UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
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Check the appropriate box:
[_] Preliminary proxy statement
[_] Confidential, for use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[X] Definitive proxy statement
[_] Definitive additional materials
[_] Soliciting material pursuant to Rule 14a-12
Sobieski Bancorp, Inc.
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
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(1) Title of each class of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11:
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previously. Identify the previous filing by registration statement number,
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[LETTERHEAD SOBIESKI BANCORP, INC.]
September 25, 2003
Dear Fellow Stockholder:
On behalf of the Board of Directors and management of Sobieski Bancorp,
Inc., I cordially invite you to attend the Company's Annual Meeting of
Stockholders. The meeting will be held at 2:00 p.m., Eastern Standard Time, on
October 20, 2003 at the Blue Heron at Blackthorn Conference Center, located at
5440 Nimtz Parkway, South Bend, Indiana 46628.
An important aspect of the meeting process is the stockholder vote on
corporate business items. I urge you to exercise your rights as a stockholder to
vote and participate in this process. Stockholders are being asked to elect two
directors and ratify the appointment of Crowe, Chizek and Company LLC as the
Company's independent auditors. The Board of Directors recommends that you vote
FOR the Board's nominees for election as directors and FOR the ratification of
the appointment of Crowe, Chizek and Company LLC as the Company's independent
auditors.
In addition to the stockholder vote on corporate business items, the
meeting will include management's report to you on Sobieski Bancorp, Inc.'s
fiscal 2003 financial and operating performance.
I encourage you to attend the meeting in person. Whether or not you attend
the meeting, please read the enclosed proxy statement and then complete, sign
and date the enclosed proxy card and return it in the accompanying postage
prepaid envelope as promptly as possible. If your shares are held through a bank
or broker, check your proxy card to see if you can also vote by telephone or via
the internet. Voting as early as possible will save the Company additional
expense in soliciting proxies and will ensure that your shares are represented
at the meeting. Please note that you may vote in person at the meeting even if
you have previously returned the proxy.
Thank you for your attention to this important matter.
Sincerely,
Steven C. Watts
President and Chief Executive Officer
SOBIESKI BANCORP, INC.
2930 W. Cleveland Road
South Bend, Indiana 46628
(574) 271-8300
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To be Held on October 20, 2003
Notice is hereby given that the Annual Meeting of Stockholders (the
"Meeting") of Sobieski Bancorp, Inc. (the "Company") will be held at the Blue
Heron at Blackthorn Conference Center, located at 5440 Nimtz Parkway, South
Bend, Indiana 46628 at 2:00 p.m., Eastern Standard Time, on October 20, 2003.
A Proxy Card and a Proxy Statement for the Meeting are enclosed.
The Meeting is for the purpose of considering and acting upon:
1. the election of two directors of the Company;
2. the ratification of the appointment of Crowe, Chizek and Company LLC
as the independent auditors of the Company for the fiscal year
ending June 30, 2004;
and such other matters as may properly come before the Meeting, or any
adjournments or postponements thereof. The Board of Directors is not aware of
any other business to come before the Meeting.
Any action may be taken on the foregoing proposals at the Meeting on the
date specified above, or on any date or dates to which the Meeting may be
adjourned or postponed. Stockholders of record at the close of business on
September 19, 2003 are the stockholders entitled to vote at the Meeting and any
adjournments or postponements thereof.
You are requested to complete and sign the enclosed form of proxy, which
is solicited on behalf of the Board of Directors, and to mail it promptly in the
enclosed envelope. If you hold your shares through a bank or broker, check your
proxy card to see whether you can also vote by telephone or via the internet.
The proxy will not be used if you attend and vote at the Meeting in person.
BY ORDER OF THE BOARD OF DIRECTORS
Steven C. Watts
President and Chief Executive Officer
South Bend, Indiana
September 25, 2003
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IMPORTANT: THE PROMPT RETURN OF PROXIES WILL SAVE THE COMPANY THE EXPENSE OF
FURTHER REQUESTS FOR PROXIES TO ENSURE A QUORUM AT THE MEETING. A SELF-ADDRESSED
ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE. NO POSTAGE IS REQUIRED IF MAILED
WITHIN THE UNITED STATES.
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PROXY STATEMENT
Sobieski Bancorp, Inc.
2930 W. Cleveland Road
South Bend, Indiana 46628
(574) 271-8300
ANNUAL MEETING OF STOCKHOLDERS
October 20, 2003
This Proxy Statement is furnished in connection with the solicitation on
behalf of the Board of Directors of Sobieski Bancorp, Inc. (the "Company"), the
parent company of Sobieski Bank (the "Bank"), of proxies to be used at the
Annual Meeting of Stockholders of the Company (the "Meeting") which will be held
at the Blue Heron at Blackthorn Conference Center, located at 5440 Nimtz
Parkway, South Bend, Indiana 46628, on October 20, 2003, at 2:00 p.m., Eastern
Standard Time, and all adjournments or postponements of the Meeting. The
accompanying Notice of Annual Meeting, this Proxy Statement and the enclosed
form of proxy are first being mailed to stockholders on or about September 25,
2003.
At the Meeting, stockholders of the Company are being asked to consider
and vote upon (i) the election of two directors and (ii) the ratification of the
appointment of Crowe, Chizek and Company LLC as independent auditors for the
Company for the fiscal year ending June 30, 2004.
Vote Required and Proxy Information
All shares of the Company's common stock represented at the Meeting by
properly executed proxies received prior to or at the Meeting, and not revoked,
will be voted at the Meeting in accordance with the instructions thereon. If no
instructions are indicated, properly executed proxies will be voted for the
director nominees named in this Proxy Statement and for the ratification of the
appointment of Crowe, Chizek and Company LLC as independent auditors for the
Company. The Company does not know of any matters, other than as described in
the Notice of Annual Meeting, that are to come before the Meeting. If any other
matters are properly presented at the Meeting for action, the Board of
Directors, as proxy for the stockholder, will have the discretion to vote on
such matters in accordance with their best judgment.
Directors will be elected by a plurality of the votes cast. The
ratification of the appointment of Crowe, Chizek and Company LLC as the
Company's independent auditors requires the affirmative vote of a majority of
the votes cast on the matter. In the election of directors, stockholders may
either vote "FOR" both nominees for election or withhold their votes from either
nominee or both nominees for election. Votes that are withheld and shares held
by a broker, as nominee, that are not voted (so-called "broker non-votes") in
the election of directors will not be included in determining the number of
votes cast. For the proposal to ratify the appointment of the independent
auditors, stockholders may vote "FOR," "AGAINST" or "ABSTAIN" with respect to
this proposal. Proxies marked to abstain will have the same effect as votes
against the proposal, and broker non-votes will have no effect on the proposal.
The holders of at least one-third of the outstanding shares of the common stock,
present in person or represented by proxy, will constitute a quorum for purposes
of the Meeting. Proxies marked to abstain and broker non-votes will be counted
for purposes of determining a quorum.
A proxy given pursuant to the solicitation may be revoked at any time
before it is voted. Proxies may be revoked by: (i) filing with the Secretary of
the Company at or before the Meeting a written notice of revocation bearing a
later date than the proxy, (ii) duly executing a subsequent proxy relating to
the same shares and delivering it to the Secretary of the Company at or before
the Meeting, or (iii) attending the Meeting and voting in person (although
attendance at the Meeting will not in and of itself constitute revocation of a
proxy). Any written notice revoking a proxy should be delivered to Secretary,
Sobieski Bancorp, Inc., 2930 W. Cleveland Road, South Bend, Indiana 46628. A
person holding shares through a bank, broker or other nominee must follow the
instructions of the bank, broker or other nominee in order to revoke a proxy.
Voting Securities and Certain Holders Thereof
Stockholders of record as of the close of business on September 19, 2003
will be entitled to one vote for each share of common stock then held. As of
that date, there were 677,032 shares of common stock issued and outstanding. The
following table sets forth, as of September 19, 2003, information regarding
share ownership of (i) those persons or entities known by management to
beneficially own more than five percent of the common stock and (ii) all
directors and executive officers of the Company and the Bank as a group. The
address for each of the Employee Stock Ownership Plan, Mr. Urbanski, Mr. Watts,
Mr. Gruber and Mr. Matthews is: c/o Sobieski Bancorp, Inc., 2930 W. Cleveland
Road, South Bend, Indiana 46628.
