to assessment or collection of Taxes, acceptances of proposed adjustments,
closing agreements, rulings and determination letters and requests therefor, and
all other written communications to or from Taxing Authorities relating to any
material Tax liability of Catskill or any Catskill Subsidiary. Catskill will not
be a "foreign person" as that term is used in ss. 1.1445-2 of the Treasury
Regulations promulgated under the IRC. Catskill Bank is not a "United States
real property holding corporation" within meaning of
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ss. 897 of the IRC and was not a "United States real property holding
corporation" on any "determination date" (as defined in ss. 1.897-2(c) of
such Regulations) that occurred during any relevant period.
(b) For purposes of this Agreement:
"Tax" means any tax (including any income tax, capital gains tax,
payroll tax, value-added tax, sales tax, property tax, gift tax, or estate tax),
levy, assessment, tariff, duty (including any customs duty), deficiency, or
other fee, and any related charge or amount (including any fine, penalty,
interest, or addition to tax), imposed, assessed, or collected by or under the
authority of any Taxing Authority or payable pursuant to any tax-sharing
agreement or any other contract relating to the sharing or payment of any such
tax, levy, assessment, tariff, duty, deficiency, or fee.
"Tax Return" means any return (including any information return),
report, statement, schedule, notice, form, or other document or information
filed with or submitted to, or required to be filed with or submitted to, any
Taxing Authority in connection with the determination, assessment, collection,
or payment of any Tax or in connection with the administration, implementation,
or enforcement of or compliance with any law, regulation or other legal
requirement relating to any Tax.
"Taxing Authority" means any:
(i) nation, state, county, city, town, village,
district, or other jurisdiction of any nature;
(ii)federal, state, local, municipal, foreign, or
other government;
(iii) governmental or quasi-governmental authority of
any nature (including any governmental agency, branch,
department, official, or entity and any court or other
tribunal);
(iv) multi-national organization or body; or
(v) body exercising, or entitled to exercise, any
administrative, executive, judicial, legislative, police,
regulatory, or taxing authority or power of any nature.
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3.11 Employee Plans.
(a) Section 3.11(a) of the Catskill Disclosure Schedule sets forth a
true and complete list of each employee benefit plan (within the meaning of
Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")), arrangement or agreement that is maintained or contributed to as of
the date of this Agreement, or that has within the last six years been
maintained or contributed to, by Catskill or any of its Subsidiaries or any
other entity which together with Catskill would be deemed a "single employer"
within the meaning of Section 4001 of ERISA or Code Sections 414(b), (c) or (m)
or under which Catskill or any such Subsidiary has any liability (collectively,
the "Plans").
(b) Catskill has heretofore delivered or made available to Troy true,
correct and complete copies of each of the Plans and all related documents,
including but not limited to (i) the actuarial report for such Plan (if
applicable) for each of the last five years, (ii) the most recent determination
letter from the IRS (if applicable) for such Plan, (iii) the current summary
plan description and any summaries of material modification, (iv) all annual
reports (Form 5500 series) for each Plan filed for the preceding five plan
years, (v) all agreements with fiduciaries and service providers relating to the
Plan, and (vi) all substantive correspondence relating to any such Plan
addressed to or received from the Internal Revenue Service, the Department of
Labor, the Pension Benefit Guaranty Corporation or any other governmental
agency.
(c) Except as set forth at Section 3.11(c) of the Catskill Disclosure
Schedule, (i) Each of the Plans has been operated and administered in all
material respects in compliance with applicable Laws, including but not limited
to ERISA and the Code, (ii) each of the Plans intended to be "qualified" within
the meaning of Section 401(a) of the Code is so qualified, any trust created
pursuant to any such Plan is exempt from federal income tax under Section 501(a)
of the Code, each such Plan has received from the Internal Revenue Service a
favorable determination letter to such effect upon which Catskill or a
Subsidiary is entitled to rely as to such matters and which is currently
applicable, and neither Catskill nor any Subsidiary is aware of any circumstance
or event which would jeopardize the tax-qualified status of any such Plan or the
tax-exempt status of any related trust, or which would cause the imposition of
any liability, penalty or tax under ERISA or the Code with respect to any Plan,
(iii) with respect to each Plan which is subject to Title IV of ERISA, the
present value of accrued benefits under such Plan, based upon the actuarial
assumptions used for funding purposes in the most recent actuarial report
prepared by such Plan's actuary with respect to such Plan, did not, as of its
latest valuation date, exceed the then current value of the assets of such Plan
allocable to such accrued benefits, (iv) no Plan provides benefits, including,
without limitation, death or medical benefits (whether or not insured), with
respect to current or former employees of Catskill or any Catskill Subsidiary
beyond their retirement or other termination of service, other than (w) coverage
mandated by applicable Law, (x) death benefits or retirement benefits under a
Plan that is an "employee pension plan," as that term is defined in Section
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3(2) of ERISA, (y) deferred compensation benefits under a Plan that are accrued
as liabilities on the books of Catskill or any Catskill Subsidiary, or (z)
benefits the full cost of which is borne by the current or former employee (or
his beneficiary), (v) no liability under Title IV of ERISA has been incurred by
Catskill or any Catskill Subsidiary that has not been satisfied in full, and no
condition exists that presents a material risk of Catskill or any Catskill
Subsidiary incurring a material liability thereunder, (vi) no Plan is a
"multiemployer pension plan," as such term is defined in Section 3(37) of ERISA,
(vii) all contributions or other amounts payable by Catskill or any Catskill
Subsidiary as of the Effective Time with respect to each Plan and all other
liabilities of each such entity with respect to each Plan, in respect of current
or prior plan years have been paid or accrued in accordance with generally
accepted accounting practices and Section 412 of the Code, (viii) neither
Catskill nor any Catskill Subsidiary has engaged in a transaction in connection
with which Catskill or any Catskill Subsidiary could be subject to either a
civil penalty assessed pursuant to Section 409 or 502(i) of ERISA or a tax
imposed pursuant to Section 4975 or 4976 of the Code, (ix) to the knowledge of
Catskill, there are no pending, threatened or anticipated claims (other than
routine claims for benefits) by, on behalf of or against any of the plans or any
trusts related thereto, and (x) all Plans could be terminated as of the
Effective Time without material liability in excess of the amount accrued with
respect to such Plan in the financial statements referred to in Sections 3.6 and
6.8 hereto; (xi) no Plan, program, agreement or other arrangement, either
individually or collectively, provides for any payment by Catskill or any
Catskill Subsidiary that would not be deductible under Code Sections 162(a)(1),
162(m) or 404 or that would constitute a "parachute payment" within the meaning
of Code Section 280G after giving effect to the transactions contemplated by
this Agreement nor would the transactions contemplated by this Agreement
accelerate the time of payment or vesting, or increase the amount of
compensation due to any employee; (xii) no "accumulated funding deficiency" as
defined in Section 302(a)(2) of ERISA or Section 412 of the Code, whether or not
waived, and no "unfunded current liability" as determined under Section 412(l)
of the Code exists with respect to any Plan; and (xiii) no Plan has experienced
a "reportable event" (as such term is defined in Section 4043(b) of ERISA) that
is not subject to an administrative or statutory waiver from the reporting
requirement; (xiv) all reports and information required to be filed with the
Department of Labor, IRS and Pension Benefit Guaranty Corporation or provided to
plan participants and their beneficiaries with respect to each Plan have been
filed or provided, as applicable, and all annual reports (including Form 5500
series) of such Plans were certified without qualification by each Plan's
accountants and actuaries; and (xv) any bond required under ERISA with respect
to any Plan has been obtained and is in full force and effect and no funds held
by or under the control of Catskill or any Subsidiary are plan assets of any
Plan
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3.12 Certain Contracts.
(a) Except as set forth at Section 3.12 of the Catskill Disclosure
Schedule, neither Catskill nor any of its Subsidiaries is a party to or bound by
any contract, arrangement or commitment (i) with respect to the employment of
any directors, officers, employees or consultants, (ii) which, upon the
consummation of the transactions contemplated by this Agreement or the Bank
Merger Agreement will (either alone or upon the occurrence of any additional
acts or events) result in any payment (whether of severance pay or otherwise)
becoming due from Troy, Catskill, or any of their respective Subsidiaries to any
director, officer or employee thereof, (iii) which materially restricts the
conduct of any line of business by Catskill or any of its Subsidiaries, (iv)
with or to a labor union or guild (including any collective bargaining
agreement) or (v) except as set forth on Section 3.12(a)(v) of the Catskill
Disclosure Schedule, any of the benefits of which will be increased, or the
vesting of the benefits of which will be accelerated by the occurrence of any of
the transactions contemplated by this Agreement, or the value of any of the
benefits of which will be calculated on the basis of any of the transactions
contemplated by this Agreement (including as to this clause (v), any stock
option plan, stock appreciation rights plan, restricted stock plan or stock
purchase plan). Except as set forth at Section 3.12 of the Catskill Disclosure
Schedule, there are no employment, consulting and deferred compensation
agreements to which Catskill or any of its Subsidiaries is a party. Section
3.12(a) of the Catskill Disclosure Schedule sets forth a list of all material
contracts (as defined in Item 601(b)(10) of Regulation S-K) of Catskill and its
Subsidiaries. Each contract, arrangement or commitment of the type described in
this Section 3.12(a), whether or not set forth in Section 3.12(a) of the
Catskill Disclosure Schedule, is referred to herein as a "Catskill Contract,"
and neither Catskill nor any of its Subsidiaries has received notice of, nor do
any executive officers of such entities know of, any violation of any Catskill
Contract.
(b) (i) Each Catskill Contract is valid and binding and in full force
and effect, (ii) Catskill and each of its Subsidiaries has in all material
respects performed all obligations required to be performed by it to date under
each Catskill Contract, and (iii) no event or condition exists which constitutes
or, after notice or lapse of time or both, would constitute, a material default
on the part of Catskill or any of its Subsidiaries under any such Catskill
Contract.
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3.13 Agreements with Regulatory Agencies.
None of Catskill, CFSI, or Catskill Bank is subject to any
cease-and-desist or other order issued by, or is a party to any written
agreement, consent agreement or memorandum of understanding with, or has adopted
any board resolutions at the request of (each, whether or not set forth on
Section 3.13 of the Catskill Disclosure Schedule, a "Regulatory Agreement"), any
Governmental Entity that restricts the conduct of its business or that in any
manner relates to its capital adequacy, its credit policies, its management or
its business, nor has Catskill, CFSI, or Catskill Bank been advised by any
Governmental Entity that it is considering issuing or requesting any Regulatory
Agreement.
3.14 State Takeover Laws; Certificate of Incorporation.
The Board of Directors of Catskill has approved the offer of Troy to
enter into this Agreement, the Bank Merger Agreement and the Option Agreement,
and has approved Catskill entering into this Agreement, the Bank Merger
Agreement and the Option Agreement, and the transactions contemplated thereby,
such that under applicable law and Catskill's Certificate of Incorporation the
only vote of Catskill shareholders necessary to consummate the transactions
contemplated hereby is the approval of at least a majority of the outstanding
shares of Catskill Common Stock entitled to vote.
3.15 Environmental Matters.
(a) Each of Catskill and the Subsidiaries is in compliance with all
applicable federal and state laws and regulations relating to pollution or
protection of the environment (including without limitation, laws and
regulations relating to emissions, discharges, releases and threatened releases
of Hazardous Materials (as hereinafter defined), or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Hazardous Materials;
(b) There is no suit, claim, action, proceeding, investigation or
notice pending or, to the knowledge of Catskill, CFSI and Catskill Bank,
threatened (or past or present actions or events that could form the basis of
any such suit, claim, action, proceeding, investigation or notice), in which
Catskill or any Catskill Subsidiary has been or, with respect to threatened
suits, claims, actions, proceedings, investigations or notices may be, named as
a defendant (x) for alleged material noncompliance (including by any
predecessor), with any environmental law, rule or regulation or (y) relating to
any material release or threatened release into the environment of any Hazardous
Material, occurring at or on a site owned, leased or operated by Catskill or any
Catskill Subsidiary, or to the knowledge of Catskill, relating to any material
release or threatened release into the environment of any Hazardous Material,
occurring at or on a site not owned, leased or operated by Catskill or any
Catskill Subsidiary;
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(c) During the period of Catskill's or any Catskill Subsidiary's
ownership or operation of any of its properties, there has not been any material
release of Hazardous Materials in, on, under or affecting any such property.
(d) To the knowledge of Catskill, CFSI and Catskill Bank, neither
Catskill nor any Catskill Subsidiary has made or participated in any loan to any
person who is subject to any suit, claim, action, proceeding, investigation or
notice, pending or threatened, with respect to (i) any alleged material
noncompliance as to any property securing such loan with any environmental law,
rule or regulation, or (ii) the release or the threatened release into the
environment of any Hazardous Material at a site owned, leased or operated by
such person on any property securing such loan.
(e) For purposes of this section 3.15, the term "Hazardous Material"
means any hazardous waste, petroleum product, polychlorinated biphenyl,
chemical, pollutant, contaminant, pesticide, radioactive substance, or other
toxic material, or other material or substance (in each such case, other than
small quantities of such substances in retail containers) regulated under any
applicable environmental or public health statute, law, ordinance, rule or
regulation.
3.16 Reserves for Losses.
All reserves or other allowances for possible losses reflected in
Catskill's most recent financial statements referred to in Section 3.6 complied
with all Laws and are adequate under GAAP. None of Catskill, CFSI or Catskill
Bank has been notified by the FDIC, the OTS, the NYSBD the New York Insurance
Department or Catskill's independent auditor, in writing or otherwise, that such
reserves are inadequate or that the practices and policies of Catskill, CFSI or
Catskill Bank in establishing such reserves and in accounting for delinquent and
classified assets generally fail to comply with applicable accounting or
regulatory requirements, or that the FDIC, the OTS, the NYSBD or Catskill's
independent auditor believes such reserves to be inadequate or inconsistent with
the historical loss experience of Catskill, CFSI or Catskill Bank. Catskill has
previously furnished Troy with a complete list of all extensions of credit and
other real estate owned ("OREO") that have been classified by any bank or trust
examiner (regulatory or internal) as other loans specially mentioned, special
mention, substandard, doubtful, loss, classified or criticized, credit risk
assets, concerned loans or words of similar import. Catskill agrees to update
such list no less frequently than monthly after the date of this Agreement until
the earlier of the Closing Date or the date that this Agreement is terminated in
accordance with Section 8.1. All OREO held by Catskill, CFSI or Catskill Bank is
being carried net of reserves at the lower of cost or net realizable value.
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3.17 Properties and Assets.
Section 3.17 of the Catskill Disclosure Schedule lists (i) all real
property owned by Catskill and each Catskill Subsidiary; (ii) each real property
lease, sublease or installment purchase arrangement to which Catskill or any
Catskill Subsidiary is a party; (iii) a description of each contract for the
purchase, sale, or development of real estate to which Catskill or any Catskill
Subsidiary is a party; and (iv) all items of Catskill's or any Catskill
Subsidiary's tangible personal property and equipment with a book value of
$25,000 or more or having any annual lease payment of $10,000 or more. Except
for (a) items reflected in Catskill's consolidated financial statements as of
September 30, 1999 referred to in Section 3.6 hereof, (b) exceptions to title
that do not interfere materially with Catskill's or any Catskill Subsidiary's
use and enjoyment of owned or leased real property (other than OREO), (c) liens
for current real estate taxes not yet delinquent, or being contested in good
faith, properly reserved against (and reflected on the financial statements
referred to in Section 3.6 above), and (d) items listed in Section 3.17 of the
Catskill Disclosure Schedule, Catskill and each Catskill Subsidiary have good
and, as to owned real property, marketable and insurable title to all their
properties and assets, free and clear of all liens, claims, charges and other
encumbrances. Catskill and each Catskill Subsidiary, as lessees, have the right
under valid and subsisting leases to occupy, use and possess all property leased
by them, and neither Catskill nor any Catskill Subsidiary has experienced any
material uninsured damage or destruction with respect to such properties since
September 30, 1999. All properties and assets used by Catskill and each Catskill
Subsidiary are in good operating condition and repair suitable for the purposes
for which they are currently utilized and comply in all material respects with
all Laws relating thereto now in effect or scheduled to come into effect.
Catskill and each Catskill Subsidiary enjoy peaceful and undisturbed possession
under all leases for the use of all property under which they are the lessees,
and all leases to which Catskill or any Catskill Subsidiary is a party are valid
and binding obligations in accordance with the terms thereof. Neither Catskill
nor any Catskill Subsidiary is in material default with respect to any such
lease, and there has occurred no default by Catskill or any Catskill Subsidiary
or event which with the lapse of time or the giving of notice, or both, would
constitute a material default under any such lease. There are no Laws,
conditions of record, or other impediments which interfere with the intended use
by Catskill or any Catskill Subsidiary of any of the property owned, leased, or
occupied by them.
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3.18 Insurance.
