SCHEDULE 14-A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant [x]
Filed by a Party other than the Registrant []
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss.240.14a-11(c) or ss.240.14a-12
Pathfinder Bancorp, Inc.
-------------------------------------------------
(Name of Registrant as Specified In Its Charter)
Alan Schick, Luse Lehman Gorman Pomerenk & Schick, PC
--------------------------------------------------------
(Name of Person(s) Filling Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
.......................................................................
2) Aggregate number of securities to which transaction applies:
.......................................................................
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
.......................................................................
4) Proposed maximum aggregate value of transaction:
.......................................................................
5) Total fee paid:
.......................................................................
[ ] Fee previously paid:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
April 3, 2000
Dear Shareholder:
We cordially invite you to attend the Annual Meeting of Shareholders of
Pathfinder Bancorp, Inc. (the "Company"). The Annual Meeting will be held at the
Bridie Manor, 1830 Bridie Square, Oswego, New York at 10:00 a.m., Eastern
Standard Time, on April 26, 2000.
The enclosed Notice of Annual Meeting and Proxy Statement describe the formal
business to be transacted. During the Annual Meeting we will also report on the
operations of the Company. Directors and officers of the Company, as well as a
representative of our independent auditors, will be present to respond to any
questions that shareholders may have.
The Annual Meeting is being held so that shareholders may consider the election
of directors and the ratification of the appointment of PricewaterhouseCoopers,
LLP as the Company's auditors for fiscal year 2000. In addition, two shareholder
proposals have been submitted for consideration by shareholders.
For the reasons set forth in the Proxy Statement, the Board of Directors
unanimously recommends a vote "FOR" the election of directors and the
ratification of the appointment of PricewaterhouseCoopers, LLP as the Company's
auditors, and "AGAINST" each of the shareholder proposals.
On behalf of the Board of Directors, we urge you to sign, date and return the
enclosed proxy card as soon as possible, even if you currently plan to attend
the Annual Meeting. This will not prevent you from voting in person, but will
assure that your vote is counted if you are unable to attend the meeting. Your
vote is important, regardless of the number of shares that you own.
Sincerely,
Thomas W. Schneider
President and Chief Executive Officer
<PAGE>
Pathfinder Bancorp, Inc.
214 West First Street
Oswego, New York 13126
(315) 343-0057
NOTICE OF
ANNUAL MEETING OF SHAREHOLDERS
To Be Held On April 26, 2000
Notice is hereby given that the Annual Meeting of Pathfinder Bancorp,
Inc., (the "Company") will be held at the Bridie Manor, 1830 Bridie Square,
Oswego, New York on April 26, 2000 at 10:00 a.m., Eastern Standard Time.
A Proxy Card and a Proxy Statement for the Annual Meeting are enclosed.
The Annual Meeting is for the purpose of considering and acting upon:
1. The election of three Directors to the Board of Directors;
2. The ratification of the appointment of PricewaterhouseCoopers,
LLP as auditors for the Company for the fiscal year ending
December 31, 2000;
3. A shareholder proposal calling on the Board of Directors to
take steps to amend the Company's Certificate of Incorporation
and Bylaws;
4. A shareholder proposal to take steps to engage an investment
banking firm; and
such other matters as may properly come before the Annual Meeting, or any
adjournments thereof. The Board of Directors is not aware of any other business
to come before the Annual Meeting.
Any action may be taken on the foregoing proposals at the Annual
Meeting on the date specified above, or on any date or dates to which the Annual
Meeting may be adjourned. Shareholders of record at the close of business on
March 17, 2000, are the shareholders entitled to vote at the Annual Meeting, and
any adjournments thereof.
EACH SHAREHOLDER, WHETHER HE OR SHE PLANS TO ATTEND THE ANNUAL MEETING,
IS REQUESTED TO SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD WITHOUT DELAY IN
THE ENCLOSED POSTAGE-PAID ENVELOPE. ANY PROXY GIVEN BY THE SHAREHOLDER MAY BE
REVOKED AT ANY TIME BEFORE IT IS EXERCISED. A PROXY MAY BE REVOKED BY FILING
WITH THE SECRETARY OF THE COMPANY A WRITTEN REVOCATION OR A DULY EXECUTED PROXY
BEARING A LATER DATE. ANY SHAREHOLDER PRESENT AT THE ANNUAL MEETING MAY REVOKE
HIS OR HER PROXY AND VOTE PERSONALLY ON EACH MATTER BROUGHT BEFORE THE ANNUAL
MEETING. HOWEVER, IF YOU ARE A SHAREHOLDER WHOSE SHARES ARE NOT REGISTERED IN
YOUR OWN NAME, YOU WILL NEED ADDITIONAL DOCUMENTATION FROM YOUR RECORD HOLDER IN
ORDER TO VOTE PERSONALLY AT THE ANNUAL MEETING.
By Order of the Board of Directors
Melissa A. Dashnau
Secretary
April 3, 2000
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IMPORTANT: THE PROMPT RETURN OF PROXIES WILL SAVE THE COMPANY THE EXPENSE OF
FURTHER REQUESTS FOR PROXIES. A SELF-ADDRESSED ENVELOPE IS ENCLOSED FOR YOUR
CONVENIENCE. NO POSTAGE IS REQUIRED IF MAILED WITHIN THE UNITED STATES.
--------------------------------------------------------------------------------
<PAGE>
PROXY STATEMENT
Pathfinder Bancorp, Inc.
214 West First Street
Oswego, New York 13126
(315) 343-0057
ANNUAL MEETING OF SHAREHOLDERS
April 26, 2000
This Proxy Statement is furnished in connection with the solicitation
of proxies on behalf of the Board of Directors of Pathfinder Bancorp, Inc. (the
"Company") to be used at the Annual Meeting of Shareholders of the Company (the
"Annual Meeting"), which will be held at the Bridie Manor, 1830 Bridie Square,
Oswego, New York on April 26, 2000, at 10:00 a.m., Eastern Standard Time, and
all adjournments of the Annual Meeting. The accompanying Notice of Annual
Meeting of Shareholders and this Proxy Statement are first being mailed to
shareholders on or about April 3, 2000.
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REVOCATION OF PROXIES
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Shareholders who execute proxies in the form solicited hereby retain
the right to revoke them in the manner described below. Unless so revoked, the
shares represented by such proxies will be voted at the Annual Meeting and all
adjournments thereof. Proxies solicited on behalf of the Board of Directors of
the Company will be voted in accordance with the directions given thereon. Where
no instructions are indicated, validly executed proxies will be voted "FOR"
Proposal 1 and Proposal 2 and "AGAINST" Proposal 3 and Proposal 4. If any other
matters are properly brought before the Annual Meeting the persons named in the
accompanying proxy will vote the shares represented by such proxies on such
matters in such manner as shall be determined by a majority of the Board of
Directors.
Proxies may be revoked by sending written notice of revocation to the
Secretary of the Company, at the address shown above. The presence at the Annual
Meeting of any shareholder who had returned a proxy shall not revoke such proxy
unless the shareholder delivers his or her ballot in person at the Annual
Meeting or delivers a written revocation to the Secretary of the Company prior
to the voting of such proxy.
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VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
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Holders of record of the Company's common stock, par value $0.10 per
share (the "Common Stock") as of the close of business on March 17, 2000 (the
"Record Date") are entitled to one vote for each share then held. As of the
Record Date, the Company had 2,614,245 shares of Common Stock issued and
outstanding of which 1,552,500 were held by Pathfinder Bancorp, M.H.C. (the
"Mutual Holding Company"), and 1,061,745 of which were held by shareholders
other than the Mutual Holding Company ("Minority Shareholders"). The presence in
person or by proxy of a majority of the outstanding shares of Common Stock
entitled to vote is necessary to constitute a quorum at the Annual Meeting.
Directors are elected by a plurality of votes cast, without regard to either
broker non-votes, or proxies as to which the authority to vote for the nominees
being proposed is withheld. The affirmative vote of holders of a majority of the
total votes present at the Annual Meeting in person or by proxy is required for
ratification of PricewaterhouseCoopers, LLP as the Company's auditors and the
approval of Proposals 3 and 4. Approval of Proposal 3 or 4 would merely
constitute a recommendation and would not require the Board of Directors to take
any action. Abstentions and broker non-votes will be counted for purposes of
determining that a quorum is present, but will not be counted as votes in favor
of Proposals 2, 3 or 4.
