SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[ ] 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 Section 240.14a-11(c) or Section 240.14a-12
GSB FINANCIAL CORPORATION
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
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[_] 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:
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(4) Date Filed:
Notes:
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GSB FINANCIAL CORPORATION
One South Church Street
Goshen, New York 10924
(914) 294-6151
March 16, 2000
Dear Fellow Stockholder:
On behalf of the Board of Directors and management of GSB Financial
Corporation, we cordially invite you to attend our Annual Meeting of
Stockholders. The meeting will be held at 4:30 p.m., New York time, on April 27,
2000 at the main office of Goshen Savings Bank, One South Church Street, Goshen,
New York 10924.
At the meeting, you will be asked to approve amendments to both our
Stock Option Plan and Incentive Stock Award Plan, to elect three directors to
our Board of Directors to serve for three year terms, and to ratify the
appointment of Nugent & Haeussler, P.C. as our auditors for the fiscal year
ending December 31, 2000.
The accompanying proxy statement gives you information about these
matters. Please read the proxy statement carefully before you decide how to
vote. Your Board of Directors unanimously recommends that you vote "For" the
director nominees and the three proposals.
It is very important that you be represented at the Annual Meeting
regardless of the number of shares you own or whether you are able to attend the
meeting in person. Please mark, sign, and date your proxy card today and return
it in the envelope provided, even if you plan to attend the meeting. This will
not prevent you from voting in person, but will ensure that your vote is counted
if you are unable to attend.
We appreciate your continued support of GSB Financial Corporation and
its subsidiary, Goshen Savings Bank.
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 April 27, 2000
--------------------------
Please take notice that the Annual Meeting of Stockholders of GSB
Financial Corporation will be held at 4:30 p.m., New York time, on April 27,
2000 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 approval of amendments to our Stock Option Plan
to provide for accelerated vesting in the event of a
hostile change in control or retirement and to permit
the grant of options without the restrictions
contained in the Stock Option Plan as it now exists;
2. The approval of amendments to our Incentive Stock
Award Plan to provide for accelerated vesting in the
event of a hostile change in control or retirement
and to permit awards without the restrictions
contained in the Incentive Stock Award Plan as it now
exists;
3. The election of three directors to our Board of
Directors; and
4. The ratification of the appointment of Nugent &
Haeussler, P.C. as our auditors for the fiscal year
ending December 31, 2000.
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 March 3, 2000 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. Each of our stockholders has one vote for each
share of common stock owned. On the election of directors, each stockholder may
vote for up to three directors, but may not cast more votes for any one nominee
than the number of shares owned by that stockholder.
BY ORDER OF THE BOARD OF DIRECTORS
Goshen, New York
March 16, 2000
PLEASE RETURN YOUR PROXY PROMPTLY TO SAVE US THE EXPENSE OF ADDITIONAL REQUESTS
TO ENSURE THAT THERE IS A QUORUM AT THE MEETING. A SELF ADDRESSED ENVELOPE IS
ENCLOSED FOR YOUR CONVENIENCE. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED
STATES.
<PAGE>
PROXY STATEMENT
--------------------------
GSB FINANCIAL CORPORATION
ANNUAL MEETING OF STOCKHOLDERS
April 27, 2000
--------------------------
The Board of Directors of GSB Financial Corporation is furnishing this
proxy statement in connection with its solicitation of proxies for the Annual
Meeting of Stockholders on April 27, 2000 at the main office of Goshen Savings
Bank, One South Church Street, Goshen, New York 10924 at 4:30 p.m, and all
adjournments of the meeting. We are first mailing the accompanying Notice of
Meeting and this Proxy Statement to stockholders on or about March 16, 2000.
At the meeting, we will ask stockholders to approve amendments to our
Stock Option Plan and our Incentive Stock Award Plan, to elect three directors
to our Board of Directors for three year terms, and to ratify the appointment of
Nugent & Haeussler, P.C. as our auditors for the fiscal year ending December 31,
2000. Stockholders of record on March 3, 2000 are entitled to receive notice of
the meeting and are entitled to vote at the meeting. This is known as the
"Record Date." As of the Record Date, there were 1,997,338 shares of common
stock, par value $.01 per share, issued and outstanding.
In this Proxy Statement, the terms "Company," "we," "our," "us," or
similar terms refer to GSB Financial Corporation. References to the "Bank" mean
Goshen Savings Bank, our wholly owned subsidiary.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR" THE
THREE DIRECTOR NOMINEES AND THE THREE PROPOSALS DESCRIBED IN THIS PROXY
STATEMENT.
VOTING AND PROXY CARDS
Each of our stockholders has one vote for each share of common stock
owned. On the election of directors, each stockholder may vote for up to three
directors, but may not cast more votes for any one nominee than the number of
shares owned by that stockholder. If you sign and return a proxy card in the
form which the Board of Directors is soliciting so we receive it before the
polls close at the meeting, your votes will be cast as you have marked on the
proxy card, unless you revoke your proxy before the polls close. If you properly
sign and return our proxy card but you do not mark on it how you want to vote on
any matter, then the Board of Directors, as your proxy, will vote your shares in
favor of the nominees for director named in this Proxy Statement and in favor of
the three proposals. We do not know of any other matters that stockholders may
present for a vote at the meeting. If any stockholder properly presents any
other matter for a vote, including a proposal to adjourn the meeting, the Board
of Directors, as your proxy, may vote on those matters based on its judgment.
If you sign and return the enclosed proxy card, you may revoke it at
any time before the polls are closed. If you want to revoke your proxy card, you
must: (i) sign a written notice dated after the date of your proxy and deliver
it to the Secretary of the Company, at or before the meeting, stating that you
want to revoke the proxy, (ii) sign and deliver to the Secretary of the Company
at or before the meeting another proxy card relating to the same shares with a
later date, or (iii) attend the meeting and vote in person. Attending the
meeting does not automatically revoke a proxy unless you also take one of the
three actions described in the prior sentence. Any written notice revoking a
proxy must be delivered to Barbara A. Carr, Secretary, GSB Financial
Corporation, One South Church Street, Goshen, New York 10924.
<PAGE>
If 998,670 shares of our common stock are present in person or
represented by proxy at the meeting, there will be a quorum which will allow the
meeting to commence. Once a quorum is present, the meeting can continue even if
some stockholders leave the meeting. If a stockholder is present in person or by
proxy but abstains from voting any shares, or if a broker submits a proxy for
shares but does not vote those shares, then the shares are counted as present
for purposes of determining a quorum.
A plurality of the votes cast will determine who will be elected as
director. The approval of the amendments to the Stock Option Plan and the
Incentive Stock Award Plan, and the ratification of the appointment of auditors,
require a majority of the votes cast at the meeting.
Our bylaws provide that, at an annual meeting, a stockholder may
nominate a person for election as a director or bring any other proposal to a
vote at any annual stockholders' meeting, by providing 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.
IMPORTANT INFORMATION FOR STOCKHOLDERS WHOSE STOCK IS HELD IN STREET NAME
If you hold your stock in street name, which means that your stock is
held for you in a brokerage account and is not registered on our stock records
in your own name, please tell your broker as soon as possible how to vote your
shares to make sure that your broker votes your shares before the polls close at
the meeting. If your stock is held in street name, you do not have the direct
right to vote your shares or revoke a proxy for your shares unless your broker
gives you that right in writing.
PROPOSALS ONE AND TWO
THE AMENDMENTS TO THE STOCK OPTION PLAN
AND THE AMENDMENTS TO THE INCENTIVE STOCK AWARD PLAN
On February 25, 1998, our stockholders approved two stock compensation
plans: the Stock Option Plan and the Incentive Stock Award Plan (also known as
the "ISAP"). The Stock Option Plan provides for awards in the form of stock
options, representing a right to purchase our common stock. The ISAP permits the
outright award of shares of our common stock. The recipient of an ISAP award is
not required to make any payment to the Company or the Bank in exchange for the
shares and as the award vests, the vested shares will be the same as any other
issued and outstanding shares of our common stock. A committee of our Board of
Directors administers the two plans and has awarded benefits under the two plans
to officers of the Bank. In addition, our directors have also received awards
under the two plans.
Federal banking regulations imposed a number of restrictions on the two
plans when stockholders first approved them. The restrictions require that:
o all awards vest over a period of at least five years from the date
of stockholder approval except in the case of death and
disability;
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o total awards to any employee may not exceed 25% of the available
awards under each plan;
o total awards to directors may not exceed 30% of the available
awards under each plan; and
o total awards to any one director may not exceed 5% of the
available awards under each plan.
Office of Thrift Supervision policy permits stockholders to remove
these restrictions if they vote to do so at least one year after the Bank
converted to the stock form of ownership in 1997. The purpose of the amendments
is to remove the restrictions. The amendments also provide for the immediate
vesting of all awards in the event of a hostile change in control or if, after
ten years of service, a director retires or is not re-elected.
The following table shows the number of options and awards held by
directors and executive officers as of the Record Date. Disclosure includes all
shares, whether or not vested, and does not take into account possible sales of
ISAP shares after they became vested. None of the options awarded under the
Stock Option Plan have been exercised.
<TABLE>
<CAPTION>
Incentive Stock Awards Stock Options
Name of Person or --------------------------- --------------------------
Number of Persons in Group Number Value* Number Value*
-------------------------- ------ ------ ------ ------
<S> <C> <C> <C> <C>
Barbara A. Carr 3,300 $ 37,331 10,400 $2,200**
Stephen W. Dederick 3,500 $ 39,594 11,400 $2,200**
Rolland B. Peacock, III 2,900 $ 32,806 6,400 $2,200**
The Three Executive Officers, as a group 9,700 $109,731 28,200 $6,600**
The Six Non-Executive Directors, as a group 26,976 $304,986 67,446 ***
Eight Other Employees, as a group 3,050 $ 34,504 8,450 $2,475**
</TABLE>
* - Value is based upon the stock price on the Record Date of $11.3125. The
value shown for options is equal to the difference between the exercise price
and the price on the Record Date. See the following notes for a discussion of
outstanding options with exercise prices in excess of the price on the Record
Date. Options with exercise prices in excess of $11.3125 are reflected as having
a value of zero.
** - The executive officers and other employees have some options with exercise
prices above the price on the Record Date. All options with lower exercise
prices have an exercise price of $10.8125 per share and were awarded in January
2000 as part of the incentive program discussed below under the caption
"Compensation Committee Report on Executive Compensation."
*** - All options held by directors are at exercise prices in excess of the
price on the Record Date.
- ----------------------------------
Directors Hopkins, Kelsey, Lippincott and Mueller all have at least ten
years of service with the Bank. Therefore, if stockholders approve the
amendments, they would be entitled to immediate vesting of all awards in the
event of retirement or termination without cause or failure to be re-elected as
a director. All of the other directors have less than five years of service with
the Bank and the Company.
The amendments will not increase the maximum number of shares or
options which we can award under either of the two plans to all directors,
officers and employees in the aggregate. However, if stockholders approve the
amendments, the Compensation Committee will have the authority to award stock
options or ISAP shares to any person without regard to any per-person limit, up
to the maximum awards available under either plan. The Compensation Committee
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will also have the authority to make awards to directors under either plan. As
the plans now exist, directors received automatic awards when stockholders
approved the plans but the plans do not allow the committee to make additional
awards to directors.
The amendments will automatically accelerate all outstanding awards if
there is a hostile change in control. The plans generally define a "change in
control" as (i) the acquisition of 25% or more of our stock, (ii) a change in a
majority of the members of our Board of Directors other than upon the approval
of two-thirds of the directors who were directors when the plans were approved,
(iii) the approval by the stockholders of a merger or consolidation in which our
Board of Directors and stockholders are not in control of the entity that
results from the merger or consolidation, or (iv) our liquidation. A change in
control would also occur if any of those same events happened to the Bank. A
"hostile change in control" is defined in the amendments as any change in
control which results from a transaction which is not expressly approved by a
resolution of, or a favorable approval or recommendation by, a majority of the
disinterested directors of the Company (if the transaction is with a stockholder
of the Company) or a majority of the Company's directors in the event of a
transaction with a person or entity other than a stockholder. A change in
control for which no Board approval or recommendation is required is a hostile
change in control unless the transaction or event is approved by a two-thirds
vote of members of our Board of Directors who were directors on the date
stockholders approve the amendments, or other directors who were elected or
nominated by such directors.
Our Board of Directors has proposed these amendments because the Board
of Directors believes that it would be appropriate to assure that directors and
officers who face the potential of substantial disruption in the event of a
hostile change in control, or directors who retire after ten years of service
with us or with the Bank, should receive the immediate benefits of their awards
under the two plans. The Board of Directors believes that it is appropriate to
provide this benefit in order to avoid unfair forfeitures. In addition, our
Board of Directors believes that the removal of other regulatory restrictions on
the ability to award benefits under the two plans will increase the ability of
the Board to better use the plans to foster the interests of our Company through
the development of incentive programs using stock-based compensation. For
example, as discussed below in the Compensation Committee Report on Executive
Compensation, the committee has developed an incentive program using stock
options and ISAP awards. The delayed vesting requirements in the two plans
restricted the committee's flexibility in developing the incentive plan, and the
Board believes that the repeal of mandatory delayed vesting will allow the
committee to improve the incentive program to the benefit of all stockholders.
Under the proposed amendments, if a hostile change in control occurs, a
director or employee who received stock options under the Stock Option Plan
could immediately exercise all options which he or she received and the director
or employee would also receive an immediate distribution of all ISAP awards from
the trust which we created to hold ISAP awards as they gradually vest. The same
would also occur if a director retires or is not re-elected after ten years of
service. The only difference between the two amendments is that an employee who
retires as an employee but remains a director receives accelerated vesting of
stock option awards but not ISAP awards. The reason for this difference is that
incentive stock options which an employee exercises within three months after
ceasing to be an employee have special tax treatment. Therefore, accelerated
vesting of stock options is necessary to obtain the tax benefits even if the
individual remains as a director.
Please note that the two plans are separate plans and stockholders will
vote on amending each plan separately. The approval or disapproval of the
amendments to one plan will not affect the approval or disapproval of the
amendments to the other plan. The text of the two plans, as amended, marked to
show the changes from the existing plans, are included as Exhibits A and B to
this proxy statement. Please read the changes carefully before you decide how to
vote.
EXISTING PROVISIONS OF THE STOCK OPTION PLAN AND ISAP
ELIGIBILITY. All directors, officers and other employees of the Company
or the Bank and, with the approval of the Board of Directors, any corporate
affiliate of the Company or the Bank, are eligible to participate in the plans.
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SHARES COVERED BY THE PLANS. The Stock Option Plan allows for the award
of options to purchase up to 224,825 shares of our common stock and the ISAP
allows for the award of up to 89,930 shares of our common stock. The Company
funded the ISAP with 89,930 shares of stock purchased on the open market.
Although 40% of the options awarded under the Stock Option Plan have vested,
none of the options has been exercised, so the Company has not needed to fund
any option exercises.
ADMINISTRATION OF THE PLANS. The Compensation Committee of our Board of
Directors administers the plans. There are approximately 46 directors, officers
and employees of the Company or its affiliates who are eligible to participate
in the plans. When deciding on grants under the plans, the Compensation
Committee has considered, among other things, position and years of service, the
value of the participant's service to the Company or the Bank and the added
responsibilities of such individual as an employee, director or officer of a
public company or its subsidiary, and the Bank's financial performance. The
Compensation Committee has the authority to select the officers and employees
who will participate in each plan, impose conditions on vesting, change or
accelerate the vesting schedule and establish rules for the implementation of
the plans, but in all cases limited by the requirements of federal and state
laws and regulations.
TERMINATIONS AND FORFEITURES UNDER THE PLANS. The plans now provide
that awards to directors and employees automatically terminate and are forfeited
if the awards are not vested and the person is terminated for cause or
voluntarily resigns. Vested options terminate 90 days after any such resignation
and they terminate immediately upon termination for cause. If a stock option or
ISAP award terminates or is forfeited before it vests, then the number of shares
covered by the option or ISAP award will again be available for new awards.