Shares
Beneficially Percent
Beneficial Owner Owned of Class
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Sobieski Bancorp, Inc. Employee Stock Ownership Plan 70,984(1) 10.48%
Robert J. Urbanski
Chairman of the Board 53,163(2) 7.80
Steven C. Watts
President and Chief Executive Officer 0(2) 0.00
Thomas F. Gruber
Former President and Chief Executive Officer 40,215(2) 5.74
Gregory J. Matthews
Vice President, Chief Operating Officer and
Acting Chief Financial Officer 13,615(2) 1.98
Directors and executive officers of the Company
and the Bank, as a group (8 persons) 164,816(3) 22.83
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(1) The amount reported represents shares held by the Company's Employee Stock
Ownership Plan ("ESOP"), 53,226 of which have been allocated to the
accounts of participants. 1st Source Bank, South Bend, Indiana, the
trustee of the ESOP, may be deemed to beneficially own the shares held by
the ESOP which have not been allocated to accounts of participants.
Participants in the ESOP are entitled to instruct the trustee as to the
voting of shares allocated to their accounts under the ESOP. Unallocated
shares held by the ESOP are voted by the trustee in the same manner that
the trustee is instructed to vote by a majority of the plan participants
who instruct the trustee as to the manner of voting the shares allocated
to their plan accounts.
(2) Includes 4,830, 0, 24,150 and 9,800 shares which Messrs. Urbanski, Watts,
Gruber and Matthews, respectively, have the right to acquire pursuant to
stock options granted under the Company's 1995 Stock Option and Incentive
Plan (the "Stock Option Plan") which are currently exercisable or which
will become exercisable within 60 days after September 19, 2003. The share
ownership information for Messrs. Watts and Matthews does not reflect
5,000 shares and 1,250 shares of restricted stock awarded to them,
respectively, under the Company's Recognition and Retention Plan (the
"RRP") which have not yet vested and which are not scheduled to vest
within 60 days after September 19, 2003.
(3) Amount includes shares held directly, as well as shares held jointly with
family members, shares held in retirement accounts, shares held in a
fiduciary capacity or by certain family members, with respect to which the
group members may be deemed to have sole or shared voting and/or
investment powers. Amount also includes 57,134 shares subject to currently
exercisable options granted under the Stock Option Plan. Amount excludes
6,636 shares of restricted stock awarded under the RRP which have not yet
vested and which are not scheduled to vest within 60 days after September
19, 2003.
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PROPOSAL I - ELECTION OF DIRECTORS
The Company's Board of Directors is presently comprised of six members,
each of whom, except for Thomas F. Gruber, also is a director of the Bank. The
directors are divided into three classes and are elected to serve for three-year
terms, with the objective being that approximately one-third of the directors
are elected at each annual meeting of stockholders. As a result of the death of
Director George Aranowski in August 2001 and the subsequent reduction by the
Board of Directors of the size of the Board from seven members to six, an
imbalance in the number of directors in each class was created. In order to
restore the balance to the Board's classes so that an equal number of directors
serve in each class, Richard J. Cullar, whose current term as a director is to
expire in 2004, has agreed to stand for re-election at the Meeting one year
earlier than required. By doing so, Mr. Cullar will, if elected, leave the class
of directors whose terms expire in 2004 and join the class of directors whose
terms expire in 2006.
The following table sets forth certain information regarding the Company's
Board of Directors, including each director's term of office. The Board of
Directors acting as the nominating committee has recommended and approved the
nominees identified in the following table. It is intended that the proxies
solicited on behalf of the Board of Directors (other than proxies in which the
vote is withheld as to the nominee) will be voted at the Meeting for the
election of the nominees identified below. If any nominee is unable to serve,
the shares represented by all such proxies will be voted for the election of
such substitute as the Board of Directors may recommend. At this time, the Board
of Directors knows of no reason why any nominee might be unable to serve, if
elected. Except as disclosed in this Proxy Statement, there are no arrangements
or understandings between any director or nominee and any other person pursuant
to which the director or nominee was selected.
Shares of Common
Age at Term Stock Beneficially Percent
June 30, Director to Owned at of
Name 2003 Position(s) Held Since(1) Expire September 19, 2003(2) Class
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NOMINEES
Robert J. Urbanski 51 Chairman of the Board 1991 2006 53,163 7.80%
Richard J. Cullar 48 Director 1999 2006 5,910 0.87%
DIRECTORS CONTINUING IN OFFICE
Leonard J. Dobosiewicz 62 Director 1977 2004 11,762 1.72%
Joseph A. Gorny 61 Director 1993 2004 26,262 3.85%
Thomas F. Gruber 60 Director and Former President
and Chief Executive Officer 1981 2005 40,215 5.74%
Joseph F. Nagy 55 Vice Chairman and Director 1985 2005 13,889 2.04%
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(1) Includes service as a director of the Bank.
(2) Includes shares held directly, as well as shares held in retirement
accounts, held by certain members of the named individuals' families, or
held by trusts of which the named individual is a trustee or substantial
beneficiary, with respect to which shares the named individuals may be
deemed to have sole or shared voting and/or investment powers. Also
includes 4,830, 3,864, 4,830, 4,830, 24,150 and 4,830 shares which Messrs.
Urbanski, Cullar, Dobosiewicz, Gorny, Gruber and Nagy, respectively,
currently have the right to acquire pursuant to stock options granted
under the Stock Option Plan. For Mr. Cullar, excludes 386 shares awarded
to him under the RRP which have not yet vested and which are not scheduled
to vest within 60 days after September 19, 2003.
3
The business experience of each director and director nominee is set forth
below. All directors and director nominees have held their present positions for
at least the past five years, except as otherwise indicated.
Robert J. Urbanski. Mr. Urbanski retired in May 2003 as President of Trans
Tech Electric Co., an electrical contractor in South Bend.
Richard J. Cullar. Mr. Cullar is President of Cullar & Associates, a
public accounting firm.
Leonard J. Dobosiewicz. Mr. Dobosiewicz has been in the maintenance
profession at local schools.
Joseph A. Gorny. Mr. Gorny is in the real estate business and is also the
owner of a liquor store.
Thomas F. Gruber. Mr. Gruber served as the President and Chief Executive
Officer of the Company and the Bank from September 1996 through November 26,
2002. Prior to becoming President and Chief Executive Officer, Mr. Gruber was
the State Editor of the South Bend Tribune.
Joseph F. Nagy. Mr. Nagy is the Auditor of St. Joseph County, Indiana.
Board of Directors' Meetings and Committees
Board and Committee Meetings of the Company. Meetings of the Company's
Board of Directors are held on at least a quarterly basis. The Board of
Directors met 12 times during the fiscal year ended June 30, 2003. During fiscal
2003, no incumbent director of the Company attended fewer than 75% of the
aggregate of the total number of Board meetings held while he was a director and
the total number of meetings held by the committees of the Board of Directors on
which he served during the period that he served.
The Board of Directors of the Company has standing Audit and Compensation
Committees.
The Audit Committee operates under a written charter adopted by the
Company's Board of Directors. The members of the Audit Committee are appointed
by the Company's Board of Directors to assist the Board in: (i) its oversight of
the Company's accounting and financial reporting processes and internal
accounting controls and procedures; (ii) its oversight and supervision of the
Company's internal audit function; (iii) its oversight of the Company's
consolidated financial statements and the independent audit of such financial
statements; and (iv) evaluating the independence of the independent auditors.
The Audit Committee is also directly responsible for the appointment,
compensation, retention and oversight of the work of the independent auditors.
The members of the Audit Committee are Directors Cullar, Nagy and Urbanski.
During fiscal 2003, this committee met 14 times. For additional information
regarding the Audit Committee, see "Audit Committee Matters" below.
The Compensation Committee is currently comprised of Directors Cullar,
Nagy and Urbanski. The Compensation Committee is responsible for administering
the Stock Option Plan and the RRP, and for determining officer salaries, bonuses
and other compensation items. The Compensation Committee also establishes an
overall salary and bonus budget for non-officer employees. The Compensation
Committee met 12 times during fiscal 2003.
