PRELIMINARY PROXY SOLICITATION MATERIALS
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
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:
[X] Preliminary Proxy Statement [ ] Confidential, for use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material pursuant to ss. 240.14a-11(c) or ss. 240.14a-12
Sun Bancorp, Inc.
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11. (set forth the amount on which the filing
fee is 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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(3) Filing Party:
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(4) Date Filed:
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<PAGE>
PRELIMINARY PROXY SOLICITATION MATERIALS
[Sun Bancorp, Inc. Letterhead]
April 10, 1998
Dear Fellow Shareholder:
On behalf of the Board of Directors and management of Sun Bancorp, Inc.
(the "Company"), I cordially invite you to attend the Annual Meeting of
Shareholders to be held at 226 Landis Avenue, Vineland, New Jersey, on April 21,
1998, at 3:30 p.m. The attached Notice of Annual Meeting and Proxy Statement
describe the formal business to be transacted at the Annual Meeting. During the
Annual Meeting, I will also report on the operations of the Company. Directors
and officers of the Company, as well as a representative of Deloitte & Touche
LLP, certified public accountants, will be present to respond to any questions
shareholders may have.
The matters to be considered by shareholders at the Annual Meeting are
described in the accompanying Notice of Annual Meeting and Proxy Statement. The
Board of Directors of the Company has determined that the matters to be
considered at the Annual Meeting are in the best interests of the Company and
its shareholders. For the reasons set forth in the Proxy Statement, the Board of
Directors unanimously recommends a vote "FOR" each matter to be considered.
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, PLEASE SIGN AND
DATE THE ENCLOSED PROXY CARD AND RETURN IT IN THE ACCOMPANYING POSTAGE-PAID
RETURN ENVELOPE AS PROMPTLY AS POSSIBLE.
This will not prevent you from voting in person at the Annual Meeting, but will
assure that your vote is counted if you are unable to attend the Annual Meeting.
YOUR VOTE IS VERY IMPORTANT.
Sincerely,
Bernard A. Brown
Chairman of the Board
<PAGE>
PRELIMINARY PROXY SOLICITATION MATERIALS
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SUN BANCORP, INC.
226 LANDIS AVENUE
VINELAND, NEW JERSEY 08360
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To be Held on April 21, 1998
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NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders (the "Meeting")
of Sun Bancorp, Inc. (the "Company"), will be held at 226 Landis Avenue,
Vineland, New Jersey on April 21, 1998, at 3:30 p.m.
The Meeting is for the purpose of considering and acting upon the following
matters:
1. The election of seven directors of the Company;
2. The ratification of the adoption of the 1997 Stock Option Plan;
3. The ratification of the adoption of the Employee Stock Purchase Plan;
4. The adoption of an Amended and Restated Certificate of Incorporation; and
5. Such other matters as may properly come before the meeting or
any adjournments thereof.
The Board of Directors is not aware of any other business to come before the
Meeting. Any action may be taken on the foregoing proposals at the Meeting on
the date specified above or on any date or dates to which, by original or later
adjournment, the Meeting may be adjourned. Shareholders of record at the close
of business on March 31, 1998 are the shareholders entitled to vote at the
Meeting and any adjournments thereof.
EACH SHAREHOLDER, WHETHER OR NOT HE OR SHE PLANS TO ATTEND THE MEETING, IS
REQUESTED TO SIGN, DATE AND RETURN THE ENCLOSED PROXY WITHOUT DELAY IN THE
ENCLOSED POSTAGE-PAID ENVELOPE. ANY PROXY GIVEN BY THE SHAREHOLDER MAY BE
REVOKED BY FILING WITH THE SECRETARY OF THE COMPANY A WRITTEN REVOCATION OR A
DULY EXECUTED PROXY BEARING A LATER DATE. ANY SHAREHOLDER PRESENT AT THE MEETING
MAY REVOKE HIS PROXY AND VOTE IN PERSON ON EACH MATTER BROUGHT BEFORE THE
MEETING. HOWEVER, IF YOU ARE A SHAREHOLDER WHOSE SHARES ARE NOT REGISTERED IN
YOUR OWN NAME, YOU WILL NEED ADDITIONAL DOCUMENTATION FROM YOUR RECORD HOLDER TO
VOTE IN PERSON AT THE MEETING.
BY ORDER OF THE BOARD OF DIRECTORS
Sidney R. Brown
Secretary
Vineland, New Jersey
April 10, 1998
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IMPORTANT: THE PROMPT RETURN OF PROXIES WILL SAVE THE COMPANY THE EXPENSE OF
FURTHER REQUESTS FOR PROXIES IN ORDER TO ENSURE A QUORUM AT THE MEETING. A
SELF-ADDRESSED ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE. NO POSTAGE IS REQUIRED
IF MAILED IN THE UNITED STATES.
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<PAGE>
PRELIMINARY PROXY SOLICITATION MATERIALS
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PROXY STATEMENT
OF
SUN BANCORP, INC.
226 LANDIS AVENUE
VINELAND, NEW JERSEY 08360
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ANNUAL MEETING OF SHAREHOLDERS
April 21, 1998
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GENERAL
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This Proxy Statement is furnished in connection with the solicitation
of proxies by the Board of Directors of Sun Bancorp, Inc. (the "Company") to be
used at the Annual Meeting of Shareholders of the Company which will be held at
226 Landis Avenue, Vineland, New Jersey, on April 21, 1998, 3:30 p.m. local time
(the "Meeting"). The accompanying Notice of Annual Meeting of Shareholders, form
of proxy and Annual Report and this Proxy Statement are being first mailed to
the Company's shareholders entitled to notice of and to vote at the Meeting, on
or about April 10, 1998. The Annual Report does not constitute "soliciting
material" and is not to be deemed "filed" with the Securities and Exchange
Commission (the "Commission").
At the Meeting, shareholders will consider and vote upon (i) the
election of seven directors, (ii) the ratification of the adoption of the 1997
Stock Option Plan (the "1997 Stock Option Plan"), (iii) the ratification of the
adoption of the Employee Stock Purchase Plan (the "ESPP"), (iv) the adoption of
an Amended and Restated Certificate of Incorporation for the Company, and (v)
such other matters as may properly come before the Meeting or any adjournments
thereof. The Board of Directors of the Company (the "Board" or the "Board of
Directors") knows of no additional matters that will be presented for
consideration at the Meeting. Execution of a proxy, however, confers on the
designated proxy holder discretionary authority to vote the shares represented
by such proxy in accordance with their best judgment on such other business, if
any, that may properly come before the Meeting or any adjournment thereof.
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VOTING AND REVOCABILITY OF PROXIES
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Shareholders who execute proxies retain the right to revoke them at any
time. Unless so revoked, the shares represented by such proxies will be voted at
the Meeting and all adjournments thereof. Proxies may be revoked by written
notice to the Secretary of the Company at the address above or by the filing of
a later dated proxy prior to a vote being taken on a particular proposal at the
Meeting. A proxy will not be voted if a shareholder attends the Meeting and
votes in person. Proxies solicited by the Board of Directors will be voted in
accordance with the directions given therein. Where no instructions are
indicated, signed proxies will be voted "FOR" the nominees for directors set
forth below and "FOR" the other listed proposals. The proxy confers
discretionary authority on the persons named therein to vote with respect to the
election of any person as a director where the nominee is unable to serve, or
for good cause will not serve, and matters incident to the conduct of the
Meeting.
<PAGE>
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VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
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Shareholders of record as of the close of business on March 31, 1998
(the "Record Date"), are entitled to one vote for each share of common stock of
the Company (the "Common Stock") then held. As of the Record Date, the Company
had 6,029,228 shares of Common Stock issued and outstanding.
The presence in person or by proxy of at least a majority of the
outstanding shares of Common Stock entitled to vote is necessary to constitute a
quorum at the Meeting. For purposes of determining the votes cast with respect
to any matter presented for consideration at the Meeting only those votes cast
"FOR" or "AGAINST" are included. Abstentions and broker non-votes (i.e., shares
held by brokers on behalf of their customers, which may not be voted on certain
matters because the brokers have not received specific voting instructions from
their customers with respect to such matters) will be counted solely for the
purpose of determining whether a quorum is present, except as otherwise noted
below. In the event there are not sufficient votes for a quorum or to ratify or
adopt any proposals at the time of the Meeting, the Meeting may be adjourned in
order to permit the further solicitation of proxies.
