Anthony D. Andora
Chairman of the Board
Dear Interchange Stockholder:
You are cordially invited to attend the 1997 Annual Meeting of Stockholders
on Thursday, May 22, 1997 at 3 p.m. at the Marriott Hotel in Saddle Brook, New
Jersey.
The Notice of the Annual Meeting and Proxy Statement accompanying this
letter describe the business to be acted upon at the meeting. Please promptly
vote, date, sign and return your proxy for the meeting even though you plan to
attend. You may vote in person at that time if you so desire.
Sincerely
/s/Anthony D. Andora
---------------------
Anthony D. Andora
April 17, 1997
<PAGE>
- --------------------------------------------------------------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
- --------------------------------------------------------------------------------
The Annual Meeting of Stockholders of Interchange Financial Services
Corporation will be held on Thursday, May 22, 1997, at 3:00 p.m. at the Marriott
Hotel in Saddle Brook, New Jersey to consider and act upon the following
matters:
1. The election of six directors.
2. The approval of an amendment to the Certificate of Incorporation to
increase the number of authorized shares of common stock without
nominal or par value from five million (5,000,000) shares to ten
million (10,000,000) shares.
3. The approval of the amendment of the Company's Stock Option Plan of
1989 (as amended in 1995) to incorporate incentive stock awards.
4. The ratification of the appointment of Deloitte & Touche, LLP as the
Company's independent auditors for 1997.
5. The transaction of such other business as may properly come before the
meeting or any adjournment thereof. The Company knows of no other
business to be brought before the meeting.
/s/Benjamin Rosenzweig
Benjamin Rosenzweig
Secretary
PLEASE COMPLETE, SIGN, AND RETURN PROMPTLY THE ENCLOSED PROXY IN THE
POSTAGE-PAID ENVELOPE PROVIDED.
APRIL 17, 1997
<PAGE>
PROXY STATEMENT
This proxy statement and the accompanying proxy/voting card (proxy card)
are being mailed beginning April 21, 1997, in connection with the solicitation
of proxies by the Board of Directors, for the Annual Meeting of Stockholders on
May 22, 1997. Proxies are solicited to give all stockholders of record at the
close of business on April 18, 1997, an opportunity to vote on matters that come
before the meeting. On that date, 4,277,840 shares of common stock were
outstanding, each of which is entitled to one vote on each matter brought before
the meeting.
When your proxy card is returned properly signed, the shares represented
will be voted in accordance with your directions. Abstentions are voted neither
"for" nor "against," but are counted in the determination of a quorum. You can
specify your choices by marking the appropriate boxes on the enclosed proxy
card. If your proxy card is signed and returned without specifying choices, the
shares will be voted as recommended by the Board of Directors.
1. ELECTION OF DIRECTORS
(ITEM 1 ON PROXY CARD)
The accompanying proxy will be voted for the election of the following
nominees unless otherwise instructed. Each nominee for director and each
continuing director also serves as director of Interchange State Bank, (the
"Bank") a subsidiary of the Company. If a nominee should become unavailable for
any reason, which management does not anticipate, the proxy will be voted for a
substitute or, if no substitute is selected, the number of directors may be
reduced.
NOMINEES AND DIRECTORS
"NOMINEE TO BE ELECTED DIRECTOR FOR A TERM OF ONE YEAR EXPIRING IN 1998."
NICHOLAS R. MARCALUS, age 53, is President & CEO of Marcal Paper Mills, Inc., in
Elmwood Park, New Jersey, and serves as a board member of that
organization. In addition, Mr. Marcalus is a member of the N.J. Bar
Association. He is currently a member of the Business Development Advisory
Board of the Delaware Otsego Corporation, a member of the Chief Executive
Organization, a trustee at Felician College, a trustee at Hartwick College,
a trustee of St. Joseph's Hospital & Medical Center Foundation, is on the
Advisory Board for VanLeer Chocolate Corporation and is on the Advisory
Board for Awkwright Mutual Insurance Company. He is a board member of the
American Forest & Paper Association and President of the Fiberclary
Council. He joined the Board of Interchange Financial Services Corporation
on February 27, 1997, and serves on the Compensation Committee, Investment
Committee and is an alternate on the Executive Committee.
"NOMINEE TO BE ELECTED DIRECTOR FOR A TERM OF TWO YEARS EXPIRING IN 1999."
ANTHONY R. COSCIA, age 37, is a partner and executive committee member of the
law firm of Windels, Marx, Davies & Ives in New York and New Brunswick, New
Jersey. Mr. Coscia's practice focuses primarily on corporate, commercial
and real estate matters with a concentration on financial transactions. Mr.
Coscia is currently serving in his second term as Chairman of the New
Jersey Economic Development Authority, initially appointed by Governor Jim
Florio in 1992 and re-appointed by Governor Whitman in 1994. Mr. Coscia is
also Chairman of the Corporation for Business Assistance in New Jersey and
General Counsel and Board member of the New Jersey World Trade Council. He
is a member of the Governor's Export Advisory Council and a member of the
New Capital Sources Partnership Board. Mr. Coscia joined the Board of
Directors of Interchange Financial Services Corporation on February 27,
1997. He serves on the Audit Committee, Oversight/Insider Committee and is
an alternate member of the Executive Committee.
"NOMINEES TO BE ELECTED DIRECTORS FOR TERMS OF THREE YEARS EXPIRING IN 2000."
DONALD L. CORRELL, age 46, is Chairman, President and CEO (since 1992) of United
Water Resources, Inc.. Prior to 1992 he was Senior Vice President of
Finance, Treasurer and Chief Financial Officer of United Water Resources,
Inc. United Water Resources, Inc., is a holding company whose subsidiaries
are active in public water supply, water-related services and real estate.
Mr. Correll has been a member of the Board of Directors of the Company and
the Bank since January 1995 and serves on the Audit Committee, Nominating
Committee, Corporate Planning and Finance Committee, and Compensation/Stock
Option Committee and is an alternate member of the Executive Committee. He
is a director of United Water Resources, Inc.
JAMES E. HEALEY, age 56 is Vice President and Treasurer (since July 1995) of CPC
International Inc., a multinational food manufacturing company. Prior to
his election as Vice President and Treasurer, he served as Comptroller and
Chief Accounting Officer of CPC International Inc., since September 1987.
Mr. Healey has been a member of the Board of Directors of the Company and
the Bank since November 1993. He is Chairman of the Compensation/Stock
Option Committee and serves on the Audit Committee, Corporate Planning and
Finance Committee, Investment Committee and is an alternate member of the
Executive Committee.
JEREMIAH F. O'CONNOR, age 63, is currently a principal of the NW Financial
Group. Mr. O'Connor was a Managing Director of NatWest Financial Markets
Group and a past Commissioner of the Board of Public Utilities for the
State of New Jersey. Prior to that he was Managing Director and Executive
Vice President of Jersey Capital Market Group, Inc., an investment banking
firm and formerly Vice President of Product and Financial Planning of The
Micro Energy Group of Bell & Howell Corporation. Mr. O'Connor has been a
member of the Board of Directors of the Company since 1984 and the Bank
since 1969. He is Vice Chairman of the Board. He is Chairman of the
Oversight/Insider Committee and serves on the Executive Committee,
Corporate Planning and Finance Committee, Nominating Committee and
Compensation/Stock Option Committee.
ROBERT P. RITTEREISER, age 58, is Chairman and Chief Executive Officer of
Gruntal Financial Corporation, an Investment Services Firm based in New
York City. He is Chairman of Yorkville Associates Corp., a private
investment and financial advisory concern formed in April 1989. He served
as a Trustee of the DBL Liquidating Trust from April 1992 until April 1996.
