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(7)
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These shares include (a)
2,500 shares of common stock owned by Mr. Smiths spouse for which he does
not have voting or investment power and as to which he disclaims beneficial
ownership and (b) 12,500 shares of common stock held for the benefit of Mr.
Smith under the Hawkstone Retirement Plan. Includes 5,355 shares of
restricted stock and options to acquire 13,380 shares of common stock which
were exercisable within 60 days of the record date. Mr. Smith has pledged
2,500 shares as security for a loan.
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(8)
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Includes 5,355 shares of
restricted stock and options to acquire 13,380 shares of common stock which
were exercisable within 60 days of the record date.
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(9)
|
These shares include 877
shares of common stock owned by Mr. Williamsons spouse for which he does not
have voting or investment power. Includes 5,355 shares of restricted stock
and options to acquire 13,380 shares of common stock which were exercisable
within 60 days of the record date.
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(10)
|
These shares include 5,567
shares owned by Mrs. Fischers spouse for which she does not have voting or
investment power and as to which she disclaims beneficial ownership, and
5,809 employee stock ownership plan shares. Includes 3,210 shares of
restricted stock and options to acquire 7,200 shares which are exercisable
within 60 days of the record date.
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(11)
|
These shares include (a)
8,385 shares of common stock owned by Mr. Kappas spouse for which he does
not have voting or investment power and as to which he disclaims beneficial
ownership and (b) 2,882 shares of common stock allocated to Mr. Kappas
account under the Cheviot Savings Bank 401(k) Retirement Savings Plan and (c)
8,625 employee stock ownership plan shares. Includes 14,392 shares of
restricted stock and options to acquire 34,800 shares which are exercisable
within 60 days of the record date.
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(12)
|
These shares include 4,402
shares of common stock owned by Mr. Lenzers spouse for which he does not
have voting or investment power and as to which he disclaims beneficial
ownership and 9,164 employee stock ownership plan shares. Includes 12,734
shares of restricted stock and options to acquire 36,300 shares which are
exercisable within 60 days of the record date. Mr. Lenzer has pledged 8,804
shares as security for a loan.
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(13)
|
These shares include 11,750
shares of common stock owned by Mr. Smiths spouse for which he does not have
voting or investment power, 1,500 shares owned by Mr. Smiths children and
7,406 employee stock ownership plan shares. Includes 10,710 shares of
restricted stock and options to acquire 24,000 shares which are exercisable
within 60 days of the record date.
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(14)
|
These shares include shares
of common stock held directly as well as by spouses or minor children, in
trust and other indirect ownership. In the aggregate, our directors and
executive officers disclaim beneficial ownership of and do not have voting or
investment power for 49,109 of the shares.
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PROPOSAL 1 ELECTION OF DIRECTORS
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Director Nominees
(Terms expire at the 2011 Annual Meeting of
Shareholders)
John T. Smith,
63, is the Secretary/Treasurer
of Hawkstone Associates, Inc. dba Triumph Energy Corp., a gasoline wholesaler
and retailer. Mr. Smith is the father of Scott T. Smith, our Chief Financial
Officer and chief financial officer of Cheviot Mutual Holding Company and
Cheviot Savings Bank. Mr. Smith has served as a director of Cheviot Savings
Bank since 1995.
Robert L. Thomas,
65, is the owner/operator of
R&R Quality Meats & Catering in Cheviot, Ohio. Mr. Thomas has served as
a director of Cheviot Savings Bank since 1989.
Directors Not Standing for Election
(Terms Expire at the 2009 Annual Meeting of
Shareholders)
Steven R. Hausfeld,
50, is a Certified Public
Accountant who owns a local accounting practice. Mr. Hausfeld previously served
as a school board member for the Oak Hills Local School District through
December, 2005. Mr. Hausfeld has served as a director of Cheviot Savings Bank
since July 2005. Mr. Hausfeld serves as the financial expert on the Audit
Committee.
Thomas J. Linneman,
54, has served as our
President and Chief Executive Officer and of Cheviot Mutual Holding Company
since our reorganization into the mutual holding company structure in 2004 and
of Cheviot Savings Bank since 1998. Mr. Linneman has served as a director of
Cheviot Savings Bank since 1998.
(Terms Expire at the 2010 Annual Meeting of
Shareholders)
Edward L. Kleemeier,
73, is a retired District
Fire Chief for the City of Cincinnati, Ohio. Mr. Kleemeier has served as a
director of Cheviot Savings Bank since 1978.
James E. Williamson,
63, is a retired District
Administrator (Director) of Oak Hills Local School District in Cincinnati, Ohio
since 2000. Mr. Williamson was a high school principal in Cincinnati, Ohio from
1989 to 2000. Mr. Williamson also serves as the Executive Secretary of Cheviot
Mutual Holding Company and Cheviot Financial Corp. Mr. Williamson has served as
a director of Cheviot Savings Bank since 1997.
Executive Officers
Jeffrey
J. Lenzer,
46, has been our Vice President of Operations since 2005.
Prior to that, he served as the Vice President of Lending.
Kevin
M. Kappa,
50, has been our Vice President of Compliance since 1993.
Scott
T. Smith,
38, has been our Chief Financial Officer and Treasurer
since 1999. Mr. Smith is the son of Director John T. Smith.
Deborah
A. Fischer,
54, has been our Vice President of Lending since 2006.
Prior to that, she served as the Assistant Vice President of Lending.
THE
BOARD RECOMMENDS THAT SHAREHOLDERS VOTE
FOR
THE ELECTION OF MESSRS. SMITH AND
THOMAS TO THE BOARD OF DIRECTORS.
Board Structure and Compensation
We are a controlled company under
NASDAQ Marketplace Rules because more than 50% of our voting power is held by
Cheviot Mutual Holding Company. Therefore, we are exempt from the NASDAQ
Marketplace
4
Rules
requiring (a) that we have a majority of independent directors on the Board,
(b) any compensation committee and nominating committee to be composed solely
of independent directors, (c) the compensation of executive officers being
determined by a majority of the independent directors or a compensation
committee composed solely of independent directors, and (d) the election or
recommendation of director nominees for the Boards selection, either by a
majority of the independent directors or a nominating committee composed solely
of independent directors.
Affirmative Determinations Regarding Director
Independence and Other Matters
Based on information supplied to it by
the directors, the Board of Directors has determined each of the following
directors to be an independent director as such term is defined in the NASDAQ
Marketplace Rules:
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Steven R.
Hausfeld
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Robert L.
Thomas
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Edward L.
Kleemeier
|
James E.
Williamson
|
In this proxy statement these four
directors are referred to individually as an Independent Director and
collectively as the Independent Directors. The Independent Directors
constitute a majority of the Board of Directors. Although Mr. Smith is not an
employee of the company or any of its affiliates, Mr. Smith is determined not
to be independent because of a family relationship; Mr. Smith is the father of
Scott T. Smith, our Chief Financial Officer and the Chief Financial Officer of
Cheviot Mutual Holding Company and Cheviot Savings Bank.
The Board of Directors has also
determined that each member of the Audit Committee of the Board meets the
independence requirements applicable to that committee prescribed by the NASDAQ
Marketplace Rules, the Securities and Exchange Commission and the Internal
Revenue Service.
In determining the independence of our
directors we considered our relationships with these individuals which consist
of making loans to our directors. We will originate mortgage loans secured by
the borrowers residence to our employees, executive officers and directors.
All of these loans are made in accordance with applicable banking regulations.
All employees and directors loans must be approved by the Board of Directors.
Board and Committee Meetings
We have six directors and the following
two committees: (1) Audit Committee and (2) Nominating Committee. The Board of
Directors has the responsibility for establishing broad corporate policies and
for our overall performance, although it is not involved in the day-to-day
operating details. Directors are kept informed of our business by various
reports and documents sent to them, as well as by operating and financial reports
presented at Board and Committee meetings by the Chief Executive Officer and
other officers.
