UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
SCHEDULE 14A
(RULE 14a-101)
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
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 Section 240.14a-12
CENTRAL FEDERAL CORPORATION
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement)
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 calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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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:
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(2) Form, Schedule or Registration Statement No.:
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(4) Date Filed:
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(LOGO)
2923 Smith Road Fairlawn, Ohio 44333 (330) 666-7979
April 15, 2005
Fellow Shareholders:
You are cordially invited to attend the Annual Meeting of shareholders of
Central Federal Corporation which will be held at the CFBank Fairlawn office
located at 2923 Smith Road, Fairlawn, Ohio on Thursday, May 19, 2005 at 10:00
a.m., local time.
The attached notice of the Annual Meeting and proxy statement describe the
formal business to be transacted at the Meeting. Directors and officers of the
Company, as well as a representative of Crowe Chizek and Company LLC, the
Company's independent auditors, will be present at the Meeting to respond to any
questions that shareholders may have regarding the business to be transacted. In
addition, the Meeting will include management's report on the Company's
financial performance for 2004.
The Board of Directors of Central Federal Corporation has determined that
matters to be considered at the Annual Meeting are in the best interests of the
Company and its shareholders, AND THE BOARD UNANIMOUSLY RECOMMENDS THAT YOU VOTE
"FOR" THE NOMINEES AS DIRECTORS SPECIFIED UNDER PROPOSAL 1, "FOR" APPROVAL OF
THE SECOND AMENDED AND RESTATED 2003 EQUITY COMPENSATION PLAN AS SPECIFIED UNDER
PROPOSAL 2, AND "FOR" RATIFICATION OF THE APPOINTMENT OF CROWE CHIZEK AND
COMPANY LLC AS INDEPENDENT AUDITORS OF THE COMPANY FOR 2005 AS SPECIFIED UNDER
PROPOSAL 3.
Your vote is very important. Whether or not you expect to attend, please
read the enclosed proxy statement and then complete, sign and return the
enclosed proxy card promptly in the postage-paid envelope provided so that your
shares will be represented. If you attend the Meeting, you may vote in person
even if you have previously mailed a proxy card.
On behalf of the Board of Directors and all of the employees, thank you for
your continued interest and support.
Sincerely yours,
/s/ David C. Vernon
David C. Vernon
Chairman
/s/ Mark S. Allio
Mark S. Allio
Vice Chairman, President and Chief Executive Officer
CENTRAL FEDERAL CORPORATION.
2923 SMITH ROAD
FAIRLAWN, OHIO 44333
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 19, 2005
NOTICE IS HEREBY GIVEN that the Annual Meeting of shareholders of Central
Federal Corporation will be held Thursday, May 19, 2005 at the CFBank Fairlawn
office located at 2923 Smith Road, Fairlawn, Ohio at 10:00 a.m., local time.
The purpose of the Meeting is to consider and vote upon the following
matters:
1. The election of two Directors for terms of three years each, or until
their successors are elected and qualified;
2. The approval of the Second Amended and Restated 2003 Equity Compensation
Plan;
3. The ratification of the appointment of Crowe Chizek and Company LLC as
independent auditors of the Company for the year ending December 31,
2005, and;
4. Such other matters as may properly come before the Meeting. The Board of
Directors is not aware of any other business to come before the Meeting.
Record holders of the common stock of Central Federal Corporation at the
close of business on April 8, 2005 are entitled to receive notice of the Meeting
and to vote at the Meeting and any adjournments or postponement of the Meeting.
The Meeting may be adjourned to permit the Company to solicit additional proxies
in the event that there are insufficient votes for a quorum or to approve or
ratify any of the aforementioned proposals at the time of the Meeting. A list of
shareholders entitled to vote will be available at the Meeting and for the ten
days preceding the Meeting at CFBank, 2923 Smith Road, Fairlawn, Ohio.
BY THE ORDER OF THE BOARD OF DIRECTORS
(/s/ Eloise L. Mackus)
Eloise L. Mackus
Corporate Secretary
Fairlawn, Ohio
April 15, 2005
IMPORTANT: THE PROMPT RETURN OF PROXIES WILL SAVE THE COMPANY THE EXPENSE
OF FURTHER REQUESTS FOR PROXIES IN ORDER TO ENSURE A QUORUM. A SELF-ADDRESSED
ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE. NO POSTAGE IS REQUIRED IF MAILED IN
THE UNITED STATES.
CENTRAL FEDERAL CORPORATION
PROXY STATEMENT
INFORMATION CONCERNING SOLICITATION AND VOTING
Your vote is very important. This proxy statement, proxy card and 2003
Annual Report are being sent on or about April 15, 2005, to shareholders of
Central Federal Corporation (the Company) in connection with the solicitation of
proxies by the Board of Directors for the Annual Meeting of Shareholders (the
Meeting). The Board of Directors encourages you to read this proxy statement
thoroughly and to take this opportunity to vote on the matters to be decided at
the Meeting.
VOTING PROCEDURES
WHO IS ENTITLED TO VOTE?
You are entitled to vote your common stock if the Company's records show
that you held your shares as of the close of business on April 8, 2005. As of
the close of business on that date, a total of 2,225,987 shares of common stock
were outstanding and entitled to vote. Each share of common stock is entitled to
one vote on each matter presented at the Meeting, except that, as provided in
the Company's Certificate of Incorporation, record holders of common stock who
beneficially own, either directly or indirectly, in excess of 10% of the
outstanding shares of common stock (the 10% limit) are not entitled to any vote
of their shares that are in excess of the 10% limit, and those shares are not
treated as outstanding for voting purposes.
A person or entity is deemed to beneficially own shares owned by an
affiliate of, as well as by persons acting in concert with, such person or
entity. The Company's Certificate of Incorporation authorizes the Board of
Directors (i) to make all determinations necessary to implement and apply the
10% limit, including determining whether persons or entities are acting in
concert and (ii) to demand that any person who is reasonably believed to
beneficially own stock in excess of the 10% limit supply information to the
Company to enable the Board of Directors to implement and apply the 10% limit.
HOW DO I VOTE?
Other than by attending the Meeting and voting in person, shareholders are
requested to vote by completing the enclosed proxy card and returning it signed
and dated in the enclosed postage-paid envelope. If you hold your shares through
a broker, bank or other nominee (i.e. in "street name"), you will receive
separate instructions from the nominee describing how to vote your shares.
WHAT ARE THE MATTERS TO BE PRESENTED?
There are three proposals that will be presented for your consideration at
the Meeting:
1) Election of two directors;
2) Approval of the Second Amended and Restated 2003 Equity
Compensation Plan; and
3) Ratification of appointment of independent auditors for 2005.
WHAT ARE THE VOTING RECOMMENDATIONS OF THE BOARD OF DIRECTORS?
The Company's Board of Directors is sending you this proxy statement for
the purpose of requesting that you allow your shares of Company common stock to
be represented at the Meeting by persons named in the enclosed proxy card. All
shares of Company common stock represented at the Meeting by properly executed
proxies will be voted according to the instructions indicated on the proxy card.
If you sign and return a proxy card without giving voting instructions, your
shares will be voted as recommended by the Company's Board of Directors.
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THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH NOMINEE TO THE BOARD OF
DIRECTORS, "FOR" APPROVAL OF THE SECOND AMENDED AND RESTATED 2003 EQUITY
COMPENSATION PLAN AND "FOR" RATIFICATION OF CROWE CHIZEK AND COMPANY LLC AS
INDEPENDENT AUDITORS.
WHAT VOTE IS REQUIRED FOR EACH PROPOSAL?
In voting on the election of Directors (Proposal 1), you may vote in favor
of any or all the nominees or withhold authority to vote for the nominees.
Directors are elected by a plurality of the votes cast. This means that the
nominees receiving the greatest number of votes will be elected. Votes that are
withheld and broker non-votes will have no effect on the outcome of the
election.
In voting on the Second Amended and Restated 2003 Equity Compensation Plan
(Proposal 2), the ratification of Crowe Chizek and Company LLC as independent
auditors of the Company (Proposal 3) and all other matters that may properly
come before the Meeting, you may vote in favor of the proposal, vote against the
proposal or abstain from voting. Under the Company's Bylaws and Delaware law, an
affirmative vote of the holders of a majority of the votes cast at the Meeting
on Proposal 2 or Proposal 3 is required to constitute shareholder approval.
Shares underlying broker non-votes or in excess of the 10% limit will not be
counted as present and entitled to vote or as votes cast and will have no effect
on the vote. If there are not sufficient votes for a quorum or to approve or
ratify any proposal at the time of the Meeting, the Meeting may be adjourned in
order to permit the further solicitation of proxies.
The Company is not aware of any other matters to be presented at the
Meeting. If any matters not described in this proxy statement are properly
presented at the Meeting, the persons named in the proxy card will use their
best judgment to determine how to vote your shares. This includes a motion to
adjourn or postpone the Meeting in order to solicit additional proxies. If the
Meeting is postponed or adjourned, your Company common stock may be voted by the
persons named on the proxy card on the new Meeting date as well, unless you have
revoked your proxy.
WHAT CONSTITUTES A QUORUM FOR THE MEETING?
The Meeting will be held if a quorum, consisting of a majority of
outstanding shares of common stock entitled to vote (after subtracting any
shares in excess of the 10% limit) is represented at the Meeting. If you return
valid proxy instructions or attend the Meeting in person, your shares will be
counted for purposes of determining whether there is a quorum, even if you
abstain from voting. Broker non-votes also will be counted for purposes of
determining a quorum. A broker non-vote occurs when a broker, bank, or other
nominee holding shares for a beneficial owner does not vote on a particular
proposal because the nominee does not have discretionary voting power with
respect to the item and has not received voting instruction from the beneficial
owner.
CAN I REVOKE OR CHANGE MY VOTE AFTER I SUBMIT MY PROXY?
You may revoke your proxy at any time before the vote is taken at the
Meeting. To revoke your proxy, you must either advise the Corporate Secretary of
the Company in writing before your common stock has been voted at the Meeting,
deliver to the Company another proxy that bears a later date, or attend the
Meeting and vote your shares in person. Attendance at the Meeting will not in
itself revoke your proxy. If your Company common stock is held in street name
and you wish to change your voting instructions after you have returned your
voting instruction form to your broker or bank, you must contact your broker or
bank.
WHO WILL COUNT THE VOTE?
The Company's transfer agent, Registrar and Transfer Company, will tally
the vote, which will be certified by an independent Inspector of Election. The
Board of Directors has designated Greg McClure of Crowe Chizek & Company LLC to
act as the inspector of election. Mr. McClure is not otherwise employed by or a
director of the Company or any of its affiliates. After the final adjournment of
the Meeting, the proxies will be returned to the Company.
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WHO CAN ATTEND THE MEETING?
If you are a shareholder of record as of the close of business on April 8,
2005, you may attend the Meeting. However, if you are a beneficial owner of
Company common stock held by a broker, bank or other nominee, you will need
proof of ownership to be admitted to the Meeting. A recent brokerage statement,
or letter from a bank or broker would serve as proof of ownership. If you want
to vote your shares of Company common stock held in street name in person at the
Meeting, you will have to get a written proxy in your name from the broker,
bank, or other nominee who holds your shares.
CORPORATE GOVERNANCE
GENERAL
The Company continues to review its corporate governance policies and
practices. This includes comparing its current policies and practices to
policies and practices suggested by various groups or authorities active in
corporate governance and practices of other public companies. Based upon this
review, the Company expects to adopt any changes that the Board of Directors
believes are the best corporate governance policies and practices for the
Company. The Company will adopt changes, as appropriate, to maintain compliance
with the Sarbanes-Oxley Act of 2002 and any rule changes made by the Securities
and Exchange Commission and the Nasdaq Stock Market, Inc.
CODE OF BUSINESS CONDUCT AND ETHICS
Since the Company's inception in 1998, it has had a Code of Business
Conduct and Ethics (Code of Conduct). The Company requires all directors,
officers and other employees to adhere to the Code of Conduct in addressing the
legal and ethical issues encountered in conducting their work. The Code of
Conduct requires that the Company's employees avoid conflicts of interest,
comply with all laws and other legal requirements, conduct business in an honest
and ethical manner and otherwise act with integrity and in the Company's best
interest. All of the Company's employees are required to certify that they
reviewed and understood the Code of Conduct. In addition, all officers and
senior level executives were required to certify as to any actual or potential
conflicts of interest involving them and the Company. The Company also provides
training for its employees on the Code of Conduct and their legal obligations.
Although the Company's Code of Conduct is applicable to all employees, including
its principal executive officer, principal financial officer and controller, and
generally meets the requirements of the Sarbanes-Oxley Act with respect to the
obligations of such persons, in 2004, the Company adopted a separate Financial
Code of Ethics specifically applicable to its principal executive officer,
principal financial officer and controller.
Employees are required to report any conduct that they believe in good
faith to be an actual or apparent violation of the Code of Conduct. The Code of
Conduct includes procedures to receive, retain and treat complaints received
regarding accounting, internal accounting controls or auditing matters and to
allow for the confidential and anonymous submission by employees of concerns
regarding questionable accounting or auditing matters.
