<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule 14a-
6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
Astoria Financial Corporation
-----------------------------------
(Name of Registrant as Specified In Its Charter)
------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
[AFC Logo and Address]
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 6, 1998
The Annual Meeting of Shareholders of Astoria Financial Corporation will be
held on Wednesday, May 6, 1998, at 9:30 a.m., Eastern time, at the New Hyde Park
Inn, 214 Jericho Turnpike, New Hyde Park, New York 11040. The meeting will be
held to consider and act upon the following matters:
1. The election of three directors for terms of three years each;
2. The approval of an amendment to the Certificate of Incorporation of
Astoria Financial Corporation to increase the authorized Common Stock of
Astoria Financial Corporation to 200,000,000 shares;
3. The ratification of the appointment of independent auditors; and
4. Such other matters as may properly come before the Annual Meeting or any
adjournment or postponements thereof.
Holders of record of Astoria Financial Corporation Common Stock as of the
close of business on March 23, 1998, are entitled to notice of and to vote at
the Annual Meeting and any adjournment or postponement thereof. A list of
shareholders entitled to vote at the Annual Meeting will be available at the
meeting, and at Astoria Financial Corporation, One Astoria Federal Plaza, Lake
Success, New York 11042-1085 and the New Hyde Park Inn at the address set forth
above for a period of ten days prior to the meeting.
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE MEETING. WHETHER OR
NOT YOU PLAN TO ATTEND THE MEETING, PLEASE COMPLETE, SIGN AND PROMPTLY RETURN
THE ENCLOSED PROXY CARD IN THE ENCLOSED POSTAGE PAID ENVELOPE AS SOON AS
POSSIBLE.
By Order of the Board of Directors,
William K. Sheerin
Executive Vice President & Secretary
Dated: April 2, 1998
<PAGE>
ASTORIA FINANCIAL CORPORATION
ONE ASTORIA FEDERAL PLAZA
LAKE SUCCESS, NEW YORK 11042-1085
---------------------------------
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
MAY 6, 1998
---------------------------------
GENERAL INFORMATION
This Proxy Statement and the accompanying proxy card are being furnished to
holders of Astoria Financial Corporation ("AFC") common stock in connection with
the solicitation of proxies by the Board of Directors of AFC (the "Board") for
use at the AFC Annual Meeting of Shareholders to be held on May 6, 1998, and at
any adjournment or postponement thereof (the "Annual Meeting"). The Annual
Meeting will be held at 9:30 a.m., Eastern time, at the New Hyde Park Inn, 214
Jericho Turnpike, New Hyde Park, New York 11040. Only holders of record of AFC's
issued and outstanding common stock, par value $0.01 per share ("AFC Common
Stock"), as of the close of business on March 23, 1998 (the "Record Date") are
entitled to vote at the Annual Meeting. The 1997 Annual Report to Shareholders,
including the consolidated financial statements for the fiscal year ended
December 31, 1997, accompanies this Proxy Statement and the proxy card which are
first being mailed or given to shareholders of record on or about April 2, 1998.
VOTING AND QUORUM REQUIREMENTS
As of the Record Date, there were [26,418,340] shares of AFC Common Stock
issued and outstanding and entitled to vote at the Annual Meeting. Each share of
AFC Common Stock outstanding on the Record Date entitles the holder thereof to
one vote on each matter to properly come before the Annual Meeting, except as
described below. The presence, either in person or by proxy, of the holders of a
majority of the shares of AFC Common Stock issued and outstanding as of the
Record Date is necessary to constitute a quorum at the Annual Meeting.
The election of directors shall be by a plurality of votes cast by the
holders of AFC Common Stock present, in person or by proxy, and entitled to vote
thereon. Holders of AFC Common Stock may not vote their shares cumulatively with
respect to the election of directors. The approval of the amendment to the
Certificate of Incorporation of AFC to increase the authorized AFC Common Stock
to 200,000,000 shares requires the affirmative vote of a majority of the holders
of AFC Common Stock issued and outstanding as of the Record Date. The
ratification of the appointment of independent auditors and any other matters as
may properly come before the Annual Meeting requires the affirmative vote of a
majority of the votes cast by the holders of AFC Common Stock present, in person
or by proxy, and entitled to vote thereon.
Shares of AFC Common Stock as to which the "ABSTAIN" box has been selected
on the proxy card, with respect to the approval of the amendment to the
Certificate of Incorporation of AFC to increase the authorized AFC Common Stock
and to the ratification of appointment of KPMG Peat Marwick LLP as independent
auditors for AFC, will be counted as present and entitled to vote and will have
the effect of a vote
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against the proposal so indicated. In contrast, shares of AFC Common Stock
underlying broker non-votes will not be counted as present and entitled to vote
and will have no effect on the vote on each matter presented except for the
approval of the amendment to the Certificate of Incorporation of AFC to increase
the authorized AFC Common Stock, in which case broker non-votes will have the
effect of a vote against the proposal.
EVERY PROPERLY EXECUTED PROXY THAT IS TIMELY RECEIVED BY AFC WILL BE VOTED
IN ACCORDANCE WITH THE INSTRUCTIONS CONTAINED THEREIN UNLESS OTHERWISE REVOKED.
PROPERLY EXECUTED UNMARKED PROXIES WILL BE VOTED FOR THE ELECTION OF THE BOARD'S
NOMINEES AS DIRECTORS, FOR APPROVAL OF THE AMENDMENT TO THE CERTIFICATE OF
INCORPORATION OF AFC TO INCREASE THE AUTHORIZED AFC COMMON STOCK AND FOR THE
RATIFICATION OF THE APPOINTMENT OF INDEPENDENT AUDITORS. IF YOU ARE A
SHAREHOLDER WHOSE SHARES ARE NOT REGISTERED IN YOUR OWN NAME, YOU WILL NEED AN
ASSIGNMENT OF VOTING RIGHTS FROM THE SHAREHOLDER OF RECORD TO VOTE PERSONALLY AT
THE ANNUAL MEETING.
Pursuant to the Certificate of Incorporation of AFC, no record shareholder
of AFC Common Stock which is beneficially owned, directly or indirectly, by a
shareholder who as of the Record Date beneficially owns more than ten percent
(10%) of the AFC Common Stock outstanding on such date will be entitled or
permitted to vote any shares of AFC Common Stock in excess of ten percent (10%)
of AFC Common Stock outstanding as of the Record Date. For purposes of this
limitation, neither the Astoria Federal Savings and Loan Association
("Association") Employee Stock Ownership Plan (the "ESOP") nor the trustee of
such plan is considered the beneficial owner of the AFC Common Stock held by the
ESOP.
REVOCATION OF PROXIES
Any shareholder who executes a proxy has the right to revoke it at any
time before it is voted. A proxy may be revoked by delivering to the Secretary
of AFC, at its principal office, either a written revocation or a proxy, duly
executed, bearing a later date, or by attending the Annual Meeting and voting in
person.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information, as of February 27,
1998, with respect to the beneficial ownership of AFC Common Stock by each
person or group of persons, as defined in Section 13(d)(3) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), known to AFC to be the
beneficial owner of more than 5% of AFC voting stock. For purposes of the Annual
Meeting, the AFC Common Stock is the only AFC voting stock outstanding.
<TABLE>
AMOUNT AND NATURE OF PERCENT OF
TITLE OF CLASS NAME & ADDRESS OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP CLASS
- -------------- ---------------------------------- -------------------- ----------
<S> <C> <C> <C>
Common State Street Bank and Trust Company, Trustee 2,703,022 (1) 10.23 %
225 Franklin Street
Boston, Massachusetts
Common FMR Corp. 1,696,870 (2) 6.42 %
82 Devonshire Street
Boston, Massachusetts 02109
</TABLE>
- ----------------------------
(1) State Street Bank and Trust Company ("State Street") is the trustee of the
ESOP, which is administered by the ESOP Committee consisting of four (4)
officers of the Association, one of whom is an executive officer of AFC. As
of December 31, 1997, State Street held 2,581,224 shares of AFC Common
Stock for the benefit of the participants of the ESOP. Under the terms of
the ESOP, the Trustee votes the shares held by the ESOP Trust based
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upon directions received from the participants as "named fiduciaries" in
the ESOP. As of December 31, 1997, approximately 860,653 shares were
allocated to participants. For voting purposes, each participant as a
"named fiduciary" will be eligible to direct the Trustee how to vote at the
Annual Meeting as to the number of shares of AFC Common Stock which have
been allocated to his or her account under the ESOP. The remaining
unallocated shares and any allocated shares with respect to which no voting
instructions have been received, will be voted by the Trustee at the Annual
Meeting in the same manner and proportion as the allocated shares, with
respect to which voting instructions have been received, so long as such
vote is in accordance with the provisions of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"). Due to the requirements of
ERISA, the Trustee is deemed to have shared voting power as to all shares
held in the ESOP Trust. According to a filing on Schedule 13G dated
February 10, 1998, State Street also holds 121,798 shares as trustee or
discretionary advisor of various collective investment funds for employee
benefit plans of other companies and other index accounts, as to which
State Street has sole voting and dispositive power.
(2) According to a filing on Schedule 13G dated February 14, 1998, Edward C.
Johnson 3d and Abigail P. Johnson own 12.0 % and 24.5 %, respectively, of
the outstanding voting common stock of FMR Corp. Mr. Johnson is Chairman of
FMR Corp. The members of the Johnson family may be deemed to form a
controlling group with respect to FMR Corp. Fidelity Management & Research
Company, a wholly owned subsidiary of FMR Corp. and an investment advisor
registered under Section 203 of the Investment Advisors Act of 1940, as
amended, is the beneficial owner of 1,072,700 shares of AFC Common Stock as
a result of acting as investment advisor to various investment companies
registered under Section 8 of the Investment Company Act of 1940. Mr.
Johnson and FMR each claim sole dispositive power with respect to such
shares of AFC Common Stock. Fidelity Management Trust Company, a wholly
owned subsidiary of FMR Corp., is the beneficial owner of 624,170 shares of
AFC Common Stock. Edward C. Johnson 3d and FMR Corp., through their control
of Fidelity Management Trust Company, each claim sole dispositive over
624,170 shares of AFC Common Stock and sole power to direct the voting of
484,970 shares, and no power to vote or to direct the voting of 129,200
shares of AFC Common Stock owned by institutional account(s).
PROPOSAL NO. 1
ELECTION OF DIRECTORS
The Board consists of ten directors divided into three classes, two classes
consisting of three directors each and one class consisting of four directors.
Upon election by the shareholders, the directors of each class serve for a term
of three years, with the directors of one class elected each year.
In all cases, directors serve until their respective successors are duly
elected and qualified. Pursuant to the Bylaws of AFC, no person is eligible for
election or appointment as a director who is seventy-five (75) years of age or
older, and no person shall continue to serve as a director after the regular
Board meeting immediately preceding his seventy-fifth (75th) birthday.
The directors whose terms expire at the Annual Meeting are William J.
