DEF 14A 1 prxy07.txt PROXY 2007 SCHEDULE 14A (Rule 14a-101) INFORMATION REQUIRED IN PROXY STATEMENT SCHEDULE 14A INFORMATION Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934 (Amendment No.) Filed by the Registrant [X] Filed by a Party other than the Registrant [_] Check the appropriate box: [_] Preliminary Proxy Statement [_] Soliciting Material Under Rule [_] Confidential, For Use of the 14a-12 Commission Only (as permitted by Rule 14a-6(e)(2)) [X] Definitive Proxy Statement [_] Definitive Additional Materials AmBase Corporation -------------------------------------------------------------------------------- (Name of Registrant as Specified In Its Charter) -------------------------------------------------------------------------------- (Name of Person(s) Filing Proxy Statement, if Other Than the Registrant) Payment of Filing Fee (Check the appropriate box): [x] No fee required. [_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11. 1) Title of each class of securities to which transaction applies: ________________________________________________________________________________ 2) Aggregate number of securities to which transaction applies: ________________________________________________________________________________ 3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): ________________________________________________________________________________ 4) Proposed maximum aggregate value of transaction: ________________________________________________________________________________ 5) Total fee paid: ________________________________________________________________________________ [_] Fee paid previously with preliminary materials: ________________________________________________________________________________ [_] Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the form or schedule and the date of its filing. 1) Amount previously paid: ________________________________________________________________________________ 2) Form, Schedule or Registration Statement No.: ________________________________________________________________________________ 3) Filing Party: ________________________________________________________________________________ 4) Date Filed: ________________________________________________________________________________ NOTICE OF ANNUAL MEETING OF STOCKHOLDERS AND PROXY STATEMENT 2007 AMBASE CORPORATION 100 Putnam Green, 3rd Floor Greenwich, CT 06830-6027 AMBASE CORPORATION 100 PUTNAM GREEN, 3RD FLOOR GREENWICH, CT 06830-6027 NOTICE OF ANNUAL MEETING OF STOCKHOLDERS TO BE HELD MAY 18, 2007 The 2007 Annual Meeting of Stockholders of AmBase Corporation (the "Company") will be held at the Hyatt Regency Hotel, 1800 East Putnam Avenue, Greenwich, Connecticut, on Friday, May 18, 2007 at 9:00 a.m., Eastern Daylight Time, to consider and act upon the following matters: 1. The election of one director to hold office for a three-year term expiring in 2010; 2. The approval of the appointment of PricewaterhouseCoopers LLP as the independent registered public accounting firm of the Company for the year ending December 31, 2007; and such other matters as may properly come before the meeting or any adjournments thereof. The Board of Directors has fixed the close of business on Monday, April 2, 2007 as the record date for determining stockholders entitled to notice of and to vote at the meeting. Whether or not you plan to attend the Annual Meeting, please sign, date and return the enclosed proxy card in the prepaid envelope provided, as soon as possible, so your shares can be voted at the meeting in accordance with your instructions. Your vote is important no matter how many shares you own. If you plan to attend the meeting and wish to vote your shares personally, you may do so at any time before your proxy is voted. Your prompt cooperation is greatly appreciated. All stockholders are cordially invited to attend the Annual Meeting. Admission to Annual Meeting Attendance at the meeting is limited to shareholders of the Company as of the April 2, 2007, record date. For safety and security reasons, video and audio recording devices and other electronic devices will not be allowed in the meeting. If your shares are held in the name of your bank, brokerage firm or other nominee, you must bring to the meeting an account statement or letter from the nominee indicating that you beneficially owned the shares as of the April 2, 2007, record date for voting. If you do not have proof of share ownership, you will not be admitted to the meeting. For registered shareholders, a copy of your proxy card can serve as verification of stock ownership. Shareholders who do not present a copy of their proxy card at the meeting, will be admitted only upon verification of stock ownership, as indicated herein. If you do not have proof of share ownership, you will not be admitted to the meeting. In addition, all meeting attendees will be asked to present a valid, government-issued photo identification, such as a driver's license or passport, as proof of identification before entering the meeting, and attendees may be subject to security inspections. By Order of the Board of Directors John P. Ferrara Secretary Greenwich, Connecticut April 2, 2007 AMBASE CORPORATION 100 PUTNAM GREEN, 3RD FLOOR GREENWICH, CT 06830-6027 ANNUAL MEETING OF STOCKHOLDERS TO BE HELD MAY 18, 2007 PROXY STATEMENT This Proxy Statement is furnished in connection with the solicitation by the Board of Directors of AmBase Corporation (the "Company") of proxies to be voted at the Annual Meeting of Stockholders of the Company (the "Annual Meeting") to be held at the Hyatt Regency Hotel, 1800 East Putnam Avenue, Greenwich, Connecticut, at 9:00 a.m., Eastern Daylight Time, on Friday, May 18, 2007, and at any adjournments thereof. This Proxy Statement and the accompanying proxy are being mailed to stockholders commencing on or about April 2, 2007. Shares represented by a duly executed proxy in the accompanying form received by the Company prior to the Annual Meeting will be voted at the Annual Meeting in accordance with instructions given by the stockholder in the proxy. Any stockholder granting a proxy may revoke it at any time before it is exercised by granting a proxy bearing a later date, by giving notice in writing to the Secretary of the Company or by voting in person at the Annual Meeting. At the Annual Meeting, the stockholders will be asked (i) to re-elect Salvatore Trani as a director of the Company to serve a three-year term ending in 2010; and (ii) to approve the appointment of PricewaterhouseCoopers LLP as the Company's independent registered public accounting firm for the year ending December 31, 2007. The persons acting under the accompanying proxy have been designated by the Board of Directors and, unless contrary instructions are given, will vote the shares represented by the proxy (i) for the election of the nominee for director named above; and (ii) for the approval of the appointment of PricewaterhouseCoopers LLP as the Company's independent registered public accounting firm. The close of business on Monday, April 2, 2007, has been fixed by the Board of Directors as the record date for the determination of stockholders entitled to notice of and to vote at the Annual Meeting or any adjournments thereof. Only the holders of record of common stock of the Company, par value $0.01 per share (the "Common Stock") at the close of business on April 2, 2007, are entitled to vote on the matters presented at the Annual Meeting. Each share of Common Stock entitles the holder to one vote on each matter presented at the Annual Meeting. As of Monday, April 2, 2007, there were 44,968,519 shares of Common Stock issued and outstanding. The holders of a majority of the outstanding shares of Common Stock entitled to vote at the Annual Meeting shall constitute a quorum. If there is less than a quorum, a majority of those present in person or by proxy may adjourn the Annual Meeting. A plurality vote of the holders of the shares of Common Stock represented in person or by proxy and voting at the Annual Meeting, a quorum being present, is required for the election of directors. The affirmative vote of the holders of a majority of the shares of Common Stock represented in person or by proxy and voting at the Annual Meeting, a quorum being present, is necessary for the approval of PricewaterhouseCoopers LLP as the Company's independent registered public accounting firm. Abstentions, votes withheld and shares not voted, including broker non-votes, are not included in determining the number of votes cast for the approval of PricewaterhouseCoopers LLP as the Company's independent registered public accounting firm. Abstentions, votes withheld and broker non-votes, are counted for purposes of determining whether a quorum is present at the Annual Meeting. 1 PROPOSAL NO. 1 - ELECTION OF DIRECTORS In accordance with the method of electing directors by class with terms expiring in different years, as required by the Company's Restated Certificate of Incorporation, one director will be elected at the Company's 2007 Annual Meeting of Stockholders to hold office until the Company's Annual Meeting of Stockholders for the year 2010. The director will serve until his successor shall be elected and shall qualify. The person named below has been nominated for directorship. The nominee is a director now in office, and has indicated a willingness to accept re-election. It is intended that at the Annual Meeting the shares represented by the accompanying proxy will be voted for the election of the nominee unless contrary instructions are given. In the event that the nominee should become unavailable for election as a director at the time the Annual Meeting is held, shares represented by proxies in the accompanying form will be voted for the election of a substitute nominee selected by the Board of Directors, unless contrary instructions are given or the Board by resolution shall have reduced the number of directors. The Board is not aware of any circumstances likely to render the nominee unavailable. Information Concerning the Nominee for Election as a Director The name, age, principal occupation, other business affiliations, and certain other information concerning the nominee for election as director of the Company is set forth below. Salvatore Trani, 66. Mr. Trani was elected a director of the Company in January 2006. Mr. Trani has over 40 years of experience on Wall Street and currently serves as an Executive Vice President at BGC Partners, L.P., a leading inter-dealer brokerage firm which provides integrated voice and electronic services to wholesale fixed income, interest rate, foreign exchange, and derivatives markets worldwide. If elected, his term will expire in 2010. The Board of Directors recommends a vote FOR the election of the nominee as director. Information Concerning Directors Continuing in Office Certain information concerning the directors of the Company whose terms do not expire in 2006 is set forth below. Richard A. Bianco, 59. Mr. Bianco was elected a director of the Company in January 1991, and has served as President and Chief Executive Officer of the Company since May 1991. On January 26, 1993, Mr. Bianco was elected Chairman of the Board of Directors of the Company. He served as Chairman, President and Chief Executive Officer of Carteret Savings Bank, FA, then a subsidiary of the Company, from May 1991 to December 1992. His term will expire in 2008. Philip M. Halpern, 50. Mr. Halpern was elected a director of the Company in January 2006. Mr. Halpern is currently the Managing Partner of the law firm, Collier, Halpern, Newberg, Nolletti and Bock, LLP, and has been a partner at the firm since 1985. Mr. Halpern received his undergraduate degree from Fordham University and his law degree from Pace University School of Law. His term will expire in 2008. Robert E. Long, 75. Mr. Long was elected a director of the Company in October 1995. Mr. Long is currently the President of Ariba GLB Asset Management, Inc., a registered investment advisor. He has been the Chairman of Emerald City Radio Partners since 1997. From 1991 to 1995, Mr. Long was President and CEO of Southern Starr Broadcasting Group, Inc. Prior to 1991, Mr. Long was President of Potomac Asset Management, Inc., a registered investment company. Mr. Long is a Chartered Financial Analyst and a graduate of George Washington University School of Law. In addition to his service as a director of the Company, Mr. Long serves as a director of Allied Capital Corporation, CSC Scientific, Inc., and Advanced Solutions International, Inc. His term will expire in 2009. 