<PAGE> 1
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
/X/ Definitive Additional Materials
/ / Soliciting Material Pursuant to Section240.14a-11(c) or
Section 240.14a-12
TAPPAN ZEE FINANCIAL, 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/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or
14a-6(i)(2) or Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3).
/ / 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:
_________________________________________________________
2) Aggregate number of securities to which transaction
applies:
_________________________________________________________
3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth the
amount on which the filing fee is calculated and state how
it was determined.):
_________________________________________________________
4) Proposed maximum aggregate value of transaction:
_________________________________________________________
5) Total fee paid:
_________________________________________________________
/ / 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:
_________________________________________________________
2) Form, Schedule or Registration Statement No.:
_________________________________________________________
3) Filing Party:
_________________________________________________________
4) Date Filed:
_________________________________________________________
<PAGE> 2
TAPPAN ZEE FINANCIAL, INC.
75 NORTH BROADWAY
TARRYTOWN, NEW YORK 10591
May 31, 1996
Dear Shareholder:
You are cordially invited to attend the 1996 Annual Meeting of
Shareholders (the "Meeting") of Tappan Zee Financial, Inc. ("Tappan Zee
Financial" or the "Company"), the holding company for Tarrytowns Bank, F.S.B.,
Tarrytown, New York, which will be held on July 10, 1996, at 5:00 p.m., at the
Tarrytown Hilton, 455 South Broadway, Tarrytown, New York 10591.
The attached Notice of Annual Meeting of Shareholders and Proxy
Statement describe the formal business to be transacted at the Meeting.
Directors and officers of Tappan Zee Financial, as well as a representative of
KPMG Peat Marwick LLP, the accounting firm appointed by the Board of Directors
to be the Company's independent auditors for the fiscal year ending March 31,
1997, will be present at the Meeting to respond to any questions that our
shareholders may have.
The Board of Directors of Tappan Zee Financial has determined that an
affirmative vote on each matter to be considered at the Meeting is in the best
interests of the Company and its shareholders and unanimously recommends a vote
"FOR" each of these matters.
Please complete, sign and return the enclosed proxy card promptly
whether or not you plan to attend the Meeting. YOUR VOTE IS IMPORTANT REGARDLESS
OF THE NUMBER OF SHARES YOU OWN. VOTING BY PROXY WILL NOT PREVENT YOU FROM
VOTING IN PERSON AT THE MEETING, BUT WILL ASSURE THAT YOUR VOTE IS COUNTED IF
YOU ARE UNABLE TO ATTEND. IF YOU ARE A SHAREHOLDER WHOSE SHARES ARE NOT
REGISTERED IN YOUR OWN NAME, YOU WILL NEED ADDITIONAL DOCUMENTATION FROM YOUR
RECORD HOLDER TO ATTEND AND TO VOTE PERSONALLY AT THE MEETING. EXAMPLES OF SUCH
DOCUMENTATION INCLUDE A BROKER'S STATEMENT, LETTER OR OTHER DOCUMENT CONFIRMING
YOUR OWNERSHIP OF SHARES OF THE COMPANY.
On behalf of the Board of Directors and the employees of Tappan Zee
Financial and Tarrytowns Bank, F.S.B., we thank you for your continued support
and appreciate your interest.
Sincerely yours,
/s/ Stephen C. Byelick
-------------------------------------
Stephen C. Byelick
President and Chief Executive Officer
<PAGE> 3
TAPPAN ZEE FINANCIAL, INC.
75 NORTH BROADWAY
TARRYTOWN, NEW YORK 10591
(914) 631-0344
NOTICE OF 1996 ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JULY 10, 1996
NOTICE IS HEREBY GIVEN that the 1996 Annual Meeting of Shareholders of
Tappan Zee Financial, Inc. (the "Company") will be held at the Tarrytown Hilton,
455 South Broadway, Tarrytown, New York 10591 on July 10, 1996 at 5:00 p.m., New
York time, to consider and vote upon:
1. The election of three directors for terms of three years each.
2. The approval of the 1996 Stock Option Plan for Officers and
Employees.
3. The approval of the 1996 Stock Option Plan for Outside
Directors.
4. The approval of the Recognition and Retention Plan for
Officers and Employees.
5. The approval of the Recognition and Retention Plan for Outside
Directors.
6. The ratification of the appointment of KPMG Peat Marwick LLP
as independent auditors for the fiscal year ending March 31,
1997; and
7. The authorization of the Board of Directors, in its
discretion, to direct the vote of the proxies upon such other
business as may properly come before the meeting, and any
adjournment thereof, including, without limitation, a motion
to adjourn the meeting. Management is not aware of any such
business.
The Board of Directors has fixed May 17, 1996 as the record date for
the determination of shareholders entitled to notice of and to vote at the
Annual Meeting and any adjournment or postponement thereof. Only shareholders of
record at the close of business on that date will be entitled to notice of and
to vote at the Annual Meeting and any adjournment or postponement thereof. A
list of shareholders entitled to vote at the Annual Meeting will be available at
Tappan Zee Financial, Inc., 75 North Broadway, Tarrytown, New York 10591 for a
period of at least ten days prior to the meeting and will also be available at
the meeting itself.
By Order of the Board of Directors
/s/ Harry G. Murphy
-------------------------------
Harry G. Murphy
Vice President and Secretary
Tarrytown, New York
May 31, 1996
- - --------------------------------------------------------------------------------
YOU ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING. IT IS IMPORTANT
THAT YOUR SHARES BE REPRESENTED REGARDLESS OF THE NUMBER YOU OWN. THE BOARD OF
DIRECTORS URGES YOU TO SIGN, DATE AND MARK THE ENCLOSED PROXY CARD PROMPTLY AND
RETURN IT IN THE ENCLOSED ENVELOPE. RETURNING THE PROXY CARD WILL NOT PREVENT
YOU FROM VOTING IN PERSON IF YOU ATTEND THE ANNUAL MEETING.
- - --------------------------------------------------------------------------------
<PAGE> 4
TAPPAN ZEE FINANCIAL, INC.
PROXY STATEMENT FOR THE
1996 ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JULY 10, 1996
GENERAL INFORMATION
GENERAL
This Proxy Statement and accompanying proxy card are being furnished to
the shareholders of Tappan Zee Financial, Inc. (the "Company") in connection
with the solicitation of proxies by the Board of Directors of the Company from
holders of the shares of the Company's issued and outstanding common stock, par
value $.01 per share (the "Common Stock"), as of the close of business on May
17, 1996 (the "Record Date"), for the use at the 1996 Annual Meeting of
Shareholders of the Company to be held on July 10, 1996 at the Tarrytown Hilton,
455 South Broadway, Tarrytown, New York 10591, at 5:00 p.m., New York time, and
at any adjournment or postponement thereof (the "Annual Meeting"). This Proxy
Statement, together with the enclosed proxy card, is first being mailed to
shareholders on or about May 31, 1996.
On October 5, 1995, the Company became the holding company for
Tarrytowns Bank, FSB (the "Bank") upon completion of the conversion of the Bank
from a mutual savings bank to a stock savings bank (the "Conversion"). The
Company, a Delaware corporation, operates as a savings association holding
company for its wholly-owned subsidiary, the Bank.
RECORD DATE AND VOTING RIGHTS
The Board of Directors of the Company has fixed the close of business
on May 17, 1996 as the record date for the determination of the Company's
shareholders entitled to notice of and to vote at the Annual Meeting.
Accordingly, only holders of record of shares of Common Stock at the close of
business on such date will be entitled to vote at the Annual Meeting. On the
Record Date, there were 1,580,062 shares of Common Stock issued and outstanding.
Each holder of shares of Common Stock outstanding on the Record Date
will be entitled to one vote for each share held of record upon each matter
properly submitted at the Annual Meeting and at any adjournment or postponement
thereof. The presence, in person or by proxy, of the holders of at least a
majority of the total number of outstanding shares of Common Stock entitled to
vote at the Annual Meeting is necessary to constitute a quorum thereat.
The Company's Certificate of Incorporation requires that no person (as
defined therein, other than the Company or any stock plan maintained by the
Company) may directly or indirectly hold beneficial ownership of more than 10%
of the issued and outstanding Common Stock (the "Limit"). As provided in the
Company's Certificate of Incorporation, record holders of Common Stock who
beneficially own in excess of the Limit shall be entitled to one hundredth
(1/100) of one vote per share for each share in excess of the Limit. A person or
entity is deemed to beneficially own shares owned by an affiliate as well as
persons acting in concert with such person or entity. The Company's Certificate
of Incorporation authorizes the Board of Directors (i) to make all
determinations necessary to implement and apply the Limit, including determining
whether persons or entities are acting in concert, and (ii) to demand that
<PAGE> 5
any person who is reasonably believed to beneficially own Common Stock in excess
of the Limit supply information to the Company to enable the Board of Directors
to implement and apply the Limit.
All properly executed proxies received by the Company will be voted in
accordance with the instructions indicated thereon. IF NO INSTRUCTIONS ARE
GIVEN, EXECUTED PROXIES WILL BE VOTED FOR THE ELECTION OF THE THREE NOMINEES FOR
DIRECTOR, AND FOR EACH OTHER PROPOSAL IDENTIFIED IN THE NOTICE OF ANNUAL
MEETING. Management is not aware of any matters other than those set forth in
the Notice of Annual Meeting that may be brought before the Annual Meeting. If
any other matters properly come before the Annual Meeting, the persons named in
the accompanying proxy card will vote the shares represented by all properly
executed proxies on such matters in such manner as shall be determined by a
majority of the Board of Directors of the Company.
VOTE REQUIRED
Directors are elected by a plurality of the votes cast in person or by
proxy at the Annual Meeting. The holders of Common Stock may not vote their
shares cumulatively for the election of directors. The approval of the 1996
Stock Option Plan for Officers and Employees, the 1996 Stock Option Plan for
Outside Directors, the Recognition and Retention Plan for Officers and Employees
and the Recognition and Retention Plan for Outside Directors, each requires the
affirmative vote of a majority of votes eligible to be cast at the Annual
Meeting. The ratification of the appointment by the Board of Directors of KPMG
Peat Marwick LLP as the Company's independent auditors and the authorization of
the Board of Directors, in its discretion, to vote upon such other business as
may properly come before the Annual Meeting, and any adjournment or postponement
thereof, including, without limitation, a motion to adjourn the Annual Meeting
("Proposal Seven"), require the affirmative vote of a majority of the votes cast
by the holders of Common Stock present, in person or by proxy, and entitled to
vote thereon.
Shares as to which the "ABSTAIN" box has been selected on the Proxy
Card with respect to the appointment of KPMG Peat Marwick LLP as independent
auditors for the Company or Proposal Seven will be counted as present and
entitled to vote and will have the effect of a vote against that proposal. In
contrast, shares underlying broker non-votes will not be counted as present and
entitled to vote and will have no effect on the vote on each matter presented.
Shares as to which the "ABSTAIN" box has been selected on the Proxy Card with
respect to the approval of the 1996 Stock Option Plan for Officers and
Employees, the 1996 Stock Option Plan for Outside Directors, the Recognition and
Retention Plan for Officers and Employees and the Recognition and Retention Plan
for Outside Directors will be counted as present and entitled to vote and will
have the effect of a vote against that proposal. Shares underlying broker
non-votes will be counted as present and entitled to vote and will have the
effect of a vote against each matter presented.
REVOCABILITY OF PROXIES
A proxy may be revoked at any time before it is voted by filing a
written revocation of the proxy with the Secretary of the Company or by
submitting a duly executed proxy bearing a later date. A proxy also may be
revoked by attending and voting at the Annual Meeting or any adjournment or
postponement thereof, only if a written revocation is filed with the Secretary
of the Annual Meeting prior to the voting of such Proxy. If you are a
shareholder whose shares are not registered in your own name, you will need
appropriate documentation from your shareholder of record to vote personally at
the Annual Meeting. Examples of such documentation would include a broker's
statement, letter or other document that will confirm your ownership of shares
of the Company.
2
<PAGE> 6
SOLICITATION OF PROXIES
The Company will bear the costs of soliciting proxies from its
shareholders. In addition to the use of mail, proxies may be solicited by
officers, directors or employees of the Company and the Bank, by telephone or
through other forms of communication. The Company will also request persons,
firms and corporations holding shares in their names or in the name of their
nominees, which are beneficially owned by others, to send proxy materials to and
obtain proxies from such beneficial owners, and will reimburse such holders for
reasonable expenses incurred in connection therewith. In addition, the Company
has retained Morrow & Co. to assist in the solicitation of proxies. The
estimated cost of such solicitation is $3,500.
PRINCIPAL SHAREHOLDERS OF THE COMPANY
The following table sets forth, as of April 30, 1996, certain
information as to the Common Stock beneficially owned by persons owning in
excess of 5% of the outstanding shares of Common Stock. Management knows of no
person, except as listed below, who beneficially owned more than 5% of the
Company's outstanding shares of Common Stock as of April 30, 1996. Except as
otherwise indicated, the information provided in the following table was
obtained from filings with the Securities Exchange Commission ("SEC") and with
the Company pursuant to the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). Addresses provided are those listed in the filings as the
address of the person authorized to receive notices and communications. Unless
otherwise noted, each beneficial owner has sole voting and sole investment power
over the shares beneficially owned. For purposes of the table below and the
table set forth under "Stock Owned by Management," in accordance with Rule 13d-3
under the Exchange Act, a person is deemed to be the beneficial owner, for
purposes of this table, of any shares of Common Stock (1) over which he has or
shares, directly or indirectly, voting or investment power, or (2) of which he
has the right to acquire beneficial ownership at any time within 60 days after
April 30, 1996. As used herein, "voting power" is the power to vote or direct
the voting of shares and "investment power" includes the power to dispose or
direct the disposition of such shares.
3
<PAGE> 7
<TABLE>
<CAPTION>
NAME AND ADDRESS OF AMOUNT AND NATURE OF
BENEFICIAL OWNER BENEFICIAL OWNERSHIP PERCENT
---------------- -------------------- -------
<S> <C> <C>
The Employee Stock Ownership Plan Trust of 129,600 shares(1) 8.00%
Tappan Zee Financial, Inc. and Certain
Affiliates
250 Park Avenue
New York, NY 10177
Endeavour Capital Partners, L.P. 126,000 shares(2) 7.78%
555 Madison Avenue
New York, NY 10022
John Hancock Advisors, Inc. 117,500 shares(3) 7.25%
P.O. Box 111
Boston, Mass 02117
Wellington Management Company 113,800 shares(4) 7.02%
75 State Street
Boston, Mass 02110
</TABLE>
- - ---------------------
(1) The Employee Stock Ownership Plan ("ESOP") is administered by a
committee of the Company's Board of Directors. The ESOP's assets are
held in a trust (the "ESOP Trust"), for which Marine Midland Bank
serves as trustee (the "ESOP Trustee"). The ESOP Trust purchased these
shares with funds borrowed from the Company and intends to allocate
them to employees over a period of years. The terms of the ESOP provide
that, subject to the ESOP Trustee's fiduciary responsibilities under
the Employee Retirement Income Security Act of 1974, ("ERISA") as
amended, the ESOP Trustee will vote, tender or exchange shares of
Common Stock held in the ESOP Trust in accordance with the following
rules. The ESOP Trustee will vote tender or exchange shares of Common
Stock allocated to participants' accounts in accordance with
instructions received from the participants. As of March 31, 1996,
4,037 shares held by the ESOP Trust have been allocated. The ESOP
Trustee will vote allocated shares as to which no instructions are
received and any shares that have not been allocated to participants'
accounts in the same proportion as allocated shares with respect to
which the ESOP Trustee receives instructions are voted. The ESOP
Trustee will tender or exchange any shares in the suspense account or
that otherwise have not been allocated to participants' accounts in the
same proportion as allocated shares with respect to which the ESOP
Trustee receives instructions are tendered or exchanged. With respect
to allocated shares as to which no instructions are received, the ESOP
Trustee will be deemed to have received instructions not to tender or
exchange such shares. Except as described above, the ESOP committee of
the Company's Board of Directors (the "ESOP Committee") has sole
investment power, except in limited circumstances, but no voting power
over all Common Stock held in the ESOP Trust.
(2) Endeavor Capital Partners L.P. ("Endeavor") filed with the SEC a
Schedule 13D, dated as of October 17, 1995. Based on Endeavor's
Schedule 13D, it has shared voting and investment power over the
126,000 shares with Michael J. Katz and Laurence M. Austin, the general
partners of Endeavour. Endeavor is a privately-owned investment
partnership.
(3) John Hancock Advisors, Inc ("JHA") filed with the SEC a Schedule 13G,
dated January 26, 1996. Based on JHA's Schedule 13G, JHA is the
investment advisor for The John Hancock Bank and Thrift Opportunity
Fund, a closed-end diversified management company that holds 45,000 of
the shares indicated, and the John Hancock Regional Bank Fund, an
open-end diversified management company that holds the remaining 72,500
shares. As investment advisor, JHA has sole voting and investment power
over the 117,500 shares.
(4) Wellington Management Company ("Wellington") filed with the SEC a
Schedule 13G on February 9, 1996. Based on Wellington's Schedule 13G,
Wellington, as an investment advisor, shares voting and investment
power over 98,000 shares, or 6.05% of Common Stock outstanding, with
Bay Pond Partners, L.P., a Delaware limited partnership, and has shared
investment power over an additional 15,800 shares.
4
<PAGE> 8
STOCK OWNED BY MANAGEMENT
The following table sets forth information as of April 30, 1996 with
respect to the shares of Common Stock beneficially owned by each director of the
Company, each Named Executive Officer identified in the Summary Compensation
Table included elsewhere herein, and by all directors and executive officers as
a group.
<TABLE>
<CAPTION>
AMOUNT AND NATURE PERCENT OF
POSITION WITH OF BENEFICIAL COMMON STOCK
NAME THE COMPANY(1) OWNERSHIP(2)(3)(4) OUTSTANDING
---- -------------- ------------------ -----------
<S> <C> <C> <C>
Stephen C. Byelick President and Chief Executive 11,880(5) *
Officer and Director
Harry G. Murphy Vice President and Secretary 3,159 *
and Director
John T. Cooney Director 7,000 *
Marvin Levy Director and Chairman 5,000(6) *
Gerald L. Logan Director 4,500 *
Kevin J. Plunkett Director 6,100(7) *
Paul R. Wheatley Director 3,500(8) *
All directors and executive officers as a group (7 persons) 166,702 9.81%
</TABLE>
- - ---------------------
* Less than one percent
(1) Titles are for both the Company and the Bank.
(2) See "Principal Shareholders of the Company" for a definition of
"beneficial ownership." All persons shown in the above table have sole
voting and investment power, except as otherwise indicated.
(3) The figures shown include shares held in trust pursuant to the ESOP
that have been allocated as of December 31, 1995 to individual accounts
as follows: Mr. Byelick, 880 shares, Mr. Murphy, 609 shares and all
directors and executive officers as a group, 1,489 shares. Such persons
have voting power (subject to the legal duties of the trustee) but no
investment power, except in limited circumstances, as to such shares.
The figures shown for Messrs. Byelick and Murphy do not include 125,563
shares held in trust pursuant to the ESOP that have not been allocated
to any individual's account and as to which Messrs. Byelick and Murphy
share voting power with other ESOP participants. The figure shown for
all directors and executive officers as a group includes such 125,563
shares as to which the members of the Company's ESOP Committee
(consisting of Messrs. Plunkett, Logan and Wheatley) may be deemed to
have sole investment power, except in limited circumstances, thereby
causing each such Committee member to be deemed a beneficial owner of
such shares. Each of the members of the ESOP Committee disclaims
beneficial ownership of such shares. See "Election of Directors
(Proposal One) -- Benefits -- Employee Stock Ownership Plan."
(4) The figures shown include shares held under the Tarrytowns Bank, FSB
Directors' Deferred Compensation Plan that have been allocated as of
December 31, 1995 to individual accounts as follows: Mr. Murphy, 1,050
shares, Mr. Levy, 1,500 shares and all directors and executive officers
as a group, 2,550 shares. Such persons have sole voting power and sole
investment power as to such shares. See "Election of Directors
(Proposal One) -- Compensation of Directors -- Deferred Compensation
Plan for Directors."
(5) Includes 4,000 shares as to which Mr. Byelick may be deemed to share
voting power, but has no investment power.
(6) Includes 1,000 shares as to which Mr. Levy may be deemed to share
voting power, but has no investment power.
(7) Mr. Plunkett may be deemed to share voting power, but has no investment
power, as to all 6,100 shares.
(8) Mr. Wheatley shares voting and investment power as to 3,000 shares and
may be deemed to share voting power, but has no investment power, as to
500 shares.
5
<PAGE> 9
--------------------------------------
ELECTION OF DIRECTORS
(PROPOSAL ONE)
--------------------------------------
The Certificate of Incorporation and Bylaws of the Company provide for
the election of directors by the shareholders. For this purpose, the Board of
Directors of the Company is divided into three classes, as nearly equal in
number as possible. The terms of office of the members of one class expire, and
a successor class is to be elected, at each annual meeting of shareholders.
There are currently seven directors of the Company.
The terms of three directors expire at the Annual Meeting. Each of the
three incumbent directors, Marvin Levy, Kevin J. Plunkett, and Paul Wheatley has
been nominated by the Nominating Committee to be re-elected at the Annual
Meeting for a three-year term expiring at the annual meeting of shareholders in
1999. The terms of the remaining two classes of directors expire at the annual
meeting of shareholders in 1997 and 1998, respectively, or when their successors
are otherwise duly elected. Each nominee has consented to being named in this
Proxy Statement and to serve if elected.
In the event that any nominee for election as a director at the Annual
Meeting is unable or declines to serve, which the Board of Directors has no
reason to expect, the persons named in the Proxy Card will vote for a substitute
nominee designated by the present Board of Directors.
Information as to Nominees and Continuing Directors. The following
table sets forth certain information with respect to each nominee for election
as a director and each director whose term does not expire at the Annual Meeting
("Continuing Director"). There are no arrangements or understandings between the
Company and any director or nominee pursuant to which such person was elected or
nominated to be director of the Company. For information with respect to
security ownership of directors, see "General Information -- Stock Owned by
Management."
<TABLE>
<CAPTION>
DIRECTOR TERM POSITION(S) HELD WITH THE
NOMINEES AGE(1) SINCE(2) EXPIRES COMPANY AND THE BANK
- - -------- ------ -------- ------- --------------------
<S> <C> <C> <C> <C>
Marvin Levy 70 1980 1996 Director and Chairman of the Company
and the Bank
Kevin J. Plunkett 46 1990 1996 Director of the Company and the Bank
Paul R. Wheatley 65 1989 1996 Director of the Company and the Bank
CONTINUING
DIRECTORS
---------
Stephen C. Byelick 71 1983 1998 President and Chief Executive
Officer and Director of the Company
and Bank
Harry G. Murphy 39 1989 1997 Vice President and Secretary and
Director of the Company and the Bank
John T. Cooney 61 1982 1998 Director of the Company and the Bank
Gerald L. Logan 58 1990 1997 Director of the Company and the Bank
</TABLE>
- - ---------------------
(1) As of April 30, 1996.
(2) Includes service as a Director or Director Emeritus of Tarrytowns Bank,
FSB and its predecessor, Tarrytown and North Tarrytown Saving and Loan
Association.
6
<PAGE> 10
The principal occupation and business experience of each nominee for
election as director and each Continuing Director is set forth below.
NOMINEES FOR ELECTION AS DIRECTOR
Marvin Levy has served as a Director and Chairman of the Company since
its formation in 1995, a Director of the Bank since 1980 and Director and
Chairman of the Board since 1990. Mr. Levy is a C.P.A. and has been the
President of Greller and Company P.C., a professional corporation of certified
public accountants, for in excess of 25 years.
Kevin J. Plunkett has served as a Director of the Company since its
formation in 1995 and has been a Director of the Bank since 1990. Mr. Plunkett
has been a practicing attorney since 1975. Mr. Plunkett was an Assistant
District Attorney, Felony Trial Division, of Westchester County from 1975 to
1979 and has been an Acting Village Justice for the Village of Tarrytown from
1985 to 1987. He is the Village Attorney for the Village of Irvington, N.Y. and
the Village of Dobbs Ferry, N.Y. Mr. Plunkett is currently a member in the law
firm of Plunkett & Jaffe, P.C., with offices in White Plains, New York City and
Albany. He is a member of the Board of Trustees of Iona College, New Rochelle,
New York.
Paul R. Wheatley has served as a Director of the Company since its
formation in 1995 and has been a Director of the Bank since 1989. Mr. Wheatley
was President of Beck & Wheatley Inc., an insurance agency and real estate
brokerage concern, from 1970 until his retirement in 1993.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS
VOTE "FOR" THE NOMINEES FOR ELECTION AS DIRECTORS
CONTINUING DIRECTORS
Stephen C. Byelick has served as President and Chief Executive Officer
of the Company since its formation in 1995 and has been a Director or Director
Emeritus of the Bank and its Chief Executive Officer since 1983. Prior to 1983,
Mr. Byelick was a vice president with The Bank of New York, serving in a variety
of functions including branch management, lending and marketing.
Harry G. Murphy has served as Vice President and Secretary of the
Company since its formation in 1995, a Vice President of the Bank since 1983,
Vice President and Secretary of the Bank since 1987 and a Director of the Bank
since 1989. Mr. Murphy is also the Community Reinvestment Officer of the Bank.
Prior to 1983, Mr. Murphy was an assistant treasurer with The Bank of New York.
John T. Cooney has served as a Director of the Company since its
formation in 1995 and has been a Director of the Bank since 1982. Mr. Cooney is
a Vice President of County Asphalt Inc., a manufacturer of asphalt paving
materials, and has been with this company for more than 25 years. Mr. Cooney is
also a Vice President of Westchester Industries, Inc., a real estate and holding
corporation, and a partner in Cooney Realty Co., a real estate partnership, and
has been with such entities for greater than 25 years.
Gerald L. Logan has served as a Director of the Company since its
formation in 1995 and has been a Director of the Bank since 1990. Since 1995,
Mr. Logan has been a registered representative of The Windmill Group, Inc., a
financial planning firm. Mr. Logan was employed as a vice president of
Axe-Houghton Management, an investment management firm from 1954 to 1992. Mr.
Logan has been a member of the National Association of Securities Dealers, Inc.
since 1958. Mr. Logan is also associated with USF&G-AHM, an insurance company,
as a consultant.
7
<PAGE> 11
COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS OF THE COMPANY
The Board of Directors meets on a monthly basis and may have additional
special meetings upon the request of the Chairman of the Board. During the
period from the Company's inception to the end of the fiscal year ended March
31, 1996, the Company's Board of Directors met 11 times. No current director
attended fewer than 75% of the total number of Board meetings and committee
meetings of which such director was a member.
The Board of Directors of the Company has established the following
committees:
The Executive Committee consists of all members of the Board of
Directors. The purpose of this committee is to monitor and manage the Company's
interest rate risk against Board and regulatory standards and coordinate such
interest rate risk management with the Company's operating plan. This committee,
from time to time, also reviews regulatory issues and reports of regulatory
examinations. This committee meets as requested by the Board of Directors. The
Executive Committee did not meet in fiscal 1995, the first year of the Company's
existence.
The Compensation Committee consists of Messrs. Plunkett (Chairman),
Logan and Wheatley. This committee establishes the compensation of the Chief
Executive Officer, approves the compensation of other officers, and determines
compensation and benefits to be paid to employees of the Bank. The committee
meets yearly and as requested by the Board of Directors. The Compensation
Committee did not meet in fiscal 1995, the first year of the Company's
existence.
The Examining and Audit Committee consists of Messrs. Logan (Chairman),
Cooney and Wheatley. The Bank's Internal Auditor reports to this committee. The
purpose of this committee is to provide assurance that the Company's internal
controls are adequate and that financial disclosures made by management portray
the Bank's financial condition and results of operations. The committee is
responsible for the classification of assets and the establishment of adequate
valuation allowances. The committee also maintains a liaison with the outside
auditors and reviews the adequacy of internal controls. The committee meets at
least annually or as called by the Committee Chairman. The Examining and Audit
Committee did not meet in fiscal 1995, the first year of the Company's
existence.
The Nominating Committee consists of Messrs. Cooney (Chairman),
Byelick, Logan and Murphy. The nominating committee nominates candidates for the
election of directors. The committee meets as called by the Committee Chairman.
The Nominating Committee did not meet in fiscal 1995, the first year of the
Company's existence, and met for the first time on April 5, 1996 to select the
nominees for election as directors at the Annual Meeting. In accordance with the
Company's Bylaws, no nominations for election as director, except those made by
the Nominating Committee, shall be voted upon at the Annual Meeting unless
properly made by a shareholder in accordance with the procedures set forth below
under "Additional Information -- Notice of Business to be Conducted at Annual
Meeting."
