REVOCABLE PROXY
FEDERAL TRUST CORPORATION
1211 ORANGE AVENUE
WINTER PARK, FLORIDA 32789
This Proxy is solicited on behalf of the Board of Directors of Federal
Trust Corporation("Federal Trust") who will serve as the Proxy Committee for the
Annual Meeting of Shareholders ("Annual Meeting").
This Proxy is solicited on behalf of the Board of Directors of Federal
Trust Corporation ("Company") who will serve as the Proxy Committee for the 1999
Annual Meeting of Shareholders ("Annual Meeting").
The undersigned shareholder of the Company hereby appoints the Proxy
Committee with the full power of substitution to represent and to vote, as
designated below, all the shares of the Company held of record by the
undersigned on March 25, 1999, at the Annual Meeting to be held at 10:00 a.m.,
Eastern Time, on May 28, 1999 at the Farmers' Market, 200 West New England
Street, Winter Park, Florida, or at any adjournment thereof.
The undersigned shareholder of the Company may revoke this Proxy at any
time before it is voted by either filing with the Secretary of the Company a
written notice of revocation, delivering to the Company a duly executed Proxy
bearing a later date, or by attending this Annual Meeting and voting in person.
PLEASE VOTE, SIGN AND DATE ON REVERSE SIDE
<PAGE>
THE BOARD OF DIRECTORS RECOMMENDS A
VOTE "FOR" PROPOSALS I, II, III, IV, V AND VI.
I. Election of five (5) directors of the FOR AGAINST ABSTAIN
Company, James V. Suskiewich, Aubrey H. [ ] [ ] [ ]
Wright, George W. Foster, Dr. Samuel C. Certo
and Kenneth W. Hill, each for a one-year
term;
II. Ratification of the selection of KPMG Peat FOR AGAINST ABSTAIN
Marwick LLP as the independent auditors of [ ] [ ] [ ]
the Company for the fiscal year ending
December 31, 1999;
III. Approval of an amendment to the Company's FOR AGAINST ABSTAIN
Amended and Restated Articles of [ ] [ ] [ ]
Incorporation to require a 66% vote of
stockholders to amend certain Articles;
IV. Approval of an amendment to the Company's FOR AGAINST ABSTAIN
Amended and Restated Articles of [ ] [ ] [ ]
Incorporation to provide for a Classified
Board with staggered terms;
V. Approval of an amendment to the Company's FOR AGAINST ABSTAIN
Amended and Restated Articles of [ ] [ ] [ ]
Incorporation to require a super-majority
vote of stockholders to approve a business
combination or a control share acquisition;
and
VI. A proposal that would allow the adjournment FOR AGAINST ABSTAIN
of the Annual Meeting to solicit additional [ ] [ ] [ ]
proxies in the event that there are not
sufficient votes to approve any one or more
of the proposals.
NOTE:
- -----
This Proxy is revocable and when properly executed will be voted in the manner
directed by the undersigned shareholder. UNLESS CONTRARY DIRECTION IS GIVEN,
THIS PROXY WILL BE VOTED "FOR" THE PROPOSALS. If any other business is presented
at such meeting, this Proxy will be voted by the Proxy Committee in its best
judgment. At the present time the Board of Directors knows of no other business
to be presented at the Annual Meeting.
IMPORTANT:
- ----------
Please sign your name exactly as it appears on this Proxy Card. When shares are
held by joint tenants, both should sign. When signing as attorney, executor,
administrator, agent, trustee or guardian, please give full title. If
shareholder is a corporation, please sign in full corporate name by the
president or other authorized officer. If shareholder is a partnership, please
sign in partnership name by an authorized person.
The undersigned acknowledges receipt from the Company, prior
to the execution of the Proxy, a Notice of the Annual Meeting and a Proxy
Statement dated April ___, 1998.
x_____________________________
Signature
x_____________________________
Signature if held jointly
Date:_____________________________
Please mark, sign, date and return this Proxy Card promptly, using the enclosed
envelope.
NOTE: IF YOU RECEIVE MORE THAN ONE PROXY CARD, PLEASE SIGN AND RETURN ALL CARDS
IN THE ACCOMPANYING ENVELOPE.
<PAGE>
[FEDERAL TRUST CORPORATION]
LETTERHEAD
April ___, 1999
Dear Shareholder:
The 1999 Annual Meeting of Shareholders Federal Trust Corporation
("Federal Trust "or "Company") is being held on May 28, 1999 at 10:00 a.m. at
the Farmers' Market, 200 West New England Street, Winter Park, Florida. As
stated in the enclosed Notice of the Annual Meeting and Proxy Statement dated
April ___, 1999, there are six items which you are being asked to consider and
vote on:
- The election of five directors each for a one
year term;
- The ratification of the appointment of the
independent auditors for Federal Trust for the
year ending December 31, 1999;
- The approval of an amendment to the Company's
Amended and Restated Articles of Incorporation to
require a 66% vote of stockholders to amend
certain Articles;
- The approval of an amendment to the Company's
Amended and Restated Articles of Incorporation to
provide for a Classified Board with staggered
terms;
- The approval of an amendment to the Company's
Amended and Restated Articles of Incorporation to
require a super-majority vote to approve a
business combination or a control share
acquisition;
- A proposal that would allow us to adjourn the
Annual Meeting to continue to solicit proxies to
obtain the necessary votes if we have not
received sufficient proxies to approve one of the
above proposals.
At the Annual Meeting we will also go over some of management's thoughts
for the upcoming year. Members of the Board of Directors will be present to
greet you, along with our Executive Officers and employees.We hope you are able
to make plans to attend the Annual Meeting.
YOUR VOTE IS IMPORTANT. In order to assist us with the tabulation of the
proxies, we would ask that you mark your vote for each of the proposals and
return the enclosed proxy card in the envelope provided, as soon as possible.
On behalf of the Board of Directors and all the employees of Federal Trust,
we look forward to seeing you at the Annual Meeting.
Sincerely,
James V. Suskiewich
Chairman of the Board
<PAGE>
FEDERAL TRUST CORPORATION
------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 28, 1999
-------------------------
OUR SHAREHOLDERS:
NOTICE IS HEREBY GIVEN that the 1999 Annual Meeting of Shareholders ("Annual
Meeting") of Federal Trust Corporation ("Company") will be held at the Farmers'
Market, 200 West New England Street, Winter Park, Florida on Friday, May 28,
1999 at 10:00 a.m. Eastern Time to consider and vote upon the following matters:
Proposal I. Election of five (5) directors of the Company, James V.
Suskiewich, Aubrey H. Wright, George W. Foster, Dr. Samuel C. Certo and
Kenneth W. Hill, each for a one-year term;
Proposal II. Ratification of the selection of KPMG Peat Marwick LLP as
the independent auditors of the Company for the fiscal year ending
December 31, 1999;
Proposal III. Approval of an amendment to the Company's Amended and
Restated Articles of Incorporation to require a 66% vote of
stockholders to amend certain Articles;
Proposal IV. Approval of an amendment to the Company's Amended and
Restated Articles of Incorporation to provide for a Classified Board
with staggered terms;
Proposal V. Approval of an amendment to the Company's Amended and
Restated Articles of Incorporation to require a super-majority vote of
stockholders to approve a business combination or a control share
acquisition; and
Proposal VI. A proposal that would allow the adjournment of the Annual
Meeting to solicit additional proxies in the event that there are not
sufficient votes to approve any one or more of the proposals.
Information relating to the above matters is set forth in the attached
Proxy Statement. Only those shareholders who were shareholders of record at the
close of business on March 25, 1999, are entitled to receive notice of and to
vote at the Annual Meeting, or at any adjournments thereof.
Shareholders are cordially invited to attend the Annual Meeting in person,
but we urge you to complete, sign, and date the enclosed proxy and return it in
the envelope provided as promptly as possible.
