[FEDERAL TRUST CORPORATION]
LETTERHEAD
April 27, 1998
Dear Shareholder:
The Board of Directors and management of Federal Trust Corporation
("Federal Trust") cordially invite you to attend the 1998 Annual Meeting of
Shareholders. The Annual Meeting will be held at the Farmers' Market, 200 West
New England Street, Winter Park, Florida on May 22, 1998, at 10:00 A.M., Eastern
Time.
Notice of the Annual Meeting and Proxy Statement attached to this letter
describe the formal business to be transacted at the Annual Meeting and provide
material information concerning that business. Directors and officers of Federal
Trust, as well as a representative of the accounting firm, Peat Marwick LLP,
will be present at the Annual Meeting to respond to any questions that you may
have.
YOUR VOTE IS IMPORTANT. You are urged to sign, date and mail the enclosed
Proxy Card promptly in the postage-paid envelope which has been provided for
your use. If you attend the Annual Meeting and prefer to vote in person, you
will have that privilege.
On behalf of the Board of Directors and all the employees of Federal Trust,
we look forward to seeing you at the Annual Meeting.
Sincerely,
/s/James V. Suskiewich
-------------------
James V. Suskiewich
Chairman of the Board
FEDERAL TRUST CORPORATION
------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 22, 1998
-------------------------
TO THE HOLDERS OF COMMON STOCK:
NOTICE IS HEREBY GIVEN that the 1998 Annual Meeting of Shareholders
("Annual Meeting") of Federal Trust Corporation ("Company") will be held at
10:00 a.m. Eastern Time, on Friday, May 22, 1998, at the Farmers' Market, 200
West New England Street, Winter Park, Florida 32789, to consider and vote upon
the following matters:
Proposal I. Election of five Directors of the Company, James V.
Suskiewich, Aubrey H. Wright, George W. Foster, Dr. Samuel C. Certo
and Kenneth W. Hill, each for a one-year term;
Proposal II. Ratify the selection of KPMG Peat Marwick LLP as the
independent auditors of the Company for the fiscal year ending
December 31, 1998;
Proposal III. Approve an amendment to the Company's Amended and
Restated Articles of Incorporation to increase the amount of
authorized common stock from 5,000,000 shares to 15,000,000 shares;
Proposal IV. Approve an amendment to the Company's Amended and
Restated Articles of Incorporation to increase the percentage of
outstanding shares required to call a Special Meeting of Shareholders
from 10% to 20%;
Proposal V. Approve the 1998 Key Employee Incentive Stock Compensation
Program;
Proposal VI. Approve the 1998 Directors' Stock Option Plan; and
Proposal VII. Approve the adjournment of the Annual Meeting to solicit
additional proxies in the event that there are not sufficient votes to
approve any one or more of the proposals.
To transact such other business as properly may come before the Annual
Meeting.
Information relating to the above matters is set forth in the attached
Proxy Statement. All shareholders of record at the close of business on April
14, 1998, are entitled to receive notice of and to vote at the Annual Meeting,
or of any adjournments thereof.
Each shareholder, whether he or she plans to attend the Annual Meeting, is
requested to sign, date and return the enclosed Proxy Card without delay in the
enclosed postage-paid envelope. Any proxy given by the shareholder may be
revoked at any time before it is exercised. A proxy may be revoked by filing
with the Corporate Secretary of the Company a written revocation or a duly
executed proxy bearing a later date. Any shareholder present at the Annual
Meeting may revoke his or her proxy and vote personally on each matter brought
before the Annual Meeting.
By Order of the Board of Directors
/s/JAMES V. SUSKIEWICH
-------------------
JAMES V. SUSKIEWICH
Chairman of the Board
Winter Park, Florida
April 27, 1998
REVOCABLE PROXY
FEDERAL TRUST CORPORATION
1211 Orange Avenue
Winter Park, Florida 32789
This Proxy is solicited on behalf of the Board of Directors of Federal
Trust Corporation ("Company") who will serve as the Proxy Committee for the 1998
Annual Meeting of Shareholders ("Annual Meeting").
The undersigned shareholder hereby appoints the Proxy Committee with the
full power of substitution to represent and to vote, as designated below, all
the shares of the Company held of record by the undersigned on April 14, 1998,
at the Annual Meeting to be held at 10:00 A.M., Eastern Time, on May 22, 1998,
at the Farmers' Market, 200 West New England Street, Winter Park, Florida, or at
any adjournment thereof.
The undersigned shareholder may revoke this Proxy at any time before it is
voted by either filing with the Secretary of the Company a written notice of
revocation, delivering to the Company a duly executed Proxy bearing a later
date, or by attending the Annual Meeting and voting in person.
PLEASE VOTE HEREIN AND SIGN AND DATE ON REVERSE SIDE
I. Election of Directors:
FOR all nominees listed below WITHHOLD AUTHORITY to vote
except as marked to the contrary for all the nominees listed below
(Instruction: To withhold authority for any individual nominee,
strike a line through the nominee's name in the list below.)
Dr. Samuel C. Certo George W. Foster Kenneth W. Hill
James V. Suskiewich Aubrey H. Wright, Jr.
II. Ratify the selection of KPMG Peat Marwick LLP, as the independent auditors
of the Company for the fiscal year ending December 31, 1998.
FOR AGAINST ABSTAIN
III. Approve the amendment to the Amended and Restated Articles of Incorporation
to increase the amount of authorized common stock from 5,000,000 shares to
15,000,000 shares.
FOR AGAINST ABSTAIN
IV. Approve the amendment to the Amended and Restated Articles of Incorporation
to increase the percentage of outstanding shares required to call a Special
Meeting of Shareholders from 10% to 20%.
FOR AGAINST ABSTAIN
V. Approve the 1998 Key Employee Incentive Stock Compensation Progarm.
FOR AGAINST ABSTAIN
VI. Approve the 1998 Directors' Stock Option Plan.
FOR AGAINST ABSTAIN
VII. Approve the adjournment of the Annual Meeting to solicit additional proxies
in the event that there are not sufficient votes to approve any one or more
of the proposals listed on this Proxy Card.
FOR AGAINST ABSTAIN
NOTE: This Proxy is revocable and when properly executed will be voted in the
manner directed by the undersigned shareholder. UNLESS CONTRARY DIRECTION IS
GIVEN, THIS PROXY WILL BE VOTED "FOR" THE PROPOSALS. If any other business is
presented at the Annual Meeting, or any adjournment thereof, this Proxy will be
voted by the Proxy Committee in its best judgment. At the present time the Board
of Directors knows of no other business to be presented at the Annual Meeting.
IMPORTANT:
Please sign your name exactly as it appears on this Proxy Card. When shares are
held by joint tenants, both should sign. When signing as attorney, executor,
administrator, agent, trustee or guardian, please give full title. If
shareholder is a corporation, please sign in full corporate name by the
president or other authorized officer. If shareholder is a partnership, please
sign in partnership name by an authorized person.
The undersigned acknowledges receipt from the Company, prior to the execution of
the Proxy, a Notice of the Annual Meeting, a Proxy Statement dated April 27,
1998 and the 1997 Annual Report.
x_____________________________________
Signature
x_____________________________________
Signature if held jointly
Date:_________________________________
Please mark, sign, date and return this
Proxy Card promptly, using the enclosed
envelope.
NOTE: IF YOU RECEIVE MORE THAN ONE PROXY CARD, PLEASE SIGN AND RETURN ALL CARDS
IN THE ACCOMPANYING ENVELOPE.
PROXY STATEMENT
FEDERAL TRUST CORPORATION
1998 ANNUAL MEETING OF SHAREHOLDERS
This Proxy Statement and accompanying Proxy Card are being furnished in
connection with the solicitation by the Board of Directors of Federal Trust
Corporation ("Federal Trust" or "Company") of proxies to be voted at the 1998
Annual Meeting of Shareholders and at any adjournments thereof ("Annual
Meeting"). The Annual Meeting will be held on FRIDAY, May 22, 1998, at 10:00
a.m., Eastern Time, at the Farmers' Market, 200 West New England Street, Winter
Park, Florida. The date on which this Proxy Statement and the enclosed Proxy
Card are first being sent or given to shareholders is April 27, 1998.
General
The securities that can be voted at the Annual Meeting consist of common
stock of the Company, $0.01 par value per share, with the holders of the common
stock being entitled to one vote for each share on each matter submitted to the
shareholders. Only shareholders of record as of the close of business on April
14, 1998 (the "Record Date") will be entitled to receive notice of, and to vote
at, the Annual Meeting. On the Record Date, there were 4,941,547 shares of
common stock outstanding, and no other classes of capital stock outstanding.
Regardless of the number of shares of common stock that you own, it is
important that shareholders be represented by proxy or in person at this Annual
Meeting. Shareholders are urged to indicate the way they wish to vote in the
spaces provided on the Proxy Card and return the Proxy Card signed and dated in
the enclosed prepaid envelope. Proxies solicited by the Board of Directors of
the Company will be voted in accordance with the directions given. If no space
is marked, the proxy will be voted "FOR" the Director nominees; "FOR" the
ratification of KPMG Peat Marwick LLP as the Company's auditors for the fiscal
year ending December 31, 1998; "FOR" an amendment to the Company's Amended and
Restated Articles of Incorporation to increase the amount of authorized common
stock from 5,000,000 shares to 15,000,000 shares; "FOR" the amendment to the
Company's Amended and Restated Articles of Incorporation to increase the
percentage of outstanding shares required to call a Special Meeting of
Shareholders from 10% to 20%; "FOR" the 1998 Key Employee Incentive Stock
Compensation Program; "FOR" the 1998 Directors' Stock Option Plan; and if
necessary; "FOR" the adjournment of the Annual Meeting to solicit additional
proxies in the event that there are not sufficient votes to approve any one or
more of the foregoing proposals.
The Board of Directors knows of no other matters that will be presented for
consideration at this Annual Meeting. Execution of a proxy, however, confers on
the designated proxy holders discretionary authority to vote the shares in
accordance with their best judgment on other business, if any, that may properly
come before the Annual Meeting, or any adjournments thereof.
Voting Procedures
The Bylaws for Federal Trust provide that a majority of shares entitled to
vote and be represented in person or by proxy at a meeting of the shareholders
constitutes a quorum. Under the Florida Business Corporation Act ("Act"),
Directors are elected by a plurality of the votes cast by the shares entitled to
vote in the election at a meeting at which a quorum is present. Other matters
are approved if affirmative votes cast by the holders of the shares represented
at a meeting at which a quorum is present and entitled to vote on the subject
matter exceed votes opposing the action unless a greater number of affirmative
votes or voting by classes is required by the Act or the Company's Amended and
Restated Articles of Incorporation. Therefore, abstentions and broker non-votes
have no effect under Florida law. A broker non-vote generally occurs when a
broker who holds shares in street name for a customer does not have authority to
vote on certain non-routine matters under the rules of the New York Stock
Exchange, because its customer has not provided any voting instructions on the
matter.
Revocation of Proxy
The presence of a shareholder at this Annual Meeting will not automatically
revoke such shareholder's proxy. Shareholders may, however, revoke a proxy at
any time prior to its exercise by simply filing with the Corporate Secretary of
the Company a written notice of revocation, by delivering to Federal Trust a
duly executed proxy bearing a later date, or by attending this Annual Meeting
and voting in person.
Costs of Solicitation
Federal Trust will bear the entire cost of preparing, assembling, printing
and mailing this Proxy Statement, the accompanying Proxy Card and any additional
material which may be furnished to shareholders. In addition to the use of the
mails, proxies may be solicited by direct communication with certain
shareholders or their representatives, including without limitation, telephone,
telegraph or personal contact, by officers and employees of the Company who will
not be specifically compensated for their services in this regard. Federal Trust
has retained Regan & Associates, Inc., New York, New York, to aid in the
solicitation of shareholders, primarily brokers, banks and others institutional
investors for an estimated fee of $6,000. Arrangements have been made with
brokerage houses, nominees and other custodians and fiduciaries to send proxy
materials to their principals and their reasonable expenses will be reimbursed
on request.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table contains information concerning the only persons known
to Federal Trust to be the beneficial owners of more than 5% of the Company's
outstanding common stock as of the Record Date.
Name and Address
of Beneficial Owner Number of Shares Percent of Class
------------------- ---------------- ----------------
William R. Hough & Co. 495,241(1) 10.02%
100 Second Avenue South, Suite 800
St. Petersburg, Florida 33701
- ------------------------------
(1) Includes 247,641 shares owned by WRH Mortgage, Inc. and 247,600 shares
owned by William R. Hough & Co.
PROPOSAL I - ELECTION OF DIRECTORS
The Board of Directors of Federal Trust has nominated the current Board of
Directors, comprised of James V. Suskiewich, Aubrey H. Wright, Jr., George W.
Foster, Dr. Samuel C. Certo, and Kenneth W. Hill, to stand for election at the
Annual Meeting. These Directors, upon the affirmative vote of the shareholders,
will serve as the Board of Directors of the Company for a one-year term, or
until such time their successors are duly elected.
The following table sets forth the names and ages of the nominees, a
description of their positions and offices with Federal Trust, a brief
description of their principal occupation and business experience during the
last five years, and certain other information including the number of shares of
common stock beneficially owned as of the Record Date. If any nominee should
become unavailable to serve for any reason (which is not anticipated) the
persons named as proxies will vote all valid proxies for the election of the
remaining nominees and for such other person or persons as may be designated by
the Board of Directors, or to allow the vacancy created thereby to remain open
until filled by the Board, or to reduce the authorized number of Directors, as
the Board of Directors recommends.
Information Concerning Nominees
Number of Shares of
Years Common Stock Percent
Principal Occupation and Elected as Owned Beneficially at of
Name and Age Other Information a Director March 31, 1998 (1) Class
- ------------ ----------------- ---------- ------------------ -----
James V. Suskiewich / 50 Chairman of the Board; 1994 92,818(2) 1.88%
President and Chief Executive
Officer ("CEO") of the
Company since July 1996;
President and CEO and a
Director of Federal Trust
Bank from January 1993 to
present; and 1988 to 1993,
President, CEO and a Director
of First Federal Savings Bank
of the Glades, Clewiston, Florida.
Resides in Apopka, Florida.
