GSB FINANCIAL
CORPORATION
One South Church Street
Goshen, New York 10924
(914) 294-6151
December 28, 1998
Dear Fellow Stockholder:
On behalf of the Board of Directors and management of GSB Financial
Corporation (the "Company"), we cordially invite you to attend our Annual
Meeting of Stockholders of the Company. The meeting will be held at 4:00 p.m.,
New York time, on January 27, 1999 at the main office of Goshen Savings Bank,
One South Church Street, Goshen, New York 10924.
At the meeting, stockholders will be asked to elect one director to serve
for a three year term and to ratify the appointment of auditors. The Board of
Directors has nominated Stephen O. Hopkins to serve for a three year term. We
urge you to exercise your rights as a stockholder to vote and participate in
this process. Your Board of Directors unanimously recommends that you vote "For"
the director nominated by the Board and the other proposal.
Please read the enclosed Proxy Statement and then complete, sign and date
the enclosed proxy card and return it in the accompanying postage prepaid return
envelope as promptly as possible. We encourage you to return the proxy card even
if you plan to attend the meeting. This will save the Company the additional
expense of soliciting proxies and will ensure that your shares are represented
at the meeting.
Sincerely,
Thomas V. Guarino
Chairman of the Board
<PAGE>
GSB Financial Corporation
One South Church Street
Goshen, New York 10924
(914) 294-6151
----------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
----------
To be Held on January 27, 1999
Please take notice that the Annual Meeting of Stockholders (the "Meeting")
of GSB Financial Corporation (the "Company") will be held at 4:00 p.m., New York
time, on January 27, 1999 at the main office of Goshen Savings Bank, One South
Church Street, Goshen, New York 10924.
A Proxy Card and a Proxy Statement for the Meeting are included with this
notice.
The Meeting is for the purpose of considering and acting upon:
1. The election of one director to serve for a three year term and until
his successor has been duly elected and qualified;
2. The ratification of the appointment of Nugent & Haeussler, P.C. as
auditors for the Company for the fiscal year ending December 31, 1999;
and
3. Such other matters as may properly come before the Meeting or any
adjournments. The Board of Directors is not aware of any other
business to come before the Meeting.
Any action may be taken on these proposals at the Meeting on the date
specified above, or on any date or dates to which the Meeting may be adjourned.
Stockholders of record at the close of business on December 16, 1998 (the
"Record Date") are the stockholders entitled to vote at the Meeting and any
adjournments.
Please complete and sign the enclosed form of proxy and mail it promptly in
the enclosed envelope. The proxy will not be used if you attend and vote at the
Meeting in person.
BY ORDER OF THE BOARD OF DIRECTORS
Goshen, New York
December 28, 1998
IMPORTANT: THE PROMPT RETURN OF PROXIES WILL SAVE US THE EXPENSE OF FURTHER
REQUESTS FOR PROXIES TO ENSURE A QUORUM AT THE MEETING. A SELF ADDRESSED
ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE. NO POSTAGE IS REQUIRED IF MAILED
WITHIN THE UNITED STATES.
<PAGE>
PROXY STATEMENT
----------
GSB FINANCIAL CORPORATION
ANNUAL MEETING OF STOCKHOLDERS
January 27, 1999
----------
This Proxy Statement is furnished in connection with the solicitation on
behalf of the Board of Directors of GSB Financial Corporation (the "Company"),
the parent company of Goshen Savings Bank (the "Bank"), of proxies to be used at
the Annual Meeting of Stockholders of the Company (the "Meeting") which will be
held at the main office of the Bank, One South Church Street, Goshen, New York
10924 on January 27, 1999, at 4:00 p.m., New York time, and all adjournments of
the Meeting. The accompanying Notice of Meeting and this Proxy Statement are
first being mailed to stockholders on or about December 28, 1998.
At the Meeting, stockholders of the Company are being asked to consider and
vote upon the election of one director for a three year term and to ratify the
appointment of Nugent & Haeussler, P.C. as the auditors of the Company for the
fiscal year ending December 31, 1999. The Board of Directors has fixed December
16, 1998 as the Record Date for determining stockholders entitled to notice of
and to vote at the Meeting. As of the Record Date, there were 2,170,450 shares
of Common Stock, par value $.01 per share, issued and outstanding.
Vote Required and Proxy Information
Each share of the Company's Common Stock, par value $.01 per share (the
"Common Stock"), is entitled to one vote on each matter to come before the
Meeting. Directors are elected by a plurality of the votes cast at the Meeting.
There is no cumulative voting in the election of directors. The ratification of
the appointment of Nugent & Haeussler, P.C. requires the affirmative vote of a
majority of the votes cast. Properly executed proxies in the form solicited by
the Board of Directors which are received prior to or at the Meeting, and not
revoked, will be voted as marked on the proxy card. If no instructions are
indicated, such proxies, if signed and returned, will be voted in favor of the
election of the nominee named below and in favor of the ratification of the
appointment of auditors. The Company does not know of any matters, other than
those described in this Proxy Statement, that are to come before the Meeting. If
any other matters are properly presented at the Meeting for action, including
the adjournment of the Meeting, the persons named in the enclosed form of proxy
will have the discretion to vote on such matters in accordance with their best
judgment.