The entire Board of Directors acts as a nominating committee for selecting
nominees for election as directors. While the Board of Directors of the Company
will consider nominees recommended by stockholders, the Board has not actively
solicited such nominations. The Board of Directors met once in fiscal 2003 in
its capacity as a nominating committee.
Pursuant to the Company's bylaws, nominations for directors by
stockholders must be made in writing and delivered to the Secretary of the
Company at least 90 days prior to the meeting date. If, however, less than 100
days' notice or prior public disclosure of the date of the meeting is given or
made to stockholders, nominations must be received by the Company not later than
the close of business on the tenth day following the later of the day on which
notice of the date of the meeting was mailed or public disclosure of the date of
the meeting was made. In addition to meeting the applicable deadline,
nominations must be accompanied by certain information specified in the
Company's bylaws.
Board and Committee Meetings of the Bank. Meetings of the Bank's Board of
Directors are generally held on a monthly basis. The Board of Directors of the
Bank held 34 meetings during the year ended June 30, 2003. During
4
fiscal 2003, no incumbent director attended fewer than 75% of the aggregate of
the total number of Board meetings held while he was a director and the total
number of meetings held by committees of the Board of Directors on which he
served during the period that he served.
Audit Committee Matters
Audit Committee Report. The Audit Committee of the Company's Board of
Directors has issued the following report with respect to the audited financial
statements of the Company for the fiscal year ended June 30, 2003:
o The Audit Committee has reviewed and discussed with the Company's
management the Company's fiscal 2003 audited financial statements;
o The Audit Committee has discussed with the Company's independent
auditors (Crowe, Chizek and Company LLC) the matters required to be
discussed by Statement on Auditing Standards No. 61;
o The Audit Committee has received the written disclosures and letter
from the independent auditors required by Independence Standards
Board No. 1 (which relates to the auditors' independence from the
Company) and has discussed with the auditors their independence from
the Company; and
o Based on the review and discussions referred to in the three items
above, the Audit Committee recommended to the Board of Directors
that the fiscal 2003 audited financial statements be included in the
Company's Annual Report on Form 10-KSB for the fiscal year ended
June 30, 2003.
Submitted by the Audit Committee of the Company's Board of Directors:
Richard J. Cullar
Joseph F. Nagy
Robert J. Urbanski
Independence of Members and Audit Committee Charter. Each of Messrs.
Cullar, Nagy and Urbanski is "independent" under the definition of independence
contained in the National Association of Securities Dealers' listing standards
for the Nasdaq Stock Market. A copy of the Audit Committee's Charter as
currently in effect is attached to this Proxy Statement as Appendix A.
Director Compensation
Fees. Directors are paid $500 per month for each meeting of the Company's
Board of Directors attended and an additional $500 for each regular meeting, and
generally $100 for each special meeting, of the Bank's Board of Directors
attended. Directors are generally also paid a fee of $100 for each Board
committee meeting attended. In addition, during fiscal 2003, Mr. Urbanski
received $400 per month for serving as Chairman of the Board of Directors of the
Company and Mr. Nagy received $200 per month for serving as Vice Chairman of the
Board of Directors of the Company. As noted above, each director of the Company
except Thomas F. Gruber also serves as a director of the Bank.
Fee Continuation Plans. Effective June 29, 1998, the Company adopted the
Sobieski Bancorp, Inc. Fee Continuation Plan for Retired Directors and the Bank
adopted the Sobieski Bank Fee Continuation Plan for Retired Directors. The plans
operate in the same manner and each plan provides for payment of a specified
amount to each eligible director upon the occurrence of the later of (i) the
director's attainment of age 70 or (ii) the termination of the director as a
member of the Company's Board of Directors (under the Company's plan) or the
Bank's Board of Directors (under the Bank's plan) ("Payment Event").
Specifically, upon the occurrence of a Payment Event with respect to an eligible
director, the director will be entitled to be paid approximately $333 per month
under each plan ($666 under both plans) for ten years, beginning on the first
day of the month following the Payment Event. The Company and the Bank maintain
life insurance contracts on the directors to provide funding for their
retirement obligations under the plans.
To be eligible to participate in the plans, a person must have been a
member of the Company's Board of Directors (for the Company's plan) or the
Bank's Board of Directors (for the Bank's plan) as of July 1, 1998, or have
5
become a member of the Company's or the Bank's Board of Directors after July 1,
1998 and serve in that capacity for five full consecutive years. Each plan
provides that if an eligible director's death occurs before commencement of the
payments described above or while the payments are being made to the director,
then the director's spouse will be entitled to receive such benefits as if the
director were alive. If the deceased eligible director had no spouse, all
benefits will terminate upon the director's death. As noted above, each director
of the Company except for Mr. Gruber is also a director of the Bank.
Executive Compensation
The Company has not paid any compensation to its executive officers since
its formation. However, the Company does reimburse the Bank for services
performed on behalf of the Company by its officers. The Company does not
presently anticipate paying any compensation to such persons until it becomes
actively involved in the operation or acquisition of businesses other than the
Bank.
The following table sets forth information concerning the compensation
paid or accrued by the Bank for services rendered by Steven C. Watts, who became
the Company's and the Bank's President and Chief Executive Officer effective
January 1, 2003, Thomas F. Gruber, who served as the Company's and the Bank's
President and Chief Executive Officer until November 26, 2002, and Gregory J.
Matthews, the Company's and the Bank's Vice President, Chief Operating Officer
and Acting Chief Financial Officer, who served as Acting Chief Executive Officer
of the Company and the Bank from November 26, 2002 through December 31, 2002
(collectively, the "Named Officers"). No executive officer of the Company or the
Bank earned a salary and bonus for fiscal 2003 in excess of $100,000.
===============================================================================================================================
Summary Compensation Table
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Long-Term Compensation
Annual Compensation Awards
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Restricted
Fiscal Salary Other Annual Stock Options/ All Other
Name and Principal Position Year ($) Bonus ($) Compensation($) Awards ($) SARs (#) Compensation ($)
- -------------------------------------------------------------------------------------------------------------------------------
Steven C. Watts, President and 2003 $ 72,500 (2) $12,500 (4) $15,365 (5) $67,450 (6) 10,000 (8) $ 4,200 (9)
Chief Executive Officer 2002 --- --- --- --- --- ---
2001 --- --- --- --- --- ---
- -------------------------------------------------------------------------------------------------------------------------------
Thomas F. Gruber, Former 2003 $ 61,400 (3) --- --- --- --- $ 59,377 (10)
President and Chief Executive 2002 103,607 (3) --- --- --- --- 13,768
Officer (1) 2001 98,899 (3) --- --- --- --- 13,250
- -------------------------------------------------------------------------------------------------------------------------------
Gregory J. Matthews, Vice 2003 $ 85,000 $ 8,500 --- $13,490 (7) --- $ 913 (11)
President, Chief Operating 2002 66,257 --- --- --- --- 8,362
Officer and Acting Chief 2001 60,199 --- --- --- --- 8,481
Financial Officer
===============================================================================================================================
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(1) Mr. Gruber resigned as President and Chief Executive Officer effective
November 26, 2002 but remained an employee of the Bank through December
31, 2002.
(2) As noted above, Mr. Watts' service commenced effective as of January 1,
2003.
(3) Amounts include fees of $12,200, $12,600, and $12,500, for Mr. Gruber's
service as a director of the Company and the Bank during fiscal 2003,
2002, and 2001, respectively. Mr. Gruber ceased to be a director of the
Bank on November 26, 2002, but continues to serve as a director of the
Company.
(4) Represents signing bonus paid to Mr. Watts pursuant to his employment
agreement. See "Employment Agreement with Steven C. Watts."
(5) Includes an automobile allowance of $6,000 and reimbursement in the amount
of $8,500 paid by the Bank to Mr. Watts' former employer for the cost of
the equity ownership in a country club of which Mr. Watts is a member (the
dues for which are now paid by the Bank).