Fendt, Robert G. Bolton and Thomas V. Powderly. Each of these directors
(singularly the "Board Nominee" and collectively the "Board Nominees") has been
nominated by the Board to stand for reelection, and, if elected, to serve for a
term expiring at the annual meeting of shareholders of AFC to be held in 2001.
Each Board Nominee has consented to being named in this Proxy Statement and to
serve if elected.
IF ANY BOARD NOMINEE SHOULD REFUSE OR BE UNABLE TO SERVE, THE PROXIES WILL
BE VOTED FOR SUCH PERSON AS SHALL BE DESIGNATED BY THE BOARD TO REPLACE SUCH
NOMINEE. THE BOARD PRESENTLY HAS NO KNOWLEDGE THAT ANY OF THE BOARD NOMINEES
WILL REFUSE OR BE UNABLE TO SERVE.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE BOARD NOMINEES FOR
---
ELECTION AS DIRECTORS OF AFC FOR TERMS OF THREE YEARS EACH.
3
<PAGE>
BOARD NOMINEES, DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information regarding the Board
Nominees for election and members of the Board.
<TABLE>
DIRECTOR TERM
NAME AGE (1) POSITIONS HELD WITH AFC (2) SINCE (3) EXPIRES
---- ------ -------------------------- --------- -------
<S> <C> <C> <C> <C>
George L. Engelke, Jr. 59 Director, Chairman of the Board, President, & 1983 1999
Chief Executive Officer
Gerard C. Keegan 51 Director, Vice Chairman and Chief 1997 2000
Administrative Officer 1988 1998
Robert G. Bolton 73 Director & Nominee 1975 2000
Andrew M. Burger 63 Director 1990 2000
Denis J. Connors 56 Director 1990 2000
Thomas J. Donahue 57 Director 1976 1998
William J. Fendt 72 Director & Nominee 1997 1999
Peter C. Haeffner, Jr. 59 Director 1996 1999
Ralph F. Palleschi 51 Director 1995 1998
Thomas V. Powderly 60 Director & Nominee
</TABLE>
- -----------------------------
(1) As of the Record Date.
(2) All directors of AFC also serve as directors of the Association.
(3) All directors, except Messrs. Keegan, Haeffner, Palleschi and Powderly,
commenced service as directors of AFC on June 14, 1993, the date of AFC's
incorporation. As to such directors, the dates set forth are the dates the
individuals commenced service as directors of the Association. Messrs.
Keegan, Haeffner, Palleschi and Powderly commenced service as directors of
both AFC and the Association on the respective dates indicated above.
The following table sets forth certain information regarding the non-
director executive officers of AFC.
NAME AGE (1) POSITIONS HELD WITH AFC
---- ------- -----------------------
Arnold K. Greenberg 57 Executive Vice President & Assistant Secretary
Thomas W. Drennan 53 Executive Vice President
47 Executive Vice President & Chief Financial
Officer
Monte N. Redman 62 Executive Vice President & Secretary
William K. Sheerin 44 Executive Vice President, Assistant Secretary &
Alan P. Eggleston General Counsel
- ----------------------
(1) As of the Record Date
All executive officers of AFC have served as such since June 16, 1993, the
date of the first organizational meeting of AFC following its incorporation,
except Messrs. Keegan and Eggleston, who have served as executive officers since
October 1997 and December 1995, respectively. All executive officers of AFC are
elected annually and serve until their respective successors have been chosen,
subject to their removal as officers at any time by the affirmative vote of a
majority of the authorized number of directors then constituting the Board. See
"Executive Compensation - Employment Agreements".
BIOGRAPHICAL INFORMATION
The following is a brief description of the business experience of the
directors, Board Nominees and
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executive officers for at least the past five years and their respective
directorships, if any, with other public companies subject to the reporting
requirements of the Exchange Act.
Directors and Board Nominees
GEORGE L. ENGELKE, JR. has been President and Chief Executive Officer of
AFC since its formation in 1993. He has served as Chairman of the Board and of
the Board of Directors of the Association since April 1997. A certified public
accountant, he joined the Association in 1971 as Vice President and Treasurer.
He was named Executive Vice President and Treasurer in 1974, Chief Operating
Officer in 1986 and President and Chief Executive Officer in 1989. Mr. Engelke
is a past Chairman and current director of the Community Bankers Association of
New York State and a former director of the Federal Home Loan Bank of New York
and of America's Community Bankers. He is a member of the Thrift Institutions
Advisory Panel to the Federal Reserve Bank of New York. He also serves as a
director of Community Preservation Corporation and the Advisory Board of
Neighborhood Housing Services of New York City, Inc. Mr. Engelke previously
served as a member of the Financial Accounting Standards Advisory Council.
GERARD C. KEEGAN has been Vice Chairman and Chief Administrative Officer of
AFC and the Association since September 30, 1997 when he joined AFC following
the merger of The Greater New York Savings Bank ("The Greater") with and into
the Association ("The Greater Merger"). Prior to joining AFC, Mr. Keegan served
from 1991 to 1997 as Chairman, President and Chief Executive Officer of The
Greater. From 1988 to 1991, he served as President and Chief Operating Officer
of The Greater. He served as a director of The Greater from 1988 to 1997.
ROBERT G. BOLTON, in 1989, retired from his position as Vice President of
the Association. Prior to his service with the Association, Mr. Bolton was Chief
Executive Officer of Oneonta Federal Savings and Loan Association, which was
acquired by the Association in 1988.
ANDREW M. BURGER is President of Atlantic Iron Works, Inc., a steel
fabricating company located in Long Island City, New York.
DENIS J. CONNORS is the former Chairman and Chief Executive Officer of
Curran & Connors, Inc., a designer and publisher of annual reports.
THOMAS J. DONAHUE, a certified public accountant, retired as a partner of
Peat, Marwick, Mitchell & Co., the predecessor of KPMG Peat Marwick LLP, in
1986. Following his retirement and prior to becoming a director of the
Association, Mr. Donahue served as president and a director of other savings
institutions from 1987 to 1990. Presently, Mr. Donahue is self-employed as a
financial consultant.
WILLIAM J. FENDT is a retired executive of New York Telephone Company, a
predecessor of Bell Atlantic.
PETER C. HAEFFNER, JR. is Co-National Director, Financial Services Group,
of Cushman & Wakefield, Inc., a real estate firm. Mr. Haeffner had served as
Eastern Regional Director, Financial Services Group from May 1994 to December
1994. Previously, Mr. Haeffner was President and Managing Director of
Sonnenblick-Goldman Company, a real estate firm, for eight years. Mr. Haeffner
also serves as a director of Stewart Title Insurance Company of New York and as
a director of World Mae Association LLC, a global mortgage banking firm. Mr.
Haeffner served as a director of The Greater from 1992 to 1997.
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RALPH F. PALLESCHI, a certified public accountant, co-founded, in 1983,
First Long Island Investors, Inc., a registered investment advisor pursuant to
the Investment Advisors Act of 1940, as amended, and a registered broker/dealer
with the National Association of Securities Dealers, Inc. (NASD). He continues
to serve as a director and is Executive Vice President and Chief Financial
Officer of such company. He has also served from 1993 to 1997 as Chief Operating
Officer of the New York Islanders hockey team. From 1977 to 1983, he served as
Vice President - Finance and Chief Financial Officer of Entenmann's Inc., a
publicly traded food products company. From 1968 to 1977, he was employed by
Peat Marwick Mitchell & Co., predecessor of KPMG Peat Marwick LLP.
THOMAS V. POWDERLY served in a variety of capacities with Fidelity New
York, F.S.B. ("Fidelity") prior to its acquisition by the Association on January
31, 1995. From 1986 to 1990, he served as its Executive Vice President. In 1990,
he was appointed its President and Chief Operating Officer and in 1992 was named
its Chief Executive Officer. He was named Chairman of the Board of Directors of
Fidelity in 1993. From 1993 until January 31, 1995, he served as its Chairman
and Chief Executive Officer. Prior to 1986, Mr. Powderly held positions with
Edward S. Gordon, Inc., a commercial real estate brokerage and management firm,
and with several other thrift institutions.
Executive Officers Who Are Not Directors
ARNOLD K. GREENBERG has served as Executive Vice President of AFC since
December 1997, as Senior Vice President from its formation in 1993 to 1997 and
as Assistant Secretary since December 1993. He joined the Association in 1975 as
Vice President and was appointed Senior Vice President in 1979 and as Executive
Vice President in 1997. In 1986, Mr. Greenberg became Senior Vice President,
Administration and Operations, and in January of 1993, Senior Vice President,
Consumer Services.
THOMAS W. DRENNAN, a certified public accountant, has served as Executive
Vice President of AFC since December 1997 and as Senior Vice President from its
formation in 1993 to 1997. He joined the Association in 1986 as Senior Vice
President, Mortgage Services. He also serves as the Association's Community
Reinvestment Act Officer.
MONTE N. REDMAN has served as Executive Vice President and Chief Financial
Officer of AFC since December 1997. He served as Senior Vice President,
Treasurer and Chief Financial Officer of AFC from its formation in 1993 to 1997.
He joined the Association in 1977. In 1979, he was named Assistant Controller,
and, in 1982, Assistant Vice President. Mr. Redman became Vice President,
Investment Officer in 1985, in 1989 was appointed Senior Vice President,
Treasurer and Chief Financial Officer and, in 1997 was appointed Executive Vice
President and Chief Financial Officer.
WILLIAM K. SHEERIN has served as Executive Vice President and Secretary of
AFC since December 1997. He served as Senior Vice President and Secretary of AFC
from its formation in 1993 to 1997. He joined the Association in 1956. He was
named Assistant Treasurer and promoted to Branch Manager in 1966. In 1974, he
was promoted to Secretary and head of Savings Operations. In 1979, he was given
the additional title of Vice President and in 1986 he was appointed Senior Vice
President, Consumer Services. In 1993, Mr. Sheerin became Senior Vice President,
Administrative Services and in 1997 became Executive Vice President and
Secretary.
ALAN P. EGGLESTON has served as Executive Vice President and General
Counsel of AFC since December 1997 and as Assistant Secretary since September
1997. He served as Senior Vice President and General Counsel of AFC from 1995 to
1997. He joined the Association in 1993 as Vice President and General Counsel.
In 1994,
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<PAGE>
he was named Vice President and General Counsel of AFC. In 1995, he became First
Vice President and General Counsel of AFC and the Association. Prior to joining
the Association, he served as an officer and counsel to several thrift
institutions, including, from 1990 to 1993, as Senior Vice President and
Secretary of National Savings Bank of Albany, a publicly traded thrift
institution.
COMMITTEES AND MEETINGS OF THE BOARD
The Board meets on a monthly basis and may have additional special meetings
upon the request of the Chairman, President and Chief Executive Officer or any
three (3) members of the Board. During the fiscal year ended December 31, 1997,
the Board met thirteen (13) times. During this period, no director attended
fewer than 75% of the total number of meetings held of the Board and its
committees on which such director served, except Mr. Donahue, who for health
related reasons, attended over 73% of such meetings. The Board has established
the following standing committees:
The Compensation Committee of AFC consists of Mr. Fendt, as Chairman, and
Messrs. Burger, Connors, Donahue and Palleschi. Mr. Engelke serves ex officio as
a non-voting member of the Compensation Committee. The function of the
Compensation Committee is to review the performance and compensation of the
officers of AFC, make recommendations to the Board with respect thereto and
administer the Astoria Financial Corporation 1993 Incentive Stock Option Plan
(the "Incentive Option Plan") and the 1996 Stock Option Plan for Officers and
Employees of Astoria Financial Corporation (the "1996 Officer Option Plan")
including the granting of options pursuant thereto. This committee meets as
needed and met two (2) times during 1997.