By Order of the Board of Directors
JAMES V. SUSKIEWICH
Chairman of the Board
Winter Park, Florida
April __, 1999
<PAGE>
PROXY STATEMENT
FOR
FEDERAL TRUST CORPORATION'S
1999 ANNUAL MEETING OF SHAREHOLDERS
General
This Proxy Statement and accompanying Proxy Card are being furnished to
shareholders of Federal Trust Corporation ("Federal Trust" or "Company"), the
parent company of Federal Trust Bank, in connection with the solicitation by the
Board of Directors of proxies to be used at the 1999 Annual Meeting of
Shareholders and at any adjournments thereof ("Annual Meeting"). The Annual
Meeting will be held on Friday, May 28, 1999, at 10:00 a.m., Eastern Time, at
the Farmers' Market, 200 West New England Street, Winter Park, Florida. The date
on which this Proxy Statement and the enclosed Proxy Card are first being sent
or given to shareholders is April ____, 1999.
The Bylaws for Federal Trust provide that a majority of shares entitled to
vote and be represented in person or by proxy at a meeting of the shareholders
constitutes a quorum. Under the Florida Business Corporation Act ("Act"),
directors are elected by a plurality of the votes cast by the shares entitled to
vote in the election at a meeting at which a quorum is present. Other matters
are approved if affirmative votes cast by the holders of the shares represented
at a meeting at which a quorum is present and entitled to vote on the subject
matter exceed votes opposing the action unless a greater number of affirmative
votes or voting by classes is required by the Act or the Company's Amended and
Restated Articles of Incorporation.
Securities Entitled to Vote
The securities that can be voted at the Annual Meeting consist of the
Company's common stock, $0.01 par value per share, with the holders of the
common stock being entitled to one vote for each share on each matter submitted
to the shareholders. Only shareholders of record as of the close of business on
March 25, 1999 (the "Record Date") will be entitled to receive notice of, and to
vote at, the Annual Meeting. On the Record Date, there were 4,941,547 shares of
common stock outstanding, and no other classes of capital stock outstanding.
Voting Procedures
Regardless of the number of shares of common stock that you may own, it is
important that all shareholders be represented by Proxy or in person at the
Annual Meeting. We would ask that you complete the enclosed Proxy Card and
return it signed and dated in the enclosed prepaid envelope. Please remember to
indicate the way you wish to vote in the box or space provided on the Proxy
Card. Proxies solicited by the Board of Directors of the Company will be voted
in accordance with the directions given. Where no instructions are indicated,
proxies will be voted:
"FOR" the director nominees;
"FOR" the ratification of KPMG Peat Marwick LLP as the Company's auditors
for the fiscal year ending December 31, 1999;
1
<PAGE>
"FOR" an amendment to the Company's Amended and Restated Articles of
Incorporation to require a 66% vote to amend certain Articles;
"FOR" an amendment to the Company's Amended and Restated Articles of
Incorporation to provide for a Classified Board with staggered terms;
"FOR" an amendment to the Company's Amended and Restated Articles of
Incorporation to require a super-majority vote to approve a business
combination or a control share acquisition; and
"FOR" the adjournment of the Annual Meeting to solicit additional proxies
in the event that there are not sufficient votes to approve any one or
more of the foregoing proposals.
If your shares are held in street name, your brokerage firm may under
certain circumstances, vote your shares. Brokerage firms have authority under
New York Stock Exchange rules to vote customers' unvoted shares on certain
"routine" matters, including election of directors. The non-routine matters
being considered at this Annual Meeting are Proposals 3, 4 and 5. If you do not
vote your proxy, your brokerage firm may either:
- vote your shares on routine matters, or
- leave your shares unvoted.
We encourage you to provide instructions to your brokerage firm for voting
your proxy. This ensures your shares will be voted at the Annual Meeting.
When a brokerage firm votes its customers' unvoted shares on routine
matters, these shares are counted for purposes of establishing a quorum to
conduct business at the meeting. A brokerage firm cannot vote customer shares on
non-routine matters. Accordingly, these shares are considered not entitled to
vote on non-routine matters, rather than as a vote against the matter.
We do not know of any other matters that will be presented for
consideration at the Annual Meeting. Execution of a proxy, however, confers on
the designated proxy holder discretionary authority to vote the shares in
accordance with their best judgment on other business, if any, that may properly
come before the Annual Meeting, or any adjournments thereof.
Revocation of Proxy
Your presence at this Annual Meeting will not automatically revoke your
Proxy. You may revoke a Proxy at any time prior to the polls closing at the
Annual Meeting by:
- filing a written notice of revocation with the
Company's Corporate Secretary,
- delivering a duly executed Proxy Card bearing a
later date to the Company, or
- attending the Annual Meeting and voting in person.
2
<PAGE>
Costs of Solicitation
Federal Trust will bear the entire cost of preparing, assembling, printing
and mailing this Proxy Statement, the accompanying Proxy Card and any additional
material which may be furnished to shareholders. In addition to the use of the
mails, proxies may be solicited by direct communication with certain
shareholders or their representatives, including without limitation, telephone,
telegraph or personal contact, by our officers and employees who will not be
specifically compensated for their services in this regard. We have retained
Regan & Associates, Inc., New York, New York, to aid in the solicitation of
shareholders, brokers, banks and others institutional investors for an estimated
fee of $4,000. Arrangements have been made with brokerage houses, nominees and
other custodians and fiduciaries to send proxy materials to their principals and
their reasonable expenses will be reimbursed on request.
Security Ownership of Certain Beneficial Owners
The following table contains information concerning the only person known
to Federal Trust to be the beneficial owner of more than 5% of the outstanding
shares of the Company's common stock as of the Record Date.
Name and Address
of Beneficial Owner Number of Shares Percent of Class
------------------- ---------------- ----------------
William R. Hough & Co. 492,241(1) 9.96%
100 Second Avenue South, Suite 800
St. Petersburg, Florida 33701
______________________
(1) Includes 247,641 shares owned by WRH Mortgage, Inc. and 244,600 shares
owned by William R. Hough & Co. as disclosed in the Form 4 filed with the
Securities and Exchange Commission on July 31, 1998.
PROPOSAL I
ELECTION OF DIRECTORS
The Company's Board of Directors is currently composed of five members who
stand for election annually. The nominees for this year's Annual Meeting are:
James V. Suskiewich, Aubrey H. Wright, Jr., George W. Foster, Dr. Samuel C.
Certo, and Kenneth W. Hill. These directors, upon the affirmative vote of the
shareholders, will serve as the Board of Directors of the Company for one-year
terms, or until such time their successors are duly elected.
The following table sets forth the names and ages of the nominees, a
description of their positions and offices with Federal Trust, a brief
description of their principal occupation and business experience during the
last five years, and certain other information including the number of shares of
common stock beneficially owned as of the Record Date. If any nominee is unable
to serve, the shares represented by all valid proxies will be voted for the
election of the remaining nominees and for such other person or persons as may
be recommended by the Board of Directors. At this time, we know of no reason why
a nominee might not be able to serve.
3
<PAGE>
Information Concerning Nominees
Except as otherwise indicated below, this table includes all shares of common
stock for which the director has sole voting and investment power, has shared
voting and investment power with a spouse, or holds in an IRA or other
retirement program.
James V. Suskiewich, age 51, has 85,580(1) shares of common stock
been a director of the Company 1.73% of common stock outstanding
since 1994 and is currently its
Chairman of the Board; He has also
been President and Chief Executive
Officer ("CEO") of the Company
since July 1996; President, CEO and
a director of Federal Trust Bank
since January 1993; and from 1988
to 1993, President, CEO and a
director of First Federal Savings
Bank of the Glades, Clewiston,
Florida. Mr. Suskiewich resides in
Apopka, Florida.
Aubrey H. Wright, Jr. , age 52, has 30,100 shares of common stock
been a director of the Company less than 1% of outstanding common stock
since 1995. He has been the Chief
Financial Officer of the Company
since April 1994; Senior Vice
President, CFO and a director of
Federal Trust Bank since June 1993;
and President, Chief Operating
Officer and director of Essex
Savings Bank, F.S.B. Palm Beach,
Florida from 1991 to 1993. Mr.
Wright resides in Winter Park,
Florida.
George W. Foster, age 69, is a 11,343 shares of common stock
retired banker and has been a less than 1% of outstanding common stock
director of the Company since 1997;
President and CEO of Federal Trust
Bank from 1990 through 1993; and a
director of Federal Trust Bank
since 1990. Mr. Foster Resides in
Longwood, Florida.