Aubrey H. Wright, Jr. / 51 Chief Financial Officer of 1995 25,100 *(3)
the Company since April 1994;
Chief Financial Officer and
Director of Federal Trust Bank since
June 1993; from 1991 to 1993,
President, Chief Operating Officer
and Director of Essex Savings Bank,
F.S.B. Palm Beach, Florida; and
from 1989 to 1991. Resides in
Winter Park, Florida.
George W. Foster / 68 Retired; President and CEO of 1997 11,343 *(3)
Federal Trust Bank from 1990 through
1993; and Director of Federal Trust
Bank since 1990. Resides in
Longwood, Florida.
Dr. Samuel C. Certo / 50 Director of the Company; Director 1997 25,000 *(3)
of Federal Trust Bank since 1996;
former Dean and Professor of
Management in the Crummer Graduate
School of Business at Rollins
College in Winter Park since 1986.
Serves as a business consultant
and has published text- books in
the area of management and
strategic management and has
been involved in executive
education for the past 20 years.
Resides in Longwood, Florida.
Kenneth W. Hill / 64 Director of the Company; 1997 25,000 *(3)
Director of Federal Trust Bank
since 1995; Retired-Vice President
and Trust Officer of SunBank, N.A.
Orlando, Florida from 1983 through
1995. Resides in Orlando, Florida.
Directors and Executive 228,847 4.63%
Officers as a Group (8 persons)
- ------------------------------
(1) Except as indicated below, includes all shares of common stock owned by
each Director's spouse, or as custodian or trustee for minor children,
over which shares such individuals effectively exercise sole voting and
investment power.
(2) Includes 50,782 shares held as trustee under Federal Trust's ESOP with
respect to which Mr. Suskiewich exercises sole voting and investment
power.
(3) Amount is less than 1%.
The Board of Directors recommends that you vote "FOR" the Directors Slate.
Meetings, Committees and Compensation of Directors
The Board of Directors of Federal Trust conducts its business through
meetings of the full Board, the Compliance Committee, and the Nominating
Committee. During the fiscal year ended December 31, 1997, the Board of
Directors met nine times, the Compliance Committee met 12 times, and the
Nominating Committee met one time. Each Director attended 100% of the aggregate
of all meetings of the Board of Directors and the Committees on which he may
have served during such fiscal year held during the period for which each of
them was a Director.
The Compliance Committee is composed of Messrs. George W. Foster, Chairman,
Dr. Samuel C. Certo, and Kenneth W. Hill. The purpose of the Compliance
Committee is to monitor the Company's compliance with certain regulatory issues
and requirements imposed on the Company by the Office of Thrift Supervision and
report to the Board of Directors its recommendations for continued or improved
compliance with these issues.
The Nominating Committee is composed of the Board of Directors. The purpose
of the Nominating Committee is to identify and recommend: (i) nominees for
executive officer positions of the Company and its subsidiaries to the Board of
Directors; and (ii) nominees for election to the Board of Directors of the
Company and its subsidiaries. The Nominating Committee will consider nominees
recommended by shareholders, but has not established any formal procedures for
doing so. At the April 3, 1998 meeting of the Company's Board of Directors it
was determined that it was in the Company's best interest to nominate the
current Board of Directors as the Company's Directors slate for the 1998 Annual
Meeting.
EXECUTIVE COMPENSATION
Summary Compensation Table
Compensation. The following table sets forth, for the fiscal
years ended December 31, 1997, 1996, and 1995, the total compensation paid to or
accrued by the Chief Executive Officer ("CEO") and each of the three most highly
compensated executive officers of the Company and its subsidiaries, whose
aggregate salaries and bonuses exceeded $100,000 per year.
Annual Compensation (1)
Name and Other Annual Restricted Stock
Principal Position (2) Year Salary Bonus (2) Directors' Fees Compensation(3) Awards(4) Options(5)
- ---------------------- ---- ------ --------- --------------- --------------- --------- ----------
James V. Suskiewich, 1997 $134,441 $ 41,000 $ 17,000 $ 21,446 -- --
President/CEO of the Company 1996 137,409 11,000 13,750 14,161 -- --
President/CEO of 1995 118,223 16,000 5,500 13,168 -- --
Federal Trust Bank
Aubrey H. Wright, Jr 1997 84,808 18,500 9,500 8,291 -- --
Senior Vice President/ 1996 79,904 6,000 7,250 5,936 -- --
CFO of the Company 1995 74,875 4,500 -- 1,589 -- --
Senior Vice President/
CFO of Federal Trust Bank
Louis Laubscher 1997 74,038 29,966 -- 3,908 -- --
Vice President/Chief Lending 1996 69,807 16,848 -- 4,218 -- --
Officer of the Federal 1995 56,077 18,318 -- 2,522 -- --
Trust Bank
- ------------------------------
(1) Includes all compensation in the year earned whether received or
deferred at the election of the executive.
(2) Includes $28,966, $10,848, and $17,318 in incentive bonuses for Mr.
Laubscher based on resolutions of non-performing loans and REO in 1997,
1996, and 1995, respectively.
(3) Includes the estimated value of:
James V. Suskiewich 1997 1996 1995
- ------------------- ---- ---- ----
Health & Life insurance premiums $ 4,126 $ 4,454 $ 3,933
Use of Company automobile 5,924 6,928 6,564
Social/Country Club Dues 5,600 2,779 2,671
Supplemental Retirement Plan 5,796 -- --
------- ------- -------
Total: $21,446 $14,161 $13,168
======= ======= =======
Aubrey H. Wright, Jr 1997 1996 1995
- -------------------- ---- ---- ----
Health & Life insurance premiums $ 5,477 $ 5,936 $ 6,285
Supplemental Retirement Plan 2,814 -- --
------- ------- -------
Total: $ 8,291 $ 5,936 $ 6,285
======= ======= =======
Louis Laubscher 1997 1996 1995
- --------------- ---- ---- ----
Health & Life insurance premiums $ 3,908 $ 4,218 $ 2,522
======= ======= =======
(4) Includes value of fully vested participation in the Company's Employee Stock
Ownership Plan ("ESOP"). In 1990, the Company adopted an ESOP which provides
that the Company can make a contribution to a trust fund for the purpose of
purchasing shares of the Company's common stock on behalf of the
participants. The Company pays the entire cost of the ESOP and all salaried
employees of the Company who have completed six months of service are
eligible to participate. The ESOP is qualified under Section 497(e)(7) of
the Internal Revenue Code, under which subsidiaries may act as participating
employees. In addition, the ESOP meets all applicable requirements of the
Tax Replacement Act of 1986 and is qualified under Section 401(c) of the
Internal Revenue Code.
Employee Stock Ownership Plan ("ESOP"). All full-time salaried employees of
the Company, and its subsidiaries are participants in the ESOP. Executive
officers of the Company are eligible to participate in the ESOP, but Directors
are not eligible unless they are also full-time salaried employees. A
participant's interest in the ESOP is vested after five years of service and
there is no vesting prior to that period of time. As of December 31, 1997, 10
employees had vested interests in the ESOP. Mr. Suskiewich, Mr. Wright and Mr.
Laubscher are not vested in the ESOP.
The ESOP contributions by the Company are determined annually by the Board
of Directors of the Company, taking into consideration the prevailing financial
conditions, the Company's fiscal requirements and other factors deemed relevant
by the Board. The Company, generally, may make contributions to the ESOP of up
to 15% of total compensation paid to employees during the year. Each
participant's contribution equals the proportion that each such participant's
compensation for the year bears to the total compensation of all participants
for such year. In 1997, 1996 and 1995, the Company contributed cash of $50,782,
$38,000, and $10,000, respectively, to the ESOP.
Options and Long-Term Compensation
Stock Option Plan for Directors. On May 5, 1993, the Board of Directors
approved a Stock Option Plan for the Directors of the Company. The Stock Option
Plan provided that a maximum of 176,968 shares of common stock (the "Option
Shares") would be made available to Directors and former Directors of the
Company. Stock Options for all the Option Shares were granted on May 6, 1993, to
12 former and one current director. The options are for a term of ten years from
the date of grant. The Options were issued at an exercise price of $6.40 per
share determined at the time of issuance to be the fair market value of the
underlying common stock, subject to the Option Shares on the date the Stock
Option was granted.
On March 7, 1997, the Board of Directors of the Company rescinded the 1993
Stock Option Plan for Directors. The Company issued no stock options or stock
appreciation rights as compensation during the period January 1, 1996 through
March 7, 1997.
The Board of Directors on January 30, 1998, adopted the 1998 Key Employee
Incentive Stock Compensation Program (for key employees of Federal Trust) and
the 1998 Directors' Stock Option Plan (collectively the "Plans") subject to
shareholder approval of the respective Plans by a required majority of the
outstanding shares of common stock. See Proposal V and Proposal VI for more
detail concerning the specific terms of the Plans.
Report of Board of Directors
Executive Compensation Policies and Program. The Company's executive
compensation program is designed to:
Attract and retain qualified management;
Enhance short-term financial goals of the Company; and
Enhance long-term shareholder value.
Federal Trust strives to pay each executive officer the base salary that
would be paid on the open market for a fully qualified officer of that position.
The Board of Directors determines the level of base salary and any incentive
bonus plan for the CEO and certain senior executive officers of the Company and
a range for other executive officers based upon competitive norms, derived from
annual surveys published by several independent banking institutes or private
companies specializing in financial analysis of financial institutions. Such
surveys provide information regarding compensation of financial institution
officers and employees based on size and geographic location of the financial
institution and serve as a bench mark for determining executive salaries. Actual
salary changes are based upon an evaluation of each individual's performance
based upon Company objectives and specific job description objectives, as well
as the overall performance of the Company. Salaries for the Company's executive
officers were reduced in fiscal year 1997 as compared to 1996, consistent with
the Company's efforts to reduce budgeted expenses and overhead. The salaries of
the executive officers of the Bank were increased to: (i) reflect the officer's
job performance and role in the overall improved financial condition of the
Company and the Bank; and (ii) to remain competitive with the salaries being
offered to executive officers of similarly situated institutions.
Bonus awards are made based upon the attainment of the Company's and Bank's
net income targets, the officer's responsibilities and individual performance
standards, with each officer being given the opportunity to earn an annual
performance bonus, generally in the range of approximately 10-40% of his or her
base salary. While Federal Trust did not award bonuses for 1997, the Bank paid
bonuses to the three highest compensated executive officers as reflected on the
Annual Compensation Table on page 7 herein, along with $22,000 in bonuses that
were paid to five other officers and key employees based upon their individual
performance.
President and CEO James V. Suskiewich and Senior Vice President Aubrey H.
Wright, Jr., received annual performance and regulatory improvement bonuses of
$31,000 and $16,000, respectively, for their individual roles and efforts in the
Company's planned internal restructuring and the successful recapitalization of
the Company and the Bank, resulting in the Bank being again considered "well
capitalized" under Federal Deposit Insurance Corporation's regulations. The
Company also posted a profit in all four quarters of 1997, in contrast to the
prior two years wherein the Company had posted losses in the aggregate of $3.2
million. The increase in net earnings was attributable to several factors, one
of which was the resolution of $3.5 million in problem assets and the reduction
in related expenses. The Board recognized Messrs. Suskiewich and Wright for
their roles in this marked turnaround.
Vice President and Chief Loan Officer, Louise E. Laubscher received a
$28,966 incentive bonus for his role in resolving a number of nonperforming
loans and real estate owned properties which are primarily attributable to prior
management.
Compensation of the Chief Executive Officer ("CEO"). The CEO of the Company
does not receive compensation from the Company, but is compensated in his
position as President and CEO of the Bank. The Company reimburses the Bank for
the time Bank employees spend on Company matters.
Compensation Committee Interlocks and Insider Participation in Compensation
Decisions. James V. Suskiewich, the President and CEO of Federal Trust and the
Bank, is a member of the Company's Board of Directors and participated in
deliberations of the Board of Directors regarding executive compensation. Mr.
Suskiewich, however, did not participate in any deliberation regarding his own
compensation. As the CEO, Mr. Suskiewich is responsible for recommending the
salary ranges for all employees, including those for executive officers, other
than himself. Mr. Suskiewich presents the salary recommendations to the Board
and the Board, in turn, reviews and analyzes all information submitted to it.
Thereafter, the Board determines the compensation of all executive officers of
the Company.
Employment Contracts
Federal Trust and the Bank have jointly entered into employment agreements
with two of their executive officers, James V. Suskiewich, President and Chief
Executive Officer, and Aubrey H. Wright, Chief Financial Officer. The employment
agreements became effective September 1, 1995. The employment agreements with
Messrs. Suskiewich and Wright are substantially the same except as noted herein.
Each of the individuals is entitled to receive a base salary, plus
reimbursement of reasonable business expenses. Mr. Suskiewich is entitled to a
discretionary performance bonus payable annually for the duration of the
Agreement. For the year ended December 31, 1997, Mr. Suskiewich received a
performance bonus of $10,000 and a one-time $20,000 bonus for his work on
regulatory matters in 1997. Mr. Wright is also considered for any annual
performance bonus program developed by the Bank or the Corporation. For the year
ended December 31, 1997, Mr. Wright received a performance bonus of $5,000 and a
one-time $10,000 bonus for his work on regulatory matters in 1997. The base
salary and any bonus is paid by the Bank. Messrs. Suskiewich and Wright may
participate in all employee benefits, stock option plans, pension plans,
insurance plans and other fringe benefits commensurate with his position. On or
before each September 15, the Board of Directors is required to review the
employment agreements and the employees' performance and vote whether to extend
the term of the employment agreements for an additional year. The decision to
extend these agreements is within the sole discretion of the Board of Directors.
The employment agreements provide for termination by the Bank for "cause",
as defined in the employment agreement. In the event the Bank chooses to
terminate Messrs. Suskiewich and Wright's employment for reasons other than for
cause, they (or in the event of death, their respective beneficiaries) would be
entitled to a severance payment equal to the total annual compensation for the
remainder of the term of their employment agreement.
The Agreement permits Messrs. Suskiewich and Wright to terminate their
employment voluntarily. In the event of voluntary termination, except as
previously described herein, all rights and benefits under the contracts shall
immediately terminate upon the effective dates of termination.
