July 14, 2003
Dear Stockholder:
We are pleased to invite you to attend the Annual Meeting of Stockholders
of Sound Federal Bancorp, Inc., (the "Company"). The Annual Meeting will be held
at the Hyatt Regency-Greenwich, 1800 E. Putnam Avenue, Old Greenwich,
Connecticut 06870 at 10:00 a.m., (local time) on August 14, 2003.
The enclosed Notice of Annual Meeting and Proxy Statement describe the
formal business to be transacted.
At the Annual Meeting, stockholders will be given an opportunity to
elect directors and to ratify the appointment of KPMG LLP as auditors for the
Company's 2004 fiscal year.
The Board of Directors of the Company has determined that the matters to be
considered at the Annual Meeting are in the best interest of the Company and its
stockholders. For the reasons set forth in the proxy statement, the Board of
Directors unanimously recommends a vote "FOR" each matter to be considered.
On behalf of the Board of Directors, we urge you to sign, date and return
the enclosed proxy card as soon as possible, even if you currently plan to
attend the Annual Meeting. Your vote is important, regardless of the number of
shares that you own. Voting by proxy will not prevent you from voting in person,
but will assure that your vote is counted if you are unable to attend the
meeting.
Sincerely,
/s/ Richard P. McStravick
-------------------------
Richard P. McStravick
President and Chief Executive Officer
Sound Federal Bancorp, Inc.
1311 Mamaroneck Avenue
White Plains, New York 10605
(914) 761-3636
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held On August 14, 2003
Notice is hereby given that the Annual Meeting of Sound Federal Bancorp,
Inc. (the "Company") will be held at the Hyatt Regency-Greenwich, 1800 E. Putnam
Avenue, Old Greenwich, Connecticut 06870 on August 14, 2003 at 10:00 a.m., local
time.
A Proxy Card and a Proxy Statement for the Annual Meeting are enclosed.
The Annual Meeting is for the purpose of considering and acting upon:
1. The election of three directors of the Company;
2. The ratification of the appointment of KPMG LLP as auditors for the Company
for the fiscal year ending March 31, 2004; and
3. Such other matters as may properly come before the Annual Meeting, or any
adjournments thereof. The Board of Directors is not aware of any other
business to come before the Annual Meeting.
Any action may be taken on the foregoing proposals at the Annual Meeting on
the date specified above, including all adjournments of the Annual Meeting.
Stockholders of record at the close of business on June 23, 2003 are the
stockholders entitled to vote at the Annual Meeting, and any adjournments
thereof.
EACH STOCKHOLDER, WHETHER HE OR SHE PLANS TO ATTEND THE ANNUAL MEETING, IS
REQUESTED TO SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD WITHOUT DELAY IN THE
ENCLOSED POSTAGE-PAID ENVELOPE. ANY PROXY GIVEN BY THE STOCKHOLDER MAY BE
REVOKED AT ANY TIME BEFORE IT IS EXERCISED. A PROXY MAY BE REVOKED BY FILING
WITH THE SECRETARY OF THE COMPANY A WRITTEN REVOCATION OR A DULY EXECUTED PROXY
BEARING A LATER DATE. ANY STOCKHOLDER PRESENT AT THE ANNUAL MEETING MAY REVOKE
HIS OR HER PROXY AND VOTE PERSONALLY ON EACH MATTER BROUGHT BEFORE THE ANNUAL
MEETING. HOWEVER, IF YOU ARE A STOCKHOLDER WHOSE SHARES ARE NOT REGISTERED IN
YOUR OWN NAME, YOU WILL NEED ADDITIONAL DOCUMENTATION FROM YOUR RECORD HOLDER IN
ORDER TO VOTE PERSONALLY AT THE ANNUAL MEETING.
By Order of the Board of Directors
/s/ Anthony J. Fabiano
---------------------
Anthony J. Fabiano
Corporate Secretary
White Plains, New York
July 14, 2003
IMPORTANT: A SELF-ADDRESSED ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE. NO
POSTAGE IS REQUIRED IF MAILED WITHIN THE UNITED STATES.
PROXY STATEMENT
SOUND FEDERAL BANCORP, INC.
1311 Mamaroneck Avenue
White Plains, New York 10605
(914) 761-3636
ANNUAL MEETING OF STOCKHOLDERS
August 14, 2003
This Proxy Statement is furnished in connection with the solicitation of
proxies on behalf of the Board of Directors of Sound Federal Bancorp, Inc. (the
"Company") to be used at the Annual Meeting of Stockholders of the Company (the
"Meeting"), which will be held at the Hyatt Regency-Greenwich, 1800 E. Putnam
Avenue, Old Greenwich, Connecticut 06870 on August 14, 2003 at 10:00 a.m., local
time, and all adjournments thereof. The accompanying Notice of Annual Meeting of
Stockholders and this Proxy Statement are first being mailed to stockholders on
or about July 14, 2003.
REVOCATION OF PROXIES
Stockholders who execute proxies in the form solicited hereby retain the
right to revoke them in the manner described below. Unless so revoked, the
shares represented by such proxies will be voted at the Meeting and all
adjournments thereof. Proxies solicited on behalf of the Board of Directors of
the Company will be voted in accordance with the directions given thereon. Where
no instructions are indicated, proxies will be voted "FOR" the proposals set
forth in this Proxy Statement for consideration at the Meeting.
Proxies may be revoked by sending written notice of revocation to the
Secretary of the Company, at the address of the Company shown above, voting a
later dated proxy, or by attending the Meeting and voting in person. The
presence at the Meeting of any stockholder who had given a proxy shall not
revoke such proxy unless the stockholder delivers his or her ballot in person at
the Meeting or delivers a written revocation to the Secretary of the Company
prior to the voting of such proxy. However, if you are a stockholder whose
shares are not registered in your name, you will need appropriate documents from
your record holder to vote personally at the Meeting.
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
Holders of record of the Company's common stock, par value $.01 per share
(the "Common Stock"), as of the close of business on June 23, 2003 (the "Record
Date") are entitled to one vote for each share then held. As of the Record Date,
the Company had 13,247,133 shares of Common Stock issued and outstanding. The
presence in person or by proxy of a majority of the outstanding shares of Common
Stock entitled to vote is necessary to constitute a quorum at the Meeting. In
the event there are not sufficient votes for a quorum, or to approve or ratify
any matter being presented at the time of the Meeting, the Meeting may be
adjourned in order to permit further solicitation of proxies.
Directors are elected by a plurality of the shares voted at the Meeting
without regard to broker non-votes or proxies as to which the authority to vote
is being withheld. The ratification of auditors must be approved by a majority
of the shares voted at the Meeting without regard to broker non-votes or proxies
marked "abstain."