He also served as a Director in 1990 as Chairman in November 1992 and
President and Chief Executive officer from March 1993 until February 1995
of Nationar Inc., a banking services corporation(1). Prior to March 1993,
he was President and Chief Executive Officer of E.F. Hutton Group until its
merger with Shearson Lehman Bros. Until June 1985 he was Executive Vice
President and Chief Administrative Officer of Merrill Lynch & Co. He has
been a Director of the Company and of the Bank since July 1989. He is a
Director of CUC International, Ferrofluidics Corporation and Wallace
Computer Services, Inc. He has been a Director of the Company and of the
Bank since July 1989. He is Chairman of the Corporate Planning and Finance
Committee and a member of the Compensation/Stock Option Committee, the
Investment Committee, the Oversight/Insider Committee and the Executive
Committee.
(1) On February 6, 1995, the Acting Superintendent of Banks of the State
of New York filed a petition to take over the business of such
corporation and the New York State Banking Department has since been
liquidating the assets of such corporation.
"DIRECTORS TO CONTINUE IN OFFICE FOR TERMS EXPIRING IN 1999"
ANTHONY S. ABBATE, age 57, is President and Chief Executive Officer. Mr. Abbate
has been a member of the Board of Directors of the Company since 1984 and
the Bank since 1981. He is a member of the Executive Committee and serves
ex-officio on all committees.
JOHN J. ECCLESTON, age 71, is a partner of R.D. Hunter & Company, Certified
Public Accountants. Prior to January 1995, he was Senior Partner of John J.
Eccleston & Company, Certified Public Accountants. Mr. Eccleston has been a
member of the Board of Directors of the Company since 1984 and the Bank
since 1969. He is Chairman of the Audit Committee and a member of the
Executive Committee, the Investment Committee, the Oversight/Insider
Committee and Corporate Planning and Finance Committee.
ELEANORE S. NISSLEY, age 65, is President of Steffens Realty Company, a
commercial real estate brokerage firm and she serves as Vice Chairperson of
the Hackensack Meadowlands Development Commission. Mrs. Nissley has been a
director of the Company and of the Bank since 1992. She is a member of the
Audit Committee, the Oversight/Insider Committee and the Nominating
Committee and is an alternate member of the Executive Committee.
"DIRECTORS TO CONTINUE IN OFFICE FOR TERMS EXPIRING IN 1998"
ANTHONY D. ANDORA, age 66, is President of Andora, Palmisano & Geaney, a
professional corporation in Elmwood Park, New Jersey. Mr. Andora, a member
of the Board of Directors of the Company since 1984 and of the Bank since
1969, is Chairman of the Board, the Executive Committee and the Nominating
Committee and is ex-officio on all committees.
DAVIDR. FICCA, age 65, served as Vice Chairman, Executive Vice President and
Senior Legal Officer of Kidde, Inc., prior to March 1988. He has been a
Director of the Company since 1984 and of the Bank since 1983. He is a
member of the Executive Committee, the Oversight/Insider Committee, the
Corporate Planning and Finance Committee and the Compensation/Stock Option
Committee.
BENJAMIN ROSENZWEIG, age 71, is the Senior Executive Partner of Azco Steel
Company, Saddle Brook, New Jersey, a nationwide steel distributor. He has
been a member of the Board of Directors of the Company since 1984 and of
the Bank since 1976 and is Secretary of the Board. He serves as a member of
the Executive Committee, Compensation/Stock Option Committee,
Oversight/Insider Committee and the Nominating Committee and is Chairman of
the Investment Committee.
BOARD COMMITTEES, MEETINGS AND COMPENSATION
The Company has an Audit Committee of the Board of Directors consisting of
Mrs. Nissley, Messrs. Correll, Eccleston (Chairman) and Healey. Mr. Creamer, who
was a member of the Audit Committee in 1996, resigned effective December 31,
1996. This committee reviews significant audit, accounting and other principles,
policies and practices, the activities of independent auditors and of the
Company's internal auditors, and the conclusion and recommendations of auditors
and the reports of regulatory examiners upon completion of their respective
audits and examinations. The committee met four times in 1996.
The Compensation/Stock Option Committee administers management incentive
compensation plans, including the stock option plan. The committee makes
recommendations to the Board with respect to compensation of directors and of
the officers as listed on page 10. The Committee, which met four times in 1996,
consists of Messrs. Correll, Ficca, Healey (Chairman), O'Connor, Rittereiser and
Rosenzweig.
The Nominating Committee advises and makes recommendations to the Board
concerning the selection of candidates as nominees for election as directors.
The committee consists of Mrs. Nissley, Messrs. Andora (Chairman), Correll,
O'Connor and Rosenzweig and met once in 1996. The committee will consider
nominations recommended by stockholders. Such nominations, together with
accompanying biographical material, should be addressed to the Secretary of the
Board and must be received not later than January 2 of the year of the annual
meeting of stockholders.
In 1996, each director not employed by the Company was paid a retainer at
an annual rate of $11,000, a fee of $150 for each board meeting attended, a fee
of $125 for each executive committee meeting attended and a fee of $100 for
attendance at other committee meetings. The Chairman of the Board, the Vice
Chairman of the Board and Secretary of the Board received additional retainers
of $17,000, $13,750 and $2,200, respectively, and directors who chair committees
of the Board receive an additional retainer of $2,000 annually. A director who
is an employee of the Company or any subsidiary receives no retainer or fees.
During 1996, the Board of Directors of the Company and the Bank held 12
meetings each. All incumbent directors, except Messrs. Correll and Rittereiser,
attended at least 75% of the aggregate meetings of such Boards of Directors and
the committees of such Board of Directors on which they served which were held
during fiscal year 1996.
Directors participate in a retirement benefit plan which entitles the
director to receive either (1) an amount equal to the annual retainer being paid
directors (exclusive of additional amounts paid to the Chairman of the Board,
the Vice Chairman of the Board, the Secretary of the Board and to committee
chairmen) multiplied by his or her years of service on the board; or (2) an
amount based on the cash surrender value of a life insurance or annuity contract
purchased by the Company. The insurance policies or annuity contracts are owned
by the Company and annual contributions of $5,000 are made by the Company for
each director who has completed five years of service as a director. The
Company's contribution increases by $1,000 for each year's service until it
reaches $10,000 annually, the level at which it remains. Benefits to a director
who retires after ten years of service are equal to the greater of (1) or (2)
above. Mr. Abbate (the only director who is employed by the Company) and any
director who retires after completing at least five years but less than ten
years of service are entitled to benefits only under (2) above.
<PAGE>
AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP
The following table sets forth information concerning the ownership of the
Company's common stock as of March 1, 1997, adjusted to reflect a 3 for 2 stock
split effective April 17, 1997 to stockholders of record at the close of
business on March 20, 1997, for (a) certain beneficial owners known to the
Company to own more than five percent to the common stock; (b) each director and
nominee for director; (c) each of the named officers (the "named officers" as
defined in Note (1) of the Summary Compensation Table, herein) not listed as a
director; and (d) directors and executive officers as a group. Except as
otherwise noted, the nominees, the directors and the executive officers or
family members had sole voting and investment power with respect to such
securities.