The Company's Financial Code of Ethics, Code of Business Conduct and Ethics
and Procedure for Reporting Complaints are available on the Company's website at
www.CFBankonline.com under the caption "CF News and Links -- Investor Relations
-- Corporate Governance."
PROPOSAL 1. ELECTION OF DIRECTORS
The number of directors is fixed at seven. Two directors, Mr. Downing and
Mr. Grace, are to be elected to hold office until the Annual Meeting in 2008.
Notwithstanding the foregoing, each director will serve until his successor is
duly qualified and elected. The nominees are listed below. Should any nominee
decline or be unable to accept such nomination or be unable to serve, an event
which management does not now expect, the Board of Directors reserves the right
in its discretion to substitute another person as a nominee or to reduce the
number of
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nominees. In this event, the proxy holders may vote in their discretion for any
substitute nominee proposed by the Board of Directors unless you indicate
otherwise.
Both nominees currently are directors of the Company. There are no family
relationships among any of the directors and executive officers. No directors
hold directorships in other reporting companies. No person being nominated as a
director is being proposed for election pursuant to any agreement or
understanding between any such person and the Company. The following is
information regarding each nominee and each director continuing in office.
Unless otherwise stated, each individual has held his current occupation for at
least five years.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THE ELECTION OF THE
NOMINEES NAMED IN THIS PROXY STATEMENT.
NOMINEES
WILLIAM R. DOWNING has been President of R. H. Downing, Inc., an automotive
supply, sales and marketing agency in Akron, Ohio since June 1973. He is also
Chairman and Chief Executive Officer of JohnDow Industries, Inc., a manufacturer
and distributor of lubrication and fluid handling equipment which he founded in
1988. Age 59. Director since 2003.
GERRY W. GRACE has been President of Grace Services, Inc., a weed and pest
control company located in Canfield, Ohio since April 1980. Mr. Grace also has
served as a Trustee of Ellsworth Township, Ohio since January 1976. Age 65.
Director since 1986.
CONTINUING DIRECTORS
JEFFREY W. ALDRICH has been President and Chief Executive Officer of
Sterling China Co., a dishware manufacturing company in Wellsville, Ohio since
November 1970. Age 62. Director since 1979. Current term as director expires on
the date of the Annual Meeting in 2006.
MARK S. ALLIO has been the Vice-Chairman, President and Chief Executive
Officer of the Company and Vice-Chairman and Chief Executive Officer of the
Company's wholly owned subsidiary, CFBank (the "Bank") since February 1, 2005.
Mr. Allio was President and Chief Executive Officer of Rock Bank (in formation)
in Livonia, Michigan from April 2003 to December 2004, President of Third
Federal Savings, MHC in Cleveland, Ohio from January 2000 to December 2002,
Chief Financial Officer of Third Federal from 1988 through 1999, and has worked
in banking for more than 17 years. Age 50. Director since 2003. Current term as
director expires on the date of the Annual Meeting in 2006.
THOMAS P. ASH has been Superintendent of Schools, Mid-Ohio Educational
Service Center in Mansfield, Ohio since January 2000. Mr. Ash was the
Superintendent of Schools, East Liverpool City School District in East
Liverpool, Ohio from August 1984 to December 1999. Age 55. Director since 1985.
Current term as director expires on the date of the Annual Meeting in 2007.
DAVID C. VERNON has been Chairman of the Company and the Bank since January
2003. Mr. Vernon was Chief Executive Officer of the Company and Bank from
January 2003 to January 2005 and President of the company from March 2003 to
January 2005. Mr. Vernon was Chairman, President and Chief Executive Officer of
Founders Capital Corporation in Akron, Ohio from September 2002 to February
2003; a Strategic Planning Consultant to Westfield Bank in Westfield, Ohio from
May 2000 to July 2002; a Consultant to Champaign National Bank in Urbana, Ohio
from July 1999 to April 2002 and a Consultant to First Place Bank in Warren,
Ohio from April 1999 to February 2001. While serving as a Consultant to
Champaign National Bank, Mr. Vernon also served as a director and member of the
Audit and Compensation Committees of the Bank's parent company, Futura Banc
Corp. In February 1999, Mr. Vernon retired as Chairman, President and Chief
Executive Officer of Summit Bank, a community bank he founded in January 1991.
Age 64. Director since 2003. Current term as director expires on the date of the
Annual Meeting in 2007.
JERRY F. WHITMER has been a Partner of Brouse McDowell, LPA, a law firm in
Akron, Ohio since 1971. Age 69. Director since 2003. Current term as director
expires on the date of the Annual Meeting in 2007.
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INDEPENDENCE OF DIRECTORS
The Board of Directors has adopted Director Independence Standards to
assist in determining the independence of each director. In order for a director
to be considered independent, the Board of Directors must affirmatively
determine that the director has no material relationship with the Company. In
each case, the Board of Directors broadly considers all relevant facts and
circumstances, including the director's commercial, industrial, banking,
consulting, legal, accounting, charitable and familial relationships and such
other criteria as the Board of Directors may determine from time to time. These
Director Independence Standards are available on the Company's website at
www.CFBankonline.com under the caption "CF News and Links -- Investor
Relations -- Corporate Governance."
The Board of Directors has determined that Messrs. Aldrich, Ash, Downing,
Grace and Whitmer meet these standards and are independent and, in addition,
satisfy the independence requirements of the Nasdaq Stock Market, Inc.
Absent unusual circumstances, each director is expected to attend all
annual and special meetings of shareholders. All the directors who were board
members at the time of the 2004 Annual Meeting of Shareholders, except Messrs.
Allio, Ash and Grace, attended that meeting.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors of the Company is responsible for establishing broad
corporate policies and for the overall performance of the Company. Directors
discharge their responsibilities at Board meetings and committee meetings. The
members of the Board of Directors of the Company also serve as members of the
Board of Directors of the Bank. The Board of Directors of the Company meets at
least quarterly, and the Board of Directors of the Bank meets on a monthly
basis. Both Boards may have additional meetings as needed. During the year ended
December 31, 2004, the Board of Directors of the Company held 7 meetings, one of
which was a special meeting, and the Board of Directors of the Bank held 12
meetings. Mr. Aldrich attended 67% of the number of meetings of the Boards and
Company committees on which he served. Mr. Whitmer attended 65% of the number of
meetings of the Boards and committees on which he served. No other director
attended fewer than 75% of the aggregate number of Board meetings and meetings
of committees on which he served. The Board of Directors of the Company
maintains committees, the nature and composition of which are described below:
Audit Committee. The Audit Committee consists of Messrs. Ash, Grace and
Whitmer. Each member of the Committee is independent as defined in the corporate
governance listing standards of the Nasdaq Stock Market, Inc. and the Company's
Director Independence Standards. There is currently no financial expert on the
audit committee. Mr. Allio, the former audit committee financial expert, was
appointed President and Chief Executive Officer of the Company on February 1,
2005 and, as such, is not independent of management and cannot serve on the
audit committee or be its financial expert. The Board of Directors is reviewing
composition of the Board and is vigilant in its efforts to include highly
qualified individuals. The Audit Committee operates under a written charter
adopted by the Board of Directors. The Audit Committee Charter is available on
the Company's website at www.CFBankonline.com under the caption "CF News and
Links -- Investor Relations -- Corporate Governance." This committee is
primarily responsible for overseeing the engagement, independence and services
of our independent auditors and is also responsible for the review of audit
reports and management's actions regarding the implementation of audit findings
and review of compliance with all relevant laws and regulations. The Audit
Committee met six times during 2004.
AUDIT COMMITTEE REPORT
The Audit Committee operates under a written charter adopted by the Board
of Directors. The Board of Directors has determined that each Audit Committee
member is independent in accordance with the listing standards of the Nasdaq
Stock Market.
The Company's management is responsible for the Company's internal controls
and financial reporting process. The independent auditors are responsible for
performing an independent audit of the Company's consolidated financial
statements and issuing an opinion on the conformity of those financial
statements with
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generally accepted accounting principles. The Audit Committee oversees the
Company's internal controls and financial reporting process on behalf of the
Board of Directors.
In this context, the Audit Committee has met and held discussions with
management and the independent auditors. Management represented to the Audit
Committee that Company's consolidated financial statements were prepared in
accordance with accounting principles generally accepted in the United States of
America, and the Audit Committee has reviewed and discussed the consolidated
financial statements with management and the independent auditors. The Audit
Committee discussed with the independent auditors matters required to be
discussed by Statement on Auditing Standards No. 61 (Communication With Audit
Committees), including the quality, not just the acceptability, of the
accounting principles, the reasonableness of significant judgments, and the
clarity of the disclosures in the financial statements.
In addition, the Audit Committee has received the written disclosures and
the letter from the independent auditors required by the Independence Standards
Board Standard No. 1 (Independence Discussions with Audit Committees) and has
discussed with the independent auditors the auditors' independence from the
Company and its management. In concluding that the auditors are independent, the
Audit Committee considered, among other factors, whether the non-audit services
provided by the auditors were compatible with its independence.
The Audit Committee discussed with the Company's independent auditors the
overall scope of plans for their audit. The Audit Committee meets with the
independent auditors, with and without management present, to discuss the
results of their examination, their evaluation of the Company's internal
controls, and the overall quality of the Company's financial reporting.
In performing all of these functions, the Audit Committee acts only in the
oversight capacity. In its oversight role, the Audit Committee relies on the
work and assurances of the Company's management, which has a primary
responsibility for financial statement and reports, and of the independent
auditors who, in their report, express an opinion on the conformity of the
Company's financial statements to generally accepted accounting principles. The
Audit Committee's oversight does not provide it with an independent basis to
determine that management has maintained appropriate accounting and financial
procedures designed to assure compliance with accounting standards and
applicable laws and regulations. Furthermore, the Audit Committee's
considerations and discussions with management and the independent auditors do
not assure that the Company's financial statements are presented in accordance
with generally accepted accounting principles, that the audit of the Company's
financial statements has been carried out in accordance with generally accepted
auditing standards or that the Company's independent auditors are in fact
"independent".
In reliance on the review and discussions referred to above, the Audit
Committee recommended to the Board of Directors, and the Board has approved,
that the audited consolidated financial statements be included in the Company's
Annual Report on Form 10-KSB for the year ended December 31, 2004 for filing
with the Securities and Exchange Commission The Audit Committee and the Board of
Directors also have approved, subject to stockholder ratification, the selection
of the Company's independent auditors.
Thomas P. Ash, Chairman,
Gerry W. Grace and
Jerry F. Whitmer
Compensation and Management Development Committee. The Compensation and
Management Development Committee consists solely of Directors Ash, Downing and
Whitmer. Each member of the Committee is independent as defined in the corporate
governance listing standards of the Nasdaq Stock Market, Inc. and the Company's
Director Independence Standards. The committee is responsible for establishing
compensation and benefits for the Chief Executive Officer and for reviewing the
incentive compensation programs when necessary, in addition to reviewing matters
regarding compensation and fringe benefits for other officers and employees of
the Company and Bank. The committee meets on an as-needed basis. The
Compensation and Management Development Committee of the Company met two times
in 2004. The Compensation and Management Development Committee has a charter,
which is available on the Company's website at www.CFBankonline.com under the
caption "CF News and Links -- Investor Relations -- Corporate Governance."
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Corporate Governance and Nominating Committee. The Corporate Governance
and Nominating Committee actively seeks individuals to become Board members who
have the highest personal and professional character and integrity, who possess
appropriate characteristics, skills, experience and time to make a significant
contribution to the Board of Directors, the Company and its shareholders, who
have demonstrated exceptional ability and judgment, and who will be most
effective, in the context of the whole Board of Directors and other nominees to
the Board of Directors, in perpetuating the success of the Company and in
representing shareholders' interests. The Committee may employ professional
search firms, for which it would pay a fee to assist it in identifying potential
members of the Board of Directors with the desired skills and disciplines.
The Committee will consider shareholder nominations for director on the
same basis and in the same manner as it considers nominations for director from
any other source. Any shareholder may submit a nomination in writing to the
Chair, Corporate Governance and Nominating Committee, c/o Corporate Secretary,
Central Federal Corporation, 2923 Smith Road, Fairlawn, Ohio 44333. The
nominations must be accompanied by all the information relating to the nominee
required by the Company's Bylaws and the Securities and Exchange Commission's
proxy rules. The Company's Bylaws provide that, to be considered timely, any
shareholder nomination for director generally must be received in writing by the
Corporate Secretary at least 90 days before the date fixed for the next Annual
Meeting of shareholders; provided, however, under certain unusual circumstances
a nomination received as late as the 10th day after the mailing of a notice of
an Annual Meeting of Shareholders may be considered. A copy of the full text of
the Bylaw provisions relating to shareholder nominations may be obtained by
writing to the Corporate Secretary at 2923 Smith Road, Fairlawn, Ohio 44333.
The Committee considers candidates for director nominees based on factors
it deems appropriate. These factors may include judgment, character, background,
skill, diversity, experience with businesses and other organizations of
comparable size, the interplay of the candidate's experience with the experience
of other Board members and the extent to which the candidate would be a
desirable addition to the Board and any committees of the Board. In addition,
because the Company is primarily a community financial services company, board
candidates must be highly regarded members of the community in which the Company
provides financial services.
