SCHEDULE 14A
(Rule 14a-101)
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-12
STEWARDSHIP FINANCIAL CORPORATION
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(Name of Registrant as Specified in Its Charter)
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(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)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(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
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|_| 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:_________________________________________________________
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Stewardship Financial Corporation
630 Godwin Avenue
Midland Park, New Jersey 07432-1405
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TUESDAY, MAY 9, 2006
To Our Shareholders:
The Annual Meeting of Shareholders of Stewardship Financial Corporation
(the "Corporation") will be held at the Christian Health Care Center, Wyckoff,
New Jersey, (use the Mountain Avenue entrance) on May 9, 2006, at 7:00 P.M. for
the following purposes:
1. To elect the three (3) directors named in the attached Proxy
Statement for three year terms.
2. To adopt the 2006 Stock Option Plan for Non-Employee
Directors.
3. To ratify the appointment of Crowe Chizek and Company LLC as
the Corporation's independent auditors for the fiscal year
ending December 31, 2006.
4. To transact such other business as may properly come before
the meeting.
Shareholders of record at the close of business on March 27, 2006 are
entitled to notice of, and to vote at, the Annual Meeting. Whether or not you
plan to attend the Annual Meeting, it is requested that the enclosed proxy be
executed and returned to our transfer agent, Registrar and Transfer Company, 10
Commerce Drive, Cranford, NJ 07016, in the envelope provided.
By Order of the Board of Directors
/s/ Robert J. Turner
Robert J. Turner
Corporate Secretary
April 6, 2006
Stewardship Financial Corporation
630 Godwin Avenue
Midland Park, New Jersey 07432-1405
------------------------------
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
MAY 9, 2006
------------------------------
This Proxy Statement is being furnished to shareholders of Stewardship
Financial Corporation (the "Corporation") in connection with the solicitation by
the Board of Directors of the Corporation of proxies to be used at the Annual
Meeting of Shareholders and at any adjournment of the meeting. You are cordially
invited to attend the Annual Meeting that will be held at the Christian Health
Care Center, Wyckoff, New Jersey, (use the Mountain Avenue entrance) on Tuesday,
May 9, 2006 at 7:00 P.M. The Annual Report to shareholders, including
consolidated financial statements for the fiscal year ended December 31, 2005,
and a proxy card accompany this Proxy Statement, which is first being mailed to
shareholders on or about April 6, 2006.
Voting of Securities
The securities which may be voted at the Annual Meeting consist of
shares of common stock, no par value, of the Corporation ("Common Stock") with
each share entitling its owner to one vote on each matter properly brought
before the Annual Meeting.
The close of business on March 27, 2006, has been fixed by the Board of
Directors as the record date for the determination of shareholders of record
entitled to notice of, and to vote at, the Annual Meeting or any adjournments
thereof. The total number of shares of Common Stock outstanding on the record
date was 4,758,907 shares.
Regardless of the number of shares of Common Stock you own, it is
important that you vote by completing the enclosed proxy card and returning it
signed and dated in the enclosed postage paid envelope. Proxies solicited by the
Board of Directors of the Corporation will be voted in accordance with the
direction given therein. Where no instructions are indicated, signed proxy cards
will be voted "FOR" the election of each of the nominees for director named in
the Proxy Statement, "FOR" the adoption of the 2006 Stock Option Plan for
Non-Employee Directors and "FOR" the ratification of Crowe Chizek and Company
LLC as the Corporation's independent auditors for the fiscal year ending
December 31, 2006. Should any other matters be properly presented at the Annual
Meeting for consideration, such as consideration of a motion to adjourn the
meeting to another time, the persons named as proxies will have discretion to
vote on those matters according to their best judgment to the same extent as the
person delivering the proxy would be entitled to vote. Other than the matters
set forth in the attached Notice of
Annual Meeting of Shareholders, the Board of Directors knows of no additional
matters that may be presented for consideration at the Annual Meeting.
A proxy may be revoked at any time prior to its exercise by sending a
written notice of revocation to Registrar and Transfer Company, 10 Commerce
Drive, Cranford, NJ 07016. In addition, a proxy filed prior to the Annual
Meeting may be revoked by delivering to the Corporation a duly executed proxy
bearing a later date, or by attending the Annual Meeting and voting in person.
If you are a shareholder whose shares are not registered in your own name, you
will need appropriate documentation from your record holder to vote personally
at the Annual Meeting.
Quorum
The presence, in person or by proxy, of the holders of at least a
majority of the total number of shares of Common Stock entitled to vote is
necessary to constitute a quorum at the Annual Meeting. In the event that there
are not sufficient votes for a quorum, or to approve or ratify any matter being
presented at the time of the Annual Meeting, the Annual Meeting may be adjourned
in order to permit the further solicitation of proxies.
Required Vote
There is no cumulative voting in the election of directors. Directors
are elected by a plurality of votes cast, without regard to either broker
non-votes, or proxies as to which authority to vote for one or more of the
nominees is withheld. Thus, a nominee for director may be elected even if the
nominee receives votes from holders of less than a majority of shares
represented at the meeting.
Cost of Proxy Solicitation
The cost of solicitation of proxies on behalf of the Board of Directors
will be borne by the Corporation. Directors, officers and other employees of the
Corporation may solicit proxies on behalf of the Corporation in person or by
telephone, e-mail, facsimile or other electronic means. These directors,
officers and employees will not receive additional compensation for such
services. The Corporation will reimburse the reasonable expenses of brokerage
firms and other custodians and nominees for sending proxy materials to, and
obtaining proxies from, beneficial owners.
PROPOSAL 1 - ELECTION OF DIRECTORS
The Corporation's Certificate of Incorporation and its bylaws authorize
a minimum of one and a maximum of twenty-five directors, but the exact number is
fixed by resolution of the Board of Directors. The Board has fixed the current
number of directors at eleven. The Board has been divided into three classes.
One class is elected each year to serve a term of three years. Directors elected
at this Annual Meeting will be elected to serve for a term of three years
through May, 2009, or until their successors are duly elected and qualified.
Each nominee has indicated to the Corporation that he or she will serve
if elected. The Corporation has no reason to believe that any of the nominees
will be unable to stand for election. Unless authority to vote for any of the
nominees is withheld, it is intended that the shares represented by the enclosed
proxy card, if executed and returned, will be voted FOR the election of the
nominees proposed by the Board of Directors. If, for any reason, any of the
nominees becomes unavailable for election, the
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proxy solicited by the Board of Directors will be voted for a substitute nominee
selected by the Board of Directors.
The Board of Directors recommends that you vote "FOR" the election of
the nominees named in this Proxy Statement.
Directors and Nominees for Director
The following sets forth the names of our nominees for director and
directors continuing to serve on our Board following the Annual Meeting; their
ages; a brief description of their recent business experience, including present
occupations; the year in which each became a director of the Corporation and our
wholly-owned subsidiary, Atlantic Stewardship Bank (the "Bank"); and the names
of any public companies for which they serve on the board of directors.
Information With Respect to the Nominees for Director With Terms
Expiring in 2009
Robert J. Turner, age 66, has been a director of the Corporation since
1997. Mr. Turner has been a director of the Bank since 1985. From 1966 to 2002,
Mr. Turner was the president of The Turner Group, an insurance brokerage
company. Mr. Turner is currently retired.
William J. Vander Eems, age 56, has been a director of the Corporation
since 1997. Mr. Vander Eems has been a director of the Bank since 1991. Since
1973, Mr. Vander Eems has been the president of William Van Der Eems, Inc., a
general contracting company.
Paul Van Ostenbridge, age 53, has been a director of the Corporation
since 1997 and has served as President and Chief Executive Officer of the
Corporation since 1997. Mr. Van Ostenbridge has been a director of the Bank
since 1985 and has served as its president and chief executive officer since
1985.
Information With Respect to the Directors With Terms Expiring in 2008
William C. Hanse, age 71, has been a director of the Corporation since
1997. Mr. Hanse has been a director of the Bank since 1985. Since 1990, Mr.
Hanse has been a partner of the law firm Hanse & Hanse.
Margo Lane, age 55, has been a director of the Corporation since 1997.
Ms. Lane has been a director of the Bank since 1994. Since 2004, Ms. Lane has
been the sales and marketing coordinator of PBI-Dansensor America Inc., a
company that sells and services equipment for industrial instrumentation and
process control. From 1976 to 2002, Ms. Lane served as the corporate
communications manager of Garden State Paper Company, LLC, a newsprint
manufacturing company.
Arie Leegwater, age 72, has been a director of the Corporation since
1997 and has been Chairman of the Board since 1997. Mr. Leegwater has been a
director of the Bank since 1985 and has been Chairman of the Board of the Bank
since 1994. Since 1988, Mr. Leegwater has been the owner of Arie Leegwater
Associates LLC, a general contracting company. Since 2002, Arie Leegwater has
been a partner in ARIEANJE LLC, a company engaged in owning and renting real
estate. Since 1993, Mr. Leegwater has been an arbitrator with the American
Arbitrator Association.
John L. Steen, age 68, has been a director of the Corporation since
1997. Mr. Steen has been a director of the Bank since 1985. Since 1972, Mr.
Steen has been the president of Steen Sales, Inc., a textile company. Since
1972, Mr. Steen has been president of Dutch Valley Throwing Co., a textile
company.
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Information With Respect to Directors for Terms Expiring in 2007
Harold Dyer, age 78, has been a director of the Corporation since 1997.
Mr. Dyer has been a director of the Bank since 1985. From 1957 to 1981, Mr. Dyer
was president of White Laundry, Inc., a laundry service company. Mr. Dyer is
currently retired.
Abe Van Wingerden, age 69, has been a director of the Corporation and
the Bank since 2001. Mr. Van Wingerden has been Vice Chairman of the Board for
the Corporation and the Bank since 2005. Since 1985, Mr. Van Wingerden has been
the president of Abe Van Wingerden Company, Inc. T/A Van Wingerden Farms, a
retailer of garden equipment and supplies.
Michael Westra, age 40, has been a director of the Corporation and the
Bank since 2005. Since 1991, Mr. Westra has been General Manager of Wayne Tile
Company, an importer of tile and stone, providing wholesale and retail sales.
Howard Yeaton, age 50, has been a director of the Corporation and the
Bank since 2005. Since 2003, Mr. Yeaton has been Managing Principal of Financial
Consulting Strategies, LLC, a firm providing strategic financial advice and
services to emerging companies. Prior to 2003, Mr. Yeaton served as Vice
President, Planning and Financial Services for Konica Photo USA, Inc.
