SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [_]
Filed by a Party other than the Registrant [X]
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 Section 240.14a-11(c) or Section 240.14a-12
Avondale Financial Corp.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
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(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):
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[_] 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
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(1) Amount Previously Paid:
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Notes:
LOGO
NOTICE OF 1998 ANNUAL MEETING
PROXY STATEMENT
March 31, 1998
Dear Fellow Stockholder:
On behalf of the Board of Directors and management of Avondale Financial
Corp. (the "Company"), I cordially invite you to attend the Company's Annual
Meeting of Stockholders. The meeting will be held at 9:00 a.m., local time, on
Tuesday, May 12, 1998 at the Conference Center of the Graduate School of
Business, The University of Chicago, 450 North Cityfront Plaza Drive, Chicago,
Illinois.
At the meeting, stockholders of the Company will be asked to vote upon the
election of three directors of the Company.
I 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
POSTAGE-PAID ENVELOPE AS PROMPTLY AS POSSIBLE. This will save the Company
additional expense in soliciting proxies and will ensure that your shares are
represented at the meeting.
Thank you for your attention to this important matter.
Very truly yours,
LOGO
Robert S. Engelman, Jr.
President and Chief Executive Officer
LOGO
20 North Clark Street
Chicago, Illinois 60602
(312) 782-6200
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 12, 1998
Notice is hereby given that the Annual Meeting of Stockholders (the
"Meeting") of Avondale Financial Corp. (the "Company") will be held at the
Conference Center of the Graduate School of Business, The University of
Chicago, 450 North Cityfront Plaza Drive, Chicago, Illinois at 9:00 a.m.,
local time, on Tuesday, May 12, 1998.
A proxy and a Proxy Statement for the Meeting are enclosed.
The Meeting is for the purpose of considering and acting upon:
1.The election of three directors of the Company;
and such other matters as may properly come before the Meeting, or any
adjournments or postponements thereof.
The Board of Directors is not aware of any other business to come before the
Meeting.
Any action may be taken on the foregoing proposals at the Meeting on the
date specified above, or on any date or dates to which the Meeting may be
adjourned or postponed. Stockholders of record at the close of business on
March 13, 1998 are the stockholders entitled to vote at the Meeting and any
adjournments or postponements thereof.
A complete list of stockholders entitled to vote at the Meeting will be
available for examination during normal business hours by any stockholder, for
any purpose germane to the Meeting, at the main office of the Company, located
at 20 North Clark Street, Chicago, Illinois, during the ten days prior to the
Meeting as well as at the Meeting.
You are requested to complete, sign and date the enclosed proxy, which is
solicited on behalf of the Board of Directors, and to mail it promptly in the
enclosed postage-paid envelope. The proxy will not be used if you attend and
vote at the Meeting in person.
By Order of the Board of Directors
LOGO
Robert S. Engelman, Jr.
President and Chief Executive Officer
Chicago, Illinois
March 31, 1998
IMPORTANT: THE PROMPT RETURN OF PROXIES WILL SAVE THE COMPANY THE EXPENSE
OF FURTHER REQUESTS FOR PROXIES TO ENSURE A QUORUM AT THE MEETING. A PRE-
ADDRESSED ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE. NO POSTAGE IS
REQUIRED IF MAILED WITHIN THE UNITED STATES.
PROXY STATEMENT
AVONDALE FINANCIAL CORP.
20 North Clark Street
Chicago, Illinois 60602
(312) 782-6200
----------------
ANNUAL MEETING OF STOCKHOLDERS
MAY 12, 1998
This Proxy Statement is furnished in connection with the solicitation, on
behalf of the Board of Directors of Avondale Financial Corp. (the "Company"),
of proxies to be used at the Annual Meeting of Stockholders of the Company
(the "Meeting") to be held at the Conference Center of the Graduate School of
Business, The University of Chicago, 450 North Cityfront Plaza Drive, Chicago,
IL at 9:00 a.m., local time, on Tuesday, May 12, 1998.
The accompanying Notice of Annual Meeting and this Proxy Statement are first
being mailed to stockholders on or about March 31, 1998. Certain of the
information provided herein relates to Avondale Federal Savings Bank (the
"Bank"), a wholly owned subsidiary and the predecessor of the Company.
At the Meeting, stockholders of the Company are being asked to elect three
directors of the Company.
VOTE REQUIRED AND PROXY INFORMATION
All shares of the Company's common stock, par value $.01 per share (the
"Common Stock"), represented at the Meeting by properly executed proxies
received prior to or at the Meeting, and not revoked, will be voted at the
Meeting in accordance with the instructions thereon. If no instructions are
indicated, properly executed proxies will be voted for the nominees set forth
herein. The Company does not know of any matters, other than as described in
the Notice of Annual Meeting, that are to be presented at the Meeting. If any
other matters are properly presented at the Meeting for action, the persons
named in the enclosed proxy and acting thereunder will have the discretion to
vote on such matters in accordance with their best judgment.
Directors shall be elected by a plurality of the votes present in person or
represented by proxy at the Meeting and entitled to vote on the election of
directors. Votes may be cast in favor of or withheld from each nominee; votes
that are withheld will be excluded entirely from the vote and will have no
effect. Broker non-votes will have no effect on the election of directors.
One-third of the outstanding shares of Common Stock, present in person or
represented by proxy, shall constitute a quorum for purposes of the Meeting.
