U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[x] QUARTERLY REPORT PURSUANT TO SECTION
13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF
For the quarterly period ended September
30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION
13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to
________
Commission file number 0-25518
SOBIESKI BANCORP, INC.
(Exact name of small business issuer as
specified in its charter)
Delaware 35-1942803______
(State or other jurisdiction of (IRS
Employer Identification No.)
incorporation or organization)
2930 W. Cleveland Road, South Bend,Indiana
46628
(Address of principal executive offices)
(Zip Code)
Issuer's telephone number, including area
code: (219) 271-8300
Check whether the issuer (1) filed all
reports required to be filed by Section 13
or 15(d) of the Exchange Act during the
past 12 months (or for such shorter period
that the registrant was required to file
such reports), and (2) has been subject to
such filing requirements for the past 90
days.
Yes[X] No [ ]
As of October 27, 1997, there were 779,500
shares of the registrant's common stock
issued and outstanding.
SOBIESKI BANCORP, INC.
AND SUBSIDIARY
INDEX
Page
Number
PART I.FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Statements
of Financial Condition 1
Condensed Consolidated Statements
of Operations 2
Condensed Consolidated Statements
of Cash Flows 3
Notes to Condensed Consolidated
Financial Statements 4-6
Item 2. Management's Discussion and
Analysis of Financial Condition
and Results of Operations 7-10
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 11
Item 2. Changes in Securities 11
Item 3. Defaults Upon Senior Securities 11
Item 4. Submission of Matters To a Vote
of Security Holders 11
Item 5. Other Information 11
Item 6. Exhibits and Reports on Form
8-K 12
SIGNATURES 13
EXHIBIT 1 14-18
EXHIBIT 2 19-23
EXHIBIT 3 24-28
i
<TABLE>
<CAPTION>
Sobieski Bancorp, Inc. And Subsidiary
Condensed Consolidated Statements Of Financial Condition
September 30, 1997 and June 30, 1997
September 30, June 30,
ASSETS 1997 1997
(Unaudited)
Cash, including interest-
bearing deposits in other
financial institutions of
$ -0- and $94,477,
<S> <C> <C>
respectively $ 1,426,963 $ 1,251,373
Certificates of deposit 198,000 198,000
Investment securities,
available-for-sale (amortized
cost of $698,419 and $1,299,335,
respectively) 697,939 1,297,148
Investment securities, held-to-
maturity (market value of
approximately $1,011,300
and $1,012,900, respectively) 1,000,000 1,000,000
Mortgage-backed securities,
available-for-sale (amortized
cost of $1,680,595 and
$1,790,203, respectively) 1,686,130 1,780,210
Mortgage-backed securities,
held-to-maturity (market value of
approximately $11,354,168 and
$11,617,500, respectively) 11,456,141 11,929,352
Loans receivable, net 64,533,973 61,134,644
Real estate owned - 11,037
Federal Home Loan Bank stock,
at cost 636,000 636,000
Property and equipment, net 2,008,898 2,028,310
Other assets 634,776 466,672
Total assets $ 84,278,820 $ 81,732,746
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits $ 58,465,425 $ 59,386,630
Federal Home Loan Bank
advances 12,450,000 9,500,000
Advances from borrowers for
taxes and insurance 565,801 260,439
Accrued income taxes 63,206 80,628
Accrued interest and other
expenses 262,348 132,077
Deferred income taxes 19,000 12,177
Total liabilities 71,825,780 69,371,951
Stockholders' equity:
Preferred stock, $.01 par
value: 500,000 shares authorized;
none issued - -
Common stock, $.01 par value:
3,500,000 shares authorized;
966,000 shares issued 9,660 9,660
Additional paid-in capital 9,147,370 9,147,176
Retained earnings,
substantially restricted 6,730,338 6,670,543
Net unrealized appreciation
(depreciation) of securities
available-for-sale 3,053 (7,356)
15,890,421 15,820,023
Less: Treasury stock, at
cost, 204,803 and 206,368
shares,respectively 2,858,031 2,879,878
Unallocated Employee Stock
Ownership Plan shares;
57,935 shares 579,350 579,350
Total stockholders' equity 12,453,040 12,360,795
Total liabilities and
stockholders' equity $ 84,278,820 $ 81,732,746
</TABLE>
See accompanying notes to condensed consolidated financial
statements.
1
Sobieski Bancorp, Inc. And Subsidiary
Condensed Consolidated Statements Of Operations
for the three months ended September 30, 1997 and 1996
<TABLE>
<CAPTION>
Three Months
Ended September 30,
1997 1996
(Unaudited)
Interest Income:
<S> <C> <C>
Loans $ 1,188,364 $ 1,058,500
Mortgage-backed securities 206,731 255,624
Interest-bearing deposits 19,003 16,407
Investments and other 81,819 80,606
Total interest income 1,495,917 1,411,137
Interest expense:
Interest on deposits 673,149 720,376
Interest on borrowings 158,459 60,387
Total interest expense 831,608 780,763
Net interest income 664,309 630,374
Non-interest income:
Fees and service charges 27,435 40,175
Other income 19,907 5,255
Total non-interest income 47,342 45,430
Non-interest expenses:
Compensation and benefits 287,422 222,229
Occupancy and equipment 68,860 64,582
Federal deposit insurance premiums 9,363 449,327
Advertising and promotion 6,175 5,105
Service bureau expense 34,828 27,189
Other operating expenses 86,381 124,413
Total non-interest expenses 493,029 892,845
Income (loss) before income taxes 218,622 (217,041)
Provision (credit) for income
taxes 95,000 (86,000)
Net income (loss) $ 123,622 $ (131,041)
Earnings (loss) per common
share $ 0.18 $ (0.16)
Dividends per common share $ 0.08 $ -
</TABLE>
See accompanying notes to condensed consolidated financial
statements.
2
Sobieski Bancorp, Inc. And Subsidiary
<TABLE>
<CAPTION>
Condensed Consolidated Statements Of Cash Flows
for the three months ended September 30, 1997 and 1996
Three Months
Ended September 30,
1997 1996
(Unaudited)
Cash flows provided by
(used in) operating activities:
<S> <C> <C>
Net income (loss) $ 123,622 $ (131,041)
Adjustments to reconcile net
income (loss) to net cash provided
by operating activities:
Depreciation of property and
equipment 26,543 28,032
Gain on disposal of equipment - (200)
Gain on sale of real estate
owned, net (2,085) -
Amortization of premiums and
accretion of discounts, net 16,611 19,400
Amortization of deferred loan
fees (13,071) (11,136)
Increase in other assets (168,104) (114,856)
Decrease in accrued income taxes (17,422) (129,305)
Increase in accrued interest and
other expenses 151,924 457,294
Net cash provided by
operating activities 118,018 118,188
Cash flows provided by
(used in) investing activities:
Purchase of investment
securities - (12,415)
Proceeds from maturities
of investment securities 600,000 200,000
Principal reductions of
mortgage-backed securities 569,611 612,701
Net increase in loans made to
customers and principal
collections on loans (3,388,360) (1,224,535)
Proceeds from sale of equipment - 200
Proceeds from sale of real
estate owned 13,122 -
Purchase of property and
equipment (7,131) (9,958)
Net cash provided by (used in)
investing activities (2,212,758) 434,007
Cash flows provided by (used in) financing activities:
Net decrease in deposits (921,205) (1,251,484)
Increase in advances from
borrowers for taxes and
insurance 305,362 256,755
Federal Home Loan Bank advances 10,450,000 3,100,000
Repayment of Federal Home Loan
Bank advances ( 7,500,000) (400,000)
Purchase of treasury stock - (123,448)
Cash dividends (63,827) - .
Net cash provided by financing
activities 2,270,330 1,581,823
Increase in cash and cash
equivalents 175,590 1,266,004
Cash and cash equivalents,
beginning of period 1,251,373 1,385,520
Cash and cash equivalents,
end of period $ 1,426,963 $ 2,651,524
</TABLE>
See accompanying notes to condensed consolidated financial
statements.
3
Sobieski Bancorp, Inc. And Subsidiary
Notes To Condensed Consolidated Financial
Statements
A. GENERAL.
The accompanying condensed
consolidated financial statements
include the accounts of Sobieski
Bancorp, Inc. (the "Company") and its
wholly owned subsidiary, Sobieski
Federal Savings and Loan Association
of South Bend (the "Association").
The condensed consolidated financial
statements included herein have been
prepared by the registrant pursuant
to the rules and regulations of the
Securities and Exchange Commission.
Certain information and footnote
disclosures normally included in
financial statements prepared in
accordance with generally accepted
accounting principles have been
condensed or omitted pursuant to such
rules and regulations, although the
registrant believes that the
disclosures are adequate to make the
information presented not misleading.
In the opinion of management, the
accompanying unaudited condensed
consolidated financial statements
contain all adjustments, consisting
only of normal recurring accruals,
necessary for a fair presentation of
the Company's consolidated financial
position, results of operations and
cash flows for the interim periods
presented. The consolidated results
of operations for the interim periods
presented are not necessarily
indicative of the results that may be
expected for the full year. The
accompanying unaudited condensed
consolidated financial statements
should be read in conjunction with
the Company's consolidated financial
statements included in the Company's
Annual Report on Form 10-KSB for the
year ended June 30, 1997.