PROPOSAL 2 - APPROVAL OF THE 2006 STOCK OPTION PLAN FOR NON-EMPLOYEE
DIRECTORS
On March 21, 2006, the Board of Directors adopted the 2006 Stock Option
Plan for Non-Employee Directors (the "2006 Non-Employee Plan"). Set forth below
is a summary of certain important features of the 2006 Non-Employee Plan, which
summary is qualified in its entirety by reference to the actual plan attached as
Exhibit A to this Proxy Statement. All capitalized terms which are not defined
herein are defined in the 2006 Non-Employee Plan.
Purpose. The purpose of the 2006 Non-Employee Plan is to assist the
Corporation and the Bank in attracting and retaining highly qualified persons as
directors of the Corporation and the Bank and its subsidiaries, and to align the
interests of such persons more closely with the interests of the Corporation's
shareholders.
Administration. The 2006 Non-Employee Plan will be administered by the
Compensation Committee as appointed by the Board of Directors (the "Committee")
from among members of the Board. The Committee will have no power to designate
the optionees or to determine the number of shares subject to each option, the
date of the grant, the exercise price for each option, or the terms and
conditions governing the options. All of these terms are set by the 2006
Non-Employee Plan. The Committee will only be charged with the responsibility of
interpreting the 2006 Non-Employee Plan and making all administrative
determinations thereunder.
Eligibility. All directors of the Corporation who are not also
employees of the Corporation will receive options under the 2006 Non-Employee
Plan. If the 2006 Non-Employee Plan is approved, the members of the Board of
Directors on May 15, 2006 will be granted Stock Options to purchase 5,000 shares
of Common Stock over a 5 year vesting schedule of 1,000 shares per director per
year with the first options to become available for purchase on May 15, 2007.
Individuals who become Non-Employee
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Directors on or after May 15, 2006, will be granted Stock Options in amounts and
with vesting rights set forth in the 2006 Non-Employee Plan.
Shares Subject to the Plan. The 2006 Non-Employee Plan authorizes the
issuance of up to 60,000 shares of Common Stock pursuant to the grant or
exercise of the Stock Options. The 2006 Non-Employee Plan provides that the
number and price of shares available for Stock Options and the number of shares
covered by the outstanding Stock Options will be adjusted equitably for stock
splits, stock dividends, recapitalizations, mergers and other changes in the
Common Stock of the Corporation.
Stock Options. The 2006 Non-Employee Plan permits the award of Stock
Options. Each option granted under the plan must be evidenced by a written
agreement which shall state the number of shares of Common Stock that are
subject to the Stock Option, the exercise price, the term of the Stock Option
and other terms the Committee may deem appropriate that are not consistent with
the plan. The purchase price per share of such Common Stock covered by an option
will be 100 percent of the Fair Market Value of such Common Stock on the day
such Stock Option is granted. All Stock Options granted under the 2006
Non-Employee Plan will have a term of six years from the date of the grant
subject to earlier termination pursuant to the terms of the plan.
Vote Required. The proposal to adopt the 2006 Non-Employee Plan in the
form attached to this proxy statement as Exhibit A will be submitted to the
shareholders for adoption at the Annual Meeting. Adoption of this proposal
requires an affirmative vote of at least a majority of the shares represented
and voting at the Annual Meeting at which a quorum is present (which shares
voting affirmatively also constitute at least a majority of the required
quorum). Abstentions from voting and broker nonvotes on this particular proposal
are treated as votes against, while shares not voted by brokers on any matters
presented will have no effect on the adoption of this proposal. PROXY CARDS
RECEIVED BY THE CORPORATION AND NOT REVOKED PRIOR TO OR AT THE ANNUAL MEETING
WILL BE VOTED "FOR" PROPOSAL NO. 2 -- THE ADOPTION OF THE 2006 NON-EMPLOYEE
PLAN.
The board of directors has adopted the 2006 Non-Employee Plan and recommends you
vote "FOR" the adoption of the 2006 Non-Employee Plan.
PROPOSAL 3 - RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
On March 10, 2006, the Audit Committee of the Corporation appointed
Crowe Chizek and Company LLC as its independent certified public accountants for
the fiscal year ending December 31, 2006. Although the appointment of auditors
is not required to be submitted to a vote of stockholders, the Board of
Directors believes that it is appropriate as a matter of policy to request that
the stockholders ratify the appointment. If the stockholders should not ratify
the appointment, the Audit Committee will investigate the reasons for the
stockholders' rejection and the Board of Directors will reconsider the
appointment. It is expected that a representative of Crowe Chizek and Company
LLC will be present at the meeting to respond to appropriate questions and will
be given the opportunity to make a statement if he or she desires to do so.
The independent public accounting firm utilized by the Corporation
during the fiscal year ended December 31, 2005 was KPMG LLP. KPMG LLP was
dismissed as the Corporation's independent accountants on March 10, 2006. KPMG
LLP's reports on the financial statements for the past two years ended December
31, 2005 and 2004 contained no adverse opinion or disclaimer of opinion, nor
were they qualified or modified as to uncertainty, audit scope or accounting
principles. In connection with its audits for the two most recent fiscal years
ended December 31, 2005 and 2004 and through March 10, 2006,
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there were: (i) no disagreements with KPMG LLP on any matter of accounting
principles or practices, financial statement disclosure, or auditing scope or
procedure, which disagreements if not resolved to the satisfaction of KPMG LLP
would have caused them to make reference thereto in their report on the
financial statements for such years, or (ii) no reportable events. It is
expected that a representative from KPMG LLP will be present at the Annual
Meeting.
The affirmative vote of the holders of a majority of the shares of
Common Stock of the Corporation present in person or by proxy and entitled to
vote at the Annual Meeting is required for the ratification and approval of the
appointment of auditors.
The Board of Directors recommends a vote "FOR" ratification of the
appointment of Crowe Chizek and Company LLC as the Corporation's independent
auditors for the fiscal year ending December 31, 2006.
6
CORPORATE GOVERNANCE
Committees of the Board of Directors
During 2005, the Board of Directors had a standing Audit Committee,
Nominating Committee, and Compensation Committee. The charters of the Audit
Committee, Nominating Committee and Compensation Committee, as approved by the
Board of Directors in February, 2004, can be found on our website at
www.asbnow.com.
Audit Committee
The Audit Committee is appointed by the Board of Directors to assist
the Board in fulfilling its oversight responsibilities. The Board has adopted a
written charter setting out the functions of the Audit Committee. The audit
functions of the Audit Committee are to: (i) monitor the integrity of the
Corporation's financial reporting process and systems of internal controls; (ii)
monitor the independence and performance of the Corporation's independent
external audit and internal audit functions; (iii) provide avenues of
communication among the independent auditor, management, internal auditors and
the Board of Directors; and (iv) encourage the adherence to, and continuous
improvement of, the Corporation's policies, procedures and practices at all
levels. The Audit Committee also reviews and evaluates the recommendations of
the independent certified public accountant, receives all reports of examination
of the Corporation and the Bank by regulatory agencies, analyzes such regulatory
reports, and informs the Board of the results of their analysis of the
regulatory reports. In addition, the Audit Committee receives reports directly
from the Corporation's internal auditors and recommends any action to be taken
in connection therewith.
In 2005, the Audit Committee consisted of directors Dyer (Chairman),
Steen and Van Wingerden. On November 8, 2005, Directors Westra and Yeaton joined
the Committee. As of December 31, 2005, Director Van Wingerden retired from the
Committee.
Nominating Committee
The Nominating Committee nominates candidates to serve on the
Corporation's Board of Directors. In 2005, the Nominating Committee consisted of
directors Steen (Chairman), Hanse, Leegwater and Vander Eems.
The Nominating Committee has adopted a procedure to consider
recommendations for directorships submitted by shareholders holding at least 20%
of our outstanding shares for a period of at least four years. Shareholders
meeting these requirements, who wish the Nominating Committee to consider their
recommendations for nominees for the position of director, should submit their
recommendations in writing in care of Corporate Governance, Stewardship
Financial Corporation, 630 Godwin Avenue, Midland Park, New Jersey 07432.
Recommendations by shareholders meeting the share ownership requirements and
that are made in accordance with these procedures will receive the same
consideration given to nominees of the Nominating Committee.
In its assessment of each potential candidate, the Nominating Committee
will review the nominee's judgment, experience, independence, understanding of
the Corporation's or other related industries and such other factors the
Nominating Committee determines are pertinent in light of the current needs of
the Board. The Nominating Committee will also take into account the ability of a
director to devote the time and effort necessary to fulfill his or her
responsibilities.
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Nominees may be suggested by directors, members of management,
shareholders or, in some cases, by a third party firm. In identifying and
considering candidates for nomination to the Board of Directors, the Nominating
Committee considers, in addition to the requirements set out in the Nominating
Committee's charter, quality of experience, the needs of the Corporation and the
range of talent and experience represented on the Board.
Compensation Committee
The Compensation Committee oversees the Corporation's and the Bank's
compensation and employee benefit plans and practices, including its executive
compensation plans and its incentive-compensation and equity-based plans. In
2005, the Compensation Committee consisted of directors Turner (Chairman), Lane,
Leegwater, and Van Wingerden.
Independence of Directors
As of December 31, 2005, the Board of Directors determined that ten of
its eleven directors, including all members of the Audit, Nominating and
Compensation Committees, are "independent" as defined in the listing standards
of the NASDAQ Stock Market and SEC rules. Director Van Ostenbridge who serves as
our President and Chief Executive Officer is not considered independent.
Board and Committee Meetings
The Board of Directors of the Corporation held 12 meetings during 2005.
The Audit Committee, Nominating Committee, and Compensation Committee met eight,
eleven, and five times, respectively, during 2005. The Board of Directors holds
regularly scheduled meetings each month and special meetings as circumstances
require. All of the directors of the Corporation attended at least 75% of the
total number of Board meetings held during 2005. In addition, each director who
is a member of a committee of the Board of Directors attended at least 75% of
the meetings for each committee of which he is a member. Each director of the
Corporation is also a director of the Bank.
The Corporation expects the Directors to attend the annual meeting. The
Directors who attended the 2005 annual meeting were Dyer, Hanse, Lane,
Leegwater, Steen, Turner, Vander Eems, Van Ostenbridge and Van Wingerden.
Communications with the Board of Directors
Shareholders are invited to contact the Directors by writing to the
Secretary of the Corporation, Robert J. Turner, at 630 Godwin Avenue, Midland
Park, New Jersey 07432. These communications are not screened.
Compensation Committee Interlocks and Insider Participation
During 2005, no executive officer of the Corporation (i) served as a
member of the Compensation Committee of the Corporation of another entity, one
of whose executive officers served on the Compensation Committee of the
Corporation, (ii) served as a director of another entity, one of whose executive
officers served on the Compensation Committee, or (iii) was a member of the
Compensation Committee of another entity, one of whose executive officers served
as a director of the Corporation.