<TABLE>
<CAPTION>
Beneficially Deferral Percent
NAME Owned Plans(1) Total of Class
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
(a)
Interchange State Bank Capital Investment
Plan
Park 80 West/Plaza Two
Saddle Brook, NJ 07663. . . . . . . . . . . . . . 194,331 194,331 4.6%
First Union Corporation
One First Union Center
Charlotte, NC 28288. . . . . . . . . . . . . . . 301,005 (2) 301,005 7.1
(b)
Anthony S. Abbate. . . . . . . . . . . . . . . . . 78,314 (3) 38,058 116,372 2.7
Anthony D. Andora. . . . . . . . . . . . . . . . . 114,162 (4) 114,162 2.7
Donald L. Correll . . . . . . . . . . . . . . . . 1,065 1,065 *
Anthony R. Coscia. . . . . . . . . . . . . . . . . 300 300 *
John J. Eccleston. . . . . . . . . . . . . . . . . 51,557 (4) 51,557 1.2
David R. Ficca. . . . . . . . . . . . . . . . . . 49,413 49,413 1.2
James E. Healey. . . . . . . . . . . . . . . . . . 12,000 12,000 *
Nicholas R. Marcalus. . . . . . . . . . . . . . . 750 750 *
Eleanore S. Nissley. . . . . . . . . . . . . . . . 30,240 30,240 1.0
Jeremiah F. O'Connor. . . . . . . . . . . . . . . 40,385 (4) 40,385 1.0
Robert P. Rittereiser. . . . . . . . . . . . . . . 18,113 18,113 *
Benjamin Rosenzweig. . . . . . . . . . . . . . . . 63,677 63,677 1.5
(c)
Frank R. Giancola. . . . . . . . . . . . . . . . . 15,861 (5) 13,116 28,977 1.0
Robert N. Harris (9). . . . . . . . . . . . . . . 26,436 (6) 5,976 32,412 1.0
Anthony Labozzetta (10) . . . . . . . . . . . . . - 39 39 *
Richard N. Latrenta. . . . . . . . . . . . . . . . 14,710 (7) 14,363 29,073 1.0
(d)
Directors and executive officers as a group. . . . 515,933 (8) 71,552 587,485 13.5
- -------------------------------------------------------
<FN>
*Does not exceed one percent of class
FOOTNOTES
1. Shares held in deferred compensation accounts to which individuals have
sole power to vote but no investment powers.
2. Includes beneficial ownership of 224,453 shares to which First Union
Corporation has sole power to vote and 76,552 shares to which it shares
power to vote. First Union Corporation has sole investment power for
301,005 shares.
3. Includes beneficial ownership of 45,812 shares which may be acquired within
60 days pursuant to stock options.
4. Includes beneficial ownership of 12,484 shares held by Washington
Interchange Corporation in which Messrs. Andora, Eccleston and O'Connor are
principals.
5. Includes beneficial ownership of 14,310 shares which may be acquired within
60 days pursuant to stock options.
6. Includes beneficial ownership of 18,131 shares which may be acquired within
60 days pursuant to stock options.
7. Includes beneficial ownership of 14,676 shares which may be acquired within
60 days pursuant to stock options.
8. Includes beneficial ownership of 92,929 shares which may be acquired within
60 days pursuant to stock options awarded under an employee incentive
compensation plan.
9. Effective December 31, 1996, Robert N. Harris retired as Executive Vice
President and Chief Financial Officer.
10. Effective January 1, 1997, Anthony Labozzetta was appointed Senior Vice
President and Treasurer.
</FN>
</TABLE>
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
The members of the Board of Directors, the executive officers of the
Company and persons who hold more than ten percent of the Company's common stock
are subject to reporting requirements of Section 16(a) of the Securities
Exchange Act of 1934, which require them to file reports with respect to their
ownership of and transactions in the Company's securities and furnish the
Company with copies of all such reports they file. Based upon the copies of
those reports furnished to the Company and written representations that no other
reports were required to be filed, the Company believes that all reporting
requirements under Section 16(a) for the fiscal year ended December 31, 1996,
were met in a timely manner by its executive officers, board members and greater
than ten percent stockholders, with the exception of the late filing by Messrs.
Abbate, Giancola, Harris, Labozzetta and Latrenta of Forms 5 due to delays in
finalizing details in the deferred compensation plan.
COMPENSATION/STOCK OPTION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
COMPENSATION STRATEGY
The objectives of this committee's strategy are to attract and retain top
quality executives and provide compensation programs designed to motivate and
reward executives to achieve business goals that foster both the enhancement of
long-term stockholder values through stock appreciation and dividend yield, and
also, the long-term best interest of the organization. Compensation programs for
executives link compensation to the performance of the Company and generally
provide competitive compensation for executives at the mean pay level of peer
group banks and other organizations of similar size, performance and geographic
location. The committee utilizes professional surveys prepared by outside
consultants focusing on compensation levels of the aforementioned groups in
order to assure competitiveness in its compensation programs. The compensation
mix reflects a balance of cash awards, including incentive awards, and
equity-based incentives. Annual cash compensation (base salaries and annual
bonus) is granted based on the achievement of corporate financial targets and
individual performance. The Stock Option Plan, approved by stockholders in 1989
and amended in 1995, is intended to function as the basis for fostering
alignment of executive compensation with the interest of stockholders.
The policies, with respect to each of these compensation elements as well
as the basis for determining the compensation of executive officers, including
the President and CEO, Mr. Abbate, are described below:
BASE SALARY
Base salaries for executive officers are based on the salary ranges that
are established for each position. These position salary ranges are determined
by evaluating the responsibilities and accountabilities of the position and
comparing it with other executive officer positions in the market place on an
annual basis. The base salary of each executive officer, including President and
CEO, is reviewed annually and adjusted within the position range based upon a
performance evaluation. Evaluations of other executive officers are submitted to
the committee by the President and CEO. These evaluations, and an evaluation of
the President and CEO by the committee, are reviewed and submitted together with
the committee's recommendations to the full board for action. Salary increases
are generally based upon the extent to which the executive is considered to have
contributed to a furtherance of the Company's goals and/or met objectives
specifically assigned to that individual.
ANNUAL BONUS
The Management Incentive Plan is an incentive plan designed to reward key
management employees for achievement of specific financial, individual and
business results for the year. The specific financial targets are primarily
based upon (i) the year-to-year increase in the Company's net after-tax earnings
and (ii) achievement of target return on equity. The targeted goal is
established annually through the budgeting process which is reviewed and
approved by the board using input relating to performance opportunities for the
year and the historical performance results of the Company. Individual and
business results are pre-established targets for specific objectives relating to
the executives area of responsibility. An objective of the Management Incentive
Plan is to relate a portion of the executives compensation to the overall
financial results of the Company for the year. The bonus for 1996 (paid in 1997)
reflects the achievement in excess of 100 percent of the financial targets set
in 1996 as well as discretionary amounts in certain cases. The Board reserves
the right to award discretionary bonus awards in the event the financial target
is either not met or is exceeded. In so doing, the committee, among other
matters, will take into account whether the Company, while not reaching its
threshold target, has performed better on a comparable basis than its peers. In
addition to the attainment of the earnings target, the level of the President
and CEO's annual bonus award is also based upon performance related factors
including various predetermined strategic objectives.
A portion of the incentive compensation awarded to executive management is
in the form of restricted stock. The restriction is for three years and is
forfeitable upon termination of employment during that time period. In addition,
executive officers were given the option to utilize their cash bonus to purchase
two-year restricted, non-forfeitable stock at a twenty-five percent discount.
The excess of market value over the purchase price is included in the summary
compensation table as other annual compensation.
STOCK OPTION PLAN
The Stock Option Plan approved by stockholders in 1989, as amended in 1995,
is designed to align stockholders' and executive officers' interests. The Plan
is administered by the Compensation/Stock Option Committee and awards are
determined by that committee. Stock options are granted with an exercise price
equal to the price of a share of stock at the close of business on the date of
the grant as reported by the American Stock Exchange. Stock options may be
exercisable between one and ten years from the date granted. Such stock options
provide a retention and motivational program for executives and an incentive for
the creation of shareholder value over the long-term since their full benefit
cannot be realized unless an appreciation in the price of the Company's common
stock occurs over a specified number of years. A total of 270,000 shares were
made available for option under the Plan of which 75,603 (adjusted for the
effects of a 5% stock dividend) shares have been granted to date. Options
granted in 1996 are included in the summary compensation table.
CEO COMPENSATION
The compensation of the President and CEO, Mr. Anthony S. Abbate, is
reviewed by the Compensation/Stock Option Committee which presents its
recommendations to the board for action. Mr. Abbate participates in the same
plans as the other executive officers, including the base salary program, the
annual bonus plan, the Stock Option Plan, and the staff benefit programs as
outlined elsewhere in this Proxy. Mr. Abbate receives no compensation for his
duties as a director; however, he does participate in the Directors' Retirement
Plan. The committee bases Mr. Abbate's compensation on the same criteria used
for all executive officers with particular emphasis on the factors which will
promote the Company's long-term growth, organization stability, and financial
strength. Mr. Abbate's salary was at the midpoint of the 1996 salary range for
his position and his annual bonus for 1996 performance was 100% of target plus a
discretionary amount of 1% of salary due to exceeding the plan goals for that
year. Mr. Abbate continues to provide the Company and the Bank with exemplary
leadership, vision and commitment, and strives to meet the long-term strategic
goals.
