SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Exchange Act of 1934 (Amendment No )
Filed by the Registrant |X|
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Check the appropriate box:
|X| Preliminary Proxy Statement |_| Confidential, For Use of the
Commission Only (as permitted
|_| Definitive Proxy Statement by Rule 14a-6(e) (2))
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to
Rule 14a-11(c) or Rule 14a-12
U.S.B. Holding Co., Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
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Payment of Filing Fee (Check the appropriate box):
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and 0-11.
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee
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Rule 0-11(a) (2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount previously paid:
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(4) Date Filed:
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<PAGE>
U.S.B. HOLDING CO., INC.
100 Dutch Hill Road
Orangeburg, New York 10962
--------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
--------------------
May 20, 1998
To the Shareholders of U.S.B. Holding Co., Inc.:
At the direction of the Board of Directors of U.S.B. Holding Co., Inc. (the
"Company"), a Delaware corporation, NOTICE IS HEREBY GIVEN that the Annual
Meeting of Shareholders of the Company will be held at the Comfort Inn, 425 East
Route 59, Nanuet, New York 10954 on May 20, 1998 at 10:00 a.m. (local time), for
the purpose of considering and voting upon the following matters:
1. Election of two directors, constituting Class I members of the
Board of Directors, to a three-year term of office.
2. Approval of an amendment to the Certificate of Incorporation to
increase the authorized number of shares of Common Stock, $5 par value per
share, from 20,000,000 to 30,000,000 and to reduce the par value of the
Common Stock to $0.01 per share.
3. Approval of the 1998 Director Stock Option Plan.
4. Any other business which may be properly brought before the meeting
or any adjournment thereof.
By order of the Board of Directors
Michael H. Fury, Secretary
April 30, 1998
YOU ARE REQUESTED TO MARK, SIGN, DATE AND RETURN THE ENCLOSED PROXY AS
PROMPTLY AS POSSIBLE, WHETHER YOU PLAN TO ATTEND THE MEETING IN PERSON OR NOT.
YOU MAY REVOKE YOUR PROXY AT ANY TIME PRIOR TO THE MEETING, OR IF YOU ATTEND THE
MEETING YOU MAY REVOKE YOUR PROXY AT THAT TIME, IF YOU WISH.
<PAGE>
U.S.B. HOLDING CO., INC.
100 Dutch Hill Road
Orangeburg, New York 10962
--------------------
PROXY STATEMENT
FOR ANNUAL MEETING OF SHAREHOLDERS
May 20, 1998
This Proxy Statement and the accompanying form of proxy are being sent to
the shareholders of U.S.B. Holding Co., Inc. (the "Company"), a Delaware
corporation, in connection with the solicitation by the Board of Directors of
the Company (the "Board") of proxies to be voted at the Annual Meeting of
Shareholders of the Company (the "Meeting") to be held at 10:00 a.m. (local
time) on Wednesday, May 20, 1998, at the Comfort Inn, 425 East Route 59, Nanuet,
New York 10954, and at any adjournments thereof. The Notice of Meeting, this
Proxy Statement and the accompanying form of proxy are being mailed to the
shareholders on or about April 30, 1998. The Annual Report of the Company for
the year 1997 has been furnished to shareholders prior to or with this Proxy
Statement.
At the Meeting, two Class I directors will be elected to the Board of
Directors to serve for a three-year term (until the 2001 Annual Meeting of
Shareholders), with each director to hold office until his successor has been
duly elected and qualified, or until his earlier death, resignation or removal.
VOTING RIGHTS AND PROXIES
The Board of Directors has fixed the close of business on April 27, 1998,
as the record date for determination of shareholders entitled to notice of, and
to vote at, the Meeting. At the close of business on such date, there were
outstanding and entitled to vote 12,450,089 shares of common stock, $5 par value
per share ("Common Stock"), which is the Company's only authorized and
outstanding class of stock entitled to vote at the Meeting.
A majority of the outstanding shares of Common Stock is required to be
represented at the Meeting, in person or by proxy, to constitute a quorum. Each
outstanding share of Common Stock is entitled to one vote. There will be no
cumulative voting of shares for any matter voted upon at the Meeting. Directors
are elected by a plurality of the votes cast. Abstentions and broker nonvotes
will be disregarded and have no effect on the outcome of the election of
directors. The affirmative vote of holders of at least a majority of the issued
and outstanding shares is required for adoption of the amendment to the
Certificate of Incorporation to increase the authorized number of shares of
Common Stock from 20,000,000 to 30,000,000 and to reduce the par value of the
Common Stock to $.01 per share. The affirmative vote of the holders of a
majority of shares of Common Stock represented at the Meeting and entitled to
vote will be required for approval of the 1998 Director Stock Option Plan. In
determining whether each of these proposals has received the requisite number of
affirmative votes, abstentions and broker nonvotes will have the same effect as
votes against the proposal.
<PAGE>
If the enclosed form of proxy is properly executed and returned to the
Company prior to or at the Meeting and is not revoked prior to its exercise, all
shares of Common Stock represented thereby will be voted at the Meeting and,
where instructions have been given by a shareholder, will be voted in accordance
with such instructions.
Any shareholder executing a proxy which is solicited hereby has the power
to revoke it prior to exercise of the authority conferred thereby. Revocation
may be made effective by attending the Meeting and voting the shares of Common
Stock in person or by delivering to the Secretary of the Company at the
principal offices of the Company prior to exercise of the Proxy a written notice
of revocation or a later-dated, properly executed proxy.
The solicitation of proxies will be by mail, but proxies also may be
solicited by telephone, telegram or in person by directors, officers and other
employees of the Company or of Union State Bank (the "Bank"), the Company's
principal subsidiary. The Company will bear all costs of soliciting proxies.
Should the Company, in order to solicit proxies, request the assistance of other
financial institutions, brokerage houses or other custodians, nominees or
fiduciaries, the Company will reimburse such persons for their reasonable
expense in forwarding proxy materials to shareholders and obtaining their
proxies.
ITEM 1: ELECTION OF DIRECTORS
Two directors, Mr. Herbert E. Peckman and Mr. Howard V. Ruderman,
constituting Class I members of the Board of Directors, are proposed to be
elected to serve for a three-year term (until the 2001 Annual Meeting of
Shareholders), with each to hold office until his successor shall have been duly
elected and qualified, or until his earlier death, resignation or removal.
The Company's Certificate of Incorporation provides for a classified Board
of Directors consisting of three classes of directors, as nearly equal in number
as possible, with terms expiring in successive years. There are currently two
Class I directors with terms expiring at this meeting, two Class II directors
with terms expiring in 1999 and three Class III directors with terms expiring in
2000, making a total of seven directors.
All proxies which are timely received in proper form will be voted FOR the
Board's nominees for director, unless contrary instructions are given. All
nominees are presently directors of the Company. If any nominee is unable to
serve, the Board of Directors may designate a substitute nominee, in which event
the votes which would have been cast for the nominee not serving will be cast
for the substitute nominee.
The following information is furnished with respect to each of the Board's
nominees for Class I directors and the Class II and Class III directors
continuing in office.
