SCHEDULE 14-A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant [x]
Filed by a Party other than the Registrant []
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss.240.14a-11(c) or ss.240.14a-12
Sound Federal Bancorp
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(Name of Registrant as Specified In Its Charter)
Alan Schick, Luse Lehman Gorman Pomerenk & Schick, PC
--------------------------------------------------------
(Name of Person(s) Filling Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
.......................................................................
2) Aggregate number of securities to which transaction applies:
.......................................................................
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
.......................................................................
4) Proposed maximum aggregate value of transaction:
.......................................................................
5) Total fee paid:
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[ ] Fee previously paid:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
July 10, 2001
Dear Stockholder:
We are pleased to invite you to attend the Annual Meeting of Stockholders of
Sound Federal Bancorp (the "Company"). The Annual Meeting will be held at the
Hyatt Regency Greenwich, 1800 E. Putnam Avenue, Old Greenwich, Connecticut
06870, at 10:00 a.m., (local time) on August 9, 2001.
The enclosed Notice of Annual Meeting and Proxy Statement describe the formal
business to be transacted.
At the Annual Meeting stockholders will be given an opportunity to elect three
directors and to ratify the appointment of KPMG LLP as auditors for the
Company's 2002 fiscal year.
The Board of Directors of the Company has determined that the matters to be
considered at the Annual Meeting are in the best interest of the Company and its
stockholders. For the reasons set forth in the proxy statement, the Board of
Directors unanimously recommends a vote "FOR" each matter to be considered.
On behalf of the Board of Directors, we urge you to sign, date and return the
enclosed proxy card as soon as possible even if you currently plan to attend the
Annual Meeting. Your vote is important, regardless of the number of shares that
you own. Voting by proxy will not prevent you from voting in person, but will
assure that your vote is counted if you are unable to attend the meeting.
Sincerely,
/s/ Richard P. McStravick
Richard P. McStravick
President and Chief Executive Officer
Sound Federal Bancorp
300 Mamaroneck Avenue
Mamaroneck, New York 10543
(914) 698-6400
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held On August 9, 2001
Notice is hereby given that the Annual Meeting of Sound Federal Bancorp
(the "Company") will be held at the Hyatt Regency Greenwich, 1800 E. Putnam
Avenue, Old Greenwich, Connecticut 06870, on August 9, 2001 at 10:00 a.m., local
time.
A Proxy Card and a Proxy Statement for the Annual Meeting are enclosed.
The Annual Meeting is for the purpose of considering and acting upon:
1. The election of three directors of the Company;
2. The ratification of the appointment of KPMG LLP as auditors
for the Company for the fiscal year ending March 31, 2002; and
3. Such other matters as may properly come before the Annual
Meeting, or any adjournments thereof. The Board of Directors
is not aware of any other business to come before the Annual
Meeting.
Any action may be taken on the foregoing proposals at the Annual
Meeting on the date specified above, or on any date or dates to which by
original or later adjournment the Annual Meeting may be adjourned. Stockholders
of record at the close of business on June 21, 2001 are the stockholders
entitled to vote at the Annual Meeting, and any adjournments thereof.
EACH STOCKHOLDER, WHETHER HE OR SHE PLANS TO ATTEND THE ANNUAL MEETING,
IS REQUESTED TO SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD WITHOUT DELAY IN
THE ENCLOSED POSTAGE-PAID ENVELOPE. ANY PROXY GIVEN BY THE STOCKHOLDER MAY BE
REVOKED AT ANY TIME BEFORE IT IS EXERCISED. A PROXY MAY BE REVOKED BY FILING
WITH THE SECRETARY OF THE COMPANY A WRITTEN REVOCATION OR A DULY EXECUTED PROXY
BEARING A LATER DATE. ANY STOCKHOLDER PRESENT AT THE ANNUAL MEETING MAY REVOKE
HIS OR HER PROXY AND VOTE PERSONALLY ON EACH MATTER BROUGHT BEFORE THE ANNUAL
MEETING. HOWEVER, IF YOU ARE A STOCKHOLDER WHOSE SHARES ARE NOT REGISTERED IN
YOUR OWN NAME, YOU WILL NEED ADDITIONAL DOCUMENTATION FROM YOUR RECORD HOLDER IN
ORDER TO VOTE PERSONALLY AT THE ANNUAL MEETING.
By Order of the Board of Directors
/s/ Anthony J. Fabiano
Anthony J. Fabiano
Corporate Secretary
Mamaroneck, New York
July 10, 2001
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IMPORTANT: 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
SOUND FEDERAL BANCORP
300 Mamaroneck Avenue
Mamaroneck, New York 10543
(914) 698-6400
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ANNUAL MEETING OF STOCKHOLDERS
August 9, 2001
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This Proxy Statement is furnished in connection with the solicitation
of proxies on behalf of the Board of Directors of (the "Company") to be used at
the Annual Meeting of Stockholders of the Company (the "Meeting"), which will be
held at the Hyatt Regency Greenwich, 1800 E. Putnam Avenue, Old Greenwich,
Connecticut 06870 on August 9, 2001 at 10:00 a.m., local time, and all
adjournments thereof. The accompanying Notice of Annual Meeting of Stockholders
and this Proxy Statement are first being mailed to stockholders on or about July
10, 2001.
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REVOCATION OF PROXIES
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Stockholders who execute proxies in the form solicited hereby retain
the right to revoke them in the manner described below. Unless so revoked, the
shares represented by such proxies will be voted at the Meeting and all
adjournments thereof. Proxies solicited on behalf of the Board of Directors of
the Company will be voted in accordance with the directions given thereon. Where
no instructions are indicated, proxies will be voted "FOR" the proposals set
forth in this Proxy Statement for consideration at the Meeting.
Proxies may be revoked by sending written notice of revocation to the
Secretary of the Company, at the address of the Company shown above voting a
later dated proxy or by attending the Meeting and voting in person. The presence
at the Meeting of any stockholder who had given a proxy shall not revoke such
proxy unless the stockholder delivers his or her ballot in person at the Meeting
or delivers a written revocation to the Secretary of the Company prior to the
voting of such proxy.