The Nominating Committee currently consists of Messrs. Burger, Connors and
Donahue. The purpose of this committee is to recommend to the Board nominees for
election to the Board with respect to those directorships which become vacant or
whose terms expire at the next annual meeting of shareholders, to review any
nominations for election to the Board made by any shareholder of AFC, and to
determine compliance with the provisions of the Bylaws of AFC applicable
thereto. See "Additional Information - 'Shareholders Proposals' and 'Notice of
Business to be Conducted at an Annual Meeting'". The committee meets as needed
and met one (1) time during 1997.
The Audit Committee consists of Mr. Donahue, as Chairman, and Messrs.,
Burger, Connors, Fendt, and Powderly. The purpose of this committee is to meet
with the independent and internal auditors of AFC and the Association and review
the plans and reports of such auditors. This committee meets, at a minimum, on a
quarterly basis, and met four (4) times during 1997.
There is no family relationship between any director, any Board Nominee,
any officer or any significant employee of AFC, except that Mr. Connors' spouse
is the first cousin of Mr. Sheerin.
TRANSACTIONS WITH CERTAIN RELATED PERSONS
It is the policy of AFC and the Association that all transactions between
AFC or the Association and its directors, executive officers, holders of 10% or
more of the shares of any class of its common stock, and affiliates thereof,
will contain terms no less favorable to AFC or the Association than could have
been obtained by it in arms-length negotiations with unaffiliated persons and
will be approved by a majority of independent outside directors of AFC or the
Association, respectively, not having any interest in the transaction or, as
allowed by law, are benefits provided generally to all full time employees of
the Association on a nondiscriminatory basis and such benefits have been
similarly approved by the Board. For a discussion of certain transactions
involving AFC's directors, Board Nominees, executive officers or members of
their families, see "Compensation
7
<PAGE>
Committee Interlocks and Insider Participation."
Effective after the close of business on September 30, 1997, AFC completed
The Greater Merger. Following The GreaterMerger and in accordance with the terms
thereof, Mr. Gerard C. Keegan was employed by AFC and the Association as Vice
Chairman and Chief Administrative Officer and both Mr. Keegan and Mr. Peter C.
Haeffner, Jr. were elected by the Boards of Directors of AFC and the Association
as directors of AFC and the Association.
AFC and the Association have entered into new employment agreements with
Mr. Keegan to serve as Vice Chairman and Chief Administrative Officer and as a
director of AFC and the Association, which agreements have an initial term of
three years. The agreements provide for Mr. Keegan to serve at an initial
minimum annual salary of $350,000 per year, subject to annual review and
adjustment by the Board, and for an award of 15,000 shares of AFC Common Stock
pursuant to the terms of the Astoria Federal Savings and Loan Association
Recognition and Retention Plan for Officers and Employees ("Officers RRP"). Such
award is earned and distributed in three equal annual installments commencing on
January 10, 1998. The shares awarded to Mr. Keegan, based upon the closing price
of AFC Common Stock as quoted on the NASDAQ National Market, had a value as of
December 31, 1997 of $836,250. For a description of the employment agreements
between AFC and the Association and their executive officers, see "Employment
Agreements" below.
In connection with the Merger, AFC agreed to honor all existing employment,
severance and other compensation agreements and arrangements, including the
employment agreement, as previously amended, and change in control letter
agreement between The Greater and Mr. Keegan. Pursuant to the terms of The
Greater Merger, AFC agreed to pay Mr. Keegan a cash amount in settlement of his
employment agreements and change in control letter agreement with The Greater as
soon as practicable following The Greater Merger. Such payment, inclusive of an
excise tax indemnity payment provided for in such agreements, was $5,212,898.
AFC also agreed with Mr. Keegan and three other individuals, all of whom
had been employees of The Greater, to convert, based upon the elections made by
such individuals, all of the options to acquire The Greater's common stock held
by such individual into options to purchase shares of AFC Common Stock. Based
upon this agreement, AFC, upon completion of The GreaterMerger, granted to Mr.
Keegan aggregate options to purchase AFC Common Stock with respect to 147,590
shares of AFC Common Stock with a weighted average exercise price equal to
$14.6023 per share. Such options are non-statutory options and were immediately
exercisable upon grant. The options have various remaining terms ranging from
approximately ten months to eight years and ten months from the date of The
Greater Merger that are equal to the terms of the converted options.
Prior to the effective date of The Greater Merger, The Greater maintained
The Retirement Plan of The Greater New York Savings Bank for Non-Employee
Directors ("The Greater Directors Plan"). The Greater Directors Plan provided
each non-employee director of The Greater who had attained the age of 55 and
completed five years of service as a director of The Greater with an annual
retirement benefit equal to the director's annual retainer payable on the date
of retirement ($24,000), reduced by 5% for each year (or fraction thereof) that
the director's retirement date precedes the director's attainment of the age of
65 and increased to the actuarial equivalent of the normal annual retirement
benefit based upon interest rate and mortality assumptions specified in The
Greater Directors Plan if the director's retirement date is after the age of 65.
The Greater Merger, as a "change in control", as defined in The Greater
Directors Plan, resulted in Mr. Haeffner being entitled to an unreduced
retirement benefit. Also, effective upon completion of The Greater Merger, the
Deferred Compensation Plan for Non-Employee Directors of The Greater was
terminated. Mr. Haeffner's benefit under such plan was transferred to the AFC
Directors Deferred Compensation Plan (the "Deferred Plan").
8
<PAGE>
AFC also agreed, for a period of six years following The Greater Merger, to
indemnify and hold harmless certain persons, including Messrs. Keegan and
Haeffner, (each, an "Indemnified Party"), against any costs or expenses
(including reasonable attorneys' fees), judgments, fines, losses, claims,
damages or liabilities (collectively, "Costs") incurred in connection with any
claim, action, suit, proceeding or investigation arising out of matters existing
or occurring at or prior to the Merger, and to advance any such Costs to each
Indemnified Party as they are from time to time incurred, in each case to the
fullest extent then permitted under applicable law. In connection with The
Greater Merger, AFC also purchased for a period of six years after The Greater
Merger, policies of directors' and officers' liability insurance providing the
same coverage and amount and containing terms which are no less advantageous to
the beneficiaries thereof, including Messrs. Keegan and Haeffner, as maintained
by The Greater prior to The Greater Merger.
Following the close of business on January 31, 1995, AFC acquired Fidelity,
of which Mr. Powderly was Chairman, President and Chief Executive Officer, by
the merger of Fidelity with and into the Association. As of the consummation of
the merger, AFC entered into a consulting agreement with Mr. Powderly (the
"Consulting Agreement"). The Consulting Agreement expired January 31, 1998 in
accordance with its terms. Pursuant to the Consulting Agreement, Mr. Powderly
received from AFC in 1997 an annual consulting fee of $290,000.
For a discussion of the compensation received by directors, Board Nominees
or executive officers, see "Director Compensation" and "Executive Compensation".
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth certain information concerning the interests
in AFC Common Stock as of February 27, 1998 of each director or Board Nominee of
AFC, each executive officer of AFC named in the Summary Compensation Table (See
"Executive Compensation - Summary Compensation Table") and all directors and
executive officers of AFC as a group.
<TABLE>
AMOUNT AND NATURE PERCENT
OF
TITLE OF CLASS NAME OF BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP (1) CLASS (2)
- -------------- ------------------------ --------------------------- ---------
<S> <C> <C> <C>
Common George L. Engelke, Jr. 673,393 (3)(14) 2.51 %
Common Gerard C. Keegan 206,470 (4)(14)
Common Robert G. Bolton 109,874 (5)(14)
Common Andrew M. Burger 112,315 (14)
Common Denis J. Connors 124,262 (14)
Common Thomas J. Donahue 119,966 (6)(14)
Common William J. Fendt 122,474 (14)
Common Peter C. Haeffner, Jr. 11,848 (7)(14)
Common Ralph F. Palleschi 9,000 (14)
Common Thomas V. Powderly 85,727 (8)(14)
Common Arnold K. Greenberg 269,320 (9)(14) 1.02 %
Common Thomas W. Drennan 212,425 (10)(14)
Common Monte N. Redman 204,168 (11)(14)
Common William K. Sheerin 226,358 (12)(14)
Common All Directors, Board Nominees and
Executive Officers as a group (15
persons) 2,423,797 (13)(14) 8.71 %
</TABLE>
- ---------------------------------
(1) Except as otherwise indicated, each person listed has sole voting and
investment power with respect to the shares of AFC Common Stock indicated.
(2) Except as otherwise indicated, the percent of class beneficially owned does
not exceed one percent (1.00%).
9
<PAGE>
(3) Included are 62,000 shares of AFC Common Stock as to which Mr. Engelke has
shared voting and investment power, 52,900 shares of AFC Common Stock as to
which he has sole voting and no investment power, 6,906 shares of AFC
Common Stock as to which he has shared voting and no investment power, and
8,293 shares of AFC Common Stock as to which he has shared voting and sole
investment power.
(4) Included are 1,218 shares of AFC Common Stock as to which Mr. Keegan has
shared voting and investment power, 10,000 shares of AFC Common Stock as to
which he has sole voting and no investment power, and 15,309 shares of AFC
Common Stock as to which he has shared voting and no investment power.
(5) Included are 3,270 shares of AFC Common Stock as to which Mr. Bolton has
shared voting and investment power.
(6) Included are 24,813 shares of AFC Common Stock as to which Mr. Donahue has
shared voting and investment power.
(7) Included are 100 shares of AFC Common Stock as to which Mr. Haeffner has
shared voting and investment power.
(8) Included are 6,784 shares of AFC Common Stock as to which Mr. Powderly has
shared voting and investment power.
(9) Included are 63,518 shares of AFC Common Stock as to which Mr. Greenberg
has shared voting and investment power, 18,918 shares of AFC Common Stock
as to which he has sole voting and no investment power, 6,906 shares of AFC
Common Stock as to which he has shared voting and no investment power, and
12,469 shares of AFC Common Stock as to which he has shared voting and sole
investment power.
(10) Included are 46,433 shares of AFC Common Stock as to which Mr. Drennan has
shared voting and investment power, 18,918 shares of AFC Common Stock as to
which he has sole voting and no investment power, 6,906 shares of AFC
Common Stock as to which he has shared voting and no investment power, and
9,814 shares of AFC Common Stock as to which he has shared voting and sole
investment power.
