<PAGE>
- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A)
OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[_] Confidential, for Use of the Commission Only (as permitted by Rule 14a-
6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12
FLUSHING FINANCIAL CORPORATION
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
----------------
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:
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<PAGE>
FLUSHING FINANCIAL CORPORATION
144-51 NORTHERN BOULEVARD
FLUSHING, NEW YORK 11354
(718) 961-5400
----------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON APRIL 29, 1997
----------------
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the "Annual
Meeting") of Flushing Financial Corporation (the "Company") will be held at
the LaGuardia Marriott located at 102-05 Ditmars Boulevard, East Elmhurst, New
York 11369 at 2:00 p.m., New York time on April 29, 1997, for the following
purposes, all of which are more completely set forth in the accompanying Proxy
Statement:
(1) To elect three directors for a three-year term and until their
successors are elected and qualified;
(2) To consider and approve certain amendments to the 1996 Restricted
Stock Incentive Plan;
(3) To consider and approve certain amendments to the 1996 Stock Option
Incentive Plan;
(4) To ratify the selection by the Board of Directors of Coopers &
Lybrand L.L.P. as the Company's independent auditors for the fiscal year
ending December 31, 1997; and
(5) To transact such other business as may properly come before the
meeting or any adjournment thereof.
The Board of Directors has fixed March 10, 1997 as the voting record date
for the determination of stockholders entitled to notice of and to vote at the
Annual Meeting and at any adjournment thereof. Only those stockholders of
record as of the close of business on that date will be entitled to vote at
the Annual Meeting or at any such adjournment.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Michael J. Hegarty
Michael J. Hegarty
Corporate Secretary
Flushing, New York
March 21, 1997
YOU ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING. IT IS IMPORTANT THAT
YOUR SHARES BE REPRESENTED REGARDLESS OF THE NUMBER YOU OWN. EVEN IF YOU
PLAN TO BE PRESENT, YOU ARE URGED TO COMPLETE, SIGN, DATE AND RETURN THE
ENCLOSED PROXY PROMPTLY IN THE ENVELOPE PROVIDED. IF YOU ATTEND THE MEETING,
YOU MAY VOTE EITHER IN PERSON OR BY PROXY. ANY PROXY GIVEN MAY BE REVOKED BY
YOU IN WRITING OR IN PERSON AT ANY TIME BEFORE IT IS VOTED.
<PAGE>
FLUSHING FINANCIAL CORPORATION
144-51 NORTHERN BOULEVARD
FLUSHING, NEW YORK 11354
(718) 961-5400
----------------
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON APRIL 29, 1997
----------------
INTRODUCTION
This Proxy Statement is furnished to holders of common stock, $.01 par value
per share ("Common Stock"), of Flushing Financial Corporation (the "Company"),
which is the sole stockholder of Flushing Savings Bank, FSB (the "Bank").
Proxies are being solicited on behalf of the Board of Directors of the Company
(the "Board of Directors") to be used at the Annual Meeting of Stockholders to
be held at the LaGuardia Marriott located at 102-05 Ditmars Boulevard, East
Elmhurst, New York, 11369 at 2:00 p.m., New York time, on April 29, 1997 (the
"Annual Meeting") and at any adjournment thereof. Only holders of record of
the Company's issued and outstanding Common Stock as of the close of business
on March 10, 1997 (the "Record Date") are entitled to notice of and to vote at
the Annual Meeting and any adjournments thereof. The Proxy Statement and the
accompanying Notice of Annual Meeting of Stockholders (the "Notice") and form
of proxy, and the Company's 1996 Annual Report to Stockholders, including the
consolidated financial statements for the year ended December 31, 1996, are
first being mailed on or about March 21, 1997 to all persons entitled to vote
at the Annual Meeting.
VOTING AND PROXIES
VOTING RIGHTS AND QUORUM REQUIREMENT
Stockholders of record as of the close of business on March 10, 1997, the
Record Date, are entitled to one vote for each share of Common Stock then
held. On the Record Date, there were 8,087,597 shares of Common Stock
outstanding and entitled to be voted and the Company had no other class of
equity securities outstanding. Holders of a majority of the outstanding shares
of Common Stock must be present at the Annual Meeting, either in person or
represented by proxy, to constitute a quorum for the conduct of business. In
order to ensure a quorum, stockholders are requested to complete the enclosed
proxy card and return it signed and dated in the enclosed postage-paid
envelope.
VOTING BY PROXY
The proxy solicited hereby, if properly signed and received by the Company
in time for the Annual Meeting and not revoked prior to its use, will be voted
in accordance with the instructions contained therein. If no instructions are
given, the proxy will be voted FOR election of the nominees for director
described herein, FOR approval of the amendments to the 1996 Restricted Stock
Incentive Plan (the "Restricted Stock Plan"), FOR approval of the amendments
to the 1996 Stock Option Incentive Plan (the "Stock Option Plan" and, together
with the Restricted Stock Plan, the "Stock Incentive Plans"), and FOR
ratification of the appointment of Coopers & Lybrand L.L.P. as independent
auditors for fiscal year 1997. With respect to the transaction of such other
business as may properly come before the meeting, each proxy received will be
voted in accordance with the best judgment of the persons appointed as
proxies. At this time, the Board of Directors knows of no such other business.
<PAGE>
REVOKING A PROXY
Any stockholder giving a proxy may revoke it at any time before it is voted
by (i) filing written notice thereof with the Corporate Secretary of the
Company (Michael J. Hegarty, Corporate Secretary, Flushing Financial
Corporation, 144-51 Northern Boulevard, Flushing, New York 11354); (ii)
submitting a duly executed proxy bearing a later date; or (iii) appearing at
the Annual Meeting and giving the Corporate Secretary notice of his or her
intention to vote in person.
VOTES REQUIRED FOR APPROVAL
Directors are elected by a plurality of the votes cast with a quorum
present. Abstentions are considered in determining the presence of a quorum
and will not affect the plurality vote required for the election of directors.
The affirmative vote of a majority of the total votes present in person or by
proxy is required for approval of the amendments to the Stock Incentive Plans
and to ratify the selection of the independent auditors. Abstentions will have
the effect of a vote against these proposals. Under rules of the New York
Stock Exchange, to which its member firms are subject, these proposals are
considered "discretionary" items upon which brokerage firms holding shares of
Common Stock in "street name" may vote in their discretion on behalf of their
clients if such clients have not furnished voting instructions.
COST OF SOLICITATION OF PROXIES
The cost of solicitation of proxies will be borne by the Company. In
addition to the solicitation of proxies by mail, Morrow & Co., Inc., a proxy
soliciting firm, will assist the Company in soliciting proxies for the Annual
Meeting and will be paid a fee of $3,500, plus reimbursement for out-of-pocket
expenses. Proxies also may be solicited personally or by telephone or telecopy
by directors, officers and employees of the Company or the Bank, without
additional compensation therefor. The Company will also request persons, firms
and corporations holding shares in their names, or in the name of their
nominees, which are beneficially owned by others, to send proxy materials to
and obtain proxies from such beneficial owners, and will reimburse such
holders for reasonable expenses incurred in connection therewith.
2
<PAGE>
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
To the knowledge of the Company, the following persons were the beneficial
owners of more than five percent of the outstanding shares of Common Stock, as
of December 31, 1996.
<TABLE>
<CAPTION>
NUMBER OF SHARES
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIALLY OWNED PERCENT OF CLASS(1)
- - ------------------------------------ ------------------ -------------------
<S> <C> <C>
J.P. Morgan Trust Company of Delaware,
as Trustee for the Flushing Financial
Corporation Employee Benefit Trust(2). 647,242 7.8
c/o J.P. Morgan & Co., Incorporated
60 Wall Street
New York, New York 10260
Wellington Management Company, LLP(3).. 713,900 8.65
75 State Street
Boston, Massachusetts 02109
Thomson Horstmann & Bryant, Inc.(4).... 638,300 7.7
Park 80 West
Plaza Two
Saddle Brook, New Jersey 07663
Mellon Bank Corporation(5)............. 472,000 5.7
One Mellon Bank Center
Pittsburgh, Pennsylvania 15258
</TABLE>
- - --------
(1) On December 31, 1996, the total number of shares of Common Stock
outstanding was 8,250,497.
(2) Such shares are the subject of a Schedule 13G filed with the Securities
and Exchange Commission ("SEC") by J.P. Morgan & Co., Incorporated, which
reports shared voting and dispositive powers with respect to such shares.
(3) According to its filing on Schedule 13G with the SEC, Wellington
Management Company, LLP ("WMC") acquired such interest through its
subsidiary Wellington Trust Company, N.A. and has shared voting power with
respect to 291,400 shares of Common Stock and shared dispositive power
with respect to 713,900 shares of Common Stock. Such filing also states
that shares of Common Stock beneficially owned by WMC are owned by a
variety of investment advisory clients of WMC, and that no such client is
known to have an interest with respect to more than 5% of the Common
Stock.
(4) According to its filing on Schedule 13G with the SEC, Thomson Horstmann &
Bryant, Inc. is an investment adviser under section 203 of the Investment
Advisers Act of 1940 and has sole voting power with respect to 459,600
shares of Common Stock, shared voting power with respect to 9,500 shares
of Common Stock, and sole dispositive power with respect to 638,300 shares
of Common Stock.
(5) Such shares are the subject of a Schedule 13G filed with the SEC by Mellon
Bank Corporation on behalf of itself and Boston Group Holdings, Inc. and
The Boston Company, Inc. According to such filing, Mellon Bank Corporation
has sole voting power with respect to 376,000 shares of Common Stock, sole
dispositive power with respect to 409,000 shares of Common Stock and
shared dispositive power with respect to 63,000 shares of Common Stock,
and each of Boston Group Holdings, Inc. and The Boston Company, Inc. has
sole voting power with respect to 366,000 shares of Common Stock, sole
dispositive power with respect to 409,000 shares of Common Stock and
shared dispositive power with respect to 53,000 shares of Common Stock.
3
<PAGE>
STOCK OWNERSHIP OF MANAGEMENT
The following table sets forth information regarding the beneficial
ownership of the Common Stock as of January 31, 1997, by all directors, by
each of the executive officers named in the Summary Compensation Table on page
13, and by all directors and executive officers as a group. Under rules of the
SEC, beneficial ownership includes any shares over which an individual has
sole or shared power to vote or power to dispose, as well as any shares that
the individual has the right to acquire within 60 days.
<TABLE>
<CAPTION>
SHARES OF
COMMON STOCK
NAME POSITION(S) HELD WITH THE COMPANY BENEFICIALLY OWNED(1)(2)
- - ---- --------------------------------- ------------------------
<S> <C> <C>
Gerard P. Tully, Sr..... Chairman of the Board 38,400(3)
James F. McConnell...... President, Chief Executive Officer 49,027(4)
and Director
Michael J. Hegarty...... Executive Vice President, 28,847(5)
Corporate Secretary and Director
John M. Gleason......... Director 13,748(6)
Robert A. Marani........ Director 31,400(7)
John O. Mead............ Director 17,900(8)
Vincent F. Nicolosi..... Director 9,660(9)
Franklin F. Regan, Jr... Director 10,285(10)
John E. Roe, Sr......... Director 26,400(11)
Michael J. Russo........ Director 33,250(12)
Thomas Trent............ Director 9,900(13)
Monica C. Passick....... Senior Vice President, 28,022(14)
Treasurer and Chief Financial Officer
Henry A. Braun.......... Senior Vice President 17,944(15)
All directors and execu- 335,668(16)
tive officers as a
group (14 persons).....