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Compensation of Directors
Directors' Fees
Directors of the Corporation and the Bank, other than full-time
employees of the Corporation and the Bank, receive fees of $1,800 per Board
meeting attended, with the exception of the chairman who receives $2,800 per
meeting attended. Directors of the Corporation and the Bank, other than
full-time employees of the Corporation and the Bank, also receive a fee of $300
per committee meeting attended.
Stock Option Plan for Non-Employee Directors
The Corporation maintains the Stewardship Financial Corporation 2001
Stock Option Plan for Non-Employee Directors (the "2001 Non-Employee Plan"). The
maximum number of shares of Common Stock subject to stock options granted under
the 2001 Non-Employee Plan is 153,154 as adjusted for stock dividends and
splits. As of March 27, 2006, 119,970 options to purchase shares of Common Stock
have been granted under the 2001 Non-Employee Plan, of which 76,572 options have
been exercised. The purchase price of the shares of Common Stock subject to
options under the 2001 Non-Employee Plan is 100% of the fair market value on the
date such option is granted. The plan expires on May 9, 2011.
EXECUTIVE OFFICERS
Our executive officers are as follows:
Name Age Position
---- --- --------
Paul Van Ostenbridge 53 President and Chief Executive Officer
Julie E. Holland 46 Senior Vice President and Treasurer
Timothy G. Madden 56 Senior Vice President
Officers are not appointed for fixed terms. Biographical information
for our current officers who are not also directors follows.
Julie E. Holland, age 46, has been Senior vice president and Treasurer
since 2005 and was Vice President and Treasurer of the Corporation from 1997
until 2005. Ms. Holland joined the Bank in 1994 and has been Senior Vice
President and Treasurer since 2005 and was Vice President and Treasurer of the
Bank from 1997 until 2005.
Timothy G. Madden, age 56, has served as Senior Vice President of the
Corporation since 2005 and was Vice President from 2002 until 2005. Mr. Madden
joined the Bank in 2001 and has served as its Senior Vice President since 2005
and was Vice President from 2001 until 2005. From 1989 until 2001, Mr. Madden
served as the Vice President of private banking at Summit Bank. Mr. Madden has
over 30 years experience in credit, sales and management in the commercial
banking field.
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EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth a summary of annual compensation for the
last three fiscal years for the president and chief executive officer of the
Corporation and any other executive officers whose individual remuneration
exceeded $100,000.
Long Term
Compensation
Annual Compensation Awards
-------------------------- --------------------
Securities All Other
Name & Bonus Underlying Options Compensation ($)
Principal Position Year Salary ($) ($)(1) (#)
Paul Van Ostenbridge 2005 235,000 36,464 0 40,522 (2)
President and Chief
Executive Officer 2004 198,000 25,000 0 37,498
2003 190,000 25,000 1,543 32,625
Timothy G. Madden 2005 131,450 15,380 0 28,543 (3)
Sr. Vice President &
Senior Commercial Loan 2004 124,000 10,600 0 23,834
Manager
2003 114,660 10,631 771 17,487
Julie E. Holland 2005 100,500 11,412 0 16,718 (4)
Sr. Vice President &
Treasurer 2004 89,000 8,100 0 14,874
2003 85,500 8,137 771 13,963
------------
(1) Includes bonuses earned through the Executive Compensation Plan and
accrued during 2005, 2004 and 2003, which were paid in the first
quarter of the following calendar years.
(2) The amounts disclosed for Mr. Van Ostenbridge for fiscal 2005
includes 401(k) matching contributions of $5,250, profit sharing plan
contributions of $20,461, life insurance and long term disability
payments of $2,277, medical and vision insurance contributions of
$7,114 and the imputed value of a personal car allowance in the amount
of $5,420.
(3) The amounts disclosed for Mr. Madden for fiscal 2005 includes
401(k) matching contributions of $3,135, profit sharing contributions
of $13,186, life insurance and long term disability payments of $1,306
and medical and vision insurance contributions of $10,916.
(4) The amounts disclosed for Ms. Holland for fiscal 2005 includes
401(k) matching contributions of $2,318, profit sharing contributions
of $9,834, life insurance and long term disability payments of $854,
and medical and vision insurance contributions of $3,712.
10
Stock Option Grants
Option Grants in Last Fiscal Year
The Corporation did not grant any stock options during the fiscal year
ended December 31, 2005.
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year End Option
Values
The following table sets forth information regarding the aggregated
option exercises during the fiscal year ended December 31, 2005, and the value
of unexercised options held as of December 31, 2005, by each executive officer
named in the Summary Compensation Table. The potential value of unexercised
in-the-money options is based on the closing per share sales price of the
Corporation's Common Stock of $14.50 on December 31, 2005.
Shares
Acquired Number of Securities
on Value Underlying Unexercised Value of Unexcercised
Exercise Realized Options at December 31, In-the-Money Options
Name (#) ($) 2005 (#) December 31, 2005 ($)
----------------------------------------------- -------------------------------------------------------------
Exercisable Unexercisable Exercisable Unexercisable
----------- ------------- ----------- -------------
Paul Van Ostenbridge 0 0 46,937 0 $440,747 $0
Timothy G. Madden 0 0 771 0 690 0
Julie E. Holland 0 0 11,760 0 106,187 0
Employee Stock Option Plan. The Corporation maintains the Stewardship Financial
Corporation 1995 Stock Option Plan (the "Employee Plan"). Under the Employee
Plan, 199,457 shares of Common Stock have been reserved for issuance. As of
March 24, 2006, 102,062 options to purchase shares of Common Stock have been
granted under the Employee Plan. Employees of the Corporation, the Bank, and any
subsidiaries which the Corporation may incorporate or acquire are eligible to
participate in the Employee Plan. The Compensation Committee manages the
Employee Plan and selects participants from the eligible employees. No options
granted under the Employee Plan may be exercised more than 10 years after the
date of its grant. The purchase price for shares of Common Stock subject to
options under the Plan may not be less than 100% of the fair market value on the
date such options are granted.
Employee Stock Purchase Plan. The Corporation maintains the Stewardship
Financial Corporation 1995 Employee Stock Purchase Plan (the "Purchase Plan").
Under the Purchase Plan, 221,617 shares of Common Stock have been reserved for
issuance. As of March 24, 2006, 31,295 shares of Common Stock have been
purchased under the Purchase Plan. Shares acquired under the Purchase Plan may
be obtained, at the discretion of the Corporation, from the authorized but
unissued shares of Common Stock, treasury stock or from the open market.
Employees of the Corporation, the Bank and any subsidiaries which the
Corporation may incorporate or acquire, who work at least 20 hours per week, are
eligible to participate in the Purchase Plan. Shares are purchased for
participants through payroll deductions in a maximum amount of 10% of a
participant's total compensation per pay period. Eligible employees must notify
the Bank of their participation in the Purchase Plan and the amount of payroll
deductions that will be applied to purchase shares for them. The funds
contributed by each participant are used to purchase shares of Common Stock at
95% of the fair market value.
11
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Corporation maintains a Compensation Committee, which oversees
executive compensation issues. The compensation payable to the Corporation's and
Bank's executive officers is determined by the Board of Directors of the
Corporation and Bank upon recommendation of the Compensation Committee.
Executive Compensation Policy. The Corporation's policy is to
compensate its executives fairly and adequately for the responsibility assumed
by them for the success and direction of the Corporation and the Bank, the
effort expended in discharging that responsibility and the results achieved
directly or indirectly from each executive's performance. "Fair and adequate
compensation" is established after careful review of: (i) the Corporation's and
the Bank's earnings; (ii) the Corporation's and the Bank's performance as
compared to other companies of similar size and market area; and (iii) a
comparison of what the market demands for compensation of similarly situated and
experienced executives.
Total compensation takes into consideration a mix of base salary,
bonus, perquisites and stock options. The particular mix is established in order
to competitively attract competent professionals, retain those professionals and
reward extraordinary achievement. The Board of Directors also considers net
income for the year and earnings per share of the Corporation and the Bank
before finalizing officer compensation increases for the coming year.
Based upon its current levels of compensation, the Corporation and the
Bank are not affected by the provisions of the Internal Revenue Code that limit
the deductibility to a corporation of compensation in excess of $1,000,000 paid
to certain executive officers. Thus, the Corporation and the Bank have no policy
regarding that subject.
Base Salary. The Board of Directors of the Corporation bears the
responsibility for establishing base salary. Salary is minimum compensation for
any particular position and is not tied to any performance formula or standard.
However, that is not to say that poor performance will not result in
termination. Acceptable performance is expected of all executive officers as a
minimum standard. To establish salary, the following criteria are used: (i)
position description; (ii) director responsibility assumed; (iii) comparative
studies of peer group compensation (special weight is given to local factors as
opposed to national averages); (iv) earnings performance of the Corporation and
the Bank resulting in availability of funds; and (v) competitive level of salary
to be maintained to attract and retain qualified and experienced executives.
Stock Options. Recommendations for stock option awards are made by the
Compensation Committee, which then makes recommendations to the entire Board of
Directors for final action. The Compensation Committee meets to evaluate
meritorious performance of all officers and employees for consideration to
receive stock options.
The Compensation Committee makes awards based upon the following
criteria: (i) position of the officer or employee in the Corporation or the
Bank; (ii) the benefit that the Corporation or the Bank has derived as a result
of the efforts of the award candidate under consideration; and (iii) the
Corporation's and the Bank's desire to encourage long term employment of the
award candidate.
Perquisites, such as Corporation and Bank automobiles and their related
expenses and auxiliary insurance benefits, which the Board of Directors of the
Corporation may approve from time to time, are determined and awarded pursuant
to evaluation under the same criteria used to establish base salary.
12
Compensation of CEO. Paul Van Ostenbridge is President and Chief
Executive Officer of the Corporation and the Bank. Mr. Van Ostenbridge has held
his respective positions at the Corporation and the Bank since the inception of
both companies. The Corporation and the Bank have continued to make progress
toward their goals during Mr. Van Ostenbridge's tenure as president and chief
executive officer. In 2005, Mr. Van Ostenbridge's total annual salary
compensation increased 18.7% above his total annual salary compensation in 2004.
The Board of Directors determined that this increase represents fair
compensation in view of Mr. Van Ostenbridge's level of personal performance in
2005, the results achieved by the Corporation and the Bank, and the compensation
levels of other executives in the banking industry.