RESTRICTIONS ON TRANSFERS. Generally, the recipient of an option may
not assign or transfer any interest in the option except under certain limited
exceptions described in the Stock Option Plan. The recipient of an ISAP award
may not transfer the shares represented by the award until the shares vest. As
the shares vest, they become like all other shares of our common stock and may
be sold in the same manner.
ADDITIONAL TERMS OF THE STOCK OPTION PLAN
The term of stock options under the Stock Option Plan may not exceed
ten years. Recipients can only exercise their options before they expire. No
options may be granted after February 24, 2008. The Compensation Committee may
award either "incentive stock options" as defined under Section 422 of the
Internal Revenue Code, or stock options not intended to qualify as such
("non-qualified options"). There are 120,729 shares remaining available for
future awards of options under the plan.
The exercise price for the purchase of shares under an option will not
be less than 100% of the market value of the shares on the date the option is
awarded. The exercise price must be paid in full in cash or, if the Compensation
Committee permits, the exercise price may be paid in shares of our stock, or a
combination of stock and cash.
The plan provides that after a participant dies, the Compensation
Committee may permit options of a deceased participant to be settled in cash
instead of by the delivery of shares.
LIMITS ON INCENTIVE STOCK OPTIONS. Incentive stock options which the
Compensation Committee awards will be subject to the following additional
requirements of Section 422 of the Internal Revenue Code:
o Incentive stock options cannot be awarded to a person owning more
than 10% of the voting power of our stock unless the option
exercise price equals 110% of the fair market value of the stock
at the time of award and the term of the option may not exceed
five years.
o If the total fair market value of the stock underlying options
first exercisable in any year exceeds $100,000, then the options
which cause the excess will not be incentive stock options.
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o The tax benefits of an incentive stock option are not effective
for the participant if he or she sells shares obtained upon
exercise of the option within two years after the option is
awarded or within one year after the option is exercised.
o The tax benefits are also not available to the participant unless
the participant is an employee of the Company or its affiliates
continually from the day the option is awarded until not more than
three months before the option is exercised.
All the options which the Compensation Committee awarded to officers were
incentive stock options.
LIMITED STOCK APPRECIATION RIGHTS. Each option under the plan is
accompanied by a Limited Stock Appreciation Right ("LSAR") that the holder of
the option may exercise for six months after a change in control (as defined in
the Stock Option Plan), or more than six months after a change in control if
necessary to avoid liability under Section 16 of the Securities Exchange Act of
1934. When a participant exercises a LSAR, he or she will receive in cash, for
each share covered by the LSAR, the difference between the fair market value of
the common stock at the time of exercise and the exercise price of the related
stock option. The related stock option will then terminate. LSARs will terminate
upon a change of control if the acquiror agrees to make a monetary payment or
provide substitute options or other property equivalent in value to the value of
the option which terminates.
EFFECT OF MERGERS AND OTHER ADJUSTMENTS. The Compensation Committee can
adjust both the maximum number of shares covered by the plan, and all
outstanding options, if there is a merger, consolidation, reorganization,
recapitalization (including any distribution of capital to shareholders, whether
taxable or otherwise), combination or exchange of shares, stock dividend, stock
split or other change in our corporate structure or our stock.
AMENDMENT AND TERMINATION OF THE STOCK OPTION PLAN. Our Board of
Directors may amend, suspend or terminate the plan, but only after complying
with any applicable state and federal banking regulations. Stockholder approval
must first be obtained for any amendment if necessary for the plan to satisfy
the requirements for the award of incentive stock options under Section 422 of
the Internal Revenue Code. For example, stockholder approval is required for the
amendment described in this proxy statement, and will be required for an
amendment which (i) increases the total number of incentive stock options which
may be issued under the plan (except for increases due to mergers and other
permitted adjustments as described above), (ii) materially increases the
benefits to participants with respect to incentive stock options, (iii)
materially changes the participation eligibility requirements to receive
incentive stock options; or (iv) seeks to modify any of the other provisions of
the plans which state or federal banking laws require be included in the
original plans. No amendment, suspension or termination may reduce the rights of
any participant, without his or her consent, in any option already awarded.
FEDERAL INCOME TAX CONSEQUENCES. Under present federal income tax laws,
awards of stock options under the plan will have the following consequences:
(1) The participant has no taxable income and the Company is not
entitled to any tax deduction when an option is awarded.
(2) When a participant exercises an incentive stock option, he or she
has no taxable income at that time. The difference between the exercise price
and the fair market value of the shares on the date of exercise is an item of
tax preference for the participant which may, in certain situations, trigger the
alternative minimum tax. When a participant sells stock which was obtained upon
the exercise of an incentive stock option, the participant has a taxable capital
gain equal to the difference between the amount received on the sale and the
amount paid for the stock. This amount is treated as ordinary income instead of
a capital gain if the participant sells the stock within one year after
exercising the option or within two years after the option was awarded.
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(3) When a participant exercises an option that is not an incentive
stock option, the participant has taxable ordinary income at that time equal to
the difference between the exercise price and the fair market value on the date
of exercise.
(4) When a participant exercises an LSAR, the participant has taxable
ordinary income at that time equal to the cash received as a result of the
exercise.
(5) The Company will be allowed a deduction at the time, and in the
amount of, any ordinary income which the participant has, but only if the
Company meets its federal withholding tax obligations.
ADDITIONAL TERMS OF THE INCENTIVE STOCK AWARD PLAN
ADMINISTRATIVE MATTERS. In order to implement the ISAP, the Company
established a trust with HSBC Bank USA as trustee. The trust purchased, on the
open market, 89,930 shares of our common stock to fund present and future awards
under the ISAP. The Company contributed $1.6 million to the trust to pay for
those stock purchases. The trust may not purchase any more shares of our common
stock. The costs and expenses of administering the ISAP are borne by the
Company, but dividends paid on shares not awarded to directors and employees may
be used to offset expenses.
ISAP awards are held in trust until they vest. There are 50,204 shares
remaining in the ISAP which have not yet been awarded. As an award vests, the
trustee distributes the vested shares to the participant and the shares are then
like all other issued and outstanding shares, without limits imposed by the
ISAP. An individual with unvested shares may vote and participate in dividends
on those shares. The trustee will vote shares which have not yet been awarded in
the same proportions as unvested shares which have been awarded and voted. Each
participant who has an unvested award under the ISAP may direct the response to
any tender offer, exchange offer or other offer made to shareholders with
respect to those shares. If no direction is given, the trustee will not tender
or exchange the shares. The trustee will generally tender or exchange shares
which have not yet been awarded in the same proportion as the directions
received on awarded but unvested shares.
FEDERAL INCOME TAX CONSEQUENCES. Holders of ISAP shares will have
taxable ordinary income when the ISAP shares vest, equal to the fair market
value of the shares on that date. In certain circumstances, a holder may instead
elect to recognize ordinary income when the award is made. Holders of ISAP
shares will also have taxable ordinary income on any dividends (other that stock
dividends) when dividend payments are received. The Company will have a
deduction at the time, and in the amount of, any ordinary income recognized by
the participant if the Company meets its federal withholding tax obligations.
EFFECT OF MERGER AND OTHER ADJUSTMENTS. If there is a merger,
consolidation, reorganization, recapitalization (including any distribution of
capital to shareholders, whether taxable or otherwise), combination or exchange
of shares, stock dividend, stock split or other change in our corporate
structure or our stock, then the number of shares held by the ISAP trust shall
be adjusted to reflect the transaction.
AMENDMENT AND TERMINATION OF THE ISAP. The Board of Directors of the
Company may amend, suspend or terminate the ISAP at any time, but no amendment
or termination may affect outstanding awards. In addition, federal or state
banking regulations require that stockholders must approve certain amendments to
the ISAP, such as the amendment we have described in this proxy statement. If
the ISAP terminates, the trustee of the ISAP trust must return all remaining
assets of the trust to the Company after making such distributions as the
Compensation Committee directs. The Company cannot terminate the ISAP if there
are any outstanding unvested awards.
FINANCIAL STATEMENT CONSEQUENCES OF THE ISAP. The Company did not
record a financial statement expense when the trust purchased the ISAP shares,
nor does it record an expense when awards are made under the ISAP. However, when
7
<PAGE>
all or any part of an award vests, the Company records an expense equal to the
trust's original purchase price of the shares as they vest.
POTENTIAL ANTI-TAKEOVER EFFECTS
Stockholders and others who may be interested in acquiring the Company
could consider the amendments to the plans which provide for accelerated vesting
in the event of a hostile change in control to have anti-takeover effects. This
is because accelerated vesting of stock options and ISAP awards could increase
the immediate costs of an acquisition of the Company. However, other
professional investors have expressed the opinion that amendments such as these
do not act as anti-takeover devices because the amendments have the effect of
reducing the potential for economic conflict between directors and employees, on
the one hand, and other stockholders on the other hand.
Our stockholders should be aware that certain provisions of state and
federal laws, as well as provisions of our certificate of incorporation, bylaws,
employment contracts and employee benefit plans could have anti-takeover
effects. The following is a general discussion of such provisions.
The Company's Certificate of Incorporation requires an 80% vote to
approve certain actions, such as certain mergers. Stockholders elect only
one-third of the Board of Directors each year. Only the Board of Directors may
call special meetings of stockholders and the only matters which stockholders
can vote on at a special meeting are matters which the Board of Directors
authorizes. Under certain circumstances, a merger or other business combination
is permitted only if a uniform price is paid for our common stock. Furthermore,
any person owning more than 10% of our outstanding voting stock may not cast any
votes for the shares owned in excess of the 10% limit.
The Bank's charter also prohibits, until July 9, 2000, any person
(other than the Company, the Company's ESOP and certain related entities) from
acquiring or offering to acquire, directly or indirectly, beneficial ownership
of more than 10% of the Bank's equity securities. These provisions may
discourage potential proxy contests and other potential takeover attempts,
particularly those which have not been negotiated with our Board of Directors.
Therefore, they may preserve the control of current management and have an
adverse effect on the market price of the common stock.
The Bank and the Company have employment contracts with three executive
officers which provide for payments in the event of termination or certain other
adverse employment action occurring within three years following a change in
control. In addition, the Bank has retention agreements with four non-executive
officers providing benefits to them if their employment is terminated under
certain circumstances within two years after a change in control. For additional
information about the employment contracts and the retention agreements, please
see the discussion below under the caption "Employment and Retention
Agreements."
Furthermore, our ESOP, which owns 8.2% of our common stock, and the
ISAP, which owns 2.5% of our common stock which has not yet been awarded to
participants, could also have anti-takeover effects because voting control of
those shares is in the hands of employees and directors who might oppose a
takeover.
These various provisions, agreements and plans may make it less likely,
or more costly, for a person to seek to acquire the Company, and stockholders
might receive less for their stock than otherwise might be paid if the Company
is acquired.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE "FOR"
THE APPROVAL OF THE AMENDMENTS TO THE PLANS
8
<PAGE>
PROPOSAL THREE
ELECTION OF DIRECTORS
Our Board of Directors has six members. The Directors are divided into
three classes and stockholders elect directors for staggered three-year terms.
Three directors will be elected at the 2000 Annual Meeting to hold office until
the Annual Meeting of Stockholders in the year 2003. The Board of Directors has
renominated Clifford E. Kelsey, Jr., Roy L. Lippincott and Herbert C. Mueller
for re-election. They are all currently directors of the Company and the Bank.
They have consented to being named in this proxy statement and to serve if
elected. If any of them becomes unavailable for election for any presently
unforeseen reason, the Board of Directors will have the right to use its
discretion to vote properly executed proxies for a substitute.
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.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
THAT STOCKHOLDERS VOTE IN FAVOR OF THESE NOMINEES
BOARD OF DIRECTORS - BIOGRAPHICAL INFORMATION
Business experience for the directors listed below comprises experience
for at least the past five years. Ages are as of the Record Date.
NOMINEES
CLIFFORD E. KELSEY, JR., age 67, served as the President and Chief
Executive 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.
ROY L. LIPPINCOTT, age 59, 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, age 72, 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.
CONTINUING DIRECTORS
GENE J. GENGEL, age 57, 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 Au Sable Valley Telephone Company, a subsidiary of the
Rochester Telephone Corporation. Mr. Gengel is President of the Goshen Rotary
Club and a member of 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. His term as a director
of the Company expires in 2001.
9
<PAGE>
THOMAS V. GUARINO, age 46, has been a director of the Bank since 1996
and Chairman of the Board of Directors of the 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. His term as a director
of the Company expires in 2001.
STEPHEN O. HOPKINS, age 61, has been a director of the Bank since 1980.
Mr. Hopkins has been the regional representative for the American LaFrance
Corporation since May 1997 and S.V.I. Trucks since 1992, supplying fire and
rescue apparatus to fire stations. From 1981 to 1983, Mr. Hopkins served as the
President of the Cataract Engine & Hose Co. He was the Town Supervisor for the
Town of Goshen from 1996 to 1998. 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. His term as a director of the Company expires in 2002.
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.
BARBARA A. CARR, age 44, serves as the Bank's Vice President and Senior
Mortgage Officer. She is also the Secretary of the Company. Ms. Carr joined the
Bank in 1976 and has served in various capacities since that time including
Teller, Auditor, Secretary and Assistant Vice President. She serves as a Vice
President of the Hudson Valley Association of Professional Mortgage Women, a
member of the Mid-Hudson Valley Mortgage Banker's Association, a member of the
Builders Association of the Hudson Valley, and a volunteer counselor with the
Cornell Cooperative Extension's Family Budget Counseling Program.
STEPHEN W. DEDERICK, age 43, joined the Bank in February 1997 as its
Senior Vice President and Chief Financial Officer. He also serves as Chief
Financial Officer and Treasurer of the Company and, as of January 1, 1999, also
became Treasurer of the Bank. Prior to joining the Bank, Mr. Dederick 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. Mr. Dederick is a member of the Board of Directors of the Orange
County United Way and is a member of its Finance Committee. He is also Treasurer
of the Orange County Bankers Association. Mr. Dederick is active in scouting and
is a member and past treasurer of the Pine Bush Lions Club.
ROLLAND B. PEACOCK, III, age 49, joined the Bank in March 1998 as its
Senior Vice President. He is also Vice President of the Company. Prior to
joining the Bank, he was a Vice President with Albank Commercial and was
previously with Key Bank, serving in a variety of positions 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 member of
the Executive Board 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.
10
<PAGE>
STOCK OWNERSHIP BY DIRECTORS, EXECUTIVE OFFICERS AND CERTAIN OTHER HOLDERS
We had 1,997,338 shares of common stock outstanding on the Record Date.
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 our common stock, (ii) each of our directors, (iii) each of the
executive officers of the Company and the Bank; 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 us to be reliable.
<TABLE>
<CAPTION>
Shares
Beneficially
Owned at Percent of
Beneficial Owner March 3, 2000(1) Class(2)
- ---------------- ---------------- ----------
<S> <C> <C>
GSB Financial Corporation
Employee Stock Ownership Plan(3)
One South Church Street, Goshen, NY 10924 163,789 8.1%
Josiah T. Austin(4)
El Coronado Ranch
Star Route Box 395, Pearce, AZ 85625 161,000 7.9%
Warwick Community Bancorp Inc.
18 Oakland Avenue, Warwick, NY 10990 151,600 7.5%
Gould Investors L.P.(5)
60 Cutter Mill Road, Suite 303, Great Neck, NY 11021 205,070 10.1%
Gene J. Gengel, Director 17,335(6) *
Thomas V. Guarino, Director 23,094(7) 1.1%
Stephen O. Hopkins, Director 11,492(8) *
Clifford E. Kelsey, Jr., Director 27,622(9) 1.4%
Roy L. Lippincott, Director 23,992(10) 1.2%
Herbert C. Mueller, Director 23,352(11) 1.2%
Barbara A. Carr, Vice President and Senior Mortgage Officer 10,935(12) *
Stephen W. Dederick, Senior Vice President
and Chief Financial Officer 11,388(13) *
Rolland B. Peacock, III, Senior Vice President 7,780(14) *
Directors and Executive Officers of the Company and the Bank,
as a group (9 persons) 156,990 7.7%
</TABLE>
NOTES APPEAR ON FOLLOWING PAGE.