</TABLE>
- - --------
(1) Unless otherwise indicated, each person has sole voting and dispositive
power as to the shares reported. Officers have the power to direct the
voting and, subject to plan provisions, the disposition of shares held for
their account in the Bank's 401(k) Savings Plan and the Company's Stock-
Based Profit Sharing Plan, and have voting powers over, but no economic
interest in, the shares representing their proportionate voting interest
in the Company's Employee Benefit Trust. Officers and directors have the
power to vote, but not the power to dispose of, unvested shares of
restricted stock granted to them under the Company's 1996 Restricted Stock
Incentive Plan.
(2) On January 31, 1997, the total number of shares of Common Stock
outstanding was 8,132,597 (including shares held by the Employee Benefit
Trust). As of January 31, 1997, each individual beneficially owned less
than 1% of the outstanding shares of Common Stock, and all directors and
executive officers as a group beneficially owned 4.13% of the outstanding
shares of Common Stock.
(3) Includes 7,000 shares held by Mrs. Tully with respect to which Mr. Tully
disclaims beneficial ownership, and 9,400 unvested shares of restricted
stock.
(4) Includes 1,236 shares held by Mrs. McConnell with respect to which Mr.
McConnell disclaims beneficial ownership. Also includes 14,076 shares
credited to Mr. McConnell's account in the Bank's 401(k) Savings Plan,
1,361 shares credited to his account in the Company's Stock-Based Profit
Sharing Plan, 27,000 unvested shares of restricted stock, and 4,371 shares
representing his proportionate voting interest in the Company's Employee
Benefit Trust.
(5) Includes 6,864 shares credited to Mr. Hegarty's account in the Bank's
401(k) Savings Plan, 612 shares credited to his account in the Company's
Stock-Based Profit Sharing Plan, 17,000 unvested shares of restricted
stock, and 4,371 shares representing his proportionate voting interest in
the Company's Employee Benefit Trust.
(6) Includes 4,348 shares held by Mrs. Gleason with respect to which Mr.
Gleason disclaims beneficial ownership, and 9,400 unvested shares of
restricted stock.
(7) Includes 9,400 unvested shares of restricted stock.
(8) Includes 9,400 unvested shares of restricted stock.
(9) Includes 260 shares held jointly by Mr. Nicolosi and his spouse, with whom
he shares voting and dispositive power, and 9,400 unvested shares of
restricted stock.
4
<PAGE>
(10) Includes 667 shares held by Mrs. Regan with respect to which Mr. Regan
disclaims beneficial ownership. Also includes 218 shares held by the
Franklin F. Regan, Jr. Defined Benefit Trust, with respect to which Mr.
Regan has sole voting and dispositive power, and 9,400 unvested shares of
restricted stock.
(11) Includes 4,000 shares held by Mrs. Roe with respect to which Mr. Roe
disclaims beneficial ownership. Also includes 4,000 shares held by
Learoyd & Roe, Inc. Profit Sharing Plan and Trust, and 2,000 shares held
by City Underwriting Agency, Inc. Defined Profit Sharing Plan and Trust,
with respect to which, in each case, Mr. Roe shares voting and
dispositive power, and 9,400 unvested shares of restricted stock.
(12) Includes 9,400 unvested shares of restricted stock.
(13) Includes 500 shares held jointly by Mr. Trent and his spouse, with whom
he shares voting and dispositive power. Also includes 9,400 unvested
shares of restricted stock; such shares became fully vested on February
28, 1997 upon Mr. Trent's resignation from the Board for reasons of
medical disability.
(14) Includes 8,588 shares credited to Ms. Passick's account in the Bank's
401(k) Savings Plan, 1,063 shares credited to her account in the
Company's Stock-Based Profit Sharing Plan, 14,000 unvested shares of
restricted stock, and 4,371 shares representing her proportionate voting
interest in the Company's Employee Benefit Trust.
(15) Includes 188 shares credited to Mr. Braun's account in the Bank's 401(k)
Savings Plan, 885 shares credited to his account in the Company's Stock-
Based Profit Sharing Plan, 11,800 unvested shares of restricted stock,
and 4,371 shares representing his proportionate voting interest in the
Company's Employee Benefit Trust.
(16) Includes 33,660 shares credited to accounts of executive officers in the
Bank's 401(k) Savings Plan, 4,691 shares credited to their accounts in
the Company's Stock-Based Profit Sharing Plan, 166,200 unvested shares of
restricted stock held by executive officers and directors and 21,855
shares representing the proportionate voting interest of executive
officers in the Company's Employee Benefit Trust.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based solely on a review of copies of reports furnished to the Company or
written representations that no other reports were required, the Company
believes that during the fiscal year ended December 31, 1996, all filing
requirements under Section 16(a) of the Securities Exchange Act of 1934
applicable to its executive officers and directors were complied with.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
The Board of Directors of the Company consists of 10 directors divided into
three classes which are as equal in number as possible. Previously, the Board
consisted of 11 directors. However, effective as of February 28, 1997, Thomas
R. Trent resigned from the Board of Directors due to a medical disability, and
the Board of Directors reduced the size of the Board to 10.
The directors hold office for staggered terms of three years (and until
their successors are elected and qualified). One of the three classes,
comprising approximately one third of the directors, is elected each year to
succeed the directors whose terms are expiring. The directors in Classes C and
A are serving terms expiring at the annual meeting of stockholders in 1998 and
1999, respectively.
The directors in Class B, whose terms expire at the 1997 Annual Meeting, are
Robert A. Marani, Franklin F. Regan, Jr., and John E. Roe, Sr. Each of these
directors (each, a "Board Nominee") has been nominated by the Board of
Directors to stand for re-election for a term expiring at the annual meeting
of stockholders to be held in 2000. Each Board Nominee has consented to being
named in this Proxy Statement and to serve if elected.
UNLESS OTHERWISE INSTRUCTED, IT IS THE INTENTION OF THE PROXY HOLDERS TO
VOTE THE PROXIES RECEIVED BY THEM IN RESPONSE TO THIS SOLICITATION FOR THE
ELECTION OF THE BOARD NOMINEES AS DIRECTORS. 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 OF DIRECTORS TO REPLACE ANY SUCH NOMINEE. THE
BOARD OF DIRECTORS PRESENTLY HAS NO KNOWLEDGE THAT ANY OF THE BOARD NOMINEES
WILL REFUSE OR BE UNABLE TO SERVE AS A DIRECTOR IF ELECTED.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE
"FOR" ELECTION OF THE BOARD NOMINEES AS DIRECTORS.
5
<PAGE>
The following table sets forth certain information regarding the Board
Nominees and the other members of the Board of Directors of the Company.
<TABLE>
<CAPTION>
DIRECTOR TERM
NAME AGE(1) POSITION(S) HELD WITH THE COMPANY SINCE(2) EXPIRES
- - ---- ------ --------------------------------- -------- -------
<S> <C> <C> <C> <C>
Gerard P. Tully, Sr..... 69 Chairman of the Board 1967 1998
President, Chief Executive
James F. McConnell...... 63 Officer and Director 1983 1998
Executive Vice President,
Michael J. Hegarty...... 57 Corporate Secretary and Director 1987 1999
John M. Gleason......... 79 Director 1961 1998
Robert A. Marani........ 74 Director 1977 2000(3)
John O. Mead............ 74 Director 1987 1999
Vincent F. Nicolosi..... 57 Director 1977 1998
Franklin F. Regan, Jr... 67 Director 1969 2000(3)
John E. Roe, Sr......... 63 Director 1968 2000(3)
Michael J. Russo........ 62 Director 1984 1999
</TABLE>
- - --------
(1) As of December 31, 1996.
(2) All directors commenced service as directors of the Company on May 10,
1994, one day after the date of the Company's incorporation. The dates set
forth above are the dates the individuals commenced service as directors
or trustees of the Bank or its predecessor.
(3) Subject to re-election at the Annual Meeting.
Set forth below is certain information with respect to the Board Nominees
and other directors of the Company. Unless otherwise indicated, the principal
occupation listed for each person below has been his or her principal
occupation for the past five years.
BOARD NOMINEES
ROBERT A. MARANI is a licensed real estate broker who worked through the
offices of Flushing Kent Realty Corp. until his retirement in 1992. He is a
commercial real estate developer currently managing family-owned commercial
real estate properties in New York and New Jersey.
FRANKLIN F. REGAN, JR. practices law in Flushing, New York. Formerly he was
a partner in the law firm of Regan & Claro.
JOHN E. ROE, SR. is Chairman of the Board and Chief Executive Officer of
City Underwriting Agency, Inc., insurance brokers located in Floral Park, New
York.
CONTINUING DIRECTORS
GERARD P. TULLY, SR. has served as Chairman of the Board of the Company
since its formation in 1994, and as Chairman of the Board of the Bank since
1980. Mr. Tully served as Chief Executive Officer of the Bank (without
additional remuneration) from 1981 through 1989. Mr. Tully is the Chief
Executive Officer and a director of Van-Tulco, Inc., a construction company,
and Bainbridge Avenue Corp., 1620 Ralph Avenue Corp. and Contractors
Associates Inc., each a real estate holding company. Mr. Tully also serves as
an officer and a director of Wil-Cor Realty Co., Inc., a real estate holding
company.
JAMES F. MCCONNELL has been a director and President and Chief Executive
Officer of the Company since its formation in 1994. He joined the Bank in 1974
as an assistant to the President. He was named Treasurer of the Bank in 1977
and President of the Bank in 1981. He became a director of the Bank in 1983.
Mr. McConnell was elected to the additional position of Chief Executive
Officer of the Bank in 1990.
6
<PAGE>
JOHN M. GLEASON is Chairman of the Board of Martin A. Gleason, Inc., which
operates funeral homes located in Flushing and Whitestone, New York.
MICHAEL J. HEGARTY has been a director of the Company since its formation in
1994. He became a director of the Bank in 1987. Mr. Hegarty joined the Company
as Executive Vice President and Corporate Secretary and the Bank as Executive
Vice President and Chief Operating Officer on August 14, 1995. Prior to that
date, he was Vice President, Finance as well as Secretary and Treasurer of EDO
Corporation, a manufacturer of defense systems and components. Mr. Hegarty
remains a director of EDO Corporation.
JOHN O. MEAD served, until his retirement in 1990, as President and Chairman
of the Board of Printfab, Inc., a fabric marketing company located in New
York, and Printed Fabrics Corp., a fabric manufacturing company located in
Carrollton, Georgia.
VINCENT F. NICOLOSI is an attorney in Bayside, New York with a general
practice specializing in civil and criminal litigation. Mr. Nicolosi was
formerly a partner in the law firm of Nicolosi & Sciacca located in Bayside,
New York.
MICHAEL J. RUSSO is self-employed as a consulting engineer and serves as
Chairman of the Board of Anthony Russo, Inc., a general contracting firm, and
of Meadow Mechanical Corp., a mechanical contracting firm, for which he also
serves as Secretary. Mr. Russo is President and Director of Operations of
Northeastern Aviation Corp., an aircraft charter and management firm, and is
President of Landmark Associates Ltd., commercial real estate developers. Mr.
Russo is a partner in AMF Associates, a commercial real estate company.
EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS
The following persons currently serve as executive officers who are not
directors of the Company.
<TABLE>
<CAPTION>
POSITION(S) HELD WITH THE
NAME AGE(1) COMPANY
- - ---- ------ -------------------------
<S> <C> <C>
Monica C. Passick....................... 58 Senior Vice President, Treasurer
and Chief Financial Officer
Henry A. Braun.......................... 51 Senior Vice President
Anna M. Piacentini...................... 50 Senior Vice President
</TABLE>
- - --------
(1) As of December 31, 1996.
Set forth below is certain information with respect to the executive
officers who are not directors of the Company.
