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 '240.14a-11(c) or '240.14a-12
Hudson River Bancorp, Inc.
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4)and 0-11.
1) Title of each class of securities to which transaction applies:
N/A
2) Aggregate number of securities to which transaction applies: N/A
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 filing fee is calculated and state how it was
determined): N/A
4) Proposed maximum aggregate value of transaction: N/A
5) Total fee paid: N/A
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
1) Amount Previously Paid: N/A
2) Form, Schedule or Registration Statement No.: N/A
3) Filing Party: N/A
4) Date Filed: N/A
<PAGE>
[HUDSON RIVER BANCORP, INC. LETTERHEAD]
July 12, 1999
Dear Fellow Shareholder:
On behalf of the Board of Directors and management of Hudson River
Bancorp, Inc. (the "Company"), we cordially invite you to attend the First
Annual Meeting of Shareholders of the Company. The meeting will be held at 3:00
p.m., Eastern Standard time, on August 19, 1999 at the St. Charles Hotel and
Restaurant located at 16 Park Place, Hudson, New York.
In addition to the election of three directors of the Company, your
Board of Directors is submitting for approval the ratification of the
appointment of KPMG LLP as auditors of the Company. The Board of Directors
unanimously recommends that you vote for each of the proposals.
We encourage you to attend the meeting in person. Whether or not you
plan to attend, please read the enclosed Proxy Statement and then complete, sign
and date the enclosed proxy card and return it in the accompanying postage
prepaid return envelope as promptly as possible. This will save the Company
additional expense in soliciting proxies and will ensure that your shares are
represented at the meeting.
Sincerely,
Carl A. Florio
President and
Chief Executive Officer
<PAGE>
HUDSON RIVER BANCORP, INC.
One Hudson City Centre
Hudson, New York, 12534
(518) 828-4600
---------------------
NOTICE OF FIRST ANNUAL MEETING OF SHAREHOLDERS
To be held on August 19, 1999
Notice is hereby given that the First Annual Meeting of Shareholders
(the "Meeting") of Hudson River Bancorp, Inc. (the "Company") will be held at
the St. Charles Hotel and Restaurant located at 16 Park Place, Hudson, New York
on August 19, 1999 at 3:00 p.m., Eastern Standard time.
A Proxy Card and Proxy Statement for the Meeting are enclosed.
The Meeting is for the purpose of considering and acting upon:
1. The election of three directors of the Company;
2. The ratification of the appointment of KPMG LLP as auditors of
the Company for the fiscal year ending March 31, 2000;
and such other business as may properly come before the Meeting or any
adjournment thereof. The Board of Directors is not aware of any such other
business.
Any action may be taken on the foregoing proposals at the Meeting on
the date specified above, or on any date or dates to which the Meeting may be
adjourned. Shareholders of record at the close of business on June 22, 1999 are
the shareholders entitled to vote at the Meeting and any adjournments thereof. A
list of shareholders entitled to vote at the Meeting will be available for
inspection at One Hudson City Centre, Hudson, New York, for a period of ten days
prior to the Meeting and will also be available at the Meeting.
You are requested to complete and sign the enclosed proxy card which is
solicited on behalf of the Board of Directors, and to mail it promptly in the
enclosed envelope. The proxy will not be used if you attend and vote at the
Meeting in person.
BY ORDER OF THE BOARD OF DIRECTORS
Earl Schram, Jr.
Chairman of the Board
Hudson, New York
July 12, 1999
- --------------------------------------------------------------------------------
IMPORTANT: THE PROMPT RETURN OF PROXIES WILL SAVE THE COMPANY THE EXPENSE OF
FURTHER REQUESTS FOR PROXIES TO ENSURE A QUORUM AT THE MEETING. A SELF-
ADDRESSED ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE. NO POSTAGE IS REQUIRED IF
MAILED WITHIN THE UNITED STATES.
- --------------------------------------------------------------------------------
<PAGE>
PROXY STATEMENT
HUDSON RIVER BANCORP, INC.
One Hudson City Centre
Hudson, New York, 12534
FIRST ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON AUGUST 19, 1999
INTRODUCTION
This Proxy Statement is being furnished to you in connection with the
solicitation on behalf of the Board of Directors of Hudson River Bancorp, Inc.
(the "Company") of the proxies to be voted at the First Annual Meeting of
Shareholders (the "Meeting") of the Company to be held at the St. Charles Hotel
& Restaurant located at 16 Park Place, Hudson, New York, 12534, on August 19,
1999 at 3:00 p.m., Eastern Standard time, and at any adjournments thereof. The
accompanying Notice of First Annual Meeting and this Proxy Statement are first
being mailed to shareholders on or about July 12, 1999. Certain information
provided herein relates to Hudson River Bank & Trust Company (the "Bank"), a
wholly owned subsidiary and predecessor of the Company.
At the Meeting, the shareholders of the Company are being asked to
consider and vote upon proposals to elect three directors of the Company and to
ratify the appointment of KPMG LLP as auditors of the Company for the fiscal
year ending March 31, 2000.
Voting Rights and Proxy Information
All shares of the Company's Common Stock, par value $.01 per share (the
"Common Stock"), represented at the Meeting by properly executed proxies
received prior to or at the Meeting, and not revoked, will be voted at the
Meeting in accordance with the instructions thereon. If no instructions are
indicated, properly executed proxies will be voted for the proposals set forth
in this Proxy Statement. The Company does not know of any matters, other than
those described in the Notice of First Annual Meeting of Shareholders, that are
to come before the Meeting. If any other matters are properly presented at the
Meeting for action, the persons named in the enclosed proxy card and acting
thereunder will have the discretion to vote on such matters in accordance with
their best judgment.
