SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted
by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Interchange Financial Services Corporation
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
_______________________________________________
2) Aggregate number of securities to which transaction applies:
_______________________________________________
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
_______________________________________________
4) Proposed maximum aggregate value of transaction:
_______________________________________________
5) Total fee paid:
_______________________________________________
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
_______________________________________________
2) Form, Schedule or Registration Statement No.:
_______________________________________________
3) Filing Party:
_______________________________________________
4) Date Filed:
________________________________________________
<PAGE>
Anthony D. Andora
Chairman of the Board
Dear Interchange Stockholder:
On behalf of the Board of Directors and management of Interchange Financial
Services Corporation, you are cordially invited to attend the 2000 Annual
Meeting of Stockholders to be held at 3:00 p.m. on Thursday, April 27, 2000 at
the Marriott Hotel, Garden State Parkway at Route 80 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. We have also
enclosed a copy of the Company's Annual Report.
In order to ensure that your shares are represented at the Annual Meeting,
please promptly vote, date, sign and return your proxy for the meeting even if
you plan to attend. You may vote in person at that time if you so desire.
Thank you for your prompt attention to this important matter.
Sincerely,
/s/ Anthony D. Andora
______________________
Anthony D. Andora
March 30, 2000
<PAGE>
Interchange Financial Services Corporation
Park 80 West/Plaza II
Saddle Brook, NJ 07663
(201) 703-2265
- --------------------------------------------------------------------------------
Notice of Annual Meeting of Stockholders
To Be Held on April 27, 2000
- --------------------------------------------------------------------------------
Notice is hereby given that the Annual Meeting of Stockholders (the "Annual
Meeting") of Interchange Financial Services Corporation (the "Company") will be
held at 3:00 p.m. on Thursday, April 27, 2000 at the Marriott Hotel, Garden
State Parkway at Route 80 in Saddle Brook, New Jersey to consider and act upon
the following matters:
1. The election of four directors.
2. To consider and vote upon the Outside Director Incentive Compensation
Plan (a copy of which appears as Appendix A to the Proxy Statement).
3. The ratification of the appointment of Deloitte & Touche LLP as the
Company's independent auditors for the year ending December 31, 2000.
4. The transaction of such other business as may properly come before the
Annual Meeting or any adjournment thereof.
The Company knows of no other business to be brought before the Annual
Meeting.
Stockholders of record at the close of business on March 27, 2000 are the
stockholders entitled to notice of and to vote at the Annual Meeting and any
adjournment thereof. The Company's Proxy Statement for the Annual Meeting
accompanies this Notice and a form of proxy is enclosed herewith. You are
requested to complete, sign and date the enclosed proxy card, which is solicited
on behalf of the Board of Directors, and to mail it promptly in the enclosed
return envelope. The proxy will not be used if you attend and vote at the Annual
Meeting in person.
By Order of the Board of Directors
/s/ Benjamin Rosenzweig
________________________
Benjamin Rosenzweig
Secretary
Your vote is important. Please complete, sign, and return promptly the enclosed
proxy in the postage-paid envelope provided even if you plan to attend the
Annual Meeting in person. If you do attend the Annual Meeting, you may then
withdraw your proxy and vote in person, if you wish.
Saddle Brook, New Jersey
March 30, 2000
<PAGE>
- --------------------------------------------------------------------------------
PROXY STATEMENT
of
INTERCHANGE FINANCIAL SERVICES CORPORATION
Park 80 West/Plaza II
Saddle Brook, NJ 07663
ANNUAL MEETING OF STOCKHOLDERS
APRIL 27, 2000
- --------------------------------------------------------------------------------
General
This proxy statement and the accompanying proxy/voting card (proxy card)
are being mailed beginning March 30, 2000, in connection with the solicitation
of proxies by the Board of Directors of Interchange Financial Services
Corporation (the "Company"), for the Annual Meeting of Stockholders (the "Annual
Meeting") to be held at 3:00 p.m. on April 27, 2000 at the Marriott Hotel,
Garden State Parkway at Route 80 in Saddle Brook, New Jersey and at any
adjournment thereof. Proxies are solicited to give all stockholders of record at
the close of business on, March 27, 2000 (the "Record Date"), an opportunity to
vote on matters that come before the Annual Meeting. At the Annual Meeting, the
stockholders of the Company are being asked to consider and vote on the proposal
to elect four directors of the Company, to consider and vote upon the Outside
Director Incentive Compensation Plan and to ratify the appointment by the Board
of Directors of the Company's independent auditors for the year ending December
31, 2000.
Proxies will be solicited by mail. Some directors, officers, and other
employees of the Company may also solicit proxies in person and by telephone or
otherwise. The cost of soliciting proxies for the Annual Meeting will be borne
by the Company. 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.
Voting Rights, Revocability of Proxies and Proxy Information
The Company's common stock, no par value (the "Common Stock"), is the only
class of voting security of the Company. As of the Record date, 6,518,864 shares
of Common Stock were issued and outstanding. Each share of Common Stock
outstanding on the Record Date is entitled to one vote with respect to each
matter properly brought before the Annual Meeting.
All shares of Common Stock represented at the Annual Meeting by properly
executed proxies received prior to or at the Annual Meeting, and not revoked,
will be voted at the Annual Meeting in accordance with the instructions thereon.
You can specify your choices by marking the appropriate boxes on the enclosed
proxy card. If no instructions are indicated, properly executed proxies will be
voted for the election of the nominees for directors named herein, the approval
of the Outside Director Incentive Compensation Plan described herein and for
ratification of auditors described herein. The Company does not know of any
matters, other than as described in the Notice of Annual Meeting, that are to
come before the Annual Meeting. If any other matters are properly presented at
the Annual Meeting for action, the persons named in the enclosed proxy will have
the discretion to vote on such matters in accordance with their best judgment.
A majority of the shares of the Common Stock, present in person or
represented by proxy, shall constitute a quorum for purposes of the Annual
Meeting. Abstentions and withholding of votes for directors will not be counted
as votes cast. In addition, shares held in street name which have been
designated by brokers on proxy cards as not voted (so-called broker non-votes)
will not be counted as votes cast. Proxies marked as abstentions, withhold or as
broker non-votes, however, will be treated as shares present for purposes of
determining whether a quorum is present.
<PAGE>
Directors shall be elected by a plurality of the votes present in person or
represented by proxy at the Annual Meeting. The affirmative vote of a majority
of the shares present in person or represented by proxy and voting at the Annual
Meeting is necessary to approve the Outside Director Incentive Compensation Plan
and ratify the appointment of Deloitte & Touche, LLP as independent auditors of
the Company.