Dr. Samuel C. Certo, age 52, ha 25,000 shares of common stock
been a director of the Company less than 1% of the outstanding common
since 1997; and a director of stock
Federal Trust Bank since 1996. He
is the former Dean and Professor of
Management in the Crummer Graduate
School of Business at Rollins
College in Winter Park since 1986.
Dr. Certo serves as a business
consultant and has published
textbooks in the area of management
and strategic management and has
been involved in executive
education for the past 20 years.
Dr. Certo resides in Longwood,
Florida.
Kenneth W. Hill, age 65, has been a 25,000 shares of common stock
director of the Company since 1997 less than 1% of the outstanding common
and director of Federal Trust Bank stock
since 1995. Mr. Hill, from 1983
through 1995, was the Vice
President and Trust Officer of
SunBank, N.A. Orlando, Florida. Mr.
Hill resides in Orlando, Florida.
Directors and Executive Officers as 215,962 shares of common stock
a Group (6 persons) 4.37% of the outstanding common stock(2)
___________________________
(1) Includes 45,483 shares held as trustee under Federal Trust's ESOP with
respect to which Mr. Suskiewich exercises sole voting and investment power.
(2) Includes 37,000 shares owned by Louis E. Laubscher, Vice President and Chief
Loan Officer of the Company; 2,500 shares owned by Jennifer B. Brodnax, Vice
President/Operations of the Company; 6,000 shares owned by Kevin L. Kranz,
Vice President/Loan Servicing of the Company; and 6,086 shares owned by
Thomas J. Punzak, Vice President/Accounting of the Company.
- --------------------------------------------------------------------------------
The Board of Directors Recommends
That you Vote "FOR" the Directors Slate.
- --------------------------------------------------------------------------------
4
<PAGE>
Meetings, Committees and Compensation of Directors
The Board of Directors of Federal Trust conducts its business through
meetings of the full Board, the Compliance Committee, and the Nominating
Committee. During the fiscal year ended December 31, 1998, the Board of
Directors met nine times, the Compliance Committee met five times, and the
Nominating Committee met one time. Each director attended 100% of the aggregate
of all meetings of the Board of Directors and the Committees on which he served
during the fiscal year.
- Compliance Committee - was composed of George W. Foster, Chairman, Samuel
C. Certo, and Kenneth W. Hill. The purpose of the Compliance Committee
was to monitor the Company's compliance with certain regulatory issues
and requirements imposed on the Company by the Office of Thrift
Supervision and report to the Board of Directors its recommendations for
continued or improved compliance with these issues. The regulatory
restrictions were lifted in June 1998 which eliminated the need for the
Compliance Committee.
- Nominating Committee - is composed of the entire Board of Directors. The
Nominating Committee's purpose is to identify and recommend: (i) nominees
for executive officer positions of the Company and its subsidiaries to
the Board of Directors; and (ii) nominees for election to the Board of
Directors of the Company and its subsidiaries. The Nominating Committee
will consider nominees recommended by shareholders, but has not
established any formal procedures for doing so. At the February 26, 1999
meeting of the Company's Board of Directors it was determined that it was
in the Company's best interest to nominate the current Board of Directors
as the Company's Directors slate for the 1999 Annual Meeting.
[This Space Intentionally Left Blank]
5
<PAGE>
EXECUTIVE COMPENSATION
Summary Compensation Table
Compensation. The following table sets forth, for the fiscal years ended
December 31, 1998, 1997, and 1996, the total compensation paid to or accrued by
the Chief Executive Officer ("CEO") and each of the other two executive officers
of the Company and its subsidiaries, whose aggregate salaries and bonuses
exceeded $100,000 per year.
<TABLE>
Annual Compensation (1)
- --------------------------------------------------------------------------------------------------------------------------------
Name and Other Annual Restricted Stock
Principal Position (2) Year Salary Bonus (2) Directors' Fees Compensation(3) Awards(4) Options(5)
- ---------------------- ---- ------ --------- ---------------- -------------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
James V. Suskiewich, 1998 $145,807 $31,000 $13,750 $39,080 22,562 120,000
President/CEO of the Company 1997 134,441 41,000 17,000 21,446 -- --
President/CEO of 1996 137,409 11,000 13,750 14,161 -- --
Federal Trust Bank
Aubrey H. Wright, Jr. 1998 93,254 12,000 11,000 20,488 14,321 70,000
Senior Vice President/ 1997 84,808 18,500 9,500 8,291 -- --
CFO of the Company 1996 79,904 6,000 7,250 5,936 --
Senior Vice President/
CFO of Federal Trust Bank
Louis Laubscher 1998 77,053 46,505 -- 4,049 -- 30,000
Vice President/Chief Lending 1997 74,038 29,966 -- 3,908 -- --
Officer of Federal 1996 69,807 16,848 -- 4,218 -- --
Trust Bank
</TABLE>
__________________________
(1) Includes all compensation in the year earned whether received or
deferred at the election of the executive.
(2) Includes $45,505, $28,966, and $10,848 in incentive bonuses for
Mr. Laubscher based on resolutions of non-performing loans
and REO in 1998, 1997 and 1996, respectively.
(3) Includes the estimated value of:
James V. Suskiewich 1998 1997 1996
- ------------------- ------- ------- -------
Health & Life insurance premiums $ 4,244 $ 4,126 $ 4,454
Use of Company automobile 5,829 5,924 6,928
Social/Country Club Dues 4,531 5,600 2,779
Supplemental Retirement Plan 24,476 5,796 -
------- ------- -------
Total: $39,080 $21,446 $14,161
======= ======= =======
Aubrey H. Wright, Jr. 1998 1997 1996
- --------------------- ------- ------- -------
Health & Life insurance premiums $ 4,974 $ 5,477 $ 5,936
Supplemental Retirement Plan 15,514 2,814 -
------- ------- -------
Total: $20,488 $ 8,291 $ 5,936
======= ======= =======
Louis Laubscher 1998 1997 1996
- --------------- ------- ------- -------
Health & Life insurance premiums $ 4,049 $ 3,908 $ 4,218
======= ======= =======
(4) Includes value of fully vested participation in the Company's Employee
Stock Ownership Plan ("ESOP"). In 1990, the Company adopted an ESOP which
provides that the Company can make a contribution to a trust fund for the
purpose of purchasing shares of the Company's common stock on behalf of the
participants. The Company pays the entire cost of the ESOP and all salaried
employees of the Company who have completed six months of service are
eligible to participate. The ESOP is qualified under Section 497(e)(7) of
the Internal Revenue Code, under which subsidiaries may act as participating
employees. In addition, the ESOP meets all applicable requirements of the
Tax Replacement Act of 1986 and is qualified under Section 401(c) of the
Internal Revenue Code.
6
<PAGE>
(5) On January 30, 1998, the Board of Directors adopted the 1998 Key Employee
Stock Compensation Program ("Program") for the benefit of officers and
other key employees of the Company. The Program is comprised of four
parts: an Incentive Stock Option Plan, a Compensatory Stock Option Plan,
a Stock Appreciation Rights Plan, and a Performance Plan. The Program
provides for a maximum of 325,000 shares of authorized common stock to be
reserved for future issuance pursuant to stock options granted under one
of the four enumerated parts of the Program. The Program was subject to
approval by the shareholders, which was obtained at the 1998 Annual
Meeting of Shareholders. The exercise price of each option is $4.00 per
share, the fair market value of the common stock on January 30, 1998. The
closing price for the common stock on March 25, 1999 was $2.63 per share.
The stock options vest at the rate of 20% per year and a stock option may
be exercised at any time on or after six months after the date of grant
until ten years after the date of grant. Unless terminated, this Program
shall remain in effect for a period of ten years ending on the tenth
anniversary of the effective date of the Program.
Employee Stock Ownership Plan ("ESOP"). All full-time salaried employees of
the Company, and its subsidiaries are participants in the ESOP. Executive
officers of the Company are eligible to participate in the ESOP, but directors
are not eligible unless they are also full-time salaried employees. a
participant's interest in the ESOP is vested after five years of service and
there is no vesting prior to that period of time. As of December 31, 1998, ten
employees had vested interests in the ESOP. Mr. Suskiewich and Mr. Wright are
now vested in the ESOP, but Mr. Laubscher is not yet vested.