COMPENSATION OF DIRECTORS
Fee Arrangements. Currently, each outside director of the Company
receives a fee of $500 per meeting attended. All committee members receive a fee
of $200 for attendance at each committee meeting, with the exception of members
of the Examining and Audit Committee. Prior to its stock conversion, employee
directors of the Bank received the same fees as outside directors. The Chairman
and members of the Examining and Audit Committee receive a fee of $100 and $50,
respectively, for each committee meeting attended. On any day when the Company's
Board and the Bank's Board meet on the same day, only one meeting fee is paid to
any director. In such a circumstance, the meeting fee
8
<PAGE> 12
is paid by the Bank. Directors will also be eligible to participate in the Stock
Option Plan for Outside Directors and Retention and Recognition Plan for Outside
Directors, which are subject to approval by the shareholders. See "1996 Stock
Option Plan for Outside Directors (Proposal Three)" and "Recognition and
Retention Plan for Outside Directors (Proposal Five)."
Directors' Retirement Plan. The Company has adopted, a non-qualified
Retirement Plan for Outside Directors of the Company and the Bank (the
"Directors' Retirement Plan"), which will provide benefits to each eligible
Outside Director commencing on his termination of Board service at or after age
65. Each Outside Director who serves or has agreed to serve as an Outside
Director subsequent to the completion of the Conversion will automatically
become a participant in the Plan unless prior to, on or after such date, the
Outside Director elected to participate in the Deferred Compensation Plan
described below. In such case, the Outside Director will be deemed to have
irrevocably waived his benefits under the Directors' Retirement Plan. An
eligible Outside Director retiring at or after age 65 will be paid an annual
retirement benefit equal to the amount of the aggregate compensation for
services as a director (excluding stock compensation) paid to him for the
12-month period immediately prior to his termination of Board service,
multiplied by a fraction, the numerator of which is the number of his years of
service as an Outside Director (including service as a director or trustee of
the Bank or any predecessor) and the denominator of which is 10. An individual
who terminates Board service after having served as an Outside Director for 10
years may elect to begin collecting benefits under the Directors' Retirement
Plan at or after attainment of age 50, but the annual retirement benefits
payable to him will be reduced pursuant to the Plan's early retirement reduction
formula to reflect the commencement of benefit payments prior to age 65. An
Outside Director may elect to have his benefits distributed in any one of the
following forms: (i) a single life annuity; (ii) a 50% or 100% joint and
survivor annuity; or (iii) a single life annuity with a 5, 10, or 15 year
guaranteed term. In the event an Outside Director dies prior to the commencement
of benefit payments under the Directors' Retirement Plan, a 50% survivor annuity
will automatically be paid to his surviving spouse.
Deferred Compensation Plan for Directors. The Company has established a
non-qualified Deferred Compensation Plan for directors of the Bank or the
Company pursuant to which directors may defer all or part of the compensation
received for their services to the Company or Bank and its affiliated companies
(including compensation paid to an officer-director for service as an officer).
Any director who has elected to participate in the Deferred Compensation Plan
will be deemed to have irrevocably waived his benefits under the Directors'
Retirement Plan. Compensation deferred is applied to either the purchase of
investments (including shares of Common Stock of the Company) for the account of
the director, in which case the amount of deferred benefits payable is based on
the investment performance of the investments made, or to purchase a life
insurance policy, in which case the amount of deferred benefits payable is based
on the value to the Bank of expected death benefit proceeds. Deferred benefits
are paid in installments over a period of ten years beginning upon termination
of service as a director. In the event a director dies prior to the complete
distribution of his account in the Deferred Compensation Plan, the remainder
will be paid in a single sum payment to his designated beneficiary. In the event
of a change in control, the Plan requires full funding of any life insurance
contracts previously purchased. The Bank has established a trust fund with an
independent fiduciary ("Trustee") for the purpose of accumulating funds to be
used to satisfy its obligations under the Deferred Compensation Plan. The
Trustee will vote any shares of Common Stock purchased for a participant's
account in the Deferred Compensation Plan in accordance with the directions
given by such participant.
9
<PAGE> 13
EXECUTIVE OFFICERS
The following individuals are executive officers of the Company and
hold the offices set forth below opposite their names. There are no executive
officers of the Company who are not also directors.
NAME POSITION HELD WITH THE COMPANY
- - ---- ------------------------------
Stephen C. Byelick President and Chief Executive Officer
Harry G. Murphy Vice President and Secretary
The executive officers of the Company are elected annually and hold
office until their respective successors have been elected and qualified or
until death, resignation or removal by the Board of Directors. The Company has
entered into an Employment Agreement with its executive officers which sets
forth the terms of their employment. See "-- Employment Agreements."
EXECUTIVE COMPENSATION
Since the formation of the Company, none of the executive officers or
other employee personnel has received remuneration from the Company.
Cash Compensation. The following table sets forth the cash compensation
paid by the Company and the Bank for services rendered in all capacities during
the fiscal year ended March 31, 1996, to the chief executive officer and the
executive officers of the Company and the Bank whose annual salary and bonus for
such fiscal year was in excess of $100,000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
-------------------
NAME AND PRINCIPAL OTHER ANNUAL ALL OTHER
POSITIONS YEAR SALARY(1) BONUS COMPENSATION(2) COMPENSATION(3)
--------- ---- --------- ----- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Stephen C Byelick, President and 1996 $158,567 $18,083 ------ $11,110
Chief Executive Officer 1995 $144,300 $17,100 ------ ------
Harry G. Murphy, 1996 $ 97,900 $12,530 ------ 7,687
Vice President and Secretary 1995 $ 97,400 $11,700 ------ ------
</TABLE>
- - ---------------------
(1) Includes directors fees earned as a director of the Bank prior to its
stock conversion and compensation under the Deferred Compensation Plan
for Directors.
(2) For 1995 and 1996, there were no (a) perquisites over the lesser of
$50,000 or 10% of the individual's total salary and bonus for the year;
(b) payments of above-market preferential earnings on deferred
compensation; (c) payments of earnings with respect to long-term
incentive plans prior to settlement or maturation; (d) tax payment
reimbursements; or (e) preferential discounts on stock.
(3) Includes shares of Common Stock allocated to the accounts of Messrs.
Byelick and Murphy, pursuant to the ESOP. Mr. Byelick was allocated 880
shares and Mr. Murphy was allocated 609 shares. The value of the shares
were based on a price per share of $12.625, the final quoted sales
price of the Company's Common Stock on NASDAQ on December 31, 1995, the
date of allocation.
10
<PAGE> 14
REPORT OF COMPENSATION COMMITTEE
The following Report of the Company's Personnel and Compensation
Committee is provided in accordance with the rules and regulations of the SEC.
Pursuant to such rules and regulations, this Report shall not be deemed
"soliciting material," filed with the SEC subject to Regulation 14A or 14C of
the Commission or subject to the liabilities of section 18 of the Exchange Act.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Tappan Zee Financial, Inc. (the "Company") was formed in 1995 for the
purpose of becoming the holding company for Tarrytowns Bank, FSB (the "Bank") in
a stock conversion that took effect in October 1995. For the fiscal year ended
March 31, 1996, substantially all of the business of the Company was conducted
through the Bank. During such fiscal year, the Company's Chief Executive Officer
and other executive officers served as the Chief Executive Officer and executive
officers, respectively, of the Bank and performed substantially all of their
services in connection with the management and operation of the Bank. As a
result, all compensation of the Chief Executive Officer and all other executive
officers for such period was paid by the Bank and determined by the Board of
Directors of the Bank on the recommendation of its Compensation Committee (the
"Bank Compensation Committee"). The Board of Directors of the Bank accepted
without modification all of the Bank Compensation Committee's recommendations on
executive compensation for the fiscal year ended March 31, 1996. The composition
of the Bank Compensation Committee is the same as that of the Company's
Compensation Committee.
It is the Company's policy to cause its executive officers to be
compensated, either directly or through its affiliates, using a combination of
cash compensation (consisting of base salary and discretionary cash bonuses) and
fringe benefit plans. These elements are intended to provide an overall
compensation package that is commensurate with the Company's financial
resources, that is appropriate to assure the retention of experienced management
personnel and align their financial interests with those of the Company's
stockholders, and that is responsive to the immediate and long-term needs of
executive officers and their families. The compensation practices of other
savings and community banks in the New York City metropolitan area are
considered in establishing the overall level of compensation and the components
of the compensation package; however, it has not been a goal or policy to set
compensation at levels designed to achieve a predetermined percentile ranking
among an identified group of peer institutions.
For the fiscal year ended March 31, 1996, base salaries of all
executive officers were set at levels determined, in the subjective judgment of
the Bank Compensation Committee, to be commensurate with the executive officers'
customary respective duties and responsibilities and to enable them to maintain
appropriate standards of living within their communities. Annual salary rates
were increased by 5% over the prior year's rates, primarily to reflect cost of
living changes. In connection with a decision to discontinue the practice of
paying separately denominated compensation to officer-directors for service as a
director, a further adjustment was made in mid-year to add to base salary an
amount equivalent to the discontinued director's compensation. Discretionary
bonuses for the fiscal year ended March 31, 1996 were determined, in the
subjective judgment of the Bank Compensation Committee, with the intention of
rewarding effort, performance and results at levels above and beyond those
assumed in establishing base salary rates. Fringe benefit plans, consisting of a
pension plan and group insurance coverage, are designed to provide for the
health and welfare of the executives and their families and as well as for their
long-term financial needs. In addition, all executive officers participated in
the Bank's Employee Stock Ownership Plan (the "ESOP") for the calendar year
ended December 31, 1995. Each executive officer has an individual account within
the ESOP Trust which is invested primarily if not
11
<PAGE> 15
exclusively in employer securities, with the result that a portion of each
executive officer's long-term retirement savings is tied to the performance of
the Bank and the Company.
The determination of the Chief Executive Officer's compensation for the
fiscal year ended March 31, 1996 was based on the same general principles
applied to other executive officers and resulted in a similar 5% salary increase
and further adjustment to account for the elimination of director compensation.
The Compensation Committee recognizes the significant additional
efforts required of the Chief Executive Officer and other executive officers of
the Bank and the Company in bringing about the Bank's successful stock
conversion and the Company's initial public offering. It also recognizes that
successfully managing and operating a public company will entail additional
ongoing duties and responsibilities for each executive officer. No additional
cash compensation has awarded on this basis. It is the Compensation Committee's
judgment that such compensation should take the form of stock-based compensation
under stock benefit plans being proposed to the shareholders for their approval
at this Annual Meeting.
COMPENSATION COMMITTEE OF
TAPPAN ZEE FINANCIAL, INC.
Kevin J. Plunkett, Chairman
Gerald L. Logan, Member
Paul R. Wheatley, Member
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
There are no other interlocks, as defined under the rules and
regulations of the SEC, between the Compensation Committee and corporate
affiliates of members of the Compensation Committee or otherwise. The
Compensation Committee consists of Messrs. Plunkett (Chairman), Logan and
Wheatley.
12
<PAGE> 16
PERFORMANCE GRAPH
Pursuant to the regulations of the SEC, the graph below compares the
performance of the Company with that of the Center for Research for Securities
Prices of the University of Chicago ("CRSP") Total Return Index for the Nasdaq
Stock Market, United States and the CRSP Financial Stock Total Return Index for
the Nasdaq Stock Market from October 5, 1996, the date of the Conversion,
through March 31, 1996. On October 5, 1996, the Bank completed the Conversion
and the Company offered 1,620,026 of shares of its common stock at a
subscription price of $10.00 per share. Immediately thereafter, the Company's
common stock began trading on the Nasdaq Stock Market. The graph assumes the
reinvestment of dividends in additional shares of the same class of equity
securities as those listed below.
<TABLE>
<CAPTION>
10/5/95 10/31/95 11/30/95 12/31/95 1/31/96 2/28/96 3/31/96
<S> <C> <C> <C> <C> <C> <C> <C>
Total Return Nasdaq Stock Market (U.S.) 101.256 103.601 106.033 105.484 106.024 110.095 110.399
Nasdaq Financial Stocks 100.246 100.957 105.603 107.870 108.383 110.053 112.165
Tappan Zee Financial, Inc. 100.000 120.000 121.875 126.250 117.500 117.500 120.500
</TABLE>
THERE CAN BE NO ASSURANCE THAT STOCK PERFORMANCE WILL CONTINUE INTO THE FUTURE
WITH THE SAME OR SIMILAR TRENDS TO THOSE DEPICTED IN THE GRAPH ABOVE.
13
<PAGE> 17
EMPLOYMENT AGREEMENTS
The Company and the Bank have entered into employment agreements
(collectively, the "Employment Agreements") with Messrs. Byelick and Murphy (the
"Senior Executive(s)"). These Employment Agreements establish the respective
duties and compensation of the Senior Executives and are intended to ensure that
the Bank and the Company will be able to maintain a stable and competent
management. The continued success of the Bank and the Company depends to a
significant degree on the skills and competence of the Senior Executives.
The Employment Agreements provide for three-year terms. The Bank's
Employment Agreements provide that, commencing on the first anniversary date and
continuing each anniversary date thereafter, the Board of Directors may, with
the Senior Executive's concurrence, extend its Employment Agreements for an
additional year, so that the remaining terms shall be three years, after
conducting a performance evaluation of the Senior Executive. The Company's
Employment Agreements provide for automatic daily extensions such that the
remaining terms of the Employment Agreements shall be three years unless written
notice of non-renewal is given by the Board of Directors or the Senior
Executive. The Employment Agreements provide that the Senior Executive's base
salary will be reviewed annually. It is anticipated that this review will be
performed by the Compensation Committee of the Board and the Senior Executive's
base salary may be increased on the basis of his job performance and the overall
performance of the Bank. As of May 31, 1996, the base salaries for Messrs.
Byelick and Murphy are $153,000 and $94,000, respectively. In addition to the
base salary, the Employment Agreements provide for, among other things,
entitlement to participation in stock, retirement and welfare benefit plans and
eligibility for fringe benefits applicable to executive personnel such as a
company car and fees for club and organization memberships deemed appropriate by
the Bank or Company and the Senior Executive. The Employment Agreements provide
for termination by the Bank or the Company at any time for cause as defined in
the Employment Agreements. In the event the Bank or the Company chooses to
terminate the Senior Executive's employment for reasons other than for cause, or
in the event of the Senior Executive's resignation from the Bank and the Company
upon: (i) failure to re-appoint, elect or re-elect the Senior Executive to his
current offices; (ii) a material adverse change in the Senior Executive's
functions, duties or responsibilities; (iii) a relocation of the Senior
Executive's principal place of employment outside Westchester County without the
Senior Executive's consent; (iv) liquidation or dissolution of the Bank or the
Company; (v) a change of control; or (vi) a breach of the Employment Agreement
by the Bank or the Company, the Senior Executive or, in the event of death, his
beneficiary would be entitled to a lump sum cash payment in an amount equal to
the remaining base salary and bonus payments due to the Senior Executive and the
additional contributions or benefits that would have been earned under any
employee benefit plans of the Bank or the Company during the remaining terms of
the Employment Agreements. The Bank and the Company would also continue the
Senior Executive's life, health and disability insurance coverage for the
remaining terms of the Employment Agreements.
Payments to the Senior Executives under the Bank's Employment
Agreements will be guaranteed by the Company in the event that payments or
benefits are not paid by the Bank. To the extent that payments under the
Company's Employment Agreements and the Bank's Employment Agreements are
duplicative, payments due under the Company's Employment Agreements would be
offset by amounts actually paid by the Bank. Senior Executives would be entitled
to reimbursement of certain costs incurred in negotiating, interpreting or
enforcing the Employment Agreements. Each Employment Agreement also provides for
the Bank and the Company to indemnify the Senior Executive to the fullest extent
allowable under federal and Delaware law, respectively.
Cash and benefits paid to a Senior Executive under the Employment
Agreements together with payments under other benefit plans following a "change
in control" of the Bank or the Company may
14
<PAGE> 18
constitute an "excess parachute" payment under Section 280G of the Internal
Revenue Code of 1986, as amended ("Code"), resulting in the imposition of a 20%
excise tax on the recipient and the denial of the deduction for such excess
amounts to the Company and the Bank. The Company's Employment Agreements would
include a provision indemnifying each Senior Executive on an after-tax basis for
any "golden parachute" excise taxes. The approximate lump sum present value of
the contract damages that would be payable to Messrs. Byelick and Murphy under
the Employment Agreements if they were terminated without just cause as of April
30, 1996 is approximately $1,160,000 and $750,000, respectively, if such
termination followed a change in control and approximately $800,000 and
$515,000, respectively, if such termination did not follow such a change in
control.
EMPLOYEE RETENTION AGREEMENTS
The Company and the Bank have entered into Employee Retention
Agreements (collectively, the "Retention Agreements") with the following four
additional employees: Robert Brennen, Christina Vidal, Margaret E. Sampson and
Valerie Wilson (the "Contract Employee(s)"). The purpose of the Retention
Agreements is to secure the Contract Employees' continued availability and
attention to the Bank's affairs, relieved of distractions arising from the
possibility of a corporate change of control. The Retention Agreements do not
impose an immediate obligation on the Bank to continue the Contract Employees'
employment but provide for a period of assured employment (the "Assurance
Period") following the change of control of the Bank or Company. The Retention
Agreements provide for initial Assurance Periods of one or two years commencing
on the date of a change of control. The applicable Assurance Periods will be
automatically extended on a daily basis under the Retention Agreements until
written notice of non-extension is given by the Bank or the Contract Employee,
in which case the Assurance Period would end on the first or second anniversary
of the date such notice is given.
If, upon a change of control, or within twelve months of, and in
connection with, a change of control, a Contract Employee is discharged without
"cause" (as defined in the Retention Agreements) or he or she voluntarily
resigns within one year following a material adverse change in his position,
duties, salary or due to a material breach of the Retention Agreement by the
Bank or Company, the Contract Employee (or, in the event of his or her death,
his estate) would be entitled to a lump sum cash payment equal to the remaining
base salary and bonus payments due during the Assurance Period plus any
additional contributions and benefits that the Contract Employee would have
earned under the Bank or Company's employee benefit plans during the Assurance
Period. Each Contract Employee's life, health, and disability coverage would
also be continued during the Assurance Period. The total amount of termination
benefits payable to each Contract Employee under the Retention Agreements is
limited to three times the Contract Employee's average total compensation for
the prior five years. Payments to the Contract Employees under their respective
Retention Agreements will be guaranteed by the Company to the extent that the
required payments are not made by the Bank.
BENEFITS
Retirement Plan. The Bank has maintained a non-contributory,
tax-qualified defined benefit pension plan (the "Retirement Plan") for eligible
employees since 1957. All employees at least age 21 who have completed at least
one year of service are eligible to participate in the Retirement Plan. The
Retirement Plan provides for a benefit for each participant, including executive
officers named in the Executive Compensation Table above, equal to 2% of the
participant's average annual earnings (average W-2 compensation during the
highest 36 consecutive months of the participant's final 120 months of
employment) multiplied by the participant's years (and any fraction thereof) of
eligible employment (up to a maximum of 30 years). A participant is fully vested
in his or her benefit under the Retirement Plan after five years of service. The
Retirement Plan is funded by the Bank on an actuarial basis. The Plan
15
<PAGE> 19
is administered by the Pension Committee of the Bank's Board of Directors and
operates on a calendar year basis. The Bank has established a trust for the
Retirement Plan ("Retirement Plan Trust") and has appointed an unrelated trustee
("Trustee") to administer the Trust. Up to 10% of the Retirement Plan's assets
may be invested by the Trustee in shares of the Common Stock of the Company, in
such amounts and upon such terms and conditions as the Pension Committee may
determine to be in the best interests of the Plan participants and
beneficiaries. These shares may be acquired through open market purchases, if
permitted, or from authorized but unissued shares. The Trustee, subject to its
fiduciary duty, will vote the shares of Common Stock held in the Retirement Plan
Trust in accordance with the directions given by the Pension Committee.
The following table illustrates the annual benefit payable upon normal
retirement at age 65 (in single life annuity amounts with no offset for Social
Security benefits) at various levels of compensation and years of service:
<TABLE>
<CAPTION>
YEARS OF SERVICE
----------------
Remuneration(1) 15 20 25 30 35(4)
--------------- --------- -------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C>
$125,000 $37,500 $50,000 $ 62,500 $ 75,000 $ 75,000
150,000(2) 45,000 60,000 75,000 90,000 90,000
175,000(2) 52,500 70,000 87,500 105,000 105,000
200,000(2) 60,000 80,000 100,000 120,000(3) 120,000(3)
</TABLE>
- - ---------------------
(1) The annual retirement benefits shown in the table do not reflect a
deduction for Social Security benefits and there are no other offsets
to benefits. The amounts shown in the table include salary and bonus as
reported in the Summary Compensation Table but do not include
additional benefits payable to Messrs. Byelick and Murphy under the
Deferred Compensation Plan for Directors. See "Deferred Compensation
Plan for Directors."
(2) For 1995, the average final compensation for computing benefits under
the Retirement Plan cannot exceed $150,000 (as adjusted for subsequent
years pursuant to the Code).
(3) Under current law, the maximum annual benefit payable under the
Retirement Plan cannot exceed $120,000 (as adjusted for subsequent
years pursuant to the Code).
(4) The maximum years of service credited for benefit purposes is 30 years.
The years of credited service and the average annual earnings (as
defined above) determined as of December 31, 1995, the end of the 1995 plan
year, for each of Stephen C. Byelick and Harry G. Murphy, the individuals named
in the Executive Compensation Table, were 13.0 years and $138,037 and 12.5 years
and $93,120, respectively.
Employee Stock Ownership Plan and Trust. The Company has established,
and the Bank has adopted, for the benefit of eligible employees, an ESOP and
related trust which became effective upon the Conversion. All employees of the
Bank or the Company are eligible to become participants in the ESOP. The ESOP
purchased, with funds borrowed from the Company, eight percent (8%) of the
Common Stock (129,600 shares) issued in the Conversion. The Company or the Bank
intends to make annual contributions to the ESOP in an aggregate amount of at
least equal to the principal and interest requirement on the debt. The term of
the ESOP loan is 10 years, with an interest rate of 8% per annum.
Shares purchased by the ESOP are initially pledged as collateral for
the loan, and will be held in a suspense account until released for allocation
among participants in the ESOP as the loan is repaid. The pledged shares will be
released annually from the suspense account in an amount proportional to the
16
<PAGE> 20
repayment of the ESOP loan for each plan year. The released shares will be
allocated among the accounts of participants on the basis of the participant's
compensation for the year of allocation. Benefits generally become vested at the
rate of 20% per year with 100% vesting after five years of service. Participants
also become immediately vested upon termination of employment due to death,
retirement at age 65, permanent disability or upon the occurrence of a change in
control. Forfeitures will be reallocated among remaining participating
employees, in the same proportion as contributions. Vested benefits may be paid
in a single sum or installment payments and are payable upon death, retirement
at age 65, disability or separation from service.
In connection with the establishment of the ESOP, the ESOP Committee of
the Company's Board of Directors was appointed to administer the ESOP. Marine
Midland Bank has been appointed the corporate trustee for the ESOP. The ESOP
Committee may instruct the trustee regarding investment of funds contributed to
the ESOP. The ESOP Trustee, subject to its fiduciary duty, must vote all
allocated shares held in the ESOP in accordance with the instructions of the
participating employees. Under the ESOP, unallocated shares will be voted in a
manner calculated to most accurately reflect the instructions it has received
from participants regarding the allocated stock as long as such vote is in
accordance with the provisions of ERISA.
Stock Option Plans. The Board of Directors of the Company has adopted
the 1996 Stock Option Plan for Officers and Employees and the 1996 Stock Option
Plan for Outside Directors. Both plans are subject to the approval of the
shareholders of the Company at the Annual Meeting. See "1996 Stock Option Plan
for Officers and Employees (Proposal Two)" and "1996 Stock Option Plan for
Outside Directors (Proposal Three)."
Recognition and Retention Plans. The Board of Directors of the Company
has adopted Recognition and Retention Plans for Officers, Employees and Outside
Directors. These plans are subject to the approval of the shareholders at the
Annual Meeting. See "Recognition and Retention Plan for Officers and Employees
(Proposal Four)" and "Recognition and Retention Plan for Outside Directors
(Proposal Five)."
TRANSACTIONS WITH CERTAIN RELATED PERSONS
The Financial Institutions Reform, Recovery and Enforcement Act of 1989
("FIRREA") requires 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. It is the policy of the
Bank not to make loans to executive officers and directors. The Bank, however,
may make loans or extend credit to certain persons related to executive officers
and directors. As of the Record Date, none of the Bank's directors and executive
officers had loans outstanding to the Bank. The Bank, however, may make loans or
extend credit to certain persons related to executive officers and directors.
All such loans were made by the Bank in the ordinary course of business and were
not made with more favorable terms nor involved more than the normal risk of
collectible or presented unfavorable features. The Bank intends that any
transactions in the future between the Bank and its executive officers,
directors, holders of 10% or more of the shares of any class of its common stock
and affiliates thereof, will contain terms no less favorable to the Bank than
could have been obtained by it in arm's-length negotiations with unaffiliated
persons and will be approved by a majority of independent outside directors of
the Bank not having any interest in the transaction.
17
<PAGE> 21
SECTION 16(a) COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's executive
officers and directors, and persons who own more than 10% of the Company's
common stock to file with the SEC reports of ownership and changes of ownership.
Officers, directors and greater than 10% shareholders are required by SEC
regulation to furnish the Company with copies of all Section 16(a) forms they
file. Other than the initial reports of beneficial ownership of securities on
Form 3 for each officer and director, which were filed within 10 days after the
date of effectiveness of the Company's registration statements under the
Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as
amended, based solely on its review of the copies of such forms received by it,
or written representations from certain reporting persons, the Company believes
that all filing requirements applicable to its executive officers, directors and
greater than 10% beneficial owners were complied with.
-----------------------------------------------------------------
1996 STOCK OPTION PLAN FOR OFFICERS AND EMPLOYEES
(PROPOSAL TWO)
-----------------------------------------------------------------
GENERAL PLAN INFORMATION
The Company has adopted, subject to approval by shareholders of the
Company, the Tappan Zee Financial, Inc. 1996 Stock Option Plan for Officers and
Employees ("Employee Option Plan"). The Employee Option Plan provides for the
grant of options to purchase common stock of the Company ("Options") to certain
officers and employees. The Employee Option Plan will not take effect, and no
Options granted thereunder will be effective, prior to the date of such
shareholder approval ("Effective Date"). The Employee Option Plan is not subject
to ERISA. The principal provisions of the Employee Option Plan are summarized
below. The full text of the Employee Option Plan is set forth as Appendix A to
this Proxy Statement, to which reference is made, and the summary provided below
is qualified in its entirety by such reference.
Pursuant to regulations of the Office of Thrift Supervision ("OTS")
applicable to management stock benefit plans to be established by a federal
association or its holding company sooner than one year after the association's
stock conversion, the affirmative vote of a majority of the votes eligible to be
cast is required for approval of the Employee Option Plan. Under the Company's
Bylaws, the affirmative vote of a majority of the shares present and entitled to
vote at a meeting at which a quorum is present would ordinarily be required for
such approval. In the event that less than a majority of the votes eligible to
be cast at the Annual Meeting, but at least a majority of the votes present and
entitled to vote at the Annual Meeting, vote in favor of approval, the Employee
Option Plan will be considered approved, but it will not be implemented and no
options will be granted, prior to October 5, 1996, which is the first
anniversary of the Bank's conversion.
PURPOSE OF THE EMPLOYEE OPTION PLAN
The purpose of the Employee Option Plan is to advance the interests of
the Company and its shareholders by providing officers and employees of the
Company and its affiliates with an incentive to achieve corporate objectives and
by attracting and retaining officers and employees of outstanding competence
through the award of equity interests in the Company.
18
<PAGE> 22
DESCRIPTION OF THE EMPLOYEE OPTION PLAN
Administration. The Compensation Committee of the Board (or any
successor committee) or such other committee as the Board may designate
("Committee"), will administer the Employee Option Plan. Such Committee will be
comprised of at least three directors of the Company, and all directors on the
Committee will be "disinterested directors" (as that term is defined under
Section 16(b) of the Exchange Act and the rules and regulations promulgated
thereunder) who are not currently and have not at any time during the
immediately preceding one-year period been an employee of the Company, the Bank
or any affiliates. The Committee will determine, within the limitations of the
Employee Option Plan, the officers and employees to whom Options will be
granted, the number of shares subject to each Option, the terms of such Options
(including provisions regarding exercisability and acceleration of
exercisability) and the procedures by which the Options may be exercised.
Subject to certain specific limitations and restrictions set forth in the
Employee Option Plan, the Committee has full and final authority to interpret
the Employee Option Plan, to prescribe, amend and rescind rules and regulations,
if any, relating to the Employee Option Plan and to make all determinations
necessary or advisable for the administration of the Employee Option Plan. The
costs and expenses of administering the Employee Option Plan will be borne by
the Company and not charged to any grant of an Option nor to any participating
officer or employee.
Stock Subject to the Employee Option Plan. The Company has reserved
113,400 shares of Shares of the Company for issuance upon exercise of Options.