Persons and groups owning in excess of 5% of the outstanding shares of
Common Stock are required to file certain reports regarding such ownership
pursuant to the Securities Exchange Act of 1934, as amended (the "Exchange
Act"). Other than as noted below, management knows of no person or group that
owns more than 5% of the outstanding shares of Common Stock at the Record Date.
Percent of Shares of
Amount and Nature of Common Stock
Name and Address of Beneficial Owner Beneficial Ownership Outstanding
- ------------------------------------ -------------------- -----------
Bernard A. Brown
71 West Park Avenue
Vineland, New Jersey 08360 2,218,367(1) 34.20%
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(1) Includes shares of Common Stock held directly as well as by spouses or
minor children, in trust and other indirect ownership, over which
shares the individual effectively exercise sole voting and investment
power, unless otherwise indicated. Includes 456,570 options that may be
exercised within 60 days of the Record Date to purchase shares of
Common Stock. Excludes 195,050 options to purchase shares which are not
presently exercisable within 60 days of the Record Date. See "Director
and Executive Officer Compensation."
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INTEREST OF CERTAIN PERSONS IN MATTERS TO BE ACTED UPON
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Officers and employees of the Company have an interest in certain
matters being presented for shareholder ratification. Upon shareholder
ratification, employees, officers and directors of the Company may be granted
stock options or may exercise stock options already granted pursuant to the 1997
Stock Option Plan. The ratification of the 1997 Stock Option Plan is being
presented as "Proposal II Ratification of the adoption of the 1997 Stock Option
Plan." Officers and employees of the Company are also eligible to participate in
the ESPP which permits participants to purchase Company Common Stock at 95% of
the then current stock price. The ESPP is being presented for ratification as
"Proposal
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III - Ratification of the Adoption of the Employee Stock Purchase Plan." See
"Proposal I - Election of Directors" for information regarding the voting
control of shares of Common Stock held by executive officers and directors of
the Company.
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PROPOSAL I - ELECTION OF DIRECTORS
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General Information and Nominees
The entire Board of Directors, consisting of seven members, is to be
elected at the Meeting, each to serve until the next Annual Meeting of
Shareholders and until his or her successor has been duly elected and qualified.
Directors of the Company will be elected by a plurality of the votes
cast. It is intended that the persons named in the proxies solicited by the
Board will vote for the election of the named nominees. If any of the nominees
are unable to serve, the shares represented by all valid proxies will be voted
for the election of such substitute as the Board of Directors may recommend or
the size of the Board may be reduced to eliminate the vacancy. At this time, the
Board knows of no reason why the nominees might be unavailable to serve.
The following table sets forth information with respect to the
nominees, their name, age, the year they first became a director of the Company,
and the number and percentage of shares of the Common Stock beneficially owned
as of the Record Date.
<TABLE>
<CAPTION>
Shares of
Stock Percent
Director/ Director Beneficially of
Executive Officer Age (1) Position Since Owned (3) Class
----------------- ------- -------- ----- ----------- -----
<S> <C> <C> <C> <C> <C>
Bernard A. Brown (2) 73 Chairman of the Board 1985 2,218,367(4) 34.20%
Ike Brown (2) 43 Director 1998 91,661 1.52
Sidney R. Brown (2) 41 Vice Chairman, 1990 133,551 2.22
Treasurer, Secretary
Adolph F. Calovi 75 Director, President 1985 513 (6)
and Chief Executive
Officer
Peter Galetto, Jr. 44 Director 1990 110,521 1.83
Philip W. Koebig, III 55 Director, Executive 1995 241,339(4) 3.91
Vice President
Anne E. Koons (2) 45 Director 1990 117,437 1.95
All directors and executive officers of the 2,967,585(5) 44.50
Company as a group (11 persons)
</TABLE>
(footnotes on next page)
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<PAGE>
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(1) At December 31, 1997.
(2) Ike Brown, Sidney R. Brown and Anne E. Koons are the sons and daughter of
Bernard A. Brown.
(3) Includes shares held directly by the individual as well as by such
individual's spouse, shares held in trust and in other forms of indirect
ownership over which shares the individual effectively exercises sole
voting and investment power and shares which the named individual has a
right to acquire within sixty days of the Record Date, pursuant to the
exercise of stock options.
(4) Includes 456,570 options and 136,432 options granted to Messrs. Bernard
Brown and Koebig, respectively, which are presently exercisable. Excludes
195,050, 56,250 and 39,704 options granted to Messrs. Bernard Brown, Sidney
Brown and Koebig, respectively, which are not presently exercisable.
(5) Includes shares of Common Stock held directly as well as by spouses or
minor children, in trust and other indirect ownership, over which shares
the individuals effectively exercise sole voting and investment power,
unless otherwise indicated. Includes 639,544 options that may be exercised
within 60 days of the Record Date to purchase shares of Common Stock.
Excludes options to purchase 436,529 shares which are not presently
exercisable within 60 days. See "Director and Executive Officer
Compensation."
(6) Less than 1%.
Biographical Information
Directors and Executive Officers of the Company. The principal
occupation of each director and executive officer of the Company is set forth
below. All directors and executive officers have held their present positions
for five years unless otherwise stated. All of the directors reside in the State
of New Jersey.
Bernard A. Brown has been the Chairman of the Board of Directors of the
Company since its inception in January, 1985. Mr. Brown is also the Chairman of
the Board of Directors of Sun National Bank (the "Bank"), a wholly owned
subsidiary of the Company. For many years, Mr. Brown has been the Chairman of
the Board of Directors and President of NFI Industries, Inc., a trucking
conglomerate headquartered in Vineland, New Jersey.
Ike Brown has been a director of the Company since March, 1998. Mr.
Brown is the President of National Freight, Inc. a privately-held, nation-wide
transportation company. He is an officer and director of NFI Industries, Inc.
and also one of the general partners of The Four B's, a partnership which has
extensive real estate holdings in the Eastern United States. Its primary
objective is investing in, and the consequent development of, commercial real
estate, leasing and/or sale. Mr. Brown is currently an officer and director of
several other corporations and partnerships in the transportation, equipment
leasing, insurance, warehousing and real estate industries.
Sidney R. Brown has been the Treasurer and a director of the Company
since April, 1990. In March 1997, Mr. Brown became secretary of the Company, and
in March 1998 he became the Vice Chairman of the Board of Directors of the
Company. Mr. Brown is the chief executive officer of NFI Industries, Inc., and
one of the general partners of The Four B's, a partnership which has extensive
real estate holdings in the Eastern United States. Its primary objective is
investing in and consequent development of commercial real estate, leasing
and/or sale. Mr. Brown is currently an officer and director of several other
corporations and partnerships in the transportation, equipment leasing,
insurance, warehousing and real estate industries.
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<PAGE>
Adolph F. Calovi has been the President, Chief Executive Officer and a
director of the Company since its inception in January, 1985. Mr. Calovi is a
director of the Bank and, from 1985 to 1994, was its President and Chief
Executive Officer.
Peter Galetto, Jr. has been a director of the Company since April 1990.
Mr. Galetto also served as secretary of the Company from April 1990 to March
1997. Mr. Galetto is the President/Sales for Stanker & Galetto, Inc., an
industrial and building contractor located in Vineland, New Jersey. He is also
the President of the Cumberland Technology Enterprise Center, a small business
incubator. Mr. Galetto has been the Secretary/Treasurer of Trimark Building
Contractors. He is also an officer and director of several other corporations
and organizations.
Philip W. Koebig, III has been the Executive Vice President of the
Company since 1994. He has been a director of the Company since 1995. Mr. Koebig
has also been a director, President and Chief Executive Officer of the Bank
since January, 1995. From 1990 to 1994, Mr. Koebig had been President and Chief
Executive Officer of Covenant Bank for Savings, Haddonfield, New Jersey. He also
serves on the Board of Directors of numerous charitable organizations and
corporations.