Proxies marked to abstain with respect to any matter and broker non-vote
will not affect the vote on the election of the director or the ratification of
the appointment of auditors. One-third of the shares of the Company's Common
Stock, present in person or represented by proxy, constitutes a quorum for
purposes of the Meeting. Abstentions and broker non-votes are counted as present
for determining a quorum.
Stockholders may revoke their proxies by: (i) filing with the Secretary of
the Company at or before the Meeting a written notice of revocation bearing a
later date than the proxy, (ii) duly executing a subsequent proxy relating to
the same shares and delivering it to the Secretary of the Company at or before
the Meeting, or (iii) attending the Meeting and voting in person (although
attendance at the Meeting will not in and of itself constitute revocation of a
proxy). Any written notice revoking a proxy must be delivered to Barbara A.
Carr, Corporate Secretary, GSB Financial Corporation, One South Church Street,
Goshen, New York 10924. The Company must actually receive the revocation before
the proxy is voted in order for the revocation to be valid.
<PAGE>
In order for a stockholder to nominate a person to the Board of Directors
or bring any other proposal to a vote at any annual stockholders' meeting, the
stockholder must provide written notice to the Secretary of the Company
identifying the proposed nominee or proposal. The notice of nomination, or
notice of any other proposal which a stockholder may bring before an annual
meeting, must set forth the name of each person such stockholder proposes to
nominate for director or a brief description of the proposal, the name and
address of the stockholder, the number of shares of common stock owned by such
stockholder, any material interest of such stockholder in such business and all
other information required under the Securities and Exchange Act of 1934 and the
bylaws of the Company. The Company must receive the notice at least 90 days
prior to an annual meeting, provided, however, for any annual meeting held in
more than 30 days in advance of the anniversary of the prior annual meeting, the
notice must be received not later than the close of business on the tenth
calendar day after the notice of the meeting is first mailed to stockholders or
publicly announced. The Company must receive the notice at its principal
executive offices, One South Church Street, Goshen, New York, 10924, Attention:
Barbara A. Carr, Corporate Secretary.
PROPOSAL I -ELECTION OF DIRECTORS
The Board of Directors of the Company currently consists of six members.
Richard C. Durland, Executive Vice President, Treasurer and a director of the
Company, has retired as an officer and a director effective December 31, 1998.
The Board of Directors has amended the bylaws to reduce the size of the Board of
Directors to six directors in connection with Mr. Durland's resignation. The
Board of Directors is divided into three classes and the Company's bylaws
provide that directors are elected for staggered three-year terms. One director
will be elected at the 1999 Annual Meeting to hold office until the Annual
Meeting of Stockholders in the year 2002 and until his successor has been
elected and qualified or until he is removed or replaced. Stephen O. Hopkins has
been nominated by the Board of Directors for election. He has consented to being
named in this proxy statement and to serve if elected. If he becomes unavailable
for election for any presently unforeseen reason, the persons authorized to cast
the votes represented by the enclosed proxy will have the right to use their
discretion to vote for a substitute.
INFORMATION CONCERNING THE BOARD OF
DIRECTORS AND EXECUTIVE OFFICERS
Set forth below is certain information, as of September 30, 1998, with
respect to the nominee for director, directors continuing in office and
executive officers. There are no arrangements or understandings pursuant to
which any director was selected to serve as such, and there are no family
relationships between any directors or executive officers of the Company. All
directors and nominees have been directors of the Company since it was formed in
March 1997.
Director Nominated For a Term Expiring In 2002
<TABLE>
<CAPTION>
Term as Director
Name and Age Position With the Company and the Bank Expires
- ------------ -------------------------------------- ----------------
<S> <C> <C>
Stephen O. Hopkins, 60 Director of the Company and the Bank 1999
</TABLE>
2
<PAGE>
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
THAT STOCKHOLDERS VOTE IN FAVOR OF MR. HOPKINS
Directors Whose Terms Will Continue Beyond The Meeting
<TABLE>
<CAPTION>
Term as Director
Name and Age Position With the Company and the Bank Expires
- ------------ -------------------------------------- ----------------
<S> <C> <C>
Gene J. Gengel, 57 Director of the Company and the Bank 2001
Clifford E. Kelsey, Jr., 66 Director, President and Chief Executive 2000
Officer of the Company and the Bank
Roy L. Lippincott, 58 Director of the Company and the Bank 2000
Herbert C. Mueller, 71 Director of the Company and the Bank 2000
Thomas V. Guarino, 45 Director of the Company and the Bank 2001
</TABLE>
Board of Directors - Biographical Information
Business experience for the directors listed below comprises experience for
at least the past five years.
Clifford E. Kelsey, Jr. served as the President and Chief Executive Officer
of the Bank from April 1973 until December 31,1998, and continues to serve,
since 1973, as a director of the Bank. Mr. Kelsey was involved in the financial
institutions industry for more than 30 years. He served as President and Chief
Executive Officer of the Company from its inception through December 31, 1998
and remains a director of the Company. He also has served as a director of the
Institutional Investors Capital Appreciation Fund, Inc., the Arden Hill
Hospital, the Arden Hill Life Care Center and the Arden Hill Life Care
Retirement Community since 1994.