The Company cautions that any forward
looking statements contained in this
report, in a report incorporated by
reference to this report or made by
management of the Company involve
risks and uncertainties and are
subject to change based on various
factors. Actual results could differ
materially from those expressed or
implied.
B. CONVERSION AND ISSUANCE OF COMMON
STOCK.
On October 4, 1994, the Board of
Directors of the Association adopted
a plan of conversion to convert the
Association from a federally
chartered mutual savings and loan
association to a federally chartered
stock savings and loan association
(the "Conversion"). The Association
obtained the required regulatory
approval for the Conversion in
February 1995 and on March 22, 1995
the plan of conversion was approved
by a majority of the votes eligible
to be cast by the members of the
Association.
The Company was organized as a
Delaware corporation in December 1994
for the purpose of acquiring all of
the issued and outstanding capital
stock of the Association issued in
the Conversion.
At the time of Conversion, the
Association established a liquidation
account in an amount equal to the
Association's retained earnings as of
September 30, 1994. The liquidation
account will be maintained for the
benefit of depositors, as of the
eligibility record date and
supplemental eligibility record date,
who continue to maintain their
deposits with the Association after
the Conversion. In the event of a
complete liquidation (and only in
such event), each eligible depositor
will be entitled to receive a
liquidation distribution from the
liquidation account, in the
proportionate amount of the then
current adjusted balance for deposits
then held, before any liquidation
distribution may be made with respect
to the stockholders.
4
Sobieski Bancorp, Inc. And Subsidiary
Notes To Condensed Consolidated Financial
Statements
Current regulations allow the Company
to pay dividends on its stock if its
regulatory capital would not thereby
be reduced below the amount then
required for the aforementioned
liquidation account. Also, capital
distribution regulations limit the
Company's ability to make capital
distributions which include
dividends, stock redemptions,
repurchases and other transactions
charged to the capital account based
on its capital level and supervisory
condition. Federal regulations also
preclude any repurchase of the stock
of the Company for three years after
conversion except for purchases of
qualifying shares of a director and
repurchases pursuant to an offer made
on a pro rata basis to all
stockholders and with prior approval
of the Office of Thrift Supervision
or pursuant to an open-market stock
repurchase program with certain
regulatory criteria.
C. ACCOUNTING POLICIES.
Securities
Securities that may be sold as part
of the Association's asset/liability
or liquidity management or in
response to or in anticipation of
changes in interest rates and
resulting prepayment risk, or for
other similar factors, are classified
as available-for-sale and carried at
fair market value. Unrealized
holding gains and losses on
securities classified as available-
for-sale are reported net of related
deferred income taxes as a separate
component of stockholders' equity.
Securities that the Association has
the ability and positive intent to
hold to maturity are classified as
held-to-maturity and carried at
amortized cost. Trading securities
are carried at fair market value with
unrealized holding gains and losses
included in earnings. Gains and
losses on all securities transactions
are recognized when sold as
determined by the identified
certificate method. The Association
had no trading securities at
September 30, 1997.
Allowance For Loan Losses
The allowance for loan losses is
established through a provision for
loan losses based on management's
evaluation of the risks inherent in
its loan portfolio and changes in the
nature and volume of its loan
activity, including those loans which
are being specifically monitored by
management. Such evaluation, which
includes a review of loans for which
full collectibility may not be
reasonably assured, considers among
other matters, loan classification,
the estimated fair value of the
underlying collateral, economic
conditions, historical loan loss
experience, the amount of loans
outstanding and other factors that
warrant recognition in providing for
an adequate allowance for loan
losses. A significant factor
considered in the Company's allowance
is its historically low level of
loans other than one-to-four family
real estate loans. The Company's
allowance for loan losses and
nonaccrual loans at September 30,
1997 aggregated $200,000 and
$106,398, respectively.
Earnings Per Common Share
Earnings per common share is
calculated by dividing net income for
the period by the weighted average
number of common shares outstanding.
The Company accounts for the shares
of common stock acquired by its
Employee Stock Ownership Plan
("ESOP") and the restricted shares
awarded under its Recognition and
Retention Plan ("RRP") in accordance
with Statement of Position 93-6 which
prescribes that shares held by the
ESOP and the restricted shares
awarded under the RRP are not
considered in the weighted average
number of shares outstanding until
such shares are for allocation to
an ESOP participant's individual
account or
5
Sobieski Bancorp, Inc. And Subsidiary
Notes To Condensed Consolidated Financial
Statements, Concluded.
vested, in the case of the RRP.
As of September 30, 1997, 21,233
shares were released or committed to
be released to ESOP participants and
4,738 shares are vested under the
RRP. Accordingly, the primary
weighted average number of common
shares outstanding for the three-
month period ended September 30, 1997
was 703,113. The respective weighted
average number of common shares
outstanding for the same period in
1996 was 822,683.
6
Item 2. Management's Discussion And
Analysis of Financial
Condition And Results of
Operations
Financial Condition
The Company's total assets increased $2.6
million during the three months ended
September 30, 1997 to $84.3 million from
$81.7 million at June 30, 1997. This
increase was mainly due to an increase in
net loans of $3.4 million offset by a
decrease of $1.2 in the security
portfolio. The increase in loans
receivable was a result of purchasing
participation interests in commercial
loans, and increased originations for
commercial, home equity and mortgage
loans.
The Company's total liabilities increased
$2.4 million from $69.4 million at June
30, 1997 to $71.8 million at September 30,
1997. The increase was primarily
attributable to an increase in Federal
Home Loan Bank ("FHLB") advances of $2.9
million. These advances were primarily
used to fund the increase in home equity
loans along with mortgage loans and
purchases of participation interests in
commercial loans. Deposits decreased $0.9
million from $59.4 million at June 30,
1997 to $58.5 million at September 30,
1997. The decrease was a result of
customers seeking higher yielding
investment alternatives.
Stockholders' equity increased by $90,000
from $12.4 million at June 30, 1997 to
$12.5 million at September 30, 1997
principally the result of net income
offset by cash dividends.
Results of Operations
General. The Company recorded net income
for the three months ended September 30,
1997 of $124,000 which was an increase of
$255,000 over the net loss of $131,000 for
the same period in 1996. The loss for the
three months ended September 30, 1996 was
the result of the one-time SAIF
recapitalization charge of $414,000. Net
of the recapitalization charge, net
income for the three months ended
September 30, 1996 would have been
approximately $119,000.
Net Interest Income. The Company's net
income is primarily dependent upon net
interest income. Net interest income
increased by $34,000 to $664,000 for the
three-month period ended September 30,
1997
from $$630,000 for the three-month period
ended September 30, 1996. The increase
was primarily a result of increased income
earned on loans and a decrease in interest
paid on deposits. The increase in
interest income earned on loans was
generated by the increased volume of
commercial loans, home equity and
residential mortgage loans.
Interest expense for the three-month
period ended September 30, 1997 was
$832,000 , as compared to $781,000 for the
comparable period in the prior year. The
increases of $51,000 in interest expense
for the three-month period ended September
30, 1997 was attributable to $98,000 of
added interest paid on FHLB advances,
offset by a $47,000 decrease in interest
paid on deposits.
Provisions for Loan Losses. During the
three months ended September 30, 1997, the
Company had no provision for loan losses.
At September 30, 1997, the Company's
allowance for loan losses totaled $200,000
or .31% of net loans receivable and 188%
of total non-performing loans.
Although management believes that it uses
the best information available to
determine the allowance, unforeseen market
conditions could result in adjustments and
net income could be significantly affected
if
circumstances differ substantially from
the assumptions used in making the final
determination. Future additions to the
Company's allowance for loan losses
will be the result of periodic loan,
property and
7
Item 2. Management's Discussion And
Analysis of Financial
Condition And Results of
Operations, Continued.
collateral reviews and thus cannot be
predicted in advance. In addition,
federal regulatory agencies, as an
integral part of their oversight
process, periodically review the Company's
allowance for loan losses. Such agencies
may require the Company to recognize
additions to the allowance based upon
their judgment of the information
available to them at the time of their
examination.
Non-Interest Income. Non-interest income
consists primarily of fees and service
charges on deposit accounts and other
income. Non-interest income increased to
$47,000 for the three months ended
September 30, 1997 as compared to $45,000
for the same period last year. The
increase was due primarily to prior period
loss recoveries offset by decreased
service fees.
Non-Interest Expenses. Non-interest
expenses decreased $400,000 to $493,000
for the three-month period ended
September 30, 1997, compared to $893,000
for the same three-month period last year.
The decrease in expense was primarily the
result of the aforementioned
recapitalization charge of $414,000
expensed on September 30, 1996 .
Income Taxes/Benefit. Income taxes for the
three months ended September 30, 1997 were
$95,000 on pre-tax income of $219,000, an
effective tax rate of 43.5%. For the three
months ended September 30, 1996, a tax
benefit of $86,000 resulted from the pre-
tax loss of $217,000 attributable to the
$414,000 SAIF assessment. The Company's
effective tax benefit for the three-month
period ended September 30, 1996 was 39.6%.