Director Compensation
Effective July 1, 1996, Federal Trust temporarily suspended the payment on
all Board and Committee fees. Prior to that time, each Director of Federal Trust
received a fee of $500 for each meeting of the Board which he or she attended,
plus $750 per quarter, $250 for each Compliance Committee meeting, and no fee
for any other standing committee of which he or she is a member or which he or
she attended. Directors are reimbursed for expenses incurred in connection with
attendance at meetings of the Board of Directors and all standing committees.
The Directors of Federal Trust Bank ("Bank"), however, receive Director's fees.
Each Bank Director receives a quarterly Director's fee of $750, $500 per Board
meeting, and $250 for each Committee meeting attended.
TRANSACTIONS WITH MANAGEMENT
Indebtedness of Management
In 1994, the Board of Directors of the Company and the Bank amended their
loan policies with regard to loans to Directors, officers and employees. The
current policy is generally not to make loans to Directors, officers and
employees. Any loans that are made, however, will require approval of a majority
of the disinterested Directors of the company making the loan. The Bank is also
subject to the provisions of Section 22(h) of the Federal Reserve Act. Any
credit extended by the Bank to Directors, executive officers and, to the extent
otherwise permitted, principal shareholders, or any affiliates thereof must be:
(i) on substantially the same terms, including interest rates and collateral, as
those prevailing at the time for comparable transactions by the Bank with
non-affiliated parties; and (ii) not involve more than the normal risk of
repayment or present other unfavorable features.
As of December 31, 1997, neither the Company nor the Bank had any loans
outstanding to Directors or executive officers. The Bank, however, did have
$737,472 in commercial loans to Morrone, Smoker and Grill, Inc., whose President
Jack L. Morrone is the brother-in-law of the Company's former Chairman and Chief
Executive Officer. Mr. Morrone is considered to be an "affiliate", as that term
is defined by SEC regulations. This largest outstanding balance during 1997 was
$478,128. As of February 28, 1997, the balance was $354,188.
Transactions With Certain Related Persons
Effective January 1, 1990, John Martin Bell, a former director and former
major shareholder of the Company and the wife of the former Chairman of the
Board of the Company, as lessor, and the Company, as lessee, entered into a
triple net lease (the "Lease"), pursuant to which the Company leased from Mrs.
Bell 3,953 square feet of office space located at 1211 Orange Avenue, Winter
Park, Florida (the "Premises"). The term of the Lease was two (2) years.
Effective January 1, 1991, the Lease was amended to increase the term from
December 31, 1991 to December 31, 2000. The square footage leased by the Company
increased to 11,393 square feet. On November 11, 1991, the Company and Ms. Bell
terminated the Lease and executed a new triple net lease (the "New Lease"),
pursuant to which the Company has leased 13,305 square feet in the Premises. The
term of the New Lease runs until December 31, 2000. The New Lease will
automatically be extended for two (2) consecutive periods of ten (10) years each
unless the Company elects to terminate the New Lease pursuant to the notice
provisions in the New Lease prior to the expiration of the ten-year lease
period. Effective July 15, 1992, the New Lease was modified to reduce the amount
of space leased to 12,392 square feet and to decrease the annual rental by
$49,510 to $240,686. Effective June 6, 1994, the New Lease was modified to
decrease the annual rent for the years 1993 and 1994 to $216,984 and $223,552,
respectively. Effective June 1, 1995, the New Lease was modified to increase the
amount of space leased to 13,305 square feet. The rent for 1996 through the end
of the New Lease term will be the preceding year's rent increased by the
Consumer Price Index Escalation, provided however, that in no event shall the
rent increase be less than 3% or more than 6%. The Company believes that the
terms of this transaction are no less favorable to the Company than transactions
obtainable from unaffiliated parties. When a transaction involves the Company
and an officer, Director, principal shareholder or affiliate, the policy of the
Company is that the transaction will be on terms no less favorable to the
Company than could be obtained from an unaffiliated party. Any such transactions
must be approved in advance by a majority of independent and the disinterested
Directors.
During the year 1995, the Company reimbursed John Martin Bell for her cost
of furniture, fixtures and leasehold improvements for the Company's office space
located at 1270 Orange Avenue, Winter Park, Florida in the amount of $1,417. No
fees or profit was paid to the Bells in connection with this reimbursement. The
Company believes that the terms of this reimbursement are no less favorable to
the Company than what could be obtained from unaffiliated parties.
All future transactions with officers, Directors, principal shareholders or
affiliates of the Company and its subsidiaries will be on terms no less
favorable than could be obtained from unaffiliated parties, and shall be
approved by the Board of Directors, including a majority of the independent
disinterested Directors of the Company.
PROPOSAL II - RATIFICATION OF
APPOINTMENT OF THE INDEPENDENT AUDITORS
The Board of Directors has appointed the KPMG Peat Marwick LLP, as the
Company's independent accountants to audit the accounts of the Company and the
Bank for the 1998 fiscal year. KPMG Peat Marwick LLP, has served as the
Company's auditors since the fiscal year ending December 31, 1990, and during
this period has been engaged by Federal Trust to provide certain tax and
consultant services. KPMG Peat Marwick LLP, plans to have a representative
present at the Annual Meeting who will have the opportunity to make a statement
if he or she desires to do so and is expected to respond to shareholders'
questions regarding the Company's financial statements. The Board of Directors
recommends that the shareholders vote for approval of the appointment of KPMG
Peat Marwick LLP, as the independent accountants for the succeeding year. If the
appointment is not approved, the Board will select other independent
accountants.
Approval of the appointment requires the affirmative vote of a majority of
the votes cast by the holders of shares of the Company's common stock present in
person or represented by proxy at the Annual Meeting, provided that a quorum is
present.
The Board of Directors recommends that you vote "FOR" ratification of the
selection of KPMG Peat Marwick LLP as independent auditors of the Company for
the fiscal year ending December 31, 1998.
PROPOSAL III - TO AMEND THE
AMENDED AND RESTATED ARTICLES OF
INCORPORATION TO INCREASE THE AMOUNT
OF AUTHORIZED SHARES OF COMMON STOCK
General. The Board of Directors has approved and recommends that the
shareholders adopt an amendment to Article III of the Company's Amended and
Restated Articles of Incorporation which would increase the number of authorized
common stock from 5,000,000 shares to 15,000,000 shares (the "Stock Amendment").
See Appendix A. To be adopted, this Proposal requires the affirmation vote of
the holders of a majority of all of the outstanding shares of common stock of
the Company entitled to vote thereon at the Annual Meeting (2,470,774 shares).
The Board of Directors believes that it is in the Company's best interests to
increase the number of authorized shares of common stock in order to have
additional authorized but unissued shares available for issuance to meet
business needs as they arise. As of the Record Date there were 4,941,547 shares
of common stock issued and outstanding. Approximately 58,453 shares are subject
to stock options that were granted in connection with the 1990 public stock
offering to certain registered sales representatives of the brokers/dealer
engaged to sell the securities. The stock options, which have an adjusted strike
price of $5.54 per share, will expire on October 26, 1999. Federal Trust
currently has no authorized shares to issue. The Board of Directors considers
the proposed increase in the number of authorized shares as being very important
to the Company because it would give the Board the necessary flexibility to
issue common stock for possible future offerings, financings, stock dividends or
distributions, acquisitions, stock option plans or other proper corporate
purposes which may be identified in the future by the Board of Directors,
without the possible expense and delay of a special shareholders' meeting.
Dilutive Effect of Issuance of Additional Shares
The authorization of additional shares of Common Stock pursuant to the
Stock Amendment will have no dilutive effect upon the proportionate voting power
of the present shareholders of Federal Trust. To the extent that shares are
subsequently issued to persons other than the present shareholders and/or in
proportions other than the proportion that presently exists, however such
issuance could have a substantial dilutive effect on present shareholders.
The Board of Directors of Federal Trust believes that the proposed Stock
Amendment to Article IV of the Amended and Restated Articles of Incorporation
will provide several long-term benefits to Federal Trust and its shareholders,
including the flexibility to pursue acquisitions in exchange for common stock of
the Company. While Federal Trust has no specific plans, proposals,
understandings or agreements for any such acquisition, the issuance of
additional shares of common stock for an acquisition may have a dilutive effect
on earnings per share and book value per share, as well as a dilutive effect on
the voting power of existing shareholders. The Company would expect that any
such dilutive effect on earnings per share and/or book value per share would be
relatively short-term in duration.
Anti-Takeover Effect of Proposal
The issuance of additional shares of common stock by the Company may
potentially have an anti-takeover effect by making it more difficult to obtain
shareholder approval of various actions, such as a merger. The proposed increase
in the number of authorized shares of common stock could enable the Board of
Directors to render more difficult an attempt by another person or entity to
obtain control of Federal Trust, though the Board of Directors has no present
intention of issuing additional shares for such purposes and has no present
knowledge of such takeover efforts.
The Company has no current arrangements, understandings or plans at the
present time for the issuance or use of the additional shares of common stock
proposed to be authorized, except that the Board of Directors has authorized a
total of 425,000 shares to be set aside for stock options, pursuant to the 1998
Key Employee Incentive Stock Compensation Program and the 1998 Directors' Stock
Option Plan which are discussed in Proposal V and Proposal VI, herein.
The Board of Directors recommends that you vote "FOR" the amendment to the
Articles of Incorporation.
PROPOSAL IV - TO AMEND THE AMENDED
AND RESTATED ARTICLES OF INCORPORATION
TO INCREASE THE PERCENTAGE OF
OUTSTANDING SHARES REQUIRED TO CALL A
SPECIAL MEETING OF SHAREHOLDERS
The Board of Directors has approved, and recommends that the shareholders
adopt an amendment to Article V, Section C., of the Company's Amended and
Restated Articles of Incorporation to increase the percentage of outstanding
shares required to call a Special Meeting of Shareholders from the current 10%
threshold to a 20% threshold. See Appendix A.
Under the current Articles of Incorporation, a Special Meeting of
Shareholders may be called pursuant to a resolution adopted by a majority of the
full Board of Directors or 10% of the outstanding shares of common stock. As a
result of the recent stock offering, the number of outstanding shares eligible
to vote increased from 2,256,505 shares to 4,941,547 shares. A number of
individual shareholders' beneficial interests also increased, making it easier
for such shareholders to be able to call a Special Meeting. See "Security
Ownership of Certain Beneficial Owners." The current 10% threshold is considered
by the Board to be too low. The Board of Directors believes that it is in the
Company's best interest to require a greater percentage of outstanding shares to
be able to call a Special Meeting of Shareholders, due to the costs and
disruptive effects a Special Meeting could have on the operations of the
Company.
Neither the Company's Articles nor Bylaws currently contain provisions that
may be deemed to be anti-takeover provisions, such as a requirement for
super-majority voting, classification of directors to serve for staggered terms,
or a limitation on business combinations with interested shareholders.
Increasing the threshold from 10% to 20% will, however, make it more difficult
for shareholders to call a Special Meeting, and could increase the costs of
calling a Special Meeting, as well as delay matters that shareholders may want
to be considered until the next Annual Meeting. If adopted, the effect of the
proposal would be to discourage such special meetings and to render it more
difficult for shareholders to call a Special Meeting of Shareholders to consider
possible mergers or sales of the Company or to remove incumbent Directors and
management, even though such actions may be beneficial to shareholders
generally. An additional effect might be to limit shareholder participation in
certain merger or acquisition transactions whether or not such transactions are
favored by incumbent management and, therefore, may be considered an
anti-takeover provision.
The Board of Directors recommends that you vote "FOR" the amendment to
increase the percentage of outstanding shares required to call a Special Meeting
of Shareholders.
PROPOSAL V - TO APPROVE THE
1998 KEY EMPLOYEE INCENTIVE STOCK COMPENSATION PROGRAM
The Board of Directors of Federal Trust has adopted the 1998 Key Employee
Stock Compensation Program ("Program") for the benefit of officers and other key
employees of the Company and the Bank. A copy of the Program is attached hereto
as Appendix B. The Program is comprised of four parts; an Incentive Stock Option
Plan, a Compensatory Stock Option Plan, a Stock Appreciation Rights Plan and a
Performance Plan.
The Program provides for a maximum of 325,000 shares of authorized common
stock to be reserved for future issuance pursuant to the exercise of stock
options ("Options") granted under the Program, unless adjusted as provided in
Article 6 of the Program. See page 3 of Appendix B. Stock appreciation rights,
which enable the recipient on exercise to elect payment wholly or partially in
cash based upon increases in the market value of the stock from the date of the
grant, may also be awarded under the Program. In addition, the Program provides
the Company with the ability to award shares of common stock to individuals
based upon the attainment of specifically defined performance objectives.
The Program is subject to approval of the holders of a majority of the
outstanding common stock at the Annual Meeting. All options granted before
shareholder approval of the Program are contingent upon receipt of such
approval. Options granted under the Program will be exercisable in one or more
installments and may be exercisable on a cumulative basis, as determined by a
committee formed to administer the Program. Options granted are exercisable for
a term not longer than 10 years. Options are not transferable and will terminate
within a period of time following termination of employment with the Company. In
the event of a change in control of the Company or a threatened change in
control of the Company, all Options granted before such event shall become
immediately exercisable; provided, however, that no Options shall be exercisable
for a period of six months from the date of grant. The term "control" generally
means the acquisition of 10% or more of the voting securities of the Company by
any person or group of persons acting as a group. See Section 6 "Acceleration of
Right of Exercise of Installments" of Appendix B pages 11 and 12. This provision
may have the effect of deterring hostile changes in control by increasing the
costs of acquiring control.
Options granted under the Program will be either "incentive stock options"
within the meaning of Section 422A of the Internal Revenue Code of 1986, as
amended, which are designed to result in beneficial tax treatment to the
employee but no tax deduction to the Company, or "compensatory stock options"
which do not give the employee certain benefits of the incentive stock option,
but will entitle the Company to a tax deduction when the Options are exercised.
The Option exercise price of incentive stock options may not be less than the
fair market value of common stock on the date the Option is granted.
Compensatory stock options may be exercisable at a price equal to or less than
the fair market value of a share of common stock at the time of the grant of the
Option.