2
<PAGE>
NOMINEES FOR DIRECTOR
CLASS I
(Terms Expiring in 2001)
<TABLE>
<CAPTION>
Served as a
Name, Age, Other Positions with the Company Director of the
or the Bank and Principal Occupation for the Past Five Years Company Since
------------------------------------------------------------ -------------
<S> <C>
Herbert E. Peckman, 86..................................................................... 1982
Proprietor, Peckman's Liquor Store, Pearl River, NY; Director of the
Bank (from 1969)
Howard V. Ruderman, 70..................................................................... 1982
Retired - President, Mohegan Electric Supply Co., Mohegan Lake, NY,
through 1997; Director of the Bank (from 1969)
</TABLE>
DIRECTORS CONTINUING IN OFFICE
CLASS II
(Terms Expiring in 1999)
<TABLE>
<CAPTION>
Served as a
Name, Age, Other Positions with the Company Director of the
or the Bank and Principal Occupation for the Past Five Years Company Since
------------------------------------------------------------ -------------
<S> <C>
Fred F. Graziano, M.D., 77................................................................. 1982
Licensed physician in State of New York, offices in Nanuet, NY; Treasurer
of the Bank; Director of the Bank (from 1969)
Kenneth J. Torsoe, 62...................................................................... 1982
President, Torsoe Brothers Construction Corp., Suffern, NY; partner,
Normandy Village Company; owner, Normandy Village Apts., Nanuet, NY;
Director of the Bank (from 1981)
</TABLE>
3
<PAGE>
CLASS III
(Terms Expiring in 2000)
<TABLE>
<CAPTION>
Served as a
Name, Age, Other Positions with the Company Director of the
or the Bank and Principal Occupation for the Past Five Years Company Since
------------------------------------------------------------ -------------
<S> <C>
Thomas E. Hales, 61........................................................................ 1982
Chairman of the Board and Chief Executive Officer of the Company (from 1982);
Chairman of the Board of the Bank (from 1981); Chief Executive Officer of
the Bank (from 1983); President of the Company and the Bank (from 1984)
Raymond J. Crotty, 50...................................................................... 1996
Senior Executive Vice President, Chief Credit Officer and Assistant Secretary of the
Company and the Bank (from 1997); Executive Vice President, Chief Credit
Officer and Assistant Secretary of the Company and the Bank from 1995 and
1992, respectively; Director of the Bank (from 1995); Senior Vice President
and Chief Credit Officer of the Bank (from 1988)
Michael H. Fury, 71........................................................................ 1982
Attorney, partner in law firm of Fury & Kennedy, Pearl River, NY; Secretary and
General Counsel of the Company and the Bank; Director of the Bank (from 1969)
</TABLE>
Executive Officers
In addition to Mr. Hales and Mr. Crotty, the executive officers of the
Company are Robert F. Picarelli, 62, Senior Executive Vice President of the
Company since 1997 (Executive Vice President from 1987), and Steven T. Sabatini,
46, Senior Executive Vice President, Chief Financial Officer and Assistant
Secretary of the Company since 1997, Executive Vice President, Chief Financial
Officer and Assistant Secretary of the Company from 1995. Mr. Picarelli also
serves as Senior Executive Vice President (since 1997) and Executive Vice
President and Senior Operations Officer of the Bank (since 1987). Mr. Sabatini
has held the same positions with the Bank as he does with the Company for the
same periods. Mr. Sabatini was Assistant to the Chairman of the Board of
Directors of the Bank from September 1994 to March 1995, and for five years
prior to that, an audit partner with Ernst & Young LLP. Mr. Picarelli has
announced his intention to retire, and is expected to retire prior to the Annual
Meeting.
Board Committees and Meetings
The Board of Directors of the Company met 13 times during 1997. Each
director attended at least ten (75%) or more of the Board of Directors
Meetings, except Mr. Torsoe, who attended nine meetings. The standing committees
of the Board include the Stock Option Committee, comprised of Messrs. Ruderman
(Chairman) and Peckman, and the Examining Committee, comprised of Messrs.
Ruderman (Chairman), Graziano and Peckman. The Stock Option Committee evaluates
the awarding of options to purchase common stock of the Company to employees
under the Company's stock option plans. The Examining Committee of the Company
functions
4
<PAGE>
in a similar manner as that described below for the Bank's Examining Committee.
The Board of Directors of the Company does not have a standing executive,
nominating or compensation committee or committees performing similar functions.
Each of the directors of the Company is also a member of the Bank's Board
of Directors, which is the Company's principal subsidiary. Among its standing
committees, the Board of Directors of the Bank has an Executive Committee, an
Examining Committee and a Compensation Committee.
The Executive Committee of the Bank's Board of Directors supervises the
day-to-day business of the Bank, but does not have authority to act on matters
which are not within the ordinary course of business. The committee's present
voting members are Messrs. Torsoe (Chairman), Graziano, Fury, Ruderman, Peckman,
Crotty and Hales.
The Examining Committee of the Bank's Board of Directors serves many of the
purposes which would be served by an audit committee. It reviews the Bank's
internal auditing and control procedures and reviews and makes recommendations
concerning internal accounting controls. Its present members are Messrs.
Ruderman (Chairman), Peckman and Graziano.
The Compensation Committee of the Bank's Board of Directors establishes and
reviews the policies and standards for hiring employees and makes
recommendations to the Bank's Board concerning hiring, promotions and
compensation policy. Its present members are Messrs. Ruderman (Chairman), Fury
and Peckman.
The above Committees meet as and when required, except for the Examining
Committees which meet at least twice each year. Certain matters that may come
before a committee may be reviewed or acted on by the Board as a whole.
Compliance with Section 16(a) of the Securities Exchange Act
Pursuant to Section 16(a) of the Securities Exchange Act of 1934 and the
Rules issued thereunder, the Company's directors and executive officers are
required to file with the Securities and Exchange Commission ("SEC") reports of
ownership and changes in ownership of Common Stock. Copies of such forms are
required to be filed with the Company. Based solely on its review of copies of
such reports furnished to the Company, the Company believes that the directors
and executive officers are in substantial compliance with the filing
requirements of Section 16(a).
Compensation of Directors
Each director of the Company during 1997 received $2,500 monthly for
serving on the Company's Board of Directors. In addition, each director of the
Bank received $500 monthly for serving on the Bank's Board of Directors. No
compensation is paid to directors for serving on or attending meetings of the
committees of the Company's or Bank's Board of Directors.
5
<PAGE>
Director Stock Option Plan
Under the Company's existing Director Stock Option Plan, each non-employee
director automatically receives annually, effective as of the close of each
annual meeting of shareholders of the Company, a non-qualified option to
purchase a fixed number of shares of Common Stock at an exercise price equal to
the market value of such shares on the date of the grant . Each eligible
director currently receives an option covering 16,940 shares of Common Stock
annually. The options may not be exercised prior to the first anniversary of the
date of grant and expire ten years after the date of grant. At December 31,
1997, options (after adjustment for stock splits and dividends) had been granted
under the plan for 542,570 shares, of which options for 146,023 shares had been
exercised and options for 396,547 shares (of which 311,847 were immediately
exercisable) were outstanding.