Submitted by:
Compensation Committee
Robert J. Turner, Chairperson
Margo Lane
Arie Leegwater
Abe Van Wingerden
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Bank has made in the past and, assuming continued satisfaction of
generally applicable credit standards, expects to continue to make loans to the
Corporation's and the Bank's directors and executive officers and to
corporations, organizations or other entities for which they serve as officers
or directors, or in which they have beneficial ownership interests of 10 percent
or more. These loans have all been made in the ordinary course of banking
business on substantially the same terms, including interest rates and
collateral, as those prevailing at the time for comparable transactions with
other persons and do not involve more than the normal risk of collectability or
present other unfavorable features.
13
STOCK OWNERSHIP OF MANAGEMENT AND PRINCIPAL SHAREHOLDERS
The following table sets forth information concerning the beneficial
ownership of the Corporation's Common Stock as of March 24, 2006, by (i) each
person who is known by the Corporation to own beneficially more than 5% of the
issued and outstanding Common Stock, (ii) each director and nominee for director
of the Corporation, (iii) each executive officer of the Corporation named in the
Summary Compensation Table and (iv) all directors and executive officers of the
Corporation as a group. Other than as set forth in this table, the Corporation
is not aware of any individual or group, which holds in excess of 5% of the
outstanding Common Stock. The percentage of beneficial ownership is based on
4,758,907 shares of Common Stock outstanding as of March 24, 2006.
Number of Shares Percent
Name of Beneficial Owner (1) Beneficially Owned (2) of Class
--------------------------- ---------------------- --------
William Almroth (3) 243,936 5.13%
Harold Dyer (4) 49,189 1.03%
William C. Hanse (5) 115,674 2.43%
Margo Lane (6) 46,624 *
Arie Leegwater (7) 55,950 1.18%
John L. Steen (8) 105,066 2.21%
Robert J. Turner (9) 128,018 2.68%
William J. Vander Eems (10) 192,597 4.04%
Paul Van Ostenbridge (11) 69,853 1.45%
Abe Van Wingerden (12) 210,964 4.43%
Michael Westra (13) 5,560 *
Howard R. Yeaton Jr. (14) 4,306 *
Julie E. Holland (15) 16,299 *
Timothy G. Madden (16) 5,229 *
5% Shareholders, Directors and Executive Officers of the
Corporation and Bank as a group (14 persons) 1,249,265 25.70%
========= ======
-------------
* Indicates less than 1% of the outstanding shares of the Corporation's
Common Stock.
(1) Unless noted, the address of each shareholder is c/o Stewardship
Financial Corporation, 630 Godwin Avenue, Midland Park, New Jersey
07432-1405.
14
(2) Beneficially owned shares include shares over which the named
person exercises either sole or shared voting power or sole or shared
investment power. They also include shares owned (i) by a spouse, minor
children or by relatives sharing the same home, (ii) by entities owned
or controlled by the named person and (iii) if the named person has the
right to acquire such shares within 60 days by the exercise of any
right or option. Unless otherwise noted, all shares are owned of record
and beneficially by the named person, either directly or through the
Corporation's Dividend Reinvestment Plan.
(3) Includes 138,386 shares held by Mr. Almroth's spouse in her own
name. Mr. Almroth's address is 210 Totowa Road, Wayne, New Jersey,
07470.
(4) Includes 7,658 shares issuable upon exercise of stock options
exercisable within 60 days of March 24, 2006.
(5) Includes 33,304 shares held jointly by Mr. Hanse and his spouse;
9,977 shares held by Mr. Hanse's spouse in her own name; and 2,552
shares issuable upon exercise of stock options exercisable within 60
days of March 24, 2006. Mr. Hanse disclaims beneficial ownership of the
common stock held by his spouse.
(6) Includes 10,884 shares held jointly by Mrs. Lane and her spouse;
745 shares held by Mrs. Lane's spouse as custodian for their children;
and 2,552 shares issuable upon exercise of stock options exercisable
within 60 days of March 24, 2006. Mrs. Lane disclaims beneficial
ownership of the common stock held by her spouse.
(7) Includes 14,990 shares held jointly by Mr. Leegwater and his
spouse; 21,354 shares held by trusts of which Mr. Leegwater is the
trustee; and 2,553 shares issuable upon exercise of stock options
exercisable within 60 days of March 24, 2006. Mr. Leegwater disclaims
beneficial ownership of the common stock owned by his spouse.
(8) Includes 2,553 shares issuable upon exercise of stock options
exercisable within 60 days of March 24, 2006.
(9) Includes 24,330 shares held jointly by Mr. Turner and his spouse;
3,157 shares held by Mr. Turner's spouse in her own name; and 12,762
shares issuable upon exercise of stock options exercisable within 60
days of March 24, 2006. Mr. Turner disclaims beneficial ownership of
the common stock held by his spouse.
(10) Includes 43,131 shares held by Mr. Vander Eems' spouse in her own
name; 10,100 shares held by Mr. Vander Eems as custodian for his child;
and 5,105 shares issuable upon exercise of stock options exercisable
within 60 days of March 24, 2006. Mr. Vander Eems disclaims beneficial
ownership of the common stock held by his spouse.
(11) Includes 676 shares held by Mr. Van Ostenbridge's immediate family
members and 46,937 shares issuable upon exercise of stock options
exercisable within 60 days of March 24, 2006.
(12) Includes 169,979 shares held by Mr. Van Wingerden and his spouse.
Includes 2,553 shares issuable upon exercise of stock options
exercisable within 60 days of March 24, 2006. Mr. Van Wingerden
disclaims beneficial ownership of the common stock held by his spouse.
(13) Includes 2,552 shares issuable upon exercise of stock options
exercisable within 60 days of March 24, 2006.
(14) Includes 302 shares held by Mr. Yeaton and his spouse. Includes
2,552 shares issuable upon exercise of stock options exercisable within
60 days of March 24, 2006. Mr. Yeaton disclaims beneficial ownership of
the common stock held by his spouse.
15
(15) Includes 11,760 shares issuable upon exercise of stock options
exercisable within 60 days of March 24, 2006.
(16) Includes 771 shares issuable upon exercise of stock options
exercisable within 60 days of March 24, 2006.
REPORT OF THE AUDIT COMMITTEE
The role of the Audit Committee is to assist the Board of Directors in
its oversight of the quality and integrity of the Corporation's financial
reporting process. We meet with both the independent auditors and the internal
auditors, each of whom has unrestricted access to the committee. We also meet
with management periodically to consider the adequacy of the Corporation's
internal controls and the objectivity of its financial reporting. We discuss
these matters with the independent auditors, internal auditors and appropriate
financial personnel of the Corporation.
The directors who serve on the committee are all "independent" for the
purposes of Rule 42000(a)(15) of the NASDAQ's listing standards. That is, the
Board of Directors has determined that none of us has a relationship with the
Corporation and the Bank that may interfere with our independence from the
Corporation and its management.
Management has primary responsibility for the Corporation's financial
statements and the overall reporting process, including the Corporation's system
of internal controls. The independent auditors audit the financial statements
prepared by management, express an opinion as to whether those financial
statements fairly present the financial position, results of operations, and
cash flows of the Corporation in conformity with generally accepted accounting
principles and discuss with us any issues they believe should be raised with us.
This year, we reviewed the Corporation's audited financial statements
and met with both management and KPMG LLP, the Corporation's independent
auditors, to discuss those financial statements. Management has represented to
us that the financial statements were prepared in accordance with generally
accepted accounting principles.
We have received from and discussed with KPMG LLP the written
disclosure and the letter required by Independence Standards Boards No. 1
(Independence Discussions with Audit Committees). These items relate to that
firm's independence from the Corporation. We also discussed with KPMG LLP any
matters required to be discussed by Statement on Auditing Standards No. 61
(Communication with Audit Committees).
Based on these reviews and discussions, we recommended to the Board
that the Corporation's audited financial statements be included in the
Corporation's Annual Report on Form 10-K for the fiscal year ended December 31,
2005.
Submitted by:
Audit Committee
Harold Dyer, Chairman
John L. Steen
Michael Westra, CPA
Howard Yeaton, CPA
16
INDEPENDENT AUDITORS
The Audit Committee of the Board of Directors of the Corporation and
the Bank has recommended the engagement of Crowe Chizek and Company LLP to act
as independent public accountants for the Corporation and the Bank for the
fiscal year ending December 31, 2006. KPMG LLP has acted as the Corporation's
and the Bank's independent public accountants for the fiscal years ended
December 31, 1996 through 2005.
During the Corporation's two most recent fiscal years and through March
10, 2006, the date the audit committee recommended the engagement of Crowe
Chizek and Company LLP ("Crowe"), neither the Corporation nor anyone acting on
the Corporation's behalf consulted with Crowe regarding (1) the application of
accounting principles to a specified transaction or the type of audit opinion
that might be rendered on the Corporation's financial statements or (2) any of
the matters or events set forth in Item 304(a)(2)(ii) of Regulation S-K.
In connection with the audits of the Corporation's consolidated
financial statements for the fiscal years ended December 31, 2005 and 2004 and
the subsequent period through March 10, 2006, there were: (1) no disagreements
with KPMG on any matter of accounting principles or practices, financial
statement disclosure, or auditing scope or procedures, which disagreements if
not resolved to KPMG's satisfaction would have caused them to make reference in
connection with their opinion to the subject matter of the disagreement, or (2)
no reportable events. Further, the audit reports of KPMG on the Corporation's
consolidated financial statements as of and for the years ending December 31,
2005 and 2004 did not contain any adverse opinion or a disclaimer of opinion,
nor were they qualified or modified as to uncertainty, audit scope or accounting
principles.
KPMG LLP has advised the Corporation that one or more of its
representatives will be present at the Annual Meeting to make a statement if
they so desire and to respond to appropriate questions.
Fees Billed by KPMG During Fiscal Year 2005 and Fiscal Year 2004
Audit Fees
The aggregate fees billed for professional services by KPMG LLP in
connection with the audit of the financial statements for the fiscal year ended
2005, and the reviews of the financial statements for each of the first three
fiscal quarters in 2005, were approximately $90,000. The aggregate fees billed
for professional services by KPMG LLP in connection with the audit of the
financial statements for the fiscal year ended 2004, and the reviews of the
financial statements for each of the first three fiscal quarters in 2004, were
approximately $65,000.
Audit-Related Fees
There were no fees billed for audit-related fees by KPMG LLP for the
fiscal years ended 2005 and 2004, respectively.
Tax Fees
KPMG LLP billed the Corporation $24,750 and $21,500 for the fiscal
years ended 2005 and 2004, respectively, for tax compliance services.
17
All Other Fees
There were no other fees billed by KPMG LLP for the fiscal years ended
2005 and 2004, respectively.
The Audit Committee has considered whether the provision of non-audit
services is compatible with maintaining the independence of KPMG LLP.
