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
|X| Filed by the Registrant
[ ] Filed by a Party other than the Registrant
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only
|X| Definitive Proxy Statement (as permitted by Rule 14a-6(e)(2))
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
CFS Bancorp, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
|X| 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 (set forth the amount on which
the filing fee is calculated and state how it was determined):
------
(4) Proposed maximum aggregate value of transaction:
--------------------
(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
---------------------------------------------
(2) Form, schedule or registration statement no.:
-----------------------
(3) Filing party:
-------------------------------------------------------
(4) Date filed:
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[cfs logo]
CFS BANCORP, INC.
707 RIDGE ROAD
MUNSTER, INDIANA 46321
(219) 836-9990
March 28, 2002
Dear Stockholder:
You are cordially invited to attend the fourth Annual Meeting of
Stockholders of CFS Bancorp, Inc. The meeting will be held at the Center for
Visual and Performing Arts located at 1040 Ridge Road, Munster, Indiana on
Tuesday, April 30, 2002 at 10:00 a.m. Central Time. The matters to be considered
by stockholders at the Annual Meeting are described in the accompanying
materials.
It is very important that you be represented at the Annual Meeting
regardless of the number of shares you own or whether you are able to attend the
meeting in person. We urge you to mark, sign, and date your proxy card today and
return it in the envelope provided, even if you plan to attend the Annual
Meeting. This will not prevent you from voting in person but will ensure that
your vote is counted if you are unable to attend.
Your continued support of and interest in CFS Bancorp, Inc. are sincerely
appreciated.
Best regards,
/s/ Thomas F. Prisby
Thomas F. Prisby
Chairman of the Board and
Chief Executive Officer
CFS BANCORP, INC.
707 RIDGE ROAD
MUNSTER, INDIANA 46321
(219) 836-9990
------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON APRIL 30, 2002
------------------
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders ("Annual
Meeting") of CFS Bancorp, Inc. ("Company") will be held at the Center for Visual
and Performing Arts located at 1040 Ridge Road, Munster, Indiana on Tuesday,
April 30, 2002 at 10:00 a.m. Central Time for the following purposes, all of
which are more completely set forth in the accompanying Proxy Statement:
(1) To elect three directors for three-year terms expiring in 2005,
and until their successors are elected and qualified;
(2) To ratify the appointment by the Board of Directors of Ernst &
Young LLP as the Company's independent auditors for the fiscal year ending
December 31, 2002; and
(3) To transact such other business as may properly come before the
meeting or any adjournment thereof. Management is not aware of any other
such business.
The Board of Directors has fixed March 8, 2002 as the voting record date
for the determination of stockholders entitled to notice of and to vote at the
Annual Meeting and at any adjournment thereof. Only those stockholders of record
as of the close of business on that date will be entitled to vote at the Annual
Meeting or at any such adjournment.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ MONICA F. SULLIVAN
Monica F. Sullivan
Corporate Secretary
Munster, Indiana
March 28, 2002
YOU ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING. IT IS IMPORTANT THAT
YOUR SHARES BE REPRESENTED REGARDLESS OF THE NUMBER YOU OWN. EVEN IF YOU PLAN TO
BE PRESENT, YOU ARE URGED TO COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED PROXY
PROMPTLY IN THE ENVELOPE PROVIDED. IF YOU ATTEND THE MEETING, YOU MAY VOTE
EITHER IN PERSON OR BY PROXY. ANY PROXY GIVEN MAY BE REVOKED BY YOU IN WRITING
OR IN PERSON AT ANY TIME PRIOR TO THE EXERCISE THEREOF. 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 IN PERSON AT
THE ANNUAL MEETING.
CFS BANCORP, INC.
------------------
PROXY STATEMENT
------------------
ANNUAL MEETING OF STOCKHOLDERS
APRIL 30, 2002
This Proxy Statement is furnished to holders of common stock, $0.01 par
value per share ("Common Stock"), of CFS Bancorp, Inc. ("Company"), the parent
holding company of Citizens Financial Services, FSB ("Bank"). The Company
acquired all of the Bank's common stock issued in connection with the conversion
of the Bank from the mutual to stock form and the related public offering of the
Common Stock in July 1998 ("Conversion"). Proxies are being solicited on behalf
of the Board of Directors of the Company to be used at the Annual Meeting of
Stockholders ("Annual Meeting") to be held at the Center for Visual and
Performing Arts located at 1040 Ridge Road, Munster, Indiana, on Tuesday, April
30, 2002 at 10:00 a.m. Central Time and at any adjournment thereof for the
purposes set forth in the Notice of Annual Meeting of Stockholders. This Proxy
Statement is first being mailed to stockholders on or about March 28, 2002.
The proxy solicited hereby, if properly signed and returned to the Company
and not revoked prior to its use, will be voted in accordance with the
instructions contained therein. If no contrary instructions are given, each
proxy received will be voted "FOR" the nominees for director described herein;
"FOR" ratification of the appointment of Ernst & Young LLP for fiscal 2002; and,
upon the transaction of such other business as may properly come before the
meeting, in accordance with the best judgment of the persons appointed as
proxies. Any stockholder giving a proxy has the power to revoke it at any time
before it is exercised by (i) filing with the Secretary of the Company (Monica
F. Sullivan, Corporate Secretary, CFS Bancorp, Inc., 707 Ridge Road, Munster,
Indiana 46321) written notice thereof; (ii) submitting a duly-executed proxy
bearing a later date; or (iii) appearing at the Annual Meeting and giving the
Secretary notice of his or her intention to vote in person. Proxies solicited
hereby may be exercised only at the Annual Meeting and at any adjournment
thereof and will not be used for any other meeting.
VOTING
Only stockholders of record at the close of business on March 8, 2002
("Voting Record Date") will be entitled to vote at the Annual Meeting. On the
Voting Record Date, there were 13,465,646 shares of Common Stock outstanding,
and the Company had no other class of equity securities outstanding. Each share
of Common Stock is entitled to one vote at the Annual Meeting on all matters
properly presented at the meeting.
Directors are elected by a plurality of the votes cast with a quorum
present. The three persons who receive the greatest number of votes of the
holders of Common Stock represented at the Annual Meeting will be elected
directors of the Company. The affirmative vote of a majority of the total votes
present in person and by proxy and entitled to vote is required to ratify the
appointment of the independent auditors. Abstentions are considered in
determining the presence of a quorum and will not affect the plurality vote
required for the election of directors. However, because of the vote required to
ratify the appointment of the independent auditors, abstentions will have the
effect of a vote against such proposals. Under rules of the New York Stock
Exchange, each of the proposals being considered at the Annual Meeting is
considered a "discretionary" item upon which brokerage firms may vote in their
discretion on behalf of their clients if such clients have not furnished voting
instructions. There are no proposals to be considered at the Annual Meeting
which are considered "non-discretionary" and for which there will be "broker
non-votes."
2
INFORMATION WITH RESPECT TO NOMINEES FOR DIRECTOR
AND EXECUTIVE OFFICERS
ELECTION OF DIRECTORS
The Certificate of Incorporation of the Company provides that the Board of
Directors shall be divided into three classes as nearly equal in number as the
then total number of directors constituting the Board of Directors permits. The
directors shall be elected by the stockholders of the Company for staggered
terms and until their successors are elected and qualified.