Brokers non-votes are counted for purposes of determining a quorum. Brokers
who do not receive instructions are entitled to vote on the election of
directors.
A proxy given pursuant to the solicitation or otherwise may be revoked at
any time before it is voted. Proxies may be revoked by: (i) filing with the
Secretary of the Company at or before the Meeting a written notice of
revocation bearing a later date than the proxy, (ii) duly executing a
subsequent proxy relating to the same shares and delivering it to the
Secretary of the Company at or before the Meeting, or (iii) attending the
Meeting and voting in person (although attendance at the Meeting will not in
and of itself constitute revocation of a proxy). Any written notice revoking a
proxy should be delivered to Doria Koros, Secretary, Avondale Financial Corp.,
20 North Clark Street, Chicago, Illinois 60602.
VOTING SECURITIES AND CERTAIN HOLDERS THEREOF
Stockholders of record as of the close of business on March 13, 1998 will be
entitled to one vote for each share of Common Stock then held. As of that
date, the Company had 3,323,566 shares of Common Stock issued and outstanding.
The following table sets forth, as of March 13, 1998, certain information as
to the beneficial ownership of Common Stock by: (i) those persons or entities
known by management to beneficially own more than 5% of the Company's
outstanding shares of Common Stock; (ii) the Company's Chief Executive Officer
and the two other executive officers of the Company (the "Named Officers"),
and (iii) all directors and executive officers of the Company as a group.
SHARES
BENEFICIALLY PERCENT
BENEFICIAL OWNER OWNED OF CLASS
---------------- ------------ --------
PRINCIPAL OWNERS
Avondale Financial Corp. (1) 278,264 8.37%
Employee Stock Ownership Plan
20 North Clark Street
Chicago, Illinois 60602
Financial Institutional Partners, L.P. 276,570 8.32
(2)
Hovde Capital, Inc.
1629 Colonial Parkway
Inverness, IL 60067
Tontine Financial Partners, L.P. (3) 260,000 7.82
Jeffrey Gendell
200 Park Avenue
Suite 3900
New York, New York 02109
NAMED OFFICERS
Robert S. Engelman, Jr. 149,065(4) 4.49
President, Chief Executive Officer and
Director
Howard A. Jaffe 36,997(4) 1.11
Vice President and Chief Financial Offi-
cer
Executive Vice President and Chief Fi-
nancial
Officer and Director of the Bank
Charles W. Sewright, Jr. 2,000(4) .06
Vice President and Chief Operating Offi-
cer
Executive Vice President and Chief Oper-
ating
Officer and Director of the Bank
Directors and executive officers as a 265,036(4) 7.97
group
(10 persons)
- --------
(1) The amount reported represents shares held by the Avondale Financial Corp.
Employee Stock Ownership Plan (the "ESOP"), 64,626 shares of which have
been allocated to accounts of participants. First Bankers Trust Co., N.A.,
Quincy, Illinois, the trustee of the ESOP, may be deemed to beneficially
own the shares held by the ESOP which have not been allocated to the
accounts of participants.
(2) A Schedule 13D under the Securities Exchange Act of 1934, as amended
("Exchange Act"), dated April 25, 1997, states that Finanical
Institutional Partners, L.P. and Hovde Capital, Inc. beneficially own
276,570 shares of the Common Stock. Financial Institutional Partners and
Hovde Capital, Inc. have sole voting and dispositive power over such
shares.
(3) A Schedule 13D under the Securities Exchange Act of 1934, as amended
("Exchange Act"), dated May 28, 1997, states that Tontine Financial
Partners, L.P. and Jeffrey Gendell beneficially own 260,000 shares of the
Common Stock. Tontine Financial Parnters and Jeffrey Gendell have sole
voting and dispositive power over such shares.
(4) Includes shares held directly, in retirement accounts, in a fiduciary
capacity or by certain affiliated entities or members of the named
individuals' families, with respect to which shares the named individuals
and group may be deemed to have sole or shared voting and/or dispositive
powers. Also includes 8,567 and 3,901 shares allocated to Messrs. Engelman
and Jaffe, respectively, under the ESOP. Excludes (i) 25,392, 12,000,
20,000, and 96,176 restricted shares of Common Stock awarded to Messrs.
Engelman, Jaffe, and Sewright and all directors and executive officers as
a group, respectively, which may not be voted by such persons, and
excludes (ii) 63,480, 27,187, 35,000 and 165,021 shares subject to options
granted under the Company's Stock Option Plans (the "Stock Option Plan")
to Messrs. Engelman, Jaffe, and Sewright and all directors and executive
officers as a group, respectively, which options are not exercisable
within 60 days of March 13, 1998.
2
STOCK OWNERSHIP
The Company's Board of Directors has adopted a policy whereby each member of
the Board of Directors shall own three times their annual Board Compensation
in Company Stock within three years of the adoption and/or modification of
this policy. Additionally the Board has adopted a similar policy for the
senior officers of the Company and Bank as follows; the President and Chief
Executive Officer--three times base compensation; the Executive Vice
Presidents--two times base compensation; all other Vice Presidents--one time
base compensation. Stock ownership shall include all shares owned directly or
indirectly, shares deposited in the deferred compensation plan for directors
and executive officers, shares allocated under the Company's ESOP plan, but
shall not include unexercised stock options.