Such Shares may be authorized and unissued shares or shares previously issued
and reacquired by the Company. Any Shares subject to grants under the Employee
Option Plan which expire or are terminated, forfeited or cancelled without
having been exercised or vested in full, shall again be available for purposes
of the Employee Option Plan. As of May 17, 1996, the aggregate fair market value
of the Shares reserved for issuance was $1,367,888, based on the closing sales
price per share of $12.0625 on the NASDAQ Stock Market on the Record Date.
Eligibility. Any employee of the Company or its affiliates who is
selected by the Committee is eligible to participate in the Employee Option Plan
as an "Eligible Individual." As of May 17, 1996, there were 13 Eligible
Individuals.
Terms and Conditions of Options. The Employee Option Plan provides for
the grant of options which qualify for favorable federal income tax treatment as
"incentive stock options" ("ISOs"), non-qualified stock options which do not so
qualify ("NQSOs") and certain limited stock appreciation rights ("LSARs").
Unless otherwise designated by the Committee, Options granted under the Employee
Option Plan will be NQSOs, will be exercisable for a price per Share equal to
the fair market value of a Share on the date of the Option grant and will be
exercisable for a period of ten years after the date of grant (or for a shorter
period ending three months after the Option holder's termination of employment
for reasons other than death, disability or retirement or discharge for cause,
one year after termination of employment due to death disability or retirement,
or immediately upon termination for cause. In no event may an Option be granted
with an exercise price per Share that less than fair market value of a Share
when the Option is granted, or for a term exceeding ten years from the date of
grant. An Option holder's right to exercise Options is suspended during any
period when the Option holder is the subject of a pending proceeding to
terminate his or her employment for cause.
Upon the exercise of an Option, the Exercise Price must be paid in
full. Payment may be made in cash or in such other consideration as the
Committee deems appropriate, including, but not limited to, Shares already owned
by the option holder or Shares to be acquired by the option holder upon exercise
of the Option, provided that the delivery of Shares concurrently with the
exercise of an Option does not violate section 16(b) of the Exchange Act, or any
rules or regulations promulgated thereunder.
19
<PAGE> 23
Terms and Conditions of Stock Appreciation Rights. Each Option granted
under the Employee Option Plan will be accompanied by a LSAR that is exercisable
for a period commencing on the date on which a Change in Control of the Company
(as defined in the Employee Option Plan) occurs and ending six months after such
date. Upon exercise of a LSAR, the Eligible Individual will be entitled to
receive an amount equal to (a) the excess of the Change of Control Consideration
(as defined in the Employee Option Plan) over the Exercise Price per Share
specified in the LSAR, multiplied by (b) the number of Shares with respect to
which the LSAR is being exercised. Change of Control Consideration is defined in
the Employee Option Plan as the greater of (i) the highest price per Share paid
by any person who initiated or sought to effect the Change in Control during the
one-year period ending on the date of the Change in Control and (ii) the average
Fair Market Value of a Share over the last 10 trading days preceding the date of
the exercise of the LSAR. Under the Employee Option Plan, LSARs will be
cancelled at the effective time of a Change of Control effected pursuant to a
written agreement whereby the acquiror has agreed to make a monetary payment or
provide substitute options or other property equivalent in value to the value of
the Options being canceled.
REGULATORY RESTRICTIONS
The Employee Option Plan is subject to certain restrictions imposed by
the Office of Thrift Supervision that are established or implemented by a
federal savings association or its holding company within one year after the
association's conversion from a mutual association to a stock association. The
restrictions apply to the Employee Option Plan because the conversion of
Tarrytowns Bank, FSB occurred within one year prior to the date of this Annual
Meeting. To reflect these requirements, the Employee Option Plan provides (i)
that no Options may be granted prior to the date on which the Company's
shareholders approve the Employee Option Plan; (ii) that, prior to October 5,
1995, no individual officer or employee may be granted Options to purchase more
than 40,500 Shares; and (iii) that any Options granted prior to October 5, 1996
shall have an exercise price no less than the fair market value of a Share on
the date the Option is granted and will become exercisable at a rate no more
rapid than 20% per year beginning on the date of grant, with accelerated vesting
in cases of death or disability. Management of the Company has been advised by
its legal counsel that the Employee Option Plan complies with all applicable OTS
regulations. The OTS has not endorsed or approved the Employee Option Plan. No
representation to the contrary shall be made.
TERMINATION OR AMENDMENT OF THE EMPLOYEE OPTION PLAN
Unless sooner terminated, the Employee Option Plan will terminate
automatically on the day preceding the tenth anniversary of the Effective Date.
The Board may suspend or terminate the Employee Option Plan in whole or in part
at any time prior to the tenth anniversary of the Effective Date by giving
written notice of such suspension or termination to the Committee. In the event
of any suspension or termination of the Employee Option Plan, all Options
theretofore granted under the Employee Option Plan that are outstanding on the
date of such suspension or termination of the Employee Option Plan will remain
outstanding under the terms of the agreements granting such Options.
The Board may amend or revise the Employee Option Plan in whole or in
part at any time, but if the amendment or revision (i) materially increases the
benefits accruing under the Employee Option Plan, (ii) materially increases the
number of Shares which may be issued under the Employee Option Plan or (iii)
materially modifies the requirements as to eligibility for Options under the
Employee Option Plan, such amendment or revision will be subject to approval by
the shareholders of the Company. Subject to these above provisions, the Board
will also have broad authority to amend the Employee Option Plan to take into
account changes in applicable securities and tax laws and accounting rules, as
well as other developments.
20
<PAGE> 24
FEDERAL INCOME TAX CONSEQUENCES
The following discussion is intended only as a summary and does not
purport to be a comprehensive description of the federal tax laws, regulations
and policies affecting the Company and recipients of ISOs, NQSOs and LSARs that
may be granted under the Employee Option Plan and any descriptions of the
provisions of any law, regulation or policy. Any change in applicable law or
regulation or in the policies of various taxing authorities may have a material
effect on the discussion contained herein.
There are no federal income tax consequences for the Company or the
option holder at the time an ISO is granted or upon the exercise of an ISO. If
there is no sale or other disposition of the shares acquired upon the exercise
of an ISO within two years after the date the ISO was granted, or within one
year after the exercise of the ISO, then at no time will any amount be
deductible by the Company with respect to the ISO. If the option holder
exercises an ISO and sells or otherwise disposes of the shares so acquired after
satisfying the foregoing holding period requirements, then he will realize a
capital gain or loss on the sale or disposition. If the option holder exercises
his ISO and sells or disposes of his shares prior to satisfying the foregoing
holding period requirements, then an amount equal to the difference between the
amount realized upon the sale or other disposition of such shares and the price
paid for such shares upon the exercise of the ISO will be includible in the
ordinary income of such person, and such amount will ordinarily be deductible by
the Company at the time it is includible in such person's income.
With respect to the grant of NQSOs and LSARs, there are no federal
income tax consequences for the Company or the option holder at the date of the
grant. Upon the exercise of a NQSO, an amount equal to the difference between
the fair market value of the shares to be purchased on the date of exercise and
the aggregate purchase price of such shares is generally includible in the
ordinary income of the person exercising such NQSO, although such inclusion may
be at a later date in the case of an option holder whose disposition of such
shares could result in liability under Section 16(b) of the Exchange Act
("Section 16(b)"). The Company will ordinarily be entitled to a deduction for
federal income tax purposes at the time the option holder is taxed on the
exercise of the NQSO equal to the amount which the option holder is required to
include as ordinary income.
Upon exercise of an LSAR, the amount of cash or the fair market value
of the shares received, determined on the date of exercise, is generally
includible in the ordinary income of the person exercising the LSAR, although
such inclusion may be at a later date in the case of an option holder who
receives stock on the exercise of an LSAR and whose disposition of such shares
could result in liability under Section 16(b). The Company will ordinarily be
entitled to a deduction for federal income tax purposes at the time the option
holder is taxed on the exercise of the LSAR, equal to the amount which the
option holder is required to include as ordinary income.
The foregoing statements are intended to summarize the general
principles of current federal income tax law applicable to Options and LSARs
that may be granted under the Employee Option Plan. State and local tax
consequences may also be significant. PARTICIPANTS ARE ADVISED TO CONSULT WITH
THEIR TAX ADVISOR AS TO THE TAX CONSEQUENCES OF THE EMPLOYEE OPTION PLAN.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE
"FOR" APPROVAL OF THE 1996 STOCK OPTION PLAN FOR OFFICERS AND EMPLOYEES.
21
<PAGE> 25
----------------------------------------------------------
1996 STOCK OPTION PLAN FOR OUTSIDE DIRECTORS
(PROPOSAL THREE)
----------------------------------------------------------
GENERAL PLAN INFORMATION
The Company has adopted, subject to approval by shareholders of the
Company, the Tappan Zee Financial, Inc. 1996 Stock Option Plan for Outside
Directors ("Director Option Plan"). The Director Option Plan provides for the
grant to outside directors of Options. The Director Option Plan will not take
effect, and no Options granted thereunder will be effective, prior to the date
of such shareholder approval ("Effective Date"). The Director Option Plan is not
subject to ERISA. The principal provisions of the Director Option Plan are
summarized below. The full text of the Director Option Plan is set forth as
Appendix B to this Proxy Statement, to which reference is made, and the summary
provided below is qualified in its entirety by such reference.
Pursuant to regulations of the OTS applicable to management stock
benefit plans to be established by a federal association or its holding company
sooner than one year after the association's stock conversion, the affirmative
vote of a majority of the votes eligible to be cast is required for approval of
the Director Option Plan. Under the Company's Bylaws, the affirmative vote of a
majority of the shares present and entitled to vote at a meeting at which a
quorum is present would ordinarily be required for such approval. In the event
that less than a majority of the votes eligible to be cast at the Annual
Meeting, but at least a majority of the votes present and entitled to vote at
the Annual Meeting, vote in favor of approval, the Director Option Plan will be
considered approved, but it will not be implemented and no options will be
granted, prior to October 5, 1996, which is the first anniversary of the Bank's
Conversion.
PURPOSE OF THE DIRECTOR OPTION PLAN
The purpose of the Director Option Plan is to advance the interests of
the Company and its shareholders by providing outside directors of the Company
and its affiliates with an incentive to achieve corporate objectives and by
attracting and retaining directors of outstanding competence through the award
of equity interests in the Company.
DESCRIPTION OF THE DIRECTOR OPTION PLAN
Administration. The Committee will administer the Director Option Plan.
Options granted under the Director Option Plan are by automatic formula grant,
and the Committee has no discretion over such grants. Subject to certain
specific limitations and restrictions set forth in the Director Option Plan, the
Committee has full and final authority to interpret the Director Option Plan, to
prescribe, amend and rescind rules and regulations, if any, relating to the
Director Option Plan and to make all determinations necessary or advisable for
the administration of the Director Option Plan. The costs and expenses of
administering the Director Option Plan will be borne by the Company and not
charged to any grant of an Option nor to any participating director.
Stock Subject to the Director Option Plan. The Company has reserved
48,600 Shares for issuance of Options. Such Shares may be authorized and
unissued shares or shares previously issued and reacquired by the Company. Any
Shares subject to grants under the Director Option Plan which expire or are
terminated, forfeited or cancelled without having been exercised or vested in
full, shall again be
22
<PAGE> 26
available for purposes of the Director Option Plan. As of May 17, 1996, the
aggregate fair market value of the Shares reserved for issuance was
approximately $586,238, based on the closing sales price per share of $12.0625
on the NASDAQ Stock Market on the Record Date.
Eligibility. Members of the Board or the board of directors of the Bank
who are not employees or officers of the Company or Bank are eligible to
participate in the Director Option Plan as an "Eligible Director." As of May 17,
1996, there were five Eligible Directors.
Terms and Conditions of Options. Effective on the Effective Date of the
Director Option Plan, each person who is an Eligible Director on such date will
be granted a NQSO to purchase 8,100 Shares. Such Options will have an Exercise
Price equal to the fair market value of a Share on the date of grant and an
Exercise Period commencing on the date the Option is granted and expiring on the
earliest of (i) the date he ceases to be an Eligible Director due to a removal
for cause (in accordance with the Company's bylaws) and (ii) the last day of the
ten-year period commencing on the date the Option was granted. On the first
anniversary of the date of grant and on each anniversary thereof until all 8,100
Shares subject to the grant are exercisable, the Option will become exercisable
as to 1,620 of the Shares as to which his outstanding Option has been granted.
All optioned Shares not previously purchased or available for purchase will
become available for purchase, on the date of the Option holder's death or
Disability. In the future, newly elected Eligible Directors will receive Options
to purchase 500 shares upon joining the Board, plus an additional 500 shares
each January thereafter, subject to availability of reserved shares. These
grants will generally be 100% vested and exercisable when granted.
Options granted under the Director Option Plan will be NQSOs. Upon the
exercise of an Option, the Exercise Price must be paid in full. Payment may be
made in cash or in such other consideration as the Committee deems appropriate,
including, but not limited to, Shares already owned by the option holder or
Shares to be acquired by the option holder upon exercise of the Option, provided
that the delivery of Shares concurrently with the exercise of an Option does not
violate section 16(b) of the Exchange Act, or any rules or regulations
promulgated thereunder.
TERMS AND CONDITIONS OF STOCK APPRECIATION RIGHTS. Each Option granted
under the Director Option Plan will be accompanied by an LSAR that is
exercisable for a period commencing on the date on which a Change in Control of
the Company (as defined in the Director Option Plan) occurs and ending six
months after such date. Upon exercise of a LSAR, the Eligible Individual will be
entitled to receive an amount equal to (a) the excess of the Change of Control
Consideration (as defined in the Director Option Plan) over the Exercise Price
per Share specified in the LSAR, multiplied by (b) the number of Shares with
respect to which the LSAR is being exercised. Change of Control Consideration is
defined in the Director Option Plan as the greater of (i) the highest price per
Share paid by any person who initiated or sought to effect the Change in Control
during the one-year period ending on the date of the Change in Control and (ii)
the average Fair Market Value of a Share over the last 10 trading days preceding
the date of the exercise of the LSAR. Under the Director Option Plan, LSARs will
be cancelled at the effective time of a Change of Control effected pursuant to a
written agreement whereby the acquiror has agreed to make a monetary payment or
provide substitute options or other property equivalent in value to the value of
the Options being cancelled.
REGULATORY RESTRICTIONS
The Director Option Plan is subject to certain restrictions imposed by
the OTS that are established or implemented by a federal savings association or
its holding company within one year after the association's conversion from a
mutual association to a stock association. The restrictions apply to the
Director Option Plan because the conversion of the Bank occurred within one year
prior to the date of
23
<PAGE> 27
this Annual Meeting. To reflect these requirements, the Director Option Plan
provides (i) that no Options may be granted prior to the date on which the
Company's shareholders approve the Director Option Plan; (ii) that, prior to
October 5, 1995, no directors may be granted Options to purchase more than 8,100
Shares individually and 48,000 in the aggregate; and (iii) that any Options
granted prior to October 5, 1996 shall have an exercise price no less than the
fair market value of a Share on the date the Option is granted and will become
exercisable at a rate no more rapid than 20% per year beginning on the date of
grant, with accelerated vesting in cases of death or disability. Management of
the Company has been advised by its legal counsel that the Employee Option Plan
complies with all applicable OTS regulations. The OTS has not endorsed or
approved the Employee Option Plan. No representation to the contrary shall be
made.
TERMINATION OR AMENDMENT OF THE DIRECTOR OPTION PLAN
Unless sooner terminated, the Director Option Plan will terminate
automatically on the day preceding the tenth anniversary of the Effective Date.
The Board may suspend or terminate the Director Option Plan in whole or in part
at any time prior to the tenth anniversary of the Effective Date by giving
written notice of such suspension or termination to the Committee. In the event
of any suspension or termination of the Director Option Plan, all Options
theretofore granted under the Director Option Plan that are effective on the
date of such suspension or termination of the Director Option Plan will remain
effective under the terms of the agreements granting such Options.
The Board may amend or revise the Director Option Plan in whole or in
part at any time, but if the amendment or revision (i) materially increases the
benefits accruing under the Director Option Plan, (ii) materially increases the
number of Shares which may be issued under the Director Option Plan or (iii)
materially modifies the requirements as to eligibility for Options under the
Director Option Plan, such amendment or revision will be subject to approval by
the shareholders of the Company. Subject to these above provisions, the Board
will also have broad authority to amend the Director Option Plan to take into
account changes in applicable securities and tax laws and accounting rules, as
well as other developments.
FEDERAL INCOME TAX CONSEQUENCES
The following discussion is intended only as a summary and does not
purport to be a comprehensive description of the federal tax laws, regulations
and policies affecting the Company and recipients of ISOs, NQSOs and LSARs that
may be granted under the Director Option Plan and any descriptions of the
provisions of any law, regulation or policy. Any change in applicable law or
regulation or in the policies of various taxing authorities may have a material
effect on the discussion contained herein.
With respect to the grant of NQSOs and LSARs, there are no federal
income tax consequences for the Company or the option holder at the date of the
grant. Upon the exercise of a NQSO, an amount equal to the difference between
the fair market value of the shares to be purchased on the date of exercise and
the aggregate purchase price of such shares is generally includible in the
ordinary income of the person exercising such NQSO, although such inclusion may
be at a later date in the case of an option holder whose disposition of such
shares could result in liability under Section 16(b). The Company will
ordinarily be entitled to a deduction for federal income tax purposes at the
time the option holder is taxed on the exercise of the NQSO equal to the amount
which the option holder is required to include as ordinary income.
Upon exercise of an LSAR, the amount of cash or the fair market value
of the shares received, determined on the date of exercise, is generally
includible in the ordinary income of the person exercising
24
<PAGE> 28
the LSAR, although such inclusion may be at a later date in the case of an
option holder who receives stock on the exercise of an LSAR and whose
disposition of such shares could result in liability under Section 16(b). The
Company will ordinarily be entitled to a deduction for federal income tax
purposes at the time the option holder is taxed on the exercise of the LSAR,
equal to the amount which the option holder is required to include as ordinary
income.
The foregoing statements are intended to summarize the general
principles of current federal income tax law applicable to Options and LSARs
that may be granted under the Director Option Plan. State and local tax
consequences may also be significant. PARTICIPANTS ARE ADVISED TO CONSULT WITH
THEIR TAX ADVISOR AS TO THE TAX CONSEQUENCES OF THE DIRECTOR OPTION PLAN.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE "FOR"
APPROVAL OF THE 1996 STOCK OPTION PLAN FOR OUTSIDE DIRECTORS.
---------------------------------------------
RECOGNITION AND RETENTION PLAN
FOR OFFICERS AND EMPLOYEES
(PROPOSAL FOUR)
---------------------------------------------
GENERAL PLAN INFORMATION
The Company has adopted, subject to the approval by shareholders of the
Company, the Tappan Zee Financial, Inc. Recognition and Retention Plan for
Officers and Employees ("Employee RRP"). The Employee RRP provides for
restricted stock awards ("Awards") to certain officers and employees. The
Employee RRP will not take effect, and no Awards granted thereunder will be
effective, prior to the date of such shareholder approval ("Effective Date").
The Employee RRP is not subject to ERISA. The principal provisions of the
Employee RRP are summarized below. The full text of the Employee RRP is set
forth as Appendix C to this Proxy Statement, to which reference is made, and the
summary provided below is qualified in its entirety by such reference.
Pursuant to regulations of the OTS applicable to management stock
benefit plans to be established by a federal association or its holding company
sooner than one year after the association's stock conversion, the affirmative
vote of a majority of the votes eligible to be cast is required for approval of
the Employee RRP. Under the Company's Bylaws, the affirmative vote of a majority
of the shares present and entitled to vote at a meeting at which a quorum is
present would ordinarily be required for such approval. In the event that less
than a majority of the votes eligible to be cast at the Annual Meeting, but at
least a majority of the votes present and entitled to vote at the Annual
Meeting, vote in favor of approval, the Employee RRP will be considered
approved, but it will not be implemented and no Awards will be granted, prior to
October 5, 1996, which is the first anniversary of the Bank's Conversion.
PURPOSE OF THE EMPLOYEE RRP
The purpose of the Employee RRP is to advance the interests of the
Company and its shareholders by providing current officers and employees of the
Company and its affiliates with an incentive to achieve corporate objectives and
by attracting and retaining officers and employees of outstanding competence
through the award of equity interests in the Company.
25
<PAGE> 29
DESCRIPTION OF THE EMPLOYEE RRP
Administration. The Committee will administer the Employee RRP. Such
Committee will be comprised of at least three directors of the Company, and all
directors on the Committee will be "disinterested directors" (as that term is
defined under Section 16(b) and the rules and regulations promulgated
thereunder) who are not currently and have not at any time during the
immediately preceding one-year period been an employee of the Company, the Bank
or any affiliates. The Committee will determine, within the limitations of the
Employee RRP, the officers and employees to whom Awards will be granted, the
number of shares subject to each Award, the terms of such Awards (including
provisions regarding exercisability and acceleration of exercisability) and the
procedures by which the Awards shall be exercised. Subject to certain specific
limitations and restrictions set forth in the Employee RRP, the Committee has
full and final authority to interpret the Employee RRP, to prescribe, amend and
rescind rules and regulations, if any, relating to the Employee RRP and to make
all determinations necessary or advisable for the administration of the Employee
RRP. The costs and expenses of administering the Employee RRP will be borne by
the Company and not charged to any grant of an Award nor to any participating
officer or employee.
Stock Subject to the Employee RRP. The Company will establish a trust
("Trust") and will contribute, or cause to be contributed, to the Trust, from
time to time, such amounts of money or property as shall be determined by the
Board, in its discretion. No contributions by participants will be permitted. A
trustee will invest the assets of the Trust in Shares and in such other
investments including savings accounts, time or other interest bearing deposits
in or other interest bearing obligations of the Company, in such proportions as
shall be determined by the Committee. In no event shall the assets of the Trust
be used to purchase more than 45,360 Shares. As of May 17, 1996, the aggregate
fair market value of the Shares to be authorized for the Employee RRP was
$547,155, based on the closing sales price per share of $12.0625 on the NASDAQ
Stock Market on the Record Date.
Eligibility. Any employee of the Company or its affiliates who is
selected by the Committee is eligible to participate in the Employee RRP as an
"Eligible Individual." As of May 17, 1996, there were 13 Eligible Individuals.
Terms and Conditions of Awards. The Committee may, in its discretion,
grant Awards of restricted stock to Eligible Individuals. The Committee will
determine at the time of the grant the number of Shares subject to an Award and
the vesting schedule applicable to the Award and may, in its discretion,
establish other terms and conditions applicable to the Award.
Stock subject to Awards is held in trust pursuant to the Employee RRP
until vested. An individual to whom an Award is granted is entitled to exercise
voting rights and receive cash dividends with respect to stock subject to Awards
granted to him whether or not vested. The Committee will exercise voting rights
with respect to shares in the Employee RRP trust that have not been allocated as
directed by the individuals eligible to participate in the Employee RRP, whether
or not such individuals have been granted as Award. The shares covered by an
Award will become vested in accordance with the terms of the Award and as soon
as practicable following such vesting, the trustee will transfer the shares to
the recipient. Unless the Committee provides otherwise, the shares covered by an
Award will vest 20% each year for five years; however, if the recipient
terminates employment with the Company on account of his death or disability, or
in the event of a tender offer for, or a change of control of, the Company, then
any shares covered by the Award will become 100% vested as of the date of his
termination of employment with the Company or as of the commencement of such
tender offer or the effective date of such change of control. If an individual
covered by an Award terminates employment for reasons other than death or
disability, the individual forfeits all rights to his unvested shares remaining
26
<PAGE> 30
in the Employee RRP trust. Shares distributed to any person pursuant to an Award
generally will not be transferable for six months following the date of
distribution.
REGULATORY RESTRICTIONS
The Employee RRP is subject to certain restrictions imposed by the OTS
that are established or implemented by a federal savings association or its
holding company within one year after the association's conversion from a mutual
association to a stock association. The restrictions apply to the Employee RRP
because the conversion of the Bank occurred within one year prior to the date of
this Annual Meeting. To reflect these requirements, the Employee RRP provides
(i) that no Awards may be granted prior to the date on which the Company's
shareholders approve the Employee RRP, (ii) that, prior to October 5, 1996, no
individual shall receive Awards for more than 16,200 Shares and (iii) that, any
Awards granted prior to October 5, 1996 will become exercisable at a rate no
more rapid than 20% per year beginning on the date of the grant, with
accelerated vesting in cases of death or disability. Management of the Company
has been advised by its legal counsel that the Employee RRP complies with all
applicable OTS regulations. The OTS has not endorsed or approved the Employee
RRP. No representation to the contrary shall be made.
TERMINATION OR AMENDMENT OF THE EMPLOYEE RRP
The Board may suspend or terminate the Employee RRP in whole or in part
at any time prior to the tenth anniversary of the Effective Date by giving
written notice of such suspension or termination to the Committee, but the
Employee RRP may not be terminated while there are outstanding Awards that may
thereafter become vested. Upon the termination of the Employee RRP, the trustee
shall make distributions from the Trust in such amounts and to such persons as
the Committee may direct and shall return the remaining assets of the Trust, if
any, to the Company.
The Board may amend or revise the Employee RRP in whole or in part at
any time, but if the amendment or revision (1) materially increases the benefits
accruing under the Employee RRP, (2) materially increases the number of Shares
which may be issued under the Employee RRP or (3) materially modifies the
requirements as to eligibility for Awards under the Employee RRP, such amendment
or revision will be subject to approval by the shareholders of the Company.
Subject to these above provisions, the Board will also have broad authority to
amend the Employee RRP to take into account changes in applicable securities and
tax laws and accounting rules, as well as other developments.
FEDERAL INCOME TAX CONSEQUENCES
The following discussion is intended only as a summary and does not
purport to be a comprehensive description of the federal tax laws, regulations
and policies affecting the Company and recipients of Awards that may be granted
under the Employee RRP. Any descriptions of the provisions of any law,
regulation or policy contained herein are qualified in their entirety by
reference to the particular law, regulation or policy. Any change in applicable
law or regulation or in the policies of various taxing authorities may have a
material effect on the discussion contained herein. The Employee RRP does not
constitute a qualified plan under section 401(a) of the Code.
The award of Shares under the Employee RRP does not result in federal
income tax consequences to either the Company or the award recipient. Upon the
vesting of an award and the distribution of the vested shares, the award
recipient will generally be required to include in ordinary income, for the
taxable year in which the vesting date occur, an amount equal to the fair market
value of the shares on the vesting date, and the Company will generally be
allowed to claim a deduction, for compensation expense,
27
<PAGE> 31
in a like amount. To the extent that dividends are paid with respect to unvested
shares held under the Employee RRP and distributed to the award recipient, such
dividend amounts will likewise be includible in the ordinary income of the
recipient and allowable as a deduction, for compensation expense, to the
Company. Dividends declared and paid with respect to vested shares, as well as
any gain or loss realized upon an award recipient's disposition of the shares,
will be treated as dividend income and capital gain or loss, respectively, in
the same manner as for other shareholders.
The foregoing statements are intended to summarize the general
principles of current federal income tax law applicable to Awards that may be
granted under the Employee RRP. State and local tax consequences may also be
significant. PARTICIPANTS ARE ADVISED TO CONSULT WITH THEIR TAX ADVISOR AS TO
THE TAX CONSEQUENCES OF THE EMPLOYEE RRP.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE "FOR"
APPROVAL OF THE RECOGNITION AND RETENTION PLAN FOR OFFICERS AND EMPLOYEES.
-------------------------------------------------
RECOGNITION AND RETENTION PLAN
FOR OUTSIDE DIRECTORS
(PROPOSAL FIVE)
-------------------------------------------------
GENERAL PLAN INFORMATION
The Company has adopted, subject to the approval by shareholders of the
Company, the Tappan Zee Financial, Inc. Recognition and Retention Plan for
Outside Directors ("Director RRP"). The Director RRP provides for restricted
stock awards ("Awards") to outside directors and directors emeritus of the
Company or Bank. The Director RRP will not take effect, and no Awards granted
thereunder will be effective, prior to the date of such shareholder approval
("Effective Date"). The Director RRP is not subject to ERISA. The principal
provisions of the Director RRP are summarized below. The full text of the
Director RRP is set forth as Appendix D to this Proxy Statement, to which
reference is made, and the summary provided below is qualified in its entirety
by such reference.
Pursuant to regulations of the OTS applicable to management stock
benefit plans to be established by a federal association or its holding company
sooner than one year after the association's stock conversion, the affirmative
vote of a majority of the votes eligible to be cast is required for approval of
the Director RRP. Under the Company's Bylaws, the affirmative vote of a majority
of the shares present and entitled to vote at a meeting at which a quorum is
present would ordinarily be required for such approval. In the event that less
than a majority of the votes eligible to be cast at the Annual Meeting, but at
least a majority of the votes present and entitled to vote at the Annual
Meeting, vote in favor of approval, the Director RRP will be considered
approved, but it will not be implemented and no Awards will be granted, prior to
October 5, 1996, which is the first anniversary of the Bank's Conversion.
PURPOSE OF THE DIRECTOR RRP
The purpose of the Director RRP is to advance the interests of the
Company and its shareholders by providing current outside directors of the
Company and its affiliates with an incentive to achieve
28
<PAGE> 32
corporate objectives and by attracting and retaining directors of outstanding
competence through the award of equity interests in the Company.