A proxy given pursuant to the solicitation may be revoked at any time
before it is voted. Proxies may be revoked by: (i) filing with the Corporate
Secretary of the Company at or before the Meeting a written notice of revocation
bearing a later date than the proxy, (ii) duly executing a subsequent proxy
relating to the same shares and delivering it to the Corporate Secretary of the
Company at or before the Meeting, or (iii) attending the Meeting and voting in
person (although attendance at the Meeting will not in and of itself constitute
revocation of a proxy). Any written notice revoking a proxy should be delivered
to Holly Rappleyea, Corporate Secretary, Hudson River Bancorp, Inc., One Hudson
City Centre, Hudson, New York, 12534.
Vote Required for Approval of Proposals
The presence, in person or by proxy, of at least one-third of the total
number of shares of Common Stock entitled to vote is required to constitute a
quorum at the Meeting. Directors shall be elected by a plurality of the votes
cast. Approval of the proposal to ratify the appointment of KPMG LLP requires
the affirmative vote of the holders of a majority of the votes cast.
Abstentions and broker non-votes are counted for purposes of
determining a quorum at the Meeting; however, abstaining shares will have the
same effect as a vote against the approval of the proposal to ratify the
appointment of auditors while non-voted shares will have no effect on such
proposal. Abstentions and non-voted shares will have no effect on the election
of directors.
1
<PAGE>
Voting Securities and Certain Holders Thereof
Shareholders of record as of the close of business on June 22, 1999
(the "Record Date") will be entitled to one vote for each share of Common Stock
then held. As of that date, the Company had 17,055,250 shares of Common Stock
issued and outstanding.
The following table sets forth information, as of the Record Date,
regarding share ownership of (i) those persons or entities known by management
to beneficially own more than five percent of the Common Stock ("Five Percent
Beneficial Owners"), (ii) each officer of the Company and the Bank who made in
excess of $100,000 (salary and bonus) (the "Named Officers") during the 1999
fiscal year ("fiscal 1999"); and (iii) all directors and executive officers of
the Company and the Bank as a group.
<TABLE>
<CAPTION>
Shares Beneficially Owned Percent
Beneficial Owner at June 22, 1999 of Class
- ---------------------------------------------------------------------- ------------------------- --------
<S> <C> <C>
Five Percent Beneficial Owners
- ------------------------------
Hudson River Bank & Trust Company Employee Stock Ownership Plan(1) 1,428,300 8.37%
One Hudson City Centre
Hudson, New York 12534
Named Officers(2)
- -----------------
Carl A. Florio, Director, President and Chief Executive Officer 67,867 *
Sidney D. Richter, Senior Vice President 39,680 *
Timothy E. Blow, Chief Financial Officer 4,390 *
All Directors and Executive Officers as a Group (12 persons) (2) 374,798 2.20
</TABLE>
- ---------------
* Less than 1%.
(1) The amount reported represents shares held by the Hudson River Bank &
Trust Company Employee Stock Ownership Plan (the "ESOP"), 95,843 of
which were allocated to accounts of participants. First Bankers Trust
Co., N.A., Quincy, Illinois, the trustee of the ESOP, may be deemed to
beneficially own the shares held by the ESOP which have not been
allocated to the accounts of participants. Unallocated shares will be
voted by the trustee in the same proportion as allocated shares.
(2) Amounts include shares held directly, as well as shares allocated to
the ESOP accounts of the Named Officers or group members, shares held
jointly with family members, shares held in retirement accounts or
shares held in a fiduciary capacity or by certain family members, with
respect to which shares the Named Officers or group members may be
deemed to have sole voting and/or investment power. The amounts shown
do not include shares subject to options granted under the 1998 Stock
Option and Incentive Plan (the "Stock Option Plan") because none of
those options are currently exercisable or exercisable within 60 days
of June 22, 1999.
I. ELECTION OF DIRECTORS
General
The Company's Board of Directors currently consists of nine members.
The Board is divided into three classes, each of which contains one-third of the
Board. One-third of the directors are elected annually. Directors of the Company
are generally elected to serve for a three-year period or until their respective
successors are elected and qualified.
The table below sets forth certain information, as of the Record Date,
regarding the composition of the Company's Board of Directors, including their
terms of office. 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 any
nominee) will be voted at the Meeting FOR the election of the nominees
identified below. If any nominee is unable to serve, the shares represented by
all valid 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 nominee might be unable to serve, if elected. There are no
arrangements or understandings between the nominees and any other person
pursuant to which the nominees were selected.
2
<PAGE>
<TABLE>
<CAPTION>
Shares of
Common Stock Percent
Position(s) Held Director Term Beneficially of
Name With the Bank Age(1) Since Expires Owned(2) Class
- ------------------------------ ---------------- -------- -------- ----------- --------------- ---------
<S> <C> <C> <C> <C> <C>
NOMINEES
Earl Schram, Jr. Chairman of the Board 76 2002 115,000 *
Carl A. Florio Director, President and 50 2002 67,867 *
Chief Executive Officer
William E. Collins Director 73 2002 18,500 *
DIRECTORS CONTINUING
IN OFFICE
Marilyn A. Herrington Director 55 2000 45,800 *
John E. Kelly Director 73 2000 --- ---
Stanley Bardwell, M.D. Director 74 2000 25,074 *
Marcia M. Race Director 54 2001 1,500 *
William H. Jones Director 56 2001 22,428(3) *
Joseph W. Phelan Director 56 2001 26,000 *
</TABLE>
- -------------------
* Less than 1%.
(1) At March 31, 1999.