OWNERSHIP OF SHARES BY MANAGEMENT
The following table sets forth certain information as of March 31, 1998
regarding the amount of Common Stock beneficially owned by the Company's
directors and director nominees, the executive officers listed below under
EXECUTIVE COMPENSATION and all directors and executives as a group:
<TABLE>
<CAPTION>
Number of Shares
and Nature of Percent
Beneficial Owner Beneficial Ownership* of Class
- ---------------- --------------------- --------
<S> <C> <C>
Raymond J. Crotty (a)................................................ 219,123 1.73
Michael H. Fury (b).................................................. 309,441 2.46
Fred F. Graziano, M.D.(c)............................................ 289,265 2.31
Thomas E. Hales (d).................................................. 2,071,533 15.73
Herbert E. Peckman (e)............................................... 282,012 2.25
Robert F. Picarelli (f).............................................. 320,554 2.52
Howard V. Ruderman (g)............................................... 741,320 5.92
Kenneth J. Torsoe (h) (i)............................................ 1,377,284 11.01
Steven T. Sabatini (j)............................................... 115,319 0.92
All directors and executive officers as a group (9 individuals)...... 5,725,851 40.45
</TABLE>
- ---------------------
* The table shows all shares as to which each named beneficial owner
possessed sole or shared voting or investment power as of the specified
date, including shares held by, in the name of, or in trust for the spouse
and dependent children of the named individual and other relatives living
in the same household, even if beneficial ownership of such shares has been
disclaimed by the named individual. Unless otherwise indicated, the named
beneficial owner was the sole and exclusive owner of all listed shares as
of the specified date. The table does not include that portion of the
1,287,072 shares owned by the Company's Employee Stock Ownership Plan (With
401(k) Provisions) ("KSOP"), of which Mr. Peckman and Mr. Sabatini are
trustees, nor that portion of the 56,217 shares owned by the Bank's Key
Employees' Supplemental Investment Plan ("KESIP"), of which Mr. Hales and
Mr. Sabatini are trustees, which may be allocated to any named beneficial
owner.
6
<PAGE>
(a) Includes 9,559 shares owned by Mr. Crotty jointly with his wife, and
209,564 shares that may be acquired pursuant to the exercise of options
within 60 days of March 31, 1998. Does not include 58,920 or 5,340 shares
allocated to Mr. Crotty under the KSOP and KESIP, respectively.
(b) Includes 102,483 shares owned by Mr. Fury jointly with his wife, 5,815
shares which he holds as trustee for his children, and 108,524 shares that
may be acquired pursuant to the exercise of options within 60 days of March
31, 1998.
(c) Includes 136,292 shares held by Mr. Graziano's wife and 62,000 shares that
may be acquired pursuant to the exercise of options within 60 days of March
31 , 1998.
(d) Includes 509,918 shares owned by Mr. Hales jointly with his wife, 156,605
shares owned by his wife, 5,256 shares held by Mr. Hales as custodian for
his grandchildren (Michael T. Shaw, Robert W. Shaw, Christopher Hales
Wilson, and Thomas Prezziosi Wilson),162,726 shares held by the Hales
Family Foundation, Inc., and 721,772 shares that may be acquired pursuant
to the exercise of options within 60 days of March 31, 1998. Does not
include 180,299 or 43,691 shares allocated to Mr. Hales under the KSOP and
KESIP, respectively.
(e) Includes 90,852 shares that may be acquired pursuant to the exercise of
options within 60 days of March 31, 1998.
(f) Includes 51,018 shares owned by Mr. Picarelli jointly with his wife, and
269,536 shares that may be acquired pursuant to the exercise of options
within 60 days of March 31, 1998. Does not include 83,853 or 5,179 shares
allocated to Mr. Picarelli under the KSOP and KESIP, respectively.
(g) Includes 73,180 shares that may be acquired pursuant to the exercise of
options within 60 days of March 31, 1998.
(h) Includes 10,996 shares owned by Mr. Torsoe's son, and 62,000 shares that
may be acquired pursuant to the exercise of options within 60 days of March
31 , 1998.
(i) If shares owned by Harold R. Torsoe were included, the total would be
2,351,991 shares (18.80%). Harold R. Torsoe is the brother of Kenneth J.
Torsoe. However, Kenneth J. Torsoe disclaims beneficial ownership of the
shares owned by his brother.
(j) Includes 44 shares owned by Michael Sabatini and 43 shares owned by Erica
Sabatini, Mr. Sabatini's children, and 108,900 shares that may be acquired
pursuant to the exercise of options within 60 days of March 31 , 1998. Does
not include 14,517 shares or 2,007 shares allocated to Mr. Sabatini under
the KSOP and KESIP, respectively.
EXECUTIVE COMPENSATION
Summary of Cash and Certain Other Compensation
The following table sets forth cash and certain other compensation paid to
or earned by the Chief Executive Officer and the three other executive officers
of the Company for the years indicated. The Bank, which is the principal
subsidiary of the Company, has paid or accrued all of the cash compensation
shown.
7
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation Long Term
------------------------ Compensation All Other
Name and Principal Position(s) Year Salary (1) Bonus (2) Options (3) Compensation (4)
- ------------------------------ ---- ---------- --------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
Thomas E. Hales................................. 1997 $423,750 $624,120 96,800 $175,306
Chairman of the Board and 1996 $393,000 $564,840 96,800 $ 77,609
Chief Executive Officer 1995 $363,000 $559,620 96,800 $ 62,864
Raymond J. Crotty............................... 1997 $171,750 $104,020 36,300 $ 28,032
Senior Executive Vice President and 1996 $145,812 $ 94,140 36,300 $ 16,686
Chief Credit Officer 1995 $105,992 $ 93,270 36,300 $ 13,415
Robert F. Picarelli............................. 1997 $110,749 $104,020 36,300 $ 42,890
Senior Executive Vice President and 1996 $109,999 $ 94,140 36,300 $ 18,246
Senior Operations Officer 1995 $ 99,622 $ 93,270 36,300 $ 12,815
Steven T. Sabatini ............................. 1997 $135,750 $104,020 36,300 $ 24,590
Senior Executive Vice President and 1996 $133,087 $ 61,390 36,300 $ 15,134
Chief Financial Officer 1995 $125,000 $ 30,635 36,300 $ 10,370
</TABLE>
- ---------------------
(1) Includes director fees in the case of Messrs. Hales and Crotty; also
includes that portion of each named executive's salary deferred pursuant to
the KSOP and the KESIP (but not amounts contributed for the named
executives by the Company, which are included under "All Other
Compensation").
(2) Reflects payments accrued for the indicated years under the Company's
Executive Compensation Plan.
(3) Number of shares covered by stock options granted, adjusted for stock
dividends and splits.
(4) Reflects annual contributions made for the account of each named executive
to the KSOP and KESIP, the value of personal use of a Company provided car
and Company paid life insurance. Also reflects additional compensation each
year for Mr. Hales, representing certain KSOP benefits lost as a result of
IRS regulations.