ESOP contributions by the Company are determined annually by the Board of
Directors of the Company, taking into consideration prevailing financial
conditions, the Company's fiscal requirements and other factors deemed relevant
by the Board. The Company, generally, may make contributions to the ESOP of up
to 15% of total compensation paid to employees during the year. Each
participant's contribution equals the proportion that each such participant's
compensation for the year bears to the total compensation of all participants
for such year. In 1997 and 1996, the Company contributed cash of $50,782 and
$38,000, respectively, to the ESOP. At December 31, 1998 the Company had accrued
$7,200 which was contributed as cash to the ESOP in February 1999.
Options and Long-term Compensation
1993 Stock Option Plan for Directors. On May 5, 1993, the Board of Directors
of the Federal Trust approved a Stock Option Plan for directors (the "1993
Plan"). The 1993 Plan provided that a maximum of 176,968 shares of common stock
(the "Option Shares") were to be made available to directors and former
directors of the Company. Options for all the Option Shares were issued on May
6, 1993. The options were for a term of ten years from the date of grant. The
options were issued at an exercise price of $6.40 per share determined at the
time of issuance to be the fair market value of the underlying common stock
subject to the option on the date the option was granted. Options held by an
active director were canceled immediately if such director was removed for
"cause" as defined in the 1993 Plan.
On March 7, 1997, the Board of Directors rescinded the 1993 Plan. No stock
options or stock appreciation rights were granted during the period January 1,
1997 through March 7, 1997, nor were any granted after December 31, 1997.
1998 Directors' Option Plan. On January 30, 1998, the Board of Directors
adopted a 1998 Directors' Stock Option Plan (the "1998 Plan"). The shareholders
of Federal Trust approved the 1998 Plan at the 1998 Annual Meeting of
Shareholders. The 1998 Plan authorizes the granting of non-statutory stock
options (options which do not qualify as incentive stock options).
Each non-employee director was granted an option to purchase 25,000 shares of
common stock on the Effective Date (as defined in the 1998 Plan). New directors
7
<PAGE>
elected or appointed to the Board of Directors of the Company or any
wholly-owned subsidiary may be granted options to purchase shares of common
stock, as determined by the Board of Directors in its sole discretion.
The per share exercise price at which the shares of common stock may be
purchased upon exercise of a granted option will be equal to the fair market
value of a share of common stock as of the date of grant. The exercise price for
the options that have been granted to date is $4.00 per share, the fair market
price raise of the common stock on January 30, 1998. The closing price for the
common stock on March 25, 1999, was $2.63 per share. For the purposes of the
1998 Plan, the fair market value of a share of common stock is the closing sale
price of a share of common stock on the date the option granted (or, if such day
is not a trading day on the U.S. markets, on the nearest preceding trading day),
as reported with respect to the principal market (or the composite of the
markets, if more than one), or national quotation system in which such shares
are then traded. If no such closing prices are reported, the fair market value
will be the mean between the closing high bid and low asked prices of a share of
common stock on the principal market or national quotation system then in use,
or if no such quotations are available, the price furnished by a professional
securities dealer making a market in such shares selected by the Board.
An option may be exercised at any time on or after six months after the date
of grant up until ten years after the date of grant. Unless terminated, the 1998
Plan shall remain in effect for a period of ten years, ending on the tenth
anniversary of the Effective Date.
Director Compensation
Beginning on July 1, 1998, each director of the Company receives a quarterly
fee of $750 for his service. Directors receive no per-meeting fees for either
Board meetings or any meetings of committees for which they serve as members.
Report of Board of Directors
The compensation of the Company's executive officers is determined by the
Company's Board of Directors, excluding any director who is also an executive
officer. Current directors who are not executive officers are George W. Foster,
Samuel C. Certo and Kenneth W. Hill. The Company's CEO determines the salary
range recommendations for all employees, including executives other than
himself. The CEO presents his recommendations to the Board which reviews and
analyzes all information that has been submitted. Thereafter, the Board
determines the compensation of all executive officers of the Company, including
the compensation of the CEO.
Executive Compensation Policies and Program. The Company's executive
compensation program is designed to:
- Attract and retain qualified management of the Company;
- Enhance short-term financial goals of the Company; and
- Enhance long-term shareholder value of the Company.
The Company strives to pay each executive officer the base salary that would
be paid on the open market for a fully qualified officer of that position. The
Board of Directors determines the level of base salary and any incentive bonus
plan for the CEO and certain senior executive officers of the Company and a
range for other executive officers based upon competitive norms, derived from
annual surveys published by several independent banking institutes or private
companies specializing in financial analysis of financial institutions. Such
surveys provide information regarding compensation of financial institution
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officers and employees based on size and geographic location of the financial
institution and serve as a bench mark for determining executive salaries. Actual
salary changes are based upon an evaluation of each individual's performance
based upon established objectives and specific job description objectives, as
well as the overall performance of the Company. Bonus awards are made based upon
the attainment of the Company's net income targets, the officer's
responsibilities and individual performance standards with each officer given
the opportunity to earn an annual performance bonus, generally in the range of
approximately 10-40% of his or her base salary.
Compensation of the Chief Executive Officer. The CEO of the Company does not
receive compensation from the Company, but is compensated in his position as
President and CEO of Federal Trust Bank. The Company reimburses Federal Trust
Bank for the time that the CEO spends on Company matters.
The employment contract of the former CEO of the Company was assigned to
Federal Trust Properties Corporation in June 1996. Federal Trust Properties
Corporation was sold to an unaffiliated third party on July 1, 1996 and is no
longer an affiliate of the Company.
Compensation Committee Interlocks and Insider Participation
in Compensation Decisions
James V. Suskiewich, President and CEO of the Company and President and CEO
of Federal Trust Bank, is a member of the Company's Board of Directors, Mr.
Suskiewich and participated in deliberations of the Board regarding executive
compensation, but did not participate in any deliberations regarding his own
compensation or transactions.
Employment Contracts
The Company and Federal Trust Bank have jointly entered into employment
agreements with two of their executive officers, James V. Suskiewich, President
and CEO and Aubrey H. Wright, Senior Vice President and CFO. Federal Trust Bank
has also entered into an employment agreement with Louis Laubscher, its Vice
President and Chief Loan Officer.
James V. Suskiewich. Mr. Suskiewich's employment agreement was significantly
amended and reexecuted on December 18, 1998. Pursuant to its terms, Mr.
Suskiewich is to receive a base salary, plus reimbursement of reasonable
business expenses. In addition, for any quarter in which Federal Trust Bank's
after-tax earnings are at least 0.50% of its average quarterly assets on an
annualized basis, Mr. Suskiewich is to receive a bonus equal to 3% of Federal
Trust Bank's quarterly net, pre-tax income; Mr. Suskiewich is also entitled to
discretionary performance bonuses to be paid annually for the duration of the
agreement. For the year ended December 31, 1998, Mr. Suskiewich received a bonus
of $31,000.
The original term of Mr. Suskiewich's employment agreement was three years.
Every day during the term of the agreement, the agreement automatically renews
for one additional day. Therefore, at all times, Mr. Suskiewich's agreement has
a three-year term. Any party to the agreement may cease the automatic renewals
by notifying the other parties of their intent to not renew. In addition, any
party may terminate the agreement by delivering to the other parties a notice of
termination. The date of termination is either 60 or 90 days (depending on the
reason for termination) after delivery of the notice.
Mr. Suskiewich's employment agreement provides for termination by Federal
Trust Bank or Company for reasons other than for "cause" and by Mr. Suskiewich
for "good reason," as those terms are defined in the agreement. In the event the
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employment agreement is terminated by Federal Trust Bank or Company for reasons
other than "cause" or by Mr. Suskiewich for "good reason," he shall be entitled
to severance payments. The severance payment would be in a lump sum equal to the
total annual compensation for the remainder of the term of the employment
agreement, the performance bonus due for the quarter of termination, an
annualized portion of any long term incentives to later come due, and the amount
of annual club dues for the year of termination multiplied by the amount of time
remaining on the term of his employment agreement.
In the event of a change in control of the Company or Federal Trust Bank, Mr.
Suskiewich will be entitled to a special incentive bonus equal to three times
his annual salary multiplied by the price/book value ratio at which Federal
Trust or the Bank is acquired. Furthermore, the agreement includes a "gross up"
payment clause. In the event severance payments received are subject to federal
excise taxes under Section 4999 of the Internal Revenue Code of 1986, or the
Company or Federal Trust Bank will increase Mr. Suskiewich's severance payment
so that the net proceeds from such payments will equal the amount of severance
payments due under the terms of the agreement.