In accordance with the provisions of the Certificate of Incorporation of
the Company, record holders of Common Stock who beneficially own in excess of
10% of the outstanding shares of Common Stock (the "Limit") are not entitled to
any vote with respect to the shares held in excess of the Limit. The Company's
Certificate of Incorporation authorizes the Board of Directors (i) to make all
determinations necessary to implement and apply the Limit, including determining
whether persons or entities are acting in concert, and (ii) to demand that any
person who is reasonably believed to beneficially own stock in excess of the
Limit supply information to the Company to enable the Board of Directors to
implement and apply the Limit.
Persons and groups who beneficially own in excess of five percent of the
Common Stock are required to file certain reports with the Securities and
Exchange Commission ("SEC") regarding such ownership pursuant to the Securities
Exchange Act of 1934 (the "Exchange Act").
The following table sets forth, as of the Record Date, the shares of Common
Stock beneficially owned by named executive officers and directors individually,
by executive officers and directors as a group and by each person who was the
beneficial owner of more than five percent of the Company's outstanding shares
of Common Stock on the Record Date.
Amount of Shares Percent of Shares
Name and Address of Owned and Nature of Common Stock
Beneficial Owner of Beneficial Ownership(4) Outstanding (2)(3)
Significant Shareholders:
Sound Federal Savings Employee Stock
Ownership Plan and Trust
1311 Mamaroneck Avenue
White Plains, New York 10605 1,125,421 8.5%
Named Directors and Executive Officers:(1)
Bruno J. Gioffre 215,124 1.6
Richard P. McStravick 250,403 1.9
Joseph Dinolfo 110,034 0.8
Donald H. Heithaus 122,854 0.9
Joseph A. Lanza 90,708 0.7
Eldorus Maynard 45,434 0.3
James Staudt 65,397 0.5
Samuel T. Telerico 1,130 --
Anthony J. Fabiano 139,364 1.0
------- -----
All executive officers and directors
as a group (9 persons) 1,040,448 7.6%
========= =====
-----------------------------
(1) The Company's executive officers and directors are also executive officers
and directors of Sound Federal Savings (the "Bank").
(2) Includes 14,575 shares awarded to each outside director other than Mr.
Telerico and Mr. Maynard, 58,100 shares and 38,733 shares awarded to
Messrs. McStravick and Fabiano, respectively, pursuant to the Company's
Recognition and Retention Plan ("RRP"). Also includes 40,948 shares,
101,816 shares, and 88,536 shares for Messrs. Gioffre, McStravick and
Fabiano, respectively, and 30,988 shares each for Messrs. Heithaus,
Dinolfo, Lanza and Staudt subject to options pursuant to the Company's
Stock Option Plan ("SOP").
(3) Calculated as a percentage of common shares outstanding plus stock options
that are exercisable within 60 days.
(4) Unless otherwise indicated, each person effectively exercises sole (or
shared with spouse) voting and dispositive power as to the shares reported.
PROPOSAL I--ELECTION OF DIRECTORS
The Company's Board of Directors currently consists of eight members. The
Board of Directors increased the size of the Board to nine members, creating a
vacancy. The Company's bylaws provide that approximately one-third of the
2
directors are to be elected annually. Directors of the Company are generally
elected to serve for a three-year period or until their respective successors
shall have been elected and shall qualify. Three directors will be elected at
the Meeting. The Board of Directors has nominated to serve as directors Donald
H. Heithaus, Joseph A. Lanza and Roberta I. Bernhardt, each to serve for a
three-year term. Messrs. Heithaus and Lanza are currently members of the Board
of Directors.
The table below sets forth certain information regarding the composition of
the Company's Board of Directors, including the terms of office of Board
members. It is intended that the proxies solicited on behalf of the Board of
Directors (other than proxies in which the vote is withheld as to one or more
nominees) will be voted at the Meeting for the election of the nominees
identified below. If any nominee is unable to serve, the shares represented by
all such proxies will be voted for the election of such substitute as the Board
of Directors may recommend. At this time, the Board of Directors knows of no
reason why any of the nominees might be unable to serve, if elected. Except as
indicated herein, there are no arrangements or understandings between any
nominee and any other person pursuant to which such nominee was selected. The
Board of Directors recommends a vote "FOR" each of the nominees for director
listed in this proxy statement.
Shares of
Common Stock
Current Beneficially
Director Term Owned on the Percent
Name Age Positions Held Since (1) to Expire Record Date (2) of Class
------------------- ------- ---------------------- ----------- ---------- ------------ ---------
NOMINEES
Donald H. Heithaus 68 Director 1978 2003 122,854 0.9%
Joseph A. Lanza 56 Director 1998 2003 90,708 0.7
Roberta I. Bernhardt 64 -- -- -- -- --
DIRECTORS CONTINUING IN OFFICE
Joseph Dinolfo 69 Director 1985 2004 110,034 0.8
Eldorus Maynard 68 Director 2000 2004 45,434 0.3
Samuel T. Telerico 67 Director 2001 2004 1,130 --
Bruno J. Gioffre 68 Chairman of the Board 1975 2005 215,124 1.6
James Staudt 50 Director 1987 2005 65,397 0.5
Richard P. McStravick 54 President, Chief 1996 2005 250,403 1.9
Executive Officer
and Director
----------------------------
(1) Reflects initial appointment to the Board of Directors of the Bank's
mutual predecessor.
(2) Includes 14,575 shares awarded to each outside director other than Mr.
Maynard and Mr. Telerico, and 58,100 shares awarded to Mr. McStravick,
pursuant to the recognition and retention plan. Also includes 40,948
shares and 101,816 shares for Messrs. Gioffre and McStravick,
respectively, and 30,988 shares each for Messrs. Staudt, Heithaus, Lanza
and Dinolfo subject to options pursuant to the stock option plan.
The principal occupation during the past five years of each director of the
Company is set forth below. All directors and executive officers have held their
present positions for all five years unless otherwise stated.
Bruno J. Gioffre is the Chairman of the Board of Directors and has been so
since December 1997. Mr. Gioffre was formerly general counsel to the Bank. Mr.
Gioffre is of counsel to the law firm of Gioffre & Gioffre Professional
Corporation and is a retired Senior Justice for the Town of Rye, New York.
3
Richard P. McStravick is President and Chief Executive Officer of the Bank.
Mr. McStravick has been employed by the Bank in various capacities since 1977.
Mr. McStravick was appointed to the Board of Directors in 1996.
Roberta I. Bernhardt, CPA is a partner in the accounting firm of Citrin
Cooperman & Company, LLP.
Joseph Dinolfo is the retired President of the Dinolfo Wilson Agency, Inc.
an insurance agency.
Donald H. Heithaus is the President of the Happiness Laundry Service, Inc.
Joseph A. Lanza is the President of Lanza Electric, a private electrical
contractor.
Eldorus Maynard is the retired Chairman of the Board and Chief Executive
Officer of Peekskill Financial Corporation ("Peekskill"). Mr. Maynard was
employed by Peekskill since 1958 and became a member of the Company's Board of
Directors in July 2000.
James Staudt is a partner with the law firm of McCullough, Goldberger &
Staudt. Mr. Staudt is also general counsel to the Bank.