A Committee consisting of not less than three Directors of the Company
(none of whom is a full-time officer or other salaried employee of the Company
or the Bank) has been given authority to administer the Program and to grant
options, stock appreciation rights and share awards thereunder. The current
Program Administrators are Messrs. George W. Foster, Dr. Samuel C. Certo and
Kenneth W. Hill. The committee may make grants under the Program at its
discretion from time to time to full-time employees of the Company, including
those who are Directors and officers. Directors who are not full-time salaried
employees of the Company are not eligible to participate in the Program.
The following table shows the stock options granted under the Program to
certain officers and employees of the Company, as well as all executive officers
and non-executive officers, as a group. No consideration will be received by the
Company in return for the grant of the Options although consideration would be
received upon exercise of the Options. The exercise price of each Option is
$4.00 per share, the fair market value of the common stock on January 30, 1998,
based upon the "bid price" on that date. The Options granted to date are
intended to be incentive stock options. For financial reporting purposes, there
will be no charge to the income of the Company in connection with the grant or
exercise of an Option. The market value of the common stock was $4.31 per share
as of April 8, 1998.
Number of Shares
Subject to
Name Title Options Granted
---- ----- ---------------
James V. Suskiewich President/CEO 120,000
Aubrey H. Wright Senior Vice President/CFO 70,000
Louis E. Laubscher Vice President/CLO 30,000
Jennifer B. Brodnax Vice President/Operations 15,000
Kevin L. Kranz Vice President/Loan Servicing 15,000
Thomas J. Punzak Vice President/Accounting 15,000
Clair I. Ford Corporate Secretary 10,000
------
Total 275,000
=======
The grant of stock appreciation rights would require charges to the income
of Federal Trust based on the amount of the appreciation, if any, in the average
market price of the common stock to which the appreciation rights are related
over the option price of those shares. In the event of a decline in the market
price of the Company's common stock subsequent to a charge against earnings
related to the estimated costs of stock appreciation rights, a reversal of prior
charges is made in the amount of such decline (but not to exceed aggregate prior
increases). Share awards also require a charge to income equal to the amount of
the award when it becomes likely that the shares will be awarded, with
subsequent increases or decreases in the market price of the common stock prior
to the actual awarding of the shares treated in the same manner as stock
appreciation rights. No stock appreciation rights or share awards have been
granted or are presently intended to be granted under the Program.
The terms of the Program may be amended by the Program Administrators
except that no amendment may increase the maximum number of shares included in
the Program, change the exercise price of incentive stock options, increase the
maximum term established for any Option, stock appreciation right or share
award, or permit any grant to a person who is not a full-time employee of the
Company.
The Board of Directors recommends that you vote "FOR" the approval of the
Trust Corporation's 1998 Key Employee Incentive Stock Compensation Program.
PROPOSAL VI - TO APPROVE THE
1998 DIRECTORS' STOCK OPTION PLAN
The Board of Directors of Federal Trust has adopted a 1998 Directors' Stock
Option Plan ("Directors' Option Plan") attached hereto as Appendix C. The
following is a summary of the material features of the Directors' Option Plan
which is qualified in its entirety by reference to the complete provisions of
the attached Directors' Option Plan.
Each member of the Board of Directors, who is not an employee of Federal
Trust or the Bank, has been granted a single non-statutory option to purchase
shares of common stock. The purpose of the Directors' Option Plan is to promote
the growth and profitability of Federal Trust and to provide outside Directors
of the Company with an incentive to achieve the long-term objectives of Federal
Trust and the Bank, attract and retain non-employee Directors of outstanding
competence and to provide such outside Directors with an opportunity to acquire
an equity interest in the Company. The Directors' Option Plan authorizes the
granting of non-statutory stock options (options which do not qualify as
incentive stock options). See discussion under Proposal IV. The shares of common
stock issued under this Plan shall be from authorized and previously unissued
shares.
Options to purchase shares of common stock shall be granted to non-employee
Directors of the Company at the following times and in the following amounts:
Each of the current non-employee Directors will be granted an Option to
purchase 25,000 shares of common stock. New Directors elected or appointed to
the Board of Directors of the Company or any wholly-owned subsidiary of the
Company may be granted Options to purchase shares of common stock, as determined
by the Board of Directors in its sole discretion.
The per share exercise price at which the shares of common stock may be
purchased upon exercise of a granted Option will be equal to the fair market
value of a share of common stock as of the date of grant. For purposes of this
Plan, the fair market value of a share of common stock shall be the closing sale
price of a share of common stock on the date in question (or, if such day is not
a trading day on the U.S. markets, on the nearest preceding trading day), as
reported with respect to the principal market (or the composite of the markets,
if more than one), or national quotation system in which such shares are then
traded, or if no such closing prices are reported, the mean between the closing
high bid and low asked prices of a share of common stock on the principal market
or national quotation system then in use, or if no such quotations are
available, the price furnished by a professional securities dealer making a
market in such shares selected by the Board.
An Option may be exercised at any time on or after six months after the
date of grant until ten years after the date of grant. Unless terminated, this
Plan shall remain in effect for a period of ten years ending on the tenth
anniversary of the Effective Date. Termination of this Plan will not affect any
Options previously granted, and such Options shall remain valid and in effect
until they: (i) have been fully exercised; (ii) are surrendered; or (iii) expire
or are forfeited in accordance with their terms.
The Board of Directors recommends a vote "FOR" the approval of Federal
Trust Corporation's 1998 Directors' Stock Option Plan.
PROPOSAL VII - ADJOURNMENT
OF ANNUAL MEETING
Federal Trust seeks your approval to adjourn the Annual Meeting in the
event that the number of proxies sufficient to approve Proposals I, II, III, IV,
V or VI are not received by May 22, 1998. In order to permit proxies that have
been received by Federal Trust at the time of the Annual Meeting to be voted, if
necessary, for the adjournment, Federal Trust is submitting the question of
adjournment to permit further solicitation of proxies to approve Proposals I,
II, III, IV, V or VI to the shareholders as a separate matter for your
consideration. If it becomes necessary to adjourn the Annual Meeting, and the
adjournment is for a period of less than 30 days, no notice of the time and
place of the adjourned meeting need be given the shareholders, other than an
announcement made at the Annual Meeting.
The Board of Directors recommends a vote "FOR" the approval of the
adjournment of the Annual Meeting.
OTHER MATTERS WHICH MAY PROPERLY COME BEFORE THE MEETING
The Board of Directors knows of no other business which will be presented
for consideration at the Annual Meeting other than those matters described above
in this Proxy Statement. However, if any other matters should properly come
before the Annual Meeting, it is intended that the proxies solicited hereby will
be voted in respect thereof in accordance with the judgment of the person or
persons voting the proxies.
FINANCIAL STATEMENTS AND OTHER FINANCIAL INFORMATION
The 1997 financial statements, selected consolidated financial data, and
management's discussion and analysis of financial condition and results of
operations appear in its Annual Report for the fiscal year ended December 31,
1997, which is being mailed to all shareholders along with this Proxy Statement.
The financial statements are incorporated herein by reference.
SHAREHOLDERS' PROPOSALS
Proposals of shareholders intended to be presented at the 1999 Annual
Meeting should be submitted by certified mail, return receipt requested, and
must be received by Federal Trust at its corporate office located at 1211 Orange
Avenue, Winter Park, Florida 32787, on or before December 16, 1998, to be
eligible for inclusion in next year's Proxy Statement in form of proxy relating
to that meeting. However, if next year's annual meeting of shareholders is held
on a date more than 30 days before or after the corresponding date of the 1998
Annual Meeting, any shareholder who wishes to have a proposal included in the
Proxy Statement for that meeting must deliver a copy of the proposal to Federal
Trust a reasonable time before the Proxy solicitation is made. Federal Trust
reserves the right to decline to include in the Proxy Statement any
shareholder's proposal which does not comply with the Proxy rules (Regulation
14A) adopted under the Securities Exchange Act of 1934, as amended.
FEDERAL TRUST CORPORATION
WINTER PARK, FLORIDA
April 27, 1998
ARTICLES OF AMENDMENT
TO
ARTICLES OF INCORPORATION
OF FEDERAL TRUST CORPORATION
Pursuant to the provisions of Section 607.1006, Florida Statutes, Federal
Trust Corporation ("Corporation") adopts the following Articles of Amendment to
its Articles of Incorporation.
Amendment adopted: Article III of the Restated Articles of Incorporation
originally filed with the Secretary of State of the State of Florida on October
5, 1994, is hereby amended to read as follows:
ARTICLE IV - CAPITAL STOCK
The maximum number of shares which this Corporation is authorized to
have outstanding at any time is 15,000,000 shares, all of which shall be
shares of common stock having a par value of $0.01 per share (the "Common
Stock"). All such shares shall be identical with each other in every
respect and the holders of such shares shall be entitled to one vote for
each share on all matters on which stockholders have the right to vote.
Amendment adopted: Article V, Section C., of the Restated Articles of
Incorporation filed with the Secretary of State of the State of Florida on
October 5, 1994, is hereby amended to read as follows:
ARTICLE V - POWERS AND GOVERNANCE
C. Special meetings of the stockholders may be called by: (i) the
Board of Directors pursuant to a resolution duly adopted by a majority of
the total number of directors then authorized, whether or not any vacancies
then exist in previously authorized directorships (the Board of Directors
as comprised of all directorships authorized at a given time being the
"Full Board"); or (ii) by stockholders who hold not less than twenty
percent (20%) of all of the votes entitled to be cast on any issue proposed
to be considered at the proposed special meeting by their signing, dating
and delivering to the Corporate Secretary one or more written demands for
the special meeting describing the purpose(s) for which the special meeting
is to be held.
In accordance with Section 607.1003, Florida Statutes, the foregoing
Articles of Amendment were proposed and approved by the Board of Directors of
the Corporation at a duly called meeting of the Board of Directors held on April
3, 1998, and subsequently adopted by affirmative vote of a sufficient number of
the single class of stockholders of the Corporation at the 1998 Annual Meeting
of Shareholders held on May 22, 1998.
APPENDIX A
IN WITNESS WHEREOF, the undersigned authorized officer of the Corporation
executed these Articles of Amendment on this 22nd day of May, 1998.
FEDERAL TRUST CORPORATION
James V. Suskiewich
Chairman of the Board,
President and Chief Executive Officer
Attest:
Clair I. Ford
Corporate Secretary
2
FEDERAL TRUST CORPORATION
1998 KEY EMPLOYEE
STOCK COMPENSATION
PROGRAM
1211 Orange Avenue
Winter Park, FL 32789
APPENDIX B
FEDERAL TRUST CORPORATION
1998 KEY EMPLOYEE STOCK COMPENSATION PROGRAM
1. Purpose. This 1998 Key Employee Stock Compensation Program ("Program")
is intended to secure for Federal Trust Corporation, Federal Trust Bank, and the
subsidiaries of either company (collectively, the "Corporation"), the benefits
arising from ownership of the Corporation's common stock, par value $.01 per
share ("Common Stock"), by those selected officers and other key employees of
the Corporation who will be responsible for its future growth. The Program is
designed to help attract and retain superior personnel for positions of
substantial responsibility with the Corporation and to provide key employees
with an additional incentive to contribute to the success of the Corporation.
2. Elements of the Program. In order to maintain flexibility in the award
of stock benefits, the Program is comprised of four parts: (i) an Incentive
Stock Option Plan ("Incentive Plan"); (ii) a Compensatory Stock Option Plan
("Compensatory Plan"); (iii) a Stock Appreciation Rights Plan ("SAR Plan"); and
(iv) a Performance Shares Plan ("Performance Plan"). Copies of the Incentive
Plan, Compensatory Plan, SAR Plan and Performance Plan are attached hereto as
Plan I, Plan II, Plan III, and Plan IV, respectively, and are collectively
referred to herein as the "Plans". The grant of an option, appreciation right or
performance share under one of the Plans shall not be construed to prohibit the
grant of an option, appreciation right or performance share under any of the
other Plans.
3. Applicability of General Provisions. Unless any Plan specifically
indicates to the contrary, all Plans shall be subject to the General Provisions
of the Program set forth below.
4. Administration of the Plans. The Plans shall be administered, construed,
governed and amended in accordance with their respective terms.
GENERAL PROVISIONS OF THE PROGRAM
Article 1. Administration. The Program shall be administered by a committee
which shall consist of three or more members of the Board of Directors, none of
whom is an officer or employee of the Corporation, and each of whom shall be a
"disinterested person" within the meaning of Rule 16b-3 promulgated under the
Securities Exchange Act of 1934, as amended. The committee, when acting to
administer the Program, is referred to as the "Program Administrators". Any
action of the Program Administrators shall be taken by majority vote or the
unanimous written consent of the Program Administrators. No Program
Administrator shall be liable for any action or determination made in good faith
with respect to the Program or to any option, stock appreciation right, or
performance share granted thereunder.
Article 2. Authority of Program Administrators. Subject to the other
provisions of this Program, and with a view to effecting its purpose, the
Program Administrators shall have sole authority in their absolute discretion:
(i) to construe and interpret the Program; (ii) to define the terms used herein;
(iii) to prescribe, amend and rescind rules and regulations relating to the
Program; (iv) to determine the employees to whom options, appreciation rights
and performance shares shall be granted under the Program; (v) to determine the
time or times at which options, appreciation rights and performance shares shall
be granted under the Program; (vi) to determine the number of shares subject to
any option or stock appreciation right under the Program and the number of
shares to be awarded as performance shares under the Program as well as the
option price, and the duration of each option, appreciation right and
performance share, vesting requirements, and any other terms and conditions of
options, appreciation rights and performance shares; (vii) to terminate the
Program; and (viii) to make any other determinations necessary or advisable for
the administration of the Program and to do everything necessary or appropriate
to administer the Program. All decisions, determinations and interpretations
made by the Program Administrators shall be binding and conclusive on all
participants in the Program and on their legal representatives, heirs and
beneficiaries.
Article 3. Maximum Number of Shares Subject to the Program. The maximum
aggregate number of shares of Common Stock available pursuant to the Plans,
subject to adjustment as provided in Article 6 hereof, shall be 325,000 shares
of Common Stock. If any of the options granted under this Program expire or
terminate for any reason before they have been exercised in full, the
unpurchased shares subject to those expired or terminated options shall again be
available for the purposes of the Program. If the performance objectives
associated with the grant of any performance share(s) are not achieved within
the specified performance period, or if the performance share grant terminates
for any reason before the performance objective date arrives, the shares of
Common Stock associated with such performance shares shall again be available
for the purposes of the Program.
