EXHIBIT 10.6

FEDERAL TRUST BANK

EMPLOYEE SEVERANCE AGREEMENT

THIS EMPLOYEE SEVERANCE AGREEMENT (“Agreement”) is entered into by and between
Federal Trust Bank (“Employer”) and Gregory E. Smith (“Employee”).

WHEREAS, in recognition of Employee’s contribution to Employer as its Executive
Vice President & Chief Financial Officer. Employer wishes to protect Employee’s
position therewith in the manner provided in this Agreement in the event of a
Change in Control of the Employer (as defined below), or of its parent-holding
company, Federal Trust Corporation (“FTC”);

NOW, THEREFORE, in consideration of Employee’s management position,
contribution, and responsibilities, Employer hereby agrees to provide Employee
with certain severance benefits as specifically provided herein.

SECTION 1 - DEFINITIONS

(a) “Change in Control” means the sale, dissolution, merger, consolidation or
other reorganization of the Employer or FTC, any sale of all or substantially
all of the assets of the Employer or FTC, or any sale or other transfer of the
ownership of, or the right to vote, more than 50% of the total combined voting
power of all classes of stock entitled to vote on the election of directors
(“voting stock”) of the Employer or FTC; provided, however, a “Change in
Control” shall be deemed not to have occurred in connection with any transaction
where stockholders who own more than 50% of the voting stock of the Employer or
FTC immediately before the consummation of such transaction, own more than 50%
of the voting stock or other controlling ownership interests of the surviving
entity immediately after such transaction.

(b) Termination for “Just Cause” means termination of Employee’s employment by
the Employer, upon written notice to Employee, upon any of the following events:

(i) Employee’s continued willful failure to perform, or his habitual neglect of,
his duties;

(ii) Employee’s conviction of, plea of nolo contendre to, indictment or
information for (which indictment or information is not discharged or otherwise
resolved within eighteen (18) months), any felony, or any crime involving moral
turpitude, or any crime which is likely to result in material injury to the
Employer;

(iii) Employee’s commission of an act of fraud, theft or dishonesty, or breach
of a fiduciary duty relating to the Employee’s employment with the Employer;

(iv) Employee’s material breach of this Agreement;

(v) Employee’s having engaged in conduct involving fraud, deceit, personal
dishonesty, or breach of fiduciary duty;

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(vi) Employee’s having violated any banking law or regulation, memorandum of
understanding, cease and desist order, or other agreement with any banking
agency having jurisdiction over FTC or the Employer;

(vii) Employee’s having become subject to continuing intemperance in the use of
alcohol or drugs which has adversely affected, or may adversely affect, the
business or reputation of FTC or the Employer, as determined by the Board of
Director of the Employer (without taking into consideration the vote of Employee
as a director) in its sole and absolute discretion; or

(viii) Any banking authority having supervisory jurisdiction over FTC or the
Employer initiating any proceeding for removal of the Employee.

Notwithstanding the foregoing, Employee shall not be deemed to have been
terminated for Just Cause under clause (i) or (iv) above unless the Employer
provided reasonable written notice to the Employee setting forth the reasons for
the Employer’s intention to terminate for Just Cause, and Employee failed within
thirty (30) days to cure the event or deficiency set forth in the written
notice.

(c) “Protected Period” means the term of this Agreement and (3) Three months
following termination hereof.

SECTION 2 - TERM OF AGREEMENT

This Agreement shall remain in effect during the term of Employee’s employment
by Employer, unless and until Employer, at any time and in its sole and absolute
discretion, shall earlier terminate this Agreement by delivering to the Employee
written notice indicating that this Agreement is terminated.

SECTION 3 - PAYMENTS TO EMPLOYEE UPON CHANGE IN CONTROL

In the event of a Change in Control within the Protected Period, if either
(i) Employer terminates Employee’s employment without Just Cause, or
(ii) Employee terminates his own employment for any reason, whether such
termination occurs prior to or after the Change of Control, Employee shall be
entitled to receive the termination benefits described in Section 4. This
Section 3 shall survive termination of this Agreement for the Protected Period.

SECTION 4 - TERMINATION BENEFITS

(a) Upon a termination of employment described in Section 3, Employer shall pay
Employee, or in the event of his subsequent death, his estate, as severance pay,
a sum equal to two years’ “highest annual base salary.” For purposes of this
Agreement, Employee’s highest annual base salary shall mean the Employee’s
highest base salary during the three years immediately preceding Employee’s
termination. Such payment shall be made in one lump sum payment six (6) months
after a termination of employment.

(b) Upon a termination described in Section 3, Employer or its successor(s)
shall continue to provide life, health and disability coverage (“Coverage”)
comparable to the coverage maintained by Employer for Employee prior to his
termination. Such Coverage shall cease upon

 

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the earlier of Employee’s obtaining new employment and receiving similar
Coverage through another employer, which provides comparable coverage, or one
year from the date of Employee’s termination.