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VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
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Holders of record of the Company's common stock, par value $.10 per
share (the "Common Stock"), as of the close of business on June 21, 2001 (the
"Record Date") are entitled to one vote for each share then held. As of the
Record Date, the Company had 4,767,292 shares of Common Stock issued and
outstanding, of which Sound Federal, MHC, the Company's mutual holding company
parent (the "Mutual Holding Company"), owns 2,810,510 shares, or 59.0% of the
total shares outstanding. The presence in person or by proxy of a majority of
the outstanding shares of Common Stock entitled to vote is necessary to
constitute a quorum at the Meeting. Directors are elected by a plurality of the
shares voted at the Meeting without regard to either broker non-votes, or
proxies as to which the authority to vote is being withheld. The ratification of
auditors must be approved by a majority of the shares voted at the Meeting
without regard to broker non-votes or proxies marked "abstain".
Persons and groups who beneficially own in excess of five percent of
the Common Stock are required to file certain reports with the Securities and
Exchange Commission ("SEC") regarding such ownership pursuant to the Securities
Exchange Act of 1934 (the "Exchange Act"). The following table sets forth, as of
the Record Date, the shares of Common Stock beneficially owned by named
executive officers and directors individually, by executive
1
officers and directors as a group and by each person who was the beneficial
owner of more than five percent of the Company's outstanding shares of Common
Stock on the Record Date.
Amount of Shares Percent of Shares
Name and Address of Owned and Nature of Common Stock
Beneficial Owner of Beneficial Ownership Outstanding (2)(3)
Sound Federal, MHC 2,810,510 57.93%
300 Mamaroneck Avenue
Mamaroneck, New York 10543
Named Directors and Executive Officers:(1)
Bruno J. Gioffre 43,668 0.90
Richard P. McStravick 69,061 1.42
Joseph Dinolfo 25,868 0.53
Donald H. Heithaus 37,568 0.77
Joseph A. Lanza 18,795 0.39
Eldorus Maynard 11,000 0.23
Arthur C. Phillips(4) 28,468 0.59
James Staudt 15,868 0.33
Anthony J. Fabiano 32,000 0.66
All officers and directors
as a group (9 persons) 282,296 5.82%
------------------------------------
<FN>
(1) The Company's executive officers and directors are also executive officers
and directors of the Mutual Holding Company and of Sound Federal Savings
and Loan Association (the "Bank").
(2) Includes 5,268 shares awarded to each outside director other than Mr.
Maynard and 21,000 shares, and 14,000 shares awarded to Messrs. McStravick
and Fabiano, respectively, pursuant to the Sound Federal Savings and Loan
Association Recognition and Retention Plan ("RRP"). Also includes 7,400
shares, 18,400 shares, and 16,000 shares for Messrs. Gioffre, McStravick
and Fabiano, respectively, and 5,600 shares each for Messrs. Heithaus,
Dinolfo, Lanza, Phillips and Staudt subject to option pursuant to the
Company's Stock Option Plan ("SOP").
(3) Calculated as a percent of common shares outstanding (4,767,292) plus stock
options that are exercisable within 60 days.
(4) Mr. Phillips will retire as a director of the Company effective at the
Meeting.
</FN>
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PROPOSAL I--ELECTION OF DIRECTORS
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The Company's Board of Directors is composed of eight members. The
Company's bylaws provide that approximately one-third of the directors are to be
elected annually. Directors of the Company are generally elected to serve for a
three year period or until their respective successors shall have been elected
and shall qualify. The terms of the Board of Directors are classified so that
approximately one-third of the directors are up for election in any one year.
Three directors will be elected at the Meeting. Effective at the Meeting, Arthur
C. Phillips will retire as a director of the Company. The Board of Directors has
nominated to serve as directors Joseph Dinolfo, Eldorus Maynard and Samuel T.
Telerico, each to serve for a three-year term. Messrs. Dinolfo and Maynard are
currently members of the Board of Directors.
The table below sets forth certain information regarding the
composition of the Company's Board of Directors, including the terms of office
of Board members. 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 one
or more nominees) will be voted at the Meeting for the election of the nominees
identified below. If any nominee is unable to serve, the shares represented
2
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 of the nominees might be unable to serve, if elected. Except
as indicated herein, there are no arrangements or understandings between any
nominee and any other person pursuant to which such nominee was selected. The
Board of Directors recommends a vote "FOR" each of the nominees to serve as
directors until their term expires.
Shares of
Common Stock
Beneficially
Director Term Owned on the Percent
Name Age Positions Held Since (1) to Expire Record Date (2) Of Class
NOMINEES
Joseph Dinolfo 67 Director 1985 2004 25,868 *
Eldorus Maynard 66 Director 2000 2004 11,000 *
Samuel T. Telerico 65 N/A 2004 200 *
DIRECTORS CONTINUING IN OFFICE
Bruno J. Gioffre 66 Chairman of the Board 1975 2002 43,668 *
Richard P. McStravick 52 President, Chief 1996 2002 69,061 1.4
Executive Officer
and Director
James Staudt 48 Director 1987 2002 15,868 *
Donald H. Heithaus 66 Director 1978 2003 37,568 *
Joseph A. Lanza 54 Director 1998 2003 18,795 *
<FN>
- ------------------------------------
* Less than 1%.
(1) Reflects initial appointment to the Board of Directors of the Bank's
mutual predecessor.
(2) Includes 5,268 shares awarded to each outside director other than Mr.
Maynard and 21,000 shares and 14,000 shares awarded to Messrs. McStravick,
and Fabiano, respectively, pursuant to the Sound Federal Savings and Loan
Association Recognition and Retention Plan ("RRP"). Also includes 7,400
shares, 18,400 shares, 16,000 shares for Messrs. Gioffre, McStravick, and
Fabiano, respectively, and 5,600 shares each for Messrs. Heithaus,
Dinolfo, Lanza and Staudt subject to option pursuant to the Company's
Stock Option Plan ("SOP").
</FN>
The principal occupation during the past five years of each director of
the Company is set forth below. All directors and executive officers have held
their present positions for all five years unless otherwise stated.
Bruno J. Gioffre is the Chairman of the Board of Directors and has been
so since December 1997. Mr. Gioffre was formerly general counsel to the Bank.
Mr. Gioffre is of counsel to the law firm of Gioffre & Gioffre, Professional
Corporation and is a retired Senior Justice for the Town of Rye, New York.
Richard P. McStravick is President and Chief Executive Officer of the
Bank. Mr. McStravick has been employed by the Bank in various capacities since
1977. Mr. McStravick was appointed to the Board of Directors in 1996.
Joseph Dinolfo is the President of the Dinolfo Wilson Agency, Inc. an
insurance agency.