DESCRIPTION OF THE DIRECTOR RRP
Administration. The Committee will administer the Director RRP. Awards
granted under the Director RRP are by automatic formula grant, and the Committee
has no discretion over such grants. Subject to certain specific limitations and
restrictions set forth in the Director RRP, the Committee has full and final
authority to interpret the Director RRP, to prescribe, amend and rescind rules
and regulations, if any, relating to the Director RRP and to make all
determinations necessary or advisable for the administration of the Director
RRP. The costs and expenses of administering the Director RRP will be borne by
the Company and not charged to any grant of an Award nor to any participating
director.
Stock Subject to the Director RRP. The Company will establish a trust
("Trust") and will contribute, or cause to be contributed, to the Trust, from
time to time, such amounts of money or property as shall be determined by the
Board, in its discretion. No contributions by participants shall be permitted. A
trustee will invest the assets of the Trust in Shares and in such other
investments including savings accounts, time or other interest bearing deposits
in or other interest bearing obligations of the Company, in such proportions as
shall be determined by the Committee. In no event shall the assets of the Trust
be used to purchase more than 19,440 Shares. As of May 17, 1996, the aggregate
fair market value of the Shares reserved for issuance was $234,495, based on the
closing sales price per share of $12.0625 on the NASDAQ Stock Market on the
Record Date.
Eligibility. Members of the Board or the board of directors of the Bank
who are not employees or officers of the Company or Bank are eligible to
participate in the Director RRP as an "Eligible Director." Former members of the
Board who are continuing to serve the Company in an advisory capacity to its
board of directors and who have not received an Award as an "Eligible Director"
are eligible to participate as an "Eligible Director Emeritus." As of May 17,
1996, there were five and three Eligible Directors and Eligible Directors
Emeritus, respectively.
Terms and Conditions of Awards. On the Effective Date, each Eligible
Director will be granted an Award of 3,240 Shares and each Eligible Director
Emeritus will be granted an Award of 1,080 Shares. A person who becomes an
Eligible Director subsequent to the Effective Date shall be granted, on the 15th
day of the month following the month in which such individual becomes an
Eligible Director (or, if such date is not a business day, the first business
day thereafter), an Award of 3,240 Shares. In the event that the number of
available Shares in the Trust is less than the total number of Shares with
respect to which Awards would be granted, each Eligible Director scheduled to
receive an Award will be granted an Award for a pro-rated number of whole Shares
based upon the amount of available Shares. Each Award granted prior to October
5, 1996 will become vested and distributable at a rate of 20% on each
anniversary date of the grant, but such Award will become fully vested on the
date of the Award holder's death or Disability.
Stock subject to Awards is held in trust pursuant to the Director RRP
until vested. An individual to whom an Award is granted is entitled to exercise
voting rights and receive cash dividends with respect to stock subject to Awards
granted to him whether or not vested. The Committee will exercise voting rights
with respect to shares in the Director RRP trust that have not been allocated as
directed by the individuals eligible to participate in the Director RRP, whether
or not such individuals have been granted as Award. The shares covered by an
Award will become vested in accordance with the terms of the
29
<PAGE> 33
Award and as soon as practicable following such vesting, the trustee will
transfer the shares to the recipient. Unless the Committee provides otherwise,
the shares covered by an Award will vest 20% each year for five years; however,
if the recipient terminates employment with the Company on account of his death
or disability, or in the event of a tender offer for, or a change of control of,
the Company, then any shares covered by the Award will become 100% vested as of
the date of his termination of employment with the Company or as of the
commencement of such tender offer or the effective date of such change of
control. If an individual covered by an Award terminates employment for reasons
other than death or disability, the individual forfeits all rights to his
unvested shares remaining in the Director RRP trust. Shares distributed to any
person pursuant to an Award generally will not be transferable for six months
following the date of distribution.
REGULATORY RESTRICTIONS
The Director RRP is subject to certain restrictions imposed by the OTS
that are established or implemented by a federal savings association or its
holding company within one year after the association's conversion from a mutual
association to a stock association. The restrictions apply to the Director RRP
because the conversion of the Bank occurred within one year prior to the date of
this Annual Meeting. To reflect these requirements, the Director RRP provides
(i) that no Awards may be granted prior to the date on which the Company's
shareholders approve the Director RRP and (ii) that, any Awards granted prior to
October 5, 1996 will become exercisable at a rate no more rapid than 20% per
year beginning on the date of the grant, with accelerated vesting in cases of
death or disability. Management of the Company has been advised by its legal
counsel that the Director RRP complies with all applicable OTS regulations. The
OTS has not endorsed or approved the Director RRP. No representation to the
contrary shall be made.
TERMINATION OR AMENDMENT OF THE DIRECTOR RRP
The Board may suspend or terminate the Director RRP in whole or in part
at any time prior to the tenth anniversary of the Effective Date by giving
written notice of such suspension or termination to the Committee, but the
Director RRP may not be terminated while there are outstanding Awards that may
thereafter become vested. Upon the termination of the Director RRP, the trustee
shall make distributions from the Trust in such amounts and to such persons as
the Committee may direct and shall return the remaining assets of the Trust, if
any, to the Company.
The Board may amend or revise the Director RRP in whole or in part at
any time, but if the amendment or revision (i) materially increases the benefits
accruing under the Director RRP, (ii) materially increases the number of Shares
which may be issued under the Director RRP or (iii) materially modifies the
requirements as to eligibility for Awards under the Director RRP, such amendment
or revision will be subject to approval by the shareholders of the Company.
Subject to these above provisions, the Board will also have broad authority to
amend the Director RRP to take into account changes in applicable securities and
tax laws and accounting rules, as well as other developments.
FEDERAL INCOME TAX CONSEQUENCES
The following discussion is intended only as a summary and does not
purport to be a comprehensive description of the federal tax laws, regulations
and policies affecting the Company and recipients of Awards that may be granted
under the Director RRP. Any descriptions of the provisions of any law,
regulation or policy contained herein are qualified in their entirety by
reference to the particular law, regulation or policy. Any change in applicable
law or regulation or in the policies of
30
<PAGE> 34
various taxing authorities may have a material effect on the discussion
contained herein. The Director RRP does not constitute a qualified plan under
section 401(a) of the Code.
The award of Shares under the Director RRP does not result in federal
income tax consequences to either the Company or the award recipient. Upon the
vesting of an award and the distribution of the vested shares, the award
recipient will generally be required to include in ordinary income, for the
taxable year in which the vesting date occur, an amount equal to the fair market
value of the shares on the vesting date, and the Company will generally be
allowed to claim a deduction, for compensation expense, in a like amount. To the
extent that dividends are paid with respect to unvested shares held under the
Director RRP and distributed to the award recipient, such dividend amounts will
likewise be includible in the ordinary income of the recipient and allowable as
a deduction, for compensation expense, to the Company. Dividends declared and
paid with respect to vested shares, as well as any gain or loss realized upon an
award recipient's disposition of the shares, will be treated as dividend income
and capital gain or loss, respectively, in the same manner as for other
shareholders.
The foregoing statements are intended to summarize the general
principles of current federal income tax law applicable to Awards that may be
granted under the Director RRP. State and local tax consequences may also be
significant. PARTICIPANTS ARE ADVISED TO CONSULT WITH THEIR TAX ADVISOR AS TO
THE TAX CONSEQUENCES OF THE DIRECTOR RRP.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE "FOR"
APPROVAL OF THE RECOGNITION AND RETENTION PLAN FOR OUTSIDE DIRECTORS.
31
<PAGE> 35
NEW PLAN BENEFITS
TAPPAN ZEE FINANCIAL, INC. STOCK PLANS
<TABLE>
<CAPTION>
==============================================================================================================================
Employee Director Option Employee Director
Option Plan(1) Plan(2) RRP(3) RRP(4)
----------------------------------------------------------------------------------------
Name/Position # $ Value # $ Value # $ Value # $ Value
==============================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Stephen C. Byelick 40,500 0 -- -- 16,200 195,413 -- --
President and CEO
- - ------------------------------------------------------------------------------------------------------------------------------
Harry G. Murphy 40,500 0 -- -- 16,200 195,413 -- --
Vice President and Secretary
- - ------------------------------------------------------------------------------------------------------------------------------
All Executive Officers as a Group 81,000 0 -- -- 32,400 390,826 -- --
- - ------------------------------------------------------------------------------------------------------------------------------
All Outside Directors as a Group -- -- 40,500 0 -- -- 19,440 $234,495
- - ------------------------------------------------------------------------------------------------------------------------------
All Non-Executive employees as a N/A N/A -- -- N/A N/A -- --
group(5)
==============================================================================================================================
</TABLE>
(1) As of the Record Date, no grants have been made under the Employee
Option Plan. It is not determinable at this time what benefits, if any,
each of the persons or groups listed will receive under such plan. The
numbers in the table reflect the Compensation Committee's intentions of
grants to be made upon the effective date of approval of the Employee
Option Plan.
(2) On the Effective Date, each outside director will receive a
non-qualified stock option to purchase 8,100 Shares with an Exercise
Price equal to the Fair Market Value of a Share on the Effective Date.
On each anniversary of the date of the grant until all Shares are
exercisable, 1,620 Shares subject to each option will become
exercisable. Such Options will expire on the earliest of the director's
removal for cause or on the tenth anniversary of the date of the grant.
(3) As of the Record Date, no grants have been made under the Employee RRP.
It is not determinable at this time what benefits, if any, each of the
persons or groups listed will receive under such plan. The numbers in
the table reflect the Compensation Committee's intentions of grants to
be made upon the effective date of approval of the Employee Option
Plan.
(4) On the Effective Date, each Eligible Outside Director will receive an
Award of 3,240 Shares and each Eligible Director Emeritus will receive
an Award of 1,080 Shares. On each anniversary of the date of the grant
until all Shares are vested, 20% of such Award will become vested and
distributed to the grantee. The dollar value is based on a price per
Share of $12.0625 (the fair market value as reported on NASDAQ on the
Record Date). The actual value of the benefits under this plan will
depend on the fair market value of a Share on the Effective Date, which
is indeterminable at this time.
(5) As of the date of this Proxy Statement, no determination has been made
as to whether other employees will receive grants or if so, the amount
of such grants.
32
<PAGE> 36
------------------------------------------------------------------
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
(PROPOSAL SIX)
------------------------------------------------------------------
The Board of Directors has appointed the firm of KPMG Peat Marwick LLP
to act as independent auditors for the company for the fiscal year ending March
31, 1997, subject to ratification of such appointment by the Company's
shareholders.
A representative of KPMG Peat Marwick LLP is expected to be present at
the Annual Meeting and will be given an opportunity to make a statement if he or
she desires to do so and will be available to respond to appropriate questions.
No determination has been made as to what action the Board of Directors would
take if the shareholders do not ratify the appointment.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE "FOR"
APPROVAL OF THE RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
------------------------------------------------------------------
AUTHORIZATION OF THE BOARD OF DIRECTORS, IN ITS DISCRETION,
TO DIRECT THE VOTE OF THE PROXIES UPON SUCH OTHER
BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING,
AND ANY ADJOURNMENT THEREOF, INCLUDING, WITHOUT
LIMITATION, A MOTION TO ADJOURN THE MEETING
(PROPOSAL SEVEN)
------------------------------------------------------------------
The Board is not aware of any other business that may properly come
before the Annual Meeting. The Board seeks the authorization of the shareholders
of the Company, in the event such matters come before the meeting, including,
but not limited to, consideration of whether to postpone or adjourn the Annual
Meeting once called to order, to direct the manner in which those shares
represented at the Annual Meeting by proxies solicited pursuant to this Proxy
Statement shall be voted as to such other matters. As to all such matters, the
Board intends that it would direct the voting of such shares in the manner
determined by the Board, in its discretion, and in the exercise of it duties and
responsibilities, to be in the best interests of the Company and its
shareholders, taken as a whole.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE "FOR"
AUTHORIZATION OF THE BOARD OF DIRECTORS OF TAPPAN ZEE FINANCIAL, INC., IN ITS
DISCRETION, TO DIRECT THE VOTE OF THE PROXIES UPON SUCH OTHER BUSINESS AS MAY
PROPERLY COME BEFORE THE MEETING, AND ANY ADJOURNMENT THEREOF, INCLUDING,
WITHOUT LIMITATION, A MOTION TO ADJOURN THE MEETING
33
<PAGE> 37
ADDITIONAL INFORMATION
DATE FOR SUBMISSION OF SHAREHOLDER PROPOSALS
Any shareholder proposal intended for inclusion in the Company's proxy
statement and proxy card relating to the Company's 1997 Annual Meeting of
shareholders must be received by the Company by March 1, 1997, pursuant to the
proxy soliciting regulations of the SEC. Nothing in this paragraph shall be
deemed to require the Company to include in its proxy statement and proxy card
for such meeting any shareholder proposal which does not meet the requirements
of the SEC in effect at the time. Any such proposal will be subject to 17 C.F.R.
Section240.14a-8 of the Rules and Regulations promulgated by the SEC under the
Exchange Act.
NOTICE OF BUSINESS TO BE CONDUCTED AT ANNUAL MEETING
The Bylaws of the Company provide an advance notice procedure for a
shareholder to properly bring business before an annual meeting or to nominate
any person for election to the Board of Directors. The shareholder must be a
shareholder of record and have given timely notice thereof in writing to the
Secretary of the Company. To be timely, a shareholder's notice must be delivered
to or received by the Secretary not later than the following dates: (i) with
respect to an annual meeting of shareholders, sixty (60) days in advance of such
meeting if such meeting is to be held on a day which is within thirty (30) days
preceding the anniversary of the previous year's annual meeting, or ninety (90)
days in advance of such meeting if such meeting is to be held on or after the
anniversary of the previous year's annual meeting; and (ii) with respect to an
annual meeting of shareholders held at a time other than within the time periods
set forth in the immediately preceding clause (i), the close of business on the
tenth (10th) day following the date on which notice of such meeting is first
given to shareholders. Notice shall be deemed to first be given to shareholders
when disclosure of such date of the meeting of shareholders is first made in a
press release reported to Dow Jones News Services, Associated Press or
comparable national news service, or in a document publicly filed by the Company
with the SEC pursuant to Section 13, 14 or 15(d) of the Exchange Act. A
shareholder's notice to the Secretary shall set forth as to the matter the
shareholder proposes to bring before the annual meeting (a) a brief description
of the proposal desired to be brought before the annual meeting or if a
nomination for election as a director, the name, age, business and residence
address and principal occupation or employment of such nominee, such nominee's
written consent to serve as director, if elected, and such other information
required by the proxy rules of the SEC; (b) the name and address of the
shareholder proposing such business; (c) the class and number of shares of the
Company which are owned of record by the shareholder and the dates upon which he
or she acquired such shares; (d) the identification of any person employed,
retained, or to be compensated by the shareholder submitting the proposal, or
any person acting on his or her behalf, to make solicitations or recommendations
to shareholders for the purpose of assisting in the passage of such proposal,
and a brief description of the terms of such employment, retainer or arrangement
for compensation; and (e) such other information regarding such proposal as
would be required to be included in a proxy statement filed pursuant to the
proxy rules of the SEC or required to be delivered to the Company pursuant to
the proxy rules of the Securities and Exchange Commission (whether or not the
Company is then subject to such rules). Nothing in this paragraph shall be
deemed to require the Company to include in its proxy statement and proxy card
relating to an annual meeting any shareholder proposal or nomination which does
not meet all of the requirements for inclusion established by the SEC in effect
at the time such proposal or nomination is received. See "Date For Submission of
Shareholder Proposals."
34
<PAGE> 38
OTHER MATTERS
As of the date of this Proxy Statement, the Board of Directors of the
Company does not know of any other matters to be brought before the shareholders
at the 1996 Annual Meeting. See "Authorization of the Board of Directors, in its
discretion, to Direct the Vote of the Proxies upon such Other Business as may
properly come before the Meeting, and any adjournment thereof, including,
without limitation, a Motion to Adjourn the Meeting (Proposal Seven)."
A copy of the 1996 Annual Report to shareholders, including the
consolidated financial statements and prepared in conformity with generally
accepted accounting principles, for the fiscal year ended March 31, 1996
accompanies this Proxy Statement. The consolidated financial statements have
been audited by KPMG Peat Marwick LLP whose report appears in the Annual Report.
THE COMPANY IS REQUIRED TO FILE AN ANNUAL REPORT ON FORM 10-K WITH THE SEC.
SHAREHOLDERS MAY OBTAIN, FREE OF CHARGE, A COPY OF THE FORM 10-K (WITHOUT
EXHIBITS) BY WRITING TO HARRY G. MURPHY, VICE PRESIDENT AND SECRETARY, TAPPAN
ZEE FINANCIAL, INC., 75 NORTH BROADWAY, TARRYTOWN, NEW YORK 10591, OR BY CALLING
(914) 631-0344.
By Order of the Board of Directors
/s/ Harry G. Murphy
Harry G. Murphy
Secretary
Tarrytown, New York
May 31, 1996
TO ASSURE THAT YOUR SHARES ARE REPRESENTED AT THE ANNUAL MEETING
PLEASE COMPLETE, SIGN, DATE AND PROMPTLY RETURN
THE ACCOMPANYING PROXY CARD IN THE
POSTAGE-PAID ENVELOPE PROVIDED.
35
<PAGE> 39
EXHIBIT A
TAPPAN ZEE FINANCIAL, INC. 1996 STOCK OPTION PLAN FOR OFFICERS AND EMPLOYEES
ARTICLE I
PURPOSE
SECTION 1.1 GENERAL PURPOSE OF THE PLAN.
The purpose of the Plan is to promote the growth and profitability of
Tappan Zee Financial, Inc., to provide certain key officers and employees of
Tappan Zee Financial, Inc. and its affiliates with an incentive to achieve
corporate objectives, to attract and retain individuals of outstanding
competence and to provide such individuals with an equity interest in Tappan Zee
Financial, Inc.
ARTICLE II
DEFINITIONS
The following definitions shall apply for the purposes of this Plan,
unless a different meaning is plainly indicated by the context:
SECTION 2.1 BANK means Tarrytowns Bank, FSB, a federally chartered
savings institution, and any successor thereto.
SECTION 2.2 BOARD means the board of directors of Tappan Zee Financial,
Inc.
SECTION 2.3 CHANGE IN CONTROL OF THE COMPANY means any of the following
events:
(a) approval by the stockholders of Tappan Zee Financial, Inc. of a
transaction that would result in the reorganization, merger or consolidation of
Tappan Zee Financial, Inc. with one or more other persons, other than a
transaction following which:
(i) at least 51% of the equity ownership interests of the
entity resulting from such transaction are beneficially owned (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) in substantially the
same relative proportions by persons who, immediately prior to such transaction,
beneficially owned (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) at least 51% of the outstanding equity ownership interests in
Tappan Zee Financial, Inc.; and
(ii) at least 51% of the securities entitled to vote generally
in the election of directors of the entity resulting from such transaction are
beneficially owned (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) in substantially the same relative proportions by persons who,
immediately prior to such transaction, beneficially owned (within the meaning of
Rule 13d-3 promulgated under the Exchange Act) at least 51% of the securities
entitled to vote generally in the election of directors of Tappan Zee Financial,
Inc.;
(b) the acquisition of all or substantially all of the assets of Tappan
Zee Financial, Inc. or beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of 20% or more of the outstanding securities
of Tappan Zee Financial, Inc. entitled to vote generally in the election of
directors by any person or by any persons acting in concert, or approval by the
stockholders of Tappan Zee Financial, Inc. of any transaction which would result
in such an acquisition;
(c) a complete liquidation or dissolution of Tappan Zee Financial,
Inc., or approval by the stockholders of Tappan Zee Financial, Inc. of a plan
for such liquidation or dissolution;
(d) the occurrence of any event if, immediately following such event,
at least 50% of the members of the Board of Directors of Tappan Zee Financial,
Inc. do not belong to any of the following groups:
(i) individuals who were members of the Board of Directors of
Tappan Zee Financial, Inc. on the effective date of this Plan; or
(ii) individuals who first became members of the Board of
Directors of Tappan Zee Financial, Inc. after the effective date of this Plan
either:
A-1
<PAGE> 40
(A) upon election to serve as a member of the Board of
Directors of Tappan Zee Financial, Inc. by affirmative vote of three-quarters of
the members of such Board, or of a nominating committee thereof, in office at
the time of such first election; or
(B) upon election by the stockholders of Tappan Zee Financial,
Inc. to serve as a member of the Board of Tappan Zee Financial, Inc., but only
if nominated for election by affirmative vote of three-quarters of the members
of the Board of Directors of Tappan Zee Financial, Inc., or of a nominating
committee thereof, in office at the time of such first nomination;
provided, however, that such individual's election or nomination did
not result from an actual or threatened election contest (within the meaning of
Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) or other
actual or threatened solicitation of proxies or consents (within the meaning of
Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) other than by
or on behalf of the Board of Tappan Zee Financial, Inc.; or
(e) any event which would be described in section 2.3(a), (b), (c) or
(d) if the term "Bank" were substituted for the term "Tappan Zee FInancial,
Inc." therein.
In no event, however, shall a Change in Control be deemed to have occurred as a
result of any acquisition of securities or assets of Tappan Zee Financial, Inc.,
the Bank, or a subsidiary of either of them, by Tappan Zee Financial, Inc., the
Bank, or a subsidiary of either of them, or by any employee benefit plan
maintained by any of them. For purposes of this section 2.3, the term "person"
shall have the meaning assigned to it under sections 13(d)(3) or 14(d)(2) of the
Exchange Act.
SECTION 2.4 CODE means the Internal Revenue Code of 1986 (including the
corresponding provisions of any succeeding law).
SECTION 2.5 COMMITTEE means the Committee described in section 3.1.
SECTION 2.6 COMPANY means Tappan Zee Financial, Inc., a corporation
organized and existing under the laws of the State of Delaware, and any
successor thereto, the Bank and any successor thereto and, with the prior
approval of the Board, and subject to such terms and conditions as may be
imposed by the Board, any other savings bank, savings and loan association,
bank, corporation, financial institution or other business organization or
institution.
SECTION 2.7 DISABILITY means a condition of total incapacity, mental
or physical, for further performance of duty with the Company which the
Committee shall have determined, on the basis of competent medical evidence, is
likely to be permanent.
SECTION 2.8 DISINTERESTED BOARD MEMBER means a member of the Board who
(a) is not a current employee of the Company, (b) is not a former employee of
the Company who receives compensation for prior services (other than benefits
under a tax-qualified retirement plan) during the taxable year, (c) has not been
an officer of the Company, (d) does not receive remuneration from the Company,
either directly or indirectly, in any capacity other than as a director and (d)
is not currently and for a period of at least one year has not been eligible for
discretionary awards under any stock compensation plan of the Company. The term
Disinterested Board Member shall be interpreted in such manner as shall be
necessary to conform to the requirements of section 162(m) of the Code and Rule
16b-3 promulgated under the Exchange Act.
SECTION 2.9 EFFECTIVE DATE means July 11, 1996.
SECTION 2.10 ELIGIBLE INDIVIDUAL means any individual whom the
Committee may determine to be a key officer or employee of the Company and
select to receive a grant of an Option pursuant to the Plan.
SECTION 2.11 EXCHANGE ACT means the Securities Exchange Act of 1934, as
amended.
SECTION 2.12 EXERCISE PRICE means the price per Share at which Shares
subject to an Option may be purchased upon exercise of the Option, determined in
accordance with section 4.4.
SECTION 2.13 FAIR MARKET VALUE means, with respect to a Share on a
specified date:
A-2
<PAGE> 41
(a) the final reported sales price on the date in question (or if there
is no reported sale on such date, on the last preceding date on which any
reported sale occurred) as reported in the principal consolidated reporting
system with respect to securities listed or admitted to trading on the principal
United States securities exchange on which the Shares are listed or admitted to
trading; or
(b) if the Shares are not listed or admitted to trading on any such
exchange, the closing bid quotation with respect to a Share on such date on the
National Association of Securities Dealers Automated Quotations System, or, if
no such quotation is provided, on another similar system, selected by the
Committee, then in use; or
(c) if sections 2.12(a) and (b) are not applicable, the fair market
value of a Share as the Committee may determine.
SECTION 2.14 INCENTIVE STOCK OPTION means a right to purchase Shares
that is granted pursuant to section 4.1, that is designated by the Committee to
be an Incentive Stock Option and that is intended to satisfy the requirements of
section 422 of the Code.
SECTION 2.15 LIMITED STOCK APPRECIATION RIGHT means a right granted
pursuant to section 4.9.
SECTION 2.16 NON-QUALIFIED STOCK OPTION means a right to purchase
Shares that (a) is granted pursuant to section 4.1 and is designated by the
Committee to be a Non-Qualified Stock Option, or (b) does not satisfy the
requirements of section 422 of the Code.
SECTION 2.17 OPTION means either an Incentive Stock Option or a
Non-Qualified Stock Option.
SECTION 2.18 OPTION PERIOD means the period during which an Option may
be exercised, determined in accordance with section 4.5.
SECTION 2.19 PERSON means an individual, a corporation, a bank, a
savings bank, a savings and loan association, a financial institution, a
partnership, an association, a joint-stock company, a trust, an estate, an
unincorporated organization and any other business organization or institution.
SECTION 2.20 PLAN means the Tappan Zee Financial, Inc. 1996 Stock
Option Plan for Officers and Employees, as amended from time to time.
SECTION 2.21 QUALIFIED DOMESTIC RELATIONS ORDER means a Domestic
Relations Order that: (a) clearly specifies (i) the name and last known mailing
address of the Option holder and of each person given rights under such Domestic
Relations Order, (ii) the amount or percentages of the Option holder's benefits
under this Plan to be paid to each person covered by such Domestic Relations
Order, (iii) the number of payments or the period to which such Domestic
Relations Order applies, and (iv) the name of this Plan; and (b) does not
require the payment of a benefit in a form or amount that is (i) not otherwise
provided for under the Plan, or (ii) inconsistent with a previous Qualified
Domestic Relations Order. For the purposes of this Plan, a "Domestic Relations
Order" means a judgment, decree or order (including the approval of a property
settlement) that is made pursuant to a state domestic relations or community
property law and relates to the provision of child support, alimony payments, or
marital property rights to a spouse, child or other dependent of an Option
holder.
SECTION 2.22 RETIREMENT means retirement at the normal or early
retirement date as set forth in any tax-qualified retirement plan of the Bank.
SECTION 2.23 SHARE means a share of Common Stock, par value $.01 per
share, of Tappan Zee Financial, Inc.
SECTION 2.24 TERMINATION FOR CAUSE means one of the following:
(a) for an Eligible Employee who is not an officer or employee of any
bank or savings institution regulated by the Office of Thrift Suprevision,
"Termination for Cause" means termination of employment with the Company upon
the occurrence of any of the following: (A) the employee intentionally engages
in dishonest conduct in connection with his performance of services for the
Company resulting in his conviction of a felony; (B) the employee is convicted
of, or pleads guilty or nolo contendere to, a felony or any crime involving
moral turpitude; (C) the employee willfully fails or refuses to perform his
duties under any employment or retention agreement and
A-3
<PAGE> 42
fails to cure such breach within sixty (60) days following written notice
thereof from the Company; (D) the employee breaches his fiduciary duties to the
Company for personal profit; or (E) the employee's willful breach or violation
of any law, rule or regulation (other than traffic violations or similar
offenses), or final cease and desist order in connection with his performance of
services for the Company;
(b) for an Eligible Employee who is an officer or employee of a bank or
savings institution regulated by the Office of Thrift Suprevision, "Termination
for Cause" means termination of employment for personal dishonesty,
incompetence, willful misconduct, breach of fiduciary duty involving personal
profit, intentional failure to perform stated duties, willful violation of any
law, rule or regulation (other than traffic violations or similar offenses) or
final cease and desist order, or any material breach of this Agreement, in each
case as measured against standards generally prevailing at the relevant time in
the savings and community banking industry; provided, however, that such
individual shall not be deemed to have been discharged for cause unless and
until he shall have received a written notice of termination from the Board,
which notice shall be given to such individual not later than five (5) business
days after the Board adopts, and shall be accompanied by, a resolution duly
approved by affirmative vote of a majority of the entire Board at a meeting
called and held for such purpose (which meeting shall be held not more than
fifteen (15) days nor more than thirty (30) days after notice to the
individual), at which meeting there shall be a reasonable opportunity for the
individual to make oral and written presentations to the members of the Board,
on his own behalf, or through a representative, who may be his legal counsel, to
refute the grounds for the proposed determination) finding that in the good
faith opinion of the Board grounds exist for discharging the individual for
cause.
ARTICLE III
ADMINISTRATION
SECTION 3.1 COMMITTEE.
The Plan shall be administered by a Committee consisting of the members
of the Compensation Committee of Tappan Zee Financial, Inc. who are
Disinterested Board Members. If fewer than three members of the Compensation
Committee are Disinterested Board Members, then the Board shall appoint to the
Committee such additional Disinterested Board Members as shall be necessary to
provide for a Committee consisting of at least three Disinterested Board
Members.