2 Director Independence The Company periodically reviews the independence of each director. Pursuant to this review, the directors and officers of the Company on an annual basis, are required to complete and forward to the Corporate Secretary a detailed questionnaire to determine if there are any transactions or relationships between any of the directors and/or officers of the Company (including immediate family and affiliates). If any transactions or relationships exist, the Company then considers whether such transaction(s) or relationship(s) are inconsistent with a determination that the director is independent. Pursuant to this process, in February 2007, the Company conducted its annual review of director independence and determined that no transactions or relationships existed that would disqualify any of our directors, under NASDAQ independence rules. Mr. Richard A. Bianco, who serves as the Chairman of the Board of Directors also serves as the Company's President and Chief Executive Officer. Mr. Bianco does not serve as a member of the Company's Accounting and Audit Committee or the Company's Personnel Committee. Based on a review of the information provided by the directors and other information reviewed, the Company has concluded that none of the Company's non-employee directors have any relationship with the Company other than as a director or shareholder of the Company. Based upon that finding, our Board of Directors determined that Messrs. Halpern, Long and Trani are "independent". INFORMATION CONCERNING THE BOARD AND ITS COMMITTEES Meetings and Attendance During 2006, the Company's Board of Directors held seven (7) meetings. Matters were also addressed by unanimous written consent in accordance with Delaware law. All directors attended at least 75% of the meetings of the Board of Directors and the committees of the Board on which they served during 2006. Committees of the Board The Board of Directors currently has (i) an Accounting and Audit Committee and (ii) a Personnel Committee. The Accounting and Audit Committee met one (1) time during 2006. Matters were also addressed by unanimous written consent in accordance with Delaware law. The Accounting and Audit Committee consists of Robert E. Long, Chairman, Philip M. Halpern and Salvatore Trani, who are all independent directors of the Company. The Board of Directors has determined that Mr. Long is an "audit committee financial expert" as that term is defined in Item 401(h) of Regulation S-K promulgated by the Securities and Exchange Commission (the "SEC"). The Accounting and Audit Committee is directly responsible for the appointment, compensation and oversight of the audit and related work of the Company's independent auditors. The Accounting and Audit Committee reviews the degree of their independence; approves the scope of the audit engagement, including the cost of the audit; approves any non-audit services rendered by the auditors and the fees for these services; reviews with the auditors and management the Company's policies and procedures with respect to internal accounting and financial controls and, upon completion of an audit, the results of the audit engagement; and reviews internal accounting and auditing procedures with the Company's financial staff and the extent to which recommendations made by the independent auditors have been implemented. The Accounting and Audit Committee has adopted a charter, which has been approved by the Company's Board of Directors. A copy of the Audit Committee Charter is attached as Exhibit A. The Personnel Committee held three (3) meetings in 2006. Matters were also addressed by unanimous written consent in accordance with Delaware law. The Personnel Committee consists of Mr. Halpern and Mr. Trani, Co-Chairpersons, and Mr. Long, who are all independent directors of the Company. 3 The principal functions of the Personnel Committee, which is equivalent to a compensation committee, are to consider and recommend nominees for the Board, to oversee the performance and approve the remuneration of officers and senior employees of the Company and its subsidiaries and to oversee and approve the employee benefit and retirement plans of the Company and its subsidiaries. The Personnel Committee is also responsible for reviewing and approving the goals and objectives relevant to compensation of officers and senior employees, evaluating the performance in light of those goals and objectives and determining and approving the compensation levels based on this evaluation. The Personnel Committee is responsible for setting and approving salary, bonus and other employment terms for the Company's Chief Executive Officer. The Chief Executive Officer recommends salary and bonus awards for other officers of the Company, which are subject to the modification and/or approval by the Personnel Committee. In connection therewith, the Personnel Committee approves and makes recommendations with respect to bonus and incentive-based compensation plans and equity based plans. The Personnel Committee will consider stockholder recommendations for director, submitted in accordance with the Company's By-Laws. The Personnel Committee does not currently have a written charter. The Company's By-Laws require that in the event a stockholder wishes to nominate a person for election as a director, advance notice must be given to the Secretary of the Company not less than 120 days in advance of the date on which the Company's proxy statement is released to stockholders in connection with the previous year's annual meeting of stockholders, except that if no annual meeting was held in the previous year or if the date of the annual meeting has been changed by more than 30 calendar days from the date contemplated at the time of the previous year's proxy statement, such a proposal must be received by the Company a reasonable time before the solicitation is made, together with the name and address of the stockholder and of the person to be nominated; a representation that the stockholder is entitled to vote at the meeting and intends to appear in person or by proxy to make the nomination; a description of arrangements or understandings between the stockholder and others pursuant to which the nomination is to be made; such other information regarding the nominee as would be required in a proxy statement filed under the proxy rules as set forth in the Securities Exchange Act of 1934, as amended (the "Securities Exchange Act"); and the consent of the nominee to serve as a director if elected. Communications with Directors In order to provide the Company's security holders and other interested parties with a direct and open line of communication to the Board of Directors, the Board of Directors has adopted the following procedures for communications to directors. The Company's security holders and other interested persons may communicate with the Chairman of the Company's Accounting and Audit Committee, either of the Co-Chairman of the Personnel Committee, or with the non-management directors of the Company as a group, by mailing a letter addressed in care of the Corporate Secretary, AmBase Corporation, 100 Putnam Green, 3rd Floor, Greenwich, Connecticut 06830. All communications received in accordance with these procedures will be reviewed initially by the Company. The Company will relay all such communications to the appropriate director or directors unless the Secretary determines that the communication: o does not relate to the business or affairs of the Company or the functioning or constitution of the Board of Directors or any of its committees; o relates to routine or insignificant matters that do not warrant the attention of the Board of Directors; o is an advertisement or other commercial solicitation or communication; o is frivolous or offensive; or o is otherwise not appropriate for delivery to directors. The director or directors who receive any such communication will have discretion to determine whether the subject matter of the communication should be brought to the attention of the full Board of Directors or one or more of its committees, and whether any response to the person sending the communication is appropriate. Any such response will be made only in accordance with applicable law and regulations relating to the disclosure of information. The Secretary will retain copies of all communications received pursuant to these procedures for a period of at least one year. The Personnel Committee of the Board of Directors will review the effectiveness of these procedures from time to time and, if appropriate, recommend changes. 