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SUSSEX BANCORP - DEF 14A - 19990329 - DIRECTOR_COMPENSATION
Compensation of Directors
Directors of the Company are not compensated for their service on the
Company's Board of Directors. Directors of the Bank, other than full-time
employees of the Bank, receive an annual retainer of $1,000. In addition,
directors who are not full-time employees of the Bank receive a fee of $500 for
each regular monthly Board meeting or special Board meeting attended and $100
for each committee meeting attended. In addition, each director who undertakes a
special project at the request of management of the Bank and with Board of
Directors' approval is paid at an hourly rate of $100 per hour for their time
spent on the project.
The Company maintains the 1995 Stock Option Plan for Non-Employee
Directors (the "Non-Employee Plan), the purpose of which is to assist the
Company in attracting and retaining qualified persons to serve as members of the
Board of Directors. Under the Non-Employee Plan, options to purchase up to a
total of 32,000 shares of Common Stock may be granted at exercise prices which
may not be less than the fair market value of the Common Stock on the date of
grant. Under the Non-Employee Plan, each
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non-employee director elected at the 1995 Annual Meeting was granted an option
to purchase 3,000 shares at $11.25 per share. In addition, each non-employee
director who is elected or re-elected to serve on the Board of Directors at
succeeding annual meetings will be granted an option to purchase 500 shares of
Common Stock at the time of such re-election. The exercise price for options
granted in connection with the 1998 annual meeting was $21.375.
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information concerning the beneficial
ownership of shares of Common Stock as of February 26, 1999, by (i) each person
who is known by the Company to own beneficially more than five percent (5%) of
the issued and outstanding Common Stock, (ii) each director and nominee for
director of the Company, (iii) each executive officer of the Company described
in this Proxy Statement under the caption "Executive Compensation" and (iv) all
directors and executive officers of the Company as a group. Other than as set
forth in this table, the Company is not aware of any individual or group which
holds in excess of 5% of the outstanding Common Stock.
Number of Shares Percent
Name of Beneficial Owner Beneficially Owned (1) of Class
------------------------ ---------------------- --------
Irvin Ackerson 28,552(2) 2.01%
Donald L. Kovach 138,745(3)(4) 9.75%
William E. Kulsar 88,346(4)(5) 6.21%
Joel D. Marvil 41,372(6) 2.91%
Richard Scott 49,128(7) 3.45%
Joseph Zitone 79,180(8) 5.56%
Directors & Principal Officers as a Group 248,060
(6 persons)
Beneficial Owners of more than 5% of Common
Stock:
Ambrose Hamm 83,319 5.85%
P.O. Box E
Branchville, NJ 07826
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(1) Beneficially owned shares include shares over which the named person
exercises either sole or shared voting power or sole or shared investment
power. It also includes shares owned (i) by a spouse, minor children or by
relatives sharing the same home, (ii) by entities owned or controlled by
the named person, and (iii) by other persons if the named person has the
right to acquire such shares within 60 days by the exercise of any right or
option. Unless otherwise noted, all shares are owned of record and
beneficially by the named person, either directly or through the dividend
reinvestment plan.
(2) Includes 10,358 shares owned by Mr. Ackerson's wife. Also includes 6,860
shares purchasable upon the exercise of immediately exercisable stock
options.
(3) Includes 14,274 shares owned by Mr. Kovach's wife, 15 shares registered in
the name of Kovach, Fitzgibbons & Goovaerts Trust, FBO Donald L. Kovach,
5,263 shares in the name of Merrill Lynch Pierce Fenner & Smith, FBO Donald
L. Kovach and 3,194 shares in the name of Merrill Lynch Pierce Fenner &
Smith, FBO Betty J. Kovach, 1,200 shares in the name of IBAA Financial
Services FBO Donald L. Kovach, 1,200 shares in the name of IBAA Financial
Services FBO Betty J. Kovach. Also includes 9,953 shares purchasable upon
the exercise of immediately exercisable stock options.
(4) Includes 59,094 shares over which Messrs. Kovach and Kulsar have shared
voting authority as administrators for The Sussex County State Bank
Employee Stock Ownership Plan.
(5) Includes 2,220 shares in the name of Merrill Lynch Pierce Fenner & Smith
Profit Sharing Plan FBO William E. Kulsar and 18,784 shares in the name of
Merrill Lynch Pierce Fenner & Smith FBO William E. Kulsar 401K. Also
includes 7,304 shares purchasable upon the exercise of immediately
exercisable stock options.