Liquidity and Capital Resources
The Company's principal sources of funds
are deposits and principal and interest
payments on loans and investments. While
scheduled loan repayments and maturing
investments are relatively predictable,
deposit flows and early loan prepayments
are more influenced by interest rates,
general economic conditions and
competition. Additionally, the Company
may borrow funds from the Federal Home
Loan Bank of Indianapolis ("FHLB") or
utilize other borrowings of funds based on
need, comparative costs and
availability at the time.
Federal regulations have required the
Company to maintain minimum levels of
liquid assets. The required percentage
has varied from time to time based upon
the economic conditions and savings flows
and is currently 5% of net withdrawable
savings deposits and borrowings payable on
demand or in one year or less during the
preceding calendar month. Liquid assets
for purposes of this ratio include cash,
certain time deposits, U.S. Government
obligations, government agency and other
securities and obligations generally
having remaining maturities of less than
five years. The Company has maintained
its liquidity ratio at levels in excess of
those required. At the September 30,
1997, the Company's liquidity ratio was
5.39%.
At September 30, 1997, the Company had
$12,450,000 in outstanding advances from
the FHLB used primarily to fund purchases
of participation interest in commercial
loans, internally originated loans, other
investments an net savings outflow.
The Company uses its liquidity resources
principally to meet ongoing
commitments to fund maturing
certificates of deposit and deposit
withdrawals and to meet operating
expenses. At September 30, 1997, the
Company had outstanding commitments to
extend credit which amounted to
$4,252,000 (including
8
Item 2. Management's Discussion And
Analysis of Financial
Condition And Results of
Operations, Continued.
$2,680,000 in available home equity lines
of credit). Management believes that loan
repayments and other sources of funds will
be adequate to meet the Company's
foreseeable liquidity needs.
At September 30, 1997, the Association had
tangible capital of $9.1 million or 11.2%
of adjusted total assets which was $7.9
million above the minimum capital
requirement of $1.2 million or 1.5% of
adjusted total assets.
At September 30, 1997, the Association had
core capital of $9.1 million or 11.2% of
adjusted total assets which was $6.7
million above the minimum capital
requirement of $2.4 million or 3.0% of
adjusted total assets.
At September 30, 1997, the Association had
total risk-based capital of $9.3 million
and risk-weighted assets of $34.7 million
or total risk-based capital of 26.8% of
risk-weighted assets. This amount was
$6.5 million above the minimum regulatory
risk-based capital requirement of $2.8
million, or 8.0% of risk-weighted assets.
Financial Accounting Developments
Statement of Financial Accounting
Standards (SFAS) No. 128, "Earnings Per
Share"
SFAS 128 establishes new standards for
computing and presenting earnings per
share ("EPS") for publicly-held companies.
The statement replaces the current
presentation of primary EPS with a
presentation of basic EPS. It also
requires dual presentation of basic and
fully diluted EPS on the face of the
income statement for all entities with
complex capital structures and requires a
reconciliation of the numerator and
denominator of the basic EPS computation
to the numerator and denominator of the
fully diluted EPS computation. SFAS 128
is effective for financial statements
issued for periods ending after December
15, 1997, including interim periods. The
statement also requires restatement of all
prior-period EPS data presented. Adoption
of this statement by the Company during
the second quarter of fiscal 1998 is not
presently expected to have any significant
impact on the Company's historical
presentation of EPS data.
Statement of Financial Accounting
Standards (SFAS) No. 129, "Disclosure of
Information About Capital Structure"
SFAS 129 is effective for financial
statements for periods ending after
December 15, 1997. SFAS 129 is applicable
to all entities and requires that
disclosure about an entity's capital
structure include a brief discussion of
the rights and privileges for securities
outstanding, including dividend and
liquidation preferences, participating
rights, call prices and dates, conversion
or exercise prices or rates and pertinent
dates, sinking-fund requirements, unusual
voting rights, and significant terms of
contracts to issue additional shares. The
number of shares issued upon conversion,
exercise, or satisfaction of required
conditions during at the least the most
recent annual fiscal period and any
subsequent interim period presented also
are required to be disclosed. In
addition, companies that issue stock with
liquidation preferences or redeemable
stock are required to disclose all
pertinent characteristics of those
securities. Adoption of SFAS 129 during
the Company's second quarter of fiscal
1998 is not presently expected to have any
significant impact on the Company's
historical financial statements.
9
Item 2. Management's Discussion And
Analysis of Financial
Condition And Results of
Operations, Concluded.
Regulatory Developments
On September 30, 1996, federal legislation
was enacted that required the Savings
Association Insurance Fund ("SAIF") be
recapitalized with a one-time assessment
on virtually all SAIF-insured
institutions, such as Sobieski Federal
Savings and Loan, equal to 65.7 basis
points on each $100 of SAIF-insured
deposits maintained by those institutions
as of March 31, 1995. The amount of the
Company's special assessment
was $414,000, which was paid to the FDIC
by November 27, 1996.
As a result of the SAIF recapitalization,
the FDIC amended its regulation concerning
the insurance premiums payable by SAIF-
insured institutions. Effective January
1, 1997, the SAIF insurance premium is 6.5
basis points per $100 of domestic
deposits, as a result of an assessment to
fund repayment of the financing
corporation (FICO) bond obligation. BIF
insured institutions will pay 1.3 cents
per $100 of deposits until the year 2000
when the assessment will be imposed at the
same rate on all FDIC insured
institutions.
10
PART II. OTHER INFORMATION
Item 1.Legal Proceedings
None
Item 2.Changes in Securities
None
Item 3.Defaults Upon Senior Securities
None
Item 4.Submission of Matters to a Vote of
Security Holders
(a) On October 27, 1997, the Company held
its Annual Meeting of Stockholders.
(b) At that meeting, George J. Aranowski
and Robert J. Urbanski were elected
Directors for terms to expire in 2000.
c) Stockholders also voted on the
following matters:
(i) The election of the following
Directors of the Company,
Votes Broker
For Withheld Non-Votes
George J.
Aranowski 608,808 96,567 89,725
Robert J.
Urbanski 611,234 94,141 89,725
(ii) The ratification of the appointment
of Coopers & Lybrand L.L. P. as
independent auditors of the Company for
the fiscal year ending June 30, 1998.
Votes Broker
For Against Abstain Non-Votes
672,908 21,901 9,166 91,125
iii) A proposal by a stockholder of the
Company for the appointment of a special
committee of the Board of Directors.
Votes Broker
For Against Abstain Non-Votes
199,376 392,552 34,268 168,904
Item 5.Other Information
None
11
Item 6.Exhibits and Reports on Form 8-K
(a) Exhibits
Employment Agreement with Thomas F. Gruber
Severance Agreement of Arthur Skale
Severance Agreement of Sharon Mrozek
(b) Form 8-K
None
12
SIGNATURES
In accordance with the requirements of the
Exchange Act, the registrant caused this
report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Sobieski Bancorp, Inc.
(Registrant)
Date: November 1, 1997 By:
/s/s Thomas F. Gruber
Thomas F. Gruber
President and Chief Executive Officer
Date: November 1, 1997 By:
/s/s Arthur Skale
Arthur Skale
Chief Financial Officer
13
Exhibit 1
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT
("Agreement") is made and entered into as
of this 30th day of September 1996, by and
between Sobieski Federal Savings and Loan
Association of South Bend, 2930 West
Cleveland Road, South Bend, Indiana 46628
(hereinafter referred to as the
"Association" whether in mutual or stock
form), and Thomas F. Gruber (the
"Employee").
WHEREAS, the Employee is currently
serving as the President and Chief
Executive Officer of the Association: and
WHEREAS, the Association is the
subsidiary of Sobieski Bancorp, Inc. (the
"Holding Company"); and
WHEREAS, the Board of Directors of
the Association recognizes that, as is the
case with publicly held corporations
generally, the possibility of a change in
control of the Holding Company and/or the
Association may exist and that such
possibility, and the uncertainty and
questions which it may raise among
management, may result in the departure or
distraction of key management personnel to
the detriment of the Association, the
Holding Company and its stockholders; and
WHEREAS, the Board of Directors of
the Association believes it is in the best
interest of the Association to enter into
this Agreement with the Employee in order
to assure continuity of management of the
Association and to reinforce and encourage
the continued attention and dedication of
the Employee to his assigned duties
without distraction in the face of
potentially disruptive circumstances
arising from the possibility of a change
in control of the Holding Company,
although no such change is now
contemplated; and
WHEREAS, the Board of Directors of
the Association has approved and
authorized the execution of this Agreement
with the Employee to take effect as stated
in Section 4 hereof;
NOW, THEREFORE, in consideration of
the foregoing and of the respective
covenants and agreements of the parties
herein contained, it is AGREED as follows:
1. Employment. The Employee is
employed as the President and Chief
Executive Officer of the Association. As
President and Chief Executive Officer,
Employee shall render administrative and
management services as are customarily
performed by persons situated in similar
executive capacities, and shall have other
powers and duties as may from time to time
be prescribed by the Board, provided that
such duties are consistent with the
Employee's position as President and Chief
Executive Officer. The Employee shall
continue to devote his best efforts and
substantially all his business time and
attention to the business and affairs of
the Association and its subsidiaries and
affiliated companies.