A stockholder who grants a proxy pursuant to this solicitation retains the
right to revoke it at any time before it is voted. Unless so revoked, the shares
represented by properly executed proxies will be voted at the Annual Meeting and
at any adjournment thereof. Proxies may be revoked by: (i) filing with the
Secretary of the Company at or before the Annual Meeting a written notice of
revocation bearing a later date than the proxy, (ii) duly executing a subsequent
proxy relating to the same shares and delivering it to the Secretary of the
Company at or before the Annual Meeting, or (iii) attending the Annual Meeting
and voting in person (although attendance at the Annual Meeting will not in
itself constitute revocation of a proxy). Any written notice revoking a proxy
should be delivered to Benjamin Rosenzweig, Secretary, Interchange Financial
Services Corporation, Park 80 West/Plaza II, Saddle Brook, New Jersey, 07663.
1. Election of Directors
(Item 1 on Proxy Card)
The first item to be acted upon at the Annual Meeting is the election of
four directors. The Company's Board of Directors currently consists of thirteen
members. In accordance with the Company's Certificate of Incorporation, the
Board is divided into three classes, each of which contains approximately
one-third of the Board. Approximately one-third of the directors are elected
annually. Directors of the Company are generally elected to serve for three-year
terms or until their respective successors are elected and qualified.
Unless contrary instruction is given, it is intended that the named
proxies will vote in favor of each of the four nominees listed below.
Each nominee for director and each continuing director also serves as
director of Interchange Bank (the "Bank"), a subsidiary of the Company. Richard
A. Gilsenan who served as a director of the Company and the Bank will continue
to serve as a director of the Bank. However, Mr. Gilsenan was not nominated to
serve as a director 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. There are no arrangements or understandings between any director or
nominee and any other person pursuant to which such director or nominee was
selected, and no director, nominee or executive officer is related to any other
director, nominee or executive officer by blood, marriage or adoption.
Nominees and Directors
Nominees to be elected Directors for a terms of three years expiring in 2003
DONALD L. CORRELL, age 49, is Chairman, President and CEO (since 1992) of United
Water Resources, Inc. which 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 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.
JAMES E. HEALEY, age 58 is Senior Vice President and Chief Financial Officer of
Nabisco Group Holdings, Inc. (since 1999), which owns 80.5% of world wide
food manufacturer Nabisco Holdings, Inc. of which he is Executive Vice
President and Chief Financial Officer since 1997. He is a Trustee of Pace
University in New York and a Certified Public Accountant. Mr. Healey was
formerly Vice President and Treasurer (since 1995) of Bestfoods (formerly
CPC International, Inc.) and Comptroller (since 1987). Mr. Healey has been
a member of the Board of Directors of the Company and the Bank since 1993.
He is Chairman of the Compensation/Stock Option Committee and serves on the
Audit Committee, Corporate
2
<PAGE>
Planning and Finance Committee, Investment Committee and is an alternate
member of the Executive Committee.
JEREMIAH F. O'CONNOR, age 66, is currently a principal of NW Financial Group
(since 1996), a financial advisory firm. Mr. O'Connor was formerly a
Managing Director of NatWest Financial Markets Group (since 1994). 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 61, 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 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.
Directors to continue in office for terms expiring in 2002
ANTHONY S. ABBATE, age 60, 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 the
Corporate Planning and Finance Committee and serves ex-officio on all
Committees.
ANTHONY R. COSCIA, age 40, is a partner and executive committee member of the
law firm of Windels Marx Lane & Mittendorf, LLP in New York and New
Brunswick, New Jersey. He is currently serving his third term as Chairman
of the New Jersey Economic Development Authority. Mr. Coscia has been a
member of the Board of Directors of the Company and the Bank since 1997. He
serves on the Audit Committee, Oversight/Insider Committee and is an
alternate member of the Executive Committee.
JOHN J. ECCLESTON, age 74, is a principal in the firm 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 68, is a commercial real estate investor, and she
serves as Vice Chairperson of 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.
<PAGE>
Directors to continue in office for terms expiring in 2001
ANTHONY D. ANDORA, age 69, is President of Andora, Palmisano & Geaney, a law
firm in Elmwood Park, New Jersey. Mr. Andora has been a member of the Board
of Directors of the Company since 1984 and of the Bank since 1969. He is
Chairman of the Board, the Executive Committee and the Nominating
Committee. He is a member of the Corporate Planning and Finance committee
and is ex-officio on all committees.
DAVID R. FICCA, age 68, is a board member of Richton International Corporation.
In March 1988 he retired from his position as Vice Chairman, of Kidde, Inc,
a multi-market manufacturing and service organization. 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.
3
<PAGE>
NICHOLAS R. MARCALUS, age 56, is President & CEO of Marcal Paper Mills, Inc., a
manufacturer of paper products, in Elmwood Park, New Jersey, and serves as
a board member of that organization. Mr. Marcalus has been a member of the
Board of the Company and the Bank since 1997, and serves on the
Compensation/Stock Option Committee, Investment Committee and is an
alternate on the Executive Committee.
BENJAMIN ROSENZWEIG, age 74, 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 Company and the Bank. 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.
Each of the directors has held the same position or another position with
the same employer during the past five years, unless otherwise indicated.
Board Committees, Meetings and Compensation
The Company has an Audit Committee of the Board of Directors consisting of
Mrs. Nissley, Messrs. Correll, Coscia, Eccleston (Chairman) and Healey. 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 1999.
The Compensation/Stock Option Committee administers management incentive
compensation plans, including the Company's stock option plan. The committee
makes recommendations to the Board with respect to compensation of directors and
executive officers. The Committee, which met two times in 1999, consists of
Messrs. Correll, Ficca, Healey (Chairman), Marcalus, 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 twice in 1999. The committee will consider
nominations recommended by stockholders. In accordance with the Company's
by-laws, such nominations, together with accompanying biographical material,
must be in writing and should be addressed to the Secretary of the Company and
the Bank and must be received not later than January 2 of the year of the annual
meeting of stockholders.
In 1999, each director not employed by the Company was paid a retainer of
$1,000. The chairman of the Board, Vice-Chairman of the Board and Secretary of
the Board received additional retainers of $500, $250 and $100, respectively. In
addition, each director not employed by the Bank was paid a retainer at an
annual rate of $10,000, 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 Company and the Bank received
additional retainers of $16,500, $13,500 and $2,000, respectively. Directors who
are chairmen of committees, which act in a dual capacity for the Company and the
Bank, 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 1999, the Board of Directors of the Company and the Bank held 12
meetings each. All incumbent directors, except Messrs. Gilsenan 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 1999.