Gene J. Gengel has been a director of the Bank since 1995. Mr. Gengel is
the Executive Director of the Orange County Cerebral Palsy Association
Rehabilitation Center, a position he has held since 1992. From 1965 to 1992, Mr.
Gengel held various management positions in the telephone industry including
General Manager of the Highland Telephone Company, a subsidiary of the Rochester
Telephone Corporation. Mr. Gengel is a member of the Goshen Rotary Club and the
Elks Club. He has been recognized as a Professional in Human Resources by the
Society for Human Resources Management and has completed the Cornell certificate
program in Collective Bargaining.
Thomas V. Guarino has been a director of the Bank since 1996 and Chairman
of the Board of Directors of Company since April 1998. Mr. Guarino is the
President and Senior Portfolio Manager of the Hudson Valley Investment Advisors,
Inc., an investment management and advisory company, a position he has held
since 1995. Prior to that, he had been, since 1988, a Vice President of Fleet
Investment Advisors, Inc. and was Vice President in charge of investments of
Norstar Bank of the Hudson Valley from 1981 to 1988. Mr. Guarino was an Adjunct
Assistant Professor of finance for Orange County Community College from 1983
until 1995. He has served as the past president of the Goshen Rotary Club, the
Mid-Hudson Chapter of the American Institute of Banking and the Hudson Valley
Estate Planning Council. Mr. Guarino also serves as a trustee of the Goshen
Rotary Scholarship Foundation, Inc. Mr. Guarino was elected President of the
Bank, effective January 1, 1999, to satisfy regulatory requirements that the
Bank have a person with that title.
Stephen O. Hopkins has been a director of the Bank since 1980. Mr. Hopkins
has been the regional representative for the R.D. Murray Fire Apparatus Company
since May 1997 and S.V.I. Trucks since 1992, supplying fire and rescue
3
<PAGE>
apparatus to fire stations. From 1981 to 1983, Mr. Hopkins served as the
President of the Cataract Engine & Hose Co. He has been the Town Supervisor for
the Town of Goshen since 1996. Mr. Hopkins served as the Mayor of the Village of
Goshen from 1983 until 1989 and as the chief of the Goshen Fire District from
1975 to 1978.
Roy L. Lippincott has been a director of the Bank since 1978. Mr.
Lippincott, now retired, was the President of Lippincott Funeral Chapel, Inc. in
Goshen, New York, and from 1981 until 1996 he was President of Lippincott
Funeral Home Inc. in Chester, New York. From 1971 until 1996, Mr. Lippincott was
President of Ralston Lippincott Hasbrouck Ingrasia Funeral Home, Inc. located in
Middletown, New York. Mr. Lippincott served as the Orange County Coroner from
1971 until 1985.
Herbert C. Mueller has been a director of the Bank since 1973. Dr. Mueller
is a retired veterinarian, past owner of the Orange County Veterinary Hospital
and past president of the Hudson Valley Veterinary Association. He also serves
as the Treasurer and director of the Black Meadow Club, a local hunting club.
Dr. Mueller served in the 11th Airborne Division from 1946 to 1947.
Executive Officers Who Are Not Directors
Executive officers are elected for one year terms and serve at the pleasure
of the Board of Directors. Provided below is certain information regarding the
executive officers of the Company and the Bank who are not directors.
Stephen W. Dederick joined the Bank in February 1997 as its Senior Vice
President and Chief Financial Officer. Mr. Dederick also serves as Chief
Financial Officer and Treasurer of the Company and, at January 1, 1999, will
also become Treasurer of the Bank. Prior to joining the Bank, he was the Vice
President and Controller of MSB Bank, where he also served on the
Asset/Liability Committee and the Investment Committee. Mr. Dederick joined MSB
Bank in 1985. He is active in scouting and is a member and past treasurer of the
Pine Bush Lions Club.
Rolland B. Peacock, III joined the Bank in March 1998 as its Senior Vice
President. Prior to joining the Bank, he was a Vice President with Albank
Commercial and thereafter with Key Bank, serving in a variety of positions at
such institutions over a period of 25 years, including commercial lending,
branch administration, business development and human resources. He is Chairman
of the Board of Trustees of the Arden Hill Foundation and a trustee of Arden
Hill Hospital. Mr. Peacock is also a Vice President and member of the Executive
Committee of the Hudson Valley Boy Scout Council, a trustee of McQuade Family
Services, a member of the Goshen Rotary Club and active in the Chamber of
Commerce of Orange County.
Barbara A. Carr has served as the Bank's Assistant Vice President and
Senior Mortgage Officer since 1998. Ms. Carr joined the Bank in 1976 and has
served in various capacities since that time including Teller, Auditor, Mortgage
Officer, Secretary and Assistant Vice President. She serves as a director of the
Hudson Valley Association of Professional Mortgage Women, a member of the
Mid-Hudson Valley Mortgage Banker's Association, and a volunteer counselor with
the Cornell Cooperative Extension's Family Budget Counseling Program.