(11) Included are 814 shares of AFC Common Stock as to which Mr. Redman has
shared voting and investment power, 18,918 shares of AFC Common Stock as to
which he has sole voting and no investment power, 6,906 shares of AFC
Common Stock as to which he has shared voting and no investment power, and
7,931 shares of AFC Common Stock as to which he has shared voting and sole
investment power.
(12) Included are 68,962 shares of AFC Common Stock as to which Mr. Sheerin has
shared voting power, 14,238 shares of AFC Common Stock as to which he has
sole voting and no investment power, 6,906 shares of AFC Common Stock as to
which he has shared voting and no investment power, and 13,791 shares of
AFC Common Stock as to which he has shared voting and sole investment
power.
(13) Included are 178,445 shares of AFC Common Stock as to which Directors,
Board Nominees and Executive Officers, as a group, have shared voting and
investment power, 133,892 shares of AFC Common Stock as to which they have
sole voting and no investment power, 54,647 shares of AFC Common Stock as
to which they have shared voting and no investment power, and 53,078 shares
of AFC Common Stock as to which they have shared voting and sole investment
power.
(14) Included are shares of AFC Common Stock which could be acquired within 60
days of February 27, 1998 pursuant to options to acquire AFC Common Stock
as follows:, Mr. Engelke (356,880 shares), Mr. Keegan (147,590 shares), Mr.
Bolton (67,314 shares), Mr. Burger (82,314 shares), Mr. Connors (82,314
shares), Mr. Donahue (82,314 shares), Mr. Fendt (62,314 shares), Mr.
Haeffner (6,000 shares), Mr. Palleschi (8,000 shares), Mr. Powderly (75,347
shares), Mr. Greenberg (101,425 shares), Mr. Drennan (118,225 shares), Mr.
Redman (106,825 shares), Mr. Sheerin (75,657 shares) and all Directors,
Board Nominees and Executive Officers as a group (1,394,357 shares).
DIRECTOR COMPENSATION
DIRECTORS' AND OTHER FEE ARRANGEMENTS
All non-employee directors of AFC receive an annual retainer of $15,000. No
additional fees for attendance at Board or committee meetings are paid. The
members of the Board also served as directors of the Association. All non-
employee directors of the Association receive an annual retainer of $30,000. No
additional fees for attendance at Association Board of Directors or committee
meetings are paid.
10
<PAGE>
DIRECTORS OPTION PLANS
AFC maintains the AFC 1993 Stock Option Plan for Outside Directors (the
"1993 Directors Option Plan"), which has remained frozen by the Board since
1996, and the 1996 Stock Option Plan for Outside Directors of AFC (the "1996
Directors Option Plan") pursuant to which non-employee directors of AFC and the
Association are granted options on terms previously approved by the shareholders
of AFC.
Pursuant to the 1996 Directors Option Plan, each person who was a non-
employee director of AFC or the Association on May 15,1996 was granted an
initial option on such date to purchase 2,000 shares of AFC Common Stock. Each
person who becomes a non-employee director of AFC or the Association after May
15, 1996 is granted, on the 15th day of the month following the month in which
he or she becomes a non-employee director, an option to purchase 4,000 shares of
AFC Common Stock at an exercise price per share equal to the closing bid
quotation for AFC Common Stock on the NASDAQ Stock Market on the date of grant.
In addition, on January 15th of each succeeding year, each person who is then a
non-employee director receives a grant of an option to purchase an additional
2,000 shares of AFC Common Stock at an exercise price per share equal to the
closing bid quotation for AFC Common Stock on the NASDAQ Stock Market on the
date of grant. All options granted pursuant to the 1996 Directors Option Plan
vest and become exercisable upon grant.
All options granted under the 1993 Directors Option Plan or the 1996
Directors Option Plan expire upon the earlier of 10 years following the date of
grant or one year following the date the director ceases to be a director for
any reason other than removal for cause, in which case the director's options
immediately terminate.
DIRECTOR RRP
The Association maintains the Association Recognition and Retention Plan
for Outside Directors (the "Director RRP") pursuant to which directors of AFC or
the Association who are not employees of AFC, the Association, or any of their
affiliates have been awarded restricted shares of AFC Common Stock on terms
previously approved by the shareholders of AFC.
Non-employee directors of AFC or the Association in 1993 received awards of
restricted shares which became fully vested and were distributed. Individuals
who became non-employee directors after 1993 and before 1996 (Mr. Powderly)
received an award of 10,176 restricted shares, subject to vesting in three equal
annual installments.
In connection with the adoption of the 1996 Director Stock Option Plan, the
Director RRP was amended such that no further awards will be made pursuant to
the Director RRP.
DIRECTORS' RETIREMENT PLAN
The Association maintains the Directors' Retirement Plan (the "Retirement
Plan") to provide retirement benefits for directors, who are not also employees
of AFC or the Association, with at least 10 years of service as a director of
AFC or the Association. The annual benefit is payable beginning in the month
following termination of service as a director or attainment of age 65,
whichever is later, and continues until the death of the retired director. The
annual benefit amount is equal to 100% of the annualized aggregate rate of fees
paid for service as a non-employee director of AFC or the Association for the
last month of service prior to retirement, reduced by 10% for each year that the
director's years of service is less than 20.
The Retirement Plan provides that, in the event of a change of control of
AFC or the Association, each
11
<PAGE>
director may require the Association or its successor to pay either (i) a lump
sum payment to the director, at the time of the change of control or such later
date as the director ceases to serve as a director of AFC or the Association,
equal to the actuarially determined present value of the future benefits payable
to the director or (ii) an amount into a grantor trust established for the
benefit of the director adequate to fund the benefits payable under the
Retirement Plan as they become due.
DIRECTORS DEFERRED COMPENSATION PLAN
AFC has adopted the AFC Directors Deferred Compensation Plan (the "Deferred
Plan") which is an unfunded plan. Pursuant to the Deferred Plan, outside
directors of either AFC or the Association may elect to defer receipt of all or
any part of the directors' fees to which such director would otherwise be
entitled. Deferred fees are carried on the books of AFC and are credited with
interest quarterly at a rate equal to the average of AFC's consolidated cost of
funds and yield on investments for the preceding quarter, unless the cost of
funds exceeds the yield on investments, in which case the rate is based upon the
preceding quarter's consolidated yield on investments.
In the event of a change of control of AFC, the Association or other
affiliated company, as defined in the Deferred Plan, each participating director
may elect that his fees, with accrued interest, be placed in a grantor trust
established for the benefit of the director, applied to the purchase of an
insurance company annuity contract to provide payments according to the
director's previously selected payment schedule, or he may continue to rely upon
AFC or its successor for the payment of such benefits.
DIRECTORS' DEATH BENEFIT
The Board has adopted the AFC Death Benefit Plan for Outside Directors (the
"Death Benefit Plan") which provides that in the event a non-employee director
dies while in service as a director of AFC or the Association, the decedent's
designated beneficiary will receive from AFC a payment equal to the aggregate
directors' fees received by the director for the last month of service as a
director of AFC and the Association annualized. If a director leaves the service
of AFC and the Association for any reason other than death, all rights to any
benefit under the Death Benefit Plan cease.
EXECUTIVE COMPENSATION
The Report of the Compensation Committee on Executive Compensation and the
Stock Performance Chart 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 (the "Securities Act") or the Exchange
Act, except to the extent that AFC specifically incorporates this information by
reference, and shall not otherwise be deemed filed under such Acts.
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
Under rules established by the SEC, AFC is required to provide certain data
and information regarding the compensation and benefits provided to AFC's Chief
Executive Officer and certain other executives of AFC. The disclosure
requirements for the Chief Executive Officer and such other executives include
the use of tables and a report explaining the rationale and considerations that
led to fundamental compensation decisions affecting those individuals. In
fulfillment of this requirement, the Compensation Committee of AFC, at the
direction of the Board, has prepared the following report for inclusion in this
proxy statement.
12
<PAGE>
GENERAL. The compensation of the executive and other officers of AFC for
fiscal year 1997 was reviewed by the Compensation Committees of AFC and the
Association and ratified by the Boards of Directors of AFC and the Association
in December 1996.
The Compensation Committee of AFC met on two occasions in fiscal 1997. It
limited its activities to granting stock options under the 1996 Officer Option
Plan to, among others, executive officers, adopting certain policies with
respect to the administration of the option plans of AFC, ratifying certain
actions of the Association's Compensation Committee relating to payments earned
by, among others, executive officers under the Association Incentive
Compensation Plan for Select Executives (the "Incentive Compensation Plan"), and
the establishment of compensation levels for the executive officers of AFC for
fiscal year 1998.
EXECUTIVE COMPENSATION PHILOSOPHY. The primary objective of the executive
compensation program of AFC and the Association is to attract and retain highly
skilled and motivated executive officers who will manage AFC in a manner to
promote its growth and profitability and advance the interests of its
shareholders. The compensation program is designed to provide levels of
compensation which are competitive and reflective of the organization's
performance in achieving its goals and objectives, both financial and non-
financial, as determined in its business plan. The program aligns the interests
of the executives with those of the shareholders of AFC by providing a
proprietary interest in AFC, the value of which can be significantly enhanced by
the appreciation of AFC Common Stock. The program also seeks to adequately
provide for the needs of the executive upon retirement based upon the length of
service provided to AFC, the Association and their successors.
In structuring its executive compensation program, among the factors
considered by AFC is the before and after tax financial impact the program will
have or likely have on AFC and the Association. Section 162(m) of the Internal
Revenue Code of 1986, as amended (the "Code"), places a limitation of $1 million
for each executive named in the "Summary Compensation Table" below (the "Named
Executive" or collectively the "Named Executives") on the deductibility of
certain elements of compensation, as defined in the Code, paid to such executive
by either AFC or the Association. Among the factors which would influence the
effect of this provision, in addition to the specific provisions of its
compensation plans, is the date the specific plan was adopted or implemented, as
well as the composition of the Compensation Committees. This limitation does not
apply to all institutions within AFC's industry or to all companies from which
it would recruit executive personnel. For 1997, based upon the current level and
composition of the compensation of its executive officers, the limitations
contained in Section 162(m) of the Code have not had any adverse impact on the
financial condition or results of operations of AFC.
The executive compensation program of AFC consists of four elements: base
salary, short-term incentive compensation, long-term incentive compensation and
retirement benefits. The following is a discussion of each of these components.
BASE SALARY. Salary levels are designed to be competitive with cash
compensation levels paid to similar executives at banking and thrift
institutions of similar size and standing, giving due consideration to the
marketplace in which AFC and the Association operate. Base salary is considered
in conjunction with the short-term incentive compensation component of the
executive compensation program. Base salary is set at a level to provide a
reasonably competitive level of compensation even if AFC, due to factors outside
of the control of the executives, fails to meet its minimum threshold targets
such that no awards are made under the short-term incentive component of the
compensation program.
To determine whether or not base salary and short-term incentive
compensation, discussed below, for 1997 were set at levels that were
competitive, the Compensation Committee reviewed a number of sources of
13
<PAGE>
information, including SNL Executive Compensation Review 1996, Thrift
Institutions, and the SNL Executive Compensation Review 1996, Commercial Banks.