(c) Notwithstanding the foregoing, the Employee shall not receive any
termination benefits described in this Section 4 unless and until the Employee
has executed and delivered to the Employer a full and unconditional release, in
a form reasonably acceptable to the Employer, of all claims which the Employee
may have against the Employer or FTC in connection with the Employee’s
employment or the termination thereof, other than (i) the Employee’s claim for
the termination benefits described in this Section 4, and (ii) any claim which
cannot be waived by law.

SECTION 5 - SUSPENSION OF OBLIGATIONS

(a) If Employee is suspended from office and/or temporarily prohibited from
participating in the conduct of Employer’s affairs pursuant to an action brought
by the Office of Thrift Supervision or the Federal Deposit Insurance Corporation
(either referred to herein as a “Regulatory Agency”), Employer’s obligations
under this Agreement shall be suspended as of the date of such action. The
obligations of this Agreement shall be reinstated if the charges of the
Regulatory Agency are subsequently dismissed, or if the Employee is otherwise
determined to be not guilty of such charges.

(b) If Employee is removed from office or permanently prohibited from
participating in Employer’s conduct or affairs by a final order resulting from
an action brought by a Regulatory Agency, all obligations of Employer under this
Agreement shall terminate on the effective date of the order.

SECTION 6 - NOTICE OF TERMINATION

Any purported termination of employment by Employer or by Employee shall be
communicated by a Notice of Termination to the other party hereto. For purposes
of this Agreement, a “Notice of Termination” shall mean a written notice which
shall set forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of Employee’s employment under the provision so
indicated.

SECTION 7 - NON-SOLICITATION; CONFIDENTIALITY

In consideration of the benefits and protections of this Agreement, Employee
agrees to the following:

(a) During the term of Employee’s employment by the Employer, and for a period
of one year following the termination of Employee’s employment for any reason,
Employee will not, directly or indirectly:

(i) solicit, divert, or take away, or attempt to solicit, divert, or take away
from the Employer the business of any person who the Employee knows or
reasonably should know is a customer or identified, prospective customer of the
Employer, or cause any such person to refrain, in any respect, from conducting
business with the Employer; or

 

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(ii) solicit, request, or induce, or attempt to solicit, request, or induce any
employee of the Employer or FTC to terminate employment with the Employer or FTC
and accept employment with another person, firm, corporation, or other entity;
provided, however, that general advertisements for employment that are not
directed to the Employer’s or FTC’s employees will not violate this Section 7.

(b) The Employee will not at any time use for his own benefit, copy or make
known in any manner to any person, firm, corporation or other entity the
contents of any agreements (including this Agreement), memoranda,
correspondence, writings, drawings, reports, charts, or other media, of or
related to information, data, methods, systems, processes, concepts or
technologies, used or developed by the Employee, the Employer, or FTC,
including, without limitation, any and all trade secrets (as defined under
Florida law), proprietary information or other confidential information acquired
by the Employee in connection with the Employee’s employment with the Employer.
The Employee understands and agrees that the lists of existing or prospective
customers, vendors, and contractors of the Employer, as such may exist from time
to time, and information concerning such customers, vendors, and contractors are
valuable, special and unique assets of the Employer’s business which are
entitled to protection under the provisions of this Section 7.

(c) The parties acknowledge and agree that money damages cannot fully compensate
Employer in the event of Employee’s violation of the provisions of this
Section 7. Thus, in the event of a breach of any of the provisions of this
Section 7, Employee agrees that Employer, upon application to a court of
competent jurisdiction, shall be entitled to an injunction restraining Employee
from any further breach of the terms of this Section 7. Employee’s sole remedy,
in the event of the wrongful entry of such injunction, shall be the dissolution
of such injunction. Employee hereby waives any and all claims for damages by
reason of the wrongful issuance of any such injunction.

(d) This Section 7 shall survive termination of this Agreement for any reason.

SECTION 8 - ENFORCEMENT COSTS

The Employer is aware that upon the occurrence of a Change in Control, the Board
of Directors or a stockholder of the Employer may then cause or attempt to cause
the Employer to refuse to comply with its obligations under this Agreement, or
may cause or attempt to cause the Employer to institute, or may institute,
litigation seeking to have this Agreement declared unenforceable, or may take,
or attempt to take, other action to deny the Employee the benefits intended
under this Agreement. In these circumstances, the purpose of this Agreement
could be frustrated. It is the intent of the parties that the Employee not be
required to incur the legal fees and expenses associated with the protection or
enforcement of his rights under this Agreement in the event of a Change of
Control by litigation or other legal action because such costs would
substantially detract from the benefits intended to be extended to the Employee
hereunder, nor be bound to negotiate any settlement of his rights hereunder
under threat of incurring such costs in the event of a Change of Control.
Accordingly, if in connection with, or as a result of, a Change of Control, it
should reasonably appear to the Employee that the Employer is or has acted
contrary to or is failing or has failed to comply with any of its obligations
under this Agreement for the reason that it regards this Agreement to be void or
unenforceable or for any other reason, or in the event that the Employer or any
other person takes any action to declare this Agreement