(2) Amounts include shares held directly, as well as shares allocated to
such individual's account under the ESOP, shares held jointly with
family members, shares held in retirement accounts or shares held in a
fiduciary capacity or by certain family members, with respect to which
shares the individual may be deemed to have sole voting and/or
investment power. The amounts shown do not include shares subject to
options granted under the Stock Option Plan because none of those
options are currently exercisable or exercisable within 60 days of June
22, 1999.
(3) Includes 660 shares owned by Mr. Jones' children and 2,335 shares owned
by Mr. Jones' spouse's IRA. Mr. Jones disclaims beneficial ownership
with respect to those shares.
The business experience of each director is set forth below. All
directors have held their present positions for at least the past five years,
except as otherwise indicated.
Earl Schram, Jr. Mr. Schram is currently Chairman of the Board of
Directors of the Company and the Bank, a position he has held since 1998. Mr.
Schram is an attorney and President of the law firm of Connor, Curran & Schram,
P.C. in Hudson, New York. He is also Vice President and Director of Taconic
Farms, Inc. Mr. Schram serves on the Executive Committee and Trust Committee of
the Company. Mr. Schram also serves as a Director of Hudson River Bank & Trust
Company Foundation.
Carl A. Florio. Mr. Florio has served as President and Chief Executive
Officer of the Company since its incorporation and of the Bank since 1996. From
1993 until his appointment as President and Chief Executive Officer, Mr. Florio
served as Chief Financial Officer of the Bank. Prior to his becoming the Bank's
Chief Financial Officer, Mr. Florio was a partner in the accounting firm of
Pattison, Koskey, Rath & Florio. Mr. Florio serves on the Executive Committee,
Trust Committee and as a director of Hudson City Associates, Inc.
William E. Collins. Mr. Collins served as President and Chief Executive
Officer of the Bank from 1983 until his retirement in 1990. Prior to becoming
President and Chief Executive Officer, Mr. Collins served as Executive Vice
President of the Bank from March 1982 to December 1982. From 1991 to 1996, Mr.
Collins served as a director of Hudson City
3
<PAGE>
Associates, Inc., a wholly owned subsidiary of the Bank and general partner of
Premium Payment Plan. Mr. Collins serves on the Executive Committee and the
Audit Committee.
Marilyn A. Herrington. Ms. Herrington is the Vice President and
Secretary of Herrington-Yaffe Auto Center, an auto repair facility, Secretary of
Richmond Telephone Company, a provider of long distance telephone service, and
involved in real estate investments. Ms. Herrington serves on the Executive
Committee, Compensation Committee and Audit Committee. Ms. Herrington also
serves as a director of Hudson River Bank & Trust Company Foundation.
John E. Kelly. Since 1992, Mr. Kelly has owned and operated Berkshire
Telephone Corp., Kinderhook, New York. Mr. Kelly is Chairman of the Board of
Berkshire Telephone Corp. He has been with Berkshire Telephone Company since
1946 in various capacities. Berkshire Telephone Corp. provides long distance,
internet, cellular, paging and TV cable services. Mr. Kelly serves on the
Executive Committee and Compensation Committee.
Stanley Bardwell, M.D. Dr. Bardwell is a retired physician in
Craryville, New York. From 1958 until 1988, Dr. Bardwell specialized in internal
medicine and cardiology. He has served as Chief of Medicine in Columbia Memorial
Hospital and Greene County Hospital, served on the Board of Health and was
President of the Potts Memorial Foundation as well as other various charitable
groups. Dr. Bardwell serves on the Executive Committee and Audit Committee. Dr.
Bardwell also serves as a director of Hudson River Bank & Trust Company
Foundation.
Marcia M. Race. Ms. Race was employed by the Bank from 1962 until her
retirement in 1997. Ms. Race served as Assistant Secretary of the Bank from 1972
to 1978, Corporate Secretary from 1978 to 1989 and Assistant to the President
from 1989 to 1997. She is also Trustee of the Nativity/St. Mary's Parish
Community Church. Ms. Race serves on the Executive Committee.
William H. (Tony) Jones. Since 1986, Mr. Jones has owned and served as
President and Publisher of Roe Jan Independent Publishing Co., Inc., Hillsdale,
New York, a publisher of community newspapers and similar publications. Mr.
Jones serves on the Executive Committee and Audit Committee and as a director of
Hudson City Associates, Inc. Mr. Jones also serves as a director of Hudson River
Bank & Trust Company Foundation.
Joseph W. Phelan. Since 1983, Mr. Phelan has served as President of
Taconic Farms, Inc., Germantown, New York, a provider of laboratory animals for
research. He is also Treasurer of the Reformed Church in Germantown, New York.
Mr. Phelan serves on the Executive Committee, Trust Committee and Compensation
Committee.
Meetings and Compensation of the Board of Directors and Committees
Hudson River Bancorp, Inc. Meetings of the Company's Board of Directors
are generally held on a quarterly basis. The Board of Directors met six times
during the fiscal year ended March 31, 1999. During fiscal 1999, no incumbent
director of the Company attended fewer than 75% of the aggregate of the total
number of Board meetings and the total number of meetings held by the committees
of the Board of Directors on which he or she served. Directors of the Company
are not paid a fee for serving on the Company Board.
The Board of Directors of the Company has established the Company's
Executive, Audit and Compensation Committees.
The Company's Executive Committee exercises the powers of the full
Board of Directors between board meetings, except that this Committee does not
have the authority to amend the charter or bylaws, adopt a plan of merger,
consolidation, dissolution, or provide for the disposition of all or
substantially all of the property and assets of the Company. The Executive
Committee is composed of the full Board of Directors. The Executive Committee
met six times during the year ended March 31, 1999.