Submitted by the Compensation/
Stock Option Committee
James E. Healey, Chairman
Donald L. Correll
David R. Ficca
Nicholas R. Marcalus
Jeremiah F. O'Connor
Robert P. Rittereiser
Benjamin Rosenzweig
<PAGE>
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Annual Compensation Long-term Compensation
----------------------------------------- ---------------------------------------
Other Restricted
Annual Stock Options All Other
Compensa- Awards($) No. of Compensa-
Name and Principal Position (1) Year Salary($) Bonus($) tion($) (3) Shares tion ($)(2)
- ------------------------------------- ------------------------------------------- -----------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Anthony S. Abbate ............................. 1996 $287,000 $ 61,700 $ 3,687 $ 80,211(4) -- $53,643
President and CEO 1995 274,500 58,473 5,375 58,738 -- 37,097
1994 264,000 69,000 -- -- -- 41,254
Frank R. Giancola ............................. 1996 120,000 24,000 -- 9,588 -- 4,314
Senior Vice President 1995 114,400 24,481 806 11,438 -- 4,131
Retail Banking 1994 110,000 24,600 -- -- -- 3,973
Robert N. Harris .............................. 1996 147,000 29,400 9,801 9,175 -- 29,324
Executive Vice President 1995 142,500 30,495 9,503 9,976 -- 20,284
1994 137,000 23,500 -- -- -- 19,024
Richard N. Latrenta ........................... 1996 122,000 24,400 -- 15,252 -- 4,374
Senior Vice President 1995 116,500 24,931 1,666 11,653 -- 4,209
Senior Loan Officer 1994 112,000 30,000 -- -- -- 4,045
Anthony Labozzetta ............................ 1996 94,135 12,825 -- -- 1,575 2,406
Senior Vice President
and Treasurer
- --------
<FN>
(1) Includes the President and CEO and all other officers whose total annual salary and bonus exceeded $100,000 in 1996.
(2) Represents payments as shown below:
</FN>
</TABLE>
<TABLE>
<CAPTION>
Year Abbate Giancola Harris Latrenta Labozzetta
----- ------ -------- ------ -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Amounts contributed to 401(k) plan in 1996 $ 4,500 $ 3,600 $ 4,410 $ 3,660 $ 2,201
1994, 1995 and 1996 1995 4,500 3,432 4,275 3,495 --
1994 6,119 3,300 4,110 3,360 --
Value of life insurance premium paid in 1996 3,150 714 4,914 714 205
respect to coverage in excess of $50,000 1995 4,050 699 6,009 714 --
1994 3,150 673 4,914 685 --
Contribution to life insurance policy/ 1996 10,000 -- 20,000(5) -- --
annuity contract 1995 10,000 -- 10,000 -- --
1994 10,000 -- 10,000 -- --
Premium paid on disability policy 1996 6,963 -- -- -- --
1995 6,564 -- -- -- --
1994 6,245 -- -- -- --
Contribution to Supplemental Executives' 1996 29,210(6) -- -- -- --
Retirement Plan 1995 11,983 -- -- -- --
1994 15,740 -- -- -- --
<FN>
(3) The restricted stock awards granted, to date, totaled 5,451, 857, 775 and
1,059 for Messrs. Abbate, Giancola, Harris and Latrenta. The value of such
awards at December 31, 1996, were $136,447, $21,103, $19,084 and $26,078,
respectively. The value of these shares at the date of grant is reflected
in the table above. The awards for Messrs. Abbate, Giancola and Latrenta
vest in three years following the date of grant provided they do not
terminate their employment during that period. The awards granted to Mr.
Harris are fully vested as per the terms of his retirement agreement
(effective December 31, 1996). Dividends will be paid on all restricted
stock awards.
(4) The 1996 restricted stock awards for Mr. Abbate includes $22,804
attributable to an adjustment to correctly reflect his achievement under
the 1995 incentive plan.
(5) Includes an additional $10,000 contribution made to the annuity contract
for Robert N. Harris as part of his retirement agreement.
(6) The 1996 contribution to the Supplemental Executives' Retirement Plan for
Mr. Abbate includes adjustments of $3,420 and $4,381 for 1994, and 1995,
respectively, attributable to the 401(k) portion of the Plan.
</FN>
</TABLE>
<PAGE>
<TABLE>
YEAR-END VALUES OF OPTIONS
<CAPTION>
NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTION AT YEAR END IN-THE-MONEY OPTIONS
------------------------------- AT YEAR-END
SHARES SHARES ----------------------
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Anthony S. Abbate . . . . . . . . . 45,812 - $514,824 -
Frank R. Giancola . . . . . . . . . . 14,310 - 154,526 -
Robert N. Harris . . . . . . . . . . 18,131 - 196,510 -
Anthony Labozzetta. . . . . . . . . - 1,575 - $11,230
Richard N. Latrenta . . . . . . . . . 14,676 - 158,552 -
</TABLE>
FIVE YEAR PERFORMANCE COMPARISON
The table below provides an indicator of cumulative total stockholder
returns for the Company as compared with a Peer Group and the AMEX Market Value
Index. (1)
Cumulative Total Return
---------------------------------------
12/91 12/92 12/93 12/94 12/95 12/96
----- ----- ------ ------ ------ -----
Interchange Financial Services Corp. 100 130 154 156 231 294
Peer Group 100 131 172 189 257 332
AMEX Market Value 100 101 121 110 139 148
ASSUMES $100 INVESTED ON DECEMBER 31, 1991, IN INTERCHANGE COMMON STOCK, THE
AMEX MARKET VALUE INDEX AND PEER GROUP COMMON STOCK.
TOTAL STOCKHOLDER RETURNS ASSUMES REINVESTMENT OF DIVIDENDS.
FOOTNOTE
1. THE PEER GROUP COMPRISES 21 BANKING INSTITUTIONS REPRESENTING ALL SUCH
INSTITUTIONS IN CONNECTICUT, NEW JERSEY AND NEW YORK WITH ASSET SIZE OF AT
LEAST $250 MILLION, BUT LESS THAN $1 BILLION, AS OF DECEMBER 31, 1996 AS
REPORTED IN THE SNL QUARTERLY BANK DIGEST OF MARCH 1997. THE BANKING
INSTITUTIONS INCLUDED ARE: BNH BANCSHARES, INC., NEW MILFORD BANK & TRUST
AND NEW ENGLAND COMMUNITY BANCORP, (CT); BROAD NATIONAL BANCORPORATION,
CENTER BANCORP., COVENANT BANK, CARNEGIE BANCORP, RAMAPO FINANCIAL
CORPORATION, YARDVILLE NATIONAL BANCORP, AND VISTA BANCORP, (NJ); ARROW
FINANCIAL CORPORATION, CNB FINANCIAL CORP., EVERGREEN BANCORP, INC., FNB
ROCHESTER CORP., FIRST OF LONG ISLAND CORPORATION, HUDSON CHARTERED
BANCORP, INC., IROQUIS BANCORP. INC., STATE BANCORP, INC., STERLING
BANCORP, SUFFOLK BANCORP AND TOMPKINS COUNTY TRUST COMPANY (NY).
<PAGE>
PENSION PLAN AND SUPPLEMENTAL EXECUTIVES' RETIREMENT PLAN
The Company, through its subsidiary bank, maintains a non-contributory
defined benefit pension plan covering all eligible employees including Messrs.
Abbate, Giancola, Harris (retired effective December 31, 1996), Labozzetta and
Latrenta. Retirement income is based on years of service under the Plan and,
subject to certain limits, on final average compensation.
Effective January 1, 1994, the Company adopted a Supplemental Executives'
Retirement Plan, a non-qualified plan intended to provide retirement income that
would have been paid but for limitations imposed by the Internal Revenue Code
under the qualified plan.