Donald H. Heithaus is the President of the Happiness Laundry Service,
Inc.
3
Joseph A. Lanza is the President of Lanza Electric, a private
electrical contractor.
Eldorus Maynard is the retired Chairman of the Board and Chief
Executive Officer of Peekskill Financial Corporation ("Peekskill"). Mr. Maynard
was employed by Peekskill since 1958 and became a member of the Company's Board
of Directors in July 2000.
James Staudt is a partner with the law firm of McCullough, Goldberger &
Staudt. Mr. Staudt is also general counsel to the Bank.
Samuel T. Telerico is a principal with Teledan Enterprises
International, an international trade and consulting firm. Mr. Telerico was
previously employed by American Can Company from 1960 until 1990.
Executive Officer Who Is Not A Director
Anthony J. Fabiano has served as Vice President and Chief Financial
Officer since January 1, 1999. He joined the Bank in July 1998. Prior to that,
he was the Chief Financial Officer at another thrift institution. Mr. Fabiano is
the beneficial owner of 32,000 shares of Common Stock.
Ownership Reports by Officers and Directors
The Common Stock is registered pursuant to Section 12(g) of the
Exchange Act. The officers and directors of the Company and beneficial owners of
greater than 10% of the Company's Common Stock ("10% beneficial owners") are
required to file reports on Forms 3, 4, and 5 with the SEC disclosing changes in
beneficial ownership of the Common Stock. SEC rules require disclosure in the
Company's Proxy Statement and Annual Report on Form 10-K of the failure of an
officer, director or 10% beneficial owner of the Company's Common Stock to file
a Form 3, 4 or 5 on a timely basis. All Officers and Directors of the Company
who are required to file Forms 3, 4 and 5 filed these forms on a timely basis.
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MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
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The business of the Company's Board of Directors is conducted through
meetings and activities of the Board and its committees. During the fiscal year
ended March 31, 2001, the Board of Directors of the Company held 12 regular and
special meetings. During the year ended March 31, 2001, no director attended
fewer than 75 percent of the total meetings of the Board of Directors of the
Company or the Bank and committees on which such director served.
The Executive Committee acts as the Compensation Committee which meets
periodically to review the performance of officers and employees and determine
compensation programs and adjustments. It is comprised of Directors Gioffre,
Heithaus, Phillips and Dinolfo. The Executive Committee met three times during
the year ended March 31, 2001.
The Board of Directors serves as the Nominating Committee. During the
year ended March 31, 2001, two meetings of the Nominating Committee were held.
The Audit Committee consists of Directors Heithaus, Phillips and
Staudt. This committee meets on a quarterly basis and as otherwise required to
review audit programs and reports as well as other regulatory compliance issues.
The Audit Committee recommends to the Board of Directors the appointment of
independent auditors for the upcoming fiscal year. The Audit Committee met five
times during the year ended March 31, 2001.
4
Audit Committee Report
The Audit Committee of the Board is responsible for providing
independent, objective oversight of the Company's accounting functions and
internal controls. The Audit Committee is composed of three directors, all of
whom are independent as defined by the National Association of Securities
Dealers' listing standards. The Audit Committee operates under a written charter
approved by the Board of Directors. A copy of the charter is attached to this
Proxy Statement as Appendix A.
Management is responsible for the Company's internal controls and
financial reporting process. The independent accountants are responsible for
performing an independent audit of the Company's consolidated financial
statements in accordance with auditing standards generally accepted in the
United States and to issue a report thereon. The Audit Committee's
responsibility is to monitor and oversee these processes.
In connection with these responsibilities, the Audit Committee met with
management and KPMG LLP, the independent auditing firm for the Company, to
review and discuss the March 31, 2001 consolidated financial statements. The
Audit Committee also discussed with KPMG LLP, the matters required by Statement
on Auditing Standards No. 61 (Communication with Audit Committees). The Audit
Committee also received the written disclosures and the letter from our
independent accountants, KPMG LLP, required by Independent Standards Board
Standard No. 1 (Independence Discussions with Audit Committee). Additionally,
the Audit Committee has discussed with KPMG LLP the issue of its independence
from the Company.
Based upon the Audit Committee's discussions with management and the
independent accountants, and the Audit Committee's review of the representations
of management and the independent accountants, the Audit Committee recommended
that the Board of Directors include the audited consolidated financial
statements in the Company's Annual Report on Form 10-K for the year ended March
31, 2001, to be filed with the Securities and Exchange Commission.
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, except to the extent that the Company specifically
incorporates this information by reference, and shall not otherwise be deemed
filed under such Acts.
This report has been provided by the Audit Committee:
Directors Heithaus, Phillips and Staudt
5
Stock Performance Graph
Set forth below is a stock performance graph comparing the yearly total
return on the Company's Common Stock with (a) the monthly cumulative total
return on stocks included in the Nasdaq Composite Index, and (b) the monthly
cumulative total return on stocks included in the SNL Mutual Holding Company
Thrift Index. The Company first issued its Common Stock effective October 8,
1998. In accordance with the information presented below is for the period
beginning with the closing price of the Company's Common Stock on October 8,
1998, its first trading day and ending on March 31, 2001.
There can be no assurance that the Company's stock performance will
continue in the future with the same or similar trend depicted in the graph. The
Company will not make or endorse any predictions as to future stock performance.
Sound Federal Bancorp
[GRAPHIC OMITTED]
Period Ending
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10/8/98 03/31/99 09/30/99 03/31/00 09/30/00 03/31/01
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|X| Sound Federal Bancorp 100.0 107.35 112.66 104.57 110.88 125.08
o Nasdaq Composite 100.0 174.47 195.60 324.50 259.65 129.89
|X| MHC Thrifts 100.0 123.67 118.20 112.07 134.79 158.71
6
Compensation Committee Interlocks and Insider Participation
The Company does not independently compensate its executive officers,
directors, or employees. The Executive Committee of the Bank retains the
principal responsibility for the compensation of the officers, directors and
employees of the Bank. The Executive Committee consists of Directors Gioffre,
Phillips, Heithaus and Dinolfo. The Executive Committee reviews the benefits
provided to the Bank's officers and employees. During the year ended March 31,
2001 the Executive Committee met three times.