Our directors also serve as the Board of
Directors for Cheviot Savings Bank and did so prior to our mutual holding
company reorganization with the exception of Mr. Hausfeld. For the year ended
December 31, 2007, the Board of Directors held 26 regular and no special
meetings. No director attended fewer than 75 percent of the total meetings of
the Board of Directors and the committees on which such director served.
Audit Committee.
The Audit Committee consists
of three of the Independent Directors, Messrs. Hausfeld, Thomas and Williamson.
The committee is responsible for engaging our independent registered public
accounting firm, overseeing our financial reporting process, evaluating the
adequacy of our internal controls, reviewing our compliance with federal, state
and local laws and regulations, and monitoring the legal and ethical conduct of
our management and employees. In addition, the committee reviews our financial
affairs, including our capital structure, borrowing limits, financing of
corporate acquisitions and the performance of our benefit plans. The Audit
Committee membership meets the audit committee composition requirements of the
NASDAQ Marketplace Rules. Mr. Hausfeld has been designated as the audit
committees financial expert. Mr. Hausfeld is a certified public accountant.
The Audit Committee also serves as the audit committee for the Board of
Directors of Cheviot Savings Bank.
5
The Audit Committee met nine times for the year ended December 31,
2007. Pursuant to applicable regulations, the Audit Committee has adopted a
written charter, a copy of which is available on our website
www.
cheviotsavings. com
.
Nominating Committee.
The Nominating Committee
consists of the entire Board of Directors, as required by our Bylaws except for
directors who are under consideration for relection, including both independent
and non-independent directors. As a controlled company, we are not required
to have the Nominating Committee comprised solely of the Independent Directors.
The non-independent members of the Nominating Committee are Messrs. Linneman
and Smith. The Committee recommends nominees for the election of directors and
officers, monitors the performance of the other Board committees, and informs
the Board of shareholder concerns. The Nominating Committee does not operate
under a formal written charter. We do not pay any third party a fee to assist
us in identifying and evaluating potential nominees.
The Nominating Committee of the Company
met one time during 2007.
Compensation Committee.
We do not have a
Compensation Committee because we do not independently compensate our executive
officers, directors or employees. These persons are compensated by Cheviot
Savings Bank. As a controlled company, we are not required to adhere to the
NASDAQ Marketplace Rules with respect to the Boards determination of the
compensation of officers.
Other Board Committees of Cheviot Savings Bank.
In
addition to the committees of the Board of Cheviot Financial Corp. , the Board
of Directors of Cheviot Savings Bank also maintains a loan committee, a
compensation committee and product development committee. The loan committee
has the principal responsibility of approving certain loans to be provided by
Cheviot Savings Bank in its ordinary course of business. Since we do not
independently compensate our executive officers, directors or employees, the
compensation committee has the principal responsibility for setting and
reviewing the compensation benefits provided to officers and employees of
Cheviot Savings Bank, who are also employees of Cheviot Financial Corp. The
planning and development committee has the responsibility of making sure we are
offering the products customers want and expect.
Attendance at Annual Meeting of Shareholders
We do not have a policy regarding
director attendance at the annual meetings of shareholders. Directors Hausfeld,
Kleemeier, Smith, Thomas, Williamson and Linneman attended the prior years
annual meeting of shareholders.
Executive Sessions of Non-Management
Directors
Our non-management directors meet in
executive session without management present from time to time as deemed
necessary by the non-management directors, but at least two times per year.
Shareholders or other interested parties may communicate with the presiding
director or to the non-management directors as a group.
The Director Nominations Process
The purpose of the Nominating Committee
is to consider both management and shareholder recommended candidates for
possible inclusion in our recommended slate of director nominees.
Minimum Criteria for Candidates.
At a minimum,
each candidate must (a) agree to accept the nomination for Board candidacy, (b)
meet the standards of independence established by NASDAQ, and (c) meet all
other applicable laws, rules, and regulations related to service as a Director.
Desirable Qualities and Skills.
In addition,
the Nominating Committee will consider the following skills and characteristics
of candidates: (a) judgment, (b) diversity, (c) experience, (d) skills, (e)
accountability and integrity, (f) financial literacy, (g) industry knowledge,
(h) other board appointments, and (i) independence. In addition, in determining
whether an incumbent director should stand for re-election, the Nominating
Committee will
6
consider the
directors attendance at meetings, achievement of satisfactory performance and
other matters determined by the Board.
Internal Process for Identifying Candidates.
On
a periodic basis, the Nominating Committee solicits ideas for possible
candidates from a number of sources members of the Board; senior level
executives; individuals personally known to the members of the Board; and
research, including database and Internet searches.
General Nomination Right of All Shareholders.
Any
of our shareholders may nominate one or more persons for election as a director
at an annual meeting of shareholders if the shareholder complies with the
notice, information and consent provisions contained in our Bylaws. We have an
advance notice bylaw provision. In order for the director nomination to be
timely, a shareholders notice to our Executive Secretary must be delivered to
our principal executive offices not less than 30 days nor more than 60 days
prior to the date of our next annual meeting. If a shareholder provides timely
notice as described above, in accordance with our Bylaws, the candidate may be
voted upon in the election of directors at the annual meeting and the
candidates name will be included on the ballot for election. If a shareholder
fails to provide timely notice, but still provides written notice to our
Executive Secretary at least five days prior to the annual meeting, the
candidate will be added to the ballots provided at the annual meeting, but will
not be included on any proxy cards delivered by the company. Further, the
persons named in the proxy cards will be permitted to exercise discretionary voting
authority with respect to any candidate submitted by a shareholder less than 30
days before the date of the annual meeting.
A shareholder entitled to vote may
propose a candidate from the floor at the annual meeting itself only if the
Nominating Committee has failed to nominate a slate of candidates at least 20
days before the date of the annual meeting. If the Nominating Committee
recommends a slate of candidates at least 20 days before the date of the annual
meeting, no votes will be allowed for candidates who are proposed from the
floor during the annual meeting.
Evaluation of Candidates.
The Nominating
Committee will consider all candidates identified through the processes
described above and will evaluate each of them, including incumbents, based on
the same criteria. If, based on the Nominating Committees initial evaluation,
a candidate continues to be of interest to the Nominating Committee, a member
of the Nominating Committee will interview the candidate and communicate such
members evaluation to the other Nominating Committee members. Later reviews
will be conducted by other members of the Nominating Committee and our
executive officers. Ultimately, background and reference checks will be
conducted and the Nominating Committee will meet to finalize its list of
recommended candidates for the Boards consideration.
Timing of the Identification and Evaluation Process.
Our
fiscal year ends on December 31. The Nominating Committee usually meets in
February or March to consider and determine, among other things, candidates to
be included in our recommended slate of director nominees for election by
shareholders at the annual meeting.
There have been no material changes to
these procedures since they were previously disclosed in our proxy statement
for the 2007 Annual Meeting of Shareholders.
Audit Committee Report
During 2007, Messrs. Hausfeld, Thomas and
Williamson served on our Audit Committee, with Mr. Williamson serving as Chair.
The Audit Committee operates pursuant to a written charter, which complies with
the applicable provisions of the Sarbanes-Oxley Act of 2002 and related rules
of the SEC and Nasdaq. The Audit Committee is responsible for overseeing our
accounting and financial reporting processes, including the quarterly review
and the annual audit of our consolidated financial statements by Clark,
Schaefer, Hackett & Co., our independent registered public accounting
firm. As part of fulfilling its responsibilities, the Audit Committee reviewed
and discussed the audited consolidated financial statements for the year ended
December 31, 2007 with management and Clark, Schaefer, Hackett & Co. and
discussed those matters required by Statement on Auditing Standards No. 61
(Communication with Audit Committees), as amended, with Clark, Schaefer,
Hackett & Co. The Audit Committee received the written disclosures and the
letter required by Independent Standards Board Statement No. 1 (Independence
Discussions with Audit Committee) from Clark, Schaefer, Hackett & Co. and
discussed that
7
firms
independence with representatives of the firm.