Anne E. Koons has been a director of the Company since April, 1990. Ms.
Koons is a real estate agent with Prudential Preferred Properties, and a travel
agent for Leisure Time Travel. Ms. Koons is also a Commissioner of the Camden
County Improvement Authority and a member of the Cooper Medical Center's
Foundation Board.
Additional Executive Officers of the Bank. Set forth below is
biographical information of certain executive officers of the Bank who are not
also executive officers of the Company.
Robert F. Mack has been with the Bank since 1992 and serves as its
Executive Vice President and Chief Financial Officer. Mr. Mack has twenty-five
years of extensive banking experience and has worked for several commercial
banks in New Jersey.
Bart A. Speziali has been with the Bank since 1992 and is the
Senior Lending Officer and Executive Vice President. Mr. Speziali has over
twenty years of banking experience in southern New Jersey.
James S. Killough joined the Bank in February 1997 and serves as
Executive Vice President of Administration, Operations and Retail Banking.
Before joining the Bank, Mr. Killough was president and chief professional
officer for the United Way of Camden County, New Jersey for two years. Prior to
that, Mr. Killough was executive vice president for Central Jersey Bank and
Trust and Midlantic National Bank/South.
Harry G. Miller joined the Bank in December, 1997 as Executive Vice
President of Business Development. Prior to joining the Bank, Mr. Miller was
Executive Vice President for Collective Bank with an extensive background in
marketing, advertising, investor relations and cash management. Mr. Miller has
over 30 years experience in the banking and financial services industries.
Meetings and Committees of the Board of Directors
The Company is governed by a Board of Directors and various committees
of the Board which meet regularly throughout the year. During the fiscal year
ended December 31, 1997, the Board of Directors held 9 regular meetings and 8
special meetings. No director attended fewer
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<PAGE>
than 75% of the total meetings of the Board of Directors and committees during
the time such director served during the fiscal year ended December 31, 1997.
The Nominating Committee consists of the board of directors of the
Company. The Committee met once during the year ended December 31, 1997.
The Audit Committee consists of Directors Calovi, Galetto, and Koons.
The Audit Committee is responsible for recommending the appointment of the
Company's independent public accountants and meeting with such accountants with
respect to the scope and review of the annual audit. Additional responsibilities
of the Audit Committee are to ensure that the Board of Directors receives
objective information regarding policies, procedures and activities of the
Company with respect to auditing, accounting, internal accounting controls,
financial reporting, regulatory matters and such other activities of the Company
as may be directed by the Board of Directors. The Audit Committee met once
during the year ended December 31, 1997.
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DIRECTOR AND EXECUTIVE OFFICER COMPENSATION
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Directors' Compensation
Each member of the Board of Directors, except for the chairman and
employee directors, received a fee of $300 for each meeting attended for the
year ended December 31, 1997. Directors who are executive officers do not
receive any fees for their services as Directors. For the year ended December
31, 1997, directors fees totaled $31,500 of which $29,400 was paid in shares of
Common Stock.
Executive Compensation
The Company has no full time employees, relying upon employees of the
Bank for the limited services required by the Company. All compensation paid to
officers and employees is paid by the Bank.
Compensation Committee Report on Executive Compensation
The Personnel Committee (the "Committee") has furnished the following
report on executive compensation:
Under the supervision of the Board of Directors, the Company has
developed and implemented compensation policies, plans and programs which seek
to enhance the profitability of the Company, and thus shareholder value, by
aligning closely the financial interests of the Company's employees, including
its Chief Executive officer ("CEO"), Chairman of the Board and the Company's
other senior management, with those of its shareholders. With regard to
compensation actions affecting the CEO, the Executive Committee of the Board of
Directors, consisting of the members of the Personnel Committee, as well as all
of the non-employee members of the Board of Directors, acted as the approving
body.
The executive compensation program of the Company is designed to:
o Support a pay-for-performance policy that differentiates
compensation based on corporate and individual performance;
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<PAGE>
o Motivate employees to assume increased responsibility and reward
them for their achievement;
o Provide compensation opportunities that are comparable to those
offered by other leading companies, allowing the Company to
compete for and retain top quality, dedicated executives who are
critical to the Company's long-term success; and
o Align the interests of executives with the long-term interests of
shareholders through award opportunities that can result in
ownership of Common Stock.
At present, the executive compensation program is comprised of salary,
annual cash incentive opportunities, long-term incentive opportunities in the
form of stock options, and miscellaneous benefits typically offered to
executives in comparable corporations. The Committee considers the total
compensation (earned or potentially available) in establishing each element of
compensation so that total compensation paid is competitive with the market
place, based on an independent consultant's survey of salary competitiveness of
other financial institutions. The Committee intends to be advised periodically
by independent compensation consultants concerning salary competitiveness.
As an executive's level of responsibility increases, a greater portion
of his or her potential total compensation opportunity is based on Company
performance incentives rather than on salary. Reliance on Company performance
causes greater variability in the individual's total compensation from year to
year. By varying annual and long-term compensation and basing both on corporate
performance, the Company believes executive officers are encouraged to continue
focusing on building profitability and shareholder value. The mix of annual and
long-term compensation was set subjectively. In determining the mix, the
Committee balanced rewards for past performance with incentives for future
performance, and took into account such factors as overall risk of the pay
package and award sizes in prior years.
Base Salary. Annual base salaries for all executive officers are
generally set somewhat below competitive levels so that the Company relies to a
large degree on annual and longer term incentive compensation to attract and
retain corporate officers and other employees and to motivate them to perform to
the full extent of their abilities. Effective January 1, 1997, the Board of
Directors, acting on the recommendation of the Committee, increased the base
salary paid to executive officers. The increase reflected consideration of
competitive data provided by an independent consulting firm, the Committee's and
the Board's assessment of the executive officer's performance, over the previous
year and recognition of the improvement in performance by the Company during
1997 as compared with the Company's goals included in its business plan.
Long-Term Incentive Compensation. The long-term incentive compensation
consists of stock option awards. The Committee believes that issuing stock
options to executives benefits the Company's shareholders by encouraging and
enabling executives to own stock of the Company, thus aligning executive pay
with shareholder interests.
1997 Compensation for the CEO. Mr. Calovi has been President, Chief
Executive Officer and a director of the Company since its inception in 1985. Mr.
Calovi's salary of $131,000 is fixed in his employment agreement and is based
upon his prior years of service to the Bank and the Company. Mr. Calovi's
compensation of $131,000 is for a term of four years. See "-Employment
Agreement."
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<PAGE>
Personnel Committee
Anne E. Koons
Sidney R. Brown
Philip W. Koebig, III
Stock Performance Graph
Set forth below is a stock performance graph comparing the cumulative
total shareholder return on the Common Stock with (a) the cumulative total
shareholder return on stocks included in the Nasdaq Stock Market index and (b)
the cumulative total shareholder return on stocks included in the Nasdaq Bank
index, as prepared for Nasdaq by the Center for Research in Securities Prices
("CRSP") at the University of Chicago. All three investment comparisons assume
the investment of $100 as of August 29, 1996 (the date the Common Stock began
trading on the Nasdaq Stock Market). All of these cumulative total returns are
computed assuming the reinvestment of dividends. In the graph below, the periods
compared were August 29, 1996 and the Company's fiscal years ended December 31,
1996 and 1997.
There can be no assurance that the Company's future stock performance
will be the same or similar to the historical stock performance shown in the
graph below. The Company neither makes nor endorses any predictions as to stock
performance.
[GRAPH OMITTED]
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8/96 12/31/96 12/31/97
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CRSP Nasdaq U.S. Index $100 $113 $139
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CRSP Nasdaq Bank Index 100 118 200
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Sun Bancorp, Inc. 100 103 398
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<PAGE>
The information set forth above under the subheadings "Compensation
Committee Report on Executive Compensation" and "Stock Performance Graph" (i)
shall not be deemed to be "soliciting material" or to be "filed" with the
Commission or subject to Regulation 14A or the liabilities of Section 18 of the
Exchange Act, and (ii) notwithstanding anything to the contrary that may be
contained in any filing by the Company under such Act or the Securities Act of
1933, as amended ("Securities Act"), shall not be deemed to be incorporated by
reference in any such filing.