Particular emphasis was placed on those institutions that were of similar asset
size to that of AFC. The total cash compensation level was then targeted at the
high end of the survey data in recognition, in part, that such survey data is
historical in nature.
As a result of their analysis, the Compensation Committees approved, and
the Boards of Directors of AFC and the Association ratified, total 1997 base
salary compensation, excluding Mr. Keegan, for the remaining six (6) executive
officers of $1,866,250, compared to $1,737,000 paid to six such officers for
1996. The Chief Executive Officer received an increase of $40,000, from $560,000
to $600,000, or 7.14%, effective January 1, 1997. The remaining five (5)
executive officers received increases averaging 7.44%, ranging from a high of
9.3% to a low of 6.1%. All such increases reflected contributions to the goals
and objectives of AFC and the Association and the increased cost of living
within the market from which AFC and the Association draw their work force. Mr.
Keegan joined AFC and the Association as an executive officer commencing
September 30, 1997. His compensation was negotiated as part of The
GreaterMerger.
SHORT-TERM INCENTIVE COMPENSATION. Short-term incentive compensation
consists of awards paid pursuant to the Association's Incentive Compensation
Plan. The Board and Compensation Committee of AFC recognize that the operation
of AFC is substantially impacted by the environment in which it operates. It is
expected that its executives will maintain systems in place to monitor that
environment and will take steps to foresee and manage the various risks that
such environment presents. The Board and the Compensation Committee also believe
that to be effective, the attainment of targets established under the short term
incentive component of the compensation program should be both attainable, yet
very challenging.
The Incentive Compensation Plan for 1997 provided for a target incentive
for the Chief Executive Officer equal to thirty-five percent (35%) of his base
salary and, in the case of the other executive officers, including Mr. Keegan as
to that portion of his base salary earned while employed by AFC and the
Association, equal to twenty-five percent (25%) of each executive's base salary.
Individual awards to the Chief Executive Officer are computed based upon AFC's
consolidated financial performance, to the extent of eighty percent (80%) of the
award, and an evaluation of his contribution to and the overall level of
achievement of the goals and objectives of AFC's business plan, to the extent of
twenty percent (20%) of the award. Other executive officers' awards were
similarly computed with AFC's consolidated financial performance comprising
seventy-five percent (75%) of the award and individual performance related to
AFC's business plan comprising twenty-five percent (25%).
The financial performance measurements utilized for 1997 for the financial
performance portion of such awards were as follows: (i) eighty percent (80%) of
the financial performance measure was based upon the earnings per share of AFC;
and (ii) twenty percent (20%) was based upon the return on average assets of
AFC. For each of these measurements, a series of achievement levels was
established, with each level assigned a percentage award from zero percent (0%)
up to one hundred percent (100%). The zero percent (0%) award represented
performance below a reasonable threshold level of achievement. If the range of
performance specified for a one hundred percent (100%) award was exceeded, the
executive could be paid an award of up to one hundred fifty percent (150%) of
the financial performance measurement award. The Compensation Committee of the
Association, which administers the plan, has discretion under the Incentive
Compensation Plan to exclude from AFC's financial performance unusual items of
income or loss in determining the actual awards to be granted and may make
additional awards to any employee who has made an unusual and important
contribution outside of the ordinary course of his or her duties.
For fiscal year 1997, AFC's financial performance, after adjustment by the
Compensation Committee, resulted in awards of up to 120% of target amounts for
financial performance. Executive officers also received
14
<PAGE>
up to 120% of their individual performance awards.
LONG-TERM INCENTIVE COMPENSATION. The long-term incentive compensation
portion of AFC's and the Association's compensation program consists of the
Association Recognition and Retention Plan for Officers and Employees (the
"Officer and Employee RRP"), the Incentive Option Plan and the 1996 Officer
Option Plan (the option plans being referred to collectively as the"Option
Plans").These plans are designed to provide incentives for longer-term positive
performance of the executive officers and to align their financial interests to
those of AFC shareholders by providing the opportunity to participate in AFC
Common Stock price appreciation, if any, which may occur after the date of grant
of such award or option.
The Compensation Committee of the Association administers the Officer and
Employee RRP, determines which eligible employees will be granted plan share
awards (the "Plan Share Awards") and grants Plan Share Awards. Officer and
Employee RRP Plan Share Awards, which are nontransferable and nonassignable, are
granted in the form of shares of AFC Common Stock and are held in trust until
the Plan Share Awards vest.
Recipients of the Plan Share Awards become vested in the shares of AFC
Common Stock covered by the Plan Share Awards over a period of time. The Plan
Share Awards granted to the Named Executives vest in equal installments of
twenty percent (20 %) on the tenth business day of January each year, commencing
on January 17, 1995. Effective September 30, 1997, Mr. Keegan was granted a Plan
Share Award of 15,000 shares of AFC Common Stock which will vest in three equal
annual installments commencing on January 10, 1998. Plan Share Awards
immediately vest upon termination of employment due to death, disability or
retirement of the award holder or following a change of control of AFC or the
Association, as defined in the Officer and Employee RRP. In the event that an
award holder otherwise terminates employment with AFC or the Association, the
award holder's non-vested awards will be forfeited. See "Executive Compensation
- - Employment Agreements" below.
Vested shares are distributed to recipients as soon as practicable
following the vesting date. At such time, the recipients also receive amounts
equal to accumulated dividends with respect to such shares. Prior to vesting,
recipients of Plan Share Awards may direct the voting of shares of AFC Common
Stock granted to them and held in the trust. Shares of AFC Common Stock held by
the Officer and Employee RRP trust which have not been awarded are voted by the
trustee in the same proportion as the awarded shares are voted in accordance
with the directions given by the recipients. See the "Summary Compensation
Table" below for description of the Plan Share Awards outstanding to the Named
Executives as of December 31, 1997. See the table above related to the
beneficial ownership of AFC Common Stock by the directors, Board Nominees and
executive officers of AFC and "Executive Compensation - Incentive Option Plans"
below for further information regarding options related to the Named Executives.
RETIREMENT BENEFITS. Retirement benefits are designed to provide for an
adequate level of income to the executive officer following his or her
retirement from AFC and the Association based upon length of service with the
organization and to support the goals and objectives of the rest of the
compensation program as described above. The retirement benefits are provided
through the Association Incentive Savings Plan, the ESOP, the Association
Employees' Pension Plan (the "Pension Plan"), the Association Excess Benefit
Plan (the "Excess Plan"), and the Association Supplemental Benefit Plan (the
"Supplemental Plan"). See "Executive Compensation - Pension Plans" for a
description of the Pension Plan, Excess Plan and Supplemental Plan which are all
defined benefit pension plans.
The Association maintains the ESOP and ESOP Trust for the benefit of the
salaried employees of AFC and the Association. The ESOP provides for the
allocation of shares of AFC Common Stock and other contributions, if any, based
on payments by the Association of a loan made by AFC in 1993 to the ESOP to fund
15
<PAGE>
the acquisition of 2,642,354 shares of AFC Common Stock. See the "Summary
Compensation Table" below and the table above related to the beneficial
ownership of AFC Common Stock by the directors, Board Nominees and executive
officers of AFC for further information regarding the ownership of AFC Common
Stock by the Named Executives.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER. The Compensation Committees of
AFC and the Association met in December 1996 to review the performance of the
executive officers during 1996, to establish recommended compensation levels for
such officers for 1997 and to commence discussions regarding appropriate goals
and participation levels with respect to such officers participation in the
Incentive Compensation Plan.
At the December 1996 meeting, the financial performance of AFC and the
accomplishments of financial and non-financial goals and objectives of AFC and
the Association, as set forth in the prior year business plan, were reviewed as
was the performance of the executive officers of AFC. Mr. Engelke provided to
the Committees his insights as to both his own performance and that of the other
executive officers.
The Compensation Committees, based upon these discussions, determined the
level of salary for the executive officers, including the Chief Executive
Officer, to take effect January 1, 1997, after reviewing the overall executive
compensation program for the executive officers including the Chief Executive
Officer. As a part of that review, the Committees utilized relative information
provided in the SNL Executive Compensation Review 1996, Thrift Institutions and
the SNL Executive Compensation Review 1996, Commercial Banks.
COMPENSATION COMMITTEE OF AFC
William J. Fendt, Chairman Thomas J. Donahue
Andrew M. Burger Ralph F. Palleschi
Denis J. Connors George L. Engelke, Jr. (ex officio)
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION.
While AFC does not, the Association from time to time lends money to AFC's
and the Association's directors, Board Nominees, executive officers, or members
of their families, as well as to members of the public. The Association's policy
provides that all loans made by the Association to AFC or Association directors
and executive officers or members of their families be made in the ordinary
course of the Association's business on substantially the same terms, including
interest rates and collateral, as those prevailing at the time for comparable
transactions with other persons, and not involve more than the normal risk of
collection or present other unfavorable features. Since January 1, 1996, all
loans outstanding to the directors, Board Nominees or executive officers of AFC
or members of their immediate families were made in conformity with the
Association's policy in this regard and have not been disclosed as non-accrual,
past due, restructured or potential problems.
Recommendations to the Compensation Committees of AFC and the Association
as to officers' salaries, including those of executive officers, are developed
by an internal salary committee including Messrs. Engelke and Sheerin and the
Association's Vice President - Human Resources, a non-executive officer. These
recommendations are presented to the Compensation Committees by Mr. Engelke. Mr.
Engelke also provides insight to the Compensation Committees regarding his and
the performance of the other officers of AFC and the Association, both executive
and non-executive. Mr. Engelke is an ex officio member of the Compensation
Committees and does not participate in the discussion or approval of
compensation issues relating to himself.
STOCK PERFORMANCE CHART. The following graph shows a comparison of
cumulative total shareholder return on AFC Common Stock since November 18, 1993,
the day AFC Common Stock commenced trading, with
16
<PAGE>
the cumulative total returns of both a broad market index, the NASDAQ Stock
Market (U.S.) Index produced by the Center for Research in Security Prices
("CRSP"), and a peer group index, the NASDAQ Financial Stock Index also produced
by CRSP. The peer group index set forth in the graph below consists of a
different set of institutions than that considered by the Compensation
Committees or the Boards of Directors of AFC or the Association in determining
the compensation of the executive officers.
COMPARISON OF CUMULATIVE TOTAL RETURN OF
AFC COMMON STOCK, NASDAQ MARKET INDEX AND PEER GROUP INDEX (1)
[GRAPH APPEARS HERE]
<TABLE>
AFC COMMON STOCK NASDAQ MARKET INDEX NASDAQ FINANCIAL INDEX
---------------- ------------------- ----------------------
<S> <C> <C> <C>
November 18, 1993 $100.000 $100.000 $100.000
December 31, 1993 96.943 103.044 102.927
December 30, 1994 91.703 100.726 103.171
December 29, 1995 160.852 142.453 150.225
December 31, 1996 263.897 175.209 192.612
December 31, 1997 403.785 215.005 296.430
</TABLE>
- ----------------------------
(1) Assumes $100 invested on November 18, 1993 and all dividends reinvested
through the end of AFC's fiscal year ended December 31, 1997. NASDAQ Market
Index and NASDAQ Financial Index values calculated using daily values for
CRSP Total Return Indexes as of the applicable date.
