SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the registrant |X|
Filed by a party other than the registrant |_|
Check the appropriate box: |_| Confidential, For Use of
|_| Preliminary proxy statement the Commission Only (as
|X| Definitive proxy statement permitted by Rule 14a-6(e)(2))
|_| Definitive additional materials
|_| Soliciting material pursuant to Rule 14a-12
SKIBO FINANCIAL CORP.
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(Name of Registrant as Specified in Its Charter)
SKIBO FINANCIAL CORP.
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(Name of Person(s) Filing 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)(l) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number 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 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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|_| Fee paid previously with preliminary materials:
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|_| 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:
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(2) Form, schedule or registration statement no.:
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(3) Filing party: SKIBO FINANCIAL CORP.
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(4) Date filed:
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SKIBO FINANCIAL CORP.
242 East Main Street
Carnegie, Pennsylvania 15106
June 15, 2001
To Our Stockholders:
We are pleased to invite you to attend the Annual Meeting of
Stockholders of Skibo Financial Corp., the holding company of First Carnegie
Deposit, to be held at Southpointe Golf Club, 360 Southpointe Boulevard,
Canonsburg, Pennsylvania, on Thursday, July 19, 2001, at 9:00 a.m.
The attached Notice of Annual Meeting and Proxy Statement describe the
formal business to be transacted at the Annual Meeting. Directors and officers
of Skibo Financial Corp., as well as a representative of our independent
auditors, Stokes & Hinds, LLC, are expected to be present to respond to any
questions that stockholders may have.
Additional information concerning these items is included in the
accompanying Notice of Annual Meeting and Proxy Statement. The Board of
Directors of Skibo Financial Corp. has determined that the matters to be
considered at the Annual Meeting are in the best interest of Skibo Financial
Corp. 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.
Your vote as a stockholder is important, regardless of the number of
shares you own. 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 meeting. This will not prevent you from voting in person, but
will assure that your vote is counted if you are unable to attend the Meeting.
On behalf of the Board of Directors and all of the employees of Skibo
Financial Corp. and First Carnegie Deposit, I wish to thank you for your past
and continued support.
Sincerely,
/s/Walter G. Kelly
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Walter G. Kelly
President
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SKIBO FINANCIAL CORP.
242 EAST MAIN STREET
CARNEGIE, PENNSYLVANIA 15106
(412) 276-2424
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JULY 19, 2001
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NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the
"Meeting") of Skibo Financial Corp. (the "Company") will be held at Southpointe
Golf Club, 360 Southpointe Boulevard, Canonsburg, Pennsylvania, on Thursday,
July 19, 2001, at 9:00 a.m. The Meeting is for the purpose of considering and
acting upon the following:
1. The election of two directors of the Company for terms of three
years each;
2. The ratification of the appointment of Stokes & Hinds, LLC as
independent auditors for the fiscal year ending March 31, 2002;
and
3. The transaction of such other business as may properly come
before the Meeting or any adjournments thereof.
Any action may be taken on any one of the foregoing proposals at the
Meeting on the date specified above, or on any date or dates to which, by
original or later adjournment, the Meeting may be adjourned. The Board of
Directors is not aware of any other business to come before the Meeting.
Pursuant to the Bylaws, the Board of Directors has fixed the close of business
on June 8, 2001, as the record date (the "Record Date") for determination of the
stockholders entitled to vote at the Meeting and any adjournments thereof.
You are requested to complete and sign the enclosed form of Proxy,
which is solicited by the Board of Directors, and to mail it promptly in the
enclosed envelope. The proxy will not be used if you attend and vote at the
Meeting in person.
EACH STOCKHOLDER, WHETHER HE OR SHE PLANS TO ATTEND THE MEETING, IS
REQUESTED TO SIGN, DATE AND RETURN THE ENCLOSED PROXY WITHOUT DELAY IN THE
ENCLOSED POSTAGE-PAID ENVELOPE. ANY PROXY GIVEN BY THE STOCKHOLDER 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 MEETING
MAY REVOKE HIS OR HER PROXY AND VOTE PERSONALLY ON EACH MATTER BROUGHT BEFORE
THE 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
TO VOTE PERSONALLY AT THE MEETING.
BY ORDER OF THE BOARD OF DIRECTORS
/s/Alexander J. Senules
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ALEXANDER J. SENULES
SECRETARY
Carnegie, Pennsylvania
June 15, 2001
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IMPORTANT: PLEASE FILL IN, DATE, SIGN AND RETURN PROMPTLY THE ENCLOSED PROXY. AN
ADDRESSED ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE. NO POSTAGE IS REQUIRED IF
MAILED IN THE UNITED STATES.
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SKIBO FINANCIAL CORP.
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PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
JULY 19, 2001
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GENERAL
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This Proxy Statement is furnished in connection with the solicitation
of proxies by the Board of Directors of the Company (the "Board") to be used at
the Annual Meeting of Stockholders of the Company, which will be held at
Southpointe Golf Club, 360 Southpointe Boulevard, Canonsburg, Pennsylvania, on
Thursday, July 19, 2001, at 9:00 a.m. The accompanying Notice of Meeting and
this Proxy Statement are being first mailed to stockholders on or about June 15,
2001. The Company is a majority-owned subsidiary of Skibo Bancshares, M.H.C.
(the "Mutual Holding Company" or "MHC"), which was formed in connection with the
mutual holding company reorganization of First Carnegie Deposit (the "Bank") on
April 4, 1997 and subsequently acquired a majority interest in the Company when
the Company was formed pursuant to the two-tier holding company reorganization
on October 29, 1998. Because the MHC owns 60% of the Company Common Stock, the
votes cast by the MHC will be determinative of the outcome of Proposal I
(election of directors) and Proposal II (ratification of auditors).