2. Compensation.
(a) Salary. The Association agrees to
pay the Employee during the term of this
Agreement a salary established by the
Board of Directors. The salary hereunder
shall be at least the Employee's salary as
of the Commencement Date (as defined in
Section 4 hereof). The Employee's salary
shall be payable not less frequently than
monthly and not later than the tenth day
following the expiration of the month in
question. The amount of the Employee's
salary shall be reviewed by the Board of
Directors not less often than annually and
explicitly approved by the Board of
Directors, beginning not later than the
date one year after the Commencement Date
(as defined in Section 4 hereof). Any
adjustments in salary or other
compensation shall in no way limit or
reduce any other obligation of the
Association hereunder.
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(b) Discretionary Bonuses. The
Employee shall be entitled to participate
in an equitable manner with all other
executive officers of the Association in
discretionary bonuses as authorized and
declared by the Board of Directors of the
Association to its executive employees.
No other compensation provided for in this
Agreement shall be deemed a substitute for
the Employee's right to participate in
such bonuses when and as declared by the
Board of Directors.
(c) Expenses. During the term of his
employment hereunder, the Employee shall
be entitled to receive prompt
reimbursement for all reasonable expenses
incurred by him (in accordance with the
policies and procedures applicable to the
senior executive officers of the
Association) in performing services
hereunder, provided that the Employee
properly accounts therefor in accordance
with Association policy.
3. Benefits.
(a) Participation in Retirement and
Employee Benefit Plans. The Employee shall
be entitled while employed to participate
in, and receive benefits under, all plans
relating to pension, thrift, profit-
sharing, group life insurance, medical
coverage, education, cash bonuses, and
other retirement or employee benefits or
combination thereof, that are maintained
for the benefit of the Association's
executive employees or for its employees
generally.
(b) Fringe Benefits. The Employee
shall be eligible while employed hereunder
to participate in and receive benefits
under, any other fringe benefit plans
which are or may become applicable to the
Association's executive employees or to
its employees generally.
4. Term. The term of employment under
this Agreement shall be a period of three
years commencing on the date of this
Agreement (the "Commencement Date"),
subject to earlier termination as provided
herein. Beginning on the first
anniversary of the Commencement Date, and
on each anniversary thereafter, the term
of employment under this Agreement shall
be extended for a period of one year in
addition to the then-remaining term of
employment under this Agreement, unless
either the Association or the Employee
gives contrary written notice to the other
not less than 90 days in advance of the
date on which the term of employment under
this Agreement would otherwise be
extended, provided that such term will not
be automatically extended unless, prior
thereto, the Board of Directors of the
Association reviews a formal performance
evaluation of the Employee performed by
disinterested members of the Board of
Directors of the Association and reflected
in the minutes of the Board of Directors
and affirmatively approves the extension
for such term. Reference herein to the
term of employment under this Agreement
shall refer to both such initial term and
such extended terms.
5. Vacations. The Employee shall be
entitled, without loss of pay, to absent
himself voluntarily from the performance
of his employment under this Agreement,
all such voluntary absences to count as
vacation time, provided that:
(a) the Employee shall be entitled to
an annual vacation of not less than four
(4) weeks per year;
(b) the timing of vacations shall be
scheduled in a reasonable manner by the
Employee; and
(c) solely at the Employee's request,
the Board of Directors shall be entitled
to grant to the Employee a leave of
absence with or without pay at such time
or times and upon such terms and
conditions as the Board, in its
discretion, may determine.
6. Termination of Employment; Death.
(a) The Association's Board of
Directors may terminate the Employee's
employment at any time, but any
termination by the Association's Board of
Directors other than termination for
cause, shall not
15
prejudice the Employee's right to
compensation or other benefits under this
Agreement. If the employment of the
Employee is involuntarily terminated,
other than for "cause" as provided in this
Section 6(a) or pursuant to any of
Sections 6(d) through 6(g), or by reason
of death or disability as provided in
Sections 6(c) or 7, the Employee shall be
entitled to (I) his then applicable salary
for then-remaining term of the Agreement
as calculated in accordance with Section 4
hereof, payable in such manner and at such
times as such salary would have been
payable to the Employee under Section 2
had he remained in the employ of the
Association, and (ii) health insurance
benefits as maintained by the Association
for the benefit of its senior executive
employees or its employees generally over
the then-remaining term of the Agreement
as calculated in accordance with Section 4
hereof.
The terms "termination" or
"involuntarily terminated" in this
Agreement shall refer to the termination
of the employment of Employee without his
express written consent. In addition, a
material diminution of or interference
with the Employee's duties,
responsibilities and benefits as President
and Chief Executive Officer of the
Association shall be deemed and shall
constitute an involuntary termination of
employment to the same extent as express
notice of such involuntary termination.
Any of the following action shall
constitute such diminution or interference
unless consented to in writing by the
Employee: (1) a change in the principal
workplace of the Employee to a location
outside of 50 miles radius from the
Association's headquarters office as of
the date hereof; (2) a material demotion
of the employee, a material reduction in
the number or seniority of other
Association personnel reporting to the
Employee, or a material reduction in the
frequency with which, or in the nature of
the matters with respect to which, such
personnel are to report to the Employee,
other than as part of a Association-or
Holding Company-wide benefits or vacation
time which had theretofore been provided
to the Employee, other than as part of an
overall program applied uniformly and with
equitable effect to all members of the
senior management of the Association or
the Holding Company; and (4) a material
permanent increase in the required hours
of work or the workload of the Employee.
In case of termination of the
Employee's employment for cause the
Association shall pay the Employee his
salary through the date of termination,
and the Association shall have no further
obligation to the Employee under this
Agreement. For purposes of this
Agreement, termination for "cause" shall
include termination for personal
dishonesty, incompetence, willful
misconduct, breach of a fiduciary duty
involving personal profit, intentional
failure to perform stated duties, willful
violation of any law, rule, or regulation
(other than traffic violations or similar
offenses) or final cease-and-desist order,
or material breach of any provision of
this Agreement. Notwithstanding the
foregoing, the Employee shall not be
deemed to have been terminated for cause
unless and until there shall have been
delivered to the Employee a copy of a
resolution, duly adopted by the
affirmative vote of not less than a
majority of the entire membership of the
Board of Directors of the Association at a
meeting of the Board called and held for
such purpose (after reasonable notice to
the Employee and an opportunity for the
Employee, together with the Employee's
counsel, to be heard before the Board),
stating that in the good faith opinion of
the Board the Employee was guilty of
conduct constituting "cause" as set forth
above and specifying the particulars
thereof in detail.
(b) The Employee's employment may be
voluntarily terminated by the Employee at
any time upon 90 days written notice to
the Association or upon such shorter
period as may be agreed upon between the
Employee and the Board of Directors of the
Association. In the event of such
voluntary termination, the Association
shall be obligated to continue to pay the
Employee his salary and benefits only
through the date of termination, at the
time such payments are due, and the
Association shall have no further
obligation to the Employee under this
Agreement.
(c) In the event of the death of the
Employee during the term of employment
under this Agreement and prior to any
termination hereunder, the Employee's
estate, or such person as the Employee may
have previously designated in writing,
shall be entitled to receive from the
Association the salary of the Employee
through the last day of the calendar month
in which his death shall have occurred,
and the term of employment under this
Agreement shall end on such last day of
the month.
16
(d) If the Employee is suspended
and/or temporarily prohibited from
participating in the conduct of the
Association's affairs by a notice served
under Section 8(c)(3) or (g)(1) of the
Federal Deposit Insurance Act ("FDIA'), 12
U.S.C.-1818(e)(3) and (g)(1), the
Association's obligation under this
Agreement shall be suspended as of the
date of service, unless stayed by
appropriate proceedings. If the charges
in the notice are dismissed, the
Association may in its discretion (1) pay
the Employee all or part of the
compensation withheld while its
obligations under this Agreement were
suspended and (ii) reinstate in whole or
in part any of its obligations which are
suspended.
(e) If the Employee is removed and/or
permanently prohibited from participating
in the conduct of the Association's
affairs by an order issued under Section
8(e)(4) or (g)(1) of the FDIA, 12 U.S.C.-
1818(e)(4) and (g)(1), all obligations of
the Association under this Agreement shall
terminate as of the effective date of the
order, but vested rights of the
contracting parties shall not be affected.
(f) If the Association is in default
(as defined in Section 3(x)(1) of the
FDIA), all obligations under this
Agreement shall terminate as of the date
of default, but this provision shall not
affect any vested rights of the
contracting parties.