Summary Compensation Table. The following table sets forth compensation
awarded to the Chief Executive Officer and Executive Vice President of the
Company who, for the year ended December 31, 1997, received total salary and
bonus payments from the Bank in excess of $100,000. Except as set forth below,
no executive officer of the Company had a salary and bonus during the year ended
December 31, 1997, that exceeded $100,000 for services rendered in all
capacities to the Company.
<TABLE>
<CAPTION>
Long Term
Compensation
------------
Annual Compensation Awards
------------------- ------
Securities
Name and Underlying All Other
Principal Position Year Salary Bonus Options(#) Compensation
------------------ ---- ------ ----- ---------- ------------
<S> <C> <C> <C> <C> <C>
Adolph F. Calovi 1997 $131,000 $ -- -- $ --
President and Chief 1996 131,000 -- -- --
Executive Officer 1995 131,000 -- -- --
Philip W. Koebig, III 1997 199,039 -- 22,500 11,658(1)
Executive Vice 1996 174,044 22,500 10,500 10,583
President 1995 150,000 -- 52,499 10,383
Bart A. Speziali 1997 106,704 -- 4,500 --
Executive Vice President 1996 97,692 6,000 4,961 --
of the Bank 1995 89,577 3,000 -- --
James S. Killough(2) 1997 105,769 -- 28,125 --
Executive Vice President
of the Bank
</TABLE>
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(1) For Mr. Koebig, all other compensation constitutes life and disability
insurance premiums of $8,098, and country club dues of $3,560 for 1997.
(2) Mr. Killough joined the Bank in February 1997.
Stock Option Plans. The Company has adopted the 1985 Stock Option Plan,
the 1995 Stock Option Plan and the 1997 Stock Option Plan (the "Option Plans").
Officers, directors and employees are eligible to receive, at no cost to them,
options under the Option Plans. Options granted under the Option Plans may be
either incentive stock options (options that afford favorable tax treatment to
recipients upon compliance with certain restrictions pursuant to Section 422 of
the Internal Revenue Code and that do not normally result in tax deductions to
the Company) or options that do not so qualify. The option price
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<PAGE>
may not be less than 100% of the fair market value of the shares on the date of
the grant. Option shares may be paid in cash, shares of the common stock, or a
combination of both. The options are exercisable for a period of ten years.
The following tables set forth additional information concerning
options granted under the Option Plans.
<TABLE>
<CAPTION>
Option Grants in Last Fiscal Year
---------------------------------
Potential Realizable
Individual Grants Value at Assumed
- -------------------------------------------------------------------------------------------- Annual Rates of Stock
Price Appreciation for
Option Term
Percent of Total -----------
Number of Options Granted Exercise
Options to Employees Price Expiration
Name Granted in Fiscal Year ($/Share) Date 5% ($) 10% ($)
- ---- ------- -------------- --------- ---- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Philip W. Koebig, III 11,241 4.36% $10.00 7/15/07 $183,104 $291,563
11,259 4.36 10.00 7/25/07 183,397 292,029
Bart A. Speziali 4,500 1.74 10.00 7/15/07 73,300 116,718
James S. Killough 22,503 8.72 8.89 1/21/07 325,863 518,883
1,122 0.43 8.89 1/31/07 16,248 25,871
2,250 0.87 10.00 7/15/07 36,650 58,359
2,250 0.87 10.00 7/25/07 36,650 58,359
</TABLE>
<TABLE>
<CAPTION>
Aggregated Option Exercises in Last Fiscal Year and Option Values at End of Fiscal Year
---------------------------------------------------------------------------------------
Value of
Number of Options In-the-money Options
Shares Acquired Value at Fiscal Year-End(#) at Fiscal Year-End($)
Name on Exercise (#) Realized Exercisable/Unexercisable Exercisable/Unexercisable(1)
- ---- --------------- -------- ------------------------- ----------------------------
<S> <C> <C> <C> <C>
Philip W. Koebig, III -- -- 136,432/39,704 $2,240,833/$450,150
Bart A. Speziali -- -- 17,365/6,981 283,572/89,879
James S. Killough -- -- 11,812/16,313 152,847/206,095
</TABLE>
- -------------------
(1) Based upon the difference between the option exercise price and the market
price of stock of $21.83 per share as of December 31, 1997.
Employment Agreement. The Company has an employment agreement, dated
January 2, 1995, with Adolph F. Calovi, its President and CEO. Under the terms
of the agreement, Mr. Calovi will receive an annual salary of $131,000 for each
of the four years of the agreement. In addition, he will receive all benefits
offered officers of the Company and will have the use of a Company-owned
automobile. If, during the term of the agreement, Mr. Calovi's employment
terminates for any reason except voluntary resignation, embezzlement, fraud, or
due to a material default by Mr. Calovi of his employment obligations, the
Company will be fully liable for all remaining salary payments under the
agreement.
-10-
<PAGE>
- --------------------------------------------------------------------------------
ADDITIONAL INFORMATION ABOUT DIRECTORS AND EXECUTIVE OFFICERS
- --------------------------------------------------------------------------------
Compensation Committee Interlocks and Insider Participation
The Compensation Committee of the Company during the year ended
December 31, 1997 consisted of Anne E. Koons, Sidney R. Brown and Philip W.
Koebig, III. All are members of the Board of Directors of the Company. Mr.
Koebig is also a Director and Officer of the Bank and did not participate in
matters involving his personal compensation. No member of the Committee is, or
was during 1997, an executive officer of another company whose board of
directors has a comparable committee on which one of the Company's executive
officers serves. None of the executive officers of the Company is, or was during
1997, a member of a comparable compensation committee of a company of which any
of the directors of the Company is an executive officer.
Certain Relationships and Related Transactions
Bernard A. Brown, the Chairman of the Board of Directors of the Company
and of the Bank, and Shirley Brown, a director of the Company, are the owners of
Vineland Construction Company. The Company and the Bank lease office space in
Vineland, New Jersey from Vineland Construction Company. The Company believes
that the transactions with Vineland Construction Company are on terms
substantially the same, or at least as favorable to the Bank, as those that
would be provided by a non-affiliate. The Company paid $360,897 to Vineland
Construction during the year ended December 31, 1997. The Bank is also party to
a lease agreement for an office building with a partnership comprised of
directors and shareholders of the Bank. The Company believes that the lease is
on terms substantially the same, or at least as favorable to the Bank, as those
that would be provided by a non-affiliate. The Company paid $299,036 in annual
rent under this lease agreement during the year ended December 31, 1997.
The Bank has a policy of offering various types of loans to officers,
directors and employees of the Bank and of the Company. These loans have been
made in the ordinary course of business and on substantially the same terms and
conditions (including interest rates and collateral requirements) as, and
following credit underwriting procedures that are not less stringent than, those
prevailing at the time for comparable transactions by the Bank with its other
unaffiliated customers and do not involve more than the normal risk of
collectibility, nor present other unfavorable features. None of these loans are
nonperforming.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires the Company's officers and
directors, and persons who own more than ten percent of the Common Stock, to
file reports of ownership and changes in ownership of the Common Stock with the
Commission and the Nasdaq National Market, and to provide copies of those
reports to the Company.
Based upon a review of the copies of the forms furnished to the
Company, or written representations from certain reporting persons, the Company
believes that all Section 16(a) filing requirements applicable to its executive
officers and directors were complied with during the year ended December 31,
1997.