Section 3.18 of the Catskill Disclosure Schedule contains a true,
correct and complete list of all insurance policies and bonds maintained by
Catskill and any Catskill Subsidiary, including the name of the insurer, the
policy number, the type of policy and any applicable deductibles, and all such
insurance policies and bonds (or other insurance policies and bonds that have,
from time to time, in respect of the nature of the risks insured against and
amount of coverage provided, been substantially similar in kind and amount to
that customarily carried by parties similarly situated who own properties and
engage in businesses substantially similar to that of Catskill and any Catskill
Subsidiary) are in full force and effect and have been in full force and effect
since their respective dates of inception. As of the date hereof, neither
Catskill nor any Catskill Subsidiary has received any notice of cancellation or
amendment of any such policy or bond or is in default under any such policy or
bond, no coverage thereunder is being disputed and all material claims
thereunder have been filed in a timely fashion. The existing insurance carried
by Catskill and Catskill Subsidiaries is and will continue to be, in respect of
the nature of the risks insured against and the amount of coverage provided,
sufficient for compliance by Catskill and the Catskill Subsidiaries with all
requirements of Law and agreements to which Catskill or any of the Catskill
Subsidiaries is subject or is party, and is, to Catskill's knowledge,
substantially similar in kind and amount to that customarily carried by parties
similarly situated who own properties and engage in businesses substantially
similar to that of Catskill and the Catskill Subsidiaries. True, correct and
complete copies of all such policies and bonds reflected at Section 3.18 of the
Catskill Disclosure Schedule, as in effect on the date hereof, have been
delivered to Troy.
3.19 Compliance with Applicable Laws.
Each of Catskill and any Catskill Subsidiary has complied in all
material respects with all Laws applicable to it or to the operation of its
business. Neither Catskill nor any Catskill Subsidiary has received any notice
of any material alleged or threatened claim, violation, or liability under any
such Laws that has not heretofore been cured and for which there is no remaining
liability.
3.20 Loans.
As of the date hereof:
(a) All loans owned by Catskill or any Catskill Subsidiary, or in which
Catskill or any Catskill Subsidiary has an interest, comply in all material
respects with all Laws, including, but not limited to, applicable usury
statutes, underwriting and recordkeeping requirements and the Truth in Lending
Act, the Equal Credit Opportunity Act, and the Real Estate Settlement Procedures
Act, and other applicable consumer protection statutes and the regulations
thereunder.
(b) All loans owned by Catskill or any Catskill Subsidiary, or in which
Catskill or any Catskill Subsidiary has an interest, have been made or acquired
by Catskill in accordance with
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board of director-approved loan policies and all of such loans are collectable,
except to the extent reserves have been made against such loans in Catskill's
consolidated financial statements at March 31, 2000 referred to in Section 3.6
hereof. Each of Catskill and each Catskill Subsidiary holds mortgages contained
in its loan portfolio for its own benefit to the extent of its interest shown
therein; such mortgages evidence liens having the priority indicated by the
terms of such mortgages, including the associated loan documents, subject, as of
the date of recordation or filing of applicable security instruments, only to
such exceptions as are discussed in attorneys' opinions regarding title or in
title insurance policies in the mortgage files relating to the loans secured by
real property or are not material as to the collectability of such loans; and
all loans owned by Catskill and each Catskill Subsidiary are with full recourse
to the borrowers (except as set forth at Section 3.20(b) of the Catskill
Disclosure Schedule), and each of Catskill and any Catskill Subsidiary has taken
no action which would result in a waiver or negation of any rights or remedies
available against the borrower or guarantor, if any, on any loan. All applicable
remedies against all borrowers and guarantors are enforceable except as may be
limited by bankruptcy, insolvency, moratorium or other similar laws affecting
creditors' rights and except as may be limited by the exercise of judicial
discretion in applying principles of equity. Except as set forth at Section
3.20(b) of the Catskill Disclosure Schedule, all loans purchased or originated
by Catskill or any Catskill Subsidiary and subsequently sold by Catskill or any
Catskill Subsidiary have been sold without recourse to Catskill or any Catskill
Subsidiary and without any liability under any yield maintenance or similar
obligation. True, correct and complete copies of loan delinquency reports as of
April 30, 2000 prepared by Catskill and each Catskill Subsidiary, which reports
include all loans delinquent or otherwise in default, have been furnished to
Troy. True, correct and complete copies of the currently effective lending
policies and practices of Catskill and each Catskill Subsidiary also have been
furnished to Troy.
(c) Except as set forth at Schedule 3.20(c) each outstanding loan participation
sold by Catskill or any Catskill Subsidiary was sold with the risk of
non-payment of all or any portion of that underlying loan to be shared by each
participant (including Catskill or any Catskill Subsidiary) proportionately to
the share of such loan represented by such participation without any recourse of
such other lender or participant to Catskill or any Catskill Subsidiary for
payment or repurchase of the amount of such loan represented by the
participation or liability under any yield maintenance or similar obligation.
Catskill and any Catskill Subsidiary have properly fulfilled in all material
respects its contractual responsibilities and duties in any loan in which it
acts as the lead lender or servicer and has complied in all material respects
with its duties as required under applicable regulatory requirements.
(d) Catskill and each Catskill Subsidiary have properly perfected or caused to
be properly perfected all security interests, liens, or other interests in any
collateral securing any loans made by it.
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(e) Section 3.20(e) of the Catskill Disclosure Schedule sets forth a
list of all loans or other extensions of credit to all directors, officers and
employees, or any other person covered by Regulation O of the FRB. 3.21
Affiliates.
Each director, executive officer and other person who is an "affiliate" (for
purposes of Rule 145 under the Securities Act of 1933, as amended (the
"Securities Act")) of Catskill is listed at Section 3.21 of the Catskill
Disclosure Schedule, and except as indicated thereon each such person has
delivered to Troy, concurrently with the execution of this Agreement, a
stockholder agreement in the form of Exhibit D hereto (the "Catskill Stockholder
Agreement"). The Catskill Stockholder Agreement has been duly and validly
executed and delivered by each person that is a party thereto and, assuming due
authorization, execution and delivery by Troy, constitutes the valid and binding
obligation of such person, enforceable against such person in accordance with
their terms, except as enforcement may be limited by general principles of
equity whether applied in a court of law or a court of equity and by bankruptcy,
insolvency and similar laws affecting creditors' rights and remedies generally.
3.22 Ownership of Troy Common Stock.
Except as set forth at Section 3.22 of the Catskill Disclosure Schedule, neither
Catskill nor any of its directors, executive officers or affiliates (as used
above in Section 3.21) (i) beneficially own, directly or indirectly, or (ii) is
a party to any agreement, arrangement or understanding for the purpose of
acquiring, holding, voting or disposing of, in each case, any shares of
outstanding capital stock of Troy (other than those agreements, arrangements or
understandings specifically contemplated hereby).
3.23 Fairness Opinion.
Catskill has received an opinion from Ryan Beck to the effect that, in its
opinion, the consideration to be paid to shareholders of Catskill hereunder is
fair to such shareholders from a financial point of view (the "Fairness
Opinion"), and Ryan Beck has consented to the inclusion of the Fairness Opinion
in the Proxy Materials.
3.24 Catskill Information.
The information relating to Catskill and its Subsidiaries provided by Catskill
herein and to be provided by Catskill to be contained in the Proxy Materials do
not and will not contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements herein or therein, in
light of the circumstances in which they are made, not misleading. The Proxy
Materials (except for the portions thereof relating solely to Troy or any of its
Subsidiaries, as to which Catskill makes no representation or warranty) will
comply in all material respects with the provisions of the Exchange Act and the
rules and regulations thereunder.
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2.25 Sale of Securities Portfolio. Catskill Bank has determined to sell the
portfolio of securities listed on Schedule 3.25 hereto (the "Securities
Portfolio Sale").
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF TROY
Troy, on behalf of itself and its wholly-owned subsidiary, Troy Bank hereby
makes the following representations and warranties to Catskill as set forth in
this Article IV, each of which is being relied upon by Catskill as a material
inducement to enter into and perform this Agreement.
4.1 Corporate Organization.
(a) Troy is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware. Troy has the corporate power and
authority to own or lease all of its properties and assets and to carry on its
business as it is now being conducted, and is duly licensed or qualified to do
business in each jurisdiction in which the nature of the business conducted by
it or the character or location of the properties and assets owned or leased by
it makes such licensing or qualification necessary. Troy is duly registered as a
bank holding company under the BHCA. The Certificate of Incorporation and
By-Laws of Troy, copies of which have previously been made available to
Catskill, are true, correct and complete copies of such documents as in effect
as of the date of this Agreement.
(b) Troy Bank is a New York-chartered savings bank duly organized and validly
existing and in good standing under the laws of the State of New York. Troy Bank
has the corporate power and authority to own or lease all of its properties and
assets and to carry on business as is now being conducted, and is duly licensed
or qualified to do business in each jurisdiction in which the nature of the
business conducted by it or the character or location of the properties and
assets owned or leased by it makes such licensing or qualification necessary.
The Charter and By-Laws of Troy Bank, copies of which have previously been made
available to Catskill, are true, correct and complete copies of such documents
as in effect as of the date of this Agreement.
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4.2 Authority; No Violation.
(a) Troy has full corporate power and authority to execute and deliver
this Agreement and the Option Agreement and to consummate the transactions
contemplated hereby and thereby. The execution and delivery of this Agreement
and the Option Agreement, subject to receipt of the required regulatory
approvals specified herein, and the consummation of the transactions
contemplated hereby have been duly and validly approved by the Board of
Directors of Troy. No other corporate proceedings on the part of Troy are
necessary to approve this Agreement or the Option Agreement or to consummate the
transactions contemplated hereby or thereby. This Agreement has been, and the
Option Agreement will be, duly and validly executed and delivered by Troy and
(assuming due authorization, execution and delivery by Catskill) will constitute
valid and binding obligations of Troy, enforceable against Troy in accordance
with their terms, except as enforcement may be limited by general principles of
equity whether applied in a court of law or a court of equity and by bankruptcy,
insolvency and similar law affecting creditors' rights and remedies generally.
(b) Troy Bank has full corporate power and authority to execute and
deliver the Bank Merger Agreement and, subject to receipt of the required
regulatory approvals specified herein, to consummate the transactions
contemplated thereby. The execution and delivery of the Bank Merger Agreement
and the consummation of the transactions contemplated thereby have been duly and
validly approved by the Board of Directors of Troy Bank and by Troy as the sole
shareholder of Troy Bank. All corporate proceedings on the part of Troy Bank
necessary to consummate the transactions contemplated thereby have been taken.
The Bank Merger Agreement, upon execution and delivery by Troy Bank, will be
duly and validly executed and delivered by Troy Bank and will (assuming due
authorization, execution and delivery by Catskill Bank) constitute a valid and
binding obligation of Troy Bank, enforceable against Troy Bank in accordance
with its terms, except as enforcement may be limited by general principles of
equity whether applied in a court of law or a court of equity and by bankruptcy,
insolvency and similar laws affecting creditors' rights and remedies generally.
(c) Neither the execution and delivery of this Agreement or the Option
Agreement by Troy or the Bank Merger Agreement by Troy Bank, nor the
consummation by Troy, of the transactions contemplated hereby or thereby, nor
compliance by Troy or Troy Bank with any of the terms or provisions hereof or
thereof, will (i) violate any provision of the Certificate of Incorporation or
Bylaws of Troy or the Charter or By-Laws of Troy Bank, as the case may be, or
(ii) assuming that the consents and approvals referred to in Section 4.3 are
duly obtained, (x) violate any Laws applicable to Troy, Troy Bank or any of
their respective properties or assets, or (y) violate, conflict with, result in
a breach of any provision of or the loss of any benefit under, constitute a
default (or an event which, with notice or lapse of time, or both, would
constitute a default) under, result in the termination of or a right of
termination or cancellation under, accelerate the performance
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required by, or result in the creation of any lien, pledge, security interest,
charge or other encumbrance upon any of the respective properties or assets of
Troy or Troy Bank under any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, deed of trust, license, lease, agreement or other
instrument or obligation to which Troy or Troy Bank is a party, or by which they
or any of their respective properties or assets may be bound or affected.
4.3 Regulatory Approvals.
(a) Except for (i) the filing of applications, notices or waiver
requests, as applicable, as to the Merger and the Bank Merger with the FRB under
the BHCA, the OTS under HOLA and the OTS regulations, the FDIC under the Bank
Merger Act, the NYSBD and approval of such applications and notices, (ii) the
filing of any required applications or notices with the NYSBD and the FDIC as to
the subsidiaries of Catskill Bank which become subsidiaries of Troy Bank and
approval of such applications and notices, (iii) the State Banking Approvals,
(iv) the filing of the Proxy Materials with the SEC, (v) the approval of this
Agreement by the requisite vote of the shareholders of Catskill, (vi) the filing
of the Certificate of Merger with the Secretary of State of Delaware pursuant to
the DGCL, (vii) such consents, approvals, orders, authorizations, registrations,
declarations and filings as may be required under applicable federal, foreign
and state securities (or related) laws and, if applicable, the HSR Act, and the
securities or antitrust laws of any foreign country, (viii) the filing of
applications or notices with the New York Insurance Department with respect to
the acquisition of CFSI and approval of such applications or notices and (ix)
the filings required by the Bank Merger Agreement, no consents or approvals of
or filings or registrations with any Governmental Entity or with any third party
are necessary in connection with (1) the execution and delivery by Troy of this
Agreement and the Option Agreement, (2) the consummation by Troy of the Merger
and the other transactions contemplated hereby, (3) the execution and delivery
by Troy Bank of the Bank Merger Agreement, and (4) the consummation by Troy Bank
of the transactions contemplated by the Bank Merger Agreement except for such
consents, approvals or filings the failure of which to obtain will not have a
material adverse effect on the ability of Catskill to consummate the
transactions contemplated thereby. (b) Troy hereby represents to Catskill that
it has no knowledge of any reason why approval or effectiveness of any of the
applications, notices or filings referred to in Section 4.3(a) cannot be
obtained or granted on a timely basis.
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4.4 Troy Information.
The information relating to Troy and its Subsidiaries to be provided by
Troy to be contained in the Proxy Materials will not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements therein, in light of the circumstances in which they are made,
not misleading. The Proxy Materials (except for the portions thereof relating
solely to Catskill or any of its Subsidiaries, as to which Troy makes no
representation or warranty) will comply in all material respects with the
provisions of the Securities Act, Exchange Act and the rules and regulations
thereunder. 3.5 Adequate Resources. As of the Closing Date, Troy will have the
funds available and will be able to meet its financial obligations under, and to
timely consummate the transactions contemplated by, this Agreement.