Pre-Approval of Audit and Permissible Non-Audit Services
The Audit Committee pre-approves all audit and permissible non-audit
services provided by the independent auditors. These services may include audit
services, audit-related services, tax services and other services. The Audit
Committee has adopted a policy for the pre-approval of services provided by the
independent auditors. Under the policy, pre-approval is generally provided for
up to one year and any pre-approval is detailed as to the particular service or
category of services and is subject to a specific budget. In addition, the Audit
Committee may pre-approve particular services on a case-by-case basis. For each
proposed service, the independent auditor is required to provide detailed
back-up documentation at the time of approval. All audit and permissible
non-audit services provided by KPMG LLP to the Corporation for the fiscal years
ended 2005 and 2004 were approved by the Audit Committee.
18
PERFORMANCE GRAPH
The Performance Line Graph presents the total return to the
Corporation's shareholders for the period December 31, 2000 through December 31,
2005. The Corporation's Common Stock is compared to the NASDAQ Composite Index
and a peer group consisting of ten banks located in the Mid-Atlantic region with
total asset size similar to that of the Corporation. The peer group consists of
1st Constitution Bancorp, Boardwalk Bank, Central Jersey Bancorp, Codorus Valley
Bancorp, Inc., Community Bank of Bergen County, First Morris Bank & Trust, Mid
Pen Bancorp, Sterling Bank, Sussex Bancorp and Unity Bancorp, Inc. The
information in this graph is not necessarily indicative of the Corporation's
future performance.
SSFN Nasdaq Composite Index Peer Index FWFC MBP CVLY PFIS SRCK EGBN CBNJ CRRB JFBC UNNF
100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
130.49 140.10 120.97 176.92 83.45 87.79 155.07 222.35 73.21 115.52 96.55 113.14 85.72
144.83 260.51 112.59 185.77 87.82 91.80 173.25 107.97 75.00 105.66 91.04 126.53 81.08
141.48 158.57 96.54 160.19 62.01 88.65 148.69 64.26 74.78 105.35 73.38 123.88 64.23
162.52 125.59 114.10 166.79 78.55 82.49 174.46 80.64 126.87 126.09 83.66 145.50 75.90
169.25 86.40 153.94 183.47 98.40 99.98 199.60 77.36 170.75 224.98 93.77 298.04 93.05
SSFN Nasdaq Composite Index Peer Index FWFC MBP CVLY PFIS SRCK EGBN CBNJ CRRB JFBC UNNF
100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
110.99 185.95 93.30 127.75 91.47 105.00 83.20 87.91 56.64 82.50 102.44 90.81 105.24
108.42 113.19 79.36 88.75 91.20 90.54 104.49 88.46 18.88 61.03 102.13 73.83 74.31
124.54 89.64 107.98 178.27 109.15 94.27 106.43 107.79 61.36 61.19 173.29 93.95 94.13
129.70 61.67 143.34 254.41 194.76 103.70 109.02 183.17 77.78 60.78 233.22 98.63 117.92
240.43 92.90 184.20 290.44 257.87 169.78 176.46 190.55 113.59 82.48 301.68 119.71 139.47
SSFN Nasdaq Composite Index Peer Index FWFC MBP CVLY PFIS SRCK EGBN CBNJ CRRB JFBC UNNF
100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
97.69 60.87 81.68 69.47 76.95 125.59 33.33 80.88 73.98 97.78 80.99 81.30 96.57
112.21 48.21 109.59 139.55 107.49 127.92 108.33 90.00 74.17 138.91 116.16 103.46 89.86
116.86 33.17 127.41 199.14 122.22 131.04 137.33 115.88 73.67 170.29 106.97 108.62 108.91
223.42 49.96 180.53 227.35 162.58 212.09 200.57 165.37 99.98 314.21 130.87 131.83 160.45
222.02 54.51 230.86 271.69 267.06 217.12 238.52 225.88 115.01 496.66 148.85 168.66 159.10
SSFN Nasdaq Composite Index Peer Index FWFC MBP CVLY PFIS SRCK EGBN CBNJ CRRB JFBC UNNF
100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
114.87 79.20 129.67 200.87 139.68 101.85 137.59 111.27 100.26 142.07 143.42 126.67 93.05
119.63 54.49 151.17 286.65 158.82 104.34 141.32 143.27 99.58 174.15 132.08 158.68 112.78
228.71 82.08 220.84 327.26 211.27 168.87 324.66 204.46 135.15 321.34 161.58 187.68 166.15
227.28 89.55 281.98 391.08 347.05 172.88 386.09 279.27 155.47 507.93 183.79 231.47 164.76
223.78 91.42 286.41 476.11 327.21 176.78 448.98 269.81 199.38 382.47 185.42 219.39 178.53
19
COMPLIANCE WITH SECTION 16(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the
Corporation's officers and directors, and persons who own more than 10% of a
registered class of the Corporation's equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange Commission.
Officers, directors and greater than 10% shareholders are required by regulation
of the Securities and Exchange Commission to furnish the Corporation with copies
of all Section 16(a) forms they file.
Based solely on its review of the copies of such forms received by it,
or written representations from certain reporting persons, the Corporation
believes that, during the fiscal year ended December 31, 2005, all filing
requirements applicable to its officers, directors and greater than 10%
shareholders were timely met except for Julie Holland (2 late Form 4 filings),
Arie Leegwater (1 late Form 4 filings), Tim Madden (2 late Form 4 filings), Paul
Van Ostenbridge (2 late Form 4 filings), Abe Van Wingerden (8 late Form 4
filings), Michael Westra (3 late Form 4 filings), and Howard Yeaton (3 late Form
4 filings). The late filings for Julie Holland, Tim Madden, and Paul Van
Ostenbridge were to report stock purchases from the Employee Stock Purchase
Plan. The late filings for Abe Van Wingerden, Michael Westra, and Howard Yeaton
were to report stock purchases from the Directors Stock Purchase Plan.
Procedures have been put in place as of March 30, 2006 to timely file these
types of purchases in the future.
ANNUAL REPORT ON FORM 10-K
The Corporation will furnish without charge its annual report on Form
10-K upon receipt of your written request. Requests should be sent to the
Secretary of the Corporation at 630 Godwin Avenue, Midland Park, New Jersey
07432.
SHAREHOLDER PROPOSALS
Shareholders who wish to present proposals to be included in the Corporation's
2007 proxy materials must submit such proposals to the Secretary of the
Corporation at 630 Godwin Avenue, Midland Park, New Jersey 07432 by December 6,
2006. For any proposal that is not submitted for inclusion in next year's proxy
materials, but is instead sought to be presented directly at the 2007 Annual
Meeting, SEC rules permit the Corporation to exercise discretionary voting
authority to the extent conferred by proxy if the Corporation: (1) receives
notice of the proposal before February 19, 2007 and advises shareholders in the
2007 proxy statement of the nature of the proposal and how management intends to
vote on such matter or (2) does not receive notice of the proposal before
February 19, 2007. Notices of intention to present proposals at the 2007 Annual
Meeting should be submitted to the Secretary of the Corporation at 630 Godwin
Avenue, Midland Park, New Jersey 07432.
OTHER MATTERS
The Board of Directors is not aware of any other matters which may come before
the Annual Meeting; however, in the event such other matters come before the
meeting, it is the intention of the persons named in the proxy to vote on any
such matters in accordance with the recommendation of the Board of Directors.
20
EXHIBIT A.
THIS DOCUMENT CONSTITUTES PART OF A PROSPECTUS COVERING SECURITIES THAT
HAVE BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933
May, 2006
[LOGO STEWARDSHIP FINANCIAL CORPORATION]
2006 STOCK OPTION PLAN
FOR NON-EMPLOYEE DIRECTORS
Section 1. Purpose
The Stewardship Financial Corporation 2006 Stock Option Plan for
Non-Employee Directors (the "Plan") is hereby established to foster and promote
the long term success of Stewardship Financial Corporation (the "Corp.") and its
shareholders by providing directors who are not employees with an opportunity to
establish an equity interest in the Corp. The Plan will assist the Corp. and its
subsidiaries in attracting and retaining the highest quality of experienced
persons as directors and in aligning the interest of non-employee directors of
the Corp. more closely with the interest of the Corp.'s shareholders.
Section 2. Definitions
Capitalized terms not specifically defined elsewhere herein shall have
the following meanings:
"Act" shall mean the Securities Exchange Act of 1934, as amended from
time to time, and the rules and regulations promulgated thereunder.
"Board" shall mean the Board of Directors of the Corp.
"Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time, and the regulations promulgated thereunder.
"Committee" shall mean the Compensation Committee of the Board, which
shall consist of two (2) or more directors of the Board to administer the Plan
and perform the functions set forth herein.
"Common Stock" or "Stock" shall mean the common stock, no par value, of
the Corp.
"Corp." shall mean Stewardship Financial Corporation and any present or
future subsidiary corporations of Stewardship Financial Corporation (as defined
in Section 424 of the Code) or any successor to such corporations.
"Disability" shall mean permanent and total disability which if the
Non-Employee Director were an employee of the Corp. would be treated as a total
disability under the term of the Corp.'s long term disability plan for employees
as in effect from time to time.
"Fair Market Value" means, with respect to a share of Common Stock, the
fair market value as determined by the Committee in good faith and in a manner
established by the Committee from time to time using a reasonable method;
provided, however, if the shares of Common Stock are "last sale reported over
the counter securities," then the "Fair Market Value" of such shares on any date
shall be the average of the high and low prices for the Common Stock reported in
the consolidated reporting system, or the average of the bid and asked prices
(if the shares of Common Stock are over the counter securities), on the business
day immediately preceding the date in question, as reported on the NASDAQ
system. If there is no such reported price for the Common Stock for the date in
question, then such price on the last preceding date for which such price exists
shall be determinative of Fair Market Value.
"Non-Employee Director" shall mean a member of the Board who is not an
employee of the Corp.
"Plan" shall mean the Stewardship Financial Corporation 2006 Stock
Option Plan for Non-Employee Directors.
"Stock Option(s)" or "Option(s)" shall mean a right or rights to
purchase Common Stock of the Corp. granted to a Non-Employee Director pursuant
to the Plan, which is not intended to be an incentive stock option under Section
422 of the Code.
Section 3. Administration
(a) The Plan shall be administered by the Committee, which shall hold
meetings at such times as may be necessary for the proper administration of the
Plan. Any action of the Committee with respect to the administration of the Plan
shall be taken by a majority vote, or by unanimous written consent of its
members.