11
<PAGE>
NOTES TO STOCK OWNERSHIP TABLE.
1. The amount reported represents shares held directly, as well as shares
allocated to participants in 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 or investment power. The table also includes, for each director,
2,698 unvested ISAP shares which vest in equal amounts in 2001, 2002 and 2003
but which the director can vote at the meeting and 4,496 options per director
which are exercisable now or within 60 days after the Record Date. The Company
has requested that the IRS permit an amendment of its ESOP to allow new
employees hired during the last six months of 1998 to become ESOP participants
for 1999. If the IRS approves the amendment, the number of ESOP shares allocated
to executive officers on account of 1999 will be less than the amount included
in this table.
2. Based upon 1,997,338 shares outstanding on the Record Date, which includes
18,668 shares issued but unvested under the ISAP, plus stock options for 32,776
shares exercisable on the Record Date or within 60 days thereafter. An asterisk
("*") means less than 1%.
3. Includes 28,894 shares representing the approximate number of shares
allocated to ESOP participants. Of these allocated shares, approximately 8,763
shares are allocated to executive officers and also included elsewhere in this
table as appropriate. The trustee of the ESOP is HSBC Bank USA. 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 8,343 shares owned by Mr. Gengel's Individual Retirement Account
("IRA").
7. Includes 500 shares owned by Mr. Guarino's spouse and 2,899 shares owned by
him as custodian for his children.
8. Includes 2,000 shares owned by Mr. Hopkins' IRA.
9. Includes 8,630 shares owned by Mr. Kelsey's IRA and 10,899 shares owned by
his wife.
10. Includes 15,000 shares owned by Mr. Lippincott's IRA.
11. Includes 5,000 shares owned by Mr. Mueller's IRA and 6,860 shares owned by
his spouse.
12. Includes 2,640 unvested ISAP shares, 3,280 options exercisable now or with
60 days after the Record Date and 2,955 shares allocated to Ms. Carr in the
ESOP.
13. Includes 600 shares owned by Mr. Dederick's IRA, 2,800 unvested ISAP shares,
3,680 options exercisable now or within 60 days after the Record Date and 3,608
shares allocated to Mr. Dederick in the ESOP.
14. Includes 1,000 shares owned by Mr. Peacock's IRA, 1,600 unvested ISAP
shares, 1,680 options exercisable now or within 60 days after the Record Date
and 2,200 shares allocated to Mr. Peacock in the ESOP.
- -------------------------
12
<PAGE>
MEETINGS OF THE BOARD OF DIRECTORS AND CERTAIN COMMITTEES
The Company's Board of Directors held eight meetings during 1999. Each
of the directors of the Company is also a director of the Bank. The following is
information about the Compensation and Audit Committees of the Company and the
Bank.
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 ISAP. The committee,
which is comprised of directors Gengel, Lippincott and Mueller, also oversees
the Company's Employee Stock Ownership Plan (the "ESOP"). The committee of the
Company met seven times during 1999, twice in conjunction with the same
committee of the Bank.
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 AUDIT COMMITTEE of the Company, which also serves as the audit
committee of the Bank, consists of directors Gengel, Kelsey and Lippincott. 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 twice during 1999.
The entire Board of Directors acts as a nominating committee. 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 "Voting and Proxy Cards."
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. For certain other services rendered to the Company from time to time
outside scheduled Board and committee meetings, directors are paid a fee of $100
per hour, not to exceed $300 on any single day. Directors are also eligible for
participation in the Company's Stock Option Plan and ISAP.
EXECUTIVE COMPENSATION
The Company has not paid any cash compensation to its executive
officers since its formation. Except for stock-based compensation under its
Stock Option Plan and ISAP, the Company does not presently anticipate paying any
compensation to such persons until it becomes actively involved in the operation
or acquisition of businesses other than the Bank.
The following table sets forth information concerning the compensation
paid to Ms. Carr and Messrs. Dederick and Peacock. Since the voluntary
retirement of Mr. Kelsey as President and Chief Executive Officer of the Company
and the Bank effective December 31, 1998, the Company has functioned without a
person holding the title of Chief Executive Officer. The three executive
officers together handle the daily management of the Company and the Bank, and
thus compensation information for all of them is included in the table below.
13
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
SUMMARY COMPENSATION TABLE
- -----------------------------------------------------------------------------------------------------------------------------------
Long-Term Compensation
Annual Compensation Awards
- -----------------------------------------------------------------------------------------------------------------------------------
Options/Stock
Restricted Appreciation
Other Annual Stock Rights All Other
Name and Principal Position Year(1) Salary($) Bonus($)(2) Compensation($)(3) Awards($)(4) ("SARs")(#) Compensation(5)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Barbara A. Carr, 1999 $60,817 $1,820 None $7,280 2,000 $17,035
Vice President and 1998 $53,441 None None $6,700 4,000 $10,965
Senior Mortgage Officer 1997 $49,057 None None None None $ 6,462
- -----------------------------------------------------------------------------------------------------------------------------------
Stephen W. Dederick, 1999 $89,556 $1,820 None $7,280 2,000 $24,223
Senior Vice President 1998 $78,206 None None $10,050 5,000 $15,016
and Chief Financial 1997 $60,991 None None None None $ 22
Officer
- -----------------------------------------------------------------------------------------------------------------------------------
Rolland B. Peacock, III(6) 1999 $88,000 $1,820 None $7,280 2,000 $24,101
Senior Vice President 1998 $57,416 None None None None $ 0
- -----------------------------------------------------------------------------------------------------------------------------------
</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
- --------------------
(1) The Company changed its fiscal year to a calendar year for 1999.
All data in the table is presented on a calendar year basis.
(2) Includes the value, based upon the stock price on the date of
grant, of 140 ISAP shares for each executive officer which were granted in 1999
and vested immediately.
(3) None of the three executive officers received additional benefits
or perquisites which in the aggregate exceeded the lesser of $50,000 or 10% of
his or her respective salary and bonus for the fiscal year.
(4) On December 31, 1999, Ms. Carr had 880 shares of restricted stock
with a value of $10,560, Mr. Dederick had 1,040 shares with a value of $12,480
and Mr. Peacock had 560 shares with a value of $6,720, based upon a market price
of $12.00 per share on that date. These shares vest gradually in installments
through 2003.
(5) Other compensation includes: (i) the Bank's matching contribution
under its 401(k) Plan for Ms. Carr of $1,824 in 1999, $1,603 in 1998 and $1,472
in 1997; $1,792 in 1999 and $1,275 in 1998 for Mr. Dederick; and $2,040 in 1999
for Mr. Peacock; (ii) premium payments for Ms. Carr of $11 in 1999 and $2 in
1998; for Mr. Dederick, $41 in 1999, $51 in 1998 and $22 in 1997; and for Mr.
Peacock, $61 in 1999; and (iii) the Bank's contribution to the ESOP to repay the
ESOP loan for shares allocated to Ms. Carr of $15,200 in 1999, $9,360 in 1998
and $4,990 in 1997, to Mr. Dederick of $22,390 in 1999 and 13,690 in s 1998, and
to Mr. Peacock of $22,000 in 1999.
(6) Mr. Peacock joined the Bank in March 1998.
14
<PAGE>
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.
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. Since the voluntary retirement of
Mr. Kelsey as President and Chief Executive Officer of the Company and the Bank
effective December 31, 1998, the Company has functioned without a person holding
the title of Chief Executive Officer. Director Thomas Guarino was elected
President of the Bank, effective January 1, 1999, to satisfy regulatory
requirements that the Bank have a person with that title. Mr. Guarino is not
involved in the day to day management of the Bank or the Company. Messrs.
Dederick and Peacock and Ms. Carr, the three executive officers of the Company
and the Bank, are together responsible for overseeing the daily management of
the Company and the Bank.
The Compensation Committee determines the salary of the three executive
officers on a calendar year basis. Base salary paid to Ms. Carr for fiscal year
1999 was $60,817, and reflects a 13.8% increase over her base salary for fiscal
year 1998. Base salary paid to Mr. Dederick for fiscal 1999 was $89,556 which
reflects a 14.5% increase over his base salary for fiscal 1998, and base salary
paid in fiscal 1999 to Mr. Peacock, who joined the Bank in March 1998, was
$88,000. In determining total compensation to be paid to these executive
officers, the Compensation Committee considered the factors discussed above and
also considered a number of specific matters including the increased
responsibilities of these three executive officers with respect to the daily
management of the Bank and 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 transition of the Bank following the retirement
15
<PAGE>
in December 1998 of the President and Chief Executive Officer, Senior Vice
President and eight other officers and employees who elected to terminate their
employment with the Bank under the Enhanced Voluntary Termination Program. The
committee did not apply any mathematical or quantitative analysis in calculating
any compensation package.
In addition, in 1999, the committee developed an incentive plan for
executive officers based upon awards under the Stock Option Plan and the ISAP.
The committee established three levels of review to determine incentives under
the plan. The first two levels were based upon net income of the Bank. If the
Bank reached budgeted net income for 1999, the three executive officers would
equally share 6,000 options and 3,000 shares under the ISAP. For exceeding
budgeted net income, the thee officers would equally share up to 8,550 options
and 4,275 shares under the ISAP, with the exact amount awarded based on a
sliding scale depending upon how much net income exceeded budget. An additional
4,000 ISAP shares and 8,000 options were available to be awarded by the
committee entirely in its discretion based upon qualitative judgments of
performance by the executive officers. The awards on account of 1999 were made
in 2000. Based upon net income of the Bank, the executive officers earned the
entire available incentives for reaching budget and one-half of the graduated
incentives for exceeding budget. The committee awarded the executive officers
36.5% of the additional discretionary awards based upon a general performance
review, which was also shared equally among the executive officers. In addition,
the committee established a parallel plan for awards to other officers based
upon recommendations of the executive officers covering, for incentives based
upon reaching or exceeding budgeted net income, a total of 2,425 ISAP shares and
4,850 stock options. The committee also retained the ability to allocate the
discretionary awards under the third level of review to non-executive officers.
This report is included at the direction of the Compensation Committee
members, directors, Gene J. Gengel, Roy L. Lippincott and Herbert C. Mueller.
OPTION GRANTS DURING THE YEAR
The following table sets forth information about options granted during
1999 to our executive officers under our Stock Option Plan.
16
<PAGE>
<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR
Potential Realizable Value at
Assumed Annual Rates of
Stock Price Appreciation
Individual Grants for Option Term(1)
-----------------------------------------------------------------------------------------------
Percent of 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>
Barbara A. Carr 2,000 25% $ 13.00 5/13/09 $16,360 $41,440
Stephen W. Dederick 2,000 25% $ 13.00 5/13/09 $16,360 $41,440
Rolland B. Peacock, III 2,000 25% $ 13.00 5/13/09 $16,360 $41,440
</TABLE>
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 (SNL is a firm that compiles and
distributes financial information); (ii) the total return for the total U.S.
NASDAQ stock market (as published by the Center for Research in Security Prices
of the University of Chicago) commencing as of July 9, 1997, the date on which
the Company's common stock commenced public trading and (iii) as a peer group
comparison, SNL's total return index for thrifts with assets less than $250
million. This year, we have added the index for thrifts with assets less than
$250 million because we believe that this index most accurately indicates our
peer group, and thus will more accurately measure our stock performance, as
compared to other similar. 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 initial offering price of $10.00 was used, the
cumulative stockholder return would have been approximately 22.5% through
December 31, 1999. Total return assumes the reinvestment of cash dividends.
- -------------------
(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.
17
<PAGE>
TRANSACTIONS WITH DIRECTORS AND OFFICERS
The directors and the executive officers of the Bank maintain normal
deposit account relationships with the Bank on terms and conditions no more
favorable than those available to the general public. In the ordinary course of
business, the Bank may make loans to directors, officers and employees. All
loans to directors, executive officers and related parties are on substantially
the same terms, including interest rate and collateral, as the prevailing at the
same time for comparable loans to other customers and do not involve more than
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 1999 fiscal year.
[THE FOLLOWING TABLE REPRESENTS A GRAPHIC CHART WHICH HAS BEEN OMITTED]
TOTAL RETURN PERFORMANCE
GSB FINANCIAL NASDAQ SNL THRIFT SNL <$250M
CORPORATION TOTAL US* INDEX THRIFT INDEX
------------- --------- ---------- ------------
[PLOT POINTS TO BE INSERTED HERE]
EMPLOYMENT AND RETENTION AGREEMENTS
The Company and the Bank has employment agreements with its three
executive officers. The agreements establish each executive officers' duties and
provide benefits in the event of a change in control. The employment agreements
generally provide for a three year period of employment after a change in
control with extension periods at the discretion of Board of Directors. The
agreements do not, however, guarantee that the Board will continue any of the
officer's continued employment with the Bank or the Company prior to a change in
control.
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If the executive officer's employment terminates after a change in
control under circumstances described in the employment agreement, such as
changes in responsibilities or title following the change in control which are
not commensurate with the executive officer's senior officer status, he or she
would be entitled to receive, in addition to his or her earned but unpaid salary
through the date of termination plus benefits in effect on the date of
termination, a lump sum cash payment equal to (i) the present value of his or
her remaining cash compensation (salary plus bonus that the executive officer
would have earned if he or she had been employed until the end of the three year
employment period, at the highest annual rate of salary and bonus paid during
the two years prior to the change in control and (ii) the additional
contributions or benefits that the executive officer would have earned under any
employee benefit plans had his or her employment not been terminated prior to
the end of the assurance period. If permitted by applicable laws, provisions
will also be made for the cash out of stock options, appreciation rights or
restricted stock as if he or she were fully vested. The executive officer's
life, health and disability insurance or other benefit plan coverage would also
continue for the remainder of the three year guaranty period.
In general, a "change in control" will be deemed to occur when a person
or group of persons acting in concert acquires beneficial ownership of 25% or
more of any class of equity security of the Company or the Bank, upon
stockholder approval of a merger or consolidation unless certain conditions are
met, or a change of the majority of the Board of Directors of the Company or the
Bank or upon liquidation or sale of substantially all the assets of the Company
or the Bank.
Payments under the Bank's agreements with the three executive officers
are guaranteed by the Company. If payments under the two agreements are
duplicative, payments due under the Company's agreement would be offset by
amounts actually paid by the Bank. Ms. Carr and Messrs. Dederick and Peacock are
entitled to reimbursement of certain costs incurred in interpreting or enforcing
the agreements.
Cash and benefits paid to the three executive officers pursuant to the
agreements and under other benefit plans following a "change in control" may
constitute "excess parachute" payments under Section 280G of the Internal
Revenue Code, resulting in a 20% excise tax payable by the recipient and the
denial of the deduction for such excess amounts to the Company and the Bank. The
Company's agreement includes a provision indemnifying the executive officers on
an after-tax basis for any such excise taxes. We estimate that, based on
compensation for 1999, cash payments to be made in the event of a change in
control of the Bank or the Company to the three executive officers would
aggregate $715,000, not including payments for excise tax indemnification or for
continuation of employee benefits such as health insurance.
The Bank has also entered into employee retention agreements with four
non-executive officers. The agreements establish the officers' respective duties
and are intended to ensure that the Bank will be able to continue to benefit
from their services. The retention agreements generally promise two years of
employment after a change in control, with extension periods at the discretion
of the Board of Directors, unless otherwise terminated by either party. The
agreements do not, however, guarantee any of the officer's continued employment
with the Bank 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 employment agreements with the executive officers, the
officer would be entitled to a payment generally equal to the employee's salary
for the remainder of the promised two year employment period plus continued
health insurance coverage for the two years. 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 for 1999, 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 up to
$373,000, not including the cost of continued health insurance.
The actual amount that may be paid in the event of a change in control
pursuant to the employment and 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.