At the Annual Meeting, stockholders of the Company will be asked to elect
one class of directors, consisting of three directors, for three-year terms
expiring in 2005, and until their successors are elected and qualified.
No nominee is related to any other director or executive officer of the
Company by blood, marriage or adoption. Each of the nominees currently serves as
director of the Company and the Bank.
Unless otherwise directed, each proxy executed and returned by a
stockholder will be voted for the election of the nominees for director listed
below. If any person named as a nominee should be unable or unwilling to stand
for election at the time of the Annual Meeting, the proxies will nominate and
vote for any replacement nominee or nominees recommended by the Board of
Directors. At this time, the Board of Directors knows of no reason why any of
the nominees listed below may not be able to serve as a director if elected.
The following table presents information concerning the nominees for
director of the Company and each director whose term continues, including tenure
as a director.
NOMINEES FOR DIRECTOR FOR THREE-YEAR TERMS EXPIRING IN 2005
<Table>
<Caption>
PRINCIPAL OCCUPATION DURING DIRECTOR
NAME AGE(1) THE PAST FIVE YEARS SINCE
- ---- ------ --------------------------- --------------
Sally A. Abbott...................... 68 Director of the Bank since 1986; 1998
currently retired; Ms. Abbott retired
from the Bank as a Vice President in
1994.
Gregory W. Blaine.................... 53 Director of the Bank since 1998; 1998
consultant to and former Chairman and
Chief Executive Officer of TN
Technologies; Mr. Blaine has served in
various capacities with True North
Communications, Inc., the parent of TN
Technologies, since 1979, including
director of Global Operating Systems
and as a member of the Board from 1990
to 1997.
Thomas J. Burns...................... 69 Director of the Bank since 1994; Mr. 1998
Burns has operated the Burns-Kish
Funeral Homes, Hammond, Indiana since
1954.
</Table>
3
DIRECTORS WHOSE TERMS ARE CONTINUING
DIRECTORS WITH A TERM EXPIRING IN 2003
<Table>
<Caption>
PRINCIPAL OCCUPATION DURING DIRECTOR
NAME AGE(1) THE PAST FIVE YEARS SINCE
---- ------ --------------------------- --------
Gene Diamond......................... 49 Director of the Bank since 1994; President and 1998
Chief Executive Officer of St. Margaret Mercy
Healthcare Centers located in Hammond and
Dyer, Indiana since April 1993.
James W. Prisby...................... 51 Vice Chairman, President and Chief Operating 1998
Officer of the Company since 1998 and of the
Bank since February 1996; previously,
Executive Vice President of the Bank from 1993
to 1996 and Corporate Secretary of the Bank
from 1977 to 1996. Mr. Prisby joined the Bank
in 1974 as internal auditor. Mr. James Prisby
is the brother of Mr. Thomas Prisby.
</Table>
DIRECTORS WITH A TERM EXPIRING IN 2004
<Table>
Thomas F. Prisby..................... 60 Chairman of the Board and Chief Executive 1998
Officer of the Company since 1998 and of the
Bank since February 1996; previously, Mr.
Prisby served as the President and Chief
Operating Officer of the Bank from 1989 to
1996. Mr. Prisby joined the Bank in 1982 as
Executive Vice President. Mr. Thomas Prisby is
the brother of Mr. James Prisby.
Frank D. Lester...................... 61 Director of the Bank since 2000. President of 2001
Union Tank Car, Chicago, Illinois since 1999;
previously President of Procor, Inc., Toronto,
Canada from 1994 to 1999.
</Table>
- ---------------
(1) As of March 8, 2002.
Set forth below is information with respect to the principal occupations
during the last five years for the three most highly compensated executive
officers of the Company and the Bank who do not serve as directors of the
Company. All executive officers are elected annually by the Board of Directors
and serve until their successors are elected and qualified. As of the date
hereof, no executive officer set forth below is related to any director or other
executive officer of the Company by blood, marriage or adoption, and there are
no arrangements or understandings between a director of the Company and any
other person pursuant to which such person was elected an executive officer.
John T. Stephens. Age 57. Mr. Stephens currently serves as Executive Vice
President and Chief Financial Officer of the Company. Mr. Stephens has also
served as Executive Vice President, Chief Financial Officer and Treasurer of the
Bank since 1993, as well as director of the Bank since 1986. Mr. Stephens joined
the Bank in 1983 as Senior Vice President, Chief Financial Officer and
Treasurer.
Jeffrey C. Stur. Age 53. Mr. Stur has served as Senior Vice President of
the Bank for Lending since 1995. Prior to February 1995, Mr. Stur had served as
Vice President of the Bank for Lending since 1980. Mr. Stur has been employed by
the Bank since 1972 and had previously served as a loan officer, a staff
appraiser and the Manager of the Appraisal Department.
Janice S. Dobrinich. Age 46. Ms. Dobrinich currently is Senior Vice
President of the Bank and the Company. She has served as Senior Vice
President -- Human Resources of the Bank since 1999. Previously, Ms. Dobrinich
served as Vice President -- Human Resources beginning in 1992. Ms. Dobrinich has
been employed by the Bank since 1977 and has served the Bank as Teller,
Administrative Secretary, Personnel Assistant, Business Services Coordinator,
Personnel Director, Office Manager and Human Resources Manager.
4
STOCKHOLDER NOMINATIONS
Article IV, Section 4.15 of the Company's Bylaws governs nominations for
election to the Board of Directors and requires all such nominations, other than
those made by the Board of Directors or committee appointed by the Board, to be
made at a meeting of stockholders called for the election of directors, and only
by a stockholder who has complied with the notice provisions in that section.
Stockholder nominations must be made pursuant to timely notice in writing to the
Secretary of the Company. Generally, to be timely, a stockholder's notice must
be delivered to, or mailed, postage prepaid, to the principal executive offices
of the Company not later than 120 days prior to the anniversary date of the
mailing of proxy materials by the Company in connection with the immediately
preceding annual meeting of stockholders of the Company. Each written notice of
a stockholder nomination is required to set forth certain information specified
in the Bylaws. Any such nomination by a stockholder with respect to the Annual
Meeting must have been delivered or received no later than the close of business
on November 23, 2001. No such nominations by stockholders were received.
COMPLIANCE WITH SECTION 16(a) OF THE 1934 ACT
Section 16(a) of the Securities Exchange Act of 1934, as amended ("1934
Act"), requires the officers, directors, and persons who own more than 10% of
the Common Stock to file reports of ownership and changes in ownership with the
Securities and Exchange Commission ("SEC") and the Nasdaq Stock Market.
Officers, directors and greater than 10% stockholders are required by regulation
to furnish the Company with copies of all Section 16(a) forms they file. The
Company knows of no person who owns 10% or more of the Company's Common Stock,
except for the CFS Bancorp, Inc. Employee Stock Ownership Plan, which owns
10.32% of the Common Stock of the Company.
Based solely on review of the copies of such forms furnished to the
Company, or written representations from its officers and directors, the Company
believes that during, and with respect to, fiscal year 2001, the Company's
officers and directors complied with the reporting requirements promulgated
under Section 16(a) of the 1934 Act with the exception of Sally A. Abbott, who
on July 19, 2001 belatedly filed a Form 4 originally due on May 10, 2001
regarding the sale of 3,200 shares of common stock on April 8, 2001.