Based upon the Audit Committees review
of the audited consolidated financial statements and its discussions with
management, the internal audit function and our independent registered public
accounting firm, the Audit Committee recommended that the Board of Directors
include our audited financial statements for the year ended December 31, 2007
in the Annual Report on Form 10-K as filed with the SEC.
This report shall not be deemed
incorporated by reference by any general statement incorporating by reference
this proxy statement into any filing under the Securities Act of 1933, as
amended, or the Securities Exchange Act of 1934, as amended, expect to the
extent that we specifically incorporate this information by reference, and
shall not otherwise be deemed filed under such Acts.
Respectfully
submitted,
Steven R.
Hausfeld
Robert L. Thomas
James E. Williamson
Compensation Committee
Overview of Compensation Program
. The
Compensation Committee (for purposes of this analysis, the Committee) of the
Board of Directors of Cheviot Savings Bank has the responsibility for
establishing, implementing and continually monitoring adherence with our
compensation philosophy. The Committee ensures that the total compensation paid
is fair, reasonable and competitive. The members of the Compensation Committee
of Cheviot Savings Bank are directors Hausfeld, Thomas and Kleemeier, all of
whom are independent directors. The Compensation Committee does not operate
under a written charter. The Compensation Committee of Cheviot Savings Bank met
four times during the year ended December 31, 2007.
Throughout this proxy statement, the
individual who served as our Chief Executive Officer during 2007 as well as the
other individuals included in the Summary Compensation Table, are referred to
as the named executive officers.
Compensation Philosophy and Objectives
. The
Committee believes that the most effective executive compensation program is
one that is designed to reward the achievement of specific annual, long-term
and strategic goals. The Committee evaluates both performance and current
compensation to ensure that we maintain our ability to attract and retain
superior employees in key positions. The compensation provided to key employees
remains competitive relative to the compensation paid to similarly situated
executives of our industry and in our market area.
Role of Executive Officers in Compensation Decisions
.
The Committee makes all compensation decisions for the named executive officers
and approves recommendations made by the Chief Executive Officer for other
employees. The Chief Executive Officer annually reviews the performance of each
one of the named executive officers. The conclusions reached and
recommendations made based on these reviews are presented to the Committee. The
Committee can exercise its discretion in modifying any recommendation or
awards.
Compensation Components
. For the fiscal year
ended December 31, 2007, the principal components of compensation include base
salary, performance-based incentive compensation, retirement, stock based
incentive plan and other benefits.
Code of Business Conduct and Ethics
We have adopted a Code of Business Conduct
and Ethics that applies to our directors, executive officers and employees,
including our principal executive officer, principal financial officer,
principal accounting officer or controller, or other persons performing similar
functions. The Code of Ethics requires our directors, executive officers and
employees to avoid conflicts of interest, comply with all laws and other legal
requirements, conduct business in an honest and ethical manner and otherwise
act with integrity and in our best interest. Under the terms of
8
the Code of
Ethics, directors, executive officers and employees are required to report any
conduct that they believe in good faith to be an actual or apparent violation
of the Code of Ethics.
Executive Compensation
Summary Compensation Table
. The following table
shows for the years ended December 31, 2007 and 2006, the compensation of
Thomas J. Linneman, our principal executive officer and our two highest
compensated executive officers who received total compensation of $100,000 for
services to us or any of our subsidiaries during the year ended December 31,
2007.
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Summary Compensation Table
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Name and
Principal Position
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Year
|
|
Salary
($)
|
|
Bonus
($)
|
|
Stock
awards
(1)
($)
|
|
Option
awards
(2)
($)
|
|
All other
compensation
($)
|
|
Total
($)
|
|
|
Thomas J. Linneman,
|
|
2007
|
|
$
|
194,333
|
(3)
|
$
|
4,858
|
|
$
|
103,262
|
|
$
|
67,200
|
|
$
|
62,320
|
(9)
|
$
|
431,973
|
|
President and Chief
Executive Officer
|
|
2006
|
|
$
|
187,916
|
(4)
|
$
|
14,094
|
|
$
|
103,262
|
|
$
|
67,200
|
|
$
|
64,633
|
(10)
|
$
|
437,105
|
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Kevin M. Kappa,
|
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2007
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$
|
111,755
|
(5)
|
$
|
2,794
|
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$
|
61,900
|
|
$
|
38,976
|
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$
|
28,375
|
(11)
|
$
|
243,800
|
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Vice President
Compliance of the Bank
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2006
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$
|
107,940
|
(6)
|
$
|
8,096
|
|
$
|
61,900
|
|
$
|
38,976
|
|
$
|
30,160
|
(12)
|
$
|
247,072
|
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Jeffrey J. Lenzer,
|
|
2007
|
|
$
|
125,704
|
(7)
|
$
|
3,143
|
|
$
|
61,900
|
|
$
|
40,656
|
|
$
|
31,056
|
(13)
|
$
|
262,459
|
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Vice President
Operations of the Bank
|
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2006
|
|
$
|
120,003
|
(8)
|
$
|
9,000
|
|
$
|
61,900
|
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$
|
40,656
|
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$
|
32,709
|
(14)
|
$
|
264,268
|
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(1)
|
The amounts reflect the
dollar amount recognized for financial statement reporting purposes for the
fiscal years ended December 31, 2007 and 2006, in accordance with FAS 123 (R)
of awards pursuant to the Stock-Based Incentive Plan and this includes
amounts from awards granted prior to 2007 and 2006. Assumptions used in the
calculation of these amounts are included in Note A to our audited financial
statements for the year ended December 31, 2007.
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(2)
|
The amounts reflect the
dollar amount recognized for financial statement reporting purposes for the
fiscal years ended December 31, 2007 and 2006, in accordance with FAS 123 (R)
of awards pursuant to the Stock-Based Incentive Plan and this includes
amounts from awards granted prior to 2007 and 2006. Assumptions used in the
calculation of these amounts are included in Note A to our audited financial
statements for the year ended December 31, 2007.
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(3)
|
The amounts include salary
earned during the fiscal year ended December 31, 2007. In relation to the
salary amounts earned Mr. Linneman contributed $3,817 to Cheviot Savings
Banks 401(k) Plan.
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(4)
|
The amounts include salary
earned during the fiscal year ended December 31, 2006. In relation to the
salary amounts earned Mr. Linneman contributed $4,122 to Cheviot Savings
Banks 401(k) Plan.
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(5)
|
The amounts include salary
earned during the fiscal year ended December 31, 2007. In relation to the
salary amounts earned Mr. Kappa contributed $10,787 to Cheviot Savings Banks
401(k) Plan.
|
(6)
|
The amounts include salary
earned during the fiscal year ended December 31, 2006. In relation to the
salary amounts earned Mr. Kappa contributed $11,128 to Cheviot Savings Banks
401(k) Plan.
|
(7)
|
The amounts include salary
earned during the fiscal year ended December 31, 2007. In relation to the
salary amounts earned Mr. Lenzer contributed $8,082 to Cheviot Savings Banks
401(k) Plan.
|
(8)
|
The amounts include salary
earned during the fiscal year ended December 31, 2006. In relation to the
salary amounts earned Mr. Lenzer contributed $8,229 to Cheviot Savings Banks
401(k) Plan.
|
(9)
|
The amounts include
dividends paid on stock awards, contributions by Cheviot Savings Bank to
Cheviot Savings Banks 401(k) Plan and employee stock ownership plan,
premiums paid on behalf of Mr. Linneman and directors fees of $10,353,
$12,952, $21,418, $597 and $17,000.