(6) Pursuant to the RRP, on January 1, 2003, Mr. Watts was awarded 5,000
restricted shares of common stock. The value of this award provided in the
table above was determined by multiplying the number of shares awarded by
the closing price per share of the common stock on December 31, 2002 of
$13.49. The vesting schedule of this award is 20% annually beginning
January 1, 2004, subject to earlier vesting in full
6
upon a change in control. Dividends are paid on the restricted shares to
the extent and on the same date as dividends are paid on all other
outstanding shares of the common stock. Based on the $13.00 closing price
per share of the common stock on the Nasdaq Stock Market on June 30, 2003,
the value as of that date of the 5,000 unvested shares awarded under the
RRP held by Mr. Watts was $65,000.
(7) Pursuant to the RRP, on May 1, 2003, Mr. Matthews was awarded 1,000
restricted shares of common stock. The value of this award provided in the
table above was determined by multiplying the number of shares awarded by
the closing price per share of the common stock on May 1, 2003 of $13.49.
The vesting schedule of this award is 20% annually beginning May 1, 2004,
subject to earlier vesting in full upon a change in control. Dividends are
paid on the restricted shares to the extent and on the same date as
dividends are paid on all other outstanding shares of the common stock.
Based on the $13.00 closing price per share of the common stock on the
Nasdaq Stock Market on June 30, 2003, the value as of that date of the
1,500 unvested shares awarded under the RRP held by Mr. Matthews was
$19,500.
(8) For additional information regarding this award, see the table below
captioned "Option Grants in Last Fiscal Year."
(9) Includes term life insurance premiums paid by the Bank for Mr. Watts'
benefit of $1,200 and reimbursement in the amount of $3,000 for attorneys'
fees incurred by Mr. Watts in the negotiation of his employment agreement
with the Bank pursuant to the terms of that agreement. The value of the
allocation for fiscal 2003 to Mr. Watts' ESOP account is not included
because the amount of such allocation was not yet available from the ESOP
trustee prior to the printing of this proxy statement.
(10) Includes employer contributions under the Bank's 401(k) plan of $738 and
term life insurance premiums paid for Mr. Gruber's benefit of $639. Also
includes a payment of $3,000 for accrued unused vacation and other
time_off and a consulting fee of $55,000, each paid pursuant to his
Agreement and General Release entered into with the Bank in connection
with his resignation as President and Chief Executive Officer. See
"Agreement and General Release with Thomas F. Gruber." The value of the
allocation for fiscal 2003 to Mr. Gruber's ESOP account is not included
because the amount of such allocation was not yet available from the ESOP
trustee prior to the printing of this proxy statement.
(11) Represents employer contributions under the Bank's 401(k) plan. The value
of the allocation for fiscal 2003 to Mr. Matthews' ESOP account is not
included because the amount of such allocation was not yet available from
the ESOP trustee prior to the printing of this proxy statement.
The following table sets forth certain information concerning grants of
stock options to the Named Officers during fiscal 2003. No stock appreciation
rights were granted in fiscal 2003.
=====================================================================================================================
OPTION GRANTS IN LAST FISCAL YEAR
- ---------------------------------------------------------------------------------------------------------------------
Individual Grants
- ---------------------------------------------------------------------------------------------------------------------
Number of % of Total
Shares Options
Underlying Granted to Per Share
Options Employees in Exercise Expiration
Granted Fiscal Year Price Date
- ---------------------------------------------------------------------------------------------------------------------
Steven C. Watts 10,000 (1) 100% $13.49 01/01/13
- ---------------------------------------------------------------------------------------------------------------------
Thomas F. Gruber --- --- --- ---
- ---------------------------------------------------------------------------------------------------------------------
Gregory J. Matthews --- --- --- ---
=====================================================================================================================
- ----------
(1) Option is scheduled to vest in 20% annual increments beginning January 1,
2004, subject to earlier vesting in full upon a change in control.
7
The following table sets forth information regarding stock options
exercised by the Named Officers during fiscal 2003 and the number and value of
unexercised stock options held by the Named Officers at June 30, 2003.
========================================================================================================================
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END
OPTION/SAR VALUES
- ------------------------------------------------------------------------------------------------------------------------
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options/SARs
Options/SARs at at FY-End ($)(1)
FY-End (#)
- ------------------------------------------------------------------------------------------------------------------------
Shares
Acquired on Value
Name Exercisable Realized ($) Exercise (#) Unexercisable Exercisable Unexercisable
- ------------------------------------------------------------------------------------------------------------------------
Steven C. Watts --- --- --- 10,000 --- ---
- ------------------------------------------------------------------------------------------------------------------------
Thomas F. Gruber --- --- 24,150 --- $6,641 ---
- ------------------------------------------------------------------------------------------------------------------------
Gregory J. Matthews --- --- 8,200 3,800 $6,954 $7,006
========================================================================================================================
- ----------
(1) Represents the aggregate market value (market price of the common stock
less the exercise price) of the options based on the closing price of the
Company's common stock on the Nasdaq Stock Market on June 30, 2003 of
$13.00. An option is in-the-money if the exercise price of the option is
less than the market value of the common stock.
Employment Agreement with Steven C. Watts. The Bank has entered into an
employment agreement with Mr. Watts. The agreement is for a three-year term,
which commenced on January 1, 2003, and provides for an extension of one-year,
in addition to the then-remaining term under the agreement, on January 1, 2005
and each January 1st thereafter for the subsequent ten years, if the Bank's
Board of Directors acts to extend the agreement unless one of the parties gives
written notice of non-extension to the other party at least 60 days prior to the
scheduled extension date. The agreement provides for an annual salary of
$145,000 for calendar year 2003, $150,000 for calendar year 2004, and $155,000
for calendar year 2005 and for each year thereafter, subject to increases by the
Bank. Pursuant to the agreement, Mr. Watts received on January 1, 2003 a signing
bonus in the amount of $12,500, an award of 5,000 shares of restricted stock
under the Company's Recognition and Retention Plan and an option to purchase
10,000 shares of Company common stock under the Stock Option Plan; the shares of
restricted stock and the option are scheduled to vest annually in 20% increments
beginning January 1, 2004, subject to earlier vesting in full upon a change in
control. See the tables above captioned "Summary Compensation Table" and "Option
Grants in Last Fiscal Year."
The agreement provides that Mr. Watts is entitled to participation in
medical, life and disability insurance plans, retirement plans and other
employee benefit plans to the same extent as other management employees, as well
as participation in a supplemental executive retirement plan to be established
for his benefit. See "Supplemental Executive Retirement Plans." The agreement
also provides that Mr. Watts is entitled to certain fringe benefits, including
an automobile allowance of $6,000 per year and specified reimbursement of club
dues.
The agreement provides that if Mr. Watts' employment is terminated by the
Bank without just cause or by Mr. Watts for good reason, Mr. Watts will be
entitled to a continuation of his base salary for the longer of two years
following the termination and the remainder of the agreement term. The salary
payable to Mr. Watts following his termination under these circumstances is
subject to reduction by any income earned by him from another employer or from
other services performed by him following termination, and Mr. Watts is
obligated under the agreement to make efforts to obtain such other employment or
service-providing opportunities in order to mitigate the post-termination
amounts payable to him by the Bank under the agreement. The agreement further
provides that if Mr. Watts' employment is terminated by the Bank or its
successor, for any reason other than death, disability or just cause, in
contemplation of or within one year following a change in control, or if Mr.
Watts terminates his employment for good reason within one year following a
change in control, he will be entitled to a continuation of his base salary for
two years following the date of termination, without any duty to mitigate these
amounts by obtaining other employment and without any offset for income earned
by him from another source following termination. The agreement provides that to
the extent any
8
payment to Mr. Watts would be non-deductible by the Bank for federal income tax
purposes because of Section 280G of the Internal Revenue Code, such payment will
reduced to the extent necessary to prevent the payment from being non-deductible
under Section 280G.
The agreement contains a covenant not to compete for a period of one year
following termination of Mr. Watts' employment for any reason other than
termination by the Bank without just cause or termination by Mr. Watts for good
reason.