The options referred to below were granted under the Company's 1984 and
1993 Incentive Stock Option Plans, and 1997 Employee Stock Option Plan.
8
<PAGE>
Option Grants in 1997
<TABLE>
<CAPTION>
Potential Realizable
Aggregate Value at
% of Total Assumed Annual Rates
Options of Stock Price
Granted to Appreciation for Option
Employees Exercise Term*
Options In Fiscal Price Expiration -----------------------
Name Granted Year ($/Share) Date 5% 10%
- ---- ------- ------ -------- ------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
Thomas E. Hales.................... 5,992 2.36 $18.3563 6/25/02 17,608 51,029
Thomas E. Hales.................... 90,808 35.77 $16.6875 6/25/07 953,029 2,415,163
Raymond J. Crotty.................. 36,300 14.30 $16.6875 6/25/07 380,968 965,448
Robert F. Picarelli................ 36,300 14.30 $16.6875 6/25/07 380,968 965,448
Steven T. Sabatini................. 36,300 14.30 $16.6875 6/25/07 380,968 965,448
</TABLE>
- ------------------------------------
* The dollar gains under these columns result from calculations assuming 5%
and 10% growth rates as set by the SEC and are not intended to forecast
future price appreciation of Common Stock of the Company over the option
term, which is ten years (five years in the case of Mr. Hales's incentive
stock options). The gains reflect a future value based upon growth at these
prescribed rates.
Option Exercises in 1997 and December 31, 1997 Values
<TABLE>
<CAPTION>
Value
of Unexercised
Unexercised In-the-Money
Options at Options at
Shares 12/31/97 12/31/97*
Acquired Value (Exercisable/ (Exercisable/
Name on Exercise Realized Unexercisable) Unexercisable)
- ---- ----------- -------- -------------- --------------
<S> <C> <C> <C> <C>
Thomas E. Hales......................... None NA 721,772/0 $ 14,346,396/NA
Raymond J. Crotty....................... None NA 209,564/0 $ 4,004,812/NA
Robert F. Picarelli..................... 7,530 $162,949 278,284/0 $ 5,616,286/NA
Steven T. Sabatini...................... None NA 108,900/0 $ 1,744,106/NA
</TABLE>
- ------------------------------------
* Difference between the market value per share of the Company's Common Stock
at December 31, 1997 ($25.625) and the option exercise price, multiplied by
the number of shares covered by the options.
Employment Agreement. The Company and the Bank are parties to an employment
agreement with Mr. Hales for a term of five years expiring July 1, 1999 covering
his services as Chairman of the Board of Directors, President and Chief
Executive Officer of the Company and the Bank. The agreement provides for annual
salary and other payments to Mr. Hales of $430,000, increasing by $30,000
annually during the remaining term of the agreement, for an annual bonus equal
to 6% of net income of the Company under the Executive Compensation Plan, for
annual stock option grants of 96,800 shares issued at fair value at the date of
grant (110% of fair market value for incentive stock options if Mr. Hales'
ownership of the Company equals or exceeds 10% at the date of the grant), and
for other fringe benefits. On February 18, 1998, the Board of Directors of the
Company and the Bank, on the recommendation of the Bank's Compensation
Committee, increased Mr. Hales' base compensation by $100,000, to $530,000. All
other terms of Mr. Hales' contract remain the same.
9
<PAGE>
Notwithstanding anything to the contrary set forth in any of the Company's
previous filings under the Securities Act of 1933, as amended, or the Securities
Exchange Act of 1934, as amended, that might incorporate future filings,
including this Proxy Statement, in whole or in part, the following Report of the
Bank's Compensation Committee on Executive Compensation and the Performance
Graph shall not be incorporated by reference into any such filings.
REPORT OF BANK'S COMPENSATION COMMITTEE
ON EXECUTIVE COMPENSATION
The proxy statement rules of the Securities and Exchange Commission require
a report from the Compensation Committee of the Board of Directors which
discusses the compensation policies for executive officers and the Committee's
rationale for compensation paid to the Chief Executive Officer. The Company's
Board does not have a Compensation Committee. All of the compensation (other
than stock options) paid to the Company's executive officers is paid to them by
the Bank, and decisions concerning the Chief Executive Officer's compensation
and guidelines for the compensation of the other executive officers are made by
the Compensation Committee of the Bank's Board of Directors. Accordingly, the
following report is submitted by the Bank's Compensation Committee.
Compensation Policies for Executive Officers
The Compensation Committee's executive compensation policy is designed to
provide competitive levels of compensation that align compensation with the
Company's annual and long-term performance goals, reward good performance at the
Company and Bank levels, recognize individual initiative and achievements and
assist the Company in attracting and retaining qualified executives. A
significant portion of an executive officer's compensation is performance
related, and, therefore, actual compensation levels vary from year to year and
in any particular year may be above or below those of the Company's competitors.
The Compensation Committee also believes that stock ownership by management
of the Company is beneficial in aligning the interests of management and the
Company's shareholders. Accordingly, the Compensation Committee has also relied
upon stock-based compensation arrangements in compensating the Company's
executive officers.
Relationship of Company's Performance to Compensation
Compensation paid to the Company's executive officers for 1997 consisted
primarily of salary, annual bonus under the Bank's Executive Compensation Plan
and awards of stock options under the Company's 1997 Employee Stock Option Plan.
While each executive officer's salary is determined on the basis of the
individual's responsibilities and a comparison with salaries paid by competitors
of the Company, the other primary components of executive compensation are
directly related to Company and Bank performance.
10
<PAGE>
Annual Bonus Arrangements
Corporate performance determines the aggregate amount of annual bonuses, if
any, awarded to the executive officers under the Bank's Executive Compensation
Plan. In determining the aggregate percent of consolidated net income after
taxes that is paid as bonuses in accordance with the Executive Compensation
Plan, the Compensation Committee considers the financial performance of the
Company in comparison to the Company's business plan for the year, with
particular emphasis on net income, return on average common equity, return on
average assets and expense to revenue ratios. The Compensation Committee also
considers certain measures of asset quality, including net charge-offs and the
level of nonperforming loans, and other specific items such as capital ratios
that the Board may have identified as being priorities for that year.
In 1997, the Committee took into account the fact that the Company achieved
the highest net income in its history. Net income of $10.4 million represented
an increase of 10.5% over 1996. Diluted earnings per share increased to $.77
from $.70 in 1996, as a result of higher net income and the redemption of
Preferred Stock and the elimination of preferred stock dividends, partially
offset by higher adjusted weighted average shares outstanding. Excluding
non-recurring net income related to the disposition of a former branch of Royal
Oak Savings Bank, F.S.B. ("Royal") in 1996, net income increased by $1.3 million
in 1997, or 14% over net income for 1996. On this basis, diluted earnings per
share increased $.09, or 13%. In addition, the Company's risk-based capital
position remained strong as Tier I and total capital ratios at year-end exceeded
the "well capitalized" regulatory minimums. The price of the Company's Common
Stock rose 201.5% during 1997, while the return on average assets was 1.12% and
return on average common shareholders' equity was 17.95% for the year.
Certain subjective factors, such as the achievement of qualitative goals
relating to customers and employees and the historic level of bonus payments at
competing organizations in light of their relative per formance, are also
considered. After the Committee's evaluation of overall corporate performance,
the indi vidual performance of each of the executive officers is evaluated in
light of the factors described above that are relevant to the officer's
responsibilities.
Long-Term Incentive Plan Arrangements
The long-term incentive component of executive officers' compensation for
1997 consists of awards of stock options under the Company's 1997 Employee Stock
Option Plan (the "Plan"). The Plan is designed to link rewards for Executive
Officers and other key personnel to increases in shareholder value, foster share
ownership by the Company's executives and enable the Company to retain and
attract key employees with superior management skills. Awards under the Plan
each year take into account performance during the prior year as measured by the
factors described above under the caption "Annual Bonus Arrangements" and the
Company's progress toward meeting longer-term objectives, emphasizing
profitability and capital strength. The options granted to Mr. Hales in 1997,
shown under the caption "Stock Options Granted" in the Summary Compensation
Table, reflect his high level of individual performance and the Committee's view
of the continuing importance of his role in determining the future success of
the Company. The actual size of any stock option gains Mr. Hales and other
executives will realize depends solely on the future performance of the
Company's Common Stock.