MONICA C. PASSICK has been Senior Vice President, Treasurer and Chief
Financial Officer of the Company since its formation in 1994. Ms. Passick
joined the Bank in 1979 as an Assistant Treasurer. She was appointed
Controller of the Bank in 1982 and Vice President in 1983. In 1993, Ms.
Passick was promoted to Senior Vice President/Finance of the Bank. Ms. Passick
is a Certified Public Accountant.
HENRY A. BRAUN has been a Senior Vice President of the Company since
September 19, 1995. Mr. Braun joined the Bank in 1994 as Senior Vice
President/Bank Operations, a position he previously held at The Greater New
York Savings Bank where he was employed for five years. Prior to that, Mr.
Braun was with The Williamsburgh Savings Bank for twenty years rising from
Assistant Vice President/EDP Auditor to Vice President/Auditor to Senior Vice
President/Operations to Executive Vice President and Chief Operating Officer.
ANNA M. PIACENTINI has been a Senior Vice President of the Company since
September 19, 1995. Ms. Piacentini joined the Bank in 1969 as a Customer
Service Representative. She also has served as an Executive Assistant for
Branch Operations, Assistant Secretary for Human Resources and Assistant Vice
President of Human Resources. In 1984, Ms. Piacentini was named Vice President
of Human Resources of the Bank and in 1994 was promoted to Senior Vice
President/Human Resources of the Bank. Since August 1995, Ms. Piacentini has
also been Secretary of the Bank.
7
<PAGE>
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS OF THE COMPANY AND OF THE
BANK
The Board of Directors meets on a monthly basis and may have additional
special meetings upon the request of the Chairman of the Board, the President
or a majority of directors in office at the time. During 1996, the Board of
Directors held 12 meetings. No director attended less than 75% of the meetings
of the Board of Directors and its committees on which he served. The Board of
Directors has established the following committees, among others:
Compensation. The Compensation Committee is composed of Messrs. Nicolosi
(Chairman), Mead and Roe. The Committee has primary responsibility for
establishing and administering the compensation and benefit programs of the
Company for its executive officers and other key personnel, and recommends to
the Board of Directors grants to employees under the Company's Stock Incentive
Plans. The Committee meets on an as needed basis. During 1996, this committee
met six times.
Examining and Audit Committee. The Examining and Audit Committee is composed
of Messrs. Mead (Chairman), Gleason and Roe. The Committee meets quarterly and
reports to the Board of Directors concerning the results of examinations,
internal audits, and audits by the Company's independent public accountants;
the status of actions taken to correct conditions reported; and any other
matters affecting the internal controls of the Company. The Committee also
meets with the Company's outside auditors and implements the audit
requirements under applicable federal regulations. During 1996, this committee
met four times.
In addition to the committees described above, the Board of Directors has
established an Executive Committee, an Insurance Committee, an Investment
Committee, and a Special Planning Committee. The Board of Directors does not
have a nominating committee. Nominations for directors of the Company are made
by the full Board of Directors.
The business of the Bank is conducted at regular and special meetings of the
Bank's Board of Directors (the "Bank Board") and its committees. The Bank
Board and the Board of Directors are identically constituted. During 1996, the
Bank Board held 12 regular meetings.
The Bank Board maintains executive, insurance, investment and special
planning committees, in addition to a compensation and an examining and audit
committee. The membership of these committees is the same as the comparable
committees of the Company's Board of Directors. These committees serve
substantially the same functions at the Bank level as those of the Company.
The Bank Board also maintains a loan committee. No director attended less than
75% of the meetings of the Bank Board and its committees on which he served.
Nominations for directors of the Bank are made by the full Bank Board.
DIRECTOR COMPENSATION
Fee Arrangements. Directors who are not executive officers of the Company or
the Bank ("Outside Directors") currently receive an annual retainer of $15,000
from the Bank, with no additional retainer from the Company. During 1996, the
annual retainer was $12,000. Outside Directors also receive meeting fees of
$650 for each Board or Bank Board meeting attended and $450 for each committee
meeting attended. However, where the Board of Directors and the Bank Board
meet on the same day, directors receive only a single board meeting fee for
such meetings. Similarly, directors receive only a single committee meeting
fee where identically constituted committees of the Board of Directors and
Bank Board meet on the same day. In addition to the retainer and meeting fees,
Mr. Tully receives a fee of $70,000 per year for providing additional
consulting services to the Bank and the Company in his capacity as Chairman.
Outside Directors also receive a fee for conducting on-site inspections of
proposed real estate collateral for commercial real estate loans in excess of
$500,000. For each day that a director conducts such inspections, the director
receives a fee of $400 for the first property inspected and $100 for each
additional property inspected on that day.
8
<PAGE>
For the year ended December 31, 1996, the aggregate amount of retainer,
meeting, and site inspection fees paid by the Bank to Outside Directors was
$305,800. For the year ended December 31, 1996, the Bank paid an aggregate of
$287,592 to Mr. Regan as a retainer for general legal services and for fees in
connection with mortgage foreclosure actions. Also during 1996, the Bank paid
$3,000 in legal fees to Mr. Nicolosi for certain litigation and contract
matters. See "Compensation Committee Interlocks and Insider Participation,"
and "Certain Transactions."
Director Deferred Compensation Plan. The Bank has adopted an Outside
Director Deferred Compensation Plan pursuant to which Outside Directors may
elect to defer all or a portion of their annual retainer, meeting fees, and
inspection fees. Deferred amounts are credited with earnings based on mutual
fund investments offered by Retirement System Fund, Inc. ("RSI"), as elected
by the director. The deferred amounts plus earnings thereon will be paid to
the director in cash after the director's termination of service, either in a
lump sum or, if the director so elects, in installments over a period not to
exceed five years. The Company has guaranteed the payment of benefits under
the Outside Director Deferred Compensation Plan. A director's right to receive
benefits under the plan is no greater than the right of an unsecured general
creditor of the Bank or the Company. The Bank Board may amend or terminate the
plan at any time as it may deem advisable.
Director Retirement Plan. The Bank has adopted an Outside Director
Retirement Plan, which provides benefits to each Outside Director who serves
or has agreed to serve as an Outside Director for two years or more subsequent
to the February 1995 effective date of the plan and whose years of service as
an Outside Director (including service as a director or trustee of the Bank or
its predecessor) plus age equals or exceeds 75. Benefits are also payable to
an Outside Director whose status as an Outside Director terminates due to
disability or who is an Outside Director upon a change of control (as defined
below). An eligible director will be paid an annual retirement benefit equal
to the last annual retainer paid prior to the director's retirement. Such
benefit will be paid in equal monthly installments for the lesser of the
number of months such director served as an Outside Director, 120 months, or
until the director's death; provided, however, that the retirement benefits
will be paid in a cash lump sum in the event of a change of control. No
benefits will be payable to a director who is removed for cause. The Company
has guaranteed the payment of benefits under the Outside Director Retirement
Plan. A director's right to receive benefits under the plan is no greater than
the right of an unsecured general creditor of the Bank or the Company. The
Bank Board may amend, suspend or terminate the Outside Director Retirement
Plan at any time.
Stock Options and Restricted Stock. Pursuant to the Restricted Stock Plan
which was approved by stockholders at the 1996 Annual Meeting, each Outside
Director received, and each newly-elected Outside Director will receive, a
grant of 9,400 shares of restricted stock. Pursuant to the Stock Option Plan
which was approved by stockholders at the 1996 Annual Meeting, each Outside
Director received, and each newly-elected Outside Director will receive (to
the extent there are shares available), a grant of options to purchase 28,750
shares of Common Stock at an exercise price equal to the fair market value of
the Common Stock on the date of grant of the option (with tandem limited stock
appreciation rights). Each of the stock option and restricted stock grants
vests with respect to 20% of the covered shares on the anniversary of the
grant date each year, provided that the Outside Director is then serving on
the Board of Directors of the Company or one of its subsidiaries. The grants
vest in full upon the Outside Director's termination of service by reason of
death or disability, or in the event of a change of control of the Company. At
the Annual Meeting, stockholders are being asked to approve amendments to both
plans which would provide for full vesting of grants upon the retirement of
the Outside Director under specified conditions. See "Proposal No. 2" and
"Proposal No. 3."
Indemnity Agreements. The Company and the Bank have entered into an
Indemnity Agreement with each of the directors and executive officers, which
agreements provide for mandatory indemnification of each director or executive
officer to the full extent permitted by law for any claim arising out of such
person's service to the Company or the Bank. The agreements provide for
advancement of expenses and specify procedures for determining entitlement to
indemnification in a particular case.
9
<PAGE>
EXECUTIVE COMPENSATION
The Report of the Compensation Committee and the Stock Performance Graph
which are set forth below 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 or the Securities Exchange Act of 1934
(the "Exchange Act"), except to the extent that the Company specifically
incorporates the information under such headings by reference, and shall not
otherwise be deemed filed under such Acts.
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
Compensation Philosophy. The Company's executive compensation program is
intended to link management pay with the Company's annual and long-term
performance. The Compensation Committee believes it is important to attract
and retain highly-qualified senior managers by providing compensation
opportunities that are both competitive with the market for executive talent
and consistent with the Company's performance.
The following is a discussion of the Company's executive compensation
program, including a description of the decisions and actions taken by the
Compensation Committee with respect to fiscal 1996 compensation for the Chief
Executive Officer (the "CEO").
Salary. In determining the base salary of executive officers, the
Compensation Committee takes into consideration a variety of factors,
including the executive's level of responsibility and individual performance,
the salaries of similar positions in the Company and in other companies in the
savings institution industry that are located in our geographical market area
and are of comparable size, and the financial and operational performance of
the Company and the Bank in relation to their competition in the industry.
Consistent with this approach, Mr. McConnell's annual rate of base salary was
increased from $302,500 to $332,750 effective in July 1996. The increase was
determined based on the Committee's assessment of the Company's and the Bank's
performance and Mr. McConnell's instrumental role in achieving such
performance, as well as its assessment of the competitive marketplace
compensation for positions of comparable responsibility among similar
financial institutions.
Annual Incentive Bonus. The annual incentive bonus paid to executive
officers is determined by the Compensation Committee in its discretion at the
end of the year based on its assessment of the Company's and Bank's
performance during the year. The individual contribution of each executive
officer to corporate performance is a significant factor in determining the
amount of his or her annual incentive bonus.
In determining annual incentive bonuses for 1996, the Compensation Committee
primarily considered the significant increases in the Company's net income and
earnings per share, as well as the Bank's asset growth and improved asset
quality. Another key factor was the Company's successful management of
operations in its first year as a publicly traded company with SEC reporting
obligations. The executive officers' annual incentive bonuses for 1996 were
comprised of cash payments and grants of stock options and restricted stock
under the Stock Incentive Plans. The cash portion of the annual incentive
bonuses paid to executive officers in 1996 ranged in amount from $4,000 to
$13,200. The stock portion of the annual incentive bonuses granted to
executive officers ranged in amount from 800 to 3,000 shares of restricted
stock and grants of options to purchase shares of Common Stock ranged in
amount from 1,600 to 6,000 shares. Mr. McConnell's bonus was set at the
highest of each of these ranges in recognition of his leadership of the
management team and his instrumental role in achieving the Company's and
Bank's results.
Long Term Incentive Compensation. In furtherance of the Compensation
Committee's compensation philosophy, the Compensation Committee made grants of
stock options and restricted stock under the Stock Incentive Plans to
executive officers and other employees in March 1996 which became effective
upon stockholder approval of the Stock Incentive Plans at the 1996 Annual
Meeting. The initial restricted stock grants to the named executive officers
under these plans ranged in amount from 11,000 to 24,000 shares of restricted
stock and the initial grants of options to purchase shares of Common Stock
ranged in amount from 30,000 to
10
<PAGE>
55,000 shares, with Mr. McConnell's awards set at the highest of these ranges.