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(10)
|
The amounts include
dividends paid on stock awards, contributions by Cheviot Savings Bank to
Cheviot Savings Banks 401(k) Plan and employee stock ownership plan,
premiums paid on behalf of Mr. Linneman and directors fees of $11,156,
$13,580, $23,323, $574 and $16,000.
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(11)
|
The amounts include
dividends paid on stock awards, contributions by Cheviot Savings Bank to
Cheviot Savings Banks 401(k) Plan and employee stock ownership plan and
premiums paid on behalf of Mr. Kappa of $6,206, $9,324, $12,316 and $529.
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(12)
|
The amounts include
dividends paid on stock awards, contributions by Cheviot Savings Bank to
Cheviot Savings Banks 401(k) Plan and employee stock ownership plan and
premiums paid on behalf of Mr. Kappa of $6,688, $9,715, $13,380 and $377.
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(13)
|
The amounts include
dividends paid on stock awards, contributions by Cheviot Savings Bank to
Cheviot Savings Banks 401(k) Plan and employee stock ownership plan and
premiums paid on behalf of Mr. Lenzer of $6,206, $10,661, $13,842 and $347.
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(14)
|
The amounts include
dividends paid on stock awards, contributions by Cheviot Savings Bank to
Cheviot Savings Banks 401(k) Plan and employee stock ownership plan and
premiums paid on behalf of Mr. Lenzer of $6,688, $10,930, $14,841 and $250.
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Employment Contracts and Termination of
Employment and Change-in-Control Arrangements
Employment Agreement with Mr. Linneman.
Effective
January 5, 2004, Cheviot Savings Bank entered into an employment agreement with
Mr. Linneman which provides for the employment and retention of Mr. Linneman
for a three-year term. Commencing on the first anniversary date of the
employment agreement and continuing on
9
each
anniversary thereafter, the disinterested members of the Board of Directors of
Cheviot Savings Bank may extend the employment agreement an additional year
such that the remaining term of the agreement shall be 36 months, unless Mr.
Linneman elects not to extend the term by giving written notice to the Board of
Directors. The employment agreement provides that the executives base salary
will be reviewed annually and may be increased but not decreased. The base
salary that will be effective for such employment agreement will be $199,600.
Cheviot Savings Bank also provides a bonus program to Mr. Linneman which
provides him with the opportunity to earn up to 50% of his base salary, on an
annual basis, the amount of which shall be determined by specific performance
standards and a formula to be agreed to by Mr. Linneman and Cheviot Savings
Banks Board of Directors annually. Performance standards are measured on a
calendar year, and no bonus shall be payable if Mr. Linneman is not employed on
December 31 of the pertinent year. Mr. Linneman is entitled to participate in
such life insurance, medical, dental, 401(k), profit-sharing and stock-based
compensation plans and other programs and arrangements as may be approved from
time to time by Cheviot Savings Bank for the benefit of its employees. In
addition, Cheviot Savings Bank provides Mr. Linneman with a supplemental life
insurance policy with a death benefit of not less than $200,000.
Under the employment agreement, if Mr.
Linneman dies, retires or is terminated for cause or if he voluntarily
terminates his employment without good reason (as defined in the employment
agreement), Mr. Linneman (or his estate) shall be entitled to receive the
compensation due him through the last day of the calendar month in which his
death, retirement or termination occurred. In the event of Mr. Linnemans
disability, Cheviot Savings Bank will pay him, as disability pay, pursuant to
the long-term disability policy then in effect. Such payments shall be reduced
by the amount of any short- or long-term disability benefits payable to him
under any other disability programs sponsored by Cheviot Savings Bank. In
addition, during any period of his disability, he and his dependents shall, to
the greatest extent possible, continue to be covered under all benefit plans
including, without limitation, retirement plans and medical, dental and life
insurance plans of Cheviot Savings Bank on the same terms as if he were
actively employed by Cheviot Savings Bank.
Under the employment agreement, if the
employment of Mr. Linneman is terminated by Cheviot Savings Bank without cause
or Mr. Linneman terminates his employment with good reason (as defined in the
employment agreement), Mr. Linneman would be entitled to a severance payment
equal to the base salary (determined by reference to his base salary on the
termination date) and bonuses (determined by reference to his average bonus
over the three years preceding his termination date) that would otherwise have
been payable over the remaining term of the agreement. Such amounts shall be
paid in one lump sum within ten calendar days of such termination. In addition,
Mr. Linneman shall, for the remaining term of the employment agreement, receive
the benefits he would have received during the remaining term of the employment
agreement under any retirement programs in which he participated prior to his
termination and continue to participate in any benefit plans of Cheviot Savings
Bank that provide health (including medical and dental), life, or similar
coverage upon terms no less favorable than the most favorable terms provided to
senior executives of Cheviot Savings Bank during such period.
If, within the period ending two years after a change in
control (as defined in the employment agreement), Cheviot Savings Bank shall
terminate Mr. Linnemans employment without good cause or Mr. Linneman terminates
his employment with good reason, Cheviot Savings Bank shall, within ten
calendar days of termination of his employment, make a lump sum cash payment to
him equal to 2.99 times the executives average annual compensation over the
five most recently completed calendar years ending with the year immediately
preceding the effective date of the change in control. In such event, Mr.
Linneman shall for a 36-month period following his termination of employment
continue to receive the benefits he would have received over such period under
any retirement plans in which he participated prior to this termination and
shall continue to participate in any benefit plans that provide health
(including medical and dental), life or similar coverage upon terms no less
favorable than the most favorable terms provided to senior executives during
such period. Section 280G of the Internal Revenue Code provides that severance
payments that equal or exceed three times the individuals base amount are
deemed to be excess parachute payments if they are contingent upon a change
in control. Individuals receiving excess parachute payments are required to pay
a 20% excise tax on the amount of the payment in excess of the base amount, and
the employer is not entitled to deduct such amount. If Mr. Linneman was
terminated as a result of a change of control as of December 31, 2007, total
payments he would be entitled to receive would be $625,000.
10
Upon
termination of Mr. Linneman for any reason, he must adhere to a two-year
non-competition covenant.
All
reasonable costs and legal fees paid or incurred by Mr. Linneman in any dispute
or question of interpretation relating to the employment agreement will be paid
by Cheviot Savings Bank, if Mr. Linneman is successful on the merits in a legal
judgment, arbitration or settlement. The employment agreement also provides
that Cheviot Savings Bank will indemnify the executive for certain liabilities
and expenses as provided therein.
Potential
Payments upon Termination
. Mr. Linneman would receive
payments totaling $631,000 in the event he were terminated, consisting of
$614,000 in salary and bonus payments, $13,000 in health insurance premium
payments for three years and $4,000 in life insurance premium payments for
three years.
Change-in-Control
Severance Agreements with Messrs. Kappa and Lenzer
.
Effective January 5, 2004, Cheviot Savings Bank entered into change in control
severance agreements with each of Messrs. Lenzer and Kappa to provide benefits
to each of them upon a change in control of either Cheviot Savings Bank or
Cheviot Financial Corp. Each severance agreement provides for a three-year
term. Additionally, on or before each anniversary date of the effective date of
the severance agreement, the term of the agreement may be extended for an
additional one-year period beyond the then effective expiration date upon a
determination and resolution of the Board of Directors that the performance of
the employee has met the requirements and standards of the board and that the
term of the agreement should be extended. Under the severance agreement, if a
change in control of Cheviot Savings Bank or Cheviot Financial Corp. occurs,
Messrs. Lenzer and Kappa, if terminated or if each terminates his employment
upon the occurrence of certain events specified in the severance agreement
within 12 months after any change in control, will be entitled to receive an
amount equal to two times the prior calendar years cash compensation paid to
such executive by Cheviot Savings Bank. Such sum will be paid at the option of
the executive either in one lump sum not later than the date of such
termination of employment or in periodic payments over the next 24 months after
such termination of employment. If Messrs. Kappa and Lenzer were terminated as
a result of a change of control as of December 31, 2007, total payments they
would be entitled to receive would both be $471,000.