19
<PAGE>
PENSION PLAN
The Bank maintains a non-contributory, tax-qualified defined benefit
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
not to exceed 30 years of service. For the plan year beginning January 1, 2000,
the maximum permitted average annual compensation for determining pension
benefits under the pension plan is $160,000 and the maximum annual pension
benefit is $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 Company funds the pension plan on an
actuarial basis, and all assets are held in trust by the pension plan trustee.
At December 31, 1999, Ms. Carr had 16 years of credited service under
the pension plan, Mr. Dederick had two years of credited service and Mr. Peacock
had one year of credited service.
PROPOSAL FOUR
RATIFICATION OF APPOINTMENT OF AUDITORS
Our 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, 2000, 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 27 years to examine their
books and accounts and for other purposes.
Representatives of Nugent & Haeussler, P.C. are expected to be present
at the meeting and will have an opportunity to make a statement if they may
desire. The representatives are expected to be available to respond to
appropriate questions from stockholders.
20
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OTHER BUSINESS
Management has no reason to believe that any other business will be
presented at the meeting, but if any other business is presented, the Board of
Directors as the holder of the proxies will vote on those matters in accordance
with their judgment of the best interests of the Company.
GENERAL
We are sending you our Annual Report for 1999, including financial
statements, with this proxy statement. The annual report is not part of the
proxy solicitation material.
The Company will pay the cost of this proxy statement and the related
proxy solicitation. We have retained Regan & Associates, Inc., a firm
experienced in the solicitation of proxies on behalf of public companies, to
assist in the proxy solicitation process at a fee of $6,250, which includes all
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. 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.
2001 ANNUAL MEETING
The Company's Board of Directors will establish the date for the 2001
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 2001 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 2001 which
corresponds to the date in 2000 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 1999 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
STATED ABOVE. 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,
March 16, 2000
21
<PAGE>
EXHIBIT A
GSB FINANCIAL CORPORATION
STOCK OPTION PLAN FOR
OUTSIDE DIRECTORS, OFFICERS AND EMPLOYEES
All proposed amendments to the Stock Option Plan, except for
changes representing renumbering of sections to accommodate
the proposed amendments, are UNDERLINED.
<PAGE>
GSB FINANCIAL CORPORATION
STOCK OPTION PLAN FOR
OUTSIDE DIRECTORS, OFFICERS AND EMPLOYEES
TABLE OF CONTENTS
ARTICLE I
PURPOSE
Section 1.1 General Purpose of the Plan ............... 1
ARTICLE II
DEFINITIONS
Section 2.1 Bank....................................... 1
Section 2.2 Board...................................... 1
Section 2.3 Change in Control.......................... 1
Section 2.4 Code....................................... 2
Section 2.5 Committee.................................. 2
Section 2.6 Company.................................... 2
Section 2.7 Disability................................. 2
Section 2.8 Disinterested Board Member................. 2
Section 2.9 Effective Amendment Date................... 2
Section 2.10 Effective Date ........................... 2
Section 2.11 Eligible Director......................... 2
Section 2.12 Eligible Employee......................... 2
Section 2.13 Employer.................................. 2
Section 2.14 Exchange Act.............................. 2
Section 2.15 Exercise Price............................ 2
Section 2.16 Fair Market Value......................... 2
Section 2.17 Family Member............................. 2
Section 2.18 Hostile Change in Control................. 2
Section 2.19 Incentive Stock Option.................... 3
Section 2.20 Limited Stock Appreciation Right.......... 3
Section 2.21 Non-Profit Organization................... 3
Section 2.22 Non-Qualified Stock Option................ 3
Section 2.23 Option.................................... 3
Section 2.24 Option Period............................. 3
Section 2.25 OTS Regulations........................... 3
Section 2.26 Person.................................... 3
Section 2.27 Plan...................................... 3
Section 2.28 Retirement................................ 3
Section 2.29 Share..................................... 3
Section 2.30 Successor................................. 3
Section 2.31 Termination for Cause..................... 3
ARTICLE III
AVAILABLE SHARES
Section 3.1 Available Shares........................... 4
ARTICLE IV
ADMINISTRATION
Section 4.1 Committee.................................. 4
Section 4.2 Committee Action........................... 4
Section 4.3 Committee Responsibilities................. 4
ARTICLE V
STOCK OPTIONS FOR ELIGIBLE DIRECTORS
Section 5.1 In General................................. 5
Section 5.2 Exercise Price............................. 5
Section 5.3 Option Period.............................. 5
ARTICLE VI
STOCK OPTIONS FOR ELIGIBLE EMPLOYEES
Section 6.1 Size of Option............................. 6
Section 6.2 Grant of Options........................... 6
Section 6.3 Exercise Price............................. 6
Section 6.4 Option Period.............................. 6
Section 6.5 Required Regulatory Provisions............. 6
Section 6.6 Additional Restrictions on Incentive Stock
Options................................... 7
ARTICLE VII
OPTIONS -- IN GENERAL
Section 7.1 Method of Exercise......................... 8
Section 7.2 Limitations on Options..................... 8
Section 7.3 Limited Stock Appreciation Rights.......... 9
Section 7.4 Accelerated Vesting........................ 9
ARTICLE VIII
AMENDMENT AND TERMINATION
Section 8.1 Termination................................ 9
Section 8.2 Amendment.................................. 9
Section 8.3 Adjustments in the Event of a Business
Reorganization...................... 9
ARTICLE IX
MISCELLANEOUS
Section 9.1 Status as an Employee Benefit Plan........ 10
Section 9.2 No Right to Continued Employment.......... 10
Section 9.3 Construction of Language.................. 10
Section 9.4 Governing Law............................. 10
Section 9.5 Headings.................................. 10
Section 9.6 Non-Alienation of Benefits................ 10
Section 9.7 Taxes..................................... 10
Section 9.8 Approval of Shareholders.................. 11
Section 9.9 Notices................................... 11
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<PAGE>
GSB FINANCIAL CORPORATION STOCK OPTION PLAN
FOR
OUTSIDE DIRECTORS, OFFICERS AND EMPLOYEES
ARTICLE I
PURPOSE
SECTION 1.1 GENERAL PURPOSE OF THE PLAN. The purpose of the Plan is to promote
the growth and profitability of GSB FINANCIAL CORPORATION (the "Company") by
providing eligible directors, certain key officers and employees of the Company,
and its affiliates with an incentive to achieve corporate objectives, and by
allowing the Company to attract and retain individuals of outstanding competence
by offering such individuals an equity interest in the Company.
ARTICLE II
DEFINITIONS
The following definitions shall apply for the purposes of this Plan,
unless a different meaning is plainly indicated by the context:
SECTION 2.1 BANK means Goshen Savings Bank, a federally chartered
savings institution, and any successor thereto.
SECTION 2.2 BOARD means the board of directors of the Company.
SECTION 2.3 CHANGE IN CONTROL means any of the following events: (a)
the occurrence of any event upon which any "person" (as such term is used in
sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended
("Exchange Act")), other than (A) a trustee or other fiduciary holding
securities under an employee benefit plan maintained for the benefit of
employees of the Company; (B) a corporation owned, directly or indirectly, by
the stockholders of the Company in substantially the same proportions as their
ownership of stock of the Company; or (C) any group constituting a person in
which employees of the Company are substantial members, becomes the "beneficial
owner" (as defined in Rule 13d-3 promulgated under the Exchange Act), directly
or indirectly, of securities issued by the Company representing 25% or more of
the combined voting power of all of the Company's then outstanding securities;
or
(b) the occurrence of any event upon which the individuals who on the
date the Plan is adopted are members of the Board, together with individuals
whose election by the Board or nomination for election by the Company's
stockholders was approved by the affirmative vote of at least two-thirds of the
members of the Board then in office who were either members of the Board on the
date this Plan is adopted or whose nomination or election was previously so
approved, cease for any reason to constitute a majority of the members of the
Board, but excluding, for this purpose, any such individual whose initial
assumption of office is in connection with an actual or threatened election
contest relating to the election of directors of the Company (as such terms are
used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act); or
(c) the shareholders of the Company approve either:
(i) a merger or consolidation of the Company with any other
corporation, other than a merger or consolidation following which both of the
following conditions are satisfied:
(A) either (I) the members of the Board of the Company
immediately prior to such merger or consolidation constitute at least a majority
of the members of the governing body of the institution resulting from such
merger or consolidation; or (II) the shareholders of the Company own securities
of the institution resulting from such merger or consolidation representing 80%
or more of the combined voting power of all such securities of the resulting
institution then outstanding in substantially the same proportions as their
ownership of voting securities of the Company immediately before such merger or
consolidation; and
(B) the entity which results from such merger or
consolidation expressly agrees in writing to assume and perform the Company's
obligations under the Plan; or
(ii) a plan of complete liquidation of the Company or an
agreement for the sale or disposition by the Company of all or substantially all
of its assets; and
(d) any event that would be described in section 2.3(a), (b) or (c) if
"the Bank" were substituted for "the Company" therein.
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<PAGE>
SECTION 2.4 CODE means the Internal Revenue Code of 1986 (including the
corresponding provisions of any succeeding law).
SECTION 2.5 COMMITTEE means the Committee described in section 4.1.
SECTION 2.6 COMPANY means GSB Financial Corporation, a corporation
organized and existing under the laws of the State of Delaware, and any
successor thereto.
SECTION 2.7 DISABILITY means a condition of total incapacity, mental or
physical, for further performance of duty with the Company which the Committee
shall have determined, on the basis of competent medical evidence, is likely to
be permanent.
SECTION 2.8 DISINTERESTED BOARD MEMBER means a member of the Board who
(a) is not a current employee of the Company or a subsidiary, and (b) satisfies
all other requirements which may be necessary so that the Plan qualifies for the
maximum available benefits under Section 162(m) of the Code and any applicable
rules of the Securities Exchange Commission under Section 16 of the Exchange
Act.
SECTION 2.10 EFFECTIVE AMENDMENT DATE MEANS THE DATE ON WHICH THE
AMENDMENT TO ADD THIS SECTION IS APPROVED BY THE SHAREHOLDERS OF THE COMPANY.
SECTION 2.9 EFFECTIVE DATE means the date on which this Plan is
approved by Shareholders pursuant to section 9.8 hereof.
SECTION 2.11 ELIGIBLE DIRECTOR means a member of the board of directors
of an Employer who is not also an employee of an Employer.
SECTION 2.12 ELIGIBLE EMPLOYEE means any employee whom the Committee
may determine to be a key officer or employee of an Employer and select to
receive a grant of an Option pursuant to the Plan.
SECTION 2.13 EMPLOYER means the Company, the Bank and any successor
thereto and, with the prior approval of the Board, and subject to such terms and
conditions as may be imposed by the Board, any other savings bank, savings and
loan association, bank, corporation, financial institution or other business
organization or institution. With respect to any Eligible Employer or Eligible
Director, the Employer shall mean the entity which employs such person or upon
whose board of directors such person serves.
SECTION 2.14 EXCHANGE ACT means the Securities Exchange Act of 1934, as
amended.
SECTION 2.15 EXERCISE PRICE means the price per Share at which Shares
subject to an Option may be purchased upon exercise of the Option, determined in
accordance with section 5.4.
SECTION 2.16 FAIR MARKET VALUE means, with respect to a Share on a
specified date: (a) the final reported sales price on the date in question (or
if there is no reported sale on such date, on the last preceding date on which
any reported sale occurred) as reported in the principal consolidated reporting
system with respect to securities listed or admitted to trading on the principal
United States securities exchange on which the Shares are listed or admitted to
trading; or
(b) if the Shares are not listed or admitted to trading on any such
exchange, the closing bid quotation with respect to a Share on such date on the
National Association of Securities Dealers Automated Quotations System, or, if
no such quotation is provided, on another similar system, selected by the
Committee, then in use; or
(c) if sections 2.16(a) and (b) are not applicable, the fair market
value of a Share as the Committee may determine.
SECTION 2.17 FAMILY MEMBER means the spouse, parent, child or sibling
of an Eligible Director or Eligible Employee.
SECTION 2.18 HOSTILE CHANGE OF CONTROL MEANS A CHANGE OF CONTROL WHICH
RESULTS FROM A TRANSACTION WHICH IS NOT EXPRESSLY APPROVED BY A RESOLUTION OF,
OR IS APPROVED WITHOUT A FAVORABLE RECOMMENDATION BY, (I) A MAJORITY OF THE
DISINTERESTED BOARD MEMBERS, IN THE EVENT OF A TRANSACTION WITH A SHAREHOLDER OF
THE COMPANY, OR (II) BY A MAJORITY OF THE MEMBERS OF THE BOARD IMMEDIATELY PRIOR
TO SUCH TRANSACTION, IN THE EVENT OF A TRANSACTION WITH A PERSON OTHER THAN
SHAREHOLDER OF THE COMPANY. A CHANGE IN CONTROL FOR WHICH NO BOARD APPROVAL OR
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<PAGE>
RECOMMENDATION IS REQUIRED SHALL BE DEEMED A HOSTILE CHANGE IN CONTROL UNLESS
THE TRANSACTION OR EVENT CONSTITUTING SUCH CHANGE IN CONTROL IS APPROVED BY A
TWO-THIRDS VOTE OF MEMBERS OF THE BOARD WHO WERE DIRECTORS OF THE COMPANY ON THE
EFFECTIVE AMENDMENT DATE, OR THEIR SUCCESSORS. IF THERE ARE THEN NO MEMBERS OF
THE BOARD WHO WERE DIRECTORS OF THE BANK ON THE EFFECTIVE AMENDMENT DATE, OR WHO
CONSTITUTE THEIR SUCCESSORS AS DEFINED HEREIN, THEN THE CHANGE IN CONTROL SHALL
BE DEEMED A HOSTILE CHANGE IN CONTROL.
SECTION 2.19 INCENTIVE STOCK OPTION means a right to purchase Shares
that is granted to Eligible Employees pursuant to section 6.1, that is
designated by the Committee to be an Incentive Stock Option and that is intended
to satisfy the requirements of section 422 of the Code.
SECTION 2.20 LIMITED STOCK APPRECIATION RIGHT means a right granted
pursuant to section 7.3.
SECTION 2.21 NON-PROFIT ORGANIZATION means any organization which is
exempt from federal income tax under section 501(c)(3), (4), (5), (6), (7), (8)
or (10) of the Internal Revenue Code.
SECTION 2.22 NON-QUALIFIED STOCK OPTION means a right to purchase
Shares that is granted pursuant to section 5.1 or 6.1. For Eligible Employees,
an Option will be a Non-Qualified Stock Option if (a) it is not designated by
the Committee to be an Incentive Stock Option, or (b) it does not satisfy the
requirements of section 422 of the Code.
SECTION 2.23 OPTION means either an Incentive Stock Option or a Non-
Qualified Stock Option.
SECTION 2.24 OPTION PERIOD means the period during which an Option may
be exercised, determined in accordance with section 5.3 and 6.4.
SECTION 2.25 OTS REGULATIONS means the regulations issued by the Office
of Thrift Supervision and applicable to the Plan, the Bank or the Company.
SECTION 2.26 PERSON means an individual, a corporation, a bank, a
savings bank, a savings and loan association, a financial institution, a
partnership, an association, a joint-stock company, a trust, an estate, an
unincorporated organization and any other business organization or institution.
SECTION 2.27 PLAN means this Stock Option Plan for Outside Directors,
Officers and Employees, as amended from time to time.
SECTION 2.28 RETIREMENT means retirement at or after the normal or
early retirement date set forth in any tax-qualified retirement plan of the
Bank.
SECTION 2.29 SHARE means a share of Common Stock, par value $.01 per
share, of the Company.
SECTION 2.30 SUCCESSOR MEANS A PERSON WHO WAS FIRST ELECTED AS A
DIRECTOR OF THE COMPANY BY EITHER (I) A MAJORITY OF THE MEMBERS THE BOARD WHO
WERE DIRECTORS OF THE COMPANY ON THE EFFECTIVE AMENDMENT DATE OR THEIR
SUCCESSORS; OR (II) OR BY VOTE OF THE SHAREHOLDERS OF THE COMPANY AFTER
NOMINATION FOR ELECTION BY A MAJORITY OF THE MEMBERS THE BOARD WHO WERE
DIRECTORS OF THE COMPANY ON THE EFFECTIVE AMENDMENT DATE OR THEIR SUCCESSORS.