The Audit Committee is responsible for selecting the Company's
independent accountants and meeting with the independent accountants and
internal auditors to outline the scope and review the results of the annual
audit. The current members of this Committee are Directors Bardwell, Collins,
Jones and Herrington. This Committee met two times during the year ended March
31, 1999.
The Compensation Committee recommends employee compensation, benefits
and personnel policies to the Board of Directors, as well as salaries and cash
bonus plan distributions concerning executive officers of the Company and the
Bank. The current members of this Committee are Directors Phelan, Herrington and
Kelly. This Committee met two times during the year ended March 31, 1999.
4
<PAGE>
The full Board of Directors of the Company acts as a Nominating
Committee for the annual selection of its nominees for election as directors.
Pursuant to the Company's Bylaws, nominations for directors by shareholders must
be made in writing and delivered to the Corporate Secretary of the Company at
least 90 days prior to the meeting and such written nomination must contain
certain information as provided in the Company's Bylaws. While the Board of
Directors will consider nominees recommended by shareholders, it has not
actively solicited nominations. This Committee met one time during the year
ended March 31, 1999.
Hudson River Bank & Trust Company. The Bank's Board of Directors meets
monthly and may have additional special meetings. The Board of Directors met 13
times during the year ended March 31, 1999. During fiscal 1999, no incumbent
director of the Bank attended fewer than 75% of the aggregate of the total
number of Board meetings and the total number of meetings held by the committees
of the Board of Directors on which he or she served.
Non-employee directors of the Bank are paid a fee of $1,500.00 per
meeting for serving on the Board of Directors. During fiscal 1999, members of
the Executive Committee each received $750.00 per committee meeting attended,
members of the Audit Committee received $600.00 per committee meeting attended,
and members of the Compensation Committee each received $300.00 per committee
meeting attended.
Executive Compensation
The following table sets forth information concerning the compensation
paid or granted to the Named Officers in fiscal 1999, 1998 and 1997 whose salary
and bonus exceeded $100,000. No other executive officers had compensation
(salary and bonus) in excess of $100,000 in fiscal 1999.
<TABLE>
<CAPTION>
=====================================================================================================================
SUMMARY COMPENSATION TABLE
- ---------------------------------------------------------------------------------------------------------------------
Long Term Compensation
Annual Compensation Awards
- ---------------------------------------------------------------------------------------------------------------------
Restricted Stock All Other
Award(s) Options Compensation
Name and Principal Position Year Salary($)(1) Bonus($) ($)(2) (#) ($)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Carl A. Florio, President and Chief 1999 $236,763 --- 2,053,187(3) 312,441 $30,851(4)
Executive Officer 1998 208,750 10,000 N/A N/A 6,319
1997 150,000 13,125 N/A N/A 4,700
Sidney D. Richter 1999 120,900 300 985,527(3) 149,972 22,351(4)
Senior Vice President 1998 120,000 700 N/A N/A 4,763
1997 103,000 13,375 N/A N/A 4,300
Timothy E. Blow 1999 95,713 5,300 985,527(3) 149,972 20,212(4)
Chief Financial Officer 1998 90,000 --- N/A N/A 270
1997 N/A N/A N/A N/A N/A
=====================================================================================================================
</TABLE>
- ---------------
(1) Includes Mr. Florio's service as Chief Financial Officer of the Bank
from April 1996 to June 1996 and as Chief Executive Officer from June
1996 to March 1997.
(2) Based upon the $10.938 closing price per share of the Common Stock on
March 31, 1999, the 178,538 restricted shares held by Mr. Florio had an
aggregate market value of $1,952,849, the 85,698 restricted shares held
by Mr. Richter had an aggregate market value of $937,365 and the 85,698
shares held by Mr. Blow had an aggregate market value of $937,365.
(3) Represents the dollar value of the award of restricted stock based upon
the $11.50 closing price on January 5, 1999, the date of grant. The
shares of restricted stock shall vest in ten equal installments
beginning one year from the date of grant, provided that the grantee
maintains "Continuous Service" (as defined in the 1998 Recognition and
Retention Plan) with the Company. Dividends are paid on the restricted
shares to the extent and on the same date as dividends that are paid on
all other outstanding shares of Common Stock.
(4) Includes life insurance premiums of $270, $270 and $270, ESOP
allocations of $26,100, $19,737 and $16,342 and 401(k) plan
contributions of $4,481, $2,344 and $3,600 on behalf of Messrs. Florio,
Richter and Blow, respectively.
5
<PAGE>
The following table sets forth certain information concerning stock
options granted to Mr. Florio, Mr. Richter and Mr. Blow in fiscal 1999 pursuant
to the Stock Option Plan. There were no stock appreciation rights granted in
fiscal 1999.
<TABLE>
<CAPTION>
=========================================================================================================================
OPTION GRANTS IN LAST FISCAL YEAR
- -------------------------------------------------------------------------------------------------------------------------
Potential Realizable
Value at Assumed
Annual Rates of Stock
Price Appreciation
Individual Grants for Option Term
- -------------------------------------------------------------------------------------------------------------------------
Number of % of Total
Securities Options
Underlying Granted to Exercise
Options Employees or Base
Granted in Fiscal Price Expiration
Name (#)(1) Year ($/Sh) Date 5%($) 10%($)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Carl A. Florio 312,441 35.7% $11.50 01/05/09 $2,259,663 $5,726,431
Sidney D. Richter 149,972 17.1% $11.50 01/05/09 1,084,641 2,748,693
Timothy E. Blow 149,972 17.1% $11.50 01/05/09 1,084,641 2,748,693
=========================================================================================================================
</TABLE>
- ----------
(1) Options granted on January 5, 1999, which options vest in five equal
annual installments beginning on January 5, 2000.