At the Meeting, stockholders will consider and vote upon (i) the
election of two directors, and (ii) the ratification of the Company's
independent auditor.
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REVOCABILITY OF PROXIES
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Stockholders who execute proxies retain the right to revoke them at any
time. Unless so revoked, the shares represented by such proxies will be voted at
the Meeting and all adjournments thereof. Proxies may be revoked by written
notice delivered in person or mailed to the Secretary of the Company at the
address of the Company shown above or by the filing of a later-dated proxy prior
to a vote being taken on a particular proposal at the Meeting. A proxy will not
be voted if a stockholder attends the Meeting and votes in person. Proxies
solicited by the Board of Directors of the Company will be voted in accordance
with the directions given therein. Where no instructions are indicated, proxies
will be voted for the nominees for director set forth below, and in favor of
each of the other proposals set forth in this Proxy Statement for consideration
at the Meeting or any adjournment thereof.
The proxy confers discretionary authority on the persons named therein
to vote with respect to the election of any person as a director where the
nominee is unable to serve, or for good cause will not serve, and matters
incident to the conduct of the meeting, including matters of which the Company
receives notice after July 14, 2001.
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VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
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Stockholders of record as of the close of business on June 8, 2001, are
entitled to one vote for each share then held ("Record Date"). As of June 8,
2001, the Company had 3,150,333 shares of Company Common Stock outstanding.
As provided in the Charter of the Company, for a period of five years
from the effective date of the MHC Reorganization, no person, except for the
Mutual Holding Company, is permitted to beneficially own in excess of 10% of the
outstanding shares of Company Common Stock (the "Limit"), and any shares of
1
Company Common Stock acquired in violation of this Limit, are not entitled to
any vote. A person or entity is deemed to beneficially own shares owned by an
affiliate of, as well as persons acting in concert with, such person or entity.
The presence, in person or by proxy, of the holders of at least a
majority of the outstanding shares of Company Common Stock entitled to vote
(after subtracting any shares held in excess of the Limit) is necessary to
constitute a quorum at the Meeting.
As to the election of directors (Proposal I), the proxy card being
provided by the Board enables a stockholder to vote "FOR" the election of the
nominees proposed by the Board, or to "WITHHOLD" authority to vote for one or
more of the nominees being proposed. Under federal law and the Company's Federal
Stock Charter ("Charter") and Bylaws, directors are elected by a plurality of
the votes cast, without regard to either (i) Broker Non-votes or (ii) proxies as
to which authority to vote for one or more of the nominees being proposed is
withheld.
As to the ratification of auditors (Proposal II) and all other matters
that may properly come before the Meeting, by checking the appropriate box, a
stockholder may; (i) vote "FOR" the item, (ii) vote "AGAINST" the item, or (iii)
"ABSTAIN" with regard to the item. Under the Company's Charter and Bylaws,
unless otherwise required by law, Proposal II and all other matters shall be
determined by a majority of the votes cast affirmatively or negatively without
regard to (a) Broker Non-votes, or (b) proxies marked "ABSTAIN" as to that
matter.
Persons and groups owning in excess of five percent of the Company
Common Stock are required to file certain reports with the Securities and
Exchange Commission (the "SEC") regarding such ownership pursuant to the
Securities Exchange Act of 1934, as amended ("Exchange Act"). The following
table sets forth, as of the Record Date, the shares of Company Common Stock
beneficially owned by each person who was the beneficial owner of more than five
percent of the outstanding shares of Company Common Stock, based solely upon
information supplied to the Company by the Company's stock transfer agent and
the filings required pursuant to the Exchange Act.
Name and Address Percent of Shares of
of Beneficial Owner Number of Shares Common Stock Outstanding
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Skibo Bancshares, M.H.C.
242 East Main Street 1,897,500 60.2%
Carnegie, Pennsylvania 15106
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SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
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The Company Common Stock is registered pursuant to Section 12(g) of the
Exchange Act. The executive officers and directors of the Company and beneficial
owners of greater than 10% of Company 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 Company Common Stock. The Company's Proxy Statement
and Annual Report on Form 10-KSB must disclose the failure of an executive
officer, director or 10% beneficial owner of the Company's Common Stock to file
a Form 3, 4, or 5 on a timely basis. Based on the Company's review of such
ownership reports, none of the executive officers and/or directors of the
Company failed to file such ownership reports on a timely basis during the
fiscal year ended March 31, 2001.
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PROPOSAL I - ELECTION OF DIRECTORS
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The Company currently has five directors serving on its Board. The
Company's Bylaws provide that Directors are to be elected for terms of three
years, approximately one-third of whom are to be elected annually. Two directors
will be elected at the Meeting, each to serve for a three-year period.
2
Layne W. Craig and John T. Mendenhall, Jr., who are current members of
the Board, have been nominated by the Board of Directors to serve as directors,
each for a term of three years. It is intended that the persons named in the
proxies solicited by the Board will vote for the election of the named nominees.
The nominees are elected as directors if they receive more votes than any other
candidate.