-11-
<PAGE>
- --------------------------------------------------------------------------------
PROPOSAL II - RATIFICATION OF THE ADOPTION OF THE
1997 STOCK OPTION PLAN
- --------------------------------------------------------------------------------
General
The Company's Board of Directors adopted the 1997 Stock Option Plan (the "Plan")
on November 18, 1997. The Plan is subject to approval by the Company's
shareholders. Pursuant to the Plan, an aggregate of 300,000 shares (adjusted for
the 3-for-2 stock split effected by means of a 50% stock dividend on March 18,
1998) of Common Stock are to be reserved for issuance by the Company upon
exercise of stock options to be granted to employees, officers, directors and
advisory directors of the Company and each present or future subsidiary
corporation of the Company. The purpose of the Plan is to encourage these
individuals to invest in the Company's stock and thereby acquire a proprietary
interest in the business of the Company and so an increased personal interest in
it's continued success and progress, to the mutual benefit of shareholders and
themselves.
The Plan, which will become effective upon the date of it's adoption by
the Board, subject to ratification by the shareholders of the Company
("Effective Date"), provides for a term of ten years, after which time no awards
may be made. The following summary of the material features of the Plan is
qualified in its entirety by reference to the complete provisions of the Plan,
attached hereto as Exhibit A.
The Plan will be administered by the Company's Board of Directors or a
committee of not less than two nor more than seven non-employee directors
appointed by the Board and serving at the pleasure of the Board (the "Option
Committee"). Members of the Option Committee shall be deemed "Non- Employee
Directors" within the meaning of Rule 16b-3 pursuant to the Exchange Act. The
Option Committee shall select those individuals to whom options are to be
granted, the number of options to be granted, whether the option shall be an
incentive stock option or a nonqualified stock option, etc. A majority of the
members of the Option Committee shall constitute a quorum and the vote or
written consent of a majority of the members of the Option Committee shall
constitute the action of the Option Committee.
Employees, officers, directors and advisory directors who are
designated by the Option Committee will be eligible to receive, at no cost to
them, options under the Plan (the "Optionees"). Options granted under the Plan
will constitute either incentive stock options (options that afford favorable
tax treatment to recipients upon compliance with certain restrictions pursuant
to Section 422 of the Internal Revenue Code ("Code") and that do not normally
result in tax deductions to the Company) or nonqualified stock options (options
that do not afford recipients favorable tax treatment under Code Section 422).
Option shares may be paid for in cash, shares of Common Stock, or a combination
of both. The Company will receive no consideration other than the option
exercise price per share for Common Stock issued to Optionees upon the exercise
of those Options.
Shares issuable under the Plan may be from authorized but unissued
shares or they may be reacquired shares. An Option which expires, becomes
unexercisable or is forfeited for any reason prior to its exercise will again be
available for issuance under the Plan.
Transferability
An incentive stock option shall not be assignable or transferable
otherwise than by will or by the laws of descent and distribution. A
nonqualified stock option, on the other hand, may, with the prior written
consent of the Option Committee, be assigned or transferred during the
Optionee's lifetime.
-12-
<PAGE>
Stock Options
The Option Committee may grant both an incentive stock option and a
nonqualified stock option to the same person, or more than one of each type of
option to the same person. The option price for both incentive stock options and
nonqualified stock options issued under this Plan shall equal at least the fair
market value of the Common Stock as of the date of the grant of the option. Fair
market value will be determined by the Option Committee in accordance with its
interpretation of the requirements of Section 422 of the Code and the
regulations thereunder.
If an Optionee ceases to serve as an employee of the Company for any
reason other than disability or death, an exercisable incentive stock option may
continue to be exercisable for three months but in no event after the expiration
date of the option, except as may otherwise be determined by the Option
Committee at the time of the award. Nonqualified stock options expire ten years
and ten days after the date they are granted, unless terminated earlier under
the option terms. These are determined by the Option Committee, in its sole
discretion at the time of grant.
If an officer or employee owns Common Stock representing more than ten
percent of the outstanding Common Stock at the time an incentive stock option is
granted, then the exercise price shall not be less than one hundred and ten
percent (110%) of the Fair Market Value of the Common Stock at the time the
incentive stock option is granted. No more than $100,000 of incentive stock
options can become exercisable for the first time in any one year for any one
person. The Option Committee may impose additional conditions upon the right of
an Optionee to exercise any Option granted hereunder which are not inconsistent
with the terms of the Plan or the requirements for qualification as an incentive
stock option, if such Option is intended to qualify as an incentive stock
option.
Upon the exercise of an Option by an Optionee (or the Optionee's
personal representative), the Option Committee, in its sole and absolute
discretion, may make a cash payment to the Optionee, in whole or in part, in
lieu of the delivery of shares of Common Stock. Such cash payment to be paid in
lieu of delivery of Common Stock shall be equal to the difference between the
Fair Market Value of the Common Stock on the date of the Option exercise and the
exercise price per share of the Option. Such cash payment shall be in exchange
for the cancellation of such Option. Such cash payment shall not be made in the
event that such transaction would result in liability to the Optionee and the
Company under Section 16(b) of the Exchange Act, and regulations promulgated
thereunder.
Awards Under the Plan
The Board or the Option Committee shall from time to time in its sole
discretion determine who are the officers, employees, directors and advisory
directors of the Company and each present and future subsidiary corporation of
the Company eligible to receive options under this Plan, which of these
individuals shall in fact be granted an option or options, whether the option
shall be an incentive stock option or a nonqualified stock option, the time or
times at which the options shall be granted, the rate of option exercisability,
and, pursuant to the Plan, the price at which each of the options is exercisable
and the duration of the option.
-13-
<PAGE>
The table below presents information related to stock option awards
previously made under the Plan.
PRIOR AWARDS UNDER
1997 STOCK OPTION PLAN
----------------------
Number of Options
Name and Position to be Granted (1)(2)(3)
- ----------------- -----------------------
Bernard A. Brown 2,400
Chairman of the Board
Philip W. Koebig III 4,800
Executive Vice President
Harry G. Miller 15,000
Executive Vice President of the Bank
Executive Officer Group (3 persons)............... 22,200
Non-Executive Officer Director Group (0 persons).. --
Non-Executive Officer Employee Group (1 person)... 1,500
- -----------------
(1) The exercise price of such options are equal to the fair market value
of such Common Stock on the date of grant. The number of options has
been adjusted for the 3-for-2 stock split effected by means of a 50%
stock dividend on March 18, 1998.
(2) Options awarded to directors, officers and employees are exercisable as
follows: Options awarded at the time of stockholder approval are first
exercisable at the rate of 50% after the first anniversary of the grant
and 50% after the second anniversary of the grant.
(3) Such options shall continue to vest provided the individual remains an
employee, a director or director emeritus.
Effect of Mergers, Change of Control and Other Adjustments
Subject to any required action by the shareholders of the Company,
within the sole discretion of the Option Committee, the aggregate number of
shares of Common Stock for which Options may be granted hereunder or the number
of shares of Common Stock represented by each outstanding Option will be
proportionately adjusted for any increase or decrease in the number of issued
and outstanding shares of Common Stock resulting from a subdivision or
consolidation of shares or the payment of a stock dividend or any other increase
or decrease in the number of shares of Common Stock effected without the receipt
or payment of consideration by the Company. Subject to any required action by
the shareholders of the Company, in the event of any change in control,
recapitalization, merger, consolidation, exchange of shares, spin-off,
reorganization, tender offer, partial or complete liquidation or other
extraordinary corporate action or event, the Option Committee, in its sole
discretion, shall have the power, prior to or subsequent to such action or
events, to (i) appropriately adjust the number of shares of Common Stock subject
to each Option, the exercise price per share of such Option, and the
consideration to be given or received by the Company upon the exercise of any
outstanding Options; (ii) cancel any or all previously granted Options, provided
that appropriate consideration is paid to the Optionee in connection therewith;
and/or (iii) make such other adjustments in connection with the Plan as the
Option Committee, in its sole discretion, deems necessary, desirable,
appropriate or advisable. However, no action may be taken by the Option
Committee which would cause incentive stock options granted pursuant to the Plan
to fail to meet the requirements of Section 422 of the Code without the consent
of the Optionee. Upon the payment of a special or non-recurring cash dividend
that has the effect of a return of capital to the shareholders, the Option
exercise price per share shall be adjusted proportionately.