Directors, excluding directors who are employed by the Bank, participate in
a retirement benefit plan which entitles the director to receive upon retirement
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 Company and the Bank and to
committee chairmen) multiplied by his or her years of service on the board; or
(2) an amount based
4
<PAGE>
on the cash surrender value of a life insurance or annuity contract purchased by
the Bank. The insurance policies or annuity contracts are owned by the Bank and
annual contributions of $5,000 are made by the Bank for each director who has
completed five years of service as a director. The Bank'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. 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.
Amount and Nature of Beneficial Ownership
The following table sets forth information concerning the ownership of the
Company's common stock as of February 29, 2000, for (a) certain beneficial
owners known to the Company to own more than five percent of the Common Stock;
(b) each director and nominee for director; (c) each of the named executive
officers (as defined in Note (1) of the Summary Compensation Table, herein) not
listed as a director; and (d) all 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. . . . . . . . . . . 263,809 263,809 4.0 %
First Union Corporation
One First Union Center
Charlotte, NC 28288. . . . . . . . . . . . . 341,617 (2) 341,617 5.2
(b)
Anthony S. Abbate. . . . . . . . . . . . . . 169,172 (3) 19,336 188,508 2.9
Anthony D. Andora. . . . . . . . . . . . . . 167,844 167,844 2.6
Donald L. Correll . . . . . . . . . . . . . 5,822 5,822 *
Anthony R. Coscia. . . . . . . . . . . . . . 6,950 6,950 *
John J. Eccleston. . . . . . . . . . . . . . 82,424 82,424 1.3
David R. Ficca. . . . . . . . . . . . . . . 84,057 (4) 84,057 1.3
Richard A. Gilsenan . . . . . . . . . . . . 27,162 27,162 *
James E. Healey. . . . . . . . . . . . . . . 25,300 25,300 *
Nicholas R. Marcalus. . . . . . . . . . . . 1,625 1,625 *
Eleanore S. Nissley. . . . . . . . . . . . . 45,660 45,660 *
Jeremiah F. O'Connor. . . . . . . . . . . . 56,811 56,811 *
Robert P. Rittereiser. . . . . . . . . . . . 27,168 27,168 *
Benjamin Rosenzweig. . . . . . . . . . . . . 108,117 108,117 1.7
(c)
Patricia D. Arnold . . . . . . . . . . . .. 8,670 (5) 12,733 21,403 *
Frank R. Giancola. . . . . . . . . . . . . . 21,414 (6) 19,148 40,562 *
Anthony Labozzetta . . . . . . . . . . . . . 13,065 (7) 10,430 23,495 *
(d)
Directors and executive officers as a
group (16 persons). . . . . . . . . . . . 851,261 (8) 61,647 912,908 13.9
---------------------------------------------
<FN>
* Does not exceed one percent of class
1. Shares held in deferred compensation accounts to which individuals have
sole power to vote but no investment powers.
2. Includes beneficial ownership of 298,248 shares to which First Union
Corporation has sole power to vote and 40,769 for which it has shared power
to vote and 2,600 for which it has investment discretionary capacity. First
Union Corporation has sole investment power for 292,353 shares and shared
investment power for 40,769 shares.
3. Includes beneficial ownership of 36,994 shares, which may be acquired upon
the exercise of stock options exercisable within 60 days.
4. Includes beneficial ownership of 1,689 shares held by a foundation to which
Mr. Ficca has sole voting power and shared investment power.
5. Includes beneficial ownership of 5,633 shares, which may be acquired upon
the exercise of stock options exercisable within 60 days.
6. Includes beneficial ownership of 14,728 shares, which may be acquired upon
the exercise of stock options exercisable within 60 days.
7. Includes beneficial ownership of 6,620 shares, which may be acquired upon
the exercise of stock options exercisable within 60 days.
8. Includes beneficial ownership of 63,975 shares, which may be acquired upon
the exercise of stock options exercisable within 60 days, awarded under an
employee incentive compensation plan.
</FN>
</TABLE>
5
<PAGE>
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, 1999,
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.
Andora and Marcalus, of one Form 4 each. Mrs. Arnold and Messrs. Abbate,
Giancola and Labozzetta filed Forms 5 late due to delays with respect to shares
allocated to their accounts in the Capital Investment Plan ("401(k)") caused by
administrative delays.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Annual Compensation Long-term Compensation
------------------------------------- ----------------------------
Other Restricted All Other
Annual Stock Options Compensation
Name and Principal Position Year Salary($) Bonus($) Compensation ($) Awards($)(3) (No. of Shares) ($)(2)
- ---------------------------- ----- -------- --------- ---------------- ------------ -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Anthony S. Abbate . . . . . 1999 $327,500 $ 117,081 - $ 100,706 $ 12,500 $ 77,999
President and CEO 1998 315,000 99,225 - 119,700 11,500 61,309
1997 300,000 86,250 - 112,500 12,000 49,581
Anthony Labozzetta . . . . . 1999 132,000 33,600 - 26,400 4,000 4,477
Executive Vice President 1998 120,000 37,800 - 27,000 4,000 4,066
Chief Financial Officer 1997 107,675 33,263 11,080 23,135 4,500 3,657
Frank R. Giancola . . . . . 1999 131,000 33,405 - 10,551 (5) 4,000 5,753
Senior Vice President 1998 127,500 40,163 - 6,375 4,000 4,997
1997 125,000 35,937 463 8,965 4,500 4,464
Patricia D. Arnold . . . . . 1999 120,000 30,600 - 6,000 4,000 4,380
Senior Vice President 1998 106,667 34,650 - 18,700 4,000 4,187
1997 91,862 17,238 3,330 6,104 4,500 3,040
- --------------------------
<FN>
(1)Includes the President and CEO and all other executive officers whose total
annual salary and bonus exceeded $100,000 in 1999.
(2)Represents payments as shown below:
</FN>
</TABLE>
<TABLE>
<CAPTION>
Year Abbate Labozzetta Giancola Arnold
----- ------- ----------- -------- --------
<S> <C> <C> <C> <C> <C>
Amounts contributed to 401(k)plan 1999 $ 6,400 $4,103 $5,136 $4,008
1998 5,433 3,551 4,216 3,514
1997 4,800 3,230 3,750 2,756
Value of life insurance premium paid 1999 3,564 374 617 372
in respect to coverage in excess 1998 4,500 515 781 673
of $50,000 1997 3,150 427 714 284
Contribution to life insurance policy/ 1999 - (4) - -
annuity contract 1998 - (4) - - -
1997 10,000 - - -
Premium paid on disability policy 1999 7,860 - - -
1998 7,614 - - -
1997 7,287 - - -
Contribution to Supplemental Executives' 1999 60,175 (4) - - -
Retirement Plan 1998 43,762 (4) - - -
1997 24,344 (5) - - -
- --------------------------
<FN>
(3) The unvested restricted stock awards granted, to date, (adjusted for the
effects of 3 for 2 stock splits granted in both 1997and 1998), totaled
1,799, 25,453, 4,461 and 3,474 for Mrs. Arnold and Messrs. Abbate,
Labozzetta and Giancola, respectively. The value of such awards at December
31, 1999, were $29,459, $416,793, $73,049 and $56,887, respectively. The
value of these shares at the date of grant is reflected in the table above.