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The Committee believes that the programs described above provide
compensation that is competitive with the levels paid by other major
corporations, effectively links executive and shareholder interests through
performance and equity based plans and is structured to provide incentives that
are consistent with the long-term investment horizons which characterize the
business in which the Company is engaged.
COMPENSATION COMMITTEE
Howard V. Ruderman, Chairman
Michael H. Fury
Herbert E. Peckman
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PERFORMANCE GRAPH
The following graph provides a comparison of the annual percentage changes
in the cumulative total shareholder return on the Company's Common Stock with
that of a Peer Group* and the American Stock Exchange Market value Index ("AMEX
Index") for the five-year period ended December 31, 1997. The com parison
assumes that $100 was invested on December 31, 1992 in the Common Stock of the
Company and in each of the foregoing indices and assumes the reinvestment of all
dividends.
Comparison of Five-Year Cumulative Total Return
Among the Company, a Peer Group and AMEX Index
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PRINCIPAL SHAREHOLDERS OF THE COMPANY
The following information is furnished with respect to each person known by
management of the Company to be the beneficial owner of more than 5% of the
outstanding shares of Common Stock as of March 31, 1998:
Number of Shares
Name and Address and Nature of Percent
of Beneficial Owner Beneficial Ownership* Of Class
- ------------------- --------------------- --------
Thomas E. Hales (a)....................... 2,071,553 15.73
66 Brookwood Drive
Briarcliff Manor, NY 10510
Howard V. Ruderman (b).................... 741,320 5.92
6 Aspen Court
Pomona, NY 10970
Harold R. Torsoe (c)...................... 974,707 7.83
4 Bridgitte Court
Suffern, NY 10901
Kenneth J. Torsoe (d)..................... 1,377,284 11.01
70 West Gate Road
Suffern, NY 10901
U.S.B. Holding Co., Inc................... 1,287,072 10.34
Employee Stock Ownership Plan
(With 401(k) Provisions)
100 Dutch Hill Road
Orangeburg, NY 10962
- ------------------------------------
* The table shows all shares as to which each named beneficial owner
possessed sole or shared voting or investment power as of the specified
date, including shares held by, in the name of, or in trust for, the spouse
and dependent children of the named individual and other relatives living
in the same household, even if beneficial ownership of such shares has been
disclaimed by the named individual. Unless otherwise indicated, the named
beneficial owner was the sole and exclusive owner of all listed shares as
of the specified date.
(a) Includes 509,918 shares owned by Mr. Hales jointly with his wife, 156,605
shares owned by his wife, 5,256 shares held by Mr. Hales as custodian for
his grandchildren (Michael T. Shaw, Robert W. Shaw, Christopher Hales
Wilson, and Thomas Prezziosi Wilson), 162,726 shares held by the Hales
Family Foundation, Inc., and 721,772 shares that may be acquired pursuant
to the exercise of options within 60 days of March 31 , 1998. Does not
include 180,299 or 43,691 shares allocated to Mr. Hales under the KSOP and
KESIP, respectively.
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(b) Includes 73,180 shares that may be acquired pursuant to the exercise of
options within 60 days of March 31, 1998.
(c) Includes 2,057 shares owned by Harold R. Torsoe's son and 23,352 shares
owned by his wife.
(d) Includes 10,996 shares owned by Kenneth J. Torsoe's son, and 62,000 shares
that may be acquired pursuant to the exercise of options within 60 days of
March 31 , 1998.
CERTAIN RELATIONSHIPS AND TRANSACTIONS WITH MANAGEMENT
During 1997, some of the directors and executive officers of the Company
(and members of their immediate families and corporations, organizations, trusts
and estates with which these individuals are associated) were indebted to the
Bank in amounts of $60,000 or more. However, all such loans, which did not
exceed a total of $843,000 (or 1.31% of shareholders' equity at March 31, 1998)
at any one time during 1997, were made in the ordinary course of business, did
not involve more than normal risk of collectibility or present other unfavorable
features, and were made on substantially the same terms, including interest rate
and collateral requirements, as those prevailing at the same time for comparable
loan transactions with unaffiliated persons, and no such loan is classified at
present as a nonaccrual, past due, restructured or potential problem loan.
Outside of normal customer relationships, none of the directors, executive
officers or 5% shareholders of the Company (or members of their immediate
families) presently maintains, directly or indirectly, any significant business
or personal relationship with the Company or the Bank, other than such as might
arise by virtue of his position with, or ownership interest in, the Company,
except Michael H. Fury, who is a director of the Company and the Bank and is a
partner in the law firm of Fury & Kennedy, which was employed by the Company and
the Bank during 1997 and received $32,403 from the Bank for services rendered
and related out-of-pocket disbursements.
RELATIONSHIP WITH INDEPENDENT AUDITORS
On recommendation of the Examining Committees of the Company and the Bank,
the Board has appointed Deloitte & Touche LLP as independent auditors of the
Company and the Bank, for the year ending December 31, 1998. The appointment of
Deloitte & Touche LLP continues a relationship that began in 1980.
Representatives of Deloitte & Touche LLP are expected to be present at the
Meeting and will have the opportunity to make statements if they so desire and
will be available to respond to appropriate questions.
ITEM 2: AMENDMENT OF CERTIFICATE OF INCORPORATION
On April 15, 1998, the Board unanimously approved a proposal to amend the
Company's Certificate of Incorporation to increase the number of authorized
shares of Common Stock from 20,000,000 to 30,000,000 and to reduce the par value
of the Common Stock to $.01 per share from $5 per share (the
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"Amendment"). Upon adoption of the Amendment, Article FOURTH of the Certificate
of Incorporation would read in its entirety as follows:
4. Number of Shares. The total number of shares of stock which the
Corporation shall have authority to issue is 30,100,000 shares, consisting
of 30,000,000 shares of Common Stock having a par value of $.01 per share
and 100,000 shares of Preferred Stock without par value.
Increase of Authorized Common Stock
The Board has determined that the proposed increase in authorized shares is
appropriate in light of the two-for-one stock split in the form of a 100% stock
dividend distributed on December 24, 1997, as a result of which the number of
shares of Common Stock issued and outstanding, including those reserved for
issuance under outstanding employee and director stock options and the Company's
dividend reinvestment and stock purchase plan, was increased to ____________ as
of March 31, 1998. In addition, pursuant to an Agreement and Plan of Merger
between the Company and Tappan Zee Financial, Inc. dated March 6, 1998 (the
"Tappan Zee Merger"), the Company may be required to issue as many as 1,900,000
shares of Common Stock to the shareholders of Tappan Zee Financial, Inc. The
Company has a sufficient number of authorized but unissued shares of Common
Stock to consummate the Tappan Zee Merger, and the approval of the Company's
shareholders is not required. However, the consummation of the Tappan Zee Merger
would reduce the number of authorized but unissued shares of Common Stock to as
few as ___________ .