MEETINGS OF THE BOARD OF THE COMPANY
During the fiscal year ended December 31, 2001, the Board of Directors of
the Company met twelve times. No director of the Company attended fewer than 75%
of the aggregate of the total number of Board meetings held during the period
for which he or she has been a director and the total number of meetings held by
all committees of the Board on which he or she served during the periods that he
or she served.
COMMITTEES
The Board of Directors of the Company has established a Nominating
Committee, an Audit Committee and a Compensation and Benefits Committee
("Compensation Committee"), among others.
Nominations for director of the Company were made by the Nominating
Committee comprised solely of independent members of the Board of Directors of
the Company. Members of the Nominating Committee were Mr. Lester and Mr.
Diamond. The Nominating Committee met one time in fiscal 2001.
The Audit Committee is a joint Board committee composed solely of
independent members of the Board of Directors of the Company and the Bank. In
addition, all committee members are required to be financially literate, and at
least one member will have accounting or related financial management
experience. The Audit Committee reviews with management and the independent
auditors the systems of internal control, monitors the Company's adherence in
accounting and financial reporting to generally accepted accounting principles
and reviews the records and affairs of the Company and its financial condition.
On January 24, 2000, the Company adopted an Audit Committee Charter. On May 15,
2000, the Company amended the Audit Committee Charter, a copy of which was
attached as Appendix A to the 2001 Proxy Statement. The current
5
members of the Audit Committee are Mr. Blaine, who is Chairman, Mr. Burns and
Mr. Lester. The Audit Committee met four times in fiscal 2001.
The Compensation Committee is comprised of at least three directors each of
whom is independent of management and the Company. Members of the Compensation
Committee shall be considered independent if they have no relationship to the
Company that may interfere with the exercise of their independence from
management and the Company. All Compensation Committee members are required to
be financially literate, and at least one member will have large company
experience in the areas of human resources and compensation management. During
fiscal 2001, the members of the Compensation Committee were Mr. Diamond, who is
Chairman, Mr. Blaine and Mr. Burns. No member of the Compensation Committee is a
current officer or employee of the Company, the Bank or any of its subsidiaries.
The Compensation Committee met three times in 2001.
REPORT OF THE AUDIT COMMITTEE
The Audit Committee of the Board is responsible for providing independent,
objective oversight of the Company's accounting function and internal controls.
Management is responsible for the Company's internal controls and financial
reporting process. The Company's independent auditors are responsible for
performing an independent audit of the Company's consolidated financial
statements in accordance with generally accepted auditing standards and to issue
a report thereon.
The Audit Committee is composed of directors all of whom are independent as
defined by The Nasdaq Stock Market, Inc. listing requirements. The Audit
Committee is governed by the previously described Audit Committee Charter which
specifies, among other things, the scope of the Audit Committee's
responsibilities and how those responsibilities are to be performed. The
responsibilities of the Audit Committee include recommending to the Board an
accounting firm to be engaged as the Company's independent auditors.
The Audit Committee has reviewed and discussed the audited financial
statements with management. In addition, in compliance with applicable
provisions of the Audit Committee Charter, the Audit Committee has discussed
with the Company's independent auditors the matters required to be discussed by
Statement on Auditing Standards No. 61 "Communication with Audit Committees."
The Audit Committee has received the written disclosures and the letter from the
independent accountants required by Independence Standards Board Standard No. 1
and has discussed with the auditors their independence. Based on the review and
discussions referred to above in this report, the Audit Committee recommended to
the Board of Directors that the audited financial statements be included in the
Company's Annual Report to Stockholders, which financial statements were
incorporated into the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 2001 for filing with the Securities and Exchange Commission.
The Audit Committee also recommended the selection of Ernst & Young LLP as the
Company's independent auditors for the fiscal year ending December 31, 2002.
Respectfully submitted,
Gregory W. Blaine (Chairman)
Thomas J. Burns
Frank D. Lester
REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee has been established by the Board of Directors
in order to assist in the development and oversight of human resources policies,
compensation policies, incentive plans, stock benefit programs and other
employee compensation and benefits issues. The Compensation Committee also
established policies regarding compensation of the Company's executive officers
and, pursuant to such policies, makes recommendations to the full Board of
Directors for compensation of and benefits to the Company's executive officers.
6
The Compensation Committee members recognize that the Company must attract,
retain and motivate management to achieve performance goals that reward them for
outstanding performance while serving the financial interests of the Company and
its stockholders. In determining executive compensation levels, the Compensation
Committee seeks to establish salary and bonus levels which will attract and
retain qualified executives when considered with other components of the
Company's compensation structure. The Committee also considers specific annual
performance criteria and looks to create compensation plans that reward
executive officers for continuous improvement in those areas which contribute to
increases in stockholder value. The level of any salary increase is based upon
an executive's job performance over the year in conjunction with the Company's
goals of profitability, growth, and customer satisfaction. Economic conditions
and peer group compensation surveys provide additional information to support
the compensation planning process.
To do so, the Company must compensate its executives fairly and
competitively in the markets in which it competes. The competitive market for
the Company's executives is primarily banks and thrifts of a similar asset size
located throughout the midwestern United States.
The Company's compensation philosophy is to provide its executives,
including the Chairman and Chief Executive Officer ("CEO"), with conservatively
competitive base salaries along with performance-based annual and long-term
incentives which provide an appropriate balance and focus between near-term and
long-term objectives of the Company. The compensation model for executives of
the Company, including the CEO, targets total compensation to be competitive (at
the 50th percentile) when measured against a range of selected comparable
companies, including financial institutions in the Company's size range.
Executive compensation is comprised of base salary, short and long-term
incentives, as well as deferred compensation.
In considering the compensation levels for officers of the Company and the
Bank, the Compensation Committee reviewed total compensation levels of
executives in comparable positions at selected similar institutions and
recommended to the Board of Directors base and total compensation amounts for
each executive based on such review, among other factors, using a regression
formula based on the Company's asset size. To assist the Compensation Committee,
an independent compensation consultant was retained to prepare a compensation
analysis and compile compensation data from various sources, including the
latest ECS Financial Institutions Benchmark Compensation Survey, the most recent
BAI Bank Cash Compensation Survey, and the most recent publicly disclosed
compensation data from proxy statements for selected peer group organizations.
Mr. Thomas Prisby's compensation base is deemed appropriate and equitable
based on:
- the Bank's progress towards its long-term strategic plan of transforming
its business model from a traditional thrift to a full-service community
bank and financial center;
- the Bank's maintenance of capital at adequate levels in excess of
regulatory requirements and its continuing application of sound lending
policies; and
- the Bank's successful implementation of its tax expense reduction
efforts.
While each of the factors described above was considered by the
Compensation Committee, such factors were not assigned a specific weight.
The Compensation Committee also is responsible for administering awards
granted pursuant to the Company's 1998 Stock Option Plan ("Option Plan"). Under
the Option Plan, the Compensation Committee determines which officers, key
employees and non-employee directors will be granted options, whether such
options will be granted as incentive or compensatory options (in case of options
to employees), the number of shares subject to each option, the exercise price
of each option and whether such options may be exercised by delivering other
shares of Common Stock. During fiscal 2001, 45 individuals were granted
aggregate options on 307,500 shares, 10,710 options were exercised, and 34,110
options were cancelled, leaving a total of 155,135 shares remaining available
for issuance under the Option Plan as of year end. Awards to the Company's
executive officers are reviewed by the Company's compensation consultants and
other professionals, including
7
the Company's accountants and attorneys, as to propriety and reasonableness as
compared to historical levels of grants within the financial services industry.