The employment agreement also permits Mr. Suskiewich to terminate his
employment voluntarily. In the event of voluntary termination, except as
previously described herein, all rights and benefits under the contract shall
immediately terminate upon the effective date of such termination.
Aubrey H. Wright. Mr. Wright's employment agreement became effective on
September 1, 1995 and had an original term of three years. By September 15 of
each subsequent year, the Company and Federal Trust Bank are to review Mr.
Wright's performance to determine whether the term of the agreement should be
extended for an additional year. Under the agreement, Mr. Wright is entitled to
receive a base salary, plus reimbursement of reasonable business expenses. In
addition, for any quarter in which Federal Trust Bank meets the "Well
Capitalized" definition under federal banking regulations and its quarterly
after-tax earnings are at least 0.50% of its average quarterly assets on an
annualized basis, Mr. Wright is to receive a bonus equal to 1% of Federal Trust
Bank's quarterly net, pre-tax income. He is also entitled to discretionary
performance bonuses payable annually for the duration of the agreement. For the
year ended December 31, 1998, Mr. Wright received a bonus of $12,000.
In the event Mr. Wright's employment is terminated for reasons other than for
"just cause" or he terminates his employment for "good reason," as those terms
are defined in his employment agreement, he shall receive as a severance payment
the total annual compensation due for the remainder of the term of his
employment agreement plus any incentive bonus which he would then be entitled.
In the event of a change in control of the Company or Federal Trust Bank, Mr.
Wright will be entitled to a special incentive bonus equal to two times his
annual salary then in effect, multiplied by the price/book value ratio at which
the Company or Federal Trust Bank is acquired. However, if he accepts employment
with the acquirer, he shall instead receive a bonus of 50% of his salary then in
effect, multiplied by the price/book value ratio at which Federal Trust Bank or
the Company is acquired.
The employment agreement permits Mr. Wright to terminate his employment
voluntarily. In the event of voluntary termination, except as previously
described herein, all rights and benefits under the contract shall immediately
terminate upon the effective date of such termination.
Louis Laubscher. Mr. Laubscher's employment agreement became effective on
February 1, 1999. The agreement replaces a previous Employee Severance Agreement
between Mr. Laubscher and Federal Trust Bank. Under the terms of the employment
agreement, Mr. Laubscher is entitled to receive a base salary, plus
reimbursement of reasonable business expenses. He is also entitled to
discretionary performance bonuses payable annually for the duration of the
agreement and to participate in any bonus and incentive programs adopted by
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Federal Trust Bank. For the year ended December 31, 1998, Mr. Laubscher received
a performance bonus of $46,505.
The original term of Mr. Laubscher's employment agreement was one year. Every
day during its term, the agreement automatically renews for one additional day
so that the agreement, at all times, has a one year term. Either party to the
agreement may cease the automatic renewals by notifying the other party of their
intent to not renew. In addition, either party may terminate the agreement by
delivering the other party a notice of termination. A termination is effective
30 days after delivery of the notice.
Mr. Laubscher's employment agreement provides for termination by Federal
Trust Bank for reasons other than for "just cause," as well as by Mr. Laubscher
for "good reason," as those terms are defined in the employment agreement. In
the event his employment agreement is terminated by Federal Trust Bank for
reasons other than for "just cause" or by Mr. Laubscher for "good reason," he
would be entitled to severance payments.
In the event Federal Trust Bank terminates Mr. Laubscher's employment for
other than just cause, he will be entitled to his annual base salary and any
bonus he would have then been entitled to under the agreement. In the event of
termination due to a change in control, he will be entitled to a sum equal to
two times sum equal to his annual base salary. Mr. Laubscher will receive these
sums in semi-monthly instalments. Furthermore, for the longer of one year or the
remaining term of the agreement, Federal Trust Bank is to maintain in full force
and effect any benefit plans or programs Mr. Laubscher was entitled to
participate in at the time of his termination.
In addition, the agreement permits Mr. Laubscher to terminate his employment
voluntarily. In the event of voluntary termination, except as previously
described herein, all rights and benefits under the contract shall immediately
terminate upon the effective date of such termination.
1999 Key Employee Incentive Stock Compensation Program
The Board of Directors adopted and the shareholders of the Company approved
the 1999 Key Employee Stock Compensation Program ("Program") at the 1998 Annual
Meeting of Shareholders. The Program is for the benefit of officers and other
key employees of the Company and Federal Trust Bank. The Program is comprised of
four parts; an Incentive Stock Option Plan, a Compensatory Stock Option Plan, a
Stock Appreciation Rights Plan and a Performance Plan.
The Program provides for a maximum of 325,000 shares of authorized common
stock to be reserved for future issuance pursuant to the exercise of stock
options ("Options") granted under the Program, unless outside adjusted. Stock
appreciation rights, which enable the recipient on exercise to elect payment
wholly or partially in cash based upon increases in the market value of the
stock from the date of the grant, may also be awarded under the Program. In
addition, the Program provides the Company with the ability to award shares of
common stock to individuals based upon the attainment of specifically defined
performance objectives.
Options granted under the Program are exercisable in one or more installments
and may be exercisable on a cumulative basis, as determined by a committee
formed to administer the Program. Options granted are exercisable for a term not
longer than ten years. Options are not transferable and will terminate within a
period of time following termination of employment with the Company. In the
event of a change in control of the Company or a threatened change in control of
the Company, all Options granted before such event shall become immediately
exercisable; provided, however, that no Options shall be exercisable for a
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period of six months from the date of grant. The term "control" generally means
the acquisition of 10% or more of the voting securities of the Company by any
person or group of persons acting as a group. This provision may have the effect
of deterring hostile changes in control by increasing the costs of acquiring
control.
Options granted under the Program will be either "incentive stock options"
within the meaning of Section 422A of the Internal Revenue Code of 1986, as
amended, which are designed to result in beneficial tax treatment to the
employee but no tax deduction to the Company, or "compensatory stock options"
which do not give the employee certain benefits of the incentive stock option,
but will entitle the Company to a tax deduction when the Options are exercised.
The Option exercise price of incentive stock options may not be less than the
fair market value of common stock on the date the Option is granted.
Compensatory stock options may be exercisable at a price equal to or less than
the fair market value of a share of common stock at the time of the grant of the
Option.
A committee consisting of not less than three directors of the Company (none
of whom is a full-time officer or other salaried employee of the Company or
Federal Trust Bank) has been given authority to administer the Program and to
grant options, stock appreciation rights and share awards thereunder. The
current Program Administrators are Messrs. George W. Foster, Kenneth W. Hill and
Dr. Samuel C. Certo. The committee may make grants under the Program at its
discretion from time to time to full-time employees of the Company, including
those who are directors and officers. directors who are not full-time salaried
employees of the Company are not eligible to participate in the Program.
The following table shows the stock options granted under the Program to
certain officers and employees of the Company, as well as all executive officers
and non-executive officers, as a group. No consideration will be received by the
Company in return for the grant of the Options although consideration would be
received upon exercise of the Options. The exercise price of each Option is
$4.00 per share, the fair market value of the common stock on January 30, 1999,
based upon the "bid price" on that date. The Options granted to date are
intended to be incentive stock options. For financial reporting purposes, there
will be no charge to the income of the Company in connection with the grant or
exercise of an Option. As of March 25, 1999, the market value of the common
stock was $2.63 per share.
Number of Shares
Subject to
Name Title Options Granted
- ------------------- ----------------------------- ---------------
James V. Suskiewich President/CEO 120,000
Aubrey H. Wright Senior Vice President/CFO 70,000
Louis E. Laubscher Vice President/CLO 30,000
Jennifer B. Brodnax Vice President/Operations 15,000
Kevin L. Kranz Vice President/Loan Servicing 15,000
Thomas J. Punzak Vice President/Accounting 15,000
-------
Total 265,000
The grant of stock appreciation rights would require charges to the income of
Federal Trust based on the amount of the appreciation, if any, in the average
market price of the common stock to which the appreciation rights are related
over the option price of those shares. In the event of a decline in the market
price of the Company's common stock subsequent to a charge against earnings
related to the estimated costs of stock appreciation rights, a reversal of prior
charges is made in the amount of such decline (but not to exceed aggregate prior
increases). Share awards also require a charge to income equal to the amount of
the award when it becomes likely that the shares will be awarded, with
subsequent increases or decreases in the market price of the common stock prior
to the actual awarding of the shares treated in the same manner as stock
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appreciation rights. No stock appreciation rights or share awards have been
granted or are presently intended to be granted under the Program.