Report of the Compensation Committee
Under rules established by the SEC, the Company is required to provide
certain data and information in regard to the compensation and benefits provided
to the Company's Chief Executive Officer and other executive officers of the
Company. The disclosure requirements for the Chief Executive Officer and other
executive officers include the use of tables and a report explaining the
rationale and considerations that led to fundamental executive compensation
decisions affecting those individuals. In fulfillment of this requirement, the
Executive Committee of the Bank, at the direction of the Board of Directors, has
prepared the following report for inclusion in this proxy statement.
The Board has delegated to the Executive Committee the responsibility
of assuring that the compensation of the Chief Executive Officer and other
executive officers is consistent with the compensation strategy, competitive
practices, the performance of the Bank, and the requirements of appropriate
regulatory agencies. Only non-employee directors serve on the Executive
Committee and participate in executive compensation decision making. Any cash
compensation paid to executive officers is paid by the Bank. The Company does
not currently pay any cash compensation to executive officers.
The primary goal of the Bank and its Executive Committee is to provide
an adequate level of compensation and benefits in order to attract and retain
key executives. The performance of each officer is reviewed annually to
determine his or her contribution to the overall success of the institution.
This report has been provided by the Executive
Committee:
Directors Gioffre, Heithaus, Phillips and Dinolfo
Compensation of Directors
Directors of the Company receive an annual retainer of $500, except for
the Chairman of the Board who receives $1,000. Directors of the Bank receive
$1,500 for each meeting attended, except for the Chairman of the Board who
receives $3,000.
7
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EXECUTIVE COMPENSATION
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The following table sets forth information as to annual and other
compensation for services in all capacities for executive officers who earned
more than $100,000 in salary and bonuses during the fiscal year ended March 31,
2001.
Summary Compensation Table
====================================================================================================================================
Annual Compensation Long-Term
Compensation Awards
Other Restricted
Annual Stock Options/ All Other
Name and Fiscal Salary Bonus Compensation Award(s) SARs Compensation
Principal Position Year ($) ($) ($) (1) ($)(3) (#)(4) Payouts ($) (2)
Richard P. McStravick 2001 155,690 9,000 18,675 -- -- -- 3,718
President and Chief 2000 143,259 8,408 21,900 191,625 46,000 -- 3,718
Executive Officer 1999 131,875 7,949 23,200 -- -- -- 3,718
- ------------------------- ---------- ------------ ---------- ----------------- --------------- ----------- -------- -------------
Anthony J. Fabiano 2001 106,167 7,800 -- -- -- -- --
Vice President and Chief 2000 96,250 5,741 -- 127,750 40,000 -- --
Financial Officer
========================= ========== ============ ========== ================= =============== =========== ======== =============
<FN>
(1) Represents director's fees for service on the Company's and Bank's Board of Directors.
(2) Consists of the use of the Bank's automobile.
(3) Amount reflects dollar value of award of 21,000 shares and 14,000
shares of restricted stock granted to Messrs. McStravick and Fabiano,
respectively. The dollar value per share of such award on the date of
grant was $9.125.
(4) On October 20, 1999, pursuant to the Sound Federal Bancorp 1999 Stock
Option Plan, the Company granted these options to purchase shares of
common stock of the Company at an exercise price of $9.125, the market
value per share on the date of the grant.
</FN>
Benefits
Directors Deferred Fee Plan. The Directors Deferred Fee Plan
("Directors Plan") is a non-qualified deferred compensation plan into which
directors can defer up to 100% of their board fees earned during the calendar
year. All amounts deferred by a director are fully vested at all times. Amounts
credited to a deferred fee account are assumed to be invested, without charge,
at a 6% interest rate. Upon cessation of a director's service with the Bank, the
Bank will pay the director the amounts credited to the director's deferred fee
account. The amounts will be paid in substantially equal annual installments, as
selected by the director. The date of the first installment payment also will be
selected by the director. The Directors' Plan permits each director to determine
whether to invest all or a portion of such Director's account in Common Stock of
the Company. If a director elects to invest all or a portion of his or her
account in Common Stock, the amount so invested will be credited with earnings
and appreciation (or depreciation) equivalent to that which would be earned on
such investment and the amount not invested in Common Stock will continue to
earn interest at a 6% interest rate.
If the director dies before all payments have been made, the remaining
payments will be made to the beneficiary designated by the director in the same
form that payments were made to the director. If a director dies before
receiving any payments, the Bank shall pay the director's account to the
director's beneficiary, commencing within 30 days of the director's death, over
the period initially elected by the director. At the request of the beneficiary,
and with the approval of the Board, the director's benefits may be paid to the
beneficiary in a lump sum. The director may request a hardship distribution of
all or part of his or her benefits if the director suffers an unforeseeable
emergency, defined as a severe financial hardship to the director resulting from
a sudden and unexpected illness or accident of the director or his or her
dependent, loss of the director's property due to casualty,
8
or other similar extraordinary and unforeseeable circumstances arising as a
result of events beyond the director's control.
Executive Agreements. The Bank has employment agreements with Messrs.
McStravick and Fabiano. The agreements with Messrs. McStravick and Fabiano have
a term of three years and may be extended for an additional 12 months on each
anniversary date so that the remaining term shall be 36 months. If the agreement
is not renewed, the agreement will expire 36 months following the anniversary
date. Under the agreements, the base salaries for Messrs. McStravick and Fabiano
are $137,500 and $95,000, respectively. In addition to the base salary, each
agreement provides for, among other things, participation in retirement plans,
stock option plans and other employee and fringe benefits applicable to other
employees. The agreements provide for termination by the Bank for cause at any
time, in which event, the executive would have no right to receive compensation
or other benefits for any period after termination. In the event the Bank
terminates the executive's employment for reasons other than disability or for
cause, or in the event of the executive's termination of employment for good
reason upon (i) failure by the Bank to comply with any material provision of the
agreement, which failure has not been cured within 10 days after a notice of
noncompliance is issued by the executive, (ii) following a change in control (as
defined) at any time during the term of the agreement, or (iii) any purported
termination of the executive's employment which is not pursuant to a valid
notice of termination, the executive would be entitled to severance pay in an
amount equal to three times the average annual compensation (computed on the
basis of the most recent five (5) taxable years) includable in gross income for
federal income tax purposes. Messrs. McStravick and Fabiano would receive an
aggregate of approximately $433,000 and $349,000, respectively, pursuant to
their employment agreements upon a change in control of the Bank, based upon
current levels of compensation. The Bank would also continue, at the Bank's
expense, the executive's life, health, dental and other applicable benefit plan
coverage until the executive attains the age of 70 years, provided, however,
that the Bank's obligation terminates if the executive receives equivalent
medical or dental coverage from a new employer. The executive is entitled to
participate in the Bank's medical, dental and life insurance coverage and
reimbursement plans to the extent that such plans exist, until the executive's
death.