The Corporate Governance and Nominating Committee met two times in 2004 and
is currently composed of three directors: Messrs. Aldrich, Grace and Whitmer
Each member of the Committee is independent as defined in the corporate
governance listing standards of the Nasdaq Stock Market, Inc. and the Company's
Director Independence Standards.
The Corporate Governance and Nominating Committee charter is available on
the Company's website at www.CFBankonline.com under the caption "CF News and
Links -- Investor Relations -- Corporate Governance."
Committee Charters and Other Corporate Governance Documents. The Audit
Committee Charter, Compensation and Management Development Committee Charter,
Corporate Governance and Nominating Committee Charter, Corporate Governance
Guidelines, Director Independence Standards, Code of Business Conduct and
Ethics, Financial Code of Ethics and Procedures for Reporting Complaints are
available on the Company's website at www.CFBankonline.com under the caption "CF
News and Links -- Investor Relations -- Corporate Governance." You also may
receive copies without charge by writing to: Corporate Secretary, Central
Federal Corporation, 2923 Smith Road, Fairlawn, Ohio 44333.
COMMUNICATIONS WITH DIRECTORS
The Board of Directors also has adopted a process by which shareholders and
other interested parties may communicate with the Board, any individual
director, any committee chair or the non-management directors as a group by
e-mail or regular mail. Communications by e-mail should be sent to
EllyMackus@CFBankmail.com. Communications by regular mail should be sent to the
attention of the Board of Directors; any individual director by name; Chair,
Audit Committee; Chair, Compensation and Management Development Committee;
Chair, Corporate Governance and Nominating Committee or to the Non-Management
Directors, c/o Corporate Secretary, Central Federal Corporation, 2923 Smith
Road, Fairlawn, Ohio 44333. All communications will be reviewed by management to
determine whether the communication requires immediate action. Management will
7
pass on all communications received, or a summary of such communications, to the
appropriate director or directors.
DIRECTORS' COMPENSATION
Directors' Fees. Each director is paid an annual retainer in the amount of
$15,000, which includes a retainer of $3,000 for service as a director of the
Company and a retainer of $12,000 for service as a director of the Bank. The
Chairman of the Board receives an additional $9,500 per year.
1999 Stock-Based Incentive Plan and Amended and Restated 2003 Equity
Compensation Plan. The Company maintains the 1999 Stock-Based Incentive Plan
and the Amended and Restated 2003 Equity Compensation Plan for the benefit of
employees and outside directors of the Company and the Bank. On April 15, 2004,
the Board of Directors awarded Messrs. Allio, Downing and Whitmer 1,000 shares
of restricted Company common stock each that will vest as follows: 500 shares on
October 16, 2005 and 500 shares on October 16, 2006. These stock awards all vest
fully upon the director's death, disability or a change in control of the
Company or the Bank.
EXECUTIVE COMPENSATION
Summary Compensation Table. The following table shows for 2004, 2003 and
2002, the cash compensation paid by the Company, as well as certain other
compensation paid or accrued for those years, to the chief executive officer and
the next four most highly paid executive officers of the Company who received
salary and bonus in excess of $100,000 during 2004. None of the named executive
officers was with the Company in 2002.
ANNUAL COMPENSATION LONG TERM COMPENSATION
--------------------------------- -------------------------------------
SECURITIES
OTHER ANNUAL RESTRICTED UNDERLYING LTIP ALL OTHER
SALARY BONUS COMPENSATION STOCK AWARDS OPTIONS/SARS PAYOUTS COMPENSATION
NAME AND POSITION YEAR ($) (1) ($) ($) (2)(11) ($) (3) (#) (4) ($) (5) ($) (6)
----------------- ---- -------- ------- ------------ ------------ ------------ ------- ------------
David C. Vernon (7),
(11)................... 2004 $126,154 $ -- $13,200 $ 37,800 15,000 $-- $499
Chairman, President and 2003 109,716 -- 11,000 176,944 39,390 -- 23
Chief Executive Officer
Eloise L. Mackus (8)..... 2004 105,128 10,000 -- 18,900 7,500 -- 300
Senior Vice President, 2003 44,231 -- -- 38,100 7,000 -- 13
General Counsel and
Secretary
Raymond E. Heh (9)....... 2004 120,898 -- -- 25,200 11,132 -- 449
President and Chief 2003 52,904 -- -- 37,710 12,000 -- 13
Operating Officer,
CFBank
R. Parker MacDonell
(10)................... 2004 105,128 -- -- 25,200 7,500 -- 300
President, Columbus 2003 61,538 -- -- 69,000 14,000 -- 15
Region, CFBank
---------------
Notes to Summary Compensation Table:
(1) Salary includes amounts deferred pursuant to the Company's 401(k) plan.
(2) There were no (a) perquisites over the lesser of $50,000 or 10% of the
individual's total salary and bonus, except Mr. Vernon, see (11) below, (b)
above-market or preferential earnings on restricted stock, options or
deferred compensation, (c) payments, or deferral of payments of earnings
with respect to long-term incentive plans, (d) tax payment reimbursements,
or (e) preferential discounts on stock.
(3) On April 15, 2004, Mr. Vernon, Ms. Mackus, Mr. Heh and Mr. MacDonell were
granted 3000, 1,500, 2,000 and 2,000 shares of restricted stock,
respectively which vest on March 31, June 30, May 31 and March 31, 2007,
respectively. On January 16, 2003, Mr. Vernon was granted 3,875 shares of
restricted stock which vest at a rate of 20% each year over 5 years
beginning on January 16, 2004. On April 17, 2003, Mr. Vernon and Mr.
MacDonell were granted 12,000 and 6,000 shares of restricted stock,
respectively, which vest at a rate of one-third each year over 3 years
beginning on March 31, 2004. On June 9, and July 7, 2003, Mr. Heh
8
and Ms. Mackus were each granted 3,000 shares of restricted stock which
vest at a rate of one-third each year over 3 years beginning on May 31,
2004 and June 30, 2004, respectively. At December 31, 2004, the value of
unvested shares of restricted stock granted to Mr. Vernon, Ms. Mackus, Mr.
Heh and Mr. MacDonell; 14,100, 3,500, 4,000 and 6,000 shares, respectively,
totaled $188,940, $46,900, $53,600 and $80,400, respectively, based on the
closing price of the Company's stock at that date. Dividends on unvested
shares are paid to the grantees.
(4) On April 15, 2004, Mr. Vernon, Ms. Mackus, Mr. Heh and Mr. MacDonell were
granted 15,000, 7,500, 7,500 and 7,500 options, respectively, which vest at
a rate of one-third each year over 3 years beginning March 31, 2005. On
March 18, 2004, Mr. Heh was granted 3,632 options which vest at a rate of
one-third each year over 3 years beginning on March 31, 2005. On January
16, 2003, Mr. Vernon was granted 11,390 options which vest at a rate of 20%
each year over 5 years beginning on January 16, 2004. On April 17, 2003,
Mr. Vernon and Mr. MacDonell were granted 28,000 and 14,000 options,
respectively, which vest at a rate of one-third each year over 3 years
beginning on March 31, 2004. On June 9, 2003, Mr. Heh was granted 12,000
options which vest at a rate of one-third each year over 3 years beginning
on May 31, 2004. On July 7, 2003, Ms. Mackus was granted 7,000 options
which vest at a rate of one-third each over 3 years beginning on June 30,
2004.
(5) The Company had no long-term incentive plans in existence during 2003, 2002
and 2001.
(6) Other compensation includes group term life insurance premiums.
(7) Mr. Vernon was appointed Chief Executive Officer on February 20, 2003 and
President on April 23, 2003 and served until February 1, 2005. Mark S.
Allio was named Chief Executive Officer and President on February 1, 2005.
(8) Ms. Mackus was appointed Senior Vice President, General Counsel and
Secretary in July 2003.
(9) Mr. Heh was appointed President and Chief Operating Officer, CFBank in June
2003.
(10) Mr. MacDonell was appointed President, Columbus Region, CFBank in May 2003.
(11) Mr. Vernon receives $1,100 per month auto and country club allowances per
his employment contracts.
Option/SAR Grants Table. The following table shows stock options granted
to the named executive officers of the Company in 2004.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
(INDIVIDUAL GRANTS)
NUMBER OF PERCENT OF
SECURITIES TOTAL OPTIONS/
UNDERLYING SARS GRANTED
OPTIONS/SARS TO EMPLOYEES EXERCISE OR BASE
NAME GRANTED (#) (1)(2) IN FISCAL YEAR PRICE ($/SHARE) EXPIRATION DATE
---- ------------------- -------------- ---------------- ---------------
David C. Vernon.................... 15,000 15.12% $12.60 4/15/2014
Eloise L. Mackus................... 7,500 7.56% $12.60 4/15/2014
Raymond E. Heh..................... 3,632 3.66% $13.76 3/18/2014
7,500 7.56% $12.60 4/15/2014
R. Parker MacDonell................ 7,500 7.56% $12.60 4/15/2014
---------------
(1) On April 15, 2004, Mr. Vernon, Ms. Mackus, Mr. Heh and Mr. MacDonell were
granted 15,000, 7,500, 7,500 and 7,500 options, respectively, which vest at
a rate of one-third each year over 3 years beginning March 31, 2005.
(2) On March 18, 2004, Mr. Heh was granted 3,632 options which vest at a rate of
one-third each year over 3 years beginning on March 31, 2005.
9
Aggregate Option/SAR Exercises and Year-End Option Value Table. The
following table shows information concerning the number and value of stock
options held by the named executive officers at December 31, 2004, measured in
terms of the $13.40 closing price of the Company's common stock on December 31,
2004.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND YEAR-END OPTION /SAR
VALUE TABLE
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
OPTIONS/SARS AT IN-THE-MONEY OPTION/SARS
DECEMBER 31, 2004 AT DECEMBER 31, 2004 (1)
SHARES VALUE --------------------------- ---------------------------
ACQUIRED ON REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
NAME EXERCISE (#) ($) (#) (#) ($) ($)
---- ------------ -------- ----------- ------------- ----------- -------------
David C. Vernon.......... -- -- 11,611 42,779 $25,364 $77,993
Eloise L. Mackus......... -- -- 2,330 12,170 $ 1,631 $ 9,269
Raymond E. Heh........... -- -- 4,000 19,132 $ 3,320 $12,640
R. Parker MacDonell...... -- -- 4,665 16,835 $ 8,864 $23,737
---------------
(1) The difference between the option exercise price and the fair market value
of the underlying shares at December 31, 2004.
Employment Agreements. The Bank and the Company maintain employment
agreements with David C. Vernon, who was President and Chief Executive Officer
of the Company and Chief Executive Officer of the Bank (the Executive) until
January 31, 2005. The original Employment Agreements provided for a three-year
term. In May 2004, the Board of Directors extended the agreements for 2 years,
until February 28, 2008. Effective February 28, 2003, the base salary for Mr.
Vernon was $120,000. In addition to base salary, the Employment Agreements
provide for, among other things, participation in various employee benefit plans
and stock-based compensation programs, as well as furnishing certain fringe
benefits available to similarly-situated executive personnel. The Employment
Agreements provide for termination by the Bank or the Company for cause (as
described in the agreement) at any time. In the event the Bank or Company choose
to terminate the Executive's employment for reasons other than for cause, or in
the event of the Executive's resignation from the Bank or the Company upon: (i)
failure to re-elect the Executive to his current offices; (ii) a material change
in the Executive's functions, duties or responsibilities; (iii) a relocation of
the Executive's principal place of employment by more than 25 miles; (iv) a
material reduction in the benefits and perquisites to the Executive; (v)
liquidation or dissolution of the Bank or the Company, or (vi) a breach of the
Employment Agreements by the Bank or the Company, the Executive or, in the event
of the Executive's death, the Executive's beneficiary would be entitled to
receive an amount generally equal to the remaining base salary and bonus
payments that would have been paid to the Executive during the remaining term of
the Employment Agreements, plus all benefits that would have been provided to
the Executive during the remaining term of the agreements.
Under the agreements, if involuntary or voluntary termination (under
certain circumstances) followed a change in control of the Bank or the Company,
the Executive or, in the event of the Executive's death, the Executive's
beneficiary is entitled to a severance payment equal to the greater of (i) the
payments due for the remaining terms of the agreements; or (ii) three times the
average of the five preceding taxable years' annual compensation. The Bank and
the Company would also continue the Executive's life, health, and disability
coverage for thirty-six months. Notwithstanding that both Employment Agreements
provided for a severance payment in the event of a change in control, the
Executive would only be entitled to receive a severance payment under one
agreement.
The Employment Agreements were amended in December 2004 in connection with
a management succession plan whereby Mark S. Allio was appointed President and
Chief Executive Officer of the Company and Chief Executive Officer of the Bank
effective February 1, 2005. The terms of the amended Employment Agreements
provide that effective February 1, 2005 and so long as Mr. Vernon continues to
serve, if elected, as a director, Mr. Vernon will be Chairman of the Board of
Directors through December 31, 2005 and, thereafter, Vice Chairman of the Board
of Directors until his expected retirement date in February 2008. At that time
Mr. Vernon will be named Chairman Emeritus and remain a Director, if elected,
and will continue to serve as a consultant or employee and be available to
perform special project services for and on behalf of the Company and Bank at a
10
compensation level commensurate with his duties and responsibilities, but in any
event not less than $100 per month until April 17, 2014.