(g) All obligations under this
Agreement shall be terminated, except to
the extent determined that continuation of
this Agreement is necessary for the
continued operation of the Association:
(1) by the Director of the Office of
Thrift Supervision (the "Director") or his
or her designee, at the time the Federal
Deposit Insurance Corporation ("FDIC") or
the Resolution Trust Corporation enters
into an agreement to provide assistance to
or on behalf of the Association under the
authority contained in Section 13(c) or
the FDIA; or (ii) by the Director or his
or her designee, at the time the Director
or his or her designee approves a
supervisory merger to resolve problems
related to operation of the Association or
when the Association is determined by the
Director to be in an unsafe or unsound
condition. Any rights of the parties that
have already vested, however, shall not be
affected by any such action.
(h) In the event the Association
purports to terminate the Employee for
cause, but it is determined by a court of
competent jurisdiction or by an arbitrator
pursuant to Section 17 that cause did not
exist for such termination, or if any
event it is determined by any such court
or arbitrator that the Association has
failed to make timely payment of any
amounts owed to the Employee under this
Agreement, the Employee shall be entitled
to reimbursement for all reasonable costs,
including attorneys' fees, incurred in
challenging such termination or collecting
such amounts. Such reimbursement shall be
in addition to all rights to which the
Employee is otherwise entitled under this
Agreement.
7. Disability. If the Employee shall
become disabled as defined in the
Association's then current disability plan
or if the Employee shall be otherwise
unable to serve as President and Chief
Executive Officer, the Employee shall be
entitled to receive group and other
disability income benefits of the type
then provided by the Association for other
executive employees.
8. Change in Control.
(a) Involuntary Termination. If the
Employee's employment is involuntarily
terminated (other than for cause or
pursuant to any of Sections 6(c) through
6(g) or Section 7 of this Agreement) in
connection with or within 12 months after
a change in control which occurs at any
time during the term of employment under
this Agreement, in addition to its
obligations under Section 6(a) of this
Agreement, the Association shall pay to
the Employee in a lump sum in cash within
25 business days after the Date of
Termination (as hereinafter defined) of
employment an amount equal to 299% of the
Employee's "base amount" as defined in
Section 280G of the Internal Revenue Code
of 1986, as amended (the "Code"), subject
to reduction under Section 9 of this
Agreement.
(b) Definitions. For purposes of
Section 8,9, and 11 of this Agreement,
"Date of Termination" means the earlier of
(I) the date upon which the Association
gives notice to the Employee of the
17
termination of his employment with the
Association or (ii) the date upon which
the Employee ceases to serve as an
Employee of the Association, and "change
in control" is defined solely as any
acquisition of control (other than by a
trustee or other fiduciary holding
securities under an employee benefit plan
of the Holding Company or a subsidiary of
the Holding Company), as defined in 12
C.F.R.-574.4, or any successor regulation,
of the Association or Holding Company
which would require the filing of an
application for acquisition of control or
notice of change in control in a manner as
set forth in 12 C.F.R.-574.3, or any
successor regulation.
9. Certain Reduction of Payments by
the Association.
(a) Anything in this Agreement to the
contrary notwithstanding, in the event
that the amount or amounts of any benefit
or benefits payable to the Employee under
this Agreement or otherwise ("Benefits")
are such that any portion of the amount of
Benefits would be non-deductible by the
Holding Company or the Association for
Federal income tax purposes pursuant to
Section 280G of the Code, then the amount
of Benefits shall be reduced to the
amount, not less than zero, which
maximizes the amount of Benefits payable
to the Employee without causing any
portion to be non-deductible by the
Holding Company or the Association
pursuant to Section 280G of the Code. The
Employee shall determine the allocation of
any such reduction among the Benefits.
(b) The total of payments to the
Employee under Section 6(a) and Section
8(a) shall not exceed three times his
average annual compensation from the
Association over the five most recent
taxable years (or, if employed by the
Association for a shorter period, over the
period of his employment by the
Association).
(c) Any payments made to the Employee
pursuant to this Agreement, or otherwise,
are subject to and conditioned upon their
compliance with 12 U.S.C. 1828(k) and any
regulations promulgated thereunder.
10. No Mitigation. The Employee shall
not be required to mitigate the amount of
any salary or other payment or benefit
provided for in this Agreement by seeking
other employment or otherwise, nor shall
the amount of any payment or benefit
provided for in this Agreement be reduced
by any compensation earned by the Employee
as the result of employment by another
employer, by retirement benefits after the
date of termination or otherwise.
11. No Assignments.
(a) This Agreement is personal to
each of the parties hereto, and neither
party may assign or delegate any of its
rights or obligations hereunder without
first obtaining the written consent of the
other party; provided, however, that the
Association will require any successor or
assign (whether direct or indirect, by
purchase, merger, consolidation or
otherwise) to all or substantially all of
the business and/or assets of the
Association, by an assumption agreement in
form and substance satisfactory to the
Employee, to expressly assume and agree to
perform this Agreement in the same manner
and to the same extent that the
Association would be required to perform
it if no such succession or assignment had
taken place. Failure of the Association
to obtain such an assumption agreement
prior to the effectiveness of any such
succession or assignment shall be a breach
of this Agreement and shall entitle the
Employee to compensation from the
Association in the same amount and on the
same terms as the compensation pursuant to
Section 8(a) hereof. For purposes of
implementing the provisions of this
Section 11(a), the date on which any such
succession becomes effective shall be
deemed the Date of Termination.
(b) This Agreement and all rights of
the Employee hereunder shall inure to the
benefit of and be enforceable by the
Employee's personal and legal
representatives, executors,
administrators, successors, heirs,
distributes, devisees and legatees. If
the Employee should die while any amounts
would still be
18
payable to the Employee hereunder if the
Employee had continued to live, all such
amounts, unless otherwise provided herein,
shall be paid in accordance with the terms
of this Agreement to the Employee's
devisee, legatee or other designee or if
there is no such designee, to the
Employee's estate.
12. Notice. For purposes of this
Agreement, notices and all other
communications provided for in the
Agreement shall be in writing and shall be
deemed to have been duly given when
personally delivered or sent by certified
mail, return receipt requested, postage
prepaid. All notices to the Association
shall be sent to its home office, directed
to the attention of the Board of Directors
of the Association, with a copy to the
Secretary of the Association. All notices
to the Employee shall be sent to the home
or other address he has most recently
provided in writing to the Association.
13. Amendments. No amendments or
additions to this Agreement shall be
binding unless in writing and signed by
both parities, except as herein otherwise
provided.
14. Paragraph Headings. The paragraph
headings used in this Agreement are
included solely for convenience and shall
not affect, or be used in connection with,
the interpretation of this Agreement.
15. Severability. The provisions of
this Agreement shall be deemed severable
and the invalidity or unenforceability of
any provision shall not affect the
validity or enforceability of the other
provisions hereof.
16. Governing Law. This Agreement
shall be governed by the laws of the
United States to the extent applicable and
otherwise by the laws of the State of
Indiana.
17. Arbitration. Any dispute or
controversy arising under or in connection
with this Agreement shall be settled
exclusively by arbitration in accordance
with the rules of the American Arbitration
Association then in effect. Judgment may
be entered on the arbitrator's award in
any court having jurisdiction.
IN WITNESS WHEREOF, the parties have
executed this Agreement as of the day and
year first above written.
THIS AGREEMENT CONTAINS A BINDING
ARBITRATION PROVISION WHICH MAY BE
ENFORCED BY THE PARTIES.
SOBIESKI FEDERAL SAVINGS AND LOAN
ASSOCIATION OF SOUTH BEND
By:
/s/s Robert J. Urbanski
Its:
Chairman of Board of Directors
EMPLOYEE
/s/s
Thomas F. Gruber
Thomas
F. Gruber
19
Exhibit 2
CHANGE IN CONTROL SEVERANCE AGREEMENT
THIS CHANGE IN CONTROL SEVERANCE
AGREEMENT (`Agreement") is made and
entered into as of this 13th day of
August, 1997, by and between Sobieski
Federal Savings and Loan Association of
South Bend, a federally chartered savings
institution(which, together with any
successor thereto which executes and
delivers the assumption agreement provided
for in Section 8(a) hereof of which
otherwise becomes bound by the terms and
provisions of this Agreement by operation
of law, is hereinafter referred to as the
"Association"), and Arthur Skale (the
"Employee").
WHEREAS, the Employee is currently
serving as Chief Financial Officer of the
Association; and
WHEREAS, the Association has
converted to capital stock form and (the
"Conversion") and become the wholly-owned
subsidiary of Sobieski Bancorp, Inc. (the
"Holding Company"); and
WHEREAS, the Board of Directors of
the Association recognizes that, as is the
case with publicly held corporations
generally, the possibility of a change in
control of the Association or the Holding
Company may exist and that such
possibility, and the uncertainty and
questions which it may raise among
management, may result in the departure or
distraction of key management personnel to
the detriment of the Association, the
Holding Company and their respective
stockholders; and
WHEREAS, the Board of Directors of
the Association believes it is in the best
interest of the Company to enter into this
Agreement with the Employee in order to
assure continuity of management of the
Association and to reinforce and encourage
the continued attention and dedication of
the Employee to the Employee's assigned
duties without distraction in the face of
potentially disruptive circumstances
arising from the possibility of a change
in control of the Association or the
Holding Company, although no such change
is now contemplated; and
WHEREAS, the Board of Directors of
the Association has approved and
authorized the execution of this Agreement
with the Employee to take effect as stated
in Section 1 hereof;
NOW, THEREFORE, in consideration of
the foregoing and of the respective
covenants and agreements of the parties
herein contained, it is AGREED as follows:
1. TERMS OF AGREEMENT.
The term of this Agreement shall be
deemed to have commenced as of the date of
the completion of the Association's
conversion to stock form (the "Conversion
Date") and shall continue for a period of
one year thereafter. Commencing on the
first anniversary of the Conversion Date
and on each anniversary thereafter, this
Agreement shall be extended for a period
of one year unless either the Association
or the Employee gives contrary written
notice to the other not less than 90 days
in advance of the date on which the term
of this Agreement would otherwise be
extended, and provided that no extension
shall occur unless prior to each
anniversary of the Conversion Date, the
Board of Directors of the Association has
reviewed a formal evaluation of the
Employee's performance during the year
preceding such anniversary prepared by the
disinterested members of the Board of
Directors of the Association and
explicitly approved such extension of the
term of this Agreement.