Samuel T. Telerico is a principal with Teledan Enterprises International,
an international trade and consulting firm. Mr. Telerico was previously employed
by American Can Company from 1960 until 1990.
Executive Officer Who Is Not A Director
Anthony J. Fabiano is Senior Vice President, Chief Financial Officer and
Corporate Secretary of the Company. He joined the Bank in July 1998. Prior to
joining the Bank, he was the Chief Financial Officer at MSB Bancorp, Inc.
Ownership Reports by Officers and Directors
The Common Stock is registered pursuant to Section 12(g) of the Exchange
Act. The officers and directors of the Company and beneficial owners of greater
than 10% of the Company's Common Stock ("10% beneficial owners") are required to
file reports on Forms 3, 4, and 5 with the SEC disclosing changes in beneficial
ownership of the Common Stock. SEC rules require disclosure in the Company's
Proxy Statement and Annual Report on Form 10-K of the failure of an officer,
director or 10% beneficial owner of the Company's Common Stock to file a Form 3,
4 or 5 on a timely basis. All Officers and Directors of the Company who are
required to file Forms 3, 4 and 5 filed these forms on a timely basis except for
a Form 4 for Bruno J. Gioffre which was filed late. The Form 4 was filed on
January 17, 2003 and reported a purchase of 1,000 shares on March 13, 2002.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The business of the Company's Board of Directors is conducted through
meetings and activities of the Board and its committees. During the fiscal year
ended March 31, 2003, the Board of Directors of the Company held 16 regular and
special meetings. During the year ended March 31, 2003, no director attended
fewer than 75 percent of the total meetings of the Board of Directors of the
Company or the Bank and committees on which such director served.
The Executive Committee, which acts as the Compensation Committee, meets
periodically to review the performance of officers and employees and determine
compensation programs and adjustments. It is comprised of Directors Gioffre,
Staudt, Heithaus, McStravick and Dinolfo. The Executive Committee met three
times during the year ended March 31, 2003.
The Board of Directors serves as the Nominating Committee. During the year
ended March 31, 2003, one meeting of the Nominating Committee was held.
4
The Audit Committee consists of Directors Heithaus, Maynard and Telerico.
This committee meets on a quarterly basis and as otherwise required to review
audit programs and reports as well as other regulatory compliance issues. The
Audit Committee's primary function is to assist the Board of Directors in
fulfilling its oversight responsibilities. The primary duties of the Audit
Committee include but are not limited to the following:
o Prepare the report of the Committee included in the Company's annual proxy
statements;
o Serve as an independent and objective party to monitor the Company's
financial reporting process and internal control systems;
o Retain and monitor the qualifications, independence and performance of the
Company's independent auditor; and
o Provide an open avenue of communication among the independent auditor,
senior management, the internal auditing department and the Board.
Each member of the Audit Committee is "independent" as defined in the
listing standards of the National Association of Securities Dealers. The Board
of Directors has adopted a written charter for the Audit Committee. The Audit
Committee recommends to the Board of Directors the appointment of independent
auditors for the upcoming fiscal year. The Audit Committee met four times during
the year ended March 31, 2003.
Audit Committee Report
The Audit Committee of the Board is responsible for providing independent,
objective oversight of the Company's accounting functions and internal controls.
The Audit Committee operates under a written charter approved by the Board of
Directors.
Management is responsible for the Company's internal controls and financial
reporting process. The independent accountants are responsible for performing an
independent audit of the Company's consolidated financial statements in
accordance with auditing standards generally accepted in the United States and
to issue a report thereon. The Audit Committee's responsibility is to monitor
and oversee these processes.
In connection with these responsibilities, the Audit Committee met with
management and KPMG LLP, the independent auditing firm for the Company, to
review and discuss the March 31, 2003 consolidated financial statements. The
Audit Committee also discussed with KPMG LLP the matters required by Statement
on Auditing Standards No. 61 (Communication with Audit Committees). The Audit
Committee also received the written disclosures and the letter from KPMG LLP,
required by Independence Standards Board Standard No. 1 (Independence
Discussions with Audit Committees). Additionally, the Audit Committee has
discussed with KPMG LLP the issue of its independence from the Company.
Based upon the Audit Committee's discussions with management and the
independent auditors, and the Audit Committee's review of the representations of
management and the independent auditors, the Audit Committee recommended that
the Board of Directors include the audited consolidated financial statements in
the Company's Annual Report on Form 10-K for the year ended March 31, 2003,
filed with the Securities and Exchange Commission.
This report shall not be deemed incorporated by reference by any general
statement incorporating by reference this proxy statement into any filing under
the Securities Act of 1933, as amended, or the Exchange Act except to the extent
that the Company specifically incorporates this information by reference, and
shall not otherwise be deemed filed under such Acts.
This report has been provided by the Audit Committee:
Director Donald Heithaus (Chairman of the Audit Committee)
and Directors Maynard and Telerico
5
Stock Performance Graph
Set forth below is a stock performance graph comparing the yearly total
return on the Company's Common Stock with (a) the monthly cumulative total
return on stocks included in the Nasdaq Composite Index, and (b) the monthly
cumulative total return on stocks for federal savings institutions included in
the Company's Standard Industry Code ("SIC") Index. The Company first issued its
Common Stock on October 8, 1998. Accordingly, the information presented below is
for the period beginning with the closing price of the Company's Common Stock on
October 8, 1998, its first trading day and ending on March 31, 2003. Cumulative
return assumes the reinvestment of dividends, and is expressed in dollars on an
assumed initial investment of $100.
There can be no assurance that the Company's stock performance will
continue in the future with the same or similar trend depicted in the graph. The
Company will not make or endorse any predictions as to future stock performance.
[OBJECT OMITTED]
Period Ending
------------------------------------------------------------------------
Index 10/08/98 03/31/99 03/31/00 03/31/01 03/31/02 03/31/03
-----
----------- ------------ ----------- ----------- ----------- -----------
Sound Federal Bancorp, Inc. 100.00 107.35 110.23 139.26 227.67 532.42
SIC Code 6035 - Federal Savings
Institutions 100.00 107.56 87.49 137.65 163.70 174.38
Nasdaq Market Index 100.00 145.24 267.45 110.08 111.45 81.74
6
Compensation Committee Interlocks and Insider Participation
The Company does not independently compensate its executive officers or
employees. The Executive Committee of the Bank retains the principal
responsibility for the compensation of the officers, directors and employees of
the Bank. The Executive Committee consists of Directors Gioffre, Heithaus,
Dinolfo, Staudt and McStravick. The Executive Committee reviews the benefits
provided to the Bank's officers and employees. During the year ended March 31,
2003 the Executive Committee met three times.
Report of the Compensation Committee
Under rules established by the SEC, the Company is required to provide
certain data and information in regard to the compensation and benefits provided
to the Company's Chief Executive Officer and other executive officers of the
Company. The disclosure requirements for the Chief Executive Officer and other
executive officers include the use of tables and a report explaining the
rationale and considerations that led to fundamental executive compensation
decisions affecting those individuals. In fulfillment of this requirement, the
Executive Committee of the Bank, at the direction of the Board of Directors, has
prepared the following report for inclusion in this proxy statement.