Meetings of the Board of Directors and Certain Committees
The Company's Board of Directors held ten meetings during the 1998 fiscal
year. Each of the directors of the Company is also a director of the Bank. The
Board of Directors of the Company has a Compensation, Executive, Strategic
Planning and Audit Committee. The entire Board of Directors acts as a nominating
committee. The Bank has a Compensation Committee and an Examining Committee.
The Compensation Committee. The Compensation Committee is responsible for
compensation matters of the Company and is responsible for administering and
making grants or awards under the Stock Option Plan and the Incentive Stock
Award Plan (the "ISAP"). The committee also oversees the Company's Employee
Stock Ownership Plan (the "ESOP").
4
<PAGE>
The Compensation Committee of the Bank consists of the same persons as the
Compensation Committee of the Company, none of whom are salaried officers of the
Company or the Bank. The committee is responsible for determining the
compensation of executive officers and employees of the Bank. The committee of
the Company met two times during the 1998 fiscal year, once in conjunction with
the same committee of the Bank.
The Executive Committee is comprised of all Board members and meets as
necessary between meetings of the full Board of Directors and generally has the
full authority of the Board. The committee met three times during the 1998
fiscal year.
Strategic Planning Committee is compromised of all Board members and
certain executive officers which met as necessary regarding matters affecting
the future and goals of the Bank and the Company. The committee met 41 times
during the 1998 fiscal year.
The Audit Committee of the Company, which also serves as the audit
committee of the Bank, consists of directors Mueller, Gengel and Guarino. The
Audit Committee (i) recommends and maintains communications with the independent
auditors; (ii) reviews the status of the annual audit; and (iii) supervises the
Bank's internal auditor. The Committee met two times in fiscal 1998.
Any stockholder desiring to suggest a nominee to the Board of Directors as
a possible director should submit in writing a detailed resume of such person
and a statement of such person's knowledge, expertise and experience in banking
and financial matters. Stockholders of record may nominate candidates as
directors, provided, however, that they must follow the procedural requirements
discussed above under the caption "Vote Required and Proxy Information."
Voting Securities and Certain Holders Thereof
Stockholders of record as of the close of business on the Record Date will
be entitled to one vote for each share of Common Stock then held. As of that
date, the Company had 2,170,450 shares of Common Stock issued and outstanding.
The following table sets forth information regarding share ownership of (i)
those persons or entities known by management to own beneficially more than five
percent of the Common Stock, (ii) each of the Company's directors, (iii) each
officer of the Company and the Bank who made in excess of $100,000 (salary and
bonus) during the fiscal year ended September 30, 1998 (the "Named Officers");
and (iv) all directors and executive officers of the Company and the Bank as a
group. Information with respect to persons who own beneficially more than five
percent of the Common Stock is based upon filings made pursuant to Section 13 of
the Securities Exchange Act and other sources believed by the Company to be
reliable.
5
<PAGE>
<TABLE>
<CAPTION>
Shares Beneficially Owned at Percent of
Beneficial Owner December 16, 1998(1) class(2)
- ---------------- ---------------------------- ----------
<S> <C> <C>
GSB Financial Corporation
Employee Stock Ownership Plan(3) 179,860 8.3%
One South Church Street
Goshen, NY 10924
Josiah T. Austin(4) 161,000 7.4%
El Coronado Ranch
Star Route Box 395
Pearce, AZ 85625
Warwick Community Bancorp Inc. 124,600 5.7%
18 Oakland Avenue
Warwick, NY 10990
Gould Investors L.P.(5) 198,570 9.1%
60 Cutter Mill Road, Suite 303
Great Neck, NY 11021
Clifford E. Kelsey, Jr., President
Chief Executive Officer and 21,000(6) *
Director
</TABLE>
- ----------
(1) The amount reported represents shares held directly, as well as shares
allocated to its participants by the Company's Employee Stock Ownership Plan
(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 4,496 shares
awarded to each non-employee director pursuant to the Company's Incentive Stock
Award Plan (the "ISAP").
(2) Based upon 2,170,450 shares outstanding on the Record Date. An asterisk
("*") means less than 1%.
(3) Includes 8,993 shares allocated to ESOP participants. Of these allocated
shares, 4,053 are allocated to executive officers and also included elsewhere in
this table as appropriate. The trustee of the ESOP is Marine Midland Bank.
Subject to the trustee's fiduciary responsibilities, the trustee will vote
allocated shares as instructed by the applicable participant. The trustee will
vote allocated shares as to which no instructions are received and any shares
that have not been allocated in the same proportion as allocated shares for
which voting instructions are received.
(4) Based upon a Rule 13d filing pursuant to the Exchange Act, which reflects
that Josiah T. Austin has the sole voting power over 161,000 shares, including
17,000 shares in his own name and 144,000 shares owned by El Coronado Holdings,
L.L.C. of which Mr. Austin is sole managing member.
(5) Shares are beneficially owned by an investment advisory limited partnership
for investment purposes and are estimated based upon a Rule 13d filing pursuant
to the Exchange Act and other publicly available information.