In making these awards the Compensation Committee considered, among other
factors, the fact that due to banking regulatory requirements, such grants
could not be made until the first annual meeting after the Bank's conversion
from mutual to stock form in November 1995 (the "Conversion").
Submitted by the Compensation Committee of the Board of Directors,
<TABLE>
<S> <C> <C>
Vincent F. Nicolosi John E. Roe, Sr. John O. Mead
Chairman
</TABLE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 1996, the Compensation Committee consisted of Messrs. Nicolosi
(Chairman), Mead and Roe. None of the current members of the Compensation
Committee are current or former officers of the Company or the Bank. During
1996, the Bank paid $3,000 in legal fees to Mr. Nicolosi for certain
litigation and contract matters.
Under the Bank's lending policies, residential mortgage loans to adult
children of directors are made at market rates of interest and other normal
terms, but with reduced origination fees. Two such loans outstanding to adult
children of directors on the Compensation Committee had balances in excess of
$60,000 during 1996. The highest aggregate balance of those loans since
January 1, 1996 was $227,437, and the aggregate balance of those loans at
January 31, 1997 was $224,583. All of such loans were made in the ordinary
course of business and were fully approved in accordance with all of the
Bank's credit underwriting standards. The Bank believes that such loans do not
involve more than the normal risk of collectability or present other
unfavorable features.
11
<PAGE>
STOCK PERFORMANCE GRAPH
The following graph shows a comparison of cumulative total stockholder
return on the Common Stock since November 21, 1995 (the date on which the
Common Stock began trading) with the cumulative total returns of both a broad
equity market index and a published industry index. The broad equity market
index chosen was the Center for Research in Security Prices ("CRSP") Total
Return Index for the Nasdaq Stock Market (US) and the published industry index
chosen was the CRSP Total Return Index for Nasdaq Bank Stocks. The graph
reflects historical performance only, which is not indicative of possible
future performance of the Common Stock.
COMPARISON OF CUMULATIVE TOTAL RETURN AMONG THE COMMON STOCK,
CRSP TOTAL RETURN INDEX FOR THE NASDAQ STOCK MARKET (US) AND
CRSP TOTAL RETURN INDEX FOR NASDAQ BANK STOCKS (1)
[GRAPHIC APPEARS HERE]
- - --------
(1) Assumes $100 invested on November 21, 1995 and all dividends reinvested
through the end of the Company's fiscal year ended December 31, 1996. The
price of the Common Stock issued in the Company's initial public offering
was $11.50 per share. The performance graph above is based upon closing
prices on the trading day specified. The Common Stock closed on November
21, 1995, its first day of trading activity, at $14.2188 per share.
12
<PAGE>
SUMMARY COMPENSATION TABLE
The following table sets forth the compensation paid by the Company or the
Bank during the years ended December 31, 1996, 1995 and 1994 to each of the
executive officers who served during 1996 and who received an amount in salary
and cash bonus in 1996 in excess of $100,000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
----------------------
SECURITIES
ANNUAL COMPENSATION RESTRICTED UNDERLYING
NAME AND PRINCIPAL ------------------------ STOCK OPTIONS/ ALL OTHER
POSITION(S) YEAR SALARY BONUS(1) AWARD(S)(2) SARS(#) COMPENSATION
- - ------------------ ---- ---------- ---------- ----------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
James F. McConnell...... 1996 $ 349,388(3) $ 13,200 $447,562 61,000 $89,746(5)
President and Chief
Executive 1995 301,250(3) -- (4) -- -- 84,920
Officer of the Company
and the 1994 274,964(3) -- (4) -- -- 60,414
Bank
Michael J. Hegarty(6)... 1996 $ 236,500(3) $ 9,200 $282,000 44,000 $53,040(7)
Executive Vice
President of the 1995 84,615(3) 6,000 15,500
Company and the Bank;
Chief Operating Officer
of the Bank; Corporate
Secretary of the
Company
Monica C. Passick....... 1996 $ 118,999 $ 4,800 $231,063 36,000 $18,528(8)
Senior Vice President,
Treasurer, 1995 109,799 5,400 -- -- 17,755
and Chief Financial
Officer of the 1994 102,439 10,000 -- -- 7,545
Company; Senior Vice
President/Finance of
the Bank
Henry A. Braun(9)....... 1996 $ 98,000 $ 4,000 $194,675 31,600 $11,614(10)
Senior Vice President
of the 1995 87,750 4,300 -- -- 7,590
Company; Senior Vice 1994 13,077 1,250 -- -- --
President/Bank
Operations of the Bank
</TABLE>
- - --------
(1) Amounts shown reflect cash bonus. Stock options and restricted stock
granted as part of 1996 annual incentive bonus are included under the
stock option and restricted stock columns.
(2) Reflects dollar value of restricted stock granted, calculated by
multiplying the number of shares granted by the closing market price of
the Common Stock on the date of grant. With respect to awards which were
granted subject to stockholder approval, value is based on the closing
stock price on the date of such approval. The number of shares of
restricted stock held by each of the named executive officers on December
31, 1996 and the dollar value of such shares (based on the closing market
price of the Common Stock on such date) are as follows: Mr. McConnell,
27,000 shares, $489,375; Mr. Hegarty, 17,000 shares, $308,125; Ms.
Passick, 14,000 shares, $253,750; and Mr. Braun, 11,800 shares, $213,875.
All grants of restricted stock vest 20% per year beginning one year after
the date of grant, subject to immediate vesting in the event of death,
disability, or a change of control. Stockholders are being asked to
approve an amendment to the Restricted Stock Plan which would provide for
accelerated vesting in the event of retirement. See "Proposal No. 2."
Dividends are paid on all shares of restricted stock.
(3) Includes mandatory deferred compensation equal to 10% of salary.
(4) Mr. McConnell did not participate in the Bank's incentive bonus plan for
1995 and 1994.
(5) Consists of $4,499 in matching contributions to the Bank's 401(k) Savings
Plan, $10,519 in contributions to the Company's Stock-Based Profit Sharing
Plan, $41,667 credited toward Supplemental Retirement Benefits, and
$33,061 credited under the Bank's Supplemental Savings Incentive Plan.
(6) Mr. Hegarty became an executive officer and full-time employee in August
1995.
(7) Consists of $2,032 in matching contributions to the Bank's 401(k) Savings
Plan, $10,519 in contributions to the Company's Stock-Based Profit Sharing
Plan, $30,000 credited toward Supplemental Retirement Benefits, and
$10,489 credited under the Bank's Supplemental Savings Incentive Plan.
(8) Consists of $3,216 in matching contributions to the Bank's 401(k) Savings
Plan, $8,597 in contributions to the Company's Stock-Based Profit Sharing
Plan, and $6,716 credited under the Bank's Supplemental Savings Incentive
Plan.
(9) Mr. Braun commenced employment with the Bank in November 1994.
(10) Consists of $921 in matching contributions to the Bank's 401(k) Savings
Plan, $7,341 in contributions to the Company's Stock-Based Profit Sharing
Plan, and $3,352 credited under the Bank's Supplemental Savings Incentive
Plan.
13
<PAGE>
STOCK OPTION GRANTS
The following table contains certain information with respect to stock
options granted in 1996 under the Company's Stock Option Plan to the named
executive officers.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
----------------------------------------------------------
POTENTIAL REALIZABLE VALUE
NUMBER OF % OF TOTAL AT ASSUMED RATES OF STOCK
SECURITIES OPTIONS/SARS PRICE APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OR OPTION TERM (10 YEARS)(4)
GRANT OPTIONS/SARS EMPLOYEES IN BASE PRICE EXPIRATION ---------------------------
NAME DATE GRANTED(#)(1) FISCAL YEAR ($/SH)(2) DATE(3) 5%(4) 10%(4)
- - ---- -------- ------------- ------------ ----------- ---------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C> <C>
James F. McConnell...... 05/21/96 55,000 10.9% $16.25 05/20/2006 $562,075 $1,424,407
12/17/96 6,000 1.2% 18.21 12/16/2006 68,713 174,132
Michael J. Hegarty...... 05/21/96 40,000 7.9% $16.25 05/20/2006 $408,782 $1,035,932
12/17/96 4,000 0.8% 18.21 12/16/2006 45,808 116,088
Monica C. Passick....... 05/21/96 34,000 6.7% $16.25 05/20/2006 $347,464 $880,543
12/17/96 2,000 0.4% 18.21 12/16/2006 22,904 58,044
Henry A. Braun.......... 05/21/96 30,000 5.9% $16.25 05/20/2006 $306,586 $776,949
12/17/96 1,600 0.3% 18.21 12/16/2006 18,324 46,435
</TABLE>
- - --------
(1) Each stock option was granted with a tandem limited stock appreciation
right that may be exercised only within 90 days after a change of control.
The stock options become exercisable in 20% increments on each of the
first five anniversaries of the date of grant, subject to acceleration in
the event of death, disability, or a change of control. Stockholders are
being asked to approve an amendment to the Stock Option Plan which would
provide for accelerated vesting in the event of retirement. See "Proposal
No. 3."
(2) Pursuant to the Stock Option Plan, the exercise price equals the mean of
the high and low sales price of the Common Stock on the day before the
grant date.
(3) The stock options (and tandem limited stock appreciation rights) are
subject to termination prior to their expiration date in the event of
termination of employment.
(4) The potential realizable value reflected in the table represents the
difference between (i) the price the Common Stock would attain at the end
of the option's 10-year term if the price appreciated from the date of the
stock option grant at a rate of 5% or 10% per year (as the case may be),
and (ii) the option exercise price. The amounts shown in the table are the
result of multiplying the amount described above by the number of options
granted to the respective individual on the applicable grant date.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
VALUE OF
# OF SECURITIES UNEXERCISED
SHARES UNDERLYING IN-THE-MONEY
ACQUIRED VALUE UNEXERCISED OPTIONS/SARS
ON REALIZED OPTIONS/SARS AT FY-END
NAME EXERCISE(#) ($) FY-END (#)(1) ($)(1)(2)
- - ---- ----------- -------- --------------- ------------
<S> <C> <C> <C> <C>
James F. McConnell............ -- -- 61,000 $103,125
Michael J. Hegarty............ -- -- 44,000 75,000
Monica C. Passick............. -- -- 36,000 63,750
Henry A. Braun................ -- -- 31,600 56,250
</TABLE>
- - --------
(1) All of these options were unexercisable at fiscal year-end.
(2) The value of each unexercised in-the-money stock option (or tandem limited
stock appreciation right) is equal to the difference between $18.125 (the
closing price of the Common Stock on December 31, 1996) and the exercise
price of the stock option.
EMPLOYMENT, SEVERANCE AND CHANGE OF CONTROL ARRANGEMENTS
Employment Agreements. The Bank and the Company have entered into employment
agreements with Mr. McConnell, Mr. Hegarty, Ms. Passick, Mr. Braun and Ms.
Piacentini (collectively, the "Employment Agreements"). The Employment
Agreements establish the respective duties and compensation of these
14
<PAGE>
individuals and are intended to ensure that the Bank and the Company will be
able to maintain a stable and competent management team. The continued success
of the Bank and the Company depends to a significant degree on the skills and
competence of these executive officers.
The Employment Agreements are substantially similar. The Employment
Agreements with Mr. McConnell and Mr. Hegarty (as amended) have an initial
three-year term and the Employment Agreements with Ms. Passick, Mr. Braun and
Ms. Piacentini have an initial two-year term. Prior to the completion of each
year during the term of the agreement, the agreement is subject to renewal for
an additional year. Thus, the unexpired term of the agreement at any time will
generally vary between two and three years, in the case of Mr. McConnell and
Mr. Hegarty, and between one and two years, in the case of the other
executives.