If any nominee is unable to serve, the shares represented by all valid
proxies will be voted for the election of such substitute as the Board of
Directors may recommend. At this time, the Board knows of no reason why any
nominee might be unavailable to serve.
The following table sets forth, for each nominee and each director
continuing in office, his name, age, the year he first became a director, the
year in which his current term will expire and the number of shares and
percentage of Company Common Stock beneficially owned as of the Record Date. The
table also sets forth the number of shares and percentage of Company Common
Stock beneficially owned by all directors and executive officers as a group as
of the Record Date.
SHARES OF
YEAR FIRST CURRENT COMMON STOCK PERCENT
ELECTED OR TERM BENEFICIALLY OF CLASS
NAME AGE APPOINTED EXPIRES OWNED %
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BOARD NOMINEE FOR TERMS TO EXPIRE IN 2004
Layne W. Craig 87 1998 2001 22,714 (1)(2) *
John T. Mendenhall, Jr. 52 1998 2001 24,675 (1)(2) *
DIRECTORS CONTINUING IN OFFICE
Walter G. Kelly 55 1998 2002 93,744 (3) 3.0
Alexander J. Senules 68 1998 2002 53,664 (1)(2) 1.7
John C. Burne 74 1998 2003 35,850 (1)(2) 1.1
All Executive Officers
and Directors as a
Group (6 persons) -- -- -- 297,590 (4) 9.4
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* Less than 1%.
(1) Includes options to purchase 10,867 shares of Company Common Stock that may
be exercised within 60 days of the Record Date under the 1998 Stock Option
plan (the "Stock Option Plan"). Includes 870 shares of Company Common Stock
awarded under the 1998 restricted stock plan (the "RSP").
(2) Excludes 124,200 shares of Company Common Stock held under the employee
stock ownership plan (the "ESOP") for which such individual serves as
either a member of the ESOP Committee or as an ESOP Trustee. Such
individual disclaims beneficial ownership with regard to shares held in a
fiduciary capacity. The ESOP purchased such shares for the exclusive
benefit of ESOP participants with funds borrowed from an unrelated third
party. The loan was subsequently refinanced by the Company. These shares
are held in a suspense account and are allocated among ESOP participants
annually on the basis of compensation as the ESOP debt is repaid. The Board
of Directors has appointed Messrs. Craig, Mendenhall, Senules and Burne to
serve on the ESOP Committee and to serve as ESOP Trustees. The ESOP
Committee or the Board instructs the ESOP Trustee regarding investment of
ESOP plan assets. The ESOP Trustees must vote all shares allocated to
participant accounts under the ESOP as directed by ESOP participants.
Unallocated shares and shares for which no timely voting direction is
received will be voted by the ESOP Trustees as directed by the Board or the
ESOP Committee. As of the Record Date, 105,965 shares had been allocated
under the ESOP to participant accounts.
3
(3) Includes 38,812 shares of Company Common Stock that may be acquired through
options that are exercisable within 60 days of the Record Date and 22,321
shares of Company Common Stock allocated to the account of Mr. Kelly under
the ESOP
(4) Includes options to purchase 102,740 shares of Company Common Stock that
may be exercised within 60 days of the Record Date to purchase shares of
Company Common Stock under the Stock Option Plan. Includes 3,480 shares of
Company Common Stock awarded under the RSP. Excludes 18,235 shares held by
the ESOP which have not been allocated to participating employees over
which certain directors, as trustees to the ESOP, exercise shared voting
and investment power. Such directors disclaim beneficial ownership with
regard to such shares held by the ESOP. See footnote 2. Includes 35,222
shares of Company Common Stock held by the ESOP and allocated to executive
officers (2 persons) of the Company.
The principal occupation during the past five years of each director
and nominee of the Company is set forth below. All directors and nominees have
held their present positions for five years unless otherwise stated.
John C. Burne has served as a director and Chairman of the Board of the
Company since 1998, as a director of the Bank since 1971, as Chairman of the
Board of the Bank since 1993, and as Vice President of the Bank from 1992 to
1993. Mr. Burne is a retired general insurance agent and currently is the sole
proprietor of a log home dealership in Canonsburg, Pennsylvania. Mr. Burne
serves as a member, elder, choir member, and president of the Carnegie
Presbyterian Church, a member and past president of the Carnegie Rotary Club and
the Allegheny Chapter of the CPCU Society, a member of the VFW, a member and
past presiding officer of several masonic lodges, the former president of the
Board of Trustees of Woodville State Hospital, and a current director and vice
president of the Pittsburgh Phoenix Youth Orchestra.
Layne W. Craig has served as a director of the Company since 1998 and
as a director of the Bank since 1964. Mr. Craig is a former plumbing contractor
and former owner of Craig Plumbing and Heating, Carnegie, Pennsylvania.
Walter G. Kelly has served as a director, President and Chief Executive
Officer of the Company since 1998, as a director of the Bank since 1983, as
President of the Bank since 1993, as Chief Executive Officer of the Bank since
1981, and has been employed by the Bank since 1976. Mr. Kelly also serves as the
Chairman of the Chartiers Valley Industrial Development Authority.
John T. Mendenhall, Jr. has served as a director of the Company since
1998 and as a director of the Bank since 1994. Dr. Mendenhall has practiced
general dentistry in Carnegie, Pennsylvania since 1978. Dr. Mendenhall currently
serves as a board member of the Carnegie Rotary Club and the Chartiers Area Boys
& Girls Club.