401(k) Plan
Cheviot
Savings Bank maintains the Cheviot Savings Bank 401(k) Retirement Savings Plan
which is a qualified, tax-exempt profit sharing plan with a salary deferral
feature under Section 401(k) of the Code. Employees who have attained age 21
and have completed one year of employment are eligible to participate.
Employees are entitled to enter the 401(k) Plan on the first January 1 or July
1 occurring after the employee becomes eligible to participate in the 401(k)
Plan.
Under
the 401(k) Plan participants may elect to defer a percentage of their
compensation each year instead of receiving that amount in cash equal to the
lesser of (i) a maximum percentage of compensation as indicated in a notice
received from the 401(k) Plan administrator or (ii) an indexed dollar amount
set by the Internal Revenue Service, which is $15,500 for 2007. In addition,
for participants that are age 50 or older by the end of any taxable year, the
participant may elect to defer additional amounts (called catch-up contributions)
to the 401(k) Plan. The additional amounts may be deferred regardless of any
other limitations on the amount that a participant may defer to the 401(k)
Plan. The maximum catch-up contribution that a participant can make in 2007
is $5,000.
Each
plan year (a calendar year), Cheviot Savings Bank will contribute to the 401(k)
Plan the following amounts: (a) the total amount of the salary reduction a
participant elected to defer; (b) in the discretion of Cheviot Savings Bank, a
matching contribution equal to a percentage of the amount of the salary
reduction a participant elected to defer; and (c) an amount equal to 3% of a
participants plan compensation (generally the sum of a participants Form W-2
wages and other compensation for the year plus a participants before-tax
contributions to the 401(k) Plan and any other benefit plans of Cheviot Savings
Bank, up to a legal limit (which is $225,000 for 2007)) for the year plus 3% of
a participants plan compensation for the year in excess of 50% of the Social
Security Taxable Wage Base for old-age retirement benefits for the year
($48,750 for 2007) plus any additional amount that does not match a
participants salary reduction and that is determined by Cheviot Savings Bank
in its discretion.
11
The
401(k) Plan permits employees to direct the investment of his or her own
accounts into various investment options, including the opportunity to invest
in a Cheviot Financial Corp. Stock Fund. Each participant who directs the
trustee to invest all or part of his or her account in the Cheviot Financial
Corp. Stock Fund will have assets in his or her account applied to the purchase
of shares of common stock. Participants will be entitled to direct the trustee
as to how to vote his or her allocable shares of common stock.
Plan
benefits will be paid to each participant in the form of a single cash payment
at normal retirement age unless earlier payment is selected. If a participant
dies prior to receipt of the entire value of his or her 401(k) Plan accounts,
payment will generally be made to the beneficiary in a single cash payment as
soon as possible following the participants death. Payment will be deferred if
the participant had previously elected a later payment date. If the beneficiary
is not the participants spouse, payment will be made within one year of the
date of death. If the spouse is the designated beneficiary, payment will be
made no later than the date the participant would have attained age 70 1/2.
Normal retirement age under the 401(k) Plan is age 65. Early retirement age is
age 55.
Employee Stock Ownership Plan and Trust
In
January 2004, we implemented the Cheviot Financial Corp. Employee Stock
Ownership Plan in connection with the reorganization and stock offering.
Employees who are at least 21 years old, who have at least one year of
employment with Cheviot Savings Bank or an affiliated corporation and who have
completed at least 1,000 hours of service, are eligible to participate. As part
of the reorganization and stock offering, the employee stock ownership plan
borrowed funds from us and used those funds to purchase 357,075 shares of
common stock. Collateral for the loan is the common stock purchased by the
employee stock ownership plan. The loan is being repaid principally from the
participating employers discretionary contributions to the employee stock
ownership plan over a period of up to 10 years. The loan bears interest at an
annual percentage rate fixed at 4.0%. Shares purchased by the employee stock
ownership plan are held in a suspense account for allocation among participants
as the loan is repaid.
Contributions
to the employee stock ownership plan and shares released from the suspense
account in an amount proportional to the repayment of the employee stock
ownership plan loan are allocated among employee stock ownership plan
participants on the basis of compensation in the year of allocation. Benefits
under the plan are 100% vested upon completion of five years of credited service.
A participants interest in his or her account under the plan also fully vest
in the event of termination of service due to a participants early or normal
retirement, death, disability, or upon a change in control (as defined in the
plan). Vested benefits are payable in the form of common stock and/or cash.
Contributions to the employee stock ownership plan are discretionary, subject
to the loan terms and tax law limits. Therefore, benefits payable under the
employee stock ownership plan cannot be estimated. Under generally accepted
accounting principles, a participating employer will be required to record
compensation expense each year in an amount equal to the fair market value of
the shares released from the suspense account.
Effect of Change in Control on Certain
Executive Compensation Plans
In
the event of a change in control, the employee stock ownership plan will
terminate and participants will become fully vested in their account balances,
which will be paid to them.
12
Outstanding
Equity Awards at Year End
.The following table sets forth information with respect to
our outstanding equity awards as of December 31, 2007 for our named executive
officers.
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Outstanding
Equity Awards at Fiscal Year-End
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Option
awards
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Stock
awards
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Name
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Number
of
securities
underlying
unexercised
options (#)
exercisable
|
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Number
of
securities
underlying
unexercised
options (#)(1)
unexercisable
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Equity
incentive
plan
awards:
number of
securities
underlying
unexercised
earned
options (#)
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Option
exercise
price ($)
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Option
expiration
date
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Number
of
shares or
units of
stock that
have not
vested (#)(2)
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Market
value of
shares or
units of
stock that
have not
vested ($)
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Equity
incentive
plan
awards:
number of
unearned
shares, units
or other
rights that
have not
vested (#)
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Equity
incentive plan
awards:
market or
payout value
of unearned
shares, units
or other
rights that
have not
vested ($)
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Thomas J. Linneman,
President and Chief
Executive Officer
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40,000
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60,000
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$
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11.15
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5/5/2015
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26,775
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$
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254,630
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$
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Kevin M. Kappa,Vice
President
Compliance of the Bank
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23,200
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34,800
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$
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11.15
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5/5/2015
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16,050
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$
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152,636
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$
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Jeffrey J. Lenzer,
Vice President
Operations of the Bank
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24,200
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36,300
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$
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11.15
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5/5/2015
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16,050
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$
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152,636
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$
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(1)
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All options awards listed
above vest at a rate of 20% per year over the first five years commencing on
May 5, 2005 of the ten year option term.
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(2)
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All stock awards listed
above vest at a rate of 20% per year over five years commencing on May 5,
2005.
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Plan-Based
Awards
. There were no grants of plan-based awards for
our named executive officers in 2006.
Stock Benefit Plans
Stock-Based
Incentive Plan.
The 2005 Cheviot Financial Corp.
Stock-Based Incentive Plan provides officers, employees and directors of
Cheviot Financial Corp. or Cheviot Savings Bank with additional incentives to
share in our growth and performance.
The
2005 Stock-Based Incentive Plan authorizes the issuance of up to 680,426 shares
of our common stock pursuant to grants of incentive and non-statutory stock
options, reload options or restricted stock awards, provided that no more than
194,408 shares may be issued as restricted stock awards, and no more than
486,018 shares may be issued pursuant to exercise of stock options.