(6) Includes 5,000 shares owned by Mr. Kelsey's Individual Retirement Account
("IRA") and 6,000 ISAP shares. Mr. Kelsey retired as an officer effective
December 31, 1998. He does, however, continue to be a director.
6
<PAGE>
<TABLE>
<S> <C> <C>
Richard C. Durland, Executive
Vice President, Treasurer and 11,000(7) *
Director
Gene J. Gengel, Director 12,839(8) *
Thomas V. Guarino, Director 18,598(9) *
Stephen O. Hopkins, Director 6,996(10) *
Roy L. Lippincott, Director 19,496(11) *
Herbert C. Mueller, Director 18,856(12) *
Directors and Executive officers
of the Company and the Bank, 114,825(13) 5.3%
as a group (12 persons)
</TABLE>
Director Compensation
Directors who are not employees of the Company or the Bank or any of their
subsidiaries are paid a fee of $500 for each regular Board meeting and $300 for
each committee meeting of the Company or the Bank. Each non-employee chairman of
the various committees is paid a fee of $450 for each committee meeting.
Directors are also eligible for participation in the Company's Stock Option Plan
and ISAP.
Executive Compensation
The following table sets forth information concerning the compensation paid
to former President and Chief Executive Officer Clifford E. Kelsey, Jr. and
former Executive Vice President Richard C. Durland, the only executive officers
who each had a salary in excess of $100,000 for the 1998 fiscal year.
- ----------
(7) Includes 600 shares owned in Mr. Durland's name as custodian for one of his
children, 400 shares owned directly by one of his children and 5,000 ISAP
shares. Mr. Durland was an officer and director on the Record Date but has
retired effective December 31, 1998.
(8) All shares are owned by Mr. Gengel's IRA.
(9) Includes 500 shares owned by Mr. Guarino's spouse and 2,000 shares owned by
him as custodian for his children.
(10) Includes 2,000 shares owned by Mr. Hopkins' IRA.
(11) All shares are owned by a corporate profit sharing trust of which Mr.
Lippincott is the trustee and the beneficiary.
(12) Includes 5,000 shares owned by Mr. Mueller's IRA and 6,860 shares owned by
his spouse.
(13) Includes 4,053 ESOP shares allocated to executive officers and ISAP shares
awarded but not yet vested which can be voted at the Meeting totaling 12,800 for
executive officers and 22,480 for non-employee directors.
7
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Summary Compensation Table
- ------------------------------------------------------------------------------------------------------------------------------------
Long-Term Compensation
Annual Compensation Awards
- ------------------------------------------------------------------------------------------------------------------------------------
Options/Stock
Restricted Appreciation
Name and Principal Fiscal Other Annual Stock Rights All Other
Position Year Salary($) Bonus($) Compensation($)(1) Awarded($)(2) ("SARs")(#)(3) Compensation(4)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Clifford E. Kelsey, Jr., 1998 $134,266 None None $74,880 15,000 $6,120
President and Chief
Executive Officer
1997 $129,611 None None None None $5,712
1996 $123,610 None None None None $4,717
- ------------------------------------------------------------------------------------------------------------------------------------
Richard C. Durland 1998 $101,485 None None $62,400 12,000 $3,334
Executive Vice
President and 1997 $ 99,190 None None None None $3,238
Director
1996 $ 94,246 None None None None $3,058
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Compensation Committee Report on Executive Compensation
In fulfillment of Securities and Exchange Commission's requirements for
disclosure in proxy materials of the Compensation Committee Report on Executive
Compensation Committee's policies regarding compensation of executive officers,
the Committee has prepared the following report for inclusion in this proxy
statement.
General Policy Considerations. The Board of Directors of the Bank has
delegated to its Compensation Committee the responsibility and authority to
oversee the general compensation policies of the Bank and to establish
compensation plans and specific compensation levels for executive officers. The
Compensation Committee of the Company has been delegated the responsibility and
authority to oversee implementation of, and approve grants and awards under, the
Company's Stock Option Plan and the Company's ISAP. Both committees consist of
all the non-officer directors so decisions of the two committees should be
viewed together, and for the purposes of this discussion they will be referred
to as the Compensation Committee.
- ----------
(1) Neither Mr. Kelsey or Mr. Durland received additional benefits or
perquisites which in the aggregate exceeded the lesser of $50,000 or 10% of his
respective salary and bonus for the fiscal year.
(2) On September 30, 1998, Mr. Kelsey had 6,000 shares of restricted stock with
a value of $74,880 and Mr. Durland had 5,000 shares with a value of $62,400,
based upon a market price of $12.48 on that date. The shares awarded to Msrs.
Kelsey and Durland will vest 20% on February 25, 1999e and an equal amount will
vest on the same date on each of 2000, 2001, 2002 and 2003.
(3) Pursuant to the Stock Option Plan, the Company granted Mr. Kelsey and Mr.
Durland on February 25, 1998, options to purchase 15,000 and 12,000 shares,
respectively, of common stock. None of such options were vested at September 30,
1998, nor will any options vest on the Record Date or within 60 days thereafter.