2. DEFINITIONS.
(a) A "change in control" of the
Association or the Holding Company is
defined solely as any acquisition of
control (other than by a trustee or other
fiduciary holding securities under an
employee benefit plan of the Holding
Company or a subsidiary of the Holding
Company), as defined in 12 C.F.R.-
20
574.4, or any successor regulation, of the
Association or Holding Company which would
require the filing of an application for
acquisition of control or notice of change
in control in a manner as set forth in 12
C.F.R.-574.3, or any successor regulation.
(b) The terms "involuntary
termination" or "involuntarily terminated"
in this Agreement shall refer to the
termination of the employment of Employee
without the Employee's express written
consent. In addition, any of the
following actions, shall constitute
involuntary termination of employment
unless consented to in writing by the
Employee: (1) change in the principal
workplace of the Employee to a location
outside of a 50 mile radius from the
Association's headquarters office as of
the date hereof; (2) a material demotion
of the Employee or material adverse change
in the salary, perquisites, benefits,
contingent benefits or vacation time which
had theretofore been provided to the
Employee, other than as part of an overall
program applied uniformly and with
equitable effect to all members of the
senior management of the Association or
the Holding Company; and (3) a material
permanent increase in the required hours
of work or the workload of the Employee.
(c) For purposes of this Agreement,
termination for "cause" shall include
termination for personal dishonesty,
incompetence, willful misconduct, breach
of a fiduciary duty involving personal
profit, intentional failure to perform
stated duties, willful violation of any
material law, rule, or regulation (other
than a law, rule or regulation relating to
a traffic violation or similar offense) or
final cease-and-desist order, or material
breach of any provision of this Agreement.
Notwithstanding the foregoing, the
Employee shall not be deemed to have been
terminated for cause unless and until
there shall have been delivered to the
Employee a copy of a resolution, duly
adopted by the affirmative vote of not
less than a majority of the entire
membership of the Board of Directors of
the Association at a meeting of the Board
called and held for such purpose (after
reasonable notice to the Employee and an
opportunity for the Employee, together
with the Employee's counsel, to be heard
before the Board), stating that in the
good faith opinion of the Board the
Employee was guilty of conduct
constituting "cause" as set forth above
and specifying the particulars thereof in
detail.
3. TERMINATION BENEFITS.
(a) Upon the occurrence of a change
in control during the term of this
Agreement, followed by the involuntary
termination of the Employee's employment,
other than for cause, within twelve (12)
months after the date of the change in
control, the Association shall pay to the
Employee in a lump sum in cash within 25
business days after the date of
termination of employment an amount equal
to 299 percent of the Employee's annual
salary as of such date.
(b) Upon the occurrence of a change
in control of the Association or the
Holding Company during the term of this
Agreement, followed by the involuntary
termination of the Employee's employment,
other than for cause, within twelve (12)
months after the date of the change in
control, the Association shall cause life
and health insurance coverage
substantially similar to the coverage
maintained by the Association for the
Employee immediately prior to such
termination to be maintained for a period
of twelve (12) months following such
termination of employment.
(c) If the term of this Agreement
expires following a change in control of
the Association or the Holding Company but
prior to the expiration of (12) twelve
months following the date of the change in
control, the Association's obligations
under this Section 3 shall survive the
expiration of the term of this Agreement
and the Association shall provide the
benefits described above in this Section 3
in the event of involuntary termination of
the Employee, other than for cause, during
such twelve (12) month period.
4. CERTAIN REDUCTION OF PAYMENTS BY THE
ASSOCIATION.
(a) Anything in this Agreement to the
contrary notwithstanding, in the event
that the amounts or amounts of any benefit
or benefits payable to the Employee under
this Agreement or otherwise
21
("Benefits") are such that any portion of
the amount of Benefits would be non-
deductible by the Holding Company or the
Association for Federal income tax
purposes pursuant to Section 280G of the
Internal Revenue Code of 1986, as amended
(the "Code"), than the amount of Benefits
shall be reduced to the amount, not less
than zero, which maximizes the amount of
Benefits payable to the Employee without
causing any portion to be non-deductible
by the Holding Company or the Association
pursuant to Section 280G of the Code. The
Employee shall determine the allocation of
any such reduction among the Benefits.
5. REQUIRED REGULATORY PROVISIONS.
(a) The Association may terminate the
Employee's employment any time, but any
termination by the Association, other than
a termination for cause, shall not
prejudice the Employee's right to
compensation or other benefits under this
Agreement. The Employee shall not have
the right to receive compensation or other
benefits for any period after a
termination for cause as defined in
Section 2(c) hereinabove.
(b) If the Employee is suspended from
office and/or temporarily prohibited from
participating in the conduct of the
Association's affairs by a notice served
under Section 8(e)(3) or (g)(1) of the
Federal Deposit Insurance Act ("FDIA"), 12
U.S.C.-1818(e)(3) and (g)(1), the
Association's obligations under this
Agreement shall be suspended as of the
date of service, unless stayed by
appropriate proceedings. If the charges
in the notice are dismissed, the
Association may in its discretion (1) pay
the Employee all or part of the
compensation withheld while its
obligations under this Agreement were
suspended, and (ii) reinstate in whole or
in part any of the obligations were
suspended.
(c) If the Employee is removed from
office and/or permanently prohibited from
participating in the conduct of the
Association's affairs by an order issued
under Section 8(e)(4) or (g)(1) of the
FDIA, 12 U.S.C.-1818(e)(4) or (g)(1), all
obligations of the Association under this
Agreement shall terminate, as of the
effective date of the order, but vested
rights of the parties shall not be
affected.
(d) If the Association becomes in
default (as defined in Section 3(x)(1) of
the FDIA, all obligations under this
Agreement shall terminate as of the date
of default, but this provision shall not
affect any vested rights of the parties.
(e) All obligations under this
Agreement may be terminated, except to the
extent determined that continuation of
this Agreement is necessary for the
continued operation of the Association:
(I) by the Director or his or her
designee, at the time the Federal Deposit
Insurance Corporation or the Resolution
Trust Corporation enters into an agreement
to provide assistance to or on behalf of
the Association under the authority
contained in Section 13 (c) of the FDIA,
or (ii) by the Director of the Office of
Thrift Supervision ("Director") or his or
her designee at the time the Director or
his or her designee approves a supervisory
merger to resolve problems related to
operation of the Association or when the
Association is determined by the Director
to be in an unsafe or unsound condition.
Any rights of the parties that have
already vested, however, shall not be
affected by any such action.
(f) Any payments made to the Employee
pursuant to this Agreement, or otherwise,
are subject to and conditioned upon their
compliance with 12 U.S.C. 1828(k) and any
regulations promulgated thereunder.
6. MODIFICATION AND WAIVER
(a) This Agreement may not be
modified or amended except by an
instrument in writing signed by the
parties hereto.
(b) No term or condition of this
Agreement shall be deemed to have been
waived, nor shall there
22
be any estoppel against the enforcement of
any provision of this Agreement, except by
written instrument of the party charged
with such waiver or estoppel. No such
written waiver shall be deemed a
continuing waiver unless specifically
stated herein, and each such waiver shall
operate only as to the specific term or
condition waived and shall not constitute
a waiver of such term or condition for the
future or as to any act other than that
specifically waived.
7. NO MITIGATION.
The amount of any payment or benefit
provided for in this Agreement shall not
be reduced by any compensation earned by
the Employee as the result of employment
by another employer, by retirement
benefits after the date of termination or
otherwise.
8. NO ASSIGNMENTS.
(a) This Agreement is personal to
each of the parties hereto, and neither
party may assign or delegate any of its
rights or obligations hereunder without
first obtaining the written consent of the
other party; provided, however, that the
Association will require any successor or
assign (whether direct or indirect, by
purchase, merger, consolidation or
otherwise) to all or substantially all of
the business and/or assets of the
Association, by an assumption agreement in
form and substance satisfactory to the
Employee, to expressly assume and agree to
perform this Agreement in the same manner
and to the same extent that the
Association would be required to perform
it if no such succession or assignment had
taken place. Failure of the Association
to obtain such an assumption agreement
prior to the effectiveness of any such
succession or assignment shall be a breach
of this Agreement and shall entitle the
Employee to compensation from the
Association in the same amount and on the
same terms as the compensation pursuant to
Section 3 hereof. For purposes of
implementing the provisions of this
Section 8(a), the date on which any such
succession becomes effective shall be
deemed the date of termination of
employment.