ARTICLE V
COVENANTS RELATING TO CONDUCT OF BUSINESS
5.1 Covenants of Catskill
During the period from the date of this Agreement and continuing until
the Effective Time, except as expressly contemplated or permitted by this
Agreement, the Bank Merger Agreement or the Option Agreement or with the prior
written consent of Troy, Catskill and each Catskill Subsidiary shall carry on
their respective businesses in the ordinary course consistent with past
practices and consistent with prudent banking practices. Catskill will use its
best efforts to (x) preserve its business organization and that of each Catskill
Subsidiary intact, (y) keep available to itself and Troy the present services of
the employees of Catskill and each Catskill Subsidiary and (z) preserve for
itself and Troy the goodwill of the customers of Catskill and each Catskill
Subsidiary and others with whom business relationships exist. Without limiting
the generality of the foregoing, and except as set forth in the Catskill
Disclosure Schedule or as otherwise contemplated by this Agreement or consented
to by Troy in writing, Catskill shall not, and shall not permit any Catskill
Subsidiary to:
(a) declare or pay any dividends on, or make other distributions in
respect of, any of its capital stock (except for the payment of regular
quarterly cash dividends by Catskill not to exceed $.1325 per share on the
Catskill Common Stock with declaration, record and payment dates corresponding
to the quarterly dividends paid by Catskill during its fiscal year ended
September 30, 1999 and except that any Catskill Subsidiary may declare and pay
dividends and distributions to Catskill); provided, however, that under no
circumstances shall Catskill declare, set aside or pay any
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dividends if it would result in the holders of Catskill Common Stock receiving
more than four cash dividend payments in fiscal 2000;
(b) (i) split, combine or reclassify any shares of its capital stock or
issue, authorize or propose the issuance of any other securities in respect of,
in lieu of or in substitution for shares of its capital stock except upon the
exercise or fulfillment of rights or options issued or existing pursuant to the
Catskill Stock Plan in accordance with their present terms, all to the extent
outstanding and in existence on the date of this Agreement, and except pursuant
to the Option Agreement, or (ii) repurchase, redeem or otherwise acquire (except
for the acquisition of Trust Account Shares and DPC Shares, as such terms are
defined in Section 1.4(c) hereof), any shares of the capital stock of Catskill
or any Catskill Subsidiary, or any securities convertible into or exercisable
for any shares of the capital stock of Catskill or any Catskill Subsidiary;
(c) issue, deliver or sell, or authorize or propose the issuance,
delivery or sale of, any shares of its capital stock or any securities
convertible into or exercisable for, or any rights, warrants or options to
acquire, any such shares, or enter into any agreement with respect to any of the
foregoing, other than (i) the issuance of Catskill Common Stock pursuant to
stock options or similar rights to acquire Catskill Common Stock granted
pursuant to the Catskill Stock Plan and outstanding prior to the date of this
Agreement, in each case in accordance with their present terms and (ii) pursuant
to the Option Agreement;
(d) amend its Certificate of Incorporation, By-Laws or other similar
governing documents;
(e) directly or indirectly, and will instruct its officers, directors,
employees, accountants, consultants, legal counsel, investment bankers,
advisors, agents and other representatives, (collectively, "Representatives")
not to, directly or indirectly, initiate, solicit or encourage (including by way
of furnishing information or assistance), or take any other action to
facilitate, any inquiries or the making of any proposal that constitutes, or
reasonably may be expected to lead to, any Competing Proposal (as defined in
Section 9.13 hereof), or enter into or maintain discussions or negotiate with
any person in furtherance of or relating to such inquiries or to obtain a
Competing Proposal, or agree to or endorse any Competing Proposal, or authorize
or permit any Representative of Catskill or any of its subsidiaries to take any
such action, and Catskill shall use its reasonable best efforts to cause the
Representatives of Catskill and the Catskill Subsidiaries not to take any such
action, and Catskill shall promptly notify Troy if any such inquiries or
proposals are made regarding a Competing Proposal, and Catskill shall keep Troy
informed, on a current basis, of the status and terms of any such proposals;
provided, however, that prior to such time as the stockholders of Catskill shall
have adopted and approved this Agreement in accordance with Delaware Law,
nothing contained in this Section 5.1(e) shall prohibit the Board of Directors
of Catskill from (i), in connection with a Superior Competing Transaction (as
defined in Section 9.13 hereof), furnishing information to, or entering into
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discussions or negotiations with, any person that makes an unsolicited bona fide
proposal to acquire Catskill pursuant to a merger, consolidation, share
exchange, business combination or other similar transaction, if, and only to the
extent that, (A) the Board of Directors of Catskill, after consultation with and
based upon the advice of independent legal counsel, determines in good faith
that such action is required for the Board of Directors of Catskill to comply
with its fiduciary duties to stockholders imposed by Delaware Law, (B) prior to
furnishing such information to, or entering into discussions or negotiations
with, such person, Catskill provides written notice to Troy to the effect that
it is furnishing information to, or entering into discussions or negotiations
with, such person, (C) prior to furnishing such information to such person,
Catskill receives from such person an executed confidentiality agreement with
terms no less favorable to Catskill than those contained in the Confidentiality
Agreement by and between Troy and Catskill, dated as of March 27, 2000 (the
Confidentiality Agreement"), and (D) Catskill keeps Troy informed, on a current
basis, of the status and details of any such discussions or negotiations; or
(ii) complying with Rule 14e-2 promulgated under the Exchange Act;
(f) make capital expenditures aggregating in excess of $20,000;
(g) enter into any new line of business;
(h) acquire or agree to acquire, by merging or consolidating with,
or by purchasing an equity interest in or the assets of, or by any other manner,
any business or any corporation, partnership, association or other business
organization or division thereof or otherwise acquire any assets, other than in
connection with foreclosures, settlements in lieu of foreclosure or troubled
loan or debt restructurings, or in the ordinary course of business consistent
with prudent banking practices;
(i) take any action that is intended or may reasonably be expected
to result in any of its representations and warranties set forth in this
Agreement being or becoming untrue or in any of the conditions to the Merger set
forth in Article VII not being satisfied, or in a violation of any provision of
this Agreement or the Bank Merger Agreement, except, in every case, as may be
required by applicable law;
(j) change its methods of accounting in effect at September 30, 1999
except as required by changes in GAAP or regulatory accounting principles;
(k) (i) except as required by applicable law or this Agreement or to
maintain qualification pursuant to the Code, adopt, amend, renew or terminate
any Plan or any agreement, arrangement, plan or policy between Catskill or any
Catskill Subsidiary and one or more of its current or former directors or
officers, (ii) increase in any manner the compensation of any director,
executive officer or other employee who is a party to a contract relating to
employment or severance referenced in Section 3.12 of this Agreement, or pay any
benefit not required by any plan or agreement as in
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effect as of the date hereof (including, without limitation, the granting of
stock options, stock appreciation rights, restricted stock, restricted stock
units or performance units or shares), (iii) enter into, modify or renew any
contract, agreement, commitment or arrangement providing for the payment to any
director, executive officer or employee who is a party to a contract relating to
employment or severance referenced in Section 3.12 of this Agreement of
compensation or benefits, (iv) enter into, modify or renew any contract,
agreement, commitment or arrangement providing for the payment to any employee
who is not a director or executive officer or who is not a party to a contract
relating to employment or severance referenced in Section 3.12 of this Agreement
of compensation or benefits, other than normal annual cash increases in pay,
consistent with past practice and not exceeding 4% of such employee's base
salary or wage, (v) hire any new employee at an annual compensation in excess of
$24,000, (v) pay expenses of any employees or directors for attending
conventions or similar meetings which conventions or meetings are held after the
date hereof, (vi) promote to a rank of vice president or more senior any
employee, or (vii) pay any retention or other bonuses to any employees;
(l) except for short-term borrowings with a maturity of six months
or less in the ordinary course of business consistent with past practices, incur
any indebtedness for borrowed money (other than deposit liabilities), assume,
guarantee, endorse or otherwise as an accommodation become responsible for the
obligations of any other individual, corporation or other entity, except for
accepting, negotiating and paying checks and payment orders in the ordinary
course of its banking business;
(m) sell, purchase, enter into a lease, relocate, open or close any
banking or other office, or file an application pertaining to such action with
any Governmental Entity;
(n) make any equity investment or commitment to make such an
investment in real estate or in any real estate development project, other than
in connection with foreclosure, settlements in lieu of foreclosure, or troubled
loan or debt restructuring, in the ordinary course of business consistent with
past banking practices;
(o) make any new loans to, modify the terms of any existing loan to,
or engage in any other transactions (other than routine banking transactions)
with, any Affiliated Person of Catskill or any Catskill Subsidiary; (p) incur
deposit liabilities, other than in the ordinary course of business consistent
with past practices, including deposit pricing policies, and which would not
change the risk profile of Catskill Bank based on its existing deposit and
lending policies;
(q) purchase any loans or sell, purchase or lease any real property,
except for the sale of real estate that is the subject of a casualty loss or
condemnation or the sale of OREO on a basis consistent with past practices;
(r) originate (i) any loans except in accordance with existing
Catskill Bank lending policies, (ii) residential mortgage loans in excess of
$150,000, (iii) 30 year residential
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mortgage loans whose interest rate, terms, appraisal, and underwriting do not
make them immediately available for sale in the secondary market, (iv) unsecured
consumer loans in excess of $20,000, (v) commercial business loans in excess of
$50,000 as to any loan or $100,000 in the aggregate as to related loans or loans
to related persons, (vi) commercial real estate first mortgage loans in excess
of $150,000 as to any loans or $300,000 in the aggregate as to related loans or
loans to related borrowers, (vii) modifications and/or extensions of any
commercial business or commercial real estate loans in the amounts set forth in
(v) and (vi) above, or (viii) loans, the outstanding principal balance of which,
in the aggregate, exceed the lesser of (1) the cash flow received from
prepayment and repayment, sale or interest and penalties paid on any other loans
or (2) $1 million per month.
(s) make any investments other than in [Federal Funds and US
Treasuries] that have a maturity date that does not exceed three months;
provided, however, the maturity date shall not extend beyond January 31, 2001
or, with respect to investments made or committed to after the parties have
agreed on the Closing Date (as defined in Section 9.1 hereof), beyond such
Closing Date.
(t) sell or purchase any mortgage loan servicing rights; or
(u) agree or commit to do any of the actions set forth in (a) - (t)
above. The consent of Troy to any action by Catskill or any Catskill Subsidiary
that is not permitted by any of the preceding paragraphs shall be evidenced by a
writing signed by the President or any Senior Vice President of Troy.
5.2 Merger Covenants.
Notwithstanding that Catskill believes that it has established all
reserves and taken all provisions for possible loan losses required by GAAP and
applicable laws, rules and regulations, Catskill recognizes that Troy may have
adopted different loan, accrual and reserve policies (including loan
classifications and levels of reserves for possible loan losses). In that
regard, and in general, from and after the date of this Agreement to the
Effective Time, Catskill and Troy shall consult and cooperate with each other in
order to formulate the plan of integration for the Merger, including, among
other things, with respect to conforming, based upon such consultation,
Catskill's loan, accrual and reserve policies to those policies of Troy to the
extent appropriate.
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5.3 Compliance with Antitrust Laws.
Each of Troy and Catskill shall use its reasonable best efforts to
resolve objections, if any, which may be asserted with respect to the Merger
under antitrust laws, including, without limitation, the HSR Act. In the event a
suit is threatened or instituted challenging the Merger as violative of
antitrust laws, each of Troy and Catskill shall use its reasonable best efforts
to avoid the filing of, or resist or resolve such suit. Troy and Catskill shall
use their reasonable best efforts to take such action as may be required: (a) by
the Antitrust Division of the Department of Justice or the Federal Trade
Commission in order to resolve such objections as either of them may have to the
Merger under antitrust laws, or (b) by any federal or state court of the United
States, in any suit brought by a private party or governmental entity
challenging the Merger as violative of antitrust laws, in order to avoid the
entry of, or to effect the dissolution of, any injunction, temporary restraining
order, or other order which has the effect of preventing the consummation of the
Merger. Reasonable best efforts shall not include, among other things and to the
extent Troy so desires, the willingness of Troy to accept an order agreeing to
the divestiture, or the holding separate, of any assets of Troy or Catskill. 4.4
Securities Portfolio Sale. Catskill shall complete the Securities Portfolio Sale
as soon as practical after the date hereof, but in no event later than 30 days
after the date of this Agreement.
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ARTICLE VI
ADDITIONAL AGREEMENTS
6.1 Regulatory Matters.
(a) Within 30 calendar days from the date hereof, Catskill shall
prepare and file, subject to the review and consent of Troy, with the SEC, Proxy
Materials for soliciting the approval of this Agreement and the Merger by the
shareholders of Catskill. Catskill will use its reasonable best efforts to have
the Proxy Materials approved for use by the SEC as soon as possible after the
filing. The parties shall cooperate in responding to and considering any
questions or comments from the SEC staff regarding the information contained in
the Proxy Materials. If at any time after the Proxy Materials are filed with the
SEC, and prior to the Closing Date, any event relating to Catskill is discovered
by Catskill which should be set forth in an amendment of, or a supplement to,
the Proxy Materials, Catskill shall promptly cause an appropriate amendment to
the Proxy Materials to be filed with the SEC. Upon the approval of such
amendment, Catskill (if prior to the meeting of shareholders pursuant to Section
6.3 hereof) will take all necessary action as promptly as practicable to permit
an appropriate amendment or supplement to be transmitted to its shareholders
entitled to vote at such meeting. If at any time after the Proxy Materials are
filed with the SEC, and prior to the Closing Date, any event relating to Troy is
discovered by Troy which should be set forth in an amendment of, or a supplement
to, the Proxy Materials, Troy shall promptly inform Catskill, and Catskill shall
promptly cause an appropriate amendment to the Proxy Materials to be filed with
the SEC. Upon the approval of such amendment, each of Troy and Catskill (if
prior to the meeting of shareholders pursuant to Section 6.3 hereof) will take
all necessary action as promptly as practicable to permit an appropriate
amendment or supplement to be transmitted to its shareholders entitled to vote
at such meeting.
(b) Troy will prepare and file all necessary documentation, to effect
all applications, notices, petitions and filings, and to obtain as promptly as
practicable all permits, consents, approvals and authorizations of all third
parties and Governmental Entities which are necessary or advisable to consummate
the transactions contemplated by this Agreement (including without limitation
the Merger and the Bank Merger). Catskill shall cooperate with Troy to effect
the foregoing. Catskill and Troy shall have the right to review in advance, and
to the extent practicable each will consult the other on, in each case subject
to applicable laws relating to the exchange of information, all the information
relating to Catskill or Troy, as the case may be, which appears in any filing
made with, or written materials submitted to, any third party or any
Governmental Entity in connection with the transactions contemplated by this
Agreement; provided, however, that nothing contained herein shall be deemed to
provide either party with a right to review any information
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provided to any Governmental Entity on a confidential basis in connection with
the transactions contemplated hereby. In exercising the foregoing right, each of
the parties hereto shall act reasonably and as promptly as practicable. The
parties hereto agree that they will consult with each other with respect to the
obtaining of all permits, consents, approvals and authorizations of all third
parties and Governmental Entities necessary or advisable to consummate the
transactions contemplated by this Agreement and each party will keep the other
apprised of the status of matters relating to contemplation of the transactions
contemplated herein.
(c) Troy shall, upon request, furnish Catskill with all information
concerning Catskill and its directors, officers and shareholders and such other
matters as may be reasonably necessary in connection with the Proxy Materials or
any other statement, filing, notice or application made by or on behalf of
Catskill to any Governmental Entity in connection with the Merger or the other
transactions contemplated by this Agreement.
(d) Troy and Catskill shall promptly advise each other upon receiving
any communication from any Governmental Entity whose consent or approval is
required for consummation of the transactions contemplated by this Agreement
which causes such party to believe that there is a reasonable likelihood that
any Requisite Regulatory Approval (defined in Section 7.1(c) hereof) will not be
obtained or that the receipt of any such approval will be materially delayed.
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6.2 Access to Information.
(a) Upon reasonable notice and subject to applicable Laws relating to
the exchange of information, Catskill shall accord to the officers, employees,
accountants, counsel and other representatives of Troy, access, during normal
business hours during the period prior to the Effective Time, to all its, CFSI's
and Catskill Bank's properties, books, contracts, commitments and records and,
during such period, Catskill shall make available to Troy (i) a copy of each
report, schedule, registration statement and other document filed or received by
it (including CFSI and Catskill Bank) during such period pursuant to the
requirements of federal securities laws or federal or state banking laws and
(ii) all other information concerning its (including CFSI and Catskill Bank)
business, properties and personnel as Troy may reasonably request. Troy shall
receive notice of all meetings of the Catskill, CFSI and Catskill Bank Board of
Directors and any committees thereof, and of any management committees (in all
cases, at least as timely as all Catskill, CFSI and Catskill Bank, as the case
may be, representatives to such meetings are required to be provided notice). A
representative of Troy shall be permitted to attend all meetings of the Board of
Directors (except for the portion of such meetings which relate to the Merger or
a Superior Competing Transaction ("Confidential Matters") of Catskill, CFSI or
Catskill Bank, as the case may be) and such meetings of committees of the Board
of Directors and management of Catskill, CFSI and Catskill Bank which Troy
desires. Troy will hold all such information in confidence to the extent
required by, and in accordance with, the provisions of the Confidentiality
Agreement.
(b) No investigation by either of the parties or their respective
representatives shall affect the representations and warranties of the other set
forth herein.
(c) Catskill shall provide Troy with true, correct and complete copies
of all financial and other information provided to directors of Catskill, CFSI
and Catskill Bank in connection with meetings of their Boards of Directors or
committees thereof.
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6.3 Shareholder Meeting.
Catskill shall take all steps necessary to duly call, give notice of,
convene and hold a meeting of its shareholders within 35 days after the Proxy
Materials are approved for use for the purpose of voting upon the approval of
this Agreement and the Merger (the "Special Meeting"). Management and the Board
of Directors of Catskill shall recommend to Catskill's shareholders approval of
this Agreement, including the Merger, and the transactions contemplated hereby,
together with any matters incident thereto, and shall oppose any third party
proposal or other action that is inconsistent with this Agreement or the
consummation of the transactions contemplated hereby; provided, however, that
Catskill shall not be obligated to recommend or oppose, as the case may be, if
the Board of Directors of Catskill determines in accordance with the terms of
this Agreement to enter into a Superior Competing Transaction; provided further,
however, that notwithstanding anything to the contrary in the foregoing,
Catskill shall hold its Special Meeting in accordance with the time period
specified in the first sentence of this Section 6.3.
6.4 Legal Conditions to Merger.
Each of Troy and Catskill shall use their reasonable best efforts (a)
to take, or cause to be taken, all actions necessary, proper or advisable to
comply promptly with all legal requirements which may be imposed on such party
with respect to the Merger and, subject to the conditions set forth in Article
VII hereof, to consummate the transactions contemplated by this Agreement and
(b) to obtain (and to cooperate with the other party to obtain) any consent,
authorization, order or approval of, or any exemption by, any Governmental
Entity and any other third party which is required to be obtained by Catskill or
Troy in connection with the Merger and the other transactions contemplated by
this Agreement.
6.5 Employees.
(a) To the extent permissible under the applicable provisions of the
Code and ERISA, for purposes of crediting periods of service for eligibility to
participate, entitlement to benefits and vesting, but not for pension benefit
accrual purposes, under employee pension benefit plans (within the meaning of
ERISA Section 3(2)) and employee welfare plans (within the meaning of ERISA
Section 3(1) maintained by Troy or Troy Bank, as applicable (other than Troy's
Employee Stock Ownership Plan), individuals who are employees of Catskill or any
Catskill Subsidiary at the Effective Time and who become eligible to participate
in such plans will be credited with periods of service with Catskill or any
Catskill Subsidiary (or with any predecessor to Catskill or any Catskill
Subsidiary, to the extent such service is credited for such purposes under the
corresponding Plan) before the Effective Time as if such service had been with
Troy or Troy Bank, as applicable.
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(b) If required by Troy in writing delivered to Catskill not less than
five business days before the Closing Date, Catskill and each Catskill
Subsidiary, as applicable, shall, on or before the day immediately preceding the
Closing Date, terminate the Catskill Bank 401(k) Plan and any other Plan that
includes a qualified cash or deferred arrangement within the meaning of Code
Section 401(k) (collectively, the "401(k) Plans") and no further contributions
shall be made to any 401(k) Plan after such termination. Catskill shall provide
to Troy (i) certified copies of resolutions adopted by the Board of Directors of
Catskill or such Catskill Subsidiary, as applicable, authorizing such
termination and (ii) an executed amendment to each 401(k) Plan in form and
substance reasonably satisfactory to Troy to conform the plan document for such
Plan with all applicable requirements of the Code and regulations thereunder
relating to the tax-qualified status of such Plan. Troy and Troy Bank will not
be obligated to make any matching or other employer contributions to any 401(k)
Plan after the Merger.