The awards for Mrs. Arnold and Messrs. Abbate, Labozzetta, and Giancola
vest in three years following the date of grant provided they do not
terminate their employment during that period. Dividends will be paid on
all restricted stock awards.
(4) In 1998, the Board of Directors amended the Supplemental Executives'
Retirement Plan to provide Mr. Abbate with the retirement benefits he is
entitled to as a member of the Board of Directors. The 1999 and 1998
contribution to the Supplemental Executives' Retirement Plan includes the
costs associated with the life insurance policy.
(5) The 1999 restricted stock award for Mr. Giancola amounting to $10,551 is
attributable to an adjustment to correctly reflect his achievement under
the 1998 incentive plan.
</FN>
</TABLE>
6
<PAGE>
Stock Option Grants in Last Fiscal Year*
The following table sets forth certain information concerning grants of
stock options awarded to the named executive officers during the year ended
December 31, 1999. All options granted during the year were incentive stock
options:
<TABLE>
<CAPTION>
Potential Realized Value
Number of % of Total at Assumed Annual Rates
Securities Options of Stock Price Appreciation
Underlying Granted to Exercise or For Option Term (3)
Options Employees in Base Price Expiration -----------------------------
Name Granted (1) Fiscal Year ($/Sh) (1) Date (2) 5% 10%
- --------------------------- ------------- -------------- ------------- ------------ ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Anthony S. Abbate 12,500 21.8% $16.50 2/24/2010 335,960 534,959
Anthony Labozzetta 4,000 7.0 16.50 2/24/2010 107,507 171,187
Frank R. Giancola 4,000 7.0 16.50 2/24/2010 107,507 171,187
Patricia Arnold 4,000 7.0 16.50 2/24/2010 107,507 171,187
- ---------------------------
<FN>
* The grant of stock options presented in this table was made in early 2000
based upon 1999 performance criteria.
(1) The exercise price was based on the closing price of a share of the
Company's stock on the date of grant as reported on the American Stock
Exchange.
(2) Options are exercisable starting one year from the date of grant and become
vested 1/3 each year from the grant date. Options expire if not exercised
within 10 years of grant date.
(3) Pre-tax gain. The dollar amounts under these columns are the result of
calculations at the 5% and 10% rates set by the Securities and Exchange
Commission in the proxy disclosure rules and, therefore, are not intended
to forecast possible future appreciation, if any, of the Company's stock
price. The Company's per share stock price would be $26.88 and $42.80 if
the increase was 5% and 10%, respectively, compounded annually over the
option term.
</FN>
</TABLE>
Aggregated Option Exercises in Last Fiscal Year and Year End Option Values
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised
Options at Year End In-the-Money Options
No. Shares -------------------------- at Year-end (2)
Acquired on Value Shares Shares ------------------------------
Name Exercise Realized (1) Exercisable Unexercisable Exercisable Unexercisable
- --------------------- ----------- ------------ ------------ --------------- -------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Anthony S. Abbate - - 36,994 24,167 $230,852 -
Anthony Labozzetta - - 6,620 8,917 6,870 $281
Patricia D. Arnold 312 $ 2,501 5,633 8,167 10,420 -
Frank R. Giancola 4,570 53,309 14,728 8,167 95,374 -
- ---------------------
<FN>
(1) Pre-tax gain. Amounts shown represent the difference between the stock
option grant price and the market value of the stock on the date of
exercise.
(2) Pre-tax gain. Value of unexercised in-the-money options based on the
December 31, 1999 closing price of $16.375 as reported on the American
Stock Exchange.
</FN>
</TABLE>
PENSION PLAN AND SUPPLEMENTAL EXECUTIVES' RETIREMENT PLAN
The Company, through the Bank, maintains a non-contributory defined benefit
pension plan covering all eligible employees including Mrs. Arnold, Messrs.
Abbate, Giancola and Labozzetta. Retirement income is based on years of service
under the Plan and, subject to certain limits, on final average compensation.
The Company maintains a Supplemental Executives' Retirement Plan (the
"SERP"), 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. In 1998, the Company amended the Plan to include the
director related retirement benefits relating to Mr. Abbate's membership in the
Board of Directors. Benefits under the SERP are paid from the general assets of
the Company.
7
<PAGE>
The following table shows the annual benefits payable based on a range of
average compensation (comprised solely of base salary) and years of future
service at normal retirement date.
<TABLE>
<CAPTION>
Pension Plan
5-Year Years of Service at Normal Retirement Date
Average -----------------------------------------------------------------
Compensation 5 10 20 30 35
------------- ------------ ------------- ------------ ------------ -------------
<S> <C> <C> <C> <C> <C>
$100,000 $ 5,795 $11,589 $ 23,178 $ 34,767 $ 40,562
150,000 9,545 19,089 38,178 57,267 66,182
200,000 13,295 26,589 53,178 79,767 93,062
250,000 17,045 34,089 68,178 102,267 119,312
300,000 20,795 41,589 83,178 124,767 145,562
400,000 28,295 56,589 113,178 169,767 198,062
- --------------------
<FN>
Footnotes:
1. This Plan was effective January 1, 1993.
2. Benefits calculated are based on base salary and total credited service at
normal retirement date from the later of (a) January 1, 1993 or (b) date of
hire. The benefits above are inclusive of both benefits from the qualified
defined benefit plan and from the defined benefit portion of the
supplemental plan. Currently, the supplemental plan only covers Mr. Abbate.
3. Average compensation is the average of base salary over the five (5)
consecutive calendar years producing the highest average.
4. The chart reflects a Social Security integration level based on the average
age of the executive officer group, which was 46 years as of December 31,
1999.
5. Annual benefit is payable as a life annuity which is the normal form of
retirement benefit for non-married participants. For married participants,
the normal form of benefit is an actuarial equivalent joint and 50%
survivor annuity.
6. At December 31, 1999, the estimated credited years of service for purposes
of computing the retirement benefits under the Pension Plan and the SERP
for the named executive officers are as follows: Mr. Abbate - 7 years; Mr.
Labozzetta - 4 years; Mr. Giancola - 7 years; and Mrs. Arnold - 7 years.