SECTION 3.2 COMMITTEE ACTION.
The Committee shall hold such meetings, and may make such
administrative rules and regulations, as it may deem proper. A majority of the
members of the Committee shall constitute a quorum, and the action of a majority
of the members of the Committee present at a meeting at which a quorum is
present, as well as actions taken pursuant to the unanimous written consent of
all of the members of the Committee without holding a meeting, shall be deemed
to be actions of the Committee. All actions of the Committee shall be final and
conclusive and shall be binding upon the Company and all other interested
parties. Any Person dealing with the Committee shall be fully protected in
relying upon any written notice, instruction, direction or other communication
signed by the secretary of the Committee and one member of the Committee, by two
members of the Committee or by a representative of the Committee authorized to
sign the same in its behalf.
SECTION 3.3 COMMITTEE RESPONSIBILITIES.
Subject to the terms and conditions of the Plan and such limitations as
may be imposed from time to time by the Board, the Committee shall be
responsible for the overall management and administration of the Plan and shall
have such authority as shall be necessary or appropriate in order to carry out
its responsibilities, including, without limitation, the authority:
(a) to interpret and construe the Plan, and to determine all questions
that may arise under the Plan as to eligibility for participation in the Plan,
the number of Shares subject to the Options, if any, to be granted, and the
terms and conditions thereof;
(b) to adopt rules and regulations and to prescribe forms for the
operation and administration of the Plan; and
(c) to take any other action not inconsistent with the provisions of
the Plan that it may deem necessary or appropriate.
A-4
<PAGE> 43
ARTICLE IV
STOCK OPTIONS
SECTION 4.1 IN GENERAL.
Subject to the limitations of the Plan, the Committee may, in its
discretion, grant to an Eligible Individual an Option to purchase Shares. Any
such Option shall be evidenced by a written agreement which shall:
(a) designate the Option as either an Incentive Stock Option or a
Non-Qualified Stock Option;
(b) specify the number of Shares covered by the Option;
(c) specify the Exercise Price, determined in accordance with section
4.4, for the Shares subject to the Option;
(d) specify the Option Period determined in accordance with section
4.5;
(e) set forth specifically or incorporate by reference the applicable
provisions of the Plan; and
(f) contain such other terms and conditions not inconsistent with the
Plan as the Committee may, in its discretion, prescribe with respect to an
Option granted to an Eligible Individual.
SECTION 4.2 AVAILABLE SHARES.
Subject to section 5.3, the maximum aggregate number of Shares with
respect to which Options may be granted at any time shall be equal to the excess
of:
(a) 113,400 Shares; over
(b) the sum of:
(i) the number of Shares with respect to which previously
granted Options may then or may in the future be exercised; plus
(ii) the number of Shares with respect to which previously
granted Options have been exercised.
For purposes of this section 4.2, an Option shall not be considered as having
been exercised to the extent that such Option terminates by reason other than
the purchase of the related Shares.
SECTION 4.3 SIZE OF OPTION.
Subject to sections 4.2 and 4.10 and such limitations as the Board may
from time to time impose, the number of Shares as to which an Eligible
Individual may be granted Options shall be determined by the Committee, in its
discretion. Except as provided in section 4.10, the maximum number of Shares
that may be optioned to any one individual under this Plan during its entire
duration shall be the entire number of Shares available under the Plan.
SECTION 4.4 EXERCISE PRICE.
The price per Share at which an Option granted to an Eligible
Individual may be exercised shall be determined by the Committee, in its
discretion; provided, however, that the Exercise Price shall not be less than
the Fair Market Value of a Share on the date on which the Option is granted.
SECTION 4.5 OPTION PERIOD.
Subject to section 4.10, the Option Period during which an Option
granted to an Eligible Individual may be exercised shall commence on the date
specified by the Committee in the Option agreement and shall expire on the date
specified in the Option agreement or, if no date is specified, on the earliest
of:
A-5
<PAGE> 44
(a) the close of business on the last day of the three-month period
commencing on the date of the Eligible Individual's termination of employment
with the Company, other than on account of death or Disability, Retirement or a
Termination for Cause;
(b) the close of business on the last day of the one-year period
commencing on the date of the Eligible Individual's termination of employment
due to death, Disability or Retirement;
(c) the date and time when the Eligible Individual ceases to be an
employee of the Company due to a Termination for Cause; and
(d) the last day of the ten-year period commencing on the date on which
the Option was granted.
SECTION 4.6 METHOD OF EXERCISE.
(a) Subject to the limitations of the Plan and the Option agreement, an
Option holder may, at any time during the Option Period, exercise his right to
purchase all or any part of the Shares to which the Option relates; provided,
however, that the minimum number of Shares which may be purchased shall be 100,
or, if less, the total number of Shares relating to the Option which remain
unpurchased. An Option holder shall exercise an Option to purchase Shares by:
(i) giving written notice to the Committee, in such form and manner as
the Committee may prescribe, of his intent to exercise the Option;
(ii) delivering to the Committee full payment, consistent with section
4.6(b), for the Shares as to which the Option is to be exercised; and
(iii) satisfying such other conditions as may be prescribed in the
Option agreement.
(b) The Exercise Price of Shares to be purchased upon exercise of any
Option shall be paid in full in cash (by certified or bank check or such other
instrument as the Company may accept) or, if and to the extent permitted by the
Committee, by one or more of the following: (i) in the form of Shares already
owned beneficially for a period of more than six months by the Option holder
having an aggregate Fair Market Value on the date the Option is exercised equal
to the aggregate Exercise Price to be paid; (ii) after a period of six months
from the date of grant of any such Option, by requesting the Company to cancel
without payment Options outstanding to such Person for that number of Shares
whose aggregate Fair Market Value on the date of exercise, when reduced by their
aggregate Exercise Price, equals the aggregate Exercise Price of the Options
being exercised; or (iii) by a combination thereof; provided, however, that an
election under section 4.6(b)(ii) or (iii) shall be subject to the conditions
and limitations of Rule 16b-3(e) promulgated under the Exchange Act. Payment for
any Shares to be purchased upon exercise of an Option may also be made by
delivering a properly executed exercise notice to the Company, together with a
copy of irrevocable instructions to a broker to deliver promptly to the Company
the amount of sale or loan proceeds to pay the purchase price. To facilitate the
foregoing, the Company may enter into agreements for coordinated procedures with
one or more brokerage firms.
(c) When the requirements of section 4.6(a) and (b) have been
satisfied, the Committee shall take such action as is necessary to cause the
issuance of a stock certificate evidencing the Option holder's ownership of such
Shares. The Person exercising the Option shall have no right to vote or to
receive dividends, nor have any other rights with respect to the Shares, prior
to the date as of which such Shares are transferred to such Person on the stock
transfer records of the Company, and no adjustments shall be made for any
dividends or other rights for which the record date is prior to the date as of
which such transfer is effected, except as may be required under section 5.3.
SECTION 4.7 LIMITATIONS ON OPTIONS.
(a) An Option by its terms shall not be transferable by the Option
holder other than by will or by the laws of descent and distribution, or
pursuant to the terms of a Qualified Domestic Relations Order, and shall be
exercisable, during the lifetime of the Option holder, only by the Option holder
or an alternate payee designated pursuant to such a Qualified Domestic Relations
Order.
A-6
<PAGE> 45
(b) The Company's obligation to deliver Shares with respect to an
Option shall, if the Committee so requests, be conditioned upon the receipt of a
representation as to the investment intention of the Option holder to whom such
Shares are to be delivered, in such form as the Committee shall determine to be
necessary or advisable to comply with the provisions of applicable federal,
state or local law. It may be provided that any such representation shall become
inoperative upon a registration of the Shares or upon the occurrence of any
other event eliminating the necessity of such representation. The Company shall
not be required to deliver any Shares under the Plan prior to (i) the admission
of such Shares to listing on any stock exchange on which Shares may then be
listed, or (ii) the completion of such registration or other qualification under
any state or federal law, rule or regulation as the Committee shall determine to
be necessary or advisable.
SECTION 4.8 ADDITIONAL RESTRICTIONS ON INCENTIVE STOCK OPTIONS.
In addition to the limitations of section 4.7, an Option designated by
the Committee to be an Incentive Stock Option shall be subject to the following
limitations:
(a) If, for any calendar year, the sum of (i) plus (ii) exceeds
$100,000, where (i) equals the Fair Market Value (determined as of the date of
the grant) of Shares subject to an Option intended to be an Incentive Stock
Option which first become available for purchase during such calendar year, and
(ii) equals the Fair Market Value (determined as of the date of grant) of Shares
subject to any other options intended to be Incentive Stock Options and
previously granted to the same Eligible Individual which first become
exercisable in such calendar year, then that number of Shares optioned which
causes the sum of (i) and (ii) to exceed $100,000 shall be deemed to be Shares
optioned pursuant to a Non-Qualified Stock Option or Non-Qualified Stock
Options, with the same terms as the Option or Options intended to be an
Incentive Stock Option;
(b) The Exercise Price of an Incentive Stock Option granted to an
Eligible Individual who, at the time the Option is granted, owns Shares
comprising more than 10% of the total combined voting power of all classes of
stock of the Company shall not be less than 110% of the Fair Market Value of a
Share, and if an Option designated as an Incentive Stock Option shall be granted
at an Exercise Price that does not satisfy this requirement, the designated
Exercise Price shall be observed and the Option shall be treated as a
Non-Qualified Stock Option;
(c) The Option Period of an Incentive Stock Option granted to an
Eligible Individual who, at the time the Option is granted, owns Shares
comprising more than 10% of the total combined voting power of all classes of
stock of the Company, shall expire no later than the fifth anniversary of the
date on which the Option was granted, and if an Option designated as an
Incentive Stock Option shall be granted for an Option Period that does not
satisfy this requirement, the designated Option Period shall be observed and the
Option shall be treated as a Non-Qualified Stock Option;
(d) An Incentive Stock Option that is exercised during its designated
Option Period but more than (i) three (3) months after the termination of
employment with the Company (other than on account of disability within the
meaning of section 22(e)(3) of the Code or death) of the Eligible Individual to
whom it was granted; and (ii) one (1) year after such individual's termination
of employment with the Company due to disability (within the meaning of section
22(e)(3) of the Code); may be exercised in accordance with the terms but shall
be treated as a Non-Qualified Stock Option; and
(e) Except with the prior written approval of the Committee, no
individual shall dispose of Shares acquired pursuant to the exercise of an
Incentive Stock Option until after the later of (i) the second anniversary of
the date on which the Incentive Stock Option was granted, or (ii) the first
anniversary of the date on which the Shares were acquired.
SECTION 4.9 LIMITED STOCK APPRECIATION RIGHTS.
(a) Each Option granted under this Plan shall be accompanied by a
Limited Stock Appreciation Right that is exercisable at the times and upon the
terms and conditions set forth herein. Each Limited Stock Appreciation Right
granted hereunder shall be exercisable for a period commencing on the date on
which a Change in Control of the Company occurs and ending six (6) months after
such date or, if later in the case of any Person, thirty (30) days after the
earliest date on which such Person may exercise the Limited Stock Appreciation
Right without subjecting himself to liability under section 16 of the Securities
Exchange Act of 1934, as amended. A Person in possession of a Limited Stock
Appreciation Right granted hereunder may exercise such Limited Stock
Appreciation Right by:
A-7
<PAGE> 46
(i) giving written notice to the Committee, in such form and manner as
the Committee may prescribe, of his intent to exercise the Limited Stock
Appreciation Right; and
(ii) agreeing in such written notice to the cancellation of Options
then outstanding to him for a number of Shares equal to the number of Shares for
which the Limited Stock Appreciation Right is being exercised.
Except as provided in section 4.9(c), within ten (10) days after the giving of
such a notice, the Committee shall cause the Company to deliver to such Person a
monetary payment in an amount per Share equal to the amount by which the Change
in Control Consideration exceeds the Exercise Price per Share of each of the
Options being cancelled.
(b) For purposes of section 4.9(a), the term Change in Control
Consideration shall mean the greater of (i) the highest price per Share paid by
any Person who initiated or sought to effect the Change in Control for a Share
during the period of one (1) year ending on the date of the relevant Change in
Control of the Company; and (ii) the average Fair Market Value of a Share over
the last ten (10) trading days preceding the date of exercise of the Limited
Stock Appreciation Right.
(c) Notwithstanding anything herein contained to the contrary, the
Limited Stock Appreciation Rights granted hereunder shall be cancelled at the
effective time of a Change in Control of the Company resulting from a
transaction between the Company and another party pursuant to a written
agreement whereby the consummation of the transaction is conditioned upon the
delivery to each Option holder, upon the closing of such transaction and in
exchange for the cancellation of all of such Option holder's outstanding
Options, of a monetary payment or property with a value equivalent to the value
of the Options being cancelled.
SECTION 4.10 REQUIRED REGULATORY PROVISIONS.
Notwithstanding anything contained herein to the contrary:
(a) no Option shall be granted under the Plan prior to the date on
which the Plan is approved by the holders of a majority of the Shares
outstanding on such date and eligible to vote upon the proposal to approve the
Plan;
(b) at any time prior to October 5, 1996, no individual may be granted
Options to purchase more than Forty Thousand Five Hundred (40,500) Shares;
(c) each Option granted prior to October 5, 1996 shall become
exercisable as follows:
(i) prior to the first anniversary of the date on which the
Option is granted, the Option shall not be exercisable;
(ii) on and after the first anniversary, but prior to the
second anniversary, of the date on which the Option is granted, the Option may
be exercised as to a maximum of twenty percent (20%) of the Shares subject to
the Option when granted;
(iii) on and after the second anniversary, but prior to the
third anniversary, of the date on which the Option is granted, the Option may be
exercised as to a maximum of forty percent (40%) of the Shares subject to the
Option when granted, including in such forty percent (40%) any optioned Shares
purchased prior to such second anniversary;
(iv) on and after the third anniversary, but prior to the
fourth anniversary, of the date on which the Option is granted, the Option may
be exercised as to a maximum of sixty percent (60%) of the Shares subject to the
Option when granted, including in such sixty percent (60%) any optioned Shares
purchased prior to such third anniversary;
(v) on and after the fourth anniversary, but prior to the
fifth anniversary, of the date on which the Option is granted, the Option may be
exercised as to a maximum of eighty percent (80%) of the Shares subject to the
Option when granted, including in such eighty percent (80%) any optioned Shares
purchased prior to such fourth anniversary; and
A-8
<PAGE> 47
(vi) on and after the fifth anniversary of the date on which
the Option is granted and for the remainder of the Option Period, the Option may
be exercised as to the entire number of optioned Shares not theretofore
purchased;
provided, however, that such an Option shall become fully exercisable,
and all optioned Shares not previously purchased shall become available for
purchase, on the date of the Option holder's death or Disability; and
(d) The Exercise Period of any Option granted hereunder, whether or not
previously vested, shall be suspended as of the time and date at which the
Option holder has received notice from the Board that his or her employment is
subject to a possible Termination for Cause. Such suspension shall remain in
effect until the Option holder receives official notice from the Board that he
or she has been cleared of any possible Termination for Cause, at which time,
the original Exercise Period shall be reinstated without any adjustment for the
intervening suspended period.
(e) No Option granted hereunder, whether or not previously vested,
shall be exercised after the time and date at which the Option holder's
employment with the Company is terminated in a Termination for Cause.
ARTICLE V
AMENDMENT AND TERMINATION
SECTION 5.1 TERMINATION.
The Board may suspend or terminate the Plan in whole or in part at any
time prior to the tenth anniversary of the Effective Date by giving written
notice of such suspension or termination to the Committee Unless sooner
terminated, the Plan shall terminate automatically on the day preceding the
tenth anniversary of the Effective Date. In the event of any suspension or
termination of the Plan, all Options theretofore granted under the Plan that are
outstanding on the date of such suspension or termination of the Plan shall
remain outstanding and exercisable for the period and on the terms and
conditions set forth in the Option agreements evidencing such Options.
SECTION 5.2 AMENDMENT.
The Board may amend or revise the Plan in whole or in part at any time;
provided, however, that if the amendment or revision:
(a) materially increases the benefits accruing under the Plan;
(b) materially increases the number of Shares which may be issued under
the Plan; or
(c) materially modifies the requirements as to eligibility for Options
under the Plan;
such amendment or revision shall be subject to approval by the shareholders of
the Company; and provided, further, that no amendment required to comply with or
conform to any condition imposed under section 162(m) of the Code on federal
income tax deductions allowable to the Company in respect of the Plan shall
require such approval.
SECTION 5.3 ADJUSTMENTS IN THE EVENT OF A BUSINESS REORGANIZATION.
(a) In the event of any merger, consolidation, or other business
reorganization in which the Company is the surviving entity, and in the event of
any stock split, stock dividend or other event generally affecting the number of
Shares held by each Person who is then a holder of record of Shares, the number
of Shares covered by each outstanding Option and the number of Shares available
pursuant to section 4.2 shall be adjusted to account for such event. Such
adjustment shall be effected by multiplying such number of Shares by an amount
equal to the number of Shares that would be owned after such event by a Person
who, immediately prior to such event, was the holder of record of one Share, and
the Exercise Price of the Options shall be adjusted by dividing the Exercise
Price by such number of Shares; provided, however, that the Committee may, in
its discretion, establish another appropriate method of adjustment.
A-9
<PAGE> 48
(b) In the event of any merger, consolidation, or other business
reorganization in which the Company is not the surviving entity, any Options
granted under the Plan which remain outstanding may be cancelled as of the
effective date of such merger, consolidation, business reorganization,
liquidation or sale by the Board upon 30 days' written notice to the Option
holder; provided, however, that on or as soon as practicable following the date
of cancellation, each Option holder shall receive a monetary payment in such
amount, or other property of such kind and value, as the Board determines in
good faith to be equivalent in value to the Options that have been cancelled.
(c) In the event that the Company shall declare and pay any dividend
with respect to Shares (other than a dividend payable in Shares) which results
in a nontaxable return of capital to the holders of Shares for federal income
tax purposes or otherwise than by dividend makes distribution of property to the
holders of its Shares, the Company shall make an equivalent payment to each
Person holding an outstanding Option as of the record date for such dividend.
Such payment shall be made at substantially the same time, in substantially the
same form and in substantially the same amount per optioned Share as the
dividend or other distribution paid with respect to outstanding Shares;
provided, however, that if any dividend or distribution on outstanding Shares is
paid in property than cash, the Company, in its discretion applied uniformly to
all outstanding Options, may make such payment in a cash amount per optioned
Share equal in fair market value to the fair market value of the non-cash
dividend or distribution.
ARTICLE VI
MISCELLANEOUS
SECTION 6.1 STATUS AS AN EMPLOYEE BENEFIT PLAN.
This Plan is not intended to satisfy the requirements for qualification
under section 401(a) of the Code or to satisfy the definitional requirements for
an "employee benefit plan" under section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended. It is intended to be a non-qualified incentive
compensation program that is exempt from the regulatory requirements of the
Employee Retirement Income Security Act of 1974, as amended. The Plan shall be
construed and administered so as to effectuate this intent.
SECTION 6.2 NO RIGHT TO CONTINUED EMPLOYMENT.
Neither the establishment of the Plan nor any provisions of the Plan
nor any action of the Board or the Committee with respect to the Plan shall be
held or construed to confer upon any Eligible Individual any right to a
continuation of employment by the Company. The Company reserves the right to
dismiss any Eligible Individual or otherwise deal with any Eligible Individual
to the same extent as though the Plan had not been adopted.
SECTION 6.3 CONSTRUCTION OF LANGUAGE.
Whenever appropriate in the Plan, words used in the singular may be
read in the plural, words used in the plural may be read in the singular, and
words importing the masculine gender may be read as referring equally to the
feminine or the neuter. Any reference to an Article or section number shall
refer to an Article or section of this Plan unless otherwise indicated.
SECTION 6.4 GOVERNING LAW.
The Plan shall be construed, administered and enforced according to the
laws of the State of New York without giving effect to the conflict of laws
principles thereof, except to the extent that such laws are preempted by federal
law.
SECTION 6.5 HEADINGS.
The headings of Articles and sections are included solely for
convenience of reference. If there is any conflict between such headings and the
text of the Plan, the text shall control.
SECTION 6.6 NON-ALIENATION OF BENEFITS.
The right to receive a benefit under the Plan shall not be subject in
any manner to anticipation, alienation or assignment, nor shall such right be
liable for or subject to debts, contracts, liabilities, engagements or torts,
except to the extent provided in a Qualified Domestic Relations Order.
A-10
<PAGE> 49
SECTION 6.7 TAXES.
The Company shall have the right to deduct from all amounts paid by the
Company in cash with respect to an Option under the Plan any taxes required by
law to be withheld with respect to such Option. Where any Person is entitled to
receive Shares pursuant to the exercise of an Option, the Company shall have the
right to require such Person to pay the Company the amount of any tax which the
Company is required to withhold with respect to such Shares, or, in lieu
thereof, to retain, or to sell without notice, a sufficient number of Shares to
cover the amount required to be withheld.
SECTION 6.8 APPROVAL OF SHAREHOLDERS.
The Plan and all Options and Limited Stock Appreciation Rights granted
hereunder shall be conditioned on the approval of the Plan by the holders of a
majority of the Shares of Tappan Zee Financial, Inc. entitled to vote at an
annual or special meeting of the holders of Shares held no earlier than April 5,
1996. No Option or Limited Stock Appreciation Rights under the Plan shall be
granted, nor shall any such Option or Limited Stock Appreciation Rights be
exercised or any Shares issued or purchased, prior to such approval.
SECTION 6.9 NOTICES.
Any communication required or permitted to be given under the Plan,
including any notice, direction, designation, comment, instruction, objection or
waiver, shall be in writing and shall be deemed to have been given at such time
as it is delivered personally or five (5) days after mailing if mailed, postage
prepaid, by registered or certified mail, return receipt requested, addressed to
such party at the address listed below, or at such other address as one such
party may by written notice specify to the other party:
(a) If to the Committee:
Tappan Zee Financial, Inc.
75 North Broadway
P.O. Box 187
Tarrytown, New York 10591
Attention: Corporate Secretary
(b) If to an Option holder, to the Option holder's address as shown in
the Company's personnel records.
A-11
<PAGE> 50
EXHIBIT B
TAPPAN ZEE FINANCIAL, INC. 1996 STOCK OPTION PLAN FOR OUTSIDE DIRECTORS
ARTICLE I
PURPOSE
SECTION 1.1 GENERAL PURPOSE OF THE PLAN.
The purpose of the Plan is to promote the growth and profitability of
Tappan Zee Financial, Inc., to provide Eligible Directors of Tappan Zee
Financial, Inc. and its affiliates with an incentive to achieve corporate
objectives, to attract and retain key directors of outstanding competence and to
provide such Eligible Directors with an equity interest in Tappan Zee Financial,
Inc.
ARTICLE II
DEFINITIONS
The following definitions shall apply for the purposes of this Plan,
unless a different meaning is plainly indicated by the context:
SECTION 2.1 BANK means Tarrytowns Bank, FSB, a federally chartered
savings institution, and any successor thereto.
SECTION 2.2 BOARD means the board of directors of Tappan Zee Financial,
Inc.
SECTION 2.3 CHANGE IN CONTROL OF THE COMPANY means any of the following
events:
(a) approval by the stockholders of Tappan Zee Financial, Inc. of a
transaction that would result in the reorganization, merger or consolidation of
Tappan Zee Financial, Inc. with one or more other persons, other than a
transaction following which:
(i) at least 51% of the equity ownership interests of the
entity resulting from such transaction are beneficially owned (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) in substantially the
same relative proportions by persons who, immediately prior to such transaction,
beneficially owned (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) at least 51% of the outstanding equity ownership interests in
Tappan Zee Financial, Inc.; and
(ii) at least 51% of the securities entitled to vote generally
in the election of directors of the entity resulting from such transaction are
beneficially owned (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) in substantially the same relative proportions by persons who,
immediately prior to such transaction, beneficially owned (within the meaning of
Rule 13d-3 promulgated under the Exchange Act) at least 51% of the securities
entitled to vote generally in the election of directors of Tappan Zee Financial,
Inc.;
(b) the acquisition of all or substantially all of the assets of Tappan
Zee Financial, Inc. or beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of 20% or more of the outstanding securities
of Tappan Zee Financial, Inc. entitled to vote generally in the election of
directors by any person or by any persons acting in concert, or approval by the
stockholders of Tappan Zee Financial, Inc. of any transaction which would result
in such an acquisition;
(c) a complete liquidation or dissolution of Tappan Zee Financial,
Inc., or approval by the stockholders of Tappan Zee Financial, Inc. of a plan
for such liquidation or dissolution;
(d) the occurrence of any event if, immediately following such event,
at least 50% of the members of the Board of Directors of Tappan Zee Financial,
Inc. do not belong to any of the following groups:
(i) individuals who were members of the Board of Directors of
Tappan Zee Financial, Inc. on the effective date of this Plan; or
(ii) individuals who first became members of the Board of
Directors of Tappan Zee Financial, Inc. after the effective date of this Plan
either:
B-1
<PAGE> 51
(A) upon election to serve as a member of the Board of
Directors of Tappan Zee Financial, Inc. by affirmative vote of three-quarters of
the members of such Board, or of a nominating committee thereof, in office at
the time of such first election; or
(B) upon election by the stockholders of Tappan Zee Financial,
Inc. to serve as a member of the Board of Directors of Tappan Zee Financial,
Inc., but only if nominated for election by affirmative vote of three-quarters
of the members of the Board of Directors of Tappan Zee Financial, Inc., or of a
nominating committee thereof, in office at the time of such first nomination;
provided, however, that such individual's election or nomination did
not result from an actual or threatened election contest (within the meaning of
Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) or other
actual or threatened solicitation of proxies or consents (within the meaning of
Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) other than by
or on behalf of the Board of Directors of Tappan Zee Financial, Inc.; or
(e) any event which would be described in section 2.3(a), (b), (c) or
(d) if the term "Bank" were substituted for the term "Tappan Zee Financial,
Inc." therein.
In no event, however, shall a Change in Control be deemed to have occurred as a
result of any acquisition of securities or assets of Tappan Zee Financial, Inc.,
the Bank, or a subsidiary of either of them, by Tappan Zee Financial, Inc., the
Bank, or a subsidiary of either of them, or by any employee benefit plan
maintained by any of them. For purposes of this section 2.4, the term "person"
shall have the meaning assigned to it under sections 13(d)(3) or 14(d)(2) of the
Exchange Act.
SECTION 2.4 CODE means the Internal Revenue Code of 1986 (including the
corresponding provisions of any succeeding law).
SECTION 2.5 COMMITTEE means the Committee described in section 3.1.
SECTION 2.6 COMPANY means Tappan Zee Financial, Inc., a corporation
organized and existing under the laws of the State of Delaware, and any
successor thereto, the Bank and any successor thereto and, with the prior
approval of the Board, and subject to such terms and conditions as may be
imposed by the Board, any other savings bank, savings and loan association,
bank, corporation, financial institution or other business organization or
institution.
SECTION 2.7 DISABILITY means a condition of total incapacity, mental
or physical, for further performance of duty with the Company which the
Committee shall have determined, on the basis of competent medical evidence, is
likely to be permanent.
SECTION 2.8 EFFECTIVE DATE means July 11, 1996.
SECTION 2.9 ELIGIBLE DIRECTOR means a member of the Board who is not
also an employee or an officer of the Company.
SECTION 2.10 EXCHANGE ACT means the Securities Exchange Act of 1934, as
amended.
SECTION 2.11 EXERCISE PRICE means the price per Share at which Shares
subject to an Option may be purchased upon exercise of the Option, determined in
accordance with section 4.3.
SECTION 2.12 FAIR MARKET VALUE means, with respect to a Share on a
specified date:
(a) the final reported sales price on the date in question (or if there
is no reported sale on such date, on the last preceding date on which any
reported sale occurred) as reported in the principal consolidated reporting
system with respect to securities listed or admitted to trading on the principal
United States securities exchange on which the Shares are listed or admitted to
trading; or
(b) if the Shares are not listed or admitted to trading on any such
exchange, the closing bid quotation with respect to a Share on such date on the
National Association of Securities Dealers Automated Quotations System, or, if
no such quotation is provided, on another similar system, selected by the
Committee, then in use; or
B-2
<PAGE> 52
(c) if sections 2.12(a) and (b) are not applicable, the fair market
value of a Share as the Committee may determine.
SECTION 2.13 LIMITED STOCK APPRECIATION RIGHT means a right granted
pursuant to section 4.7.
SECTION 2.14 OPTION means a right to purchase Shares that is granted
pursuant to section 4.1.
SECTION 2.15 OPTION PERIOD means the period during which an Option may
be exercised, determined in accordance with section 4.4.
SECTION 2.16 PERSON means an individual, a corporation, a bank, a
savings bank, a savings and loan association, a financial institution, a
partnership, an association, a joint-stock company, a trust, an estate, an
unincorporated organization and any other business organization or institution.