Under the agreement, if the executive becomes disabled or incapacitated
to the extent that the executive is unable to perform his duties, he will be
entitled to 100% of his compensation for the first six months, and 60%
thereafter for the remaining term of the agreement. Any disability payment is
reduced to the extent benefits are received under disability insurance, workers'
compensation or other similar program.
Director Emeritus Plan. The Director Emeritus Plan is a non-qualified
retirement plan. Under the Director Emeritus Plan, any director who attains the
age of 70 years after the completion of 15 years of service as a director
qualifies for director emeritus status. A director who has completed five years
of service as a director qualifies for director emeritus if termination of
service is due to the merger, consolidation, takeover or dissolution of the
Bank. Under the Director Emeritus Plan, a director emeritus is entitled to the
same compensation that the Director received when her or she retired as a
director, without the obligation of attendance at meetings of the Board of
Directors. Compensation is paid to the director emeritus from the date of
attainment of such status until his or her death.
Defined Benefit Pension Plan. The Bank maintains two defined benefit
pension plans, one of which was assumed at the time the Company completed the
acquisition of Peekskill Financial Corporation ("Retirement Plans"). Employees
age 21 or older who have worked at the Bank for a period of one year and have
been credited with 1,000 or more hours of service with the Bank during the year
are eligible to accrue benefits under the Retirement Plans. The Bank contributes
each year, if necessary, an amount to the Retirement Plans to satisfy the
actuarially determined minimum funding requirements in accordance with the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"). For the
year ended March 31, 2001, the Bank made contributions to the Retirement Plans
of approximately $372,000. At March 31, 2001, the total market value of the
assets in the Retirement Plans trust funds was approximately $7.3 million.
In the event of retirement on or after the normal retirement date
(i.e., the first day of the calendar month coincident with or next following the
later of age 65 or the 5th anniversary of participation in the Retirement Plans,
9
or, for a participant prior to January 1, 1992, age 65), the plan is designed to
provide a single life annuity. For a married participant, the normal form of
benefit is an actuarially reduced joint and survivor annuity where, upon the
participant's death, the participant's spouse is entitled to receive a benefit
equal to 50% of that paid during the participant's lifetime. Alternatively, a
participant may elect (with proper spousal consent, if necessary) from various
other options, including a joint and 100% survivor annuity, joint and 66-2/3%
survivor annuity, joint and 50% survivor annuity, years certain option and
social security option. The normal retirement benefit provided is an amount
equal to the difference between 4% of final earnings (as defined in the plan)
and 0.65% of the final average compensation (average earnings during the last
three (3) calendar years of service) up to the Social Security taxable wage
base, multiplied by the participant's years of credited service (up to a maximum
of 15 years). Retirement benefits are also payable upon retirement due to early
and late retirement or death. A reduced benefit is payable upon early retirement
at age 55 and the completion of 5 years of vested service with the Bank. Fifty
percent of the normal retirement benefit will be paid to a surviving spouse if
the participant dies while in active service and has attained age 50 with 10
years of vested service. The preretirement death benefit is reduced by 1.96% for
each year the spouse is more than 10 years younger than the participant. If the
participant has not attained age 50 with 10 years of service, but has completed
5 years of service, the spouse will be eligible for a reduced benefit payable as
a joint and 50% annuity. Upon termination of employment other than as specified
above, a participant who has five years of vested service is eligible to receive
his or her accrued benefit commencing, generally, on the employee's normal
retirement date, or, if elected, on or after reaching age 55.
The following table indicates the annual retirement benefit that would
be payable under the Retirement Plans upon retirement at age 65 in calendar year
2000, expressed in the form of a single life annuity for the final average
salary and benefit service classifications specified below.
Final Average Years of Service and Benefit Payable at Retirement
Compensation 15 20 25 30
$ 50,000 $ 25,125 $ 25,125 $ 25,125 $ 25,125
$ 75,000 $ 37,551 $ 37,551 $ 37,551 $ 37,551
$ 100,000 $ 52,551 $ 52,551 $ 52,551 $ 52,551
$ 125,000 $ 67,551 $ 67,551 $ 67,551 $ 67,551
$ 160,000 and above $ 88,551 $ 88,551 $ 88,551 $ 88,551
As of March 31, 2001, Mr. McStravick and Mr. Fabiano had 23 years and
three years, respectively, of credited service (i.e., benefit service) under the
Retirement Plans.
401(k) Plan. The Bank maintains the Sound Federal Savings and Loan
Association 401(k) Savings Plan in RSI Retirement Trust (the "401(k) 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, provided,
however, that leased employees, employees paid on an hourly or contract basis,
employees covered by a collective bargaining agreement and owner employees (as
defined in the plan) are not eligible to participate. Eligible employees are
entitled to enter the 401(k) Plan on a monthly basis.
Under the 401(k) Plan, participants are permitted to make salary
reduction contributions (in whole percentages) equal to the lesser of (i) from
1% to 10% of compensation or (ii) $10,000 (as indexed annually). For these
purposes, "compensation" includes wages, salary, fees and other amounts received
for personal services prior to reduction for the participant contribution to the
401(k) plan, commissions, compensation based on profits, overtime, bonuses, wage
continuation payments due to illness or disability of a short-term nature,
amounts paid or reimbursed for moving expenses, and the value of any
nonqualified stock option granted to the extent includable in gross income for
the year granted. Compensation does not include contributions made by the Bank
to any other pension, deferred compensation, welfare or other employee benefit
plan, amounts realized from the exercise of a nonqualified stock option or the
sale of a qualified stock option, and other amounts which received special tax
benefits. Compensation
10
does not include compensation in excess of the Code Section 401(a)(17) limits
(i.e., $160,000 in 1998). Prior to January 1, 1999, the Bank matched 50% of the
first 10% of salary that a participant contributes to the 401(k) Plan. The Bank
ceased matching contributions on February 1, 1999. All contributions and
earnings are fully and immediately vested. A participant may withdraw salary
reduction contributions, rollover contributions and matching contributions in
the event the participant suffers a financial hardship. A participant may make a
withdrawal from his accounts for any reason after age 59 1/2.