</FN>
</TABLE>
The Company also maintains a Capital Investment Plan ("401(k)") covering
all eligible employees. Retirement income is based on the value of each
participant's account balance and is paid upon retirement, termination of
employment, disability or death. The SERP also supplements the retirement
benefits payable to certain participants under the 401(k). At present, only Mr.
Abbate participates in the SERP. These benefits are intended to provide
participants with an amount (plus earnings) that the Company would have
contributed under the 401(k) as matching employer contributions and for fixed
employer contributions (in excess of the amounts the Company actually
contributed) but for certain limitations imposed by the Internal Revenue Code
under the 401(k). The benefits under the SERP with respect to the 401(k) are to
be paid in lump sum in cash at the same time as the distribution of a
participant's account balance is made under the 401(k).
Compensation/Stock Option Committee Report on Executive Compensation
The Compensation/Stock Option Committee is responsible for reviewing and
recommending executive compensation to the full board for action and
administering the Company's executive compensation programs and plans. The
Committee reports regularly to the Board of Directors. During 1999, the
Committee consisted of seven Directors who were not employees of the Company,
and also, therefore, were not eligible to participate in such programs and
plans.
Compensation Strategy
The objectives of this Committee 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
the long-term best interests of the organization. Compensation programs for
executives are designed to link compensation to the performance of the Company
and generally provide competitive compensation for executives at the
seventy-fifth percentile 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
8
<PAGE>
the aforementioned peer group 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 established based on the
achievement of corporate financial targets and individual performance. The Stock
Option and Incentive Plan, approved by stockholders in 1999, is intended to
function as the basis for fostering alignment of executive compensation with the
interests of stockholders.
The policies with respect to each of these compensation elements as well as
the basis for determining the compensation level 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 by the Committee annually for each position. These position
salary ranges are determined by evaluating the responsibilities and account
abilities 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, which are
weighted equally, 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 1999 (paid in 2000) reflects the achievement in excess of
100 percent of the financial targets set in 1999. The Board reserves the right
to award discretionary bonus awards in the event the financial target is either
not met or is exceeded. No discretionary bonuses were paid in 1999. 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 the
restricted stock 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, 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.
9
<PAGE>
Stock Option and Incentive Plan
The Stock Option and Incentive Plan of 1997 (the "Plan") approved by
stockholders, is designed to align stockholders' and executive officers'
interests. The Compensation/Stock Option Committee administers the Plan and that
committee reviews the awards and submits recommendations to the full board for
action. Stock options are granted on a discretionary basis 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
Common Stock occurs over a specified number of years.
The Plan also provides for the issuance of incentive stock awards as
determined by the Board of Directors of the Company. Certain key executives may
be awarded incentive compensation in the form of 3-year restricted stock, which
is forfeitable upon termination of employment during that time period. Key
employees may also use their cash bonus to purchase two-year restricted stock at
a twenty-five percent discount. All amounts in excess of the purchase price of
this stock are forfeitable should they terminate their employment during that
time period. Incentive stock awards are an important factor in attracting and
motivating key executives who will dedicate their maximum efforts toward the
advancement of the Company.
A total of 637,875 shares were made available for option and incentive
awards under the Plan of which 382,316 shares have been granted to date. Options
granted in 1999 and those granted in 2000 as a result of 1999's performance 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 Management Incentive Plan, the Stock Option Plan, and the staff benefit
programs as outlined elsewhere in this Proxy Statement. Mr. Abbate also
participates in the Supplemental Executives' Retirement Plan. Mr. Abbate
receives no compensation for his duties as a director. 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 seventy-fifth percentile of the 1999 salary range for his position and
his annual cash bonus for 1999 performance was based upon achieving 101.0% of
targeted financial 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
10
<PAGE>
FIVE-YEAR PERFORMANCE COMPARISON
The graph below provides an indicator of cumulative total stockholder
returns for the Company as compared with a Peer Group (1) and the AMEX Market
Value Index.
<TABLE>
<CAPTION>
Cumulative Total Return
-----------------------------------------------
12/94 12/95 12/96 12/97 12/98 12/99
------- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
INTERCHANGE FINANCIAL SERVICES CORPORATION 100 148 188 346 293 303
PEER GROUP 100 125 148 238 235 213
AMEX MARKET VALUE 100 129 131 163 175 224
Assumes $100 invested on December 31, 1994, in Interchange Common Stock, the
AMEX Market Value Index and Peer Group Common Stock.
Total Stockholder returns assumes reinvestment of dividends.
<FN>
Footnote
(1) The Peer Group is comprised of 17 banking institutions in Connecticut, New
Jersey and New York with asset size of at least $250 million, but less than
$1 billion, as of September 30, 1999 the most recently available
information as reported in the SNL Quarterly Bank Digest of December 1999.
The banking institutions included are: First International Bancorp and NMBT
Corp. (CT); Center Bancorp Inc., Greater Community Bancorp, Unity Bancorp
and Vista Bancorp (NJ); Alliance Financial Corp., Arrow Financial
Corporation, CNB Financial Corp., First of Long Island Corporation, Iroquis
Bancorp Inc., Jeffersonville Bancorp, Letchworth Independent BS Corp., Long
Island Financial Corp., State Bancorp, Inc., Suffolk Bancorp and Tompkins
County Trust Company (NY).
</FN>
</TABLE>
11
<PAGE>
TRANSACTIONS WITH MANAGEMENT
Officers and directors of the Company and their affiliated companies are
customers of and are engaged in transactions with the Company and its
subsidiaries in the ordinary course of business on substantially the same terms
(including interest rates on loans, collateral and collectibility
considerations) as those prevailing at the time for comparable transactions with
other borrowers and suppliers.
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. During 1999, Andora, Palmisano & Geaney
received fees for legal services of $325,000, including $95,000 paid pursuant to
retainer contracts and $134,000 representing fees for real estate matters, the
bulk of which was reimbursed to the Bank by its customers.
2. Proposal to Approve the Outside Director's Incentive Compensation Plan
(Item 2 on Proxy Card)
The purpose of the Outside Director's Incentive Compensation Plan (the
"Plan") is to attract qualified personnel to accept positions of responsibility
as outside directors with the Company, and to provide incentives to persons to
remain on the Board of the Company as outside directors. The Board of Directors
is submitting the Plan for approval at the annual meeting in order to comply
with certain provisions of the Internal Revenue Code. The following summary of
the Plan is not intended to be complete and is qualified in its entirety by
reference to the Plan, a copy of which is attached as Appendix A to this Proxy
Statement.
ELIGIBILITY
Persons eligible to participate in the Plan shall be those members of the
Board of Directors of the Company who have not served as a full-time employee of
the Company or any of its subsidiaries during the prior twelve month period.
Currently, there are 11 directors eligible to participate in the Plan.