 

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void or unenforceable in connection with, or as a result of, a Change of
Control, or institutes any litigation or other legal action designed to deny,
diminish or to recover from the Employee the benefits provided or intended to be
provided to him hereunder in connection with, or as a result of, a Change of
Control, and the Employee has acted in good faith to perform his obligations
under this Agreement, the Employer irrevocably authorizes the Employee from time
to time to retain counsel of his choice at the expense of the Employer (as
provided below) to represent him in connection with the protection and
enforcement of his rights hereunder arising from such Change of Control,
including without limitation representation in connection with the initiation or
defense of any litigation or other legal action, whether by or against the
Employee or the Employer or any director, officer, stockholder or other person
affiliated with the Employer, in any jurisdiction. The reasonable fees and
expenses of counsel selected from time to time by the Employee as herein above
provided shall be paid or reimbursed to the Employee by the Employer on a
regular, periodic basis upon presentation by the Employee of a statement or
statements prepared by such counsel in accordance with its customary practices.
Counsel so retained by the Employee may be counsel representing other officers
or key executives of the Employer in connection with the protection and
enforcement of their rights under similar agreements between them and the
Employer, and, unless in his sole judgment use of common counsel could be
prejudicial to him or would not be likely to reduce the fees and expenses
chargeable hereunder to the Employer, the Employee agrees to use his best
efforts to agree with such other officers or executives to retain common
counsel.

SECTION 9 - MODIFICATION AND WAIVER

(a) This Agreement may not be modified or amended except as agreed to in writing
by the parties hereto. Notwithstanding the foregoing, this Section 8(a) shall
not be construed to limit the Employer’s ability under Section 2 to terminate
this Agreement.

(b) No term or condition of this Agreement shall be deemed to have been waived,
nor shall there be any estoppel against the enforcement of any provision of this
Agreement, except by written instrument of the party charged with such waiver or
estoppel. No such written waiver shall be deemed a continuing waiver unless
specifically stated therein, and each such waiver shall operate only as to the
specific term or condition waived and shall not constitute a waiver of such term
or condition for the future, or as to any act other than that specifically
waived.

SECTION 10 - ARBITRATION

The parties agree that, except for the specific remedies for injunctive relief
as contained in Section 7, any controversy or claim arising out of or relating
to this Agreement or any breach hereof, including, without limitation, any claim
that this Agreement or any portion hereof is invalid, illegal or otherwise
voidable, shall be submitted to binding arbitration before and in accordance
with the rules of the American Arbitration Association, and judgment upon the
determination and/or award of such arbitrator(s) may be entered in any court
having jurisdiction thereof. This Section shall not be construed to permit the
award of punitive damages to either party. The venue of any arbitration shall be
in Seminole County, Florida.

 

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SECTION 11 - ATTORNEYS’ FEES

In the event of any proceeding occurring out of or involving this Agreement, the
prevailing party shall be entitled to recovery of reasonable attorneys’ fees,
expenses, and costs, including fees and costs to enforce an award.

SECTION 12 - SEVERABILITY

The invalidity or unenforceability of any provision of this Agreement shall not
affect the validity or enforceability of any other provision of this Agreement,
which shall remain in full force and effect.

SECTION 13 - HEADINGS FOR REFERENCE ONLY

The headings of the sections herein are included solely for convenience of
reference and shall not control the meaning or the interpretation of any of the
provisions of this Agreement.

SECTION 14 - APPLICABLE LAW

This Agreement shall be governed in all respects and be interpreted by and under
the laws of the State of Florida.

SECTION 15 - SUCCESSORS

Employer shall require any successor to the business of Employer in connection
with a Change in Control to assume and agree to perform Employer’s obligations
under this Agreement in writing.

SECTION 16 - NO CONTRACT OF EMPLOYMENT

This Agreement shall not, under any circumstances, be deemed to constitute an
employment contract between Employer and Employee or to be in consideration of
or an inducement for the employment of Employee. Nothing contained in this
Agreement shall be deemed to give Employee the right to be retained in the
service of Employer, or to interfere with the right of Employer to discharge
Employee at any time.

SECTION 17 - LIMITATION OF RIGHTS

Neither this Agreement, nor any amendment hereof, nor the payment of any
benefits hereunder shall be construed as giving Employee or other person any
legal or equitable right against Employer except as expressly herein.

 

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IN WITNESS WHEREOF, Employee and Employer have duly executed this Agreement this
5th day of January, 2008

 

EMPLOYEE     FEDERAL TRUST BANK

/s/ Gregory E. Smith

    By:  

/s/ Dennis T. Ward

Gregory E. Smith     Print:   Dennis T. Ward     Its:   Chief Executive Officer

 

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