The Board has delegated to the Executive Committee the responsibility of
assuring that the compensation of the Chief Executive Officer and other
executive officers is consistent with the compensation strategy, competitive
practices, the performance of the Bank, and the requirements of appropriate
regulatory agencies. Only non-employee directors who serve on the Executive
Committee participate in executive compensation decision making. Any cash
compensation paid to executive officers is paid by the Bank. The Company does
not currently pay any cash compensation to executive officers.
Compensation of senior management is reviewed annually on a calendar-year
basis. In general, the purpose of the annual compensation review is to ensure
that the Bank's base salary levels are competitive with financial institutions
similar in size, geographic market and business profile in order for the Bank to
attract and retain persons of high quality. In this regard, the Executive
Compensation Committee utilized various informational sources, including the
"Savings and Community Bankers Annual Salary Survey." In addition, the Executive
Compensation Committee considers the overall profitability of the Bank and the
executive officer's contribution to the Bank when making its decision.
The Board of Directors approved a base salary for the Bank's Chief
Executive Officer of $205,000 for fiscal year 2003, which represented a 15%
increase from the Chief Executive Officer's base salary of $177,650 in fiscal
2002. The 2003 base salary was based upon the Chief Executive Officer's
performance, industry standards, and the successful completion of the
second-step conversion.
The primary goal of the Bank and its Executive Committee is to provide an
adequate level of compensation and benefits in order to attract and retain key
executives. The performance of each officer is reviewed annually to determine
his or her contribution to the overall success of the institution.
This report has been provided by the non-employee members of the
Executive Committee:
Directors Gioffre, Heithaus, Dinolfo and Staudt
Compensation of Directors
Directors of the Company receive an annual retainer of $500, except for the
Chairman of the Board who receives $1,000. Directors of the Bank receive $2,000
for each meeting attended, except for the Chairman of the Board who receives
$4,000. In addition, the Chairman of the Board receives a $10,000 annual
retainer for his services as Chairman.
7
EXECUTIVE COMPENSATION
The following table sets forth information as to annual and other
compensation for services in all capacities for executive officers who earned
more than $100,000 in salary and bonuses during the fiscal year ended March 31,
2003.
==================================================================================================================================
Summary Compensation Table
==================================================================================================================================
==================================================================================================================================
Annual Compensation Long-Term
Compensation Awards
------------------------------------------------------------------------------- ---------------------------------- ---------------
-------------------------- ----------- ------------- --------- ---------------- ------------- ---------- --------- ---------------
Name and Fiscal Salary Bonus Other Restricted Options/ LTIP All Other
Annual
Compensation Stock SARs Compensation
Principal Position Year ($) ($) ($) (1) Award(s) ($) (#) Payouts ($) (2)
-------------------------- ----------- ------------- --------- ---------------- ------------- ---------- --------- ---------------
-------------------------- ----------- ------------- --------- ---------------- ------------- ---------- --------- ---------------
Richard P. McStravick 2003 185,171 10,700 27,200 -- -- -- 3,942
President and Chief 2002 171,875 12,000 18,500 -- -- -- 3,800
Executive Officer 2001 155,690 9,000 18,675 -- -- -- 3,718
-------------------------- ----------- ------------- --------- ---------------- ------------- ---------- --------- ---------------
Anthony J. Fabiano 2003 148,250 12,000 -- -- -- -- --
Senior Vice President, 2002 124,500 9,000 -- -- -- -- --
Chief Financial Officer 2001 106,167 7,800 -- -- -- -- --
and Corporate Secretary
========================== =========== ============= ========= ================ ============= ========== ========= ===============
(1) Represents director's fees for service on the Company's and Bank's Board of
Directors.
(2) Consists of the use of the Bank's automobile.
Benefits
Directors Deferred Fee Plan. The Directors Deferred Fee Plan ("Directors
Plan") is a non-qualified deferred compensation plan into which directors can
defer up to 100% of their board fees earned during the calendar year. All
amounts deferred by a director are fully vested at all times. Upon cessation of
a director's service with the Bank, the Bank will pay the director the amounts
credited to the director's deferred fee account. The amounts will be paid in
substantially equal annual installments, as selected by the director. The date
of the first installment payment also will be selected by the director. The
Directors Plan permits each director to determine whether to invest all or a
portion of such Director's account in Common Stock of the Company.
If the director dies before all payments have been made, the remaining
payments will be made to the beneficiary designated by the director in the same
form that payments were made to the director. If a director dies before
receiving any payments, the Bank shall pay the director's account to the
director's beneficiary, commencing within 30 days of the director's death, over
the period initially elected by the director. At the request of the beneficiary,
and with the approval of the Board, the director's benefits may be paid to the
beneficiary in a lump sum. The director may request a hardship distribution of
all or part of his or her benefits if the director suffers an unforeseeable
emergency, defined as a severe financial hardship to the director resulting from
a sudden and unexpected illness or accident of the director or his or her
dependent, loss of the director's property due to casualty, or other similar
extraordinary and unforeseeable circumstances arising as a result of events
beyond the director's control.
Executive Agreements. The Bank has employment agreements with Messrs.
McStravick and Fabiano. The agreements with Messrs. McStravick and Fabiano have
a term of three years and may be extended for an additional 12 months on each
anniversary date so that the remaining term shall be 36 months. If the agreement
is not renewed, the agreement will expire 36 months following the anniversary
date. Under the agreements, the base salaries for Messrs. McStravick and Fabiano
are $205,000 and $165,000, respectively. In addition to the base salary, each
agreement provides for, among other things, participation in retirement plans,
stock option plans and other employee and fringe benefits applicable to other
employees. The agreements provide for termination by the Bank for cause at any
time, in which event, the executive would have no right to receive compensation
or other benefits for any period after termination. In the event the Bank
terminates the executive's employment for reasons other than disability or for
8
cause, or in the event of the executive's termination of employment for good
reason upon (i) failure by the Bank to comply with any material provision of the
agreement, which failure has not been cured within 10 days after a notice of
noncompliance is issued by the executive, (ii) following a change in control (as
defined) at any time during the term of the agreement, or (iii) any purported
termination of the executive's employment which is not pursuant to a valid
notice of termination, the executive would be entitled to severance pay in an
amount equal to three times the average annual compensation (computed on the
basis of the most recent five (5) taxable years) includable in gross income for
federal income tax purposes. Messrs. McStravick and Fabiano would receive an
aggregate of approximately $671,000 and $470,000, respectively, pursuant to
their employment agreements upon a change in control of the Bank, based upon
current levels of compensation. The Bank would also continue, at the Bank's
expense, the executive's life, health, dental and other applicable benefit plan
coverage until the executive attains the age of 70 years, provided, however,
that the Bank's obligation terminates if the executive receives equivalent
medical or dental coverage from a new employer. The executive is entitled to
participate in the Bank's medical, dental and life insurance coverage and
reimbursement plans to the extent that such plans exist, until the executive's
death. Under each agreement, if the executive becomes disabled or incapacitated
to the extent that the executive is unable to perform his duties, he will be
entitled to 100% of his compensation for the first six months, and 60%
thereafter for the remaining term of the agreement. Any disability payment is
reduced to the extent benefits are received under disability insurance, workers'
compensation or other similar program.