The Board believes that the proposed increase in the number of authorized
shares of Common Stock will benefit the Company by improving its flexibility in
responding to future business needs and opportunities. The additional authorized
shares will be available for issuance from time to time in connection with stock
dividends (including stock splits in the form of stock dividends), the Company's
dividend reinvestment and stock purchase plan, executive incentive compensation
and employee benefit plans, financings and acquisitions and for any other proper
corporate purpose. The Company has no present intention to issue any additional
shares of Common Stock except pursuant to the Tappan Zee Merger and pursuant to
its dividend reinvestment and stock purchase and stock option plans.
If the Amendment is adopted, the additional authorized shares may be issued
for such consideration and upon such terms and conditions as may be approved by
the Board. The Board does not intend to seek further approval by the
shareholders for the issuance of additional shares unless required to do so by
applicable laws or regulations. Certain large issuances of shares may require
shareholder approval to maintain the listing of the Common Stock on the American
Stock Exchange.
The Amendment will not change the proportionate interest of any shareholder
in the Company and will have no adverse effect on any shareholder's voting or
other rights. The Amendment will also not affect the Company's Preferred Stock,
of which 100,000 shares are authorized in the Certificate of Incorporation and
no shares are currently outstanding.
If the Amendment is approved by the shareholders, the increased number of
authorized shares of Common Stock, as well as the presently authorized but
unissued shares of Common Stock, might be utilized
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in a transaction which could have the effect of delaying or preventing a change
in control of the Company which some or a majority of the shareholders may
consider desirable. For example, such stock could be issued to third parties in
order to discourage a takeover attempt or to dilute the ownership interest of a
substantial shareholder who opposes Board policies.
The Company's Certificate of Incorporation contains other provisions which
might be deemed to have the effect of delaying or preventing a change in control
of the Company. These include the provision establishing a classified Board of
Directors; the provision permitting the Board of Directors to issue preferred
stock with rights (including voting rights) and preferences which could impede
the completion of such a transaction; and the provision requiring a
"supermajority" vote of the shareholders or the Board of Directors for any
business combination transaction involving a substantial shareholder.
The Board does not currently intend to propose any other amendments to the
Company's Certificate of Incorporation which might be deemed to have the effect
of discouraging takeover attempts, nor is the Board aware of any existing or
threatened effort to obtain control of the Company.
Reduction of Par Value
The Amendment would also reduce the par value of the authorized shares of
Common Stock of the Company from $5 per share to $0.01 per share. The Board has
determined that the proposed reduction in par value is appropriate to allow for
further stock dividends and cash dividends.
Since January 1, 1996, the Company has issued __________ shares of its
Common Stock as stock dividends (including stock splits structured as stock
dividends), in order to maintain what the Company considers to be an appropriate
market price per share for the Company's Common Stock. Each time that the
Company pays a dividend in its Common Stock, it is required to transfer the par
value of such Common Stock from its capital surplus account (which includes
additional paid in capital and retained earnings) to its capital account.
Consequently, the Company has been required to transfer $______ from capital
surplus to capital to reflect the stock dividends described above. These
transfers have reduced the Company's capital surplus to levels that restrict its
ability to declare and pay additional dividends, either in cash or Common Stock.
Dividends, whether cash or stock dividends, may be paid only out of current
earnings or out of capital surplus.
The proposed Amendment will result in the automatic transfer of $_____
(i.e., the amount by which the par value of the Company's outstanding Common
Stock has been reduced) from capital to capital surplus. Such transfer will have
no effect on the cash position or other assets of the Company. The reduction in
par value of the Common Stock would not change the number of issued and
outstanding shares, nor would it affect the book value or earnings per share.
Shareholders would continue to own the same number of shares as they currently
own. Each outstanding share with a par value of $5 would be deemed to represent
a new share with a par value of $0.01. Stockholders would NOT be required to
return existing stock certificates for replacement certificates.
The Board believes that the proposed reduction in par value of Common Stock
and the transfer from capital to capital surplus will benefit the Company by
allowing it to declare and pay dividends of cash or Common Stock when it might
otherwise be prohibited from doing so due to an insufficient amount of capital
surplus. Although it may do so in the future, the Company has no present plans
to pay any additional
17
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dividends in shares of its Common Stock. The Company does intend to continue to
pay cash dividends at levels consistent with its prior practice.
The Board believes that, if the Amendment is not adopted, the Company will
continue to be able to pay cash dividends at levels consistent with its past
practice but will be severely limited in its ability to pay dividends in Common
Stock. The Board does not intend to seek further shareholder approval for the
declaration or payment of additional dividends in cash or Common Stock unless
required to do so by applicable laws or regulations.
Delaware law prohibits the issuance of shares of stock (other than treasury
shares) for a consideration less than the par value of those shares. If the par
value is reduced, the Company could legally issue shares for a consideration of
as little as $0.01 per share. The Company has no current intention of so issuing
any shares of its Common Stock.
The Board has determined that the proposed Amendment is advisable and
directed that the Amendment be considered at the Meeting. (Financial statements
are not deemed material for the exercise of prudent judgment in regard to the
foregoing proposal, and therefore, are not included in this proxy statement.)
The affirmative vote of holders of at least a majority of the issued and
outstanding shares is required for the adoption of the Amendment. The Board of
Directors unanimously recommends that you vote FOR this proposal.
ITEM 3: APPROVAL OF 1998 DIRECTOR STOCK OPTION PLAN
On April 15, 1998, the Board of Directors adopted, subject to approval of
the Company's shareholders, the Company's 1998 Director Stock Option Plan (the
"Director Plan"). The Board adopted the 1998 Director Plan because only 88,424
shares of Common Stock remain available for the granting of options under the
Company's current director stock option plan, which was approved by shareholders
in 1989, and options may be granted under the existing plan only for one more
year. The 1998 Director Plan is designed to replace the existing plan and, if
the 1998 Director Plan is approved by the shareholders, no more options will be
granted under the existing plan.
The terms of the Director Plan are substantially the same as those of the
existing plan. Under the Director Plan, each eligible director of the Company
will automatically receive annually an option to purchase a fixed number of
shares of Common Stock at an exercise price equal to the fair market value of
such shares on the date of grant. The Director Plan has a term of ten years. The
purpose of the Director Plan is to encourage ownership in the Company by outside
directors whose continued services are essential to the Company's success, and
to provide them with an additional incentive to continue as directors of the
Company. The following is a summary of the provisions of the Director Plan. A
copy of the Director Plan is attached hereto as Exhibit A. Shareholders are
urged to review the Director Plan before determining how to vote on this
proposal.
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Administration; Eligibility; Number of Shares
The Board of Directors will supervise and administer the Director Plan.
Directors of the Company who are not employees of the Company or any subsidiary
of the Company will be eligible to participate in the Director Plan. A total of
four hundred thousand (400,000) shares of Common Stock may be issued under the
Director Plan.
Terms of Options
If the Director Plan is approved by the shareholders, the Company
automatically will grant an option to purchase 16,940 shares of Common Stock to
each eligible director as of the close of the Meeting. Thereafter, the Company
automatically will grant an option to purchase 16,940 shares of Common Stock
(subject to adjustment for intervening stock splits and stock dividends) to each
eligible director effective as of the close of each annual meeting of
shareholders of the Company (i) following which such individual is elected a
director or (ii) following which such individual will continue to serve as a
director as a member of a continuing class of directors. Each option granted
under the Director Plan will have an exercise price equal to the fair market
value of the Common Stock as of the close of business on the date of grant and
no option may be exercised prior to the first anniversary of the date of grant.