4 Board Attendance at Annual Meetings We have not established a formal policy regarding director attendance at our annual meetings of shareholders, but our directors generally do attend the annual meeting. The Chairman of the Board presides at the annual meeting of shareholders, and the Board of Directors holds one of its regular meetings in conjunction with the annual meeting of shareholders. Accordingly, unless one or more members of the Board are unable to attend, all members of the Board are expected to be present for the annual meeting. All of the four members of the Board at the time of the Company's 2006 annual meeting of shareholders attended that meeting. Nomination of Directors The Personnel Committee has adopted specifications applicable to members of the Board of Directors, and nominees for the Board of Directors recommended by the Personnel Committee must meet these specifications. The specifications provide that a candidate for director should: o have a reputation for industry, integrity, honesty, candor, fairness and discretion; o be knowledgeable in his or her chosen field of endeavor, which field should have such relevance to our businesses as would contribute to the Company's success; o be knowledgeable, or willing and able to become so quickly, in the critical aspects of our businesses and operations; and o be experienced and skillful in communicating with and serving as a competent overseer of, and trusted advisor and confidant to senior management, of a publicly held corporation or other corporation. In addition, nominees for the Board of Directors should contribute to the mix of skills, core competencies and qualifications of the Board through expertise in one or more of the following areas: accounting and finance, the financial industry, international business, mergers and acquisitions, leadership, business and management, strategic planning, government relations, investor relations, executive leadership development, and executive compensation. The Personnel Committee will consider nominees recommended by stockholders for election at the 2008 Annual Meeting of Stockholders that are submitted prior to December 2, 2007, to our Secretary at the Company's offices, 100 Putnam Green, 3rd Floor, Greenwich, Connecticut 06830. Any recommendation must be in writing and must include a detailed description of the business experience and other qualifications of the recommended nominee as well as the signed consent of the nominee to serve if nominated and elected, so that the candidate may be properly considered. All stockholder recommendations will be reviewed in the same manner as other potential candidates for Board membership. Section 16(a) Beneficial Ownership Reporting Compliance Based solely upon a review of the forms filed with the SEC and written representations received by the Company pursuant to the requirements of Section 16(a) of the Securities Exchange Act, the Company believes that, during 2006, there were no transactions with respect to the Company's equity securities which were not reported on a timely basis to the SEC, no late reports nor other failure to file a required form by any director, officer or 10% stockholder of the Company. Settlement of Delaware Court of Chancery Section 220 Books and Records Action Two Stockholders who owned approximately 14.4% of the Company's outstanding common stock (the "Stockholders") had previously made demand in January 2004 to inspect certain Company books and records pursuant to Section 220 of the Delaware General Corporation Law. The Company opposed the request on various grounds, and the Stockholders brought suit in March 2004 to compel inspection of certain Company books and records. In August 2005, the Court of Chancery issued a Memorandum Opinion finding that the Stockholders had met the technical requirements of Section 220 and had stated a proper purpose under Section 220, and were legally entitled to inspect specified books and records, but declined to find the Company liable for the Stockholders' attorneys' fees. 5 In October 2006, in order to eliminate continued involvement in the above referenced action or potential future actions, and the resultant time, expense and potential adverse impact on the Company's current operations and litigation claims, the Company, its Chief Executive Officer and principal stockholder, and the Company's Directors entered into an agreement with the Stockholders who had initiated the action to obtain Company books and records. Pursuant to the agreement: (i) the Company's Chief Executive Officer agreed to purchase 6,615,531 shares of Company common stock (representing approximately 14.4% of the Company's outstanding common stock and all of the Company stock beneficially owned by the Stockholders), for a cash purchase price of $0.55 per share ($3,638,542 in the aggregate for all of the shares); (ii) the Stockholders agreed to dismiss the books and records action and release any additional claims the Stockholders might have, including claims the Stockholders said they had been considering litigating against the Company, its Directors and its Chief Executive Officer; (iii) the Stockholders entered into a standstill and other agreements which will preclude them from taking a position in the Company for a period of time; and (iv) the Company agreed to pay the Stockholders $1.1 million. No portion of the purchase price for the shares acquired by the Company's Chief Executive Officer was provided by or financed by the Company. Although the shares were not offered to the Company for purchase, the Company's Board of Directors declined to purchase the shares at the price they were offered to the Company's Chief Executive Officer. A settlement charge of $1,100,000 recorded as other expense and related insurance recovery of $400,000 recorded as other income, have been reflected the Company's consolidated statement of operations for the year ended December 31, 2006. The net cost to the Company of the settlement was approximately $700,000. This matter is, therefore, concluded. Certain Relationships and Related Party Transactions Pursuant to the Company's Code of Business Conduct and Ethics ("Code of Conduct"), all employees (including our Named Executive Officers) who have, or whose immediate family members have, any direct or indirect financial or other participation in any business that competes with, supplies goods or services to, or is a customer of the Company or its subsidiaries, are required to disclose to us and receive written approval prior to transacting such business. No such relationships have been reported. Our employees are expected to make reasoned and impartial decisions in the workplace. As a result, approval of a business relationship would be denied if it is believed that the employee's interest in such a relationship could influence decisions relative to the Company's business, or have the potential to adversely affect the Company's business or the objective performance of the employee's work. In addition, the Company's Code of Conduct requires adherence to a number of other underlying principles which are important to the Company. These items include, but are not limited to, restrictions on disclosure of Company information, insider trading, and the protection and use of Company assets. In connection with the Company's annual review of Directors independence, as described under "Director Independence" above, the Company reviews whether or not there have been any related party transactions by a Director, including any such transactions with the Company's directors and/or officers. If a transaction was deemed to be a related party transaction, that transaction would be reviewed by the Company's Board of Directors. Corporate Governance In addition to the various procedures followed by the Company's Board of Directors, as described herein, the Company maintains a separate Audit Committee and Personnel Committee. The Company believes the functions of its Board of Directors and existing committees essentially perform the responsibilities of a nominating and a corporate governance committee, and therefore, the Company does not maintain these additional separate committees. 6 INDEPENDENT REGISTERED PUBLIC ACCOUNTANT MATTERS Report of the Accounting and Audit Committee As set forth in more detail in the Accounting and Audit Committee (the "Audit Committee") charter (attached as Exhibit A) the primary purpose of the Audit Committee is to assist the Board of Directors in fulfilling its responsibility to oversee management's conduct of the Company's financial reporting process, including the oversight of the following: o financial reports and other financial information provided by the Company to any governmental or regulatory body, the public or other users thereof; o the Company's systems of internal accounting and financial controls; and o the annual independent audit of the Company's financial statements. The Audit Committee reviewed the Company's audited financial statements and met with both Company management and PricewaterhouseCoopers LLP, the Company's registered independent public accounting firm, to discuss those financial statements. Management has represented to us that the financial statements were prepared in accordance with accounting principles generally accepted in the United States of America. The Audit Committee has received from and discussed with PricewaterhouseCoopers LLP the written disclosure and the letter required by Independence Standards Board Standard No. 1 "Independence Discussions with Audit Committees". These items relate to that firm's independence from the Company. The Audit Committee also discussed with PricewaterhouseCoopers LLP any matters required to be discussed by Statement on Auditing Standards No. 61 "Communication with Audit Committees". Based on these reviews and discussions, the Audit Committee recommended to the Board of Directors that the Company's audited financial statements be included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2006. Audit Committee: Robert E. Long, Chairman Philip M. Halpern Salvatore Trani Audit Fees Aggregate fees billed by PricewaterhouseCoopers LLP for professional services rendered for the audit of our annual consolidated financial statements included in the Annual Report on Form 10-K and the review of interim consolidated financial statements included in Quarterly Reports on Form 10-Q and the review and audit of the application of new accounting pronouncements and SEC releases were $68,000 and $58,000 for the years ended December 31, 2006 and 2005, respectively. Audit Related Fees Aggregate fees billed by PricewaterhouseCoopers LLP for assurance and related services that are reasonably related to the performance of the audit or review of our financial statements and that are not disclosed under "Audit Fees" above were $0 and $8,000 for the years ended December 31, 2006 and 2005, respectively. These audit related services were for regulatory reporting services in connection with the sale of real estate by the Company during 2005. Tax Fees and All Other Fees No other fees relating to tax advisory or other services were paid to PricewaterhouseCoopers LLP for professional services rendered to the Company for the years ended December 31, 2006 and 2005. 