DIRECTORS AND EXECUTIVE MANAGEMENT
The Company's Board of Directors currently consists of eight members, each
of whom is also a director of the Bank. The Board is divided into three
classes, each of which contains approximately one-third of the Board, and
approximately one-third of the directors are elected annually. Directors of
the Company are generally elected to serve for a three-year term or until
their respective successors are elected and qualified.
The following table sets forth certain information, as of March 13, 1998,
regarding the Company's Board of Directors, including each director's term of
office. The Board of Directors acting as the nominating committee has
recommended and approved the nominees identified in the following table. 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 nominee) will be
voted at the Meeting "FOR" the election of the nominees identified below. If a
nominee is unable to serve, the shares represented by all valid proxies will
be voted for the election of such substitute nominee as the Board of Directors
may recommend. At this time, the Board of Directors knows of no reason why the
nominees may be unable to serve, if elected. There are no arrangements or
understandings between any director or nominee and any other person pursuant
to which such director or nominee was selected.
SHARES OF
COMMON STOCK PERCENT
POSITION(S) HELD DIRECTOR TERM TO BENEFICIALLY OF
NAME AGE IN THE COMPANY SINCE (1) EXPIRE OWNED (2) CLASS
---- --- ---------------- --------- ------- ------------ -------
NOMINEES
Jameson A. 54 Director 1993 2001 14,375 0.04%
Baxter
Sandra P. 54 Director 1995 2001 7,293 0.02
Guthman
Robert A. 53 Director 1993 2001 9,441 0.03
Wislow
DIRECTORS CONTINUING IN OFFICE
R. Thomas 57 Chairman of the Board 1991 1999 13,183 0.04
Eiff
Robert S. 56 Director, President and 1993 1999 149,065(3) 4.49
Engelman, Chief Executive Officer
Jr.
Arthur L. 60 Director 1993 1999 18,430 0.06
Knight,
Jr.
Peter G. 51 Director 1993 2000 9,130 0.03
Krivkovich
Hipolito 54 Director 1993 2000 5,122 0.02
Roldan
- --------
(1) Includes service as a director of the Bank prior to the formation of the
Company.
(2) Includes shares held directly, in retirement accounts, in the deferred
compensation plan, in a fiduciary capacity or by certain affiliated
entities or members of the named individuals' families, with respect to
which shares the named individuals may be deemed to have sole or shared
voting and/or dispositive powers. Excludes 63,480, 12,696, 5,078, and
4,316 shares subject to options granted under the Stock Option Plan to
Messrs. Engelman and Eiff, Knight, and each of the other Directors,
respectively, which options are not exercisable within 60 days of March
13, 1998. Includes Board of Directors retainer fees deferred in the form
of Common Stock units pursuant to the Deferred Compensation Plan.
(3) Includes 8,567 shares allocated to Mr. Engelman under the ESOP. Excludes
25,392 restricted shares awarded to Mr. Engelman which may not be voted by
him. Includes 77,320 shares subject to options which are exercisable
within 60 days of March 13, 1998.
3
The business experience for at least the past five years of each nominee and
Director is set forth below.
JAMESON A. BAXTER. Ms. Baxter has been President of Baxter Associates, Inc.,
a firm providing management and financial services to start-up and troubled
companies in environmentally sensitive and other industries, since 1992. Ms.
Baxter is also a Trustee of The Putnam Fund and a Director of The Banta
Corporation. Ms. Baxter served as a Consultant to First Boston Corporation
during 1991 and 1992.
R. THOMAS EIFF. Mr. Eiff has been the Chief Operating Officer of Adams
Brothers Distribution, an automotive service and distribution company, since
January 1991. Mr. Eiff serves as the Chairman of the Board of the Company.
ROBERT S. ENGELMAN, JR. Mr. Engelman joined the Bank in January 1993 as
President, Chief Executive Officer and Director and has been the Company's
President and Chief Executive Officer since its inception. Prior to joining
the Company, Mr. Engelman was the Chairman of the Board and Chief Executive
Officer of University Financial Corporation and its wholly-owned subsidiary,
First Federal of Elgin, FSA, Elgin, Illinois.
SANDRA P. GUTHMAN. Ms. Guthman has been the President and Chief Executive
Officer of Polk Bros. Foundation, a philanthropic organization for social
service, educational and cultural interests, since 1993. Prior to such time,
Ms. Guthman served IBM Corporation in various marketing capacities. Ms.
Guthman also serves as a Director of MBIA Insurance Corporation of Illinois,
as well as other educational and social organizations.
ARTHUR L. KNIGHT, JR. Mr. Knight is a private investor and business
consultant and was recently President, Chief Executive Officer and Director of
Morgan Products Ltd., a manufacturer and distributor of specialty building
products.
PETER G. KRIVKOVICH. Mr. Krivkovich has been President of Cramer-Krasselt
Company, a marketing communications company, since 1986.
HIPOLITO (PAUL) ROLDAN. Mr. Roldan has been President of the Hispanic
Housing Development Corp., a residential and retail development and property
management company, since 1976. Mr. Roldan serves as a director of the
Woodstock Institute.
ROBERT A. WISLOW. Mr. Wislow is Chairman of U.S. Equities Realty, Inc., a
commercial real estate company.
EXECUTIVE OFFICERS
The following contains certain information regarding the executive officers
who are not directors of the Company.