(4) Amount includes the Company's matching contribution accrued to Mr. Kelsey's
accounts under the Bank's 401(k) Plan of $4,028, $5,712 and $4,717 and life
insurance premiums of $2,092, $199 and $211 for the 1998, 1997 and 1996 fiscal
years, respectively. Mr. Durland receive 401(k) contributions of $3,045, $2,976
and $2,827 and life insurance premiums of $289, $262 and $231 for the 1998, 1997
and 1996 fiscal years, respectively.
8
<PAGE>
The Compensation Committee has developed an executive compensation policy
designed to: (i) offer competitive compensation to attract, motivate, retain and
reward executive officers who are crucial to the long-term success of the
Company; and (ii) encourage decision-making that maximizes long-term stockholder
value. The Compensation Committee seeks to consider a multitude of factors in
establishing appropriate levels of compensation for executive officers, with no
one factor clearly overshadowing all the others. The overall determination is
based upon the subjective judgment of the committee members.
The compensation package provided to the executive officers of the Bank is
composed principally of base salary. The executive officers of the Bank are also
eligible for awards and grants under the Stock Option Plan and the ISAP. The
ISAP also provides employees and officers, with an additional equity-based
incentive to maximize long-term shareholder value. The Compensation Committee
considers it important to use stock-based compensation as a significant
incentive as a component of an officer's total compensation package.
The Compensation Committee considers multiple factors in determining
executive compensation, some related to the specific work performed and expected
of the officer and others related to the Company, the Bank, the local business
climate and other general matters. For example, the Compensation Committee
considers, among other factors, the level of responsibility of each officer; the
expertise and skill level required to perform the position; satisfaction of
prior period goals and objectives; length of service; the complexity of work
that may be required in connection with strategic plans or special projects; and
prior compensation history. General considerations include the Bank's earnings,
capital and asset size; the results of government regulatory examinations; the
Bank's regulatory ratings on safety and soundness as well as Community
Reinvestment Act examinations; the ratio of salary and benefits expense to total
assets; and performance and compensation programs of peer group banks.
Employee benefit plans also represent an important component of any
compensation package. The defined benefit pension plan, contributions to the
401(k) plan and health insurance benefits available to all employees, including
executive officers, provide competitive benefits comparable to those available
at other institutions.
The Compensation Committee's decisions are discretionary and no
mathematical or similar formula is utilized to determine any compensation
package. The Compensation Committee believes that a competitive employee benefit
package is essential to achieving the goals of attracting and retaining highly
qualified employees.
Chief Executive Officer Compensation. The Compensation Committee determines
the salary of the Chief Executive Officer on a calendar year basis. Base salary
paid to Mr. Kelsey for fiscal year 1998 was $134,266, and reflects a 3.6%
increase over Mr. Kelsey's base salary for fiscal year 1997. In determining
total compensation to be paid to the Chief Executive Officer, the Compensation
Committee considered the factors discussed above and also considered a number of
specific matters including the efforts to improve the Bank's interest rate
spread through restructuring the Bank's loan and deposit programs. The Committee
also considered the successful conversion of the Bank to the stock form and the
additional effort required in serving as the President and Chief Executive
Officer of a public company. The committee did not apply any mathematical or
quantitative analysis in calculating the Chief Executive Officer's compensation.
This report is included herein at the direction of the Compensation
Committee members, directors, Herbert C. Mueller, Roy L. Lippincott, Stephen O.
Hopkins, Gene J. Gengel and Thomas V. Guarino.
9
<PAGE>
<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR
Potential Realizable Value at
Assumed Annual Rates of Stock
Individual Grants Price Appreciation for Option Term(1)
---------------------------------------------------------------------------------------------------------
Percent to Total
Options Granted
Options Granted to Employees in Exercise or
(#)(2) Fiscal year Base Price Expiration Date 5% 10%
--------------- ----------- ---------- --------------- -- ---
<S> <C> <C> <C> <C> <C> <C>
Clifford E. Kelsey, Jr. 15,000 35.5% $15.875 2/25/08 149,756 379,510
Richard C. Durland 12,000 27.6% $15.875 2/25/08 119,804 303,608
</TABLE>
Upon the retirement of Mr. Kelsey and Mr. Durland effective December 31,
1998, all options granted to them under the Stock Option Plan and all restricted
stock awarded to them under the ISAP will be forfeited except that Mr. Kelsey
will retain, as do other non-employee directors, options for 11,241 shares and
4,496 shares of restricted stock.
Stockholder Return Performance Presentation
Set forth below is a line graph comparing the cumulative total shareholder
return on GSB Financial Corporation Common Stock with the cumulative total
stockholder return of a broad market index including (i) the total return
industry index for SNL All Thrift stocks and (ii) the total return for the total
U.S. NASDAQ stock market commencing as of July 9, 1997, the date on which the
Company's Common Stock commenced public trading. In accordance with the SEC
guidelines, the stock price of the Company on July 9, 1997 which was used to
establish the initial point in the following performance graph was $14.625,
representing the closing price on that date. If the offering price of $10.00 was
used, the cumulative stockholder return index would have been 85.40 at September
30, 1998. Total return assumes the reinvestment of cash dividends.
[THE FOLLOWING TABLE WAS REPRESENTED BY A GRAPH IN THE PRINTED MATERIAL.]