SUMMARY COMPENSATION TABLE
The following table shows, for the fiscal years ended December 31, 1997,
1996 and 1995, the cash compensation paid by AFC and the Association, as well as
certain other compensation paid or accrued for those years, to the Chief
Executive Officer and the four highest paid executive officers (the "Named
Executives") of
17
<PAGE>
AFC and the Association who received salary and bonuses in excess of $100,000 in
the 1997 fiscal year.
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG TERM COMPENSATION
---------------------------- -------------------------------------------
AWARDS PAYOUTS
-------------------------------------------
OTHER SECURITIES ALL
ANNUAL RESTRICTED UNDERLYING OTHER
COMPEN- STOCK OPTIONS/ LTIP COMPEN-
NAME AND SALARY BONUS SATION AWARDS SARS PAYOUTS SATION
PRINCIPAL POSITIONS YEAR $ ($) (1) ($) ($) (2) (#)(3) ($) ($) (4)
- ------------------- ---- ------- ------- ------- --------- ---------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
George L. Engelke, Jr. 1997 600,000 252,000 --- --- 30,000 --- 77,188
Chairman, President, 1996 560,000 215,600 --- --- 20,000 --- 56,080
CEO and Director 1995 525,000 126,000 --- --- --- --- 40,091
Arnold K. Greenberg 1997 281,250 70,000 --- --- 12,500 --- 77,188
Executive Vice President 1996 265,000 66,250 --- --- 10,000 --- 56,080
and Assistant Secretary 1995 250,000 41,250 --- --- --- --- 40,091
Thomas W. Drennan 1997 285,000 78,000 --- --- 17,500 --- 77,188
Executive Vice President 1996 265,000 72,875 --- --- 10,000 --- 56,080
1995 250,000 41,250 --- --- --- --- 40,091
Monte N. Redman 1997 295,000 81,000 --- --- 17,500 --- 77,188
Executive Vice President 1996 270,000 74,250 --- --- 10,000 --- 56,080
and Chief Financial 1995 250,000 41,250 --- --- --- --- 40,091
Officer
William K. Sheerin 1997 210,000 52,000 --- --- 12,500 --- 77,188
Executive Vice President 1996 197,000 49,250 --- --- 10,000 --- 56,080
and Secretary 1995 183,000 30,195 --- --- --- --- 40,091
</TABLE>
- -----------------------------------------------
(1) The column titled "Bonus" consists of payments under the Association
Incentive Compensation Plan which is a short-term incentive plan. See
"Executive Compensation - Report of the Compensation Committee on Executive
Compensation".
(2) Pursuant to the Officer and Employee RRP, as of December 31, 1997, Messrs.
Engelke, Greenberg, Drennan, Redman and Sheerin had outstanding grants of
restricted stock of 105,800, 37,836, 37,836, 37,836, and 28,478 shares of
AFC Common Stock, respectively. The awards, based upon the closing price of
AFC Common Stock of $55.75, as quoted on the NASDAQ National Market on
December 31, 1997, had a value of $5,898,350, $2,109,357, $2,109,357,
$2,109,357 and $1,587,648, respectively.
(3) There were no options or stock appreciation rights ("SARs") granted to any
of the Named Executives during 1995. Options with limited stock
appreciation rights ("LSARs") attached were granted to the Named Executives
during 1996 and 1997. No freestanding SARs have been granted to the Named
Executives. See "Executive Compensation - Incentive Option Plans" below.
(4) The sums reported represent the fair market value of AFC Common Stock which
was allocated under the ESOP to the account of the Named Executive during
the year ended December 31, 1997, 1996, and 1995, respectively, based upon
the closing price of AFC Common Stock of $55.75 as quoted on the NASDAQ
National Market on December 31, 1997, $36.875 as quoted on the NASDAQ
National Market on December 31, 1996 and $22.8125 as quoted on the NASDAQ
National Market on December 29, 1995, respectively.
EMPLOYMENT AGREEMENTS
AFC and the Association have entered into employment agreements with each
of the executive officers.
18
<PAGE>
Mr. Engelke's and Mr. Keegan's employment agreements each provide for a three-
year term. The employment agreements entered into with the remaining Named
Executives each provide for two-year terms. The Association's agreements each
run from January 1st, except for Mr. Keegan's which runs from October 1st. Prior
to January 1st each year, the Board of Directors of the Association may extend
the agreements with the Association for an additional year such that the
remaining terms shall be 3 years, in the cases of Mr. Engelke and Mr. Keegan,
and 2 years, as to the other Named Executives. Prior to January 1, 1998, such
employment agreements were so extended. The agreements with AFC automatically
extend daily, so as to maintain their original term, unless written notice of
non-renewal is given by the Board. No such notice has been given to any Named
Executive.
The employment agreements provide for the Named Executives' participation
in retirement plans, group life, medical and disability insurance plans and any
other employee benefit programs, including incentive compensation plans and
stock option, SAR and restricted stock plans maintained by AFC or the
Association in accordance with the terms and conditions of such plans. The
employment agreements also provide that AFC and the Association will maintain
for the benefit of the Named Executives directors and officers liability
insurance and will indemnify the Named Executives for claims and related costs
and liabilities, arising from the services provided pursuant to the employment
agreements on prescribed terms for a period of six years beyond the termination
of such agreements.
The employment agreements provide for termination of each of the Named
Executive's employment at any time by AFC or the Association with or without
cause, as separately defined in such agreements. The Named Executive would be
entitled to a severance payment(s) in the event the Named Executive's employment
terminates (i) due to AFC's or the Association's (A) failure to re-elect the
executive to his current office, and in Mr. Engelke's and Mr. Keegan's
agreements, to the Board; (B) failure by whatever cause to vest in the executive
the functions, duties or responsibilities prescribed for the executive in such
agreement; (C) a material breach of the agreement by AFC or the Association or a
reduction in the executive's base salary or other change to the terms and
conditions of the executive's compensation and benefits which either
individually or in the aggregate, as to such executive, has a material adverse
effect on the aggregate value of the total compensation package provided to such
executive; or (D) relocation of the executive's principal place of employment
outside of Nassau or Queens Counties of New York; or (ii) for reasons other than
(A) for cause; (B) voluntary resignation, except as a result of the actions
specified under clause (i) above or following a change of control, as defined in
the agreements; (C) following the executive's attainment of mandatory retirement
age for executive officers (currently 70 years of age); (D) death; (E) long term
disability or (F) expiration of the term of the agreement.
The severance payment(s), to which the Named Executives would be entitled,
include: (i) continued life, medical and disability insurance benefits for the
period from termination of the executive's employment through the remaining term
of the applicable employment agreement as if the executive had continued in the
employmentAFC or the Association through the end of the term of the agreement
(the "Unexpired Term"); (ii) a lump sum payment equal to the present value of
the salary, incentive compensation, pension, profit-sharing and ESOP benefits
the executive would have earned during the Unexpired Term computed using a
prescribed valuation method; (iii) accelerated vesting of all outstanding
options and restricted stock awards; and at the election of AFC or the
Association, a cash settlement of all outstanding options and restricted stock
awards.
In addition to the severance payment described above, if a Named
Executive's employment terminates following a change of control of AFC or the
Association, the executive's employment agreement with AFC provides that for any
taxable year in which the executive would be liable for the payment of excise
taxes under Section 4999 of the Code with respect to any payment in the nature
of compensation paid by AFC or any of its affiliated companies, as a result of
such payments constituting "excess parachute payments" under Section 280G
19
<PAGE>
of the Code, or any successor thereto, then an amount will be paid (the "Tax
Payment") to the executive, or on behalf of the executive, based upon a formula
set forth in the agreements, the effect of which would be to maintain the after-
tax severance benefit to which the executive would be entitled as described in
the preceding paragraph but for the application of the excise tax specified in
Section 4999 of the Code and any federal, state and local income or other taxes
to which the executive would be subject as a result of the Tax Payment.
It is anticipated, given the renewal provisions described above and set
forth in the employment agreements between AFC and the Named Executives,
respectively, that in the event of a termination of a Named Executive, entitling
such executive to a severance benefit or the payment described in the preceding
paragraph, the Unexpired Term, in the case of Mr. Engelke and in the case of Mr.
Keegan, will be three years from the date of termination and, in the case of the
other Named Executives, will be two years from the date of termination.
INCENTIVE OPTION PLANS
The Board has established the Incentive Option Plan and the 1996 Officer
Option Plan for the benefit of the officers and employees of AFC and the
Association. The following table sets forth all grants of options (and limited
SARs), under the 1996 Officer Option Plan, to the Named Executives during 1997
and contains certain information about potential value of these options based
upon certain assumptions as to the appreciation of AFC Common Stock over the
life of the option. No options or SARs were granted pursuant to the Incentive
Option Plan to any of the Named Executives during 1997, nor has AFC, during such
period, adjusted or amended the exercise price of any stock options or SARs
previously awarded to any of the Named Executives or otherwise.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE VALUE AT
ASSUMED ANNUAL
RATES OF STOCK
PRICE
APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM (4)
-----------------------------------------------------------------------------------
% OF TOTAL
OPTIONS/
SECURITIES SARS
UNDERLYING GRANTED TO EXERCISE
OPTIONS/ EMPLOYEES OR BASE
SARS IN FISCAL PRICE PER EXPIRATION
GRANTED (1) YEAR (2) SHARE (3) DATE 5% 10%
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
George L. Engelke, Jr. 30,000 7.18% $58.125 December 16, 2007 $1,096,635 $2,779,088
Arnold K. Greenberg 12,500 2.99% $58.125 December 16, 2007 $ 456,931 $1,157,954
Thomas W. Drennan 17,500 4.19% $58.125 December 16, 2007 $ 639,704 $1,621,135
Monte N. Redman 17,500 4.19% $58.125 December 16, 2007 $ 639,704 $1,621,135
William K. Sheerin 12,500 2.99% $58.125 December 16, 2007 $ 456,931 $1,157,954
</TABLE>
- ------------------------------------
(1) Of the options granted, each Named Executive received the grant of an
option as to 1,720 shares of AFC Common Stockwhich are intended to qualify
as incentive stock options. The remainder are non-statutory stock options.
All options granted to the Named Executives have a ten year term and vest
on January 10, 2001. See "Executive Compensation - Employment Agreements"
above. All such options also vest and become immediately exercisable upon
death, disability, retirement or in the event of a Change of Control or
Threatened Change of Control, as defined in the 1996 Officer Option Plan.
All such options were granted in tandem with LSARs which provide that,
20
<PAGE>
in the event of a Change of Control, the Named Executive, in lieu of
exercising the option as to which the LSAR relates, may, during the period
commencing on the Change of Control and ending at the latter of six (6)
months following such date or thirty (30) days following the earliest date
on which the Named Executive may exercise the LSAR without subjecting
himself to liability under Section 16 of the Exchange Act, as amended,
surrender his option and receive a payment in cash equal to, on a per share
basis as to the number of shares as to which the option is surrendered, the
difference between the exercise price per share and the greater of (i) the
highest price paid per share of AFC Common Stock by any person who
initiated or sought to effect the Change of Control during the one year
period ending on the date of the Change of Control or (ii) the average of
the Fair Market Value per share as defined in the 1996 Officer Option Plan
over the last ten trading days preceding the date of exercise of the LSAR.