HOWARD A. JAFFE. Mr. Jaffe, 44, is Vice President and Chief Financial
Officer of the Company. Mr. Jaffe joined the Company in August 1995. From 1990
through July 1995, Mr. Jaffe was Executive Vice President and Chief Financial
Officer of Northern States Financial Corporation, a multi-bank holding
company.
CHARLES W. SEWRIGHT, JR. Mr. Sewright, 51, is Vice President and Chief
Operating Officer of the Company. Mr. Sewright joined the Company in December
1997. From December 1990 through January 1995, Mr. Sewright was President and
Chief Executive Officer of Anchor Mortgage Services, as well as Executive Vice
President of Anchor Savings Bank, fsb. From January 1995 through December
1997, Mr. Sewright was Chairman, President and Chief Executive Officer of
Quest Advisors, Inc. ("Quest"), a mortgage banking consulting company. Mr.
Sewright continues to serve as Chairman of Quest.
4
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
THE COMPANY. The Company's Board of Directors has standing Executive, Audit
and Compensation Policy Committees which meet and act in conjunction with the
like committees of the Bank's Board of Directors. The Board of Directors met
nine times in 1997. During 1997, no incumbent director of the Company attended
fewer than 75% of the total number of board and committee meetings held by the
Board of Directors.
The entire Board of Directors acts as a nominating committee for selecting
nominees for election as directors. While the Board of Directors will consider
nominees recommended by stockholders, the Board has not actively solicited
such nominations. Pursuant to the Company's Bylaws, nominations by
stockholders generally must be delivered in writing to the Secretary of the
Company at least 30 days prior to the date of the Meeting. The Board of
Directors met once during 1997 in its capacity as a nominating committee.
THE BANK. The Bank's Board of Directors met nine times during the year.
During 1997, no incumbent director of the Bank attended fewer than 75% of the
aggregate of the total number of Board meetings and the total number of
meetings held by the committees of the Board of Directors on which he or she
served.
The Company's Executive Committee exercises the powers of the full Board of
Directors between Board meetings. The Executive Committee is composed of
Directors Eiff (Chairman), Baxter, Knight and Engelman. The Executive
Committee met three times during 1997.
The Audit Committee is responsible for recommending the selection of the
independent auditors of the Company and the Bank and meeting with the
independent auditors to outline the scope and review the results of the annual
audit. The Audit Committee also meets with the Bank's internal auditor on a
periodic basis. The current members of this committee are Directors Baxter
(Chairman), Guthman and Roldan. This committee held three meetings during
1997.
The Compensation Policy Committee is responsible for the design and
administration of the overall compensation program. In addition, the committee
reviews and approves all executive officers' compensation plans, evaluates
executive performance, grants awards under the Omnibus Incentive Plan and
considers other related matters. The current members of the committee are
Directors Knight (Chairman), Wislow and Baxter. The Compensation Policy
Committee met three times during 1997.
DIRECTOR COMPENSATION
The Company currently does not compensate its directors for their service in
such capacity. For 1997, non-employee directors of the Bank were paid an
annual retainer of $12,000, and in 1998 will be paid an annual retainer of
$12,000, plus, (i) $1,000 per regularly scheduled Board meeting attended, (ii)
$500 per special Board meeting attended via telephone, (iii) $1,500 per
committee membership, (iv) $3,000 for serving as committee chairman; and (v)
$3,500 Chairman of the Board fee. All Board and Committee fees may be paid in
the form of Common Stock, however, at least 50% of the annual retainer and
Board meeting fees must be taken in the form of Common Stock. There are no
extra fees paid for committee meetings. All fees may be deferred pursuant to
the Company's Deferred Compensation Plan for Directors and Executive Officers.
There are eight regularly scheduled Board meetings per year.
EXECUTIVE COMPENSATION
Executive officers of the Company currently do not receive any remuneration
in their capacity as Company executive officers. The following table sets
forth information concerning the compensation of the Named Officers for
services in all capacities to the Bank for the years ended December 31, 1997,
1996 and 1995.
5
SUMMARY COMPENSATION TABLE
LONG TERM
ANNUAL COMPENSATION
COMPENSATION AWARDS
----------------- -------------------
RESTRICTED
NAME AND STOCK OPTIONS/ ALL OTHER
PRINCIPAL CALENDAR SALARY BONUS AWARD(S) SARS COMPENSATION
POSITION YEAR ($) ($) (3) ($)(4) (#)(5) ($)
--------- -------- ------ ------- ---------- -------- ------------
Robert S. Engel-
man, Jr. 1997 $300,000 $ -- $ -- 35,000 $274,498(6)
President and
Chief Executive 1996 250,000 140,000 -- -- 152,945(7)
Officer 1995 250,000 110,000 608,350 105,800 55,512(8)
Howard A. Jaffe 1997 151,196 -- -- 15,187 24,140(9)
Vice President
(1) 1996 143,750 65,000 -- -- 16,111(10)
1995 55,730 19,200 287,500 20,000 20,078(11)
Charles W.
Sewright, Jr. 1997 14,615 -- 315,000 35,000 15,000(12)
Vice President
(2) 1996 -- -- -- -- --
1995 -- -- -- -- --
- --------
(1) Mr. Jaffe was hired in August 1995.
(2) Mr. Sewright was hired in December 1997.
(3) The 1995 bonus payment was based upon a nine month period, reflecting the
change in the Company's fiscal year.