Alexander J. Senules has served as a director, Vice President and
Secretary of the Company since 1998, as a director of the Bank since 1976, as
Secretary of the Bank since 1993, and as Vice President of the Bank since 1994.
Mr. Senules is not a salaried employee of the Bank. Mr. Senules is the president
and the majority stockholder of Blasting Products, Inc., an equipment rental and
bag manufacturer located in Republic, Pennsylvania, president of Senex
Explosives, Inc., a drilling and blasting company located in Cuddy,
Pennsylvania, and secretary and treasurer of Florex Explosives, Inc., an
explosives manufacturer and drilling and blasting contractor located in Naples,
Florida. Mr. Senules is also a major sponsor of the Boy Scouts of America, the
Civic Light Opera, the Make a Wish Foundation, the Pittsburgh Ballet Theatre,
and the Carnegie Museum.
Executive Officer Not Serving As A Director
Carol A. Gilbert, age 56, has served as Chief Financial and Operating
Officer and Treasurer of the Company since 1998, as Treasurer of the Bank since
1978, and has been employed by the Bank since 1970. Ms. Gilbert is currently the
Chief Financial and Operating Officer of the Bank. Ms. Gilbert is a member of
the board of directors of the Carnegie Area Revitalization Effort, a nonprofit
organization.
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MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
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During the fiscal year ended March 31, 2001, the Board of Directors of
the Company held four regular meetings and two special meetings, and the Board
of Directors of the Bank held twelve regular meetings and no special meetings.
During the fiscal year ended March 31, 2001, no director attended fewer than 75%
of the total meetings of the Board of Directors of the Company and the Bank and
committees on which such director served.
The Pension and Salary Committee of the Bank, a standing committee,
meets semi-annually to review the performance of employees and to determine
compensation to be recommended to the Board. The Pension and Salary Committee is
comprised of Directors Senules (chairman), Burne, and Craig. The Pension and
Salary Committee of the Bank met twice during the fiscal year ended March 31,
2001. The Company does not have a similar committee.
The Audit Committee, a standing committee of the Company, consists of
Directors Senules (chairman), Burne, and Mendenhall. The Audit Committee reviews
the adequacy of internal controls and management reports and meets with the
accountants to discuss the scope and to review the results of the annual audit.
This committee met four times during the fiscal year ended March 31, 2001.
The Nominating Committee of the Company is a standing committee which
consists of all members of the Board of Directors. The Nominating Committee met
once during the fiscal year ended March 31, 2001.
Pursuant to Article II, Section 14 of the Company's Bylaws,
nominations, other than those made by or at the direction of the Board of
Directors, shall be made pursuant to timely notice in writing to the Secretary
of the Company. To be timely, a stockholder's notice shall be delivered to the
Secretary of the Company not less than five days prior to the annual meeting of
the stockholders of the Company.
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COMPENSATION OF DIRECTORS
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General. Directors of the Company receive incentive compensation based
upon their unexercised stock option shares previously awarded under the
Company's Stock Option Plan. The Company paid a total of $6,500 of centive
compensation to non-employee directors during the fiscal year ended March 31,
2001. Non-employee directors of the Bank currently receive annual compensation
of $21,600 with $500 being deducted for every Board meeting missed. The Chairman
and Vice Chairman of the Bank receive additional fees of $500 and $300 a month,
respectively. Directors also receive cash dividends on unvested RSP shares.
Directors do not receive additional fees for attendance at committee meetings.
The Bank paid a total of $93,000 in fees to non-employee directors for their
service on the Board of Directors and its committees and $2,900 cash dividends
on unvested RSP shares. See also "Executive Compensation" for incentive
compensation paid to employee directors and "Compensation of Directors - Skibo
Financial Corp. Compensation Plan" for incentive compensation paid to all
directors, officers and employees.
Directors Retirement Plan. Beginning in 1994, the Bank sponsored a
Directors Retirement Plan ("DRP") to provide retirement benefits to non-employee
directors of the Bank. Any director who served as a non-employee director
participated in the DRP and payments under the DRP would commence once the
director ceased being a director of the Bank. The DRP provided a retirement
benefit based on the number of years of service to the Bank. Generally,
non-employee directors receive 2% of the final average Board compensation (as
defined in the DRP) for each year of service prior to age 80 up to a maximum
annual benefit equal to 60% of the director's final average Board compensation.
In December 1999, the plan was amended to only consider calendar years 1999 and
earlier in the computation of final average compensation. In November 2000, the
Board of Directors voted to terminate the DRP. An actuarial firm calculated the
lump sum payments due the directors and the cash surrender value of the life
insurance policies held on the lives of the directors. After reviewing the
information, it was determined, because of his age and the cost to the Bank, it
was not beneficial to the Bank to cancel Mr. Craig's DRP. Mr. Craig, because of
his health when
5
the DRP was established, has maintained a separate DRP contract from the other
directors. Mr. Craig's DRP provides that the Bank will pay the benefits in a
single life, joint and survivor, or term certain annuity commencing upon his
retirement or in the event of a change in control of the Company or the Bank. In
December 2000, the Bank instructed the insurance company to transfer the
policies (the value equivalent to the lump sum payments calculated by the
actuary) on the three remaining directors. The cash surrender value of the
policies was $541,568, of which transfers totaling $335,282 were made to the
directors, and the remainder of $206,286 was returned to the Bank. See also
"Executive Compensation - Supplemental Executive Retirement Plan."