(b) Subject to the express terms and conditions set forth herein, the
Committee shall have the power from time to time:
(i) to construe and interpret the Plan, any Stock Option
Agreement described in Section 6(e) and the Stock Options granted hereunder and
thereunder and to establish, amend and revoke rules, regulations, guidelines and
practices for the administration of the Plan as it shall from time to time
consider advisable, including, but not limited to, correcting any defect or
supplying any omission, or reconciling any inconsistency in the Plan or in any
Stock Option, in the manner and to the extent it shall deem necessary or
advisable to make the Plan fully effective; provided, however, that the
Committee shall have no discretion with respect to designating (x) the recipient
of Stock Options, (y) the number of shares of Common Stock that are subject to a
Stock Option, or (z) the exercise price for a Stock Option. All decisions and
determinations by the Committee in the exercise of this power shall be final and
binding upon the Corp. and the Non-Employee Directors; and
(ii) to exercise such powers and to perform such acts as are
deemed necessary or advisable to promote the best interests of the Corp. with
respect to the Plan.
2
(c) The Committee may employ such legal counsel, consultants and agents
as it may deem desirable for the administration of the Plan and may rely upon
any opinion received from any such counsel or consultant and any computation
received from any such consultant or agent.
Section 4. Eligibility and Participation
Each Non-Employee Director of the Corporation shall participate in the
Plan.
Section 5. Common Stock Subject to Plan
(a) The maximum number of shares of Common Stock that may be made
subject to Stock Options granted pursuant to the Plan is 60,000, subject to the
adjustments provided for in Section 9. The Corp. shall reserve such number of
shares of Common Stock for the purposes of the Plan, out of its authorized but
unissued Common Stock, as shall be determined by the Board. No fractional shares
of Common Stock shall be issued with respect to Stock Options granted under the
Plan.
(b) If any Stock Option in respect of shares of Common Stock expires or
is canceled without having been fully exercised, the number of shares subject to
such Stock Option, but as to which such Stock Option was not exercised prior to
its expiration or cancellation may again be available for the grant of Stock
Options under the Plan.
Section 6. Grant of Stock Options
(a) Directors in Office on May 15, 2006. On May 15, 2006, the Corp.
------------------------------------
shall grant to each Non-Employee Director in office on May 15, 2006 Stock
Options to purchase 5,000 shares of Common Stock, subject to the vesting
schedule and other conditions referred to in Section 7(g) hereof.
(b) New Directors. The Corp. shall grant to individuals who become
--------------
Non-Employee Directors on or after May 15, 2006 Stock Options in accordance with
the table below:
---------------------------------------------------------------------------------------
The Corp. shall award to Persons who Become Number of shares of Common Stock
Non-Employee Directors subject to Stock Option grants
---------------------------------------------------------------------------------------
On or after May 15, 2006 and before May 15, Stock Options to purchase 5,000 shares of
2007 Common Stock
---------------------------------------------------------------------------------------
On or after May 15, 2007 and before May 15, Stock Options to purchase 4,000 shares of
2008 Common Stock
---------------------------------------------------------------------------------------
On or after May 15, 2008 and before May 15, Stock Options to purchase 3,000 shares of
2009 Common Stock
---------------------------------------------------------------------------------------
On or after May 15, 2009 and before May 15, Stock Options to purchase 2,000 shares of
2010 Common Stock
---------------------------------------------------------------------------------------
On or after May 15, 2010 and before May 15, Stock Options to purchase 1,000 shares of
2011 Common Stock
---------------------------------------------------------------------------------------
On and after May 15, 2011 -0-
---------------------------------------------------------------------------------------
(c) Date of Grant. The date of grant of Stock Options shall be the date
-------------
such Non-Employee Director takes office, or the date provided in the written
instrument evidencing such grant, whichever is later.
(d) Non-Statutory Options. All Stock Options granted under the Plan
----------------------
shall be non-statutory options not entitled to special tax treatment under
Section 422 of the Code.
3
(e) Option Agreement. The grant of any Stock Option shall be evidenced
----------------
by a written agreement delivered to the Non-Employee Director which shall state
the number of shares of Common Stock that are subject to the Stock Option, the
exercise price, the term of the Stock Option, and other terms, as the Committee
may deem appropriate, that are not inconsistent with requirements of this Plan.
Section 7. Terms and Conditions
(a) The purchase price of the shares of Common Stock subject to each
Stock Option shall be 100 percent of the Fair Market Value of such Common Stock
on the day such Stock Option is granted, or the par value of such shares of
Common Stock, whichever is greater. All Stock Options shall have a term of six
(6) years from the date of grant subject to earlier termination pursuant to the
terms set forth herein.
(b) In the event a Non-Employee Director's membership on the Board
ceases by reason of his Disability or death, all Stock Options held by such
Non-Employee Director shall become immediately exercisable, and may be exercised
by the Non-Employee Director or his executor or administrator at any time prior
to the expiration of the stated term of such Stock Options, or within one (1)
year following his cessation of Board membership, whichever period is shorter.
(c) In the event a Non-Employee Director's membership on the Board
ceases for any reason other than death, Disability or as provided in Section
7(d) herein, all Stock Options then held and exercisable by such Non-Employee
Director may be exercised at any time prior to the expiration of the stated term
of such Stock Options, or within a period of three (3) months from the date of
such cessation of Board membership, whichever period is shorter.
(d) In the event a Non-Employee Director's membership on the Board
ceases on or after he has attained age 72 for reasons other than death or
Disability, any Stock Options then held and exercisable by such Non-Employee
Director may be exercised at any time prior to the expiration of the term of the
Stock Options or within three (3) years following his cessation of Board
membership, whichever is shorter.
(e) If a Non-Employee Director becomes an employee of the Corp. or any
of its subsidiaries, the Non-Employee Director shall be treated as continuing in
service for purposes of this Plan, but shall not be eligible to receive future
grants hereunder while an employee. If the Non-Employee Director's service as an
employee terminates without his again becoming a Non-Employee Director, the
provisions of this Section 7 shall apply as if such termination of employment
were the termination of the Non-Employee Director's membership on the Board.
(f) Except as otherwise provided in this Section 7, no Stock Option
under the Plan shall be assignable or transferable by the Non-Employee Director,
and any attempted disposition thereof shall be null and void and of no effect.
Nothing in this Section 7 shall prevent transfers by will or by the applicable
laws of descent and distribution. During the life of a Non-Employee Director, a
Stock Option shall be exercisable only by such Non-Employee Director or the
Non-Employee Director's appointed guardian or legal representative.
(g) It is understood and agreed that Stock Options are subject to the
following terms and conditions:
(i) Expiration Date. Stock Options shall expire at the close
----------------
of business on May 15, 2012 (such date being no later than the sixth anniversary
of the date of grant), or as otherwise specified in subparagraphs of this
section 7.
4
(ii) Exercise of Option. Stock Options may only be exercised
------------------
on or after the following dates for the number of shares of Common Stock
specified below; provided, however that no Stock Option shall be or become
exercisable on any date that is less than six months from the date of grant of
such Stock Option in accordance with Section 6 hereof.
--------------------------------------------------------------------------------
On or After Stock Options May be Exercised for
--------------------------------------------------------------------------------
May 15, 2007 1,000 shares of Common Stock
--------------------------------------------------------------------------------
May 15, 2008 1,000 shares of Common Stock
--------------------------------------------------------------------------------
May 15, 2009 1,000 shares of Common Stock
--------------------------------------------------------------------------------
May 15, 2010 1,000 shares of Common Stock
--------------------------------------------------------------------------------
May 15, 2011 1,000 shares of Common Stock
--------------------------------------------------------------------------------
Notwithstanding the foregoing (i) in the event a Non-Employee Director
ceases membership on the Board at or after age 72 for reasons other
than death or Disability, all Stock Options held by such Non-Employee
Director shall become immediately exercisable, or (ii) in the event a
Non-Employee Director ceases membership on the Board prior to age 72
for reasons other than death or Disability, the Committee may
accelerate the vesting of all or part of the Stock Options held by such
Non-Employee Director, in its sole and absolute discretion. In the
event a Non-Employee Director's vesting schedule is accelerated
pursuant to this provision, such Non-Employee Director shall exercise
his Stock Options in accordance with Section 8 hereof.
Section 8. Exercise of Option
(a) Any Stock Option may be exercised in whole or in part at any time
subsequent to such Stock Option becoming exercisable during the term of such
Stock Option; provided, however, that each partial exercise shall be for a
minimum of 100 whole shares of Common Stock only. No fractional shares may be
purchased under this Plan.
(b) Options may be exercised by written notice of exercise accompanied
by payment of the exercise price in full for the purchased shares of Common
Stock in cash or by certified or cashier's check payable to the Corp. or, unless
otherwise prohibited by the terms of the grant agreement, by surrender to the
Corp. of shares of Stock already owned by the Non-Employee Director based on the
Fair Market Value of the Stock on the date the Option is exercised.
(c) In the event that any Stock Option shall be exercised pursuant
to Section 7 by any person or persons other than the
Non-Employee Director, appropriate proof of the right of such
person or persons to exercise such Stock Option must be
provided to the Corp.
Section 9. Capital Adjustments and Corporate Reorganizations
(a) If, through or as a result of any merger, consolidation, sale of
all or substantially all of the assets of the Corp., reorganization,
recapitalization, reclassification, stock dividend, stock split up, spin-off,
combination, exchange of shares, reverse stock split, or other similar
transaction, (i) the outstanding shares of Common Stock are increased or
decreased or are exchanged for a different number or kind of shares or other
securities of the Corp. or (ii) new, different or additional shares or other
securities of the Corp. or other non-cash assets are distributed with respect to
such shares of Common Stock or other
5
securities, an appropriate and proportionate adjustment shall automatically be
made in (x) the maximum number and kind of shares of Common Stock reserved for
issuance under the Plan as set forth in Section 5, (y) the number and kind of
shares or other securities subject to the outstanding Stock Options under the
Plan, and (z) the purchase price for each share of Common Stock subject to any
then outstanding Stock Options under the Plan, without changing the aggregate
purchase price (except for any change resulting from rounding off of share
quantities or price as to which such Stock Options remain exercisable), provided
that no adjustment shall be made pursuant to this Section 9 if such adjustment
would cause the Plan to fail to comply with Rule 16b-3 of the Act. No fractional
shares will be issued under the Plan on account of any such adjustment.