Payments to the Executive under the Bank's Employment Agreement are
guaranteed by the Company in the event that payments or benefits are not paid by
the Bank. Payments under the Company Employment Agreement are to be made by the
Company. All reasonable costs and legal fees paid or incurred by the Executive
pursuant to any dispute or question of interpretation relating to the Employment
Agreements are to be paid by the Bank or Company, respectively, if the Executive
is successful on the merits pursuant to a legal judgment, arbitration or
settlement. The Employment Agreements also provide that the Bank and Company
indemnify the Executive to the fullest extent allowable under federal, Ohio and
Delaware law, respectively.
Salary Continuation Agreement. In 2004, the Bank initiated a nonqualified
Salary Continuation Agreement for Mr. Vernon. Under the plan, the Company pays
him, or his beneficiary, a retirement benefit of $25,000 annually for 20 years
beginning the earlier of March 2008 or termination of his employment.
ADDITIONAL INFORMATION ABOUT DIRECTORS AND EXECUTIVE OFFICERS
Compliance With Section 16(a) of the Exchange Act. Section 16(a) of the
Securities Exchange Act of 1934 requires the Company's executive officers and
directors, and persons who own more than 10% of any registered class of the
Company's equity securities to file reports of ownership and changes in
ownership with the Securities and Exchange Commission. Executive officers,
directors and greater than 10% shareholders are required by regulations of the
Securities and Exchange Commission to furnish the Company copies of all Section
16(a) reports they file.
Based solely on a review of the copies of all such reports of ownership
furnished to the Company, or written representations that no forms were
necessary, we believe there were no known failures to file a required Form. For
the year ended December 31, 2004, two reports were filed late for Mr. Allio,
which resulted in two transactions not reported on a timely basis. These late
transactions were reported on Form 5.
Certain Relationships and Related Transactions. Federal regulations
require that all loans or extensions of credit to executive officers and
directors of insured financial institutions must be made on substantially the
same terms, including interest rates and collateral, as those prevailing at the
time for comparable transactions with the general public, except for loans made
pursuant to programs generally available to all employees, and must not involve
more than the normal risk of repayment or present other unfavorable features.
The Bank is therefore prohibited from making any new loans or extensions of
credit to executive officers and directors at different rate or terms than those
offered to the general public, except for loans made pursuant to programs
generally available to all employees, and has adopted policy to this effect. In
addition, loans made to a director or executive officer in an amount that, when
aggregated with the amount of all other loans to such person and his or her
related interests, are in excess of the greater of $25,000 or 5% of the Bank's
capital and surplus (up to a maximum of $500,000) must be approved in advance by
a majority of the disinterested members of the Board of Directors. As of
December 31, 2004, there were no loans outstanding to any executive officers,
directors or their related interests.
Founders Capital Corporation, of which Mr. Vernon was the founder, received
a consulting fee of $75,000 from the Company on January 24, 2003 which was prior
to the time Mr. Vernon became President and Chief Executive Officer of the
Company.
Richard J. O'Donnell, President of Reserve Mortgage Services, Inc., a
wholly owned subsidiary of the Bank, owns 100% of Reserve 1730, Ltd., the
company that owns and manages the office building at 1730 Akron-Peninsula Road,
Akron, Ohio 44313 where the Company's main residential mortgage origination
office is located. Lease agreements between the Company and Reserve 1730, Ltd.
include monthly rental payments of approximately $7,000, increasing 3% annually
through the terms of the leases, which expire at various times from May 2007
thru December 2009. Rent paid by the Company to Reserve 1730, Ltd. in 2004
totaled $8,273. Rental payments to be paid over the terms of the leases total
approximately $325,000.
11
PROPOSAL 2. SECOND AMENDED AND RESTATED CENTRAL FEDERAL CORPORATION
2003 EQUITY COMPENSATION PLAN
(formerly referred to as the Amended and Restated Central Federal Corporation
2003 Equity Compensation Plan)
PROPOSED ACTION REGARDING THE 2003 EQUITY COMPENSATION PLAN
At the Meeting, shareholders will be asked to approve the second amendment
and restatement of the Amended and Restated Central Federal Corporation 2003
Equity Compensation Plan ("Second Amended and Restated 2003 Equity Compensation
Plan") which was adopted, subject to shareholder approval, by the Board of
Directors on March 17, 2005. The Grand Central Financial Corp. 2003 Equity
Compensation Plan (the "2003 Equity Compensation Plan") was originally approved
by Company shareholders on April 23, 2003, and the first Amended and Restated
Central Federal Corporation 2003 Equity Compensation Plan (the "Amended and
Restated 2003 Equity Compensation Plan") was approved by Company shareholders on
April 20, 2004. The plan is being amended and restated to:
1. Increase the number of shares of Company common stock reserved for
issuance under the Amended and Restated 2003 Equity Compensation Plan;
and
2. Comply with certain regulatory and listing requirements.
The Company believes that incentive and stock-based awards focus employees
and directors on the dual objective of creating shareholder value and promoting
the Company's success, and that equity compensation plans like the Amended and
Restated 2003 Equity Compensation Plan help attract, retain and motivate valued
employees and directors. The Board of Directors believes that the 2003 Equity
Compensation Plan, as amended and restated, will help enable the Company to
compete effectively with other financial institutions, attract and retain key
personnel and secure the services of experienced and qualified persons as
directors.
As of March 15, 2005, there were 14,474 shares available for additional
grants of stock options or restricted stock awards under the 2003 Equity
Compensation Plan or the Amended and Restated 2003 Equity Compensation Plan.
SUMMARY DESCRIPTION OF THE SECOND AMENDED AND RESTATED 2003 EQUITY COMPENSATION
PLAN
The principal terms of the Second Amended and Restated 2003 Equity
Compensation Plan are summarized below. The following summary is qualified in
its entirety by the full text of the plan, which appears as Appendix A to this
proxy statement.
Purposes of the Second Amended and Restated 2003 Equity Compensation
Plan. The purposes of the Second Amended and Restated 2003 Equity Compensation
Plan are to provide incentives and rewards to those employees and directors
largely responsible for the success and growth of the Company and its
affiliates, and to assist the Company in attracting and retaining directors,
executives and other key employees with experience and ability.
Administration. The Board of Directors of the Company will administer the
Second Amended and Restated 2003 Equity Compensation Plan (the "Committee").
Subject to the terms of the plan, the Committee interprets the plan and is
authorized to make all determinations and decisions thereunder. The Committee
also determines the participants to whom awards will be granted, the type and
amount of awards that will be granted and the terms and conditions applicable to
such awards. Each award granted under the Second Amended and Restated 2003
Equity Compensation Plan will be evidenced by an award agreement that sets forth
the terms and conditions of each award.
Eligibility. All employees and outside directors of the Company and the
Bank are eligible to participate in the Amended and Restated 2003 Equity
Compensation Plan.
Authorized Shares. Prior to the restatement of the Amended and Restated
2003 Equity Compensation Plan, the Company reserved 100,000 shares of Company
common stock for issuance under the plan. Of that amount, no more than 30,000
shares could be issued as restricted stock awards. The Second Amended and
Restated 2003
12
Equity Compensation Plan reserves an additional 100,000 shares of Company common
stock of which all of the shares can be used for stock options or stock
appreciation rights, but no more than 30,000 shares of the additional reserve
can be used for restricted stock awards. The shares of Company common stock to
be issued under the Second Amended and Restated 2003 Equity Compensation Plan
may be either authorized but unissued shares, or reacquired shares held by the
Company as treasury stock.
To the extent that an award is settled in cash or a form other than shares
of Company common stock, the shares that would have been delivered had there
been no cash or other settlement will not be counted against the shares
available for issuance under the plan. In the event that shares are delivered in
respect of a stock appreciation right, or other award, only the actual number of
shares delivered with respect to the award will be counted against the share
limits of the plan. Shares that are subject to or underlie awards that expire
for any reason or are cancelled, terminated or forfeited, fail to vest, or for
any other reason are not paid or delivered under the Amended and Restated 2003
Equity Compensation Plan will again be available for subsequent awards under the
plan. Shares that are exchanged by a participant or withheld by the Company to
satisfy tax withholding obligations under the plan will be available for
subsequent awards under the Second Amended and Restated 2003 Equity Compensation
Plan.
Types of Awards. The Second Amended and Restated 2003 Equity Compensation
Plan authorizes grants of stock options, stock appreciation rights and
restricted stock awards.
A stock option is the right to purchase shares of Company common stock at a
future date at a specified price per share (the "exercise price"). The per share
exercise price of stock option may not be less than the fair market value of a
share of Company common stock on the date of grant. The exercise price for a
stock option may be paid in cash, common stock or a combination of cash and
common stock, or through a cashless exercise, to the extent permitted by the
Committee. Upon written consent of the Committee, non-statutory stock options
may be transferred pursuant to the terms of the plan. Incentive stock options
may not be transferred or assigned. The maximum term of a stock option is ten
years from the date of grant. The plan provides for the grant of incentive stock
options and non-statutory stock options. (see --"Federal Income Tax Treatment of
Awards Under the Second Amended and Restated 2003 Equity Compensation Plan",
below).
A stock appreciation right is the right to receive payment of an amount
equal to the excess of the fair market value per share of Company common stock
on the date of exercise of the stock appreciation right over the base price of
the stock appreciation right. The base price may not be lower than the fair
market value of a share of Company common stock on the date of grant. Stock
appreciation rights may be granted in connection with other awards or
independently. The maximum term of a stock appreciation right is ten years from
the date of grant. (see --"Federal Income Tax Treatment of Awards Under the
Second Amended and Restated 2003 Equity Compensation Plan", below).
A restricted stock award is a grant of a certain number of shares of
Company common stock subject to the lapse of certain restrictions (such as
continued service) determined by the Committee. Participants are entitled to
receive dividends and other distributions declared and paid on the shares and
may also vote any unvested shares subject to their restricted stock awards. (see
--"Federal Income Tax Treatment of Awards Under the Second Amended and Restated
2003 Equity Compensation Plan", below).
Effect of Termination of Service and Change in Control on Awards. The
Second Amended and Restated 2003 Equity Compensation Plan provides that all
outstanding awards will vest upon death, termination of service due to
disability or upon a change in control, as defined in the plan. Options and
stock appreciation rights that vest upon death or disability remain exercisable
for one (1) year following termination of service. Options and stock
appreciation rights that vest upon a change in control remain exercisable for
their term. In the event of a Termination for Cause (as defined in the plan),
award recipients forfeit all rights to unvested and unexercised awards. Unless
otherwise determined by the Committee, upon an award recipient's retirement, the
recipient forfeits all unvested awards and has one (1) year to exercise vested
stock options and stock appreciation rights. Incentive stock options exercised
more than three (3) months from an optionee's retirement date will be treated as
non-statutory stock options for tax purposes. Award recipients that terminate
service for reasons other than death, disability or retirement forfeit all
rights to any unvested awards. Vested and unexercised stock options and stock
appreciation rights remain exercisable for three (3) months following
termination of service.
13
Term of the Plan. The plan will terminate on April 23, 2013, unless
terminated sooner by the Board of Directors.
Amendment of the Plan and Awards. The plan allows the Board of Directors
to amend the plan in certain respects without shareholder approval, unless such
approval is required to comply with tax law regulatory or listing requirements.
Awards cannot be amended without the written consent of an award recipient.
Federal Income Tax Treatment of Awards Under the Second Amended and
Restated 2003 Equity Compensation Plan. The federal income tax consequences of
the Second Amended and Restated 2003 Equity Compensation Plan, under current
federal law, which is subject to change, are summarized in the following
discussion of the general tax principles applicable to the plan. This summary is
not intended to be exhaustive and, among other considerations, does not describe
state or local tax consequences.
Non-Statutory Stock Options (NSO). The Company is generally entitled to
deduct, and the optionee recognizes taxable income in an amount equal to, the
difference between the option exercise price and the fair market value of the
shares at the time of exercise.
Stock Appreciation Rights. Stock appreciation rights are generally taxed
and deductible in substantially the same manner as NSOs.
Incentive Stock Options (ISO). If an optionee disposes of shares of
Company common stock acquired upon exercise of an ISO within two years of the
date of grant or one year of the date of exercise, the optionee will recognize
ordinary income, and the Company will be entitled to a deduction, equal to the
excess of the fair market value of the shares on the date of exercise over the
exercise price (limited generally to the gain on the sale). The balance of any
gain or loss will be treated as a capital gain or loss to the optionee. If the
shares are disposed of after the two year and one year periods mentioned above,
the Company will not be entitled to any deduction, and the entire gain or loss
for the optionee will be treated as a capital gain or loss. However, the excess
of the fair market value of the shares on the date of exercise over the exercise
price is includible for purposes of determining an optionee's alternative
minimum tax liability.