Stock Awards. On April 16, 1998, the Bank's stockholders approved the
Stock Option Plan and the RSP. On October 29, 1998, upon formation of the
mid-tier stock holding company, the Stock Option Plan became known as the Skibo
Financial Corp. 1998 Stock Option Plan. Pursuant to the terms of the Stock
Option Plan, each non-employee director received, on the date of stockholder
approval, options to purchase 10,867 shares of Company Common Stock, and under
the RSP the same non-employee directors received 4,347 shares of restricted
Company Common Stock. The options granted to these directors are exercisable at
a rate of 50% on the date of grant and 50% one year thereafter. Restricted stock
granted to these directors vest 20% on the date of grant and 20% annually,
thereafter. See also "Executive Compensation" for awards to employee directors.
Skibo Financial Corp. Compensation Plan. On September 14, 2000, the
Company adopted a Compensation Plan ("Plan") for directors, officers and
employees of the Company or the Bank. The level of compensation is determined
based upon the number of unexercised stock options previously awarded under the
Company's Stock Option Plan held by such individuals, and the cash dividends
paid on the Company Common Stock from time to time. It is anticipated that such
compensation payable to such plan participants shall be paid each time that a
cash dividend is paid on the Company Common Stock, however, the Board of
Directors reserves the right to amend, modify, suspend or cancel the Plan at any
time without prior notice to any participant. The Plan provides that upon the
payment of a cash dividend on the Company Common Stock, the holder of such
options shall receive payment of cash in an amount equivalent to the cash
dividend payable as if such stock options had been exercised and such Company
Common Stock held as of the dividend record date. Such payment of compensation
shall expire upon the expiration or exercise of such underlying options. During
the year ended March 31, 2001, the Company's total expense for this Plan to all
directors, officers and employees was $23,287. See also "Compensation of
Directors - General and "Executive Compensation."
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EXECUTIVE COMPENSATION
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Summary Compensation Table. The following table sets forth certain
information as to the total remuneration received by the chief executive
officer. No other executive officer received cash compensation in excess of
$100,000 during the fiscal years ended March 31, 2001, 2000 and 1999.
Long Term
Annual Compensation Compensation Awards
----------------------------------------- -------------------
Securities
Fiscal Restricted Underlying
Name and Year Other Annual Stock Options/ All Other
Principal Position Ending Salary Bonus Compensation(1) Awards SARs(#) Compensation
- ------------------- ------ ------ ----- --------------- ---------- ------- ------------
Walter G. Kelly 2001 $ 154,262 $ 33,000 $6,210 -- -- $52,296(4)
President and CEO 2000 $ 152,913 $ 33,000 $1,941 -- -- $29,288(5)
1999 $ 149,913 $ 30,000 $2,328 $192,510(2) 38,812(3) $45,040(6)
- ------------------------
(1) Does not include the value of certain benefits which do not exceed the
lesser of $50,000 or 10% of Mr. Kelly's total salary and bonus. For fiscal
2001, includes $388 in cash dividends on unvested restricted shares and
$5,822 cash dividends on unexercised stock shares. For fiscal 2000,
includes $1,941 in cash dividends on unvested restricted shares. For fiscal
1999, includes $2,328 in cash dividends on unvested restricted shares.
6
(2) Represents awards of 15,525 shares of Common Stock under the RSP at a value
of $12.40 per share. Such stock awards become non-forfeitable at the rate
of one-third per year commencing on April 16, 1998. As of March 31, 2001,
all stock awards have been vested.
(3) Represents award of options exercisable at the rate of 50% per year
commencing on April 16, 1998. The exercise price equals the market value of
common stock on the date of repricing of $6.83. See "Stock Compensation
Programs."
(4) Consists of 6,537 shares of Common Stock allocated under the ESOP during
fiscal 2000 with a market value of $8.00 per share at March 31, 2001. Does
not include accruals made pursuant to the SERP. See "Supplemental Executive
Retirement Plan."
(5) Consists of 5,654 shares of Common Stock allocated under the ESOP during
fiscal 2000 with a market value of $5.18 per share at March 31, 2000. Does
not include accruals made pursuant to the SERP. See "Supplemental Executive
Retirement Plan."
(6) Consists of 5,630 shares of Common Stock allocated under the ESOP during
fiscal 1999 with a market value of $8.00 per share at March 31, 1999. Does
not include accruals made pursuant to the SERP. See "Supplemental Executive
Retirement Plan."
Employment Agreements. The Bank has entered into an employment
agreement ("agreement") with Walter G. Kelly, its President and Chief Executive
Officer. The agreement is for a term of three years with a minimum base salary
of $144,685. It may be extended quarter by quarter by the Board of Directors
upon a determination of satisfactory performance within the Board's sole
discretion. The agreement provides that Mr. Kelly may be terminated by the Bank
for "just cause" as defined in the agreement. If the Bank terminates him without
just cause, he will be entitled to a continuation of salary from the date of
termination through the remaining term of the agreement. The agreement contains
a provision stating that in the event of involuntary termination of employment
in connection with any change in control of the Bank or Company, Mr. Kelly will
be paid in a lump sum generally equal to 2.99 times his prior five-year average
taxable compensation. Had the Bank terminated Mr. Kelly in connection with a
change in control as of March 31, 2001, Mr. Kelly would be entitled to a payment
of approximately $623,000. The aggregate payments that would be made would be an
expense to the Company, and would reduce the Company's net income and capital.