Article 4. Eligibility and Participation. Only regular, full-time employees
of the Corporation, including officers whether or not directors of the
Corporation, or of any subsidiary, shall be eligible for selection by the
Program Administrators to participate in the Program. Directors who are not
full-time, salaried employees of the Corporation, or of any subsidiary, shall
not be eligible to participate in the Program.
Article 5. Effective Date and Term of Program. The Program shall become
effective upon its adoption by the Board of Directors of the Corporation and
subsequent approval of the Program by a majority of the total votes eligible to
be cast at a meeting of Federal Trust Corporation's shareholders, which vote
shall be taken within 12 months of adoption of the Program by the Corporation's
Board of Directors; provided, however, that options, appreciation rights and
performance shares may be granted under this Program prior to obtaining
shareholder approval of the Program and, further provided, that any such options
or appreciation rights or performance shares shall be contingent upon such
shareholder approval being obtained and may not be exercised prior to such
approval. The Program shall continue in effect for a term of 10 years unless
sooner terminated under Article 2 of the General Provisions.
Article 6. Adjustments. If the shares of Common Stock of the Corporation as
a whole are increased, decreased, changed into or exchanged for a different
number or kind of shares or securities through merger, consolidation,
combination, exchange of shares, other reorganization, recapitalization,
reclassification, stock dividend, stock split or reverse stock split, an
appropriate and proportionate adjustment shall be made in the maximum number and
kind of shares as to which options, appreciation rights and performance shares
may be granted under this Program. A corresponding adjustment changing the
number or kind of shares allocated to unexercised options, appreciation rights,
performance shares or portions thereof, which shall have been granted prior to
any such change, shall likewise be made. Any such adjustment in outstanding
options and appreciation rights shall be made without change in the aggregate
purchase price applicable to the unexercised portion of the option or
appreciation right but with a corresponding adjustment in the price for each
share or other unit of any security covered by the option or appreciation right.
In making any adjustment pursuant to this Article 6, any fractional shares shall
be disregarded.
Article 7. Termination and Amendment of Program. The Program shall
terminate no later than 10 years from the date such Program is adopted by the
Board of Directors or the date such Program is approved by the shareholders,
whichever is earlier. No options, appreciation rights or performance shares
shall be granted under the Program after that date. Subject to the limitation
contained in Article 8 of the General Provisions, the Program Administrators may
at any time amend or revise the terms of the Program, including the form and
substance of the option, appreciation right, and performance share agreements to
be used hereunder; provided that no amendment or revision shall: (i) increase
the maximum aggregate number of shares that may be sold, appreciated or
distributed pursuant to options, appreciation rights or performance shares
granted under this Program, except as permitted under Article 6 of the General
Provisions; (ii) change the minimum purchase price for shares under Section 4 of
the Plan I; (iii) increase the maximum term established under the Plans for any
option, appreciation right or performance share; or (iv) permit the granting of
an option, appreciation right or performance share to anyone other than as
provided in Article 4 of the General Provisions.
Article 8. Prior Rights and Obligations. No amendment, suspension or
termination of the Program shall, without the consent of the employee who has
received an option, appreciation right or performance share, alter or impair any
of that employee's rights or obligations under any option, appreciation right or
performance share granted under the Program prior to such amendment, suspension
or termination.
Article 9. Privileges of Stock Ownership. Notwithstanding the exercise of
any options granted pursuant to the terms of this Program or the achievement of
any performance objective specified in any performance share granted pursuant to
the terms of this Program, no employee shall have any of the rights or
privileges of a shareholder of the Corporation in respect of any shares of stock
issuable upon the exercise of his or her option or achievement of his or her
performance goal until certificates representing the shares have been issued and
delivered. No shares shall be required to be issued and delivered upon exercise
of any option or achievement of any performance goal as specified in a
performance share unless and until all of the requirements of law and of all
regulatory agencies having jurisdiction over the issuance and delivery of the
securities shall have been fully complied with. No adjustment shall be made for
dividends or any other distribution for which the record date is prior to the
date on which such stock certificate is issued.
Article 10. Reservation of Shares of Common Stock. During the term of this
Program, the Corporation will at all times, reserve and keep available such
number of shares of its Common stock as shall be sufficient to satisfy the
requirements of the Program. In addition, the Corporation will from time to
time, as is necessary to accomplish the purposes of this Program, seek to obtain
from any regulatory agency having jurisdiction over any requisite authority in
order to issue and sell shares of Common Stock hereunder. The inability of the
Corporation to obtain from any regulatory agency having jurisdiction the
authority deemed by the Corporation's counsel to be necessary to permit the
lawful issuance and sale of any shares of its stock hereunder shall relieve the
Corporation of any liability in respect of the non-issuance or sale of the stock
as to which the requisite authority shall not have been obtained.
Article 11. Tax Withholding. The exercise of any option, appreciation right
or performance share granted under the Program is subject to the condition that
if at any time the Corporation shall determine, in its discretion, that the
satisfaction of withholding tax or other withholding liabilities under any state
or federal law is necessary or desirable as a condition of, or in any connection
with, such exercise or the delivery or purchase of shares pursuant thereto, then
in such event, the exercise of the option, appreciation right or performance
share shall not be effective unless such withholding tax or other withholding
liabilities shall have been satisfied in a manner acceptable to the Corporation.
Article 12. Employment. Nothing in the Program or in any option, stock
appreciation right or performance share award shall confer upon any eligible
employee any right to continued employment by the Corporation, or by any
subsidiary corporations, or limit in any way the right of the Corporation or its
subsidiary corporations at any time to terminate or alter the terms of that
employment
FEDERAL TRUST CORPORATION
PLAN I
INCENTIVE STOCK OPTION PLAN
Section 1. Purpose. The purpose of this Incentive Stock Option Plan
("Incentive Plan") is to promote the growth and general prosperity of Federal
Trust Corporation, Federal Trust Bank and the subsidiaries of either company
(collectively, the "Corporation") by permitting the Corporation to grant options
to purchase shares of its Common Stock. The Incentive Plan is designed to help
attract and retain superior personnel for its positions of responsibility with
the Corporation, or of any subsidiary, and to provide key employees with an
additional incentive to contribute to the success of the Corporation. The
Corporation intends that options granted pursuant to the provisions of the
Incentive Plan will qualify and will be identified as "incentive stock options"
within the meaning of Section 422 of the Internal Revenue Code of 1986, as
amended ("Code"). This Incentive Plan is Part I of the Corporations Program.
Unless any provision herein indicates to the contrary, this Incentive Plan shall
be subject to the General Provisions of the Program.
Section 2. Option Terms and Conditions. The terms and conditions of options
granted under the Incentive Plan may differ from one another as the Program
Administrators shall, in their discretion, determine, as long as all options
granted under the Incentive Plan satisfy the requirements of the Incentive Plan.
Section 3. Duration of Options. Each option and all rights thereunder
granted pursuant to the terms of the Incentive Plan shall expire on the date
determined by the Program Administrators, but in no event shall any option
granted under the Incentive Plan expire later than 10 years from the date on
which the option is granted, except that any employee who owns more than 10% of
the combined voting power of all classes of stock of the Corporation, or of its
subsidiaries, must exercise any options granted thereto within three years from
the date of the grant. In addition, each option shall be subject to early
termination as provided in the Incentive Plan.
Section 4. Purchase Price. The purchase price for shares acquired pursuant
to the exercise, in whole or in part, of any option shall not be less than the
fair market value of the shares at the time of the grant of the option; except
that for any employee who owns more than 10% of the combined voting power of all
classes of stock of the Corporation, or of its subsidiaries, the purchase price
shall not be less than 110% of the fair market value. For purposes of this Plan
I, fair market value shall be the closing sale price of a share of Common Stock
on the date in question (or, if such day is not a trading day in the U.S.
markets, on the nearest preceding trading day), as reported with respect to the
principal market (or the composite of the markets, if more than one) or national
quotation system in which such shares are then traded, or if no such closing
prices are reported, the mean between the high bid and low asked prices that day
on the principal market or national quotation system then in use, or if no such
quotations are available, the price furnished by a professional securities
dealer making a market in such shares as selected by the Board of Directors of
the Corporation.
Section 5. Maximum Amount of Options Exercisable in any Calendar Year. The
aggregate fair market value (determined as of the time the option is granted) of
the Common Stock with respect to which incentive stock options, as defined in
Section 422(b) of the Code, are exercisable for the first time by any employee
during any calendar year (under the terms of this Plan and all such plans of the
Corporation and any subsidiaries) shall not exceed $100,000.
Section 6. Exercise of Options. Each option shall be exercisable in one or
more installments during its term, and the right to exercise may be cumulative
as determined by the Program Administrators; provided, however, that no option
may be exercisable for the first six months following the date the option is
granted. No option may be exercised for a fraction of a share of Common Stock.
The purchase price of any shares purchased shall be paid in full in cash or by
certified or cashier's check payable to the order of the Corporation or by
shares of Common Stock (including shares acquired pursuant to the exercise of an
option), if permitted by the Program Administrators, or by a combination of
cash, check or shares of Common Stock, at the time of exercise of the option,
provided that the form(s) of payment allowed the employee shall be established
when the option is granted. If any portion of the purchase price is paid in
shares of Common Stock, those shares shall be tendered at their then fair market
value as determined by the Program Administrators in accordance with Section 4
of this Incentive Plan.
Section 7. Acceleration of Rights of Exercise of Installments.
Notwithstanding the first sentence of Section 6 of this Incentive Plan with
respect to the ability to exercise options in installments, in the event the
Corporation or its shareholders enter into an agreement to dispose of all or
substantially all of the assets or stock of the Corporation by means of a sale,
merger or other reorganization, liquidation or otherwise, any option granted
pursuant to the terms of the Incentive Plan shall become immediately exercisable
with respect to the full number of shares subject to that option during the time
period commencing as of the date of the agreement to dispose of all or
substantially all of the assets or stock of the Corporation and, subject to the
provisions hereof, ending when the disposition of assets or stock contemplated
by that agreement is consummated or the option is otherwise terminated in
accordance with its provisions or the provisions of this Incentive Plan,
whichever occurs first; provided, however, that no option shall be immediately
exercisable under this Section 7 on account of any agreement to dispose of all
or substantially all of the assets or stock of the Corporation by means of a
sale, merger or other reorganization, liquidation or otherwise where the
shareholders of the Corporation immediately before the consummation of the
transaction will own at least 50% of the total combined voting power of all
classes of stock entitled to vote of the surviving entity, whether the
Corporation or some other entity, immediately after the consummation of the
transaction; and, provided further, that the exercisability of an option may not
be accelerated prior to the sixth month anniversary of the date the option was
granted. In the event the transaction contemplated by the agreement referred to
in this Section 7 is not consummated, but rather is terminated, canceled or
expires, the options granted pursuant to the Incentive Plan shall thereafter be
treated as if that agreement had never been entered into.
Notwithstanding the first sentence of Section 6 of this Incentive Plan with
respect to the ability to exercise options in installments, and subject to the
provisions of the first paragraph of this Section 7, in the event of a change of
control of the Corporation or threatened change in control of the Corporation as
determined by a vote of not less than a majority of the Board of Directors of
the Corporation, all options granted prior to such change in control or
threatened change of control shall become immediately exercisable, except that
any option granted for less than six months shall not become exercisable until
the sixth month anniversary of the date the option was granted. The term
"control" for purposes of this Section shall refer to the acquisition of 10% or
more of the voting securities of the Corporation by any person or by persons
acting as a group within the meaning of Section 13(d) of the Securities Exchange
Act of 1934, as amended; provided, however, that for purposes of this Incentive
Plan, except under the circumstances as set forth in the paragraph of this
Section 7, no change in control or threatened change in control shall be deemed
to have occurred if prior to the acquisition of, or offer to acquire, 10% or
more of the voting securities of the Corporation, the full Board of Directors of
the Corporation shall have adopted by not less than two-thirds vote a resolution
specifically approving such acquisition or offer. The term "person" for venture,
pool, syndicate, sole proprietorship, unincorporated organization or any other
form of entity not specifically listed herein.
Section 8. Written Notice Required. Any option granted pursuant to the
terms of the Incentive Plan shall be exercised when written notice of that
exercise has been given to the Corporation at its principal office by the person
entitled to exercise the option and full payment for the shares with respect to
which the option is exercised has been received by the Corporation.
Section 9. Compliance With Securities Laws. Shares of Common Stock shall
not be issued with respect to any option granted under the Incentive Plan unless
the exercise of that option and the issuance and delivery of those shares
pursuant to that exercise shall comply with all relevant provisions of state and
federal law including, without limitation, the Securities Act of 1933, as
amended ("Securities Act"), the rules and regulations promulgated thereunder,
and the requirements of any stock exchange or national quotation system upon
which the shares may be listed, and shall be further subject to the approval of
counsel for the Corporation with respect to such compliance. The Program
Administrators may also require an employee to whom an option has been granted
under the Incentive Plan ("Optionee") to furnish evidence satisfactory to the
Corporation, including a written and signed representation letter and consent to
be bound by any transfer restriction imposed by law, legend, condition or
otherwise, that the shares are being purchased only for investment and without
any present intention to sell or distribute the shares in violation of any state
or federal law, rule or regulation. Further, each Optionee shall consent to the
imposition of a legend on the shares of Common Stock subject to his or her
option restricting their transferability to the extent required by law or by
this Section 9.
Section 10. Employment of Optionee. Each Optionee, if requested by the
Program Administrators when the option is granted, must agree in writing as a
condition of receiving his or her option that he or she will remain in the
employ of the Corporation or any subsidiary of the Corporation (or a corporation
or a parent or subsidiary of such corporation issuing or assuming a stock option
in a transaction to which Section 425[a] of the Code applies), as the case may
be, following the date of the granting of that option for a period specified by
the Program Administrators, which period shall in no event exceed three years.