ADMINISTRATION
The Compensation Committee of the Board shall administer the Plan. The
Compensation Committee of the Board shall also have full authority and
discretion to adopt and revise such rules and procedures as it shall deem
necessary for the administration of the Plan and compliance with applicable law.
The Compensation Committee of the Board's interpretation and construction of any
provisions of the Plan or any option granted hereunder shall be final,
conclusive, and binding.
STOCK SUBJECT TO THE PLAN
There will be reserved for use upon the exercise of options granted from
time to time under the Plan an aggregate of 100,000 shares of Common Stock,
subject to adjustment as provided in the Plan. The Board shall determine from
time to time whether all or part of such 100,000 shares shall be authorized but
unissued shares of Common Stock or issued shares of Common Stock which shall
have been reacquired by the Company and which are held in its treasury. If any
option granted under the Plan should expire or terminate for any reason without
having been exercised in full, the unpurchased shares shall become available for
the grant of options under the Plan.
TAX TREATMENT AND WITHHOLDING
All options granted under the Plan shall be Non-Qualified Stock Options not
entitled to special tax treatment under the Code, as amended to date and as may
be amended from time to time. The increase in the price of the stock under a
Non-Qualified Stock Option at the time of exercise is taxable as ordinary income
at the date of exercise - all future appreciation is considered a capital
12
<PAGE>
gain. The Company receives a deduction equal to the increase in the price of the
stock under a Non-Qualified Stock Option at the time of exercise. The Company,
as and when appropriate, shall have the right to require each holder of options
purchasing or receiving shares of Common Stock under the Plan to pay any
federal, state, or local taxes required by law to be withheld.
TERMINATION AND AMENDMENT
The Board may at any time terminate or amend the Plan as it may deem
advisable, except that (i) the provisions of the Plan relating to the amount of
shares covered by options, the exercise price of options or the timing of option
grants or exercises shall not be amended more than once every six months, other
than to comport with changes in the Code, the Employment Retirement Income
Security Act or the rules thereunder, and (ii) no such termination or amendment
shall adversely affect any participant with respect to any right which has
accrued under the Plan in regard to any option granted prior to such termination
or amendment. By accepting an option under the Plan, each participant
acknowledges the right of the Board to terminate or amend the Plan subject to
the conditions set forth therein. Each member of the Board of Directors will,
upon satisfying the eligibility requirements of the Plan, receive a grant of
1,000 options, with each option representing the right to purchase, upon
exercise, one share of Common Stock. Provided that the director continues to be
eligible under the Plan, he or she will receive an additional grant of 1,000
options on the first anniversary date of the initial grant and each anniversary
date thereafter. Pursuant to Section 8 of the Plan, the exercise price of the
options will be equal to the closing price of a share of Common Stock on the
date of the grant as reported by the American Stock Exchange. The options will
vest over a three-year period from the grant date with one-third of the options
vesting each year on the anniversary date of the grant. The options will have a
term of no longer than 10 years.
CHANGE IN CONTROL
In the case of a change of control of the Company including, but not
limited to, by way of a stock dividend, recapitalization, reorganization,
merger, consolidation or comparable transaction, the Board may make appropriate
adjustments to the number and kind of shares reserved for issuance under the
Plan and upon the grant and exercise of options. In the event of a change of
control of the Company, all of the options granted under the Plan shall be fully
exercisable.
BOARD OF DIRECTOR RECOMMENDATION
The Board of Directors believes that the Plan is in the best interests
of the Company and the stockholders. Therefore, your directors recommend that
the stockholders vote FOR ratification of this appointment.
3. Ratification of Appointment of Independent Auditors
(Item 3 on Proxy Card)
Deloitte & Touche LLP served as the Company's independent auditors for the
year ended December 31,1999. The Board of Directors, upon recommendation of the
Audit Committee, has again reappointed the firm of Deloitte & Touche LLP as the
independent auditors to examine the Company's financial statements for the year
2000. Your directors recommend that the 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.
4. 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
Annual Meeting should be presented, the persons named in the accompanying proxy
will vote the shares represented by the proxy on such
13
<PAGE>
matter in accordance with their best judgment. If any matter not proper for
action at the Annual Meeting should be presented, the named proxies will vote
against consideration thereof or action thereon.
Submission of Stockholder Proposals
Proposals intended for inclusion in the proxy statement for next
year's annual meeting of shareholders must be in writing and must be received by
the Secretary of the Company at Park 80 West/Plaza Two, Saddle Brook, NJ 07663,
not later than December 22, 2000. To be considered for inclusion in the
Company's proxy statement and form of proxy for the forthcoming annual meeting,
a stockholder proposal must be submitted on a timely basis and the proposal and
proponent thereof must meet the requirements established by the Securities and
Exchange Commission for stockholders proposal.
Other Information
Consolidated financial statements of the Company and its subsidiaries
are included in the Company's Annual Report to Stockholders for the year 1999.
Additional copies of the Annual Report to Stockholders and the Company's Annual
Report on Form 10-K as filed with the Securities and Exchange Commission may be
obtained without charge from the Secretary of the Company, 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: March 30, 2000
14
<PAGE>
APPENDIX A
INTERCHANGE FINANCIAL SERVICES CORPORATION
OUTSIDE DIRECTOR INCENTIVE COMPENSATION PLAN
1. PURPOSE OF THE PLAN
The purpose of this Stock Option Plan ("Plan"), to be known as the
Interchange Financial Services Corporation Outside Director Incentive
Compensation Plan, is to attract qualified personnel to accept positions of
responsibility as outside directors with Interchange Financial Services
Corporation, a New Jersey Corporation ("Company"), and to provide incentives for
persons to remain on the Board of the Company as outside directors.
2. DEFINITIONS
(a) "Board" shall mean the Board of Directors of the Company.
(b) "Change of Control" shall mean any of the following events: (i) when
any person (as such term is used in Section 13(d) and 14(d)(2)
of the Securities Exchange Act of 1934), other than an affiliate of
the Company or an employee benefit plan established or maintained by
the Company, is or becomes the beneficial owner (as defined in Rule
13d-3 of the Exchange Act), directly or indirectly, of securities of
the Company representing more than twenty percent(20%) of the
combined voting power of the Company's then outstanding securities,
(ii) if during any period of two (2) consecutive years, individuals
who at the beginning of such period constitute the Board (the
"Initial Directors") cease for any reason to constitute at least
seventy-five percent (75%) of the number of directors at the end of
such period; provided that any individual whose election to the
Board during such period was approved by a vote of at least two-
thirds of the Initial Directors then in office shall himself be
considered an Initial Director, or (iii) upon the approval by the
Company's stockholders of (A) a merger or consolidation (other than
a merger or consolidation in which there is a definitive agreement
which provides that at least a majority of the directors of the
surviving or resulting corporation immediately after the
transaction are Initial Directors), (B) a sale or disposition
of all or substantially all of the Company's assets or (C) a plan
of liquidation or dissolution of the Company.