The aggregate fair market value of the shares for which ISOs granted to any
employee may be exercisable for the first time by such employee during any
calendar year (under all Company plans) may not exceed $100,000.
Restricted Stock Award. A restricted stock award recipient recognizes
ordinary income, and the Company is entitled to a corresponding deduction, equal
to the fair market value of the stock at the time any transfer or forfeiture
restrictions applicable to the restricted stock award lapse. A restricted stock
award recipient who makes an election under Section 83(b) of the Internal
Revenue Code, however, recognizes ordinary income equal to the fair market value
of the stock at the time of grant, and the Company is entitled to a
corresponding deduction at that time. If the recipient makes a Section 83(b)
election, there are no further federal income tax consequences to either the
recipient or the Company at the time any applicable transfer or forfeiture
restrictions lapse.
Specific Benefits Under the Second Amended and Restated Equity Compensation
Plan. The Company has not approved any awards under the Second Amended and
Restated 2003 Equity Compensation Plan that are conditioned upon shareholder
approval of the plan and is not currently considering any specific award grants
under the Second Amended and Restated 2003 Equity Compensation Plan.
14
Equity Compensation Plan Information. The following table sets forth
information about Company common stock that may be issued upon exercise of
options, warrants and rights under all of the Company's equity compensation
plans as of December 31, 2004.
NUMBER OF SECURITIES
TO BE ISSUED UPON NUMBER OF SECURITIES
EXERCISE OF WEIGHTED-AVERAGE REMAINING AVAILABLE
OUTSTANDING EXERCISE PRICE OF FOR FUTURE ISSUANCE
OPTIONS, WARRANTS OUTSTANDING OPTIONS, UNDER EQUITY
PLAN CATEGORY AND RIGHTS WARRANTS AND RIGHTS COMPENSATION PLANS
------------- -------------------- -------------------- --------------------
Equity compensation plans approved by
shareholders......................... 256,536 $11.32 14,474
Equity compensation plans not approved
by shareholders...................... -- -- --
------- ------ ------
Total.................................. 256,536 $11.32 14,474
======= ====== ======
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THE APPROVAL OF THE
SECOND AMENDED AND RESTATED 2003 CENTRAL FEDERAL CORPORATION EQUITY COMPENSATION
PLAN.
PROPOSAL 3. RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has appointed Crowe Chizek and Company LLC to be its
auditors for 2005, subject to ratification by shareholders. A representative of
Crowe Chizek and Company LLC will be present at the Meeting to respond to
appropriate questions from shareholders and will have the opportunity to make a
statement should he or she desire to do so.
If ratification of the appointment of the auditors is not approved by a
majority of the votes cast by shareholders at the Meeting, other independent
auditors will be considered by the Board of Directors.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" RATIFICATION OF THE
APPOINTMENT OF CROWE CHIZEK AND COMPANY LLC AS THE COMPANY'S INDEPENDENT
AUDITORS FOR 2005.
The following table sets forth the fees billed to the Company for 2004 and
2003 by Crowe Chizek and Company LLC:
2004 2003
------- -------
Audit Fees.................................................. $60,500 $50,500
Audit-Related Fees.......................................... 9,450 7,500
Tax Fees.................................................... 11,850 6,000
Other Fees.................................................. -- --
------- -------
Total....................................................... $81,800 $64,000
======= =======
Audit-related fees were related to Crowe Chizek and Company LLC's review of
the Company's filings with the Securities and Exchange Commission during 2004
and 2003. Tax fees were related to Crowe Chizek and Company LLC's preparation of
the Company's federal and state tax returns.
The Company's Audit Committee must pre-approve all engagements of the
independent auditor by the Company and its subsidiaries, including the Bank, as
required by the Company's Audit Committee's charter and the rules of the
Securities and Exchange Commission. Prior to the beginning of each fiscal year,
the Audit Committee will approve an annual estimate of fees for engagements,
taking into account whether the services are permissible under applicable law
and the possible impact of each non-audit service on the independent auditor's
independence from management. In addition, the Audit Committee will evaluate
known potential engagements of the independent auditor, including the scope of
the proposed work to be performed and the proposed fees, and approve or reject
each service. Management may present additional services for approval at
subsequent committee meetings. The Audit Committee has delegated to the Audit
Committee Chairman the authority to evaluate and approve engagements on behalf
of the Audit Committee in the event a need arises for pre-approval
15
between Committee meetings and in the event the engagement for services was
within the annual estimate but not specifically approved. If the Chairman so
approves any such engagements, he will report that approval to the full
Committee at the next Committee meeting.
Since the effective date of the Securities and Exchange Commission's rules
regarding strengthening auditor independence, all the audit, audit-related, and
tax services provided by Crowe Chizek and Company LLC were pre-approved in
accordance with the Audit Committee's policies and procedures.
STOCK OWNERSHIP
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table provides information as of March 15, 2005 about the
persons known by the Company to be beneficial owners of more than 5% of the
Company's outstanding common stock. A person may be considered to beneficially
own any shares of common stock over which he or she has, directly or indirectly,
sole or shared voting or investment power.
AMOUNT AND NATURE
OF BENEFICIAL PERCENT OF COMMON
NAME AND ADDRESS OF BENEFICIAL OWNER OWNERSHIP STOCK OUTSTANDING
------------------------------------ ----------------- -----------------
Richard J. O'Donnell............................... 123,077 5.5%
1730 Akron-Peninsula Road
Akron, Ohio 44313
SECURITY OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth information as of March 15, 2005 with
respect to the amount of shares of Company common stock considered to be owned
by each director or nominee for director of the Company, by each executive
officer named in the Summary Compensation Table and by all directors and
executive officers of the Company as a group. A person may be considered to own
any shares of common stock over which he or she has, directly or indirectly,
sole or shared voting or investment power.
AMOUNT AND NATURE OF PERCENT OF COMMON
NAME TITLE BENEFICIAL OWNERSHIP STOCK OUTSTANDING
---- ----- -------------------- -----------------
David C. Vernon............ Chairman of the Board 69,005 (1) 3.1%
Mark S. Allio.............. Vice-Chairman of the Board, 33,377 (4),(10) 1.5%
President and
Chief Executive Officer
Jeffrey W. Aldrich......... Director 33,572 (2) 1.5%
Thomas P. Ash.............. Director 33,572 (3) 1.5%
William R. Downing......... Director 17,692 (5) 0.8%
Gerry W. Grace............. Director 43,572 (3) 1.9%
Jerry F. Whitmer........... Director 6,500 (4) 0.3%
Eloise L. Mackus........... Senior Vice President, 11,330 (8) 0.5%
General Counsel and
Secretary
Raymond E. Heh............. President and 13,710 (6) 0.6%
Chief Operating Officer,
CFBank
R. Parker MacDonell........ President, Columbus Region, 62,501 (7) 2.8%
CFBank
All directors and executive
officers as a group
(12 persons)............. 457,238 (9) 19.8%
16
---------------
Notes to Securities Ownership table:
(1) Includes 13,325 shares awarded to Mr. Vernon pursuant to the Company's
equity compensation plans which have not yet vested, but as to which he may
provide voting recommendations. Includes 28,218 shares which may be
acquired by exercising stock options within 60 days. Also includes 412
shares owned by Catherine Vernon, Mr. Vernon's spouse.
(2) Includes 9,694 shares which may be acquired by exercising stock options
within 60 days. Also includes 23,104 shares owned by Jean Aldrich, Mr.
Aldrich's spouse.
(3) Includes 9,694 shares which may be acquired by exercising stock options
within 60 days.
(4) Includes 1,000 shares awarded to these outside directors pursuant to the
Company's equity compensation plans which have not yet vested, but as to
which they may provide voting recommendations.
(5) Includes 1,000 shares awarded to Mr. Downing pursuant to the Company's
equity compensation plans which have not yet vested, but as to which he may
provide voting recommendations. Also includes 16,192 shares owned by R.H.
Downing, Inc., which is 100% owned by Mr. Downing.
(6) Includes 4,000 shares awarded to Mr. Heh pursuant to the Company's equity
compensation plans which have not yet vested, but as to which he may
provide voting recommendations. Includes 7,710 shares which may be acquired
by exercising stock options within 60 days.
(7) Includes 6,000 shares awarded to Mr. MacDonell pursuant to the Company's
equity compensation plans which have not yet vested, but as to which he may
provide voting recommendations. Includes 11,830 shares which may be
acquired by exercising stock options within 60 days.
(8) Includes 3,500 shares awarded to Ms. Mackus pursuant to the Company's
equity compensation plans which have not yet vested, but as to which she
may provide voting recommendations. Includes 4,830 shares which may be
acquired by exercising stock options within 60 days.
(9) Includes 34,325 shares awarded to all directors and executive officers as a
group pursuant to the Company's equity compensation plans which have not
yet vested, but as to which they may provide voting recommendations.
Includes 86,500 shares which may be acquired by exercising stock options
within 60 days.
(10) Mr. Allio was appointed Chief Executive Officer and President on February
1, 2005.
MISCELLANEOUS
The Company will pay the cost of this proxy solicitation. In addition to
soliciting proxies by mail, the Company has retained Georgeson Shareholder to
assist with the solicitation of proxies for a fee of $750 plus expenses. The
Company will reimburse brokerage firms and other custodians, nominees and
fiduciaries for reasonable expenses incurred by them in sending proxy materials
to the beneficial owners of the Company's common stock. Directors, officers and
regular employees of the Company may also solicit proxies personally or by
telephone and will not receive additional compensation for these activities.
SHAREHOLDER PROPOSALS
The Company will consider for inclusion in its proxy materials for the 2006
Annual Meeting of Shareholders any shareholder proposal received by the Company
at its main office at 2923 Smith Road, Fairlawn, Ohio 44333 by December 16,
2005. If the 2006 Annual Meeting of Shareholders is held on a date more than 30
calendar days after May 19, 2006, the Company will consider any shareholder
proposal received within a reasonable time before the Company begins to print
and mail its proxy solicitation for the 2006 Annual Meeting. In determining
whether to include a shareholder proposal in its proxy materials, the Company
will apply the criteria set forth in the Securities and Exchange Commission's
proxy rules and interpretative guidance. Shareholder nominations for director
are discussed above under the caption "Corporate Governance and Nominating
Committee."
17
A COPY OF THE FORM 10-KSB (WITHOUT EXHIBITS) FOR THE YEAR ENDED DECEMBER
31, 2004, AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, WILL BE
FURNISHED WITHOUT CHARGE TO SHAREHOLDERS OF RECORD UPON WRITTEN REQUEST TO THE
CORPORATE SECRETARY, CENTRAL FINANCIAL CORPORATION, 2923 SMITH ROAD, FAIRLAWN,
OHIO 44333
BY ORDER OF THE BOARD OF DIRECTORS
(/s/ Eloise L. Mackus)
Eloise L. Mackus
Corporate Secretary
Fairlawn, Ohio
April 15, 2005
YOU ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING IN PERSON. WHETHER
OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, YOU ARE REQUESTED TO SIGN, DATE
AND PROMPTLY RETURN THE ACCOMPANYING PROXY CARD IN THE ENCLOSED POSTAGE-PAID
ENVELOPE.
18
APPENDIX A
SECOND AMENDED AND RESTATED CENTRAL FEDERAL CORPORATION
2003 EQUITY COMPENSATION PLAN
1. DEFINITIONS
(a) "Affiliate" means any "parent corporation" or "subsidiary corporation"
of the Holding Company, as such terms are defined in Sections 424(e)
and 424(f) of the Code.
(b) "Award" means, individually or collectively, a grant under the Plan of
Non-Statutory Stock Options, Incentive Stock Options, Stock
Appreciation Rights and Restricted Stock Awards.
(c) "Bank" means CFBank and includes its wholly owned subsidiary, Reserve
Mortgage Services, Inc., an Ohio corporation.
(d) "Board of Directors" means the board of directors of the Holding
Company.
(e) "Change in Control" means with respect to the Bank or the Holding
Company, an event of a nature that:
(i) would be required to be reported in response to Item 1(a) of the
current report on Form 8-K, as in effect on the date hereof,
pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934 (the "Exchange Act"); or
(ii) results in a Change in Control of the Holding Company or the
Bank within the meaning of the Home Owner's Loan Act of 1933, as
amended, the Federal Deposit Insurance Act and the Rules and
Regulations promulgated by the Office of Thrift Supervision (the
"OTS") (or its predecessor agency), as in effect on the date
hereof (provided, that in applying the definition of change in
control as set forth under the rules and regulations of the OTS,
the Board shall substitute its judgment for that of the OTS); or
(iii) without limitation, such a Change in Control shall be deemed to
have occurred at such time as:
(A) any "person" (as the term is used in Sections 13(d) and 14(d)
of the Exchange Act) is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of voting securities of the Bank or the Holding
Company representing 20% or more of the Bank's or the Holding
Company's outstanding voting securities or right to acquire
such securities except for any voting securities of the Bank
purchased by the Holding Company and any voting securities
purchased by any employee benefit plan of the Holding Company
or its Subsidiaries; or
(B) individuals who constitute the Board on the date hereof (the
"Incumbent Board") cease for any reason to constitute at least
a majority thereof, provided that any person becoming a
director subsequent to the date hereof whose election was
approved by a vote of at least three-quarters of the directors
comprising the Incumbent Board, or whose nomination for
election by the Holding Company's stockholders was approved by
a Nominating Committee solely composed of members who are
Incumbent Board members, shall be, for purposes of this clause
(B), considered as though he were a member of the Incumbent
Board; or
(C) a plan of reorganization, merger, consolidation, sale of all or
substantially all the assets of the Bank or the Holding Company
or similar transaction occurs or is effectuated in which the
Bank or Holding Company is not the resulting entity; or
(D) a proxy statement has been distributed soliciting proxies from
stockholders of the Holding Company, by someone other than the
current management of the Holding Company, seeking stockholder
approval of a plan of reorganization, merger or consolidation
of the Holding Company or Bank with one or more corporations as
a result of which the outstanding shares of the class of
securities then subject to such plan or transaction are
exchanged for or
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converted into cash or property or securities not issued by the
Bank or the Holding Company shall be distributed; or
(E) a tender offer is made for 20% or more of the voting securities
of the Bank or Holding Company then outstanding.