7 Audit Committee Pre-Approval Policy Pursuant to its charter, the Audit Committee is responsible for selection, approving compensation and overseeing the independence, qualifications and performance of the Company's independent accountants. The Audit Committee has adopted a pre-approval policy pursuant to which certain permissible audit and non-audit services may be provided by the independent accountants. Pre-approval is generally provided for up to one year, is detailed as to the particular service or category of services and may be subject to a specific budget. The Audit Committee may also pre-approve particular services on a case-by-case basis. In assessing requests for services by the Company's independent accountants, the Audit Committee considers whether such services are consistent with the auditor's independence; whether the Company's independent accountants are likely to provide the most effective and efficient service based upon their familiarity with the Company; and whether the service could enhance our ability to manage or control risk or improve audit quality. There was no non audit-related tax or other services provided by PricewaterhouseCoopers in fiscal year 2006. EXECUTIVE COMPENSATION Compensation Discussion & Analysis The following Compensation Discussion and Analysis ("CDA") describes the material elements of compensation for the Company's officers identified in the Summary Compensation Table ("Named Executive Officers"). As more fully described above herein, the Personnel Committee consists of three independent directors of the Company. The Personnel Committee is responsible for establishing the Company's compensation programs including benefit plans, retirement plans and the Company's stock option program, including approving the granting of stock option awards to the Company's officer and employees. The Personnel Committee annually reviews and approves all compensation decisions relating to the Company's officers, including Named Executive Officers. The day-to-day design and administration of health, welfare and paid time-off plans and policies applicable to salaried employees in general are handled by the Company's management. The Personnel Committee is responsible for certain plan design changes outside the day-to-day requirements necessary to maintain these plans and policies. The Personnel Committee has the ability to, and may from time to time utilize the services of independent compensation consultants or other outside advisors in reviewing the Company's compensation programs, as they deem necessary. Objectives of the Compensation Program The Personnel Committee's overall objective in administering the Company's compensation programs is to attract, motivate and retain qualified personnel, reward corporate performance and recognize individual contributions on both a short-term and long-term basis. The Personnel Committee seeks to align the interests of these executives with those of the Company's stockholders by encouraging stock ownership by executive officers to promote a proprietary interest in the Company's success, and to provide incentives to achieve the Company's goals. In furtherance of these objectives, the Company's executive compensation policies are designed to focus the executive officers on the Company's goals. The Personnel Committee determines salary, bonuses and equity incentives based upon the performance of the individual executive officer and the Company. Management compensation is intended to be set at levels that the Personnel Committee believes fully reflects the challenges confronted by management. 8 The Company strives to provide a combined, overall competitive salary and benefits package, including annual cash bonus incentives, to retain qualified personnel who are familiar with the Company's operations and critical to the long-term success of the Company. The Company rewards personnel for contributions to a variety of matters, including the pursuit of claims recovery, compromising of actual and contingent liabilities and attention to the maintenance of a controlled level of expenditures. Cash bonus incentives are utilized to reward above average corporate performance and recognize individual initiative and achievement which provide immediate and/or long-term value to the Company. Due to the nature of the Company's operations, focusing on the recovery of assets, with an emphasis on the recovery of the Company's investment in Carteret Savings Bank ("Carteret") through the Supervisory Goodwill litigation and other proceedings, the Personnel Committee intends to continue its strategy of compensation through programs that provide an incentive for performance and for contributions to the Company's efforts to realize recoveries, achieve asset appreciation, eliminate liabilities and control costs. Elements of Compensation The Company's total compensation program for its officers consists of competitive market salaries, annual cash bonus awards, stock option awards and other benefits such as health and other insurance programs and a retirement plan in the form of a 401(k) Savings Plan, which is a qualified plan, within the meaning of the Internal Revenue Code of 1986, as amended (the "Code"). The Company's Supplemental Retirement Plan (the "Supplemental Plan"), as further discussed below, is scheduled for termination upon the previously agreed to lump-sum benefit payment in May 2007, to the Company's President and Chief Executive Officer. Due to cost considerations, administrative requirements and as part of an overall compensation philosophy, the Company seeks to maintain a minimal level of benefit programs and other perquisites. Section 162(m) of the Code, as amended, imposes a limitation on the deduction for certain executive officers' compensation unless certain requirements are met. In that regard, the Company maintains a Senior Management Incentive Compensation Plan (the "1994 Plan"), which provides for an annual bonus pool based on a percentage of an increase in the Company's total stockholders equity and/or an increase in the Company's market value. Payments pursuant to the 1994 Plan are intended to qualify as performance based compensation, which is deductible under Section 162(m). The 1994 Plan is not the exclusive plan under which the Executive Officers may receive cash or other incentive compensation or bonuses. No bonuses were paid attributable to the 1994 Plan for 2006. The Company has paid in the past, and reserves the right to pay in the future, compensation that is not deductible if it believes it is in the best interests of the Company. The Personnel Committee considered the provisions of Section 162(m) in setting compensation paid in 2006. Base Annual Salary Base annual salaries for executive officers are determined initially by evaluating the responsibilities of the position, the experience of the individual and the competition in the marketplace for management talent, including companies confronting problems of the magnitude and complexity faced by the Company. Base annual salaries are intended to be competitive to the overall market place, commensurate with the qualifications and experience of the Named Executive Officer. They are intended to provide the necessary incentive to retain and motivate qualified personnel. Individuals are encouraged to add value and provide benefit to the Company in all aspects of the Company's operations currently and in the future. Base annual salaries and salary adjustments are evaluated on a number of factors. The most important factor is the executive's performance and contribution to the Company, followed by the performance of the Company, any increased responsibilities assumed by the executive and the competition in the marketplace for similarly experienced executives. The salaries of the Named Executive Officers are reviewed on an annual basis typically at the end of each year and may also be adjusted from time to time based on changes in responsibilities, changes in benefit programs or as a result of other external and economic factors. 9 The base annual salary for Mr. Bianco of $625,000 per year remained unchanged for 2006 and has been at the same level as originally set forth in the January 1, 2001, amendment to his current employment agreement. See additional information herein for a discussion of Mr. Bianco's new employment agreement effective June 1, 2007 (the "2007 Employment Agreement"). The base annual salary of $157,500 for Mr. Ferrara and $132,500 for Mr. J. Bianco remained the same in 2006 as compared with 2005. Annual Bonus Awards The Personnel Committee approved cash bonuses for officers and employees for 2006. Factors considered included performance of the executive, performance of the Company, total compensation level, the Company's financial position and other pertinent factors. This analysis was necessarily a subjective process which utilized no specific weighting or formula with respect to the described factors in determining cash bonuses. Mr. Bianco was paid a bonus of $625,000 for 2006, which was the same amount as in 2005 and a reduction from the $800,000 received in 2004. Mr. Ferrara was paid a bonus of $150,000 in 2006, a reduction from the $175,000 received in 2005. Mr. J. Bianco was paid a bonus of $100,000 in 2006, a reduction from the $135,000 received in 2005. For 2006, the Personnel Committee considered the Named Executive Officer's continuing, integral roles in the Company's Supervisory Goodwill case, and other pending proceedings which are significant to the Company, as well as the Company's receipt of the $1.2 million Internal Revenue Service ("IRS") interest refund. The Personnel Committee also recognized management's role in the maintenance of a controlled level of expenditures. Mr. Bianco was additionally recognized for his management of the Company's investment returns and his role in pursuing several potential acquisitions. 2007 Employment Agreement with the Company's President and Chief Executive Officer An employment agreement, as amended, is in effect between Mr. Bianco and the Company, which provides for him to serve as Chairman, President and Chief Executive Officer of the Company at an annual base salary of $625,000 through May 31, 2007. The employment agreement also provides for additional benefits, including his participation in various employment benefit plans, annual bonus eligibility, and the accrual of benefits under the Company's Supplemental Plan at 4% of his average base salary and bonus (averaged over the three years of credited service that produces the highest benefit), and 100% vesting in his Supplemental Plan accrued benefit. A major objective and focus for the Company continues to be the recovery of the value of the Company's investment in Carteret Savings Bank ("Carteret"), through successful litigation efforts (the "CSB Recovery Litigation"). Due to a number of reasons as summarized below, the Personnel Committee and the Board of Directors of the Company believe Mr. Bianco's continued employment beyond his current contract end date of May 31, 2007, is essential to the Company's pursuit of the CSB Recovery Litigation. In particular, Mr. Bianco has been instrumental in managing the Company's overall litigation effort and in developing and executing litigation strategies being pursued. In addition, as the former President and Chief Executive Officer from May 1991 to December 1992, and one of the individuals who led the recapitalization efforts during that time frame, Mr. Bianco has intimate knowledge of Carteret, its operations and financial position which will provide a basis for the CSB Recovery Litigation. As part of the Board of Directors efforts to extend Mr. Bianco's employment contract, the Board of Directors determined that it wished to eliminate the current employment agreement language, providing for a minimum annual bonus equal to annual base salary, but wanted to continue annual bonus eligibility at the discretion of the Personnel Committee. In addition, the Personnel Committee believed it was important to replace future Supplemental Plan accruals and the portion of annual cash bonuses paid on progress in the CSB Recovery Litigation effort with an incentive arrangement, contingent solely upon the eventual success of the CSB Recovery Litigation. The Board of Directors and Personnel Committee considered the impact of continuing Mr. Bianco's current contract to May 31, 2012, the potential increase to the Company's Supplemental Plan liability and Mr. Bianco's integral involvement in the CSB Recovery Litigation effort. The Board of Directors and Personnel Committee also considered the obstacles the Company faces in its efforts and the probable extended length of time to obtain a recovery and; therefore, believe, given the demands of the task, it was appropriate to provide an incentive arrangement to Mr. Bianco. 