1
<PAGE>
Persons and groups who beneficially own in excess of five percent of
the Common Stock are required to file certain reports with the Securities and
Exchange Commission (the "SEC") regarding such ownership. The following table
sets forth, as of the Record Date, the shares of Common Stock beneficially owned
by Directors individually, by executive officers individually, by executive
officers and Directors as a group and by each person who was the beneficial
owner of more than five percent of the Company's outstanding shares of Common
Stock.
Amount of Shares
Owned and Nature Percent of Shares
Name and Address of of Beneficial of Common Stock
Beneficial Owners Ownership (1) (4) Outstanding
----------------------- ------------------ -------------------
Directors and Officers (2):
Chris C. Gagas 74,106 (5) 2.8%
Thomas W. Schneider 7,526 (6) .3
Chris R. Burritt 17,950 (7) .7
Raymond W. Jung 14,034 .5
Bruce E. Manwaring 13,215 .5
L. William Nelson, Jr. 24,900 (8) 1.0
Janette Resnick 6,750 (10) .3
Corte J. Spencer 12,150 (11) .5
James A. Dowd 7,793 (13) .3
Gregory L. Mills 4,410 (15) .2
Melissa A. Miller 3,498 (14) .1
W. David Schermerhorn 6,338 (12) .2
All Directors and Executive Officers 180,467 6.9
as a Group (12 persons) (3)
Principal Shareholders:
Pathfinder Bancorp, M. H. C. (3) 1,552,500 59.4
214 West First Street
Oswego, New York 13126
Pathfinder Bancorp, M.H.C. (3) 1,732,967 66.3
and all Trustees and Executive
Officers of Pathfinder Bancorp,
MHC as a group (11 persons)
Oswego City Savings Company (4) 92,574 3.5
Employee Stock Ownership Plan
214 West First Street
Oswego, New York 13126
Jewelcor Management Consulting Corp. 158,714 6.1
100 N. Wilkes-Barre Boulevard
Wilkes-Barre, Pennsylvania 18702
----------------------------
(1) A person is deemed to be the beneficial owner for purposes of this table,
of any shares of Common Stock if he has shared voting or investment power
with respect to such security, or has a right to acquire beneficial
ownership at any time within 60 days from the Record Date. As used herein,
"voting power" is the power to vote or direct the voting of shares and
"investment power" is the power to dispose or direct the disposition of
shares. Includes all shares held directly as well as by spouses and minor
children, in trust and other indirect ownership, over which shares the
named individuals effectively exercise sole or shared voting and investment
power. Unless otherwise indicated, the named individual has sole voting and
investment power.
(2) The mailing address for each person listed is 214 West First Street,
Oswego, New York 13126.
(3) All but two of the Company's executive officers and directors are also
executive officers and trustees of the Mutual Holding Company.
(4) Includes 92,574 shares, of which 58,654 are unallocated and as to which
the Employee Stock Ownership Plan (the "ESOP") trustee has sole voting and
investment power and 33,920 of which are allocated and as to which the ESOP
trustee has shared voting and sole investment power.
2
<PAGE>
(5) Mr. Gagas has sole voting and investment power over 70,553 shares and
shared voting and investment power over 3,553 shares. Also includes 30,000
shares underlying options which are exercisable within 60 days from the
record date.
(6) Mr. Schneider has sole voting and investment power over 7,226 shares and
shared voting and investment power over 300 shares. Also includes 3,000
shares underlying options which are exercisable within 60 days from the
record date.
(7) Mr. Burritt has sole voting and investment power over 17,800 shares and
shared voting and investment power over 150 shares. Also includes 3,750
shares underlying options which are exercisable within 60 days from the
record date.
(8) Mr. Nelson has sole voting and investment power over 6,420 shares and
shared voting and investment power over 18,480 shares. Also includes 3,750
shares underlying options which are exercisable within 60 days from the
record date.
(9) Ms. Resnick has sole voting power over 6,450 shares and shared voting and
investment power over 300 shares. Also includes 2,500 shares underlying
options which are exercisable within 60 days of the record date.
(10) Mr. Spencer has sole voting and investment power over 6,450 shares and
shared voting and investment power over 5,700 shares. Also includes 3,750
shares underlying options which are exercisable within 60 days of the
record date.
(12) Mr. Schermerhorn has sole voting and investment power over all shares
reported. Also includes 3,000 shares underlying options which are
exercisable within 60 days from the record date.
(13) Mr. Dowd has sole voting and investment power over all shares reported.
Also includes 1,500 shares underlying options which are exercisable within
60 days from the record date.
(14) Ms. Miller has sole voting and investment power over all shares reported.
Also includes 1,500 shares underlying options which are exercisable within
60 days from the record date.
(15) Mr. Mills has sole voting and investment power over 4,370 shares and shared
voting and investment power over 40 shares. Also includes 1,500 shares
underlying options which are exercisable within 60 days from the record
date.
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PROPOSAL 1--ELECTION OF DIRECTORS
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The Company's Board of Directors is currently composed of nine members. The
Company's bylaws provide that approximately one-third of the Directors are to be
elected annually. Directors of the Company are generally elected to serve for a
three-year period and until their respective successors shall have been elected
and shall qualify. Victor S. Oakes and Lawrence W. O'Brien have retired as
directors of the Company. George P. Joyce has been selected to complete Mr.
Oakes term as director and will stand for election at this meeting of
shareholders. Steven W. Thomas has been selected to complete the balance of
Lawrence W. O' Brien's term, and will stand for election at the 2001 annual
meeting. Three Directors will be elected at the Annual Meeting to serve for a
three-year period and until their respective successors shall have been elected
and shall qualify. The Board of Directors has nominated to serve as Directors,
Bruce E. Manwaring, L. William Nelson, Jr. and George P. Joyce who are currently
members of the Board of Directors.
3
<PAGE>
The table below sets forth certain information regarding the composition of
the Company's Board of Directors, including the terms of office of Board
members. It is intended that the proxies solicited on behalf of the Board of
Directors (other than proxies in which the vote is withheld as to one or more
nominees) will be voted at the Annual Meeting for the election of the nominees
identified below. If the nominee is unable to serve, the shares represented by
all such proxies will be voted for the election of such substitute as the Board
of Directors may recommend. At this time, the Board of Directors knows of no
reason why any of the nominees would be unable to serve if elected. Except as
indicated herein, there are no arrangements or understandings between any
nominee and any other person pursuant to which such nominee was selected.
<TABLE>
<CAPTION>
Shares of
Common Stock
Beneficially
Position Director Current Term Owned on Percent
Name (1) Age Held Since (2) to Expire Record Date (3) Of Class
-------- --- ---- --------- --------- --------------- --------
NOMINEE
<S> <C> <C> <C> <C> <C> <C>
Bruce E. Manwaring 59 Director 1984 2000 13,215 .5%
L. William Nelson, Jr. 56 Director 1986 2000 24,900 1.0
George P. Joyce 49 Director 2000 2000 -- --
DIRECTORS CONTINUING IN OFFICE
Steven W. Thomas 38 Director 2000 2001 -- --
Corte J. Spencer 57 Director 1984 2001 12,150 .5
Janette Resnick 58 Director 1996 2001 6,750 .3
Chris C. Gagas 69 Chairman of the Board 1966 1999 74,160 2.8
Chris R. Burritt 47 Director 1986 1999 17,950 .7
Raymond W. Jung 70 Director 1978 1999 14,034 .5
</TABLE>
(1) The mailing address for each person listed is 214 West First Street,
Oswego, New York 13126. Each of the persons listed, with the exception of
Messrs. Joyce and Thomas, is also a Trustee of Pathfinder Bancorp, M.H.C.,
which owns the majority of the Company's issued and outstanding shares of
Common Stock.
(2) Dates prior to 1995 reflect initial appointment to the Board of Trustees of
the mutual predecessor to Pathfinder Bank. (3) See definition of
"beneficial ownership" in the table in "Voting Securities and Principal
Holders Thereof."