(4) Represents restricted stock issued. Restricted Stock vests between a three
and five year period. Dividends are paid on the restricted shares to the
extent and on the same date as dividends are paid on all other outstanding
shares of the Common Stock. The dividends, however, are held by the
Company for the accounts of Messrs. Engelman, Jaffe and Sewright until the
vesting of the corresponding portion of the award. The shares that have
not been released and the aggregate market value at December 31, 1997 was:
Mr. Engelman--25,392 shares, $412,620; Mr. Jaffe--12,000 shares, $195,000;
Mr. Sewright--20,000 shares, $325,000 at $16.25 the price of the Company's
Common Stock on December 31, 1997.
(5) Represents incentive and non-qualified stock options granted pursuant to
the Company's Stock Option Plans. All options were granted at or above the
market price of the stock on the date of the grant and vest up to five
years.
(6) Includes SERP contribution of $240,000, ESOP contribution of $24,140,
supplemental life insurance premium of $9,555 and an automobile allowance
of $803.
(7) Includes SERP contribution of $120,000, ESOP contribution of $22,727,
supplemental life insurance premium of $9,555 and an automobile allowance
of $663.
(8) Includes two ESOP contributions totaling $40,266, term life insurance
contribution of $9,541, supplemental health insurance plan of $3,500,
excess group life insurance premium of $1,440 and an automobile allowance
of $765.
(9) Includes ESOP contribution of $24,140.
(10) Includes ESOP contribution of $16,111.
(11) Includes payment made in lieu of retirement benefits of $20,000 and
excess group life insurance of $78.
(12) Includes payment for relocation expenses of $15,000.
STOCK OPTIONS
The following table sets forth certain information with respect to stock
options granted to the Named Officers during 1997.
In addition to providing the number of options granted in the Summary
Compensation Table, the following table discloses the range of potential
realizable values at various assumed appreciation rates. The table discloses
for the Chief Executive Officer and other Named Officers the gain or "spread"
that would be realized at the end of the option term for the options granted
during 1997, if the price of the Common Stock appreciates annually by the
percentage levels indicated from the market price on the date of grant.
6
OPTION GRANTS IN 1997
% OF TOTAL POTENTIAL REALIZABLE VALUE AT
OPTIONS ASSUMED ANNUAL RATES OF
GRANTED TO STOCK PRICE APPRECIATION FOR
EMPLOYEES EXERCISE OPTION TERM
OPTIONS IN FISCAL PRICE PER EXPIRATION -----------------------------
NAME GRANTED 1997 SHARE(1) DATE 5.00% 10.00%
- ---- ------- ---------- --------- ---------- -------------- --------------
Robert S.
Engelman,
Jr. 35,000 21.05% $19.35 07/30/02 $ 48,650 $ 238,700
Howard A.
Jaffe 15,187 9.13% 19.35 07/30/02 21,110 103,575
Charles
W.
Sewright,
Jr. 35,000 21.05% 15.75 12/01/02 174,650 364,700
The following table sets forth information with respect to shares of the
Common Stock acquired in 1997 through the exercise of stock options, including
the value realized upon the exercise, and the value of all stock options held
at December 31, 1997.
OPTION EXERCISES, HOLDINGS AND VALUES TABLE
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT DECEMBER 31, "IN-THE-MONEY" OPTIONS AT
SHARES 1997 DECEMBER 31, 1997(1)
ACQUIRED VALUE ----------------------- -------------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- -------- ----------- ------------- ----------- -------------
Robert S.
Engelman,
Jr. -0- -0- 77,320 63,480 $79,350 $119,250
Howard A.
Jaffe -0- -0- 8,000 27,187 15,000 22,500
Charles
W.
Sewright,
Jr. -0- -0- -0- 35,000 -0- 17,500
- --------
(1) Represents the difference between the closing price of the Common Stock on
December 31, 1997 ($16.25 per share) and the exercise price of the stock
options.
The Stock Option Plan provides for the grant of a non-qualified stock option
to purchase 22,160, 9,464, and 8,194 shares of Common Stock, respectively, to
Chairman Eiff, Director Knight and to each other Director who is not an
employee of the Company. The Omnibus Incentive Plan also provides for the
grant of a non-qualified stock option for each Board member to purchase 1,000
shares at market value on the first business day of the year following twelve
consecutive months of service. All of such options have a term between five
and ten years, are not transferable and vest at the rate between immediate
vesting and up to five years from the date of grant. The exercise price per
share of such options shall be equal to the fair market value of the Common
Stock on the date of grant.
EMPLOYMENT AGREEMENT
The Company has entered into an employment agreement with Mr. Engelman, as
modified. The employment agreement became effective upon completion of the
Bank's conversion from mutual to stock form on April 3, 1995, and provides for
an annual base salary in an amount not less than the employee's current salary
($300,000) and an initial term of three years. Commencing on the first
anniversary date and continuing each anniversary date thereafter, the
agreement will extend automatically for an additional year so that the
remaining term shall be three years, unless written notice of non-renewal is
given by the Board of Directors of the Bank after the Compensation Policy
Committee of the Board of Directors of the Bank conducts an annual formal
performance evaluation of Mr. Engelman. The agreement provides that the base
salary of Mr. Engelman will be reviewed annually. The agreement also provides
for, among other things, disability pay, a retirement bonus, participation in
benefit plans and other fringe benefits applicable to executive personnel.