(f) "Code" means the Internal Revenue Code of 1986, as amended.
(g) "Committee" means the committee designated, pursuant to Section 4 of
the Plan, to administer the Plan.
(h) "Common Stock" means the common stock of the Holding Company, par value
$.01 per share.
(i) "Disability" means any mental or physical condition with respect to
which the Participant qualifies for and receives benefits under a
long-term disability plan of the Holding Company or an Affiliate, or
in the absence of such a long-term disability plan or coverage under
such a plan, "Disability" shall mean a physical or mental condition
which, in the sole discretion of the Committee, is reasonably expected
to be of indefinite duration and to substantially prevent the
Participant from fulfilling his duties or responsibilities to the
Holding Company or an Affiliate. In the case of Incentive Stock
Options, "Disability" has the meaning set forth in Code Section
22(e)(3).
(j) "Effective Date" of this Second Amended and Restated Central Federal
Corporation 2003 Equity Compensation Plan means May 19, 2005. The
original Effective Date of the Central Federal Corporation 2003 Equity
Compensation Plan, as amended herein, was April 23, 2003.
(k) "Employee" means any person employed by the Holding Company or an
Affiliate. Directors who are also employed by the Holding Company or an
Affiliate shall be considered Employees under the Plan.
(l) "Exchange Act" means the Securities Exchange Act of 1934, as amended.
(m) "Exercise Price" means the price at which an individual may purchase a
share of Common Stock pursuant to an Option.
(n) "Fair Market Value" means the market price of Common Stock, determined
by the Committee as follows:
(i) If the Common Stock was traded on the date in question on the
Nasdaq Stock Market, then the Fair Market Value shall be equal to
the closing price reported for such date;
(ii) If the Common Stock was traded on a stock exchange for the date
in question, then the Fair Market Value shall be equal to the
closing price reported by the applicable composite transactions
report for such date; and
(iii) If neither of the foregoing provisions is applicable, then the
Fair Market Value shall be determined by the Committee in good
faith on such basis as it deems appropriate. Whenever possible,
the determination of Fair Market Value by the Committee shall be
based on the prices reported in The Wall Street Journal. The
Committee's determination of Fair Market Value shall be
conclusive and binding on all persons.
(o) "Holding Company" means Central Federal Corporation (formerly Grand
Central Financial Corp.) and any entity which succeeds to the business
of Central Federal Corporation.
(p) "Incentive Stock Option" means a stock option granted under the Plan,
that is intended to meet the requirements of Section 422 of the Code.
(q) "Non-Statutory Stock Option" means a stock option granted to an
individual under the Plan that is not intended to be and is not
identified as an Incentive Stock Option, or a stock option granted
under the Plan that is intended to be and is identified as an Incentive
Stock Option, but that does not meet the requirements of Section 422 of
the Code.
(r) "Option" means an Incentive Stock Option or a Non-Statutory Stock
Option.
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(s) "Outside Director" means a member of the board(s) of directors of the
Holding Company or an Affiliate who is not also an Employee of the
Holding Company or an Affiliate.
(t) "Participant" means any Employee or Outside Director who was granted an
Option or Restricted Stock Award under the Plan.
(u) "Plan" means this Second Amended and Restated Central Federal
Corporation 2003 Equity Compensation Plan.
(v) "Restricted Stock Award" means an Award of restricted stock granted to
an individual pursuant to Section 7 of the Plan.
(w) "Retirement" means retirement from employment with the Holding Company
or an Affiliate in accordance with the then current retirement policies
of the Holding Company or Affiliate, as applicable. "Retirement" with
respect to an Outside Director means the termination of service from
the board(s) of directors of the Holding Company and any Affiliate
following written notice to such board(s) of directors of the Outside
Director's intention to retire.
(x) "Stock Appreciation Right" or "SAR" means a right to a payment provided
in accordance with Section 7 of the Plan.
(y) "Termination for Cause" shall mean, in the case of an Outside Director,
removal from the board(s) of directors of the Holding Company and its
Affiliates in accordance with the applicable by-laws of the Holding
Company and its Affiliates or, in the case of an Employee, as defined
under any employment agreement with the Holding Company or an
Affiliate; provided, however, that if no employment agreement exists
with respect to the Employee, Termination for Cause shall mean
termination of employment because of a material loss to the Holding
Company or an Affiliate, as determined by and in the sole discretion of
the Board of Directors or its designee(s).
2. PURPOSE
The purpose of this Plan is to:
(a) provide the Holding Company with the ability to continue using Common
Stock as a means to attract and retain Employees and Outside Directors;
(b) provide Participants with additional incentives to continue to work for
the success of the Holding Company and its Affiliates; and
(c) align the financial interests of Participants with the interests of the
Holding Company's shareholders.
3. ELIGIBILITY
(a) Incentive Stock Options may be granted to any individual who, at the
time the Incentive Stock Option is granted, is an Employee.
(b) Non-Qualified Stock Options may be granted to Employees and Outside
Directors.
(c) Stock Appreciation Rights may be granted to Employees and Outside
Directors.
(d) Restricted Stock Awards may be granted to Employees and Outside
Directors.
4. ADMINISTRATION
(a) The Committee shall administer the Plan. The Committee shall consist of
the entire Board of Directors of the Company.
(b) The Committee shall:
(i) select the individuals who are to receive grants of Awards under
the Plan;
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(ii) determine the type, number, vesting requirements and other
features and conditions of such Awards made under the Plan;
(iii) interpret the Plan and Award Agreements (as defined below); and
(iv) make all other decisions related to the operation of the Plan.
In granting Awards under the Plan, the Committee shall consider
recommendations of the Chief Executive Officer. The Committee shall
adopt any rules or guidelines that it deems appropriate to implement and
administer the Plan. The Committee's determinations under the Plan shall
be final and binding on all persons.
(c) Each Award granted under the Plan shall be evidenced by a written
agreement ("Award Agreement"). Each Award Agreement shall constitute a
binding contract between the Holding Company or an Affiliate and the
Award holder, and every Award holder, upon acceptance of an Award
Agreement, shall be bound by the terms and restrictions of the Plan and
the Award Agreement. The terms of each Award Agreement shall be set in
accordance with the Plan, but each Award Agreement may also include any
additional provisions and restrictions determined by the Committee. In
particular, and at a minimum, the Committee shall set forth in each
Award Agreement:
(i) the type of Award granted;
(ii) the Exercise Price of any Option or base price of any SAR;
(iii) the number of shares subject to the Award;
(iv) the expiration date of the Award;
(v) the manner, time and rate (cumulative or otherwise) of exercise
or vesting of the Award; and
(vi) the restrictions, if any, placed on the Award, or upon shares
which may be issued upon the exercise or vesting of the Award.
The Chairman of the Committee and such Outside Directors and Employees
as shall be designated by the Committee are hereby authorized to execute
Award Agreements on behalf of the Holding Company or an Affiliate and to
cause them to be delivered to the recipients of Awards granted under the
Plan.
(d) The Committee may delegate all authority for the determination of forms
of payment to be made or received by the Plan and for the execution of
any Award Agreement. The Committee may rely on the descriptions,
representations, reports and estimates provided to it by the management
of the Holding Company or an Affiliate for determinations to be made
pursuant to the Plan.
5. STOCK SUBJECT TO THE PLAN
(a) Subject to adjustment as provided in Section 13 of the Plan, the number
of shares reserved for issuance under the Plan is 300,000. The share
reserve includes shares of Common Stock previously issued under the
Plan prior to the Plan's restatement. The following limits also apply
with respect to Awards granted under the Plan:
(i) The maximum number of shares of Common Stock that may be
delivered pursuant to Incentive Stock Options granted under the
Plan is 300,000 shares less the number of shares of Common Stock
issued pursuant to Non-Statutory Stock Options and Restricted
Stock Awards.
(ii) The maximum number of shares of Common Stock that may be
delivered pursuant to Non-Statutory Stock Options granted under
the Plan is 300,000 shares less the number of shares of Common
Stock issued pursuant to Incentive Stock Options and Restricted
Stock Awards.
(iii) The maximum number of Shares of Common Stock that may be
delivered pursuant to Restricted Stock Awards granted under the
Plan is 90,000 Shares.
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(b) The shares of Common Stock issued under the Plan may be either
authorized but unissued shares or authorized shares previously issued
and acquired or reacquired by the Holding Company. Shares underlying
outstanding Awards will be unavailable for any other use, including
future grants under the Plan, except that, to the extent the Awards
terminate, expire or are forfeited without vesting or having been
exercised, new Awards may be granted with respect to these shares
subject to the limitations set forth in this Section 5.
(c) To the extent that an Award is settled in cash or a form other than
shares of Common Stock, the shares that would have been delivered had
there been no such cash or other settlement shall not be counted
against the shares available for issuance under this Plan. Shares of
Common Stock that are exchanged by a Participant or withheld by the
Holding Company as full or partial payment in connection with any Award
under this Plan, as well as any shares exchanged by a Participant or
withheld by the Holding Company to satisfy the tax withholding
obligations related to any Award under this Plan, shall be available
for subsequent Awards under this Plan.
6. OPTIONS
The Committee may, subject to the limitations of this Plan and the
availability of shares of Common Stock reserved but not previously awarded under
the Plan, grant Options to Employees and outside directors, subject to terms and
conditions as it may determine, to the extent that such terms and conditions are
consistent with the following provisions:
(a) EXERCISE PRICE. The Exercise Price shall not be less than one hundred
percent (100%) of the Fair Market Value of the Common Stock on the date
of grant.
(b) TERMS OF OPTIONS. In no event may an individual exercise an Option, in
whole or in part, more than ten (10) years from the date of grant.
(c) NON-TRANSFERABILITY. Unless otherwise determined by the Committee in
accordance with this Section 5(c), an individual may not transfer,
assign, hypothecate, or dispose of an Option in any manner, other than
by will or the laws of intestate succession. The Committee may,
however, in its sole discretion, permit transfer or assignment of a
Non-Statutory Stock Option, if it determines that the transfer or
assignment is for valid estate planning purposes and is permitted under
the Code and Rule 16b-3 of the Exchange Act. For purposes of this
Section 6(c), a transfer for valid estate planning purposes includes,
but is not limited to, transfers:
(i) to a revocable inter vivos trust, as to which an individual is
both settlor and trustee; or
(ii) for no consideration to:
(A) any member of the individual's Immediate Family;
(B) a trust solely for the benefit of members of the individual's
Immediate Family;
(C) any partnership whose only partners are members of the
individual's Immediate Family; or
(D) any limited liability corporation or other corporate entity
whose only members or equity owners are members of the
individual's Immediate Family.
For purposes of this Section 6(c), "Immediate Family" includes, but is
not necessarily limited to, an individual's parents, grandparents,
spouse, children, grandchildren, siblings (including half brothers and
sisters), and individuals who are family members by adoption. Nothing
contained in this Section 6(c) shall be construed to require the
Committee to approve the transfer or assignment of any Non-Statutory
Stock Option, in whole or in part. Receipt of the Committee's approval
to transfer or assign a Non-Statutory Stock Option, in whole or in part,
does not mean that the Committee must approve a transfer or assignment
of any other Non-Statutory Stock Option, or portion thereof. The
transferee or assignee of any Non-Statutory Stock Option shall be
subject to all terms and conditions applicable to the Option immediately
prior to transfer or assignment, and shall remain subject to any other
conditions proscribed by the Committee with respect to the Option.
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(d) SPECIAL RULES FOR INCENTIVE STOCK OPTIONS. Notwithstanding foregoing
provisions, the following rules apply to the grant of Incentive Stock
Options:
(i) If an Employee owns or is treated as owning, for purposes of
Section 422 of the Code, Common Stock representing more than ten
percent (10%) of the total combined voting securities of the
Holding Company at the time the Committee grants the Incentive
Stock Option (a "10% Owner"), the Exercise Price shall not be
less than one hundred and ten percent (110%) of the Fair Market
Value of the Common Stock on the date of grant.
(ii) An Incentive Stock Option granted to a 10% Owner shall not be
exercisable more than five (5) years from the date of grant.