Nothing in the Plan or in any option granted hereunder shall confer upon any
Optionee any right to continued employment by the Corporation, or limit in any
way the right of the Corporation at any time to terminate or alter the terms of
that employment
Section 11. Option Rights Upon Termination of Employment. If an Optionee
ceases to be employed by the Corporation or any subsidiary corporation (or a
corporation or a parent or subsidiary of such corporation issuing or assuming a
stock option in a transaction to which Section 425[a] of the Code applies), for
any reason other than death, disability or cause, his or her option shall
immediately terminate; provided, however, that the Program Administrators, may,
in their discretion, allow such option to be exercised (to the extent
exercisable on the date of termination of employment) at any time within three
months after the date of termination of employment, unless either the option or
this Incentive Plan otherwise provides for earlier termination. If an Optionee
is terminated for cause, any options granted thereto under the provision of this
Plan shall terminate as of the effective date of such termination of employment.
Section 12. Option Rights Upon Disability. If an Optionee becomes disabled
within the meaning of Section 22(e)(3) of the Code while employed by the
Corporation or any subsidiary corporation (or a corporation or a parent or
subsidiary of such corporation issuing or assuming a stock option in a
transaction to which Section 425[a] of the Code applies), the option may be
exercised, to the extent exercisable on the date of termination of employment at
any time within one year after the date of termination of employment due to
disability, unless either the option or this Incentive Plan otherwise provides
for earlier termination.
Section 13. Option Rights Upon Death of Optionee. Except as otherwise
limited by the Program Administrators at the time of the grant of an option, if
an Optionee dies while employed by the Corporation or any subsidiary corporation
(or a corporation or a parent or subsidiary of such corporation issuing or
assuming a stock option in a transaction to which Section 425[a] of the Code
applies), or within three months after ceasing to be an employee thereof, his or
her option shall expire one year after the date of death, unless by its term it
expires sooner. During this one year or shorter period, the option may be
exercised, to the extent that it remains unexercised on the date of death, by
the person or persons to whom the Optionee's rights under the option shall pass
by will or by the laws of descent and distribution, but only to the extent that
the Optionee was entitled to exercise the option at the date of death.
Section 14. Options not Transferable. Options granted pursuant to the terms
of this Incentive Plan may not be sold, pledged, assigned or transferred in any
manner otherwise than by will or the laws of descent and distribution and may be
exercised during the lifetime of an Optionee, only by that Optionee, or his
guardian or legal representative.
Section 15. Conversion of Options Granted Under Incentive Plan. Options
granted pursuant to the terms of this Incentive Plan may be converted with the
written consent of the Optionee to compensatory non-qualified stock options
subject to and governed by the provisions of the Compensatory Stock Option Plan,
which is a part of the Program.
FEDERAL TRUST CORPORATION
PLAN II
COMPENSATORY STOCK OPTION PLAN
Section 1. Purpose. The purpose of this Compensatory Stock Option Plan
("Compensatory Plan") is to permit Federal Trust Corporation, Federal Trust Bank
and the subsidiaries of either company (collectively, the "Corporation") to
grant options to purchase shares of its Common Stock to selected officers and
full-time, key employees of the Corporation or any subsidiary. The Compensatory
Plan is designed to help attract and retain superior personnel for positions of
substantial responsibility with the Corporation and to provide key employees
with an additional incentive to contribute to the success of the Corporation.
Any option granted pursuant to this Compensatory Plan shall be clearly and
specifically designated as not being an incentive stock option, ass defined in
Section 422 of the Code. This Compensatory Plan is Part II of the Corporation's
Program. Unless any provision herein indicates to the contrary, this
Compensatory Plan shall be subject to the General Provisions of the Program.
Section 2. Option Terms and Conditions. The terms and conditions of options
granted under this Compensatory Plan may differ from one another as the Program
Administrators shall, in their discretion determine as long as all options
granted under the Compensatory Plan satisfy the requirements of the Compensatory
Plan.
Section 3. Duration Options. Each option and all rights thereunder granted
pursuant to the terms of this Compensatory Plan shall expire on the date
determined by the Program Administrators, but in no event shall any option
granted under the Compensator Plan expire later than 10 years and one month from
the date on which the option is granted. In addition, each option shall be
subject to early termination as provided in the Compensatory Plan.
Section 4. Purchase Price. The purchase price for shares acquired pursuant
to the exercise, in whole or in part, of any option shall be equal to the fair
market value of the shares at the time of the grant of the option. For purposes
of this Plan II, fair market value shall be the Closing sale price of a share of
Common Stock on the date in question (or, if such day is not a trading day in
the U.S. markets, on the nearest preceding trading day) as reported with respect
to the principal market (or the composite of the markets, if more than one) or
national quotation system in which such shares are then traded, or if no such
closing prices are reported, the mean between the high bid and low asked prices
that day on the principal market or national quotation system then in use, or if
no such quotations are available, the price furnished by a professional
securities dealer making a market in such shares as selected by the Board of
Directors of the Corporation.
Section 5. Exercise of Options. Each option shall be exercisable in one or
more installments during its term and the right to exercise may be cumulative as
determined by the Program Administrators; provided, however, that no option may
be exercisable for the first six months following the date the option is
granted. No options may be exercised for a fraction of a share of Common Stock.
The purchase price of any shares purchased shall be paid in full in cash or by
certified or cashier's check payable to the order of the Corporation or by
shares of Common Stock (including shares acquired pursuant to the exercise of an
option), if permitted by the Program Administrators, or by a combination of
cash, check or shares of Common Stock, at the time of exercise of the option. If
any portion of the purchase price is paid in shares of Common Stock, those
shares shall be tendered at their then fair market value as determined by the
Program Administrators in accordance with Section 4 of this Compensatory Plan.
Section 6. Acceleration of Right of Exercise of Installments.
Notwithstanding the first sentence of Section 5 of this Compensatory Plan with
respect to the ability to exercise options in installments, if the Corporation
or its shareholders enter into an agreement to dispose of all or substantially
all of the assets or stock of the Corporation by means of a sale, merger or
other reorganization, liquidation, or otherwise, any option granted pursuant to
the terms of this Compensatory Plan shall become immediately exercisable with
respect to the full number of shares subject to that option during the period
commencing as of the date of the agreement to dispose of all or substantially
all of the assets or stock of the Corporation and, subject to the provisions
hereof, ending when the disposition of assets or stock contemplated by that
agreement is consummated, or the option is otherwise terminated in accordance
with its provisions or the provisions of this Compensatory Plan, whichever
occurs first; provided, however, that no option shall be immediately exercisable
under this Section 6 on account of any agreement to dispose of all or
substantially all of the assets or stock of the Corporation by means of a sale,
merger or other reorganization, liquidation or otherwise where the shareholders
of the Corporation immediately before the consummation of the transaction will
own least 50% of the total combined voting power of all classes of stock
entitled to vote of the surviving entity, whether the Corporation or some other
entity, immediately after the consummation of the transaction; and, provided
further, that the exercisability of an option may not be accelerated prior to
the sixth month anniversary of the date the option was granted. In the event the
transaction contemplated by the agreement referred to in this Section 6 is not
consummated but rather is terminated, canceled or expires, the options granted
pursuant to this Compensatory Plan shall thereafter be treated as if that
agreement had never been entered into.
Notwithstanding the first sentence of Section 5 of this Compensatory Plan
with respect to the ability to exercise options in installments, and subject to
the provisions of the first paragraph of this Section 6, in the event of a
change in control of the Corporation, or threatened change in control of the
Corporation as determined by a vote of not less than a majority of the Board of
Directors of the Corporation, all options granted prior to such change in
control or threatened change in control shall become immediately exercisable,
except that any option granted for less than six months shall not become
exercisable until the sixth month anniversary of the date the option was
granted. The term "control" for purposes of this Section shall refer to the
acquisition of 10% or more of the voting securities of the Corporation by any
person or by persons acting as a group within the meaning of Section 13(d) of
the Securities Exchange Act of 1934, as amended; provided, however, that for
purposes of this Compensatory Plan, except under the circumstances as set forth
in the first paragraph of this Section 6 no change in control or threatened
change in control shall be deemed to have occurred if prior to the acquisition
of, or offer to acquire, 10% or more of the voting securities of the
Corporation, the full Board of Directors of the Corporation shall have adopted
by not less than two-thirds vote a resolution specifically approving such
acquisition or offer. The term "person" for purposes of this Section refers to
an individual or a corporation, partnership, trust, association, joint venture,
pool, syndicate, sole proprietorship, unincorporated organization or any other
form of entity not specifically listed herein.
Section 7. Written Notice Required. Any option granted pursuant to the
terms of this Compensatory Plan shall be exercised when written notice of that
exercise has been given to the Corporation at its principal office by the person
entitled to exercise the option and full payment for the shares with respect to
which the option is exercised has been received by the Corporation.
Section 8. Compliance With Securities Laws. Shares shall not be issued with
respect to any option granted under the Compensatory Plan, unless the exercise
of that option and the issuance and delivery of the shares pursuant thereto
shall comply with all relevant provisions of state and federal law, including,
without limitation, the Securities Act, the rules and regulations promulgated
thereunder and the requirements of any stock exchange or national quotation
system upon which the shares may then be listed, and shall be further subject to
the approval of counsel for the Corporation with respect to such compliance. The
Program Administrators may also require an employee to whom an option has been
granted ("Optionee") to furnish evidence satisfactory to the Corporation,
including a written and signed representation letter and consent to be bound by
any transfer restrictions imposed by law, legend, condition or otherwise, that
the shares are being purchased only for investment purposes and without any
present intention to sell or distribute the shares in violation of any state or
federal law, rule or regulation. Further, each Optionee shall consent to the
imposition of a legend on the shares of Common Stock subject to his or her
option restricting their transferability to the extent required by law or by
this Section 8.
Section 9. Employment of Optionee. Each Optionee, if requested by the
Program Administrators, must agree in writing as a condition of receiving his or
her option that he or she will remain in the employment of the Corporation or
any subsidiary (or a corporation or a parent or subsidiary of such corporation
issuing or assuming a stock option in a transaction to which section 425[a] of
the Code applies), following the date of the granting of that option for a
period specified by the Program Administrators, which period shall in no event
exceed three years. Nothing in this Compensatory Plan or in any option granted
hereunder shall confer upon any Optionee any right to continued employment by
the Corporation or any of its subsidiaries, or limit in any way the right of the
Corporation or any subsidiary at any time to terminate or alter the terms of
that employment.
Section 10. Option Rights Upon Termination of Employment. If any Optionee
under this Compensatory Plan ceases to be employed by the Corporation or any
subsidiary (or a corporation or a parent or subsidiary of such corporation
issuing or assuming a stock option in a transaction to which section 425[a] of
the Code applies), for any reason other than disability, death or cause, his or
her option; provided, however, that the Program Administrators may, in their
discretion, allow such option to be exercised, to the extent exercisable on the
date of termination of employment, at any time within the remaining period for
exercise of the option, unless either the option or this Plan otherwise provides
for earlier termination. If an Optionee is terminated for cause, any options
granted thereto under the provisions of this Plan shall terminate as of the
effective date of such termination of employment.
Section 11. Option Rights Upon Disability. If an Optionee becomes disabled
within the meaning of Section 22(e)(3) of the Code while employed by the
Corporation or any subsidiary corporation (or a corporation or a parent or
subsidiary of such corporation issuing or assuming a stock option in a
transaction to which section 425[a] of the Code applies), the Program
Administrators, in their discretion, may allow the option to be exercised, to
the extent exercisable on the date of termination of employment or directorship,
at any time within five years after the date of termination of employment due to
disability, unless either the option or this Compensatory Plan otherwise
provides for earlier termination.
Section 12. Option Rights Upon Death of Optionee. Except as otherwise
limited by the Program Administrators at the time of the grant of an option, if
an Optionee dies while employed by the Corporation or any subsidiary corporation
(or a corporation or a parent or subsidiary of such corporation issuing or
assuming a stock option in a transaction to which Section 425[a] of the Code
applies), his or her option shall expire one year after the date of death unless
by its terms it expires sooner. During this one year or shorter period, the
option may be exercised, to the extent that it remains unexercised, on the date
of death by the person or persons to whom the Optionee's rights under the option
shall pass by will or by the laws of descent and distribution, but only to the
extent that the Optionee was entitled to exercise the option at the date of
death.
Section 13. Options not Transferable. Options granted pursuant to the terms
of this Compensatory Plan may not be sold, pledged, assigned or transferred in
any manner otherwise than by will or the laws of descent and distribution and
may be exercised during the lifetime of an Optionee only by that Optionee or his
guardian or legal representative.
FEDERAL TRUST CORPORATION
PLAN III
STOCK APPRECIATION RIGHTS PLAN
Section 1. V Purpose. The purpose of this Stock Appreciation Rights Plan
("SAR Plan") is to permit Federal Trust Corporation, Federal Trust Bank and the
subsidiaries of either company (collectively, the "Corporation") to grant stock
appreciation rights for its Common Stock to its full-time, key employees. The
SAR Plan is designed to help attract and retain superior personnel for positions
of substantial responsibility with the Corporation and to provide key employees
with an additional incentive to contribute to the success of the Corporation.
This SAR Plan is Plan III of the Program. Unless any provision herein indicates
to the contrary, this SAR Plan shall be subject to the General Provisions of the
Program.
Section 2. Terms and Conditions. The Program Administrators may, but shall
not be obligated to, authorize, on such terms and conditions as they deem
appropriate in each case, the Corporation to accept the surrender by the
recipient of a stock option granted under Plan I or Plan II of the right to
exercise that option, or portion thereof, in consideration for the payment by
the Corporation of an amount equal to the excess of the fair market value of the
shares of Common Stock subject to such option, or portion thereof, surrendered,
over the option price of such shares. Such payment, at the discretion of the
Program Administrators, may be made in shares of Common Stock valued at the then
fair market value thereof, determined as provided in Section 4 of Plan I, or in
cash or partly in cash and partly in shares of Common Stock; provided that with
respect to rights granted in tandem with incentive stock options, the Program
Administrators shall establish the form(s) of payment allowed the Optionee at
the date of grant. The Program Administrators shall not be authorized to make
payment to any Optionee in shares of the Corporation's Common Stock unless
Section 83 of the Code would apply to the Common Stock transferred to the
Optionee. The Program Administrators may, but shall not be obligated to, also
authorize naked stock appreciation rights in accordance with Section 9 hereof.