(c) Promptly following the Effective Time, as a result of the
transactions contemplated hereby, the Catskill Employee Stock Ownership Plan
(the "Catskill ESOP") will be terminated and the obligations of Troy or any of
its Subsidiaries shall be limited to those actions which are necessary to
terminate the ESOP. Troy or its Subsidiaries, as applicable, will take
commercially reasonable actions consistent with the Catskill ESOP (i) to cause
the trustee of the Catskill ESOP to repay the outstanding balance of its stock
acquisition loan with the proceeds received by the Catskill ESOP hereunder with
respect to unallocated shares of Catskill Common Stock and (ii) to terminate the
Catskill ESOP, subject to receipt of a favorable determination letter from the
IRS concerning the qualified status of the Catskill ESOP and the adoption of any
amendments to the Catskill ESOP that may be necessary in order to obtain such
determination letter. No employee of Catskill or any Catskill Subsidiary shall
be eligible to become a participant in the Catskill ESOP after the Effective
Time.
(d) After the Effective Time, except to the extent that Troy or its
Subsidiaries continues Plans in effect, employees of Catskill or its
Subsidiaries who become employed by Troy or any of its Subsidiaries will be
eligible for employee benefits that Troy or such Subsidiary, as the case may be,
provides to its employees generally and, except as otherwise required by this
Agreement, on substantially the same basis as is applicable to such employees,
provided that nothing in this Agreement shall require any duplication of
benefits. Troy will or will cause Troy Bank to (i) give credit to employees of
Catskill and its Subsidiaries, with respect to the satisfaction of the
limitations as to pre-existing condition exclusions, evidence of insurability
requirements and waiting periods for participation and coverage that are
applicable under the employee welfare benefit plans (within the meaning of
Section 3(1) of ERISA) of Troy or Troy Bank, equal to the credit that any such
employee had received as of the Effective Time towards the satisfaction of any
such limitations and waiting periods under the comparable employee welfare
benefit plans of
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Catskill or its Subsidiaries and to waive preexisting condition limitations to
the same extent waived under the corresponding Plan.
(e) After the Subsidiary Merger and the Bank Merger, Troy and each
relevant Troy Subsidiary will honor, without modification, and perform the
obligations of Catskill and Catskill Bank under, the contracts, plans and
arrangements listed in Section 6.5(e) of the Catskill Disclosure Schedule.
(f) After the Effective Time, Troy and each relevant Troy Subsidiary
will provide a severance benefit to each full-time employee of Catskill or any
Catskill Subsidiary immediately before the Effective Time (other than any such
employee who is a party to any written agreement relating to employment or
severance described in Section 3.12(a) hereof) and whose employment is
terminated involuntarily, other than for "Cause" (as defined below), by Troy or
such Troy Subsidiary as of the Effective Time or within three months thereafter.
The severance benefit shall consist of continuation of such employee's base
salary or wages for a period equal to (i) two weeks multiplied by (ii) the
number of full years of continuous service completed by such employee with
Catskill or any Catskill Subsidiary, up to a maximum of 26 weeks, as if such
employee had continued to be employed on a full-time basis by Troy or such Troy
Subsidiary during such period, subject to applicable tax withholding. For
purposes of this Section 6.5(f), "Cause" shall mean the employee's personal
dishonesty, willful misconduct, breach of fiduciary duty involving personal
profit, failure to perform stated duties, violation of any law, rule, or
regulation (other than traffic violations or similar offenses) or final
cease-and- desist order.
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6.6 Indemnification.
(a) In the event of any threatened or actual claim, action, suit,
proceeding or investigation, whether civil, criminal or administrative, in which
any person who is now, or has been at any time prior to the date of this
Agreement, or who becomes prior to the Effective Time, a director or officer or
employee of Catskill (the "Indemnified Parties") is, or is threatened to be,
made a party based in whole or in part on, or arising in whole or in part out
of, or pertaining to (i) the fact that he is or was a director, officer or
employee of Catskill or any of their respective predecessors or (ii) this
Agreement or any of the transactions contemplated hereby, whether in any case
asserted or arising before or after the Effective Time, the parties hereto agree
to cooperate and defend against and respond thereto to the extent permitted by
applicable law and the Certificate of Incorporation and Bylaws of Catskill as in
effect on the date hereof. It is understood and agreed that after the Effective
Time, Troy shall indemnify and hold harmless, as and to the fullest extent
permitted by applicable law and the Certificate of Incorporation and Bylaws of
Troy as in effect on the date hereof (subject to change as required by law),
each such Indemnified Party against any losses, claims, damages, liabilities,
costs, expenses (including reasonable attorney's fees and expenses in advance of
the final disposition of any claim, suit, proceeding or investigation to each
Indemnified Party to the fullest extent permitted by law upon receipt of any
undertaking required by applicable law), judgments, fines and amounts paid in
settlement in connection with any such threatened or actual claim, action, suit,
proceeding or investigation, and in the event of any such threatened or actual
claim, action, suit, proceeding or investigation (whether asserted or arising
before or after the Effective Time), the Indemnified Parties may retain counsel
reasonably satisfactory to Troy; provided, however, that (1) Troy shall have the
right to assume the defense thereof and upon such assumption Troy shall not be
liable to any Indemnified Party for any legal expenses of other counsel or any
other expenses subsequently incurred by any Indemnified Party in connection with
the defense thereof, except that if Troy elects not to assume such defense or
counsel for the Indemnified Parties reasonably advises the Indemnified Parties
that there are issues which raise conflicts of interest between Troy and the
Indemnified Parties, the Indemnified Parties may retain counsel reasonably
satisfactory to Troy, and Troy shall pay the reasonable fees and expenses of
such counsel for the Indemnified Parties, (2) Troy shall be obligated pursuant
to this paragraph to pay for only one firm of counsel for each Indemnified
Party, (3) Troy shall not be liable for any settlement effected without its
prior written consent (which consent shall not be unreasonably withheld or
delayed), and (4) Troy shall not be obligated pursuant to this paragraph to the
extent that a final judgment determines that any such losses, claims, damages,
liabilities, costs, expenses, judgments, fines and amounts paid in settlement
are as a result of the gross negligence, willful misconduct or malfeasance of
the Indemnified Party. Troy shall have no obligation to advance expenses
incurred in connection with a threatened or pending action, suit or preceding in
advance of final disposition of such action, suit or proceeding, unless (i) Troy
would be permitted to advance such expenses pursuant to the DGCL and Troy's
Certificate of Incorporation or
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Bylaws, and (ii) Troy receives an undertaking by the Indemnified Party to repay
such amount if it is determined that such party is not entitled to be
indemnified by Troy pursuant to the DGCL and Troy's Certificate of Incorporation
or Bylaws. Any Indemnified Party wishing to claim indemnification under this
Section 6.6, upon learning of any such claim, action, suit, proceeding or
investigation, shall notify Troy thereof; provided, however, that the failure to
so notify shall not affect the obligations of Troy under this Section 6.6 except
to the extent such failure to notify materially prejudices Troy. Troy's
obligations under this Section 6.6 continue in full force and effect for a
period of six years from the Effective Time; provided, however, that all rights
to indemnification in respect of any claim asserted or made within such period
shall continue until the final disposition of such claim. Troy shall require any
successor to expressly assume its obligations under this Section 6.6(a).
(b) Troy shall purchase for the benefit of the persons serving as
executive officers and directors of Catskill immediately prior to the Effective
Time and who are, as of the date of this Agreement, individually covered by a
directors' and officers' liability insurance policy, a similar directors' and
officers' liability insurance coverage for at least two years after the
Effective Time, under either Catskill's policy in existence on the date hereof,
or under a policy of similar coverage and amounts containing terms and
conditions which are generally not less advantageous than Troy's current policy,
and in either case, with respect to acts or omissions occurring prior to the
Effective Time which were committed by such executive officers and directors in
their capacity as such ("Tail Insurance"); provided however, that in no event
shall Troy be required to expend pursuant to this Section 6.6(b) more than the
amount equal to 150% of the current annual amount expended by Catskill to
maintain or procure insurance coverage pursuant hereto. In connection with the
foregoing, Catskill agrees to provide such insurer or substitute insurer with
such representations as such insurer may reasonably request with respect to the
reporting of any prior claims.
6.7 Subsequent Interim and Annual Financial Statements.
As soon as reasonably available, but in no event more than 45 days
after the end of each fiscal quarter (other than the fourth fiscal quarter, as
to which the time period shall be 90 days), Catskill will deliver to Troy its
Quarterly Reports on Form 10-Q and Annual Reports on Form 10-K, as filed with
the SEC under the Exchange Act. Catskill shall also deliver to Troy any Current
Reports on Form 8- K promptly after filing such reports with the SEC.
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6.8 Additional Agreements.
In case at any time after the Effective Time any further action is
necessary or desirable to carry out the purposes of this Agreement, or to vest
the Surviving Corporation or the Surviving Bank with full title to all
properties, assets, rights, approvals, immunities and franchises of any of the
parties to the Merger, or the constituent banks to the Bank Merger, as the case
may be, the proper officers and directors of each party to this Agreement and
Troy's and Catskill's Subsidiaries shall take all such necessary action as may
be reasonably requested by Troy.
6.9 Advice of Changes.
Troy and Catskill shall promptly advise the other party of any change
or event that, individually or in the aggregate, has or would be reasonably
likely to have a Material Adverse Effect on it or to cause or constitute a
material breach of any of its representations, warranties or covenants contained
herein. From time to time prior to the Effective Time, each party will promptly
supplement or amend its disclosure schedule delivered in connection with the
execution of this Agreement to reflect any matter which, if existing, occurring
or known at the date of this Agreement, would have been required to be set forth
or described in such disclosure schedule or which is necessary to correct any
information in such disclosure schedule which has been rendered inaccurate
thereby. No supplement or amendment to such disclosure schedule shall have any
effect for the purpose of determining satisfaction of the conditions set forth
in Sections 7.2(a) or 7.3(a) hereof, as the case may be, or the compliance by
Catskill with the covenants set forth in Section 5.1 hereof.
6.10 Current Information.
During the period from the date of this Agreement to the Effective
Time, Catskill will cause one or more of its designated representatives to
confer on a regular and frequent basis (not less than monthly) with
representatives of Troy and to report the general status of the ongoing
operations of Catskill. Catskill will promptly notify Troy of any material
change in the normal course of business or in the operation of the properties of
Catskill and of any governmental complaints, investigations or hearings (or
communications indicating that the same may be contemplated), or the institution
or the threat of litigation involving Catskill, and will keep Troy fully
informed of such events.
6.11 Execution and Authorization of Bank Merger Agreement.
Prior to the Effective Time, (a) Troy and Catskill each shall execute
and deliver the Certificate of Merger substantially in the form at Exhibit C,
and (b) Troy and Catskill each shall cause Troy Bank and Catskill Bank,
respectively, to execute and deliver the Bank Merger Agreement, in substantially
the form at Exhibit A.
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6.12 Transaction Expenses of Catskill.
(a) For Troy's planning purposes, Catskill shall, within 15 days from
the date hereof, provide Troy with its estimated budget of transaction-related
expenses reasonably anticipated to be payable by Catskill in connection with
this transaction, including the fees and expenses of counsel, accountants,
investment bankers and other professionals. Catskill shall promptly notify Troy
if or when it determines that it will expect to exceed its budget.
(b) Promptly after the execution of this Agreement, Catskill shall ask
all of its attorneys and other professionals to render current and correct
invoices for all unbilled time and disbursements. Catskill shall accrue and/or
pay all of such amounts which are actually due and owing as soon as possible.
(c) Catskill shall advise Troy monthly of all out-of-pocket expenses
which Catskill has incurred in connection with this transaction.
(d) Catskill, in reasonable consultation with Troy, shall make all
arrangements with respect to the printing and mailing of the Proxy Materials.
Catskill shall, if Troy reasonably deems necessary, also engage a proxy
solicitation firm to assist in the solicitation of proxies for its Special
Meeting. Catskill agrees to cooperate as to such matters.
6.13 Further Actions of Catskill.
Upon the written request of Troy, Catskill shall, within 5 business
days of the date of such written request, demand payment of, or cause Catskill
Bank to demand payment of, any and all loans (to the extent identified by Troy)
of Catskill or Catskill Bank, as the case may be, which loans are (or should
have been) set forth at Sections 3.5(a) or 3.20(e) of the Catskill Disclosure
Schedule, and which loans are secured or collateralized in any way by Catskill
Common Stock.
ARTICLE VII
CONDITIONS PRECEDENT
7.1 Conditions to Each Party's Obligation To Effect the Merger.
The respective obligation of each party to effect the Merger shall be
subject to the satisfaction at or prior to the Effective Time of the following
conditions:
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(a) Shareholder Approvals.
This Agreement, including the Certificate of Merger, and the
Merger shall have been approved and adopted by the affirmative vote of the
holders of at least a majority of the outstanding shares of Catskill Common
Stock entitled to vote thereon.
(b) Other Approvals.
All regulatory approvals required to consummate the
transactions contemplated hereby shall have been obtained and shall remain in
full force and effect and all statutory waiting periods in respect thereof shall
have expired (all such approvals and the expiration of all such waiting periods
being referred to herein as the "Requisite Regulatory Approvals"). No Requisite
Regulatory Approval shall contain a non-customary condition that Troy reasonably
determines to be burdensome or otherwise alter the benefits for which it
bargained in this Agreement.
(c) Proxy Materials.
The Proxy Materials shall have approved for use under the
Exchange Act, and no stop order suspending the approval of the Proxy Materials
shall have been issued and no proceedings for that purpose shall have been
initiated or threatened by the SEC.
(d) No Injunctions or Restraints; Illegality.
No order, injunction or decree issued by any court or agency
of competent jurisdiction or other legal restraint or prohibition preventing the
consummation of the Merger or any of the other transactions (an "Injunction")
contemplated by this Agreement or the Certificate of Merger shall be in effect.
No statute, rule, regulation, order, injunction or decree shall have been
enacted, entered, promulgated or enforced by any Governmental Entity which
prohibits, restricts or makes illegal consummation of the Merger.
7.2 Conditions to Obligations of Troy.
The obligation of Troy to effect the Merger is also subject to the
satisfaction or waiver by Troy at or prior to the Effective Time of the
following conditions:
(a) Representations and Warranties.
The representations and warranties of Catskill set forth in this
Agreement shall be true and correct in all material respects as of the date of
this Agreement and (except to the extent such representations and warranties
speak as of an earlier date) as of the Closing Date as though made on and as of
the Closing Date. Troy shall have received a certificate signed on behalf of
Catskill by each of the President and Chief Executive Officer and the Chief
Financial Officer of Catskill to the foregoing effect.
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(b) Performance of Covenants and Agreements of Catskill
Catskill shall have performed in all material respects all
covenants and agreements required to be performed by it under this Agreement at
or prior to the Closing Date. Troy shall have received a certificate signed on
behalf of Catskill by each of the President and Chief Executive Officer and the
Chief Financial Officer of Catskill to such effect.
(c) Consents under Agreements.
(i) The consent, approval or waiver of each person (other than
the Governmental Entities referred to in Section 7.1(b) hereof) whose consent or
approval shall be required in order to permit the succession by the Surviving
Corporation pursuant to the Merger to any obligation, right or interest of
Catskill under any loan or credit agreement, note, mortgage, indenture, lease,
license or other agreement or instrument shall have been obtained except for
those, the failure of which to obtain, will not result in a Material Adverse
Effect on Catskill or the Surviving Corporation.
(ii) The consent, approval or waiver of each person (other
than the Governmental Entities referred to in Section 7.1(b) hereof) whose
consent or approval shall be required in order to permit the succession by the
Surviving Bank pursuant to the Bank Merger to any obligation, right or interest
of Catskill Bank under any loan or credit agreement, note, mortgage, indenture,
lease, license or other agreement or instrument shall have been obtained except
for those, the failure of which to obtain, will not result in a Material Adverse
Effect on Catskill Bank or the Surviving Bank.
(d) No Pending Governmental Actions.
No proceeding initiated by any Governmental Entity seeking an
Injunction shall be pending.
(e) No Material Adverse Change.
There shall have been no changes, other than changes
contemplated by this Agreement, in the business, operations, condition
(financial or otherwise), assets or liabilities of Catskill or any Catskill
Subsidiary (regardless of whether or not such events or changes are inconsistent
with the representations and warranties given herein) that individually or in
the aggregate has had or would have a Material Adverse Effect on Catskill
(f) Accountant's Comfort Letter.
Catskill shall have caused to be delivered on the respective
dates thereof to Troy "comfort letters" from KPMG L.L.P., Catskill's independent
public accountants, dated the date on which the Proxy Materials or last
amendment thereto shall be approved for use, and dated the date of the Closing
(defined in Section 9.1 hereof), and addressed to Troy and Catskill, with
respect to Catskill's financial data presented in the Proxy Materials, which
letters shall be based upon Statements on Auditing Standards Nos. 72 and 76.
(g) Repayment of Loans.