(6) Also includes 9,324 shares purchasable upon the exercise of immediately
exercisable stock options.
(7) Also includes 8,304 shares purchasable upon the exercise of immediately
exercisable stock options.
(8) Includes 10,110 shares owned by the Zitone Construction & Supply Co., Inc.
Profit Sharing Plan Trust and 25,194 shares in the name of Smith Barney FBO
Joseph Zitone. Also includes 1,000 shares purchasable upon the exercise of
immediately exercisable stock options.
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Annual Executive Compensation and All Other Compensation
The following table sets forth a summary for the last three (3) fiscal
years of the cash and non-cash compensation awarded to, earned by, or paid to,
the Chief Executive Officer of the Company and each of the four (4) most highly
compensated executive officers whose individual remuneration exceeded $100,000
for the last fiscal year.
SUMMARY COMPENSATION TABLE
Cash and Cash Equivalent Forms
of Remuneration
Annual Compensation Award Payouts
------------------- ----- -------
Securities
Underlying LTIP All Other
Name and Principal Other Annual Options/SARs Payouts Compensation
Position Year Salary ($) Bonus ($) Compensation($) (#) ($) ($)
------------------ ---- ---------- --------- --------------- ------------ ------- ------------
1998 155,546 -0- (2) 945 None -0-
Donald L. Kovach,
Chairman of the Board 1997 139,615 -0- (2) 500 None -0-
and CEO
1996(1) 85,700 -0- (2) -0- None -0-
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(1) Mr. Kovach became Chief Executive Officer of the Company on January 17,
1996.
(2) During the fiscal years presented, the Company provided additional life
insurance and an automobile and provided a match to Mr. Kovach's 401(k)
plan account membership for Mr. Kovach. The use made thereof for personal
purposes did not exceed 10% of the total cash compensation to such persons
which is the sum of base salary and bonus and therefore is not included in
the above table.
The Company and the Bank have entered into an Employment Agreement with
Mr. Donald L. Kovach pursuant to which he serves as President and Chief
Executive Officer of the Company and the Bank (the "Employment Agreement"). The
Employment Agreement provides for a term commencing January 1, 1997 and
terminating on December 31, 1999. The Employment Agreement provides that Mr.
Kovach will receive a base salary of $140,000, subject to increase or decrease,
and may be granted a discretionary bonus as determined by the Board of
Directors. The Employment Agreement permits the Company to terminate Mr.
Kovach's employment for cause at any time. The Employment Agreement defines
cause to mean personal dishonesty, willful misconduct, breach of fiduciary duty
involving personal profit, intentional failure to perform stated duties, willful
violation of law, rule or regulation, other than traffic violations or similar
offenses, or violation of a final cease and desist order, or a material
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breach of any provision of the Agreement. In the event Mr. Kovach is terminated
for any reason other than cause, or in the event Mr. Kovach resigns his
employment because he is reassigned to a position of lesser rank or status than
President and Chief Executive Officer, his place of employment is relocated by
more than 30 miles from its location on the date of the Agreement, or his
compensation or other benefits are reduced, Mr. Kovach, or in the event of his
death, his beneficiary, will be entitled to receive his base salary at the time
of such termination or resignation for the remaining term of the Agreement. In
addition, the Company will continue to provide Mr. Kovach with certain insurance
and other benefits through the end of the term of the Agreement. Mr. Kovach's
Employment Agreement further provides that upon the occurrence of a change in
control of the Company, as defined in the Employment Agreement, and in the event
Mr. Kovach is terminated for reasons other than cause or in the event Mr.
Kovach, within 18 months of the change in control, resigns his employment for
the reasons discussed above, he shall be entitled to receive a severance payment
based upon his then current base salary. Under the Agreement, in the event the
change in control occurs during the first year of the Agreement, the severance
payment would equal Mr. Kovach's then current base salary, if a change in
control occurs during the second year of the Agreement, the severance payment
would equal twice Mr. Kovach's then current base salary, and if a change in
control occurs during the third year of the Agreement, the severance payment
would equal 2.99 times Mr. Kovach's then current base salary. The Employment
Agreement also prohibits Mr. Kovach from competing with the Bank and the Company
for a period of one year following termination of his employment.