Base pay levels for Messrs. Thomas Prisby, James Prisby, Stephens, Stur and
Ms. Dobrinich were adjusted by 3.0%, 6.5%, 3.0%, 6.2% and 15.2%, respectively,
effective May 1, 2001. Messrs. Thomas Prisby, James Prisby, Stephens and Stur
and Ms. Dobrinich were granted options on 35,000, 30,000, 20,000, 10,000 and
10,000 shares, respectively, in fiscal 2001.
In September 2000, the Bank purchased split dollar whole life insurance
policies for the benefit of Messrs. Thomas Prisby and James Prisby. The policies
were issued in their name, but the Bank has agreed to pay all premiums as
required until they terminate their employment or retire from the Bank. However,
as a part of such agreement, the executives have assigned to the Bank their
interest in the policies to the extent of the cash surrender value and death
benefit thereof equal to the premiums paid. Upon their death, any proceeds
remaining, after reimbursing the Bank for the total amount of premiums paid,
will be paid to their beneficiaries under the policies. This plan was continued
in 2001.
Officers, key employees and directors of the Company who are selected by
the Compensation Committee are eligible to receive benefits under the 1998
Recognition and Retention Plan ("Recognition Plan"). During fiscal 2001, there
were no awards made under the Recognition Plan.
Respectfully submitted,
Gene Diamond (Chairman)
Gregory W. Blaine
Thomas J. Burns
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Determinations regarding compensation of the Company's and Bank's employees
are made by the Compensation Committee of the Board of Directors, who are all
independent directors. Messrs. Blaine, Burns and Diamond are the current members
of the Compensation Committee and also serve as directors of the Bank.
8
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth a summary of certain information concerning
the compensation paid by the Bank for services rendered in all capacities during
the fiscal years ended December 31, 2001, 2000 and 1999 to the Chairman and
Chief Executive Officer and the four highest paid executive officers of the Bank
and its subsidiaries, whose total annual compensation during fiscal 2001
exceeded $100,000. The named executive officers do not receive separate
compensation from the Company.
<Table>
<Caption>
- ----------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
ANNUAL COMPENSATION
-------------------------------------------
OTHER
ANNUAL
NAME AND COMPENSATION
PRINCIPAL POSITION YEAR SALARY BONUS (1)(2)
- ---------------------------------------------------------------------------------------------------------------------------------
Thomas F. Prisby 2001 $328,920 $35,985 $ 49,559
Chairman and Chief 2000 $322,809 $63,737 $ 44,048
Executive Officer 1999 $348,964 $57,840 $204,907
- ----------------------------------------------------------------------------------
James W. Prisby 2001 $290,016 $32,405 $ 33,135
President and Chief 2000 $277,524 $56,133 $ 27,331
Operating Officer 1999 $308,732 $50,804 $180,660
- ----------------------------------------------------------------------------------
John T. Stephens 2001 $214,992 $21,820 $ 14,291
Executive Vice President 2000 $209,333 $37,965 $ 12,743
and Chief Financial Officer 1999 $224,222 $33,716 $ 78,966
- ----------------------------------------------------------------------------------
Jeffrey C. Stur 2001 $108,028 $ 9,768 --
Senior Vice President -- 2000 $100,096 $15,946 --
Commercial Lending 1999 $ 98,787 $12,932 --
- ----------------------------------------------------------------------------------
Janice S. Dobrinich 2001 $ 99,760 $ 9,038 --
Senior Vice President -- 2000 $ 87,692 $14,089 --
Human Resources 1999 $ 84,279 $11,176 --
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
<Caption>
- ----------------------------- ----------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
LONG TERM COMPENSATION
-----------------------------------------
AWARDS PAYOUTS
----------------------------- -----------
SECURITIES ALL OTHER
NAME AND RESTRICTED UNDERLYING LTIP COMPENSATION
PRINCIPAL POSITION STOCK(3) OPTIONS PAYOUTS (4)(5)(6)
- ----------------------------- -----------------------------------------------------------------------------------------------------
- ----------------------------
Thomas F. Prisby -- 35,000 -- $79,540
Chairman and Chief -- 35,000 -- $50,272
Executive Officer $1,400,000 210,000 -- $58,550
- ---------------------------------------------------------------------------------- -----------------------------------------------
- -----------
James W. Prisby -- 30,000 -- $75,394
President and Chief -- 30,000 -- $45,134
Operating Officer $1,100,000 165,000 -- $49,106
- ---------------------------------------------------------------------------------- -----------------------------------------------
- -----------
John T. Stephens -- 20,000 -- $57,771
Executive Vice President -- 10,000 -- $36,127
and Chief Financial Officer $ 800,000 120,000 -- $40,152
- ---------------------------------------------------------------------------------- -----------------------------------------------
- -----------
Jeffrey C. Stur -- 10,000 -- $35,592
Senior Vice President -- -- 5,000 -- $19,307
Commercial Lending $ 175,000 25,000 -- $22,608
- ---------------------------------------------------------------------------------- -----------------------------------------------
- -----------
Janice S. Dobrinich -- 10,000 -- $32,298
Senior Vice President -- -- -- -- $16,831
Human Resources $ 250,000 30,000 -- $12,023
- ----------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------- -----------------------------------------------
- -----------
----------------------------------------------------------
</Table>
- ---------------
(1) Does not include amounts attributable to miscellaneous benefits received by
the named executive officers. In the opinion of management of the Company,
the costs to the Bank of providing such benefits to each of the named
executive officers during the fiscal year ended December 31, 2001 did not
exceed the lesser of $50,000 or 10% of the total of annual salary and bonus
reported for each individual.
(2) Reflects the payment of deferred supplemental retirement benefits ("SERP")
in the amount equal to the difference between the benefits that would be
payable under the Bank's retirement plans but for the limitation set forth
in the Internal Revenue Code of 1986, as amended ("Code"), with respect to
includable compensation and the maximum benefit payable under the Bank's
retirement plans. Includable compensation does not include SERP payments or
Recognition Plan benefits.
(3) Represents the grant of 140,000, 110,000, 80,000, 17,500 and 25,000 shares
of restricted Common Stock to Messrs. Thomas Prisby, James Prisby, Stephens
and Stur and Ms. Dobrinich, respectively, pursuant to the Recognition Plan
which were deemed to have had the indicated value at the date of grant, and
which, with respect to the portion of the grants which remains unvested, had
fair market values at December 31, 2001 of $1,230,600, $947,100, $688,800,
$150,675 and $215,250, respectively. The awards vest 20% per year from the
date of grant. Dividends paid on the restricted Common Stock are held by the
Recognition Plan and paid to the recipient when the restricted stock vests.
(4) For fiscal 2001, consists of the Bank's contributions to the Bank's 401(k)
profit sharing plan of $4,542, $4,516, $4,509, $3,752 and $3,170 for the
accounts of Messrs. Thomas Prisby, James Prisby, Stephens and Stur and Ms.
Dobrinich, respectively; contributions to the Bank's defined benefit plan of
$9,860, $9,860, $9,860, $7,201, and $6,617, for the benefit of Messrs.