(b) This Agreement and all rights of
the Employee hereunder shall inure to the
benefit of and be enforceable by the
Employee's personal and legal
representatives, executors,
administrators, successors, heirs,
distributes, devisees and legatees. If
the Employee should die while any amounts
would still be payable to the Employee
hereunder if the Employee had continued to
live, all such amounts, unless otherwise
provided herein, shall be paid in
accordance with the terms of this
Agreement to the Employee's devisee,
legatee or other designee or if there is
no such designee, to the Employee's
estate.
9. NOTICE.
For the purposes of this Agreement,
notices and all other communications
provided for in the Agreement shall be in
writing and shall be deemed to have been
duly given when personally delivered or
sent by certified mail, return receipt
requested, postage prepaid, addressed to
the Association at its main office to the
attention of the Board of Directors of the
Association with a copy to the Secretary
of the Association, or, it to the
Employee, at such home or other address as
the Employee has most recently furnished
in writing to the company.
10. AMENDMENTS
No amendments or additions to this
Agreement shall be binding unless in
writing and signed by both parties, except
as herein otherwise provided.
11. PARAGRAPH HEADINGS.
The paragraph headings used in this
Agreement are included solely for
convenience and shall not affect, or be
used in connection with, the
interpretation of this Agreement.
23
12. SEVERABILITY.
The provisions of this Agreement
shall be deemed severable and the
invalidity or unenforceability of any
provision shall not affect the validity or
enforceability of the other provisions
hereof.
13. GOVERNING LAW.
This Agreement shall be governed by
the laws of the United States to the
extent applicable and otherwise by the
laws of the State of Indiana.
14. ARBITRATION.
Any dispute or controversy arising
under or in connection with this Agreement
shall be settled exclusively by
arbitration in accordance with the rules
of the American Arbitration Association
then in effect. Judgment may be entered
on the arbitrator's award in any court
having jurisdiction.
15. REIMBURSEMENT.
In the event the Association purports
to terminate the Employee for cause, but
it is determined by a court of competent
jurisdiction or by an arbitrator pursuant
to Section 14 that cause did not exist for
such termination, or if in any event it is
determined by any such court or arbitrator
that the Association has failed to make
timely payment of any amounts owed to the
Employee under this Agreement, the
Employee shall be entitled to
reimbursement for all reasonable costs,
including attorneys' fees, incurred in
challenging such termination or collecting
such amounts. Such reimbursement shall be
in addition to all rights to which the
Employee is otherwise entitled under this
Agreement.
IN WITNESS WHEREOF, the parties have
executed this Agreement as of the day and
year first above written.
THIS AGREEMENT CONTAINS A BINDING
ARBITRATION PROVISION WHICH MAY BE
ENFORCED BY THE PARTIES.
SOBIESKI FEDERAL SAVINGS AND LOAN
OF
SOUTH BEND
BY:
/s/s Robert J. Urbanski
Its:
Chairman of the Board of Directors
EMPLOYEE
/s/s
Arthur Skale
24
Exhibit 3
CHANGE IN CONTROL SEVERANCE AGREEMENT
THIS CHANGE IN CONTROL SEVERANCE
AGREEMENT (`Agreement") is made and
entered into as of this 13th day of
August, 1997, by and between Sobieski
Federal Savings and Loan Association of
South Bend, a federally chartered savings
institution(which, together with any
successor thereto which executes and
delivers the assumption agreement provided
for in Section 8(a) hereof of which
otherwise becomes bound by the terms and
provisions of this Agreement by operation
of law, is hereinafter referred to as the
"Association"), and Sharon K. Mrozek (the
"Employee").
WHEREAS, the Employee is currently
serving as Vice President of Operations of
the Association; and
WHEREAS, the Association has
converted to capital stock form and (the
"Conversion") and become the wholly-owned
subsidiary of Sobieski Bancorp, Inc. (the
"Holding Company"); and
WHEREAS, the Board of Directors of
the Association recognizes that, as is the
case with publicly held corporations
generally, the possibility of a change in
control of the Association or the Holding
Company may exist and that such
possibility, and the uncertainty and
questions which it may raise among
management, may result in the departure or
distraction of key management personnel to
the detriment of the Association, the
Holding Company and their respective
stockholders; and
WHEREAS, the Board of Directors of
the Association believes it is in the best
interest of the Company to enter into this
Agreement with the Employee in order to
assure continuity of management of the
Association and to reinforce and encourage
the continued attention and dedication of
the Employee to the Employee's assigned
duties without distraction in the face of
potentially disruptive circumstances
arising from the possibility of a change
in control of the Association or the
Holding Company, although no such change
is now contemplated; and
WHEREAS, the Board of Directors of
the Association has approved and
authorized the execution of this Agreement
with the Employee to take effect as stated
in Section 1 hereof;
NOW, THEREFORE, in consideration of
the foregoing and of the respective
covenants and agreements of the parties
herein contained, it is AGREED as follows:
1. TERMS OF AGREEMENT.
The term of this Agreement shall be
deemed to have commenced as of the date of
the completion of the Association's
conversion to stock form (the "Conversion
Date") and shall continue for a period of
one year thereafter. Commencing on the
first anniversary of the Conversion Date
and on each anniversary thereafter, this
Agreement shall be extended for a period
of one year unless either the Association
or the Employee gives contrary written
notice to the other not less than 90 days
in advance of the date on which the term
of this Agreement would otherwise be
extended, and provided that no extension
shall occur unless prior to each
anniversary of the Conversion Date, the
Board of Directors of the Association has
reviewed a formal evaluation of the
Employee's performance during the year
preceding such anniversary prepared by the
disinterested members of the Board of
Directors of the Association and
explicitly approved such extension of the
term of this Agreement.
2. DEFINITIONS.
(a) A "change in control" of the
Association or the Holding Company is
defined solely as any acquisition of
control (other than by a trustee or other
fiduciary holding securities under an
employee
25
benefit plan of the Holding Company or a
subsidiary of the Holding Company), as
defined in 12 C.F.R.-574.4, or any
successor regulation, of the Association
or Holding Company which would require the
filing of an application for acquisition
of control or notice of change in control
in a manner as set forth in 12 C.F.R.-
574.3, or any successor regulation.
(b) The terms "involuntary
termination" or "involuntarily terminated"
in this Agreement shall refer to the
termination of the employment of Employee
without the Employee's express written
consent. In addition, any of the
following actions, shall constitute
involuntary termination of employment
unless consented to in writing by the
Employee: (1) change in the principal
workplace of the Employee to a location
outside of a 50 mile radius from the
Association's headquarters office as of
the date hereof; (2) a material demotion
of the Employee or material adverse change
in the salary, perquisites, benefits,
contingent benefits or vacation time which
had theretofore been provided to the
Employee, other than as part of an overall
program applied uniformly and with
equitable effect to all members of the
senior management of the Association or
the Holding Company; and (3) a material
permanent increase in the required hours
of work or the workload of the Employee.
(c) For purposes of this Agreement,
termination for "cause" shall include
termination for personal dishonesty,
incompetence, willful misconduct, breach
of a fiduciary duty involving personal
profit, intentional failure to perform
stated duties, willful violation of any
material law, rule, or regulation (other
than a law, rule or regulation relating to
a traffic violation or similar offense) or
final cease-and-desist order, or material
breach of any provision of this Agreement.
Notwithstanding the foregoing, the
Employee shall not be deemed to have been
terminated for cause unless and until
there shall have been delivered to the
Employee a copy of a resolution, duly
adopted by the affirmative vote of not
less than a majority of the entire
membership of the Board of Directors of
the Association at a meeting of the Board
called and held for such purpose (after
reasonable notice to the Employee and an
opportunity for the Employee, together
with the Employee's counsel, to be heard
before the Board), stating that in the
good faith opinion of the Board the
Employee was guilty of conduct
constituting "cause" as set forth above
and specifying the particulars thereof in
detail.
3. TERMINATION BENEFITS.
(a) Upon the occurrence of a change
in control during the term of this
Agreement, followed by the involuntary
termination of the Employee's employment,
other than for cause, within twelve (12)
months after the date of the change in
control, the Association shall pay to the
Employee in a lump sum in cash within 25
business days after the date of
termination of employment an amount equal
to 299 percent of the Employee's annual
salary as of such date.
(b) Upon the occurrence of a change
in control of the Association or the
Holding Company during the term of this
Agreement, followed by the involuntary
termination of the Employee's employment,
other than for cause, within twelve (12)
months after the date of the change in
control, the Association shall cause life
and health insurance coverage
substantially similar to the coverage
maintained by the Association for the
Employee immediately prior to such
termination to be maintained for a period
of twelve (12) months following such
termination of employment.