The Employment Agreements provide for a base salary that will be reviewed
annually, customarily in July, with an effective date retroactive to July 1.
In this regard, the base salaries of Mr. McConnell, Mr. Hegarty, Ms. Passick,
Mr. Braun and Ms. Piacentini in effect as of July 1, 1996 were $332,750,
$230,000, $124,000, $105,500, and $88,500, respectively. In the case of Mr.
McConnell and Mr. Hegarty, an additional amount equal to 10% of base salary is
deferred each year and is credited with earnings based on mutual fund
investments offered by RSI. The deferred amounts plus earnings thereon will be
paid to Mr. McConnell and Mr. Hegarty upon termination of employment in three
annual installments. In addition to any other pension benefit to which he may
be entitled, the Bank was required to credit (and has credited) to a
bookkeeping account for Mr. McConnell $250,000 as a supplemental retirement
benefit. The Bank is required to credit to such account earnings on such
amount based on mutual fund investments offered by RSI. In addition to any
other pension benefit to which he may be entitled, the Bank is required to
credit to a bookkeeping account for Mr. Hegarty, as a supplemental retirement
benefit, $30,000 in May of each year in the period 1996-2000. The account is
required to be credited with earnings based on mutual fund investments offered
by RSI for the period commencing with the earlier of Mr. Hegarty's termination
of employment or May 27, 2000. In the case of both Mr. McConnell and Mr.
Hegarty, the supplemental retirement benefit will be payable upon termination
of employment (other than for cause) in three annual installments. In
accordance with the agreements with Messrs. McConnell and Hegarty, their
deferred compensation, supplemental retirement benefits, and benefits under
the Bank's Supplemental Savings Incentive Plan have been funded in a "grantor
trust."
The Employment Agreements provide for termination of the executive's
employment by the Bank or the Company with or without cause at any time. The
executive would be entitled to a lump sum severance payment upon the
occurrence of certain events: termination of the executive's employment for
reasons other than for cause, resignation by the executive during the 60-day
period commencing six months following a change of control (as defined below),
or the executive's resignation from the Bank and the Company following (i)
failure to re-elect the executive to his or her current offices, (ii) a
material adverse change in the executive's functions, duties or
responsibilities, (iii) a relocation of the executive's place of employment
outside the Borough of Queens, (iv) a failure to renew the Employment
Agreement by the Bank or Company, or (v) a material breach of the Employment
Agreement by the Bank or Company. The lump sum severance payment would be
equal to the salary payments and bonuses (based on the highest bonus received
in the last three years preceding termination) otherwise payable if the
executive's employment had continued for an additional 24 months (36 months
for Mr. McConnell, if termination occurs before his 65th birthday or after a
change of control, and 36 months for Mr. Hegarty). In addition, Messrs.
McConnell and Hegarty will be entitled to receive a lump sum payment of the
deferred compensation and supplemental retirement benefits that would have
been credited during such period. In the event the Company's Employee Benefit
Trust is terminated and its assets are distributed to employees in accordance
with its terms, Mr. Hegarty will be entitled to receive under his Employment
Agreement an amount equal to the difference between (i) the amount he would
have received from the Employee Benefit Trust if he had completed four full
calendar years of employment with the Company or Bank prior to its termination
plus the completed portion of the calendar year of its termination, and (ii)
the amount he actually received from the Employee Benefit Trust. The
Employment Agreements for each of the executives provides that if the
executive receives payments that would be subject to the excise tax on excess
parachute payments imposed by Section 4999 of the Internal Revenue Code, the
executive will be entitled to receive an additional
15
<PAGE>
payment (a "gross-up") in an amount necessary to put the executive in the same
after-tax position as if such excise tax had not been imposed.
Assuming a change of control had occurred on December 31, 1996, Mr.
McConnell, Mr. Hegarty, Ms. Passick, Mr. Braun and Ms. Piacentini would have
received cash lump sum severance payments equal to approximately $1,301,000,
$986,000, $304,000, $249,000, and $221,000, based on their salaries and
bonuses as of that date. The preceding amounts do not take into account the
gross-up, amounts related to termination of the Employee Benefit Trust, or
other amounts payable under the Employment agreements.
In the event an executive terminates employment for reasons not described in
the immediately preceding paragraph, or the executive's employment is
terminated for cause, the executive would receive only his or her earned but
unpaid salary. Messrs. McConnell and Hegarty also would receive their accrued
deferred compensation benefit and, except upon a termination for cause, their
accrued supplemental retirement benefit.
In the event an executive terminates employment due to a "disability," which
is defined generally to mean the inability of the executive to perform his or
her duties for 270 consecutive days due to incapacity, each Employment
Agreement provides that the executive would receive 100% of his or her salary
and bonus for the first six months, 75% for the next six months and 60% for
the balance of the term (less any benefits payable to the executive under any
disability insurance coverage maintained by the Company or the Bank). The
Employment Agreements for Mr. McConnell and Mr. Hegarty provide that in the
event of termination of employment due to a disability, the executive would
receive the reduced salary described above, the deferred compensation benefit
based on such reduced salary, and a lump sum payment of the supplemental
retirement benefit that would have been payable to him if his employment had
terminated after the maximum supplemental retirement benefit had been credited
to him.
The Employment Agreements provide that in the event the executive's
employment terminates due to death, the executive's beneficiaries (or estate)
would receive a lump sum payment of the executive's earned but unpaid salary,
and, in the case of Mr. McConnell and Mr. Hegarty, the beneficiaries (or
estate) would also receive a lump sum payment of the supplemental retirement
benefit that would have been payable to him if his employment had terminated
after the maximum supplemental retirement benefit had been credited to him.
Change of Control Arrangements. Upon a change of control (as defined below),
in addition to the provisions of the Employment Agreements described above,
(i) all outstanding restricted stock will immediately vest; (ii) all
outstanding options (and tandem limited stock appreciation rights ("SARs"))
held by then-current employees and Outside Directors will become immediately
exercisable; (iii) the exercise of an outstanding SAR within 90 days after the
change of control will entitle the holder to receive a cash payment equal to
the excess of (A) the highest price per share of Common Stock paid during the
90-day period prior to the exercise of the SAR or the change of control over
(B) the exercise price of the related stock option; and (iv) the Employee
Benefit Trust which was established by the Company to satisfy its obligations
under certain employee benefit plans will terminate and any trust assets
remaining after repayment of the Company's loan to the trust and certain
benefit plan contributions will be distributed to all full-time employees of
the Company or Bank with at least one year of service, in proportion to their
compensation over the current year and the preceding four years.
Definition of Change of Control. A "change of control" is generally defined,
for purposes of the Employment Agreements and benefit plans maintained by the
Company or the Bank, to mean: (a) the acquisition of all or substantially all
of the assets of the Bank or the Company; (b) the occurrence of any event if,
immediately following such event, a majority of the members of the Board of
Directors of the Bank or the Company or of any successor corporation shall
consist of persons other than Current Members (defined as any member of the
Board of Directors as of the completion of the Conversion and any successor of
a Current Member whose nomination or election has been approved by a majority
of the Current Members then on the Board of Directors); (c) the acquisition of
beneficial ownership of 25% or more of the total combined voting power of all
classes of stock of the Bank or the Company by any person or group; or (d)
approval by the stockholders of the Bank or the Company of an agreement
providing for the merger or consolidation of the Company with another
16
<PAGE>
corporation where the stockholders of the Bank or the Company, immediately
prior to the merger or consolidation, would not beneficially own, directly or
indirectly, immediately after the merger or consolidation, shares entitling
such stockholders to 50% or more of the total combined voting power of all
classes of stock of the surviving corporation.
RETIREMENT PLAN
The Bank maintains a Retirement Plan which is a tax-qualified defined
benefit plan. Salaried employees who are over age 21 and have been employed by
the Bank for at least one year are eligible to participate in the Retirement
Plan. Participants earn an annual retirement benefit at normal retirement age
(the later of age 65 or the fifth anniversary of participation) equal to the
sum of (i) 2% of "average annual earnings" (the average annual base salary for
the three consecutive years out of the final ten years of service which
produces the highest average) times years of credited service prior to March
1, 1993, up to 30 years, plus (ii) 1.6% of "average annual earnings" times
years of credited service after February 28, 1993, plus (iii) .45% of "average
annual earnings" in excess of "average social security compensation" (as
determined pursuant to IRS regulations) times years of credited service after
February 28, 1993. The total years of credited service taken into account
cannot exceed 35 years, and benefits earned in any year cannot be reduced by
subsequent changes to the plan. Annual benefits under the Retirement Plan are
limited by federal tax laws. As a general rule, during 1996 annual benefits
were limited to $120,000. Compensation in excess of $150,000 (subject to cost
of living adjustments which raise the applicable limit to $160,000 for 1997)
is required to be disregarded for purposes of benefits earned after 1993. The
Retirement Plan is funded by the Bank on an actuarial basis. Participants earn
a vested right to their accrued retirement benefit upon completion of five
years of service with the Bank.
The following table sets forth information with respect to Retirement Plan
benefits payable to the named executive officers.
RETIREMENT PLAN BENEFITS
<TABLE>
<CAPTION>
CURRENT ESTIMATED ANNUAL
YEARS OF RETIREMENT
NAME SERVICE(1) BENEFIT AT AGE 65(2)
- - ---- ---------- --------------------
<S> <C> <C>
James F. McConnell.............................. 22 $95,339
Michael J. Hegarty.............................. 1 27,272
Monica C. Passick............................... 17 53,602
Henry A. Braun.................................. 2 28,754
</TABLE>
- - --------
(1) The number of years of credited service under the Retirement Plan as of
December 31, 1996.
(2) The estimated annual retirement benefit payable as a single life annuity
at age 65 to the named executive officer, based on the assumptions that
such officer retires at age 65 with no increase in compensation or "social
security compensation" from that in effect in 1996.
CERTAIN TRANSACTIONS
Under the Bank's lending policies, residential mortgage loans to non-
executive officer employees and immediate family members of employees and
directors are made at market rates of interest and other normal terms, but
with reduced origination fees. Excluding the two loans discussed above under
the caption "Compensation Committee Interlocks and Insider Participation,"
there were seven such loans outstanding to immediate family members of
executive officers or directors with balances in excess of $60,000 during
1996. The highest aggregate balance of these loans since January 1, 1996 was
$935,120 and the aggregate balance of these loans at January 31, 1997 was
$913,862. All of such loans were made in the ordinary course of business and
were fully approved in accordance with all of the Bank's credit underwriting
standards. The Bank believes that such loans do not involve more than the
normal risk of collectability or present other unfavorable features.
The Bank leases office space in its 159-18 Northern Boulevard building at a
market rental rate to Franklin F. Regan, Jr. for use in his law practice. Mr.
Regan is a director of the Company and the Bank.
17
<PAGE>
Since 1981, Mr. Regan (or his former law firm) has had a retainer agreement
with the Bank, pursuant to which he is paid an annual retainer for general
legal services to the Bank. In addition, Mr. Regan represents the Bank in
closings of residential and certain commercial real estate loans, the fees of
which are paid by borrowers. The current fee paid to Mr. Regan by borrowers
for closing of a residential loan is $575. Fees paid for commercial real
estate loan transactions are based on the formula of approximately one-quarter
of one percent (0.25%) of the principal balance for the loan with a minimum
fee of $850. Mr. Regan also represents the Bank in connection with some of its
mortgage foreclosure actions. During 1996, Mr. Regan received an aggregate of
$287,592 in retainer and legal fees paid by the Bank, and $338,517 in fees
paid by borrowers.