The terms of the Program may be amended by the Program Administrators except
that no amendment may increase the maximum number of shares included in the
Program, change the exercise price of incentive stock options, increase the
maximum term established for any Option, stock appreciation right or share
award, or permit any grant to a person who is not a full-time employee of the
Company.
TRANSACTIONS WITH MANAGEMENT
Indebtedness of Management
In 1994, the Board of Directors of the Company and Federal Trust Bank amended
their loan policies with regard to loans to directors, officers and employees.
The current policy is generally not to make loans to directors, officers or
employees. Any loans that are made, however, will require approval of a majority
of the disinterested directors of the Company. Federal Trust Bank is also
subject to the provisions of Section 22(h) of the Federal Reserve Act. Any
credit extended by Federal Trust Bank to directors, executive officers and, to
the extent otherwise permitted, principal shareholders, or any affiliates
thereof must be: (i) on substantially the same terms, including interest rates
and collateral, as those prevailing at the time for comparable transactions by
Federal Trust Bank with non-affiliated parties; and (ii) not involve more than
the normal risk of repayment or present other unfavorable features.
As of December 31, 1998, neither the Company nor Federal Trust Bank had any
loans outstanding to directors or executive officers. Federal Trust Bank,
however, did have $324,585.01 in commercial loans outstanding to Morrone, Smoker
and Grill, Inc., whose President, Jack L. Morrone, is the brother-in-law of the
Company's former Chairman and Chief Executive Officer. Mr. Morrone is considered
to be an "affiliate", as that term is defined by SEC regulations.
Transactions With Certain Related Persons
Effective January 1, 1990, John Martin Bell, a former director and former
major shareholder of the Company and the wife of the former Chairman of the
Board of the Company, as lessor, and the Company, as lessee, entered into a
triple net lease (the "Lease"), pursuant to which the Company leased from Mrs.
Bell 3,953 square feet of office space located at 1211 Orange Avenue, Winter
Park, Florida (the "Premises"). The term of the Lease was two years. Effective
January 1, 1991, the Lease was amended to increase the term from December 31,
1991 to December 31, 2000. The square footage leased by the Company increased to
11,393 square feet. On November 11, 1991, the Company and Ms. Bell terminated
the Lease and executed a new triple net lease (the "New Lease"), pursuant to
which the Company has leased 13,305 square feet in the Premises. The term of the
New Lease runs until December 31, 2000. The New Lease will automatically be
extended for two (2) consecutive periods of ten (10) years each, unless the
Company elects to terminate the New Lease pursuant to the notice provisions in
the New Lease prior to the expiration of the ten-year lease period. Effective
July 15, 1992, the New Lease was modified to reduce the amount of space leased
to 12,392 square feet and to decrease the annual rental by $49,510 to $240,686.
Effective June 6, 1994, the New Lease was modified to decrease the annual rent
for the years 1993 and 1994 to $216,984 and $223,552, respectively. Effective
June 1, 1995, the New Lease was further modified to increase the amount of space
leased to 13,305 square feet. The rent for 1996 through the end of the New Lease
term will be the preceding year's rent increased by the Consumer Price Index
Escalation, provided however, that in no event shall the rent increase be less
than 3% or more than 6%. The Company believes that the terms of this transaction
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were no less favorable to the Company than transactions obtainable from
unaffiliated parties. When a transaction involves the Company and an officer,
director, principal shareholder or affiliate, the policy of the Company is that
the transaction must be on terms no less favorable to the Company than could be
obtained from an unaffiliated party. Any such transactions must be approved in
advance by a majority of independent and disinterested directors.
PROPOSAL II
RATIFICATION OF APPOINTMENT OF THE INDEPENDENT AUDITORS
The Board of Directors has appointed KPMG Peat Marwick LLP, as the Company's
independent auditor to audit the accounts of the Company and Federal Trust Bank
for the 1999 fiscal year. KPMG Peat Marwick LLP, has served as the Company's
independent auditor since the fiscal year ending December 31, 1990, and during
this period has been engaged by Federal Trust to provide certain tax and
consultant services. KPMG Peat Marwick LLP, plans to have a representative
present at the Annual Meeting who will have the opportunity to make a statement
if he or she desires to do so and is expected to respond to shareholders'
questions regarding the Company's financial statements. The Board of Directors
recommends that the shareholders vote for approval of the appointment of KPMG
Peat Marwick LLP, as the independent accountants for the 1999 fiscal year. If
the appointment is not approved, the Board will select other independent
accountants.
Approval of the appointment requires the affirmative vote of a majority of
the votes cast by the holders of shares of the Company's common stock present in
person or represented by proxy at the Annual Meeting, provided that a quorum is
present.
- --------------------------------------------------------------------------------
The Board of Directors Recommends
That you vote "FOR" ratification of the selection of KPMG Peat Marwick LLP
as independent auditors of the Company for the fiscal year ending
December 31, 1999.
- --------------------------------------------------------------------------------
[This Space Intentionally Left Blank]
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PROPOSALS III, IV and V:
PROPOSED AMENDMENTS TO
ARTICLES OF INCORPORATION
General
Proposals III, IV and V contain three separate proposed amendments to the
Company's Amended and Restated Articles of Incorporation. The proposed
amendments have been unanimously approved by the Board of Directors and may be
considered to be anti-takeover in nature. The amendments are being presented to
shareholders in three separate proposals. The amendments would: (i) revise
Article VIII of the current Articles of Incorporation to require the vote of at
least 66% of the Company's outstanding shares of common stock to amend certain
Articles in the Amended and Restated Articles of Incorporation; (ii) revise
Article I to provide for a Classified Board; and (iii) add one new Article
(Article IX) to the Amended and Restated Articles of Incorporation.
Reasons for the Proposed Amendments
The number of announcements of takeover offers for publicly owned
corporations in recent years continues to grow. Some of these offers have been
structured so that the acquirer is able to quickly acquire a block of shares
sufficient to permit the exercise of voting control over the target company.
Once control is acquired, the purchaser can then proceed to acquire the
remaining stock from shareholders on terms more advantageous to the acquirer
than might otherwise be possible. Although such takeovers may have benefits to
shareholders of the acquired company, both to those who tender (insofar as they
might be paid a premium over market value for their shares or might be offered
shares in another company more attractive to them) and to those who do not, such
tender offers may be detrimental because, among other things, (i) the suddenness
and short duration of an offer may leave insufficient time to evaluate the
merits of the offer in comparison with other alternatives, and (ii) the terms of
an ensuing merger or other changes offered by those newly in control may be less
favorable to the remaining stockholders than is warranted. The objectives of the
anti-takeover provisions in the proposed Amendments to the Amended and Restated
Articles of Incorporation are to deter such a sudden and surprise takeover
attempt and to try to assure equal treatment for the Company's shareholders in
the event of any sudden and surprise tender or exchange offer for the Company's
securities or similar surprise acquisition offer. The Board of Directors
believes that this is desirable, although they recognize that such provisions
could have the effect of making it more difficult to acquire control of Federal
Trust by a person who has acquired a large block of securities or otherwise, or
a change of management, even if this action might be viewed by holders of a
majority of the Company's securities to be in their interest.
Federal Trust is a unitary savings and loan holding company and is governed
by the Home Owners Loan Act ("HOLA"). Under HOLA, a takeover attempt by a
company or person would require approval of the Officer of Thrift Supervision.
The Board of Directors has no knowledge of any such proposed tender offer or any
reason to believe that a tender offer will be made.
The Reigle-Neal Interstate Banking and Efficiency Act of 1994 and recent
changes to Florida law have lifted restrictions which now allow large money
center bank holding companies to acquire companies such as Federal Trust.