The following tables show the annual benefits payable based on a range of
average compensation and years of future service at normal retirement date.
PENSION PLAN
<TABLE>
<CAPTION>
5-Year Years of Future Service at Normal Retirement Date
Average -----------------------------------------------------------------------------------------
Compensation 5 10 20 30 35
------------ -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$100,000 $ 6,200 $ 12,400 $ 24,800 $ 37,200 $ 43,400
150,000 9,950 19,900 39,800 59,700 69,650
200,000 11,450 27,400 54,800 82,200 95,900
250,000 11,450 28,300 69,800 104,700 122,150
300,000 11,450 28,300 84,800 127,200 148,400
400,000 11,450 28,300 85,400 172,200 200,900
--------
<FN>
FOOTNOTES:
1. This Plan was effective January 1, 1993.
2. Plan benefits are calculated using future service from January 1, 1997 and
base salary only. The maximum salary that may be used is limited by law and
regulations. The maximum salary that can be used for 1997 is $160,000. The
chart above anticipates future salary increases as well as increases to
these legal limits.
3. The above chart is based on the average age of the executive officer group
which was 51.8 years as of January 1, 1997.
4. Average compensation is the average of base salary over the five (5)
consecutive calendar years producing the highest average.
5. Annual benefit is payable as a life annuity which is the normal form of
retirement benefit for married participants. The normal form of retirement
benefit for married participants is an actuarial equivalent joint and 50%
survivor annuity.
6. The estimated number of credited years of service for each named officer
is: Four years each for Messrs. Abbate, Giancola, Harris and Latrenta and
one year for Mr. Labozzetta
</FN>
</TABLE>
<TABLE>
<PAGE>
SUPPLEMENTAL EXECUTIVES' RETIREMENT PLAN
<CAPTION>
5-Year Years of Future Service at Normal Retirement Date
Average ---------------------------------------------------------------------
Compensation 5 10 15 20
------------ ----------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 200,000 $ 13,930 $ 27,860 $ 41,790 $ 55,720
250,000 17,680 35,360 53,040 70,720
300,000 21,430 42,860 64,290 85,720
350,000 25,180 50,360 75,540 100,720
400,000 28,930 57,860 86,790 115,720
--------
<FN>
FOOTNOTES:
1. This Plan was effective January 1, 1994.
2. Plan benefits are calculated using future service from January 1, 1997, and
base salary only. The chart above anticipates future salary increases,
ignores legal limits on both compensation and benefits and INCLUDES
benefits payable from the qualified defined benefit plan.
3. The above chart is based on the age of the covered officer which was 57.1
as of January 1, 1997.
4. Average Compensation is the average of base salary over five (5)
consecutive calendar years producing the highest average.
5. Annual benefit is payable as a life annuity which is the normal form of
retirement benefit for unmarried participants is an actuarially equivalent
Joint and 50% Survivor annuity.
</FN>
</TABLE>
TRANSACTIONS WITH MANAGEMENT
Officers and directors of the Company and their affiliated companies are
customers and are engaged in transactions with the Company and its subsidiaries
in the ordinary course of business on substantially the same terms as those
prevailing with other borrowers and suppliers.
Certain directors of the Company have engaged in transactions with the
Company related to the Bank's branch in the Township of Washington, New Jersey.
The Bank leases that branch from Washington Interchange Corp. ("WIC") a
corporation in which Messrs. Andora, Eccleston and O'Connor each has a ten
percent ownership interest. Lease payments in 1996 totaled $82,800 under a lease
expiring in 2003. Through a special committee of the board consisting of Messrs.
Amato (a former director), Healey and Rosenzweig, the Company negotiated the
acquisition of WIC by merger. The principal assets of WIC consist of the
aforementioned banking premises and 124,855 shares (after giving effect to the
April 17, 1997, 3 for 2 stock split) of the Company's common stock. The agreed
to acquisition price (based upon the market price of the Company's common stock
as of March 20, 1997) is approximately 150,279 shares (after giving effect for
the April 17, 1997, 3 for 2 stock split) of the Company's common stock. The
actual acquisition price will be based upon the discounted fair market value (as
determined by independent valuations) of WIC's real estate and the average
closing price of the Company's common stock for the ten trading days preceding
the closing date. It is anticipated that the transaction will close during the
second quarter of 1997.
The following director is engaged in transactions with the Company and is
expected to continue to transact such business in the future.
Mr. Andora is a member of Andora, Palmisano & Geaney, a firm that renders
various legal services to the Company and its subsidiaries and received fees for
those services of $376,700 in 1996, including $95,000 paid pursuant to retainer
contracts and $101,400 representing fees for real estate matters, the bulk of
which was reimbursed to the Bank by its customers.
2. TO APPROVE AN AMENDMENT TO THE CERTIFICATE OF INCORPORATION INCREASING THE
NUMBER OF AUTHORIZED SHARES OF COMMON STOCK WITHOUT NOMINAL OR PAR VALUE
FROM FIVE MILLION (5,000,000) SHARES TO TEN MILLION (10,000,000) SHARES.
(ITEM 2 ON THE PROXY CARD)
The Company's Certificate of Incorporation, as amended in 1992, currently
provides that the Company is authorized to issue 5,000,000 shares of common
stock without nominal or par value and 1,000,000 shares of preferred stock
without nominal or par value. The Board of Directors of the Company has the
authority to issue additional Company Common Stock. As of March 20, 1997,
4,267,680 shares (after giving effect for the 3 for 2 stock split) of the
Company's common stock were outstanding.
The Company is soliciting an amendment to the Articles of Incorporation to
increase the number of authorized shares of Common Stock without nominal or par
value to TEN million (10,000,000). The Company believes that the Board's ability
to issue additional Company Common Stock could facilitate certain financings and
acquisitions and provide a means for meeting other corporate needs that might
arise. The authorized but unissued shares of Company Common Stock will be
available for issuance without further action by the Company's shareholders,
unless shareholder action is required by applicable law or the rules of any
stock exchange or system on which the Company Common Stock may then be listed.
The Board's ability to issue additional Company Common Stock could, under
certain circumstances, either impede or facilitate the completion of a merger,
tender offer or other takeover attempt.
With the authorization of 10,000,000 shares, it should be noted that
existing shareholders' percent of ownership could be diluted if such shares were
issued.
The holders of shares of the Company's Common Stock are entitled to
dividends when, as, and if declared by the Company's Board of Directors subject
to certain limitations. These limitations exist on the availability of the
subsidiary bank's undistributed net assets for the payment of dividends to the
Company without prior approval of the Bank's regulatory authorities. The only
source from which the Company is able to declare dividends is dividends, if any,
received from its subsidiary, the Bank. The subsidiary bank may pay dividends
only if capital would remain unimpaired and remaining surplus would equal 50% of
stated capital.
The holders of the common stock of the Company will be entitled to one vote
for each share held and there is no provision for cumulative voting in elections
of directors. There are no preemptive rights with respect to the common stock of
the Company.
TEXT OF PROPOSED AMENDMENT
If approved by the shareholders, Article V of the restated Certificate of
Incorporation of Interchange Financial Services Corporation will read as
follows:
CAPITAL STOCK
"THE COMPANY IS AUTHORIZED TO ISSUE 10,000,000 SHARES OF COMMON STOCK, all
of which are without nominal or par value, as the Board of Directors may
determine. The Company is also authorized to issue 1,000,000 shares of preferred
stock, all of which are without nominal or par value, as the Board of Directors
may determine.
The Board of Directors may, at any time or from time to time, (a) divide
any or all of the preferred shares into series; (b) determine for any series
established by the Board, its designation, number of shares, and relative
rights, preferences, and limitations; (c) increase the number of shares of any
series established by the Board, as long as the number, together with the number
of shares of all series of preferred shares, does not exceed the number of those
shares authorized pursuant to this certificate of incorporation; (d) decrease
the number of shares of any series established by the Board to a number not less
than the number of shares of that series then outstanding; (e) change the
designation, number of shares, relative rights, preferences, or limitations of
the shares of any series established by the Board, no shares of which have been
issued; and (f) cause to be executed and filed without further approval of the
shareholders of this Company, any amendment or amendments to this certificate of
incorporation as may be required to accomplish any of these amendments.