Agreement and General Release with Thomas F. Gruber. On November 26, 2002,
Mr. Gruber executed an Agreement and General Release (the "Termination
Agreement") with the Bank setting forth the terms and conditions of his
resignation as President and Chief Executive Officer of the Company and the
Bank. As provided in the Termination Agreement, Mr. Gruber's resignation as
President and Chief Executive Officer became effective as of November 26, 2002,
and his employment agreement with the Bank was terminated effective as of that
date. Pursuant to the Termination Agreement, Mr. Gruber remained an employee of
the Bank through December 31, 2002 and continued to receive his salary and
insurance benefits and remain eligible for participation in the Company's
employee benefit plans through that date. Mr. Gruber was also paid for all of
his accrued unused vacation and other personal time-off. As a result of the
termination of his employment prior to his vesting date for benefits under the
supplemental executive retirement plan that was established for him, Mr. Gruber
will not receive any benefits under that plan.
In January 2003, pursuant to the Termination Agreement, Mr. Gruber was
paid a consulting fee of $55,000, less applicable taxes and withholdings, in
consideration for his being available, when needed, to assist in matters
relating to certain fraudulent and unauthorized loans made by a former employee
of the Bank. The Termination Agreement provides that Mr. Gruber will receive
severance payments of $55,000, less applicable taxes and withholdings, in
January 2004, and $40,000, less applicable taxes and withholdings, in January
2005. In the event of Mr. Gruber's death, any remaining unpaid severance
payments will be paid to his estate.
The Termination Agreement provides for the general release of the Company,
the Bank and specified related parties by Mr. Gruber of all claims and
liabilities relating to his employment and the termination of his employment.
Supplemental Executive Retirement Plans. Effective July 1, 1998, the Bank
adopted a Supplemental Executive Retirement Plan ("SERP") for the benefit of
Gregory J. Matthews, the Company's and the Bank's Chief Operating Officer and
Acting Chief Financial Officer. Mr. Matthews' SERP provides for payment of a
specified amount to him upon the occurrence of the later of (i) Mr. Matthews'
attainment of age 65 or (ii) the termination (other than for cause) of Mr.
Matthews as Chief Operating Officer of the Bank ("Payment Event"). Specifically,
upon the occurrence of a Payment Event, Mr. Matthews will be entitled to begin
receiving payment of an amount equal to one and one-third percent of his base
annual salary in effect as of the date of termination of his employment as Chief
Operating Officer of the Bank, multiplied by the number of full years he was
employed as Chief Operating Officer of the Bank, beginning on June 30, 1998 and
ending on the effective date of termination (the "Benefit"). The Benefit will be
paid to Mr. Matthews for each of the ten years following the Payment Event and
will be paid monthly beginning on the first day of the month following the
Payment Event. The Bank maintains a life insurance contract on Mr. Matthews to
provide funding for the Bank's retirement obligations under Mr. Matthews' SERP.
Mr. Matthews became fully vested in his benefits under his SERP on June
29, 2003. Mr. Matthews' SERP provides that if he dies before commencement of
payment of the Benefit, or while the Benefit is being paid, then his spouse will
be entitled to receive such payments as if he were alive.
As noted above, under the terms of his employment agreement, Mr. Watts is
entitled to participate in a SERP to be established for his benefit. See
"Employment Agreement with Steven C. Watts."
Certain Transactions
The Bank has followed a policy of granting loans to eligible directors,
officers, employees and members of their immediate families for the financing of
their personal residences and for other purposes. All loans to directors and
executive officers are required to be made in the ordinary course of business
and on substantially the same terms, including collateral and interest rates, as
those prevailing at the time for comparable transactions and do not involve more
than the normal risk of collectibility. Directors and officers are, however, as
are employees of the Bank, generally
9
entitled to a 1% reduction in the interest rate on any loan secured by their
primary residence from the then current market interest rate, as long as they
continue to serve as a director, officer or employee. All loans to directors and
officers were performing in accordance with their terms at June 30, 2003.
Settlement of Claims Filed by Arthur Skale
On or about July 7, 2003, Arthur Skale, the former Chief Financial Officer
for the Company and the Bank, filed charges with the U.S. Equal Employment
Opportunity Commission alleging that the Bank discriminated against him because
of his age and disability in violation of the Age Discrimination in Employment
Act of 1967 and the Americans with Disabilities Act of 1990. On or about July
20, 2003, the Bank received notice that Mr. Skale filed charges with the U.S.
Department of Labor claiming the Company and the Bank violated the so-called
"whistle blower protection" provisions of the Sarbanes-Oxley Act of 2002. Mr.
Skale claimed to have objected to the adoption of certain internal financial
statements by the Company's Board of Directors. Mr. Skale further alleged that
because of his claimed objection, he was subjected to heightened performance
scrutiny and that his employment was ultimately terminated.
The Bank vigorously contested the charges filed by Mr. Skale and maintains
that his claims were without merit. On September 23, 2003, the Bank reached an
agreement with Mr. Skale settling his age and disability discrimination claims
in consideration for payment to him of an amount the Company does not consider
to be material. In addition, Mr. Skale has agreed to withdraw his whistle blower
protection claim. As part of the settlement, Mr. Skale has also agreed to sign
an acknowledgment to the effect that the financial reports that were publicly
filed with the Securities and Exchange Commission while he served as Chief
Financial Officer fairly represented the financial condition and results of
operations of the Company and that such financial reports did not contain any
material misstatements or omit any material information.
PROPOSAL II - RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Audit Committee of the Board of Directors of the Company has renewed
the Company's arrangement for Crowe, Chizek and Company LLC to be the Company's
independent auditors for the fiscal year ending June 30, 2004, subject to
ratification of this appointment by the Company's stockholders at the Meeting.
Representatives of Crowe, Chizek and Company LLC are expected to attend the
Meeting to respond to appropriate questions and to make a statement if they so
desire.
For the fiscal year ended June 30, 2003, Crowe, Chizek and Company LLC
provided various audit and non-audit services to the Company. Set forth below
are the aggregate fees billed for these services:
(a) Audit Fees: Aggregate fees billed for professional services rendered
for the audit of the Company's fiscal 2003 annual financial
statements and review of financial statements included in the
Company's Quarterly Reports on Form 10-QSB for fiscal 2003: $99,702.
(b) Financial Information Systems Design and Implementation Fees: $0.
(c) All other fees: $57,505.
The Audit Committee of the Company's Board of Directors has considered
whether the provision of services covered by item (c) above is compatible with
maintaining the independence of Crowe, Chizek and Company LLC.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE
RATIFICATION OF THE APPOINTMENT OF CROWE, CHIZEK AND COMPANY LLC AS THE
COMPANY'S INDEPENDENT AUDITORS FOR THE FISCAL YEAR ENDING JUNE 30, 2004.
10
STOCKHOLDER PROPOSALS
Stockholder proposals intended to be presented at the Company's next
annual meeting must be received by its Secretary at the administrative office of
the Company, located at 2930 W. Cleveland Road, South Bend, Indiana 46628, no
later than May 28, 2004 to be eligible for inclusion in the Company's proxy
statement and form of proxy relating to the next annual meeting. Any such
proposal will be subject to the requirements of the proxy rules adopted under
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and as
with any stockholder proposal (regardless of whether included in the Company's
proxy materials), the Company's certificate of incorporation and bylaws and
Delaware law.
To be considered for presentation at the next annual meeting, but not for
inclusion in the Company's proxy statement and form of proxy for that meeting,
proposals must be received by the Company at least 90 days before the date of
the meeting. If, however, less than 100 days' notice or prior public disclosure
of the date of the next annual meeting is given or made to stockholders,
proposals must instead be received by the Company by the tenth day following the
day on which notice of the date of the next annual meeting is mailed or public
announcement of the date of the next annual meeting is first made. If a
stockholder proposal that is received by the Company after the applicable
deadline for presentation at the next annual meeting is raised at the next
annual meeting, the holders of the proxies for that meeting will have the
discretion to vote on the proposal in accordance with their best judgment and
discretion, without any discussion of the proposal in the Company's proxy
statement for the next annual meeting.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's officers and
directors, and persons owning more than 10% of a registered class of the
Company's equity securities, to file periodic reports of ownership and changes
in ownership with the SEC and to provide the Company with copies of such
reports. Based solely upon information provided to the Company by the directors
and officers subject to Section 16(a), all Section 16(a) filing requirements
applicable to such persons were complied with during fiscal 2003, except for the
failure by Gregory J. Matthews, the Company's Vice President, Chief Operating
Officer and Acting Chief Financial Officer, to timely report on Form 4 one
transaction, the inadvertent failure by Steven C. Watts, the Company's President
and Chief Executive Officer, to timely file a Form 3 upon becoming an officer of
the Company, and the failure of Mr. Watts to timely report on Form 4 two
transactions.