Any and all loans of Catskill and Catskill Bank as to which
Troy has requested that Catskill or Catskill Bank make demand for payment in
accordance with Section 6.13 above, shall
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have been paid in full, with no waiver or negation of any rights or remedies
available against the borrower thereunder.
7.3 Conditions to Obligations of Catskill
The obligation of Catskill to effect the Merger is also subject to the
satisfaction or waiver by Catskill at or prior to the Effective Time of the
following conditions:
(a) Representations and Warranties.
The representations and warranties of Troy set forth in this
Agreement shall be true and correct as of the date of this Agreement and (except
to the extent such representations and warranties speak as of an earlier date)
as of the Closing Date as though made on and as of the Closing Date. Catskill
shall have received a certificate signed on behalf of Troy by each of the
President and the Chief Financial Officer of Troy to the foregoing effect.
(b) Performance of Covenants and Agreements of Troy.
Troy shall have performed in all material respects all
covenants and agreements required to be performed by it under this Agreement at
or prior to the Closing Date. Catskill shall have received a certificate signed
on behalf of Troy by each of the President and the Chief Financial Officer of
Troy to such effect.
(c) Consents under Agreements.
The consent or approval or waiver of each person (other than
the Governmental Entities referred to in Section 7.1(b)) whose consent or
approval shall be required in connection with the transactions contemplated
hereby under any loan or credit agreement, note, mortgage, indenture, lease,
license or other agreement or instrument to which Troy is a party or is
otherwise bound shall have been obtained.
(d) No Pending Governmental Actions.
No proceeding initiated by any Governmental Entity seeking an
Injunction shall be pending.
ARTICLE VIII
TERMINATION AND AMENDMENT
8.1 Termination.
This Agreement may be terminated at any time prior to the
Effective Time, whether before or after approval of the matters presented in
connection with the Merger by the shareholders of Catskill:
(a) by mutual consent of Troy and Catskill in a written
instrument, if the Board of Directors of each so determines by a vote of a
majority of the members of its entire Board;
(b) by either Troy or Catskill upon written notice to the
other party (i) 30 days after the date on which any request or application for a
Regulatory Approval shall have been denied or
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withdrawn at the request or recommendation of the Governmental Entity which must
grant such Regulatory Approval, unless within the 30-day period following such
denial or withdrawal the parties agree to file, and have filed with the
applicable Governmental Entity, a petition for rehearing or an amended
application, provided, however, that no party shall have the right to terminate
this Agreement pursuant to this Section 8.1(b), if such denial or request or
recommendation for withdrawal shall be due to the failure of the party seeking
to terminate this Agreement to perform or observe the covenants and agreements
of such party set forth herein;
(c) by either Troy or Catskill if the Merger shall not have
been consummated on or before January 31, 2001, unless the failure of the
Closing to occur by such date shall be due to the failure of the party seeking
to terminate this Agreement to perform or observe the covenants and agreements
of such party set forth herein;
(d) by either Troy or Catskill (provided that the terminating
party is not in breach of its obligations under Section 6.3 hereof) if the
approval of the shareholders of Catskill hereto required for the consummation of
the Merger shall not have been obtained by reason of the failure to obtain the
required vote at a duly held meeting of shareholders or at any adjournment or
postponement thereof;
(e) by either Troy or Catskill (provided that the terminating
party is not then in breach of any representation, warranty, covenant or other
agreement contained herein that, individually or in the aggregate, would give
the other party the right to terminate this Agreement) if there shall have been
a breach of any of the representations or warranties set forth in this Agreement
on the part of the other party, if such breach, individually or in the
aggregate, has had or is likely to have a Material Adverse Effect on the
breaching party, and such breach shall not have been cured within 30 days
following receipt by the breaching party of written notice of such breach from
the other party hereto or such breach, by its nature, cannot be cured prior to
the Closing;
(f) by either Troy or Catskill (provided that the terminating
party is not then in breach of any representation, warranty, covenant or other
agreement contained herein that, individually or in the aggregate, would give
the other party the right to terminate this Agreement) if there shall have been
a material breach of any of the covenants or agreements set forth in this
Agreement on the part of the other party, and such breach shall not have been
cured within 30 days following receipt by the breaching party of written notice
of such breach from the other party hereto or such breach, by its nature, cannot
be cured prior to the Closing;
(g) by Troy, if the management of Catskill or its Board of
Directors, for any reason, (i) fails to call and hold within 35 days of the
approval for use of the Proxy Materials a special meeting of Catskill's
shareholders to consider and approve this Agreement and the transactions
contemplated hereby, (ii) fails to recommend to shareholders the approval of
this Agreement and the transactions contemplated hereby, (iii) fails to oppose
any third party proposal that is inconsistent with the transactions contemplated
by this Agreement or (iv) violates Section 5.1(e) of this Agreement;
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(h) by Troy if Catskill has complied with Section 5.1(e)
above, and has given written notice to Troy that Catskill has agreed to enter
into a Superior Competing Transaction; provided, however, that such termination
under this Section 8.1(h) shall not be effective unless and until Catskill shall
have complied with the expense and breakup fee provisions of Section 9.3 below,
and shall have acknowledged in the written notice to be provided in accordance
herewith that the Option granted pursuant to the Option Agreement shall then be
exercisable in accordance with terms thereof.
(i) by Catskill in the event of a Catastrophic Market Event
(as defined below) and that, if the Securities Portfolio Sale has not been
completed, results in Catskill's inability to obtain Sale Proceeds in excess of
$73.2 million. For purposes of this subsection (i), "Catastrophic Market Event"
shall mean (i) a decline of more than 10% in the Bond Buyer 20 Index and a
decline of more than 10% in the Merrill Lynch Corporate Bond Index, as quoted in
the Wall Street Journal from the level on the date hereof until 30 days after
the date hereof or (ii) if the values for the Bond Buyer 20 Index and Merrill
Lynch Corporate Bond Index are not published for 3 consecutive business days
because of financial market conditions in the United States.
8.2 Effect of Termination.
In the event of termination of this Agreement by either Troy or
Catskill as provided in Section 8.1 hereof, this Agreement shall forthwith
become void and have no effect except (i) the last sentence of Section 6.2(a)
and Sections 8.2, 9.2 and 9.3 hereof shall survive any termination of this
Agreement, and (ii) notwithstanding anything to the contrary contained in this
Agreement, no party shall be relieved or released from any liabilities or
damages arising out of its willful or intentional breach of any provision of
this Agreement.
8.3 Amendment.
Subject to compliance with applicable law, this Agreement may be
amended by the parties hereto, by action taken or authorized by their respective
Board of Directors, at any time before or after approval of the matters
presented in connection with the Merger by the shareholders of Catskill;
provided, however, that after any approval of the transactions contemplated by
this Agreement by Catskill's shareholders, there may not be, without further
approval of such shareholders, any amendment of this Agreement which reduces the
amount or changes the form of the consideration to be delivered to Catskill
shareholders hereunder other than as contemplated by this Agreement. This
Agreement may not be amended except by an instrument in writing signed on behalf
of each of the parties hereto.
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8.4 Extension; Waiver.
At any time prior to the Effective Time, the parties hereto, by action
taken or authorized by their respective Boards of Directors, may, to the extent
legally allowed, (a) extend the time for the performance of any of the
obligations or other acts of the other parties hereto, (b) waive any
inaccuracies in the representations and warranties contained herein or in any
document delivered pursuant hereto, and (c) waive compliance with any of the
agreements or conditions contained herein. Any agreement on the part of a party
hereto to any such extension or waiver shall be valid only if set forth in a
written instrument signed on behalf of such party, but such extension or waiver
or failure to insist on strict compliance with an obligation, covenant,
agreement or condition shall not operate as a waiver of, or estoppel with
respect to, any subsequent or other failure.
ARTICLE IX
GENERAL PROVISIONS
9.1 Closing.
Subject to the terms and conditions of this Agreement, the closing of
the Merger (the "Closing") will take place at 10:00 a.m. at the offices of Hogan
& Hartson L.L.P., counsel to Troy, on a date and place specified by the Parties,
which shall be no later than three business days after the satisfaction or
waiver (subject to applicable law) of all conditions precedent specified under
Article VII hereof (other than those conditions that by their nature are to be
satisfied at the Closing, but subject to the fulfillment or waiver of those
conditions), or on such other date, place and time as the parties may agree in
writing (the "Closing Date").
9.2 Nonsurvival of Representations, Warranties and Agreements.
None of the representations, warranties, covenants and agreements in
this Agreement or in any instrument delivered pursuant to this Agreement (other
than pursuant to the Option Agreement, which shall terminate in accordance with
its terms) shall survive the Effective Time, except for those covenants and
agreements contained herein and therein which by their terms apply in whole or
in part after the Effective Time.
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9.3 Expenses; Breakup Fee.
All costs and expenses incurred in connection with this Agreement and
the transactions contemplated hereby shall be paid by the party incurring such
expense. Except as set forth herein, in the event that this Agreement is
terminated by either Troy or Catskill by reason of a material breach pursuant to
Sections 8.1(e) or (f) hereof or by Troy pursuant to Section 8.1(g) hereof, Troy
or Catskill, as applicable, shall pay all documented, reasonable costs and
expenses up to $500,000 incurred by the terminating party in connection with
this Agreement and the transactions contemplated hereby. In the event that this
Agreement is terminated by Troy under Section 8.1(d) by reason of Catskill
shareholders not having given any required approval, or in the event this
Agreement is terminated by Troy by reason of a willful material breach pursuant
to Sections 8.1(e) or (f) hereof, Catskill shall pay all documented, reasonable
costs and expenses up to $500,000 incurred by Troy in connection with this
Agreement and the transactions contemplated hereby, plus a breakup fee of $1.5
million. In the event that this Agreement is terminated by Catskill by reason of
a willful material breach pursuant to Sections 8.1(e) or (f) hereof, Troy shall
pay all documented, reasonable costs and expenses up to $500,000 incurred by
Catskill in connection with this Agreement and the transactions contemplated
hereby, plus a breakup fee of $2.5 million. In the event that this Agreement is
terminated by Troy under Section 8.1(h) by reason of Catskill having agreed to
enter into an Superior Competing Transaction, Catskill shall pay all documented,
reasonable costs and expenses up to $500,000 incurred by Troy in connection with
this Agreement and the transactions contemplated hereby, plus a breakup fee of
$1.5 million.
9.4 Notices.
All notices and other communications hereunder shall be in writing and
shall be deemed given if delivered personally, mailed by registered or certified
mail (return receipt requested) or delivered by an express courier (with
confirmation) to the parties at the following addresses (or at such other
address for a party as shall be specified by like notice):
(a) if to Troy, to:
Troy Financial Corporation
32 Second Street
Troy, NY 12180
Attn.: Mr. Daniel J. Hogarty, Jr.
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with a copy (which shall not constitute notice) to:
Hogan & Hartson L.L.P.
Columbia Square
555 Thirteenth Street, N.W.
Washington, DC 20004-1109
Attn.: Stuart G. Stein, Esq.
and
(b) if to Catskill, to:
Catskill Financial Corporation
341 Main Street
Catskill, NY 12414-1450
Attn.: Mr. Wilbur J. Cross
with a copy (which shall not constitute notice) to:
Hinman, Howard & Kattell, LLP
700 Security Mutual Building
Binghamton, NY 13902-5250
Attn.: Clifford S. Weber, Esq.
9.5 Interpretation.
When a reference is made in this Agreement to Sections, Exhibits or
Schedules, such reference shall be to a Section of or an Exhibit or Schedule to
this Agreement unless otherwise indicated. The table of contents and headings
contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement. Whenever the words
"include", "includes" or "including" are used in this Agreement, they shall be
deemed to be followed by the words "without limitation".
9.6 Counterparts.
This Agreement may be executed in counterparts, all of which shall be
considered one and the same agreement and shall become effective when
counterparts have been signed by each of the parties and delivered to the other
parties, it being understood that all parties need not sign the same
counterpart.
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9.7 Entire Agreement.
This Agreement (including the disclosure schedules, documents and the
instruments referred to herein) constitutes the entire agreement and supersedes
all prior agreements and understandings, both written and oral, among the
parties with respect to the subject matter hereof, other than the
Confidentiality Agreement, the Certificate of Merger, the Option Agreement and
the Catskill Stockholder Agreement.
9.8 Governing Law.
This Agreement shall be governed and construed in accordance with the
laws of the State of Delaware, without regard to any applicable conflicts of law
rules.
9.9 Enforcement of Agreement.
The parties hereto agree that irreparable damage would occur in the
event that the provisions of this Agreement were not performed in accordance
with its specific terms or were otherwise breached. It is accordingly agreed
that the parties shall be entitled to an injunction or injunctions to prevent
breaches of this Agreement and to enforce specifically the terms and provisions
thereof in any court of the United States or any state having jurisdiction, this
being in addition to any other remedy to which they are entitled at law or in
equity.
9.10 Severability.
Any term or provision of this Agreement which is invalid or
unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective
to the extent of such invalidity or unenforceability without rendering invalid
or unenforceable the remaining terms and provisions of this Agreement or
affecting the validity or enforceability of any of the terms or provisions of
this Agreement in any other jurisdiction. If any provision of this Agreement is
so broad as to be unenforceable, the provision shall be interpreted to be only
so broad as is enforceable.
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9.11 Publicity.
Except as otherwise required by law or the rules of the Nasdaq Stock
Market National Market System (or such other exchange on which the Troy Common
Stock may become listed), so long as this Agreement is in effect, neither Troy
nor Catskill shall, or shall permit any of Troy's or Catskill's Subsidiaries to,
issue or cause the publication of any press release or other public announcement
with respect to, or otherwise make any public statement concerning, the
transactions contemplated by this Agreement, the Certificate of Merger, the
Option Agreement or the Catskill Stockholder Agreement without the consent of
the other party, which consent shall not be unreasonably withheld. Troy and
Catskill shall cooperate to prepare a joint press release announcing the signing
of this Agreement and the transactions contemplated hereunder.
9.12 Assignment; Limitation of Benefits.
Neither this Agreement nor any of the rights, interests or obligations
hereunder shall be assigned by any of the parties hereto (whether by operation
of law or otherwise) without the prior written consent of the other parties.
Subject to the preceding sentence, this Agreement will be binding upon, inure to
the benefit of and be enforceable by the parties and their respective successors
and assigns. Except as otherwise specifically provided in Section 6.6 hereof,
this Agreement (including the documents and instruments referred to herein) is
not intended to confer upon any person other than the parties hereto any rights
or remedies hereunder, and the covenants, undertakings and agreements set out
herein shall be solely for the benefit of, and shall be enforceable only by, the
parties hereto and their permitted assigns.
9.13 Additional Definitions.
In addition to any other definitions contained in this Agreement, the
following words, terms and phrases shall have the following meanings when used
in this Agreement.
"Affiliated Person": any director, officer or 5% or greater
shareholder, spouse or other person living in the same household of such
director, officer or shareholder, or any company, partnership or trust in which
any of the foregoing persons is an officer, 5% or greater shareholder, general
partner or 5% or greater trust beneficiary.
"Competing Proposal": any of the following involving Catskill or any
Catskill Subsidiary: any inquiry, proposal or offer from any person relating to
any direct or indirect acquisition or purchase by such person of Catskill, any
Catskill Subsidiary or any business line of Catskill that constitutes 15% or
more of the net revenues, net income or assets of Catskill and its subsidiaries,
taken as a whole, or 15% or more of any class of equity securities of Catskill
or any of its subsidiaries, any tender offer or exchange offer that if
consummated would result in any
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person beneficially owning 15% or more of any class of equity securities of
Catskill or any of its subsidiaries, any merger, consolidation, business
combination, recapitalization, liquidation, dissolution or similar transaction
involving Catskill or any of its subsidiaries, other than the transactions
contemplated by this Agreement.
"Knowledge": with respect to any entity, refers to the actual knowledge
of such entity's directors and officers in the ordinary course of their duties
in such positions.
"Laws": any and all statutes, laws, ordinances, rules, regulations,
orders, permits, judgments, injunctions, decrees, case law and other rules of
law enacted, promulgated or issued by any Governmental Entity.
"Material Adverse Effect": with respect to Troy or Catskill, as the
case may be, means a condition, event, change or occurrence, other than the
Securities Portfolio Sale, that is reasonably likely to have a material adverse
effect upon (A) the financial condition, results of operations, loans,
securities, deposit accounts, business or properties of Troy or Catskill (other
than as a result of (i) changes in laws or regulations or accounting rules of
general applicability or interpretations thereof, or (ii) decreases in capital
under Financial Accounting Standards No. 115 attributable to general changes in
interest rates), or (B) the ability of Troy or Catskill to perform its
obligations under, and to consummate the transactions contemplated by, this
Agreement, the Certificate of Merger and, in the case of Catskill, the Option
Agreement, but shall not include Catskill's obligations under the Catskill Stock
Plan, the Catskill Management Recognition Plan or any employment or severance
agreement set forth in Section 3.12 of the Catskill Disclosure Schedule.
"Subsidiary": with respect to any party means any corporation,
partnership or other organization, whether incorporated or unincorporated, which
is consolidated with such party for financial reporting purposes.