10 The Personnel Committee reviewed the Supplemental Plan and the Company's related liability, including the desirability of continuing to maintain and administer the Supplemental Plan, the untying of Mr. Bianco's future employment with the Company from the timing of his Supplemental Plan benefit payment(s), the Company's overall financial position, and the desirability of continued accruals under the Supplemental Plan after Mr. Bianco's current employment contract expires on May 31, 2007. In connection with this review, the Personnel Committee considered various options, including whether or not to terminate and/or curtail the Supplemental Plan. Mr. Bianco is the only current employee of the Company who participates in the Supplemental Plan and his Supplemental Plan benefit is fully vested. For purposes of computing his accrued benefit under the Supplemental Plan, assuming his continued employment with the Company, Mr. Bianco will have 16.08 years of credited service upon the expiration of his current employment contract on May 31, 2007. His accrual percentage under the Supplemental Plan is 4%, in effect from the time of his initial employment with the Company, and in accordance with the Supplemental Plan (prior to the amendment described below), he had the entitlement to receive his Supplemental Plan benefit in either a lump-sum or an annuity upon termination of his employment with the Company. As a result of the above considerations, during 2006, the Company entered into a new employment agreement with Mr. Bianco to extend his employment with the Company for an additional five (5) years beyond May 31, 2007, until May 31, 2012 (the "2007 Employment Agreement"). As part of the 2007 Employment Agreement terms: (i) Mr. Bianco's annual rate of base salary will not increase from his current rate of base salary during the first three years of the 2007 Employment Agreement (the amount of Mr. Bianco's base salary for the fourth and fifth years of the 2007 Employment Agreement term to be determined by the Personnel Committee, in its sole discretion, although in no event less than $625,000 per annum); (ii) Mr. Bianco's service accruals under the Supplemental Plan will cease as of May 31, 2007; (iii) Mr. Bianco's Final Average Earnings (as defined in the Supplemental Plan) for Supplemental Plan benefit calculation purposes, are capped as of December 31, 2004; and (iv) Mr. Bianco's annual bonus opportunity will no longer be linked to recovery efforts in connection with the Company's Supervisory Goodwill litigation. Instead on or about May 31, 2007, Mr. Bianco will receive a lump-sum payment of his Supplemental Plan benefit of $16,676,115, which amount was calculated on the basis of a 5.75% discount rate, a "RP-2000" projected to 2004 mortality table, and 16.08 years of credited service, and the Company and Mr. Bianco have agreed to a long term incentive bonus formula, at varying percentages ranging from 5% to 10%, or more, based upon recoveries received by the Company for its investment in Carteret, through litigation or otherwise (including the Company's Supervisory Goodwill litigation). The Supplemental Plan has been amended to provide for its automatic termination immediately following the payment to Mr. Bianco of his Supplemental Plan lump-sum benefit on or about May 31, 2007. The Board of Directors and Personnel Committee utilized the services of an independent outside compensation consultant, Pearl Meyer & Partners, other outside advisors and independent legal counsel in connection with the 2007 Employment Agreement and the amendment to the Supplemental Plan. With the advice and consultation of outside advisors and given the challenges faced by the Company in its efforts to obtain a CSB Litigation Recovery, including the projected timeframe to achieve such a recovery; the Personnel Committee believes the 2007 Employment Agreement with Mr. Bianco, and the lump-sum Supplemental Plan benefit payment and its termination, provide the necessary and appropriate incentives for the best interests of the Company and its shareholders. See Employment Contracts, below for a further discussion of Mr. Bianco's employment agreements. 11 etirement/Pension Benefits Supplemental Plan As more fully described above, the Company currently has an unfunded non-tax qualified retirement plan which has been in effect since 1985, the Supplemental Plan. Mr. Bianco is currently the only individual who participates in the Supplemental Plan and his Supplemental Plan benefits are fully vested effective with the terms of his initial employment with the Company in 1991. No other employee or officer of the Company is a participant under the Supplemental Plan. The materials terms of the Supplemental Plan are described under Pension Benefits below. As noted above, as part of the 2007 Employment Agreement between the Company and Mr. Bianco, in consideration for Mr. Bianco's agreement to extend his employment with the Company for an additional five (5) years (beyond his current May 31, 2007 contract expiration date), with no further Supplemental Plan accruals for the extension period, the Company has amended the Supplemental Plan to provide for the payment to Mr. Bianco of his Supplemental Plan benefit in a lump-sum on or about May 31, 2007 (the date of his Supplemental Plan benefit entitlement had he not agreed to extend his employment with the Company beyond May 31, 2007). The Company and Mr. Bianco further agreed that for purposes of computing his Supplemental Plan benefit as of May 31, 2007, his Final Average Earnings (as defined in the Supplemental Plan) would be capped as of December 31, 2004, a 5.75% discount rate would be used and a "RP-2000" projected to 2004 mortality table would be used, resulting in a Supplemental Plan lump-sum benefit payment to Mr. Bianco of $16,676,115. The Company has further amended the Supplemental Plan to automatically terminate following the lump-sum payment of $16,676,115 to Mr. Bianco on or about May 31, 2007. 401(k) Savings Plan Other than the Supplemental Plan, the only other retirement type plan maintained by the Company, is the Company's 401(k) Savings Plan (the "Savings Plan"). Pursuant to the terms of the Savings Plan, employees can make contributions which are 100% matched by the Company. The employee and the employer matching contribution are subject to the maximum limitations as set forth in the Internal Revenue Code of 1986, as amended. During 2006, the Company's matching contributions to the Named Executive Officers aggregated $55,000. Stock Options The Company maintains the 1993 Stock Incentive Plan, which authorizes the grant of stock options. The Personnel Committee has not granted any stock options since 2004. If awarded, stock option grants are generally awarded as incentive stock options intended to qualify for favorable tax treatment under Federal tax law. The exercise price of stock option grants is set at the fair market value of the Company's common stock on the date of grant. Accordingly, stock option grants would only have value if the market price of the common stock increases after the date of grant. Stock option grants generally have a 10 year term and vest in equal installments over a 2 year period. In determining the size of stock option grants to officers, the Personnel Committee considers the individual's contributions to the Company, Company performance and previously issued stock options grants. Stock option awards are granted to encourage stock ownership by the Named Executive Officers, to provide further incentive to the achievement of the Company's goals and to align the interests of the Named Executive Officers with those of the Company's stockholders. 12 Practices Regarding the Grant of Stock Options Awards If granted, the Personnel Committee makes grants of stock options or other equity based awards to the Named Executive Officers or employees of the Company generally at the beginning of each year. The Company does not have any program, plan or practice to time grants of stock options or other equity based awards in coordination with the release of material non-public information or otherwise. All stock option awards made to the Company's Named Executive Officers, or any of our other employees, are made pursuant to the Company's 1993 Stock Incentive Plan with an exercise price equal to the fair market value of the Company's common stock on the date of grant. Fair market value is determined based upon the closing market price of a share of the Company's common stock on the date of grant. The Company's does not have any program, plan or practice of awarding options and setting the exercise price based upon a stock price other than on the fair market value on the date of grant. The Company does not have a practice of determining the exercise price of options grants by using the lowest prices of the Company's common stock in a period preceding, surrounding or following the date of grant. Other Benefits The Company provides only a limited number of additional benefits and perquisites. Such additional items, to the extent provided, are included as Other Compensation in the Summary Compensation table presented herein. The benefits and other perquisites are reasonably consistent with general competitive market practices. Items provided by the Company include, depending on the Named Executive Officer, Company paid term life insurance at two times the individuals base annual salary, Company paid long-term disability with a monthly benefit up to 60% of the individuals base monthly salary, supplemental medical and dental coverage for costs not covered under the base health insurance plans, and depending on the Named Executive Officer, reimbursement for income tax services and Company provided transportation. Health and welfare plans are provided through outside insurance carriers. Benefits generally available to all full-time employees of the Company are not included herein. The Company does not provide any other type of deferred compensation programs nor does it provide or have outstanding loans with the Named Executive Officers or any other employee of the Company. Personnel Committee Report The Personnel Committee believes that its compensation programs, mixing equity and cash incentives, will continue to focus the efforts of the Company's executive officers on long-term growth for the benefit of the Company and its stockholders. The Personnel Committee has found all the components of Company's officers' compensation to be fair, reasonable and appropriate. The Personnel Committee has reviewed and discussed the Company's Compensation Discussion and Analysis ("CDA") (included herein above), with the Company's management and has recommended that the CDA be included in the Company's 2007 Proxy Statement. Personnel Committee: Philip M. Halpern, Esq., Co-Chairperson Salvatore Trani, Co-Chairperson Robert E. Long, Member 13 The following table sets forth the total compensation earned by the Chief Executive Officer and each other executive officer of the Company and its subsidiaries (the "Named Executive Officers") for services rendered to the Company during the last fiscal year:

Summary Compensation Table - 2006 ($) (d) Change In ($) (c) Pension Value and ($)(b) Non-Equity Non-qualified Name and Principal ($) ($)(a) ($) Stock Incentive Deferred ($)(e)(f) Position Year Salary Bonus Stock Option Plan Compensation All Other ($) Awards Awards Compensation Earnings Compensation Total Richard A. Bianco, 2006 $625,000 $625,000 - $80,201 - $1,687,000 $95,953 $3,113,154 Chairman, President and Chief Executive Officer John P. Ferrara, 2006 $157,500 $150,000 - $3,937 - - $40,282 $351,719 Vice President/ Chief Financial Officer & Controller Joseph R. Bianco, 2006 $132,500 $100,000 - $3,937 - - $33,084 $269,521 Treasurer

(a) Amounts include bonuses earned for the year indicated and paid in the following fiscal year, consistent with past practice of the Company. (b) The dollar value for Stock Option Awards in the table above represents the compensation expense recognized by the Company for financial statement reporting purposes for the fiscal year ended December 31, 2006. Such amounts were determined in accordance with Statement of Financial Accounting Standards No. 123 (revised 2004), "Share-Based Payment" ("SFAS 123R") utilizing the assumptions discussed in Note 8 to the Company's consolidated financial statements for the fiscal year ended December 31, 2006, but disregarding the estimate of forfeitures related to service-based vesting. The amounts shown for 2006 reflects the aggregate of the grant date fair value of stock option awards previously granted and vesting in 2006. The values shown for stock options are theoretical. The value a Named Executive Officer may actually realize will depend on the amount by which the Company's common stock market value exceeds the exercise price of the stock option award when the stock options are actually exercised. (c) See the discussion in Employment Contracts below, for information relating to the 2007 Employment Agreement between Mr. Bianco and the Company and the amounts which could be payable to Mr. Bianco in the future in connection with a recovery received by the Company for its investment in Carteret Savings Bank, F.A. (d) The dollar value indicated in "Change in Pension Value and Non-qualified Deferred Compensation Earnings" represents the actuarial increase in the named executive's Supplemental Pension Plan benefit, as accrued on the Company's financial statements in accordance with generally accepted accounting principles. (e) Amounts for personal use of a Company provided automobile for Mr. Bianco, included in table below for other compensation, includes mileage, fuel, maintenance, insurance and other miscellaneous fees. 14 (f) All Other Compensation in the table above consists of the following:

Mr. Bianco Mr.Ferrara Mr. J. Bianco ---------- ---------- ------------- Company contributions to 401(k) savings plan $20,000 $15,000 $20,000 Supplemental life insurance premiums 13,347 1,574 1,968 Long-term disability insurance premiums 13,672 1,092 3,312 Supplemental medical and dental insurance 12,043 20,902 4,490 Reimbursement of income tax costs for participation in life insurance plans 8,268 1,012 1,184 Reimbursement of income tax costs for participation in long-term disability plans 8,468 702 2,130 Company provided automobile (e) 3,605 - - Reimbursement for tax services 7,550 - - Director's fees 9,000 - - --------- --------- ----------- Total $95,953 $40,282 $33,084 ========= ========= ===========

Grants of Plan Based Awards During 2006 No stock options, SARs, or any other type of stock award grants were granted to the Named Executive Officers during the year ended December 31, 2006. 15 EMPLOYMENT CONTRACTS An employment agreement, as amended, is in effect between Mr. Bianco and the Company, which provides for him to serve as Chairman, President and Chief Executive Officer of the Company at an annual base salary of $625,000 through May 31, 2007 (the "Current Employment Agreement"). The employment agreement also provides for additional benefits, including his participation in various employee benefit plans, annual bonus eligibility, certain long-term disability benefits and the accrual of benefits under the Company's Supplemental Plan at 4% of his average base salary and bonus (averaged over the three years of credited service that will produce the highest benefit), and 100% vesting in his Supplemental Plan accrued benefit. (See Retirement/Pension Benefits above, for further information with regard to the lump-sum payment of Mr. Bianco's Supplemental Plan benefits of $16,676,115 on or about May 31, 2007.) In the event the Company was to terminate his employment other than for reasons permitted in the employment agreement, Mr. Bianco would be entitled to receive a lump-sum amount equal to the salary payments provided for in the employment agreement for the remaining term thereof following the passage of a six (6) month period from his date of termination. As of December 31, 2006, the aggregate lump-sum amount of such salary payments, pursuant to the Current Employment Agreement, would be approximately $260,000. During March 2006, an additional employment agreement between Mr. Bianco and the Company, effective June 1, 2007, was executed (the "2007 Employment Agreement"). The terms of the 2007 Employment Agreement provide for Mr. Bianco to continue to serve as Chairman, President and Chief Executive Officer of the Company from June 1, 2007 through May 31, 2012 (the "Employment Period"). Under the terms of the 2007 Employment Agreement, Mr. Bianco will continue to receive an annual base salary of $625,000 for the first three (3) years and then is eligible for discretionary increases to the amount of his base salary in the fourth and fifth years. The 2007 Employment Agreement continues to provide for discretionary annual bonuses (which may not take into consideration his efforts to obtain a recovery for the Company of its investment in Carteret Savings Bank, FA), employee benefit plans participation, and certain long-term disability benefits; however, there will be no further Supplemental Plan benefit accruals. (See Retirement/Pension Benefits above, for further information with regard to the lump-sum payment of Mr. Bianco's Supplemental Plan benefits or $16,676,115 on or about May 31, 2007.) The 2007 Employment Agreement provides a long-term incentive arrangement for Mr. Bianco (the "Long-Term Incentive Award"), whereby, should the Company receive a recovery of its investment in Carteret Savings Bank, FA, through litigation or otherwise (including the Company's Supervisory Goodwill litigation) (the "Recovery Amount"), Mr. Bianco will receive (with certain exceptions), a lump-sum payment equal to a percentage of that recovery, as follows: Long-Term Incentive Award = 5% of the first $50,000,000 of Recovery Amount; Plus 8% of Recovery Amount in excess of $50,000,000 but not greater than $150,000,000; Plus 10% of Recovery Amount in excess of $150,000,000 but not greater than $250,000,000; Plus Discretionary amount (not less than 10%), to be determined by the Board, of Recovery Amount in excess of $250,000,000. Under the terms of the 2007 Employment Agreement, if no recovery has been obtained by the Company by the expiration of the five-year term of the 2007 Employment Agreement, the Company and Mr. Bianco will enter into a consulting arrangement pursuant to which, following his employment with the Company, he will continue to provide services to the Company as an independent contractor, solely for the purpose of assisting the Company in obtaining such a recovery. The Long-Term Incentive Award to Mr. Bianco is to be paid in the future (i.e., whether during or after the Employment Period and/or the Consulting Period) except if Mr. Bianco willfully refuses to cooperate in a reasonable fashion with the Company and/or the Board in connection with the Company's efforts to obtain a Recovery Amount, in which case he would forfeit his entitlement to receive a Long-Term Incentive Award. 16 During the Employment Period, if Mr. Bianco voluntarily resigns or has his employment with the Company terminated by the Company for cause (as set forth in the 2007 Employment Agreement), Mr. Bianco will forfeit his entitlement to receive the Long-Term Incentive Award. If Mr. Bianco becomes disabled (as set forth in the 2007 Employment Agreement) or dies, Mr. Bianco or his estate, as applicable, would be entitled to receive the Long-Term Incentive Award upon the Company's receipt of the Recovery Amount, regardless of when the Recovery Amount is received by the Company. If the Company terminates Mr. Bianco's employment with the Company without cause, Mr. Bianco or his estate, as applicable would be entitled to receive the Long-Term Incentive Award upon the Company's receipt of the Recovery Amount, regardless of when the Recovery Amount is received by the Company. Mr. Bianco's employment under the 2007 Employment Agreement automatically terminates if Mr. Bianco dies during the term of the Employment Period and can be terminated by the Company at its option for cause (as set forth in the 2007 Employment Agreement) or Mr. Bianco's inability to engage in any substantial gainful activity (as set forth in the 2007 Employment Agreement). In the event the Company terminates Mr. Bianco's employment for any reason other than those permitted pursuant to the 2007 Employment Agreement, Mr. Bianco would be entitled to receive a lump-sum amount equal to the salary payments provided for in the 2007 Employment Agreement for the remaining term thereof, following the passage of a six (6) month period from the date of his termination. Outstanding Equity Awards at December 31, 2006 The Company does not have any outstanding SARs or any other type of stock award grants outstanding. The following table sets forth information concerning the fiscal year-end value of unexercised options held by the Named Executive Officers on December 31, 2006.