<PAGE>
The following table sets forth certain information concerning the
number and value of unexercised stock options held by Messrs. Florio, Richter
and Blow at March 31, 1999.
<TABLE>
<CAPTION>
========================================================================================================================
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION VALUES
- ------------------------------------------------------------------------------------------------------------------------
Number of Securities Value of Unexercised
Shares Underlying Unexercised In-the-Money Options
Acquired Value Options at FY-End (#) at FY-End ($)(1)
on Realized ------------------------------------------------------------
Name Exercise(#) ($) Exercisable Unexercisable Exercisable Unexercisable
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Carl A. Florio --- --- --- 312,441 --- ---
Sidney D. Richter --- --- --- 149,972 --- ---
Timothy E. Blow --- --- --- 149,972 --- ---
========================================================================================================================
</TABLE>
- ------------
(1) None of the options granted to Messrs. Florio, Richter and Blow are
in-the-money options based upon the fair market value of the underlying
shares at March 31, 1999.
Employment Agreements
The Bank and the Company entered into employment agreements with Mr.
Florio and three other officers of the Bank (individually, the "Executive") and
the Company entered into employment agreements with Carl Florio, Sidney Richter,
Timothy Blow and one other executive officer of the Bank (collectively, the
"Employment Agreements"). The Employment Agreements ensure that the Bank and the
Company are able to maintain a stable and competent management base. The
continued success of the Bank and the Company depends to a significant degree
upon the skills and competence of the above referenced officers.
6
<PAGE>
The Employment Agreements provide for either three-year or two-year
terms for each Executive. The terms of the Employment Agreements shall be
extended on a daily basis unless written notice of non-renewal is given by the
Board of Directors. The Employment Agreements provide that the Executive's base
salary is reviewed annually. The base salary which is effective for such
Employment Agreement for Mr. Florio is $235,000. In addition to the base salary,
the Employment Agreements provide for, among other things, participation in
stock benefit plans and other fringe benefits applicable to executive personnel.
The agreements provide for termination by the Bank or the Company for cause, as
defined in the Employment Agreements, at any time. In the event the Bank or the
Company chooses to terminate the Executive's employment for reasons other than
for cause, or in the event of the Executive's resignation from the Bank and the
Company upon; (i) failure to re-elect the Executive to his current offices; (ii)
a material change in the Executive's functions, duties or responsibilities;
(iii) a reduction in the benefits and perquisites being provided to the
Executive under the Employment Agreement; (iv) liquidation or dissolution of the
Bank or the Company; or (v) a breach of the agreement by the Bank or the
Company, the Executive or, in the event of death, his beneficiary would be
entitled to receive an amount equal to the remaining base salary payments due to
the Executive for the remaining term of the Employment Agreement and the
contributions that would have been made on the Executive's behalf to any
employee benefit plans of the Bank and the Company during the remaining term of
the agreement. The Bank and the Company would also continue and pay for the
Executive's life, health, dental and disability coverage for the remaining term
of the Agreement. Upon any termination of the Executive, other than following a
change in control, the Executive is subject to a one year non-competition
agreement.
Under the Employment Agreements, if voluntary or involuntary
termination follows a change in control of the Bank or the Company, the
Executive or, in the event of the Executive's death, his beneficiary, would be
entitled to the payment of base salary, plan contributions and other forms of
compensation to which the executive would be entitled for the remaining term of
the Employment Agreement plus a severance payment equal to the greater of: (i)
the payments due for the remaining terms of the agreement; or (ii) three times
the average of the five preceding taxable years' annual compensation. The Bank
and the Company would also continue the Executive's life, health, and disability
coverage for thirty-six months. Under the Employment Agreements, a voluntary
termination following a change in control means the executive's voluntary
resignation following any demotion, loss of title, office authority or
responsibility, a reduction in compensation or benefits or relocation.
Notwithstanding that both the Bank and Company Employment Agreements provide for
a severance payment in the event of a change in control, the Executive would
only be entitled to receive a severance payment under one agreement.
Payments to the Executive under the Bank's Employment Agreement are
guaranteed by the Company in the event that payments or benefits are not paid by
the Bank. Payment under the Company's Employment Agreement would be made by the
Company. The Company's Employment Agreement also provides that the Company
compensates the Executive for excise taxes imposed on any "excess parachute
payments," as defined under section 280G of the Internal Revenue Code of 1986,
as amended (the "Code"), made thereunder, and any additional income and excise
taxes imposed as a result of such compensation. All reasonable costs and legal
fees paid or incurred by the Executive pursuant to any dispute or question of
interpretation relating to the Employment Agreements shall be paid by the Bank
or Company, respectively, if the Executive is successful on the merits pursuant
to a legal judgment, arbitration or settlement. The Employment Agreements also
provide that the Bank and Company shall indemnify the Executive to the fullest
extent allowable under New York and Delaware law, respectively. In the event of
a change in control of the Bank or the Company, the total amount of payments due
under the Agreements, based solely on cash compensation over the past five
fiscal years paid to the officers who received Employment Agreements and
excluding any benefits under any employee benefit plan which may be payable,
would be approximately $2.5 million.