In July 2001, the Company entered into employment agreements with Messrs.
McStravick and Fabiano. The Company's employment agreements with each executive
contain substantially similar provisions to the Bank employment agreements,
except that the Company employment agreements provide each executive
indemnification against any excise taxes which may be owed by the executive for
any payments made in connection with a change in control which would constitute
"excess parachute payments" under Section 280G of the Code. The indemnification
payment would be the amount necessary to ensure that the amount of such payments
and the value of such benefits received by the executive be equal to the amount
of such payments and the value of such benefits as the executive would receive
in the absence of such excise tax, including any federal, state and local taxes
on the Company's payment to the executive attributable to such taxes. The
agreements with the Company do not provide for additional compensation to either
executive.
Severance Plan for Key Employees. Sound Federal Savings maintains the
Severance Plan for Key Employees, which is designed to offer a degree of
economic security to employees in the position of assistant vice-president and
above in the event their services are terminated as a result of a change in
control. In the event of (i) the involuntary termination of a key employee
following a change in control other than for cause, or (ii) the voluntary
termination of a key employee's employment within one year after a change in
control, following any demotion, loss of title, office or significant authority,
reduction in annual compensation or benefits or relocation of the key employee's
principal place of employment by more than 30 miles, the key employee shall be
entitled to a severance pay in an amount equal to one month of base salary
multiplied by the key employee's years of employment, up to twenty-four months,
provided that the minimum severance payment will be six months of base salary
for an assistant vice-president and twelve months for a vice-president. In
addition, the key employee will be entitled to continued life, medical and
dental coverage for the same period as the number of months used for the
calculation of severance benefits. Severance benefits will be paid in a lump sum
within 30 days of the key employee's termination of employment. Benefits payable
under the Severance Plan for Key Employees will be reduced, if necessary, to
avoid an "excess parachute payment" under Section 280G of the Internal Revenue
Code.
Director Emeritus Plan. The Director Emeritus Plan is a non-qualified
retirement plan. Under the Director Emeritus Plan, any director who attains the
age of 70 years after the completion of 15 years of service as a director
qualifies for director emeritus status. A director who has completed five years
of service as a director qualifies for director emeritus if termination of
service is due to the merger, consolidation, takeover or dissolution of the
Bank. Under the Director Emeritus Plan, a director emeritus is entitled to the
same compensation that the Director received when he or she retired as a
director, without the obligation of attendance at meetings of the Board of
Directors. Compensation is paid to the director emeritus from the date of
attainment of such status until age eighty-five, or for fifteen years or death
whichever comes first.
Defined Benefit Pension Plan. The Bank maintains two defined benefit
pension plans, one of which was assumed at the time the Company completed the
acquisition of Peekskill Financial Corporation ("Retirement Plans"). Employees
9
age 21 or older who have worked at the Bank for a period of one year and have
been credited with 1,000 or more hours of service with the Bank during the year
are eligible to accrue benefits under the Retirement Plans. The Bank contributes
each year, if necessary, an amount to the Retirement Plans to satisfy the
actuarially determined minimum funding requirements in accordance with the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"). For the
year ended March 31, 2003, the Bank made contributions to the Retirement Plans
of approximately $3.1 million. At December 31, 2002, the total market value of
the assets in the Retirement Plans trust funds was approximately $7.1 million.
In the event of retirement on or after the normal retirement date (i.e.,
the first day of the calendar month coincident with or next following the later
of age 65 or the fifth anniversary of participation in the Retirement Plans, or,
for a participant prior to January 1, 1992, age 65), the plan is designed to
provide a single life annuity. For a married participant, the normal form of
benefit is an actuarially reduced joint and survivor annuity where, upon the
participant's death, the participant's spouse is entitled to receive a benefit
equal to 50% of that paid during the participant's lifetime. Alternatively, a
participant may elect (with proper spousal consent, if necessary) from various
other options, including a joint and 100% survivor annuity, joint and 66-2/3%
survivor annuity, joint and 50% survivor annuity, years certain option and
social security option. The normal retirement benefit provided is an amount
equal to the difference between 4% of final earnings (as defined in the plan)
and 0.65% of the final average compensation (average earnings during the last
three (3) calendar years of service) up to the Social Security taxable wage
base, multiplied by the participant's years of credited service (up to a maximum
of 15 years). Retirement benefits are also payable upon retirement due to early
and late retirement or death. A reduced benefit is payable upon early retirement
at age 55 and the completion of 5 years of vested service with the Bank. Fifty
percent of the normal retirement benefit will be paid to a surviving spouse if
the participant dies while in active service and has attained age 50 with 10
years of vested service. The preretirement death benefit is reduced by 1.96% for
each year the spouse is more than 10 years younger than the participant. If the
participant has not attained age 50 with 10 years of service, but has completed
5 years of service, the spouse will be eligible for a reduced benefit payable as
a joint and 50% annuity. Upon termination of employment other than as specified
above, a participant who has five years of vested service is eligible to receive
his or her accrued benefit commencing, generally, on the employee's normal
retirement date, or, if elected, on or after reaching age 55.
The following table indicates the annual retirement benefit that would be
payable under the Retirement Plans upon retirement at age 65 in calendar year
2003, expressed in the form of a single life annuity for the final average
salary and benefit service classifications specified below.
Years of Service and Benefit Payable at Retirement
Final Average --------------------------------------------------
Compensation 15 20 25 30
------------ ----------- ----------- ----------- ----------
$ 50,000 $ 26,154 $ 26,154 $ 26,154 $ 26,154
$ 75,000 $ 41,154 $ 41,154 $ 41,154 $ 41,154
$ 100,000 $ 56,154 $ 56,154 $ 56,154 $ 56,154
$125,000 $ 71,154 $ 71,154 $ 71,154 $ 71,154
$150,000 $ 86,154 $ 86,154 $ 86,154 $ 86,154
$ 170,000 $ 98,154 $ 98,154 $ 98,154 $ 98,154
$ 200,000 $ 116,154 $ 116,154 $ 116,154 $ 116,154
As of March 31, 2003, Mr. McStravick and Mr. Fabiano had 25 years and four
years, respectively, of credited service (i.e., benefit service) under the
Retirement Plans.