The 401(k) Plan permits employees to direct the investment of his or
her own accounts into various investment options including an "Employer Stock
Fund." Participants are entitled to direct the trustee as to how to vote his or
her allocable shares of Common Stock in the Employer Stock Fund.
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 participant's death. Payment will be
deferred if the participant had previously elected a later payment date. If the
beneficiary is not the participant's 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.
At March 31, 2001, the total market value of the assets in the 401(k)
Plan was approximately $970,000.
Stock Option Plan. During the year ended March 31, 2000, the Company
adopted, and the Company's stockholders approved, the 1999 Stock Option Plan
(the "Stock Option Plan"). Pursuant to the Stock Option Plan, options to
purchase 94,500 shares were granted to non-employee directors (including two
directors emeriti) at an exercise price of $9.125 per share, the fair market
value of the underlying shares on the date of the award. The term of the options
is ten years from the date of grant, and the shares subject to awards will be
adjusted in the event of any merger, consolidation, reorganization,
recapitalization, stock dividend, stock split, combination or exchange of shares
or other change in the corporate structure of the Company. The awards included
an equal number of reload options ("Reload Options"), limited stock appreciation
rights ("Limited Rights") and dividend equivalent rights ("Dividend Equivalent
Rights"). A Limited Right gives the option holder the right, upon a change in
control of the Company or the Bank, to receive the excess of the market value of
the shares represented by the Limited Rights on the date exercised over the
exercise price. The Limited Rights are subject to the same terms and conditions
as the stock options. Payment upon exercise of Limited Rights will be in cash,
or in the event of a change in control in which pooling accounting treatment is
a condition to the transaction, for shares of stock of the Company, or in the
event of a merger transaction, for shares of the acquiring corporation or its
parent, as applicable. The Dividend Equivalent Rights entitle the option holder
to receive an amount of cash at the time that certain extraordinary dividends
are declared equal to the amount of the extraordinary dividend multiplied by the
number of options that the person holds. For these purposes, an extraordinary
dividend is defined as any dividend where the rate of dividend exceeds the
Bank's weighted average cost of funds on interest-bearing liabilities for the
current and preceding three quarters. The Reload Options entitle the option
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 in. Reload Options may also be granted
to replace option shares retained by the employer for payment of the option
holder's 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 previously owned stock at the time it was
surrendered. 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.
11
Set forth below is certain information concerning options outstanding
to the Named Executive Officers at March 31, 2001. No options were granted to
the Named Executive Officers during fiscal year 2001. No options were exercised
by the Named Executive Officers during fiscal year 2001.
FISCAL YEAR-END OPTION VALUES
=========================================================================================================================
Number of Unexercised Value of Unexercised In-
Options at The-Money Options at
Shares Acquired Value Year-End Year-End (1)
Name Upon Exercise Realized
Exercisable/Unexercisable Exercisable/Unexercisable
(#) ($)
Richard P. McStravick -- $-- 18,400/27,600 $16,100/$24,150
Anthony J. Fabiano -- $-- 16,000/24,000 $14,000/$21,000
=========================== ================= ================= ========================== ==========================
<FN>
____________________________________
(1) Based on a market value of $10.00 per share at March 31, 2001 and an
exercise price of $9.125.
</FN>
Recognition and Retention Plan. During the fiscal year ended March 31,
2000 the Company adopted, and the Company's stockholders approved, the 1999
Recognition and Retention Plan (the "Recognition Plan"). Pursuant to the
Recognition Plan, 5,268 shares of stock were awarded to each non-employee
director and 21,000 and 14,000 shares were awarded to Mr. McStravick and Mr.
Fabiano, respectively.
Employee Stock Ownership Plan and Trust
The Bank established an employee stock ownership plan ("ESOP") for
eligible employees. Employees age 21 or older who have worked at the Bank for a
period of one year and have been credited with 1,000 or more hours of service
during the year are eligible to participate. The ESOP borrowed funds from the
Company and used those funds to purchase 192,125 shares of the Company Common
Stock. The loan is collateralized by the Common Stock purchased by the ESOP. The
Bank will contribute to the ESOP sufficient funds to pay the principal and
interest on the loan over ten years. The loan bears interest at a floating rate
equal to the prime interest rate published in the Wall Street Journal. Shares
purchased by the ESOP are held in a suspense account for allocation among
participants as the loan is repaid.
Shares are released from the suspense account in an amount proportional
to the repayment of the ESOP loan and are allocated among ESOP participants on
the basis of compensation in the year of allocation. Participants in the ESOP
received credit for service prior to the effective date of the ESOP. A
participant vests in 100% of his or her account balance after 5 years of
credited service. A participant who terminates employment for reasons other than
death, retirement, disability or following a change in control prior to five
years of credited service will forfeit the nonvested portion of his or her
benefits under the ESOP. Benefits are payable in the form of Common Stock and
cash upon death, retirement, disability or separation from service.
Alternatively, a participant may request that the benefits be paid entirely in
the form of Common Stock. The Company recognized an expense of $176,000 to the
ESOP in fiscal year 2001 and allocated 19,213 shares of Common Stock to
participants.
In connection with the establishment of the ESOP, the Bank established
a committee of non-employee directors to administer the ESOP and appointed an
independent financial institution to serve as trustee of the ESOP. The ESOP
committee may instruct the trustee regarding investment of funds contributed to
the ESOP. The ESOP trustee, subject to its fiduciary duty, must vote all
allocated shares held in the ESOP in accordance with the instructions of
participating employees provided such action does not violate ERISA standards.
Under the ESOP, nondirected shares, and shares held in the suspense account,
will be voted in a manner calculated to most accurately
12
reflect the instructions it has received from participants regarding the
allocated stock so long as such vote is in accordance with the provisions of
ERISA.
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TRANSACTIONS WITH CERTAIN RELATED PERSONS
- --------------------------------------------------------------------------------
Transactions With Certain Related Persons
The Bank offers to directors, officers, and employees loans which are
made by the Bank to such persons in the ordinary course of business on
substantially the same terms (other than interest rate), including collateral,
as those prevailing at the time for comparable transactions with other persons,
and which do not involve more than the normal risk of collectibility or present
other unfavorable features. All such loans were performing in accordance with
their terms as of the date of this proxy statement. 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. The
interest rate on loans to directors and officers is the same as that offered to
the Bank's other employees.