Non-Qualified Bank Stock Option Plan
The Company maintains the 1988 Non-Qualified Stock Option Plan, under
which options to purchase up to 31,857, authorized shares of Common Stock may be
granted. Options may be granted to any officer of the Company, at a grant price
not to be less than 85% of its fair market value at the grant date. Options are
exercisable when granted, with the term of the option determined by the Bank's
Board of Director's but not to exceed five years. As of December 31, 1998, no
options have been granted under this plan.
Incentive Stock Option Plan
The Company maintains the 1995 Incentive Stock Option Plan which
provides for options to purchase shares of Common Stock to be issued to key
employees of the Company, the Bank and any other subsidiaries which the Company
may acquire or incorporate in the future. Individual employees to whom options
will be granted under the Plan are selected by the Stock Option Committee of the
Board of Directors. The Stock Option Committee has the authority to determine
the terms and conditions of options granted under the Plan and the exercise
price therefor, which may be no less than the fair market value of the Common
Stock.
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The following table sets forth information regarding stock option
grants to the individuals named in the table above:
OPTION/SAR GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
Number of Securities % of Total Present Value of
Underlying Option/SARs Granted Exercise or Base
Options/SARs to Employees in Price Expiration Option on Date of
Name Granted (#)(1) Fiscal Year ($/SH)(2) Date Grant($)(3)
---- -------------- ----------- ---------- ---- -----------
Donald L. Kovach 945 27% 19.75 1/22/01 18,653
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(1) All options are immediately exercisable.
(2) These numbers have not been restated to give effect to the Company's
two-for-one stock split, declared on June 17, 1998.
(3) The present value of each option grant is estimated on the date of
grant using the Black-Scholes option pricing model with the following
weighted average assumptions: dividend yield of 2.0%, expected
volatility of 16.0%, risk free interest rate of 6.6%, and an expected
life of five (5) years.
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The following table sets forth information concerning the fiscal
year-end value of unexercised options held by the executive officers of the
Company named in the table above. No stock options were exercised by such
executive officers during 1998:
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL
YEAR AND FY-END OPTION/SAR VALUES
Value of Unexercised
Number of Securities In-the-Money Options/SARs at
Underlying Unexercised FY-End ($) (based on $10.625
Options/SARs at FY-End (#) per share)
Shares Acquired on Value Realized Exercisable/ Exercisable/
Name Exercise (#) $ Unexercisable Unexercisable
---- ------------ -------------- ------------- -------------
Donald L. Kovach -0- -0- 9,953 34,785
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Interest of Management and Others in Certain Transactions
The Bank has made in the past and, assuming continued satisfaction of
generally applicable credit standards, expects to continue to make loans to
directors, executive officers and their associates (i.e. corporations or
organizations for which they serve as officers or directors or in which they
have beneficial ownership interests of ten percent or more). These loans have
all been made in the ordinary course of the Bank's business on substantially the
same terms, including interest rates and collateral, as those prevailing at the
time for comparable transactions with other persons and do not involve more than
the normal risk of collectibility or present other unfavorable features.
The Bank paid $43,132 to Kovach, Vanderwiele and Gavan, Attorneys at
Law, at which Donald L. Kovach, Chairman of the Board and Chief Executive
Officer, is a member, for legal services rendered to the Bank during fiscal
1998. Said firm renders legal services to the Bank on a continuing basis.
The Bank paid $13,095 during fiscal 1998 to Caristia, Kulsar & Wade,
P.A., Certified Public Accountants, at which William E. Kulsar, Secretary and a
director of the Company and the Bank is a member, for accounting services
rendered to the Bank for IRS filing purposes and other accounting services
beyond those provided by the annually retained independent public accountants.
Caristia, Kulsar, & Wade, P.A. continues to render accounting services to the
Bank.
The Bank paid $11,915 to Irvin Ackerson for appraisal services rendered
to the Bank during fiscal 1998. Irvin Ackerson continues to render appraisal
services to the Bank.
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The Bank leases its Montague branch office from Montague Mini Mall,
Inc. under a lease covering 1,200 square feet. The lease agreement was renewed
as of April 1, 1997. As renewed, the lease will terminate on March 31, 2002, and
provides for a monthly rent of $1,650. Mr. Joseph Zitone, a Director of the
Company, is a majority stockholder of Montague Mini Mall, Inc. The Company
considers the lease terms to be comparable to those which exist with
unaffiliated third parties.