(iii) To the extent the aggregate Fair Market Value of shares of
Common Stock with respect to which Incentive Stock Options are
exercisable for the first time by an Employee during any
calendar year, under the Plan or any other stock option plan of
the Holding Company, exceeds $100,000, or such higher value as
may be permitted under Section 422 of the Code, Options in
excess of the limit shall be treated as Non-Statutory Stock
Options. Fair Market Value shall be determined as of the date of
grant for each Incentive Stock Option.
(iv) Each Award Agreement for an Incentive Stock Option shall require
the individual to notify the Committee within ten (10) days of
any disposition of shares of Common Stock under the circumstances
described in Section 421(b) of the Code (relating to certain
disqualifying dispositions).
(v) Incentive Stock Options exercised more than three (3) months
following the date an Employee terminates employment (for reasons
other than death or Disability) will be treated as Non-Statutory
Stock Options. In the event employment is terminated due to death
or Disability, Incentive Stock Options will remain exercisable
for one (1) year from the date the Employee terminates
employment.
(e) ACCELERATION UPON A CHANGE IN CONTROL. Upon a Change in Control, all
Options held by an individual as of the date of the Change in Control
shall immediately become exercisable and shall remain exercisable until
the expiration of the Option term.
(f) TERMINATION OF EMPLOYMENT OR SERVICE. The following rules apply upon
the termination of a Participant's employment or other service:
(i) In General. Unless the Committee determines otherwise, upon
termination of employment or service for any reason other than
Retirement, Disability or death, or Termination for Cause, a
Participant may exercise only those Options that were immediately
exercisable by the Participant at the date of termination, and
only for a period of three (3) months from the date of
termination, or, if sooner, until the expiration of the Option
term.
(ii) Retirement. Unless the Committee determines otherwise, upon a
Participant's Retirement, the Participant may exercise only
those Options that were immediately exercisable by the
Participant at the date of Retirement, and only for a period of
one (1) year from the date of Retirement, or, if sooner, until
the expiration of the Option term. Incentive Stock Options
exercised more than three (3) months following a Participant's
Retirement date will be treated as Non-Statutory Stock Options
for tax purposes.
(iii) Disability or Death. Unless the Committee determines otherwise,
upon termination of a Participant's employment or service due to
Disability or death, all Options shall become immediately
exercisable and shall remain exercisable for a period of one (1)
year from the date of termination, or, if sooner, until the
expiration of the Option term.
(iv) Termination for Cause. Unless the Committee determines otherwise,
upon Termination for Cause, all rights to a Participant's Options
shall expire immediately upon the effective date of Termination
for Cause.
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7. STOCK APPRECIATION RIGHTS
An SAR shall provide a Participant with the right to receive a payment, in
cash and/or Common Stock, equal to the excess of the Fair Market Value of a
specified number of shares of Common Stock on the date the SAR is exercised over
the Fair Market Value of a share of Common Stock on the date the SAR was granted
(the "base price") as set forth in the applicable Award Agreement, provided,
however, that, in the case of an SAR granted retroactively, in tandem with or as
a substitution for another Award, the base price may be no lower than the Fair
Market Value of a share of Common Stock on the date such other Award was
granted. The maximum term of an SAR shall be ten (10) years. Notwithstanding the
foregoing, effective on and after January 1, 2005, the exercise of an SAR shall
entitle the Participant to receive payment with respect to such SAR only in the
form of Common Stock. Further, effective January 1, 2005, the base price of an
SAR may never be less than the Fair Market Value of a share of Common Stock on
the date that the SAR is awarded even if the SAR is awarded in tandem with or as
substitution for another Award.
(a) TERMINATION OF EMPLOYMENT OR SERVICE. The following rules apply upon
the termination of a Participant's employment or other service:
(i) In General. Unless the Committee determines otherwise, upon
termination of employment or service for any reason other than
Retirement, Disability or death, or Termination for Cause, a
Participant may exercise only those SARs that were immediately
exercisable by the Participant at the date of termination, and
only for a period of three (3) months from the date of
termination, or, if sooner, until the expiration of the SAR term.
(ii) Retirement. Unless the Committee determines otherwise, upon a
Participant's Retirement, the Participant may exercise only
those SARs that were immediately exercisable by the Participant
at the date of Retirement, and only for a period of one (1) year
from the date of Retirement, or, if sooner, until the expiration
of the SAR term.
(iii) Disability or Death. Unless the Committee determines otherwise,
upon termination of a Participant's employment or service due to
Disability or death, all SARs shall become immediately
exercisable and shall remain exercisable for a period of one (1)
year from the date of termination, or, if sooner, until the
expiration of the SAR term.
(iv) Termination for Cause. Unless the Committee determines
otherwise, upon Termination for Cause, all rights to a
Participant's SARs shall expire immediately upon the effective
date of Termination for Cause.
(b) ACCELERATION UPON A CHANGE IN CONTROL. Upon a Change in Control, all
SARs held by an individual as of the date of the Change in Control
shall immediately become exercisable and shall remain exercisable until
the expiration of the SAR term.
8. RESTRICTED STOCK AWARDS
The Committee may make grants of Restricted Stock Awards, which shall
consist of the grant of some number of shares of Common Stock to an individual
upon such terms and conditions as it may determine to the extent such terms and
conditions are consistent with the following provisions:
(a) GRANTS OF STOCK. Restricted Stock Awards may only be granted in whole
shares of Common Stock.
(b) NON-TRANSFERABILITY. Except to the extent permitted by the Code, the
rules promulgated under Section 16(b) of the Exchange Act or any
successor statutes or rules:
(i) The recipient of a Restricted Stock Award grant shall not sell,
transfer, assign, pledge, or otherwise encumber shares subject to
the grant until full vesting of such shares has occurred. For
purposes of this section, the separation of beneficial ownership
and legal title through the use of any "swap" transaction is deemed
to be a prohibited encumbrance.
(ii) Unless determined otherwise by the Committee and except in the
event of the Participant's death or pursuant to a domestic
relations order, a Restricted Stock Award grant is not
transferable and
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may be earned in his or her lifetime only by the individual to
whom it is granted. Upon the death of a Participant, a Restricted
Stock Award grant is transferable by will or the laws of descent
and distribution. The designation of a beneficiary shall not
constitute a transfer.
(iii) If the recipient of a Restricted Stock Award is subject to the
provisions of Section 16 of the Exchange Act, shares of Common Stock
subject to the grant may not, without the written consent of the
Committee (which consent may be given in the Award Agreement), be
sold or otherwise disposed of within six (6) months following the
date of grant.
(c) ACCELERATION OF VESTING UPON A CHANGE IN CONTROL. Upon a Change in
Control, all Restricted Stock Awards held by a Participant as of the
date of the Change in Control shall immediately become vested and any
further restrictions shall lapse.
(d) TERMINATION OF EMPLOYMENT OR SERVICE. The following rules will govern
the treatment of a Restricted Stock Award upon the termination of a
Participant's termination of employment or other service:
(i) In General. Unless the Committee determines otherwise, upon the
termination of a Participant's employment or service for any reason
other than Retirement, Disability or death, or Termination for
Cause, any Restricted Stock Award in which the Participant has not
become vested as of the date of such termination shall be forfeited
and any rights the Participant had to such Restricted Stock Award
shall become null and void.
(ii) Retirement. Unless the Committee determines otherwise, upon a
Participant's Retirement, any Restricted Stock Award in which the
Participant has not become vested as of the date of Retirement
shall be forfeited and any rights the individual had to such
unvested Restricted Stock Award shall become null and void.
(iii) Disability or Death. Unless otherwise determined by the Committee,
in the event of a termination of a Participant's service due to
Disability or death, all unvested Restricted Stock Awards held by
such Participant shall immediately vest as of the date of such
termination.
(iv) Termination for Cause. Unless otherwise determined by the
Committee, in the event of a Participant's Termination for Cause,
all Restricted Stock Awards in which the Participant had not
become vested as of the effective date of such termination shall
be forfeited and any rights the Participant had to such unvested
Restricted Stock Awards shall become null and void.
(e) ISSUANCE OF CERTIFICATES. Unless otherwise held in trust and registered
in the name of the Plan trustee, reasonably promptly after the date of
grant with respect to shares of Common Stock pursuant to a Restricted
Stock Award, the Holding Company shall cause to be issued a stock
certificate, registered in the name of the Participant to whom the
Restricted Stock Award was granted, evidencing such shares; provided,
however, that the Holding Company shall not cause a stock certificate
to be issued unless it has received a stock power duly endorsed in
blank with respect to such shares. Each such stock certificate shall
bear the following legend:
The transferability of this certificate and the shares of stock
represented hereby are subject to the restrictions, terms and
conditions (including forfeiture provisions and restrictions
against transfer) contained in the Second Amended and Restated
Central Federal Corporation 2003 Equity Compensation Plan entered
into between the registered owner of such shares and Central
Federal Corporation or its Affiliates. A copy of the Plan and
Award Agreement is on file in the office of the Corporate
Secretary of Central Federal Corporation, 2923 Smith Road,
Fairlawn, Ohio 44333.
This legend shall not be removed until the individual becomes vested in
such shares pursuant to the terms of the Plan and Award Agreement. Each
certificate issued pursuant to this Section 8(e) shall be held by the
Holding Company or its Affiliates, unless the Committee determines
otherwise.
(f) TREATMENT OF DIVIDENDS. Participants are entitled to all dividends and
other distributions declared and paid on Common Stock with respect to
all shares of Common Stock subject to a Restricted Stock Award,
A-8
from and after the date such shares are awarded or from and after such
later date as may be specified by the Committee in the Award Agreement.
The Participant shall not be required to return any such dividends or
other distributions to the Holding Company in the event of forfeiture
of the Restricted Stock Award. In the event the Committee establishes a
trust for the Plan, the Committee may elect to distribute dividends and
other distributions at the time the Restricted Stock Award vests or pay
the dividends (or other distributions) directly to the Participants.
(g) VOTING OF RESTRICTED STOCK AWARDS. Participants who are granted
Restricted Stock Awards are entitled to vote or to direct the Plan
trustee to vote, as the case may be, all unvested shares of Common
Stock subject to the Restricted Stock Award.
9. DEFERRED PAYMENTS
The Committee, in its discretion, may permit an individual to elect to
defer the receipt of all or any part of any cash or stock payment under the
Plan, or the Committee may determine to defer receipt by some or all
individuals, of all or a portion of any payment. The Committee shall determine
the terms and conditions of any permitted deferral, including the period of
deferral, the manner of deferral and the method used to measure appreciation on
deferred amounts until paid. Notwithstanding the foregoing, the provisions of
this Section 9 shall not apply on and after January 1, 2005 and a Participant
shall not be permitted to defer the receipt of all or any part of any cash or
stock payment under the Plan.
10. METHOD OF EXERCISING OPTIONS
Subject to any applicable Award Agreement, an individual may exercise any
Option, in whole or in part, at such time or times as the Committee specifies in
the Award Agreement. The individual may make payment of the Exercise Price in
such form or forms as the Committee specifies in the Award Agreement, including,
without limitation, payment by delivery of cash, Common Stock or a cashless
exercise with a qualified broker. Any Common Stock used in full or partial
payment of the Exercise Price shall be valued at the Fair Market Value of the
Common Stock on the date of exercise. Delivery by the Holding Company of the
shares as to which an Option has been exercised shall be made to the person
exercising the Option or the designee of such person. If so provided by the
Committee upon grant of the Option, the shares received upon exercise may be
subject to certain restrictions upon subsequent transfer or sale by the
Participant. In the event the Exercise Price is to be paid in full or in part by
surrender of Common Stock, in lieu of actual surrender of shares of Common Stock
the Holding Company may waive such surrender and instead deliver to or on behalf
of the Participant a number of shares equal to the total number of shares as to
which the Option is then being exercised less the number of shares which would
otherwise have been surrendered by the Participant to the Holding Company.
11. RIGHTS OF INDIVIDUALS
No individual shall have any rights as a shareholder with respect to any
shares of Common Stock covered by a grant under this Plan until the date of
issuance of a stock certificate for such Common Stock. Nothing contained in this
Plan or in any Award Agreement confers on any person the right to continue in
the employ or service of the Holding Company or an Affiliate or interferes in
any way with the right of the Holding Company or an Affiliate to terminate an
individual's services.
12. DESIGNATION OF BENEFICIARY
With the Committee's consent, an individual may designate a person or
persons to receive, upon the individual's death, any Award to which the
individual would then be entitled. This designation shall be made upon forms
supplied by, or otherwise acceptable to, and delivered to the Holding Company. A
designation of beneficiary may be revoked in writing. If an individual fails to
effectively designate a beneficiary, the individual's estate shall be deemed to
be the beneficiary for purposes of the Plan.