401(k) Plan. The Bank maintains the Sound Federal Savings and Loan
Association 401(k) Savings Plan in RSI Retirement Trust (the "401(k) Plan")
which is a qualified, tax-exempt defined contribution plan with a salary
deferral feature under Section 401(k) of the Code. Employees who have attained
age 21 and have completed one year of employment are eligible to participate,
provided, however, that leased employees, employees paid on an hourly or
contract basis, employees covered by a collective bargaining agreement and owner
employees (as defined in the plan) are not eligible to participate. Eligible
employees are entitled to enter the 401(k) Plan on a monthly basis.
Under the 401(k) Plan, participants are permitted to make salary reduction
contributions (in whole percentages) equal to the lesser of (i) from 1% to 10%
10
of compensation or (ii) $10,000 (as indexed annually). For these purposes,
"compensation" includes wages, salary, fees and other amounts received for
personal services prior to reduction for the participant contribution to the
401(k) plan, commissions, compensation based on profits, overtime, bonuses, wage
continuation payments due to illness or disability of a short-term nature,
amounts paid or reimbursed for moving expenses, and the value of any
nonqualified stock option granted to the extent includable in gross income for
the year granted. Compensation does not include contributions made by the Bank
to any other pension, deferred compensation, welfare or other employee benefit
plan, amounts realized from the exercise of a nonqualified stock option or the
sale of a qualified stock option, and other amounts which received special tax
benefits. Compensation does not include compensation in excess of the Code
Section 401(a)(17) limits (i.e., $200,000 in 2002). All contributions and
earnings are fully and immediately vested. A participant may withdraw salary
reduction contributions, rollover contributions and matching contributions in
the event the participant suffers a financial hardship. A participant may make a
withdrawal from his or her accounts for any reason after age 59 1/2.
The 401(k) Plan permits employees to direct the investment of his or her
own accounts into various investment options including an "Employer Stock Fund."
Participants are entitled to direct the trustee as to how to vote his or her
allocable shares of Common Stock in the Employer Stock Fund.
Plan benefits will be paid to each participant in the form of a single cash
payment at normal retirement age unless earlier payment is selected. If a
participant dies prior to receipt of the entire value of his or her 401(k) Plan
accounts, payment will generally be made to the beneficiary in a single cash
payment as soon as possible following the participant's death. Payment will be
deferred if the participant had previously elected a later payment date. If the
beneficiary is not the participant's spouse, payment will be made within one
year of the date of death. If the spouse is the designated beneficiary, payment
will be made no later than the date the participant would have attained age 70
1/2. Normal retirement age under the 401(k) Plan is age 65. Early retirement age
is age 55.
At March 31, 2003, the total market value of the assets in the 401(k) Plan
was approximately $3.1 million.
Stock Option Plan. During the year ended March 31, 2000, the Company
adopted, and the Company's stockholders approved, the 1999 Stock Option Plan
(the "Stock Option Plan"). Pursuant to the Stock Option Plan, options to
purchase 261,453 shares were granted to non-employee directors (including two
directors emeriti) at an exercise price of $3.298 per share, the fair market
value of the underlying shares on the date of the award. The term of the options
is ten years from the date of grant, and the shares subject to awards will be
adjusted in the event of any merger, consolidation, reorganization,
recapitalization, stock dividend, stock split, combination or exchange of shares
or other change in the corporate structure of the Company. The awards included
an equal number of reload options ("Reload Options"), limited stock appreciation
rights ("Limited Rights") and dividend equivalent rights ("Dividend Equivalent
Rights"). A Limited Right gives the option holder the right, upon a change in
control of the Company or the Bank, to receive the excess of the market value of
the shares represented by the Limited Rights on the date exercised over the
exercise price. The Limited Rights are subject to the same terms and conditions
as the stock options. Payment upon exercise of Limited Rights will be in cash,
or in the event of a merger transaction, for shares of the acquiring corporation
or its parent, as applicable. The Dividend Equivalent Rights entitle the option
holder to receive an amount of cash at the time that certain extraordinary
dividends are declared equal to the amount of the extraordinary dividend
multiplied by the number of options that the person holds. For these purposes,
an extraordinary dividend is defined as any dividend where the rate of dividend
exceeds the Bank's weighted average cost of funds on interest-bearing
liabilities for the current and preceding three quarters. The Reload Options
entitle the option holder, who has delivered shares that he or she owns as
payment of the exercise price for option stock, to a new option to acquire
additional shares equal in amount to the shares he or she has traded in. Reload
Options may also be granted to replace option shares retained by the employer
for payment of the option holder's withholding tax. The option price at which
additional shares of stock can be purchased by the option holder through the
exercise of a Reload Option is equal to the market value of the previously owned
stock at the time it was surrendered. The option period during which the Reload
Option may be exercised expires at the same time as that of the original option
that the holder has exercised.
Set forth below is certain information concerning options outstanding to
the Named Executive Officers at March 31, 2003. No options were granted to the
Named Executive Officers during fiscal year 2003. No options were exercised by
the Named Executive Officers during fiscal year 2003.
11
====================================================================================================================
FISCAL YEAR-END OPTION VALUES
====================================================================================================================
============================ ================ ================= ========================= ==========================
Number of Unexercised Value of Unexercised
Shares Acquired Value Options at In-The-Money Options at
Name Upon Exercise Realized Year-End Year-End (1)
------------------------- --------------------------
------------------------- --------------------------
Exercisable/Unexercisable Exercisable/Unexercisable
(#) ($)
---------------------------- ---------------- ----------------- ------------------------- --------------------------
---------------------------- ---------------- ----------------- ------------------------- --------------------------
Richard P. McStravick -- $-- 101,816/25,454 $937,928/$234,482
---------------------------- ---------------- ----------------- ------------------------- --------------------------
Anthony J. Fabiano -- $-- 88,536/22,134 $815,593/$203,898
============================ ================ ================= ========================= ==========================
------------------------------------
(1) Based on a market value of $12.51 per share at March 31, 2003 and an
exercise price of $3.298.
Recognition and Retention Plan. During the fiscal year ended March 31, 2000
the Company adopted, and the Company's stockholders approved, the 1999
Recognition and Retention Plan (the "Recognition Plan"). Pursuant to the
Recognition Plan, 14,575 shares of stock were awarded to each non-employee
director, except for Messrs. Maynard and Telerico who did not receive awards,
and 58,100 and 38,733 shares were awarded to Mr. McStravick and Mr. Fabiano,
respectively.
The Company does not have any equity compensation program that was not
approved by stockholders other than its employee stock ownership plan.
Set forth below is certain information as of March 31, 2003 regarding
equity compensation to directors, directors emeriti, executive officers and
employees of the Company approved by stockholders.
===================================================================================================================
Number of securities to be Number of securities
issued upon exercise of Weighted average remaining available for
Plan Category outstanding options and rights exercise pricse issuance under plans
-------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------
Equity compensation plans approved
by stockholders(1) 822,019 $3.298 --
-------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------
Total 822,019 $3.298 --
===================================================================================================================
-------------
(1) Includes 40,424 shares awarded under the Recognition and Retention Plan
that were unvested at March 31, 2003.