-14-
<PAGE>
The Option Committee will at all times have the power to accelerate the
exercise date of all Options granted under the Plan. In the case of a Change in
Control of the Company as determined by the Option Committee, all outstanding
options shall become immediately exercisable. A Change in Control is defined to
include (i) the sale of all, or a material portion, of the assets of the
Company; (ii) the merger or recapitalization of the Company whereby the Company
is not the surviving entity; (iii) the acquisition, directly or indirectly, of
the beneficial ownership (within the meaning of Section 13(d) of the Exchange
Act and rules and regulations promulgated thereunder) of 25% or more of the
outstanding voting securities of the Company by any person, trust, entity, or
group. This limitation shall not apply to the purchase of shares by underwriters
in connection with a pubic offering of Company stock or the purchase of shares
of up to 25% of any class of securities of the Company by a tax-qualified
employee stock benefit plan which is exempt from the approval requirements in
effect, or as may hereafter be amended.
In the event of such a Change in Control, the Option Committee and the
Board of Directors will take one or more of the following actions to be
effective as of the date of such Change in Control: (i) provide that such
Options shall be assumed, or equivalent options shall be substituted,
("Substitute Options") by the acquiring or succeeding corporation (or an
affiliate thereof), provided that: (A) any such Substitute Options exchanged for
incentive stock options shall meet the requirements of Section 424(a) of the
Code, and (B) the shares of stock issuable upon the exercise of such Substitute
Options shall constitute securities registered in accordance with the Securities
Act or such securities shall be exempt from such registration in accordance with
Sections 3(a)(2) or 3(a)(5) of the Securities Act, (collectively, "Registered
Securities"), or in the alternative, if the securities issuable upon the
exercise of such Substitute Options shall not constitute Registered Securities,
then the Optionee will receive upon consummation of the Change in Control
transaction a cash payment for each Option surrendered equal to the difference
between (1) the Fair Market Value of the consideration to be received for each
share of Common Stock in the Change in Control transaction times the number of
shares of Common Stock subject to such surrendered Options, and (2) the
aggregate exercise price of all such surrendered Options, or (ii) in the event
of a transaction under the terms of which the holders of the Common Stock of the
Company will receive upon consummation thereof a cash payment (the "Merger
Price") for each share of Common Stock exchanged in the Change in Control
transaction, to make or to provide for a cash payment to the Optionees equal to
the difference between (A) the Merger Price times the number of shares of Common
Stock subject to such Options held by each Optionee (to the extent then
exercisable at prices not in excess of the Merger Price) and (B) the aggregate
exercise price of all such surrendered Options in exchange for such surrendered
Options.
The power of the Option Committee to accelerate the exercise of Options
and the immediate exercisability of Options in the case of a Change in Control
of the Company could have an anti-takeover effect by making it more costly for a
potential acquiror to obtain control of the Company due to the higher number of
shares outstanding following such exercise of Options. The power of the Option
Committee to make adjustments in connection with the Plan, including adjusting
the number of shares subject to Options and canceling Options, prior to or after
the occurrence of an extraordinary corporate action, allows the Option Committee
to adapt the Plan to operate in changed circumstances, to adjust the Plan to fit
a smaller or larger company, and to permit the issuance of Options to new
management following such extraordinary corporate action. However, this power of
the Option Committee also has an anti-takeover effect, by allowing the Option
Committee to adjust the Plan in a manner to allow the present management of the
Company to exercise more options and hold more shares of the Company's Common
Stock, and to possibly decrease the number of Options available to new
management of the Company.
-15-
<PAGE>
Although the Plan may have an anti-takeover effect, the Company's Board
of Directors did not adopt the Plan specifically for anti-takeover purposes. The
Plan could render it more difficult to obtain support for shareholder proposals
opposed by the Company's Board and management in that recipients of Options
could choose to exercise such Options and thereby increase the number of shares
for which they hold voting power. In addition, the exercise of such Options
could increase the cost of an acquisition by a potential acquiror.
Amendment and Termination of the Plan
The Board of Directors may at any time, and from time to time, modify
or amend the Plan, or suspend or terminate it, effective as of such date, which
date may be either before or after the taking of the action, provided that
options granted prior to the actual date on which such action occurred, will not
be affected.
Possible Dilutive Effects of the Plan
To the extent that the Company funds the Plan, in whole or in part,
with authorized but unissued shares, the interests of current shareholders will
be diluted. If upon the exercise of all of the Options, the Company delivers
newly issued shares of Common Stock (i.e., 300,000 shares of Common Stock), then
the dilutive effect to current shareholders would be approximately _____%.
Federal Income Tax Consequences
Under present federal tax laws, awards under the Plan will have the
following consequences:
1. The grant of an Option will not by itself result in the
recognition of taxable income to an Optionee nor entitle the
Company to a tax deduction at the time of such grant.
2. The exercise of an Option which is an "incentive stock option"
within the meaning of Section 422 of the Code generally will not,
by itself, result in the recognition of taxable income to an
Optionee nor entitle the Company to a deduction at the time of
such exercise. However, the difference between the Option
exercise price and the Fair Market Value of the Common Stock on
the date of Option exercise is an item of tax preference which
may, in certain situations, trigger the alternative minimum tax
for an Optionee. An Optionee will recognize capital gain or loss
upon resale of the shares of Common Stock received pursuant to
the exercise of incentive stock options, provided that such
shares are held for at least one year after transfer of the
shares or two years after the grant of the Option, whichever is
later. Generally, if the shares are not held for that period, the
Optionee will recognize ordinary income upon disposition in an
amount equal to the difference between the Option exercise price
and the Fair Market Value of the Common Stock on the date of
exercise, or, if less, the sales proceeds of the shares acquired
pursuant to the Option.
3. The exercise of a nonqualified stock option will result in the
recognition of ordinary income by the Optionee on the date of
exercise in an amount equal to the difference between the
exercise price and the Fair Market Value of the Common Stock
acquired pursuant to the Option.
-16-
<PAGE>
4. The Company will be allowed a tax deduction for federal tax
purposes equal to the amount of ordinary income recognized by an
Optionee at the time the Optionee recognizes such ordinary
income.
5. In accordance with Section 162(m) of the Code, the Company's tax
deductions for compensation paid to the most highly paid
executives named in the Company's Proxy Statement may be limited
to no more than $1 million per year, excluding certain
"performance-based" compensation. The Company intends for the
award of Options under the Plan to comply with the requirement
for an exception to Section 162(m) of the Code applicable to
stock option plans so that the Company's deduction for
compensation related to the exercise of Options would not be
subject to the deduction limitation set forth in Section 162(m)
of the Code.
Accounting Treatment
The Company expects to use the "intrinsic value based method" as
prescribed by APB Opinion 25. Accordingly, neither the grant nor the exercise of
an Option under the Plan currently requires any charge against earnings under
generally accepted accounting principles. Common Stock issuable pursuant to
outstanding Options which are exercisable under the Plan might be considered
outstanding for purposes of calculating earnings per share and earnings per
share on a fully diluted basis.
Shareholder Ratification
Shareholder ratification of the adoption of the Plan is being sought by
the Board in order to qualify the Plan for the granting of incentive stock
options in accordance with the Code, to enable Optionees to qualify for certain
exemptive treatment from the short-swing profit recapture provisions of Section
16(b) of the Exchange Act, to meet the requirements for the tax-deductibility of
certain compensation items under Section 162(m) of the Code, and to meet the
requirements for continued listing of the Common Stock under the Nasdaq National
Market. An affirmative vote of the holders of a majority of the shares present,
in person or by proxy, and entitled to vote at the Meeting is required to
constitute shareholder ratification of this Proposal II. Proxies marked
"ABSTAIN" for purposes of Proposal II will have the same effect as a vote
against the proposal.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE RATIFICATION OF THE
1997 STOCK OPTION PLAN, WHICH IS ATTACHED HERETO AS APPENDIX A. UNLESS MARKED TO
THE CONTRARY, THE SHARES REPRESENTED BY SIGNED PROXIES WILL BE VOTED FOR
RATIFICATION OF THE 1997 STOCK OPTION PLAN.