Notwithstanding the foregoing, the Corporation may not permit the exercise and
cancellation of a stock appreciation right issued pursuant to this SAR Plan
until the Corporation has been subject to the reporting requirements of Section
13 of the Exchange Act for a period of at least one year prior to the exercise
and cancellation of any such stock appreciation right and until a stock
appreciation right issued pursuant to this SAR Plan has been outstanding for at
least six months from the date of grant.
Section 3. Time Limitations. Any election by an Optionee to exercise the
stock appreciation rights provided in this SAR Plan shall be made during the
period beginning on the third business day following the release for publication
of quarterly or annual financial information required to be prepared and
disseminated by the Corporation pursuant to the requirements of the Exchange Act
and ending on the twelfth business day following such date. The required release
of information shall be deemed to have been satisfied when the specified
financial data appears on or in a wire service, financial news service or
newspaper of general circulation or is otherwise first made publicly available.
Section 4. Exercise of Stock Appreciation Rights. Effect on Stock Options
and Vice Versa. Upon the exercise of a stock appreciation right, the number of
shares available under the stock option to which it relates shall decrease by a
number equal to the number of shares for which the right was exercised. Upon the
exercise of a stock option, any related stock appreciation right shall terminate
as to any number of shares subject to the right that exceeds the total number of
shares for which the stock option remains unexercised.
Section 5. Time of Grant. With respect to options granted under Plan I,
stock appreciation rights must be granted concurrently with the stock options to
which they relate; with respect to options granted under Plan II, stock
appreciation rights may be granted concurrently or at any time thereafter prior
to the exercise or expiration of such options.
Section 6. Non-Transferable. The holder of a stock appreciation right may
not transfer or assign the right otherwise than by will or in accordance with
the laws of descent and distribution. Furthermore, in the event of the
termination of his or her service with the Corporation as an officer and/or
employee, the right may be exercised only within the period, if any, which the
option to which it relates may be exercised.
Section 7. Tandem Incentive Stock Option - Stock Appreciation Right.
Whenever an incentive stock option authorized pursuant to Plan I and a stock
appreciation right authorized hereunder are granted together and the exercise of
one affects the right to exercise the other, the following requirements shall
apply:
(i) The stock appreciation right will expire no later than the
expiration of the underlying incentive stock option;
(ii) The stock appreciation right may be for no more than the
difference between the exercise price of the underlying
option and the market price of the stock subject to the
underlying option at the time the stock appreciation right
is exercised;
(iii) The stock appreciation right is transferable only when the
underlying incentive stock option is transferable and under
the same conditions;
(iv) The stock appreciation right may be exercised only when the
underlying incentive stock option is eligible to be
exercised; and
(v) The stock appreciation right may be exercised only when the
market price of the stock subject to the option exceeds the
exercise price of the stock subject to the option.
Section 8. Tandem Stock Option - Limited Stock Appreciation Right. The
Program Administrators may provide that any tandem stock appreciation right
granted pursuant to this Section 8 shall be a limited stock appreciation right,
in which event:
(i) The limited stock appreciation right shall be exercisable
during the period beginning on the first day following the
expiration of an Offer (as defined below) and ending on the
thirtieth day following such date (but in no event less than
six months after the date of grant of the right);
(ii) Neither the option tandem to the limited stock appreciation
right nor any other stock appreciation right tandem to such
option may be exercised at any time that the limited stock
appreciation right may be exercised, provided that this
requirement shall not apply in the case of an incentive
stock option tandem to a limited stock appreciation right if
and to the extent that the Program Administrators determine
that such requirement is not consistent with applicable
statutory provisions regarding incentive stock options and
the regulations issued thereunder; and
(iii) Upon exercise of the limited stock appreciation right, the
fair market value of the shares to which the right relates
for purposes of Section 4 of Plan I shall be determined as
the highest price per share paid in any Offer that is in
effect at any time during the period beginning on the
sixtieth day prior to the date on which the limited stock
appreciation right is exercised and ending on such exercise
date; provided, however, with respect to a limited stock
appreciation right tandem to an incentive stock option, the
Program Administrators shall determine the fair market value
of such shares in a different manner if and to the extent
that the Program Administrators deem necessary or desirable
to conform with applicable statutory provisions regarding
incentive stock options and the regulations issued
thereunder.
The term "Offer" shall mean any tender offer or exchange offer for shares
of the Corporation, provided that the person making the offer acquires shares of
the Corporation's capital stock pursuant to such offer.
Section 9. Naked Stock Appreciation Right. The Program Administrators may
provide that any stock appreciation right granted pursuant to this Section 9
shall be a naked stock appreciation right ("Naked Right"), in which event:
(1) Operation. Participants shall be awarded Naked Rights for a period of
up to five years or such shorter period which shall not be less than
six months, as may be determined by the Program Administrators. Such
designated period may vary as among participants and as among awards
to a participant. Subject to compliance with Section 3 hereof, at the
end of such designated period with respect to a participant, such
participant shall receive an amount equal to the appreciation in
market value of his or her Naked Rights as determined in paragraph (2)
of this Section 9 (the "Right Award"). The Right Award shall be
payable in cash or in shares of Common Stock, as may be determined by
the Program Administrators. A participant may receive as many awards
of Naked Rights at various times as may be determined to be
appropriate by the Program Administrators.
(2) Appreciation of Naked Rights. For purposes of determining the amount
of a Right Award, the Program Administrators shall determine the
market value of Naked Rights held by such participant at the end of
the designated period for which such Naked Rights have been held
("Valuation Period") and subtract therefrom the market value of the
same Naked Rights on the date awarded to such participant. The market
value of one Naked Right on a valuation date for purposes of this Plan
shall be determined by the Program Administrators on the basis of such
factors as they deem appropriate, provided, however, that fair market
value shall be the closing sale price of a share of Common Stock on
the date in question (or, if such day is not a trading day in the U.S.
markets, on the nearest preceding trading day), as reported with
respect to the principal market (or the composite of the markets, if
more than one) or national quotation system in which such shares are
then traded, or if no such closing prices are reported, the mean
between the high bid and low asked prices that day on the principal
market or national quotation system then in use, or if no such
quotations are available, the price furnished by a professional
securities dealer making a market in such shares selected by the Board
of Directors of the Corporation. The market value of Naked Rights held
by a participant on a valuation date shall be determined by
multiplying the number of Naked Rights held by such participant by the
market value of one Naked Right on such valuation date. The
measurement of appreciation shall be made separately with respect to
each separate award of Naked Rights.
(3) Nature of Naked Rights. The Naked Rights shall be used solely as a
device for the measurement and determination of the amount to be paid
to participants as provided in this Plan. The Naked Rights shall not
constitute or be treated as property or as a trust fund of any kind.
All amounts at any time attributable to the Naked Rights shall be and
remain the sole property of the Corporation and the participants'
rights hereunder are limited to the right to receive cash and shares
of Common Stock as herein provided.
(4) Acceleration of Right of Exercise. Notwithstanding the duration of an
award of Naked Rights set forth in the first sentence of paragraph (1)
of this Section 9, in the event the Corporation or its shareholders
enter into an agreement to dispose of all or substantially all of the
assets or stock of the Corporation by means of a sale, merger or other
reorganization, liquidation or otherwise, any Naked Right granted
pursuant to paragraph (1) of this Section 9 shall become immediately
exercisable during the period commencing as of the date of the
agreement to dispose of all or substantially all of the assets or
stock of the Corporation and, subject to the provisions hereof, ending
when the disposition of assets or stock contemplated by that agreement
is consummated or the Naked Right is otherwise terminated in
accordance with its provisions or the provisions of this Plan,
whichever occurs first; provided, however, that no Naked Right shall
be immediately exercisable under this paragraph (4) on account of any
agreement to dispose of all or substantially all of the assets or
stock of the Corporation by means of a sale, merger or other
reorganization, liquidation or otherwise where the shareholders of the
Corporation immediately before the consummation of the transaction
will own at least 50% of the total combined voting power of all
classes of stock entitled to vote of the surviving entity, whether the
Corporation or some other entity, immediately after the consummation
of the transaction; and, provided further, that any Naked Right which
has been granted and is outstanding for less than six months shall not
be exercisable until the sixth month anniversary of the date the Naked
Right was granted. In the event the transaction contemplated by the
agreement referred to in this paragraph (4) is not consummated, but
rather is terminated, canceled or expires, the Naked Rights granted
pursuant to paragraph (4) of this Section 9 shall thereafter be
treated as if that agreement had never been entered into.
Notwithstanding the duration of an award of Naked Rights set forth in
the first sentence of paragraph (1) of this Section 9, in the event of
a change in control of the Corporation or threatened change in control
of the Corporation as determined by a vote of not less than a majority
of the Board of Directors of the Corporation, all Naked Rights granted
prior to such change in control or threatened change of control shall
become immediately exercisable. The term "control" for purposes of
this Section shall refer to the acquisition of 10% or more of the
voting securities of the Corporation by any person or by persons
acting as a group within the meaning of Section 13(d) of the Exchange
Act; provided, however, no change in control or threatened change in
control shall be deemed to have occurred if prior to the acquisition
of, or offer to acquire, 10% or more of the voting securities of the
Corporation, the full Board of Directors of the Corporation shall have
adopted by not less than a two-thirds vote a resolution specifically
approving such acquisition or offer; and provided further, that any
Naked Right which has been granted and is outstanding for less than
six months shall not be exercisable until the sixth month anniversary
of the date the Naked Right was granted. The term "person" for
purposes of this paragraph refers to an individual or a corporation,
partnership, trust, association, joint venture, pool, syndicate, sole
proprietorship, unincorporated organization or any other form of
entity not specifically listed herein.
(5) Written Notice Required. Any Naked Rights granted pursuant to
paragraph (1) of this Section 9 shall be exercised when written notice
of that exercise has been given to the Corporation at its principal
office by the person entitled to exercise the Naked Right.
(6) Compliance With Securities Laws. Shares of Common Stock shall not be
issued with respect to any Naked Right granted under paragraph (1) of
this Section 9 unless the exercise of that Naked Right and the
issuance and delivery of those shares pursuant to that exercise shall
comply with all relevant provisions of state and federal law
including, without limitation, the Securities Act of 1933, as amended,
the rules and regulations promulgated thereunder, and the requirements
of any stock exchange or national quotation system upon which the
shares may then be listed, and shall be further subject to the
approval of counsel for the Corporation with respect to such
compliance. In addition, any shares of Common Stock issued under this
Section 9 to a participant may not be sold by the participant for a
period of six months after the date of issuance of such shares. The
Program Administrators may also require an employee to whom a right
has been granted under paragraph (1) of this Section 9 ("Right
Holder") to furnish evidence satisfactory to the Corporation,
including a written and signed representation letter and consent to be
bound by any transfer restriction imposed by law, legend, condition or
otherwise, that the shares are being acquired without any present
intention to sell or distribute the shares in violation of any state
or federal law, rule or regulation. Further, each Right Holder shall
consent to the imposition of a legend on any shares of Common Stock so
acquired restricting their transferability as required by law or by
this paragraph (6).
(7) Employment of Optionee. Each Right Holder, if requested by the Program
Administrators when a Naked Right is granted, must agree in writing as
a condition of receiving his or her Naked Right, that he or she will
remain in the employ of the Corporation, or any subsidiary corporation
of the Corporation (or a corporation or a parent or subsidiary of such
corporation issuing or assuming a Naked Right), as the case may be,
following the date of the granting of that Naked Right for a period
specified by the Program Administrators, which period shall in no
event exceed three years. Nothing in this Section 9 or in any Naked
Right granted hereunder shall confer upon any Right Holder any right
to continued employment by the Corporation, or any subsidiary
corporations, or limit in any way the right of the Corporation or any
subsidiary corporations at any time to terminate or alter the terms of
that employment.
(8) Termination of Employment. If a Right Holder ceases to be employed by
the Corporation, or any subsidiary corporation (or a corporation or a
parent or subsidiary of such corporation issuing or assuming a Naked
Right), for any reason other than death or disability, his or her
Naked Right shall immediately terminate; provided, however, that the
Program Administrators may, at the time a Naked Right is granted, in
their discretion, allow such Naked Right to be exercised to the extent
exercisable on the date of termination of employment at any time
within three months after the date of termination of employment unless
either the Naked Right or this Section 9 otherwise provides for
earlier termination.
(9) Rights Upon Disability. If a Right Holder becomes disabled within the
meaning of Section 22(e)(3) of the Code while employed by the
Corporation or any subsidiary corporation (or a corporation or a
parent or subsidiary of such corporation issuing or assuming a Naked
Right) his or her Naked Rights may be exercised, to the extent
exercisable on the date of termination of employment, at any time
within one year after the date of termination of employment due to
disability, unless either the Naked Right of Section 9 otherwise
provides for earlier termination.
(10) Rights Upon Death of Optionee. Except as otherwise limited by the
Program Administrators at the time of the grant of a Naked Right, if a
Right Holder dies while employed by the Corporation or any subsidiary
corporation (or a corporation or a parent or subsidiary of such
corporation issuing or assuming a Naked Right), or within three months
after ceasing to be an employee thereof, his or her Naked Right shall
expire one year after the date of death unless by its term it expires
sooner. During this one year or shorter period, the Naked Right may be
exercised, to the extent that it remains unexercised on the date of
death, by the person or persons to whom the Right Holder's Naked
Rights shall pass by will or by the laws of descent and distribution,
but only to the extent that the Right Holder was entitled to exercise
the Naked Right at the date of death.
(11) Rights Not Transferable. Naked Rights granted pursuant to the terms of
this Section 9 may not be sold, pledged, assigned or transferred in
any manner otherwise than by will or the laws of descent or
distribution and may be exercised during the lifetime of a Right
Holder only by that Right Holder.
(12) Adjustments to Number of Rights. All Naked Rights granted pursuant to
the terms of this Section 9 shall be adjusted in the manner prescribed
by Article 6 of the General Provisions of this Program.
Section 10. Request for Reports. A copy of the Corporation's annual report
to shareholders shall be delivered to each Right Holder. Upon written request,
the Corporation shall furnish to each Right Holder a copy of its most recent
Annual Report on Form 10-K or Form 10-KSB, Annual Report, each Form 10-Q or
10-QSB, Quarterly Report, Form 8-K, and Current Report filed with the Securities
and Exchange Commission since the end of the Corporation's prior fiscal year.