In particular, but without limiting the generality of the above authority,
the Board of Directors shall have the authority to determine the following
concerning any series of preferred stock established by the Board:
(1) The dividend rate or rates on shares of the series, any restrictions,
limitations or conditions on the payment of the dividends, whether
dividends shall be cumulative and, if so, the date or dates from which
dividends shall cumulate, and the dates on which dividends, if
declared, shall be payable.
(2) Whether the shares of the series shall be redeemable and, if so, the
time or times, the price or prices, the required notice or notices,
and the other terms and conditions on which the shares may be
redeemed.
(3) The rights of the holders of shares of the series in the event of
liquidation, dissolution, or winding up of the Company.
(4) Whether the shares of the series shall be convertible into shares of
any class, classes, or series, and if convertible, the price, prices,
rate or rates of conversion, any method of adjusting these prices or
rates, and any other terms and conditions on which the shares shall be
convertible.
(5) The extent of any voting powers of the shares of the series."
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVING AN AMENDMENT TO THE
CERTIFICATE OF INCORPORATION TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF
COMMON STOCK WITHOUT NOMINAL OR PAR VALUE FROM FIVE MILLION (5,000,000) TO TEN
MILLION (10,000,000) SHARES OF COMMON STOCK OF INTERCHANGE FINANCIAL SERVICES
CORPORATION. The Board of Directors, having recommended approval of this
amendment, the affirmative votes of a majority of the votes cast by the holders
of shares of common stock entitled to vote thereon is necessary to approve an
amendment to the Certificate of Incorporation to increase the authorized shares.
3. PROPOSAL TO APPROVE THE STOCK OPTION AND INCENTIVE STOCK PLAN OF 1997
(ITEM 3 ON PROXY CARD)
The Stock Option Plan of 1989, as amended in 1995, (the "Stock Option
Plan"), approved by stockholders in 1995, was designed to encourage officers and
other key employees to acquire a proprietary interest in the Company and thereby
align their interest with those of the shareholders, to continue their
employment with the Company and to render superior performance during such
employment. The Stock Option Plan enables the Company, through the
Compensation/Stock Option Committee of the Board of Directors, to grant
incentive stock options and nonqualified stock options to officers and key
employees of the Company.
The Company's Board of Directors has adopted an amendment to the Stock
Option Plan that will provide for incentive stock awards. A copy of the Stock
Option Plan incorporating the amendments is attached as Appendix A to this Proxy
Statement. Certain key executives of the Company, as determined by the Board of
Directors of the Company, shall be eligible to receive stock that is subject to
the requirements of the plan and such other restrictions as the committee deems
appropriate or desirable ("Restricted Stock"). Some shares of Restricted Stock
may be acquired in lieu of some or all of certain cash bonus payments otherwise
due a key executive. Shares of Restricted Stock which a key executive elects to
acquire in lieu of receiving additional cash bonus shall be acquired by the key
executive at a price to be determined by the Committee. This amendment requires
stockholder approval.
The Board took such action to include an Incentive Stock Plan in the Stock
Option Plan because it believes that a stock incentive program is an important
factor in attracting, retaining and motivating key executives who will dedicate
their maximum efforts toward the advancement of the Company. As of this date,
13,199 shares of stock have been issued to key executives under the Incentive
Stock Plan. THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS PROPOSAL.
4. RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
(ITEM 4 ON PROXY CARD)
The Board of Directors, upon recommendation of the Audit Committee, has
reappointed the firm of Deloitte & Touche, LLP as the independent auditors to
examine the Company's financial statements for the year 1996. YOUR DIRECTORS
RECOMMEND THAT STOCKHOLDERS VOTE FOR RATIFICATION OF THIS APPOINTMENT.
Representatives of Deloitte & Touche, LLP are expected to attend the annual
meeting and will have the opportunity to make a statement if they desire and to
respond to appropriate questions.
OTHER MATTERS
The Board of Directors is not aware of any other matters to be presented at
the Annual Meeting. If any other matter proper for action at the meeting should
be presented, the holders of the accompanying proxy will vote the shares
represented by the proxy on such matter in accordance with their best judgment.
If any matter not proper for action at the meeting should be presented, the
holders of the proxy will vote against consideration thereof or action thereon.
The affirmative vote of a majority of the shares cast at the Annual Meeting
is necessary to elect the six directors.
The cost of soliciting proxies for the meeting will be borne by the
Company. Some directors, officers, and other employees of the Company may
solicit proxies in person and by telephone or otherwise. The Company will
reimburse brokers and others who are record holders of its shares for the
reasonable expenses incurred in obtaining voting instructions from beneficial
owners of such shares.
SUBMISSION OF STOCKHOLDER PROPOSALS
Proposals intended for inclusion in next year's proxy statement should be
sent to the Secretary of the Company at Park 80 West/Plaza Two, Saddle Brook, NJ
07663, and must be received by December 20, 1997.
<PAGE>
OTHER INFORMATION
Consolidated financial statements of the Company and its subsidiaries are
included in the Company's Annual Report to Stockholders for the year 1996.
Additional copies of the Annual Report and the Company's Annual Report to the
Securities and Exchange Commission on Form 10-K, may be obtained without charge
from the Secretary of Interchange Financial Services Corporation, Park 80
West/Plaza Two, Saddle Brook, NJ 07663.
The above notice and proxy statement are sent by order of the board of
directors.
Benjamin Rosenzweig,
Secretary
Dated: April 17, 1997
<PAGE>
(Front)
PROXY INTERCHANGE FINANCIAL SERVICES CORPORATION
PARK 80 WEST, PLAZA TWO, SADDLE BROOK, NEW JERSEY 07662
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Jeremiah F. O'Connor, Benjamin Rosenzweig
and John J. Eccleston as proxies, each with the power to appoint his substitute,
and hereby authorizes them to represent and to vote, as designated below, all
the shares of common stock of Interchange Financial Services Corporation held of
record by the undersigned on April 18, 1997, at the annual meeting of
stockholders to be held on May 22, 1997, or any adjournment thereof.
1. ELECTION OF DIRECTORS
FOR all nominees listed below |_| WITHHOLD AUTHORITY |_|
(except as marked to the contrary below) to vote for all nominees
listed below
Donald L. Correll, Anthony R. Coscia, James E. Healey, Nicholas R.
Marcalus, Jeremiah F. O'Connor, Robert P. Rittereiser
(INSTRUCTION: To withhold authority to vote for an individual nominee write that
nominee's name in the space provided below.)
- --------------------------------------------------------------------------------
2. THE APPROVAL OF THE AMENDMENT TO THE CERTIFICATE OF INCORPORATION
INCREASING THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK WITHOUT NOMINAL
OR PAR VALUE FROM FIVE MILLION (5,000,000) SHARES TO TEN MILLION
(10,000,000) SHARES.
|_| FOR |_| AGAINST |_| ABSTAIN
- -------------------------------------------------------------------------------
3. THE APPROVAL OF THE AMENDMENT OF THE COMPANY'S STOCK OPTION PLAN OF 1989
(AS AMENDED IN 1995) TO INCORPORATE INCENTIVE STOCK AWARDS.
|_| FOR |_| AGAINST |_| ABSTAIN
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(BACK)
(CONTINUED FROM OTHER SIDE)
4. RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
|_| FOR |_| AGAINST |_| ABSTAIN
5. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR ELECTION OF DIRECTORS.
Please sign exactly as name appears below. When shares are held by joint
tenants, both should sign. When signing as an attorney, as executor,
administrator, trustee or guardian, please give full title as such. If a
corporation, please sign in full corporate name by president or other
authorized officer. If a partnership, please sign in partnership name by
authorized person.