Change in Control Agreements
The Bank entered into two-year Change in Control Agreements (the "CIC
Agreements") with seven officers of the Bank, none of whom are covered by
employment contracts. Commencing on the first anniversary date and continuing on
each anniversary thereafter, the Bank CIC Agreements may be renewed by the Board
of Directors of the Bank for an additional year. The Bank's CIC Agreements
provide that in the event voluntary or involuntary termination follows a change
in control of the Company or the Bank, the officer would be entitled to receive
a severance payment equal to two times the officer's average base amount of cash
compensation for the five most recent taxable years. The Bank would also
continue to pay for the officer's life, health and disability coverage for
twenty-four months following termination. Under the CIC Agreements, a voluntary
termination following a change in control means the executive's voluntary
resignation following any demotion, loss of title, office authority or
responsibility, a reduction in compensation or benefits or relocation. In the
event of a change in control of the Company or the Bank, the total payments that
would be due under the CIC Agreements, based solely on the five year average
base amount of cash
7
<PAGE>
compensation paid to the officers covered by the CIC Agreements and excluding
any benefits under any employee benefit plan which may be payable, would be
approximately $750,000.
Employee Severance Compensation Plan
The Bank's Board of Directors established the Hudson River Bank & Trust
Company Employee Severance Compensation Plan ("Severance Plan") which provides
designated employees with severance pay benefits in the event of a change in
control of the Bank or the Company. Management personnel with Employment
Agreements or CIC Agreements are not eligible to participate in the Severance
Plan. Generally, designated employees are eligible to participate in the
Severance Plan if they have completed at least one year of service with the
Bank. The Severance Plan vests in each participant a contractual right to the
benefits such participant is entitled to thereunder. Under the Severance Plan,
in the event of a change in control of the Bank or the Company, eligible
employees who are terminated from or terminate their employment within one year
(for reasons specified under the Severance Plan), are entitled to receive a
severance payment. If the participant, whose employment has terminated, has
completed at least one year of service, the participant is entitled to a cash
severance payment equal to the last two weeks of annual compensation immediately
preceding a change-in-control for each year of service up to a maximum of 100%
of annual compensation. Such payments may tend to discourage takeover attempts
by increasing costs to be incurred by the Bank in the event of a takeover. In
the event the provisions of the Severance Plan are triggered, the total amount
of payments that would be due thereunder, based solely upon current salary
levels, would be approximately $190,000. However, it is management's belief that
certain of the Bank's employees would be retained in their current positions in
the event of a change in control, and that any amount payable under the
Severance Plan would be considerably less than the total amount that could
possibly be paid under the Severance Plan.
Benefit Plans
General. The Bank currently provides health care benefits to its
employees, including hospitalization, major medical, dental, life and disability
insurance, subject to certain deductibles and copayments by employees.
Defined Benefit Pension Plan. The Bank sponsors a defined benefit
pension plan for its employees (the "Pension Plan"). Salaried employees are
eligible to participate in the Pension Plan following the completion of one year
of service (1,000 hours worked during a continuous 12-month period) and
attainment of 21 years of age. A participant must reach five years of service
before attaining a vested interest in his or her retirement benefits, after
which such participant is 100% vested. The Pension Plan is funded solely through
contributions made by the Bank.
The benefit provided to a participant at normal retirement age
(generally age 65) is based on the average of the participant's basic annual
compensation during the 36 consecutive months of service within the last 120
completed months of a participant's service which yields the highest average
compensation ("average annual compensation"). Compensation for this purpose is
the participant's basic annual salary, including any contributions through a
salary reduction arrangement to a cash or deferred plan under Section 401(k) of
the Code, but exclusive of overtime, bonuses, severance pay, or any special
payments or other deferred compensation arrangements. The annual benefit
provided to a participant, without offset for the participant's anticipated
Social Security benefit, who retires at age 65 is equal to 2% of average annual
compensation for each year of service up to a maximum of 30 years.
The annual benefit provided to participants (i) at early retirement age
(generally age 62) with five years of service who elect to defer the payment of
their benefits to normal retirement age, (ii) at early retirement age with five
years of service who elect to receive payment of their benefits prior to normal
retirement age, or (iii) who postpone annual benefits beyond normal retirement
age, are calculated basically the same as the benefits for normal retirement
age, with annual average compensation being multiplied by 2% for each year of
such individual's actual years of service. A participant eligible for early
retirement benefits who does not meet the requirements set forth above will have
his or her benefits adjusted as further described in the Pension Plan.
The Pension Plan also provides for disability and death benefits.
8
<PAGE>
The following table sets forth, as of March 31, 1999, estimated annual
pension benefits for individuals at age 65 payable in the form of a life annuity
under the most advantageous plan provisions for various levels of compensation
and years of service. The figures in this table are based upon the assumption
that the Pension Plan continues in its present form and does not reflect offsets
for Social Security benefits and does not reflect benefits payable under the
ESOP. At March 31, 1999, the estimated years of credited service of Messrs.
Florio, Richter and Blow were six, eight and two years, respectively.
<TABLE>
<CAPTION>
Pension Plan Table
Years of Benefit Service
- -----------------------------------------------------------------------------------------------------
Final Average 15 20 25 30 35*
Salary
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 75,000 $22,500 $30,000 $37,500 $45,000 $46,875
- -----------------------------------------------------------------------------------------------------
$100,000 $30,000 $40,000 $50,000 $60,000 $62,500
- -----------------------------------------------------------------------------------------------------
$125,000 $37,500 $50,000 $62,500 $75,000 $78,125
- -----------------------------------------------------------------------------------------------------
$150,000 $45,000 $60,000 $75,000 $90,000 $93,750
- -----------------------------------------------------------------------------------------------------
$160,000 $48,000 $64,000 $80,000 $96,000 $100,000
- -----------------------------------------------------------------------------------------------------
</TABLE>
- --------------------
* Assumes that participant had 30 or more years of Credited Service as of July
14, 1995.
For the 1999 plan year, the Maximum Compensation, as per IRC Section
401(a)(17), is limited to $160,000. Maximum Benefit payable under the qualified
plan for the 1999 plan year is $130,000.