FEDERAL TRUST CORPORATION
PLAN IV
PERFORMANCE SHARE PLAN
Section 1. Purpose. The purpose of this Performance Share Plan
("Performance Plan") is to promote the growth and general prosperity of Federal
Trust Corporation, Federal Trust Bank and the subsidiaries of either company
(collectively, the "Corporation") by permitting the Corporation to grant
performance shares to help attract and retain superior personnel for positions
of substantial responsibility with the Corporation and any subsidiary and to
provide key employees with an additional incentive to contribute to the success
of the Corporation. The Performance Plan is Plan IV of the Corporation's
Program. Unless any provision herein indicates to the contrary, the Performance
Plan shall be subject to the General Provisions of the Program.
Section 2. Terms and Conditions. The Program Administrators may grant
performance shares to any employee eligible under Article 4 of the General
Provisions. Each performance share grant confers upon the recipient thereof the
right to receive a specified number of shares of Common Stock of the Corporation
contingent upon the achievement of specified performance objectives within a
specified period. The Program Administrators shall specify the performance
objective and the period of duration of the performance share grant at the time
that such performance share is granted. Any performance shares granted under
this Plan shall constitute an unfunded promise to make future payments to the
affected employee upon the completion of specified conditions. The grant of an
opportunity to receive performance shares shall not entitle the affected
employee to any rights to specific fund(s) or assets of the Corporation, or any
parent or subsidiary. Any Common Stock distributed pursuant to a performance
share may not be sold by the recipient for a period of six months from the date
of receipt by an employee.
Section 3. Cash in Lieu of Stock. In lieu of some or all of the shares
earned by achievement of the specified performance objectives within the
specified period, the Program Administrators may distribute cash in an amount
equal to the fair market value of the Common Stock at the time that the employee
achieves the performance objective within the specified period. Such fair market
value shall be determined in accordance with the terms of Section 4 of Plan I
and Plan II on the business day next preceding the date of payment.
Section 4. Performance Objective Period. The duration of the period within
which to achieve the performance objectives is to be determined by the Program
Administrators. The period may not be less than one year, nor more than five
years from the date the performance share is granted.
Section 5. Non-Transferable. A participating employee may not transfer or
assign a performance share.
Section 6. Performance Share Rights Upon Death or Termination of
Employment. If a participating employee dies or terminates service with the
Corporation or any subsidiary of the Corporation (or a corporation or a parent
or subsidiary of such corporation issuing or assuming a performance share in a
transaction to which Section 425[a] of the Internal Revenue Code of 1986, as
amended ["Code"], applies), prior to the expiration of the performance objective
period, any performance shares granted to him during that period are terminated.
Section 7. Tax Consequences. No federal income tax consequences arc
incurred by the Corporation or the participating employee at the time a
performance share is granted. However, if the specified performance objectives
are met, the employee will realize ordinary income at the end of the award
period equal to the amount of cash or the fair market value of the stock
received by him or her. The Corporation will ordinarily be entitled to a
deduction for federal income tax purposes at the same time and in the same
amount. The Program Administrators shall be authorized to make payment in shares
of Common Stock only if Section 83 of the Code would apply to the transfer of
Common Stock to the employee.
FEDERAL TRUST CORPORATION
1998 DIRECTORS' STOCK OPTION PLAN
ARTICLE I
ESTABLISHMENT OF THE PLAN
Federal Trust Corporation (the "Company") hereby establishes this 1998
Directors' Stock Option Plan ("Plan") upon the terms and conditions hereinafter
stated.
ARTICLE II
PURPOSE OF THE PLAN
The purpose of this Plan is to improve the growth and profitability of the
Company by attracting and retaining qualified non-employee directors and
providing such directors with a proprietary interest in the Company through
non-discretionary grants or non-qualified stock options (an "Option" or
"Options") to purchase shares of the Company's common stock, par value $.01 per
share ("Common Stock").
ARTICLE III
ADMINISTRATION OF THE PLAN
Section 3.01 Administration. This Plan shall be administered by the entire
Board of Directors of the Company (the "Board"). The Board shall have the power,
subject to and within the limits of the expressed provisions of this Plan, to
exercise such powers and to perform such acts as are deemed necessary or
expedient to promote the best interests of the Company with respect to this
Plan.
Section 3.02 Compliance with Law and Regulations. All Options granted
hereunder shall be subject to all applicable federal and state laws, rules and
regulations and the approval of a majority of the Company's shareholders at a
meeting of the shareholders which vote shall be taken within 12 months of the
adoption of this Plan by the Board of Directors at the next annual meeting. The
Company shall not be required to issue or deliver any certificates for shares of
Common Stock prior to the completion of any registration or qualification of or
obtaining of consents or approvals with respect to such shares under any federal
or state law or any rule or regulation of any government body, which the Company
shall, in its sole discretion, determine to be necessary or advisable. Moreover,
no Option may be exercised if such exercise or issuance would be contrary to
applicable laws and regulations.
APPENDIX C
Section 3.03 Restrictions on Transfer. The Company may place a legend upon
any certificate representing shares acquired pursuant to an Option granted
hereunder noting that the transfer of such shares may be restricted by
applicable laws and regulations.
ARTICLE IV
ELIGIBILITY
Options shall be granted pursuant to the terms hereof to each director of
the Company who is not an employee of the Company or any subsidiary of the
Company ("non-employee director"). No honorary directors, advisory director, or
director, emeritus shall be entitled to receive Options hereunder.
ARTICLE V
COMMON STOCK COVERED BY THE PLAN
Section 5.01 Option Shares. The aggregate number of shares of Common Stock
of the Company that may be issued pursuant to this Plan, subject to adjustment
as provided in Article VIII, is 90,000 shares of Common Stock. None of these
shares shall be the subject of more than one Option at any time, but if an
Option as to any shares is surrendered before exercise or expires or terminates
for any reason without having been exercised in full, or for any other reason
ceases to be exercisable, the number of shares covered thereby shall again
become available for grant under this Plan as if no Options had been previously
granted with respect to such shares.
Section 5.02 Source of Shares. The shares of Common Stock issued under this
Plan shall be from authorized and previously unissued shares.
ARTICLE VI
OPTION GRANTS
Section 6.01 Option Grants. Options to purchase shares of Common Stock
shall be granted to non-employee directors of the Company at the following times
and in the following amounts:
(i) as of the date this Plan was approved by the Board of Directors, each
non-employee director of the Company was granted an Option to purchase
25,000 shares of Common Stock;
(ii) on the date any person (other than a director covered by Section
6.01[a] above) is elected or appointed to the Board of Directors of
the Company for the first time, such person shall be granted an Option
to purchase and amount of shares of Common Stock, as determined by the
Board of Directors in its sole discretion; and
(iii)on the date any person (other than those covered by Sections 6.01[a]
and [b] above) is elected or appointed to the Board or Directors or
any first tier, wholly-owned subsidiary of the Company for the first
time, such person shall be granted an Option to purchase an amount of
shares of Common Stock, as determined by the Board of Directors in its
sole discretion.
ARTICLE VII
OPTION TERMS
Each Option granted hereunder shall be on the following terms and
conditions:
Section 7.01 Option Agreement. The proper officers of the Company and each
Optionee shall execute an Option Agreement which shall set forth the total
number of shares of Common Stock to which it pertains, the exercise price and
such other terms, conditions and provisions as are appropriate, provided that
they are not inconsistent with the terms, conditions and provisions of this
Plan. Each Optionee shall receive a copy of his executed Option Agreement.
Section 7.02 Option Exercise Price. The per share exercise price at which
the shares of Common Stock may be purchased upon exercise of an Option granted
pursuant to Section 6.01 hereof shall be equal to the Fair Market Value of a
share of Common Stock as of the date of grant. For purposes of this Plan, the
Fair Market Value of a share of Common Stock shall be the closing sale price of
a share of Common Stock on the date in question (or, if such day is not a
trading in the U.S. markets, on the nearest preceding trading day), as reported
with respect to the principal market (or the composite of the markets, if more
than one), or national quotation system in which such shares are then traded, or
if no such closing prices are reported, the mean between the closing high bid
and low asked prices of a share of Common Stock on the principal market or
national quotation system then in use, or if no such quotations are available,
the price furnished by a professional securities dealer making a market in such
shares selected by the Board.
Section 7.03 Vesting or Options. Options shall be immediately vested on the
date of grant.
Section 7.04 Exercise and Duration or Options.
(i) Each Option or portion thereof shall be exercisable at any time on or
after six months after the date of grant until 10 years after the date
of grant, provided that no Option or portion thereof may be exercised
until the shareholders of the Company have approved this Plan by such
vote as may be required by applicable laws and regulations;
(ii) Exception for Termination Due to Death, Disability, Retirement or
Resignation. If an Optionee dies while serving as a non-employee
director or terminates his service as a non-employee director as a
result of disability, retirement or resignation without having fully
exercised his Options, the Optionee or the executors, administrators,
legatees or distributees of his estate shall have the right to
exercise such Options during the one-year period following such death,
disability, retirement or resignation, provided that no Option shall
be exercisable within six months after the date of grant or more than
10 years from the date it was granted; and
(iii)Options granted to a non-employee director who is removed for cause
pursuant to the Company's Articles of Incorporation shall terminate as
of the effective date of such removal.
Section 7.05 Non-assignability. Options shall not be transferable by an
optionee except by will or the laws of descent and distribution, and during an
Optionee's lifetime shall be exercisable only by such Optionee or the Optionee's
guardian or legal representative.
Section 7.06 Manner of Exercise. Options may be exercised in part or in
whole and at one time or from time to time. The procedures for exercise shall be
set forth in the written Option Agreement provided for in Section 7.01.
Section 7.07 Payment for Shares. Payment in full of the purchase price for
shares of Common Stock purchased pursuant to the exercise of an Option shall be
made to the Company upon exercise of the Option. Payment for shares may be made
by the Optionee in cash or by delivering shares of Common Stock (including
shares acquired pursuant to the exercise of an Option) equal in Fair Market
Value to the purchase price of the shares to be acquired pursuant to the Option,
or any combination of the foregoing.
Section 7.08 Voting and Dividend Rights. No Optionee shall have any voting
or dividend rights or other rights of a shareholder in respect of any shares of
Common Stock covered by an Option prior to the time that his name is recorded on
the Company's shareholder ledger as the holder of record of such shares acquired
pursuant to an exercise of an Option.
ARTICLE V111
ADJUSTMENTS FOR CAPITAL CHANGES
The aggregate number of shares of Common Stock available for issuance under
this Plan, the number of shares to which any Option relates and the exercise
price per share of Common Stock under any Option shall be proportionately
adjusted for any increase or decrease in the total number of outstanding shares
of Common Stock issued subsequent to the effective date of this Plan resulting
from a split, subdivision or consolidation of shares or any other capital
adjustment, the payment of a stock dividend, or other increase or decrease in
such shares effected without receipt or payment of consideration by the Company.
If, upon a merger, consolidation, reorganization, liquidation, recapitalization
or the like of the Company, the shares of the Company's Common Stock shall be
exchanged for other securities of the Company or of another corporation, each
recipient of an Option shall be entitled, subject to the conditions herein
stated, to purchase or acquire such number of shares of Common Stock or amount
of other securities of the Company or such other corporation as were
exchangeable for the number of shares of Common Stock of the Company which the
Optionees would have been entitled to purchase or acquire except for such
action, and appropriate adjustments shall be made to the per share exercise
price of outstanding Options.
ARTICLE IX
AMENDMENT AND TERMINATION OF THE PLAN
The Board may, by resolution, at any time terminate, amend or revise this
Plan with respect to any shares of Common Stock as to which Options have not
been granted; provided, however, that no amendment which: (i) changes the
maximum number of shares that may be sold or issued under the Plan (other than
in accordance with the provisions of Article VIII); or (ii) changes the class of
persons that may be granted Option shall become effective until it receives the
approval of the shareholders of the Company, and further provided that the Board
may determine that shareholder approval for any other amendment to this Plan may
he advisable for any reason, such as for the purpose of obtaining or retaining
any statutory or regulatory benefits under tax, securities or other laws or
satisfying any applicable stock exchange listing requirements. The Board may
not, without the consent of the holder of an Option, alter or impair any Option
previously granted under this Plan as specifically authorized herein.
Notwithstanding, anything contained in this Plan to the contrary, the provisions
of Articles IV, VI and VII of this Plan shall not be amended more than once
every six months, other than to comport with changes in the Internal Revenue
Code of 1986, as amended, the Employee Retirement Income Security Act of 1974,
as amended, or the rules and regulations promulgated under such statutes.
ARTICLE X
RIGHTS TO CONTINUE AS A DIRECTOR
Neither this Plan nor the grant of any Options hereunder nor any action
taken by the Board in connection with this Plan shall create any right on the
part of any non-employee director of the Company to continue as such.
ARTICLE XI
WITHHOLDING
The Company may withhold from any cash payment made under this Plan
sufficient amount to cover any applicable withholding and employment taxes, and
if the amount of such cash payment is insufficient, the Company may require the
Optionee to pay to the Company the amount required to be withheld as a condition
to delivering the shares acquired pursuant to an Option.
ARTICLE XII
EFFECTIVE DATE OF THE PLAN; TERM
Section 12.01 Effective Date of the Plan. This Plan shall become effective
upon the date of its adoption by the Company's Board ("Effective Date"),
provided that no shares of Common Stock may be issued pursuant to this Plan
until this Plan is approved by the shareholders of the Company by such vote as
may be required by applicable laws and regulations.
Section 12.02 Term of Plan. Unless sooner terminated, this Plan shall
remain in effect for a period of 10 years ending on the tenth anniversary of the
Effective Date. Termination of this Plan shall not affect any Options previously
granted, and such Options shall remain valid and in effect until they: (i) have
been fully exercised; (ii) are surrendered; or (iii) expire or are forfeited in
accordance with their terms.
ARTICLE XIII
MISCELLANEOUS
Section 13.01 Governing Law. This Plan shall be construed under the laws of
the State of Florida.
Section 13.02 Pronouns. Wherever appropriate, the masculine pronoun shall
include the feminine pronoun, and the singular shall include the plural.
BOARD OF DIRECTORS
By: ______________________________
James V. Suskiewich
Chairman of the Board
DATED: January 30, 1998.