The agreement provides for termination by the Bank for cause, upon Mr.
Engelman's death or in certain events specified by Office of Thrift
Supervision ("OTS") regulations. In the event the Bank chooses to terminate
Mr. Engelman's employment for other than these reasons, or in the event of Mr.
Engelman's resignation from the Bank upon a material diminution of or
interference with Mr. Engelman's duties, Mr. Engelman would be entitled to his
salary and insurance benefits under the agreement for the remaining term of
the agreement.
7
Notwithstanding the foregoing, in the event the Bank (or its successor)
chooses to terminate Mr. Engelman's employment for reasons other than for
cause, his death, pursuant to OTS regulations or for disability, or Mr.
Engelman resigns due to involuntary termination in connection with or within
12 months after a "change in control" of the Bank, Mr. Engelman would be
entitled to a severance payment equal to up to 299% of Mr. Engelman's average
annual compensation over the past three years of employment with the Bank. The
Bank also would continue Mr. Engelman's health benefits for the remaining term
of the agreement. For the purposes of the employment agreement, a "change in
control" is defined as any event which would require the filing of an
application for acquisition of control or notice of change in control pursuant
to 12 C.F.R. (S) 574.3 or 4. Such events are generally triggered prior to the
acquisition or control of 10% of the Common Stock.
If Mr. Engelman's employment had been terminated as of December 31, 1997
under circumstances entitling him to severance pay as described above, he
would have been entitled to receive a lump sum cash payment of approximately
$1,050,000.
SEVERANCE PAY AGREEMENTS
The Bank has entered into Severance Pay Agreements with Howard A. Jaffe and
Charles W. Sewright, Jr. Under the Severance Pay Agreements, if the officer's
employment with the Bank is involuntarily terminated within 12 months of a
change in control under certain conditions, the officer will be entitled to a
lump sum payment of two year's cash compensation. Each Severance Pay Agreement
has an initial term of three years and shall be extended by the Board of
Directors for a period of one year beginning on the first anniversary of the
agreement, and on each anniversary date thereafter. Based on their current
salaries, if the officers had been terminated as of December 31, 1997 under
circumstances entitling them to severance pay as described above, Messrs.
Jaffe and Sewright each would have been entitled to receive a lump sum payment
of approximately $430,000 and $540,000, respectively.
COMPENSATION POLICY COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Under rules established by the Securities and Exchange Commission ("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 for and
considerations that led to fundamental executive compensation decisions
affecting those individuals. In fulfillment of this requirement, the
Compensation Policy Committee of the Bank, at the direction of the Board of
Directors, has prepared the following report for inclusion in this Proxy
Statement.
GENERAL. The Board of Directors of the Bank has delegated to the
Compensation Policy Committee the responsibility and authority to oversee the
general compensation policies of the Bank, to establish compensation plans and
specific compensation levels for executive officers, and to review the
recommendations of management for compensation and benefits for other officers
and employees of the Bank. The Compensation Policy Committee is composed
solely of independent outside directors. Non-employee directors who are not
members of the Compensation Policy Committee also participate in executive
compensation decisions by way of review, discussion and ratification of
Compensation Policy Committee recommendations.
The Compensation Policy Committee has adopted an executive compensation
program designed to: (i) offer competitive compensation packages in order to
attract, motivate, retain and reward those key executive officers who are
crucial to the long-term success of the Company; (ii) establish a direct link
between executive compensation and annual and long-term performance of the
Company; and (iii) encourage decision-making that maximizes long-term
shareholder value. The Compensation Policy Committee's primary compensation
objective is to ensure that such compensation be tied to the achievement of
both short term and longer term goals and objectives established in
conjunction with the Company's annual planning process, and to ensure that a
significant portion of total compensation is at risk for those executive
officers who have significant control over and responsibility for the
direction and performance of the Company.
8
EXECUTIVE COMPENSATION POLICY. The compensation package provided to the
executive officers of the Bank is composed principally of base salary, an
annual incentive bonus and awards under the Company's equity based plans.
Executive officers also participate in other benefit plans available to all
eligible employees including the Company's ESOP. The Compensation Policy
Committee periodically reviews the various elements of the compensation
package available to executive officers in consideration of the policies
described above. The Compensation Policy Committee met three times in 1997 to
review employee-related compensation/benefit issues in general and to review
and recommend the base salary and incentive bonus targets of the Chief
Executive Officer and the other executive officers.
Base Salary. It is the policy of the Compensation Policy Committee to
annually review executive compensation packages, including base salaries paid
or proposed to be paid, with compensation packages and base salaries offered
by other financial institutions and specialty finance companies with total
assets, loan origination and performance results comparable to those of the
Company, as well as to compare the complexities of the positions under
consideration with similar jobs in other financial institutions and/or
specialty finance companies regardless of size. This information is primarily
derived from third party sources and company proxy statements that provide
compensation data and analysis from other publicly held companies. Specific
factors considered include the level of responsibility delegated to a
particular officer, the complexity of the job being evaluated, the position's
impact on both short term and long term corporate goals and objectives, the
expertise and skill level of the individual under consideration, the degree to
which the officer has achieved his management objectives for the plan year,
his ability to attract highly skilled individuals to the Company and the
officer's overall performance in managing his area of responsibility. The
Compensation Policy Committee's decisions are discretionary and no
quantifiable formula or weighting of the above mentioned factors are utilized
in the decision making process.