Service as a director must be continuous for such vesting to occur.
The exercise price of shares of Common Stock subject to options may be paid
with cash or in Common Stock, a combination of the foregoing, or any other form
of consideration acceptable to the Company (including, to the extent permitted
by law, relinquishment of options) having a fair market value equal to the
exercise price. Options are not transferable or assignable other than upon the
death of the optionee. An optionee may exercise his or her option, if vested, up
to three months after he or she ceases to be a director of Company. If the
optionee becomes disabled or dies while serving as a director, the option will
vest in full and the optionee or his or her representative may exercise the
option in full during the year following his or her disability or death.
No option can be exercised after the expiration of ten years and one day
from the date of the option was granted.
Amendment of the Director Plan
The Board of Directors at any time may amend or modify the terms of the
Director Plan in any respect except that, without the approval of the
shareholders of the Company, the Board of Directors may not materially increase
the benefits accruing to eligible directors under such plan, change the number
of shares which may be issued under such plan, or materially modify the
requirements as to eligibility for participation under such plan. In addition,
the Director Plan may not be amended more than once every six months regarding
which directors may receive grants of options, the timing of the grants for all
participants, and the amounts of options to be granted to individual
participants.
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Federal Income Tax Consequences
A participant who is granted an option under the Director Plan will not
recognize income for federal income tax purposes on the date of grant. Upon
exercise, a participant will generally recognize ordinary income equal to the
excess of the Common Stock's fair market value at the time of exercise over the
exercise price. Upon disposition of the Common Stock acquired upon exercise of
an option, capital gain or loss will be recognized in an amount equal to the
difference between the sales price and the option exercise price. The Company
will be entitled to a tax deduction upon the timely exercise of an option equal
to the amount of ordinary income recognized by the participant. The foregoing
summary of federal income tax considerations is based upon interpretations of
existing laws, regulations and rulings.
The affirmative vote of the holders of a majority of the shares of Common
Stock represented at the Meeting and entitled to vote will be required for
approval of the 1998 Director Stock Option Plan. The Board of Directors
unanimously recommends that you vote FOR this proposal.
OTHER MATTERS
The Board of Directors of the Company is not aware of any other matters
that may come before the Meeting. However, the proxies may be voted with
discretionary authority with respect to any other matters that may properly come
before the Meeting.
SHAREHOLDER PROPOSALS
Shareholder proposals for inclusion in the proxy statement for the 1999
Annual Meeting of Shareholders must be received by the Company at its principal
executive offices by January 1, 1999. Such shareholder proposals, together with
any supporting statements, should be directed to the Secretary of the Company.
Date: April 30, 1998
By order of the Board of Directors
Michael H. Fury, Secretary
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EXHIBIT A
1998 DIRECTOR STOCK OPTION PLAN
1. Purpose
The purpose of this Director Stock Option Plan (the "Plan") of U.S.B.
Holding Co., Inc. (the "Company") is to encourage ownership in the Company by
outside directors of the Company whose continued services are considered
essential to the Company's future progress and to provide them with a further
incentive to remain as directors of the Company.
2. Administration
The Board of Directors shall supervise and administer the Plan. Grants of
stock options granted shall be automatic in accordance with Section 5. However,
all questions of interpretation of the Plan or of any options issued under it
shall be determined by the Board of Directors and such determination shall be
final and binding upon all persons having an interest in the Plan.
3. Participation in the Plan
Directors of the Company who are not employees of the Company or any
subsidiary of the Company shall be eligible to participate in the Plan.
4. Stock Subject to the Plan
(a) The maximum number of shares which may be issued under the Plan shall
be four hundred thousand (400,000) shares of the Company's Common Stock, par
value $5.00 per share ("Common Stock"), subject to adjustment as provided in
Section 9 of the Plan.
(b) If any outstanding option under the Plan for any reason expires or is
terminated without having been exercised in full, the shares subject to such
option shall again become available for grant pursuant to the Plan.
5. Terms, Conditions and Form of Options
Each option granted under the Plan shall be evidenced by a written
agreement in such form as the Board of Directors shall from time to time
approve, which agreements shall comply with and be subject to the following
terms and conditions:
(a) Option Grant Dates. An option shall be granted automatically to each
eligible director at the close of business on the date the Plan is approved by
the stockholders of the Company. Thereafter, an option shall be granted
automatically to each eligible director effective as of the close of each annual
meeting of stockholders of the Company (i) at which such individual is elected a
director or (ii) following which such individual will continue to serve as a
director as a member of a continuing class of directors.
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(b) Shares Subject to Option. Each option granted under the Plan shall be
exercisable, in whole or in part, for sixteen thousand nine hundred forty
(16,940) shares of Common Stock, subject to adjustment as provided in Section 9
of the Plan.
(c) Option Exercise Price. The option exercise price per share for each
option granted under the Plan shall equal not less than 100% of the fair market
value of the Common Stock on the date an option is granted nor less than the par
value of the Common Stock, whichever is greater. The fair market value of the
Common Stock on any day shall be (a) if the principal market for the Common
Stock is a national securities exchange, the last selling price of the Common
Stock on such day (or last day of trade prior to such day if not traded on such
day) as reported by such exchange or on a consolidated tape reflecting
transactions on such exchange, or (b) if the principal market for the Common
Stock is not a national securities exchange and the Common Stock is subject to
quotation on the Nasdaq Stock Market, the mean between the highest independent
bid and the lowest independent asked prices for the Common Stock on such day (or
the last day quoted prior to such day if not quoted on such day) on such system,
or (c) if the principal market for the Common Stock is not a national securities
exchange and the Common Stock is not subject to quotation on the Nasdaq Stock
Market, the mean between the highest bid and lowest asked prices for the Common
Stock on such day (or the last day quoted prior to such day if not quoted on
such day) as reported by National Quotation Bureau Incorporated or a similar
organization, or (d) if none of the above is applicable, fair market value will
be determined by the Board of Directors.
(d) Options Non-Transferable. Each option granted under the Plan by its
terms shall not be transferable by the optionee otherwise than by will, or by
the laws of descent and distribution, and shall be exercised during the lifetime
of the optionee only by him or her. No option or interest therein may be
transferred, assigned, pledged, or hypothecated by the optionee during his
lifetime, whether by operation of law or otherwise, or be made subject to
execution, attachment or similar process.
(e) Exercise Period. Except as otherwise provided in this Plan, no option
may be exercised prior to the first anniversary of the date of grant of such
option, provided that, subject to the provisions of Section 5 (f), no option may
be exercised more than 90 days after the optionee ceases to serve as a director
of the Company. No option shall be exercisable after the expiration of ten (10)
years and one day from the date of grant.
(f) Exercise Period Upon Death or Disability. Notwithstanding the
provisions of Section 5(e), any option granted under the Plan may be exercised
in full by an optionee who becomes disabled while acting as a director of the
Company, or may be exercised in full upon the death of such optionee while a
director of the Company or within three months after he ceases to serve as a
director of the Company, by the person to whom it is transferred by will, by the
laws of descent and distribution, or by written notice filed pursuant to Section
5(h), in each case within the period of one year after the date of the optionee
ceases to be such a director by reason of such death or disability; provided,
that no option shall be exercisable after the expiration of ten (10) years and
one day from the date of grant.