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
GSB Financial Corporation
=======================================================================================
Total Return Performance
Period Ending
---------------------------------------------------------
Index 7/9/97 9/30/97 12/31/97 3/31/98 6/30/98 9/30/98
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
GSB Financial Corporation 100.00 111.97 123.51 118.80 116.24 85.40
NASDAQ - Total U.S. 100.00 113.46 106.40 124.47 128.06 115.98
SNL Thrift Index 100.00 116.14 128.71 138.00 132.78 104.12
</TABLE>
- ----------
(1) Based upon the price on the date of grant and an annual appreciation at the
rate stated (compounded annually) of such market price through the expiration
date of such options. The 5% and 10% appreciation rates are set in Securities
and Exchange Commission regulations and therefore are not intended to forecast
possible future appreciation, if any, of the Company's stock price.
(2) Options were granted ten years prior to the expiration dates shown. On each
of the first five anniversaries following the respective dates of grant, 20% of
the options granted will vest and become exercisable.
10
<PAGE>
Transactions with Directors and Officers
Some of the directors and executive officers of the Company and the Bank,
as well as their immediate family members or firms and companies with which they
are associated, are and have been customers of the Bank. All of the Bank's
transactions with such persons and entities were completed in the ordinary
course of business, were on substantially the same terms as those prevailing at
the time for comparable transactions with the general public and did not involve
more than the normal risk of collectibility or present other unfavorable
features.
In addition to such normal customer relationships, none of the directors or
executive officers of the Company (or members of their immediate families)
maintained, directly or indirectly, any significant business or personal
relationship with the Company or the Bank during the 1998 fiscal year.
Retention Agreements
The Bank has entered into employee retention agreements with three
executive officers, Stephen W. Dederick, Rolland B. Peacock, III and Barbara A.
Carr and one non-executive officer. The agreements establish such executive
officers' respective duties and are intended to ensure that the Bank and the
Company will be able to continue to benefit from their services. The retention
agreements, which are guaranteed by the Company, generally provide for
three-year assurance periods of employment after a change in control, with
automatic one year extension periods on each anniversary of the commencement of
the assurance period, unless otherwise terminated by either party. The
agreements do not, however, guarantee any of the officer's continued employment
with the Bank or the Company prior to a change in control.
If the officer's employment terminates after a change in control under
circumstances comparable to those which would give rise to change in control
payments under the retention agreements, the officer would be entitled to
severance payments based upon the salary and benefits paid to the terminated
officer prior to the termination. However, in no event may the aggregate amount
payable under such agreements exceed 299% of average annual compensation paid to
such officer during the five preceding taxable years. Based on compensation and
benefit costs for fiscal 1998, cash payments to be made in the event of a change
in control of the Bank or the Company to the four officers, in the aggregate,
pursuant to the terms of the retention agreements are estimated to be
approximately $742,651. The actual amount that may be paid in the event of a
change in control pursuant to the retention agreements can only be estimated at
this time because the actual amount will be based on the compensation and
benefit costs and other factors existing at the time of the change in control
which cannot be determined at this time.
Separate employment agreements between the Company and the Bank and former
executive officers Clifford E. Kelsey, Jr., Richard C. Durland, Diane D. King
and Jenny M. Ford terminate effective upon their retirement on December 31,
1998.
The Enhanced Voluntary Termination Program
During the fiscal year 1998, the Bank offered an Enhanced Voluntary
Termination Program (the " Program") to all of its employees who had at least
five years of vested service under the Bank's existing pension plan. These
employees were given the right to elect to terminate their employment effective
between October 31, 1998 and the close of business on December 31, 1998. Mr.
Kelsey, Mr. Durland, Ms. Ford and Ms. King all elected, in addition to seven
other employees of the Bank, to terminate their employment with the Bank under
the Program.
The Program, which employees had to elect to participate in on or before
September 30, 1998, provided a number of special benefits to participating
employees including: (a) the right to receive a lump sum pension plan
distribution equal to the present value of future installment payments they
would have been entitled to receive under the pension plan, instead of receiving
the installment payments, (b) two additional years of service and five
additional years of age in calculating pension
11
<PAGE>
benefits (offered only to certain participants whose age plus years of service
on December 31, 1998 equaled 75 or more), (c) a lump sum termination payment on
December 31, 1998 (for officers of the Bank, the lump sum payment is equal to
one week of salary for each year of service up to 26 years of service), and (d)
post-retirement health insurance benefits and life insurance benefits (one times
salary) up to the amount of the premium as of January 1, 1999, which will be
paid by the Bank only for participants whose age plus years of service on
December 31, 1998 equaled 75 or more.
Pension Plan
The Bank maintains a non-contributory, tax-qualified defined benefit
pension plan (the "Pension Plan") for eligible employees. The following table
illustrates the annual benefit payable upon normal retirement at age 65 in the
normal form of benefit under the Pension Plan at various levels of average
annual compensation and years of service under the Pension Plan.