Loans made to directors and named executives of the Company amounted to
$1.1 million at May 31, 2001 with the largest amount of indebtedness during the
past fiscal year amounting to $1.3 million.
Bruno J. Gioffre, in addition to his duties as Chairman of the Board of
the Company, is counsel to the law firm of Gioffre & Gioffre, Professional
Corporation which represents the Bank in mortgage loan transactions. Prior to
January 1, 1999, Mr. Gioffre also acted as general counsel to the Bank. For the
year ended March 31, 2001, the Bank paid Gioffre & Gioffre, Professional
Corporation fees of $119,000. The terms and conditions of these fees and
services are substantially the same as those for similar transactions with other
parties.
James Staudt, in addition to his duties as a Director of the Company,
is a partner in the law firm of McCullough, Goldberger & Staudt which also
represents the Bank in mortgage loan transactions. Effective January 1, 1999,
Mr. Staudt is also general counsel to the Company. For the year ended March 31,
2001, the Bank paid McCullough, Goldberger & Staudt fees of $29,000 and paid Mr.
Staudt legal fees of $25,000 for his services as general counsel.
- --------------------------------------------------------------------------------
PROPOSAL II--RATIFICATION OF APPOINTMENT OF AUDITORS
- --------------------------------------------------------------------------------
The Board of Directors of the Company has approved the engagement of
KPMG LLP to be the Company's auditors for the 2002 fiscal year, subject to the
ratification of the engagement by the Company's stockholders. At the Meeting,
stockholders will consider and vote on the ratification of the engagement of
KPMG LLP for the Company's fiscal year ending March 31, 2002. A representative
of KPMG LLP is expected to attend the Meeting to respond to appropriate
questions and to make a statement, if deemed appropriate.
Set forth below is certain information concerning aggregate fees billed
for professional services rendered by KPMG LLP during the year ended March 31,
2001:
Audit Fees............... $97,500
Tax Services............. $25,500
All Other Fees........... $33,300
KPMG LLP was not paid fees by the Company relating to financial
information systems design and implementation. All other fees represent fees
incurred in connection with the acquisition of Peekskill.
13
In order to ratify the selection of KPMG LLP as the auditors for the
2002 fiscal year, the proposal must receive at least a majority of the votes
cast, either in person or by proxy, in favor of such ratification. The Board of
Directors recommends a vote "FOR" the ratification of KPMG LLP as auditors for
the 2002 fiscal year.
- --------------------------------------------------------------------------------
STOCKHOLDER PROPOSALS
- --------------------------------------------------------------------------------
In order to be eligible for inclusion in the Company's proxy materials
for next year's Annual Meeting of Stockholders, any stockholder proposal to take
action at such meeting must be received at the Company's executive office, 300
Mamaroneck Avenue, Mamaroneck, New York 10543, no later than March 12, 2002. Any
such proposals shall be subject to the requirements of the proxy rules adopted
under the Exchange Act.
The Bylaws of the Company provide an advance notice procedure for
certain business, or nominations to the Board of Directors, to be brought before
an annual meeting. In order for a stockholder to properly bring business before
an annual meeting, or to propose a nominee to the Board, the stockholder must
give written notice to the Secretary of the Company at least five (5) days
before the date fixed for such meeting. The notice must include the
stockholder's name, record address, and number of shares owned by the
stockholder, describe briefly the proposed business, the reasons for bringing
the business before the annual meeting, and any material interest of the
stockholder in the proposed business. In the case of nominations to the Board,
certain information regarding the nominee must be provided. Nothing in this
paragraph shall be deemed to require the Company to include in its proxy
statement and proxy relating to an annual meeting any stockholder proposal which
does not meet all of the requirements for inclusion established by the SEC in
effect at the time such proposal is received.
- --------------------------------------------------------------------------------
MISCELLANEOUS
- --------------------------------------------------------------------------------
The Board of Directors is not aware of any business to come before the
Meeting other than the matters described above in the Proxy Statement. However,
if any matters should properly come before the Meeting, it is intended that
holders of the proxies will act as directed by a majority of the Board of
Directors, except for matters related to the conduct of the Meeting, as to which
they shall act in accordance with their best judgment.
The cost of solicitation of proxies will be borne by the Company. The
Company will reimburse brokerage firms and other custodians, nominees and
fiduciaries for reasonable expenses incurred by them in sending proxy materials
to the beneficial owners of Common Stock. In addition to solicitations by mail,
directors, officers and regular employees of the Bank may solicit proxies
personally or by telegraph or telephone without additional compensation.
A copy of the Company's Annual Report on Form 10-K for the fiscal year
ended March 31, 2001 will be furnished without charge to stockholders as of the
record date upon written request to the Corporate Secretary, Sound Federal
Bancorp 300 Mamaroneck Avenue, Mamaroneck, New York 10543.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Anthony J. Fabiano
Anthony J. Fabiano
Corporate Secretary
Mamaroneck, New York
July 10, 2001
14
EXHIBIT A
Sound Federal Bancorp
Audit Committee Charter
The Audit Committee (the "Committee") of Sound Federal Bancorp (the
"Company") and its Chairman are appointed by the Board of Directors annually,
and currently consists of three members. Each member of the Committee shall be
'independent' and possess any other qualification required by applicable law or
regulation.
The Committee is designated by the Board to oversee the audit of the
Company and to perform such specific audit functions as may be assigned by the
Board. The Committee shall serve as the Audit Committee of all subsidiary
financial institutions of the Company and shall perform all the duties of such
Audit Committees as determined by the Board.
The Committee is responsible for recommending to the Board annually the
selection, retention, or termination of a firm to serve as the Company's and any
subsidiary's independent public accountants. The Committee is responsible for
the recommendation to the Board of Directors of an individual to serve as Senior
Internal Auditor for the Company. Additionally, the Committee is responsible for
the general oversight of all external and internal audit activities.
The Committee is responsible for the oversight of the audit and
compliance functions, which deal with all relevant laws, regulation policies and
procedures that the company is required to follow. Internal Audit monitors the
adequacy of the system of internal controls. The compliance function monitors
compliance with legal and regulatory requirements. It shall also be the
responsibility of the Committee to carefully consider all reports of examination
of the affairs of the Company or any of its subsidiaries, and to carry out such
other duties as the Board may, from time to time, assign.