- --------------------------------------------------------------------------------
PROPOSAL III - RATIFICATION OF THE EMPLOYEE STOCK PURCHASE PLAN
- --------------------------------------------------------------------------------
Description of the Plan
Shareholders are being asked to consider and to ratify the adoption by
the Board of the Sun Bancorp. Inc. Employee Stock Purchase Plan (the "ESPP")
that would provide for employees of the Company to purchase the Company's Common
Stock through payroll deductions. The ESPP became effective August 1, 1997. The
following is a brief summary of the important elements of the ESPP, the complete
text of which is attached to this proxy statement as Exhibit B and incorporated
herein in its
-17-
<PAGE>
entirety by this reference. Shareholders are urged to read the ESPP in its
entirety prior to voting on this Proposal.
The ESPP allows employees of the Company to make purchases of the
Common Stock through regular payroll deductions of no less than $10 nor more
than $985 per bi-weekly pay period (not to exceed $23,750 per calendar year).
The amounts withheld from all participants' payroll deductions will be pooled
and forwarded to the Company, the administrator of the ESPP (the
"Administrator"), to purchase shares of Common Stock in the open market (or,
upon 10 days written notice from the Company, newly issued shares directly from
the Company) for the accounts of all participants under the ESPP on at least a
monthly basis. Participants will not have to pay any brokerage commissions and
the Company will pay expenses associated with the stock purchases. Additionally,
the Company shall subsidize 5% of the purchase price of such Common Stock.
Participants have the authority to direct the Administrator in the manner of
voting the number of whole and fractional shares of Common Stock held in their
accounts and may withdraw from the ESPP at any time to be effective as of the
first full payroll period of the next calendar quarter following receipt of the
notice of withdrawal.
Under the ESPP, eligible employees may join the plan at any time to
become effective upon the first full payroll period of the calendar quarter
following receipt by the Company of the employee's request. Participants may
change or terminate their payroll deductions to be effective as of the first
full payroll period beginning after the next January 1, April 1, July 1 or
October 1, after giving timely notice to the Administrator. Purchases of Common
Stock under the ESPP are made using after-tax funds at a purchase price equal to
95% of the average purchase price of such stock during a specified period. There
are no tax consequences to the employee related to such stock purchases until
the stock is sold. Provided that the stock acquired under the ESPP is held for
at least two years, the 5% purchase discount will be taxed as ordinary income at
the time of sale of the stock and any additional appreciation will be taxed as a
long-term capital gain. If the stock acquired under the ESPP is sold prior to
two years from acquisition, then the full amount received upon sale in excess of
the purchase price paid by the participant will be taxed as ordinary income.
Participation under the ESPP is open to all employees of the Company
and its subsidiaries on an equal basis. Participation under the ESPP and an
individual's level of payroll savings for the purchase of Common Stock is
completely voluntary. In that participation under the ESPP is open to all
eligible employees of the Company and its subsidiaries, the ESPP does not afford
any special benefit to officers of the Company. The maximum benefit which may be
realized to any Participant under the ESPP, assuming that such Participant
enrolls to purchase the maximum permissible amount bi-weekly equal to $985 per
payroll period, would be $48 bi-weekly (i.e., the 5% Company subsidy related
to stock purchases) or $1,250 per calendar year.
Reasons for Submitting the ESPP to Shareholders
The Company is submitting the ESPP to shareholders for ratification,
although it is not required to do so. The ESPP will be effective notwithstanding
the absence of shareholder ratification of this Proposal III. The purpose of
requesting shareholder ratification of the ESPP is to enable participants under
the ESPP who are executive officers of the Company to qualify for certain
exemptive treatment from the reporting provisions of Section 16 of the Exchange
Act, and to meet the requirements of Section 423 of the Internal Revenue Code to
permit the deferral of taxation of the 5% purchase price discount until after
the stock purchased is sold. Specifically, absent shareholder ratification,
executive officers of the Company who participate in the ESPP will be required
to file Forms 4 with the SEC each month to report stock purchases under the
ESPP. With shareholder ratification of the ESPP, the ESPP has been
-18-
<PAGE>
designed to permit such executive officers to report purchases under the ESPP on
a Form 5 annually. Also, absent shareholder ratification, the 5% purchase price
discount will be deemed taxable income to the participant immediately.
Vote Required for Ratification
The affirmative vote of holders of a majority of the shares of the
Company present, in person or by proxy, and entitled to vote at the Meeting is
required for ratification of the adoption of the ESPP. Proxies marked "ABSTAIN"
for purposes of Proposal III will have the same effect as a vote against the
proposal.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR"
RATIFICATION OF THE ADOPTION OF THE ESPP, WHICH IS ATTACHED HERETO AS APPENDIX
B. UNLESS MARKED TO THE CONTRARY, THE SHARES REPRESENTED BY SIGNED PROXIES WILL
BE VOTED FOR RATIFICATION OF THE ESPP.
- --------------------------------------------------------------------------------
PROPOSAL IV - ADOPTION OF AN AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
- --------------------------------------------------------------------------------
General
Shareholders are being asked to consider and approve certain amendments
to, and the restatement of, the Company's Certificate of Incorporation (the
"Restated Certificate"). The Restated Certificate contains several provisions
that will make more difficult the acquisition of control of the Company by means
of a tender offer, open market purchases, a proxy fight or other transactions
that are not approved by the Board of Directors.
The purposes of the relevant provisions of the Restated Certificate are
to discourage certain types of transactions, described below, which may involve
an actual or threatened change of control of the Company and to encourage
persons seeking to acquire control of the Company to consult first with the
Board of Directors to negotiate the terms of any proposed business combination
or offer. The provisions are designed to reduce the vulnerability of the Company
to an unsolicited proposal for a takeover that does not contemplate the
acquisition of all outstanding shares or is otherwise unfair to shareholders of
the Company, or an unsolicited proposal for the restructuring or sale of all or
part of the Company. The Company believes that, as a general rule, such
proposals would not be in the best interests of the Company and its
shareholders.
There has been a recent trend towards the accumulation of substantial
stock positions in public companies by third parties as a prelude to forcing a
takeover or a restructuring or sale of all or part of the company or another
similar extraordinary corporate action. Such actions are often undertaken by the
third party without advance notice to, or consultation with, the management or
board of directors of, the company. In many cases, the purchaser seeks
representation on the company's board of directors in order to increase the
likelihood that its proposal will be implemented by the company. If a company
resists the efforts of the purchaser to obtain representation on the company's
board, the purchaser may commence a proxy contest to have its nominees elected
to the board in place of certain directors or the entire board. In some cases,
the purchaser may not truly be interested in taking over the company, but may
use the threat of a proxy fight and/or a bid to take over the company as a means
of forcing the company to repurchase its equity position at a substantial
premium over market price.
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The Company believes that the imminent threat of removal of management
or the Board in such situations would severely curtail the ability of management
or the Board to negotiate effectively with potential purchasers. Management or
the Board would be deprived of the time and information necessary to evaluate
any takeover proposal, to study alternative proposals and to help ensure that
the best price is obtained in any transaction involving the Company which may
ultimately be undertaken. If the real purpose of a takeover bid were to force
the Company to repurchase an accumulated stock interest at a premium price,
management or the Board would face the risk that, if it did not repurchase the
purchaser's stock interest, the Company's business and management would be
disrupted, perhaps irreparably.
Certain provisions of the Restated Certificate, in the view of the
Company, will help ensure that the Board, if confronted by a surprise proposal
from a third party which has acquired a block of stock, will have sufficient
time to review the proposal and appropriate alternatives to the proposal and to
act in what it believes to be the best interests of the shareholders. In
addition, certain other provisions of the Restated Certificate are designed to
prevent a purchaser from utilizing two-tier pricing and similar inequitable
tactics in the event of an attempt to take over the Company.