The principal occupation during the past five years of each Director is set
forth below. All Directors have held their present positions for five years
unless otherwise stated.
Chris C. Gagas is Chairman of the Company, and its principal subsidiary,
Pathfinder Bank ( the"Bank"). Until his retirement on January 14, 2000, Mr.
Gagas was also President and Chief Executive Officer of the Company and the
Bank. Mr. Gagas had served as an officer of the Company since 1986.
Chris R. Burritt is the president and general manager of R.M. Burritt
Motors, Inc./Chris Cross, Inc., an automobile dealership located in Oswego,
New York.
Raymond W. Jung is retired. Previously Mr. Jung was the owner of Raymond's
Jewelers in Oswego, New York.
Bruce E. Manwaring is the Chamberlain for the City of Oswego.
L. William Nelson, Jr. is the owner and manager of Nelson Funeral Home
located in Oswego, New York.
Steven W. Thomas is a licensed real estate broker and a developer. Mr.
Thomas owns and operates three Dunkin Donuts franchises and two hotels in Oswego
County. Mr. Thomas additionally is involved in numerous commercial development
projects in Oswego County and operates a number of businesses within central
New York.
George P. Joyce is the owner and operator of Laser Transit, Ltd., Lacona,
NY, a key Central New York logistics services provider. Mr. Joyce is also the
general manager of Oswego Warehousing, Inc., Oswego, NY.
Janette Resnick is the Executive Director of Oswego County Opportunities, a
private, not for profit human services agency located in Oswego and Fulton, New
York.
Corte J. Spencer is the Chief Executive Officer and Administrator of Oswego
Hospital located in Oswego, New York.
4
<PAGE>
Ownership Reports by Officers and Directors
The Common Stock of the Company is registered with the SEC pursuant to
Section 12(g) of the Securities Exchange Act of 1934 (the "Exchange Act"). The
officers and directors of the Company and beneficial owners of greater than 10%
of the Company's Common Stock ("10% beneficial owners") are required to file
reports on Forms 3,4 and 5 with the SEC disclosing beneficial ownership and
changes in beneficial ownership of the Common Stock. SEC rules require
disclosure in the Company's Proxy Statement or Annual Report on Form 10-K of the
failure of an officer, director or 10% beneficial owner of the Company's Common
Stock to file a Form 3, 4, or 5 on a timely basis. All of the Company's officers
and directors filed these reports on a timely basis.
Meetings and Committees of the Board of Directors
The business of the Board of Directors is conducted through meetings and
activities of the Board and its committees. During the year ended December 31,
1999, the Board of Directors held 16 regular and special meetings. During the
year ended December 31, 1999, no director attended fewer than 75% percent of the
total meetings of the Board of Directors and committees on which such director
served.
The Human Resources Committee meets periodically to review the performance
of officers and employees and to determine compensation programs and
adjustments. The entire Board of Directors ratifies the recommendations of the
Human Resources Committee. In the year ending December 31, 1999, the Human
Resources Committee consisted of directors Gagas, Oakes, Spencer, Manwaring and
Resnick. The Human Resources Committee met four times during the year ended
December 31, 1999.
The Audit Committee consists of directors Jung, Nelson, Burritt and
Manwaring. This Committee meets on a quarterly basis with the internal auditor
to review audit programs and the results of audits of specific areas as well as
other regulatory compliance issues. The Audit Committee met four times during
the year ended December 31, 1999.
The Nominating Committee meets once a year to nominate Directors to fulfill
the terms of the upcoming year. In the year ended December 31, 1999, the
nominating committee was comprised of Directors Spencer, Gagas, Burritt and
Jung.
5
<PAGE>
Performance Graph
Set forth hereunder is a performance graph comparing (a) the total return
on the Common Stock for the period beginning on November 16, 1995 through
December 31, 1999, (b) the cumulative total return on stocks included in the
Nasdaq Composite Index over such period, and (c) the yearly cumulative total
return on stocks included in the SNL Thrift Index over such period. The
cumulative total return on the Common Stock was computed assuming the
reinvestment of cash dividends during the fiscal year.
[GRAPHIC OMITTED]
<TABLE>
<CAPTION>
Period Ending
----------------------------------------------------
INDEX 11/16/95 12/31/95 12/31/96 12/31/97 12/31/98 12/31/99
-------- -------- ---------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Pathfinder Bancorp, Inc. 100.00 116.67 106.50 345.85 159.13 158.51
NASDAQ - Total US 100.00 100.92 124.17 152.15 214.35 389.65
SNL Thrift Index 100.00 104.11 135.66 230.83 203.02 165.84
</TABLE>
There can be no assurance that the Common Stock's performance will continue in
the future with the same or similar trend depicted in the graph. The Company
will not make or endorse any predictions as to future stock performance.
Personnel Committee Interlocks and Insider Participation
The full Board of Directors of the Company determines the salaries to
be paid each year to the officers of the Company. During the year ended December
31, 1999, Chris C. Gagas was a director of the Company and the President and
Chief Executive Officer of the Company and the Bank. In 1999, Mr. Gagas did not
participate in the Board of Directors' determination of compensation for the
President and Chief Executive Officer.
6
<PAGE>
Report of the Board of Directors on Executive Compensation
Under SEC rules, the Company is required to disclose certain data and
information regarding compensation and benefits of its Chief Executive Officer
and other executive officers. The disclosure includes the use of tables and a
report explaining the rationale for and considerations that led to fundamental
executive compensation decisions affecting these individuals. In fulfilling of
this requirement, the Board of Directors of the Company has prepared the
following report for inclusion in this proxy statement.
The Board of Directors annually reviews the performance of the Chief
Executive Officer and other executive officers and approves changes to base
compensation as well as the amount of any bonus to be awarded. In determining
whether the base salary of an officer should be increased, the Board of
Directors takes into account individual performance, performance of the Company
and information regarding compensation paid to executives of peer group
institutions made to executives performing similar duties for financial
institutions in the Bank's market area.
While the Board of Directors does not use strict numerical formulas to
determine changes in compensation for the Chief Executive Officer and Vice
Presidents, and while it weighs a variety of different factors in its
deliberations, it has emphasized and will continue to emphasize earnings,
profitability, earnings contribution to capital, capital strength, asset
quality, and return on tangible equity as factors in setting the compensation of
the Chief Executive Officer and senior officers. Non-quantitative factors
considered by the Board of Directors in fiscal 1999 included general management
oversight of the Company, the quality of communication with the Board of
Directors, and the productivity of employees. Finally, the Board of Directors
considered the standing of the Company with customers and the community, as
evidenced by customer and community complaints and compliments. While the Board
of Directors considered each of the quantitative and non-quantitative factors
described above, such factors were not assigned a specific weight in evaluating
the performance of the Chief Executive Officer and Vice Presidents. Based on its
review of these factors, the Board of Directors approved an increase in the base
salary of the Chief Executive Officer and each of the Vice Presidents.
Accordingly, the Board of Directors approved salary increases totaling $21,000
for the Company's and Bank's eight senior officers, bringing 1999 total base
compensation for all officers to $642,000 from $621,000 in 1998.
This as been provided by the Board of Directors: Chris C. Gagas,
Chris R. Burritt, Raymond W. Jung, Bruce E. Manwaring, L. William Nelson, Jr.,
Victor S. Oakes, Lawrence W. O'Brien, Janette Resnick and Corte J. Spencer.
Directors' Compensation
Each non-employee director receives an annual retainer fee of $6,000, a
meeting fee of $500 for each Board meeting attended and $300 for each committee
meeting attended. Employee directors do not receive monthly meeting fees. The
Bank paid a total of $116,000 in director fees during the year ending December
31, 1999.