Despite the protection afforded to shareholders by HOLA, federal securities laws
and regulations and Florida law, it is the opinion of the Board of Directors
that these protections may be insufficient to ensure that all shareholders would
be treated equally in the event of a takeover. The shareholder who chooses not
to tender shares because he or she considers the offer inadequate, or who has a
portion of his or her shares returned because the tender offeror purchases fewer
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shares than are tendered, may find himself or herself at a disadvantage. The
trading market for the Company's shares would most likely contract, which could
lead to removal of the quotation for the Company's shares from NASDAQ, a
quotation system of the National Association of Securities Dealers, Inc. Because
the opportunity for smaller shareholders to exert any meaningful influence over
a company is eliminated where a single person, a small group of persons or
another corporation owns a majority of the voting shares, the number of
interested buyers of the common stock would probably be reduced. All of these
factors can reduce the value and marketability of the stock. Faced with these
risks, a shareholder may be compelled to tender shares even though such
shareholder considers the offer inadequate.
PROPOSAL III
AMENDMENT TO THE ARTICLES OF INCORPORATION
TO REQUIRE A SUPER-MAJORITY VOTE
TO AMEND CERTAIN ARTICLES OF THE ARTICLES OF INCORPORATION
This proposed amendment to Article VIII, the full text of which,
incorporating the proposed amendment, is set forth below, provides that all of
the amendments proposed in this Proxy Statement, as well as Articles VI and
VIII, may be amended, changed or repealed only by a vote of not less than 66% of
all outstanding shares of common stock of the Company at a shareholders'
meeting. At the present time, the Company's Amend and Restated Articles of
Incorporation provide that the Articles may be amended by a majority vote of all
shares of all outstanding common stock. The adoption of this amendment to
Article VIII may thus make it more difficult for shareholders to amend, change
or repeal the herein proposed Articles and Articles VI and VIII. The purpose of
the proposed amendment to Article VIII is to ensure that the proposed Articles,
if they are adopted, and Articles VI and VIII, can not be repealed by a vote of
a simple majority of the outstanding voting shares.
ARTICLE VIII INCLUDING THE PROPOSED AMENDMENT
The Corporation reserves the right to amend or repeal any provision contained
in these Articles of Incorporation in the manner prescribed by the laws of the
State of Florida and all rights conferred upon stockholders are granted subject
to this reservation; provided, however, that, notwithstanding any other
provision of these Amended and Restated Articles of Incorporation or any
provision of law which might otherwise permit a lesser vote or no vote, but in
addition to any vote of the holders of any class or series of the stock of this
Corporation required by law or by these Articles of Incorporation, the
affirmative vote of the holders of a majority of the voting power of all of the
then outstanding shares of the capital stock of the Corporation entitled to vote
generally in the election of directors, voting together as a single class, shall
be required to amend or repeal any provision of these Amended and Restated
Articles of Incorporation.
The foregoing paragraph notwithstanding, any specific Article of these
Amended and Restated Articles of Incorporation ratified by the stockholders of
the Corporation at the 1999 Annual Meeting and Articles VI and VIII may only be
amended or repealed by the affirmative vote of the holders of not less than 66%
of the voting power of all of the then outstanding shares of the capital stock
of the Corporation entitled to vote generally in the election of directors,
voting together as a single class.
- --------------------------------------------------------------------------------
The Board of Directors Recommends
That you vote "FOR" the adoption of an Amendment to Article VIII which would
require a super-majority vote to amend certain Articles of the Articles of
Incorporation.
- --------------------------------------------------------------------------------
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PROPOSAL IV
AMENDMENT TO THE ARTICLES OF INCORPORATION
TO PROVIDE FOR BOARD CLASSIFICATION AND STAGGERED TERMS
To enhance the continuity and stability of the Board of Directors and the
policies they formulate, the Board has unanimously approved and is proposing an
amendment to the Amended and Restated Articles of Incorporation, to provide for
classification of the Board of Directors (the "Board Classification Amendment").
The Board Classification Amendment will divide the Board of Directors into three
classes, as nearly equal in number as possible. Furthermore, this Proposal IV
provides for the nullification of the election of directors under Proposal I
herein and provides for the election of one director to a one-year term (Class
I), two directors to two-year terms (Class II) and two directors to three-year
terms (Class III). After this transitional arrangement, all directors will serve
for three years, with one class being elected each year. The Board
Classification Amendment will replace Article I, Section 1 of the Amended and
Restated Articles of Incorporation. The complete text of the proposed Article I,
Section 1 is stated below.
Rather than elect the entire Board annually, the Board of Directors believes
that the Board Classification Amendment is desirable to help ensure stability
and continuity in the management of the Company's business and affairs. Although
there have been no problems with respect to stability or continuity of the Board
of Directors in the past, the Board believes that the longer time required to
elect a majority of a classified board will help to prevent the occurrence of
such problems in the future. The Board of Directors also believes that the
proposed amendment is desirable to help discourage hostile attempts to take
control of the Company.
Potential Effects of the Provision
The provision for classification of directors will apply in all years, even
when no takeover or proxy contest is being proposed or when no change in control
has occurred. Change in the composition of the whole Board would take up to
three years and the change of a majority of the directors would require two
successive annual meetings. The Board Classification Amendment, therefore, could
make more difficult or discourage a merger, tender offer, proxy contest or the
assumption of control by a holder of a substantial block of the Company's stock
or the removal of the incumbent Board, irrespective of whether such action might
be perceived by shareholders holding a majority of the voting power to be
beneficial to the Company and its shareholders. The Board Classification
Amendment could also discourage a third party from acquiring a substantial block
of stock in the first instance, with a view to a subsequent bid for control of
the Company, irrespective of whether an initial acquisition might be viewed as
beneficial to the Company and its shareholders. Thus, shareholders might not
have the opportunity to dispose of their shares at a price which may be
substantially higher than the prevailing market price. To the extent that the
Board Classification Amendment delays a change in control of the Board, the
position of current management may be strengthened, thereby assisting management
personnel in retaining their positions, even when the only reason for the change
is the performance of the directors.
The Board of Directors of the Company has carefully considered the potential
adverse effects of the Board Classification Amendment, and has unanimously
concluded that any such risk is substantially outweighed by the increased
protection which the Board Classification Amendment will afford the Company and
its shareholders.
Election of Directors
As the proposed Board Classification Amendment will take effect immediately,
if ratified by the stockholders, this Proposal IV also includes the election of
the initial classes of directors. Upon passage of this Proposal IV, the previous
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election of directors at this Annual Meeting under Proposal I shall be nullified
upon the filing of Amended Article I with the Florida Secretary of State.
The Company's Board of Directors is currently composed of five members who
stand for election annually. The nominees for the proposed three classes of
directors are:
Class 1: Kenneth W. Hill
Class 2: George W. Foster and Aubrey H. Wright, Jr.
Class 3: James V. Suskiewich and Dr. Samuel C. Certo
These directors, upon the affirmative vote of the shareholders, will serve
either a one-year term (Class 1), a two year term (Class 2), or a three-year
term (Class 3), or until such time as their successors are duly elected.
Information concerning the ages of the nominees, a description of their
positions and offices with Federal Trust, a brief description of their principal
occupation and business experience during the last five years, and certain other
information including the number of shares of common stock beneficially owned as
of the Record Date are provided under Proposal I above.
If any nominee is unable to serve, the shares represented by all valid
proxies will be voted for the election of the remaining nominees and for such
other person or persons as may be recommended by the Board of Directors. At this
time, we know of no reason why a nominee might not be able to serve.
ARTICLE I, SECTION I, INCLUDING THE PROPOSED AMENDMENT
The number of directors shall be fixed from time to time exclusively
by the Board of Directors pursuant to a resolution adopted by a majority of
the full Board. However, the maximum number of directors shall be eleven and
the minimum shall be three. The directors shall be divided into three
classes, as nearly equal in number as reasonably possible, with the term of
office of those elected as Class 1 at the 1999 Annual Meeting of Shareholders
to expire at the 2000 Annual Meeting of Shareholders; the term of office of
those elected as Class 2 directors at the 1999 Annual Meeting of Shareholders
to expire at the 2001 Annual Meeting of Shareholders; and the term of office
of those elected as Class 3 at the 1999 Annual Meeting of Shareholders to
expire at the 2002 Annual Meeting of Shareholders. At each Annual Meeting of
Shareholders following such initial classification and election, each
director elected to succeed a director whose term is expiring shall be
elected for a three-year term.