The Bank has virtually an identical employment agreement with another executive
officer. Had the Bank terminated that employee in connection with a change in
control as of March 31, 2001, the employee would be entitled to a payment of
approximately $302,000.
Supplemental Executive Retirement Plan. The Bank has adopted an
unfunded supplemental retirement plan ("SERP") for the benefit of Walter G.
Kelly, President. The purpose of the SERP is to attract and retain executives
and key employees by providing additional retirement benefits to supplement the
other retirement benefits provided to all employees. The targeted level of
retirement benefits under the SERP are calculated as 80% of the final average
compensation (as defined in the SERP), as adjusted to take into account certain
other retirement benefits. In December 1999, the plan was amended to only
consider calendar years 1999 and earlier in the computation of final average
compensation. In December 2000, the plan was amended to add as another payment
form the option of receiving a distribution of benefits in a lump-sum payment.
The SERP provides that the Bank will pay the benefits under the SERP in a single
life annuity, joint and 50% survivor annuity, joint and 100% survivor annuity,
term certain annuity or a lump- sum payment. Upon receipt of payment of
benefits, the participant will recognize taxable ordinary income in the amount
of such payments received and the Company will be entitled to recognize a
tax-deductible compensation expense at that time for tax return purposes.
Benefits under the SERP are immediately payable upon death or disability of the
participant, or upon the termination of the participant (other than for cause),
after obtaining 20 years of credited service. During the years ended March 31,
2001 and 2000, the Company's DRP/SERP expenses totaled $206,000 and $236,000,
respectively.
ESOP. The Bank maintains an ESOP for the exclusive benefit of
participating employees. Participating employees are full-time employees who
have completed one year of service with the Company or its subsidiary and
attained age 21. The ESOP is funded by contributions made by the Bank in cash or
the Company Common Stock. The ESOP had borrowed funds from an unrelated third
party to purchase stock in the Bank's initial stock offering. The loan was
subsequently refinanced by the Company. The Bank
7
contributed to the ESOP approximately $192,000 and $187,000 during the years
ended March 31, 2001 and 2000, respectively. It is anticipated that this loan
will be fully repaid in fiscal 2002. Contributions to the ESOP and shares
released from the suspense account are allocated among participants on the basis
of total compensation, excluding certain payments. All participants must be
employed at least 1,000 hours in a plan year or shall have terminated employment
following death, disability or retirement in order to receive an allocation for
such plan year. The Bank's contributions to the ESOP are discretionary;
therefore, benefits payable under the ESOP cannot be estimated.
Stock Compensation Programs. The following table sets forth information
concerning options granted to the named executive.
Number of Securities
Underlying Unexercised Value of Unexercised In-
Option/SARs The-Money Option/SARs
Shares Acquired at FY-End (#)(2) at FY-End (3)($)
Name on Exercise Value Realized ($)(1) Exercisable/Unexercisable Exercisable/Unexercisable
- -------------------- ------------- --------------------- ------------------------- -------------------------
Walter G. Kelly -- -- 38,812 / -- $45,410 / --
- --------------
(1) Market value of the underlying securities at the date of exercise minus the
exercise price, multiplied by the number of underlying securities.
(2) The options in this table have an exercise price of $6.83.
(3) Market value of the underlying securities at fiscal year-end minus the
exercise price, multiplied by the number of underlying securities. Based
upon the closing price of the Common Stock as of March 31, 2001 of $8.00
per share.
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INDEBTEDNESS OF MANAGEMENT AND
TRANSACTIONS WITH CERTAIN RELATED PARTIES
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The Bank, like many financial institutions, grants loans to its
officers and directors. All loans by the Bank to its directors and executive
officers are subject to regulations restricting loans and other transactions
with affiliated persons of the Company. Savings institutions are permitted to
make loans to executive officers, directors and principal shareholders
("insiders") on preferential terms, provided the extension of credit is made
pursuant to a benefit or compensation program of the Bank that is widely
available to employees of the Bank or its affiliates and does not give
preference to any insider over other employees of the Bank or affiliate. The
Bank maintains a benefit and compensation program whereby mortgage loans are
offered to all employees and directors at a 1.50% discount off the
then-prevailing rate at the time of grant. This rate is only available during
the term of the employee's employment or the director's board membership. Upon
termination, resignation or retirement, the rate reverts to the market rate that
existed at the time the loan was granted. In addition, the Bank will pay the
costs for any credit check and appraisal. Furthermore, pursuant to the benefit
and compensation plan, the Bank will make loans collateralized by (i) savings
deposits at 1% over the annual percentage yield earned on the collateral, and
(ii) new and used automobiles. All other loans to insiders (a) have been made in
the ordinary course of business, (b) were made on substantially the same terms
and conditions, including interest rates and collateral, as those prevailing at
the time for comparable transactions with the Bank's other customers, and (c) do
not involve more than the normal risk of default or present other unfavorable
features. Loans to executive officers and directors of the Company and their
affiliates amounted to approximately $519,304 or 2.1% of the Company's equity at
March 31, 2001.