"Superior Competing Transaction": any of the following involving
Catskill or any Catskill Subsidiary: any proposal made by a third party to
acquire, directly or indirectly, including pursuant to a tender offer, exchange
offer, merger, consolidation, business combination, recapitalization,
liquidation, dissolution or similar transaction, for consideration consisting of
cash and/or securities, more than 50% of the combined voting power of the shares
of Catskill Common Stock then outstanding or all or substantially all the assets
of Catskill, and otherwise on terms which the Board of Directors of Catskill,
determines in its good faith judgment (based on the opinion of Ryan, Beck & Co.,
or another financial advisor of nationally recognized reputation) to be more
favorable to its stockholders than the Merger and for which financing, to the
extent required, is then committed or which if not committed is, in the good
faith judgment of its Board of Directors, reasonably capable of being obtained
by such third party.
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[SIGNATURES PAGE FOLLOWS]
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IN WITNESS WHEREOF, Troy, Merger Sub and Catskill have caused this
Agreement to be executed and delivered by their respective officers thereunto
duly authorized as of the date first above written.
TROY FINANCIAL CORPORATION
ATTEST:
By: /s/ Kevin M. O'Bryan By: /s/ Daniel J. Hogarty, Jr.
----------------------------- ------------------------------
Name: Kevin M. O'Bryan Name: Daniel J. Hogarty, Jr.
Title: Senior Vice President Title: Chairman, President and Chief
and Secretary Executive Officer
CATSKILL FINANCIAL CORPORATION
ATTEST:
By: /s/ Allan Oren By: /s/ Wilbur J. Cross
----------------------------- ------------------------------
Name: Allan Oren Name: Wilbur J. Cross
Title: Director Title: Chairman, President and
Chief Executive Officer
CHARLIE ACQUISITION CORPORATION
ATTEST:
By: /s/ Kevin M. O'Bryan By: /s/ Daniel J. Hogarty, Jr.
----------------------------- ------------------------------
Name: Kevin M. O'Bryan Name: Daniel J. Hogarty, Jr.
Title: Secretary Title: President and Chief Executive
Officer
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APPENDIX B - STOCK OPTION AGREEMENT
B-1
<PAGE>
CATSKILL FINANCIAL CORPORATION STOCK OPTION AGREEMENT
THE TRANSFER OF THE OPTION GRANTED BY THIS AGREEMENT IS
SUBJECT TO RESALE RESTRICTIONS.
This STOCK OPTION AGREEMENT, dated as of June 7, 2000 (this
"Agreement"), is entered into between Catskill Financial Corporation, a Delaware
corporation ("Issuer"), and Troy Financial Corporation, a Delaware corporation
("Grantee").
WITNESSETH:
WHEREAS, Grantee, Charlie Acquisition Corporation, a Delaware
corporation, and Issuer have entered into an Agreement and Plan of Merger, dated
as of even date with this Agreement (the "Plan"), which was executed by the
parties thereto prior to the execution of this Agreement; and
WHEREAS, as a condition and inducement to Grantee's entering into the
Plan and in consideration therefor, Issuer has agreed to grant Grantee the
Option (as defined below).
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements set forth herein and in the Plan, the parties hereto
agree as follows:
SECTION 1. Issuer hereby grants to Grantee an irrevocable option (the
"Option") to purchase, subject to the terms hereof, up to a number of fully paid
and nonassessable shares of common stock, par value $0.01 per share of Issuer
("Issuer Common Stock") equal to 19.9% of the total of the number of issued and
outstanding shares of Issuer Common Stock as of the first date that the Option
becomes exercisable, at a price per share equal to $19.00 (the "Option Price").
SECTION 2. (a) Grantee may exercise the Option, in whole or part, at any
time and from time to time following the occurrence of a Purchase Event (as
defined below); provided, however, that the Option shall terminate and be of no
further force and effect upon the earliest to occur of the following events
(which are collectively referred to as an "Exercise Termination Event"):
(i) The time immediately prior to the Effective Time (as defined in
the Plan); (ii) 18 months after the first occurrence of a Purchase Event;
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(iii)18 months after the termination of the Plan following the
occurrence of a Preliminary Purchase Event (as defined below);
(iv) upon the valid termination of the Plan, if no Purchase Event or
Preliminary Purchase Event has occurred prior to such termination, by Issuer
pursuant to Sections 8.1(e) or 8.1(f) of the Plan as a result of a breach by
Grantee, both parties pursuant to Section 8.1(a) of the Plan, or by either party
pursuant to Sections 8.1(b) or 8.1(c) of the Plan;
(v) 18 months after the termination of the Plan, by either party
pursuant to Section 8.1(d) of the Plan based on the required vote of Issuer's
stockholders not being obtained at a duly called meeting of the stockholders of
the Issuer, if no Purchase Event or Preliminary Purchase Event has occurred
prior to the meeting of Issuer's stockholders (or any adjournment or
postponement thereof) held to vote on the Plan; or
(vi) 18 months after the termination of the Plan, by Grantee
pursuant to Sections 8.1(e) or 8.1(f) thereof as a result of a breach by Issuer,
or by Grantee pursuant to Sections 8.1(g) or (h) of the Plan.
(b) The term "Preliminary Purchase Event" shall mean any of the
following events or transactions occurring on or after the date hereof and prior
to an Exercise Termination Event:
(i) Issuer without having received Grantee's prior written consent,
shall have entered into any letter of intent or definitive agreement to engage
in an Acquisition Transaction (as defined below) with any person (as defined
below) other than Grantee or any of its subsidiaries (each a "Grantee
Subsidiary") or the Board of Directors of Issuer shall have recommended that the
stockholders of Issuer approve or accept any Acquisition Transaction with any
Person (as the term "person" is defined in Sections 3(a)9 and 13(d)(3) of the
Exchange Act and the rules and regulations thereunder) other than Grantee or any
Grantee Subsidiary. For purposes of this Agreement, "Acquisition Transaction"
shall mean (x) a merger, consolidation or other business combination involving
Issuer, (y) a purchase, lease or other acquisition of all or substantially all
of the assets of Issuer, (z) a purchase or other acquisition (including by way
of merger, consolidation, share exchange or otherwise) of Beneficial Ownership
(as the term "beneficial ownership" is defined in Regulation 13d-3(a) of the
Exchange Act) of securities representing 20% or more of the voting power of
Issuer; provided, however, that "Acquisition Transaction" shall not include a
transaction entered into after the
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termination of the Plan in which the Issuer is the surviving entity, if in
connection with such transaction, no person acquires Beneficial Ownership of 20%
or more of the total voting power of the Issuer to be outstanding after giving
effect to such transaction and in which the aggregate voting power of Issuer
acquired by all persons is less than 33% of the total voting power of Issuer;
(ii) Any Person (other than Grantee, any Grantee Subsidiary or any
current affiliate of Issuer) shall have acquired Beneficial Ownership of 20% or
more of the outstanding shares of Issuer Common Stock;
(iii)(a) Any Person (other than Grantee or any Grantee Subsidiary)
shall have made a bona fide proposal to Issuer or, by a public announcement or
written communication that is or becomes the subject of public disclosure, to
Issuer's stockholders prior to the Catskill Stockholders' Meeting to engage in
an Acquisition Transaction (including, without limitation, any situation in
which any Person other than Grantee or any Grantee Subsidiary shall have
commenced (as such term is defined in Rule 14d-2 promulgated under the Exchange
Act of 1934, as amended (the "Exchange Act"), or shall have filed a registration
statement under the Securities Act of 1933, as amended (the "Securities Act"),
with respect to a tender offer or exchange offer to purchase any shares of
Issuer Common Stock such that, upon consummation of such offer, such person
would have Beneficial Ownership of 20% or more of the then outstanding shares of
Issuer Common Stock (such an offer being referred to herein as a "Tender Offer"
or an "Exchange Offer", respectively) and (b) the stockholders of Issuer do not
approve the Merger, as defined in the Plan, at a meeting of the Issuer's
stockholders;
(iv) There shall exist a willful or intentional breach under the
Plan by Issuer and such breach would entitle Grantee to terminate the Plan; or
(v) The meeting of the Issuer's stockholders to be held for the
purpose of voting on the Plan shall not have been held pursuant to the Plan or
shall have been canceled prior to termination of the Plan, or for any reason
whatsoever Issuer's Board of Directors shall have failed to recommend, or shall
have withdrawn or modified in a manner adverse to Grantee the recommendation of
Issuer's Board of Directors, that Issuer's stockholders approve the Plan, or if
Issuer or Issuer's Board of Directors fails to oppose any proposal of the type
described at Section 2(b)(iii)(a) above by any Person (other than Grantee or any
Grantee Subsidiary).
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(c) The term "Purchase Event" shall mean any of the following events or
transactions occurring on or after the date hereof and prior to an Exercise
Termination Event:
(i) The acquisition by any Person (other than Grantee or any Grantee
Subsidiary) of Beneficial Ownership (other than on behalf of the Issuer) of 20%
or more of the then outstanding Issuer Common Stock;
(ii) The occurrence of a Preliminary Purchase Event described in
Section 2(b)(i); or
(iii)The termination of the Plan by Grantee pursuant to Section
8.1(h) thereof.
(d) Issuer shall notify Grantee promptly in writing of the occurrence
of any Preliminary Purchase Event or Purchase Event known to Issuer; provided,
however, that the giving of such notice by Issuer shall not be a condition to
the right of Grantee to exercise the Option.
(e) In the event that Grantee is entitled to and wishes to exercise the
Option, it shall send to Issuer a written notice (the "Option Notice," the date
of which being hereinafter referred to as the "Notice Date") specifying (i) the
total number of shares of Issuer Common Stock it will purchase pursuant to such
exercise and (ii) the time (which shall be on a business day that is not less
than three nor more than 10 business days from the Notice Date) on which the
closing of such purchase shall take place (the "Closing Date"); such closing to
take place at the principal office of the Issuer; provided, however, that if
prior notification to or approval of the Board of Governors of the Federal
Reserve System ("FRB"), Office of the Comptroller of the Currency ("OCC"), the
Office of Thrift Supervision ("OTS"), the New York State Banking Department
("NYSBD"), the Federal Trade Commission (the "FTC"), the Antitrust Division of
the Department of Justice ("DOJ") or any other Governmental Authority is
required in connection with such purchase (each, a "Notification" or an
"Approval," as the case may be), at Grantee's sole expense, (a) Grantee shall
promptly file the required notice or application for approval
("Notice/Application"), (b) Grantee shall expeditiously process the
Notice/Application and (c) for the purpose of determining the Closing Date
pursuant to clause (ii) of this sentence, the period of time that otherwise
would run from the Notice Date shall instead run from the later of (x) in
connection with any Notification, the date on which any required notification
periods have expired or been terminated and (y) in connection with any Approval,
the date on which such approval has been obtained and any requisite waiting
period or periods shall have expired. For purposes of Section 2(a) hereof, any
exercise of the Option shall be deemed to occur on the Notice Date relating
thereto. Prior to the Closing Date, Grantee shall have the right to revoke its
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exercise of the Option by written notice to the Issuer given not less than three
business days prior to the Closing Date.
(f) At the closing referred to in Section 2(e) hereof, Grantee shall
pay to Issuer the aggregate purchase price for the number of shares of Issuer
Common Stock specified in the Option Notice in immediately available funds by
wire transfer to a bank account designated by Issuer; provided, however, that
failure or refusal of Issuer to designate such a bank account shall not preclude
Grantee from exercising the Option.
(g) At such closing, simultaneously with the delivery of immediately
available funds as provided in Section 2(f) hereof, Issuer shall deliver to
Grantee a certificate or certificates representing the number of shares of
Issuer Common Stock specified in the Option Notice and, if the Option should be
exercised in part only, a new Option evidencing the rights of Grantee thereof to
purchase the balance of the shares of Issuer Common Stock purchasable hereunder.
(h) Certificates for Issuer Common Stock delivered at a closing
hereunder shall be endorsed with a restrictive legend substantially as follows:
THE TRANSFER OF THE SHARES REPRESENTED BY THIS CERTIFICATE IS
SUBJECT TO RESALE RESTRICTIONS ARISING UNDER THE SECURITIES ACT OF
1933, AS AMENDED, AND APPLICABLE STATE SECURITIES LAWS.
It is understood and agreed that the reference to the resale restrictions of the
Securities Act in the above legend shall be removed by delivery of substitute
certificate(s) without such reference if Grantee shall have delivered to Issuer
a copy of a letter from the staff of the Securities and Exchange Commission (the
"SEC") or Governmental Authority responsible for administering any applicable
state securities laws or an opinion of counsel to the effect that such legend is
not required for purposes of the Securities Act or applicable state securities
laws. In addition such certificates shall bear any other legend as may be
required by law.
(i) Upon the giving by Grantee to Issuer of an Option Notice and the
tender of the applicable purchase price in immediately available funds on the
Closing Date, unless prohibited by applicable law, Grantee shall be deemed to be
the holder of record of the number of shares of Issuer Common Stock specified in
the Option Notice, notwithstanding that the stock transfer books of Issuer shall
then be closed or that certificates representing such shares of Issuer Common
Stock shall not then actually be delivered to Grantee. Issuer shall pay all
expenses and other charges that may be payable in connection with the
preparation, issuance and delivery of stock certificates under this Section 2 in
the name of Grantee.
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SECTION 3. Issuer agrees: (i) that it shall at all times until the
termination of this Agreement have reserved for issuance upon the exercise of
the Option that number of authorized and reserved shares of Issuer Common Stock
equal to the maximum number of shares of Issuer Common Stock at any time and
from time to time issuable hereunder, all of which shares will, upon issuance
pursuant hereto, be duly authorized, validly issued, fully paid, non-assessable,
and delivered free and clear of all claims, liens, encumbrances and security
interests and not subject to any preemptive rights; (ii) that it will not, by
amendment of its certificate of incorporation or through reorganization,
consolidation, merger, dissolution or sale of assets, or by any other voluntary
act, avoid or seek to avoid the observance or performance of any of the
covenants, stipulations or conditions to be observed or performed hereunder by
Issuer; (iii) promptly to take all reasonable action as may from time to time be
requested by Grantee, at Grantee's expense (including (x) complying with all
premerger notification, reporting and waiting period requirements specified in
15 U.S.C. ss. 18a and regulations promulgated thereunder and (y) in the event
prior approval of or notice to the FRB, OCC, FTC, DOJ or any other Governmental
Authority, under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, the Bank Holding Company Act, the Change in Bank Control Act, the Home
Owners' Loan Act of 1933, as amended, or any other applicable federal or state
law, is necessary before the Option may be exercised), cooperating with Grantee
in preparing such applications or notices and providing such information to each
such Governmental Authority as it may require in order to permit Grantee to
exercise the Option and Issuer duly and effectively to issue shares of Issuer
Common Stock pursuant hereto; and (iv) to take all action provided herein to
protect the rights of Grantee against dilution.
SECTION 4. This Agreement (and the Option granted hereby) are exchangeable,
without expense, at the option of Grantee, upon presentation and surrender of
this Agreement at the principal office of Issuer, for other agreements providing
for Options of different denominations entitling the holder thereof to purchase,
on the same terms and subject to the same conditions as are set forth herein, in
the aggregate the same number of shares of Issuer Common Stock purchasable
hereunder. The terms "Agreement" and "Option" as used herein include any
agreements and related options for which this Agreement (and the Option granted
hereby) may be exchanged. Upon receipt by Issuer of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of this
Agreement, and (in the case of loss, theft or destruction) of reasonably
satisfactory indemnification, and upon surrender and cancellation of this
Agreement, if mutilated, Issuer will execute and deliver a new Agreement of like
tenor and date.
SECTION 5. The number of shares of Issuer Common Stock purchasable upon the
exercise of the Option shall be subject to adjustment from time to time as
follows:
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(a) In the event of any change in the type or number of shares of
Issuer Common Stock by reason of stock dividends, split-ups, mergers,
recapitalizations, combinations, subdivisions, conversions, exchanges of shares
or other issuances of additional shares (other than pursuant to the exercise of
the Option), the type and number of shares of Issuer Common Stock purchasable
upon exercise hereof shall be appropriately adjusted and proper provision shall
be made so that, in the event that any additional shares of Issuer Common Stock
are to be issued or otherwise become outstanding as a result of any such change
(other than pursuant to an exercise of the Option), the number of shares of
Issuer Common Stock that remain subject to the Option shall be increased or
decreased (as applicable) so that, after such issuance and together with the
shares of Issuer Common Stock previously issued pursuant to the prior partial
exercise of the Option (as adjusted on account of any of the foregoing changes
in the Issuer Common Stock), such number of shares shall equal the sum of 19.9%
of the total of the number of shares of Issuer Common Stock issued and
outstanding on the date the Option first becomes exercisable.
(b) Whenever the number of shares of Issuer Common Stock purchasable
upon exercise hereof is adjusted as provided in this Section 5, the Option Price
shall be adjusted by multiplying the Option Price by a fraction, the numerator
of which shall be equal to the number of shares of Issuer Common Stock
purchasable prior to the adjustment and the denominator of which shall be equal
to the number of shares of Issuer Common Stock purchasable after the adjustment.