Thomas Prisby, James Prisby, Stephens,
(Footnotes continued on following page)
9
Stur and Ms. Dobrinich, respectively, $33,711, $33,711, $33,649, $24,639 and
$22,511 allocated on behalf of Messrs. Thomas Prisby, James Prisby, Stephens
and Stur and Ms. Dobrinich, respectively, pursuant to the Company's Employee
Stock Ownership Plan ("ESOP"); and $28,011, $21,082 and $9,753 allocated to
Messrs. Thomas Prisby, James Prisby and Stephens, respectively, pursuant to
an excess benefit plan for amounts not allocated under the ESOP due to
limits under the Code ("ESOP SERP"). Also includes for fiscal 2001, the
present value of the premiums paid, as well as the term insurance paid, for
split-dollar life insurance purchased by the Bank on behalf of Messrs.
Thomas Prisby and James Prisby in the amounts of $3,406 and $6,224,
respectively.
(5) For fiscal 2000, consists of the Bank's contributions to the Bank's 401(k)
profit sharing plan of $5,100, $5,100, $5,100, $3,409 and $2,975 for the
accounts of Messrs. Thomas Prisby, James Prisby, Stephens and Stur and Ms.
Dobrinich, respectively; $23,605, $23,605, $23,546, $15,898 and $13,856
allocated on behalf of Messrs. Thomas Prisby, James Prisby, Stephens and
Stur and Ms. Dobrinich, respectively, pursuant to the ESOP; and $21,380,
$16,232, and $7,481 allocated to Messrs. Thomas Prisby, James Prisby and
Stephens, respectively, pursuant to the ESOP SERP. Also includes for fiscal
2000, the economic benefit of split-dollar life insurance purchased in
November 2000 by the Bank on behalf of Messrs. Thomas Prisby and James
Prisby.
(6) For fiscal 1999, consists of the Bank's contributions to the Bank's 401(k)
profit sharing plan of $4,800, $5,099, $4,800, $3,124 and $2,575 for the
accounts of Messrs. Thomas Prisby, James Prisby, Stephens and Stur and Ms.
Dobrinich, respectively; contributions of $17,356, 17,356, $17,305, $11,104
and $9,448 for the accounts of Messrs. Thomas Prisby, James Prisby, Stephens
and Stur and Ms. Dobrinich, respectively, pursuant to the ESOP; and
contributions of $36,395, $26,652 and $18,048 allocated to Messrs. Thomas
Prisby, James Prisby and Stephens, respectively, pursuant to the ESOP SERP.
STOCK OPTIONS
The following table sets forth certain information concerning grants of
stock options awarded to the named executive officers during the fiscal year
ended December 31, 2001.
<Table>
<Caption>
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS GRANT DATE
% OF TOTAL VALUE
OPTIONS OPTIONS GRANTED EXERCISE EXPIRATION GRANT DATE
NAME GRANTED(1) TO EMPLOYEES PRICE(2) DATE PRESENT VALUE(3)
- -------------------------------------------------------------------------------------------------------------------
Thomas F. Prisby 35,000 12.2% $11.25 4/27/11 $117,250
- -------------------------------------------------------------------------------------------------------------------
James W. Prisby 30,000 10.4% $11.25 4/27/11 $100,500
- -------------------------------------------------------------------------------------------------------------------
John T. Stephens 20,000 7.0% $11.25 4/27/11 $ 67,000
- -------------------------------------------------------------------------------------------------------------------
Jeffrey C. Stur 10,000 3.5% $11.25 4/27/11 $ 33,500
- -------------------------------------------------------------------------------------------------------------------
Janice S. Dobrinich 10,000 3.5% $11.25 4/27/11 $ 33,500
</Table>
- ---------------
(1) Consists of stock options exercisable at the rate of 20% per year from the
date of grant.
(2) In all cases the exercise price was based on the fair market value of a
share of Common Stock on the date of grant.
(3) The fair value of the options granted was estimated using the Black-Scholes
Pricing Model. Under such analysis, the risk-free interest rate was assumed
to be 5.03%, the expected volatility to be 30.2% and an expected dividend
yield of 3.2%.
10
The following table sets forth certain information concerning exercises of
stock options by the named executive officers during the fiscal year ended
December 31, 2001 and options held at December 31, 2001.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND YEAR END OPTION VALUES
<Table>
<Caption>
- ------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
NUMBER OF UNEXERCISED OPTIONS
AT YEAR END
SHARES ACQUIRED VALUE -------------------------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE
- -----------------------------------------------------------------------------------------------------------------
Thomas F. Prisby -- -- 91,000 189,000
- ------------------------------------------------------------------------------------------------
James W. Prisby -- -- 72,000 153,000
- ------------------------------------------------------------------------------------------------
John T. Stephens -- -- 50,000 100,000
- ------------------------------------------------------------------------------------------------
Jeffrey C. Stur -- -- 11,000 29,000
- ------------------------------------------------------------------------------------------------
Janice S. Dobrinich -- -- 12,000 28,000
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
<Caption>
- --------------------- -------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
VALUE OF UNEXERCISED OPTIONS
AT YEAR END(1)
------------------------------
NAME EXERCISABLE UNEXERCISABLE
- -----------------------------------------------------------------------------------------------------------------------------------
Thomas F. Prisby $406,350 $820,400
- ------------------------------------------------------------------------------------------------ ---------------------------------
- ----
James W. Prisby $322,200 $664,050
- ------------------------------------------------------------------------------------------------ ---------------------------------
- ----
John T. Stephens $220,500 $422,000
- ------------------------------------------------------------------------------------------------ ---------------------------------
- ----
Jeffrey C. Stur $ 49,410 $119,710
- ------------------------------------------------------------------------------------------------ ---------------------------------
- ----
Janice S. Dobrinich $ 52,200 $109,300
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------ ---------------------------------
- ----
-------------------------------------
</Table>
- ---------------
(1) Based on a per share market price of $14.35 at December 31, 2001.
EMPLOYMENT AGREEMENTS
In connection with the conversion of the Bank from a federally chartered
mutual savings bank to a federally chartered stock savings bank, the Company and
the Bank ("Employers") entered into employment agreements with each of Messrs.
Thomas Prisby, James Prisby and Stephens ("Executives"), which agreements
superseded existing employment agreements with such persons. The Employers
agreed to employ each of the Executives for a term of three years, in each case
in their current respective positions. The agreements with the Executives are at
their current salary levels. The Executives' compensation and expenses are paid
by the Employers in the same proportion as the time and services actually
expended by the Executives on behalf of each respective Employer. The employment
agreements are reviewed annually by the Boards of Directors of the Employers.
The term of each of the Executives' employment agreements is extended daily for
a successive additional one-day period unless the Employers provide notice not
less than 60 days prior to such date, not to extend the employment term.
Each of the employment agreements is terminable with or without cause by
the Employers. The Executives have no right to compensation or other benefits
pursuant to the employment agreements for any period after voluntary termination
or termination by the Employers for cause, disability, retirement or death. In
the event that (i) the Executive terminates his employment because of failure to
comply with any material provision of the employment agreement by the Employers
or the Employers change the Executive's title or duties or (ii) the employment
agreement is terminated by the Employers other than for cause, disability,
retirement or death or by the Executive as a result of certain adverse actions
which are taken with respect to the Executive's employment following a change in
control of the Company, as defined, the Executive will be entitled to a cash
severance amount equal to three times his average annual compensation, as
defined, plus an amount to reimburse the Executive for certain tax obligations
per Section 280G of the Code.