(g) Exercise Procedure. Options may be exercised only by written notice to
the Company at its principal office specifying the number of shares as to which
the option is being exercised. Except as otherwise provided in the Plan, the
purchase price of the shares as to which an option shall be exercised shall be
paid to the Company at the time of exercise either in cash or in Common Stock
already owned by the
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optionee, or a combination of cash and Common Stock, or in such other
consideration acceptable to the Company (including, to the extent permitted by
applicable law, the relinquishment of a portion of the option) as the Company
deems appropriate, having a total fair market value equal to the purchase price.
For purposes of this Section 5(g), the fair market value of the portion of an
option that is relinquished shall be the excess of
(x) the fair market value at the time of exercise of the number of shares
of Common Stock subject to the portion of the option that is
relinquished over
(y) the aggregate exercise price specified in the option with respect to
such shares.
(h) Exercise by Representative Following Death of Director. A director, by
written notice to the Company, may designate one or more persons (and from time
to time change such designation), including his legal representative, who, by
reason of the director's death, shall acquire the right to exercise all or a
portion of the option. If the person or persons so designated wish to exercise
any portion of the option, they must do so within the term of the option as
provided herein. Any exercise by a representative shall be subject to the
provisions of the Plan.
6. Assignments
The rights and benefits under the Plan may not be assigned except for the
designation of a beneficiary as provided in Section 5.
7. Time for Granting Options
All options for shares subject to the Plan shall be granted, if at all, not
later than ten (10) years after the approval of the Plan by the Company's
stockholders.
8. Limitation of Rights
(a) No Right to Continue as a Director. Neither the Plan, nor the granting
of an option nor any other action taken pursuant to the Plan, shall constitute
or be evidence of any agreement or understanding, express or implied, that the
Company will retain a director for any period of time.
(b) No Stockholders' Rights for Options. An optionee shall have no rights
as a stockholder with respect to the shares covered by his options until the
date of the issuance to him of a stock certificate therefor, and no adjustment
will be made for dividends or other rights (except as provided in Section 9) for
which the record date is prior to the date such certification is issued.
9. Adjustment in Event of Change in Common Stock
(a) Subject to Section 9(b), if the outstanding shares of Common Stock of
the Company are increased, decreased, or exchanged for a different number or
kind of shares or other securities, or if additional shares or new or different
shares or other securities are distributed with respect to such shares of Stock
or other securities, through merger, consolidation, sale of all or substantially
all of the property of the Company,
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reorganization, recapitalization, reclassification, stock dividend, stock split,
reverse stock split or other distribution with respect to such shares of Common
Stock or other securities, an appropriate and proportionate adjustment shall be
made in (i) the maximum number and kind of shares provided in Section 4, (ii)
the number and kind of shares or other securities subject to the outstanding
options, and (iii) the price for each share or other unit of any other
securities subject to outstanding options without change in the aggregate
purchase price or value as to which such options remain exercisable or subject
to restrictions. Any adjustment under this Section 9(a) will be made by the
Board, whose determination as to what adjustments will be made and the extent
thereof will be final, binding and conclusive. No fractional interests will be
issued under the Plan resulting from any such adjustment.
(b) Notwithstanding anything else herein to the contrary, the Company, in
its sole discretion at the time of grant of an option or otherwise may, in an
option agreement, in a notice of the grant of an option or otherwise, provide
that, with an optionee's consent, upon the occurrence of certain events,
including a change in control of the Company (as determined by the Board), any
outstanding options not theretofore exercisable shall immediately become
exercisable in their entirety and that any such option may be purchased by the
Company for cash at a price to be determined by the Board.
10. Amendment of the Plan
The Board of Directors may suspend or discontinue the Plan or review or
amend it in any respect whatsoever; provided, however, that without approval of
the stockholders of the Company no revision or amendment shall change the number
of shares subject to the Plan (except as provided in Section 9), change the
designation of the class of directors eligible to receive options, or materially
increase the benefits accruing to participants under the Plan; and provided
further, however, that in no case may the Plan be amended more than once every
six months regarding which directors may receive grants of options, the timing
of the grants for all participants, and the amount of options to be granted to
individual participants.
12. Governing Law
The Plan and all determinations made and actions taken pursuant hereto
shall be governed by the laws of the State of New York.
A-4
<PAGE>
PROXY
U.S.B. HOLDING CO., INC.
100 Dutch Hill Road
Orangeburg, New York 10962
1998 Annual Meeting of Shareholders
The Proxy is Solicited by the Board of Directors of U.S.B. Holding Co.,
Inc., a Delaware Corporation (the "Company"). The undersigned shareholder(s) of
the Company hereby appoint(s) Michael Giglio and Alfred L. Fox, and each or
either of them, with full power of substitution and revocation, and hereby
authorize(s) them, and each or either of them, to represent and to vote all
shares of Common Stock of the Company which the undersigned is entitled to vote
at the annual meeting of its shareholders to be held at the Comfort Inn, 425
East Route 59, Nanuet, New York 10954, on Wednesday, May 20, 1998, at 10:00 a.m.
(local time), and at any adjournment thereof, with all powers the undersigned
would possess if personally present as specified on the reverse side:
<PAGE>
1. Election of Class I Directors: Herbert E.
Peckman, Howard V. Ruderman
FOR all nominees listed WITHHOLD INSTRUCTION: To withhold
(Except as marked to the AUTHORITY for one or more
contrary) to vote for all nominee(s), write the
nominees listed name(s) of the nominee(s)
in the space below,
_____ _______ ________________________
2. Approval of an amendment to the Certificate of Incorporation to increase
the authorized number of shares of Common Stock, par value $5 per share,
from 20,000,000 to 30,000,000 and to reduce the par value of the Common
Stock to $0.01 per share (as described in the Proxy Statement).
(Management recommends a vote FOR)
FOR AGAINST ABSTAIN
_____ _____ _____
3. Approval of the 1998 Director Stock Option Plan (as described in the Proxy
Statement).
(Management recommends a vote FOR)
FOR AGAINST ABSTAIN
_____ _____ _____
4. In their discretion, upon such other business as may properly come before
the meeting.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED
AS DIRECTED HEREIN, IF NO DIRECTION IS GIVEN. THIS
PROXY WILL BE VOTED FOR MANAGEMENT'S NOMINEES FOR
DIRECTOR AND FOR ITEMS 2 AND 3 ABOVE IN ACCORDANCE
WITH THE RECOMMENDATIONS OF THE COMPANY'S BOARD OF
DIRECTORS.
Dated _____________________________________, 1998
Signature _______________________________________
Signature _______________________________________
YOU ARE REQUESTED TO MARK, SIGN, DATE AND RETURN
THIS PROXY PROMPTLY. PLEASE SIGN EXACTLY AS NAME
APPEARS ON THIS PROXY. ALL JOINT OWNERS MUST SIGN.
PERSONS SIGNING AS EXECUTORS, ADMINISTRATORS,
TRUSTEES OR CORPORATE OFFICERS OR IN OTHER
REPRESENTATIVE CAPACITIES SHOULD SO INDICATE.