Compensation Committee Report on Executive Compensation
In fulfillment of SEC requirements for disclosure in proxy materials of
the Compensation Committee's policies regarding compensation for executive
officers, the committee has prepared the following report for inclusion in this
proxy statement.
Decisions on compensation of the Company's executives are made by the
Compensation Committee of the Board (the "Committee"). Each member of the
Committee is a non-employee director. The Committee believes that the actions of
each executive officer have the potential to impact the short-term and long-term
profitability of the Company. Consequently, the Committee places considerable
importance on its task of designing and administering an executive compensation
program.
Compensation Policy. 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 shareholder value. The Compensation Committee has sought to
consider a multitude of factors establishing appropriate levels of compensation
for executive officers, with no one factor clearly overshadowing all the others.
The compensation package provided to the executive officers of the
Company is composed principally of base salary and cash and stock-based
incentive awards. Executive officers also participate in other benefit plans
available to all eligible employees, including the ESOP.
The Compensation Committee considers a variety of factors in
determining executive compensation. These factors generally fall into two
categories, those that relate to specific work performed and expected of the
officer and those that relate to the Company, the Bank, the local business
economic conditions and other general matters. In the former category, the
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. In the latter category, the
Committee considers, among other factors, the Company's earnings, capital and
asset size; the results of government regulatory examinations; the Bank's
regulatory ratings on safety and soundness as well as Community Reinvestment Act
examinations; and performance and compensation programs of peer group banks.
Employee benefit plans represent an important component of any
compensation package. The defined benefit pension plan and health insurance
benefits available to all employees, including executive officers, provide
competitive
9
<PAGE>
benefits comparable to those available at other institutions. Stock-based
compensation plans, including the ESOP, the 1998 Stock Option and Incentive Plan
and the 1998 Recognition and Retention Plan, provide employees, including
executive officers, with additional equity-based incentives to maximize
long-term shareholder value. Cash bonuses are utilized to incent both executive
officers and other employees in relation to specific projects or additional
responsibilities.
The Compensation Committee's decisions are discretionary and are based
upon subjective factors. No mathematical or similar objective formula is
utilized to determine any compensation package. The Compensation Committee
believes that a competitive employee benefit package is essential to achieving
the goals of attracting and retaining highly qualified employees.
Chief Executive Officer. Total annual compensation paid to Carl A.
Florio, President and Chief Executive Officer, for fiscal 1999 was $236,763 as
detailed in the above compensation table and reflects a 8.2% increase from
fiscal 1998. Mr. Florio was also granted 178,538 shares of restricted stock
under the Company's 1998 Recognition and Retention Plan and 312,441 stock
options under the Company's 1998 Stock Option and Incentive Plan. These awards
were granted to Mr. Florio in recognition of future service to be provided. In
determining total compensation paid to the Chief Executive Officer, including
his benefits under the Benefit Restoration Plan, the Compensation Committee
considered the factors discussed above and also considered a number of specific
matters including stock-based compensation and benefit plans awarded or made
available to chief executive officers of other newly-converted thrift
institutions, the successful transition of the Bank from a mutual institution to
the subsidiary of a public-traded holding company, and efforts to satisfactorily
deploy the resulting new capital. In connection with its decision to adopt the
Benefit Restoration Plan, the Compensation Committee considered the fact that
Mr. Florio was continuing to work for the Company but was no longer earning
benefits under the Company's retirement plan because of his length of service
and salary level. The Benefit Restoration Plan was adopted to correct the
unfairness of this situation.
This report is included herein at the direction of the Compensation
Committee members.
Joseph W. Phelan
Marilyn A. Herrington
John E. Kelly
Compensation Committee Interlocks and Insider Participation
Sidney D. Richter, Senior Vice President of the Company and the Bank,
also serves as a director of Taconic Farms, Inc. Director Phelan, a member of
the Compensation Committee of the Company and the Bank, also serves as the
President of Taconic Farms, Inc., and Director Schram, Chairman of the Board of
the Company and the Bank, also serves as a Vice President and Director of
Taconic Farms, Inc.
10
<PAGE>
Comparative Stock Performance Presentation
Set forth below is a line graph comparing the cumulative total return
on the Company's Common Stock to the cumulative total return of the Nasdaq Bank
Index and the S&P 500 Index for each quarterly period from July 1, 1998 (the
date the Company's Common Stock first reported on the Nasdaq Stock Market)
through March 31, 1999. The presentation assumes $100 was invested on July 1,
1998 in the Company's Common Stock at a price of $10.00 per share, the
subscription offering price in the Company's initial public offering.
[GRAPHIC OMITTED -- GRAPH PLOTTED TO POINTS LISTED IN TABLE BELOW]
<TABLE>
<CAPTION>
7/1/98 9/30/98 12/31/98 3/31/99
------ ------- -------- -------
<S> <C> <C> <C> <C>
Hudson River Bancorp, Inc........... $100.00 $101.25 $113.13 $109.38
S&P 500 Index....................... 100.00 89.70 108.42 113.46
Nasdaq Bank Index................... 100.00 81.58 86.58 82.46
</TABLE>
If the closing price of the Company's Common Stock on July 1, 1998 of
$12.56 was utilized in the presentation above, the cumulative total return for
the respective periods would be $80.60, $90.05 and $87.06.
Certain Transactions
The Bank's policies do not permit the Bank to make loans to any of its
Directors. Federal laws require that all loans or extensions of credit to
executive officers and directors must be made on substantially the same terms,
including interest rates and collateral, as those prevailing at the time for
comparable transactions with the general public and must not involve more than
the normal risk of repayment or present other unfavorable features. As of March
31, 1999, all outstanding loans to the Bank's executive officers were made in
the ordinary course of business and on the same terms, including collateral and
interest rates, as those prevailing at the time for comparable transactions with
the general public, and do not involve more than the normal risk of
collectiblity.