A change in control is generally defined in the employment agreements to
include any change in control of the Company required to be reported under the
federal securities laws, as well as (i) the acquisition by any person of 20% or
more of the Company's outstanding voting securities and (ii) a change in a
majority of the directors of the Company during any three-year period without
the approval of at least two-thirds of the persons who were directors of the
Company at the beginning of such period.
Although the above-described employment agreements could increase the cost
of any acquisition of control of the Company, management of the Company does not
believe that the terms thereof would have a significant anti-takeover effect.
The Company and/or the Bank may determine to enter into similar employment
agreements with other officers of the Company and/or the Bank in the future.
11
DIRECTORS' COMPENSATION
Members of the Company's Board of Directors receive $500 per Board meeting.
Members of the Bank's Board of Directors receive $1,500 per Board meeting
attended, $350 per Compensation Committee meeting, $200 per Executive Committee
meeting, and $300 per Audit Committee meeting. Messrs. Thomas Prisby, James
Prisby and Stephens are not compensated for attending Bank or Company Board
Meetings, or for attending Bank or Company Committee meetings. Board fees are
subject to periodic adjustment by the Board of Directors.
RETIREMENT PLAN
The Bank maintains a non-contributory, tax-qualified defined benefit
pension plan ("Retirement Plan") for eligible employees. All salaried employees
at least age 21 who have completed at least one year of service are eligible to
participate in the Retirement Plan. The Retirement Plan provides a benefit for
each participant, including executive officers named in the Summary Compensation
Table above, equal to 1.5% of the participant's final average compensation
(highest average annual compensation during 60 consecutive calendar months)
multiplied by the participant's years (and any fraction thereof) of eligible
employment. A participant is fully vested in his or her benefit under the
Retirement Plan after five years of service. The Retirement Plan is funded by
the Bank on an actuarial basis, and all assets are held in trust by the
Retirement Plan trustee.
The following table illustrates the annual benefit payable upon normal
retirement at age 65 at various levels of compensation and years of service
under the Retirement Plan.
<Table>
<Caption>
YEARS OF SERVICE(1)(2)
------------------------------------------------
REMUNERATION 15 20 25 30 35
- ------------ ------- ------- ------- ------- --------
$ 80,000.................................... $18,000 $24,000 $30,000 $36,000 $ 42,000
100,000.................................... 22,500 30,000 37,500 45,000 52,500
120,000.................................... 27,000 36,000 45,000 54,000 63,000
140,000.................................... 31,500 42,000 52,500 63,000 73,500
160,000.................................... 36,000 48,000 60,000 72,000 84,000
180,000.................................... 40,500 54,000 67,500 81,000 94,500
200,000.................................... 45,000 60,000 75,000 90,000 105,000
220,000.................................... 49,500 66,000 82,500 99,000 115,500
</Table>
- ---------------
(1) The annual retirement benefits shown in the table are single life annuity
amounts with no offset for Social Security benefits. There are no other
offsets to benefits.
(2) For the fiscal year of the Retirement Plan beginning on July 1, 2001, the
average final compensation used to compute benefits under the Retirement
Plan did not exceed $170,000 in accordance with the Code (as adjusted for
subsequent years pursuant to Code provisions). Benefits in excess of the
limitation are provided through cash payments made annually to each officer
affected by such limitation. For the fiscal year of the Retirement Plan
beginning on July 1, 2001, the maximum annual benefit payable under the
Retirement Plan was $127,273 (as adjusted for subsequent years pursuant to
Code provisions). The maximum years of service credited for benefit purposes
is not limited.
12
The following table sets forth the years of credited service and the
average annual earnings (as defined above) determined as of June 30, 2001, the
end of the 2000 plan year, for each of the executive officers named in the
Summary Compensation Table.
<Table>
<Caption>
YEARS OF AVERAGE ANNUAL
CREDITED SERVICE EARNINGS(1)
---------------- --------------
Thomas F. Prisby......................................... 18 $159,996
James W. Prisby.......................................... 26 $159,996
John T. Stephens......................................... 17 $159,996
Jeffrey C. Stur.......................................... 28 $112,296
Janice S. Dobrinich...................................... 24 $ 92,248
</Table>
- ---------------
(1) Reflects effect of limitation of the amount of compensation that may be used
in calculating benefits under the provisions of the Code.
TRANSACTIONS WITH CERTAIN RELATED PERSONS
In accordance with applicable federal laws and regulations, the Bank offers
mortgage loans to its directors, officers and employees as well as members of
their immediate families for the financing of their primary residences and
certain other loans. These loans are generally made on substantially the same
terms as those prevailing at the time for comparable transactions with
non-affiliated persons. It is the belief of management that these loans neither
involve more than the normal risk of collectibility nor present other
unfavorable features.
Section 22(h) of the Federal Reserve Act generally provides that any credit
extended by a savings institution, such as the Bank, to its executive officers,
directors and, to the extent otherwise permitted, principal stockholder(s), or
any related interest of the foregoing, must be on substantially the same terms,
including interest rates and collateral, as those prevailing at the time for
comparable transactions by the savings institution with non-affiliated parties
unless the loans are made pursuant to a benefit or compensation program that (i)
is widely available to employees of the institution, (ii) does not give
preference to any director, executive officer or principal stockholder, or
certain affiliated interests of either, over other employees of the savings
institution, and (iii) does not involve more than the normal risk of repayment
or present other unfavorable features.
13
PERFORMANCE GRAPH
The following graph demonstrates comparison of the cumulative total returns
for the Common Stock, the S&P 500, the Nasdaq Bank Index and the SNL $1B -- $5B
Thrift Index from the close of trading on July 24, 1998, the date the Common
Stock commenced trading, to the close of trading on December 31, 2001.
CFS BANCORP, INC.
TOTAL RETURN PERFORMANCE
[PERFORMANCE GRAPH]
<Table>
<Caption>
- ----------------------------------------------------------------------------------------------------------
Index 07/24/98 12/31/98 12/31/99 12/31/00 12/31/01
- ----------------------------------------------------------------------------------------------------------
CFS Bancorp Inc. 100.00 88.77 84.80 101.21 139.96
- ----------------------------------------------------------------------------------------------------------
S&P 500 100.00 108.47 131.29 119.34 105.16
- ----------------------------------------------------------------------------------------------------------
Nasdaq Bank Index* 100.00 87.50 82.39 97.01 109.18
- ----------------------------------------------------------------------------------------------------------
SNL $1B-$5B Thrift Index 100.00 85.25 76.34 92.28 131.56
- ----------------------------------------------------------------------------------------------------------
</Table>
*Previously, the Company has relied on the S&P 500 and SNL $1B-$5B Thrift
Index for comparison. However, in view of the ongoing implementation of the
Company's strategic decision to become more like a community bank, the Company
believes that the Nasdaq Bank Index is a more appropriate index than SNL $1B-$5B
Thrift Index.
14
BENEFICIAL OWNERSHIP OF COMMON STOCK
BY CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table includes, as of the Voting Record Date, certain
information as to the Common Stock beneficially owned by (i) the only persons or
entities, including any "group" as that term is used in Section 13(d)(3) of the
1934 Act, who or which were known to the Company to be the beneficial owners of
more than 5% of the issued and outstanding Common Stock, (ii) the directors and
director nominees of the Company, (iii) certain executive officers of the
Company, and (iv) all directors, director nominees and executive officers of the
Company as a group.