8
The following table sets forth the indebtedness of executive officers,
directors, and members of the immediate family of an executive officer or
director who are or were indebted to the Bank at any time since March 31, 1999
in an aggregate amount in excess of $60,000 and whose loans were made pursuant
to the benefit and compensation program.
Largest Amount
Outstanding Since Balance at Interest
Name and Position Date of Loan Type of Loan March 31, 1999 March 31, 2001 Rate
- ----------------- ------------ ------------ --------------- -------------- -----
Alexander J. Senules First
Director and Secretary 02/10/97 Mortgage $265,631 $248,768 6.25%*
John C. Burne First
Chairman of the Board 02/03/97 Mortgage $153,687 $146,282 6.25%*
Walter G. Kelly First
President and Chief 02/03/97 Mortgage $129,643 $124,254 6.25%*
Executive Officer
- -------------------
* The prevailing market rate was 1.5% above the rate charged. All other
mortgage loans were made at the prevailing market rate when originated.
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AUDIT COMMITTEE REPORT
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In accordance with its charter adopted by the Board of Directors, the
Audit Committee ("Committee") assists the Board in fulfilling its
responsibilities relating to the Company's audited financial reports, accounting
procedures and financial controls. Additionally, the Committee recommends to the
full Board the selection of the independent auditors and approves the fees and
other significant compensation to be paid to the independent auditors. The
Committee reviews the procedures and results of the Company's independent
audits, and provides a direct communications link to the Board of Directors from
Stokes & Hinds, LLC, the Company's independent auditors, and the Company's chief
financial officer to help assure the quality of the Company's financial
reporting and control systems.
During fiscal 2001, the Audit Committee, comprised of three independent
directors, met four times and the committee chair, as representative of the
committee, began holding discussions with the chief financial officer and
independent auditors regarding interim financial information contained in the
Company's quarterly reports on Form 10-QSB prior to filing with the Securities
and Exchange Commission.
Auditor Independence and 2001 Audit. To fulfill its duties, the Audit
Committee obtained a formal written report of the independent auditors
describing all relationships between the auditors and the Company that might
bear on the auditors' independence consistent with Independence Standards Board
Standard No. 1, "Independence Discussions with Audit Committee." In addition,
the Committee discussed with the auditors any relationships that may impact
their objectivity and independence and satisfied itself as to the auditor's
independence. The Committee also discussed with management and the independent
auditors the quality and adequacy of the Company's internal controls. The
Committee reviewed with the independent auditors their audit plans, audit scope
and identification of audit risks.
The Audit Committee discussed and reviewed with the independent
auditors all communications required by generally accepted auditing standards,
including those described in Statement on Auditing Standards No. 61, as amended,
"Communications with Audit Committee" and reviewed the results of the
independent auditors' examination of the financial statements.
9
2001 Financial Statements and Recommendations of the Audit Committee.
The Audit Committee reviewed the Company's audited financial statements as of
and for the year ended March 31, 2001 with management and the independent
auditors. Management has the responsibility for the preparation of the Company's
financial statements and the independent auditors have the responsibility for
the examination of those statements. Based on the review, the Committee
recommended to the Board that the Company's audited financial statements be
included in the Company's Annual Report on Form 10-KSB for the year ended March
31, 2001 for filing with the Securities and Exchange Commission.
Audit Fees. The aggregate fees billed for professional services
rendered by the independent auditors for the audit of the Company's financial
statements as of and for the year ended March 31, 2001 and the review of the
financial statements in the Company's Form 10-QSB filings for the year were
$30,900.
All Other Fees. The aggregate fees billed by the independent auditors
during the year ended March 31, 2001 for non-audit and non-information systems
related services were $6,885. These services consisted of tax consultation, tax
compliance and tax research services. The independent auditors did not provide
professional services during the year ended March 31, 2001 for the operation of
the Company's information systems or financial system design and implementation.
The Audit Committee considered whether, and has determined that, the provision
for these services is compatible with maintaining the independent auditors'
independence.
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PROPOSAL II - RATIFICATION OF APPOINTMENT OF AUDITORS
- --------------------------------------------------------------------------------
At the Meeting, stockholders will consider and vote upon the
ratification of the appointment of independent auditors for the Company's fiscal
year ending March 31, 2002. Stokes & Hinds, LLC was the Company's independent
auditor for the fiscal year ended March 31, 2001. The Board of Directors has
approved to renew the Company's arrangements with Stokes & Hinds, LLC to be its
auditor for the fiscal year ending March 31, 2002, subject to ratification by
the Company's stockholders. A representative of Stokes & Hinds, LLC is expected
to be present at the Meeting to respond to stockholders' questions and will have
the opportunity to make a statement.
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MISCELLANEOUS
- --------------------------------------------------------------------------------
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 Company or the Bank may
solicit proxies personally or by telegraph or telephone without payment of
additional compensation.
The Company's 2001 Annual Report, including financial statements, has
been mailed to all persons who were listed as stockholders of record as of the
close of business on June 8, 2001. Any stockholder who has not received a copy
of such Annual Report may obtain a copy by writing the Company or by accessing
the Company's website at www.skibofin.com. Such Annual Report is not to be
treated as a part of the proxy solicitation material or as having been
incorporated herein by reference.