The Chairman of the Board of Directors, Earl Schram, Jr., is President
of the law firm of Connor, Curran & Schram P.C. ("Connor Curran"). Connor Curran
serves as outside counsel to the Bank and performs various legal services for
the Bank. During fiscal 1999, the Bank paid Connor Curran approximately $190,204
in fees for services rendered. Connor Curran also receives an indirect benefit
from the Bank to the extent borrowers of the Bank engage Connor Curran to close
their loans. Services provided by Connor Curran to the Bank are provided on
terms comparable to those which are available to unaffiliated parties.
11
<PAGE>
II. RATIFICATION OF THE APPOINTMENT OF AUDITORS
The Board of Directors has renewed the Company's arrangement for KPMG
LLP to be its auditors for the 2000 fiscal year, subject to the ratification of
the appointment by the Company's shareholders. A representative of KPMG LLP is
expected to attend the Annual Meeting to respond to appropriate questions and
will have an opportunity to make a statement if he or she so desires.
The Board of Directors recommends that shareholders vote "FOR" the
ratification of the appointment of KPMG LLP as the Company's auditors for the
fiscal year ending March 31, 2000.
SHAREHOLDER PROPOSALS
In order to be eligible for inclusion in the Company's 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 at One
Hudson City Centre, Hudson, New York 12534 no later than March 14, 2000. Any
such proposal shall be subject to the requirements of the proxy rules adopted
under the Exchange Act of 1934, as amended. Otherwise, any shareholder proposal
to take action at such meeting must be received at the Company's main office
located at One Hudson City Centre, Hudson, New York 12534 by May 19, 2000;
provided, however, that in the event that the date of the annual meeting is held
before July 28, 2000, or after October 19, 2000, the shareholder proposal must
be received not later than the close of business on the later of the 90th day
prior to such annual meeting or the tenth day following the day on which notice
of the date of the annual meeting was mailed or public announcement of the date
of such meeting was first made. All shareholder proposals must also comply with
the Company's by-laws and Delaware law.
OTHER MATTERS
The Board of Directors is not aware of any business to come before the
Meeting other than those matters described above in this Proxy Statement.
However, if any other matter should properly come before the Meeting, it is
intended that holders of the proxies will act in accordance with their best
judgment.
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, directors, officers and
regular employees of the Company and/or the Bank may solicit proxies personally
or by telegraph or telephone without additional compensation.
12
<PAGE>
REVOCABLE PROXY
HUDSON RIVER BANCORP, INC.
[X] PLEASE MARK VOTES
AS IN THIS EXAMPLE
ANNUAL MEETING OF SHAREHOLDERS
August 19, 1999
The undersigned hereby appoints the Board of Directors of Hudson River
Bancorp, Inc. (the "Company"), and its survivor, with full power 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 (the "Meeting"), to be held on August 19,
1999, at the St. Charles Hotel and Restaurant located at 16 Park Place, Hudson,
New York, at 3:00 P.M. Eastern Standard time, and at any and all adjournments
thereof, as follows:
I. The election of the following
directors for the terms specified
(except as marked to the contrary below):
FOR WITH- FOR ALL
HOLD EXCEPT
[ ] [ ] [ ]
Earl Schram, Jr. Carl A. Florio William E. Collins
INSTRUCTION: To withold authority to vote for any individual
nominee, mark "For All Except" and write that nominee's name in the
space provided below.
--------------------------------------------------------------
II. The ratification of the appointment of KPMG LLP as independent
auditors of the Company for the fiscal year ending March 31,
2000.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
In their discretion, the proxies are authorized to vote on any other business
that may properly come before the Meeting or any adjournment thereof.
The Board of Directors recommends a vote "FOR" the listed proposals.
THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS ARE
SPECIFIED, THIS PROXY WILL BE VOTED FOR THE PROPOSALS STATED. IF ANY OTHER
BUSINESS IS PRESENTED AT SUCH MEETING, THIS PROXY WILL BE VOTED BY THOSE NAMED
IN THIS PROXY IN THEIR BEST JUDGMENT. AT THE PRESENT TIME, THE BOARD OF
DIRECTORS KNOWS OF NO OTHER BUSINESS TO BE PRESENTED AT THE MEETING.
Please be sure to sign and date this Proxy in the box below.
________________________________________
Date
_________________________________________
Stockholder sign above
_________________________________________
Co-holder (if any) sign above
<PAGE>
- --------------------------------------------------------------------------------
Detach above card, sign, date and mail in postage paid envelope provided.
HUDSON RIVER BANCORP, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The shareholder may revoke this proxy by: (i) filing with the Corporate
Secretary of the Company at or before the Meeting a written notice of revocation
bearing a later date than the proxy; (ii) duly executing a subsequent proxy
relating to the same shares and delivering it to the Corporate Secretary of the
Company at or before the Meeting; or (iii) attending the Meeting and voting in
person (although attendance at the Meeting will not in and of itself constitute
revocation of a proxy).
The above signed acknowledges receipt from the Company prior to the
execution of this Proxy, of Notice of the Meeting and of a Proxy Statement dated
on or about July 12, 1999.
Please sign exactly as your name appears above on this card. When
signing as attorney, executor, administrator, trustee, guardian or corporate
officer please give your full title. If shares are held jointly, each holder
should sign.
- --------------------------------------------------------------------------------
PLEASE PROMPTLY COMPLETE, DATE, SIGN AND MAIL THIS PROXY IN
THE ENCLOSED POSTAGE-PAID ENVELOPE
- --------------------------------------------------------------------------------