<Table>
<Caption>
AMOUNT AND NATURE
OF BENEFICIAL
NAME OF BENEFICIAL OWNER OWNERSHIP AS OF PERCENT OF
OR NUMBER OF PERSONS IN GROUP MARCH 8, 2002 (1) COMMON STOCK
- ----------------------------- ----------------- ------------
CFS Bancorp, Inc. .......................................... 1,390,087(2) 10.32%
Employee Stock Ownership Plan
707 Ridge Road
Munster, Indiana 46321
Directors and Director Nominees:
Sally A. Abbott............................................. 46,918(3)(4) *
Gregory W. Blaine........................................... 31,550(5) *
Thomas J. Burns............................................. 26,217(6) *
Gene Diamond................................................ 70,211(7) *
Frank D. Lester............................................. 3,156(8) *
James W. Prisby............................................. 380,356(3)(9) 2.80%
Thomas F. Prisby............................................ 383,449(3)(10) 2.82%
Other Executive Officers:
John T. Stephens............................................ 235,912(3)(11) 1.74%
Jeffrey C. Stur............................................. 58,513(12) *
Janice S. Dobrinich......................................... 60,511(13) *
All directors, director nominees, and executive officers of
the Company as a group (10 persons)....................... 1,296,793(14) 9.35%
</Table>
- ---------------
* Represents less than 1% of the outstanding stock.
(1) Based upon filings made pursuant to the 1934 Act and information furnished
by the respective individuals. Under regulations promulgated pursuant to
the 1934 Act, shares of Common Stock are deemed to be beneficially owned by
a person if he or she directly or indirectly has or shares (i) voting
power, which includes the power to vote or to direct the voting of the
shares, or (ii) investment power, which includes the power to dispose or to
direct the disposition of the shares. Unless otherwise indicated, the named
beneficial owner has sole voting and dispositive power with respect to the
shares.
(2) The ESOP was established by an agreement between the Company and Messrs.
James Prisby and Stephens and Ms. Dobrinich who act as trustees of the plan
("Trustees"). Under the terms of the ESOP, the allocated shares held in the
ESOP will be voted in accordance with the instructions of the participating
employees. Unallocated shares held in the ESOP will generally be voted in
the same ratio on any matter as those allocated shares for which
instructions are given, subject in each case to the fiduciary duties of the
ESOP trustees and applicable law. Any allocated shares which either abstain
on the proposal or are not voted will be disregarded in determining the
percentage of stock voted for and against each proposal by the participants
and beneficiaries. As of the Voting Record Date, 443,095 shares held by the
ESOP had been allocated to the accounts of participating employees. The
amount of
(Footnotes continued on following page)
15
Common Stock beneficially owned by directors who serve as Trustees of the
ESOP and by all directors and executive officers as a group does not
include the unallocated shares held by the ESOP.
(3) Includes with respect to Ms. Abbott and Messrs. James Prisby, Thomas Prisby
and Stephens 9,078, 37,424, 45,883 and 24,324 shares, respectively, held by
a trust established by the Company to fund its obligations with respect to
deferred supplemental retirement benefits. Ms. Abbott and Messrs. Stephens,
James Prisby and Thomas Prisby each disclaim beneficial ownership of such
shares except to the extent of their personal pecuniary interests therein.
(4) Includes 8,000 shares subject to stock options exercisable within 60 days
of March 8, 2002, and 9,600 shares held in the Recognition Plan allocated
to Ms. Abbott, and 20,240 shares held in an individual retirement plan for
Ms. Abbott.
(5) Includes 8,000 shares subject to stock options exercisable within 60 days
of March 8, 2002, 8,100 shares held in the Recognition Plan allocated to
Mr. Blaine, and 50 shares held by Mr. Blaine's children living at his home.
(6) Includes 8,000 shares subject to stock options exercisable within 60 days
of March 8, 2002, and 9,600 shares held in the Recognition Plan allocated
to Mr. Burns, and 2,217 shares held in an individual retirement plan for
Mr. Burns.
(7) Includes 8,000 shares subject to stock options exercisable within 60 days
of March 8, 2002 and 9,600 shares held in the Recognition Plan allocated to
Mr. Diamond and 1,211 shares held in an individual retirement plan for Mr.
Diamond.
(8) Includes 2,400 shares subject to stock options exercisable within 60 days
of March 8, 2002 allocated to Mr. Lester.
(9) Includes 111,000 shares subject to stock options exercisable within 60 days
of March 8, 2002, 66,000 shares held in the Recognition Plan allocated to
Mr. James Prisby, 8,449 shares allocated to him pursuant to the ESOP,
30,437 shares held in the Bank's 401(k) profit sharing plan, 66,773 shares
held in the James W. Prisby Trust for which Mr. James Prisby is the trustee
and sole beneficiary, 23,000 shares held by Mr. James Prisby's son and
37,273 shares held in a trust for Mr. James Prisby's spouse.
(10) Includes 140,000 shares subject to stock options exercisable within 60 days
of March 8, 2002, 84,000 shares held in the Recognition Plan allocated to
Mr. Thomas Prisby, 8,449 shares allocated to him pursuant to the ESOP,
17,388 shares held in the Bank's 401(k) profit sharing plan, 25,150 shares
held in a trust of which Mr. Thomas Prisby is the trustee and sole
beneficiary, 7,310 shares in an individual retirement account and 27,269
shares held in a trust for Mr. Thomas Prisby's spouse.
(11) Includes 78,000 shares subject to stock options which are exercisable
within 60 days of March 8, 2002, 48,000 shares held in the Recognition Plan
allocated to Mr. Stephens, 8,284 shares allocated to him pursuant to the
ESOP, 22,636 shares held in the Bank's 401(k) profit sharing plan and
14,980 shares owned by Mr. Stephens' spouse and daughter.
(12) Includes 19,000 shares subject to stock options which are exercisable
within 60 days of March 8, 2002, 10,500 shares held in the Recognition Plan
allocated to Mr. Stur, 6,227 shares allocated to him pursuant to the ESOP,
14,420 shares held in the Bank's 401(k) profit sharing plan, 100 shares
owned by his son and 5,000 shares owned jointly with Mr. Stur's spouse.
(13) Includes 20,000 shares subject to stock options which are exercisable
within 60 days of March 8, 2002, 15,000 shares held in the Recognition Plan
allocated to Ms. Dobrinich, 5,370 shares allocated to her pursuant to the
ESOP and 14,074 shares held in the Bank's 401(k) profit sharing plan.
(14) Includes 260,400 shares held by the Recognition Plan, which may be voted by
directors and executive officers pending vesting and distribution, 36,779
shares allocated to executive officers pursuant to the ESOP and 402,400
shares which may be acquired by directors and officers upon the exercise of
stock options which are currently or shall first become exercisable within
60 days of March 8, 2002.
(Footnotes continued on following page)
16
RATIFICATION OF APPOINTMENT OF AUDITORS
The Audit Committee has recommended and the Board of Directors of the
Company has appointed Ernst & Young, LLP independent certified public
accountants, to perform the audit of the Company's financial statements for the
fiscal year ending December 31, 2002 and further directed that the selection of
auditors be submitted for ratification by the stockholders at the Annual
Meeting.