SECTION 2.31 TERMINATION FOR CAUSE means one of the following: (a) for
an Eligible Employee who is not an officer or employee of any bank or savings
institution regulated by the Office of Thrift Supervision, "Termination for
Cause" means termination of employment with the Employer upon the occurrence of
any of the following: (i) the employee intentionally engages in dishonest
conduct in connection with his performance of services for the Employer
resulting in his conviction of a felony; (ii) the employee is convicted of, or
pleads guilty or nolo contendere to, a felony or any crime involving moral
turpitude; (iii) the employee willfully fails or refuses to perform his duties
under any employment or retention agreement and fails to cure such breach within
sixty (60) days following written notice thereof from the Employer; (iv) the
employee breaches his fiduciary duties to the Employer for personal profit; or
(v) the employee's willful breach or violation of any law, rule or regulation
(other than traffic violations or similar offenses), or final cease and desist
order in connection with his performance of services for the Employer;
(b) for an Eligible Employee who is an officer or employee of a bank or
savings institution regulated by the Office of Thrift Supervision, "Termination
for Cause" means termination of employment for personal dishonesty,
incompetence, willful misconduct, breach of fiduciary duty involving personal
profit, intentional failure to perform stated duties, willful violation of any
law, rule or regulation (other than traffic violations or similar offenses) or
final cease and desist order, or any breach of any material provision of this
Agreement, in each case as measured against standards generally prevailing at
the relevant time in the savings and community banking industry; provided,
-3-
<PAGE>
however, that such individual shall not be deemed to have been discharged for
cause unless and until he shall have received a written notice of termination
from the Board, which notice shall be given to such individual not later than
five (5) business days after the board of directors of the Employer adopts, and
shall be accompanied by, a resolution duly approved by affirmative vote of a
majority of the entire board of directors of the Employer at a meeting called
and held for such purpose (which meeting shall be held not less than fifteen
(15) days nor more than thirty (30) days after notice to the individual), at
which meeting there shall be a reasonable opportunity for the individual to make
oral and written presentations to the members of the board of directors of the
Employer, on his own behalf, or through a representative, who may be his legal
counsel, to refute the grounds for the proposed determination) finding that in
the good faith opinion of the board of directors of the Employer grounds exist
for discharging the individual for cause.
ARTICLE III
AVAILABLE SHARES
SECTION 3.1 AVAILABLE SHARES. Subject to section 8.3, the maximum
aggregate number of Shares with respect to which Options may be granted at any
time shall not exceed 224,825 and shall be equal to the excess of:
(a) 224,825 Shares; over
(b) the sum of:
(i) the number of Shares with respect to which previously
granted Options may then or may in the future be exercised; plus
(ii) the number of Shares with respect to which previously
granted Options have been exercised.
ARTICLE IV
ADMINISTRATION ..
SECTION 4.1 COMMITTEE. The Plan shall be administered by the
Compensation Committee of the Board, all whose members shall be Disinterested
Board Members. If the Committee consists of fewer than two Disinterested Board
Members, then the Board shall appoint to the Committee such additional
Disinterested Board Members as shall be necessary to provide for a Committee
consisting of at least two Disinterested Board Members. Said Committee shall
constitute a compensation committee as that term is used in section 162(m) of
the Code, and the regulations thereunder, and such committee shall have the
authority described therein. If, for any reason, a member of the Compensation
Committee is not or ceases to be a Disinterested Board Member, then any action
taken by such person as a member of said Committee shall be void and shall be
disregarded for all purposes. Said person shall be retroactively deemed not to
have been a member of said Committee since said person ceased being a
Disinterested Board Member.
SECTION 4.2 COMMITTEE ACTION. The Committee shall hold such meetings,
and may make such administrative rules and regulations, as it may deem proper. A
majority of the members of the Committee shall constitute a quorum, and the
action of a majority of the members of the Committee present at a meeting at
which a quorum is present, as well as actions taken pursuant to the unanimous
written consent of all of the members of the Committee without holding a
meeting, shall be deemed to be actions of the Committee. All actions of the
Committee shall be final and conclusive and shall be binding upon the Company
and all other interested parties. Any Person dealing with the Committee shall be
fully protected in relying upon any written notice, instruction, direction or
other communication signed by the secretary of the Committee and one member of
the Committee, by two members of the Committee or by a representative of the
Committee authorized to sign the same in its behalf.
SECTION 4.3 COMMITTEE RESPONSIBILITIES. Subject to the terms and
conditions of the Plan and such limitations as may be imposed from time to time
by the Board, the Committee shall be responsible for the overall management and
administration of the Plan and shall have such authority as shall be necessary
or appropriate in order to carry out its responsibilities, including, without
limitation, the authority.
(a) to interpret and construe the Plan, and to determine all questions
that may arise under the Plan as to eligibility for participation in the Plan,
the number of Shares subject to the Options, if any, to be granted, and the
terms and conditions thereof;
(b) to adopt rules and regulations and to prescribe forms for the
operation and administration of the Plan; and
(c) to take any other action not inconsistent with the provisions of
the Plan that it may deem necessary or appropriate.
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ARTICLE V
STOCK OPTIONS FOR ELIGIBLE DIRECTORS
SECTION 5.1 IN GENERAL. (a) On the Effective Date, each Eligible
Director shall be granted an Option to purchase 11,241 Shares.
(b) Any Option granted under this section 5.1 shall be evidenced by a
written agreement which shall specify the number of Shares covered by the
Option, the Exercise Price for the Shares subject to the Option and the Option
Period, all as determined pursuant to this Article V. The Option agreement shall
also set forth specifically or incorporate by reference the applicable
provisions of the Plan.
(c) IN ADDITION TO THE GRANT OF OPTIONS TO ELIGIBLE DIRECTORS PURSUANT
TO SECTION 5.1(A) HEREOF, THE COMMITTEE MAY, IN ITS DISCRETION, GRANT TO AN
ELIGIBLE DIRECTOR AN ADDITIONAL OPTION OR OPTIONS.
(d) ANY OPTION GRANTED PURSUANT TO SECTION 5.1(C) SHALL CONTAIN SUCH
OTHER TERMS AND CONDITIONS NOT INCONSISTENT WITH THE PLAN AS THE COMMITTEE MAY,
IN ITS DISCRETION, PRESCRIBE.
SECTION 5.2 EXERCISE PRICE. The price per Share at which an Option
granted to an Eligible Director under section 5.1 may be exercised shall be the
Fair Market Value of a Share on the date on which the Option is granted.
SECTION 5.3 OPTION PERIOD. (a) Subject to section 5.3(b), the Option
Period during which an Option granted to an Eligible Director under section 5.1
may be exercised shall commence on the date the Option is granted and shall
expire on the earlier of:
(i) removal for cause in accordance with the Employer's
bylaws; or
(ii) the last day of the ten-year period commencing on the
date on which the Option was granted.
(b) During the Option Period, the maximum number Shares as to which an
outstanding Option may be exercised shall be as follows.
(i) prior to the first anniversary of the Effective Date, the
Option shall not be exercisable.
(ii) on and after the first anniversary, but prior to the
second anniversary, of the Effective Date, the Option may be exercised as to a
maximum of twenty percent (20%) of the Shares subject to the Option.
(iii) on and after the second anniversary, but prior to the
third anniversary, of the Effective Date, the Option may be exercised as to a
maximum of forty percent (40%) of the Shares subject to the Option, when
granted, including in such number any optioned Shares purchased prior to such
second anniversary.
(iv) on and after the third anniversary, but prior to the
fourth anniversary, of the Effective Date, the Option may be exercised as to a
maximum of sixty percent (60%) of the Shares subject to the Option, when
granted, including in such number any optioned Shares purchased prior to such
third anniversary.
(v) on and after the fourth anniversary, but prior to the
fifth anniversary, of the Effective Date, the Option may be exercised as to a
maximum of eighty percent (80%) of the Shares subject to the Option, when
granted, including in such number any optioned Shares purchased prior to such
fourth anniversary; and
(vi) on and after the fifth anniversary of the Effective Date,
and for the remainder of the Option Period, the Option may be exercised as to
the entire number of optioned Shares not theretofore purchased.
provided, however, that such an Option shall become fully exercisable, and all
optioned Shares not previously purchased shall become available for purchase, on
the date of the Option holder's death or Disability.
(c) THE VESTING REQUIREMENTS OF SECTION 5.3 (B) SHALL NOT APPLY TO ANY
OPTION GRANTED AFTER THE EFFECTIVE AMENDMENT DATE, BUT THE COMMITTEE SHALL HAVE
THE AUTHORITY TO IMPOSE SUCH VESTING RESTRICTIONS AS IT DEEMS APPROPRIATE AT THE
TIME OF GRANTING ANY OPTION PURSUANT TO SECTION 5.1(C).
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ARTICLE VI
STOCK OPTIONS FOR ELIGIBLE EMPLOYEES
SECTION 6.1 SIZE OF OPTION. Subject to sections 6.2 and 6.5 and such
limitations as the Board may from time to time impose, the number of Shares as
to which an Eligible Employee may be granted Options shall be determined by the
Committee, in its discretion.
SECTION 6.2 GRANT OF OPTIONS. (a) Subject to the limitations of the
Plan, the Committee may, in its discretion, grant to an Eligible Employee an
Option to purchase Shares. The Option for such Eligible Employees must be
designated as either an Incentive Stock Option or a Non-Qualified Stock Option
and, if not designated as either, shall be a Non-Qualified Stock Option.
(b) Any Option granted under this section 6.2 shall be evidenced by a
written agreement which shall.
(i) specify the number of Shares covered by the Option.
(ii) specify the Exercise Price, determined in accordance with
section 6.3, for the Shares subject to the Option.
(iii) specify the Option Period determined in accordance with
section 6.4.
(iv) set forth specifically or incorporate by reference the
applicable provisions of the Plan; and
(v) contain such other terms and conditions not inconsistent
with the Plan as the Committee may, in its discretion, prescribe with respect to
an Option granted to an Eligible Employee.
SECTION 6.3 EXERCISE PRICE. The price per Share at which an Option
granted to an Eligible Employee shall be determined by the Committee, in its
discretion; provided, however, that the Exercise Price shall not be less than
the Fair Market Value of a Share on the date on which the Option is granted.
SECTION 6.4 OPTION PERIOD. Subject to section 6.5, the Option Period
during which an Option granted to an Eligible Employee may be exercised shall
commence on the date specified by the Committee in the Option agreement and
shall expire on the date specified in the Option agreement or, if no date is
specified, on the earliest of.
(a) the close of business on the last day of the three-month period
commencing on the date of the Eligible Employee's termination of employment with
the Employer, other than on account of death or Disability, Retirement or a
Termination for Cause.
(b) the close of business on the last day of the one-year period
commencing on the date of the Eligible Employee's termination of employment due
to death, Disability or Retirement.
(c) the date and time when the Eligible Employee ceases to be an
employee of the Employer due to a Termination for Cause; and
(d) the last day of the ten-year period commencing on the date on which
the Option was granted.
SECTION 6.5 VESTING PROVISIONS. (a) Unless otherwise permitted by OTS
Regulations and approved by the Committee, each Option granted to an Eligible
Employee shall become exercisable as follows.
(i) prior to the first anniversary of the Effective Date, the
Option shall not be exercisable.
(ii) on and after the first anniversary, but prior to the
second anniversary, of the Effective Date, the Option may be exercised as to a
maximum of twenty percent (20%) of the Shares subject to the Option when
granted.
(iii) on and after the second anniversary, but prior to the
third anniversary, of the Effective Date, the Option may be exercised as to a
maximum of forty percent (40%) of the Shares subject to the Option when granted,
including in such forty percent (40%) any optioned Shares purchased prior to
such second anniversary.
(iv) on and after the third anniversary, but prior to the
fourth anniversary, of the Effective Date, the Option may be exercised as to a
maximum of sixty percent (60%) of the Shares subject to the Option when granted,
including in such sixty percent (60%) any optioned Shares purchased prior to
such third anniversary.
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(v) on and after the fourth anniversary, but prior to the
fifth anniversary, of the Effective Date, the Option may be exercised as to a
maximum of eighty percent (80%) of the Shares subject to the Option when
granted, including in such eighty percent (80%) any optioned Shares purchased
prior to such fourth anniversary; and
(vi) on and after the fifth anniversary of the Effective Date,
and for the remainder of the Option Period, the Option may be exercised as to
the entire number of optioned Shares not theretofore purchased;
provided, however, that such an Option shall become fully exercisable, and all
optioned Shares not previously purchased shall become available for purchase, on
the date of the Option holder's death or Disability; provided, further, that the
Committee may establish a different vesting schedule if not inconsistent with
section 563b.3(g) of OTS Regulations.
(b) THE VESTING REQUIREMENTS OF SECTION 6.5 (A) SHALL NOT APPLY TO ANY
OPTION GRANTED AFTER THE EFFECTIVE AMENDMENT DATE, BUT THE COMMITTEE SHALL HAVE
THE AUTHORITY TO IMPOSE SUCH VESTING RESTRICTIONS AS IT DEEMS APPROPRIATE AT THE
TIME OF GRANTING ANY SUCH OPTION.
(c) The Option Period of any Option granted to an Eligible Employee
hereunder, whether or not previously vested, shall be suspended as of the time
and date at which the Option holder has received notice from the Board that his
or her employment is subject to a possible Termination for Cause. Such
suspension shall remain in effect until the Option holder receives official
notice from the Board that he or she has been cleared of any possible
Termination for Cause, at which time, the original Exercise Period shall be
reinstated without any adjustment for the intervening suspended period. In the
event that the Option Period under section 6.4 expires during such suspension
for any of the reasons specified in sections 6.4(a), (b) or (d), other than
voluntary resignation not constituting Retirement, the Company shall pay to the
Eligible Employee, damages equal to the value of the expired Options less the
Exercise Price of such Options if it is determined that there had not existed
justification for Termination for Cause on the date of such expiration.
(d) No Option granted to an Eligible Employee hereunder, whether or not
previously vested, shall be exercised after the time and date at which the
Option holder's employment with the Employer is terminated in a Termination for
Cause.
SECTION 6.6 ADDITIONAL RESTRICTIONS ON INCENTIVE STOCK OPTIONS. In
addition to the limitations of section 7.3, an Option granted to an Eligible
Employee designated by the Committee to be an Incentive Stock Option shall be
subject to the following limitations.
(a) If, for any calendar year, the sum of (i) plus (ii) exceeds
$100,000, where (i) equals the Fair Market Value (determined as of the date of
the grant) of Shares subject to an Option intended to be an Incentive Stock
Option which first become available for purchase during such calendar year, and
(ii) equals the Fair Market Value (determined as of the date of grant) of Shares
subject to any other options intended to be Incentive Stock Options and
previously granted to the same Eligible Employee which first become exercisable
in such calendar year, then that number of Shares optioned which causes the sum
of (i) and (ii) to exceed $100,000 shall be deemed to be Shares optioned
pursuant to a Non-Qualified Stock Option or Non-Qualified Stock Options, with
the same terms as the Option or Options intended to be an Incentive Stock
Option.
(b) The Exercise Price of an Incentive Stock Option granted to an
Eligible Employee who, at the time the Option is granted, owns Shares comprising
more than 10% of the total combined voting power of all classes of stock of the
Company shall not be less than 110% of the Fair Market Value of a Share, and if
an Option designated as an Incentive Stock Option shall be granted at an
Exercise Price that does not satisfy this requirement, the designated Exercise
Price shall be observed and the Option shall be treated as a Non-Qualified Stock
Option.
(c) The Option Period of an Incentive Stock Option granted to an
Eligible Employee who, at the time the Option is granted, owns Shares comprising
more than 10% of the total combined voting power of all classes of stock of the
Company, shall expire no later than the fifth anniversary of the date on which
the Option was granted, and if an Option designated as an Incentive Stock Option
shall be granted for an Option Period that does not satisfy this requirement,
the designated Option Period shall be observed and the Option shall be treated
as a Non-Qualified Stock Option.