(2) Included in calculating the "% of Total Options/SARs Granted to Employees
in Fiscal Year" are options granted as part of The Greater Merger, in
substitution of options to acquire shares of common stock of The Greater to
Mr. Keegan and another former employee of The Greater who remained in the
employ of the Association for more than on a temporary basis.
(3) The exercise price may be paid in whole or in part in cash, through the
surrender of previously held shares of AFC Common Stock, or the surrender
of options granted pursuant to the 1996 Officer Option Plan.
(4) The amounts stated assume the specified annual rates of appreciation only.
Actual experience is dependent on the future performance of AFC Common
Stock and overall stock market conditions. There can be no assurance that
the amounts reflected in this table will be achieved.
The following table provides certain information with respect to options
exercised by the Named Executives during 1997 and the number of shares of AFC
Common Stock represented by outstanding stock options held by the Named
Executives as of December 31, 1997. Also reported are the values for "in-the-
money" options, which represents the positive spread between the exercise price
of any outstanding stock options and the 1997 fiscal year end price of AFC
Common Stock.
FISCAL YEAR END OPTION/SAR VALUES
<TABLE>
NUMBER OF VALUE OF
SECURITIES UNDERLYING UNEXERCISED
UNEXERCISED IN - THE - MONEY
OPTIONS/SARS OPTIONS/SARS
AT FISCAL YEAR- AT FISCAL YEAR-
END (#) END ($)
SHARES ACQUIRED EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE (#) VALUE REALIZED (1) UNEXERCISABLE UNEXERCISABLE (2)
- ------------------------ --------------- ----------------- --------------------- ------------------------
<S> <C> <C> <C> <C>
George L. Engelke, Jr. 24,000 $1,029,000 261,660 / 240,440 $11,316,795 / $8,631,530
Arnold K. Greenberg 6,500 $ 278,687 91,169 / 87,613 $ 3,943,059 / $3,013,937
Thomas W. Drennan 7,000 $ 299,687 85,669 / 92,613 $ 3,705,184 / $3,013,637
Monte N. Redman 0 NA 97,669 / 92,613 $ 4,224,184 / $3,013,637
William K. Sheerin 7,000 $ 204,125 61,243 / 71,329 $ 2,648,759 / $2,309,354
</TABLE>
- --------------------------------------
(1) Represents the fair market value per share of AFC Common Stock as quoted on
the NASDAQ National Market on the day of exercise of the option minus the
exercise price per share of the option exercised times the number of shares
of AFC Common Stock as to which the option was exercised.
(2) Represents the fair market value per share of AFC Common Stock at fiscal
year end based upon the closing price of $55.75 as quoted on the NASDAQ
National Market on December 31, 1997 minus the exercise price per share of
the options outstanding times the number of shares of AFC Common Stock as
to which the option, whether exercisable or unexercisable as the case may
be, relates. Excluded are options with an exercise price in excess of
$55.75.
21
<PAGE>
PENSION PLANS. The Association maintains the Pension Plan, a non-
contributory defined benefit pension plan for the benefit of eligible employees.
The Pension Plan permits the trustee thereof to purchase shares of AFC Common
Stock. At December 31, 1997, the Pension Plan trust held 60,000 shares of AFC
Common Stock.
The Association also maintains the Excess Plan. This non-qualified plan
provides the benefits that would have been provided under the Pension Plan but
for the maximum annual benefit limitation in Section 415 of the Code ($114,000
for 1997, payable in the form of a ten-year certain and continuous annuity at
age 65) and the maximum annual compensation limitation in Section 401(a)(17) of
the Code ($160,000 for 1997). In addition, the Association maintains the
Supplemental Plan. This non-qualified plan was adopted effective January 1, 1989
so that selected participants in the Pension Plan could receive the retirement
benefits that would have been provided under the Pension Plan had the benefit
formula in effect immediately prior to that date remained in effect.
The following tables set forth the estimated annual benefits payable under
the defined benefit pension plans described above upon retirement at age 65 in
calendar year 1997, expressed in the form of a ten-year certain and continuous
annuity, for the highest five-year average annual base wage (referred to in the
table as remuneration) and years of service classifications specified.
PENSION AND EXCESS PLANS
CREDITABLE YEARS OF SERVICE AT AGE 65 (1)
-------------------------------------------------
REMUNERATION (2) 15 20 25 30 35 (3)
- ------------ -------- -------- -------- -------- --------
$125,000 $ 27,400 $ 36,500 $ 45,600 $ 54,700 $ 54,700
150,000 33,400 44,500 55,600 66,700 66,700
175,000 39,400 52,500 65,600 78,700 78,700
200,000 45,400 60,500 75,600 90,700 90,700
225,000 51,400 68,500 85,600 102,000 102,000
250,000 57,400 76,500 95,600 114,700 114,700
300,000 69,400 92,500 115,600 138,700 138,700
400,000 93,400 124,500 155,600 186,700 186,700
450,000 105,400 140,500 175,600 210,700 210,700
500,000 117,400 156,500 195,600 234,700 234,700
600,000 141,400 188,500 235,600 282,700 282,700
700,000 165,400 220,500 275,600 330,700 330,700
800,000 189,400 252,500 315,600 378,700 378,700
PENSION, EXCESS AND SUPPLEMENTAL PLANS
CREDITABLE YEARS OF SERVICE AT AGE 65 (1)
-------------------------------------------------
REMUNERATION (2) 15 20 25 30 35 (3)
- ---------------- -------- -------- -------- -------- --------
$125,000 $ 32,200 $ 42,900 $ 53,600 $ 64,300 $ 64,300
150,000 49,700 52,900 66,100 79,300 79,300
175,000 47,200 62,900 78,600 94,300 94,300
200,000 54,700 72,900 91,100 109,300 109,300
225,000 62,200 82,900 103,600 124,300 124,300
250,000 69,700 92,900 116,100 139,300 139,300
300,000 84,700 112,900 141,100 169,300 169,300
400,000 114,700 152,900 191,100 229,300 229,300
450,000 129,700 172,900 216,100 259,300 259,300
500,000 144,700 192,900 241,100 289,300 289,300
600,000 174,700 232,900 291,100 350,000 350,000
700,000 204,700 272,900 341,100 409,300 409,300
800,000 234,700 312,900 391,100 469,300 469,300
22
<PAGE>
- --------------------------
(1) The benefits listed in the retirement benefits table are not subject to any
Social Security or other offset amounts.
(2) The remuneration under the Pension Plan, the Excess Plan and the
Supplemental Plans is calculated based upon the amount shown in the column
entitled "Salary" in the "Summary Compensation Table" and does not include
amounts shown in the column entitled "Bonus" in such Table. The Pension
Plan is a qualified plan and is subject to the compensation limit,
described above, contained in Section 401 (a) (17) of the Code for
calculating the Participant's benefit.
(3) Benefits do not accrue for service in excess of 30 years.
The Named Executives, as of December 31, 1997, had the following years of
credited service (i.e., benefit service): George L. Engelke, Jr., 26 years 6
months; Arnold K. Greenberg, 22 years 7 months; Thomas W. Drennan, 11 years 6
months; Monte N. Redman, 20 years 7 months; and William K. Sheerin, 41 years 8
months.
PROPOSAL NO. 2
APPROVAL OF AN AMENDMENT TO THE CERTIFICATE OF INCORPORATION OF ASTORIA
FINANCIAL CORPORATION TO INCREASE THE AUTHORIZED COMMON STOCK OF ASTORIA
FINANCIAL CORPORATION TO 200,000,000 SHARES
The Board has unanimously determined it to be in the best interests of AFC
and its shareholders to amend the Certificate of Incorporation of AFC to
increase the number of shares of stock that AFC has the authority to issue to an
aggregate of 205,000,000 shares, of which 200,000,000 would be AFC Common Stock
and 5,000,000 would be Preferred Stock, and directed that the amendment be
submitted to a vote of the shareholders at the Annual Meeting for approval. If
the proposal is adopted, Article FOURTH (A) of the Certificate of Incorporation
of AFC will be amended to read as follows:
FOURTH: A. The total number of shares of all classes of stock which
------
the Corporation shall have authority to issue is Two Hundred Five million
(205,000,000) consisting of:
1. Five million (5,000,000) shares of Preferred Stock, par value one
dollar ($1.00) per share (the "Preferred Stock"); and
2. Two Hundred million (200,000,000) shares of Common Stock, par
value one cent ($.01) per share ("Common Stock").
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE AMENDMENT TO
---
THE CERTIFICATE OF INCORPORATION.
The Certificate of Incorporation of AFC currently authorizes the issuance
of up to 75,000,000 shares, consisting of 70,000,000 shares of AFC Common Stock
and 5,000,000 shares of Preferred Stock. As of the Record Date, AFC had
[26,418,340] shares of AFC Common Stock and 2,000,000 shares of Preferred Stock
outstanding, with an additional [2,307,023] shares of AFC Common Stock reserved
for issuance under AFC's stock option plans and option conversion agreements and
an additional 300,000 shares of AFC Common Stock reserved for issuance in
connection with the Astoria Financial Corporation Automatic Dividend
Reinvestment and Stock Purchase Plan. In addition, AFC had reserved 325,000
shares of Preferred Stock for possible issuance pursuant to the AFC's
shareholder rights plan, adopted in July 1996 (the "Rights Plan").
23
<PAGE>
The Board believes that it is in the best interest of AFC and its
shareholders to increase the number of authorized shares of AFC Common Stock in
order to have additional shares available for issuance to meet a variety of
business needs as they may arise and to enhance AFC's flexibility in connection
with possible future actions. These business needs and actions may include stock
dividends, stock splits, corporate business combinations, funding of business
acquisitions, employee benefit programs and other corporate purposes. The Board
periodically considers transactions such as those listed above. No assurance can
be given as to the future outcome of such consideration. Due to the number of
remaining authorized but unissued or unreserved shares, AFC's ability to use its
securities for these purposes could be limited under the present terms of the
Certificate of Incorporation. The Board does not intend to issue any stock
except on terms or for reasons which the Board deems to be in the best interests
of AFC and its shareholders taken as a whole.
Upon adoption of the amendment, the authorized shares of AFC Common Stock
and Preferred Stock in excess of those presently issued will be available for
issuance at such times and for such purposes as the Board may deem advisable
without further action by AFC's stockholders, except as may be required by
applicable laws or regulations. In this regard, the rules of the National
Association of Securities Dealers, Inc. with respect to securities of companies
approved for trading on the NASDAQ National Market System, upon which AFC's
Common Stock trades, currently requires stockholder approval of (a) acquisition
transactions where the present or potential issuance of shares could result in
an increase of 20% or more in the number of shares of AFC Common Stock
outstanding, (b) a stock option or purchase plan to be established pursuant to
which stock may be acquired by officers or directors, and (c) a transaction
pursuant to which the issuance would result in a change of control.