OTHER MATTERS
The Board of Directors is not aware of any business to come before the
Meeting other than those matters described above in this Proxy Statement. If,
however, any other matter should properly come before the Meeting, the Board of
Directors, as proxy for the stockholder, will act on such matter in accordance
with its best judgment.
The cost of solicitation of proxies will be borne by the Company. The
Company will reimburse brokerage firms and other custodians, nominees and
fiduciaries for reasonable expenses incurred by them in sending proxy materials
to the beneficial owners of common stock. In addition to solicitation by mail,
directors, officers and regular employees of the Company and the Bank may
solicit proxies personally or by telephone without additional compensation. The
Company has retained Regan & Associates, Inc. to assist in the solicitation of
proxies for a fee of $3,500, including expenses.
11
APPENDIX A
Sobieski Bancorp, Inc.
Audit Committee Charter
(Revised August 19, 2003)
Purpose of the Audit Committee
The purposes of the Sobieski Bancorp, Inc. (the "Corporation") Audit Committee
are to assist the Board of Directors:
I. In its oversight of the Corporation's accounting and financial reporting
principles and policies and internal accounting and disclosure controls
and procedures;
II. In its oversight and supervision of the Corporation's internal audit
function;
III. In its oversight of the certification of the Corporation's quarterly and
annual financial statements and disclosures and assessment of disclosure
controls and procedures and internal control over financial reporting by
the Corporation's Chief Executive Officer ("CEO") and Chief Financial
Officer ("CFO");
IV. In its oversight of the Corporation's consolidated financial statements
and the independent external audit thereof, by, among other things,
appointing, compensating, overseeing (including resolving any
disagreements between management and the independent external auditor
regarding financial reporting), and evaluating and, where deemed
appropriate, replacing the registered independent external auditors; and
V. In evaluating the independence of the external auditors.
The function of the Audit Committee is oversight. The management of the
Corporation is responsible for the preparation, presentation and integrity of
the Corporation's consolidated financial statements. Management is responsible
for maintaining appropriate accounting and financial reporting principles and
policies and internal accounting controls, disclosure controls and procedures,
and internal control over financing reporting designed to assure compliance with
accounting standards and applicable laws and regulations.
The independent external auditors are responsible for planning and carrying out
a proper audit of the Corporation's annual consolidated financial statements,
reviews of the Corporation's quarterly consolidated financial statements prior
to the filing of each quarterly report on Form 10-QSB, and other procedures.
In fulfilling their responsibilities hereunder, it is recognized that members of
the Audit Committee are not full-time employees of the Corporation and do not
represent themselves to be, by virtue of their membership on the Audit
Committee, accountants or auditors by profession or experts in the fields of
accounting or auditing including in respect of external auditor independence. It
is not the duty or responsibility of the Audit Committee or its members to
conduct "field work" or other types of auditing or accounting reviews or
procedures or to set auditor independence standards, and each member of the
Audit Committee shall be entitled to rely on:
a. The integrity of those persons and organizations within and outside
the Corporation from which it receives information,
A-1
b. The accuracy of the financial and other information provided to the
Audit Committee by such persons or organizations, absent actual
knowledge to the contrary (which shall be promptly reported to the
Board of Directors), and
c. Representations made by management as to any permitted non-audit
services provided by the independent external auditors to the
Corporation.
The independent external auditors for the Corporation are ultimately accountable
to the Audit Committee. The Audit Committee has the ultimate authority and
responsibility to select, evaluate, engage, and terminate the independent
external auditors. The Audit Committee shall pre-approve all audit and non-audit
services proposed to be provided by the Corporation's external auditors in
compliance with section 202 of the "Public Company Accounting Reform and
Investor Protection Act of 2002" and the rules and regulations of the Securities
and Exchange Commission (the "SEC") thereunder.
Composition of the Audit Committee
The Audit Committee shall be comprised of at least three directors appointed by
the Board of Directors, each of whom shall be an independent director qualified
to serve on the Audit Committee under applicable law, the rules and regulations
of the SEC and the rules of the NASDAQ Stock Market, and each of whom shall have
no relationship to the Corporation, or to the executive officers of the
Corporation or its subsidiaries or affiliates, that may interfere with the
exercise of their independence from management and the Corporation.
Each member of the Audit Committee must able to read and understand fundamental
financial statements, including the Corporation's consolidated balance sheet,
statements of income and cash flows and the related footnotes. Additionally, the
Corporation will have at least one member of the Audit Committee that has past
employment experience in finance or accounting, requisite professional
certification in accounting, or any other comparable experience or background
which results in the individual's financial sophistication, including being or
having been a chief executive officer, chief financial officer or other senior
officer with financial oversight responsibilities.
While not an absolute requirement, the Corporation will seek to have at least
one member of the Audit Committee who is considered to be an "audit committee
financial expert," as that term is defined in the regulations of the SEC and as
the Board of Directors interprets such qualification in its business judgment.
Members of the Audit Committee shall be appointed annually by majority vote of
the Board of Directors and shall serve until the next annual meeting of the
Board of Directors or until their successors shall be duly qualified and
appointed. A chairperson may be designated by the Board of Directors or, in the
absence of Board action, by a majority of the full Audit Committee membership.
Members of the Audit Committee shall not simultaneously serve on the audit
committees of more than two other public companies.
Meetings of the Audit Committee
The Audit Committee shall meet four times annually, or more frequently if
circumstances dictate, to discuss with management the annual audited financial
statements, quarterly financial results, and the required certifications of the
CEO and CFO. The Audit Committee shall meet separately with the internal auditor
and the independent external auditor, without any members of management being
present, to discuss any matters that the Audit Committee or any of these persons
or firms believes should be discussed outside the presence of management.
A-2
The Audit Committee may request any officer or employee of the Corporation, or
the Corporation's independent counsel, or independent external auditors to
attend a meeting of the Audit Committee or to meet with any members of or
consultants to, the Audit Committee.
Members of the Audit Committee may participate in a meeting of the Audit
Committee by means of conference call or similar communications equipment by
means of which all persons participating in the meeting can hear each other.
Responsibilities of the Audit Committee
The following shall be the principal duties, responsibilities, and recurring
processes of the Audit Committee in carrying out its oversight role. The
processes are set forth as a guide with the understanding that the Audit
Committee may supplement them as appropriate.
I. Overseeing Financial Reporting and Disclosures
a. Review of Financial Statements and Related Disclosures. The Audit
Committee shall read all financial statements and related
disclosures included in the Corporation's periodic and annual
filings with the SEC, and consider whether the financial statements
and related disclosures accurately and appropriately reflect their
knowledge of the financial condition of the Corporation and its
results of operations. Prior to the release of quarterly and annual
earnings press releases and the filing of quarterly and annual
reports on Forms 10-QSB and 10-KSB with the SEC, the Audit Committee
shall review and discuss with management and the independent
external auditors: (i) matters that affect the Corporation's
consolidated financial statements, including disclosures under
"Management's Discussion and Analysis of Financial Condition and
Results of Operations;" (ii) the results of the independent external
auditor's interim reviews, annual audit and report, and any other
matters required to be communicated to the Audit Committee by the
independent external auditors, as well as discussions regarding
qualitative judgments of the independent external auditors about the
appropriateness, not just the acceptability, of the Company's
accounting principles, and the clarity and quality of the financial
statements; (iii) all critical accounting policies and practices to
be used; (iii) all alternative treatments of financial information
within generally accepted accounting principals that have been
discussed with management, the ramifications of the use of such
alternative disclosures and treatments, and the treatment preferred
by the independent external auditor; and (iv) other material written
communications between the independent external auditor and
management.
b. Accuracy of Financial Reports. The Audit Committee shall have the
authority to require management to make all material correcting
adjustments to the Corporation's quarterly and annual consolidated
financial statements to be filed with the SEC that are identified by
the independent external auditor as being required by accounting
principles generally accepted in the United States of America
("GAAP") or the rules of the SEC.
c. Internal Controls and Reporting Processes. In consultation with
management, the independent external auditors and the internal
auditors, monitor the integrity and effectiveness of the Company's
financial reporting processes and systems of internal controls,
including reviewing significant financial risk exposures and the
steps management has taken to monitor, control and report such
exposures; review significant findings relating to the foregoing
prepared by the independent external auditors or the internal
auditors, together with management's responses and follow-up to
these reports.