SECTION 2.17 PLAN means the 1996 Stock Option Plan for Outside
Directors of Tappan Zee Financial, Inc., as amended from time to time.
SECTION 2.18 QUALIFIED DOMESTIC RELATIONS ORDER means a Domestic
Relations Order that: (a) clearly specifies (i) the name and last known mailing
address of the Option holder and of each person given rights under such Domestic
Relations Order, (ii) the amount or percentages of the Option holder's benefits
under this Plan to be paid to each person covered by such Domestic Relations
Order, (iii) the number of payments or the period to which such Domestic
Relations Order applies, and (iv) the name of this Plan; and (b) does not
require the payment of a benefit in a form or amount that is (i) not otherwise
provided for under the Plan, or (ii) inconsistent with a previous Qualified
Domestic Relations Order. For the purposes of this Plan, a "Domestic Relations
Order" means a judgment, decree or order (including the approval of a property
settlement) that is made pursuant to a state domestic relations or community
property law and relates to the provision of child support, alimony payments, or
marital property rights to a spouse, child or other dependent of an Option
holder.
SECTION 2.19 SHARE means a share of Common Stock, par value $.01 per
share of Tappan Zee Financial, Inc.
ARTICLE III
ADMINISTRATION
SECTION 3.1 COMMITTEE.
The Plan shall be administered by a Committee which shall be the
Compensation Committee of Tappan Zee Financial, Inc.
SECTION 3.2 COMMITTEE ACTION.
The Committee shall hold such meetings, and may make such
administrative rules and regulations, as it may deem proper. A majority of the
members of the Committee shall constitute a quorum, and the action of a majority
of the members of the Committee present at a meeting at which a quorum is
present, as well as actions taken pursuant to the unanimous written consent of
all of the members of the Committee without holding a meeting, shall be deemed
to be actions of the Committee. All actions of the Committee shall be final and
conclusive and shall be binding upon the Company and all other interested
parties. Any Person dealing with the Committee shall be fully protected in
relying upon any written notice, instruction, direction or other communication
signed by the secretary of the Committee and one member of the Committee, by two
members of the Committee or by a representative of the Committee authorized to
sign the same in its behalf.
SECTION 3.3 COMMITTEE RESPONSIBILITIES.
Subject to the terms and conditions of the Plan and such limitations as
may be imposed from time to time by the Board, the Committee shall be
responsible for the overall management and administration of the Plan and shall
have such authority as shall be necessary or appropriate in order to carry out
its responsibilities, including, without limitation, the authority:
B-3
<PAGE> 53
(a) to interpret and construe the Plan, and to determine all questions
that may arise under the Plan as to eligibility for participation in the Plan,
the number of Shares subject to the Options to be granted, and the terms and
conditions thereof;
(b) to adopt rules and regulations and to prescribe forms for the
operation and administration of the Plan; and
(c) to take any other action not inconsistent with the provisions of
the Plan that it may deem necessary or appropriate.
ARTICLE IV
OPTION GRANTS
SECTION 4.1 AVAILABLE SHARES.
Subject to section 5.3, the maximum aggregate number of Shares with
respect to which Options may be granted at any time shall be equal to the excess
of:
(a) 48,600 Shares; over
(b) the sum of:
(i) the number of Shares with respect to which previously
granted Options may then or may in the future be exercised; plus
(ii) the number of Shares with respect to which previously
granted Options have been exercised.
For purposes of this section 4.1, an Option shall not be considered as having
been exercised to the extent that such Option terminates by reason other than
the purchase of the related Shares.
SECTION 4.2 OPTION GRANTS.
(a) On the Effective Date, each Person who is then an Eligible Director
shall be granted an Option to purchase Eight Thousand One Hundred (8,100)
Shares.
(b) Any Person who becomes an Eligible Director after the Effective
Date shall be granted, on the 15th day of the month following the month in which
such individual becomes an Eligible Director (or, if such date is not a business
day, the first business day thereafter), an Option to purchase Five Hundred
(500) Shares and, subject to sections 4.2(c) and 4.1, on January 1 of each
succeeding calendar year during which the Plan is in effect (or, if such date is
not a business day, the first business day thereafter) and provided that the
Eligible Director is still an Eligible Director on that date, an additional
Option to purchase Five Hundred (500) Shares. All Options granted under this
section 4.2(b) after October 5, 1996 shall not be subject to section 4.4(b) but
shall instead be exercisable immediately upon grant.
(c) Any Option granted under this section 4.2 shall be evidenced by a
written agreement which shall specify the number of Shares covered by the
Option, the Exercise Price for the Shares subject to the Option, the Option
Period, all as determined pursuant to this Article IV. The Option agreement
shall also set forth specifically or incorporate by reference the applicable
provisions of the Plan.
(d) Notwithstanding sections 4.2(a) and (b), in the event that, as of
the first business day of any calendar month, the number of available Shares
determined under section 4.1 is less than the total number of Shares with
respect to which Options would be granted under section 4.2(b) during such
month, each Eligible Director scheduled to receive a grant of Options during
such month shall be granted an Option for the number of whole Shares determined
by multiplying (i) the number of Shares with respect to which the Eligible
Director would have been granted an Option on such date by (ii) a fraction, the
numerator of which is the number of Shares that are then available under section
4.1 and the denominator of which is the total number of Shares that would have
to have been available under section 4.1 in order to grant all of the Options
that would otherwise have been granted under section 4.2(b) during such month,
and rounding to the nearest whole Share; provided, however, if rounding
B-4
<PAGE> 54
will require more Shares to be available than provided in section 4.1, then the
amount determined pursuant to this section 4.2(c) will be calculated by rounding
down to the lesser whole number.
SECTION 4.3 EXERCISE PRICE.
The price per Share at which an Option granted to an Eligible Director
under section 4.2 may be exercised shall be the Fair Market Value of a Share on
the date on which the Option is granted.
SECTION 4.4 OPTION PERIOD.
(a) Subject to section 4.4(b), the Option Period during which an Option
granted to an Eligible Director under section 4.2 may be exercised shall
commence on the date the Option is granted and shall expire on the earlier of:
(i) removal for cause in accordance with the Company's bylaws; or
(ii) the last day of the ten-year period commencing on the date on
which the Option was granted.
(b) During the Option Period, the maximum number Shares as to which an
outstanding Option may be exercised shall be as follows:
(i) prior to the first anniversary of the date on which the Option is
granted, the Option shall not be exercisable;
(ii) on and after the first anniversary, but prior to the second
anniversary, of the date on which the Option is granted, the Option may be
exercised as to a maximum of One Thousand Six Hundred and Twenty (1,620) Shares;
(iii) on and after the second anniversary, but prior to the third
anniversary, of the date on which the Option is granted, the Option may be
exercised as to a maximum of Three Thousand Two Hundred and Forty (3,240)
Shares, including in such number any optioned Shares purchased prior to such
second anniversary;
(iv) on and after the third anniversary, but prior to the fourth
anniversary, of the date on which the Option is granted, the Option may be
exercised as to a maximum of Four Thousand Eight Hundred and Sixty (4,860)
Shares, including in such number any optioned Shares purchased prior to such
third anniversary;
(v) on and after the fourth anniversary, but prior to the fifth
anniversary, of the date on which the Option is granted, the Option may be
exercised as to a maximum of Six Thousand Four Hundred and Eighty (6,480)
Shares, including in such number any optioned Shares purchased prior to such
fourth anniversary; and
(vi) on and after the fifth anniversary of the date on which the Option
is granted and for the remainder of the Option Period, the Option may be
exercised as to the entire number of optioned Shares not theretofore purchased;
provided, however, that such an Option shall become fully exercisable, and all
optioned Shares not previously purchased shall become available for purchase, on
the date of the Option holder's death or Disability.
SECTION 4.5 METHOD OF EXERCISE.
(a) Subject to the limitations of the Plan and the Option agreement, an
Option holder may, at any time during the Option Period, exercise his right to
purchase all or any part of the Shares to which the Option relates; provided,
however, that the minimum number of Shares which may be purchased at any time
shall be 100, or, if less, the total number of Shares relating to the Option
which remain unpurchased. An Option holder shall exercise an Option to purchase
Shares by:
(i) giving written notice to the Committee, in such form and manner as
the Committee may prescribe, of his intent to exercise the Option;
B-5
<PAGE> 55
(ii) delivering to the Committee full payment, consistent with section
4.5(b), for the Shares as to which the Option is to be exercised; and
(iii) satisfying such other conditions as may be prescribed in the
Option agreement.
(b) The Exercise Price of Shares to be purchased upon exercise of any
Option shall be paid in full in cash (by certified or bank check or such other
instrument as the Company may accept) or, with the approval of the Committee, by
one or more of the following: (i) in the form of Shares already owned
beneficially for a period of more than six months by the Option holder having an
aggregate Fair Market Value on the date the Option is exercised equal to the
aggregate Exercise Price to be paid; (ii) after a period of six months from the
date of grant of any such Option, by requesting the Company to cancel without
payment Options outstanding to such Person for that number of Shares whose
aggregate Fair Market Value on the date of exercise, when reduced by their
aggregate Exercise Price, equals the aggregate Exercise Price of the Options
being exercised; or (iii) by a combination thereof; provided, however, that an
election under section 4.5(b)(ii) or (iii) shall be subject to the conditions
and limitations of Rule 16b-3(e) promulgated under the Exchange Act. Payment
for any Shares to be purchased upon exercise of an Option may also be made by
delivering a properly executed exercise notice to the Company, together with a
copy of irrevocable instructions to a broker to deliver promptly to the Company
the amount of sale or loan proceeds to pay the purchase price. To facilitate the
foregoing, the Company may enter into agreements for coordinated procedures with
one or more brokerage firms.
(c) When the requirements of section 4.5(a) and (b) have been
satisfied, the Committee shall take such action as is necessary to cause the
issuance of a stock certificate evidencing the Option holder's ownership of such
Shares. The Person exercising the Option shall have no right to vote or to
receive dividends, nor have any other rights with respect to the Shares, prior
to the date as of which such Shares are transferred to such Person on the stock
transfer records of the Company, and no adjustments shall be made for any
dividends or other rights for which the record date is prior to the date as of
which such transfer is effected, except as may be required under section 5.3.
SECTION 4.6 LIMITATIONS ON OPTIONS.
(a) An Option by its terms shall not be transferable by the Option
holder other than by will or by the laws of descent and distribution, or
pursuant to the terms of a Qualified Domestic Relations Order, and shall be
exercisable, during the lifetime of the Option holder, only by the Option holder
or an alternate payee designated pursuant to such a Qualified Domestic Relations
Order.
(b) The Company's obligation to deliver Shares with respect to an
Option shall, if the Company so requests, be conditioned upon the receipt of a
representation as to the investment intention of the Person to whom such Shares
are to be delivered, in such form as the Committee shall determine to be
necessary or advisable to comply with the provisions of applicable federal,
state or local law. It may be provided that any such representation shall become
inoperative upon a registration of the Shares or upon the occurrence of any
other event eliminating the necessity of such representation. The Company shall
not be required to deliver any Shares under the Plan prior to (i) the admission
of such Shares to listing on any stock exchange on which Shares may then be
listed, or (ii) the completion of such registration or other qualification under
any state or federal law, rule or regulation as the Company shall determine to
be necessary or advisable.
SECTION 4.7 LIMITED STOCK APPRECIATION RIGHTS.
(a) Each Option granted under this Plan shall be accompanied by a
Limited Stock Appreciation Right that is exercisable at the times and upon the
terms and conditions set forth herein. Each Limited Stock Appreciation Right
granted hereunder shall be exercisable for a period commencing on the date on
which a Change in Control of the Company occurs and ending six (6) months after
such date or, if later in the case of any Person, thirty (30) days after the
earliest date on which such Person may exercise the Limited Stock Appreciation
Right without subjecting himself to liability under section 16 of the Securities
Exchange Act of 1934, as amended. A Person in possession of a Limited Stock
Appreciation Right granted hereunder may exercise such Limited Stock
Appreciation Right by:
(i) giving written notice to the Committee, in such form and manner as
the Committee may prescribe, of his intent to exercise the Limited Stock
Appreciation Right; and
B-6
<PAGE> 56
(ii) agreeing in such written notice to the cancellation of Options
then outstanding to him for a number of Shares equal to the number of Shares for
which the Limited Stock Appreciation Right is being exercised.
Except as provided in section 4.9(c), within ten (10) days after the giving of
such a notice, the Committee shall cause the Company to deliver to such Person a
monetary payment in an amount per Share equal to the amount by which the Change
in Control Consideration exceeds the Exercise Price per Share of each of the
Options being cancelled.
(b) For purposes of section 4.9(a), the term Change in Control
Consideration shall mean the greater of (i) the highest price per Share paid by
any Person who initiated or sought to effect the Change in Control for a Share
during the period of one (1) year ending on the date of the relevant Change in
Control of the Company; and (ii) the average Fair Market Value of a Share over
the last ten (10) trading days preceding the date of exercise of the Limited
Stock Appreciation Right.
(c) Notwithstanding anything herein contained to the contrary, the
Limited Stock Appreciation Rights granted hereunder shall be cancelled at the
effective time of a Change in Control of the Company resulting from a
transaction between the Company and another party pursuant to a written
agreement whereby the consummation of the transaction is conditioned upon the
delivery to each Option holder, upon the closing of such transaction and in
exchange for the cancellation of all of such Option holder's outstanding
Options, of a monetary payment or property with a value equivalent to the value
of the Options being cancelled.
ARTICLE V
AMENDMENT AND TERMINATION
SECTION 5.1 TERMINATION.
The Board may suspend or terminate the Plan in whole or in part at any
time prior to the tenth anniversary of the Effective Date by giving written
notice of such suspension or termination to the Committee. Unless sooner
terminated, the Plan shall terminate automatically on the day preceding the
tenth anniversary of the Effective Date. In the event of any suspension or
termination of the Plan, all Options theretofore granted under the Plan that are
outstanding on the date of such suspension or termination of the Plan shall
remain outstanding under the terms of the Option agreements evidencing such
Options.
SECTION 5.2 AMENDMENT.
The Board may amend or revise the Plan in whole or in part at any time;
provided, however, that if the amendment or revision:
(a) materially increases the benefits accruing under the Plan;
(b) materially increases the number of Shares which may be issued under
the Plan; or
(c) materially modifies the requirements as to eligibility for Options
under the Plan;
such amendment or revision shall be subject to approval by the shareholders of
the Company; and provided, further, that (i) sections 4.1, 4.2, 4.3 and 4.4
shall not be amended more frequently than once in any period of six (6) months
and (ii) no amendment required to comply with or conform to any condition
imposed under section 162(m) of the Code on federal income tax deductions
allowable to the Company in respect of the Plan shall require such approval or
be subject to such limitations.
SECTION 5.3 ADJUSTMENTS IN THE EVENT OF A BUSINESS REORGANIZATION.
(a) In the event of any merger, consolidation, or other business
reorganization in which the Company is the surviving entity, and in the event of
any stock split, stock dividend or other event generally affecting the number of
Shares held by each Person who is then a holder of record of Shares, the number
of Shares covered by each outstanding Option and the number of Shares available
pursuant to section 4.1 shall be adjusted to account for such event. Such
adjustment shall be effected by multiplying such number of Shares by an amount
equal to the number of Shares that would be owned after such event by a Person
who, immediately prior to such event, was the holder of record of one Share, and
the Exercise Price of the Options shall be adjusted by dividing the Exercise
Price
B-7
<PAGE> 57
by such number of Shares; provided, however, that the Committee may, in its
discretion, establish another appropriate method of adjustment.
(b) In the event of any merger, consolidation, or other business
reorganization in which the Company is not the surviving entity, any Options
granted under the Plan which remain outstanding may be cancelled as of the
effective date of such merger, consolidation, business reorganization,
liquidation or sale by the Board upon 30 days' written notice to the Option
holder; provided, however, that on or as soon as practicable following the date
of cancellation, each Option holder shall receive a monetary payment in such
amount, or other property of such kind and value, as the Board determines in
good faith to be equivalent in value to the Options that have been cancelled.
(c) In the event that the Company shall declare and pay any dividend
with respect to Shares (other than a dividend payable in Shares) which results
in a nontaxable return of capital to the holders of Shares for federal income
tax purposes or otherwise than by dividend makes distribution of property to the
holders of its Shares, the Company shall make an equivalent payment to each
Person holding an outstanding Option as of the record date for such dividend.
Such payment shall be made at substantially the same time, in substantially the
same form and in substantially the same amount per optioned Share as the
dividend or other distribution paid with respect to outstanding Shares;
provided, however, that if any dividend or distribution on outstanding Shares is
paid in property than cash, the Company, in its discretion applied uniformly to
all outstanding Options, may make such payment in a cash amount per optioned
Share equal in fair market value to the fair market value of the non-cash
dividend or distribution.
ARTICLE VI
MISCELLANEOUS
SECTION 6.1 STATUS AS AN EMPLOYEE BENEFIT PLAN.
This Plan is not intended to satisfy the requirements for qualification
under section 401(a) of the Code or to satisfy the definitional requirements for
an "employee benefit plan" under section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended. It is intended to be a non-qualified incentive
compensation program for self-employed individuals that is exempt from the
regulatory requirements of the Employee Retirement Income Security Act of 1974,
as amended. The Plan shall be construed and administered so as to effectuate
this intent.
SECTION 6.2 NO RIGHT TO CONTINUED EMPLOYMENT.
Neither the establishment of the Plan nor any provisions of the Plan
nor any action of the Board or the Committee with respect to the Plan shall be
held or construed to confer upon any Eligible Director any right to a
continuation of his position as a director of the Company. The Company reserves
the right to remove any Eligible Director or otherwise deal with any Eligible
Director to the same extent as though the Plan had not been adopted.
SECTION 6.3 CONSTRUCTION OF LANGUAGE.
Whenever appropriate in the Plan, words used in the singular may be
read in the plural, words used in the plural may be read in the singular, and
words importing the masculine gender may be read as referring equally to the
feminine or the neuter. Any reference to an Article or section number shall
refer to an Article or section of this Plan unless otherwise indicated.
SECTION 6.4 GOVERNING LAW.
The Plan shall be construed, administered and enforced according to the
laws of the State of New York without giving effect to the conflict of laws
principles thereof, except to the extent that such laws are preempted by federal
law.
SECTION 6.5 HEADINGS.
The headings of Articles and sections are included solely for
convenience of reference. If there is any conflict between such headings and the
text of the Plan, the text shall control.
B-8
<PAGE> 58
SECTION 6.6 NON-ALIENATION OF BENEFITS.
The right to receive a benefit under the Plan shall not be subject in
any manner to anticipation, alienation or assignment, nor shall such right be
liable for or subject to debts, contracts, liabilities, engagements or torts,
except to the extent provided in a Qualified Domestic Relations Order.
SECTION 6.7 TAXES.
The Company shall have the right to deduct from all amounts paid by the
Company in cash with respect to an Option under the Plan any taxes required by
law to be withheld with respect to such Option. Where any Person is entitled to
receive Shares pursuant to the exercise of an Option, the Company shall have the
right to require such Person to pay the Company the amount of any tax which the
Company is required to withhold with respect to such Shares, or, in lieu
thereof, to retain, or to sell without notice, a sufficient number of Shares to
cover the amount required to be withheld.
SECTION 6.8 APPROVAL OF SHAREHOLDERS.
The Plan and all Options and Limited Stock Appreciation Rights granted
hereunder shall be conditioned on the approval of the Plan by the holders of a
majority of the Shares of Tappan Zee Financial, Inc. entitled to vote at an
annual or special meeting of the holders of Shares held no earlier than April 5,
1996. No Option or Limited Stock Appreciation Rights under the Plan shall be
granted, nor shall any such Option or Limited Stock Appreciation Right be
exercised or any Shares issued or purchased, prior to such approval.
SECTION 6.9 NOTICES.
Any communication required or permitted to be given under the Plan,
including any notice, direction, designation, comment, instruction, objection or
waiver, shall be in writing and shall be deemed to have been given at such time
as it is delivered personally or five (5) days after mailing if mailed, postage
prepaid, by registered or certified mail, return receipt requested, addressed to
such party at the address listed below, or at such other address as one such
party may by written notice specify to the other party:
(a) If to the Compensation Committee:
Tappan Zee Financial, Inc.
75 North Broadway
P.O. Box 187
Tarrytown, New York 10591
Attention: Corporate Secretary
(b) If to an Option holder, to the Option holder's address as shown in
the Company's records.
B-9
<PAGE> 59
EXHIBIT C
RECOGNITION AND RETENTION PLAN FOR OFFICERS OF TAPPAN ZEE FINANCIAL, INC.
ARTICLE I
PURPOSE
SECTION 1.1 GENERAL PURPOSE OF THE PLAN.
The purpose of the Plan is to promote the growth and profitability of
Tappan Zee Financial, Inc. and to provide certain key officers and employees of
Tappan Zee Financial, Inc. with an incentive to achieve corporate objectives, to
attract and retain key officers and employees of outstanding competence and to
provide such officers and employees with an equity interest in Tappan Zee
Financial, Inc.
ARTICLE II
DEFINITIONS
The following definitions shall apply for the purposes of this Plan,
unless a different meaning is plainly indicated by the context:
SECTION 2.1 AWARD means a grant of Shares to an Eligible Employee
pursuant to section 5.1.
SECTION 2.2 AWARD DATE means, with respect to a particular Award, the
date specified by the Committee in the notice of the Award issued to the
Eligible Employee by the Committee, pursuant to section 5.1.
SECTION 2.3 BANK means Tarrytowns Bank, FSB, a federally chartered
stock savings bank, and any successor thereto.
SECTION 2.4 BENEFICIARY means the Person designated by an Eligible
Employee pursuant to section 6.2, to receive distribution of any Shares
available for distribution to such Eligible Employee, in the event such Eligible
Employee dies prior to receiving distribution of such Shares.
SECTION 2.5 BOARD means the Board of Directors of Tappan Zee Financial,
Inc.
SECTION 2.6 CHANGE OF CONTROL means any of the following events:
(a) approval by the stockholders of Tappan Zee Financial, Inc. of a
transaction that would result in the reorganization, merger or consolidation of
Tappan Zee Financial, Inc. with one or more other persons, other than a
transaction following which:
(i) at least 51% of the equity ownership interests of the
entity resulting from such transaction are beneficially owned (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) in substantially the
same relative proportions by persons who, immediately prior to such transaction,
beneficially owned (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) at least 51% of the outstanding equity ownership interests in
Tappan Zee Financial, Inc.; and
(ii) at least 51% of the securities entitled to vote generally
in the election of directors of the entity resulting from such transaction are
beneficially owned (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) in substantially the same relative proportions by persons who,
immediately prior to such transaction, beneficially owned (within the meaning of
Rule 13d-3 promulgated under the Exchange Act) at least 51% of the securities
entitled to vote generally in the election of directors of Tappan Zee Financial,
Inc.;
(b) the acquisition of all or substantially all of the assets of Tappan
Zee Financial, Inc. or beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of 20% or more of the outstanding securities
of Tappan Zee Financial, Inc. entitled to vote generally in the election of
directors by any person or by any persons acting in concert, or approval by the
stockholders of Tappan Zee Financial, Inc. of any transaction which would result
in such an acquisition;
C-1
<PAGE> 60
(c) a complete liquidation or dissolution of Tappan Zee Financial,
Inc., or approval by the stockholders of Tappan Zee Financial, Inc. of a plan
for such liquidation or dissolution;
(d) the occurrence of any event if, immediately following such event,
at least 50% of the members of the Board of Directors of Tappan Zee Financial,
Inc. do not belong to any of the following groups:
(i) individuals who were members of the Board of Directors of
Tappan Zee Financial, Inc. on the Effective Date of this Plan; or
(ii) individuals who first became members of the Board of
Directors of Tappan Zee Financial, Inc. after the Effective Date of this Plan
either:
(A) upon election to serve as a member of the Board
of Directors of Tappan Zee Financial, Inc. by affirmative vote of three-quarters
of the members of such Board, or of a nominating committee thereof, in office at
the time of such first election; or
(B) upon election by the stockholders of Tappan Zee
Financial, Inc. to serve as a member of the Board of Tappan Zee Financial, Inc.,
but only if nominated for election by affirmative vote of three-quarters of the
members of the Board of Directors of Tappan Zee Financial, Inc., or of a
nominating committee thereof, in office at the time of such first nomination;
provided, however, that such individual's election or nomination did
not result from an actual or threatened election contest (within the meaning of
Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) or other
actual or threatened solicitation of proxies or consents (within the meaning of
Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) other than by
or on behalf of the Board of Tappan Zee Financial, Inc.; or
(e) any event which would be described in section 2.6(a), (b), (c) or
(d) if the term "Bank" were substituted for the term "Tappan Zee Financial,
Inc." therein.
In no event, however, shall a Change of Control be deemed to have occurred as a
result of any acquisition of securities or assets of Tappan Zee Financial, Inc.,
the Bank, or a subsidiary of either of them, by Tappan Zee Financial, Inc., the
Bank, or a subsidiary of either of them, or by any employee benefit plan
maintained by any of them. For purposes of this section 2.6, the term "person"
shall have the meaning assigned to it under sections 13(d)(3) or 14(d)(2) of the
Exchange Act.
SECTION 2.7 CODE means the Internal Revenue Code of 1986 (including the
corresponding provisions of any succeeding law).
SECTION 2.8 COMMITTEE means the Committee described in section 3.1.
SECTION 2.9 COMPANY means Tappan Zee Financial, Inc., a corporation
organized and existing under the laws of the State of Delaware, and any
successor thereto, the Bank and any successor thereto and, with the prior
approval of the Board, and subject to such terms and conditions as may be
imposed by the Board, any other savings bank, savings and loan association,
bank, corporation, financial institution or other business organization or
institution.
SECTION 2.10 DISABILITY means a condition of total incapacity, mental
or physical, for further performance of duty with the Company which the
Committee shall have determined, on the basis of competent medical evidence, is
likely to be permanent.
SECTION 2.11 DISINTERESTED BOARD MEMBER means a member of the Board who
(a) is not a current employee of the Company, (b) is not a former employee of
the Company who receives compensation for prior services (other than benefits
under a tax-qualified retirement plan) during the taxable year, (c) has not been
an officer of the Company, (d) does not receive remuneration from the Company,
either directly or indirectly, in any capacity other than as a director and (d)
is not currently and for a period of at least one year has not been eligible for
discretionary awards under any stock compensation plan of the Company. The term
Disinterested Board Member shall be interpreted in such manner as shall be
necessary to conform to the requirements of section 162(m) of the Code and Rule
16b-3 promulgated under the Exchange Act.
C-2
<PAGE> 61
SECTION 2.12 EFFECTIVE DATE means July 11, 1996.
SECTION 2.13 ELIGIBLE EMPLOYEE means any employee whom the Committee
may determine to be a key officer or employee of the Company and select to
receive an Award pursuant to the Plan.
SECTION 2.14 EXCHANGE ACT means the Security and Exchange Commission
Exchange Act of 1934.
SECTION 2.15 PERSON means an individual, a corporation, a bank, a
savings bank, a savings and loan association, a financial institution, a
partnership, an association, a joint-stock company, a trust, an estate, an
unincorporated organization and any other business organization or institution.
SECTION 2.16 PLAN means the Recognition and Retention Plan for Officers
of Tappan Zee Financial, Inc, as amended from time to time.
SECTION 2.17 QUALIFIED DOMESTIC RELATIONS ORDER means a Domestic
Relations Order that: (a) clearly specifies (i) the name and last known mailing
address of the Award holder and of each person given rights under such Domestic
Relations Order, (ii) the amount or percentages of the Award holder's benefits
under this Plan to be paid to each person covered by such Domestic Relations
Order, (iii) the number of payments or the period to which such Domestic
Relations Order applies, and (iv) the name of this Plan; and (b) does not
require the payment of a benefit in a form or amount that is (i) not otherwise
provided for under the Plan, or (ii) inconsistent with a previous Qualified
Domestic Relations Order. For the purposes of this Plan, a "Domestic Relations
Order" means a judgment, decree or order (including the approval of a property
settlement) that is made pursuant to a state domestic relations or community
property law and relates to the provision of child support, alimony payments, or
marital property rights to a spouse, child or other dependent of an Award
holder.
SECTION 2.18 SHARE means a share of common stock of Tappan Zee
Financial, Inc., par value $.01 per share.
SECTION 2.19 TERMINATION FOR CAUSE means termination of employment with
the Company upon the occurrence of any of the following: (A) the employee
intentionally engages in dishonest conduct in connection with his performance of
services for the Company resulting in his conviction of a felony; (B) the
employee is convicted of, or pleads guilty or nolo contendere to, a felony or
any crime involving moral turpitude; (C) the employee willfully fails or refuses
to perform his duties under any employment or retention agreement and fails to
cure such breach within sixty (60) days following written notice thereof from
the Company; (D) the employee breaches his fiduciary duties to the Company for
personal profit; or (E) the employee's willful breach or violation of any law,
rule or regulation (other than traffic violations or similar offenses), or final
cease and desist order in connection with his performance of services for the
Company.