(d) An Incentive Stock Option that is exercised during its designated
Option Period but more than:
(i) three (3) months after the termination of employment with
the Company, a parent or a subsidiary (other than on account of disability
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within the meaning of section 22(e)(3) of the Code or death) of the Eligible
Employee to whom it was granted; and
(ii) one (1) year after such individual's termination of
employment with the Company, a parent or a subsidiary due to disability (within
the meaning of section 22(e)(3) of the Code) may be exercised in accordance with
the terms but shall at the time of exercise be treated as a Non-Qualified Stock
Option; and
(e) Except with the prior written approval of the Committee, no
individual shall dispose of Shares acquired pursuant to the exercise of an
Incentive Stock Option until after the later of (i) the second anniversary of
the date on which the Incentive Stock Option was granted, or (ii) the first
anniversary of the date on which the Shares were acquired.
ARTICLE VII
OPTIONS -- IN GENERAL
SECTION 7.1 METHOD OF EXERCISE. (a) Subject to the limitations of the
Plan and the Option agreement, an Option holder may, at any time during the
Option Period, exercise his or her right to purchase all or any part of the
Shares to which the Option relates; provided, however, that the minimum number
of Shares which may be purchased at any time shall be 100, or, if less, the
total number of Shares relating to the Option which remain unpurchased. An
Option holder shall exercise an Option to purchase Shares by.
(i) giving written notice to the Secretary of the Company, in
such form and manner as the Committee may prescribe, of his intent to exercise
the Option.
(ii) delivering to the Secretary of the Company, full payment,
consistent with section 7.1(b), for the Shares as to which the Option is to be
exercised; and
(iii) satisfying such other conditions as may be prescribed in
the Option agreement. If, at anytime that any Option is exercisable there is not
a duly appointed Secretary of the Company, then notice of intent to exercise
shall be given, in writing, accompanied by payment in full, to the Board of
Directors of the Company.
(b) The Exercise Price of Shares to be purchased upon exercise of any
Option shall be paid in full in cash (by certified or bank check or such other
instrument as the Company may accept) or, if and to the extent permitted by the
Committee, by one or more of the following: (i) in the form of Shares already
owned by the Option holder having an aggregate Fair Market Value on the date the
Option is exercised equal to the aggregate Exercise Price to be paid; (ii) by
requesting the Company to cancel without payment Options outstanding to such
Person for that number of Shares whose aggregate Fair Market Value on the date
of exercise, when reduced by their aggregate Exercise Price, equals the
aggregate Exercise Price of the Options being exercised; or (iii) by a
combination thereof. Payment for any Shares to be purchased upon exercise of an
Option may also be made by delivering a properly executed exercise notice to the
Company, together with a copy of irrevocable instructions to a broker to deliver
promptly to the Company the amount of sale or loan proceeds to pay the purchase
price. To facilitate the foregoing, the Company may enter into agreements for
coordinated procedures with one or more brokerage firms.
(c) When the requirements of section 7.1(a) and (b) have been
satisfied, the Committee shall take such action as is necessary to cause the
issuance of a stock certificate evidencing the Option holder's ownership of such
Shares. The Person exercising the Option shall have no right to vote or to
receive dividends, nor have any other rights with respect to the Shares, prior
to the date as of which such Shares are transferred to such Person on the stock
transfer records of the Company, and no adjustments shall be made for any
dividends or other rights for which the record date is prior to the date as of
which such transfer is effected, except as may be required under section 8.3.
SECTION 7.2 LIMITATIONS ON OPTIONS. (a) An Option by its terms shall
not be transferable by the Option holder other than to Family Members or
Non-profit Organizations or by will or by the laws of descent and distribution
and shall be exercisable, during the lifetime of the Option holder, only by the
Option holder, a Family Member or a Non-profit Organization. Any such transfer
shall be effected by written notice to the Company given in such form and manner
as the Committee may prescribe and shall be recognized only if such notice is
received by the Company prior to the death of the person giving it. Thereafter,
the transferee shall have, with respect to such Option, all of the rights,
privileges and obligations which would attach thereunder to the transferor if
the Option were issued to such transferor. If a privilege of the Option depends
on the life, employment or other status of the transferor, such privilege of the
Option for the transferee shall continue to depend on the life, employment or
other status of the transferor. The Committee shall have full and exclusive
authority to interpret and apply the provisions of this Plan to transferees to
the extent not specifically described herein. Notwithstanding the foregoing, an
Incentive Stock Option is not transferable by an Eligible Employee other than by
will or the laws of descent and distribution, and is exercisable, during his
lifetime, solely by him.
(b) The Company's obligation to deliver Shares with respect to an
Option shall, if the Committee so requests, be conditioned upon the receipt of a
representation as to the investment intention of the Option holder to whom such
Shares are to be delivered, in such form as the Committee shall determine to be
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necessary or advisable to comply with the provisions of applicable federal,
state or local law. It may be provided that any such representation shall become
inoperative upon a registration of the Shares or upon the occurrence of any
other event eliminating the necessity of such representation. The Company shall
not be required to deliver any Shares under the Plan prior to (i) the admission
of such Shares to listing on any stock exchange on which Shares may then be
listed, or (ii) the completion of such registration or other qualification under
any state or federal law, rule or regulation as the Committee shall determine to
be necessary or advisable.
SECTION 7.3 LIMITED STOCK APPRECIATION RIGHTS. (a) Each Option granted
under this Plan shall be accompanied by a Limited Stock Appreciation Right that
is exercisable at the times and upon the terms and conditions set forth herein.
Each Limited Stock Appreciation Right granted hereunder shall be exercisable for
a period commencing on the date on which a Change in Control occurs and ending
six (6) months after such date or, if later in the case of any Person, thirty
(30) days after the earliest date on which such Person may exercise the Limited
Stock Appreciation Right without subjecting himself to liability under section
16 of the Securities Exchange Act of 1934, as amended, provided, however, that a
Limited Stock Appreciation Right shall not be exerciseable if and to the extent
that the exercise thereof is prohibited by any then-applicable OTS Regulations.
A Person in possession of a Limited Stock Appreciation Right granted hereunder
may exercise such Limited Stock Appreciation Right by.
(i) giving written notice to the Committee, in such form and
manner as the Committee may prescribe, of his intent to exercise the Limited
Stock Appreciation Right; and
(ii) agreeing in such written notice to the cancellation of
Options then outstanding to him for a number of Shares equal to the number of
Shares for which the Limited Stock Appreciation Right is being exercised. Except
as provided in this Plan, within ten (10) days after the giving of such a
notice, the Committee shall cause the Company to deliver to such Person a
monetary payment in an amount per Share equal to the amount by which the Fair
Market Value of the Share on the date of exercise exceeds the Exercise Price per
Share of each of the Options being canceled.
(b) Notwithstanding anything herein contained to the contrary, the
Limited Stock Appreciation Rights granted hereunder shall be canceled at the
effective time of a Change in Control resulting from a transaction between the
Company and another party pursuant to a written agreement whereby the
consummation of the transaction is conditioned upon the delivery to each Option
holder, upon the closing of such transaction and in exchange for the
cancellation of all of such Option holder's outstanding Options, of a monetary
payment or property (including but not limited to options to purchase securities
of the entity resulting from such transaction) with a value equivalent to the
value of the Options being canceled.
SECTION 7.4 ACCELERATED VESTING. NOTWITHSTANDING ANY OTHER PROVISION OF
THIS PLAN OR ANY VESTING RESTRICTIONS IMPOSED BY THE COMMITTEE, ALL OPTIONS
GRANTED UNDER THIS PLAN WHICH REMAIN OUTSTANDING BUT WHICH ARE NOT YET
EXERCISABLE SHALL IMMEDIATELY VEST AND SHALL BE IMMEDIATELY EXERCISABLE IF (A) A
HOSTILE CHANGE IN CONTROL OCCURS, OR (B) AS TO OPTIONS GRANTED TO ANY ELIGIBLE
DIRECTOR, IF THAT DIRECTOR RETIRES FROM SERVICE AS A DIRECTOR OF ALL EMPLOYERS
AFTER NOT LESS THAN TEN YEARS OF SERVICE WITH ANY EMPLOYER. FOR THE PURPOSE OF
THIS SECTION, A DIRECTOR SHALL BE DEEMED TO HAVE RETIRED UPON VOLUNTARY
RESIGNATION OR UPON FAILURE TO BE RE-ELECTED AS A DIRECTOR.
ARTICLE VIII
AMENDMENT AND TERMINATION
SECTION 8.1 TERMINATION. The Board may suspend or terminate the Plan in
whole or in part at any time prior to the tenth anniversary of the Effective
Date by giving written notice of such suspension or termination to the
Committee. Unless sooner terminated, the Plan shall terminate automatically on
the day preceding the tenth anniversary of the Effective Date. In the event of
any suspension or termination of the Plan, all Options theretofore granted under
the Plan that are outstanding on the date of such suspension or termination of
the Plan shall remain outstanding and exercisable for the period and on the
terms and conditions set forth in the Option agreements evidencing such Options.
SECTION 8.2 AMENDMENT. The Board may amend or revise the Plan in whole
or in part at any time whether before or after approval of the Plan by the
Shareholders of the Company; provided, however, that, to the extent required to
comply with
SECTION 162(m) and Section 422 of the Code, no such amendment or
revision shall be effective if it amends a material term of the Plan unless
approved by the holders of a majority of the voting Shares of GSB Financial
Corporation.
SECTION 8.3 ADJUSTMENTS IN THE EVENT OF A BUSINESS REORGANIZATION. (a)
In the event of any merger, consolidation, or other business reorganization in
which the Company is the surviving entity, and in the event of any stock split,
stock dividend or other event generally affecting the number of Shares held by
each Person who is then a holder of record of Shares, the number of Shares
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covered by each outstanding Option and the number of Shares available pursuant
to section 3.1 shall be adjusted to account for such event. Such adjustment
shall be effected by multiplying such number of Shares by an amount equal to the
number of Shares that would be owned after such event by a Person who,
immediately prior to such event, was the holder of record of one Share, and the
Exercise Price of outstanding Options shall be adjusted by dividing the
aggregate Exercise Price for all Shares covered by each Option by the adjusted
number of Shares covered by such Option; provided, however, that the Committee
may, in its discretion, establish another appropriate method of adjustment.
(b) In the event of any merger, consolidation, or other business
reorganization in which the Company is not the surviving entity, any Options
granted under the Plan which remain outstanding may be canceled as of the
effective date of such merger, consolidation, business reorganization,
liquidation or sale by the Board upon 30 days' written notice to the Option
holder; provided, however, that on or as soon as practicable following the date
of cancellation, each Option holder shall receive a monetary payment in such
amount, or other property of such kind and value, as the Board determines in
good faith to be equivalent in value to the Options that have been canceled.
(c) In the event that the Company shall declare and pay any dividend
with respect to Shares (other than a dividend payable in Shares) which results
in a nontaxable return of capital to the holders of Shares for federal income
tax purposes or otherwise than by dividend makes distribution of property to the
holders of its Shares, the Company shall make an equivalent payment to each
Person holding an outstanding Option as of the record date for such dividend.
Such payment shall be made at substantially the same time, in substantially the
same form and in substantially the same amount per optioned Share as the
dividend or other distribution paid with respect to outstanding Shares;
provided, however, that if any dividend or distribution on outstanding Shares is
paid in property other than cash, the Company, in its discretion applied
uniformly to all outstanding Options, may make such payment in a cash amount per
optioned Share equal in fair market value to the fair market value of the
non-cash dividend or distribution.
ARTICLE IX
MISCELLANEOUS
SECTION 9.1 STATUS AS AN EMPLOYEE BENEFIT PLAN. This Plan is not
intended to satisfy the requirements for qualification under section 401(a) of
the Code or to satisfy the definitional requirements for an "employee benefit
plan" under section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended. It is intended to be a non-qualified incentive compensation program
that is exempt from the regulatory requirements of the Employee Retirement
Income Security Act of 1974, as amended. The Plan shall be construed and
administered so as to effectuate this intent.
SECTION 9.2 NO RIGHT TO CONTINUED EMPLOYMENT. Neither the establishment
of the Plan nor any provisions of the Plan nor any action of the Board or the
Committee with respect to the Plan nor the grant of any Option or Limited Stock
Appreciation Rights shall be held or construed to confer upon any Eligible
Director or Eligible Employee any right to a continuation of his or her position
as a director or employee of the Company. The Employer reserves the right to
remove any Eligible Director or dismiss any Eligible Employee or otherwise deal
with any Eligible Director or Eligible Employee to the same extent as though the
Plan had not been adopted.
SECTION 9.3 CONSTRUCTION OF LANGUAGE. Whenever appropriate in the Plan,
words used in the singular may be read in the plural, words used in the plural
may be read in the singular, and words importing the masculine gender may be
read as referring equally to the feminine or the neuter. Any reference to an
Article or section number shall refer to an Article or section of this Plan
unless otherwise indicated.
SECTION 9.4 GOVERNING LAW. The Plan shall be construed, administered
and enforced according to the laws of the State of New York without giving
effect to the conflict of laws principles thereof, except to the extent that
such laws are preempted by federal law. The Plan shall be construed to comply
with applicable OTS Regulations.
SECTION 9.5 HEADINGS. The headings of Articles and sections are
included solely for convenience of reference. If there is any conflict between
such headings and the text of the Plan, the text shall control.
SECTION 9.6 NON-ALIENATION OF BENEFITS. The right to receive a benefit
under the Plan shall not be subject in any manner to anticipation, alienation or
assignment, nor shall such right be liable for or subject to debts, contracts,
liabilities, engagements or torts, except to the extent provided in a qualified
domestic relations order as defined in section 414(p) of the Code.
SECTION 9.7 TAXES. The Company shall have the right to deduct from all
amounts paid by the Company in cash with respect to an Option under the Plan any
taxes required by law to be withheld with respect to such Option. Where any
Person is entitled to receive Shares pursuant to the exercise of an Option, the
Company shall have the right to require such Person to pay the Company the
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amount of any tax which the Company is required to withhold with respect to such
Shares, or, in lieu thereof, to retain, or to sell without notice, a sufficient
number of Shares to cover the amount required to be withheld.
SECTION 9.8 APPROVAL OF SHAREHOLDERS. The Plan shall not be effective
or implemented unless approved by shareholders of the Company. The Plan shall
become effective on the date of such shareholder approval. Shareholder approval
shall not be obtained earlier than six months following such conversion unless
permitted by the Office of Thrift Supervision. No Option or Limited Stock
Appreciation Rights shall be granted prior to shareholder approval of the Plan.
SECTION 9.9 NOTICES. Any communication required or permitted to be
given under the Plan, including any notice, direction, designation, comment,
instruction, objection or waiver, shall be in writing and shall be deemed to
have been given at such time as it is delivered personally or five (5) days
after mailing if mailed, postage prepaid, by registered or certified mail,
return receipt requested, addressed to such party at the address listed below,
or at such other address as one such party may by written notice specify to the
other party.
(a) If to the Committee.
GSB Financial Corporation
One South Church Street
Goshen, New York 10924
Attention: President
(b) If to an Option holder, to the Option holder's address as shown in
the Employer's records.
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Exhibit B
INCENTIVE STOCK AWARD PLAN
FOR DIRECTORS, OFFICERS
AND EMPLOYEES
OF GSB FINANCIAL CORPORATION
All proposed additions to the ISAP, except for
changes representing renumbering of sections to accommodate
the proposed amendments, are underlined and proposed deletions
are marked with a strikeout.