A-3
d. Disclosure of Off-Balance-Sheet Transactions. On a quarterly basis,
the Audit Committee shall inquire of management as to whether they
have complied with the SEC's disclosure requirements regarding the
Corporation's requirement to disclose, in quarterly and annual SEC
filings, all material off-balance-sheet transactions, arrangements,
obligations (including contingent obligations) and other
relationships of the Corporation with unconsolidated entities or
other persons, that have a material current or future effect on
financial condition, changes in financial condition, results of
operations, liquidity, capital resources, or significant components
of revenues or expenses.
e. Disclosure of Pro Forma Financial Information. On at least a
quarterly basis, the Audit Committee shall inquire of management as
to whether they have complied with the SEC's pro forma information
disclosure requirements regarding the Corporation's requirement to
only disclose in SEC filings, or in any public disclosures or press
or other release, pro forma financial information that does not
contain an untrue statement of a material fact or omit to state a
material fact necessary in order to make the pro forma financial
information, in light of the circumstances under which it is
presented, not misleading; and to reconcile the pro forma financial
information with the financial condition and results of operations
of the Corporation under GAAP, all in accordance with the rules and
regulations of the SEC.
f. Disclosure of Transactions Involving Management and Principal
Stockholders. The Audit Committee shall determine that management
has put in place procedures to ensure timely and proper reporting to
the SEC of changes in Corporation stockholdings by directors,
officers, and more than 10% stockholders of the Corporation, in
accordance with the rules and regulations of the SEC. Also, the
Audit Committee shall determine that management has put in place
procedures to ensure proper reporting to the SEC, within ten
business days, for any new directors, officers or 10% stockholders
of the Corporation, their stockholdings in the Corporation, in
accordance with the rules and regulations of the SEC.
g. Management Certification of Financial Statements and Disclosures,
and Assessment of Internal Controls. The Audit Committee shall
ensure that the Corporation has established adequate procedures to
ensure that quarterly and annual financial statements and
disclosures, required to be reported to the SEC, are accurate and
complete. This will include reviewing and approving the process to
be followed by management to comply with quarterly and annual CEO
and CFO certifications required by the SEC, and reviewing the
disclosures made to the Audit Committee by the Corporation's CEO and
CFO during such certification process. The Audit Committee shall be
responsible for discussing the results of the quarterly and annual
CEO and CFO certification process with management to consider
whether the Corporation has appropriately fulfilled its quarterly
and annual SEC reporting requirements. In reviewing and considering
the quarterly and annual certifications of the CEO and CFO (and any
separate disclosures of the CEO or the CFO made to the Audit
Committee in connection therewith), the Audit Committee shall also
obtain, review, and consider any applicable reports issued by the
internal auditor or the independent external auditor.
h. Disclosure of Code of Business Conduct and Ethics. The Audit
Committee shall determine that the Corporation has, once effective,
complied with applicable requirements of the SEC to disclose, in
annual reports on Form 10-KSB, whether or not, and if not, the
reason therefore, the Corporation has established a Code of Ethics
(as defined in SEC regulations) for the Company's principal
executive officer, principal financial officer, principal accounting
officer or controller or persons performing similar functions. Also,
the Audit Committee shall inquire of management to determine that
changes in or waivers of the Code of Ethics are approved by the
Audit Committee, and publicly disclosed in compliance with SEC
regulations and the rules of the NASDAQ Stock Market..
A-4
i. Disclosure of "Audit Committee Financial Expert". The Audit
Committee shall determine that the Corporation has, once effective,
complied with applicable requirements of the SEC to disclose, in
annual reports on Form 10-KSB, whether or not, and if not, the
reason therefore, the Corporation has at least one member on the
Audit Committee who is an "audit committee financial expert" as
defined by the SEC.
j. Disclosure of Audit Committee Approval of Non-Audit Services. The
Audit Committee shall determine that the Corporation has, once
effective, complied with applicable requirements of the SEC to
disclose, in annual reports on Form 10-KSB, the Audit Committee's
pre-approval policies and procedures with respect to audit and
non-audit services to be performed by the Corporation's independent
external auditor.
k. Real Time Issuer Disclosures. The Audit Committee shall determine
that the Corporation has implemented procedures to comply with, when
effective, applicable requirements of the SEC to report to the SEC
real time (prompt) disclosures of any material changes in the
Corporation's financial condition or results of operations.
II. Review and Approval of Related Party Transactions
The Audit Committee shall review and approve in advance all related party
transactions in accordance with applicable laws and the rules of the NASDAQ
Stock Market.
III. Approval of Expenses of Executive Management
All expenses of personnel defined as executive management for purposes of
complying with banking regulations, shall be reported to and approved by the
Audit Committee on a quarterly basis.
IV. Independent External Auditor
The Audit Committee shall review the independence and performance of the
independent external auditors annually. The Audit Committee is directly
responsible for the appointment, compensation, retention and oversight of the
work of the independent external auditor (including resolution of disagreements
between management and the independent auditor regarding financial reporting)
for the purpose of preparing or issuing an audit report or performing other
audit, review or attest services for the Corporation. The independent external
auditor shall report directly to the Audit Committee. The Audit Committee shall
ensure the rotation of the lead (or coordinating) audit partner having primary
responsibility for the audit and the audit partner responsible for reviewing the
audit as required by law and applicable rules and regulations of the SEC. The
Audit Committee shall also ensure that appropriate hiring policies are followed
by the Corporation with respect to former employees of the independent external
auditor who participated in any capacity in the audit of the Corporation's
financial statements.
The Audit Committee shall approve the engagement letters and the fees to be paid
to the independent external auditors. The Audit Committee shall pre-approve, in
accordance with applicable law and the rules and regulations of the SEC and any
separate written policy adopted by the Audit Committee, all audit and non-audit
services to be provided by the independent external auditors and consider the
possible effect that these services could have on the independence of such
auditors. The Audit Committee shall ensure that prohibited non-audit services
are not performed. The Audit Committee may delegate to one or more of its
members pre-approval authority of non-audit services in accordance with
applicable law and rules and regulations of the SEC.
A-5
V. Internal and External Audit Plans
The Audit Committee shall review the annual audit plans of the internal audit
division and the independent external auditor, including the degree of
coordination of the respective plans.
The Audit Committee should inquire of the internal auditor and independent
external auditor as to the extent to which the planned audit scope can be relied
upon to detect material misstatements in the consolidated financial statements
and other public disclosures, weaknesses in internal accounting and disclosure
controls, and fraud. Additionally, the Audit Committee shall inquire regarding
the audit plans of the internal auditor and independent external auditor
regarding electronic data processing and controls to ensure that such plans
address the related impact on financial risk and internal controls.
VI. Annual Proxy Statement Disclosure; Reassessment of Adequacy of Charter
The Audit Committee should report audit activities to the Board of Directors and
issue an annual report to be included in the Corporation's proxy statement for
submission to the shareholders. In addition, the Audit Committee shall review
and discuss the adequacy of the Audit Committee Charter at least annually and
submit the Audit Committee Charter for approval by the Board of Directors
annually. The Audit Committee shall ensure that a copy of the Audit Committee
Charter is made public at least once every three years, and after any
amendments, as required by the rules and regulations of the SEC, and that all
required certifications with respect to the Audit Committee Charter are timely
and properly submitted to the NASDAQ Stock Market.
VII. Independent External Auditor Communication With the Audit Committee
It is the independent external auditor's responsibility, as required by auditing
standards generally accepted in the United States of America, to make certain
communications to the Audit Committee on at least an annual basis. Such matters
include matters pertaining to the external auditor's independence. The Audit
Committee shall, on an annual basis, review and discuss with the independent
external auditors all significant relationships they have with the Company that
could impair the auditors' independence and receive the written disclosures and
letter from the independent auditors required by Independence Standards Board
Standard No. 1. The Audit Committee shall also annually obtain and review a
report by the independent external auditor describing its quality control
procedures and any material issues raised, or any material issues raised by any
peer review of the firm, or by any inquiry or investigation by governmental or
professional authorities, within the past five years respecting one or more
independent audits, and any steps taken to deal with such issues.