DATED: ,1997
Signature
Signature if held jointly
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE.
<PAGE>
APPENDIX A
INTERCHANGE FINANCIAL SERVICES CORPORATION
STOCK OPTION AND INCENTIVE STOCK PLAN OF 1997
1. PURPOSES. This Stock Option and Incentive Stock Plan of 1997 (the "Plan")
of Interchange Financial Services Corporation (the "Company") is
established so that the Company may make available to Key Employees ("Key
Employees") the opportunity to acquire ownership of Company stock pursuant
to options intended to qualify as incentive stock options ("Incentive Stock
Options") within the meaning of Section 422 of the Internal Revenue Code of
1986, as amended (the "Code"), and stock options that do not qualify as
Incentive Stock Options (Non-Qualified Options), as well as other awards of
common stock subject to such restrictions as provided herein. It is
anticipated that such stock options and awards of restricted stock will
materially assist the Company in providing incentives to Key Employees, to
provide long term gain through their outstanding service to the Company and
its stockholders and to assist in retaining people of ability and
initiative in senior management positions.
2. ADMINISTRATION. The Plan shall be administered by the Compensation/Stock
Option Committee (the "Committee"), which shall be appointed, from time to
time, by the Board of Directors, and shall consist of not less than two
non-employee directors of the Company. Any member of the Committee who is
not a non-employee director within the meaning of Rule 16b-3 (or any
successor rule or regulation) under the Securities Exchange Act of 1934, as
amended (the "Exchange Act") shall be excluded from all Committee actions
and votes regarding the Plan. The Committee shall have full power and
authority, subject to the terms and conditions of the Plan, to determine
the Key Employees to whom awards may be made under the Plan, the number of
such shares and the type of option (Incentive Stock Option, Non-Qualified
Stock Option, or both) to be awarded to each of such Key Employees, the
applicable terms and conditions of such awards or other grants of
restricted stock and all other matters which may arise in the
administration of the Plan. The determination of the Committee concerning
any matter arising under or with respect to the Plan or any awards granted
shall be final, binding and conclusive on all interested persons. Awards
shall be made only in accordance with the recommendation of the Committee
and with the approval of the Board of Directors. The Committee may, as to
all questions of accounting, rely conclusively upon any determinations made
by the independent auditors of the Company.
3. STOCK AVAILABLE FOR AWARDS. There shall be available for option under the
Plan and for other awards a total of 270,000 shares of the Company's Common
Stock (the "Stock"), subject to any adjustments which may be made pursuant
to Section 4(i). Shares of Stock used for purposes of the Plan may be
either authorized and unissued shares or treasury shares or both. Stock
covered by options which have terminated or expired prior to exercise or
have been surrendered and canceled as contemplated by Section 4(m) or any
stock forfeited as contemplated by Section 5(c) shall be available for
further option.
4. TERMS AND CONDITIONS OF OPTIONS.
(a) GENERAL. Each option granted shall be in writing and shall contain
such terms and conditions as the Committee may determine, which terms
and conditions need not be the same in each case. Each option shall be
designated as an Incentive Stock Option or as a Non-Qualified Option,
as the case may be.
(b) ELIGIBILITY. Key Employees of the Company, and of any subsidiary
corporation of the Company ("Subsidiary"), as defined in Section
424(f) of the Code, shall be eligible to receive awards under the
Plan, provided that no award may be granted to any director who is not
also an employee of the Company or a Subsidiary. Eligibility to
receive options shall be determined by the Committee.
(c) OPTION PRICE. The price at which each share of Stock covered by an
option granted hereunder may be purchased shall be the price of a
share of Stock on the date of grant as reported by the American Stock
Exchange ("AMEX") or, if there is no reported trade on that date, on
the last preceding date on which a trade was reported. The "date of
grant" shall be the date as of which an option shall become effective
as determined by the Committee provided that the date of grant cannot
precede the date on which the Committee awards such option.
(d) OPTION PERIOD. The period for exercise of an option shall not exceed
ten years from the date the option is granted. Options shall become
exercisable during the option period at the rate set by the Committee,
provided that: (i) no option may be exercised prior to one year after
date of grant and (ii) the aggregate fair market value (at time of
grant) with respect to which Incentive Stock Options are exercisable
for the first time by any optionee during any calendar year (under the
Plan or any other stock option plan of the Company or any Subsidiary)
shall not exceed $100,000. Notwithstanding the foregoing, upon a
"Change of Control" (as defined below) options shall become
immediately exercisable to the full extent of the original award.
"Change of Control" shall occur upon:
(i) The acquisition by any person (including a group, within the
meaning of Section 13(d) or 14(d)(2) of the Exchange Act), other
than the Company or any of its Subsidiaries without the prior
written approval of the Company's Board of Directors, of
beneficial ownership (within the meaning of Exchange Act Rule
13d-3) of 20% or more of the then outstanding shares of stock in
a transaction or series of transactions not approved by a vote of
at least a majority of the "Continuing Directors" (as defined
below); or
(ii) Individuals who, as of January 1, 1997, constitute the Board of
Directors of the Company (generally the "Directors" and as of
January 1, 1997, the "Continuing Directors") cease for any reason
to constitute at least a majority thereof, provided that any
person becoming a Director subsequent to January 1, 1997 whose
nomination for election was approved by a vote of at least a
majority of the Continuing Directors (other than a nomination of
an individual whose initial assumption of office is in connection
with an actual or threatened election contest relating to the
election of the Directors of the Company, as such terms are used
in Rule 14a-11 of Regulation 14A under the Exchange Act) shall be
deemed to be a Continuing Director.
Subject to the provisions of paragraph (f), options that have become
exercisable shall remain exercisable until expiration or exercise,
whichever occurs first.
(e) EXERCISE OF OPTIONS. To exercise an option, the option holder shall
give written notice to the Company specifying the number of shares to
be purchased and accompanied by payment in full of the purchase price
thereof. Such purchase price may be paid in cash, or, with the consent
of the Committee, in whole or in part by the surrender of shares of
Stock held for a period of time as determined by the Committee and
having a fair market value, as determined by the Committee, equal to
such purchase price or the portion thereof which is not paid in cash.
An option holder shall have none of the rights of a stockholder until
the shares are paid for in full and issued to the option holder.
(f) EFFECT OF TERMINATION OF EMPLOYMENT OR DEATH. No option may be
exercised after the termination of employment of an optionee, except
that if such termination occurs by reason of retirement, disability,
or death (as described below) an extended period is permitted to
exercise those options which are exercisable on the date of
termination. Such extended period may not exceed the original option
period or the last day on which options may be exercised under the
Plan. If termination of employment occurs by reason of: (i) retirement
at normal or late retirement age under any tax-qualified retirement,
profit sharing or employee stock ownership plan maintained by the
Company or any Subsidiary in which the optionee is employed, the
extended period shall be 90 days; (ii) disability, which shall mean
the inability due to injury or illness which prevents the optionee
from performing the material duties of his position, and said
inability is expected to last for at least six months, the extended
period shall be 90 days; and (iii) death while employed, the extended
period is 180 days. Notwithstanding the foregoing, unexercisable
options shall be forfeited unless the Committee, in its sole
discretion, accelerates the exercisability of some or all of such
options. In no event, however, shall any option be exercisable more
than ten years from the date of grant thereof.
(g) Nothing contained in the Plan or in any option granted shall confer on
any employee any right to continue his employment or interfere in any
way with the right of his employer to terminate his employment at any
time.
(h) NONTRANSFERABILITY OF OPTIONS. During an optionee's lifetime his
option shall be exercisable only by him. No option shall be
transferable other than by will or the law of descent and
distribution.
(i) ADJUSTMENT FOR CHANGE IN STOCK SUBJECT TO PLAN. In the event of a
stock split, stock dividend, combination of shares, recapitalization,
reorganization, merger, consolidation, rights offering, or any other
change in the corporate structure or shares of the Company, the Board
of Directors shall make such adjustment, if any, as it deems
appropriate for purposes hereof in the number and kind of shares
subject to the Plan, in the number and kind of shares covered by
outstanding options, or in the option prices.