Employees
and outside directors and our subsidiaries are eligible to receive awards under
the 2005 Stock Based-Incentive Plan.
The
Compensation Committee may determine the type and terms and conditions of
awards under the 2005 Stock-Based Incentive Plan. Awards may be granted in a
combination of incentive and non-statutory stock options, reload options or
restricted stock awards. Awards may include the following:
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(i) Stock
Options.
A stock option gives the recipient or
optionee the right to purchase shares of common stock at a specified price
for a specified period of time. The exercise price shall not be less than the
fair market value of the underlying common stock on the date the stock option
is granted. Fair market value for purposes of the 2005 Stock-Based Incentive
Plan means the average of the closing high bid and low asked price of the
common stock as reported on the OTC Electronic Bulletin Board (or the average
of the high and low quoted sales prices of the common stock on the Nasdaq
Stock Market) on the day the
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13
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option is
granted or, if the common stock is not traded on the date of grant, the fair
market value shall be determined by the Compensation Committee in good faith
on an appropriate basis.
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Stock
options are either incentive stock options or non-qualified stock
options. Incentive stock options have certain tax advantages and must comply
with the requirements of Section 422 of the Internal Revenue Code. Only
employees are eligible to receive incentive stock options. Shares of common
stock purchased upon the exercise of a stock option must be paid for in full
at the time of exercise (i) either in cash, check payable to Cheviot
Financial Corp. or electronic funds transfer; or (ii) with stock of Cheviot
Financial Corp. which was owned by the participant for at least six months
prior to delivery; or (iii) by reduction in the number of shares deliverable
pursuant to the stock option, or (iv) subject to a cashless exercise
through a third party. Cash may be paid in lieu of any fractional shares
under the 2005 Stock-Based Incentive Plan and generally no fewer than 100
shares may be purchased on exercise of an award unless the total number of
shares available for purchase or exercise pursuant to an award is less than
100 shares. Stock options are subject to vesting conditions and restrictions
as determined by the Compensation Committee.
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(ii) Reload
Options.
Reload options entitle the holder, who has
delivered shares that he or she owns as payment of the exercise price for
option stock, to a new option to acquire additional shares equal in amount to
the shares he or she has traded. Reload options may also be granted to
replace option shares retained by the employer for payment of the option
holders withholding tax. The option price at which additional shares of
stock can be purchased by the option holder through the exercise of a reload
option is equal to the market value of the shares on the date the original
option is exercised. The option period during which the reload option may be
exercised expires at the same time as that of the original option that the
holder has exercised. Reload options issued on the exercise of incentive
stock options may be incentive stock options or non-statutory stock options.
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(iii) Stock
Awards.
Stock awards under the 2005 Stock-Based
Incentive Plan will be granted only in whole shares of common stock. Stock
awards will be subject to conditions established by the Compensation
Committee which are set forth in the award agreements. Any stock award
granted under the 2005 Stock-Based Incentive Plan will be subject to vesting
as determined by the Compensation Committee. Awards will be evidenced by
agreements approved by the Compensation Committee which set forth the terms
and conditions of each award.
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Transferability
of Awards.
Generally, all awards, except non-statutory
stock options, granted under the 2005 Stock-Based Incentive Plan will be
nontransferable except by will or in accordance with the laws of intestate
succession. Stock awards may be transferable pursuant to a qualified domestic
relations order. At the Compensation Committees sole discretion, non-statutory
stock options may be transferred for valid estate planning purposes that are
permitted by the Code and the Exchange Act. During the life of the participant,
awards can only be earned by him or her. The Compensation Committee may permit
a participant to designate a beneficiary to exercise or receive any rights that
may exist under the 2005 Stock-Based Incentive Plan upon the participants
death.
Change
in Control.
Upon the occurrence of an event
constituting a change in control of the company as defined in the 2005
Stock-Based Incentive Plan, all stock options will become fully vested, and all
stock awards then outstanding shall vest free of restrictions. A conversion of
Cheviot Mutual Holding Company from mutual to stock form will not be considered
as a change of control.
Effect
of Termination of Service.
Unless the Compensation
Committee specifies otherwise at the time an award is granted, upon the
occurrence of the participants termination of service due to death or
disability, all unvested stock options and stock awards made to the participant
will become fully vested. Subject to OTS regulations and policy (or the receipt
of any required waivers from the OTS), and unless the Compensation Committee
specifies otherwise at the time an award is granted, in the event of a normal
retirement of a participant any unvested award of stock options and/or
restricted stock shall become fully vested in the participant. Unless the
Committee specifies otherwise, a person who is a member of the Board of
Directors shall not be deemed to have retired until service as a director or
director emeritus has ceased.
14
We do not
have any pension benefits, defined contribution or other non-qualified deferred
compensation plans.
Compensation of Directors
Directors
Summary Compensation Table.
Set forth below is summary compensation for each of our non-employee
directors for the year ended December 31, 2007.
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Director Compensation
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Name
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Fees earned
or paid in
cash ($)
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Stock
awards
($)(1)
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Option
awards
($)(2)
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Non-equity
incentive plan
compensation
($)
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Change in
pension value
and non-
qualified
deferred
compensation
earnings
($)
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All other
compensation
($)
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Total
($)
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Steven R. Hausfeld
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$
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22,500
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$
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16,487
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$
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2,649
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$
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$
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$
|
41,636
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Edward L. Kleemier
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$
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20,000
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$
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20,652
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$
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14,986
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$
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4,411
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$
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2,071
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(3)
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$
|
62,120
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John T. Smith
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$
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20,000
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$
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20,652
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$
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14,986
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$
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3,188
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$
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4,669
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(4)
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$
|
63,495
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Robert L. Thomas
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$
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22,500
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$
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20,652
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$
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14,986
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$
|
3,670
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$
|
8,646
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(5)
|
$
|
70,454
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James E. Williamson
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$
|
22,500
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$
|
20,652
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$
|
14,986
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$
|
3,206
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$
|
7,378
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(6)
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$
|
68,722
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(1)
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The
amounts reflect the dollar amount recognized for financial statement
reporting purposes for the fiscal year ended December 31, 2007, in accordance
with FAS 123(R) of awards pursuant to the Stock-Based Incentive Plan and thus
may include amounts from awards granted prior
to 2007. Assumptions used in the calculation of these amounts are included in
Note A to our audited financial statement for the year ended December 31,
2007.
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(2)
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The
amounts reflect the dollar amount recognized for financial statement
reporting purposes for the fiscal year ended December 31, 2007, in accordance
with FAS 123(R) of awards pursuant to the Stock-Based Incentive Plan and thus
may include amounts from awards granted prior to 2007. Assumptions used in
the calculation of these amounts are included in Note A to our audited
financial statement for the year ended December 31, 2007.
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(3)
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The amount reflects dividends
paid on stock awards during the fiscal year ended December 31, 2007 totaling
$2,071.
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(4)
|
The
amount reflects dividends paid on stock awards during the fiscal year ended
December 31, 2007 totaling $2,071. It also reflects $2,598 which represents
50% of health insurance premiums paid by Cheviot Financial Corp.
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(5)
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The
amount reflects dividends paid on stock awards during the fiscal year ended
December 31, 2007 totaling $2,071. It also includes $6,575 which represents
50% of health insurance premiums paid by Cheviot Financial Corp.
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(6)
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The
amount reflects dividends paid on stock awards during the fiscal year ended
December 31, 2007 totaling $2,071. It also includes $5,307
which represents 50% of health insurance premiums paid by Cheviot Financial
Corp.
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The Boards
of Cheviot Financial Corp., Cheviot Mutual Holding Company and Cheviot Savings
Bank are comprised of the same persons. To date, Cheviot Savings Bank has
compensated its directors for their services. Cheviot Financial Corp. has not
paid any additional compensation to the directors for this service, though it
may choose to do so in the future.