(b) Except as otherwise provided in the instrument that evidences the
Stock Option, in the event of a consolidation, merger, reorganization or sale of
all or substantially all of the assets of the Corp. in which outstanding shares
of Common Stock are exchanged for securities, cash or other property of any
other corporation or business entity or in the event of a liquidation of the
Corp. (collectively an "Extraordinary Event"), (i) all Stock Options held by
such Non-Employee Director shall become immediately exercisable on the day which
is three (3) days (but excluding Saturdays, Sunday's and legal holidays) before
the date of consummation of the Extraordinary Event, (ii) holders of Stock
Options shall continue to have the right to exercise their unexercised but
currently exercisable Stock Options on or before the day before the date of
consummation of the Extraordinary Event, and (iii) the board of directors of any
corporation assuming the obligations of the Corp. (or any committee thereof),
may, in its discretion, take any one or more of the following actions, as to
outstanding Stock Options: (A) provide that such Stock Options shall be assumed,
or equivalent options shall be substituted, by the acquiring or succeeding
corporation (or an affiliate thereof), (B) upon written notice to the
Non-Employee Directors holding Stock Options, provide that all unexercised Stock
Options will terminate immediately prior to the consummation of such transaction
unless exercised by the Participant before the time specified in clause (ii)
above, (C) in the event of a merger under the terms of which holders of the
Common Stock of the Corp. will receive upon consummation thereof a cash payment
for each share surrendered in the merger (the "Merger Price"), make or provide
for a cash payment to the Non-Employee Directors holding Stock Options equal to
the difference between (x) the Merger Price times the number of shares of Common
Stock subject to such outstanding Stock Options (to the extent then exercisable
at prices not in excess of the Merger Price) and (y) the aggregate exercise
price of all such outstanding Stock Options in exchange for the termination of
such Stock Options, and (D) provide that all or any outstanding Stock Options
shall become exercisable in full immediately prior to such event; provided,
however that in no event shall the operation of the foregoing provisions be
permitted to cause the Non-Employee Director or the Plan to fail to comply with
Rule 16b-3 of the Act, and provided, further that in the unlikely event any
Stock Options issued under the Plan shall remain outstanding after giving effect
to the foregoing provisions, such Stock Options shall terminate on the date the
Extraordinary Event is consummated.
Section 10. General Provisions Applicable to Stock Options
(a) The Committee shall have no authority to take any action if the
authority to take such action, or the taking of such action, would disqualify
the Plan from the exception provided by Rule 16b-3 under the Act.
(b) Upon the issuance of shares of Common Stock in respect of a Stock
Option exercised by a Non-Employee Director such number of shares issuable shall
be reduced by the number of shares necessary to satisfy such Non-Employee
Director's federal, and where applicable state withholding tax
6
obligations. For withholding tax purposes, the value of the shares of Common
Stock shall be the Fair Market Value on the date the withholding obligation is
incurred. The Corp. may, to the extent permitted by law, deduct any such tax
obligations from any payment of any kind otherwise due to the Non-Employee
Director.
Section 11. Other Provisions
(a) The validity, interpretation and administration of the Plan and any
rules, regulations, determinations or decisions made thereunder, and the rights
of any and all persons having or claiming to have any interest therein or
thereunder, shall be determined exclusively in accordance with the laws of the
State of New Jersey, to the extent such state laws are not preempted by any laws
of the United States.
(b) As used herein, the masculine gender shall include the feminine
gender.
(c) The headings in the Plan are for reference purposes only and shall
not affect the meaning or interpretation of the Plan.
(d) All notices or other communications made or given pursuant to this
Plan shall be in writing and shall be sufficiently made or given if
hand-delivered or mailed by certified mail, addressed to any Non-Employee
Director at the address contained in the records of the Corp. or to the Corp. at
its principal office.
(e) Nothing in this Plan or in any Stock Option granted hereunder shall
confer upon any Non-Employee Director any right to continue to serve as a
director of the Corp. or shall interfere with or restrict in any way the right,
which right is hereby expressly reserved, to remove any Non-Employee Director as
a director in accordance with the by-laws and certificate of incorporation of
the Corp. and applicable law.
(f) The obligation of the Corp. to sell or deliver shares of Common
Stock with respect to Stock Options granted under the Plan shall be subject to
all applicable laws, rules and regulations, including all applicable federal and
state securities laws, and the obtaining of all such approvals by governmental
agencies as may be deemed necessary or appropriate by the Committee.
(g) The Plan is intended to comply with Rule 16b-3 promulgated under
the Act and is further intended to be administered in the manner specified in
paragraph (c)(2)(ii) of that Rule, and the Committee shall interpret and
administer the provisions of the Plan or any Stock Option in a manner consistent
therewith. Any provisions inconsistent with such Rule and paragraph shall be
inoperative and shall not affect the validity of the Plan.
(h) All expenses and costs incurred in connection with the operation of
the Plan shall be borne by the Corp.
(i) The adoption of the Plan shall not affect any other compensation of
incentive plans in effect for the Corp. Nothing in this Plan shall be construed
to limit the right of the Corp. to establish, alter or terminate any other forms
of incentives, benefits or compensation for directors of the Corp., including,
without limitation, conditioning the right to receive other incentives, benefits
or compensation on a director not participating in this Plan; or to grant or
assume options otherwise than under this Plan in connection with any proper
corporate purpose, including, without limitation, the grant or assumption of
stock options in connection with the acquisition by purchase, lease, merger,
consolidation or otherwise, of the business, stock, or assets of any
corporation, firm or association.
7
(j) Holders of Stock Options under the Plan shall have no rights
as shareholders of the Corp. unless and until certificates for
shares of Common Stock are registered in their names in
satisfaction of a properly exercised Stock Option.
(k) The terms of the Plan shall be binding upon the Corp., the
Non-Employee Directors and their successors and assigns.
Section 12. Amendment or Termination of the Plan
The Board may not terminate, suspend, amend or modify the Plan without approval
by the Corp.'s shareholders, except that the Board may amend or modify the Plan
and any stock option agreement made pursuant to Section 6(e) of the Plan in
order to conform the Plan to any applicable law, rule, regulation or accounting
requirement applicable to the Company, or to avoid any adverse consequence to
the company or the Plan under any of the foregoing. The termination or any
modifications or amendment of the Plan shall not, without the consent of a
Non-Employee Director, affect his rights under a Stock Option previously granted
to him. The Plan shall not be amended more than once every six months, other
than to comport with changes in the Code.
Section 13. Effective Date and Term of the Plan
The Plan shall be effective on the date it is first approved by the shareholders
of the Corp. Unless sooner terminated in accordance with Section 9, the Plan
shall terminate upon the close of business on the day next preceding the sixth
anniversary of the date of its adoption. Stock Options may not be granted under
this Plan after that date.
SUMMARY
-------
The Plan; Eligibility
---------------------
The 2006 Stock Option Plan for Non-Employee Directors (the "Plan") of
Stewardship Financial Corporation (the "Corp.") was approved by the shareholders
of Stewardship Financial Corporation on May 9, 2006. The purpose of the Plan is
to assist the Corp. and its subsidiaries in attracting and retaining highly
qualified persons to serve as members of the Board of Directors.
Administration of the Plan
--------------------------
The Plan is administered by the Compensation Committee of the Corp.'s Board of
Directors (the "Committee"). The members have been selected by the Board and
serve for a term of one (1) year, or until their successors are selected by the
Board. The Board may fill vacancies, however caused, in the Committee.
Any participant wishing to obtain additional information about the Plan and its
administrators should contact Stewardship Financial Corporation, Attn: Corporate
Services, 630 Godwin Avenue, Midland Park NJ 07432, telephone 877-844-BANK or
201-444-7100. The Corp.'s website is www.asbnow.com.
Certain Resale Restrictions
---------------------------
Participants who are directors, executive officers or beneficial owners of at
least 10% of the company's equity securities are deemed to be "affiliates" (i.e.
control persons) of the Corp., for purposes of the Securities Act of 1933, as
amended (the "Act"). Affiliates are required to comply with the requirements
8
(other than the two year holding period) of Rule 144 of the Securities and
Exchange Commission promulgated pursuant to the Act, with respect to offers and
sales of the shares of Common Stock acquired upon exercise of Stock Options,
unless those shares are registered by the Corp. pursuant to a separate
registration statement. The Corp. does not presently intend to file such a
registration statement in the foreseeable future.
The Plan qualifies for an exemption from certain restrictions imposed by Section
16 of the Securities Exchange Act of 1934 (the "Exchange Act").
Certain Tax Information
-----------------------
The Stock Options granted under the Plan will be treated as "non-statutory
options" for federal income tax purposes. The grant of a non-statutory option
which has no readily ascertainable fair market value at the time it is granted
is not taxable to the recipient of the option for federal income tax purposes at
the time the option is granted. The options granted under the Plan should be
considered as having no readily ascertainable fair market value at the time of
grant because they are neither tradable on an established market nor
transferable by the recipient.
The recipient of a non-statutory option realizes compensation taxable as
ordinary income at the time the option is exercised or transferred. The amount
of such compensation is equal to the amount by which the fair market value of
the stock acquired upon exercise of the option exceeds the amount required to be
paid for such stock. At the time the compensation income is realized by the
recipient of the option, the Corp. is entitled to an income tax deduction in the
amount of the compensation income, provided applicable rules pertaining to tax
withholding are satisfied and the compensation represents an ordinary and
necessary business expense of the Corp. The stock acquired upon exercise of the
option has an adjusted basis in the hands of the recipient equal to its fair
market value taken into account in determining the recipient's compensation and
a holding period commencing on the date the stock is acquired by the recipient.
At the time the stock is subsequently sold or otherwise disposed of by the
recipient, the recipient will recognize a taxable capital gain or loss measured
by the difference between the adjusted basis of the stock at the time it is
disposed of and the amount realized in connection with the transaction. The long
term or short term nature of such gain or loss will depend upon the applicable
holding period for such stock.
The foregoing is a summary of the Federal income tax consequences of the Plan,
and does not purport to be a complete statement of all possible tax
ramifications of the Plan to the Corp. or the Participants holding the Stock
Options. Participants should consult with their own tax advisers regarding the
tax consequences of participating in the Plan with respect to their own
particular circumstances, including the applicability of various foreign, state
and local laws.
The Plan is not qualified under Section 401(a) of the Code, nor is it subject to
the provisions of the Employee Retirement Income Security Act of 1974, as
amended.
Additional Information Available
--------------------------------
The following documents are available to Participants at no charge, upon
request: (i) the last 10K report of the Corp. for the fiscal year ended December
31, 2005, (ii) the Corp.'s last 10Q reports for the fiscal quarters ended March
30, June 30 and September 30, 2005, (iii) Stewardship Financial Corporation's
Registration Statement on Form 8-B filed with the Securities and Exchange
Commission on December 10, 1996 and (iv) the Corp.'s annual and periodic reports
subsequently filed with the Securities and Exchange Commission, all of which are
incorporated by reference in, and made a part of, the prospectus covering the
shares registered under the Plan. The Annual Report to the shareholders of the
Corp. for the
9
fiscal year ended December 31, 2005, as well as all documents constituting part
of the prospectus covering the shares registered under the Plan, are also
available to Participants at any time, free of charge, upon request. If
information regarding the Plan is updated, Participants will automatically be
sent such updated information, and will also receive, upon becoming stockholders
pursuant to the Plan, all items regularly furnished to stockholders of the
Corp., such as annual reports, interim reports and proxy statements.