7
<PAGE>
Executive Compensation
The following table sets forth for the years ended December 31, 1999,
1998, and 1997, certain information as to the total remuneration paid by the
Company to Mr. Gagas, the Company's chief executive officer. No other officer of
the Company received cash compensation exceeding $100,000 in 1999.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
==========================================================================================================================
Annual Compensation Long-Term Compensation
Awards
Fiscal
Years Other Restricted
Ended Annual Stock Options/ All Other
Name and December Salary Bonus Compensation Award(s) SARs Compensation
Principal Position (1) 31 ($)(2) ($) ($)(3) ($)(5) (#)(6) Payouts ($)(4)
--------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Chris C. Gagas 1999 $200,400 $20,000 $ 8,283 $22,550 6,000 -- $ (4)
President and Chief 1998 $190,400 $20,000 $19,151 $38,867 6,000 -- $ (4)
Executive Officer 1997 $185,000 -- $23,790 -- -- -- $ (4)
==========================================================================================================================
</TABLE>
(1) No other executive officer received salary and bonuses that in the
aggregate exceeded $100,000.
(2) Includes compensation deferred at the election of the named individual
under the Company's cafeteria plan.
(3) Includes 862 shares allocated to Mr. Gagas under the Company's Employee
Stock Ownership Plan.
(4) The aggregate amount of such benefits did not exceed the lesser of $50,000
or 10% of cash compensation for the named individuals.
(5) Amount represent compensation associated with the vested portion of stock
awards granted under the Management Recognition and Retention Plan.
(6) Amount represents the vested portion of option shares granted under the
Stock Option Plan.
Benefits
Medical and Life Insurance and Educational Assistance. The Company
provides full-time employees with medical and life and accidental death and
dismemberment insurance. In addition, the Company maintains a "cafeteria plan"
for employees, which permits qualifying employees to allocate a portion of their
compensation, on a pre-tax basis, for the payment of medical, dental and
dependent care expenses as well as the payment of certain insurance premiums.
The Company also offers educational assistance to full-time employees who have
worked for the Company for at least one year and who desire to take courses at
any accredited school of learning. The Company also provides long-term
disability income insurance for all employees equal to the lesser of $6,000 per
month or 60% of the employee's basic monthly earnings.
Defined Benefit Plan. The Company maintains a tax-qualified
noncontributory defined benefit plan ("Retirement Plan"). All employees age 21
or older who have worked for the Company for at least one year and have been
credited with 1,000 or more hours of employment with the Company during the year
are eligible to accrue benefits under the Retirement Plan. The Company
contributes annually to the Retirement Plan an amount necessary to satisfy the
actuarially determined minimum funding requirements in accordance with the
Employee Retirement Income Security Act of 1974 ("ERISA").
At the normal retirement age of 65 the plan is designed to provide a
life annuity. The retirement benefit provided is equal to 2% of a participant's
average monthly compensation based on the average of the three consecutive years
during the last 10 years of employment which provides the highest monthly
average compensation multiplied by the participant's years of credited service
(not to exceed 30 years) to the normal retirement date. Retirement benefits also
are payable upon retirement due to early and late retirement. Benefits also are
paid from the Retirement Plan upon a Participant's disability or death. A
reduced benefit is payable upon early retirement at or after age 60, or the
completion of 30 years of service with the Company. Upon termination of
employment other than as specified above, a participant who was employed by the
Company for a minimum of five years is eligible to receive his or her accrued
benefit reduced for early retirement or a deferred retirement benefit commencing
on such participant's normal retirement date. Benefits are payable in various
annuity forms. At December 31, 1999, the market value of the Retirement Plan
trust fund was approximately $3,562,000. For the plan year ended September 30,
1999, the Company made no contribution to the Retirement Plan.
8
<PAGE>
The following table indicates the annual retirement benefit that would
be payable under the Retirement Plan upon retirement at age 65 in plan year
1999, expressed in the form of a single life annuity for the final average
salary and benefit service classification specified below.
YEARS OF BENEFIT SERVICE AT RETIREMENT
--------------------------------------------------------------------------------
Final
Average Compensation 15 20 25 30
--------------------------------------------------------------------------------
$28,333 $7,500 $10,000 $12,500 $15,000
$50,000 $15,000 $20,000 $28,333 $30,000
$75,000 $22,500 $30,000 $37,500 $45,000
$100,000 $30,000 $40,000 $50,000 $60,000
$150,000(1) $45,000 $60,000 $75,000 $90,000
================================================================================
----------------------------
(1) Under Section 401(a)(17) of the Code, the maximum amount of compensation
that may be taken into account under the Retirement Plan in the 1998 Plan
Year is $160,000.
As of December 31, 1999, Chris C. Gagas had 14 years of credited
service (i.e., benefit service) under the Retirement Plan.
Employee Savings Plan. The Company maintains the Employee Savings Plan
which is a qualified, tax- exempt profit sharing plan with a cash or deferred
feature that is tax-qualified under Section 401(k) of the Internal Revenue Code
(the "401(k) Plan"). All employees who have attained age 21 and have completed
at least one year of employment during which they worked at least 1,000 hours
are eligible to participate.
Participants may contribute, and receive a deduction for, up to 15% of
compensation to the 401 (k) Plan. For these purposes, "compensation" includes
total compensation (including salary reduction contributions made under the
401(k) Plan or the flexible benefits plan sponsored by the Company), but does
not include compensation in excess of $160,000. The Company, in its discretion,
may match participants' salary reduction contributions based upon Company
profits for the current fiscal year. All employee contributions and earnings
thereon are fully and immediately vested. All employer matching contributions
vest at the rate of 20% per year beginning at the end of a participant's third
year of service with the Company until a participant is 100% vested after seven
years of service. Participants also will vest in employer matching contributions
when they reach the normal retirement age of 65 or later, or upon death or
disability regardless of years of service.
Plan benefits will be paid to each participant in a lump sum. At
December 31, 1999, the market value of the 401(k) Plan trust fund was
approximately $1,254,000. For the plan year ended December 31, 1999, the Company
made a contribution in the amount of $48,000 to the 401(k) Plan Trust of which
$5,000 was contributed on behalf of Mr. Gagas.
Executive Supplemental Retirement Income Master Agreement. The Company
maintains a non-tax-qualified executive supplemental retirement income master
agreement (the "Master Agreement") for qualifying executives of the Company.
Three executives are currently eligible to participate in the Master Agreement.
The Master Agreement provides a supplemental retirement income benefit in an
annual amount equal to highest average compensation received by the executive
during any 36 month period while employed by the Company, multiplied by a wage
replacement percentage designated in the individual executive's joinder
agreement, less the actual annual amount available to the executive from the
Company's other tax-qualified or nonqualified plans. Benefits under the Master
Agreement are payable to the executive upon the benefit age designated in the
individual executive's joinder agreement. Benefits will be payable in monthly
installments beginning on the executive's benefit age and continuing for a
period of months designated in the individual executive's joinder agreement.
Payments to an executive, or to his beneficiary, may be made from the Master
Agreement upon the executive's death, total or permanent disability, or
termination of service with the Company.
9
<PAGE>
The Master Agreement is considered an unfunded plan for tax and ERISA
purposes. All obligations arising under the Master Agreement are payable from
the general assets of the Company. As of December 31, 1999, $314,300 was accrued
on behalf of Mr. Gagas.
Executive Deferred Compensation Master Agreement. The Company sponsors
a non-tax qualified deferred compensation plan for the benefit of two of its
executives, Mr. Gagas and Mr. Manwaring (the "Executive Plan"). Under the
Executive Plan, the executives are entitled to defer a portion of their income
during the sixty-month period commencing January 1, 1988. Deferred amounts are
payable upon attainment of the benefit age as designated in the executive's
joinder agreement, in the form of monthly installments commencing on the first
day of the month following attainment of the executive's benefit age and
continuing for the period designated in the individual executive's joinder
agreement. Payments to an executive, or to his designated beneficiary, may also
be made from the Executive Plan upon the executive's death or total and
permanent disability. Under the Executive Plan, the executives will not
recognize taxable income until their benefits are actually distributed.
Employee Stock Ownership Plan and Trust. The Company has established an
Employee Stock Ownership Plan and Related Trust ("ESOP") for eligible employees.
The ESOP is a tax-qualified plan subject to the requirements of ERISA and the
Code. Persons who have been employed by the Company for 12-months during which
they worked at least 1,000 hours and who have attained age 21, are eligible to
participate. The ESOP has borrowed funds and purchased 61,716 shares in open
market transactions. The Common Stock purchased by the ESOP is collateral for
the loan. The loan will be repaid principally from the Bank's contributions to
the ESOP over a period of up to seven years. The interest rate for the loan is
the prime rate minus 1 point. Shares purchased by the ESOP will be held in a
suspense account for allocation among participants as the loan is repaid.