PROPOSAL NO. 2
AMENDMENT OF THE 1996 RESTRICTED STOCK INCENTIVE PLAN
The Restricted Stock Plan, which was approved by stockholders in May 1996
and amended in certain technical respects in November 1996, is intended to
advance the best interests of the Company and the Bank by providing employees
and Outside Directors with additional incentives in the form of restricted
stock, thereby increasing their personal stake in the continued success and
growth of the Company and encouraging them to stay in the employ or service of
the Company. The Restricted Stock Plan provides for automatic grants of
restricted stock to Outside Directors, and authorizes the Board of Directors
to grant, upon recommendation of the Compensation Committee, awards of
restricted stock to employees, including officers, of the Company and of any
subsidiary or other entity in which the Company holds at least a 20% interest.
In May and December of 1996, approximately 60 officers and employees of the
Company and its subsidiaries received awards under the Restricted Stock Plan.
It is not possible to predict the number of employees who will receive grants
in the future. Outside Directors automatically received awards in May 1996, at
the time the Restricted Stock Plan was approved by stockholders, and are not
eligible to receive future additional awards under the Restricted Stock Plan.
The Restricted Stock Plan provides that, except as may otherwise be
permitted by the Office of Thrift Supervision ("OTS"), the restricted stock
may vest with respect to no more than 20% of the shares subject to an award
per year, commencing on the first anniversary of the date of grant, provided
that the holder is an employee or Outside Director, on such anniversary date.
In addition, restricted stock will vest fully upon the holder's termination of
employment or service as an Outside Director by reason of death or disability
or upon a "change of control" of the Company (as defined in the Restricted
Stock Plan and summarized earlier in this Proxy Statement.
As originally approved by the Company's stockholders, the Restricted Stock
Plan also contained provisions which would accelerate vesting upon an
employee's or Outside Director's retirement, under certain conditions. OTS
regulations, however, prohibit the inclusion of a provision for immediate
vesting upon retirement in any restricted stock plan adopted by a federal
savings bank or its parent holding company (such as the Bank and the Company)
within one year after the date on which the federal savings bank converted
from mutual to stock form. Accordingly, the Restricted Stock Plan specifically
provided that such provisions would not become effective until November 21,
1996 (the first anniversary date of the Conversion) and then only if the OTS
approved the inclusion of the retirement provisions before such date. Because
the OTS declined to provide the Company with the required approvals, the
vesting upon retirement provisions did not become effective on November 21,
1996.
The one year prohibition on accelerated vesting as applied to the Bank and
the Company has expired, and the Company's Board of Directors has determined
to amend the Restricted Stock Plan to provide for immediate vesting of
restricted stock upon the retirement of employees, including officers, and
Outside Directors under certain conditions, subject to stockholder approval.
Specifically, the amendments provide for full and immediate vesting of
restricted stock upon the retirement of (i) officers and employees, if such
persons retire at a time when they are eligible to do so under a retirement
program of the Company or the Bank or as otherwise determined by the
Compensation Committee, and (ii) Outside Directors, but only if (x) the
retiring Outside Director has served
18
<PAGE>
as a director for at least two years subsequent to the date of grant of the
restricted stock, and (y) the retiring Outside Director's age plus years of
service on the Company's or the Bank's Board of Directors equals or exceeds
seventy-five. Of the executive officers, Mr. McConnell, Ms. Passick and Ms.
Piacentini are currently eligible to retire under the Bank's retirement plan
by virtue of their age and years of service. Information as to the age and
years of service for each Outside Director is provided on page 6. The intent
of these amendments is to assure that officers, employees and Outside
Directors who elect to retire at or after retirement age and after many years
of service to the Bank and the Company, both before and after the Conversion,
are not unfairly disadvantaged by their age at the time of the Conversion or
the date of grant of their restricted stock.
The text of the provisions as amended subject to stockholder approval are
printed in Appendix A of this Proxy Statement.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" AMENDMENT OF THE 1996
RESTRICTED STOCK INCENTIVE PLAN (PROPOSAL NO. 2).
PROPOSAL NO. 3
AMENDMENT OF THE 1996 STOCK OPTION INCENTIVE PLAN
The Stock Option Plan, which was approved by stockholders in May 1996 and
amended in certain technical respects in November 1996, is intended to advance
the best interests of the Company and the Bank by providing employees and
Outside Directors with additional incentives in the form of stock options,
thereby increasing their personal stake in the continued success and growth of
the Company and encouraging them to stay in the employ or service of the
Company. The Stock Option Plan provides for the automatic grant of non-
statutory stock options and tandem limited stock appreciation rights to
Outside Directors, and authorizes the Board of Directors to grant, upon
recommendation of the Compensation Committee, incentive or non-statutory
options and tandem limited stock appreciation rights to employees, including
officers, of the Company or any subsidiary. In May and December of 1996,
approximately 60 officers and employees of the Company and its subsidiaries
received grants under the Stock Option Plan. It is not possible to predict the
number of employees who will receive grants in the future. Outside Directors
automatically received grants in May 1996, at the time the Stock Option Plan
was approved by stockholders, and are not eligible to receive future
additional options under the Stock Option Plan.
The Stock Option Plan provides that, except as may otherwise be permitted by
the OTS, an option may become exercisable with respect to no more than 20% of
the shares subject to the option per year, commencing on the first anniversary
of the date of grant, provided that the holder is an employee or Outside
Director, on such anniversary date. Stock options will become fully
exercisable upon the holder's termination of employment or service as an
Outside Director by reason of death or disability or upon a "change of
control" of the Company (as defined in the Stock Option Plan and summarized
earlier in this Proxy Statement).
As originally approved by the Company's stockholders, the Stock Option Plan
also contained provisions which would make stock options immediately
exercisable upon an employee's or Outside Director's retirement, under certain
conditions. OTS regulations, however, prohibit the inclusion of a provision
for immediate exercisability upon retirement in any stock option plan adopted
by a federal savings bank or its parent holding company (such as the Bank and
the Company) within one year after the date on which the federal savings bank
converted from mutual to stock form. Accordingly, the Stock Option Plan
specifically provided that such provisions would not become effective until
November 21, 1996 (the first anniversary date of the Conversion) and then only
if the OTS approved the inclusion of the retirement provisions before such
date. Because the OTS declined to provide the Company with the required
approvals, the accelerated exercisability upon retirement provisions did not
become effective on November 21, 1996.
The one year prohibition on accelerated exercisability as applied to the
Bank and the Company has expired, and the Company's Board of Directors has
determined to amend the Stock Option Plan to make stock options immediately
exercisable upon the retirement of employees, including officers, and Outside
Directors under
19
<PAGE>
certain conditions, subject to stockholder approval. Specifically, the
amendments make stock options immediately exercisable upon the retirement of
(i) officers and employees, if such persons retire at a time when they are
eligible to do so under a retirement program of the Company or the Bank or as
otherwise determined by the Compensation Committee, and (ii) Outside
Directors, but only if (x) the retiring Outside Director has served as a
director for at least two years subsequent to the date of grant of the
options, and (y) the retiring Outside Director's age plus years of service on
the Company's or the Bank's Board of Directors equals or exceeds seventy-five.
Of the executive officers, Mr. McConnell, Ms. Passick and Ms. Piacentini are
currently eligible to retire under the Bank's retirement plan by virtue of
their age and years of service. Information as to the age and years of service
for each Outside Director is provided on page 6. The intent of these
amendments is to assure that officers, employees and Outside Directors who
elect to retire at or after retirement age and after many years of service to
the Bank and the Company, both before and after the Conversion, are not
unfairly disadvantaged by their age at time of the Conversion or the date of
grant of their stock options.
The text of the provisions as amended subject to stockholder approval are
printed in Appendix B of this Proxy Statement.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" AMENDMENT OF THE 1996 STOCK
OPTION INCENTIVE PLAN (PROPOSAL NO. 3).
PROPOSAL NO. 4
RATIFICATION OF APPOINTMENT OF AUDITORS
The Board of Directors has appointed Coopers & Lybrand L.L.P. to perform the
audit of the Company's consolidated financial statements for the year ending
December 31, 1997, subject to ratification by the Company's stockholders at
the Annual Meeting. Coopers & Lybrand L.L.P. served as the independent
auditors of the Company for the year ended December 31, 1996. Representatives
from Coopers & Lybrand L.L.P. will be present at the Annual Meeting and will
be given the opportunity to make a statement if they so desire, and will be
available to respond to appropriate questions from stockholders.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" RATIFICATION OF THE APPOINTMENT
OF COOPERS & LYBRAND L.L.P. AS THE COMPANY'S INDEPENDENT AUDITORS FOR THE
FISCAL YEAR ENDING DECEMBER 31, 1997.
OTHER MATTERS THAT MAY PROPERLY COME BEFORE THE SPECIAL MEETING
The Board of Directors of the Company knows of no business that will be
presented for consideration at the Annual Meeting other than as stated in the
Notice of Annual Meeting of Stockholders. 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 in accordance with their best judgment.
Whether or not you intend to be present at the Annual Meeting, you are urged
to return your signed and dated proxy promptly. If you are present at the
Annual Meeting and wish to vote your shares in person, your proxy may be
revoked by giving the Secretary notice of your intention to vote in person.
NOTICE OF BUSINESS TO BE CONDUCTED AT AN ANNUAL MEETING
The Bylaws of the Company provide an advance notice procedure for a
stockholder to properly bring business before an annual meeting. The
stockholder must give written advance notice to the Corporate Secretary of the
Company which must be received not more than ninety days nor less than sixty
days prior to the anniversary of the date of the immediately preceding annual
meeting; provided, however, that in the event that the date of the forthcoming
annual meeting is more than thirty days after such anniversary date, such
written notice will also be timely if it is received by the Corporate
Secretary by the earlier of (1) the 10th day prior to the forthcoming meeting
date, or (2) the close of business on the 10th day following the date on which
the Company first makes public disclosure of the meeting date.
20
<PAGE>
The advance notice by stockholders must include the stockholder's name and
address, a representation that the stockholder is a holder of record of the
Company's stock entitled to vote at such meeting (or if the record date for
such meeting is subsequent to the date required for such stockholder notice, a
representation that the stockholder is a holder of record at the time of such
notice and intends to be a holder of record on the date of such meeting) and
intends to appear in person or by proxy at such meeting to propose such
business, a brief description of the proposed business, the reason for
conducting such business at the annual meeting, and any material interest of
such stockholder in the proposed business. In the case of nominations for
election to the Board of Directors, certain information regarding the nominee
must also be provided. Nothing in this paragraph shall be deemed to require
the Company to include in its proxy statement and proxy relating to an annual
meeting any stockholder proposal which does not meet all of the requirements
for inclusion established by the SEC in effect at the time such proposal is
received.
STOCKHOLDER PROPOSALS
In order to be eligible for inclusion in the proxy materials of the Company
for the 1998 Annual Meeting of Stockholders, any stockholder proposal to take
action at such meeting must be received at the Company's executive offices at
144-51 Northern Boulevard, Flushing, New York 11354 no later than November 21,
1997. Any such proposal shall be subject to the requirements of the proxy
rules adopted under the Exchange Act.
MISCELLANEOUS
A copy of the Company's Annual Report on Form 10-K (without exhibits) for
the year ended December 31, 1996 as filed with the SEC, will be furnished
without charge to stockholders of record upon written request to Flushing
Financial Corporation, 144-51 Northern Boulevard, Flushing, New York 11354,
Attention: Michael J. Hegarty.
By Order of the Board of Directors,
/s/ Michael J. Hegarty
Michael J. Hegarty
Corporate Secretary
Flushing, New York
March 21, 1997
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, DATE AND
PROMPTLY RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
21
<PAGE>
APPENDIX A
1996 RESTRICTED STOCK INCENTIVE PLAN AMENDMENT
1. Section 2.1(a)(iv) of the Plan is hereby amended to read as follows:
"(iv) Unless the Committee shall specifically provide otherwise at the time
Restricted Stock is awarded, Restricted Stock shall become vested in full
on the date the respective participant terminates his or her employment
because of retirement. For these purposes, "retirement" shall mean
termination at a time when the participant is eligible to retire under a
retirement program of the Company or one of its Subsidiaries or as
otherwise determined by the Committee."
2. Section 3.1(d) of the Plan is hereby amended to read as follows:
"(d) Notwithstanding the provisions of Section 3.1(b), Restricted Stock
shall become vested in full upon the Outside Director's retirement. For
purposes of this Section 3.1(d), "retirement" shall mean termination of
service other than for Cause, provided that (A) such Outside Director has
served as an Outside Director for two or more years subsequent to the date
of award of the Restricted Stock and (B) such Outside Director's age plus
years of service on the Board of Directors or the board of directors of any
Subsidiary (including service on the Board of Trustees of Flushing Savings
Bank, FSB (the "Bank") or its predecessor) equals or exceeds seventy-five.
For the purposes of this Plan, termination for "Cause" shall mean
termination for dishonesty or willful misconduct involving moral
turpitude."
22
<PAGE>
APPENDIX B
1996 STOCK OPTION INCENTIVE PLAN AMENDMENT
1. Section 2.1(c)(iv) of the Plan is hereby amended to read as follows:
"(iv) Unless the Committee shall specifically provide otherwise at the time
an Option is granted, an Option shall become exercisable in full on the
date the respective option holder terminates his or her employment because
of retirement. For these purposes, "retirement" shall mean termination at a
time when the option holder is eligible to retire under a retirement
program of the Company or one of its Subsidiaries or as otherwise
determined by the Committee."
2. Section 3.1(g) of the Plan is hereby amended to read as follows:
"(g) Retirement. Notwithstanding the provisions of Section 3.1(c), any
Option held by an Outside Director whose service as such is terminated by
reason of his or her retirement shall become immediately exercisable and
may be exercised by such option holder for a period of two years following
his or her retirement, provided that in no event shall the exercise period
extend beyond the expiration of the Option term. For purposes of this
Section 3.1(g), termination for "retirement" shall mean termination other
than for Cause, provided that (A) such Outside Director has served as an
Outside Director for two or more years subsequent to the date of grant of
the Option and (B) such Outside Director's age plus years of service on the
Board of Directors or the board of directors of any Subsidiary (including
service on the Board of Trustees of the Bank or its predecessor) equals or
exceeds seventy-five."
23
<PAGE>
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
FLUSHING FINANCIAL CORPORATION
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
APRIL 29, 1997
The undersigned hereby appoints James F. McConnell and Michael J. Hegarty, and
either of them, proxies for the undersigned, with full power of substitution and
revocation in each, to vote all shares of Flushing Financial Corporation Common
Stock which the undersigned may be entitled to vote at the Annual Meeting of
Stockholders of Flushing Financial Corporation to beheld on Tuesday, April 29,
1997 at 2:00 p.m., New York time, at the LaGuardia Marriott located at 102-05
Ditmars Boulevard, East Elmhurst, New York 11369, or at any adjournment thereof.
PLEASE MARK THIS PROXY AS INDICATED ON THE REVERSE SIDE TO VOTE ON ANY ITEM. IF
YOU WISH TO VOTE IN ACCORDANCE WITH THE BOARD OF DIRECTORS' RECOMMENDATIONS,
PLEASE SIGN ON THE REVERSE SIDE; NO BOXES NEED TO BE CHECKED.
- - --------------------------------------------------------------------------------
PLEASE VOTE, DATE AND SIGN ON REVERSE AND RETURN PROMPTLY IN THE ENCLOSED
ENVELOPE.
- - --------------------------------------------------------------------------------
IF YOUR ADDRESS HAS CHANGED, PLEASE INDICATE NEW ADDRESS BELOW.
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
<PAGE>
[X] PLEASE MARK VOTES
AS IN THIS EXAMPLE
For All With- For All
1. Election of Directors. Nominees hold Except
ROBERT A. MARANI [_] [_] [_]
FRANKLIN F. REGAN, JR.
JOHN E. ROE, SR.
INSTRUCTION: If you do not wish your shares voted "For" a particular
nominee, mark the "For All Except" box and write that nominee's name in the
space below.
- - --------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF ALL NOMINEES IN
ITEM 1 AND FOR APPROVAL OF ITEMS 2, 3 AND 4.
RECORD DATE SHARES:
Please be sure to sign and date this Proxy. Date
- - --------------------------------------------------------------------------------
- - --------------Stockholder sign here--------------Co-owner sign here-------------
DETACH CARD
For Against Abstain
2. Amendments to the 1996 Restricted Stock [_] [_] [_]
Incentive Plan.
3. Amendments to the 1996 Stock Option Incentive [_] [_] [_]
Plan.
4. Ratification of the appointment of Coopers & [_] [_] [_]
Lybrand L.L.P. as the independent auditors of
the Corporation.
Mark box at right if an address change or comment has been noted on [_]
the reverse side of this card.
In their discretion, the proxies are authorized to vote upon other business
as may properly come before the meeting or at any adjournment thereof.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED BY THE
STOCKHOLDERS. IF NO DIRECTION IS GIVEN WHEN THE DULY EXECUTED PROXY IS
RETURNED, SUCH SHARES WILL BE VOTED FOR THE ELECTION OF ALL NOMINEES IN ITEM
1 AND FOR APPROVAL OF ITEMS 2, 3 AND 4.
Please mark, date and sign as your name(s) appear(s) hereon and return in the
enclosed envelope. If acting as executor, administrator, trustee, guardian,
etc., you should so indicate when signing. If the signer is a corporation,
please sign the full corporate name, by duly authorized officer. If the
signer is a partnership, please sign partnership name by authorized person.
If shares are held jointly, each stockholder named should sign.
DETACH CARD
<PAGE>
MARINE MIDLAND BANK
AS TRUSTEE UNDER THE
FLUSHING FINANCIAL CORPORATION
STOCK-BASED PROFIT SHARING PLAN
RE: FLUSHING FINANCIAL CORPORATION
ANNUAL MEETING APRIL 29, 1997
Receipt of proxy soliciting material for the above meeting is acknowledged. As
to stock of Flushing Financial Corporation of which I am entitled to direct the
voting under the Flushing Financial Corporation Stock-Based Profit Sharing Plan,
you are instructed to sign and forward a proxy in the form solicited by the
Board of Directors, and to direct a vote as set forth on the reverse side.
- - --------------------------------------------------------------------------------
PLEASE VOTE, DATE AND SIGN ON THE REVERSE SIDE AND RETURN PROMPTLY IN THE
ENCLOSED ENVELOPE.
- - --------------------------------------------------------------------------------
<PAGE>
[X] PLEASE MARK VOTES
AS IN THIS EXAMPLE
For All With- For All
1. Election of Directors. Nominees hold Except
ROBERT A. MARANI [_] [_] [_]
FRANKLIN F. REGAN, JR.
JOHN E. ROE, SR.
INSTRUCTION: If you do not wish your shares voted "For" a particular
nominee, mark the "For All Except" box and write that nominee's name in the
space below.
- - --------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF ALL NOMINEES IN
ITEM 1 AND FOR APPROVAL OF ITEMS 2, 3 AND 4.
RECORD DATE SHARES:
Please be sure to sign and date this Proxy. Date
- - --------------------------------------------------------------------------------
- - --------------Stockholder sign here--------------Co-owner sign here-------------
DETACH CARD
For Against Abstain
2. Amendments to the 1996 Restricted Stock [_] [_] [_]
Incentive Plan.
3. Amendments to the 1996 Stock Option Incentive [_] [_] [_]
Plan.
4. Ratification of the appointment of Coopers & [_] [_] [_]
Lybrand L.L.P. as the independent auditors of
the Corporation.
Mark box at right if an address change or comment has been noted on [_]
the reverse side of this card.
In their discretion, the proxies are authorized to vote upon other business
as may properly come before the meeting or at any adjournment thereof.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED BY THE
STOCKHOLDERS. IF NO DIRECTION IS GIVEN WHEN THE DULY EXECUTED PROXY IS
RETURNED, SUCH SHARES WILL BE VOTED FOR THE ELECTION OF ALL NOMINEES IN ITEM
1 AND FOR APPROVAL OF ITEMS 2, 3 AND 4.
Please mark, date and sign as your name(s) appear(s) hereon and return in the
enclosed envelope. If acting as executor, administrator, trustee, guardian,
etc., you should so indicate when signing. If the signer is a corporation,
please sign the full corporate name, by duly authorized officer. If the
signer is a partnership, please sign partnership name by authorized person.
If shares are held jointly, each stockholder named should sign.
DETACH CARD DETACH CARD
NOTICE TO PARTICIPANTS
IN FLUSHING FINANCIAL CORPORATION
STOCK-BASED PROFIT SHARING PLAN
Dear Plan Participant: March 21, 1997
Enclosed with this notice is a Proxy Statement for the Annual Meeting of
Stockholders of Flushing Financial Corporation (the "Company"), which will be
held on April 29, 1997. The items to be voted on at the Annual Meeting are
described in the enclosed Proxy Statement.
As a participant in the Flushing Financial Corporation Stock-Based Profit
Sharing Plan, you have the right to direct Marine Midland Bank, as Trustee of
the Plan how to vote the shares of the Company's common stock which are
allocated to your account as of March 10, 1997. Enclosed is a voting instruction
card to be used for that purpose. You can direct the Trustee to vote for,
against, or to abstain from voting with respect to each of the proposals which
are being voted on. You should send your voting instructions in the envelope
provided directly to State Street Bank and Trust Company ("State Street"), which
will tabulate the voting instructions for the Trustee. Your voting instructions
will be kept confidential from the officers, directors, and employees of the
Company and Flushing Savings Bank, FSB.
Because of the time needed to tabulate the participant voting instructions,
we have established a cutoff date for receiving your instruction card. IF YOUR
INSTRUCTION CARD IS NOT RECEIVED BY STATE STREET BY THE CLOSE OF BUSINESS ON
APRIL 18, 1997, THE SHARES ALLOCATED TO YOUR ACCOUNT MAY NOT BE VOTED ACCORDING
TO YOUR INSTRUCTIONS. If you do not provide voting instructions, or if your
instructions are received too late to be included in the tabulation, the shares
allocated to your account will be voted by the Trustee in the same proportion as
the shares for which timely instructions were received from other Plan
participants.
IF YOU OWN SHARES OF THE COMPANY DIRECTLY AND/OR ARE A PARTICIPANT IN THE
FLUSHING SAVINGS BANK, FSB 401(K) SAVINGS PLAN OR ARE ENTITLED TO DIRECT THE
VOTE OF SHARES HELD IN THE COMPANY'S EMPLOYEE BENEFIT TRUST, YOU WILL RECEIVE,
UNDER SEPARATE COVER, A PROXY CARD AND/OR VOTING INSTRUCTION CARD FOR THOSE
PURPOSES. THE VOTING OF SHARES HELD IN THE STOCK-BASED PROFIT SHARING PLAN MUST
BE DIRECTED ON THE CARD ENCLOSED WITH THIS NOTICE.
If you have any questions regarding the mechanics for voting, you may call
Anna M. Piacentini, the Company's Senior VP/Human Resources at Ext. 207 or the
Plan's Trustee, Marine Midland Bank, at (716)841-2004.
Marine Midland Bank
as Trustee under the Flushing
Financial Corporation
Stock-Based Profit Sharing Plan
<PAGE>
J.P. MORGAN TRUST COMPANY OF DELAWARE
AS TRUSTEE UNDER THE
FLUSHING FINANCIAL CORPORATION
EMPLOYEE BENEFIT TRUST
RE: FLUSHING FINANCIAL CORPORATION
ANNUAL MEETING APRIL 29, 1997
Receipt of proxy soliciting material for the above meeting is acknowledged. As
to stock of Flushing Financial Corporation of which I am entitled to direct the
voting under the Flushing Financial Corporation Employee Benefit Trust, you are
instructed to sign and forward a proxy in the form solicited by the Board of
Directors, and to direct a vote as set forth on the reverse side.
- - --------------------------------------------------------------------------------
PLEASE VOTE, DATE AND SIGN ON THE REVERSE SIDE AND RETURN PROMPTLY IN THE
ENCLOSED ENVELOPE.
- - --------------------------------------------------------------------------------
<PAGE>
[X] PLEASE MARK VOTES
AS IN THIS EXAMPLE
For All With- For All
1. Election of Directors. Nominees hold Except
ROBERT A. MARANI [_] [_] [_]
FRANKLIN F. REGAN, JR.
JOHN E. ROE, SR.
INSTRUCTION: If you do not wish your shares voted "For" a particular
nominee, mark the "For All Except" box and write that nominee's name in the
space below.
- - --------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF ALL NOMINEES IN
ITEM 1 AND FOR APPROVAL OF ITEMS 2, 3 AND 4.
Please be sure to sign and date this Proxy. Date
- - --------------------------------------------------------------------------------
- - --------------Stockholder sign here--------------Co-owner sign here-------------
DETACH CARD
For Against Abstain
2. Amendments to the 1996 Restricted Stock [_] [_] [_]
Incentive Plan.
3. Amendments to the 1996 Stock Option Incentive [_] [_] [_]
Plan.
4. Ratification of the appointment of Coopers & [_] [_] [_]
Lybrand L.L.P. as the independent auditors of
the Corporation.
Mark box at right if an address change or comment has been noted on [_]
the reverse side of this card.
In their discretion, the proxies are authorized to vote upon other business
as may properly come before the meeting or at any adjournment thereof.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED BY THE
STOCKHOLDERS. IF NO DIRECTION IS GIVEN WHEN THE DULY EXECUTED PROXY IS
RETURNED, SUCH SHARES WILL BE VOTED FOR THE ELECTION OF ALL NOMINEES IN ITEM
1 AND FOR APPROVAL OF ITEMS 2, 3 AND 4.
Please mark, date and sign as your name(s) appear(s) hereon and return in the
enclosed envelope. If acting as executor, administrator, trustee, guardian,
etc., you should so indicate when signing. If the signer is a corporation,
please sign the full corporate name, by duly authorized officer. If the
signer is a partnership, please sign partnership name by authorized person.
If shares are held jointly, each stockholder named should sign.
DETACH CARD DETACH CARD
NOTICE TO "QUALIFIED EMPLOYEES"
UNDER THE FLUSHING FINANCIAL CORPORATION
EMPLOYEE BENEFIT TRUST
Dear "Qualified Employee": March 21,1997
Enclosed with this notice is a Proxy Statement for the Annual Meeting of
Stockholders of Flushing Financial Corporation (the "Company"), which will be
held on April 29,1997. The items to be voted on at the Annual Meeting are
described in the enclosed Proxy Statement.
As a full-time employee of Flushing Savings Bank, FSB with at least one year
of service as of March 10, 1997, you are a "qualified employee" and have the
right to direct J.P. Morgan Trust Company of Delaware, as Trustee of the
Company's Employee Benefit Trust, how to vote a portion of the shares of the
Company's common stock which are held in the Employee Benefit Trust. Enclosed is
a voting instruction card to be used for that purpose. You can direct the
Trustee to vote for, against, or to abstain from voting with respect to each of
the proposals which are being voted on. Each "qualifying employee" has one
"vote" for each proposal, and the Trustee will vote all shares held in the
Employee Benefit Trust in the same proportion as the "votes" received from
"qualified employees". You should send your voting instructions in the envelope
provided directly to State Street Bank and Trust Company ("State Street"), which
will tabulate the voting instructions for the Trustee. Your voting instructions
will be kept confidential from the officers, directors, and employees of the
Company and Flushing Savings Bank, FSB.
Because of the time needed to tabulate the employee voting instructions, we
have established a cutoff date for receiving your instructions card. IF YOUR
INSTRUCTION CARD IS NOT RECEIVED BY STATE STREET BY THE CLOSE OF BUSINESS ON
APRIL 18, 1997, YOU WILL NOT HAVE A VOICE IN DIRECTING THE VOTE OF THE EMPLOYEE
BENEFIT TRUST SHARES. If you do not provide voting instructions, or if your
instructions are received too late to be included in the tabulation, the shares
held in the Employee Benefit Trust will be voted by the Trustee in accordance
with the instructions which were timely received from other "qualified
employees".
IF YOU OWN SHARES OF THE COMPANY DIRECTLY AND/OR ARE A PARTICIPANT IN THE
COMPANY'S STOCK-BASED PROFIT SHARING PLAN OR THE FLUSHING SAVINGS BANK, FSB
401(K) SAVINGS PLAN, YOU WILL RECEIVE, UNDER SEPARATE COVER, A PROXY CARD AND/OR
VOTING INSTRUCTION CARD FOR THOSE PURPOSES. THE VOTING OF SHARES HELD IN THE
EMPLOYEE BENEFIT TRUST MUST BE DIRECTED ON THE CARD ENCLOSED WITH THIS NOTICE.
If you have any questions regarding the mechanics for voting, you may call
Anna M. Piacentini, the Company's Senior VP/Human Resources at Ext. 207 or the
Trustee of the Employee Benefit Trust, J.P. Morgan Trust Company of Delaware, at
(302)651-3921.
J.P. Morgan Trust Company of Delaware
as Trustee under the Flushing Financial
Corporation Employee Benefit Trust
<PAGE>
MARINE MIDLAND BANK
AS TRUSTEE UNDER THE
FLUSHING SAVINGS BANK, FSB
401(K) SAVINGS PLAN
RE: FLUSHING FINANCIAL CORPORATION
ANNUAL MEETING APRIL 29, 1997
Receipt of proxy soliciting material for the above meeting is acknowledged. As
to stock of Flushing Financial Corporation of which I am entitled to direct the
voting under the Flushing Savings Bank, FSB 401(k) Savings Plan, you are
instructed to sign and forward a proxy in the form solicited by the Board of
Directors, and to direct a vote as set forth on the reverse side.
- - --------------------------------------------------------------------------------
PLEASE VOTE, DATE AND SIGN ON THE REVERSE SIDE AND RETURN PROMPTLY IN THE
ENCLOSED ENVELOPE.
- - --------------------------------------------------------------------------------
<PAGE>
[X] PLEASE MARK VOTES
AS IN THIS EXAMPLE
For All With- For All
1. Election of Directors. Nominees hold Except
ROBERT A. MARANI [_] [_] [_]
FRANKLIN F. REGAN, JR.
JOHN E. ROE, SR.
INSTRUCTION: If you do not wish your shares voted "For" a particular
nominee, mark the "For All Except" box and write that nominee's name in the
space below.
- - --------------------------------------------------------------------------------
The Board of Directors recommends a vote FOR the election of all nominees in
item 1 and FOR approval of items 2, 3 and 4.
RECORD DATE UNITS:
Please be sure to sign and date this Proxy. Date
- - --------------------------------------------------------------------------------
- - --------------Unitholder sign here---------------Co-owner sign here-------------
DETACH CARD
For Against Abstain
2. Amendments to the 1996 Restricted Stock [_] [_] [_]
Incentive Plan.
3. Amendments to the 1996 Stock Option Incentive [_] [_] [_]
Plan.
4. Ratification of the appointment of Coopers & [_] [_] [_]
Lybrand L.L.P. as the independent auditors of
the Corporation.
Mark box at right if an address change or comment has been noted on [_]
the reverse side of this card.
In their discretion, the proxies are authorized to vote upon other business
as may properly come before the meeting or at any adjournment thereof.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED BY THE
STOCKHOLDERS. IF NO DIRECTION IS GIVEN WHEN THE DULY EXECUTED PROXY IS
RETURNED, SUCH SHARES WILL BE VOTED FOR THE ELECTION OF ALL NOMINEES IN
ITE 1 AND FOR APPROVAL OF ITEMS 2, 3 AND 4.
Please mark, date and sign as your name(s) appear(s) hereon and return in the
enclosed envelope. If acting as executor, administrator, trustee, guardian,
etc., you should so indicate when signing. If the signer is a corporation,
please sign the full corporate name, by duly authorized officer. If the
signer is a partnership, please sign partnership name by authorized person.
If shares are held jointly, each stockholder named should sign.
DETACH CARD DETACH CARD
NOTICE TO PARTICIPANTS
IN FLUSHING SAVINGS BANK, FSB
401(k) SAVINGS PLAN
Dear Plan Participant: March 21, 1997
Enclosed with this notice is a Proxy Statement for the Annual Meeting of
Stockholders of Flushing Financial Corporation (the "Company"), which will be
held on April 29, 1997. The items to be voted on at the Annual Meeting are
described in the enclosed Proxy Statement.
As a participant in the Flushing Savings Bank, FSB 401(k) Savings Plan, you
have the right to direct Marine Midland Bank, as Trustee of the Plan, how to
vote the shares of the Company's common stock which are allocated to your
account as of March 10, 1997. Enclosed is a voting instruction card to be used
for that purpose. You can direct the Trustee to vote for, against, or to abstain
from voting with respect to each of the proposals which are being voted on. You
should send your voting instructions in the envelope provided directly to State
Street Bank and Trust Company ("State Street"), which will tabulate the voting
instructions for the Trustee. Your voting instructions will be kept confidential
from the officers, directors, and employees of the Company and the Bank.
Because of the time needed to tabulate the participant voting instructions,
we have established a cutoff date for receiving your instruction card. IF YOUR
INSTRUCTION CARD IS NOT RECEIVED BY STATE STREET BY THE CLOSE OF BUSINESS ON
APRIL 18, 1997, THE SHARES ALLOCATED TO YOUR ACCOUNT MAY NOT BE VOTED ACCORDING
TO YOUR INSTRUCTIONS. If you do not provide voting instructions, or if your
instructions are received too late to be included in the tabulation, the shares
allocated to your account will be voted by the Trustee in the same proportion as
the shares for which timely instructions were received from other Plan
participants.
IF YOU OWN SHARES OF THE COMPANY DIRECTLY AND/OR ARE A PARTICIPANT IN THE
COMPANY'S STOCK-BASED PROFIT SHARING PLAN OR ARE ENTITLED TO DIRECT THE VOTE OF
SHARES HELD IN THE COMPANY'S EMPLOYEE BENEFIT TRUST, YOU WILL RECEIVE, UNDER
SEPARATE COVER, A PROXY CARD AND/OR VOTING INSTRUCTION CARD FOR THOSE PURPOSES.
THE VOTING OF SHARES HELD IN THE 401(K) PLAN MUST BE DIRECTED ON THE CARD
ENCLOSED WITH THIS NOTICE.
If you have any questions regarding the mechanics for voting, you may call
Anna M. Piacentini, the Company's Senior VP/Human Resources at Ext. 207 or the
Plan's Trustee, Marine Midland Bank, at (716)841-2004
Marine Midland Bank
as Trustee under the Flushing
Savings Bank, FSB
401(k) Savings Plan