Compensation
of Non-Employee Directors.
During the year ended
December 31, 2007, directors received a $17,000 annual retainer for board
membership (on Cheviot Savings Bank), an additional $2,500 retainer for
membership on the Audit Committee and $1,500 retainer for each membership on
any other committee.
Compensation
of Directors Who are Also Employees.
During the year
ended December 31, 2007, Mr. Linneman, the only director who is also an
employee of Cheviot Financial Corp. or Cheviot Savings Bank, received
15
$17,000 in compensation for board membership (on Cheviot Savings Bank).
Mr. Linneman did not receive any compensation for committee membership.
Directors
Deferred Compensation Plan
. Cheviot Savings Bank
adopted, effective March 31, 2003, a directors deferred compensation plan as an
additional benefit for its directors. Each person who was a member of the board
on March 31, 2003 became a participant in the plan on such date. Any subsequent
member of the board shall become a participant in the plan only if he or she is
a member of the Board of Directors on the last day of the first plan year that
ends after the date on which he or she completes ten years of service, which
date is designated as his or her participation date in the plan. After becoming
a participant under the plan, a person remains a participant until the entire
balance of his or her account under the plan has been paid or forfeited under
the terms of the plan.
The plan
provides for the payment of benefits to Cheviot Savings Banks directors upon
termination of service with Cheviot Savings Bank and vesting in the compensation
plan after ten years of service. The deferred compensation liability reflects
the current value of the plan obligation based on a present value of providing
a sum certain of $11,400 per year to each participant for ten years after
retirement. The present value was determined using an interest rate of 7.00%
and the relevant time to retirement for each participant. Cheviot Savings Bank
recorded expense of approximately $21,000 for the directors deferred
compensation plan for the year ended December 31, 2007.
A
participant shall forfeit the entire balance of his or her account and any
right to future payment of a plan benefit if he or she violates certain
standards of conduct as set forth in the plan.
Certain Transactions With Related Persons
Cheviot
Savings Banks current policy is that no loans are to be extended to directors
or executive officers of Cheviot Savings Bank without the approval of Cheviot
Savings Banks Board of Directors. Current directors, officers and employees are
eligible for any type of credit offered by Cheviot Savings Bank. Federal
regulations permit executive officers and directors to participate in loan
programs that are available to other employees, as long as the director or
executive officer is not given preferential treatment compared to other
participating employees. Loans made to directors or executive officers,
including any modification of such loans, must be approved by a majority of
disinterested members of the Board of Directors. As of December 31, 2007, there
were a total of eight loans to directors/officers of Cheviot Savings Bank with
a total balance of approximately $1.3 million. The loans made to directors and
executive officers were made in the ordinary course of business and did not
involve more than a normal risk of collectibility. Any future loans made to any
directors, executive officers, officers or employees of Cheviot Savings Bank
will be made under the same terms and conditions.
All
transactions involving related parties require the approval of full Board of
Directors.
Section 402
of the Sarbanes-Oxley Act of 2002 generally prohibits a company from extending
credit, arranging for the extension of credit or renewing an extension of
credit in the form of a personal loan to an officer or director of the company.
There are several exceptions to this general prohibition, including loans made
by an FDIC insured depository institution that is subject to the insider
lending restrictions of the Federal Reserve Act. All loans to our directors and
officers comply with the Federal Reserve Act and the Federal Reserve Boards
Regulation O and, therefore, are excepted from the prohibitions of Section 402.
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PROPOSAL 2 RATIFICATION OF SELECTION OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
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The Audit
Committee requests that shareholders ratify the Audit Committees selection of
Clark, Schaefer, Hackett & Co. to serve as our independent registered
public accounting firm for the fiscal year ending December 31, 2008.
Representatives of Clark, Schaefer, Hackett & Co. will be present at the
Annual Meeting and will have an opportunity to make a statement if they so
desire and to respond to questions by shareholders.
16
THE
BOARD OF DIRECTORS RECOMMENDS A VOTE
FOR
THE RATIFICATION OF THE SELECTION OF
CLARK, SCHAEFER, HACKETT & CO. AS OUR INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM.
On July 10,
2007, Cheviot Financial Corp. engaged Clark, Schaefer, Hackett & Co. as its
independent registered public accounting firm, replacing Grant Thornton LLP.
Cheviot Financial Corp.s engagement of Clark, Schaefer, Hackett & Co. has
been approved by our Audit Committee. On July 10, 2007, our Audit Committee
elected to terminate the engagement of Grant Thornton LLP as its independent
registered public accounting firm.
The
reports of Grant Thornton LLP on our consolidated financial statements as of
and for the fiscal years ended December 31, 2006, and December 31, 2005, contained
no adverse opinion or disclaimer of opinion and were not qualified or modified
as to uncertainty, audit scope, or accounting principles.
During
the years ended December 31, 2006 and 2005, and in connection with the audit of
our financial statements for such periods, as well as the interim period
subsequent to the most recent fiscal year end and through July 10, 2007, there
were no disagreements between us and Grant Thornton LLP on any matter of
accounting principles or practices, financial statement disclosure, or auditing
scope or procedure, which, if not resolved to the satisfaction of Grant
Thornton LLP, would have caused Grant Thornton LLP to make reference to such
matter in connection with its audit reports on our financial statements.
During
the two most recent fiscal years and subsequent interim periods prior to
engaging Clark, Schaefer, Hackett & Co. neither Cheviot Financial Corp. nor
anyone on our behalf consulted Clark, Schaefer, Hackett & Co. regarding
either (i) the application of accounting principles to a specific transaction,
either completed or proposed; or the type of audit opinion that might be
rendered on our financial statements. No written report or oral advice was
provided that Clark, Schaefer, Hackett & Co. concluded was an important factor
considered by us in reaching a decision as to the accounting, auditing or
financial reporting issue; or (ii) any matter that was either the subject of a
disagreement as defined in Item 304(a)(l)(iv) of Regulation S-K or a reportable
event as described in Item 304(a)(l)(v) of Regulation S-K.
Independent Registered Public Accounting Firm
Fees
The
following table sets forth the aggregate fees billed to us (or Cheviot Savings
Bank) for the years ended December 31, 2007 and 2006 by Clark, Schaefer,
Hackett & Co. or Grant Thornton LLP:
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2007
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2006
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Audit Fees
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$
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63,900
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$
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54,900
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Audit Related Fees
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22,544
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19,415
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Tax Fees
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5,213
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4,843
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All Other Fees
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$
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91,657
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$
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79,158
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Audit Fees
consist of the aggregate fees
billed for each of the last two fiscal years for professional services rendered
by our principal accountant for the audit of our annual financial statements
and review of financial statements included in our Form 10-Q or services that
are normally provided by our accountant in connection with statutory and
regulatory filings or engagements for those fiscal years.
Audit-Related
Fees
consist of fees for assurance and related
services that are reasonably related to the performance of the audit or review
of our financial statements. This category includes fees related to audit and
attest services not required by statute or regulations, acquisitions and
investments, and consultations concerning financial accounting and reporting
standards.
Tax
Fees
consist of fees for professional services for tax
compliance, tax advice and tax planning. These services include assistance
regarding federal, state and international tax compliance, return preparation,
tax audits and customs and duties.
17
All
Other Fees.
During 2007 and 2006 no fees were billed
for products and services provided by the principal accountant, other than the
services reported above.
The Audit
Committee has considered whether the provision of non-audit services is
compatible with maintaining the independence of Clark, Schaefer, Hackett &
Co. and has concluded that it is.
Pre-approval
Policies and Procedures.