The proposed amendment is not intended to be an anti-takeover measure.
Shareholders should note, however, that the amendment may have the effect of
deterring or rendering more difficult attempts by third parties to obtain
control of AFC, if such attempts are not approved by the Board. The Board is not
aware of any current efforts to obtain control of AFC. The availability of
authorized and unissued AFC Common Stock, in addition to Preferred Stock, could
enhance the Board's ability to negotiate for better terms on behalf of the
Corporation's shareholders. On the other hand, the authorized and unissued
shares could be used to discourage a tender offer or prevent a change in control
of AFC. AFC is afforded protection against acquisition attempts, which are not
supported by the Board, by provisions contained in AFC's Certificate of
Incorporation, Bylaws and the Rights Plan.
Under the Rights Plan, each shareholder has one Right for each outstanding
share of AFC Common Stock held and each newly-issued share of Common Stock will
have issued with it one Right. The Rights currently have no value, are
represented by the certificates evidencing AFC Common Stock and trade only with
such stock. Each Right, initially, will entitle shareholders to buy a one one-
hundredth interest in a share of Series A Preferred Stock of AFC at an exercise
price of $100.00 upon the occurrence of certain events, as described in the
Rights Plan. The Rights Plan was not adopted in response to any specific event,
but is intended to help ensure that all shareholders of AFC receive fair and
equitable treatment in the event of any proposed acquisition of AFC and guards
against partial tender offers, squeeze-outs and other tactics that may be used
to gain control of AFC without paying all shareholders a fair and full value for
their investment in AFC. The Rights Plan will not prevent AFC from being
acquired, but rather encourages potential acquirors to negotiate any proposed
transaction with the Board, who has the responsibility to act in the best
interest of all of AFC's shareholders.
While the issuance of shares in certain instances may have the effect of
forestalling a takeover, the Board does not intend or view the increase in
authorized AFC Common Stock as an anti-takeover measure, nor is AFC aware of any
proposed or contemplated transaction of this type.
24
<PAGE>
In connection with this proposal, AFC recommends that each shareholder,
consider among other things, the information set forth in AFC's 1997 Annual
Report to Shareholders, a copy of which is being furnished to each shareholder
together with this proxy statement, including but not limited to the financial
statements of AFC as well as the Management's Discussion and Analysis set forth
therein.
PROPOSAL NO. 3
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
AFC's independent auditors for the fiscal year ended December 31, 1997 were
KPMG Peat Marwick LLP. AFC's Board has reappointed KPMG Peat Marwick LLP to
continue as independent auditors for AFC and the Association for the year ending
December 31, 1998, subject to ratification of such appointment by the holders of
the voting stock of AFC. Representatives of KPMG Peat Marwick LLP will be
present at the Annual Meeting. They will be given an opportunity to make a
statement if they desire to do so and will be available to respond to
appropriate questions from shareholders present at the Annual Meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION OF THE
---
APPOINTMENT OF KPMG PEAT MARWICK LLP AS THE INDEPENDENT AUDITORS OF AFC.
ADDITIONAL INFORMATION
Cost of Proxy Solicitation
The cost of solicitation of proxies by AFC, which is expected to be less
than $15,000, will be borne by AFC. Kissel-Blake, Inc. has been retained to
assist in the solicitation of proxies under a contract providing for payment of
a fee of $5,000 plus reimbursement for its expenses. In addition to
solicitations by mail, Kissel-Blake, Inc., or a number of regular employees and
directors of AFC and its subsidiaries, may solicit proxies in person, by mail or
by telephone, but none of these persons will receive any compensation for their
solicitation activities in addition to their regular compensation. Arrangements
will also be made with brokerage houses and other custodians, nominees, and
fiduciaries for forwarding solicitation material to the beneficial owners of AFC
Common Stock held of record by such fiduciaries, and AFC will reimburse them for
their reasonable expenses in accordance with the rules of the SEC and the NASD.
Shareholder Proposals
To be considered for inclusion in AFC's proxy statement and form of proxy
relating to the annual meeting of shareholders to be held in 1999, a shareholder
proposal must be received by the Secretary of AFC at the address set forth on
the first page of this Proxy Statement not later than December 4, 1998. Any such
proposal will be subject to 17 C.F.R. (S)240.14a-8 promulgated by the SEC under
the Exchange Act.
Notice of Business to be Conducted at an Annual Meeting
The Bylaws of AFC provide an advance notice procedure for a shareholder to
properly bring business before an annual meeting or to nominate any person for
election to the Board. The shareholder must give written advance notice to the
Secretary of AFC not less than ninety (90) days before the date originally fixed
for such meeting; provided, however, that in the event that less than one
hundred (100) days notice or prior public disclosure of the date of the meeting
is given or made to shareholders, notice by the shareholder, to be timely, must
be received not later than the close of business on the tenth day following the
date on which AFC's notice to shareholders of the annual meeting date was mailed
or such public disclosure was made. The advance notice
25
<PAGE>
by shareholders must include the shareholder's name and address, as they appear
on AFC's record of shareholders, the class and number of shares of AFC's capital
stock that are beneficially owned by such shareholder, a brief description of
the proposed business or the names of the person(s) the shareholder proposes to
nominate, and, as to business which the shareholder seeks to bring before an
annual meeting, the reason for conducting such business at the annual meeting
and any material interest of such shareholder in the proposed business. In the
case of nominations for election to the Board, certain information regarding the
nominee must also be provided. Nothing in this paragraph shall be deemed to
require AFC to include in its proxy statement and proxy relating to an annual
meeting any shareholder proposal or nomination which does not meet all of the
requirements for inclusion established by the SEC in effect at the time such
proposal or nomination is received.
Other Matters Which May Properly Come Before the Meeting
The Board of Directors knows of no business which will be presented for
consideration at the Annual Meeting other than as stated in the Notice of Annual
Meeting of Shareholders. If, however, other matters are properly brought before
the Annual Meeting, it is the intention of the persons named in the accompanying
proxy to vote the shares represented thereby on such matters as directed by the
Board
Whether or not you intend to be present at the Annual Meeting, you are
urged to return your proxy card promptly. If you are present at the Annual
Meeting and wish to vote your shares in person, your proxy may be revoked by
voting at the Annual Meeting.
A COPY OF AFC'S ANNUAL REPORT ON FORM 10-K (WITHOUT EXHIBITS) FOR THE YEAR
ENDED DECEMBER 31, 1997, AS FILED WITH THE SEC, WILL BE FURNISHED WITHOUT CHARGE
TO SHAREHOLDERS OF RECORD UPON WRITTEN REQUEST TO ASTORIA FINANCIAL CORPORATION,
INVESTOR RELATIONS DEPARTMENT, ONE ASTORIA FEDERAL PLAZA, LAKE SUCCESS, NEW YORK
11042-1085.
By order of the Board of Directors,
William K. Sheerin
Executive Vice President and Secretary
Lake, Success, New York
April 2, 1998
YOU ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING IN PERSON. WHETHER
OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, YOU ARE REQUESTED TO SIGN AND
PROMPTLY RETURN THE ACCOMPANYING PROXY CARD IN THE ENCLOSED POSTAGE-PAID
ENVELOPE.
26
<PAGE>
[FRONT]
ASTORIA FINANCIAL CORPORATION
REVOCABLE PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF ASTORIA
FINANCIAL CORPORATION FOR USE AT THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD
ON MAY 6, 1998 AND AT ANY ADJOURNMENT OR POSTPONEMENT THEREOF.
The undersigned shareholder of Astoria Financial Corporation, hereby
authorizes and appoints John M. Graham, Jr., William M. Thomas, Jr., or either
of them, proxy of the undersigned, with full power of substitution, to attend
and act as proxy for the undersigned and to vote as designated below all shares
of common stock of Astoria Financial Corporation which the undersigned may be
entitled to vote at the Annual Meeting of Shareholders of Astoria Financial
Corporation to be held on May 6, 1998 at 9:30 a.m., Eastern time, at the New
Hyde Park Inn, 214 Jericho Turnpike, New Hyde Park, New York, and at any
adjournment or postponement thereof.
(CONTINUED ON REVERSE SIDE. PLEASE COMPLETE, SIGN AND DATE ON THE REVERSE
SIDE AND PROMPTLY RETURN IN THE ENCLOSED POSTAGE-PAID ENVELOPE.)
<PAGE>
[BACK]
THE BOARD OF DIRECTORS OF ASTORIA FINANCIAL CORPORATION RECOMMENDS A VOTE
"FOR" ALL NOMINEES IN PROPOSAL NO. 1 AND "FOR" PROPOSAL NOS. 2 AND 3.
COMMON [X] Please mark
------ your votes
like this
1. The election of nominees Robert G. Bolton, William J. Fendt and Thomas V.
Powderly as directors for terms of three years each.
FOR WITHHOLD
[ ] [ ]
TO WITHHOLD AUTHORITY TO VOTE FOR ANY PARTICULAR NOMINEE, LINE OR STRIKE
OUT THAT NOMINEE'S NAME AND THEN CHECK THE APPROPRIATE BOX AS TO THE
REMAINING NOMINEES.
2. The approval of an amendment to the Certificate of Incorporation of Astoria
Financial Corporation to increase the authorized Common Stock of Astoria
Financial Corporation to 200,000,000 shares.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. The ratification of the appointment of KPMG Peat Marwick LLP as independent
auditors of Astoria Financial Corporation for the fiscal year ending
December 31, 1998.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
<PAGE>
All proposals listed above in this revocable proxy were proposed by Astoria
Financial Corporation. Astoria Financial Corporation is not currently aware of
any other business that may come before the Annual Meeting. The persons named as
proxies herein will vote the shares represented hereby as directed by the Board
of Directors of Astoria Financial Corporation upon such other business as may
properly come before the Annual Meeting, and any adjournment or postponement
thereof, including, without limitation, a motion to postpone or adjourn the
Annual Meeting.
THIS PROXY IS REVOCABLE. THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED
IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS
MADE, THIS PROXY WILL BE VOTED FOR THE NOMINEES LISTED IN PROPOSAL NO. 1 AND FOR
PROPOSAL NOS. 2 AND 3.
The undersigned hereby acknowledges receipt, prior to the execution of this
proxy, of a Notice of Annual Meeting of Shareholders of Astoria Financial
Corporation, a Proxy Statement dated April 2, 1998 for the Annual Meeting and a
1997 Annual Report to Shareholders of Astoria Financial Corporation.
PLEASE SIGN AND DATE BELOW AND RETURN PROMPTLY IN THE ENCLOSED POSTAGE-PAID
ENVELOPE.
X X Date: , 1998
- ---------------------- ---------------------- ------------------
Please sign name exactly as it appears hereon. If shares are registered in more
than one name, all should sign, but if one signs, it binds the others. When
signing as attorney, executor, administrator, trustee or guardian, please give
your full title as such. If a corporation, please sign in full corporate name by
an authorized officer. If a partnership, please sign in partnership name by an
authorized person.