SECTION 6. (a) Upon the occurrence of a Purchase Event that occurs prior to
an Exercise Termination Event, Issuer shall, at the request of Grantee (whether
on its own behalf or on behalf of any subsequent holder of the Option (or part
thereof) or of any of the shares of Issuer Common Stock issued pursuant hereto),
promptly prepare, file and keep current a shelf registration statement with the
SEC, under the Securities Act covering any shares issued and issuable pursuant
to the Option and shall use its reasonable best efforts to cause such
registration statement to become effective, and to remain current and effective
for a period not in excess of 180 days from the day such registration statement
first becomes effective, in order to permit the sale or other disposition of any
shares of Issuer Common Stock issued upon total or partial exercise of the
Option ("Option Shares") in accordance with any plan of disposition requested by
Grantee. Grantee shall have the right to demand two such registrations, which
demand right shall be transferable but in no event shall Issuer be required to
effect more than two registrations in the aggregate pursuant to this Option or
any subdivision hereof. Grantee shall provide all information reasonably
requested by Issuer for inclusion in any registration statement to be filed
hereunder. In connection with any such registration statement, Issuer and
Grantee shall provide each other with representations, warranties, indemnities
and other agreements customarily given in connection with such registration. If
requested by Grantee in connection with such registration,
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Issuer and Grantee shall become a party to any underwriting agreement relating
to the sale of such shares, but only to the extent of obligating themselves in
respect of representations, warranties, indemnities and other agreements
customarily included in such underwriting agreements and reasonably acceptable
to Issuer. Notwithstanding the foregoing, if Grantee revokes any exercise notice
or fails to exercise any Option with respect to any exercise notice pursuant to
Section 2(e) hereof, Issuer shall not be obligated to continue any registration
process with respect to the sale of Option Shares issuable upon the exercise of
such Option and Grantee shall not be deemed to have demanded registration of
Option Shares. If Issuer withdraws a registration statement which has been
declared effective at the request of Grantee, or any subsequent holder, then
such filing shall be deemed an effective registration for all purposes
hereunder. The Issuer will not be required to file any such registration
statement during any period of time (not to exceed 30 days in the case of
clauses (A) or (C) below or 45 days in the case of clause (B) below) when (A)
the Issuer is in possession of material non-public information which it
reasonably believes would be detrimental to be disclosed at such time and such
information would have to be disclosed if a registration statement were filed at
that time; (B) the Issuer is required under the Securities Act and the rules and
regulations thereunder to include audited financial statements for any period in
such registration statement and such financial statements are not yet available
for inclusion in such registration statement; or (C) the Issuer reasonably
determines that such registration would interfere with any financing,
acquisition or material transaction involving the Issuer. The registration
rights set forth in this Section 6 are subject to the condition that the Grantee
or subsequent holder shall provide the Issuer with such information with respect
to the holder's securities, the plan for distribution thereof, and such other
information with respect to the holder that is required under applicable
securities laws to enable the Issuer to include in a registration statement all
material facts required to be disclosed with respect to a registration
thereunder, including the identity of the holder and the holder's plan of
distribution. The Grantee shall not be able to exercise its registration rights
hereunder if Grantee can rely on Rule 144 promulgated under the Securities Act
to sell such number of shares of Issuer Common Stock that the Grantee otherwise
would seek to register.
(b) Concurrently with the preparation and filing of a registration
statement under Section 6(a) hereof, Issuer shall also make all filings required
to comply with state securities laws in such number of states as Grantee may
reasonably request; provided, that Issuer shall not be required to qualify to do
business in, or consent to service of process in, any jurisdiction by reason of
this provision.
SECTION 7. (a) Upon the occurrence of a Purchase Event that occurs prior to
an Exercise Termination Event, at the request (the date of such request being
the "Option Repurchase Request Date") of Grantee, Issuer shall repurchase,
subject to compliance with
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applicable law and out of funds legally available therefor, the Option from
Grantee at a price (the "Option Repurchase Price") equal to the amount by which
(A) the market/offer price (as defined below) exceeds (B) the Option Price,
multiplied by the number of shares for which the Option may then be exercised.
The term "market/offer price" shall mean the highest of (i) the price per share
of Issuer Common Stock at which a tender offer or exchange offer therefor has
been made after the date hereof and on or prior to the Option Repurchase Request
Date (ii) the price per share of Issuer Common Stock paid or to be paid by any
third party pursuant to an agreement with Issuer (whether by way of a merger,
consolidation or otherwise), (iii) the average of the 20 highest last sale
prices for shares of Issuer Common Stock as reported within the 90-day period
ending on the Option Repurchase Request Date, and (iv) in the event of a sale of
all or substantially all of Issuer's assets, the sum of the price paid in such
sale for such assets and the current market value of the remaining assets of
Issuer as determined by an investment banking firm selected by Grantee and
reasonably acceptable to Issuer, divided by the number of shares of Issuer
Common Stock outstanding at the time of such sale. In determining the
market/offer price, the value of consideration other than cash shall be the
value determined by an investment banking firm selected by Grantee and
reasonably acceptable to Issuer. The investment banking firm's determination
shall be conclusive and binding on all parties.
(b) Grantee may exercise its right to require Issuer to repurchase the
Option pursuant to this Section 7 by surrendering for such purpose to Issuer, at
its principal office, a copy of this Agreement, accompanied by a written notice
or notices stating that Grantee elects to require Issuer to repurchase the
Option in accordance with the provisions of this Section 7. As promptly as
practicable, and in any event within 30 business days after the surrender of the
Option and the receipt of such notice or notices relating thereto, Issuer shall
deliver or cause to be delivered to Grantee the Option Repurchase Price.
(c) Issuer hereby undertakes to use its reasonable best efforts to
obtain all required regulatory, shareholder and legal approvals and to file any
required notices as promptly as practicable in order to accomplish any
repurchase contemplated by this Section 7. Nonetheless, to the extent that
Issuer is prohibited under applicable law or regulation from repurchasing the
Option in full, Issuer shall promptly so notify Grantee and thereafter deliver
or cause to be delivered, from time to time, to Grantee the portion of the
Option Repurchase Price that it is no longer prohibited from delivering, within
five business days after the date on which Issuer is no longer so prohibited;
provided, however, that if Issuer at any time after delivery of a notice of
repurchase pursuant to Section 7(b) hereof is prohibited as referred to above,
from delivering to Grantee the Option Repurchase Price in full, Grantee may
revoke its notice of repurchase of the Option either in whole or in part
whereupon, in the case of a revocation in part, Issuer shall promptly (i)
deliver to Grantee that portion of the Option Purchase Price that Issuer is
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not prohibited from delivering after taking into account any such revocation and
(ii) deliver, as appropriate, to Grantee, a new Agreement evidencing the right
of Grantee to purchase that number of shares of Issuer Common Stock equal to the
number of shares of Issuer Common Stock purchasable immediately prior to the
delivery of the notice of repurchase less the number of shares of Issuer Common
Stock covered by the portion of the Option repurchased.
(d) Issuer shall not enter into any agreement with any Person (other
than Grantee or a Grantee Subsidiary) for an Acquisition Transaction unless the
other Person assumes all the obligations of Issuer pursuant to this Section 7 in
the event that Grantee elects, in its sole discretion, to require such other
Person to perform such obligations.
SECTION 8. Notwithstanding Sections 2 and 6 hereof, if Grantee has given
the notice referred to in one or more of such Sections, the exercise of the
rights specified in any such Section shall be extended (a) if the exercise of
such rights requires obtaining regulatory approvals (including any required
waiting periods) to the extent necessary to obtain all regulatory approvals for
the exercise of such rights, and (b) to the extent necessary to avoid liability
under Section 16(b) of the Exchange Act by reason of such exercise; provided,
that in no event shall any closing date occur more than 12 months after the
related notice date, and, if the closing date shall not have occurred within
such period due to the failure to obtain any required approval by the FRB, OCC,
OTS, FTC, DOJ or any other Governmental Authority despite the reasonable best
efforts of Grantee and Issuer to obtain such approvals, the exercise of the
rights shall be deemed to have been rescinded as of the related notice date. In
the event (a) Grantee receives official notice that an approval of the FRB, OCC,
FTC, DOJ or any other Governmental Authority required for the purchase and sale
of the Option Shares will not be issued or granted or (b) a closing date has not
occurred within 12 months after the related notice date due to the failure to
obtain any such required approval, Grantee shall be entitled to exercise the
Option in connection with the concurrent resale of the Option Shares pursuant to
a registration statement as provided in Section 6 hereof.
SECTION 9. Issuer hereby represents and warrants to Grantee as follows:
(a) Issuer has the requisite corporate power and authority to execute
and deliver this Agreement and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly approved by the Board of
Directors of Issuer and no other corporate proceedings on the part of Issuer are
necessary to authorize this Agreement or to consummate the transactions so
contemplated. This Agreement has been duly executed and delivered by, and
constitutes a valid and binding obligation of, Issuer, enforceable against
Issuer in accordance with its terms,
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subject to any required Governmental Approval, and except as enforceability
thereof may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium and other similar laws affecting the enforcement of creditors' rights
generally and general principles of equity.
(b) Issuer has taken all necessary corporate action to authorize and
reserve and to permit it to issue, and at all times from the date hereof through
the termination of this Agreement in accordance with its terms will have
reserved for issuance upon the exercise of the Option, that number of shares of
Issuer Common Stock equal to the maximum number of shares of Issuer Common Stock
at any time and from time to time issuable hereunder, and all such shares, upon
issuance pursuant hereto, will be duly authorized, validly issued, fully paid,
non- assessable, and will be delivered free and clear of all claims, liens,
encumbrances and security interests and not subject to any preemptive rights.
SECTION 10. (a) Neither of the parties hereto may assign any of its rights
or delegate any of its obligations under this Agreement or the Option created
hereunder to any other Person without the express written consent of the other
party, except that Grantee may assign this Agreement to a wholly owned
subsidiary of Grantee and Grantee may assign its rights hereunder in whole or in
part after the occurrence of a Preliminary Purchase Event. The term "Grantee" as
used in this Agreement shall also be deemed to refer to Grantee's permitted
assigns.
(b) Any assignment of rights of Grantee to any permitted assignee of
Grantee hereunder shall bear the restrictive legend at the beginning thereof
substantially as follows:
THE TRANSFER OF THE OPTION REPRESENTED BY THIS ASSIGNMENT AND THE
RELATED OPTION AGREEMENT IS SUBJECT TO RESALE RESTRICTIONS ARISING UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND APPLICABLE STATE SECURITIES LAWS AND
TO CERTAIN PROVISIONS OF AN AGREEMENT BETWEEN CATSKILL FINANCIAL CORPORATION
AND TROY FINANCIAL CORPORATION ("TROY"), DATED AS OF JUNE 7, 2000. A COPY OF
SUCH AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICE OF TROY, AND WILL BE
PROVIDED TO ANY PERMITTED ASSIGNEE OF THE OPTION WITHOUT CHARGE UPON RECEIPT
OF A WRITTEN REQUEST THEREFOR.
SECTION 11. Each of Grantee and Issuer will use its reasonable efforts to
make all filings with, and to obtain consents of, all third parties including,
if applicable, the FRB, OCC, FTC, DOJ and other Governmental Authorities
necessary to the consummation of the transactions contemplated by this
Agreement.
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SECTION 12. The parties hereto acknowledge that damages would be an
inadequate remedy for a breach of this Agreement by either party hereto and that
the obligations of the parties hereto shall be enforceable by either party
hereto through injunctive or other equitable relief. Both parties further agree
to waive any requirement for the securing or posting of any bond in connection
with the obtaining of any such equitable relief and that this provision is
without prejudice to any other rights that the parties hereto may have for any
failure to perform this Agreement.
SECTION 13. If any term, provision, covenant or restriction contained in
this Agreement is held by a court or a federal or state regulatory agency of
competent jurisdiction to be invalid, void or unenforceable, the remainder of
the terms, provisions and covenants and restrictions contained in this Agreement
shall remain in full force and effect, and shall in no way be affected, impaired
or invalidated. If for any reason such court or regulatory agency determines
that Grantee is not permitted to acquire or Issuer is not permitted to
repurchase pursuant to Section 7 hereof, the full number of shares of Issuer
Common Stock provided in Section 1 hereof (as adjusted pursuant hereto), it is
the express intention of Issuer to allow Grantee to acquire or to require Issuer
to repurchase such lesser number of shares as may be permissible without any
amendment or modification hereof.
SECTION 14. All notices, requests, claims, demands and other communications
hereunder shall be deemed to have been duly given when delivered in the manner
and at the respective addresses of the parties set forth in the Plan.
SECTION 15. This Agreement, the rights and obligations of the parties
hereto, and any claims or disputes relating thereto shall be governed by and
construed in accordance with the laws of the State of Delaware (but not
including the choice of law rules thereof).
SECTION 16. This Agreement may be executed in counterparts, each of which
shall be deemed to be an original, but all of which shall constitute one and the
same agreement and shall be effective at the time of execution and delivery.
SECTION 17. Except as otherwise expressly provided herein, each of the
parties hereto shall bear and pay all costs and expenses incurred by it or on
its behalf in connection with the transactions contemplated hereunder.
SECTION 18. Except as otherwise expressly provided herein or in the Plan,
this Agreement contains the entire agreement between the parties with respect to
the transactions contemplated hereunder and supersedes all prior arrangements or
understandings with respect thereof, written or oral. The terms and conditions
of this Agreement shall inure to the benefit of
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<PAGE>
and be binding upon the parties hereto and their respective successors and
permitted assigns. Nothing in this Agreement, expressed or implied, is intended
to confer upon any party, other than the parties hereto, and their respective
successors except as assigns, any rights, remedies, obligations or liabilities
under or by reason of this Agreement, except as expressly provided herein.
SECTION 19. Capitalized terms used in this Agreement and not defined herein
but defined in the Plan shall have the meanings assigned therein.
SECTION 20. Nothing contained in this Agreement shall be deemed to
authorize or require Issuer or Grantee to breach any provision of the Plan or
any provision of law applicable to the Grantee or Issuer.
SECTION 21. In the event that any selection or determination is to be made
by Grantee or a subsequent holder hereunder and at the time of such selection or
determination there is more than one Grantee or holders, such selection shall be
made by a majority in interest of such Grantees or holders.
SECTION 22. In the event of any exercise of the option by Grantee, Issuer
and such Grantee shall execute and deliver all other documents and instruments
and take all other action that may be reasonably necessary in order to
consummate the transactions provided for by such exercise.
SECTION 23. Except to the extent Grantee exercises the Option, Grantee
shall have no rights to vote or receive dividends or have any other rights as a
shareholder with respect to shares of Issuer Common Stock covered hereby.
[SIGNATURE PAGE FOLLOWS]
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<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this Option
Agreement to be executed and delivered on its behalf by their respective
officers thereunto duly authorized, all as of the date first above written.
CATSKILL FINANCIAL CORPORATION
By: /s/ Wilbur J. Cross
-------------------
Name: Wilbur J. Cross
Title: Chairman, President and
Chief Executive Officer
TROY FINANCIAL CORPORATION
By: /s/ Daniel J. Hogarty, Jr.
---------------------------
Name: Daniel J. Hogarty, Jr.
Title: Chairman, President and
Chief Executive Officer
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<PAGE>
APPENDIX C - FAIRNESS OPINION OF RYAN, BECK & CO., INC.
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September 15, 2000
The Board of Directors
Catskill Financial Corporation
341 Main Street
Catskill, NY 12414
Members of the Board:
You have requested our opinion as investment bankers that the consideration to
be received in the Merger (the "Merger") between Catskill Financial Corporation
("Catskill") and an acquisition subsidiary of Troy Financial Corporation
("Troy"), the holding company for Troy Savings Bank, pursuant to the Agreement
and Plan of Merger dated as of June 7, 2000 ("Merger Agreement") is fair to the
holders of Catskill Common Stock from a financial point of view.
Pursuant to the Merger Agreement, at the Effective Time, Charlie Acquisition
Corporation, a Delaware corporation and wholly-owned subsidiary of Troy to be
formed in connection with the contemplated transactions, shall merge with and
into Catskill with Catskill as the surviving corporation. Each share of
Catskill's issued and outstanding shares of common stock will be converted into
the right to receive $23.00 in cash. Simultaneous with or as soon as practicable
after the Merger, Catskill, as the surviving corporation in the Merger, shall be
merged with and into Troy.
Ryan, Beck & Co., Inc. as a customary part of its investment banking business,
is engaged in the valuation of financial institutions and their securities in
connection with mergers and acquisitions and other corporate transactions. In
conducting our investigation and analysis of the Merger, we have met with
members of senior management of Catskill to discuss Catskill's operations,
historical financial statements, strategic plans and future prospects. We have
reviewed and analyzed material prepared in connection with the Merger, including
but not limited to the following: (i) the Merger Agreement and related
documents; (ii) the Proxy Statement; (iii) Troy's Annual Report to Shareholders
and Annual Report on Form 10-K for the fiscal year ended September 30, 1999 and
Troy's Quarterly Reports on Form 10-Q for the periods ended June 30, 2000, March
31, 2000, December 31, 1999, June 30, 1999 and March 31, 1999; (iv) Troy's
Prospectus, dated February 12, 1999 with respect to Troy's conversion from
mutual to stock form of organization; (v) Catskill's Annual Reports to
Shareholders on Form 10-K for the fiscal years
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Catskill Financial Corporation
September 15, 2000
Page 3
ended September 30, 1999, 1998 and 1997 and Catskill's Quarterly Reports on
Form10-Q for the periods ended June 30, 2000, March 31, 2000, December 31, 1999,
June 30, 1999 and March 31, 1999; (vi) Catskill's Proxy Statements dated January
14, 2000, January 7, 1999 and January 20, 1998; (vii) the historical stock
prices and trading volume of Catskill's common stock (viii) certain operating
and financial information provided to Ryan, Beck by the management of Catskill
relating to its business and prospects; (ix) the publicly available financial
data of thrift organizations which Ryan, Beck deemed generally comparable to
Catskill; and (x) the terms of recent acquisitions of commercial bank and thrift
organizations which Ryan, Beck deemed generally comparable in whole or in part
to Catskill. We also conducted or reviewed such other studies, analyses,
inquiries and examinations as we deemed appropriate.