Contributions to the ESOP and shares released from the suspense account
in an amount proportional to the repayment of the ESOP loan will be allocated
among participants on the basis of compensation in the year of allocation, up to
an annual adjusted maximum level of compensation. Benefits generally become
vested after five years of credited service. Forfeitures will be reallocated
among remaining participating employees in the same proportion as contributions.
Benefits may be payable upon death, retirement, early retirement, disability or
separation from service. The Company's contributions to the ESOP will not be
fixed, so benefits payable under the ESOP cannot be estimated.
A committee consisting of all non-employee directors administers the
ESOP and the Company's other stock benefit plans (the "Stock Benefits
Committee"). The ESOP also has an unrelated corporate trustee who is appointed
as a fiduciary responsible for administration of the ESOP assets and who votes
the ESOP shares. The Stock Benefits Committee may instruct the trustee regarding
investment of funds contributed to the ESOP. The ESOP trustee generally will
vote all shares of Common Stock held by the ESOP in accordance with the written
instructions of the Stock Benefits Committee. In certain circumstances, however,
the ESOP trustee must vote all allocated shares held in the ESOP in accordance
with the instructions of the participating employees, and unallocated shares and
shares held in the suspense account in a manner calculated to most accurately
reflect the instructions the ESOP trustee has received from participants
regarding the allocated stock, subject to and in accordance with the fiduciary
duties under ERISA owed by the ESOP trustee to the ESOP participants. Under
ERISA, the Secretary of Labor is authorized to bring an action against the ESOP
trustee for the failure of the ESOP trustee to comply with its fiduciary
responsibilities.
Stock Option Plan. The Pathfinder Bank 1997 Stock Option Plan (the
"Stock Option Plan") authorizes the grant of stock options and limited rights to
purchase 132,251 shares of Common Stock. The Stock Option Plan authorizes grants
of (i) options intended to qualify as "incentive stock options," (ii) options
that do not qualify as incentive stock options ("non-statutory options") and
(iii) limited rights (described below) that are exercisable only upon a change
in control of the Bank (as defined). Non-employee directors are eligible to
receive only non-statutory options. No options were granted during the past
fiscal year.
Grants may be made by the Board of Directors of the Bank or a stock
benefits committee, established by the Bank consisting of at least two
non-employee members of the Board of Directors (the "Stock Benefits Committee").
In granting options, the Stock Benefits Committee considers factors such as
salary, length of employment with the Bank, and the employee's overall
performance. To the extent shares are available under the Stock Option Plan,
each newly appointed non-employee director shall receive a stock option grant to
purchase 7,500 shares of Common Stock. All stock options are exercisable in six
equal annual installments beginning January 24, 1999 and continuing each
10
<PAGE>
anniversary date thereafter; provided, however, that all options are 100%
exercisable in the event the optionee terminates his service due to normal
retirement, death or disability, or in the event of a change in control of the
Bank. All options must be exercised within 10 years from the date of grant.
Stock options may be exercised up to one year following termination of service
or such later period as determined by the Stock Benefits Committee. The exercise
price of all options is at least 100% of the fair market value of the underlying
Common Stock at the time of the grant. Adjusted to reflect the three for two
split of the Common Stock, the option exercise price is $6.58 per share. The
exercise price may be paid in cash or Common Stock. Common Stock issued in
connection with the exercise of options may be from treasury shares or
authorized but unissued shares, in which case there will be dilution of the
Common Stock holdings of existing shareholders.
Incentive stock options may be granted only to employees of the Company
or the Bank. Non-employee directors will be granted non-statutory stock options.
No stock option granted in connection with the Stock Option Plan will be
eligible to be treated as an incentive stock option if it is exercised more than
three months after the date on which the optionee ceases to perform services for
the Company or the Bank, except that in the event of death or disability, a
stock option may be eligible to be treated as an incentive stock option if it is
exercised within one year; provided, however, that if an optionee ceases to
perform services for the Company or the Bank due to normal retirement or
following a change in control (as defined in the Stock Option Plan), any
incentive stock options exercised more than three months following the date the
optionee ceases to perform services will be treated as a non-statutory stock
option as described above.
"Limited rights," exercisable only in the event of a change in control,
give the optionee the right to receive a lump sum cash payment (or in certain
cases, shares of Common Stock) equal to the difference between the exercise
price of the option and the fair market value of the shares of Common Stock
subject to the option on the date of exercise of the right in lieu of purchasing
the stock underlying the option. In the event of death or disability, the
Company or the Bank, if requested by the optionee or beneficiary, may elect to
pay the optionee or beneficiary, in the exchange for the option, the amount by
which the fair market value of the Common Stock exceeds the exercise price of
the option on the date of the optionee's termination of service for death or
disability.
Simultaneously with the grant of any stock option, the Committee may
grant a Dividend Equivalent Right with respect to all or some of the shares
covered by such stock option. The Dividend Equivalent Right provides the grantee
with a separate cash benefit equal to 100% of the amount of any extraordinary
dividend on shares of Common Stock subject to a stock option. Under the terms of
the Stock Option Plan, an extraordinary dividend is any dividend paid on shares
of Common Stock that exceeds the Company's weighted average cost of interest
bearing liabilities for the current and preceding three quarters. Upon the
payment of an extraordinary dividend, Dividend Equivalent Right will receive at
the time the related stock option vests cash or some other payment as determined
under the Stock Option Plan, equal to 100% of the extraordinary dividend paid on
shares of Common Stock plus any earnings thereon, minus any tax withholding
amounts. The Dividend Equivalent Right is transferrable only when the underlying
stock option is transferable and under the same conditions.
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
===========================================================================================================================
Number of Securities
Shares Acquired Value Underlying Unexercised Value of Unexercised In-
Name Upon Exercise Realized(1) Options at The-Money Options at
Fiscal Year-End Fiscal Year-End
------------------------------------------------------
Exercisable/Unexercisable Exercisable/Unexercisable
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Chris C. Gagas 6,000 $8,520 6,000 / 24,000 $53,250 / $213,000
===========================================================================================================================
</TABLE>
(1) Equals the difference between the aggregate exercise price of the options
exercised and the aggregate fair market value of the shares of common stock
received upon exercise computed using the price of the Common Stock as
quoted on the Nasdaq SmallCap Market at the time of exercise.
(2) Equals the difference between the aggregate exercise price of such options
and the aggregate fair market value of the shares of common stock that
would be received upon exercise, assuming such exercise occurred on
December 31, 1999, at which date the closing price of the Common Stock as
quoted on the Nasdaq SmallCap Market was at $8.875.
11
<PAGE>
The Board of Directors may amend, suspend or terminate the Stock Option
Plan except that such amendments may not impair awards previously granted.
Stockholders of the Company must approve any amendment to the Stock Option Plan
that would increase the number of options, decrease an option exercise price,
extend the term of the Stock Option Plan or any option, or change the persons or
category of persons eligible to be granted options. The exercise of options will
have a dilutive effect on the ownership interests of existing shareholders.
Further, the exercise of options may render more difficult or discourage a
merger, tender offer or other takeover attempt even if such transaction or event
would be beneficial to shareholders generally, the assumption of control by a
holder of a large block of the Company's securities, a proxy contest or the
removal of incumbent management.
Recognition and Retention Plan. The Board of Directors of the Bank has
adopted the 1997 Recognition and Retention Plan (the "Recognition Plan") as a
method of providing certain employees and non-employee directors of the Bank
with a proprietary interest in the Company and the Bank and to provide these
individuals with an incentive to increase the value of the Company and the Bank.
The Recognition Plan provides for the award of 52,901 shares at no cost to the
recipient. Under the Recognition Plan, shares of Common Stock have been awarded
in the following amounts to Named Executive Officers, executive officers as a
group, non-employee directors, and employees as a group. Chris C. Gagas received
an award for 13,200 shares of Common Stock, and each non-employee director
received Recognition Plan stock awards of 2,700 shares. During the year ended
December 31, 1999 no awards were made under the Recognition Plan.