Any Participant wishing to receive any of the foregoing documents should contact
Stewardship Financial Corporation, Attn: Corporate Services, 630 Godwin Avenue,
Midland Park NJ 07432, telephone 877-844-BANK or 201-444-7100. Items referred to
in the above paragraph are generally available on the website at www.asbnow.com.
10
NON-EMPLOYEE DIRECTORS STOCK OPTION AGREEMENT
Stewardship Financial Corporation, a New Jersey corporation, (the "Corp."),
hereby grants on this 15th day of May, 2006, to _________________ (the
"Optionee") an option to purchase a total of 1,000 shares of the common stock of
the Corp. (the "Number of Option Shares") under the 2006 Stock Option Plan for
Non-Employee Directors (the "Plan"), at an exercise price of $__________ per
share, and in the manner and subject to the provisions of this Option Agreement
(the "Option"). Unless otherwise provided in this Option Agreement, defined
terms shall have the meaning given to such terms in the Plan.
1) Grant of the Option. The Option is granted effective as of May 15,
-------------------
2006, (the "Date of Option Grant"). The Number of Option Shares and the exercise
price per share of the Option are subject to adjustment from time to time as
provided in paragraph 9 below.
2) Status of the Option. The Option shall be a non-statutory option not
--------------------
entitled to special tax treatment under Section 422 of the Code.
3) Term of the Option. The Option shall terminate and may no longer be
------------------
exercised on the first to occur of (a) the date which is six (6) years after the
date of the Option Grant (the "Option Term Date"), or (b) the last date for
exercising the Option following termination of the Optionee's director status
with the Corp. as described in paragraph 7 below.
4) Exercise of the option.
----------------------
(a) Right to Exercise. Unless otherwise determined by the
------------------
Board of Directors of the Corp. (the "Board") the Option shall be exercisable,
during the term of such stock option, in whole or in part at any time during the
option term, provided at least a minimum of 100 shares be purchased whenever a
stock option is exercised. In no event shall the Option be exercisable for more
shares than the number of Option Shares or for fractional shares. The Option may
only be exercised on or after the following dates for the number of shares of
Common Stock specified below:
On or After this Date Number of Shares
May 15, 2007 1,000
May 15, 2008 1,000
May 15, 2009 1,000
May 15, 2010 1,000
May 15, 2011 1,000
-----
5,000
The foregoing vesting schedule may be accelerated, however, as provided in
Sections 7(c), 7(g) and 9(b) of the Plan.
(b) Method of Exercise. The Option may be exercised by written
------------------
notice to the Corp. which must state the election to exercise the Option the
number of shares of common stock for which the Option is being exercised and
such other representations and agreements as to the Optionee's investment intent
with respect to such shares as may be required pursuant to the provisions of
this Option Agreement and the Plan. The written notice must be signed by the
Optionee and must be delivered in person or by certified or registered mail,
return receipt requested, to the Stock Compensation Committee or Corporate
Services of the Corp., prior to the termination of the Option as set forth in
paragraph 3 above, accompanied by full payment of the exercise price for the
number of shares of common stock being purchased in a form permitted under the
terms of the Plan.
1
(c) Withholding. At the time the Option is exercised, in whole
-----------
or in part, or at any time thereafter as requested by the Corp., the Optionee
shall make adequate provision for the foreign, federal and state tax withholding
obligations of the Corp., if any, which arise in connection with the Option,
including, without limitation obligations arising upon (i) the exercise, in
whole or in part, of the Option (ii) the transfer, in whole or in part, of any
shares of common stock acquired on exercise of the Option, (iii) the operation
of any laws or regulation providing for the imputation of interest, or (iv) the
lapsing of any restriction with respect to any shares of common stock acquired
on exercise of the Option.
5) Restrictions on Grant of the Option and Issuance or Shares. The
-------------------------------------------------------------
grant of the Option and the issuance of shares of common stock upon exercise of
the Option shall be subject to compliance with all applicable requirements of
federal or state law with respect to such securities. The Option may not be
exercised if the issuance of shares of common stock upon such exercise would
constitute a violation of any applicable federal or state securities laws or
other law or regulation. In addition, the Option may not be exercised unless (a)
a registration statement under the Securities Act of 1933, as amended (the
"Securities Act"), shall at the time of exercise of the Option be in effect with
respect to the shares of common stock issueable upon exercise of the Option or
(b) in the opinion of legal counsel to the Corp., the shares of common stock
issueable upon exercise of the Option may be issued in accordance with the terms
of an applicable exemption from the registration requirements of the Securities
Act. As a condition to the exercise of the Option, the Corp. may require the
Optionee to satisfy any qualifications that may be necessary or appropriate, to
evidence compliance with any applicable law or regulation and to make any
representation or warranty with respect thereto as may be required by the Corp.
6) Non-Transferability of the Option. The Option may be exercised
-----------------------------------
during the lifetime of the Optionee only by the Optionee and may not be assigned
or transferred in any manner except by will, or by the laws of descent and
distribution.
7) Termination. The terms and conditions of Section 7 and Section 9(b)
-----------
of the Plan are incorporated herein by reference as though set forth herein in
full.
8) Effect of Change in Stock Subject to the Option. Appropriate
-----------------------------------------------------
adjustments shall be made in the number, exercise price and class of shares of
stock subject to the Option in the event of a stock dividend, stock split,
reverse stock split, recapitalization combination, reclassification, or like
change in the capital structure of the Corp.
9) Rights as a Stockholder or Directors. The Optionee shall have no
--------------------------------------
rights as a stockholder with respect to any shares of common stock covered by
the Option until the date of the issuance of a certificate or certificates for
the shares for which the Option has been exercised. No adjustment shall be made
for dividends or distributions or other rights for which the record date is
prior to the date such certificate or certificates are issued, except as
provided in paragraph 9 above. Nothing in the Option shall confer upon the
Optionee any right to continue as a Director of the Corp. or interfere in any
way with any right of the Corp. to terminate the Optionee's Director status
provided by law.
10) Notice of Sales Upon Disqualifying Disposition. The Optionee shall
----------------------------------------------
dispose of the shares of common stock acquired on exercise of the Option only in
accordance with the provisions of this Option Agreement and the Plan.
11) Certificate Registration. The certificate or certificates for the
-------------------------
shares of common stock as to which the Option has been exercised shall be
registered in the name of the Optionee, or, if applicable, the heirs of the
Optionee.
2
12) Binding Effect. This Option Agreement shall inure to the benefit of
--------------
the successors and assigns of the Corp. and be binding upon the Optionee and the
Optionee's heirs, executors, administrators, successors and assigns.
13) Integrated Agreement. This Option Agreement and the Plan constitute
--------------------
the entire understanding and agreement of the Optionee and the Corp. with
respect to the subject matter contained therein and therein, and there are no
agreements, understandings, restrictions, representations, or warranties among
the Optionee an the Corp. other than those as set forth or provided for herein
and therein. To the extent contemplated herein and thereon, the provisions of
the Option agreement and the Plan shall survive any exercise of the Option and
shall remain in full force and effect.
14) Applicable Law. This Option Agreement shall be governed by the laws
--------------
of the State of New Jersey as such laws are applied to agreements between New
Jersey residents entered into and to be performed entirely within the State of
New Jersey.
15) Subject to Plan. Except as may be specifically set forth herein,
---------------
the rights of the Optionee are subject to all of the terms and conditions of the
Plan, the provisions of which are hereby incorporated by reference herein.
Stewardship Financial Corporation
----------------------------
Robert J. Turner, Chairperson
Compensation Committee
The Optionee represents that the Optionee is familiar with the terms and
provisions of this Option Agreement and the Plan, the receipt of a copy of which
is hereby acknowledged, and hereby accepts the Option subject to all of the
terms and provisions thereof. The Optionee hereby agrees to accept as binding,
conclusive and final all decisions or interpretations of the Board upon any
questions arising under this Option Agreement or the Plan.
Date: May 15, 2006
-----------------------------
Director
3
[X] PLEASE MARK VOTES REVOCABLE PROXY
AS IN THIS EXAMPLE STEWARDSHIP FINANCIAL CORPORATION
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 9, 2006
The undersigned hereby appoints Ruth Kuiken, Brian Hanse, and Paul Ruitenberg,
and each of them, with full power of substitution, as proxies for the
undersigned to attend the annual meeting of shareholders of Stewardship
Financial Corporation (the "Corporation"), to be held at the Christian Health
Care Center, Mountain Avenue entrance, Wyckoff, New Jersey 07481, on May 9,
2006, at 7:00 p.m., or any adjournment thereof, and to vote the number of shares
of Common Stock of the Corporation that the undersigned would be entitled to
vote, and with all the power the undersigned would possess, if personally
present, as follows:
With- For All
For hold Except
1. To elect the following nominees for [_] [_] [_]
election as directors:
Robert J. Turner
William J. Vander Eems
Paul Van Ostenbridge
INSTRUCTION: To withhold authority to vote for any individual nominee, mark "For
All Except" and write that nominee's name in the space provided below.
--------------------------------------------------------------------------------
For Against Abstain
2. To adopt the 2006 Stock Option Plan for [_] [_] [_]
Non-Employee Directors.
For Against Abstain
3. To ratify the appointment of Crowe Chizek [_] [_] [_]
and Company LLC as the Corporation's
independent accountants for the fiscal
year ending December 31, 2006.
The Proxies will vote as specified herein or, if a choice is not specified, they
will vote "FOR" the proposal set forth above. In their discretion, the Proxies
are authorized to vote upon such other matters as may properly come before the
meeting or any adjournment thereof.
This Proxy is solicited by the Board of Directors of the Corporation.
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Please be sure to sign and date | Date
this Proxy in the box below. |
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---Shareholder sign above---------------------Co-holder (if any) sign above-----
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^ Detach above card, sign, date and mail in postage-paid envelope provided. ^
STEWARDSHIP FINANCIAL CORPORATION
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When shares are held by two or more persons as joint tenants, both or all
should sign. When signing as attorney, 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.
PLEASE ACT PROMPTLY
SIGN, DATE & MAIL YOUR PROXY CARD TODAY
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IF YOUR ADDRESS HAS CHANGED, PLEASE CORRECT THE ADDRESS IN THE SPACE PROVIDED
BELOW AND RETURN THIS PORTION WITH THE PROXY IN THE ENVELOPE PROVIDED.
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