- --------------------------------------------------------------------------------
FORM 10-KSB
- --------------------------------------------------------------------------------
A COPY OF THE FORM 10-KSB AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
WILL BE FURNISHED WITHOUT CHARGE TO STOCKHOLDERS AS OF THE RECORD DATE UPON
WRITTEN REQUEST TO THE SECRETARY, SKIBO FINANCIAL CORP., 242 EAST MAIN STREET,
CARNEGIE, PENNSYLVANIA 15106.
10
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STOCKHOLDER PROPOSALS AND OTHER MATTERS
- --------------------------------------------------------------------------------
Any new business to be taken up at the Annual Meeting of Stockholders
shall be stated in writing and filed with the Secretary of the Company no later
than July 14, 2001, and all business so stated, proposed, and filed shall be
considered at the annual meeting, but no other proposal shall be acted upon at
the annual meeting. Any shareholder may make any other proposal at the annual
meeting and the same may be discussed and considered, but unless received in
writing by the Secretary no later than July 14, 2001, such proposal shall be
laid over for action at an adjourned, special, or annual meeting of the
shareholders taking place 30 days or more thereafter.
For the Annual Meeting to be held in 2002, all business to be submitted
by stockholders shall be stated in writing and filed with the Secretary of the
Company no later than five days prior to that Annual Meeting.
In order to be eligible for inclusion in the Company's proxy materials
relating to the Annual Meeting of Stockholders to be held in 2002, any
stockholder proposal to take action at such meeting must be received by the
Company at 242 East Main Street, Carnegie, Pennsylvania 15106, no later than
February 15, 2002. Any such proposals shall be subject to the requirements of
the proxy rules adopted under the Securities Exchange Act of 1934, as amended.
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 any
other matters, however, should properly come before the Meeting, it is intended
that proxies in the accompanying form will be voted in respect thereof in
accordance with the judgment of the person or persons voting the proxies.
BY ORDER OF THE BOARD OF DIRECTORS
/s/Alexander J. Senules
----------------------------------
ALEXANDER J. SENULES
SECRETARY
Carnegie, Pennsylvania
June 15, 2001
11
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REVOCABLE PROXY
- --------------------------------------------------------------------------------
SKIBO FINANCIAL CORP.
242 EAST MAIN STREET
CARNEGIE, PENNSYLVANIA 15106
(412) 276-2424
- --------------------------------------------------------------------------------
ANNUAL MEETING OF STOCKHOLDERS
July 19, 2001
- --------------------------------------------------------------------------------
The undersigned hereby appoints the official proxy committee of the
Board of Directors of the Company with full powers of substitution to act, as
attorneys and proxies for the undersigned, and to vote all shares of Common
Stock of the Company which the undersigned is entitled to vote at the Annual
Meeting of Stockholders, to be held at Southpointe Golf Club, 360 Southpointe
Boulevard, Canonsburg, Pennsylvania, on Thursday, July 19, 2001, at 9:00 a.m.
and at any and all adjournments thereof, as follows:
FOR ALL
FOR EXCEPT
--- ------
1. The election as director of the nominees listed |_| |_|
below for terms to expire in 2004 (except as
marked to the contrary below):
Layne W. Craig John T. Mendenhall, Jr.
INSTRUCTION: To withhold authority to vote for
any individual nominee, mark "For All Except" and
write the nominee's name in the space provided
below.
- -------------------------------------------------
FOR AGAINST ABSTAIN
--- ------- -------
2. The ratification of the appointment of Stokes |_| |_| |_|
& Hinds, LLC as independent auditors for the
Company for the fiscal year ending March 31,
2002.
The Board of Directors recommends a vote "FOR" all of the listed
propositions.
- --------------------------------------------------------------------------------
THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS ARE SPECIFIED, THIS
PROXY WILL BE VOTED FOR EACH OF THE PROPOSITIONS STATED. IF ANY OTHER BUSINESS
IS PRESENTED AT SUCH MEETING, THIS PROXY WILL BE VOTED BY THOSE NAMED IN THIS
PROXY IN THEIR BEST JUDGMENT. THIS PROXY ALSO CONFERS DISCRETIONARY AUTHORITY ON
THE OFFICIAL PROXY COMMITTEE TO VOTE WITH RESPECT TO THE ELECTION OF ANY PERSON
AS DIRECTOR WHERE THE NOMINEE IS UNABLE TO SERVE OR FOR GOOD CAUSE WILL NOT
SERVE, AND MATTERS INCIDENT TO THE CONDUCT OF THE 2001 ANNUAL MEETING.
- --------------------------------------------------------------------------------
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
Should the undersigned be present and elect to vote at the Annual
Meeting, or at any adjournment thereof, and after notification to the Secretary
of the Company at the Meeting of the stockholder's decision to terminate this
proxy, the power of said attorneys and proxies shall be deemed terminated and of
no further force and effect.
The undersigned acknowledges receipt from the Company prior to the
execution of this proxy of notice of the Meeting, a proxy statement dated June
15, 2001, and an Annual Report to Stockholders.
Dated: , 2001 |_| Please check here if you plan to attend the Meeting.
---------
- ----------------------------------- ------------------------------
PRINT NAME OF STOCKHOLDER PRINT NAME OF STOCKHOLDER
- ----------------------------------- ------------------------------
SIGNATURE OF STOCKHOLDER SIGNATURE OF STOCKHOLDER
Please sign exactly as your name appears on the enclosed 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, DATE, SIGN AND MAIL THIS PROXY PROMPTLY IN THE ENCLOSED
POSTAGE-PREPAID ENVELOPE.
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