In accordance with rules
adopted by the SEC in order to implement requirements of the Sarbanes-Oxley Act
of 2002 and the Audit Committees charter, all audit and audit-related services
and all permitted non-audit work performed by the independent registered public
accounting firm, Clark, Schaefer, Hackett & Co., must be pre-approved by
the Audit Committee, including the proposed fees for such work. The Audit
Committee has adopted policies and procedures pursuant to which audit,
audit-related and tax services, and all permissible non-audit services, are
pre-approved, and is informed of each service actually rendered that was
approved through its pre-approval process. The Audit Committee pre-approved
100% of the audit related fees and tax fees described above during the fiscal
years ended December 31, 2007 and 2006.
Section 16(a) Beneficial Ownership Reporting
Compliance
Section
16(a) of the Exchange Act requires our directors, executive officers and
persons who own more than 10% of a registered class of our equity securities to
file reports of ownership and changes in ownership with the SEC. Directors,
executive officers and greater than 10% shareholders are required by
regulations of the SEC to furnish us with copies of all Section 16(a) reports
they file. Such reports are filed on Forms 3, 4 and 5 under the Exchange Act.
Based solely on our review of the copies of such forms received by us, we
believe that during the year ended December 31, 2007, all such persons complied
on a timely basis with the filing requirements of Section 16(a).
Shareholder Proposals for Next Years Annual
Meeting
Shareholder
proposals intended for inclusion in next years Proxy Statement should be sent
to the Executive Secretary, Cheviot Financial Corp., 3723 Glenmore Avenue,
Cheviot, Ohio 45211 and must be received by November 26, 2008. Any such
proposal must comply with Rule 14a-8 promulgated by the SEC pursuant to the
Exchange Act. Any shareholder who intends to propose any other matter to be
acted upon at the 2009 annual meeting of shareholders without inclusion of such
proposal in the Companys proxy statement must inform the company no later than
30 days prior to our 2008 annual meeting date. If notice is not provided by
that date, the persons named in our proxy for the 2009 annual meeting will be
allowed to exercise their discretionary authority to vote upon any such
proposal without the matter having been discussed in the proxy statement for
the 2008 annual meeting. All shareholder proposals and notices must also meet
all requirements set forth in our Charter and Bylaws.
Other Matters to Come Before the Meeting
At the time
this Proxy Statement was released for printing on March 25, 2008, we knew of no
other matters that might be presented for action at the meeting. If any other matters
properly come before the meeting, it is intended that the voting shares
represented by proxies will be voted with respect thereto in accordance with
the judgment of the persons voting them.
Miscellaneous/Financial Statements
We will
bear the cost of solicitation of proxies. We will reimburse brokerage firms and
other custodians, nominees and fiduciaries for reasonable expenses incurred by
them in sending proxy materials to the beneficial owners of our common stock.
In addition to solicitations by mail, our directors, officers and regular
employees of our may solicit proxies personally or by telegraph or telephone
without additional compensation.
18
Annual Report to Shareholders
Our Annual
Report to Shareholders for the year ended December 31, 2007, has been mailed to
shareholders concurrently with this mailing of this Proxy Statement, but is not
incorporated into this Proxy Statement and is not to be considered a part of
these proxy solicitation materials.
If you
would like an additional copy of the Annual Report to Shareholders or a copy of
our Form 10-K that has been filed with the SEC, including financial statements
and schedules, please write to Kimberly Siener, Investor Relations, Cheviot
Financial Corp., 3723 Glenmore Avenue, Cheviot, Ohio 45211, and we will send
copies of each to you free of charge. The exhibits to the Form 10-K will be
furnished for a fee that is reasonably related to our cost of furnishing such
items.
Proxy Statements for Shareholders Sharing the
Same Household Mailing Address
If
shareholders residing at the same household mailing address are currently
receiving multiple copies of our communications but would like to receive only
one in the future, please send written notice to The Registrar and Transfer
Company at the below address. In the written notice please indicate the names
of all accounts in your household and The Registrar and Transfer Company will
forward the appropriate forms for completion.
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The Registrar and Transfer Company
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10 Commerce Drive
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Cranford, New Jersey 07016-3506
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Any
shareholders participating in the householding program will, however, continue
to receive a separate proxy card or voting instruction card for each account.
Shareholder Communications with the Board of
Directors
Shareholders
who wish to communicate with the Board, specified individual directors and
non-management directors should send any communications to the Executive
Secretary, Cheviot Financial Corp., 3723 Glenmore Avenue, Cheviot, Ohio 45211
and identify the intended recipient. All communications addressed will be
forwarded to the identified person or persons.
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By Order of
the Board of Directors
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/s/ James E.
Williamson
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James E.
Williamson
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Executive
Secretary
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March 25,
2008
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19
REVOCABLE PROXY
CHEVIOT FINANCIAL CORP.
ANNUAL MEETING OF
SHAREHOLDERS
April 22, 2008
The
undersigned hereby appoints the official proxy committee consisting of the
Board of Directors of Cheviot Financial Corp. (the Company) with full powers
of substitution to act as attorneys and proxies for the undersigned to vote all
shares of common stock of the Company which the undersigned is entitled to vote
at the Annual Meeting of Shareholders (Annual Meeting) to be held at the
Companys main office at 3723 Glenmore Avenue, Cheviot, Ohio 45211, on April
22, 2008, at 3:00 p.m., Eastern Daylight Savings Time. The official proxy committee is authorized
to cast all votes to which the undersigned is entitled as follows:
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FOR
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WITHHELD
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1.
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The election
as Directors of the nominees listed below each to serve for a three-year
term.
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o
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o
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John T.
Smith
Robert Thomas
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INSTRUCTION:
To withhold your vote for one or more nominees, write the name of the
nominee(s) on the line(s) below.
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FOR
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WITHHELD
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ABSTAIN
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2.
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The
ratification of the appointment of Clark, Schaefer, Hackett & Co. as the
Companys independent registered public accounting firm for the year ending
December 31, 2008.
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The Board of Directors recommends a vote FOR each of
the listed proposals.
THIS
PROXY WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS ARE SPECIFIED, THIS
PROXY WILL BE VOTED FOR THE NOMINEE STATED ABOVE. IF ANY OTHER BUSINESS IS PRESENTED AT SUCH ANNUAL MEETING, THIS
PROXY WILL BE VOTED BY THE MAJORITY OF THE BOARD OF DIRECTORS. AT THE PRESENT TIME, THE BOARD OF DIRECTORS
KNOWS OF NO OTHER BUSINESS TO BE PRESENTED AT THE ANNUAL MEETING.
THIS PROXY IS SOLICITED BY THE BOARD OF
DIRECTORS
Should
the undersigned be present and elect to vote at the Annual Meeting or at any
adjournment thereof and after notification to the Secretary of the Company at
the Annual Meeting of the shareholders decision to terminate this proxy, then
the power of said attorneys and proxies shall be deemed terminated and of no
further force and effect. This proxy
may also be revoked by sending written notice to the Secretary of the Company
at the address set forth on the Notice of Annual Meeting of Shareholders, or by
the filing of a later proxy prior to a vote being taken on a particular
proposal at the Annual Meeting.
The
undersigned acknowledges receipt from the Company prior to the execution of
this proxy of notice of the Annual Meeting, a proxy statement dated March 25,
2008 and audited financial statements.
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Dated:
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Check Box if You Plan
to Attend Annual Meeting
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PRINT NAME
OF SHAREHOLDER
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PRINT NAME
OF SHAREHOLDER
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SIGNATURE OF
SHAREHOLDER
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SIGNATURE OF
SHAREHOLDER
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Please sign
exactly as your name appears on this card.
When signing as attorney, executor, administrator, trustee or guardian,
please give your full title.
Please complete and date this proxy and
return it promptly
in the enclosed postage-prepaid envelope.
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