SECTION 2.20 TRUST means the legal relationship created by the Trust
Agreement pursuant to which the Trustee holds the Trust Fund in trust. The Trust
may be referred to as the "Restricted Stock Plan Trust of Tappan Zee Financial,
Inc."
SECTION 2.21 TRUST AGREEMENT means the agreement between Tappan Zee
Financial, Inc. and the Trustee therein named or its successor pursuant to which
the Trust Fund shall be held in trust.
SECTION 2.22 TRUST FUND means the corpus (consisting of contributions
paid over to the Trustee, and investments thereof), and all earnings,
appreciations or additions thereof and thereto, held by the Trustee under the
Trust Agreement in accordance with the Plan, less any depreciation thereof and
any payments made therefrom pursuant to the Plan.
SECTION 2.23 TRUSTEE means the Trustee of the Trust Fund from time to
time in office. The Trustee shall serve as Trustee until it is removed or
resigns from office and is replaced by a successor Trustee or Trustees appointed
by Tappan Zee Financial, Inc.
C-3
<PAGE> 62
ARTICLE III
ADMINISTRATION
SECTION 3.1 COMMITTEE.
The Plan shall be administered by a Committee consisting of the members
of the Compensation Committee of Tappan Zee Financial, Inc. who are
Disinterested Board Members. If fewer than three members of the Compensation
Committee are Disinterested Board Members, then the Board shall appoint to the
Committee such additional Disinterested Board Members as shall be necessary to
provide for a Committee consisting of at least three Disinterested Board
Members.
SECTION 3.2 COMMITTEE ACTION.
The Committee shall hold such meetings, and may make such
administrative rules and regulations, as it may deem proper. A majority of the
members of the Committee shall constitute a quorum, and the action of a majority
of the members of the Committee present at a meeting at which a quorum is
present, as well as actions taken pursuant to the unanimous written consent of
all of the members of the Committee without holding a meeting, shall be deemed
to be actions of the Committee. All actions of the Committee shall be final and
conclusive and shall be binding upon the Company and all other interested
parties. Any Person dealing with the Committee shall be fully protected in
relying upon any written notice, instruction, direction or other communication
signed by the secretary of the Committee and one member of the Committee, by two
members of the Committee or by a representative of the Committee authorized to
sign the same in its behalf.
SECTION 3.3 COMMITTEE RESPONSIBILITIES.
Subject to the terms and conditions of the Plan and such limitations as
may be imposed by the Board, the Committee shall be responsible for the overall
management and administration of the Plan and shall have such authority as shall
be necessary or appropriate in order to carry out its responsibilities,
including, without limitation, the authority:
(a) to interpret and construe the Plan, and to determine all questions
that may arise under the Plan as to eligibility for Awards under the Plan, the
amount of Shares, if any, to be granted pursuant to an Award, and the terms and
conditions of such Award;
(b) to adopt rules and regulations and to prescribe forms for the
operation and administration of the Plan; and
(c) to take any other action not inconsistent with the provisions of
the Plan that it may deem necessary or appropriate.
ARTICLE IV
THE TRUST FUND
SECTION 4.1 CONTRIBUTIONS.
Tappan Zee Financial, Inc. shall contribute, or cause to be
contributed, to the Trust, from time to time, such amounts of money or property
as shall be determined by the Board, in its discretion. No contributions by
Eligible Employees shall be permitted.
SECTION 4.2 THE TRUST FUND.
The Trust Fund shall be held and invested under the Trust Agreement
with the Trustee. The provisions of the Trust Agreement shall include provisions
conferring powers on the Trustee as to investment, control and disbursement of
the Trust Fund, and such other provisions not inconsistent with the Plan as may
be prescribed by or under the authority of the Board. No bond or security shall
be required of any Trustee at any time in office.
C-4
<PAGE> 63
SECTION 4.3 INVESTMENTS.
The Trustee shall invest the Trust Fund in Shares and in such other
investments as may be permitted under the Trust Agreement, including savings
accounts, time or other interest bearing deposits in or other interest bearing
obligations of the Company, in such proportions as shall be determined by the
Committee; provided, however, that in no event shall the Trust Fund be used to
purchase more than Forty-Five Thousand Three Hundred and Sixty (45,360) Shares.
Notwithstanding the immediately preceding sentence, the Trustee may temporarily
invest the Trust Fund in short-term obligations of, or guaranteed by, the U.S.
Government or an agency thereof, or the Trustee may retain the Trust Fund
uninvested or may sell assets of the Trust Fund to provide amounts required for
purposes of the Plan.
ARTICLE V
AWARDS
SECTION 5.1 IN GENERAL.
Subject to the limitations of section 5.7, the Committee may, in its
discretion, make an Award of Shares held in the Trust Fund to an Eligible
Employee. Any such Award shall be evidenced by a written notice issued by the
Committee to the Eligible Employee, which notice shall:
(a) specify the number of Shares covered by the Award;
(b) specify the Award Date;
(c) specify the dates on which such Shares shall become available for
distribution to the Eligible Employee, in accordance with section 6.1; and
(d) contain such other terms and conditions not inconsistent with the
Plan as the Board may, in its discretion, prescribe.
SECTION 5.2 SIZE OF AWARD.
Subject to section 5.7 and such limitations as the Board may from time
to time impose, the number of Shares as to which an Eligible Employee may be
granted an Award shall be determined by the Committee in its discretion;
provided however, that in no event shall the number of Shares allocated to an
Eligible Employee in an Award exceed the number of Shares then held in the Trust
and not allocated in connection with other Awards.
SECTION 5.3 SHARE ALLOCATIONS.
Upon the grant of an Award to an Eligible Employee, the Committee shall
notify the Trustee of the Award and of the number of Shares subject to the
Award. Thereafter, until such time as the Shares subject to such Award become
vested or are forfeited, the books and records of the Trustee shall reflect that
such number of Shares are being held for the benefit of the Award recipient.
SECTION 5.4 DIVIDEND RIGHTS.
(a) Any cash dividends or distributions declared and paid with respect
to Shares in the Trust Fund that are, as of the record date for such dividend,
allocated to an Eligible Employee in connection with an Award shall be promptly
paid to such Eligible Employee. Any cash dividends declared and paid with
respect to Shares that are not, as of the record date for such dividend,
allocated in connection with any Award shall, at the direction of the Committee,
be held in the Trust or used to pay the administrative expenses of the Plan,
including any compensation due to the Trustee.
(b) Any dividends or distributions declared and paid with respect to
Shares in property other than cash shall be held in the Trust Fund. If, as of
the record date for such dividend or distribution, the Shares with respect to
which it is paid are allocated to an Eligible Employee in connection with an
Award, the property so distributed shall be similarly allocated such Eligible
Employee in connection with such Award and shall be held for distribution or
forfeiture in accordance with the terms and conditions of the Award.
C-5
<PAGE> 64
SECTION 5.5 VOTING RIGHTS.
(a) Each Eligible Employee to whom an Award has been made that is not
fully vested shall have the right to direct the manner in which all voting
rights appurtenant to the Shares related to such Award will be exercised while
such Shares are held in the Trust Fund. Such a direction shall be given by
completing and filing, with the inspector of elections, the Trustee or such
other person who shall be independent of the Company as the Committee shall
designate in the direction, a written direction in the form and manner
prescribed by the Committee. If no such direction is given by an Eligible
Employee, then the voting rights appurtenant to the Shares allocated to him
shall not be exercised.
(b) To the extent that the Trust Fund contains Shares that are not
allocated in connection with an Award, all voting rights appurtenant to such
Shares shall be exercised by the Trustee in such manner as the Committee shall
direct to reflect the voting directions given by Eligible Employees with respect
to Shares allocated in connection with their Awards.
(c) The Committee shall furnish, or cause to be furnished, to each
Eligible Employee, all annual reports, proxy materials and other information
furnished by Tappan Zee Financial, Inc., or by any proxy solicitor, to the
holders of Shares.
SECTION 5.6 TENDER OFFERS.
(a) Each Eligible Employee to whom an Award has been made that is not
fully vested shall have the right to direct, with respect to the Shares related
to such Award, the manner of response to any tender offer, exchange offer or
other offer made to the holders of Shares. Such a direction shall be given by
completing and filing, with the inspector of elections, the Trustee or such
other person who shall be independent of the Company as the Committee shall
designate in the direction, a written direction in the form and manner
prescribed by the Committee. If no such direction is given by an Eligible
Employee, then the Shares shall not be tendered or exchanged.
(b) To the extent that the Trust Fund contains Shares that are not
allocated in connection with an Award, all responses to tender, exchange and
other offers appurtenant to such Shares shall be given by the Trustee in such
manner as the Committee shall direct to reflect the responses given by Eligible
Employees with respect to Shares allocated in connection with their Awards.
(c) The Committee shall furnish, or cause to be furnished, to each
Eligible Employee, all information furnished by the offeror to the holders of
Shares.
SECTION 5.7 LIMITATIONS ON AWARDS.
(a) Notwithstanding anything in the Plan to the contrary:
(i) No Award shall be granted under the Plan prior to the date on which
the Plan is approved by the holders of a majority of the Shares of outstanding
on such date and eligible to vote upon the proposal to approve the Plan;
(ii) At any time prior to October 5, 1996, no individual may be granted
Awards covering in excess of Sixteen Thousand Two Hundred (16,200) Shares;
(iii) each Award granted prior to October 5, 1996 shall become vested
and distributable as follows:
(A) prior to the first anniversary of the date on which the
Award is granted, the Award shall not be exercisable;
(B) on the first anniversary of the date on which the Award is
granted, the Award will be vested as to twenty percent (20%) of the Shares
subject to the Award when granted;
(C) on the second anniversary of the date on which the Award
is granted, the Award will be vested as to an additional twenty percent (20%) of
the Shares subject to the Award when granted;
C-6
<PAGE> 65
(D) on the third anniversary of the date on which the Award is
granted, the Award will be vested as to an additional twenty percent (20%) of
the Shares subject to the Award when granted;
(E) on the fourth anniversary of the date on which the Award
is granted, the Award will be vested as to an additional twenty percent (20%) of
the Shares subject to the Award when granted; and
(F) on the fifth anniversary of the date on which the Award is
granted, the Award will be vested as to an additional twenty percent (20%) of
the Shares subject to the Award when granted;
provided, however, that such an Award shall become fully vested on the
date of the Award holder's death or Disability.
(b) An Award by its terms shall not be transferable by the Eligible
Employee other than by will or by the laws of descent and distribution, and the
Shares granted pursuant to such Award shall be distributable, during the
lifetime of the Recipient, only to the Recipient, except to the extent provided
otherwise pursuant to the terms of a Qualified Domestic Relations Order.
ARTICLE VI
VESTING AND DISTRIBUTION OF SHARES
SECTION 6.1 VESTING OF SHARES.
Subject to the terms and conditions of the Plan, each Award made under
the Plan shall become vested at the times and upon the conditions specified by
the Committee in the Award notice; provided, however, that an Award shall become
fully vested on the date of the Award holder's death or Disability.
SECTION 6.2 DESIGNATION OF BENEFICIARY.
An Eligible Employee who has received an Award may designate a
Beneficiary to receive any undistributed Shares that are, or become, available
for distribution on, or after, the date of his death. Such designation (and any
change or revocation of such designation) shall be made in writing in the form
and manner prescribed by the Committee. In the event that the Beneficiary
designated by an Eligible Employee dies prior to the Eligible Employee, or in
the event that no Beneficiary has been designated, any undistributed Shares that
are, or become, available for distribution on, or after, the Eligible Employee's
death shall be paid to the executor or administrator of the Eligible Employee's
estate, or if no such executor or administrator is appointed within such time as
the Committee, in its sole discretion, shall deem reasonable, to such one or
more of the spouse and descendants and blood relatives of such deceased person
as the Committee may select.
SECTION 6.3 MANNER OF DISTRIBUTION.
(a) As soon as practicable following the date any Shares granted
pursuant to an Award become vested pursuant to section 6.1, the Committee shall
take such actions as are necessary to cause the transfer of record ownership of
the Shares that have become vested from the Trustee to the Award holder and
shall cause the Trustee to distribute to the Award holder all property other
than Shares then being held in connection with the Shares being distributed.
(b) The Company's obligation to deliver Shares with respect to an Award
shall, if the Committee so requests, be conditioned upon the receipt of a
representation as to the investment intention of the Eligible Employee or
Beneficiary to whom such Shares are to be delivered, in such form as the
Committee shall determine to be necessary or advisable to comply with the
provisions of applicable federal, state or local law. It may be provided that
any such representation shall become inoperative upon a registration of the
Shares or upon the occurrence of any other event eliminating the necessity of
such representation. The Company shall not be required to deliver any Shares
under the Plan prior to (i) the admission of such Shares to listing on any stock
exchange on which Shares may then be listed, or (ii) the completion of such
registration or other qualification under any state or federal law, rule or
regulation as the Committee shall determine to be necessary or advisable.
SECTION 6.4 TAXES.
The Company, the Committee or the Trustee shall have the right to
require any person entitled to receive Shares pursuant to an Award to pay the
amount of any tax which is required to be withheld with respect
C-7
<PAGE> 66
to such Shares, or, in lieu thereof, to retain, or to sell without notice, a
sufficient number of Shares to cover the amount required to be withheld.
ARTICLE VII
AMENDMENT AND TERMINATION
SECTION 7.1 TERMINATION.
The Board may suspend or terminate the Plan in whole or in
part at any time by giving written notice of such suspension or termination to
the Committee; provided, however, that the Plan may not be terminated while
there are outstanding Awards that may thereafter become vested. Upon the
termination of the Plan, the Trustee shall make distributions from the Trust
Fund in such amounts and to such persons as the Committee may direct and shall
return the remaining assets of the Trust Fund, if any, to Tappan Zee Financial,
Inc.
SECTION 7.2 AMENDMENT.
The Board may amend or revise the Plan in whole or in part at
any time; provided, however, that if the amendment or revision:
(a) materially increases the benefits or Awards which may be
granted under the Plan;
(b) materially increases the number of Shares which may be
issued under the Plan; or
(c) materially modifies the requirements as to eligibility to
receive Awards under the Plan;
such amendment or revision shall be subject to approval by the shareholders of
the Company.
SECTION 7.3 ADJUSTMENTS IN THE EVENT OF A BUSINESS
REORGANIZATION.
(a) In the event of any merger, consolidation, or other
business reorganization (including but not limited to a Change of Control) in
which Tappan Zee Financial, Inc. is the surviving entity, and in the event of
any stock split, stock dividend or other event generally affecting the number of
Shares held by each person who is then a holder of record of Shares, the number
of Shares held in the Trust Fund, including Shares covered by Awards, shall be
adjusted to account for such event. Such adjustment shall be effected by
multiplying such number of Shares by an amount equal to the number of Shares
that would be owned after such event by a person who, immediately prior to such
event, was the holder of record of one Share; provided, however, that the
Committee may, in its discretion, establish another appropriate method of
adjustment.
(b) In the event of any merger, consolidation, or other
business reorganization (including but not limited to a Change of Control) in
which Tappan Zee Financial, Inc. is not the surviving entity, the Trustee shall
hold in the Trust Fund any money, stock, securities or other property received
by holders of record of Shares in connection with such merger, consolidation, or
other business reorganization. Any Award with respect to which Shares had been
allocated to an Eligible Employee shall be adjusted by allocating to the
Eligible Employee receiving such Award the amount of money, stock, securities or
other property received by the Trustee for the Shares allocated to such Eligible
Employee.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.1 STATUS AS AN EMPLOYEE BENEFIT PLAN.
This Plan is not intended to satisfy the requirements for
qualification under section 401(a) of the Code or to satisfy the definitional
requirements for an "employee benefit plan" under section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended. It is intended to be a
non-qualified incentive compensation program that is exempt from the regulatory
requirements of the Employee Retirement Income Security Act of 1974, as amended.
The Plan shall be construed and administered so as to effectuate this intent.
C-8
<PAGE> 67
SECTION 8.2 NO RIGHT TO CONTINUED EMPLOYMENT.
Neither the establishment of the Plan nor any provisions of
the Plan nor any action of the Board or the Committee with respect to the Plan
shall be held or construed to confer upon any Eligible Employee any right to a
continuation of employment by the Company. The Company reserves the right to
dismiss any Eligible Employee or otherwise deal with any Eligible Employee to
the same extent as though the Plan had not been adopted.
SECTION 8.3 CONSTRUCTION OF LANGUAGE.
Whenever appropriate in the Plan, words used in the singular
may be read in the plural, words used in the plural may be read in the singular,
and words importing the masculine gender may read as referring equally to the
feminine or the neuter. Any reference to an Article or section number shall
refer to an Article or section of this Plan unless otherwise indicated.
SECTION 8.4 GOVERNING LAW.
The Plan shall be construed and enforced in accordance with
the laws of the State of New York without giving effect to the conflict of laws
principles thereof, except to the extent that such laws are preempted by the
federal laws of the United States of America.
SECTION 8.5 HEADINGS.
The headings of Articles and sections are included solely for
convenience of reference. If there is any conflict between such headings and the
text of the Plan, the text shall control.
SECTION 8.6 NON-ALIENATION OF BENEFITS.
The right to receive a benefit under the Plan shall not be
subject in any manner to anticipation, alienation or assignment, nor shall such
right be liable for or subject to debts, contracts, liabilities, engagements or
torts, except to the extent provided in a Qualified Domestic Relations Order.
SECTION 8.7 NOTICES.
Any communication required or permitted to be given under the
Plan, including any notice, direction, designation, comment, instruction,
objection or waiver, shall be in writing and shall be deemed to have been given
at such time as it is personally delivered or 5 days after mailing if mailed,
postage prepaid, by registered or certified mail, return receipt requested,
addressed to such party at the address listed below, or at such other address as
one such party may by written notice specify to the other:
(a) If to the Stock Compensation Committee:
Tappan Zee Financial, Inc.
75 North Broadway
P.O. Box 187
Tarrytown, New York 10591
Attention: Corporate Secretary
(b) If to an Eligible Employee, to the Eligible Employee's
address as shown in the Company's personnel records.
SECTION 8.8 APPROVAL OF SHAREHOLDERS.
The Plan and all Awards granted hereunder shall be conditioned
on the approval of the Plan by the holders of a majority of the Shares of Tappan
Zee Financial, Inc. entitled to vote at an annual or special meeting of the
holders of Shares held no earlier than April 5, 1996. No Award under the Plan
shall be granted, nor shall any Shares be purchased or distributed, prior to
such approval.
C-9
<PAGE> 68
EXHIBIT D
RECOGNITION AND RETENTION PLAN FOR OUTSIDE DIRECTORS OF
TAPPAN ZEE FINANCIAL, INC.
ARTICLE I
PURPOSE
SECTION 1.1 GENERAL PURPOSE OF THE PLAN.
The purpose of the Plan is to promote the growth and profitability of
Tappan Zee Financial, Inc. and to provide Eligible Directors of Tappan Zee
Financial, Inc. with an incentive to achieve corporate objectives, to attract
and retain directors of outstanding competence and to provide such directors
with an equity interest in Tappan Zee Financial, Inc.
ARTICLE II
DEFINITIONS
The following definitions shall apply for the purposes of this Plan,
unless a different meaning is plainly indicated by the context:
SECTION 2.1 AWARD means a grant of Shares to an Eligible Director
pursuant to section 5.1.
SECTION 2.2 AWARD DATE means, with respect to a particular Award, the
date specified by the Committee in the notice of the Award issued to the
Eligible Director by the Committee, pursuant to section 5.1.
SECTION 2.3 BANK means Tarrytowns Bank, FSB, a federally chartered
stock savings bank, and any successor thereto.
SECTION 2.4 BENEFICIARY means the Person designated by an Eligible
[Director] pursuant to section 6.2, to receive distribution of any Shares
available for distribution to such Eligible Director, in the event such Eligible
Director dies prior to receiving distribution of such Shares.
SECTION 2.5 BOARD means the Board of Directors of Tappan Zee Financial,
Inc.
SECTION 2.6 CHANGE OF CONTROL means any of the following events:
(a) approval by the stockholders of Tappan Zee Financial, Inc. of a
transaction that would result in the reorganization, merger or consolidation of
Tappan Zee Financial, Inc. with one or more other persons, other than a
transaction following which:
(i) at least 51% of the equity ownership interests of the
entity resulting from such transaction are beneficially owned (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) in substantially the
same relative proportions by persons who, immediately prior to such transaction,
beneficially owned (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) at least 51% of the outstanding equity ownership interests in
Tappan Zee Financial, Inc.; and
(ii) at least 51% of the securities entitled to vote generally
in the election of directors of the entity resulting from such transaction are
beneficially owned (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) in substantially the same relative proportions by persons who,
immediately prior to such transaction, beneficially owned (within the meaning of
Rule 13d-3 promulgated under the Exchange Act) at least 51% of the securities
entitled to vote generally in the election of directors of Tappan Zee Financial,
Inc.;
(b) the acquisition of all or substantially all of the assets of Tappan
Zee Financial, Inc. or beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of 20% or more of the outstanding securities
of Tappan Zee Financial, Inc. entitled to vote generally in the election of
directors by any person or by any persons acting in concert, or approval by the
stockholders of Tappan Zee Financial, Inc. of any transaction which would result
in such an acquisition;
D-1
<PAGE> 69
(c) a complete liquidation or dissolution of Tappan Zee Financial,
Inc., or approval by the stockholders of Tappan Zee Financial, Inc. of a plan
for such liquidation or dissolution;
(d) the occurrence of any event if, immediately following such event,
at least 50% of the members of the Board of Directors of Tappan Zee Financial,
Inc. do not belong to any of the following groups:
(i) individuals who were members of the Board of Directors of
Tappan Zee Financial, Inc. on the Effective Date of this Plan; or
(ii) individuals who first became members of the Board of
Directors of Tappan Zee Financial, Inc. after the Effective Date of this Plan
either:
(A) upon election to serve as a member of the Board
of Directors of Tappan Zee Financial, Inc. by affirmative vote of three-quarters
of the members of such Board, or of a nominating committee thereof, in office at
the time of such first election; or
(B) upon election by the stockholders of Tappan Zee
Financial, Inc. to serve as a member of the Board of Tappan Zee Financial, Inc.,
but only if nominated for election by affirmative vote of three-quarters of the
members of the Board of Directors of Tappan Zee Financial, Inc., or of a
nominating committee thereof, in office at the time of such first nomination;
provided, however, that such individual's election or nomination did
not result from an actual or threatened election contest (within the meaning of
Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) or other
actual or threatened solicitation of proxies or consents (within the meaning of
Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) other than by
or on behalf of the Board of Tappan Zee Financial, Inc.; or
(e) any event which would be described in section 2.6(a), (b), (c) or
(d) if the term "Bank" were substituted for the term "Tappan Zee Financial,
Inc." therein.
In no event, however, shall a Change of Control be deemed to have occurred as a
result of any acquisition of securities or assets of Tappan Zee Financial, Inc.,
the Bank, or a subsidiary of either of them, by Tappan Zee Financial, Inc., the
Bank, or a subsidiary of either of them, or by any employee benefit plan
maintained by any of them. For purposes of this section 2.6, the term "person"
shall have the meaning assigned to it under sections 13(d)(3) or 14(d)(2) of the
Exchange Act.
SECTION 2.7 CODE means the Internal Revenue Code of 1986 (including the
corresponding provisions of any succeeding law).
SECTION 2.8 COMMITTEE means the Committee described in section 3.1.
SECTION 2.9 COMPANY means Tappan Zee Financial, Inc., a corporation
organized and existing under the laws of the State of Delaware, and any
successor thereto, the Bank and any successor thereto and, with the prior
approval of the Board, and subject to such terms and conditions as may be
imposed by the Board, any other savings bank, savings and loan association,
bank, corporation, financial institution or other business organization or
institution.
SECTION 2.10 DISABILITY means a condition of total incapacity, mental
or physical, for further performance of duty with the Company which the
Committee shall have determined, on the basis of competent medical evidence, is
likely to be permanent.
SECTION 2.11 EFFECTIVE DATE means July 11, 1996.
SECTION 2.12 ELIGIBLE DIRECTOR means a member of the board of directors
of the Company who is not also an employee of the Company.
SECTION 2.13 ELIGIBLE DIRECTOR EMERITUS means a former member of the
board of directors or the Company who (a) has not received an Award under
section 5.1(a) and (b) is continuing to serve the Company in an advisory
capacity to its board of directors.
D-2
<PAGE> 70
SECTION 2.14 EXCHANGE ACT means the Securities Exchange Act of 1934, as
amended.
SECTION 2.15 PERSON means an individual, a corporation, a bank, a
savings bank, a savings and loan association, a financial institution, a
partnership, an association, a joint-stock company, a trust, an estate, an
unincorporated organization and any other business organization or institution.
SECTION 2.16 PLAN means the Recognition and Retention Plan for Outside
Directors of Tappan Zee Financial, Inc., as amended from time to time.
SECTION 2.17 QUALIFIED DOMESTIC RELATIONS ORDER means a Domestic
Relations Order that: (a) clearly specifies (i) the name and last known mailing
address of the Award holder and of each person given rights under such Domestic
Relations Order, (ii) the amount or percentages of the Award holder's benefits
under this Plan to be paid to each person covered by such Domestic Relations
Order, (iii) the number of payments or the period to which such Domestic
Relations Order applies, and (iv) the name of this Plan; and (b) does not
require the payment of a benefit in a form or amount that is (i) not otherwise
provided for under the Plan, or (ii) inconsistent with a previous Qualified
Domestic Relations Order. For the purposes of this Plan, a "Domestic Relations
Order" means a judgment, decree or order (including the approval of a property
settlement) that is made pursuant to a state domestic relations or community
property law and relates to the provision of child support, alimony payments, or
marital property rights to a spouse, child or other dependent of an Award
holder.
SECTION 2.18 SHARE means a share of common stock of Tappan Zee
Financial, Inc., par value $.01 per share.
SECTION 2.19 TRUST means the legal relationship created by the Trust
Agreement pursuant to which the Trustee holds the Trust Fund in trust. The Trust
may be referred to as the "Restricted Stock Plan Trust for Directors of Tappan
Zee Financial, Inc."
SECTION 2.20 TRUST AGREEMENT means the agreement between Tappan Zee
Financial, Inc. and the Trustee therein named or its successor pursuant to which
the Trust Fund shall be held in trust.
SECTION 2.21 TRUST FUND means the corpus (consisting of contributions
paid over to the Trustee, and investments thereof), and all earnings,
appreciations or additions thereof and thereto, held by the Trustee under the
Trust Agreement in accordance with the Plan, less any depreciation thereof and
any payments made therefrom pursuant to the Plan.
SECTION 2.22 TRUSTEE means the Trustee of the Trust Fund from time to
time in office. The Trustee shall serve as Trustee until it is removed or
resigns from office and is replaced by a successor Trustee or Trustees appointed
by Tappan Zee Financial, Inc.
ARTICLE III
ADMINISTRATION
SECTION 3.1 COMMITTEE.
The Plan shall be administered by the Compensation Committee of the
Board.
SECTION 3.2 COMMITTEE ACTION.
The Committee shall hold such meetings, and may make such
administrative rules and regulations, as it may deem proper. A majority of the
members of the Committee shall constitute a quorum, and the action of a majority
of the members of the Committee present at a meeting at which a quorum is
present, as well as actions taken pursuant to the unanimous written consent of
all of the members of the Committee without holding a meeting, shall be deemed
to be actions of the Committee. All actions of the Committee shall be final and
conclusive and shall be binding upon the Company and all other interested
parties. Any Person dealing with the Committee shall be fully protected in
relying upon any written notice, instruction, direction or other communication
signed by the secretary of the Committee and one member of the Committee, by two
members of the Committee or by a representative of the Committee authorized to
sign the same in its behalf.
D-3
<PAGE> 71
SECTION 3.3 COMMITTEE RESPONSIBILITIES.
Subject to the terms and conditions of the Plan and such limitations as
may be imposed by the Board, the Committee shall be responsible for the overall
management and administration of the Plan and shall have such authority as shall
be necessary or appropriate in order to carry out its responsibilities,
including, without limitation, the authority:
(a) to interpret and construe the Plan, and to determine all questions
that may arise under the Plan as to eligibility for Awards under the Plan, the
amount of Shares, if any, to be granted pursuant to an Award, and the terms and
conditions of such Award;
(b) to adopt rules and regulations and to prescribe forms for the
operation and administration of the Plan; and
(c) to take any other action not inconsistent with the provisions of
the Plan that it may deem necessary or appropriate.
ARTICLE IV
THE TRUST FUND
SECTION 4.1 CONTRIBUTIONS.
Tappan Zee Financial, Inc. shall contribute, or cause to be
contributed, to the Trust, from time to time, such amounts of money or property
as shall be determined by the Board, in its discretion. No contributions by
Eligible Directors shall be permitted.
SECTION 4.2 THE TRUST FUND.
The Trust Fund shall be held and invested under the Trust Agreement
with the Trustee. The provisions of the Trust Agreement shall include provisions
conferring powers on the Trustee as to investment, control and disbursement of
the Trust Fund, and such other provisions not inconsistent with the Plan as may
be prescribed by or under the authority of the Board. No bond or security shall
be required of any Trustee at any time in office.