Employee Stock Ownership Plan and Trust
The Bank established an employee stock ownership plan ("ESOP") for eligible
employees. Employees age 21 or older who have worked at the Bank for a period of
one year and have been credited with 1,000 or more hours of service during the
year are eligible to participate. The ESOP borrowed funds from the Company and
used those funds to purchase 531,563 shares of the Company Common Stock in the
1998 conversion to a mutual holding company. The ESOP purchased 622,458 shares
of the Company's Common Stock in the Company's second-step conversion that was
completed in January 2003. The shares were purchased with the proceeds of a $6.2
million loan from the Company. The loans are collateralized by the Common Stock
purchased by the ESOP. The Bank will contribute to the ESOP sufficient funds to
pay the principal and interest on the loans. At March 31, 2003, the loans have
balances of $961,000 and $6.2 million, respectively; have a ten-year and
twenty-year term, respectively; and bear interest at the prime rate and 6.0%,
respectively. Shares purchased by the ESOP are held in a suspense account for
allocation among participants as the loan is repaid.
Shares are released from the suspense account in an amount proportional to
the repayment of the ESOP loans and are allocated among ESOP participants on the
basis of compensation in the year of allocation.
Participants in the ESOP received credit for service prior to the effective
date of the ESOP. A participant vests in 100% of his or her account balance
after 5 years of credited service. A participant who terminates employment for
reasons other than death, retirement, disability or following a change in
12
control prior to five years of credited service will forfeit the nonvested
portion of his or her benefits under the ESOP. Benefits are payable in the form
of Common Stock and cash upon death, retirement, disability or separation from
service. Alternatively, a participant may request that the benefits be paid
entirely in the form of Common Stock. The Company recognized an expense of
$532,000 for the ESOP in the fiscal year ended March 31, 2003 and allocated
53,156 shares of Common Stock to participants.
In connection with the establishment of the ESOP, the Bank established a
committee of non-employee directors to administer the ESOP and appointed an
independent financial institution to serve as trustee of the ESOP. The ESOP
committee may instruct the trustee regarding investment of funds contributed to
the ESOP. The ESOP trustee, subject to its fiduciary duty, must vote all
allocated shares held in the ESOP in accordance with the instructions of
participating employees, provided such action does not violate ERISA standards.
Under the ESOP, nondirected shares, and shares held in the suspense account,
will be voted in a manner calculated to most accurately reflect the instructions
it has received from participants regarding the allocated stock so long as such
vote is in accordance with the provisions of ERISA.
TRANSACTIONS WITH CERTAIN RELATED PERSONS
Transactions With Certain Related Persons
The Bank offers loans to directors, officers, and employees which are made
by the Bank to such persons in the ordinary course of business on substantially
the same terms (other than interest rate), including collateral, as those
prevailing at the time for comparable transactions with other persons, and which
do not involve more than the normal risk of collectibility or present other
unfavorable features. All such loans were performing in accordance with their
terms as of the date of this proxy statement. Federal regulations permit
executive officers and directors to participate in loan programs that are
available to other employees, so long as the director or executive officer is
not given preferential treatment compared to other participating employees. The
interest rate on loans to directors and officers is the same as that offered to
the Bank's other employees.
Section 402 of the Sarbanes-Oxley Act of 2002 generally prohibits an issuer
from: (1) extending or maintaining credit; (2) arranging for the extension of
credit; or (3) renewing an extension of credit in the form of a personal loan
for an officer or director. There are several exceptions to this general
prohibition, one of which is applicable to the Company. Sarbanes-Oxley does not
apply to loans made by a depository institution that is insured by the FDIC and
is subject to the insider lending restrictions of the Federal Reserve Act. All
loans to the Company's directors and officers are made in conformity with the
Federal Reserve Act and the FDIC Regulation O.
13
Set forth below is certain information as to loans made by Sound Federal
Savings to certain of its directors and executive officers, or their affiliates,
whose aggregate indebtedness to Sound Federal Savings exceeded $60,000 at any
time since April 1, 2002. Unless otherwise indicated, all of the loans are
secured loans and all loans designated as residential loans are first mortgage
loans secured by the borrower's principal place of residence.
Highest
Original Balance Balance on Interest Rate
Date Loan During 2003 March 31, on March
Name of Individual Loan type Originated Amount Fiscal Year 2003 31, 2003
Joseph Dinolfo Consumer 7/26/2002 $168,000 $ 168,000 $ 151,090 6.500%
Bruno J. Gioffre Mortgage 5/6/1998 300,000 249,739 234,153 6.500
Donald H. Heithaus Mortgage 10/15/1997 300,000 281,205 279,320 6.500
Commercial Mortgage 2/27/2002 600,000 586,798 577,021 7.250
Home Equity 8/17/1999 200,000 179,331 179,331 6.500
Consumer 12/12/2000 90,000 70,169 53,126 6.500
Joseph A. Lanza Home Equity 12/17/2002 260,000 177,347 177,347 7.000
Mortgage 12/24/2000 209,000 185,223 -- 9.375
Mortgage 2/1/1974 38,000 8,341 -- 8.500
Home Equity 2/11/2000 60,000 59,118 -- 6.500
Richard P. McStravick Home Equity 8/21/1998 200,000 70,853 59,758 6.500
Bruno J. Gioffre, in addition to his duties as Chairman of the Board of the
Company, is counsel to the law firm of Gioffre & Gioffre Professional
Corporation, which represents the Bank in mortgage loan transactions. For the
year ended March 31, 2003, the Bank paid Gioffre & Gioffre Professional
Corporation fees of $166,000. The terms and conditions of these fees and
services are substantially the same as those for similar transactions with other
parties.
James Staudt, in addition to his duties as a Director of the Company, is a
partner in the law firm of McCullough, Goldberger & Staudt which also represents
the Bank in mortgage loan transactions. Effective January 1, 1999, Mr. Staudt is
also general counsel to the Company. For the year ended March 31, 2003, the Bank
paid McCullough, Goldberger & Staudt fees of $66,000 and paid Mr. Staudt legal
fees of $35,000 for his services as general counsel.
PROPOSAL II--RATIFICATION OF APPOINTMENT OF AUDITORS
The Company's independent auditors for the year ended March 31, 2003 were
KPMG LLP. The Board of Directors of the Company has approved the engagement of
KPMG LLP to be the Company's independent auditors for the year ending March 31,
2004, subject to the ratification of the engagement by the Company's
stockholders at the Meeting. Representatives of KPMG LLP are expected to attend
the Meeting to respond to appropriate questions and to make a statement if
deemed appropriate.
14
Set forth below is certain information concerning aggregate fees billed for
professional services rendered by KPMG LLP during the year ended March 31, 2003:
Audit Fees....... $ 132,000
Tax Services..... $ 113,050
All other fees... $ 165,000
Audit fees are for the audit of the March 31, 2003 consolidated financial
statements and reviews of quarterly financial information for the year then
ended. Tax Services represent fees for tax compliance, consultation and advice.