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INCENTIVE STOCK AWARD PLAN
FOR DIRECTORS, OFFICERS AND EMPLOYEES
OF GSB FINANCIAL CORPORATION
TABLE OF CONTENTS
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ARTICLE I
SECTION 1.1 General Purpose of the Plan.................1
ARTICLE II
DEFINITIONS
Section 2.1 Award...................................... 1
Section 2.2 Award Date................................. 1
Section 2.3 Bank....................................... 1
Section 2.4 Beneficiary................................ 1
Section 2.5 Board...................................... 1
Section 2.6 Change of Control.......................... 1
Section 2.7 Code....................................... 2
Section 2.8 Committee.................................. 2
Section 2.9 Company.................................... 2
Section 2.10 Disability................................ 2
Section 2.11 Disinterested Board Member................ 2
Section 2.12 Effective Amendment Date.................. 2
Section 2.13 Effective Date............................ 2
Section 2.14 Eligible Director......................... 2
Section 2.15 Eligible Employee......................... 2
Section 2.16 Employer.................................. 2
Section 2.17 Exchange Act.............................. 2
Section 2.18 Hostile Change in Control................. 2
Section 2.19 OTS Regulations........................... 2
Section 2.20 Person.................................... 3
Section 2.21 Plan...................................... 3
Section 2.22 Share..................................... 3
Section 2.23 Successor................................. 3
Section 2.24 Trust..................................... 3
Section 2.25 Trust Agreement........................... 3
Section 2.26 Trust Fund................................ 3
Section 2.27 Trustee................................... 3
ARTICLE III
SHARES AVAILABLE UNDER PLAN
Section 3.1 Shares Available Under Plan................ 3
ARTICLE IV
ADMINISTRATION
Section 4.1 Committee.................................. 3
Section 4.2 Committee Action........................... 3
Section 4.3 Committee Responsibilities................. 3
ARTICLE IV
THE TRUST FUND
Section 5.1 Contributions.............................. 4
Section 5.2 The Trust Fund............................. 4
Section 5.3 Investments................................ 4
ARTICLE VI
AWARDS
Section 6.1 Awards To Eligible Directors............... 4
Section 6.2 Awards To Eligible Employees............... 4
Section 6.3 Awards in General.......................... 4
Section 6.4 Shares Allocations......................... 4
Section 6.5 Dividend Rights............................ 5
Section 6.6 Voting Rights.............................. 5
Section 6.7 Tender Offers.............................. 5
Section 6.8 Limitations on Awards...................... 5
Section 6.9 Accelerated Vesting........................ 5
ARTICLE VII
DISTRIBUTION OF SHARES
Section 7.1 Designation of Beneficiary................. 6
Section 7.2 Manner of Distribution..................... 6
Section 7.3 Taxes.......................................6
ARTICLE VIII
AMENDMENT AND TERMINATION
Section 8.1 Termination.................................6
Section 8.2 Amendment...................................6
Section 8.3 Adjustments in the Event of a
Business Reorganization..............6
ARTICLE IX
MISCELLANEOUS
Section 9.1 Status as an Employee Benefit Plan..........7
Section 9.2 No Right to Continued Employment............7
Section 9.3 Construction of Language....................7
Section 9.4 Governing Law...............................7
Section 9.5 Headings....................................7
Section 9.6 Non-Alienation of Benefits..................7
Section 9.7 Notices.....................................7
Section 9.8 Approval of Shareholders....................7
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INCENTIVE STOCK AWARD PLAN
FOR
DIRECTORS, OFFICERS AND EMPLOYEES OF GSB FINANCIAL CORPORATION
ARTICLE I
PURPOSE
SECTION 1.1 GENERAL PURPOSE OF THE PLAN. The purpose of the Plan is to
promote the growth and profitability of GSB Financial Corporation and to provide
eligible directors, certain key officers and employees of GSB Financial
Corporation with an incentive to achieve corporate objectives, to attract and
retain directors, key officers and employees of outstanding competence and to
provide such directors, officers and employees with an equity interest in GSB
Financial Corporation.
ARTICLE II
DEFINITIONS
The following definitions shall apply for the purposes of this Plan,
unless a different meaning is plainly indicated by the context.
SECTION 2.1 AWARD means a grant of Shares to an Eligible Director or
Eligible Employee pursuant to section 6.1 or 6.2.
SECTION 2.2 AWARD DATE means, with respect to a particular Award, the
date specified by the Committee in the notice of the Award issued to the
Eligible Director or Eligible Employee by the Committee, pursuant to section 6.1
or 6.2.
SECTION 2.3 BANK means Goshen Savings Bank, a federally chartered stock
savings bank, and any successor thereto.
SECTION 2.4 BENEFICIARY means the Person designated by an Eligible
Director or Eligible Employee pursuant to section 7.3, to receive distribution
of any Shares available for distribution to such Eligible Director or Eligible
Employee, in the event such Eligible Director or Eligible Employee dies prior to
receiving distribution of such Shares.
SECTION 2.5 BOARD means the Board of Directors of the Company.
SECTION 2.6 CHANGE OF CONTROL means any of the following events. (a)
the occurrence of any event upon which any "person" (as such term is used in
sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended
("Exchange Act")), other than (A) a trustee or other fiduciary holding
securities under an employee benefit plan maintained for the benefit of
employees of the Company; (B) a corporation owned, directly or indirectly, by
the stockholders of the Company in substantially the same proportions as their
ownership of stock of the Company; or (C) any group constituting a person in
which employees of the Company are substantial members, becomes the "beneficial
owner" (as defined in Rule 13d-3 promulgated under the Exchange Act), directly
or indirectly, of securities issued by the Company representing 25% or more of
the combined voting power of all of the Company's then outstanding securities;
or
(b) the occurrence of any event upon which the individuals who on the
date the Plan is adopted are members of the Board, together with individuals
whose election by the Board or nomination for election by the Company's
stockholders was approved by the affirmative vote of at least two-thirds of the
members of the Board then in office who were either members of the Board on the
date this Plan is adopted or whose nomination or election was previously so
approved, cease for any reason to constitute a majority of the members of the
Board, but excluding, for this purpose, any such individual whose initial
assumption of office is in connection with an actual or threatened election
contest relating to the election of directors of the Company (as such terms are
used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act); or
(c) the shareholders of the Company approve either.
(i) a merger or consolidation of the Company with any other
corporation, other than a merger or consolidation following which both of the
following conditions are satisfied.
(A) either (1) the members of the Board of the
Company immediately prior to such merger or consolidation constitute at least a
majority of the members of the governing body of the institution resulting from
such merger or consolidation; or (H) the shareholders of the Company own
securities of the institution resulting from such merger or consolidation
representing 80% or more of the combined voting power of all such securities of
the resulting institution then outstanding in substantially the same proportions
as their ownership of voting securities of the Company immediately before such
merger or consolidation; and
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(B) the entity which results from such merger or
consolidation expressly agrees in writing to assume and perform the Company's
obligations under the Plan; or
(ii) a plan of complete liquidation of the Company or an
agreement for the sale or disposition by the Company of all or substantially all
of its assets; and
(d) any event that would be described in section 2.6(a), (b) or (c) if
"the Bank" were substituted for "the Company" therein.
SECTION 2.7 CODE means the Internal Revenue Code of 1986 (including the
corresponding provisions of any succeeding law).
SECTION 2.8 COMMITTEE means the Committee described in section 4. 1.
SECTION 2.9 COMPANY means GSB Financial Corporation, a corporation
organized and existing under the laws of the State of Delaware, and any
successor thereto.
SECTION 2.10 DISABILITY means a condition of total incapacity, mental
or physical, for further performance of duty with the Company which the
Committee shall have determined, on the basis of competent medical evidence, is
likely to be permanent.
SECTION 2.11 DISINTERESTED BOARD MEMBER means a member of the Board who
(a) is not a current employee of the Company or a subsidiary, and (b) satisfies
all other requirements which may be necessary so that the Plan qualifies for the
maximum available benefits under Section 162(m) of the Code and any applicable
rules of the Securities Exchange Commission under Section 16 of the Exchange
Act.
SECTION 2.12 EFFECTIVE DATE means the date on which the plan is
approved by Shareholders pursuant to section 9.8.
SECTION 2.13 EFFECTIVE AMENDMENT DATE means the date on which the
amendment to add this Section is approved by the shareholders of the Company.
SECTION 2.14 ELIGIBLE DIRECTOR means a member of the board of directors
of the Employer who is not also an employee of the Employer.
SECTION 2.15 ELIGIBLE EMPLOYEE means any employee whom the Committee
may determine to be a key officer or employee of the Employer and select to
receive an Award pursuant to the Plan.
SECTION 2.16 EMPLOYER means the Company, the Bank and any successor
thereto and, with the prior approval of the Board, and subject to such terms and
conditions as may be imposed by the Board, any other savings bank, savings and
loan association, bank, corporation, financial institution or other business
organization or institution. With respect to any Eligible Employee or Eligible
Director, the Employer shall mean the entity which employs such person or upon
whose board of directors such person serves.
SECTION 2.17 EXCHANGE ACT means the Securities Exchange Act of 1934, as
amended.
SECTION 2.18 HOSTILE CHANGE OF CONTROL means a Change of Control which
results from a transaction which is not expressly approved by a resolution of,
or is approved without a favorable recommendation by, (i) a majority of the
Disinterested Board Members, in the event of a transaction with a shareholder of
the Company, or (ii) by a majority of the members of the Board immediately prior
to such transaction, in the event of a transaction with a Person other than
shareholder of the Company. A Change in Control for which no Board approval or
recommendation is required shall be deemed a Hostile Change in Control unless
the transaction or event constituting such Change in Control is approved by a
two-thirds vote of members of the Board who were Directors of the Company on the
Effective Amendment Date, or their Successors. If there are then no members of
the Board who were directors of the Bank on the Effective Amendment Date, or who
constitute their Successors as defined herein, then the Change in Control shall
be deemed a Hostile Change in Control
SECTION 2.19 OTS REGULATIONS means the regulations issued by the Office
of Thrift Supervision and applicable to the Plan, the Bank or the Company.
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SECTION 2.20 PERSON means an individual, a corporation, a bank, a
savings bank, a savings and loan association, a financial institution, a
partnership, an association, a joint-stock company, a trust, an estate, an
unincorporated organization and any other business organization or institution.
SECTION 2.21 PLAN means This Incentive Stock Award Plan for Directors,
Officers and Employees of the Company as amended from time to time.
SECTION 2.22 SHARE means a share of common stock of the Company, par
value $.01 per share.
SECTION 2.23 SUCCESSOR means a person who was first elected as a
Director of the Company by either (i) a majority of the members the Board who
were directors of the Company on the Effective Amendment Date or their
Successors; or (ii) or by vote of the shareholders of the Company after
nomination for election by a majority of the members the Board who were
directors of the Company on the Effective Amendment Date or their Successors.
SECTION 2.24 TRUST means the legal relationship created by the Trust
Agreement pursuant to which the Trustee holds the Trust Fund in trust. The Trust
may be referred to as the "Incentive Stock Award Plan Trust of GSB Financial
Corporation."
SECTION 2.25 TRUST AGREEMENT means the agreement between GSB Financial
Corporation and the Trustee therein named or its successor pursuant to which the
Trust Fund shall be held in trust.
SECTION 2.26 TRUST FUND means the corpus (consisting of contributions
paid over to the Trustee, and investments thereof), and all earnings,
appreciations or additions thereof and thereto, held by the Trustee under the
Trust Agreement in accordance with the Plan, less any depreciation thereof and
any payments made therefrom pursuant to the Plan.
SECTION 2.27 TRUSTEE means the Trustee of the Trust Fund from time to
time in office. The Trustee shall serve as Trustee until it is removed or
resigns from office and is replaced by a successor Trustee or Trustees appointed
by the Company.
ARTICLE III
SHARES AVAILABLE UNDER PLAN
SECTION 3.1 SHARES AVAILABLE UNDER PLAN. The maximum number of Shares
under the Plan shall be 89,930.
ARTICLE IV
ADMINISTRATION
SECTION 4.1 COMMITTEE. The Plan shall be administered by the members of
the Compensation Committee of the Company, all of whose members shall be
Disinterested Board Members. If the Committee consists of fewer than two
Disinterested Board Members, then the Board shall appoint to the Committee such
additional Disinterested Board Members as shall be necessary to provide for a
Committee consisting of at least two Disinterested Board Members.
SECTION 4.2 COMMITTEE ACTION. The Committee shall hold such meetings,
and may make such administrative rules and regulations, as it may deem proper. A
majority of the members of the Committee shall constitute a quorum, and the
action of a majority of the members of the Committee present at a meeting at
which a quorum is present, as well as actions taken pursuant to the unanimous
written consent of all of the members of the Committee without holding a
meeting, shall be deemed to be actions of the Committee. All actions of the
Committee shall be final and conclusive and shall be binding upon the Company
and all other interested parties. Any Person dealing with the Committee shall be
fully protected in relying upon any written notice, instruction, direction or
other communication signed by the Secretary of the Committee and one member of
the Committee, by two members of the Committee or by a representative of the
Committee authorized to sign the same in its behalf.
SECTION 4.3 COMMITTEE RESPONSIBILITIES. Subject to the terms and
conditions of the Plan and such limitations as may be imposed by the Board, the
Committee shall be responsible for the overall management and administration of
the Plan and shall have such authority as shall be necessary or appropriate in
order to carry out its responsibilities, including, without limitation, the
authority.
(a) to interpret and construe the Plan, and to determine all questions
that may arise under the Plan as to eligibility for Awards under the Plan, the
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amount of Shares, if any, to be granted pursuant to an Award, and the terms and
conditions of such Award.
(b) to adopt rules and regulations and to prescribe forms for the
operation and administration of the Plan; and
(c) to take any other action not inconsistent with the provisions of
the Plan that it may deem necessary or appropriate.
ARTICLE V
THE TRUST FUND
SECTION 5.1 CONTRIBUTIONS. The Company shall contribute, or cause to be
contributed, to the Trust, from time to time, such amounts of money or property
as shall be determined by the Board, in its discretion. No contributions by
Eligible Directors or Eligible Employees shall be permitted.
SECTION 5.2 THE TRUST FUND. The Trust Fund shall be held and invested
under the Trust Agreement with the Trustee. The provisions of the Trust
Agreement shall include provisions conferring powers on the Trustee as to
investment, control and disbursement of the Trust Fund, and such other
provisions not inconsistent with the Plan as may be prescribed by or under the
authority of the Board. No bond or security shall be required of any Trustee at
any time in office.
SECTION 5.3 INVESTMENTS. The Trustee shall invest the Trust Fund in
Shares and in such other investments as may be permitted under the Trust
Agreement, including savings accounts, time or other interest bearing deposits
in or other interest bearing obligations of the Company, in such proportions as
shall be determined by the Committee; provided, however, that in no event shall
the Trust Fund be used to purchase more than 89,930 Shares. Notwithstanding the
immediately preceding sentence, the Trustee may temporarily invest the Trust
Fund in short-term obligations of, or guaranteed by, the U.S. Government or an
agency thereof, or the Trustee may retain the Trust Fund uninvested or may sell
assets of the Trust Fund to provide amounts required for purposes of the Plan.
ARTICLE VI
AWARDS
SECTION 6.1 AWARDS TO ELIGIBLE DIRECTORS. (a) On the Effective Date,
each Person who is then an Eligible Director shall be granted an Award of 4,496
Shares.
(b) In addition to such grant of Awards to Eligible Directors pursuant
to Section 6.1(a), the Committee may, in its discretion, grant to any Eligible
Director an additional Award or Awards.
(c) Any Award granted pursuant to Section 6.1(a) or 6.1(b) shall
contain such other terms and conditions not inconsistent with the Plan as the
Committee may, in its discretion, prescribe.
SECTION 6.2 AWARDS TO ELIGIBLE EMPLOYEES. Subject to section 6.8 and
such limitations as the Board may from time to time impose, the number of Shares
as to which an Eligible Employee may be granted an Award shall be determined by
the Committee in its discretion; provided however, that in no event shall the
number of Shares allocated to an Eligible Employee in an Award exceed the number
of Shares then held in the Trust and not allocated in connection with other
Awards.
SECTION 6.3 AWARDS IN GENERAL. Any Award shall be evidenced by a
written notice issued by the Committee to the Eligible Director or Eligible
Employee, which notice shall.