SECTION 4.3 INVESTMENTS.
The Trustee shall invest the Trust Fund in Shares and in such other
investments as may be permitted under the Trust Agreement, including savings
accounts, time or other interest bearing deposits in or other interest bearing
obligations of the Company, in such proportions as shall be determined by the
Committee; provided, however, that in no event shall the Trust Fund be used to
purchase more than Nineteen Thousand Four Hundred and Forty (19,440) Shares.
Notwithstanding the immediately preceding sentence, the Trustee may temporarily
invest the Trust Fund in short-term obligations of, or guaranteed by, the U.S.
Government or an agency thereof, or the Trustee may retain the Trust Fund
uninvested or may sell assets of the Trust Fund to provide amounts required for
purposes of the Plan.
ARTICLE V
AWARDS
SECTION 5.1 IN GENERAL.
(a) On the Effective Date, each Person who is then an Eligible Director
(other than an Eligible Director Emeritus) shall be granted an Award of Three
Thousand Two Hundred and Forty (3,240) Shares. A Person who becomes an Eligible
Director subsequent to the Effective Date shall be granted, on the 15th day of
the month following the month in which such individual becomes an Eligible
Director (or, if such date is not a business day, the first business day
thereafter), an Award of Three Thousand Two Hundred and Forty (3,240) Shares. No
Eligible Director shall be granted more than one Award pursuant to this section
5.1(a).
(b) On the Effective Date, each person who is then an Eligible Director
Emeritus shall be granted an Award of One Thousand and Eighty (1,080) Shares.
D-4
<PAGE> 72
(c) Notwithstanding sections 5.1(a) and 5.1(b), in the event that, as
of the first business day of any calendar month, the number of available Shares
is less than the total number of Shares with respect to which Awards would be
granted under sections 5.1(a) and (b) during such month, each Eligible Director
scheduled to receive an Award during such month shall be granted an Award for
the number of whole Shares determined by multiplying (i) the number of Shares
with respect to which the Eligible Director would have been granted an Award on
such date by (ii) a fraction, the numerator of which is the number of Shares
that are then available and the denominator of which is the total number of
Shares that would have to have been available in order to grant all of the
Awards that would otherwise have been granted under sections 5.1(a) and (b)
during such month, and rounding to the nearest whole Share; provided, however,
that if rounding will require more Shares to be available than provided in
section 4.3, then the amount determined pursuant to this section 5.1(c) will be
calculated by rounding down to the lesser whole number.
(d) Any Award granted under this section 5.1 shall be evidenced by a
written notice issued by the Committee to the Eligible Director, which notice
shall:
(i) specify the number of Shares covered by the Award;
(ii) specify the Award Date;
(iii) specify the dates on which such Shares shall become available for
distribution to the Eligible Director, in accordance with section 6.1; and
(iv) contain such other terms and conditions not inconsistent with the
Plan as the Board may, in its discretion, prescribe.
SECTION 5.2 SHARE ALLOCATIONS.
Upon the grant of an Award to an Eligible Director, the Committee shall
notify the Trustee of the Award and of the number of Shares subject to the
Award. Thereafter, until such time as the Shares subject to such Award become
vested or are forfeited, the books and records of the Trustee shall reflect that
such number of Shares are being held for the benefit of the Award recipient.
SECTION 5.3 DIVIDEND RIGHTS.
(a) Any cash dividends or distributions declared and paid with respect
to Shares in the Trust Fund that are, as of the record date for such dividend,
allocated to an Eligible Director in connection with an Award shall be promptly
paid to such Eligible Director. Any stock dividends declared and paid with
respect to Shares that are not, as of the record date for such dividend,
allocated to any Eligible Director shall, at the direction of the Committee, be
held in the Trust or used to pay the administrative expenses of the Plan,
including any compensation due to the Trustee.
(b) Any dividends or distributions declared and paid with respect to
Shares in property other than cash shall be held in the Trust Fund. If, as of
the record date for such dividend or distribution, the Shares with respect to
which it is paid are allocated to an Eligible Director in connection with an
Award, the property so distributed shall be similarly allocated such Eligible
Director in connection with such Award and shall be held for distribution or
forfeiture in accordance with the terms and conditions of the Award.
SECTION 5.4 VOTING RIGHTS.
(a) Each Eligible Director to whom an Award has been made that is not
fully vested shall have the right to direct the manner in which all voting
rights appurtenant to the Shares related to such Award will be exercised while
such Shares are held in the Trust Fund. Such a direction shall be given by
completing and filing, with the inspector of elections, the Trustee or such
other person who shall be independent of the Company as the Committee shall
designate in the direction, a written direction in the form and manner
prescribed by the Committee. If no such direction is given by an Eligible
Director, then the voting rights appurtenant to the Shares allocated to him
shall not be exercised.
(b) To the extent that the Trust Fund contains Shares that are not
allocated in connection with an Award, all voting rights appurtenant to such
Shares shall be exercised by the Trustee in such manner as the
D-5
<PAGE> 73
Committee shall direct to reflect the voting directions given by Eligible
Directors with respect to Shares allocated in connection with their Awards.
(c) The Committee shall furnish, or cause to be furnished, to each
Eligible Director, all annual reports, proxy materials and other information
furnished by Tappan Zee Financial, Inc., or by any proxy solicitor, to the
holders of Shares.
SECTION 5.5 TENDER OFFERS.
(a) Each Eligible Director to whom an Award has been made that is not
fully vested shall have the right to direct, with respect to the Shares related
to such Award, the manner of response to any tender offer, exchange offer or
other offer made to the holders of Shares. Such a direction shall be given by
completing and filing, with the inspector of elections, the Trustee or such
other person who shall be independent of the Company as the Committee shall
designate in the direction, a written direction in the form and manner
prescribed by the Committee. If no such direction is given by an Eligible
Director, then the Shares shall not be tendered or exchanged.
(b) To the extent that the Trust Fund contains Shares that are not
allocated in connection with an Award, all responses to tender, exchange and
other offers appurtenant to such Shares shall be given by the Trustee in such
manner as the Committee shall direct to reflect the responses given by Eligible
Directors with respect to Shares allocated in connection with their Awards.
(c) The Committee shall furnish, or cause to be furnished, to each
Eligible Director, all information furnished by the offeror to the holders of
Shares.
SECTION 5.6 LIMITATIONS ON AWARDS.
(a) Notwithstanding anything in the Plan to the contrary:
(i) No Award shall be granted under the Plan prior to the date on which
the Plan is approved by the holders of a majority of the Shares of outstanding
on such date and eligible to vote upon the proposal to approve the Plan;
(ii) each Award granted prior to October 5, 1996 shall become vested
and distributable as follows:
(A) prior to the first anniversary of the date on
which the Award is granted, the Award shall not be exercisable;
(B) on the first anniversary of the date on which the
Award is granted, the Award will be vested as to twenty percent (20%) of the
Shares subject to the Award when granted;
(C) on the second anniversary of the date on which
the Award is granted, the Award will be vested as to an additional twenty
percent (20%) of the Shares subject to the Award when granted;
(D) on the third anniversary of the date on which the
Award is granted, the Award will be vested as to an additional twenty percent
(20%) of the Shares subject to the Award when granted;
(E) on the fourth anniversary of the date on which
the Award is granted, the Award will be vested as to an additional twenty
percent (20%) of the Shares subject to the Award when granted; and
(F) on the fifth anniversary of the date on which the
Award is granted, the Award will be vested as to an additional twenty percent
(20%) of the Shares subject to the Award when granted;
provided, however, that such an Award shall become fully vested on the date
of the Award holder's death or Disability.
(b) An Award by its terms shall not be transferable by the Eligible
Director other than by will or by the laws of descent and distribution, and the
Shares granted pursuant to such Award shall be distributable,
D-6
<PAGE> 74
during the lifetime of the Recipient, only to the Recipient, except to the
extent provided otherwise pursuant to the terms of a Qualified Domestic
Relations Order.
ARTICLE VI
VESTING AND DISTRIBUTION OF SHARES
SECTION 6.1 VESTING OF SHARES.
The Shares subject to each Award granted under the Plan shall become
vested as follows: (i) twenty percent (20%) of such Shares shall become vested
upon the first anniversary of the Award Date; (ii) 20% of such Shares shall
become vested upon the second anniversary of the Award Date; (iii) 20% of such
Shares shall become vested upon the third anniversary of the Award Date; (iv)
20% of such Shares shall become vested upon the fourth anniversary of the Award
Date; and (v) 20% of such Shares shall become vested upon the fifth anniversary
of the Award Date; provided, however, that the Eligible Director has remained a
director of the Company during the entire period commencing with the Award Date
and ending on the applicable anniversary of the Award Date; and provided,
further, an Award shall become 100% vested upon the death or Disability of the
Award recipient.
SECTION 6.2 DESIGNATION OF BENEFICIARY.
An Eligible Director who has received an Award may designate a
Beneficiary to receive any undistributed Shares that are, or become, available
for distribution on, or after, the date of his death. Such designation (and any
change or revocation of such designation) shall be made in writing in the form
and manner prescribed by the Committee. In the event that the Beneficiary
designated by an Eligible Director dies prior to the Eligible Director, or in
the event that no Beneficiary has been designated, any undistributed Shares that
are, or become, available for distribution on, or after, the Eligible Director's
death shall be paid to the executor or administrator of the Eligible Director's
estate, or if no such executor or administrator is appointed within such time as
the Committee, in its sole discretion, shall deem reasonable, to such one or
more of the spouse and descendants and blood relatives of such deceased person
as the Committee may select.
SECTION 6.3 MANNER OF DISTRIBUTION.
(a) As soon as practicable following the date any Shares granted
pursuant to an Award become vested pursuant to section 6.1, the Committee shall
take such actions as are necessary to cause the transfer of record ownership of
the Shares that have become vested from the Trustee to the Award holder and
shall cause the Trustee to distribute to the Award holder all property other
than Shares then being held in connection with the Shares being distributed.
(b) The Company's obligation to deliver Shares with respect to an Award
shall, if the Committee so requests, be conditioned upon the receipt of a
representation as to the investment intention of the Eligible Director or
Beneficiary to whom such Shares are to be delivered, in such form as the
Committee shall determine to be necessary or advisable to comply with the
provisions of applicable federal, state or local law. It may be provided that
any such representation shall become inoperative upon a registration of the
Shares or upon the occurrence of any other event eliminating the necessity of
such representation. The Company shall not be required to deliver any Shares
under the Plan prior to (i) the admission of such Shares to listing on any stock
exchange on which Shares may then be listed, or (ii) the completion of such
registration or other qualification under any state or federal law, rule or
regulation as the Committee shall determine to be necessary or advisable.
SECTION 6.4 TAXES.
The Company, the Committee or the Trustee shall have the right to
require any person entitled to receive Shares pursuant to an Award to pay the
amount of any tax which is required to be withheld with respect to such Shares,
or, in lieu thereof, to retain, or to sell without notice, a sufficient number
of Shares to cover the amount required to be withheld.
D-7
<PAGE> 75
ARTICLE VII
AMENDMENT AND TERMINATION
SECTION 7.1 TERMINATION.
The Board may suspend or terminate the Plan in whole or in part at any
time by giving written notice of such suspension or termination to the
Committee; provided, however, that the Plan may not be terminated while there
are outstanding Awards that may thereafter become vested. Upon the termination
of the Plan, the Trustee shall make distributions from the Trust Fund in such
amounts and to such persons as the Committee may direct and shall return the
remaining assets of the Trust Fund, if any, to Tappan Zee Financial, Inc.
SECTION 7.2 AMENDMENT.
The Board may amend or revise the Plan in whole or in part at any time;
provided, however, that if the amendment or revision:
(a) materially increases the benefits or Awards which may be granted
under the Plan;
(b) materially increases the number of Shares which may be issued under
the Plan; or
(c) materially modifies the requirements as to eligibility to receive
Awards under the Plan;
such amendment or revision shall be subject to approval by the shareholders of
the Company.
SECTION 7.3 ADJUSTMENTS IN THE EVENT OF A BUSINESS REORGANIZATION.
(a) In the event of any merger, consolidation, or other business
reorganization (including but not limited to a Change of Control) in which
Tappan Zee Financial, Inc. is the surviving entity, and in the event of any
stock split, stock dividend or other event generally affecting the number of
Shares held by each person who is then a holder of record of Shares, the number
of Shares held in the Trust Fund, including Shares covered by Awards, shall be
adjusted to account for such event. Such adjustment shall be effected by
multiplying such number of Shares by an amount equal to the number of Shares
that would be owned after such event by a person who, immediately prior to such
event, was the holder of record of one Share; provided, however, that the
Committee may, in its discretion, establish another appropriate method of
adjustment.
(b) In the event of any merger, consolidation, or other business
reorganization (including but not limited to a Change of Control) in which
Tappan Zee Financial, Inc. is not the surviving entity, the Trustee shall hold
in the Trust Fund any money, stock, securities or other property received by
holders of record of Shares in connection with such merger, consolidation, or
other business reorganization. Any Award with respect to which Shares had been
allocated to an Eligible Director shall be adjusted by allocating to the
Eligible Director receiving such Award the amount of money, stock, securities or
other property received by the Trustee for the Shares allocated to such Eligible
Director.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.1 STATUS AS AN EMPLOYEE BENEFIT PLAN.
This Plan is not intended to satisfy the requirements for qualification
under section 401(a) of the Code or to satisfy the definitional requirements for
an "employee benefit plan" under section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended. It is intended to be a non-qualified incentive
compensation program that is exempt from the regulatory requirements of the
Employee Retirement Income Security Act of 1974, as amended. The Plan shall be
construed and administered so as to effectuate this intent.
SECTION 8.2 NO RIGHT TO CONTINUED EMPLOYMENT.
Neither the establishment of the Plan nor any provisions of the Plan
nor any action of the Board or the Committee with respect to the Plan shall be
held or construed to confer upon any Eligible Director any right to a
continuation of service by the Company. The Company reserves the right to
dismiss any Eligible Director or otherwise deal with any Eligible Director to
the same extent as though the Plan had not been adopted.
D-8
<PAGE> 76
SECTION 8.3 CONSTRUCTION OF LANGUAGE.
Whenever appropriate in the Plan, words used in the singular may be
read in the plural, words used in the plural may be read in the singular, and
words importing the masculine gender may read as referring equally to the
feminine or the neuter. Any reference to an Article or section number shall
refer to an Article or section of this Plan unless otherwise indicated.
SECTION 8.4 GOVERNING LAW.
The Plan shall be construed and enforced in accordance with the laws of
the State of New York without giving effect to the conflict of laws principles
thereof, except to the extent that such laws are preempted by the federal laws
of the United States of America.
SECTION 8.5 HEADINGS.
The headings of Articles and sections are included solely for
convenience of reference. If there is any conflict between such headings and the
text of the Plan, the text shall control.
SECTION 8.6 NON-ALIENATION OF BENEFITS.
The right to receive a benefit under the Plan shall not be subject in
any manner to anticipation, alienation or assignment, nor shall such right be
liable for or subject to debts, contracts, liabilities, engagements or torts,
except to the extent provided in a Qualified Domestic Relations Order.
SECTION 8.7 NOTICES.
Any communication required or permitted to be given under the Plan,
including any notice, direction, designation, comment, instruction, objection or
waiver, shall be in writing and shall be deemed to have been given at such time
as it is personally delivered or 5 days after mailing if mailed, postage
prepaid, by registered or certified mail, return receipt requested, addressed to
such party at the address listed below, or at such other address as one such
party may by written notice specify to the other:
(a) If to the Stock Compensation Committee:
Tappan Zee Financial, Inc.
75 North Broadway
P.O. Box 187
Tarrytown, New York 10591
Attention: Corporate Secretary
(b) If to an Eligible Director, to the Eligible Director's address as
shown in the Company's personnel records.
SECTION 8.8 APPROVAL OF SHAREHOLDERS.
The Plan and all Awards granted hereunder shall be conditioned on the
approval of the Plan by the holders of a majority of the Shares of Tappan Zee
Financial, Inc. entitled to vote at an annual or special meeting of the holders
of Shares held no earlier than April 5, 1996. No Award under the Plan shall be
granted, nor shall any Shares be purchased or distributed, prior to such
approval.
D-9
<PAGE> 77
REVOCABLE PROXY
TAPPAN ZEE FINANCIAL, INC.
75 North Broadway
Tarrytown, New York 10591
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF TAPPAN ZEE FINANCIAL, INC.
FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON JULY 10, 1996.
The undersigned shareholder of Tappan Zee Financial, Inc., hereby
appoints Harry G. Murphy, John T. Cooney and Gerald L. Logan, or any of them,
with full powers of substitution, to represent and to vote as proxy, as
designated, all shares of common stock of Tappan Zee Financial, Inc. held of
record by the undersigned on May 17, 1996, at the 1996 Annual Meeting of
Shareholders (the "Annual Meeting") to be held at 5:00 p.m. on July 10, 1996,
or at any adjournment or postponement thereof, upon the matters described in
the accompanying Notice of Annual Meeting and Proxy Statement and upon such
other matters as may properly come before the Annual Meeting. The undersigned
hereby revokes all prior proxies.
This Proxy, when properly executed, will be voted in the manner
directed herein by the undersigned stockholder. IF NO DIRECTION IS GIVEN, THIS
PROXY WILL BE VOTED FOR THE ELECTION OF ALL NOMINEES LISTED IN ITEM 1 AND FOR
THE PROPOSALS LISTED IN ITEMS 2, 3, 4, 5, 6 AND 7.
PLEASE MARK, SIGN AND DATE THIS PROXY ON THE REVERSE SIDE
AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE.
- - -------------------------------------------------------------------------------
FOLD AND DETACH HERE
<PAGE> 78
The Board of Directors unanimously recommends a vote "FOR" all of the nominees
named in Item 1 and a vote "FOR" each of the proposals in Items 2, 3, 4, 5, 6
and 7.
<TABLE>
<S> <C> <C> <C>
1. Election of Directors for terms of three years each. FOR
All nominees
Nominees: Marvin Levy, Kevin J. Plunkett and (except as WITHHOLD
Paul R. Wheatley otherwise for all
Instruction: TO WITHHOLD AUTHORITY to vote for indicated) nominees
any individual nominee, write that nominee's ---------- ----------
name in the space provided:
- - --------------------------------------------------- ---------- ----------
FOR AGAINST ABSTAIN
2. Approval of the 1996 Stock Option ---------- ---------- ----------
Plan for the Officers and Employees.
---------- ---------- ----------
FOR AGAINST ABSTAIN
3. Approval of the 1996 Stock Option ---------- ---------- ----------
Plan for Outside Directors.
---------- ---------- ----------
Please mark ----------
your votes as X
indicated in
this example ----------
FOR AGAINST ABSTAIN
4. Approval of the Recognition and ---------- ---------- ----------
Retention Plan for Officers and
Employees.
---------- ---------- ----------
FOR AGAINST ABSTAIN
5. Approval of the Recognition and ---------- ---------- ----------
Retention Plan for Outside Directors.
---------- ---------- ----------
FOR AGAINST ABSTAIN
6. Ratification of the appointment of KPMG ---------- ---------- ----------
Peat Marwick LLP as independent auditors
for the fiscal year ending March 31, 1997.
---------- ---------- ----------
FOR AGAINST ABSTAIN
7. Authorization of the Board of Directors, in ---------- ---------- ----------
its discretion, to direct the vote of proxies
upon such other business as may properly
come before the meeting, and any adjournment ---------- ---------- ----------
thereof, including, without limitation,
a motion to adjourn the meeting. ----------
I will attend the Annual Meeting
----------
</TABLE>
The undersigned hereby acknowledges receipt of the Notice of Annual
Meeting of Shareholders and the Proxy Statement for the Annual Meeting.
- - ------------------------------------------------------------------------
- - ------------------------------------------------------------------------
Signature(s)
Dated:____________________________________________________________, 1996
Please sign exactly as your name appears on this proxy. Joint owners should
each sign personally. If signing as attorney, executor, administrator, trustee
or guardian, please include your full title. Corporate or partnership proxies
should be signed by an authorized officer.
- - -------------------------------------------------------------------------------
FOLD AND DETACH HERE
<PAGE> 79
[Tappan Zee Financial, Inc. Letterhead]
June 3, 1996
TO: ALL EMPLOYEE STOCK OWNERSHIP PLAN (THE "ESOP") PARTICIPANTS
Re: Annual Meeting of Shareholders to be held on July 10, 1996
Dear Participants:
As you know, Tarrytowns Bank, FSB (the "Bank") introduced a
new benefit plan -- an Employee Stock Ownership Plan, or "ESOP" -- when it
completed its stock conversion last year. The ESOP purchased 8% of the stock
issued by the Bank's parent company, Tappan Zee Financial, Inc. (the "Company")
as part of the Bank's conversion ("Shares"). These Shares are held by Marine
Midland Bank as trustee (the "ESOP Trustee") to be given to ESOP participants
over a period of years. One feature of the ESOP is that participating employees
have certain voting rights at the Company's shareholder meetings.
In connection with the Annual Meeting of Shareholders of
Tappan Zee Financial Inc. to be held on July 10, 1996, enclosed are the
following documents:
1. Confidential Voting Instruction card;
2. Proxy Statement dated June 3, 1996, including a
Notice of Annual Meeting of Shareholders;
3. 1995 Annual Report to Shareholders; and
4. a postage-paid return envelope addressed to Marine
Midland Bank ("ESOP Trustee").
As a participant in the ESOP, you have the right to direct the
ESOP Trustee how to vote the Shares held by the ESOP as of May 17, 1996, the
record date for the Annual Meeting ("Record Date"), on the proposals to be voted
by the Company's shareholders. Your rights will vary depending on whether the
matter being voted on is an "Anticipated Proposal" or an "Unanticipated
Proposal."
ANTICIPATED PROPOSALS.
Each participant has the right to instruct the ESOP Trustee
how to vote the Shares in his or her ESOP account as of the Record Date. In
general, the ESOP Trustee will vote the Shares in your ESOP account by casting
votes FOR and AGAINST each proposal as you specify on the Confidential Voting
Instruction accompanying this letter. The number of Shares in your ESOP account
is shown on the enclosed Confidential Voting Instruction card.
If you do not direct the ESOP Trustee how to vote the Shares
in your ESOP account, the ESOP Trustee will, to the extent consistent with its
fiduciary duties, vote your Shares in a manner calculated to most accurately
reflect the instructions received from other
<PAGE> 80
participants. The same is true of Shares not yet placed in anyone's ESOP
account. The ESOP Trustee's fiduciary duties require it to vote any Shares for
which it receives no voting instructions, as well as any Shares not yet given to
participants, in a manner determined to be prudent and solely in the interest of
the participants and beneficiaries.
UNANTICIPATED PROPOSALS.
It is possible, although very unlikely, that proposals other
than those specified on the Confidential Voting Instruction card will be
presented for shareholder action at the 1996 Annual Meeting of Shareholders. If
this should happen, the ESOP Trustee will vote upon such matters in its
discretion, or cause such matters to be voted upon in the discretion of the
individuals named in any proxies executed by it.
Your instruction is very important. You are encouraged to
review the enclosed material carefully and to complete, sign and date the
enclosed Confidential Voting Instruction card to signify your direction to the
ESOP Trustee. You should then seal the card in the enclosed envelope and return
it directly to the ESOP Trustee. The Confidential Voting Instruction Card must
be received by the ESOP Trustee no later than July 1, 1996.
PLEASE NOTE THAT THE VOTING INSTRUCTIONS OF INDIVIDUAL
PARTICIPANTS ARE TO BE KEPT CONFIDENTIAL BY THE ESOP TRUSTEE, WHO HAS BEEN
INSTRUCTED NOT TO DISCLOSE THEM TO ANYONE AT THE BANK OR THE COMPANY.
Very truly yours,
THE COMPENSATION COMMITTEE OF
TAPPAN ZEE FINANCIAL, INC.
Enclosure
<PAGE> 81
[FRONT]
TAPPAN ZEE FINANCIAL, INC.
CONFIDENTIAL VOTING INSTRUCTION
SOLICITED BY THE COMPENSATION COMMITTEE
OF TAPPAN ZEE FINANCIAL, INC.
FOR THE EMPLOYEE STOCK OWNERSHIP PLAN
OF TAPPAN ZEE FINANCIAL, INC. AND CERTAIN AFFILIATES
The undersigned participant, former participant or beneficiary of a
deceased former participant in the Employee Stock Ownership Plan of Tappan Zee
Financial, Inc. (the "ESOP") hereby provides the voting instructions specified
to the Trustee of the ESOP (the "Trustee"), which instructions shall be taken
into account by the Trustee in voting, in person, by limited or general power of
attorney, or by proxy, the shares and fractional shares of common stock of
Tappan Zee Financial, Inc. that are held by the Trustee, in its capacity as
Trustee, as of May 17, 1996 at the Annual Meeting of Shareholders of Tappan Zee
Financial, Inc. to be held on July 10, 1996, and at any adjournment or
postponement thereof.
As to the proposals listed on the reverse side, which are more
particularly described in the Proxy Statement dated June 3, 1996, the Trustees
will vote the common stock of Tappan Zee Financial, Inc. held by the ESOP Trust
to reflect the voting instructions on this Confidential Voting Instruction, in
the manner described in the accompanying letter from the Committee dated June 3,
1996.
(CONTINUED ON REVERSE SIDE. PLEASE COMPLETE, SIGN AND DATE ON THE
REVERSE SIDE AND PROMPTLY RETURN IN THE ENCLOSED POSTAGE-PAID ENVELOPE.)
<PAGE> 82
[BACK]
THE BOARD OF DIRECTORS OF TAPPAN ZEE FINANCIAL, INC. RECOMMENDS A VOTE
"FOR" ALL NOMINEES IN PROPOSAL NO. 1 AND "FOR" PROPOSALS NO. 2., NO. 3, NO. 4,
NO. 5, AND NO. 6. IF THIS CONFIDENTIAL VOTING INSTRUCTION IS SIGNED BUT NO
DIRECTION IS GIVEN, THE ESOP SHARES ALLOCATED TO YOUR ACCOUNT WILL BE VOTED
"FOR" ALL NOMINEES IN PROPOSAL NO. 1, NO. 2, NO. 3, NO. 4, NO. 5, OR NO. 6. THE
DIRECTIONS, IF ANY, GIVEN IN THIS CONFIDENTIAL VOTING INSTRUCTION WILL BE KEPT
CONFIDENTIAL FROM ALL DIRECTORS, OFFICERS AND EMPLOYEES OF TAPPAN ZEE FINANCIAL,
INC. OR TARRYTOWNS BANK, FSB.
Please mark your votes like this
1- /X/
ESOP SHARES (as of May 17, 1996)
- - -------------------------------------------------------------------------------
1. The election of nominees Marvin Levy, Kevin J. Plunkett and Paul
Wheatley as directors for terms of three years each.
FOR all nominees WITHHOLD as to all nominees
/ / / /
TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, WRITE THAT NOMINEE'S
NAME IN THE SPACE PROVIDED:
----------------------------------------------------
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
<S> <C> <C> <C>
2. The approval of the 1996 Stock Option Plan for Officers and Employees. / / / / / /
- - -----------------------------------------------------------------------------------------------------------------------------------
3. The approval of the 1996 Stock Option Plan for Outside Directors. / / / / / /
- - -----------------------------------------------------------------------------------------------------------------------------------
4. The approval of the Recognition and Retention Plan for Officers and Employees. / / / / / /
- - -----------------------------------------------------------------------------------------------------------------------------------
5. The approval of the Recognition and Retention Plan for Outside Directors. / / / / / /
- - -----------------------------------------------------------------------------------------------------------------------------------
6. The ratification of the appointment of KPMG Peat Marwick LLP as independent / / / / / /
auditors of Tappan Zee Financial, Inc. for the fiscal year ending March 31, 1997.
- - -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
In its discretion, the Trustee is authorized to vote upon such other
business as may come before the Annual Meeting or any adjournment or
postponement thereof or to cause such matters to be voted upon in the discretion
of the individuals named in any proxies executed by the Trustees.
All proposals listed above in this Confidential Voting Instruction were
proposed by Tappan Zee Financial, Inc.
The undersigned hereby instructs the Trustee to vote in accordance with
the voting instruction indicated above and hereby acknowledges receipt, prior to
the execution of this Confidential Voting Instruction, of a Notice of Annual
Meeting of Shareholders of Tappan Zee Financial, Inc., a Proxy Statement dated
June 3, 1996 for the Annual Meeting and a 1995 Annual Report to Shareholders.
PLEASE SIGN AND DATE BELOW AND RETURN PROMPTLY IN THE ENCLOSED
POSTAGE-PAID ENVELOPE. YOUR CONFIDENTIAL VOTING INSTRUCTION MUST BE RECEIVED NO
LATER THAN JULY 1, 1996.
Date
----------------------------------------------------
2- Signature
----------------------------------------------------
Signature of participant, former participant or
designated beneficiary of deceased former
participant. Please sign name exactly as it appears
herein. When signing as attorney, executor,
administrator, trustee or guardian, please give your
full title as such.