A-9
13. DILUTION AND OTHER ADJUSTMENTS
In the event of any change in the outstanding shares of Common Stock, by
reason of any stock dividend or split, recapitalization, merger, consolidation,
spin-off, reorganization, combination or exchange of shares, or other similar
corporate change, or any other increase or decrease in such shares, without
receipt or payment of consideration by the Holding Company, or in the event an
extraordinary capital distribution is made, the Committee may make adjustments
to previously granted Awards, to prevent dilution, diminution, or enlargement of
the rights of individuals, including any or all of the following:
(a) adjustments in the aggregate number or kind of shares of Common Stock
or other securities that may underlie future Awards under the Plan;
(b) adjustments in the aggregate number or kind of shares of Common Stock
or other securities that underlie Awards already made under the Plan;
and
(c) adjustments in the Exercise Price of outstanding Options or base price
of outstanding SARs.
The Committee, however, shall not make adjustments that materially change
the value of benefits available to an individual under a previously granted
Award. All Awards under this Plan shall be binding upon any successors or
assigns of the Holding Company.
14. TAXES
Under this Plan, whenever cash or shares of Common Stock are to be
delivered, the Committee is entitled to require as a condition of delivery that:
(a) the individual remit an amount sufficient to satisfy all related
federal, state, and local withholding tax requirements;
(b) the withholding of such sums may come from compensation otherwise due
to the individual or from shares of Common Stock due to the individual
under this Plan; or
(c) any combination of (a) and (b), above; provided, however, that no
amount shall be withheld from any cash payment or shares of Common
Stock related to an Option transferred by the individual in accordance
with this Plan.
15. NOTIFICATION UNDER SECTION 83(B)
The Committee may, on the date of grant or at a later date, prohibit an
individual from making the election described below. If the Committee has not
prohibited an individual from making this election, and the individual shall, in
connection with the exercise of any Award, make the election permitted under
Section 83(b) of the Code, the individual shall notify the Committee of the
election within ten (10) days of filing notice of the election with the Internal
Revenue Service. This requirement is in addition to any filing and notification
required under the regulations issued under the authority of Section 83(b) of
the Code.
16. AMENDMENT OF THE PLAN AND AWARD GRANTS
(a) Except as provided in paragraph (c) of this Section 16, the Board of
Directors may at any time, and from time to time, modify or amend the
Plan in any respect, prospectively or retroactively; provided, however,
that provisions governing grants of Incentive Stock Options shall be
submitted for shareholder approval to the extent required by law,
regulation, or otherwise. Failure to ratify or approve amendments or
modifications by shareholders shall be effective only as to the
specific amendment or modification requiring shareholder ratification
or approval. Other provisions of this Plan shall remain in full force
and effect. No termination, modification, or amendment of this Plan may
adversely affect the rights of an individual under an outstanding Award
without the written permission of the affected individual.
(b) Except as provided in paragraph (c) of this Section 16, the Committee
may amend any Award Agreement, prospectively or retroactively;
provided, however, that no amendment shall adversely affect
A-10
the rights of an individual under an outstanding Award Agreement
without the written consent of the affected individual.
(c) In no event shall the Board of Directors, without shareholder approval,
amend the Plan or shall the Committee amend an Award Agreement in any
manner that effectively:
(i) allows any Option to be granted with an Exercise Price below the
Fair Market Value of the Common Stock on the date of grant; or
(ii) allows the Exercise Price of any Option previously granted under
the Plan to be reduced after the date of grant.
17. TERMINATION OF THE PLAN
The right to grant Awards under the Plan will terminate upon the earlier
of:
(a) April 23, 2013, which is ten (10) years after the original Effective
Date of the Plan as amended; or
(b) the issuance of a number of shares of Common Stock pursuant to the
exercise of Options and Stock Appreciation Rights and the vesting of
Restricted Stock Awards equal to the maximum number of shares reserved
under the Plan, as set forth in Section 5. The Board of Directors may
suspend or terminate the Plan at any time; provided, however, that no
such action will adversely affect an individual's vested rights under a
previously granted Award, without the consent of the affected
individual.
18. APPLICABLE LAW
The Plan will be administered in accordance with the laws of the state of
Delaware, except to the extent that Federal law is deemed to apply.
A-11
CENTRAL FEDERAL CORPORATION
ANNUAL MEETING OF SHAREHOLDERS
MAY 19, 2005
10:00 A.M. LOCAL TIME
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints the official proxy committee of the Board of
Directors of Central Federal Corporation (the "Company"), each with full power
of substitution, to act as proxy for the undersigned, and to vote all shares of
common stock of the Company which the undersigned is entitled to vote only at
the Annual Meeting of Shareholders, to be held at the Central Federal Bank
Fairlawn office located at 2923 Smith Road, Fairlawn, Ohio on Thursday, May 19,
2005 at 10:00 a.m., local time, and at any and all adjournments thereof, with
all of the powers the undersigned would possess if personally present at such
Meeting as follows:
(1) The election as directors of all nominees listed (except as marked to the
contrary below).
William R. Downing
Gerry W. Grace
FOR VOTE WITHHELD FOR ALL EXCEPT
------------------------------------------------------------------------------
------------------------------------------------------------------------------
INSTRUCTION: TO WITHHOLD YOUR VOTE FOR ANY INDIVIDUAL NOMINEE, MARK "FOR ALL
EXCEPT" AND WRITE THAT NOMINEE'S NAME ON THE LINE PROVIDED BELOW.
------------------------------------------------------------------------------
(2) Approval of the Second Amended and Restated Central Federal Corporation
2003 Equity Compensation Plan.
FOR AGAINST ABSTAIN
------------------------------------------------------------------------------
------------------------------------------------------------------------------
(3) The ratification of the appointment of Crowe Chizek and Company LLC as
independent auditors of the Company for the year ending December 31, 2005.
FOR AGAINST ABSTAIN
------------------------------------------------------------------------------
------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH OF THE LISTED PROPOSALS
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
THIS PROXY IS REVOCABLE AND WILL BE VOTED AS DIRECTED, BUT IF NO
INSTRUCTIONS ARE SPECIFIED, THIS PROXY WILL BE VOTED "FOR" EACH OF THE
PROPOSALS LISTED. IF ANY OTHER BUSINESS IS PRESENTED AT THE ANNUAL
MEETING, INCLUDING WHETHER OR NOT TO ADJOURN THE MEETING, THIS PROXY
WILL BE VOTED BY THE PROXIES IN THEIR BEST JUDGEMENT. AT THE PRESENT
TIME, THE BOARD OF DIRECTORS KNOWS OF NO OTHER BUSINESS TO BE PRESENTED
AT THE ANNUAL MEETING.
The undersigned acknowledges receipt from the Company prior to the
execution of this proxy of a Notice of Annual Meeting of Shareholders
and of a Proxy Statement dated April 15, 2005 and of the Annual Report
to Shareholders.
Please sign exactly as you name appears on this card. When signing as
attorney, executor, administrator, trustee or guardian, please give
your full title. If shares are held jointly, each holder may sign but
only one signature is required.
Dated:__________________________
--------------------------------------
SIGNATURE OF SHAREHOLDER
--------------------------------------
SIGNATURE OF SHAREHOLDER
PLEASE COMPLETE, DATE, SIGN AND PROMPTLY MAIL THIS PROXY IN THE ENCLOSED
POSTAGE-PAID ENVELOPE
(Central Federal Corporation Letterhead)
Dear CFBank Employees' Savings & Profit Sharing Plan and Trust Participant:
On behalf of the Board of Directors, I am forwarding you the attached Vote
Authorization Form for the purpose of conveying your voting instructions to
Pentegra (the "Trustee") on the proposals to be presented at the Annual Meeting
of Shareholders of Central Federal Corporation (the "Company") on May 19, 2005.
Also enclosed is a Notice and Proxy Statement for the Company's Annual Meeting
of Shareholders and a copy of the Company's Annual Report to Shareholders.
As a participant in the CFBank Employees' Savings & Profit Sharing Plan and
Trust, you are entitled to direct the Trustee on how to vote the shares of
Company common stock in your account as of April 8, 2005, the Annual Meeting
record date. These shares will be voted as directed by you provided your
instructions are received by the Trustee by May 12, 2005. The Trustee, subject
to its fiduciary duties, will vote any shares of Company common stock for which
no instructions are provided in a manner calculated to most accurately reflect
the instructions the Trustee has received from participants regarding the shares
of Company common stock allocated to their 401(k) accounts.
In order to direct the voting of shares of Company common stock in your
account, please complete and sign the enclosed Vote Authorization Form and
return it in the enclosed postage-paid envelope no later than May 12, 2005. Your
vote will not be revealed, directly or indirectly, to any employee or director
of the Company or Bank.
Sincerely,
David C. Vernon
Chairman
VOTE AUTHORIZATION FORM
I understand that Pentegra, (the "Trustee"), is the holder of record
and custodian of all shares of Central Federal Corporation common stock
allocated to me under the CFBank Employees' Savings & Profit Sharing
Plan and Trust. Further, I understand that my voting instructions are
solicited on behalf of the Company's Board of Directors for the Annual
Meeting of Shareholders to be held on May 19, 2005.
Accordingly, vote my shares as follows:
(1) The election as directors of all nominees listed (except as
marked to the contrary below).
William R. Downing
Gerry W. Grace
FOR VOTE WITHHELD FOR ALL EXCEPT
------------------------------------------------------------------------------
------------------------------------------------------------------------------
INSTRUCTION: TO WITHHOLD YOUR VOTE FOR ANY INDIVIDUAL NOMINEE, MARK "FOR
ALL EXCEPT" AND WRITE THAT NOMINEE'S NAME ON THE LINE PROVIDED BELOW.
------------------------------------------------------------------------------
(2) Approval of the Second Amended and Restated Central Federal
Corporation 2003 Equity Compensation Plan.
FOR AGAINST ABSTAIN
------------------------------------------------------------------------------
------------------------------------------------------------------------------
(3) The ratification of the appointment of Crowe Chizek and Company
LLC as independent auditors of the Company for the year ending
December 31, 2005.
FOR AGAINST ABSTAIN
------------------------------------------------------------------------------
------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH OF THE LISTED PROPOSALS
The Trustee is hereby authorized to vote all shares in my account in its trust
capacity as indicated above.
-------------------- ---------------------------------
Date Signature
Please date, sign and mail this form in the enclosed postage-paid envelope no
later than May 12, 2005.
(Central Federal Corporation Letterhead)
Dear Stock Award Recipient:
On behalf of the Board of Directors, I am forwarding you the Attached Vote
Authorization Form for the purpose of conveying your voting instruction to First
Banker's Trust (the "Trustee") on the proposals to be presented at the Annual
Meeting of Shareholders of Central Federal Corporation (the "Company") on May
19, 2005. Also enclosed is Notice and Proxy Statement for the Company's Annual
Meeting of Shareholders and a copy of the Company's Annual Report to
Shareholders.
As a participant in the Central Federal Corporation 1999 Stock-Based Incentive
Plan (the "Incentive Plan") you are entitled to vote all unvested shares of
restricted stock awarded to you under the Incentive Plan as of April 8, 2005.
The Incentive Plan Trustee will vote those shares of the Company stock in
accordance with instructions it receives from you and the other Stock Award
recipients. Shares of restricted stock for which instructions are not received
by May 12, 2005, will not be voted by the Incentive Plan Trustee, as directed by
the Company.
At this time, in order to direct the voting of Company common stock awarded to
you under the Incentive Plan, you must complete and sign the enclosed Vote
Authorization Form and return it in the accompanying postage-paid envelope no
later than May 12, 2005.
Sincerely,
David C. Vernon
Chairman
Name____________________________________ INCENTIVE PLAN
Shares___________________________________
VOTE AUTHORIZATION FORM
I understand that First Banker's Trust (the "Trustee"), is the holder
of record and custodian of all shares of Central Federal Corporation (the
"Company") common stock held in trust for the Central Federal Corporation 1999
Stock-Based Incentive Plan (Incentive Plan). Further, I understand that my
voting instructions are solicited on behalf of the Company's Board of Directors
for the Annual Meeting of Shareholders to be held on May 19, 2005.
Accordingly, I vote my shares as follows:
(1) The election as directors of all nominees listed (except as
marked to the contrary below).
William R. Downing
Gerry W. Grace
FOR VOTE WITHHELD FOR ALL EXCEPT
------------------------------------------------------------------------------
------------------------------------------------------------------------------
INSTRUCTION: TO WITHHOLD YOUR VOTE FOR ANY INDIVIDUAL NOMINEE, MARK "FOR
ALL EXCEPT" AND WRITE THAT NOMINEE'S NAME ON THE LINE PROVIDED BELOW.
------------------------------------------------------------------------------
(2) Approval of the Second Amended and Restated Central Federal
Corporation 2003 Equity Compensation Plan.
FOR AGAINST ABSTAIN
------------------------------------------------------------------------------
------------------------------------------------------------------------------
(3) The ratification of the appointment of Crowe Chizek and Company
LLC as independent auditors of the Company for the year ending
December 31, 2005.
FOR AGAINST ABSTAIN
------------------------------------------------------------------------------
------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH OF THE LISTED PROPOSALS.
The Incentive Plan Trustee is hereby authorized to vote all unvested
shares of Company common stock awarded to me under the Incentive Plan
in its trust capacity as indicated above.
----------------------- --------------------------
Date Signature
Please date, sign and mail this form in the enclosed postage-paid envelope no
later than May 12, 2005.