VIII. Communication of Concerns of the Audit Committee With the Independent
External Auditor
The Audit Committee shall be responsible for informing the independent external
auditor of any concerns it has (or which have been brought to its attention by
others) regarding to the accuracy and integrity of the Corporation's financial
reporting, any concerns it has (or which have been brought to its attention by
others) regarding the honesty and integrity of the Corporation's management, and
any concerns it has (or which have been brought to its attention by others)
regarding the adequacy of the Corporation's internal accounting controls,
disclosure controls and procedures and internal control over
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financial reporting. In fulfilling these responsibilities, the Audit Committee
is aware that it is illegal for an officer or director of the Corporation to
mislead or lie to the independent external auditor.
IX. Internal Audit Supervision
The Audit Committee should also review the appointment and replacement of the
senior internal auditing executive or outsourced internal audit service
provider. At least annually, the Audit Committee should evaluate the
effectiveness of the internal audit function and consider the need to make
changes to ensure that the internal audit objectives are met.
The Audit Committee should review and approve the annual internal audit plans,
monitor the completion of these plans, and approve any changes to the annual
plans. The Audit Committee should review the periodic reports of internal audit
activities, including the opinion of the internal audit director or outsourced
service provider regarding the adequacy of the Corporation's internal accounting
and disclosure control structure. The Audit Committee should meet with the
internal audit director or outsourced service provider to discuss the status of
completion of the annual internal audit plans and the periodic internal audit
reports and to consider the need for further audit follow-up and investigation.
X. Fraud Reporting and Handling of Complaints
The Audit Committee shall have the responsibility for establishing procedures
for:
a. The receipt, retention, and treatment of complaints received by the
Corporation regarding accounting, internal accounting controls, or
auditing matters; and
b. The confidential, anonymous submission by employees of the
Corporation of concerns regarding questionable accounting or
auditing matters. The Audit Committee shall also establish
procedures to ensure that no retaliation will be allowed to occur
against anyone who reports potential fraud or a complaint in good
faith.
XI. New Accounting Pronouncements
Changes in accounting standards that have a material effect on the consolidated
financial statements and new or changing regulations which will affect
compliance issues or the approach taken towards evaluating the internal control
structure, should be explained to the Audit Committee by financial management,
the internal auditor, or the independent external auditor.
XII. Continuing Education for the Audit Committee
The Audit Committee shall establish a program of regular continuing education
for all Audit Committee members to ensure that they are properly equipped to
fulfill their responsibilities.
XIII. Conferring with Legal Counsel
The Audit Committee should meet with the Corporation's outside legal counsel,
when appropriate, to discuss: (i) any legal matter that could have a material
impact on the Corporation's consolidated financial statements; (ii) legal
compliance matters, including securities trading policies and material notices
to or inquiries received from governmental agencies; and (iii) reports of
evidence of a material violation of
A-7
securities laws or breaches of fiduciary duty. An assessment of the
Corporation's legal liability shall be reviewed with management and the
independent external auditor for any pending or threatened litigation, including
establishment of any appropriate reserves or financial disclosures until the
matter is adjudicated.
XIV. Areas Requiring Special Attention
The Audit Committee may request detailed reports from management, the
independent external auditor, or the internal auditor related to significant
matters affecting the financial reporting process, internal controls, or other
areas of special interest or concern.
XV. Other
The Audit Committee shall maintain minutes of its meetings and periodically
report to the Board of Directors on its activities. The Audit Committee may
perform other activities in addition to those specifically described herein that
are consistent with the Audit Committee Charter, the Corporation's Bylaws and
applicable laws, rules and regulations as the Audit Committee or the Board of
Directors deems necessary or appropriate.
Resources and Authority of the Audit Committee
The Audit Committee shall have the authority to engage, without prior permission
of the Board of Directors or management and at the expense of the Corporation,
independent legal counsel, accounting, or other advisors for special audits,
reviews and other procedures as it determines necessary to carry out its duties.
The Audit Committee is empowered to investigate any matter, with full access to
all necessary books, facilities, and personnel of the Corporation.
Funding
The Corporation shall provide the Audit Committee with appropriate funding, as
determined by the Audit Committee, in its capacity as a committee of the Board
of Directors, for payment of : -
A) Compensation to the independent external auditor engaged for the
purpose of preparing or issuing an audit report or performing other
audit, review or attest services for the Corporation;
B) Compensation to any advisors employed by the Audit Committee; and
C) Ordinary administrative expenses of the Audit Committee that are
necessary or appropriate in carrying out its duties.
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REVOCABLE PROXY
SOBIESKI BANCORP, INC.
[ ]PLEASE MARK VOTES
AS IN THIS EXAMPLE
ANNUAL MEETING OF STOCKHOLDERS
October 20, 2003
The undersigned hereby appoints the Board of Directors of Sobieski Bancorp, Inc.
(the "Company"), and its survivor, with full power of substitution, to act as
attorneys and proxies for the undersigned to vote all shares of common stock of
the Company which the undersigned is entitled to vote at the Annual Meeting of
Stockholders (the "Meeting"), to be held on October 20, 2003 at the Blue Heron
at Blackthorn Conference Center, located at 5440 Nimtz Parkway, South Bend,
Indiana, at 2:00 p.m., Eastern Standard Time, and at any and all adjournments
and postponements thereof, as follows:
With- For All
For hold Except
[ ] [ ] [ ]
1. The election of the following directors for three year terms (except as
marked to the contrary):
ROBERT J. URBANSKI
RICHARD J. CULLAR
INSTRUCTION: To withhold authority to vote for any individual nominee, mark "For
All Except" and write that nominee's name in the space provided below.
For Against Abstain
[ ] [ ] [ ]
2. The ratification of the appointment of Crowe, Chizek and Company LLC as
independent auditors for the Company for the fiscal year ending June 30,
2004
In their discretion, the proxies are authorized to vote on any other
business that may properly come before the Meeting or any adjournment or
postponement thereof.
The Board of Directors recommends a vote "FOR" the nominees named herein
and "FOR" the ratification of the appointment of Crowe, Chizek and Company LLC.
THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS ARE SPECIFIED,
THIS PROXY WILL BE VOTED FOR THE ELECTION OF THE NOMINEES NAMED HEREIN AND FOR
THE RATIFICATION OF THE APPOINTMENT OF CROWE, CHIZEK AND COMPANY LLC. IF ANY
OTHER BUSINESS IS PRESENTED AT THE MEETING, THIS PROXY WILL BE VOTED AS DIRECTED
BY THE BOARD OF DIRECTORS IN ITS BEST JUDGMENT. AT THE PRESENT TIME, THE BOARD
OF DIRECTORS KNOWS OF NO OTHER BUSINESS TO BE PRESENTED AT THE MEETING.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
This Proxy may be revoked at any time before it is voted by: (i) filing
with the Secretary of the Company at or before the Meeting a written notice of
revocation bearing a later date than this Proxy; (ii) duly executing a
subsequent proxy relating to the same shares and delivering it to the Secretary
of the Company at or before the Meeting; or (iii) attending the Meeting and
voting in person (although attendance at the Meeting will not in and of itself
constitute revocation of this Proxy). If this Proxy is properly revoked as
described above, then the power of such attorneys and proxies shall be deemed
terminated and of no further force and effect.
The above signed acknowledges receipt from the Company, prior to the
execution of this Proxy, of Notice of the Meeting, a Proxy Statement and the
Company's Annual Report to Stockholders for the fiscal year ended June 30, 2003.
Please sign exactly as your name appears above on this card. When signing
as attorney, executor, administrator, trustee or guardian, please give your full
title. If shares are held jointly, each holder should sign.
PLEASE PROMPTLY COMPLETE, DATE, SIGN AND MAIL THIS PROXY IN
THE ENCLOSED POSTAGE-PAID ENVELOPE.
IF YOUR ADDRESS HAS CHANGED, PLEAS CORRECT THE ADDRESS IN THE SPACE PROVIDED
BELOW AND RETURN THIS PORTION WITH THE PROXY IN THE ENVELOPE PROVIDED.
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