(c) "Common Stock" shall mean the Company's common stock, no par value, or
if, pursuant to the adjustment provisions of Section 14 hereof,
another security is substituted for the Common Stock, such other
security.
(d) "Effective Date" shall mean April 27, 2000, the date on which the Plan
is approved by the shareholders of the Company.
(e) "Grant Date" shall mean the date on which an Option is granted.
(f) "Option" shall mean the right, granted pursuant to Section 6 of the
Plan, to purchase one or more shares of Common Stock.
(g) "Optionee" shall mean a person to whom an Option has been granted
under the Plan.
(h) "Outside Director" shall mean any member of the Board who shall
not have served as a full-time employee of the Company or any of
the Company's subsidiaries at any time during the prior twelve
month period (determined as of the applicable date or dates during
the term of the Plan).
3. STOCK SUBJECT TO THE PLAN
There will be reserved for use upon the exercise of Options granted from
time to time under the Plan an aggregate of 100,000 shares of Common Stock,
subject to adjustment as provided in Section 13 hereof. The Board shall
determine from time to time whether all or part of such 100,000 shares shall
15
<PAGE>
be authorized but unissued shares of Common Stock or issued shares of Common
Stock which shall have been reacquired by the Company and which are held in its
treasury. If any Option granted under the Plan should expire or terminate for
any reason without having been exercised in full, the unpurchased shares shall
become available for the grant of Options under the Plan.
4. ELIGIBILITY
The only persons who shall be eligible to receive Options under the Plan
shall be Outside Directors.
5. TERM
No Option shall be granted under the Plan more than ten years after the
Effective Date.
6. ADMINISTRATION
This Plan shall be administered by the Compensation Committee of the Board.
The Compensation Committee of the Board shall also have full authority and
discretion to adopt and revise such rules and procedures as it shall deem
necessary for the administration of this Plan and compliance with applicable
law. The Compensation Committee of the Board's interpretation and construction
of any provisions of this Plan or any option granted hereunder shall be final,
conclusive, and binding.
7. GRANT
Effective as of the date of first meeting the eligibility criteria set
forth in Section 4 above, or in the event that a member of the Board satisfies
such criteria as of the Effective Date of this Plan, then effective as of such
Effective Date (either date being referred to herein as the initial "Grant
Date"), each Outside Director shall be granted 1,000 Options, with each Option
representing the right to purchase, upon exercise, one share of Common Stock.
Provided that a person continues to meet the eligibility criteria (determined as
such future date or dates), on the first anniversary date of the initial Grant
Date, and each anniversary date thereafter (each such date being considered an
additional "Grant Date"), such Outside Director shall be granted 1,000
additional Options, with each such Option representing the right to purchase,
upon exercise, one share of Common Stock.
8. OPTION PRICE
The price at which shares of Common Stock shall be purchased upon exercise
of an Option shall be equal to the closing 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.
9. VESTING AND EXERCISE OF OPTIONS
Unless the exercise date of an Option is accelerated pursuant to Section 15
hereof, each Option shall be exercisable in accordance with a standard three (3)
year vesting schedule (at 33% per year) from the applicable Grant Date, with
each such vesting period ending on an anniversary of the Grant Date; provided,
however that any portion of the Option once vested may be exercised until the
expiration or termination of the Option unless the exercise date of the Option
is accelerated pursuant to Section 15 hereof. Each Option shall cease to be
exercisable 10 years after the date on which it is granted except as otherwise
provided in Section 15 hereof.
10. SATURDAY, SUNDAY OR HOLIDAY
In the event that the time for the performance of any action or the giving
or any notice is called for under the Plan within a period of time which ends or
falls on a Saturday, Sunday or legal holiday, such period shall be deemed to and
or fall on the next date following such Saturday, Sunday or legal holiday which
is not a Saturday, Sunday or legal holiday.
16
<PAGE>
11. METHOD AND ORDER OF EXERCISE
To the extent permitted by Section 9 hereof, Optionees may exercise their
Options from time to time by giving written notice to the Company; provided,
however, that at any time when an Optionee (or other person entitled to exercise
the Option) desires to exercise any vested Options, he or she shall be required
to exercise the Options in the inverse order of purchase price (that is, the
Optionee shall be required to exercise the vested Options with the highest
purchase price first, followed by those with the next highest purchase price,
etc.). The date of exercise shall be the date on which the company receives such
notice. Such notice shall be on a form furnished by the Company and shall state
the number of shares to be purchased and the desired closing date, which date
shall be at least fifteen days after the giving of such notice, unless an
earlier date shall have been mutually agreed upon. At the closing, the Company
shall deliver to the Optionee (or other person entitled to exercise the Option)
at the principal office of the Company, or such other place as shall be mutually
acceptable, a certificate or certificates for such shares against payment in
full of the Option price for the number of shares to be delivered, such payment
to be by (i) cash, (ii) a certified or bank cashier's check or (iii)
surrendering shares of Common Stock of the Company (including shares being
purchased by exercising the Option) to the Company having a market value equal
to the amount due, or (iv) other consideration as permitted under applicable law
and regulations. If the Optionee (or other person entitled to exercise the
option) shall fail to accept delivery of and pay for all or any part of the
shares specified in his notice when the Company shall tender such shares to him,
his right to exercise the Option with respect to such unpurchased shares may be
terminated.
12. NON-QUALIFIED STOCK OPTIONS
All options granted under the Plan shall be Non-Qualified Stock Options not
entitled to special tax treatment under the Code, as amended to date and as may
be amended from time to time.
13. TERMINATION OF BOARD STATUS
In the event that an Optionee ceases to serve on the Board for any reason
other than cause, death, disability or resignation, such Optionee's Options
shall automatically terminate three months after the date on which such service
terminates, but in any event not later than the date on which such options would
terminate pursuant to Section 9 hereof. In the event that an Optionee resigns or
is removed from the Board by means of a resolution which recites that the
Optionee is being removed solely for cause, such Optionee's options shall
automatically terminate on the date such resignation or removal is effective. In
the event that an Optionee ceases to serve on the Board by reason of death or
disability, an Option exercisable by him shall terminate on the year after the
date of death or disability of the Optionee, but in any event not later than the
date on which such Options would terminate pursuant to Section 9 hereof. During
such time after death, an Option may only be exercised by the Optionee's
personal representative, executor or administrator, as the case may be. No
exercise permitted by this Section 13 shall entitle an Optionee or his personal
representative, executor or administrator to exercise any portion of any Option
beyond the extent to which such Option is exercisable pursuant to Section 9
hereof on the date such Optionee ceases to serve on the Board.