(a) specify the number of Shares covered by the Award.
(b) specify the Award Date.
(c) specify the dates on which such Shares shall become available for
distribution to the Eligible Director or Eligible Employee, in accordance with
sections 7.1 and 7.2; and
(d) contain such other terms and conditions not inconsistent with the
Plan as the Board may, in its discretion, prescribe.
SECTION 6.4 SHARE ALLOCATIONS. Upon the grant of an Award to an
Eligible Director or Eligible Employee, the Committee shall notify the Trustee
of the Award and of the number of Shares subject to the Award. Thereafter, until
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such time as the Shares subject to such Award become vested or are forfeited,
the books and records of the Trustee shall reflect that such number of Shares
are being held for the benefit of the Award recipient.
SECTION 6.5 DIVIDEND RIGHTS. (a) Any cash dividends or distributions
declared and paid with respect to Shares in the Trust Fund that are, as of the
record date for such dividend, allocated to an Eligible Director or Eligible
Employee in connection with an Award shall be promptly paid to such Eligible
Director or Eligible Employee. Any cash dividends declared and paid with respect
to Shares that are not, as of the record date for such dividend, allocated to
any Eligible Director or Eligible Employee in connection with any Award shall,
at the direction of the Committee, be held in the Trust or used to pay the
administrative expenses of the Plan, including any compensation due to the
Trustee.
(b) Any dividends or distributions declared and paid with respect to
Shares in property other than cash shall be held in the Trust Fund. If, as of
the record date for such dividend or distribution, the Shares with respect to
which it is paid are allocated to an Eligible Director or Eligible Employee in
connection with an Award, the property so distributed shall be similarly
allocated such Eligible Director or Eligible Employee in connection with such
Award and shall be held for distribution or forfeiture in accordance with the
terms and conditions of the Award.
SECTION 6.6 VOTING RIGHTS. (a) Each Eligible Director or Eligible
Employee to whom an Award has been made that is not fully vested shall have the
right to direct the manner in which all voting rights appurtenant to the Shares
related to such Award will be exercised while such Shares are held in the Trust
Fund. Such a direction shall be given by completing and filing, with the
inspector of elections, the Trustee or such other person who shall be
independent of the Company as the Committee shall designate in the direction, a
written direction in the form and manner prescribed by the Committee. If no such
direction is given by an Eligible Director or Eligible Employee, then the voting
rights appurtenant to the Shares allocated to him shall not be exercised.
(b) To the extent that the Trust Fund contains Shares that are not
allocated in connection with an Award, all voting rights appurtenant to such
Shares shall be exercised by the Trustee in such manner as the Committee shall
direct to reflect the voting directions given by Eligible Director or Eligible
Employees with respect to Shares allocated in connection with their Awards.
(c) The Committee shall furnish, or cause to be furnished, to each
Eligible Director or Eligible Employee, all annual reports, proxy materials and
other information furnished by GSB Financial Corporation, or by any proxy
solicitor, to the holders of Shares.
SECTION 6.7 TENDER OFFERS. (a) Each Eligible Director or Eligible
Employee to whom an Award has been made that is not fully vested shall have the
right to direct, with respect to the Shares related to such Award, the manner of
response to any tender offer, exchange offer or other offer made to the holders
of Shares. Such a direction shall be given by completing and filing, with the
inspector of elections, the Trustee or such other person who shall be
independent of the Company as the Committee shall designate in the direction, a
written direction in the form and manner prescribed by the Committee. If no such
direction is given by an Eligible Director or Eligible Employee, then the Shares
shall not be tendered or exchanged.
(b) To the extent that the Trust Fund contains Shares that are not
allocated in connection with an Award, all responses to tender, exchange and
other offers appurtenant to such Shares shall be given by the Trustee in such
manner as the Committee shall direct to reflect the responses given by Eligible
Director or Eligible Employees with respect to Shares allocated in connection
with their Awards.
(c) The Committee shall furnish, or cause to be furnished, to each
Eligible Director or Eligible Employee, all information furnished by the offer
or to the holders of Shares.
SECTION 6.8 LIMITATIONS ON AWARDS. (a) Notwithstanding anything in the
Plan to the contrary, Each Award shall become vested and distributable ratably
so that 20% of the Award shall become vested on each of the first five
anniversaries of the Effective Date, provided, however, that such an Award shall
become fully vested on the date of the Award holder's death or Disability; and
provided, further, that the Committee may establish a different vesting schedule
if not inconsistent with section 563b.3(g) of OTS Regulations. Such vesting
requirements shall not apply to any Award granted after the Effective Amendment
Date, but the Committee shall instead have the authority to impose such vesting
restrictions as it deems appropriate at the time of granting any such Award.
(b) An Award by its terms shall not be transferable by the Eligible
Director or Eligible Employee other than by will or by the laws of descent and
distribution, and the Shares granted pursuant to such Award shall be
distributable, during the lifetime of the Recipient, only to the Recipient.
SECTION 6.9 ACCELERATED VESTING. Notwithstanding any other provision of
this Plan or any vesting restrictions imposed by the Committee, all Awards
granted under this Plan which remain outstanding but which are not yet
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exercisable shall immediately vest and shall be immediately exercisable if (a) a
Hostile Change in Control occurs, or (b) as to Awards to any Eligible Director,
if that Director retires from service as a Director of all Employers after not
less than ten years of service with any Employer. For the purpose of this
Section, a Director shall be deemed to have retired upon voluntary resignation
or upon failure to be re-elected as a Director.
ARTICLE VII
DISTRIBUTION OF SHARES
SECTION 7.1 DESIGNATION OF BENEFICIARY. An Eligible Director or
Eligible Employee who has received an Award may designate a Beneficiary to
receive any undistributed Shares that are, or become, available for distribution
on, or after, the date of his death. Such designation (and any change or
revocation of such designation) shall be made in writing in the form and manner
prescribed by the Committee. In the event that the Beneficiary designated by an
Eligible Director or Eligible Employee dies prior to the Eligible Director or
Eligible Employee, or in the event that no Beneficiary has been designated, any
undistributed Shares that are, or become, available for distribution on, or
after, the Eligible Director's or Eligible Employee's death shall be paid to the
executor or administrator of the Eligible Director's or Eligible Employee's
estate, or if no such executor or administrator is appointed within such time as
the Committee, in its sole discretion, shall deem reasonable, to such one or
more of the spouse and descendants and blood relatives of such deceased person
as the Committee may select.
SECTION 7.2 MANNER OF DISTRIBUTION. (a) As soon as practicable
following the date any Shares granted pursuant to an Award become vested as set
forth in section 6.8 or 6.9, the Committee shall take such actions as are
necessary to cause the transfer of record ownership of the Shares that have
become vested from the Trustee to the Award holder and shall cause the Trustee
to distribute to the Award holder all property other than Shares then being held
in connection with the Shares being distributed.
(b) The Company's obligation to deliver Shares with respect to an Award
shall, if the Committee so requests, be conditioned upon the receipt of a
representation as to the investment intention of the Eligible Director or
Eligible Employee or Beneficiary to whom such Shares are to be delivered, in
such form as the Committee shall determine to be necessary or advisable to
comply with the provisions of applicable federal, state or local law. It may be
provided that any such representation shall become inoperative upon a
registration of the Shares or upon the occurrence of any other event eliminating
the necessity of such representation. The Company shall not be required to
deliver any Shares under the Plan prior to (i) the admission of such Shares to
listing on any stock exchange on which Shares may then be listed, or (ii) the
completion of such registration or other qualification under any state or
federal law, rule or regulation as the Committee shall determine to be necessary
or advisable.
SECTION 7.3 TAXES. The Company, the Committee or the Trustee shall have
the right to require any person entitled to receive Shares pursuant to an Award
to pay the amount of any tax which is required to be withheld with respect to
such Shares, or, in lieu thereof, to retain, or to sell without notice, a
sufficient number of Shares to cover the amount required to be withheld.
ARTICLE VIII
TERMINATION AND AMENDMENT
SECTION 8.1 TERMINATION. The Board may suspend or terminate the Plan in
whole or in part at any time by giving written notice of such suspension or
termination to the Committee; provided, however, that the Plan may not be
terminated while there are outstanding Awards that may thereafter become vested.
Upon the termination of the Plan, the Trustee shall make distributions from the
Trust Fund in such amounts and to such persons as the Committee may direct and
shall return the remaining assets of the Trust Fund, if any, to GSB Financial
Corporation
SECTION 8.2 AMENDMENT. The Board may amend or revise the Plan in whole
or in part at any time.
SECTION 8.3 ADJUSTMENTS IN THE EVENT OF A BUSINESS REORGANIZATION. (a)
In the event of any merger, consolidation, or other business reorganization
(including but not limited to a Change of Control) in which the Company is the
surviving entity, and in the event of any stock split, stock dividend or other
event generally affecting the number of Shares held by each person who is then a
holder of record of Shares, the number of Shares held in the Trust Fund,
including Shares covered by Awards, shall be adjusted to account for such event.
Such adjustment shall be effected by multiplying such number of Shares by an
amount equal to the number of Shares that would be owned after such event by a
person who, immediately prior to such event, was the holder of record of one
Share; provided, however, that the Committee may, in its discretion, establish
another appropriate method of adjustment.
(b) In the event of any merger, consolidation, or other business
reorganization (including but not limited to a Change of Control) in which the
Company is not the surviving entity, the Trustee shall hold in the Trust Fund
any money, stock, securities or, other property received by holders of record of
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Shares in connection with such merger, consolidation, or other business
reorganization. Any Award with respect to which Shares had been allocated to an
Eligible Director or Eligible Employee shall be adjusted by allocating to the
Eligible Director or Eligible Employee receiving such Award the amount of money,
stock, securities or other property received by the Trustee for the Shares
allocated to such Eligible Director or Eligible Employee.
ARTICLE IX
MISCELLANEOUS
SECTION 9.1 STATUS AS AN EMPLOYEE BENEFIT PLAN. This Plan is not
intended to satisfy the requirements for qualification under section 401(a) of
the Code or to satisfy the definitional requirements for an "employee benefit
plan" under section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended. It is intended to be a non-qualified incentive compensation program
that is exempt from the regulatory requirements of the Employee Retirement
Income Security Act of 1974, as amended. The Plan shall be construed and
administered so as to effectuate this intent.
SECTION 9.2 NO RIGHT TO CONTINUED EMPLOYMENT. Neither the establishment
of the Plan nor any provisions of the Plan nor any action of the Board or the
Committee with respect to the Plan shall be held or construed to confer upon any
Eligible Director or Eligible Employee any right to a continuation of employment
by the Company. The Employers reserve the right to dismiss any Eligible Director
or Eligible Employee or otherwise deal with any Eligible Director or Eligible
Employee to the same extent as though the Plan had not been adopted.
SECTION 9.3 CONSTRUCTION OF LANGUAGE. Whenever appropriate in the Plan,
words used in the singular may be read in the plural, words used in the plural
may be read in the singular, and words importing the masculine gender may be
read as referring equally to the feminine or the neuter. Any reference to an
Article or section number shall refer to an Article or section of this Plan
unless otherwise indicated.
SECTION 9.4 GOVERNING LAW. The Plan shall be construed and enforced in
accordance with the laws of the State of New York without giving effect to the
conflict of laws principles thereof, except to the extent that such laws are
preempted by the federal laws of the United States of America. The Plan shall be
construed to comply with applicable OTS Regulations.
SECTION 9.5 HEADINGS. The headings of Articles and sections are
included solely for convenience of reference. If there is any conflict between
such headings and the text of the Plan, the text shall control.
SECTION 9.6 NON-ALIENATION OF BENEFITS. The right to receive a benefit
under the Plan shall not be subject in any manner to anticipation, alienation or
assignment, nor shall such right be liable for or subject to debts, contracts,
liabilities, engagements or torts, except to the extent provided in a qualified
domestic relations order as defined in section 414(p) of the Code.
SECTION 9.7 NOTICES. Any communication required or permitted to be
given under the Plan, including any notice, direction, designation, comment,
instruction, objection or waiver, shall be in writing and shall be deemed to
have been given at such time as it is personally delivered or 5 days after
mailing if mailed, postage prepaid, by registered or certified mail, return
receipt requested, addressed to such party at the address listed below, or at
such other address as one such party may by written notice specify to the other.
(a) If to the Stock Plans Committee.
GSB Financial Corporation
One South Church Street
Goshen, New York 10924
Attention: President
(b) If to an Eligible Director or Eligible Employee, to the Eligible
Director's or Eligible Employee's address as shown in the Employer's records.
SECTION 9.8 APPROVAL OF SHAREHOLDERS. The Plan shall not be effective
or implemented prior to the one year anniversary of the conversion of Goshen
Savings Bank to stock form unless approved by the holders of a majority of the
total votes eligible to be cast at any duly called annual or special meeting of
the Company, in which case the Plan shall be effective as of the date of such
approval. If not effective prior to such one year anniversary, the Plan shall be
effective on such later date as is specified by the Board.
-7-
<PAGE>
REVOCABLE PROXY
GSB FINANCIAL CORPORATION
[X] PLEASE MARK VOTES AS IN THIS EXAMPLE
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints the Board of Directors of GSB Financial
Corporation, or their successors in office, Proxies, with full power of
substitution, to represent and vote all stock that the undersigned is entitled
to vote at the Annual Meeting of Stockholders of GSB Financial Corporation, to
be held on April 27, 2000 at 4:30 p.m. at the main office of Goshen Savings
Bank, One South Church Street, Goshen, New York, or at any adjournments thereof
upon the matters described in the accompanying Proxy Statement and upon other
business that may properly come before the meeting or any adjournment thereof.
Said Proxies are directed to vote or refrain from voting as marked hereon upon
the matters listed herein, and otherwise in their discretion.
For Against Abstain
1. Approval of the amendments to the
Stock Option Plan. [ ] [ ] [ ]
2. Approval of the amendments to the
Incentive Stock Award Plan. [ ] [ ] [ ]
3. Election of Directors. For With- For All
hold Except
[ ] [ ] [ ]
CLIFFORD E. KELSEY, JR. ROY L. LIPPINCOTT HERBERT C. MUELLER
INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE,
MARK "FOR ALL EXCEPT" AND WRITE THAT NOMINEE'S NAME IN THE SPACE
PROVIDED BELOW.
------------------------------------------------------------------
4. Ratification of the appointment of For Against Abstain
Nugent & Haeussler, P.C. as auditors for
the fiscal year ending December 31, 2000. [ ] [ ] [ ]
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR" THE NOMINEES
AND THE OTHER PROPOSALS. PLEASE SIGN, DATE AND RETURN THIS PROXY.
<PAGE>
THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO DIRECTION IS SPECIFIED, THIS
PROXY WILL BE VOTED "FOR" THE NOMINEES AND THE OTHER PROPOSALS. IF ANY OTHER
BUSINESS IS PRESENTED AT THE MEETING, THIS PROXY WILL BE VOTED BY THOSE NAMED IN
THIS PROXY IN THEIR JUDGMENT AND DISCRETION. AT THE PRESENT TIME, THE BOARD OF
DIRECTORS KNOWS OF NO OTHER BUSINESS TO BE PRESENTED AT THE MEETING.
THIS PROXY MAY BE REVOKED AT ANY TIME BEFORE IT IS VOTED. PLEASE DATE, SIGN AND
RETURN IN THE ENCLOSED POST-PAID ENVELOPE.
Date_________________________
Signature_______________________Signature if held jointly_______________________
DETACH ABOVE CARD, SIGN, DATE AND MAIL IN POSTAGE-PAID ENVELOPE PROVIDED.
GSB FINANCIAL CORPORATION
Please sign exactly as your name appears on this card. When shares are
held by joint tenants, both should sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title as such. If a
corporation, please sign in full corporate name by President or other authorized
officer. If a partnership, please sign in partnership name by authorized person.
PLEASE ACT PROMPTLY
SIGN, DATE & MAIL YOUR PROXY CARD TODAY