The Stock Benefits Committee, composed of the non-employee directors of
the Bank, will administer the Recognition Plan, and make awards to officers and
employees pursuant to the Recognition Plan. Awards to non- employee directors
are fixed by the terms of the Recognition Plan. Awards of Common Stock that have
not vested under the Recognition Plan ("Restricted Stock") are nontransferable
and nonassignable. Participants in the Recognition Plan become vested in shares
of Restricted Stock awarded to them at a rate of 16.67% per year beginning on
January 24, 1999 and continuing on each anniversary date thereafter; provided,
however, that the Stock Benefits Committee may accelerate or extend the vesting
rate on any awards made to officers and employees after the effective date of
the Recognition Plan. Awards to executive officers and outside directors become
fully vested upon termination of employment or service due to normal retirement,
death or disability, or following a termination of employment or service in
connection with a change in control (as defined therein) of the Company or the
Bank. Upon termination of employment or service for any other reason, unvested
shares are forfeited. When a participant's Restructured Stock vests, the
participant will recognize ordinary income equal to the fair market value of the
shares vested, unless the participant previously made an irrevocable election to
be taxed on the shares of Restricted Stock awarded to him in the year of the
award. The amount of income recognized by a participant will be a deductible
expense of the Company for Federal income tax purposes. A participant is
entitled to receive any cash dividends paid on the Restricted Stock both before
and after vesting of the Restricted Stock. Stock dividends declared by the
Company and paid on Restricted Stock that has not vested are subject t to the
same restrictions as the Restricted Stock until such shares vest.
Transactions With Certain Related Persons
All transactions between the Company and its executive officers,
directors, holders of 10% or more of the shares of its Common Stock and
affiliates thereof, are on terms no less favorable to the Company than could
have been obtained by it in arm's-length negotiations with unaffiliated persons.
Such transactions must be approved by a majority of independent outside
directors of the Company not having any interest in the transaction.
--------------------------------------------------------------------------------
PROPOSAL 2--RATIFICATION OF APPOINTMENT OF AUDITORS
--------------------------------------------------------------------------------
The Board of Directors of the Company has approved the engagement of
PricewaterhouseCoopers, LLP, to be the Company's auditors for the 2000 fiscal
year, subject to the ratification of the engagement by the Company's
shareholders. At the Annual Meeting, shareholders will consider and vote on the
ratification of the engagement of PricewaterhouseCoopers, LLP, for the Company's
fiscal year ending December 31, 2000. A representative of
PricewaterhouseCoopers, LLP, is expected to attend the Meeting to respond to
appropriate questions and to make a statement if he so desires.
12
<PAGE>
In order to ratify the selection of PricewaterhouseCoopers, LLP, as the
auditors for the 2000 fiscal year, the proposal must receive at least a majority
of the votes cast, either in person or by proxy, in favor of such ratification.
The Board of Directors recommends a vote "FOR" the ratification of
PricewaterhouseCoopers, LLP, as auditors for the 2000 fiscal year.
--------------------------------------------------------------------------------
PROPOSAL 3--SHAREHOLDER PROPOSAL TO AMEND CERTIFICATE OF INCORPORATION
AND BYLAWS OF THE COMPANY
--------------------------------------------------------------------------------
Thomas A. Baker, M.D., a shareholder who owns 2,000 shares of Common
Stock and whose address is R.D. #5, Country Club Road, Dallas, Pennsylvania has
submitted the following proposal:
RESOLVED, that the Board of Directors of the Company make every effort,
unless precluded by applicable state or federal law, to remove the following
"anti-takeover" defenses from the Company's Certificate of Incorporation and
Bylaws;
1. Article Fourth Subparagraph (B) of the Company's Certificate
of Incorporation;
2. Article Fifth Subparagraphs (C) and (D) of the Company's
Certificate of Incorporation;
3. Article Sixth Subparagraphs (A), (B) and (D) of the Company's
Certificate of Incorporation;
4. Article Seventh of the Company's Certificate of Incorporation;
5. Article Eighth of the Company's Certificate of Incorporation;
6. Article Twelfth of the Company's Certificate of Incorporation;
7. Sections 2 and 9 of Article I of the Company's Bylaws;
8. Sections 1,2 and 4 of Article II of the Company's Bylaws; and
9. Article VIII of the Company's Bylaws.
Supporting Statement
The Certificate of Incorporation and Bylaws of the Company presently
contain "anti-takeover" defenses which place considerable restrictions on the
ability of the stockholders to effectuate a proposed takeover of the Company
that has not been approved by the Board of Directors. These anti-takeover
defenses may deprive shareholders the opportunity to receive a substantial
premium for their shares of stock. With the anti-takeover defenses in place,
potential takeover attempts, however lucrative to the shareholders, stand little
chance of success if the Board of Directors decides, for whatever reason, to
withhold its approval.
The existence of these defenses may present an insurmountable obstacle
for a suitor of the Company who is not approved by the Board of Directors but
who seeks to acquire the Company at a stock price above current market prices.
These provisions may also create negative connotations and serve to discourage
other suitors from even pursuing a takeover of the Company. Moreover, these
provisions restrict the shareholders' ability to alter the composition of the
Board of Directors.
I do not believe that these anti-takeover defenses are in the best
interests of the shareholders. I am the beneficial owner of 2,000 shares of
Pathfinder's common stock and I am submitting the above proposal since it is my
belief that we shareholders should be given every opportunity to maximize our
investment in Pathfinder.
I therefore ask you to join me in voting for this proposal.
Thomas E. Baker, M.D.
R.D. #5, Country Club Road
Dallas, PA 18612
13
<PAGE>
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "AGAINST" PROPOSAL
3 FOR THE FOLLOWING REASONS:
As permitted by applicable Delaware corporate law, the Company's
Certificate of Incorporation and Bylaws include provisions which are intended to
help the Board of Directors and management govern the Company. The provisions
that the proponent is asking to be deleted from the Company's Certificate of
Incorporation and Bylaws are intended to assist the Board in exercising its
fiduciary duties to the Company and its shareholders for both routine business
matters and extraordinary transactions. These provisions were considered
carefully by the Board of Directors at the time the Bank established the Company
as a mid-tier holding company in the Fall of 1997 (the "Reorganization"). At
that time, the Bank's shareholders were given the opportunity to consider and
vote on the Reorganization. They were provided, as part of the Prospectus/Proxy
Statement, a copy of the Company's Certificate of Incorporation and Bylaws. In
addition, the Prospectus/Proxy Statement included a detailed discussion of those
provisions in the Certificate of Incorporation and Bylaws that might be
considered to have an anti-takeover effect.
In contrast, the proponent does not provide shareholders with any
indication of the substance of the provisions they are being asked to vote to
remove. The proponent states that all the provisions which he requests be
removed are "anti-takeover defenses which place considerable restrictions on the
ability of the shareholders to effectuate a proposed takeover of the Company."
The proponent lumps together as "anti-takeover provisions" those provisions
relating to the voting of the Board of Directors, cumulative voting, a staggered
Board of Directors, calling of special meetings, and change of control and
supermajority provisions. While the provisions may be deemed to have an anti-
takeover effect, the primary purpose of these provisions is to assist management
and the Board in the orderly operation of the Company. All of these provisions
are permissible under Delaware law; these provisions are not uncommon for
Delaware chartered companies.
The Company is part of a mutual holding company structure. In this form
of organization, a majority of the Company's Common Stock must, by law, be owned
by Pathfinder Bancorp, MHC, its mutual holding company parent. The Bank
originally adopted this form of organization in 1995 and the primary purpose of
these provisions is to assist management and the Board in the orderly operation
of the Company to permit its depositors, employees, management and trustees to
obtain an equity ownership interest in the Bank. The Bank also elected to form a
mutual holding company rather than convert entirely to stock form, to remain as
an independent savings bank in the Oswego community. The Bank is committed to
remaining an independent community bank, and management believes that the mutual
holding company structure has been effective in balancing this objective and the
long-term growth of the Bank, with the interests of stockholders. If the
proponent were successful in having the above-cited provisions of the
Certificate of Incorporation and Bylaws removed, the Company could still only
receive shareholder approval of a sale or merger if the Mutual Holding Company
voted in favor of a proposed transaction. Repeal of these provisions would,
however, make it easier for a small minority of shareholders to disrupt the
business of the Company. For example, the ability of any shareholder to call a
special meeting of shareholders would result in the Company being exposed to
numerous requests for special meetings that may be of little or no benefit to
shareholders and which would be costly and burdensome to the Company.