Incentive Bonus Awards. The annual incentive bonus is designed to provide
that a substantial portion of each executive officer's total compensation
remains variable. The purpose of the incentive plan is to more closely align
executive performance to the annual and long-term financial and operating
performance of the Company and to reward officers for the achievement of
certain specified goals and objectives. Officers are classified into groups,
based on their relative position in the Company and/or Bank, with annual
target bonuses (as a percentage of base salary) equal to 40% to 70%, 25% to
50%, 15% to 25% and 5% to 15%, respectively. An annual incentive bonus pool is
established if specific financial, operational and business goals, determined
at the beginning of each fiscal year, are achieved; and if certain safety and
soundness standards are maintained. Individual bonus awards can range from 0%
to 150% of a person's target goal depending on actual results compared to
target results, as well as the officer's individual accomplishments vs.
individual goals and objectives. Since incentive bonuses are subject to
fluctuation from year to year, the Committee's decisions are subjective and no
specific formula is utilized. The Chief Executive Officer makes specific
recommendations for incentive bonuses (other than his own) to the Compensation
Policy Committee. The Compensation Policy Committee determines the Chief
Executive Officer's incentive bonus.
Benefit Plans. The Compensation Policy Committee's policy with respect to
employee benefit plans is to provide competitive benefits to employees of the
Company, including its executive officers. Additionally, the ESOP will provide
employees, including executive officers, with an additional equity-based
incentive to maximize long-term shareholder value. The Compensation Policy
Committee believes that a competitive employee benefit package is essential to
achieving the goals of attracting and retaining highly qualified employees.
CHIEF EXECUTIVE OFFICER. The base salary paid to the Chief Executive Officer
for 1997 was $300,000, an increase over the base compensation paid in both
1995 and 1996. In examining the base compensation of other executives among
peer institutions the Compensation Committee felt the adjustment was justified
after two years of no adjustments to base pay.
The Compensation Policy Committee determined that the Chief Executive
Officer's target incentive bonus to be maintained at a range between 40%-70%
of base salary. This decision was based on the Committee's
9
annual review of third party data as discussed above, and on the results in
building the Company and Bank's infrastructure, obtaining financial
performance improvements and the completion of the Bank's 1997 target goals
and objectives. While the Compensation Policy Committee also considered other
factors relating to the performance of the Company including (i) the
successful completion of the Bank's asset-backed securitizations, (ii) goals
relating to efficiency ratios, fee income, loan volume, asset quality,
Community Reinvestment Act compliance and the improvement in the Bank's
infrastructure, based on the Company's performance in 1997, the Compensation
Policy Committee determined that the Chief Executive Officer, as well as the
other Executive Officers, did not meet the short and longer term criteria
established in the Business Plan and as described above and therefore, did not
approve any bonus payments for 1997.
The Board of Directors, in 1996 approved a Supplemental Executive Retirement
Plan ("SERP") for the benefit of the Chief Executive Officer. The SERP
provides for retirement income for the Chief Executive Officer upon his normal
retirement from the Company. The Company accrued $240,000 and $120,000 in 1997
and 1996, respectively, to fund the annuity required for the SERP.
Arthur L. Knight, Jr.,
Chairman of the Compensation Policy
Committee
Jameson A. Baxter
Robert A. Wislow
10
STOCK PERFORMANCE PRESENTATION
The following line graph shows a comparison of the cumulative returns for
the Company, the Nasdaq Market Value Index and an index of peer corporations
selected by the Company, since April 4, 1995, the date the Common Stock began
trading on The Nasdaq Stock Market. The information assumes that $100 was
invested in the Common Stock and each index on April 4, 1995, and that all
dividends are reinvested.
COMPARISON OF CUMULATIVE TOTAL RETURN
AMONG AVONDALE FINANCIAL CORP.,
NASDAQ MARKET INDEX AND PEER GROUP INDEX
LOGO
4/95 12/95 12/96 12/97
---------------------------------------------------------------------
AVONDALE FINANCIAL CORP $100.00 $126.09 $148.91 $141.30
---------------------------------------------------------------------
PEER GROUP $100.00 $149.80 $224.40 $154.79
---------------------------------------------------------------------
BROAD MARKET $100.00 $120.91 $150.25 $183.79
---------------------------------------------------------------------
ASSUMES $100 INVESTED ON APRIL 3, 1995
ASSUMES DIVIDENDS REINVESTED
FISCAL YEAR ENDING DECEMBER 31, 1997
The peer group includes the following Illinois thrift institution holding
companies and nationwide speciality finance companies offering similar loan
products to that of Avondale: Thrift Institutions: Alliance Bancorp, Calumet
Bancorp, Fidelity Bancorp, Home Bancorp of Elgin, Kankakee Bancorp, MAF
Bancorp, Southwest Bancshares, Suburbfed Financial, and Westco Bancorp;
Speciality Finance Companies: Aames Financial Corp., Cityscape Financial
Corp., Delta Financial Corp., First Alliance Corp., Firstplus Financial Corp.,
IMC Mortgage Company, Litchfield Financial Corp., Mego Mortgage Corp.,
Southern Pacific Funding Corp., and United Companies Financial Corp.