(j) REGISTRATION, LISTING AND QUALIFICATION OF SHARES. Each option shall
be subject to the requirement that if at any time the Board of
Directors of the Company shall determine that registration, listing or
qualification of the shares covered thereby upon any securities
exchange or under federal or state law, or in the consent or approval
of any governmental regulatory body is necessary or desirable as a
condition of, or in connection with, the granting of such option or
the purchase of shares thereunder, no such option may be exercised
unless and until such registration, listing, qualification, consent or
approval shall have been effected or obtained free of any conditions
not acceptable to the Board of Directors. Any person exercising an
option shall make such representations and agreements and furnish such
information as the Board of Directors may request to assure compliance
with the foregoing or any other applicable legal requirements.
(k) DURATION. Unless sooner terminated by the Board of Directors, the Plan
shall terminate on, and no option shall be granted hereunder after,
December 31, 2006.
(l) AMENDMENT. The Board of Directors of the Company may amend the Plan at
any time. No amendment shall, unless approved by stockholders of the
Company: (i) increase the maximum number of shares for which options
or other awards of Stock may be granted under the Plan; (ii) reduce
the minimum option price provided herein; or (iii) extend the period
during which options may be granted or exercised. Notwithstanding the
foregoing, the Board of Directors shall have the right to accept the
surrender of and cancel options issued under the Plan and reissue
those options and to amend the terms of outstanding options upon the
following terms and conditions.
(m) SURRENDER, CANCELLATION AND REISSUE OF OPTIONS. The Board of Directors
may, upon invitation by it during the term of this Plan to any
holder(s) of options under this Plan to do so, accept the surrender of
outstanding options, cancel such options and issue in exchange
therefor new options under this Plan provided:
(i) the tender of options for surrender is in accordance with
such conditions as the Board of Directors set forth in its
invitation for that surrender;
(ii) the number of shares covered by an option issued in exchange
for a surrendered and canceled option shall not exceed the
number of shares covered by the option surrendered and
canceled;
(iii)the price and all other terms of each option issued in
exchange shall comply with the requirements of this Plan for
the issuance of options; and
(iv) no such invitation for surrender of options shall be made by
the Board of Directors unless it shall have first received a
recommendation of the Committee that it is in the interest
of the Company to provide an opportunity for the surrender
and cancellation of outstanding options and the issue of new
options in exchange therefor upon more appropriate terms and
conditions, including exercise price.
(n) In the case of any person owning more than 10 percent of the common
stock of the Company, such person may not be granted an Incentive
Stock Option with an exercise price lower than 110 percent of the
closing price of a share of stock on the date of grant as reported by
the AMEX or, if there is no reported trade on that date, on the last
preceding date on which a trade was reported. Further, the option
received by such person(s) may not have an exercise period that
exceeds five years from the date the option is granted.
5. TERMS AND CONDITIONS OF RESTRICTED STOCK
(a) ELIGIBILITY TO RECEIVE RESTRICTED STOCK. Certain key executives of the
Company, as determined by the Board of Directors of the Company, shall
be eligible to receive Stock that is subject to the requirements of
this Section and such other restrictions as the Committee deems
appropriate or desirable ("Restricted Stock"). Some shares of
Restricted Stock may be acquired in lieu of some or all of certain
cash bonus payments otherwise due a key executive. Shares of
Restricted Stock which a key executive elects to acquire in lieu of
receiving additional cash bonus shall be acquired by the key executive
at a price to be determined by the Committee.
(b) TRANSFER RESTRICTIONS. Except as otherwise provided in this Section,
no shares of Restricted Stock shall be sold, exchanged, transferred,
pledged, or hypothecated for such period as the Committee shall
determine in its discretion (the "Restriction Period ").
(c) TRANSFER RESTRICTIONS ON TERMINATION OF EMPLOYMENT. If a holder of
Restricted Stock terminates employment for any reason other than
retirement, disability, or death within the Restriction Period, some
shares of Restricted Stock may be subject to forfeiture by the holder,
and if forfeited, shall revert to the Plan. In no event shall any cash
be transferred to a holder of Restricted Stock upon the forfeiture of
Restricted Stock. Such forfeited shares of Restricted Stock shall
again become available for award under the Plan.
(d) OTHER TERMS AND CONDITIONS. The Committee may require under such terms
and conditions as it deems appropriate or desirable that the
certificates for Stock delivered under the Plan may be held in custody
by a bank or other institution, or that the Company itself may hold
such shares in custody until the Restriction Period expires or until
restrictions thereon otherwise lapse and may require, as a condition
of any receipt of Restricted Stock that the executive shall have
delivered a stock power endorsed in blank relating to the Restricted
Stock.
(e) CHANGE OF CONTROL. Notwithstanding any provision of the Plan to the
contrary, upon a "Change of Control" (as defined in Section 4(d)), the
Restriction Period for any holder of Restricted Stock shall be deemed
to end and all restrictions on shares of Restricted Stock shall lapse.
6. EFFECTIVENESS OF PLAN. This Plan will be effective on the date it is
approved by the holders of not less than a majority of the outstanding
shares of voting stock of the Company represented and entitled to vote
thereon at a meeting thereof duly called and held for such purpose, and no
option granted shall be exercisable prior to such approval.
7. OTHER ACTIONS. This Plan shall not restrict the authority of the Board of
Directors of the Company, for proper corporate purposes, to grant or issue
stock options, other than under the Plan, to or with respect to any
employee or other person.
8. WITHHOLDING. The Company shall have the right to require an optionee or
other person entitled to receive Stock, under a Non-Qualified Option or
under an Incentive Stock Option if the optionee makes a disqualifying
distribution as described in Section 422 of the Code or under any other
award of Stock, to pay to the Company the amount which the Company is or
will be required to withhold with respect to such Stock in order for the
Company to pay taxes or to claim an income tax deduction with respect to
such stock. In lieu of such payment, the Company will be entitled to
retain, or sell upon not less than 10 days' prior written notice to the
optionee, a sufficient amount of such Stock to cover the amount required to
be withheld, such notice to be deemed given when sent first class, postage
prepaid, to the address of the optionee as it appears on the records of the
Company.
9. MISCELLANEOUS. The masculine pronoun wherever used included the feminine
pronoun.
Any notices provided or under this Plan shall be in writing and sent by
certified mail. Notices to the Company shall be addressed to the address of
the Company's principal office in Saddle Brook, New Jersey, Attention:
Compensation/Stock Option Committee. Notices sent by the Company shall be
sufficiently made if sent by certified mail addressed to such person at the
address as it appears in the regular records of the Company.
The Board of Directors and Officers of the Company shall be indemnified by
the Company against reasonable expenses, including attorney's fees,
actually and necessarily incurred in connection with the defense of any
action, suit or proceeding or in connection with any appeal thereof, to
which they or any of them may be a party by reason of any action taken or
failure to act under or in connection with the Plan or any award
thereunder, and against all amounts paid by them in settlement thereof
(provided such settlement is approved by independent legal counsel selected
by the Company) or paid by them in satisfaction of a judgment in any such
action, suit or proceeding, except in relation to matters as to which it
shall be adjudged in such action, suit or proceeding that such member of
the Board has breached his duty of loyalty to the Company, committed an act
not of good faith or in knowing violation of law, or has received an
improper personal benefit; provided that within 60 days after institution
of any such action, suit or proceeding a member of the Board of Directors
shall in writing offer the Company the opportunity, at its own expense, to
handle and defend the same.
The Plan shall be construed, administered and enforced according to the
laws of the United States and the laws of the State of New Jersey to the
extent the latter is not preempted by the former. Further, grantees of any
options under this plan shall be requested to consent to the exclusive
jurisdiction of the superior court of the State of New Jersey located in
Bergen County, New Jersey, to the extent such consent is lawful and except
that this consent shall not affect the jurisdiction of any Federal court.
10. This Plan shall be known as the Stock Option and Incentive Stock Plan of
1997.