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The Board of Directors Recommends
that you vote "FOR" the adoption of the Board Classification Amendment
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PROPOSAL V
AMENDMENT TO THE ARTICLES OF INCORPORATION
TO REQUIRE SUPER-MAJORITY VOTE FOR BUSINESS COMBINATIONS
OR A CONTROL SHARE ACQUISITION
Proposed Article IX, which follows, would require an affirmative vote of at
least 66% of the outstanding shares of the common stock for the approval or
authorization of a Control Share Acquisition or a Business Combination, as
defined in Article IX. The proposed Article also would require an affirmative
vote of at least 66% of the outstanding shares of the common stock not owned by
an acquirer of a certain percentage of outstanding common stock, to permit that
individual to vote his or her shares. With certain exceptions, Florida law
presently requires a majority of the outstanding shares entitled to vote to
approve: (i) any merger or consolidation of the Company with or into any other
company; (ii) any sale, lease, exchange, or other disposition of all or
substantially all of the assets of the Company, to or with a company, person or
other entity which is recommended by the Board of Directors; and (iii) the
granting of voting rights to an acquiror of certain percentages of outstanding
shares. If approved, the 66% approval requirement would make it more difficult
for an individual to acquire control of Federal Trust in a hostile takeover or
tender offer situation or in a situation where the majority of shareholders may
believe the acquisition is in their best interest. The Board of Directors
believes this provision is beneficial in that it will lessen the chance for a
hostile takeover or tender offer attempt, which would be disruptive to the
operations of the Company.
PROPOSED ARTICLE IX
A. The affirmative vote of the holders of not less than 66% of the
outstanding shares of common stock, not including any Control Shares (as
defined herein), shall be required for the adoption of a resolution
granting Control-Share Voting Rights pursuant to Section 607.0902(9),
Florida Statutes.
B. The affirmative vote of the holders of not less than 66% of the
outstanding shares of common stock of the Corporation shall be required
for the approval or authorization of any Business Combinations (as
defined herein).
C. For the purpose of this Article IX:
(a) The term "Business Combination" shall mean any: (i) merger, share
exchange or consolidation of the Company or a subsidiary of the
Company with an Acquiring Person or any other corporation which is
or after such merger or consolidation would be an "Affiliate" or
"Associate" (as hereinafter defined) of an Acquiring Person; (ii)
sale, lease or transfer (in one transaction or a series of
transactions) with any Acquiring Person or any Affiliate of any
Acquiring Person, of all or substantially all of the assets of the
Company or of a subsidiary of the Company to an Acquiring Person
or any Affiliate or Associate of any Acquiring Person; (iii)
adoption of any plan or proposal for the liquidation or
dissolution of the Company proposed by or on behalf of an
Acquiring Person or any Affiliate or Associate of any Acquiring
Person; (iv) reclassification of securities (including any reverse
stock split) or recapitalization of the Company or any other
transaction that would have the effect, either directly or
indirectly, of increasing the proportionate ownership of any class
of equity or convertible securities of the Company or any
subsidiary of the Company which is directly or indirectly
beneficially owned by an Acquiring Person or any Affiliate or
Associate of any Acquiring Person; and (v) an agreement, contract
or other arrangement providing for any of the transactions
described in this definition of Business Combination.
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(b) The term "Person" shall mean any individual, firm, corporation or
other entity and shall include any group comprised of any Person
and any other person with whom such person or any Affiliate or
Associate of such Person has any agreement, arrangement or
understanding, directly or indirectly, for the purpose of
acquiring, holding, voting or disposing of voting stock of the
Company.
(c) The term "Acquiring Person" shall mean any Person (other than the
Company, or any subsidiary or any profit-sharing, employee stock
ownership or other employee benefit plan of the Company or any
subsidiary or any trustee of or fiduciary with respect to any such
plan when acting in such capacity) who or which: (i) is the
Beneficial Owner (as hereinafter defined) of 25% or more of the
outstanding common stock of the Company: (ii) is an Affiliate or
Associate of the Company and at any time within the two year
period immediately prior to the date in question was the
Beneficial Owner of 25% or more of the outstanding common stock of
the Company; or (iii) is at such time an assignee of or has
otherwise succeeded to the beneficial ownership of any shares of
outstanding common stock of the Company which were at any time
within the two-year period immediately prior to such time
beneficially owned by any Acquiring Person, if such assignment or
succession shall have occurred in the course of a transaction or
series of transactions not involving a public offering within the
meaning of the Securities Act of 1933.
(d) A Person shall be a Beneficial Owner of any common stock: (i)
which such Person or any of its Affiliates or Associates
beneficially owns, directly or indirectly; or (ii) which such
person or any of its Affiliates or Associates has, directly or
indirectly, (a) the right to acquire whether such right is
exercisable immediately or not, pursuant to any agreement,
arrangement or understanding or upon the exercise of conversion
rights, exchange rights, warrants or options, or otherwise, or (b)
the right to vote pursuant to any agreement, arrangement or
understanding.
(e) The terms "Affiliate" or "Associate" shall have the respective
meanings ascribed to such terms in Rule 12b-2 of the General Rules
and Regulations under the Securities Exchange Act of 1934, as in
effect on September 3, 1991.
(f) An Acquiring Person shall be deemed to have acquired a share of
the common stock of the Company at the time when such Acquiring
Person became the beneficial owner of the share.
(g) The term "Control Shares" shall mean the shares of the
Corporation, that, except for Section 607.0902, Florida Statutes,
would have voting power, that when added to all other shares of
the Corporation Beneficially Owned by a Person, would total within
any of the following ranges of voting power:
(i) One-fifth or more but less than one-third of all voting
power.
(ii) One-third or more but less than a majority of all voting
power.
(iii) A majority or more of all voting power.
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The Board of Directors Recommends
that shareholders vote "FOR" the adoption of Article IX which would require a
Super-majority vote to approve a Business Combination or a Control Share
Acquisition
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PROPOSAL VI - ADJOURNMENT
OF ANNUAL MEETING
Federal Trust seeks your approval to adjourn the Annual Meeting in the event
that the number of proxies sufficient to approve Proposals 1, 2, 3, 4 or 5 are
not received by May 28, 1999. In order to permit proxies that have been received
by Federal Trust at the time of the Annual Meeting to be voted, if necessary,
for the adjournment, the Company is submitting the question of adjournment to
permit further solicitation of proxies to approve Proposals 1, 2, 3, 4 or 5 as a
separate matter for your consideration. If it becomes necessary to adjourn the
Annual Meeting, and the adjournment is for a period of less than 30 days, no
notice of the time and place of the adjourned meeting need be given the
shareholders, other than an announcement made at the Annual Meeting.
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The Board of Directors Recommends
That you vote "FOR" the approval of the adjournment of the Annual Meeting.
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FINANCIAL STATEMENTS AND OTHER FINANCIAL INFORMATION
The 1998 financial statements, selected consolidated financial data, and
management's discussion and analysis of financial condition and results of
operations appear in its Annual Report for the fiscal year ended December 31,
1998, which is being mailed to all shareholders along with this Proxy Statement.
The financial statements are incorporated herein by reference.
SHAREHOLDERS' PROPOSALS
Proposals of shareholders intended to be presented at the 2000 Annual Meeting
should be submitted by certified mail, return receipt requested, and must be
received by Federal Trust at its corporate office located at 1211 Orange Avenue,
Winter Park, Florida 32787, on or before December 6, 1999, to be eligible for
inclusion in next year's Proxy Statement in form of proxy relating to that
meeting. However, if next year's annual meeting of shareholders is held on a
date more than 30 days before or after the corresponding date of the 1999 Annual
Meeting, any shareholder who wishes to have a proposal included in the Proxy
Statement for that meeting must deliver a copy of the proposal to Federal Trust
a reasonable time before the Proxy solicitation is made. Federal Trust reserves
the right to decline to include in the Proxy Statement any shareholder's
proposal which does not comply with the Proxy rules (Regulation 14A) adopted
under the Securities Exchange Act of 1934, as amended.
FEDERAL TRUST CORPORATION
WINTER PARK, FLORIDA
April ___, 1999
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