The provisions of the Certificate of Incorporation or Bylaws cited by
the proponent are typical of charter and bylaw provisions of Delaware holding
companies for banks and savings institutions. They are designed to encourage any
potential acquiror to negotiate directly with the Board of Directors, which the
Company believes is in the best position to effectively and properly evaluate
the adequacy and fairness of any proposed offer, to negotiate on behalf of
shareholders and to protect shareholders against abusive tactics. The major
objective of the Board has been maintaining and enhancing the Company's value
for all shareholders, while effectively governing the Company.
FOR THE REASONS STATED ABOVE, THE BOARD OF DIRECTORS BELIEVES THAT
PROPOSAL 3 IS NOT IN THE BEST INTERESTS OF THE COMPANY AND ITS SHAREHOLDERS.
ACCORDINGLY, THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE
"AGAINST" PROPOSAL 3.
Approval of this proposal requires the affirmative vote of a majority
of the shares of Common Stock present in person or by proxy at the Annual
Meeting and entitled to vote on this proposal. However, approval of Proposal 3
would not automatically result in the Certificate of Incorporation or Bylaws
being amended in the manner contemplated by such proposal. Pursuant to Article
Twelfth of the Certificate of Incorporation, an amendment to, or repeal of, the
provisions of the Certificate of Incorporation referenced by the proponent would
require the approval
14
<PAGE>
of not less than 80% of the shares of Common Stock issued and outstanding.
Furthermore, pursuant to Article VIII of the Bylaws, the affirmative vote of the
holders of at least 80% of the outstanding Common Stock is required to amend or
repeal any provision of the Bylaws.
--------------------------------------------------------------------------------
PROPOSAL 4--SHAREHOLDER PROPOSAL TO ENGAGE AN INVESTMENT BANKING FIRM
--------------------------------------------------------------------------------
Jewelcor Management, Inc. is the record owner of 200 shares of Common
Stock and is the beneficial owner of 158,514 shares of Common Stock, and its
address is 100 North Wilkes-Barre Boulevard, Wilkes-Barre, Pennsylvania 18702.
Jewelcor Management, Inc. has submitted the following proposal:
RESOLVED, it is recommended that the Board of Directors of Pathfinder
Bancorp, Inc. (the "Company") engage an investment banking firm to advise the
Company on ways to maximize shareholder value, including a potential sale or
merger of the Company.
Supporting Statement
Based on the analyses below, Jewelcor Management, Inc. ("JMI") believes
that the Company could potentially achieve an acquisition price of $9.21 to
$13.04 per share if the Board of Directors took the necessary steps to achieve a
sale or merger. In JMI's opinion, the following acquisition valuations provide a
reasonable basis for estimating a potential acquisition price of the Company
well in excess of the current stock price.(1)
Analysis
JMI compared the Company's book value and earnings per share ("EPS")
with the acquisition ratios for three of the Company's peer groups: (1)
"Regional Peer Group," (2) "Asset-Size Peer Group" and (3) "National Industry
Peer Group." (2) Based upon summary statistics for mergers announced in 1999,
JMI derived the Average Announced Price/Book Ratio ("Price/Book") and the Median
Announced Price/Last Twelve Months EPS Ratio ("Price/EPS") for each of the three
peer groups.(3) JMI then derived an average of the three peer groups' respective
Price/Book ("Peer Group Average Price/Book") and Price/EPS ("Peer Group Average
Price/EPS") and multiplied the applicable Peer Group Average ratios times the
Company's (a) book value and (b) last twelve months diluted EPS ("Company
EPS").(4)
Book Value Approach
Company Stock Price (11/17/99) $8.50
Company Book Value (9/30/99) $7.69
Company Price Book 110.53%
Peer Group Average Price/Book 169.62%
POTENTIAL COMPANY ACQUISITION PRICE $13.04
Earnings Approach
Company EPS (9/30/99) $0.37
Company's Price/EPS 22.97X
Peer Group Average Price/EPS 24.90X
POTENTIAL COMPANY ACQUISITION PRICE $9.21
-----------------------------
(1) JMI's analyses are not the only ways to predict the Company's potential
acquisition price. Moreover, they do not reflect the unrecognized expenses
and cost savings associated with a potential transaction, since experts and
cost savings depend, in part, on the overlap in markets and subsidiaries
present in a particular transaction.
(2) "Regional Peer Group:" All thrifts in DC, DE, MD, NJ, NY, PA and PR with
mergers announced in 1999. "Asset-Size Peer Group:" All thrifts with an
asset range of less than $250 million with mergers announced in 1999.
"National Industry Peer Group:" All publicly-traded thrifts with mergers
announced in 1999.
Source: SNL Securities LC.
(3) Since the majority of the Company's shares are owned by a Mutual Holding
Company, the Company, may have Price/Book and Price/EPS ratios that could
differ materially from the averages of the thrift universe.
(4) Although the Company could possibly achieve any of the individual
acquisition ratios achieved by the peer groups, JMI believes that the most
reliable method for determining potential acquisition values is to compare
the average ratios across peer groups.
15
<PAGE>
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "AGAINST" PROPOSAL
4 FOR THE FOLLOWING REASONS:
The purpose of Proposal 4 is to have the Board of Directors take action
that would result in the sale or merger of the Company. The supporting statement
suggests that such a transaction would reward the Company's shareholders better
than their continued ownership of Common Stock.
The Board is committed to executing the Company's business plan which
includes a policy of strategic growth as a community bank in Oswego County and
the surrounding areas in central New York State. It is for this reason that the
Bank originally reorganized into a mutual holding company structure.
In addition, the Board of Directors is composed of nine persons, eight
of whom are not employees of the Company, the Bank or the Mutual Holding
Company. These individuals have close business ties to Oswego County and the
surrounding communities. The Board of Directors is overwhelmingly independent of
management, and consistent with its fiduciary obligations, reviews the strategic
options available to the Company. While the Board, in consultation with its
financial advisors, will consider carefully all options that may enhance
shareholder value, it is currently committed to remaining independent.
We believe that the proposal is impractical or misleading for two
reasons: First, it incorrectly implies that the Company could be merged with any
other financial institution. Second, it utilizes flawed methodology in
determining the potential price per share at which such merger transaction would
take place.
The proposal incorrectly implies that the Company could be merged with
any other financial institution. To date, there have been no acquisitions of
companies that are in the mutual holding company structure. As long as the
Company is part of a mutual holding company structure, management does not
believe that federal and state regulatory agencies would permit the Company to
be acquired by another financial institution that is not also in the mutual
holding company form of organization. To acquire the Company would first require
that the Mutual Holding Company convert from the mutual to capital stock form of
organization (a "Conversion Transaction"). Even if such a Conversion Transaction
were to occur, the Company could not under New York regulations effect a sale of
control of the Company for at least 12 months following the Conversion
Transaction. In any event, the Board of Trustees of the Mutual Holding Company,
and not the Board of Directors of the Company, would need to make the decision
to conduct a Conversion Transaction. Although the members of the Board of
Trustees of the Mutual Holding Company and the Board of Directors of the Company
are substantially the same, the Board of Trustees of the Mutual Holding Company
owes its fiduciary duties primarily to the Mutual Holding Company and the Bank's
depositors, and not to the Company's shareholders. The Board of Trustees of the
Mutual Holding Company and the Board of Directors of the Company believe that
the value of the Company and the Bank, the Mutual Holding Company's primary
assets, will be enhanced if the Company takes steps to build franchise value,
thereby increasing the value of any shares sold by the Company or its successor
in any future Conversion Transaction. The Mutual Holding Company does not
believe that it is in its best interest to conduct a Conversion Transaction at
this time, and the Company does not believe that its shareholders' best interest
would be served if the Mutual Holding Company conducted a Conversion Transaction
at this time.