CERTAIN TRANSACTIONS
The Bank has followed a policy of granting consumer loans and loans secured
by the borrower's personal residence to officers, directors and employees. The
loans to executive officers and directors are made in the
11
ordinary course of business and on the same terms and conditions as those of
comparable transactions prevailing at the time, in accordance with the Bank's
underwriting guidelines, and do not involve more than the normal risk of
collectibility or present other unfavorable features. Loans to executive
officers and directors must be approved by a majority of the disinterested
directors and loans to other officers and employees must be approved by the
Bank's loan committee. All loans by the Bank to its directors and executive
officers are subject to OTS regulations restricting loan and other
transactions with affiliated persons of the Bank. Federal law currently
requires that all loans to directors and executive officers be made on terms
and conditions comparable to those for similar transactions with non-
affiliates unless it is made pursuant to a plan for all employees. As of March
13, 1998, there were no loans or unused lines of credit to directors and named
executive officers. Such loans and lines of credit, if made, are granted on
terms comparable to those for other loan customers.
INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP ("Arthur Andersen"), the independent certified public
accountants for Avondale and its subsidiaries in 1997, have been selected by
the Board of Directors to continue to serve Avondale in that capacity for
1998. Representatives of Arthur Andersen are expected to be present at the
Meeting to make a statement should they desire to do so and will be available
to respond to appropriate questions from stockholders.
Arthur Andersen continues to perform audit professional services for and on
behalf of Avondale. During 1997 the audit services included examination of the
consolidated financial statements of Avondale, examination of the financial
statements of subsidiaries of Avondale and a review of certain filings with
the Securities and Exchange Commission and other regulatory agencies.
STOCKHOLDER PROPOSALS
In order to be eligible for inclusion in the Company's proxy materials for
the next Annual Meeting of Stockholders, any stockholder proposal to take
action at such meeting must be received by the Company prior to November 20,
1998. Any such proposal shall be subject to the requirements of the proxy
rules adopted under the Exchange Act.
OTHER MATTERS
The Board of Directors is not aware of any business to be properly presented
at the Meeting other than those matters described above in this Proxy
Statement. However, if any other matter should properly come before the
Meeting, it is intended that holders of the proxies will 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. The Company has retained
D. F. King & Co., Inc. to assist in the solicitation of proxies for a fee of
$3,500, plus reasonable out-of-pocket expenses. In addition to solicitation by
mail, directors, officers and employees of the Company and the Bank may
solicit proxies personally or by telegraph or telephone without additional
compensation.
By Order of the Board of Directors
LOGO
Robert S. Engelman, Jr.
President and Chief Executive Officer
Chicago, Illinois
March 31, 1998
12
PROXY AVONDALE FINANCIAL CORP. PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
ANNUAL MEETING OF STOCKHOLDERS--MAY 12, 1998
The undersigned hereby appoints the Board of Directors of Avondale
Financial Corp. (the "Company"), and its survivor, with full powers of
substitution, to act as attorneys and proxies for the undersigned to vote all
shares of common stock of the Company which the undersigned is entitled to vote
at the Annual Meeting of Stockholders (the "Meeting"), to be held on Tuesday,
May 12, 1998 at the Conference Center of the Graduate School of Business, The
University of Chicago, 450 North Cityfront Plaza Drive, Chicago, Illinois, at
9:00 a.m., local time, and at any and all adjournments or postponements thereof,
as follows:
THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS ARE SPECIFIED, THIS
PROXY WILL BE VOTED FOR EACH OF THE NOMINEES LISTED ABOVE. IF ANY OTHER
BUSINESS IS PRESENTED AT SUCH MEETING, THIS PROXY WILL BE VOTED BY THOSE NAMED
IN THIS PROXY IN THEIR BEST JUDGMENT. AT THE PRESENT TIME, THE BOARD OF
DIRECTORS KNOWS OF NO OTHER BUSINESS TO BE PRESENTED AT THE MEETING.
PLEASE PROMPTLY COMPLETE, DATE, SIGN AND MAIL THIS PROXY
IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
(Continued and to be signed on reverse side.)
- --------------------------------------------------------------------------------
3959--Avondale Financial Corp.
AVONDALE FINANCIAL CORP.
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. [_]
1. The election of the following directors for For Withhold For All
three-year terms. All All Except
Nominees: Jameson A. Baxter [_] [_] [_]
Sandra P. Guthman
Robert A. Wislow
The Board recommends a vote "FOR" each of the nominees listed above.
_____________________________________________
Nominee Exception
Should the undersigned be present and elect to vote at the Meeting or at any
adjournment or postponement 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 such attorneys and proxies shall be
deemed terminated and of no further force and effect. This proxy may also be
revoked by filing a written notice of revocation with the Secretary of the
Company or by duly executing a proxy bearing a later date.
The undersigned acknowledges receipt from the Company, prior to the execution
of this proxy, of notice of the Meeting, a Proxy Statement and the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 1997.
In their discretion, the proxies are authorized to vote on any other business
that may come before the Meeting or any adjournment or postponement thereof.
Date:_________________________________________, 1998
_____________________________________________________________________________
Signature of Stockholder
_____________________________________________________________________________
Signature if held jointly
Please sign exactly as your name(s) appear(s) 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.
- --------------------------------------------------------------------------------
. FOLD AND DETACH HERE .
PLEASE PROMPTLY COMPLETE, DATE, SIGN AND MAIL THIS PROXY
IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
3959--Avondale Financial Corp.