(c) If the term of this Agreement
expires following a change in control of
the Association or the Holding Company but
prior to the expiration of (12) twelve
months following the date of the change in
control, the Association's obligations
under this Section 3 shall survive the
expiration of the term of this Agreement
and the Association shall provide the
benefits described above in this Section 3
in the event of involuntary termination of
the Employee, other than for cause, during
such twelve (12) month period.
4. CERTAIN REDUCTION OF PAYMENTS BY THE
ASSOCIATION.
(a) Anything in this Agreement to the
contrary notwithstanding, in the event
that the amounts or
26
amounts of any benefit or benefits payable
to the Employee under this Agreement or
otherwise ("Benefits") are such that any
portion of the amount of Benefits would be
non-deductible by the Holding Company or
the Association for Federal income tax
purposes pursuant to Section 280G of the
Internal Revenue Code of 1986, as amended
(the "Code"), than the amount of Benefits
shall be reduced to the amount, not less
than zero, which maximizes the amount of
Benefits payable to the Employee without
causing any portion to be non-deductible
by the Holding Company or the Association
pursuant to Section 280G of the Code. The
Employee shall determine the allocation of
any such reduction among the Benefits.
5. REQUIRED REGULATORY PROVISIONS.
(a) The Association may terminate the
Employee's employment any time, but any
termination by the Association, other than
a termination for cause, shall not
prejudice the Employee's right to
compensation or other benefits under this
Agreement. The Employee shall not have
the right to receive compensation or other
benefits for any period after a
termination for cause as defined in
Section 2(c) hereinabove.
(b) If the Employee is suspended from
office and/or temporarily prohibited from
participating in the conduct of the
Association's affairs by a notice served
under Section 8(e)(3) or (g)(1) of the
Federal Deposit Insurance Act ("FDIA"), 12
U.S.C.-1818(e)(3) and (g)(1), the
Association's obligations under this
Agreement shall be suspended as of the
date of service, unless stayed by
appropriate proceedings. If the charges
in the notice are dismissed, the
Association may in its discretion (1) pay
the Employee all or part of the
compensation withheld while its
obligations under this Agreement were
suspended, and (ii) reinstate in whole or
in part any of the obligations were
suspended.
(c) If the Employee is removed from
office and/or permanently prohibited from
participating in the conduct of the
Association's affairs by an order issued
under Section 8(e)(4) or (g)(1) of the
FDIA, 12 U.S.C.-1818(e)(4) or (g)(1), all
obligations of the Association under this
Agreement shall terminate, as of the
effective date of the order, but vested
rights of the parties shall not be
affected.
(d) If the Association becomes in
default (as defined in Section 3(x)(1) of
the FDIA, all obligations under this
Agreement shall terminate as of the date
of default, but this provision shall not
affect any vested rights of the parties.
(e) All obligations under this
Agreement may be terminated, except to the
extent determined that continuation of
this Agreement is necessary for the
continued operation of the Association:
(I) by the Director or his or her
designee, at the time the Federal Deposit
Insurance Corporation or the Resolution
Trust Corporation enters into an agreement
to provide assistance to or on behalf of
the Association under the authority
contained in Section 13 (c) of the FDIA,
or (ii) by the Director of the Office of
Thrift Supervision ("Director") or his or
her designee at the time the Director or
his or her designee approves a supervisory
merger to resolve problems related to
operation of the Association or when the
Association is determined by the Director
to be in an unsafe or unsound condition.
Any rights of the parties that have
already vested, however, shall not be
affected by any such action.
(f) Any payments made to the Employee
pursuant to this Agreement, or otherwise,
are subject to and conditioned upon their
compliance with 12 U.S.C. 1828(k) and any
regulations promulgated thereunder.
6. MODIFICATION AND WAIVER
(a) This Agreement may not be
modified or amended except by an
instrument in writing signed by the
parties hereto.
27
(b) No term or condition of this
Agreement shall be deemed to have been
waived, nor shall there be any estoppel
against the enforcement of any provision
of this Agreement, except by written
instrument of the party charged with such
waiver or estoppel. No such written
waiver shall be deemed a continuing waiver
unless specifically stated herein, and
each such waiver shall operate only as to
the specific term or condition waived and
shall not constitute a waiver of such term
or condition for the future or as to any
act other than that specifically waived.
7. NO MITIGATION.
The amount of any payment or benefit
provided for in this Agreement shall not
be reduced by any compensation earned by
the Employee as the result of employment
by another employer, by retirement
benefits after the date of termination or
otherwise.
8. NO ASSIGNMENTS.
(a) This Agreement is personal to
each of the parties hereto, and neither
party may assign or delegate any of its
rights or obligations hereunder without
first obtaining the written consent of the
other party; provided, however, that the
Association will require any successor or
assign (whether direct or indirect, by
purchase, merger, consolidation or
otherwise) to all or substantially all of
the business and/or assets of the
Association, by an assumption agreement in
form and substance satisfactory to the
Employee, to expressly assume and agree to
perform this Agreement in the same manner
and to the same extent that the
Association would be required to perform
it if no such succession or assignment had
taken place. Failure of the Association
to obtain such an assumption agreement
prior to the effectiveness of any such
succession or assignment shall be a breach
of this Agreement and shall entitle the
Employee to compensation from the
Association in the same amount and on the
same terms as the compensation pursuant to
Section 3 hereof. For purposes of
implementing the provisions of this
Section 8(a), the date on which any such
succession becomes effective shall be
deemed the date of termination of
employment.
(b) This Agreement and all rights of
the Employee hereunder shall inure to the
benefit of and be enforceable by the
Employee's personal and legal
representatives, executors,
administrators, successors, heirs,
distributes, devisees and legatees. If
the Employee should die while any amounts
would still be payable to the Employee
hereunder if the Employee had continued to
live, all such amounts, unless otherwise
provided herein, shall be paid in
accordance with the terms of this
Agreement to the Employee's devisee,
legatee or other designee or if there is
no such designee, to the Employee's
estate.
9. NOTICE.
For the purposes of this Agreement,
notices and all other communications
provided for in the Agreement shall be in
writing and shall be deemed to have been
duly given when personally delivered or
sent by certified mail, return receipt
requested, postage prepaid, addressed to
the Association at its main office to the
attention of the Board of Directors of the
Association with a copy to the Secretary
of the Association, or, it to the
Employee, at such home or other address as
the Employee has most recently furnished
in writing to the company.
10. AMENDMENTS
No amendments or additions to this
Agreement shall be binding unless in
writing and signed by both parties, except
as herein otherwise provided.
11. PARAGRAPH HEADINGS.
The paragraph headings used in this
Agreement are included solely for
convenience and shall not affect, or be
used in connection with, the
interpretation of this Agreement.
28
12. SEVERABILITY.
The provisions of this Agreement
shall be deemed severable and the
invalidity or unenforceability of any
provision shall not affect the validity or
enforceability of the other provisions
hereof.
13. GOVERNING LAW.
This Agreement shall be governed by
the laws of the United States to the
extent applicable and otherwise by the
laws of the State of Indiana.
14. ARBITRATION.
Any dispute or controversy arising
under or in connection with this Agreement
shall be settled exclusively by
arbitration in accordance with the rules
of the American Arbitration Association
then in effect. Judgment may be entered
on the arbitrator's award in any court
having jurisdiction.
15. REIMBURSEMENT.
In the event the Association purports
to terminate the Employee for cause, but
it is determined by a court of competent
jurisdiction or by an arbitrator pursuant
to Section 14 that cause did not exist for
such termination, or if in any event it is
determined by any such court or arbitrator
that the Association has failed to make
timely payment of any amounts owed to the
Employee under this Agreement, the
Employee shall be entitled to
reimbursement for all reasonable costs,
including attorneys' fees, incurred in
challenging such termination or collecting
such amounts. Such reimbursement shall be
in addition to all rights to which the
Employee is otherwise entitled under this
Agreement.
IN WITNESS WHEREOF, the parties have
executed this Agreement as of the day and
year first above written.
THIS AGREEMENT CONTAINS A BINDING
ARBITRATION PROVISION WHICH MAY BE
ENFORCED BY THE PARTIES.
SOBIESKI FEDERAL SAVINGS AND LOAN
OF
SOUTH BEND
BY:
/s/s Robert J. Urbanski
Its:
Chairman of the Board of Directors
EMPLOYEE
/s/s
Sharon Mrozek
29
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-END> SEP-30-1997
<CASH> 1,426,963
<SECURITIES> 15,674,210
<RECEIVABLES> 64,533,973
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 634,776
<PP&E> 2,008,898
<DEPRECIATION> 0
<TOTAL-ASSETS> 84,278,820
<CURRENT-LIABILITIES> 71,825,780
<BONDS> 0
0
0
<COMMON> 9,660
<OTHER-SE> 12,443,380
<TOTAL-LIABILITY-AND-EQUITY> 84,278,820
<SALES> 0
<TOTAL-REVENUES> 1,543,259
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 493,029
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 831,608
<INCOME-PRETAX> 218,622
<INCOME-TAX> 95,000
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 123,622
<EPS-PRIMARY> .18
<EPS-DILUTED> .18
</TABLE>