All other fees consist of fees related to the second-step conversion (including
the SEC registration statement and comfort letters) and fees related to the
internal controls attestation report required under FDIC regulations. KPMG LLP
was not paid fees by the Company relating to financial information systems
design and implementation.
The Audit Committee has considered whether the provision of non-audit
services is compatible with maintaining KPMG LLP's independence. The Audit
Committee concluded that performing such non-audit services does not affect KPMG
LLP's independence in performing its functions as auditor of the Company.
In order to ratify the selection of KPMG LLP as the Company's independent
auditors, the proposal must receive at least a majority of the votes cast,
either in person or by proxy, in favor of such ratification. The Board of
Directors recommends a vote "FOR" the ratification of KPMG LLP as auditors for
the 2004 fiscal year.
STOCKHOLDER PROPOSALS
In order to be eligible for inclusion in the Company's proxy materials for
next year's Annual Meeting of Stockholders, any stockholder proposal to take
action at such meeting must be received at the Company's executive office, 1311
Mamaroneck Avenue, White Plains, New York 10605, no later than May 14, 2004. Any
such proposals shall be subject to the requirements of the proxy rules adopted
under the Exchange Act.
ADVANCE NOTICE OF BUSINESS TO BE CONDUCTED AT AN ANNUAL MEETING
The Bylaws of the Company provide an advance notice procedure before
certain business or nominations to the Board of Directors may be brought before
an annual meeting. In order for a stockholder to properly bring business before
an annual meeting, or to propose a nominee to the Board, the stockholder must
give written notice to the Secretary of the Company not less than 90 days before
the date fixed for such meeting; provided, however, that in the event that less
than 100 days notice or prior public disclosure of the date of the meeting is
given or made, to be timely, notice by the stockholder must be received no later
than the close of business on the tenth day following the day on which such
notice of the date of the annual meeting was mailed or such public disclosure
was made. The notice must include the stockholder's name, record address, and
number of shares owned by the stockholder, describe briefly the proposed
business, the reasons for bringing the business before the annual meeting, and
any material interest of the stockholder in the proposed business. In the case
of nominations to the Board, certain information regarding the nominee must be
provided. Nothing in the paragraph shall be deemed to require the Company to
include in its proxy statement and proxy relating to an annual meeting any
stockholder proposal which does not meet all of the requirements for inclusion
established by the SEC in effect at the time such proposal is received.
The date on which next year's annual meeting of stockholders is expected to
be held is August 12, 2004. Accordingly, advance written notice of business or
nominations to the Board of Directors to be brought before the next annual
meeting of stockholders must be given to the Company no later than April 10,
2004.
15
MISCELLANEOUS
The Board of Directors is not aware of any business to come before the
Meeting other than the matters described above in this proxy statement. However,
if any matters should properly come before the Meeting, it is intended that
holders of the proxies will act as directed by a majority of the Board of
Directors, except for matters related to the conduct of the Meeting, as to which
they shall act in accordance with their best judgment.
The cost of solicitation of proxies will be borne by the Company. The
Company will reimburse brokerage firms and other custodians, nominees and
fiduciaries for reasonable expenses incurred by them in sending proxy materials
to the beneficial owners of Common Stock. In addition to solicitations by mail,
directors, officers and regular employees of the Bank may solicit proxies
personally or by telegraph or telephone without additional compensation.
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR
ENDED MARCH 31, 2003 WILL BE FURNISHED WITHOUT CHARGE TO STOCKHOLDERS AS OF THE
RECORD DATE UPON WRITTEN REQUEST TO THE CORPORATE SECRETARY, SOUND FEDERAL
BANCORP, INC., 1311 MAMARONECK AVENUE, WHITE PLAINS, NEW YORK 10605.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Anthony J. Fabiano
------------------------
Anthony J. Fabiano
Corporate Secretary
White Plains, New York
July 14, 2003
16
REVOCABLE PROXY
SOUND FEDERAL BANCORP, INC.
ANNUAL MEETING OF STOCKHOLDERS
August 14, 2003
The undersigned hereby appoints the full Board of Directors, with full
powers of substitution to act as attorneys and proxies for the undersigned to
vote all shares of Common Stock of the Company which the undersigned is entitled
to vote at the Annual Meeting of Stockholders ("Meeting") to be held at the
Hyatt Regency-Greenwich, 1800 E. Putnam Avenue, Old Greenwich, Connecticut 06870
at 10:00 a.m., (local time) on August 14, 2003. The official proxy committee is
authorized to cast all votes to which the undersigned is entitled as follows:
FOR WITHHELD
1. The election as directors of all nominees
listed below (except as
marked to the contrary below) [ ] [ ]
Roberta I. Bernhardt
Donald H. Heithaus
Joseph A. Lanza
INSTRUCTION: To withhold your vote for one or
more nominees, write the name of the
nominee(s) on the line(s) below.
----------------------------------
----------------------------------
FOR AGAINST ABSTAIN
2. The ratification of the appointment of KPMG
LLP as auditors for the fiscal year ending [ ] [ ] [ ]
March 31, 2004.
The Board of Directors recommends a vote "FOR" each of the listed proposals.
THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS ARE SPECIFIED, THIS
PROXY WILL BE VOTED FOR EACH OF THE PROPOSITIONS STATED ABOVE. IF ANY OTHER
BUSINESS IS PRESENTED AT SUCH MEETING, THIS PROXY WILL BE VOTED BY THE
ABOVE-NAMED PROXIES AT THE DIRECTION OF A MAJORITY OF THE BOARD OF DIRECTORS. AT
THE PRESENT TIME, THE BOARD OF DIRECTORS KNOWS OF NO OTHER BUSINESS TO BE
PRESENTED AT THE MEETING.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
Should the undersigned be present and elect to vote at the Meeting or at
any adjournment thereof and after notification to the Secretary of the Company
at the Meeting of the stockholder's decision to terminate this proxy, then the
power of said attorneys and proxies shall be deemed terminated and of no further
force or effect. This proxy may also be revoked by sending written notice to the
Secretary of the Company at the address set forth on the Notice of Annual
Meeting of Stockholders, or by the filing of a later proxy statement prior to a
vote being taken on a particular proposal at the Meeting.
The undersigned acknowledges receipt from the Company prior to the
execution of this proxy of a Notice of the Meeting, the Company's Annual Report
on Form 10-K for the year ended March 31, 2003 and a proxy statement dated July
14, 2003.
Dated: _________________, 2003 [ ] Check Box if You Plan
to Attend Meeting
------------------------------- -----------------------------------
PRINT NAME OF STOCKHOLDER PRINT NAME OF STOCKHOLDER
------------------------------- -----------------------------------
SIGNATURE OF STOCKHOLDER SIGNATURE OF STOCKHOLDER
Please sign exactly as your name appears on this card. When signing as attorney,
executor, administrator, trustee or guardian, please give your full title. If
shares are held jointly, each holder should sign.
Please complete and date this proxy and return it promptly
in the enclosed postage-prepaid envelope.