14. EFFECT OF RECAPITALIZATION
In the event that, by reason of a stock dividend, recapitalization,
reorganization, merger, consolidation, reclassification, stock split-up,
combination or shares, exchange of shares, or comparable transaction occurring
on a date subsequent to the Effective Date of the Plan, the outstanding shares
of Common Stock of the Company are hereafter increased or decreased, or changed
into or exchanged for a different number of kind of shares or other securities
of the Company or of any other corporation, then appropriate adjustments shall
be made by the Board to the number and kind of shares reserved for issuance
under the Plan and upon the grant and exercise of Options. In addition, the
Board shall make appropriate adjustments to the number and kind of shares
subject to outstanding Options, and the
17
<PAGE>
purchase price per share under outstanding Options shall be appropriately
adjusted consistent with such change. In no event shall fractional shares be
issued or issuable pursuant to any adjustment made under this Section 14. The
determination of the Board as to any such adjustment shall be final and
conclusive.
15. ACCELERATION; EXERCISE
Notwithstanding anything to the contrary set forth in the Plan, in the
event of a Change of Control, then all Options granted under this Plan shall be
fully exercisable upon the occurrence of the Change of Control.
16. OPTION GRANT
Each grant of an Option under the Plan will be evidenced by a document in
such form as the Board may from time to time approve. Such document will contain
such provisions as the Board may in its discretion deem advisable, including
without limitation additional restrictions or conditions upon the exercise of an
Option, provided that such provisions are not inconsistent with any of the
provisions of the Plan. The Board may require an Optionee, as a condition to the
grant or exercise of an Option or the issuance or delivery of shares upon the
exercise of an Option or the payment therefor, to make such representations and
warranties and to execute and deliver such notices of exercise and other
documents as the Board may deem consistent with the Plan or the terms and
conditions of the option agreement. Not in limitation of any of the foregoing,
in any such case referred to in the preceding sentence the Board may also
require the Optionee to execute and deliver such documents (including any
appropriate investment letter described in Section 17) as the Board or counsel
to the Company shall deem necessary or advisable to comply with any exemption
from registration under the Securities Act of 1933, as amended, any applicable
State securities laws, and any other applicable law, regulation or rule.
17. INVESTMENT LETTER
If required by the Board, each Optionee shall agree to execute a statement
directed to the Company, upon each and every exercise by such Optionee of any
Options, that shares issued thereby are being acquired for investment purposes
only and not with a view to the redistribution thereof, and containing an
agreement that such shares will not be sold or transferred unless either (1)
registered under the Securities Act of 1933, as amended, and all applicable
state securities laws or (2) exempt from such registration in the opinion of
Company counsel. If required by the Board, certificates representing shares of
Common Stock issued upon exercise of options shall bear a restrictive legend
summarizing the restrictions on transferability applicable thereto.
18. REQUIREMENTS OF LAW
The granting of Options, the issuance of shares upon the exercise of an
Option, and the delivery of shares upon the payment therefor shall be subject to
compliance with all applicable laws, rules, and regulations. Without limiting
the generality of the foregoing, the Company shall not be obligated to sell,
issue or deliver any shares unless all required approvals from governmental
authorities and stock exchanges shall have been obtained and all applicable
requirements of governmental authorities and stock exchanges shall have been
complied with.
19. TAX WITHHOLDING
The Company, as and when appropriate, shall have the right to require each
Optionee purchasing or receiving shares of Common Stock under the Plan to pay
any federal, state, or local taxes required by law to be withheld.
18
<PAGE>
20. NONASSIGNABILITY
No Option shall be assignable or transferable by an optionee except by will
or the laws of descent and distribution or pursuant to a qualified domestic
relations order as defined by the Internal Revenue Code of 1986, as amended (the
"Code") or Title I of the Employee Retirement Income Security Act ("ERISA") or
the rules thereunder, in which event the terms of this Plan, including all
restrictions and limitations set forth herein, shall continue to apply to the
transferee. Except as otherwise provided in the immediately preceding sentence,
during an optionee's lifetime, no person other than the Optionee may exercise
his or her Options.
21. OPTIONEE'S RIGHTS AS SHAREHOLDER AND BOARD MEMBER
An Optionee shall have no rights as a shareholder of the Company with
respect to any shares subject to an Option until the shares purchased upon
exercise of the Option have been duly issued and registered in the name of the
Optionee. Nothing in the Plan shall be deemed to give an Optionee any right to a
continued position on the Board nor shall it be deemed to give any person any
other right not specifically and expressly provided in the Plan.
22. TERMINATION AND AMENDMENT
The Board may at any time terminate or amend the Plan as it may deem
advisable, except that (i) the provisions of this Plan relating to the amount of
shares covered by Options, the exercise price of Options or the timing of Option
grants or exercises shall not be amended more than once every six months, other
than to comport with changes in the Code, ERISA or the rules thereunder, and
(ii) no such termination or amendment shall adversely affect any Optionee with
respect to any right which has accrued under the Plan in regard to any Option
granted prior to such termination or amendment. By accepting any Option under
the Plan, each Outside Director acknowledges the right of the Board to terminate
or amend the Plan subject to the conditions set forth above.
23. EFFECTIVE DATE
Notwithstanding Board approval of the Plan, no Options may be granted or
exercised prior to the Effective Date. Any Options granted or exercised prior to
such date shall be void and have no force or effect.
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<PAGE>
(Front)
PROXY INTERCHANGE FINANCIAL SERVICES CORPORATION
Park 80 West, Plaza Two, Saddle Brook, New Jersey 07663
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Jeremiah F. O'Connor, Benjamin Rosenzweig
and Robert P. Rittereiser 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 March 27, 2000, at the annual
meeting of stockholders to be held April 27, 2000, 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, James E. Healey, Jeremiah F. O'Connor
and Robert P. Rittereiser
(INSTRUCTION: To withhold authority to vote for an individual nominee write that
nominee's name in the space provided below.)
- --------------------------------------------------------------------------------
(Back)
(Continued from other side)
2. PROPOSAL TO APPROVE THE OUTSIDE DIRECTOR INCENTIVE COMPENSATION PLAN
|_| FOR |_| AGAINST |_| ABSTAIN
3. RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
|_| FOR |_| AGAINST |_| ABSTAIN
4. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting.
<PAGE>
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 Proposals 1, 2 and 3.
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:_________________________________,2000
Signature___________________________________
Signature if held jointly___________________
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING ENCLOSED
ENVELOPE.