================================================================================
Pension Plan Table
- --------------------------------------------------------------------------------
Years of Credited Service
----------------------------------------------------------
Remuneration 15 20 25 30
$75,000 $22,500 $30,000 $37,500 $45,000
100,000 30,000 40,000 50,000 60,000
125,000 37,500 50,000 62,500 75,000
150,000 45,000 60,000 75,000 90,000
175,000 45,000 60,000 75,000 96,000
200,000 45,000 60,000 75,000 96,000
225,000 45,000 60,000 75,000 96,000
================================================================================
All employees and officers with more than 1,000 hours of service per year
who have attained age 21 and completed one year of service are eligible to
participate in the Pension Plan. The Pension Plan provides a benefit for each
participant. The annual benefit is equal to 2% of the participant's average
annual compensation multiplied by the participant's number of years of service.
A participant is entitled to a maximum of 30 years of service under the Pension
Plan. For the plan year beginning October 1, 1998, the maximum permitted average
annual compensation for determining pension benefits under the Bank's Pension
Plan was $160,000 and the maximum annual pension benefit was $96,000.
Average annual compensation is the average annual compensation for the
three years prior to retirement. A participant is fully vested in his or her
pension after five years of service. The Pension Plan is funded by the Bank on
an actuarial basis, and all assets are held in trust by the Pension Plan
trustee.
At September 30, 1998 and at December 31, 1998, Mr. Kelsey had 33 years of
credited service under the Pension Plan. Mr. Durland had 28 years of credited
service at September 30, 1998 and at December 31, 1998. The years of credited
service for both Msrs. Kelsey and Durland include two additional years of
service given to eligible employees pursuant to the Program.
PROPOSAL II - RATIFICATION OF APPOINTMENT OF AUDITORS
In December 1998, the Board of Directors approved a change of the Company's
fiscal year so that the fiscal year will be the same as the calendar year. By
changing the fiscal year to a calendar year , the Company will streamline its
reporting process. The Company's Board of Directors appointed Nugent &
Haeussler, P.C. as independent public accountants to audit the books of the
Company for the fiscal year ended December 31 1999, subject to ratification by
the stockholders at the Meeting. Nugent & Haeussler, P.C. has been employed
regularly by the Company since it was formed in 1997 and the Bank for more than
26 years to examine their books and accounts and for other purposes.
Representatives of Nugent & Haeussler, P.C. are expected to be present at
the Annual Meeting and will have an opportunity to make such statements as they
may desire. Such representatives are expected to be available to respond to
appropriate questions from stockholders.
12
<PAGE>
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
THAT STOCKHOLDERS VOTE IN FAVOR OF THE
RATIFICATION OF THE APPOINTMENT OF AUDITORS
OTHER BUSINESS
The management has no reason to believe that any other business will be
presented at the Annual Meeting, but if any other business shall be presented,
the proxies will vote on such matters in accordance with their judgment of the
best interest of the Company.
GENERAL
The Company's Annual Report to its stockholders for the fiscal year ended
September 30, 1998, including financial statements, is being concurrently
furnished with this proxy solicitation material.
All shares represented by valid proxies sent to the Company to be voted at
the Meeting will be voted if received in time. Each proxy will be voted in
accordance with the directions of the stockholder executing such proxy. If no
directions are given, such proxy will be voted "For" all the proposals set forth
in this Proxy Statement.
The cost of soliciting proxies relating to the Meeting will be borne by the
Company. The Company has engaged Corporate Investor Communication, Inc., an
independent proxy solicitor, to distribute and solicit the proxies at a fee of
$2,000, plus reasonable out of pocket expenses. In addition, directors, officers
and regular employees of the Company and the Bank may solicit proxies
personally, by telephone or by other means, without additional compensation. In
addition, the Company will, upon the request of brokers, dealers, banks and
voting trustees, and their nominees, who were holders of record of shares of the
Company's capital stock or participants in depositories on the Record Date, bear
their reasonable expenses for mailing copies of this Proxy Statement, the form
of proxy and the Notice of the Annual Meeting, to the beneficial owners of such
shares.
2000 ANNUAL MEETING
The Company's Board of Directors will establish the date for the 2000
Annual Meeting of Stockholders. In order for a stockholder to be entitled, under
the regulations of the Securities and Exchange Commission, to have a stockholder
proposal included in the Company's Proxy Statement for the 2000 meeting, the
proposal must be received by the Company at its principal executive offices, One
South Church Street, Goshen, New York, 10924, Attention: Barbara A. Carr,
Secretary, not less than 120 days in advance of the date in 2000 which
corresponds to the date in 1998 on which these proxy materials are released to
stockholders. The stockholder must also satisfy the other requirements of SEC
Rule 14a-8.
THE COMPANY WILL FURNISH, WITHOUT CHARGE TO ANY STOCKHOLDER SUBMITTING A WRITTEN
REQUEST, A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR 1998 REQUIRED TO
BE FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. SUCH WRITTEN REQUEST
SHOULD BE DIRECTED TO BARBARA A. CARR, SECRETARY, AT THE COMPANY'S ADDRESS
HEREIN. THE FORM 10- K REPORT IS NOT A PART OF THE PROXY SOLICITATION MATERIALS.
PLEASE SIGN, DATE AND MAIL YOUR PROXY NOW
Goshen, New York,
December 28, 1998
13