While we have taken care in our investigation and analyses, we have relied upon
and assumed the accuracy, completeness and fairness of the financial and other
information provided to us by the respective institutions or which was publicly
available and have not assumed any responsibility for independently verifying
such information. We have also relied upon the management of Catskill as to the
reasonableness and achievability of the financial and operating forecasts and
projections (and the assumptions and bases therefor) provided to us and in
certain instances we have made certain adjustments to such financial and
operating forecasts which in our judgment were appropriate under the
circumstances. In addition, we have assumed with your consent that such
forecasts and projections reflect the best currently available estimates and
judgments of management. Ryan, Beck is not an expert in evaluating loan and
lease portfolios for purposes of assessing the adequacy of the allowances for
losses. Therefore, Ryan, Beck has not assumed any responsibility for making an
independent evaluation of the adequacy of the allowance for loan losses set
forth in the balance sheets of Troy and Catskill at June 30, 2000, and Ryan,
Beck assumed such allowances were adequate and complied fully with applicable
law, regulatory policy, sound banking practice and policies of the Securities
and Exchange Commission as of the date of such financial statements. We also
assumed that the Merger in all respects is, and will be consummated in
compliance with all laws and regulations applicable to Troy and Catskill. We
have not made or obtained any independent evaluations or appraisals of the
assets and liabilities of either Troy or Catskill or their respective
subsidiaries, nor have we reviewed any loan files of Troy or Catskill or their
respective subsidiaries.
In conducting our analysis and arriving at our opinion as expressed herein, we
have considered such financial and other factors as we have deemed appropriate
in the circumstances. Our opinion is necessarily based on economic, market and
other conditions and projections as they exist and can be evaluated on the date
hereof.
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<PAGE>
Catskill Financial Corporation
September 15, 2000
Page 4
We have been retained by the Board of Directors of Catskill as an independent
contractor to act as financial advisor to Catskill with respect to the Merger
and will receive a fee for our services, a significant portion of which is
contingent upon consummation of the Merger. We have also received a fee for
rendering this opinion. Ryan Beck has not had an investment banking relationship
with Troy and our research department does not provide published investment
analysis on Troy. However, Ryan Beck does make a market in Troy's common stock.
Prior to this engagement, Ryan, Beck has not had an investment banking
relationship with Catskill and Ryan, Beck's research department does not provide
published investment analysis on Catskill. However, Ryan, Beck does make a
market in Catskill's common stock.
In the ordinary course of our business as a broker-dealer, we may actively trade
equity securities of Catskill and Troy for our own account and the account of
our customers and, accordingly, may at any time hold a long or short position in
such securities.
Our opinion is directed to the Board of Directors of Catskill and does not
constitute a recommendation to any shareholder of Catskill as to how such
shareholder should vote at any shareholder meeting held in connection with the
Merger. Our opinion may not be used or circulated for any purpose or used in any
proxy statement without our consent.
Based upon and subject to the foregoing it is our opinion as investment bankers
that the consideration in the Merger as provided and described in the Merger
Agreement is fair to the holders of Catskill common stock from a financial point
of view.
Very truly yours,
/s/Ryan, Beck&Co., Inc.
-----------------------
Ryan, Beck & Co., Inc.
C-4
<PAGE>
APPENDIX D-- SECTION 262 OF THE DELAWARE GENERAL CORPORATION LAW
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<PAGE>
APPENDIX D
TEXT OF SECTION 262 OF THE DELAWARE GENERAL CORPORATION LAW
262 APPRAISAL RIGHTS. - (a) Any shareholder of a corporation of this
State who holds shares of stock on the date of the making of a demand pursuant
to subsection (d) of this section with respect to such shares, who continuously
holds such shares through the effective date of the merger or consolidation, who
has otherwise complied with subsection (d) of this section and who has neither
voted in favor of the merger or consolidation nor consented thereto in writing
pursuant to Section 228 of this title shall be entitled to an appraisal by the
Court of Chancery of the fair value of the stockholder's shares of stock under
the circumstances described in subsections (b) and (c) of this section. As used
in this section, the word "stockholder" means a holder of record of stock in a
stock corporation and also a member of record of a nonstock corporation; the
words "stock" and "share" mean and include what is ordinarily meant by those
words and also membership or membership interest of a member of a nonstock
corporation; and the words "depository receipt" mean a receipt or other
instrument issued by a depository representing an interest in one or more
shares, or fractions thereof, solely of stock of a corporation, which stock is
deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to Section 251 (other than a merger effected pursuant to
Section 251(g) of this title), Section 252, Section 254, Section 257, Section
258, Section 263 or Section 264 of this title:
(1) Provided, however, that no appraisal rights under this section
shall be available for the shares of any class or series of stock, which stock,
or depository receipts in respect thereof, at the record date fixed to determine
the stockholders entitled to receive notice of and to vote at the meeting of
stockholders to act upon the agreement of merger or consolidation, were either
(I) listed on a national securities exchange or designated as a national market
system security on an interdealer quotation system by the National Association
of Securities Dealers, Inc. or (ii) held of record by more than 2,000 holders;
and further provided that no appraisal rights shall be available for any shares
of stock of the constituent corporation surviving a merger if the merger did not
require for its approval the vote of the stockholders of the surviving
corporation as provided in subsection (f) of Section251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights
under this section shall be available for the shares of any class or series of
stock of a constituent corporation if the holders thereof are required by the
terms of an agreement of merger or consolidation pursuant to Sections 251, 252,
254, 257, 258, 263 and 264 of this title to accept for such stock anything
except:
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a. Shares of stock of the corporation surviving or resulting from such
merger or consolidation, or depository receipts in respect thereof;
b. Shares of stock of any other corporation, or depository receipts in
respect thereof, which shares of stock (or depository receipts in respect
thereof) or depository receipts at the effective date of the merger or
consolidation will be either listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or held of record
by more than 2,000 holders;
c. Cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a. and b. of this paragraph; or
d. Any combination of the shares of stock, depository receipts and cash
in lieu of fractional shares or fractional depository receipts described in the
foregoing subparagraphs a., b. and c. of this paragraph.
(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under Section 253 of this title is not owned by the
parent corporation immediately prior to the merger, appraisal rights shall be
available for the shares of the subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of incorporation
that appraisal rights under this section shall be available for the shares of
any class or series of its stock as a result of an amendment to its certificate
of incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets of
the corporation. If the certificate of incorporation contains such a provision,
the procedures of this section, including those set forth in subsections (d) and
(e) of this section, shall apply as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights
are provided under this section is to be submitted for approval at a meeting of
stockholders, the corporation, not less than 20 days prior to the meeting, shall
notify each of its stockholders who was such on the record date for such meeting
with respect to shares for which appraisal rights are available pursuant to
subsections (b) or (c) hereof that appraisal rights are available for any or all
of the shares of the constituent corporations, and shall include in such notice
a copy of this section. Each stockholder electing to demand the appraisal of his
shares shall deliver to the corporation, before the taking of the vote on the
merger or consolidation, a written demand for appraisal of his shares. Such
demand will be sufficient if it reasonably informs the corporation of the
identity of
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<PAGE>
the stockholder and that the stockholder intends thereby to demand the appraisal
of his shares. A proxy or vote against the merger or consolidation shall not
constitute such a demand. A stockholder electing to take such action must do so
by a separate written demand as herein provided. Within 10 days after the
effective date of such merger or consolidation, the surviving or resulting
corporation shall notify each stockholder of each constituent corporation who
has complied with this subsection and has not voted in favor of or consented to
the merger or consolidation of the date that the merger or consolidation has
become effective; or
(2) If the merger or consolidation was approved pursuant to Section 228
or Section 253 of this title, each constituent corporation, either before the
effective date of the merger or consolidation or within ten days thereafter,
shall notify each of the holders of any class or series of stock of such
constituent corporation who are entitled to appraisal rights of the approval of
the merger or consolidation and that appraisal rights are available for any or
all shares of such class or series of stock of such constituent corporation, and
shall include in such notice a copy of this section; provided that, if the
notice is given on or after the effective date of the merger or consolidation,
such notice shall be given by the surviving or resulting corporation to all such
holders of any class or series of stock of a constituent corporation that are
entitled to appraisal rights. Such notice may, and, if given on or after the
effective date of the merger or consolidation, shall, also notify such
stockholders of the effective date of the merger or consolidation. Any
stockholder entitled to appraisal rights may, within 20 days after the date of
mailing of such notice, demand in writing from the surviving or resulting
corporation the appraisal of such holder's shares. Such demand will be
sufficient if it reasonably informs the corporation of the identity of the
stockholder and that the stockholder intends thereby to demand the appraisal of
such holder's shares. If such notice did not notify stockholders of the
effective date of the merger or consolidation, either (I) each such constituent
corporation shall send a second notice before the effective date of the merger
or consolidation notifying each of the holders of any class or series of stock
of such constituent corporation that are entitled to appraisal rights of the
effective date of the merger or consolidation or (ii) the surviving or resulting
corporation shall send such a second notice to all such holders on or within 10
days after such effective date; provided, however, that if such second notice is
sent more than 20 days following the sending of the first notice, such second
notice need only be sent to each stockholder who is entitled to appraisal rights
and who has demanded appraisal of such holder's shares in accordance with this
subsection. An affidavit of the secretary or assistant secretary or of the
transfer agent of the corporation that is required to give either notice that
such notice has been given shall, in the absence of fraud, be prima facie
evidence of the facts stated therein. For purposes of determining the
stockholders entitled to receive either notice, each constituent corporation may
fix, in advance, a record date that shall be not more than 10 days prior to the
date the notice is given, provided, that if the notice is given on or after the
effective date of the merger or consolidation, the record date shall be such
effective date. If no record date is fixed and the notice is given prior to the
effective date, the record date shall be the close of business on the day next
preceding the day on which the notice is given.
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(e) Within 120 days after the effective date of the merger or
consolidation, the surviving or resulting corporation or any stockholder who has
complied with subsections (a) and (d) hereof and who is otherwise entitled to
appraisal rights, may file a petition in the Court of Chancery demanding a
determination of the value of the stock of all such stockholders.
Notwithstanding the foregoing, at any time within 60 days after the effective
date of the merger or consolidation, any stockholder shall have the right to
withdraw his demand for appraisal and to accept the terms offered upon the
merger or consolidation. Within 120 days after the effective date of the merger
or consolidation, any stockholder who has complied with the requirements of
subsections (a) and (d) hereof, upon written request, shall be entitled to
receive from the corporation surviving the merger or resulting from the
consolidation a statement setting forth the aggregate number of shares not voted
in favor of the merger or consolidation and with respect to which demands for
appraisal have been received and the aggregate number of holders of such shares.
Such written statement shall be mailed to the stockholder within 10 days after
his written request for such a statement is received by the surviving or
resulting corporation or within 10 days after expiration of the period for
delivery of demands for appraisal under subsection (d) hereof, whichever is
later.
(f) Upon the filing of any such petition by a stockholder, service of a
copy thereof shall be made upon the surviving or resulting corporation, which
shall within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the addresses
therein stated. Such notice shall also be given by 1 or more publications at
least 1 week before the day of the hearing, in a newspaper of general
circulation published in the City of Wilmington, Delaware or such publication as
the Court deems advisable. The forms of the notices by mail and by publication
shall be approved by the Court, and the costs thereof shall be borne by the
surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled to
appraisal rights. The Court may require the stockholders who have demanded an
appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as to
such stockholder.
(h) After determining the stockholders entitled to an appraisal, the
Court shall appraise the shares, determining their fair value exclusive of any
element of value arising from the
D-5
<PAGE>
accomplishment or expectation of the merger or consolidation, together with a
fair rate of interest, if any, to be paid upon the amount determined to be the
fair value. In determining such fair value, the Court shall take into account
all relevant factors. In determining the fair rate of interest, the Court may
consider all relevant factors, including the rate of interest which the
surviving or resulting corporation would have had to pay to borrow money during
the pendency of the proceeding. Upon application by the surviving or resulting
corporation or by any stockholder entitled to participate in the appraisal
proceeding, the Court may, in its discretion, permit discovery or other pretrial
proceedings and may proceed to trial upon the appraisal prior to the final
determination of the stockholder entitled to an appraisal. Any stockholder whose
name appears on the list filed by the surviving or resulting corporation
pursuant to subsection (f) of this section and who has submitted his
certificates of stock to the Register in Chancery, if such is required, may
participate fully in all proceedings until it is finally determined that he is
not entitled to appraisal rights under this section.
(I) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to the
stockholders entitled thereto. Interest may be simple or compound, as the Court
may direct. Payment shall be so made to each such stockholder, in the case of
holders of uncertificated stock forthwith, and the case of holders of shares
represented by certificates upon the surrender to the corporation of the
certificates representing such stock. The Court's decree may be enforced as
other decrees in the Court of Chancery may be enforced, whether such surviving
or resulting corporation be a corporation of this State or of any state.
(j) The costs of the proceeding may be determined by the Court and
taxed upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation,
no stockholder who has demanded his appraisal rights as provided in subsection
(d) of this section shall be entitled to vote such stock for any purpose or to
receive payment of dividends or other distributions on the stock (except
dividends or other distributions payable to stockholders of record at a date
which is prior to the effective date of the merger or consolidation); provided,
however, that if no petition for an appraisal shall be filed within the time
provided in subsection (e) of this section, or if such stockholder shall deliver
to the surviving or resulting corporation a written withdrawal of his demand for
an appraisal and an acceptance of the merger or consolidation, either within 60
days after the effective date of the merger or consolidation as provided in
subsection (e) of this section or thereafter with the written approval of the
corporation, then the right of such stockholder to an appraisal shall cease.
Notwithstanding the foregoing, no appraisal proceeding in the Court of
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Chancery shall be dismissed as to any stockholder without the approval
of the Court, and such approval may be conditioned upon such terms as the Court
deems just.
(l) The shares of the surviving or resulting corporation to which the
shares of such objecting stockholders would have been converted had they
assented to the merger or consolidation shall have the status of authorized and
unissued shares of the surviving or resulting corporation.
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APPENDIX E- PROXY CARD
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<PAGE>
REVOCABLE PROXY
CATSKILL FINANCIAL CORPORATION
SPECIAL MEETING OF SHAREHOLDERS
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October 17, 2000
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The undersigned hereby appoints the Board of Directors of Catskill Financial
Corporation with full powers of substitution, as attorneys and proxies for the
undersigned, to vote all shares of common stock of Catskill Financial
Corporation which the undersigned is entitled to vote at a special meeting of
shareholders, to be held at our main office located at 341 Main Street,
Catskill, New York, on October 17, 2000, at 7:00 p.m., local time, and at any
and all adjournments thereof, as follows:
FOR AGAINST ABSTAIN
1. To approve the adoption of the Agreement [ ] [ ] [ ]
and Plan of Merger dated June 7, 2000
between Troy Financial Corporation,
Charlie Acquisition Corporation and
Catskill Financial Corporation.
2. In their discretion, upon such other [ ] [ ] [ ]
matters as may properly come before
the meeting, including a proposal to
adjourn or postpone the special meeting
for the purpose of soliciting additional
proxies in favor of Proposal 1.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ADOPTION OF THE MERGER
AGREEMENT.
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THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS ARE SPECIFIED, THIS
PROXY WILL BE VOTED FOR THE PROPOSITION STATED. THIS PROXY CARD WILL ALSO BE
USED TO PROVIDE VOTING INSTRUCTIONS TO THE TRUSTEE FOR ANY SHARES OF COMMON
STOCK OF CATSKILL FINANCIAL CORPORATION ALLOCATED TO PARTICIPANTS UNDER THE
CATSKILL FINANCIAL CORPORATION EMPLOYEE STOCK OWNERSHIP PLAN. IF ANY OTHER
BUSINESS IS PRESENTED AT SUCH MEETING, THIS PROXY WILL BE VOTED AS DIRECTED BY A
MAJORITY OF THE BOARD OF DIRECTORS. AT THE PRESENT TIME, THE BOARD OF DIRECTORS
KNOWS OF NO OTHER BUSINESS TO BE PRESENTED AT THE MEETING.
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<PAGE>
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
Should the undersigned be present and elect to vote at the special
meeting or at any adjournment thereof and after notification to the Secretary of
Catskill Financial Corporation at the Meeting of the shareholder's decision to
terminate this proxy, then the power of said attorneys and proxies shall be
deemed terminated and of no further force and effect.
The undersigned acknowledges receipt from Catskill Financial
Corporation prior to the execution of this proxy of notice of the special
meeting, and proxy statement dated September 15, 2000.
Dated: __________, 2000
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PRINT NAME OF SHAREHOLDER PRINT NAME OF SHAREHOLDER
------------------------------ --------------------------------
SIGNATURE OF SHAREHOLDER SIGNATURE OF SHAREHOLDER
Please sign exactly as your name appears on this proxy card. When signing as
attorney, executor, administrator, trustee or guardian, please give your full
title. If shares are held jointly, each holder should sign.
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PLEASE COMPLETE, DATE, SIGN AND MAIL THIS PROXY PROMPTLY IN THE ENCLOSED
POSTAGE-PREPAID ENVELOPE.
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