In addition, the Company believes that the proposal utilizes flawed
methodology in determining the potential price per share at which a merger
transaction would occur. In determining an "adjusted book value," the proponent
makes certain arbitrary assumptions, and describes no reasons for the
assumptions. A Conversion Transaction would require an independent valuation of
the Company which would not be arbitrarily based on the Company's current stock
price. Furthermore, it would take at least six months to complete a Conversion
Transaction, during which time market and economic conditions affecting
financial institutions may change dramatically. As stated above, under New York
regulations, the Company could not effect a sale of control for a period of 12
months following a Conversion Transaction. Consequently, the Board believes that
there can be no meaningful analysis today of the value of the Company in a sale
or merger that could not be initiated for a minimum of twelve months.
The Board is committed to executing the Company's business plan. The
Board believes that shareholders' interests are served by the Company's pursuit
of its strategy of building franchise value by pursuing a policy of strategic
growth and remaining an independent community bank serving the needs of Oswego
County and the surrounding areas in central New York State.
16
<PAGE>
FOR THE REASONS STATED ABOVE, THE BOARD OF DIRECTORS BELIEVES THAT
PROPOSAL 4 IS NOT IN THE BEST INTERESTS OF THE COMPANY AND ITS SHAREHOLDERS.
ACCORDINGLY, THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE
"AGAINST" PROPOSAL 4.
Approval of this proposal requires the affirmative vote of a majority
of the shares of Common Stock present in person or by proxy at the Annual
Meeting and entitled to vote on the proposal.
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SHAREHOLDER PROPOSALS
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In order to be eligible for inclusion in the proxy materials for next
year's Annual Meeting of Shareholders, any shareholder proposal to take action
at such meeting must be received at the Company's executive office, 214 West
First Street, Oswego, New York 13126, no later than December 1, 2000. Any such
proposals shall be subject to the requirements of the proxy rules adopted under
the Securities Exchange Act of 1934.
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OTHER MATTERS
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The Board of Directors is not aware of any business to come before the
Annual Meeting other than the matters described above in the Proxy Statement.
However, if any matters should properly come before the Annual Meeting, it is
intended that holders of the proxies will act as directed by a majority of the
Board of Directors, except for matters related to the conduct of the Annual
Meeting, as to which they shall act in accordance with their best judgment. The
Board of Directors intends to exercise its discretionary authority to the
fullest extent permitted under the Securities Exchange Act of 1934.
The Bylaws of the Company provide an advance notice procedure for
certain business or nominations to the Board of Directors to be brought before
an annual meeting. In order for a shareholder to properly bring business before
an annual meeting, or to propose a nominee to the Board, the shareholder must
give written notice to the Secretary of the Company not less than 90 days before
the date fixed for such meeting; provided, however, that in the event that less
than 100 days notice or prior public disclosure of the date of the meeting is
given or made, notice by the shareholder to be timely must be received not later
than the close of business on the tenth day following the day on which such
notice of the date of the annual meeting was mailed or such public disclosure
was made. The notice must include the shareholder's name, record address, and
number of shares owned by the shareholder, describe briefly the proposed
business, the reasons for bringing the business before the annual meeting, and
any material interest of the shareholder in the proposed business. In the case
of nominations to the Board, certain information regarding the nominee must be
provided. Nothing in this paragraph shall be deemed to require the Company to
include in its proxy statement and proxy relating to an annual meeting any
shareholder proposal which does not meet all of the requirements for inclusion
established by the SEC in effect at the time such proposal is received.
The date on which the Annual Meeting of Shareholders is expected to be
held is April 25, 2001. Accordingly, advance written notice of business or
nominations to the Board of Directors to be brought before the 2000 Annual
Meeting of Shareholders must be given to the Company no later than January 26,
2001.
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MISCELLANEOUS
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The cost of solicitation of proxies will be borne by the Company. The
Company will reimburse brokerage firms and other custodians, nominees and
fiduciaries for reasonable expenses incurred by them in sending proxy materials
to the beneficial owners of Common Stock. In addition to solicitations by mail,
directors, officers and regular employees of the Company may solicit proxies
personally or by telegraph or telephone without additional compensation.
17
<PAGE>
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR
ENDED DECEMBER 31, 1999, WILL BE FURNISHED WITHOUT CHARGE TO SHAREHOLDERS AS OF
THE RECORD DATE UPON WRITTEN OR TELEPHONIC REQUEST TO MELISSA DASHNAU, CORPORATE
SECRETARY, PATHFINDER BANCORP, INC., 214 WEST FIRST STREET, OSWEGO, NEW YORK
13126, OR CALL AT 315/243-0057.
BY ORDER OF THE BOARD OF DIRECTORS
Melissa A. Dashnau
Corporate Secretary
Oswego, New York
April 3, 2000
18
<PAGE>
REVOCABLE PROXY
PATHFINDER BANCORP, INC.
ANNUAL MEETING OF SHAREHOLDERS
__________, 2000
The undersigned hereby appoints the official proxy committee consisting
of the Board of Directors with full powers of substitution to act as attorneys
and proxies for the undersigned to vote all shares of Common Stock of the
Company which the undersigned is entitled to vote at the Annual Meeting of
Shareholders ("Annual Meeting") to be held at the Company's main office, 214
West First Street on __________, 2000, at _____ ___.m. The official proxy
committee is authorized to cast all votes to which the undersigned is entitled
as follows:
<PAGE>
VOTE
FOR WITHHELD
--- --------
(except as
marked to
the contrary
below)
_ _
1. The election as Directors of all nominees listed |_| |_|
below each to serve for a three-year term
Bruce E. Manwaring
L. William Nelson, Jr.
George P. Joyce
INSTRUCTION: To withhold your vote for one or more
nominees, write the name of the nominee(s) on the line(s) below.
------------------------------
------------------------------
FOR AGAINST ABSTAIN
--- ------- -------
_ _ _
2. The ratification of PricewaterhouseCoopers, LLP |_| |_| |_|
as the Company's independent auditor for the
fiscal year ended December 31, 2000.
_ _ _
3. A shareholder proposal calling on the Board of |_| |_| |_|
Directors to take steps to amend the Company's
Certificate of Incorporation and Bylaws.
_ _ _
4. A shareholder proposal to take steps to engage an |_| |_| |_|
investment banking firm.
The Board of Directors recommends a vote "FOR" Proposal 1 and Proposal 2 and
"AGAINST" Proposal 3 and Proposal 4.
<PAGE>
THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS ARE SPECIFIED, THIS
PROXY WILL BE VOTED FOR PROPOSALS 1 AND 2 AND AGAINST PROPOSALS 3 AND 4. IF ANY
OTHER BUSINESS IS PRESENTED AT SUCH ANNUAL MEETING, THIS PROXY WILL BE VOTED AS
DIRECTED BY A MAJORITY OF THE BOARD OF DIRECTORS. AT THE PRESENT TIME, THE BOARD
OF DIRECTORS KNOWS OF NO OTHER BUSINESS TO BE PRESENTED AT THE ANNUAL MEETING.
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THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
Should the undersigned be present and elect to vote at the Annual Meeting or at
any adjournment thereof and after notification to the Secretary of the Company
at the Annual Meeting of the shareholder's decision to terminate this proxy,
then the power of said attorneys and proxies shall be deemed terminated and of
no further force and effect. This proxy may also be revoked by sending written
notice to the Secretary of the Company at the address set forth on the Notice of
Annual Meeting of Shareholders, or by the filing of a later proxy prior to a
vote being taken on a particular proposal at the Annual Meeting.
The undersigned acknowledges receipt from the Company prior to the execution of
this proxy of notice of the Annual Meeting, a proxy statement dated __________,
2000, and audited financial statements.
Dated: _________________________ --- Check Box if You Plan
--- to Attend Annual Meeting
------------------------------- -----------------------------------
PRINT NAME OF SHAREHOLDER PRINT NAME OF SHAREHOLDER
------------------------------- -----------------------------------
SIGNATURE OF SHAREHOLDER SIGNATURE OF SHAREHOLDER
Please sign exactly as your name appears on this card. When signing as attorney,
executor, administrator, trustee or guardian, please give your full title.
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Please complete and date this proxy and return it
promptly in the enclosed postage-prepaid
envelope.
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