Recommendation and Vote Required
Nominees will be elected by a plurality of the shares voting at the
Annual Meeting.
THE BOARD UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR ITS NOMINEES
"FOR" THE BOARD OF DIRECTORS.
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INDEPENDENT AUDITORS
The Company's independent auditors for the fiscal year ended December
31, 1998 were Radics & Co., L.L.P. ("Radics"). The Company=s Board of Directors
has appointed Radics to continue as independent auditors for the Bank and the
Company for the year ending December 31, 1999. Radics has advised the Company
that one or more of its representatives will be present at the Annual Meeting to
make a statement if they so desire and to respond to appropriate questions.
Prior to the year ended December 31, 1998, the Company's financial
statements were audited by Arthur Andersen, LLP ("Andersen"). The Company's
Board of Directors elected to change auditors for the fiscal year ended December
31, 1998. The decision to change auditors was recommended by the Audit Committee
and was approved by the Company's Board of Directors. The change was not a
result of any disagreements with Andersen on any matters of auditing principles
or practices, financial statement disclosure or auditing scope or procedure
which, if not resolved to the satisfaction of Andersen, would have caused it to
make reference to the subject matter of the disagreement in connection with
their reports. The independent auditors report on the consolidated financial
statements for the fiscal year ended December 31, 1997 expressed an unqualified
opinion.
COMPLIANCE WITH SECTION 16(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers and directors, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange Commission.
Officers, directors and greater than ten percent stockholders are required by
regulation of the Securities and Exchange Commission to furnish the Company with
copies of all Section 16(a) forms they file.
Based solely on its review of the copies of such forms received by it,
or written representations from certain reporting persons that no Forms 5 were
required for those persons, the Company believes that, during the fiscal year
ended December 31, 1998, all filing requirements applicable to its officers,
directors and greater than ten percent beneficial owners were met.
STOCKHOLDER PROPOSALS
Proposals of stockholders to be included in the Company's 2000 proxy
material must be received by the Secretary of the Company no later than December
1, 1999.
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OTHER MATTERS
The Board of Directors is not aware of any other matters which may come
before the Annual Meeting. However, in the event such other matters come before
the meeting, it is the intention of the persons named in the proxy to vote on
any such matters in accordance with the recommendation of the Board of
Directors.
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SUSSEX BANCORP
REVOCABLE PROXY FOR
ANNUAL MEETING OF SHAREHOLDERS
APRIL 28, 1999
Solicited on Behalf of the Board of Directors
The undersigned hereby appoints Candace A. Leatham and Terry H.
Thompson and each of them, will full power of substitution, to vote all of the
shares of Sussex Bancorp (the "Company") standing in the undersigned's name at
the Annual Meeting of Shareholders of the Company, to be held at the Main Office
of The Sussex County State Bank (the "Bank"), 15 Trinity Street, Newton, New
Jersey, Wednesday, April 29, 1999, at 3:30 P.M., and at any adjournment thereof.
The undersigned hereby revokes any and all proxies heretofore given with respect
to such meeting.
This proxy will be voted as specified below. If no choice is specified,
the proxy will be voted "FOR" Management's nominees to the Board of Directors.
The Board of Directors recommends a vote for its nominees.
1. Election of the following two (2) nominees to each serve on
the Board of Directors for a term of three (3) years and until
their successors are elected and duly qualified: Richard Scott
and Joseph Zitone
[ ] FOR ALL NOMINEES
TO WITHHOLD AUTHORITY FOR ANY OF THE ABOVE NAMED NOMINEES,
PRINT THE NOMINEE'S NAME ON THE LINE BELOW:
[ ] WITHHOLD AUTHORITY FOR ALL NOMINEES
2. In their discretion, such other business as may properly come before
the meeting.
Dated: ________________, 1999. ______________________________
Signature
______________________________
Signature
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(Please sign exactly as your name appears. When signing as an executor,
administrator, guardian, trustee or attorney, please give your title as such. If
signer is a corporation, please sign the full corporate name and then an
authorized officer should sign his name and print his name and title below his
signature. If the shares are held in joint name, all joint owners should sign.)
PLEASE DATE, SIGN AND RETURN THIS PROXY IN THE ENCLOSED RETURN ENVELOPE.
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