--------------------------------------------------------- ----------------------------------------------- Option Awards Stock Awards ------------ ----------------------------------------------------------------- ----------------------------------------------- (#) Equity Incentive ($) # Plan Equity Equity Awards Incentive Incentive ($) of Plan Plan (#) Market Unearned Awards: Awards; Number Value of Shares, Market or Number of Securities Number of of Shares Units or Payout Value Underlying Unexercised Securities Shares or Units Other of Unearned Options/SARs at December Underlying, $ or Units of Stock Rights Shares, 31, 2006 Unexercised Option Option of Stock that that Units or Unearned Exercise Expiration that Have Not Have Not Other Rights Options Price Date Have Not Vested Vested that Have --------------------------- Vested Not Vested # # Exercisable Unexercisable -------------------- ---------------------------- ------------ ---------- ------------ ---------- ---------- ---------- ----------- Richard A. Bianco 280,000 84,000 - 1.19 1/02/2007 - - - - 136,000 - - 1.09 1/02/2012 - - - - 200,000 - - 0.64 1/06/2014 - - - - 100,000 100,000 - 0.81 1/03/2015 - - - - John P. Ferrara 5,000 - - 3.65 1/23/2008 - - - - 10,000 - - 2.56 1/04/2009 - - - - 10,000 - - 0.95 1/03/2010 - - - - 10,000 - - 0.60 1/02/2011 - - - - 100,000 - - 1.09 1/02/2012 - - - - 20,000 - - 0.64 1/06/2014 - - - - 10,000 10,000 - 0.81 1/03/2015 - - - - Joseph R. Bianco 5,000 - - 3.65 1/23/2008 - - - - 5,000 - - 2.56 1/04/2009 - - - - 5,000 - - 0.95 1/03/2010 - - - - 10,000 - - 0.60 1/02/2011 - - - - 100,000 - - 1.09 1/02/2012 - - - - 20,000 - - 0.64 1/06/2014 - - - - 10,000 10,000 - 0.81 1/03/2015 - - - -

No awards under the long-term incentive plan were made to the Named Executive Officers in 2006, and there were no stock options previously awarded to any of the Named Executive Officers that were repriced during 2006. 17 Option Exercises and Stock Vested Table During Fiscal 2006 None of the Named Executive Officers exercised stock options during 2006. The Company does not have any SARs or other stock award grants outstanding. Pension Benefits The AmBase Supplemental Retirement Plan, as amended and restated (the "Supplemental Plan"), is an unfunded, non tax-qualified retirement plan which has been in effect since 1985, under which benefits are based on a varying percentage accrual (historically ranging from 2.5% to 4%, determined on an individual basis by the Personnel Committee) of the participant's average base salary and bonus (averaged over the three years of credited service that produce the highest average) multiplied by the number of years of the participant's credited service, up to 20 years, plus 1% of his or her average base salary and bonus multiplied by his or her years of credited service from 20 to 25 years, plus 0.5% of his or her average base salary and bonus multiplied by his or her years of credited service in excess of 25 years. Benefits vest after ten years of service although the Personnel Committee may waive or reduce the ten-year service requirement for individual participants. Benefits are generally payable in the form of a 10-year life and certain annuity or upon the election of a vested participant whose employment has terminated after ten years of service or after a change in control of the Company, in the form of an actuarially equivalent lump-sum payment. Mr. Bianco is the only current executive officer of the Company who participates in the Supplemental Plan and his Supplemental Plan benefits are fully vested, effective with the terms of his initial employment with the Company in 1991. Mr. Bianco received no benefit under the AmBase Retirement Plan, a tax-qualified retirement plan, which was terminated in 1993. No other employee or officer of the Company is a participant under the Supplemental Plan. Other than the Company's 401(K) Savings Plan, the Company maintains no other retirement or deferred compensation type plans. The actuarial present value of accumulated plan benefits for Mr. Bianco under the Supplemental Plan as of December 31, 2006 is as follows:

# Number of $ $ Years of Present Value Payments Credited of Accumulated During Last Name Plan Name Service Benefit Fiscal Year Richard A. Bianco AmBase Supplemental Retirement Plan 15.67 $16,282,000 - ===== =========== ====================

For the purposes of computing accrued benefits under the Supplemental Plan, Mr. Bianco had 15.67 years of credited service as of December 31, 2006 and his accrual percentage is 4% in effect from the time of his initial employment with the Company. Assuming Mr. Bianco's continued employment with the Company until the expiration of his current employment contract on May 31, 2007, he will have 16.08 years of credited service for the computation of accrued benefits under the Supplemental Plan. In consideration for Mr. Bianco's agreement to extend his employment with the Company for an additional five (5) years, (beyond his current May 31, 2007 contract expiration date), with no further Supplemental Plan accruals for the extension period (pursuant to the 2007 Employment Agreement more fully described herein below), the Company has amended the Supplemental Plan to provide for the payment to Mr. Bianco of his Supplemental Plan benefit in a lump-sum on or about May 31, 2007 (the date of his Supplemental Plan benefit entitlement had he not agreed to extend his employment with the Company beyond May 31, 2007). The Company and Mr. Bianco have further agreed that for purposes of computing his Supplemental Plan benefit as of May 31, 2007, his Final Average Earnings (as defined in the Supplemental Plan) will be capped as of December 31, 2004, a 5.75% discount rate will be used and a "RP-2000" projected to 2004 mortality table will be used, resulting in a Supplemental Plan lump-sum benefit payment to Mr. Bianco of $16,676,115. The Company has further amended the Supplemental Plan to automatically terminate following the lump-sum payment of $16,676,115 to Mr. Bianco on or about May 31, 2007. See Employment Contracts, above for a more complete description of Mr. Bianco's employment agreements with the Company. 18 Nonqualified Deferred Compensation The Company does not maintain any other type of nonqualified deferred compensation plan. Potential Payments Upon Termination or Change in Control Other than Mr. Bianco, there are no employment agreements or employment contracts with any other officer or employee of the Company. See Employment Contracts above, for information concerning potential payments due to Mr. Bianco upon termination, pursuant to the employment agreement(s) between Mr. Bianco and the Company. The Company does not have any severance or termination payment plans in effect. Generally, subject to the terms of the individual stock options agreements, in the event the employment of an employee is terminated (other than by reason of retirement or death) without cause, as defined, the employee may exercise the vested and previously unexercised portion of their option agreement, as of such date, at any time within (i) one year after the termination of the employee's employment due to their "total and permanent disability", as defined, or (ii) three months after the termination of the employee's employment for any other reason, but, in either case, in no event after the expiration of the option terms. In the event that the employment of an employee terminates by reason of retirement, option agreements generally shall be exercisable for a period of three years after such retirement date. If an option is exercised after cessation of employment for any reason, including retirement, it may only be exercised to the extent of shares previously vested, as of such date, provided, however, that the option may not be exercised after the expiration of the option term. Additionally, stock options may, in the sole discretion of the Personnel Committee, become exercisable at any time prior to the expiration date of the option award for the full number of awarded shares or any part thereof, (less any options previously exercised under the option agreement) (i) after the employee ceases to be an employee of the Company as a result of the sale or other disposition by the Company of assets or property (including shares of any subsidiary), or (ii) in the case of a change in control of the Company. As of December 31, 2006, the intrinsic value of all outstanding options to the Named Executive Officers was $0. 19 COMPENSATION OF DIRECTORS Effective for 2006, each director of the Company, including Mr. Bianco, who is the Company's Chairman, President and Chief Executive Officer, are to be paid an annual fee of $7,500. In addition, each Chairperson and/or Co-Chairperson of a Board committee is to be paid an additional fee of $1,000 per year, and after four (4) Board and/or committee meetings, each director is to be paid a $500 per meeting attendance fee. Pursuant to the Company's By-Laws, directors may be compensated for additional services for the Board of Directors or for any committee at the request of the Chairman of the Board or the Chairman of any committee. Directors Compensation Table Details of amounts paid to the Company's directors in their capacities as directors and/or board committee members for the year ending December 31, 2006 is as follows:

($) Fees Earned ($) Name and Position or Paid in Cash Totals(b) Richard A. Bianco (a) Chairman of the Board $9,000 $9,000 Philip M. Halpern Board Member Co-Chair Personnel Committee Member Audit Committee $10,500 $10,500 Robert E. Long Board Member Chairman Audit Committee Member Personnel Committee $10,000 $10,000 Salvatore Trani Board Member Co-Chair Personnel Committee Member Audit Committee $9,500 $9,500

(a) Amounts in the table above for Mr. Bianco, exclude amounts received by him in his capacity as the Company's President and Chief Executive Officer, pursuant to his Employment Agreement; details of such compensation amounts and the terms of his Employment Agreement are provided herein. (b) With the exception of Mr. Bianco (as noted above), no other additional fees or any other type of compensation, including equity and/or deferred compensation payments or awards were paid or granted to any of the Company's outside directors in 2006. Personnel Committee Interlocks and Insider Participation The members of the Personnel Committee during 2006 were Philip M. Halpern, Co-Chairperson, Salvatore Trani, Co-Chairperson, and Robert E. Long. No executive officer serves, or in the past has served, as a member of the Board of Directors or Personnel Committee of any entity that has any of its executive officers serving as a member of the Company's Board of Directors or Personnel Committee. 20 STOCK OWNERSHIP Stock Ownership of Certain Beneficial Owners The following information is set forth with respect to persons known by the Company to be the beneficial owners of more than 5% of the outstanding Common Stock, the Company's only class of voting securities, as of February 28, 2007, except as set forth below.