The Company has been advised by Ernst & Young LLP that neither that firm
nor any of its associates has any relationship with the Company or its
subsidiaries other than the usual relationship that exists between independent
certified public accountants and clients. Ernst & Young LLP will have one or
more representatives at the Annual Meeting who will have an opportunity to make
a statement, if they so desire, and will be available to respond to appropriate
questions.
The Audit Committee has considered, in determining whether to appoint Ernst
& Young LLP as the Company's auditors, whether the provision of services, other
than auditing services, by Ernst & Young LLP is compatible with maintaining the
auditor's independence. In addition to performing auditing services, the
Company's auditor performed other tax and audit-related services for the Company
in fiscal 2001. These other services included completing corporate tax returns,
and reviewing and advising the Company regarding its internal control and
auditing programs for the Company. The Audit Committee believes that Ernst &
Young LLP's performance of these other services is compatible with maintaining
the auditor's independence.
AUDIT FEES
The aggregate amount of fees billed by Ernst & Young LLP for its audit of
the Company's annual financial statements for fiscal 2001 and for its review of
the Company's unaudited interim financial statements included in reports filed
by the Company under the Exchange Act during such year was $137,000.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION
The Company did not engage or pay any fees to Ernst & Young LLP with
respect to the provision of financial information systems design and
implementation services during fiscal 2001.
AUDIT-RELATED AND OTHER FEES
Ernst & Young LLP billed $44,666 for its audit-related services, which
related to the audit of the Company's employee benefit plans and reviewing and
advising the Company regarding its internal control and internal audit programs.
The aggregate of fees billed by Ernst & Young LLP for all other services
rendered to us during fiscal 2001 was $100,462 all of which were paid in fiscal
2001. These services consisted primarily of preparing state and local income tax
returns and other tax-related services.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE RATIFICATION OF THE
APPOINTMENT OF ERNST & YOUNG LLP AS INDEPENDENT AUDITORS FOR THE FISCAL YEAR
ENDING DECEMBER 31, 2002.
17
STOCKHOLDER PROPOSALS FOR THE 2002 ANNUAL MEETING
Any proposal which a stockholder wishes to have included in the proxy
materials of the Company relating to the next annual meeting of stockholders of
the Company, which is scheduled to be held in April 2003, must be received at
the principal executive offices of the Company, 707 Ridge Road, Munster, Indiana
46321, Attention: Monica F. Sullivan, Corporate Secretary, no later than
November 28, 2002. If such proposal is in compliance with all of the
requirements of Rule 14a-8 under the 1934 Act, it will be included in the proxy
statement and set forth on the form of proxy issued for such annual meeting of
stockholders. It is urged that any such proposals be sent certified mail, return
receipt requested.
Stockholder proposals which are not submitted for inclusion in the
Company's proxy materials pursuant to Rule 14a-8 under the 1934 Act may be
brought before an annual meeting pursuant to Section 2.14 of the Company's
Bylaws. Any such proposal must also be received no later than November 28, 2002.
ANNUAL REPORTS
A copy of the Company's Annual Report to Stockholders for the fiscal year
ended December 31, 2001 accompanies this Proxy Statement. Such annual report is
not part of the proxy solicitation materials.
UPON RECEIPT OF A WRITTEN REQUEST, THE COMPANY WILL FURNISH TO ANY
STOCKHOLDER WITHOUT CHARGE A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K
FOR FISCAL 2001 REQUIRED TO BE FILED UNDER THE 1934 ACT. SUCH WRITTEN REQUEST
SHOULD BE DIRECTED TO THE COMPANY, 707 RIDGE ROAD, MUNSTER, INDIANA 46321,
ATTENTION: MONICA SULLIVAN, CORPORATE SECRETARY. THE FORM 10-K IS NOT PART OF
THE PROXY SOLICITATION MATERIALS.
OTHER MATTERS
Management is not aware of any business to come before the Annual Meeting
other than the matters described above in this Proxy Statement. However, if any
other matters should properly come before the meeting, it is intended that the
proxies solicited hereby will be voted with respect to those other matters in
accordance with the judgment of the persons voting the proxies.
The cost of the 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 the proxy
materials to the beneficial owners of the Common Stock. The Company has retained
Georgeson Shareholder Communications, Inc. to assist with the solicitation of
proxies for a fee not to exceed $5,000, plus reimbursement for out-of-pocket
expenses. In addition to solicitations by mail, directors, officers and
employees of the Company may solicit proxies personally or by telephone without
additional compensation.
By Order of the Board of Directors
/s/ MONICA F. SULLIVAN
Monica F. Sullivan
Corporate Secretary
March 28, 2002
18
REVOCABLE REVOCABLE
PROXY CFS BANCORP, INC. PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF CFS
BANCORP, INC. FOR USE AT THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON APRIL
30, 2002 AND AT ANY ADJOURNMENT THEREOF.
The undersigned hereby appoints the Board of Directors of CFS Bancorp,
Inc. ("Company") or any successors thereto, as proxies with full power of
substitution, to represent and vote, as designated below, all the shares of
common stock of the Company held of record by the undersigned on March 8, 2002
at the Annual Meeting of Stockholders to be held at the Center for Visual and
Performing Arts located at 1040 Ridge Road, Munster, Indiana on Tuesday, April
30, 2002 at 10:00 a.m. Central Time and at any adjournment thereof.
This Proxy will be voted as directed, but if the proxy card is returned
and properly signed and no instructions are specified, this Proxy will be voted
FOR the election of the Board of Directors' nominees to the Board of Directors,
FOR ratification of the Company's independent auditors, and otherwise at the
discretion of the proxy holders. If you do not return this card, your shares
will not be voted.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD
PROMPTLY USING THE ENCLOSED ENVELOPE.
(Continued, and to be dated and signed, on the reverse side)
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CFS BANCORP, INC.
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. [X]
[ ]
FOR WITHHOLD FOR ALL
ALL ALL EXCEPT
1. Election of Directors for three year terms expiring [ ] [ ] [ ]
in 2005 or until their successors are elected and
qualified:
Nominees: Sally A. Abbott, Gregory W. Blaine, and
Thomas J. Burns
INSTRUCTIONS: To withhold authority to vote for one or
more of the nominees, write the name of such nominee(s)
in the space provided below.
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THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION
OF THE NOMINEES LISTED ABOVE.
2. PROPOSAL to ratify the appointment of Ernst & Young
LLP as independent auditors of the Company for the FOR AGAINST ABSTAIN
year ending December 31, 2002. [ ] [ ] [ ]
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE RATIFICATION OF THE
APPOINTMENT OF ERNST & YOUNG LLP AS INDEPENDENT AUDITORS OF THE COMPANY.
In their discretion the proxies are authorized to vote upon such other matters
as may properly come before the Annual Meeting.
The undersigned hereby acknowledge receipt of notice of the Annual Meeting of
Stockholders of CFS Bancorp, Inc. called for April 30, 2002 and the accompanying
Proxy Statement and other materials prior to the signing of this Proxy.
Date: , 2002
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Signature(s)
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Signature(s)
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Please sign this Proxy exactly as your name appears on your stock certificate.
When shares of the Company are held by joint tenants, both tenants should sign.
When signing this Proxy as attorney, executor, administrator, trustee, or
guardian, please give the full title as such. If the shares are owned by a
corporation, please sign the Proxy in full corporate name, by the President or
other authorized officer. If a partnership or other entity owns the shares,
please sign in the partnership or other name, as an authorized person.
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YOUR VOTE IS IMPORTANT.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE.