July 18, 2003
Dear Fellow Shareholder:
On behalf of the Board of Directors and management of Atlantic Liberty
Financial Corp., we cordially invite you to attend our first Annual Meeting of
Shareholders. The meeting will be held at 3:30 p.m., (local time) on August 20,
2003, at our main office located at 186 Montague Street, Brooklyn, New York.
We encourage you to attend the meeting in person. Whether or not you plan
to attend, however, please read the enclosed proxy statement and then complete,
sign and date the enclosed proxy card and return it in the accompanying postpaid
return envelope as promptly as possible. This will save us additional expense in
soliciting proxies and will ensure that your shares are represented at the
meeting.
The enclosed Notice of Annual Meeting and Proxy Statement describe the
formal business to be transacted at the annual meeting. The annual meeting is
being held so that shareholders may vote for a director and ratify the
appointment of Radics & Co., LLC as our independent auditors for the fiscal year
ending March 31, 2004.
Your Board of Directors has determined that the matters to be considered at
the annual meeting are in the best interests of Atlantic Liberty Financial Corp.
and its shareholders. For the reasons set forth in the proxy statement, the
Board of Directors unanimously recommends a vote "For" each matter presented.
Sincerely,
/s/ Barry M. Donohue
- ----------------------
Barry M. Donohue
President and Chief Executive Officer
Atlantic Liberty Financial Corp.
186 Montague Street
Brooklyn, New York 11201
(718) 855-3555
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held On August 20, 2003
Notice is hereby given that the Annual Meeting of Atlantic Liberty
Financial Corp. (the "Company") will be held at our main office located at 186
Montague Street, Brooklyn, New York, on August 20, 2003 at 3:30 p.m., local
time.
A Proxy Card and a Proxy Statement for the Annual Meeting are enclosed.
The Annual Meeting is for the purpose of considering and acting upon:
1. The election of one director of the Company; and
2. The ratification of the appointment of Radics & Co., LLC as auditors for
the Company for the fiscal year ending March 31, 2004.
Such other matters as may properly come before the Annual Meeting, or any
adjournments thereof. The Board of Directors is not aware of any other business
to come before the Annual Meeting.
Any action may be taken on the foregoing proposals at the Annual Meeting on
the date specified above, or on any date or dates to which the Annual Meeting
may be adjourned. Stockholders of record at the close of business on July 1,
2003 are the stockholders entitled to vote at the Annual Meeting, and any
adjournments thereof.
EACH STOCKHOLDER, WHETHER HE OR SHE PLANS TO ATTEND THE ANNUAL MEETING, IS
REQUESTED TO SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD WITHOUT DELAY IN THE
ENCLOSED POSTAGE-PAID ENVELOPE. ANY PROXY GIVEN BY THE STOCKHOLDER MAY BE
REVOKED AT ANY TIME BEFORE IT IS EXERCISED. A PROXY MAY BE REVOKED BY FILING
WITH THE SECRETARY OF THE COMPANY A WRITTEN REVOCATION OR A DULY EXECUTED PROXY
BEARING A LATER DATE. ANY STOCKHOLDER PRESENT AT THE ANNUAL MEETING MAY REVOKE
HIS OR HER PROXY AND VOTE PERSONALLY ON EACH MATTER BROUGHT BEFORE THE ANNUAL
MEETING. HOWEVER, IF YOU ARE A STOCKHOLDER WHOSE SHARES ARE NOT REGISTERED IN
YOUR OWN NAME, YOU WILL NEED ADDITIONAL DOCUMENTATION FROM YOUR RECORD HOLDER IN
ORDER TO VOTE PERSONALLY AT THE ANNUAL MEETING.
By Order of the Board of Directors
/s/ William M. Gilfillan
-------------------------
William M. Gilfillan
Corporate Secretary
Brooklyn, New York
July 18, 2003
IMPORTANT: A SELF-ADDRESSED ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE. NO
POSTAGE IS REQUIRED IF MAILED WITHIN THE UNITED STATES.
PROXY STATEMENT
Atlantic Liberty Financial Corp.
186 Montague Street
Brooklyn, New York 11201
(718) 855-3555
ANNUAL MEETING OF STOCKHOLDERS
August 20, 2003
This Proxy Statement is furnished in connection with the solicitation of
proxies on behalf of the Board of Directors of Atlantic Liberty Financial Corp.
(the "Company") to be used at the Annual Meeting of Stockholders of the Company
(the "Meeting"), which will be held at our main office located at 186 Montague
Street, Brooklyn, New York, on August 20, 2003 at 3:30 p.m., local time, and all
adjournments thereof. The accompanying Notice of Annual Meeting of Stockholders
and this Proxy Statement are first being mailed to stockholders on or about July
18, 2003.
REVOCATION OF PROXIES
Stockholders who execute proxies in the form solicited hereby retain the
right to revoke them in the manner described below. Unless so revoked, the
shares represented by such proxies will be voted at the Meeting and all
adjournments thereof. Proxies solicited on behalf of the Board of Directors of
the Company will be voted in accordance with the directions given thereon. Where
no instructions are indicated, proxies will be voted "FOR" the proposals set
forth in this Proxy Statement for consideration at the Meeting.
Proxies may be revoked by sending written notice of revocation to the
Secretary of the Company, at the address of the Company shown above voting a
later dated proxy or by attending the Meeting and voting in person. The presence
at the Meeting of any stockholder who had given a proxy shall not revoke such
proxy unless the stockholder delivers his or her ballot in person at the Meeting
or delivers a written revocation to the Secretary of the Company prior to the
voting of such proxy.
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
Holders of record of the Company's common stock, par value $.10 per share
(the "Common Stock"), as of the close of business on July 1, 2003 (the "Record
Date") are entitled to one vote for each share then held. As of the Record Date,
the Company had 1,710,984 shares of Common Stock issued and outstanding. The
presence in person or by proxy of a majority of the outstanding shares of Common
Stock entitled to vote is necessary to constitute a quorum at the Meeting.
Directors are elected by a plurality of the shares voted at the Meeting without
regard to either broker non-votes, or proxies as to which the authority to vote
is being withheld. The approval of auditors must be approved by a majority of
the shares voted at the Meeting without regard to broker non-votes or proxies
marked "abstain".
Persons and groups who beneficially own in excess of five percent of the
Common Stock are required to file certain reports with the Securities and
Exchange Commission ("SEC") regarding such ownership pursuant to the Securities
Exchange Act of 1934 (the "Exchange Act"). The following table sets forth, as of
the Record Date, the shares of Common Stock beneficially owned by named
executive officers and directors individually, by executive officers and
directors as a group and by each person who was the beneficial owner of more
than five percent of the Company's outstanding shares of Common Stock on the
Record Date.
<Page>
Amount of Shares Owned and
Nature of Beneficial Percent of Shares of
Name and Address of Beneficial Owner Ownership Common Stock Outstanding
- -------------------------------------------------------------------------------------------------------------------
Owners of More Than 5% of the outstanding common stock:
Atlantic Liberty Savings 136,879 8.00%
Employee Stock Ownership Plan (1)
BRT Realty Trust 159,800(2) 9.34%
60 Cutter Mill Road
Great Neck, New York 11021
Wellington Management Company, LLP 100,000(3) 5.84%
75 State Street
Boston, Massachusetts 02109
Officers and Directors (1):
Richard T. Arkwright 71,668(4) 4.19%
Barry M. Donohue 11,707(5) 0.68%
Hon. Guy J. Mangano 10,000 0.58%
Thomas M. De Martino 4,939 0.29%
George M. Spanakos 10,400 0.61%
William M. Gilfillan 6,008(5) 0.35%
All officers and directors
as a group (6 persons) 114,722 6.71%
- --------------------------
(1) The address of the above referenced person or entity is 186 Montague
Street, Brooklyn, New York.
(2) Based on the Schedule 13D filed on April 2, 2003 by BRT Realty Trust and
Sass Gould Financial Securities, LLC, BRT Realty Trust claims sole
dispositive and voting power over 133,950 of the reported shares and Sass
Gould Financial Securities, LLC claims sole dispositive and voting powers
over 25,850 of the reported shares.
(3) Based on the Schedule 13G filed on February 12, 2003 by Wellington
Management Company, LLP.
(4) Mr. Arkwright directly owns 51,668 shares. Mr. Arkwright may be deemed to
be the indirect owner of 20,000 shares beneficially owned by Analytic Asset
Management, Inc. of which he is Chairman. Mr. Arkwright disclaims ownership
over such shares.
(5) Includes 1,508 shares allocated pursuant to the employee stock option plan.
PROPOSAL I--ELECTION OF DIRECTORS
The Company's Board of Directors is composed of five members. The Company's
bylaws provide that approximately one-third of the directors are to be elected
annually. Directors of the Company are generally elected to serve for a three
year period or until their respective successors shall have been elected and
shall qualify. The terms of the Board of Directors are classified so that
approximately one-third of the directors are up for election in any one year.
One director will be elected at the Meeting. The Board of Directors has
nominated Thomas M. De Martino to serve as a director for a three-year term.
The table below sets forth certain information regarding the composition of
the Company's Board of Directors, including the terms of office of Board
members. It is intended that the proxies solicited on behalf of the Board of
Directors (other than proxies in which the vote is withheld as to one or more
nominees) will be voted at the Meeting for the election of the nominee
identified below. If the nominee is unable to serve, the shares represented by
all such proxies will be voted for the election of such substitute as the Board
of Directors may recommend. At this time, the Board of Directors knows of no
reason why the nominee might be unable to serve, if elected. Except as indicated
herein, there are no arrangements or understandings between any nominee and any
other person pursuant to which such nominee was selected. The Board of Directors
recommends a vote "FOR" the nominee to serve as a director until his term
expires.
2
<Page>
Shares of Common
Current Stock Beneficially
Director Term to Owned on the Percent
Name Age (1) Positions Held Since (2) Expire Record Date of Class
NOMINEE
Thomas M. De Martino 65 Director 2002 2003 4,939 0.29%
DIRECTORS CONTINUING IN OFFICE
Richard T. Arkwright 69 Chairman of the Board 1999 2005 71,668 4.19
Barry M. Donohue 62 President, Chief 2001 2005 11,707 0.68
Executive Officer and
Director
Hon. Guy J. Mangano 73 Director 2002 2004 10,000 0.58
George M. Spanakos 66 Director 2001 2004 10,400 0.61
- -------------------------------------------------------
(1) At March 31, 2003.
(2) Reflects initial appointment to the Board of Directors of the Bank's mutual
predecessor.
The principal occupation during the past five years of each director and
executive officer of the Company is set forth below. All directors and executive
officers have held their present positions for all five years unless otherwise
stated.
Richard T. Arkwright is the Chairman of the Board of Atlantic Liberty
Savings, F.A., and has held this position since 2001. In 2002 Mr. Arkwright
became the Chairman and Chief Investment Officer of Analytic Asset Management,
an investment advisory firm located in New York City. From 1983 until joining
Analytic Asset Management in 2002, Mr. Arkwright was the Executive Vice
President of Gray Seifert & Co., an investment advisory firm.
Barry M. Donohue is the President and Chief Executive Officer of Atlantic
Liberty Savings, F.A. Until his appointment in 1999, Mr. Donohue was Vice
President of Mortgage Lending at Atlantic Liberty Savings, F.A. Mr. Donohue
previously was Senior Vice President of Crossland Savings Bank until 1992 when
he joined Atlantic Liberty Savings, F.A.
Hon. Guy J. Mangano is retired. Prior to his retirement in 2000, Mr.
Mangano was the Presiding Justice of the Appellate Division, Second Department
of the New York State Appellate Court.
Thomas M. De Martino is the owner of T.M. De Martino Consulting Services, a
business and government services consultant. Prior to founding T.M. De Martino
Consulting Services in 1998, Mr. De Martino was Vice President of External
Affairs with Brooklyn Union Gas.
George M. Spanakos is a self-employed attorney. Mr. Spanakos is also an
owner of St. Georges Realty, a real estate management company located in
Brooklyn, New York.
William M. Gilfillan has been the Executive Vice President and Chief
Financial Officer of Atlantic Liberty Savings, F.A. since September 2000. From
1979 until January 2000, Mr. Gilfillan served as a Vice President with J.P.
Morgan, a financial services and investment banking company.
3
<Page>
Ownership Reports by Officers and Directors
The Common Stock is registered pursuant to Section 12(g) of the Exchange
Act. The officers and directors of the Company and beneficial owners of greater
than 10% of the Company's Common Stock ("10% beneficial owners") are required to
file reports on Forms 3, 4, and 5 with the SEC disclosing changes in beneficial
ownership of the Common Stock. SEC rules require disclosure in the Company's
Proxy Statement and Annual Report on Form 10-KSB of the failure of an officer,
director or 10% beneficial owner of the Company's Common Stock to file a Form 3,
4 or 5 on a timely basis. All officers and directors of the Company who are
required to file Forms 3, 4 and 5 filed these forms on a timely basis, expect
for a Form 4 filed by Mr. Spanakos that was filed two days after the filing due
date and an amended Form 4 filed by Mr. Arkwright on June 11, 2003 covering
1,500 shares purchased on May 28, 2003.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
Our Board of Directors meets on a monthly basis and holds additional
special meetings. During the year ended March 31, 2003, the Board of Directors
held 12 regular meetings and three special meetings.
Committees of Atlantic Liberty Financial Corp.
Atlantic Liberty Financial Corp. has standing Audit, Nominating and
Compensation Committees.
The Audit Committee reviews audit reports and related matters to ensure
effective compliance with regulations and internal policies and procedures. This
committee also acts on the recommendation by management of an accounting firm to
perform Atlantic Liberty Financial Corp.'s annual audit, and acts as a liaison
between the auditors and the Board of Directors. The Audit Committee is
comprised of Directors Arkwright, Mangano, De Martino and Spanakos. We have
adopted an Audit Committee Charter, which is set forth as Exhibit A to this
proxy statement.
The Nominating Committee meets annually in order to nominate candidates for
membership on the Board of Directors. This committee is comprised of the Board
members who are not standing for election.
The Compensation Committee of Atlantic Liberty Savings, F.A. establishes
compensation policies and reviews compensation matters. The Compensation
Committee consists of Atlantic Liberty Savings, F.A.'s non-employee directors.
Audit Committee Report
The Audit Committee of the Board is responsible for providing independent,
objective oversight of the Company's accounting functions and internal controls.
The Audit Committee is composed of directors who are independent as defined by
the National Association of Securities Dealers' listing standards. The Audit
Committee operates under a written charter approved by the Board of Directors.
Management is responsible for the Company's internal controls and financial
reporting process. The independent accountants are responsible for performing an
independent audit of the Company's consolidated financial statements in
accordance with auditing standards generally accepted in the United States and
to issue a report thereon. The Audit Committee's responsibility is to monitor
and oversee these processes.
In connection with these responsibilities, the Audit Committee met with
management and Radics & Co., LLC, the independent auditing firm for the Company,
to review and discuss the March 31, 2003 consolidated financial statements. The
Audit Committee also discussed with Radics & Co., LLC, the matters required by
Statement on Auditing Standards No. 61 (Communication with Audit Committees).
The Audit Committee also received the written disclosures and the letter from
our independent accountants, Radics & Co., LLC, required by Independent
Standards Board Standard No. 1 (Independence Discussions with Audit Committee).
Additionally, the Audit Committee has discussed with Radics & Co., LLC the issue
of its independence from the Company.
4
<Page>
Based upon the Audit Committee's discussions with management and the
independent accountants, and the Audit Committee's review of the representations
of management and the independent accountants, the Audit Committee recommended
that the Board of Directors include the audited consolidated financial
statements in the Company's Annual Report on Form 10-KSB for the year ended
March 31, 2003, to be filed with the Securities and Exchange Commission.
This report shall not be deemed incorporated by reference by any general
statement incorporating by reference this proxy statement into any filing under
the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934,
as amended, except to the extent that the Company specifically incorporates this
information by reference, and shall not otherwise be deemed filed under such
Acts.
This report has been provided by the Audit
Committee:
Directors Arkwright, Mangano, De Martino and Spanakos
Compensation Committee Interlocks and Insider Participation
The Company does not independently compensate its executive officers,
directors, or employees. The Board of Directors of the Bank retains the
principal responsibility for the compensation of the officers, directors and
employees of Atlantic Liberty Savings, F.A. The Board of Directors reviews the
benefits provided to Atlantic Liberty Savings, F.A.'s officers and employees.
Report of the Compensation Committee
Under rules established by the SEC, the Company is required to provide
certain data and information in regard to the compensation and benefits provided
to the Company's Chief Executive Officer and other executive officers of the
Company. The disclosure requirements for the Chief Executive Officer and other
executive officers include the use of tables and a report explaining the
rationale and considerations that led to fundamental executive compensation
decisions affecting those individuals. In fulfillment of this requirement, the
Compensation Committee of the Bank, at the direction of the Board of Directors,
has prepared the following report for inclusion in this proxy statement.
The Board has delegated to the Compensation Committee the responsibility of
assuring that the compensation of the Chief Executive Officer and other
executive officers is consistent with the compensation strategy, competitive
practices, the performance of Atlantic Liberty Savings, F.A., and the
requirements of appropriate regulatory agencies. Only non-employee directors
serve on the Compensation Committee and participate in executive compensation
decision making. Any cash compensation paid to executive officers is paid by
Atlantic Liberty Savings, F.A. The Company does not currently pay any cash
compensation to executive officers.
The primary goal of Atlantic Liberty Savings, F.A. and its Compensation
Committee is to provide an adequate level of compensation and benefits in order
to attract and retain key executives. The performance of each officer is
reviewed annually to determine his or her contribution to the overall success of
the institution.
Compensation of senior management is reviewed annually on a cycle that
coincides with Atlantic Liberty Savings, F.A.'s fiscal year end. In general, the
purpose of the annual compensation review is to ensure that Atlantic Liberty
Savings, F.A.'s compensation levels are competitive with financial institutions
similar in size, geographic market and business profile in order for Atlantic
Liberty Savings, F.A. to attract and retain persons of high quality. In this
regard, the Compensation Committee utilized salary surveys, including the
"Savings and Community Bankers Annual Salary Survey" the "America's Community
Bankers 2002 Compensation Survey" and the "SNL Executive Compensation Review."
In addition, the Compensation Committee considers the overall profitability of
Atlantic Liberty Savings, F.A. and the executive officer's contribution to
Atlantic Liberty Savings, F.A. when making its decision.
5
The Board of Directors approved a base salary for Atlantic Liberty Savings,
F.A.'s Chief Executive Officer of $200,000 for fiscal year 2004, which
represents a 25% increase from the Chief Executive Officer's base salary of
$160,000 in fiscal 2003. The 2004 base salary was based upon the Chief Executive
Officer's performance and industry standards.
This report has been provided by the Compensation Committee:
Directors Arkwright, Mangano, De Martino and Spanakos
Compensation of the Board of Directors of Atlantic Liberty Financial Corp.
Director Fees. Atlantic Liberty Financial Corp. pays each non-employee
director an annual retainer of $12,000, except for the Chairman of the Board who
receives a retainer of $16,000. In addition, directors receive $1,000 for
attendance at each regular meeting of the Board of Directors and $300 for each
committee meeting of the Board of Directors. An additional $100 per meeting is
paid to committee chairmen.
Executive Compensation
Summary Compensation Table. The following table sets forth for the years
ended March 31, 2003 and 2002, certain information as to the total remuneration
paid by the Company and Atlantic Liberty Savings, F.A. to its Chief Executive
Officer, as well as to the other executive officer of the Company, who received
total annual compensation in excess of $100,000.
Annual Compensation(1)
-------------------------------------------------------------------------
Other Annual
Compensation LTIP All Other
Name and Principal Position Year Salary($) Bonus($) ($)(2) Payouts Compensaiton (3)
- ----------------------------------------------------------------------------------------------------------------------
Barry M. Donohue, ............. 2003 $ 170,000 $240,000 - - $12,000
President and Chief Executive 2002 136,923 77,000 - - 10,000
Officer
William M. Gilfillan, ......... 2003 138,125 200,000 - - 12,000
Executive Vice President and 2002 114,615 71,000 - - 20,000
Chief Financial Officer
Stephen P. Parisi,............. 2003 96,250 15,000 - - 6,700
Vice President and Treasurer 2002 95,000 10,000 - - 6,300
- --------------------------
(1) Summary compensation information is excluded for the fiscal year ended
March 31, 2001, as Atlantic Liberty Savings, F.A. was not a public company
during this period.
(2) Atlantic Liberty Savings, F.A. provides certain of its executive officers
with non-cash benefits and perquisites, such as the use of employer-owned
or leased automobiles. Management believes that the aggregate value of
these benefits for fiscal 2002 did not, in the case of any executive
officer, exceed $50,000 or 10% of the aggregate salary and annual bonus
reported for him in the Summary Compensation Table.
(3) Represents employer contributions under the 401(k) plan.
Benefit Plans
Employment Agreements. Atlantic Liberty Financial Corp. and Atlantic
Liberty Savings, F.A. have entered into substantially similar employment
agreements with Messrs. Donohue and Gilfillan. Each of these agreements have a
term of three years. Commencing on January 31, 2004 and continuing on January 31
of each year thereafter, the agreements will be renewed for an additional year
so that the remaining term will be three years, subject to termination on notice
as provided in the agreements. Under the agreements, the current base salaries
for Messrs. Donohue and Gilfillan are $200,000 and $162,500, respectively. In
addition to the base salary, each agreement provides for, among other things,
participation in bonus programs and other employee pension benefit and fringe
benefit plans applicable to executive employees. Mr. Donohue's agreements
provide that he will be entitled to the use of an automobile and the payment of
reasonable expenses associated with such use. The executive's employment may be
terminated for cause at any time, in which event the executive would have no
right to receive compensation or other benefits for any period after
termination.
6
Certain events resulting in the executive's termination or resignation
entitle the executive to payments of severance benefits following termination of
employment. In the event the executive's employment is terminated for reasons
other than for cause, disability or retirement, or in the event the executive
resigns during the term of the agreement following (i) failure to elect or
reelect or to appoint or reappoint the executive to his executive position, (ii)
a significant change in the nature or scope of the executive's authority, (iii)
the liquidation or dissolution of Atlantic Liberty Savings, F.A. or Atlantic
Liberty Financial Corp. that would affect the status of the executive, or (iv) a
breach of the employment agreement by the applicable corporation, then the
executive would be entitled to payment of an amount equal to three times the sum
of (i) the average annual rate of base salary paid to him in the last three
years ending in the year of termination and (ii) the average rate of bonus
awarded to him during the prior three years, payable, at the executive's
election, either in a lump sum or in bi-weekly installments during the remaining
term of the agreement. In the event of the executive's involuntary termination
by Atlantic Liberty Savings, F.A. or voluntary resignation from Atlantic Liberty
Savings, F.A.'s employment upon a change in control or at any time following a
change in control, the executive would be entitled to the payment of a sum equal
to three times the sum of his base salary and the highest rate of bonus awarded
to him during the prior three years, payable, at his election, in a lump sum or
bi-weekly during the remaining term of the agreement. Also, the executive would
be entitled to a cash payment equal to the difference, if any, between (i) the
present value of benefits to which he would be entitled under Atlantic Liberty
Savings, F.A.'s pension plan if he continued working for Atlantic Liberty
Savings, F.A. for an additional 36 months, over (ii) the present value of the
benefits to which he is actually entitled under Atlantic Liberty Savings, F.A.'s
pension plan due to his termination. The executive also would be entitled to a
cash payment equal to the present value of Atlantic Liberty Savings, F.A.'s
contributions that would have been made on his behalf under Atlantic Liberty
Savings 401(k) plan and employee stock ownership plan and any other defined
contribution plan maintained by Atlantic Liberty Savings, F.A. if he had
continued working for Atlantic Liberty Savings, F.A. for 36 months following his
termination. In addition, the executive would be entitled to continuation of
life, medical, dental and disability benefits for a period of 36 months after
termination. He also would become vested in any outstanding unvested stock
options or shares of restricted stock that have been awarded to him. In the
event payments to the executive include an "excess parachute payment" as defined
in the Internal Revenue Code, payments under the employment agreements with
Atlantic Liberty Savings, F.A. would be reduced in order to avoid this result.
If Atlantic Liberty Savings, F.A. or Atlantic Liberty Financial Corp. does not
renew the agreement prior to the agreement's anniversary date, the executive may
resign and will be entitled to three times his annual rate of base salary.
Upon termination of the executive's employment other than in connection
with a change in control, the executive agrees not to compete with Atlantic
Liberty Savings, F.A. within a 25-mile radius for a period of one year following
termination. Should the executive become disabled, he would be entitled to the
payment of his base salary for the remaining term of his employment agreement or
one year, whichever is longer, provided that any amount paid the executive
pursuant to any disability insurance would reduce the compensation he would
receive. In the event the executive dies while employed by Atlantic Liberty
Savings, F.A., the executive's estate will be paid the executive's base salary
for one year and the executive's family will be entitled to continuation of
health benefit coverage for one year. Any payment to the executive under the
agreements with Atlantic Liberty Savings, F.A. will reduce proportionately the
amounts due the executive under the agreements with Atlantic Liberty Financial
Corp.
Change in Control Agreements. Atlantic Liberty Savings, F.A. entered into
severance agreements with two individuals who are officers of Atlantic Liberty
Savings, F.A. These agreements provide certain benefits in the event of a change
in control of Atlantic Liberty Savings, F.A. or Atlantic Liberty Financial Corp.
Each of the severance agreements provides for a term of up to 36 months.
Commencing on each anniversary date, the Board of Directors may extend any
change in control agreement for an additional year. The change in control
agreements enable Atlantic Liberty Savings, F.A. to offer to designated officers
certain protections against termination without cause in the event of a change
in control (as defined in the agreements). These protections against termination
without cause in the event of a change in control are frequently offered by
other financial institutions, and Atlantic Liberty Savings, F.A. may be at a
competitive disadvantage in attracting and retaining key employees if it does
not offer similar protections.
Following a change in control of Atlantic Liberty Financial Corp. or
Atlantic Liberty Savings, F.A., an officer is entitled to a payment under the
change in control agreement if the officer's employment is involuntarily
7
terminated during the term of such agreement, other than for cause, as defined,
or if the officer voluntarily terminates employment during the term of such
agreement as the result of a demotion, loss of title, office or significant
authority, reduction in his annual compensation or benefits, or relocation of
his principal place of employment by more than 30 miles from its location
immediately prior to the change in control. In the event that an officer who is
a party to a change in control agreement is entitled to receive payments
pursuant to the change in control agreement, he will receive a cash payment up
to a maximum of three times the sum of base salary and highest rate of bonuses
awarded to the executive over the prior three years, subject to applicable
withholding taxes. In addition to the severance payment, each covered officer is
entitled to receive life, health, dental and disability coverage for a period of
up to 36 months from the date of termination. Notwithstanding any provision to
the contrary in the change in control agreement, payments under the change in
control agreements are limited so that they will not constitute an excess
parachute payment under Section 280G of the Internal Revenue Code.
Executive Incentive Bonus Plan. For the year ended March 31 2003, Atlantic
Liberty Savings, F.A. adopted an executive incentive bonus plan for the benefit
of Messrs. Donohue and Gilfillan. The Plan provided financial incentives based
on bank level performance criteria that reflect objective measurements of
profitability and efficiency and individual performance criteria that reflect
the ability of the executive to accomplish the goals set in a manner consistent
with Atlantic Liberty Savings, F.A. management philosophy. The various criteria
are weighted each year by the plan administrator and a bonus pool is established
that is based on approximately 5% of base salary and 40% of Atlantic Liberty
Savings, F.A.'s income exceeding core income (defined as net income before
non-recurring expense). The plan administrator will set a minimum core income
threshold that must be met in order for a bonus to be paid. Assuming the minimum
threshold is achieved, the maximum bonus payable increases as core income
increases. Although the maximum bonus pool increases as core income increases,
the executive's performance of the various criteria determines the executive's
bonus each year, which may or may not equal the maximum bonus. For the fiscal
year ended March 31, 2003, Messrs. Donohue and Gilfillan received bonuses under
the executive incentive bonus plan of $240,000 and $200,000, respectively.
Insurance Plans. Our officers and employees are covered by a contributory
medical insurance plan.
Defined Benefit Pension Plan. We maintain a qualified noncontributory
defined benefit plan ("Retirement Plan") for employees. All employees age 21 or
older who have worked at Atlantic Liberty Savings, F.A. for a period of one year
and who have been credited with 1,000 or more hours of employment with Atlantic
Liberty Savings, F.A. during the year are eligible to accrue benefits under the
Retirement Plan. We make annual contributions to the Retirement Plan in order to
satisfy the actuarially determined minimum funding requirements in accordance
with the Employee Retirement Income Security Act of 1974, as amended ("ERISA").
At the normal retirement age of 65, the plan is designed to provide a
single life annuity with no ancillary benefits. For a married participant, the
normal form of benefit is an actuarially reduced joint and survivor annuity
where, upon the participant's death, the participant's spouse is entitled to
receive a benefit equal to 50% of the amount paid during the participant's
lifetime. The joint and survivor annuity will be actuarially equivalent to the
single life annuity. The annual retirement benefit provided is an amount equal
to (i) 2% of a participant's average annual compensation based on the average of
the five consecutive years of the last 10 calendar years providing the highest
average compensation, multiplied by (ii) the participant's years of credited
service to the normal retirement date (not to exceed 30 years). Retirement
benefits are also payable upon retirement due to early and late retirement,
disability or death. A reduced benefit is payable upon early retirement at or
after age 55 and the completion of 10 years of service with Atlantic Liberty
Savings, F.A. Upon termination of employment other than as specified above, a
participant who has a vested benefit under the Retirement Plan is eligible to
receive his or her accrued benefit reduced for early retirement, if applicable,
or a deferred retirement benefit commencing on such participant's normal
retirement date. Benefits are payable in various annuity forms as well as in the
form of a single lump sum payment. At March 31, 2003, the market value of the
Retirement Plan trust fund equaled approximately $1.1 million. For the fiscal
year ended March 31, 2003, no contribution to the Retirement Plan was made.
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The following table indicates the annual retirement benefit that would be
payable under the Retirement Plan upon retirement at age 65 in calendar year
2003, expressed in the form of a single life annuity for the final average
salary and benefit service classification specified below.
YEARS OF BENEFIT SERVICE AT RETIREMENT
Final
Average Compensation 15 20 25 30 35 40
-------------------- ------ --- ----- --- ------ --- ------ --- ------ --- ------ --
$ 25,000 $ 7,500 $10,000 $ 12,800 $ 15,000 $ 15,000 $ 15,000
$ 50,000 $15,000 $20,000 $ 25,000 $ 30,000 $ 30,000 $ 30,000
$ 75,000 $22,500 $30,000 $ 37,500 $ 45,000 $ 45,000 $ 45,000
$100,000 $30,000 $40,000 $ 50,000 $ 60,000 $ 60,000 $ 60,000
$150,000 $45,000 $60,000 $ 75,000 $ 90,000 $ 90,000 $ 90,000
$200,000 and above $60,000 $80,000 $100,000 $120,000 $120,000 $120,000
As of March 31, 2003, Mr. Donohue and Mr. Gilfillan had 11 years and two
years of service under the plan, respectively.
Salary Reduction Plan. We maintain a Salary Reduction Plan for employees,
which is a qualified, tax-exempt profit sharing plan with a cash-or-deferred
feature under Section 401(k) of the Code (the "401(k) Plan"). All employees who
have attained age 21 and have completed 12 consecutive months of employment in
which they completed 1,000 hours of service are eligible to participate on the
date that such requirements are first satisfied.
Under the 401(k) Plan, participants are permitted to make salary reduction
contributions to the plan from their compensation from 1% to 20% of
compensation. For these purposes, "compensation" includes regular salary, wages
and bonuses, including any salary reduction contributions made under the 401(k)
Plan, but does not include overtime and commissions, or compensation in excess
of the Internal Revenue Code Section 401(a)(17) limits (in 2002, this limit is
$200,000). The participants' salary reduction contribution will be matched by
us, up to 100% of the participants first 6% of compensation contributed to the
401(k) Plan. All employee contributions and earnings thereon are fully and
immediately vested. Atlantic Liberty Savings, F.A. may make discretionary
employee contributions to the 401(k) Plan. Employer discretionary contributions,
if made will vest at the rate of 20% per year beginning in the second year until
a participant is 100% vested after six years of service. Participants will also
vest in employer discretionary contributions upon the attainment of their normal
retirement date (i.e., age 65), death or disability regardless of their years of
service. A participant may also withdraw salary reduction contributions in the
event the participant suffers a financial hardship. The 401(k) Plan permits
employees to direct the investment of their own accounts into various investment
options.
Plan benefits will be paid to each participant in a lump sum payment. At
March 31, 2003, the market value of the 401(k) Plan trust fund equaled
approximately $863,000. The contribution to the 401(k) Plan for the Plan year
ended March 31, 2003 was $63,633. During the year ended March 31, 2003, we
contributed $12,000 and $12,000 to the 401(k) plan for the accounts of Mr.
Donohue and Mr. Gilfillan, respectively.
Employee Stock Ownership Plan and Trust. We have established an employee
stock ownership plan in connection with the conversion and offering. Employees
who are at least 21 years old with at least one year of employment with Atlantic
Liberty Savings, F.A. are eligible to participate. The employee stock ownership
plan trust borrowed funds from us to purchase a number of shares equal to up to
8% of the common stock sold in the offering or 136,879 shares. Collateral for
the loan is the common stock purchased by the employee stock ownership plan. The
loan will be repaid principally from Atlantic Liberty Savings, F.A.
discretionary contributions to the employee stock ownership plan over a period
of up to 10 years. The loan documents will provide that the loan may be repaid
over a shorter period, without penalty for prepayments. The interest rate for
the loan is a floating rate equal to the prime rate. Shares purchased by the
employee stock ownership plan will be held in a suspense account for allocation
among participants as the loan is repaid.
Contributions to the employee stock ownership plan and shares released from
the suspense account in an amount proportional to the repayment of the employee
stock ownership plan loan are allocated among employee stock ownership plan
participants on the basis of compensation in the year of allocation. Benefits
under the plan will become vested at the rate of 20% per year, starting upon
completion of two years of credited service, and will be fully vested upon
completion of six years of credited service, with credit given to participants
for years of credited service with Atlantic Liberty Savings, F.A. mutual
predecessor prior to the adoption of the plan. A participant's interest in his
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account under the plan will also fully vest in the event of termination of
service due to a participant's early or normal retirement, death, disability, or
upon a change in control (as defined in the plan). Vested benefits will be
payable in the form of common stock and/or cash. Atlantic Liberty Savings,
F.A.'s contributions to the employee stock ownership plan are discretionary,
subject to the loan terms and tax law limits. Therefore, benefits payable under
the employee stock ownership plan cannot be estimated. Pursuant to SOP 93-6, we
will be required to record compensation expense each year in an amount equal to
the fair market value of the shares released from the suspense account. In the
event of a change in control, the employee stock ownership plan will terminate.
TRANSACTIONS WITH CERTAIN RELATED PERSONS
The Bank offers to directors, officers, and employees loans which are made
by the Bank to such persons in the ordinary course of business on substantially
the same terms (other than interest rate), including collateral, as those
prevailing at the time for comparable transactions with other persons, and which
do not involve more than the normal risk of collectibility or present other
unfavorable features. All such loans were performing in accordance with their
terms as of the date of this proxy statement. Federal regulations permit
executive officers and directors to participate in loan programs that are
available to other employees, as long as the director or executive officer is
not given preferential treatment compared to other participating employees. The
interest rate on loans to directors and officers is the same as that offered to
the Bank's other employees.
Section 402 of the Sarbanes-Oxley Act of 2002 generally prohibits an issuer
from: (1) extending or maintaining credit; (2) arranging for the extension of
credit; or (3) renewing an extension of credit in the form of a personal loan
for an officer or director. There are several exceptions to this general
prohibition, one of which is applicable to the Company. Sarbanes-Oxley does not
apply to loans made by a depository institution that is insured by the FDIC and
is subject to the insider lending restrictions of the Federal Reserve Act. All
loans to the Bank's directors and officers are made in conformity with the
Federal Reserve Act and the FDIC Regulation O.
PROPOSAL II--RATIFICATION OF APPOINTMENT OF AUDITORS
The Board of Directors of the Company has approved the engagement of Radics
& Co., LLC to be the Company's auditors for the 2004 fiscal year, subject to the
ratification of the engagement by the Company's stockholders. At the Meeting,
stockholders will consider and vote on the ratification of the engagement of
Radics & Co., LLC for the Company's fiscal year ending March 31, 2004. A
representative of Radics & Co., LLC is expected to attend the Meeting to respond
to appropriate questions and to make a statement, if deemed appropriate.
Audit Fees. During the past two years the fees billed for professional
services rendered by Radics & Co., LLC (the "Independent Auditor") for the audit
of the Company's annual financial statements and for the review of the Company's
Forms 10-QSB were $46,000 for 2003 and $37,000 for 2002.
Audit-related fees. During the past two years there were no aggregate fees
billed for professional services by the Independent Auditor that are reasonably
related to the performance of the audit.
Tax Fees. During the past two fiscal years the fees billed for professional
services by the Independent Auditor for tax services were $8,500 for 2003 and
$6,000 for 2002.
All Other Fees. The fees billed for 2003 for professional services rendered
for the Company by the Independent Auditor for services related to the
conversion from mutual to stock ownership were $60,000.
Radics & Co., LLC was not paid fees by the Company relating to financial
information systems design and implementation.
In order to ratify the selection of Radics & Co., LLC as the auditors for
the 2004 fiscal year, the proposal must receive at least a majority of the votes
cast, either in person or by proxy, in favor of such ratification. The Board of
Directors recommends a vote "FOR" the ratification of Radics & Co., LLC as
auditors for the 2004 fiscal year.
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STOCKHOLDER PROPOSALS
In order to be eligible for inclusion in the Company's proxy materials for
next year's Annual Meeting of Stockholders, any stockholder proposal to take
action at such meeting must be received at the Company's executive office, 186
Montague Street, Brooklyn, New York 11201, no later than March 21, 2004. Any
such proposals shall be subject to the requirements of the proxy rules adopted
under the Exchange Act.
The Bylaws of the Company provide an advance notice procedure before
certain business or nominations to the Board of Directors may be brought before
an annual meeting. In order for a stockholder to properly bring business before
an annual meeting, or to propose a nominee to the Board, the stockholder must
give written notice to the Secretary of the Company not less than 90 days before
the date fixed for such meeting; provided, however, that in the event that less
than 100 days notice or prior public disclosure of the date of the meeting is
given or made, to be timely, notice by the stockholder must be received no later
than the close of business on the tenth day following the day on which such
notice of the date of the annual meeting was mailed or such public disclosure
was made. The notice must include the stockholder's name, record address, and
number of shares owned by the stockholder, describe briefly the proposed
business, the reasons for bringing the business before the annual meeting, and
any material interest of the stockholder in the proposed business. In the case
of nominations to the Board, certain information regarding the nominee must be
provided. Nothing in the paragraph shall be deemed to require the Company to
include in its proxy statement and proxy relating to an annual meeting any
stockholder proposal which does not meet all of the requirements for inclusion
established by the SEC in effect at the time such proposal is received.
The date on which the Annual Meeting of Stockholders is expected to be held
is August 18, 2004. Accordingly, advance written notice of business or
nominations to the Board of Directors to be brought before the next Annual
Meeting of Stockholders must be given to the Company no later than May 20, 2004.
MISCELLANEOUS
The Board of Directors is not aware of any business to come before the
Meeting other than the matters described above in the Proxy Statement. However,
if any matters should properly come before the Meeting, it is intended that
holders of the proxies will act as directed by a majority of the Board of
Directors, except for matters related to the conduct of the Meeting, as to which
they shall act in accordance with their best judgment.
The cost of solicitation of proxies will be borne by the Company. The
Company will reimburse brokerage firms and other custodians, nominees and
fiduciaries for reasonable expenses incurred by them in sending proxy materials
to the beneficial owners of Common Stock. In addition to solicitations by mail,
directors, officers and regular employees of the Bank may solicit proxies
personally or by telegraph or telephone without additional compensation.
A copy of the Company's Annual Report on Form 10-KSB for the fiscal year
ended March 31, 2003 will be furnished without charge to stockholders as of the
record date upon written request to the Corporate Secretary, Atlantic Liberty
Financial Corp., 186 Montague Street, Brooklyn, New York 11201.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ William M. Gilfillan
----------------------------
William M. Gilfillan
Corporate Secretary
Brooklyn, New York
July 18, 2003
11
AUDIT COMMITTEE CHARTER
Organization and Membership
There shall be a committee of the board of directors to be known as the
Audit Committee. The Audit Committee shall be composed of directors who are
independent of the management of the corporation and are free of any
relationship that, in the opinion of the board of directors, would interfere
with their exercise of independent judgment as a committee member. The members
of the committee should exhibit basic financial literacy, or should gain such
literacy within a reasonable time after appointment, to allow the members to
discharge their responsibilities hereunder. Financial literacy is signified by
the ability to read and understand fundamental financial statements.
Furthermore, at least one member of the committee should have financial
expertise, signified by past experience in finance or accounting, requisite
professional certification in accounting, or any other comparable experience or
background which results in the individual's financial sophistication, including
being or having been a chief executive officer or other senior officer with
financial oversight responsibilities.
Statement of Policy
The Audit Committee shall provide assistance to corporate directors in
fulfilling their responsibility to the shareholders, potential shareholders, and
investment community relating to corporate accounting, reporting practices of
the corporation, and the quality and integrity of the financial reports of the
corporation. In so doing, it is the responsibility of the Audit Committee to
maintain free and open means of communication between and among the directors,
management, the independent auditors and the internal auditors. The audit
committee shall meet four times per year, or more frequently as circumstances
warrant.
Duties of the Audit Committee
The duties of the Audit Committee consist of the following:
a. Overseeing the internal audit function, including but not limited to:
1. reviewing and approving the audit plan, which shall include all
appropriate control and compliance matters.
2. reviewing reports of internal auditors as well as management's
response;
3. monitoring adherence to the audit plan;
4. monitoring corrective action taken by management;
5. reviewing reports issued pursuant to Atlantic Liberty Savings, F.A.'s
Internal Loan Review policies and monitoring corrective action; and
6. monitoring corrective actions resulting from examination reports or
external audit reports;
7. reviewing the policies adopted by the Board of Directors governing the
Internal Audit Department and recommending modifications thereof if
indicated.
b. Recommending to the board the engagement of the independent auditor after
consideration of: the nature and quality of audit services rendered or to
be rendered; the nature of and compensation for nonaudit services rendered
or contracted for; the effect, if any, of any non-audit activities or
relationships that may bear on the objectivity or independence of the
independent auditor, and; any other relevant factors;
c. Reviewing with management and its independent auditor the scope of services
required by the audit, significant accounting policies, and audit
conclusions regarding significant accounting estimates;
d. Reviewing with management and its independent auditor their assessments of
the adequacy of internal controls and the resolution of identified material
weaknesses and reportable conditions in internal controls, including the
prevention or detection of management override or compromise of the
internal control structure;
e. Reviewing with management (i) the institution's compliance with laws and
regulations; (ii) inquiries received from regulators or governmental
agencies; (iii) all reports concerning regulatory noncompliance; and (iv)
all related party transactions;
f. Discussing with management both the selection and termination of the
independent auditor and any significant disagreements between the
independent auditor and management;
g. Taking other action, independent of management, whenever appropriate.
h. Through its chairman, or in the absence of the chairman another designated
member, review interim financial data and discuss with the Chief Financial
Officer (or other appropriate officer in the absence of the Chief Financial
Officer) and independent auditor, in person or by telephone conference, the
results of the auditor's review of the data prior to the filing of Form
10-Q, and preferably prior to the public announcement of financial results.
i. Perform such other duties as assigned by law, the company's charter and
bylaws, or the board of directors.
Internal Audit Function
The internal audit function is carried out by an outside firm under the
direction of the Audit Committee. The outside firm is hired by and reports
directly to the Audit Committee.
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REVOCABLE PROXY
Atlantic Liberty Financial Corp.
ANNUAL MEETING OF STOCKHOLDERS
August 20, 2003
The undersigned hereby appoints the full Board of Directors, with full
powers of substitution to act as attorneys and proxies for the undersigned to
vote all shares of Common Stock of the Company which the undersigned is entitled
to vote at a Annual Meeting of Stockholders ("Meeting") to be held at our main
office located at 186 Montague Street, Brooklyn, New York, at 3:30 p.m., (local
time) on August 20, 2003. The official proxy committee is authorized to cast all
votes to which the undersigned is entitled as follows:
VOTE
FOR WITHHELD
1. The election as director of the nominee listed below
[ ] [ ]
Thomas M. De Martino
____________________
____________________
FOR AGAINST ABSTAIN
2. The ratification of the appointment of [ ] [ ] [ ]
Radics & Co., LLC as auditors for the fiscal
year ending March 31, 2004.
The Board of Directors recommends a vote "FOR" each of the listed proposals.
THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS ARE SPECIFIED,
THIS PROXY WILL BE VOTED FOR EACH OF THE PROPOSITIONS STATED ABOVE. IF ANY OTHER
BUSINESS IS PRESENTED AT SUCH MEETING, THIS PROXY WILL BE VOTED BY THE
ABOVE-NAMED PROXIES AT THE DIRECTION OF A MAJORITY OF THE BOARD OF DIRECTORS. AT
THE PRESENT TIME, THE BOARD OF DIRECTORS KNOWS OF NO OTHER BUSINESS TO BE
PRESENTED AT THE MEETING.
<page>
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
Should the undersigned be present and elect to vote at the Meeting or at
any adjournment thereof and after notification to the Secretary of the Company
at the Meeting of the stockholder's decision to terminate this proxy, then the
power of said attorneys and proxies shall be deemed terminated and of no further
force or effect. This proxy may also be revoked by sending written notice to the
Secretary of the Company at the address set forth on the Notice of Annual
Meeting of Stockholders, or by the filing of a later proxy statement prior to a
vote being taken on a particular proposal at the Meeting.
The undersigned acknowledges receipt from the Company prior to the
execution of this proxy of a Notice of the Meeting and a proxy statement dated
July 18, 2003.
Dated: _________________, 2003
[ ] Check Box if You Plan to
Attend Meeting
_______________________________ ___________________________________
PRINT NAME OF STOCKHOLDER PRINT NAME OF STOCKHOLDER
_______________________________ ___________________________________
SIGNATURE OF STOCKHOLDER SIGNATURE OF STOCKHOLDER
Please sign exactly as your name appears on this card. When signing as
attorney, executor, administrator, trustee or guardian, please give your full
title. If shares are held jointly, each holder should sign.
Please complete and date this proxy and return it promptly
in the enclosed postage-prepaid envelope.