Amount and Percentage Name and Address of Nature of Beneficial of Common Beneficial Owner Ownership Stock Owned Richard A. Bianco 16,853,531 (a) 37.04% Chairman, President and (direct) Chief Executive Officer AmBase Corporation 100 Putnam Green, 3rd Floor Greenwich, CT 06830-6027

(a) Includes 536,000 shares that could be purchased by the exercise of options as of February 28, 2007 or within 60 days thereafter, under the Company's stock option plans. Stock Ownership of Directors and Executive Officers According to information furnished by each nominee, continuing director and executive officer included in the Summary Compensation Table, the number of shares of the Company's Common Stock beneficially owned by them as of February 28, 2007 was as follows:

Amount Percentage Name of Beneficial and Nature of of Common Owner Beneficial Ownership(a)(c) Stock Owned Richard A. Bianco.................................... 16,853,531 (b) 37.04% John P. Ferrara...................................... 276,029 (b) * Philip M. Halpern.................................... -- -- Robert E. Long....................................... 25,000 * Salvatore Trani...................................... -- -- All Directors and Officers as a group, (5 persons).......................................... 17,154,560 (b) 37.55%

* Represents less than 1% of Common Stock outstanding (a) All of the named individuals have sole voting and investment power with respect to such shares. (b) Includes 536,000 shares for Mr. Bianco and 175,000 shares for Mr. Ferrara that could be purchased by the exercise of stock options as of February 28, 2007, or within 60 days thereafter, under the Company's stock option plans. (c) There are no pledges of Company shares by any of the Company's officers, employees or directors. PROPOSAL NO. 2 - APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Based on the direction of the Audit Committee, the Board of Directors is proposing that the stockholders approve the appointment of PricewaterhouseCoopers LLP as the independent registered public accounting firm for the Company for the year ending December 31, 2007. The Company has been advised by PricewaterhouseCoopers LLP that neither that firm nor any of its partners had any direct financial interest or any material indirect financial interest in the Company, or any of its subsidiaries, except as independent certified public accountants. A representative of PricewaterhouseCoopers LLP is expected to be present at the Annual Meeting with the opportunity to make a statement, if he or she desires to do so, and to respond to appropriate questions from the stockholders. The Board of Directors recommends a vote FOR approval of the appointment of PricewaterhouseCoopers LLP. 21 ADDITIONAL INFORMATION The Annual Report of the Company on Form 10-K, covering the fiscal year ended December 31, 2006, is being mailed with this Proxy Statement to each stockholder entitled to vote at the Annual Meeting. Any stockholder who wishes to submit a proposal for action to be included in the Proxy Statement for the Company's 2008 Annual Meeting of Stockholders must submit such proposal so that it is received by the Secretary of the Company by December 2, 2007. The accompanying proxy is solicited by and on behalf of the Company's Board of Directors. The cost of such solicitation will be borne by the Company. In addition to solicitation by mail, regular employees of the Company may, if necessary to assure the presence of a quorum, solicit proxies in person, or by telephone, facsimile or other electronic means. Arrangements have been made with brokerage houses and other custodians, nominees and fiduciaries, for the forwarding of solicitation material to the beneficial owners of Common Stock held of record by such persons, and the Company will reimburse such entities for reasonable out-of-pocket expenses incurred in connection therewith. The Company has engaged American Stock Transfer & Trust Company to assist in the tabulation of proxies. If any matter not described in this Proxy Statement should properly come before the Annual Meeting, the persons named in the accompanying proxy will vote the shares represented by that proxy in accordance with their best judgment unless a stockholder, by striking out the appropriate provision of the proxy, chooses to withhold authority to vote on such matters. As of the date this Proxy Statement was printed, the directors knew of no other matters to be brought before the Annual Meeting. Stockholder inquiries, including requests for the following: (i) change of address; (ii) replacement of lost stock certificates; (iii) Common Stock name registration changes; (iv) Quarterly Reports on Form 10-Q; (v) Annual Reports on Form 10-K; (vi) proxy material; and (vii) information regarding stockholdings, should be directed to: American Stock Transfer & Trust Company 59 Maiden Lane New York, NY 10038 Attention: Stockholder Services (800) 937-5449 or (718) 921-8200 Ext. 6820 Copies of Quarterly Reports on Form 10-Q, Annual Reports on Form 10-K and Proxy Statements can also be obtained directly from the Company free of charge by sending a request to the Company by mail as follows: AmBase Corporation 100 Putnam Green 3rd Floor Greenwich, CT 06830 Attn: Shareholder Services In addition, the Company's public reports, including Quarterly Reports on Form 10-Q, Annual Reports on Form 10-K and Proxy Statements, can be obtained through the SEC's EDGAR Database over the World Wide Web at www.sec.gov. Materials filed with the SEC may also be read or copied by visiting the SEC's Public Reference Room, 450 Fifth Street, NW, Washington, DC 20549. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. 22 AMBASE CORPORATION PROXY FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON FRIDAY, MAY 18, 2007 This Proxy is solicited on Behalf of the Board of Directors The undersigned revoking all prior proxies, hereby appoints Richard A. Bianco and John P. Ferrara and each of them, with full power of substitution, as proxies to represent and vote, as designated on the reverse, all shares of Common Stock of AmBase Corporation (the "Company"), held or owned by the undersigned on April 2, 2007, at the Annual Meeting of Stockholders of the Company, to be held on Friday, May 18, 2007 at 9:00 a.m. Eastern Daylight Time, at the Hyatt Regency Hotel, 1800 East Putnam Avenue, Old Greenwich, Connecticut 06870 and at any adjournment(s) or postponement(s) thereof, with all powers which the undersigned would possess if personally present, and in their discretion upon such other business as may properly come before the meeting or any adjournment(s) or postponement(s) thereof. This proxy is given with authority to vote FOR Proposals (1) and (2), unless a contrary choice is specified. (CONTINUED AND TO BE SIGNED ON REVERSE SIDE) PLEASE DATE, SIGN AND MAIL YOUR PROXY CARD IN THE ENVELOPE PROVIDED AS SOON AS POSSIBLE. (Please detach along perforated line and mail in the envelope provided) The Board of Directors recommends a vote "FOR" the election of the nominee as director and "FOR" proposal 2. Please sign, date and return promptly in the enclosed envelope. Please mark your vote in blue or black ink as shown here. X Proposal (1) Election of Director. Nominee: Salvatore Trani / / For Nominee / / Withhold Authority for Nominee Proposal (2) Approval of appointment of PricewaterhouseCoopers LLP as the Company's Independent Registered Public Accounting Firm for the calendar year 2007. FOR / / AGAINST / / ABSTAIN / / THE PROXY WILL BE USED IN CONNECTION WITH THE PROPOSALS ABOVE AS SPECIFIED BY YOU. IF NO SPECIFICATION IS MADE, THE PROXY WILL BE USED IN ACCORDANCE WITH THE DIRECTORS' RECOMMENDATIONS, FOR THESE PROPOSALS. DISCRETIONARY AUTHORITY IS HEREBY GRANTED WITH RESPECT TO SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE MEETING. THE UNDERSIGNED ACKNOWLEDGES RECEIPT OF THE NOTICE OF ANNUAL MEETING OF STOCKHOLDERS AND THE PROXY STATEMENT FURNISHED THEREWITH. PLEASE MARK, DATE AND SIGN AS YOUR NAME APPEARS ABOVE AND RETURN IN THE ENCLOSED ENVELOPE. SIGNATURE OF STOCKHOLDER _ _ _ _ _ _ _ _ _ DATE _ _ _ _ _ _ _ _ _ _ _ SIGNATURE OF STOCKHOLDER _ _ _ _ _ _ _ _ _ _ DATE _ _ _ _ _ _ _ _ _ _ _ -------------------------------------------------------------------------------- To change the address on your account, please check the box at right and indicate your new address in the address space above. Please note that changes to the registered name(s) on the account may not be submitted via this method___ -------------------------------------------------------------------------------- NOTE: Please sign exactly as your name or names appear on this Proxy. When shares are held jointly, each holder should sign. When signing as executor, administrator, attorney, trustee or guardian, please give full title as such. If the signer is a corporation, please sign full corporate name by duly authorized officer giving full title as such. If signer is a partnership, please sign in partnership name by authorized person. 23