The Committee shall review with Management and the Company's
Independent Public Accountants all audit reports, prepared by the accountants,
pursuant to OTS or SEC requirements.
The Committee is authorized to request the advice of legal counsel to
assist in any legal questions or concerns they may have to fully discharge their
duties.
The Audit Committee realizes the need for its policies and procedures
to remain flexible to best meet the ever- changing conditions of a dynamic
business environment. This will include a re-evaluation of any new rules
affecting audit committee responsibilities that may be issued in the future.
Duties and Responsibilities Statement:
1. Recommend the External Auditing Firm for appointment by the Board.
Review and approve the annual audit scope and fees of the External
Auditing Firm.
2. Ensure the independence of the External Auditing Firm.
3. Discuss with the External Auditor the results of the annual audit
or reviews, including:
o Financial statements and the associated letter regarding
weakness in and recommendations for improving internal
controls.
o The adequacy of the organization's internal control
structure. o Management's cooperation with the External
Auditor. o A determination that the organization's financial
statements meet applicable disclosure requirements in all
material respects.
4. Review with Management and the External Auditor all significant
issues concerning litigation, contingencies, claims, or
assessments and all material accounting issues that require
disclosure in thefinancial statements. This review should include
a discussion of recent FASB or SEC pronouncements that have a
material impact on the organization.
A-1
5. Monitor instances (if any), where Management seeks second
opinions on significant accounting matters.
6. Review the services provided by the internal auditing function,
including:
o Review and approve the company's audit department's policies
and procedures.
o The planned scope for the Internal Audit Program, its
objectives, and the staff required attaining these
objectives.
o The report which details the activities of the Internal
Auditing Department of the preceding period and all
outstanding issues therein.
o The working relationship between the Internal Auditing
Department and External Auditors. o The appointment and
termination of the Senior Internal Auditor (Review and
Approve) o Review the internal control evaluation performed
by the Internal Auditors and management's replies to
identified weaknesses.
7. Review the audit results and management's responses to the audits
or examinations of governmental and regulatory agencies.
8. Direct and supervise an investigation into any matter as deemed
necessary to discharge its duties and responsibilities. In
connection with any such investigation, the Audit Committee shall
have the authority to utilize the internal auditing staff and
legal counsel on retainer, as they deem to be necessary.
9. Minutes of all meetings will be taken and a report of Audit
Committee activities to the Board will be given at regular
intervals.
10. Review the Audit Committee Charter and the audit policies and
procedures annually and recommend
modifications to the Board as needed.
11. Take other actions as deemed necessary to discharge its duties as
set forth herein.
These duties and responsibilities will be re-evaluated to reflect any
new rules affecting audit committee responsibilities that may be issued
in the future.
Membership Requirements:
The Board of Directors is responsible for insuring that members of the
Audit Committee are outside Directors who are independent of the Company's
Management. In determining whether a Director is independent, the following
factors will be considered:
o The Director is or has been an Officer or Employee of the
Company or its affiliates within the previous five years;
o The Director serves or has served as a consultant, advisor,
promoter, underwriter or legal counsel to the Company or its
affiliates;
o The Director is a relative of an Officer or Employee of the
Company or its affiliates; o The Director holds or controls, or
has held or controlled a controlling interest (10%) in the
Company or its affiliates; and
o The Director has material extensions of credit from the Company
or its affiliates.
While none of these factors would automatically disqualify a Director
from serving on the Audit Committee, the guidelines indicate that they should be
considered in determining whether a Director is independent of the Company's
Management. A Director who, within the preceding year, was an Officer or
Employee of the Company or any affiliates, or owned or controlled 10% or more of
voting securities of the Company, will not be considered independent.
A-2
REVOCABLE PROXY
SOUND FEDERAL BANCORP
ANNUAL MEETING OF STOCKHOLDERS
August 9, 2001
The undersigned hereby appoints the full Board of Directors, 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 a Annual Meeting of Stockholders ("Meeting") to be held at the Hyatt
Regency Greenwich, 1800 E. Putnam Avenue, Old Greenwich, Connecticut 06870, at
10:00 a.m., (local time) on August 9, 2001. The official proxy committee is
authorized to cast all votes to which the undersigned is entitled as follows:
VOTE
FOR WITHHELD
--- --------
_ _
1. The election as directors of all |_| |_|
nominees listed below (except as
marked to the contrary below)
Joseph Dinolfo
Eldorus Maynard
Samuel T. Telerico
____________________
INSTRUCTION: To withhold your vote for one or
more nominees, write the name of the nominee(s) on
the lines below.
FOR AGAINST ABSTAIN
--- ------- -------
2. The ratification of the appointment of _ _ _
KPMG LLP as auditors for the fiscal year |_| |_| |_|
ending March 31, 2002.
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 EACH OF THE PROPOSITIONS STATED ABOVE. IF ANY OTHER
BUSINESS IS PRESENTED AT SUCH MEETING, THIS PROXY WILL BE VOTED BY THE
ABOVE-NAMED PROXIES AT THE DIRECTION OF A MAJORITY OF THE BOARD OF DIRECTORS. AT
THE PRESENT TIME, THE BOARD OF DIRECTORS KNOWS OF NO OTHER BUSINESS TO BE
- --------------------------------------------------------------------------------
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
Should the undersigned be present and elect to vote at the Meeting or
at any adjournment thereof and after notification to the Secretary of the
Company at the Meeting of the stockholder's decision to terminate this proxy,
then the power of said attorneys and proxies shall be deemed terminated and of
no further force or 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 Stockholders, or by the filing of a later proxy statement
prior to a vote being taken on a particular proposal at the Meeting.
The undersigned acknowledges receipt from the Company prior to the
execution of this proxy of a Notice of the Meeting and a proxy statement dated
July 10, 2001.
_
Dated: _______________, 2001 |_|
Check Box if You Plan
to Attend Meeting
_______________________________ _________________________________
PRINT NAME OF STOCKHOLDER PRINT NAME OF STOCKHOLDER
_______________________________ _________________________________
SIGNATURE OF STOCKHOLDER SIGNATURE OF STOCKHOLDER
Please sign exactly as your name appears 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 complete and date this proxy and return it promptly
in the enclosed postage-prepaid envelope.
- --------------------------------------------------------------------------------