The Restated Certificate expressly authorizes the Board to take such
actions as it considers to be reasonably necessary or desirable (i) to encourage
persons seeking a change of control of the Company to negotiate with the board
and (ii) to contest or oppose any transaction which may result in a change of
control on terms which the Board determines to be unfair, abusive or otherwise
undesirable, and in that connection they explicitly authorize the Board to issue
rights, options or other securities for this purpose. In addition, the Restated
Certificate authorizes the Board to take into account the interests of
creditors, customers, employees and the communities in which the Company does
business as well as the long-term interests of shareholders in considering
various corporate actions.
These provisions, individually and collectively, will make more
difficult and may discourage a merger, tender offer or proxy fight, even if such
transaction or occurrence may be favorable to the interest of the shareholders,
and may delay or frustrate the assumption of control by a holder of a large
block of Company stock and the removal of incumbent management, even if such
removal might be beneficial to shareholders. Furthermore, these provisions may
deter or could be utilized to frustrate a future takeover attempt which is not
approved by the incumbent Board of Directors, but which the holders of a
majority of the shares may deem to be in their best interests or in which
shareholders may receive a substantial premium for their stock over prevailing
market prices of such stock. By discouraging takeover attempts, these provisions
might have the incidental effect of inhibiting certain changes in management
(some or all of the members of which might be replaced in the course of a change
of control) and also the temporary fluctuations in the market price of the stock
which often result from actual or rumored takeover attempts.
Set forth below is a description of such provisions in the Restated
Certificate. Such description is intended as a summary only and is qualified in
its entirety by reference to the Restated Certificate, which is attached to this
Proxy Statement as Appendix C. Capitalized terms used and not defined herein are
defined in the Restated Certificate.
Repurchase of Shares
The Restated Certificate authorizes the Company pursuant to
authorization by the Board and without action by shareholders to purchase or
otherwise acquire shares of capital stock of the Company. Such stock repurchases
could be utilized to frustrate a future takeover attempt which is not approved
by the Board. To the extent stock held by officers and directors are not
repurchased, the percentage of the
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outstanding stock held by such officers and directors will increase as a result
of Common Stock repurchases by the Company. In addition, stock repurchases may
prevent a potential acquiror from using "pooling-of-interests" accounting in
connection with the acquisition of the Company.
Number of Directors; Filling Vacancies
The Restated Certificate provides that the number of directors will be
fixed from time to time exclusively by the Board. In addition, the Restated
Certificate provides that only a majority of the Board then in office shall have
the authority to fill any vacancies on the Board. Accordingly, the Board could
prevent any shareholder from obtaining majority representation on the Board by
enlarging the Board and filling the new directorships with its own nominees.
Limitations on Shareholder Action by Written Consent; Special Meetings
Currently the Company's Certificate of Incorporation (the
"Certificate") does not prohibit shareholder action by written consent of the
minimum number of votes necessary to take such action at a meeting of
shareholders. The Restated Certificate provides that shareholders may act by
written consent only if all shareholders entitled to vote on the action consent
to such action in writing. The Company's Bylaws provide that special meetings of
shareholders may be called only by the Board. Shareholders are not permitted to
call a special meeting or to require that the Board call a special meeting of
shareholders. Moreover, the business permitted to be conducted at any special
meeting of shareholders is limited to the business brought before the meeting by
or at the direction of the Board.
The provisions of the Restate Certificate restricting shareholder
action by written consent may have the effect of delaying consideration of a
shareholder proposal until the next annual meeting unless a special meeting is
called by the Board. These provisions would also prevent the holders of a
majority of the voting power of the voting stock from using the written consent
procedure to take shareholder action and from taking action by consent without
giving all the shareholders of the Company entitled to vote on a proposed action
the opportunity to participate in determining such proposed action. Moreover, a
shareholder could not force shareholder consideration of a proposal over the
opposition of the Board by calling a special meeting of shareholders prior to
the time the Board believed such consideration to be appropriate.
Business Combinations with Interested Shareholders; Fair Price Provision
Definitions. Article XIII of the Restated Certificate ("Article XIII")
addresses Business Combinations with Interested Shareholders. Please refer to
Article XIII in the Restated Certificate, which is attached to this Proxy
Statement as Appendix C, for a summary of the definitions of certain of the
terms that follow.
Shareholder Vote Required for Certain Business Combinations. Article
XIII requires Board approval of a Business Combination with an Interested
Shareholder prior to that Interested Shareholder's Stock Acquisition Date.
Absent such Board approval, the Company will not be permitted to engage in a
Business Combination with such Interested Shareholder for a period of five
years. In addition, Article XIII prohibits the Company from engaging in a
Business Combination with an Interested Shareholder unless (i) the Business
Combination is approved by the Board prior to that Interested Shareholder's
Stock Acquisition Date and thereafter approved by shareholders in accordance
with applicable law or (ii) the Business Combination is approved by the
affirmative vote of the holders of at least 80% of the voting
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<PAGE>
stock not beneficially owned by that Interested Shareholder at a meeting called
for such purpose or (iii) the Business Combination meets certain fair price
conditions discussed below.
Exceptions to Higher Vote Requirement. In the case of Business
Combination that involved the receipt of cash or other consideration by Company
shareholders, solely in their capacity as shareholders, the 80 percent
affirmative shareholder vote requirement would not apply if either (a) the
Business Combination were approved by a majority of the Board prior to the
Interested Shareholder's Stock Acquisition Date, or (b) all of the requirements
described in paragraphs (1) through (5) below were satisfied. In order to avoid
the requirement of an 80 percent shareholder vote or approval by a majority of
the Board in the case of a Business Combination that involved the receipt of
cash or other consideration by Company shareholders, the following conditions
must be met:
(1) Form of Consideration Requirement. The consideration to be
received by holders of a particular class (or series) of capital stock
in the Business Combination would be required to be either cash or the
same form of consideration used by the Interested Shareholder in
acquiring the largest portion of their interest in such class (or
series) of capital stock.
(2) Minimum Price Requirements - Holders of Common Stock. The
aggregate of (x) the cash and (y) the market value, as of the date of
consummation of the Business Combination (the "Consummation Date"), of
any consideration other than cash to be received per share by holders
of the Company's Common Stock, in the Business Combination would have
to be at least equal to the higher of (i) the highest per share price
paid by the Interested Shareholder in acquiring any shares of the
Company's Common Stock during the five years immediately prior to the
date of the first public announcement of the proposal of the Business
Combination (the "Announcement Date") or in any transaction in which
the Interested Shareholder became an Interested Shareholder (whichever
is higher), plus interest compounded annually from the earliest date on
which that highest per share acquisition price was paid through the
Consummation Date at the rate for one-year United States Treasury
obligations from time to time in effect, less the aggregate cash
dividends paid and the market value of any dividends paid other than in
cash on each share of the Company's Common Stock from such earliest
date through the Consummation Date, and (ii) the market value per share
of the Company's Common Stock on the Announcement Date or on that
Interested Shareholder's Stock Acquisition Date, whichever is higher
plus interest compounded annually from such date through the
Consummation Date at the rate for one-year United States Treasury
obligations from time to time in effect less the aggregate amount of
any cash dividends paid and the market value of any dividends paid
other than in cash per share of common stock since that date, up to the
amount of that interest.
The higher of (i) and (ii) above would have to be paid in
respect of all outstanding shares of the Company's Common Stock,
whether or not the Interested Shareholder had previously acquired any
shares of the Company's Common Stock. If the Interested Shareholder did
not purchase any shares of the Company's Common Stock, as the case may
be, during the five-year period prior to the Announcement Date or in
the transaction in which the Interested Shareholder became an
Interested Shareholder (e.g., if the Interested Shareholder became an
Interested Shareholder by purchasing shares of any then outstanding
class of voting Preferred Stock), the minimum price would be as
determined under (ii).
(3) Minimum Price Requirements - Holders of Other
Than Common Stock. The aggregate amount of the cash and the market
value as of the consummation date of consideration other than cash to
be received per share by holders of outstanding shares of any
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<PAGE>
class or series of stock, other than common stock, of the Company is at
least equal to the highest of the following (whether or not that
Interested Shareholder has previously acquired any shares of that class
or series of stock):
(x) the highest per share price (including any
brokerage commissions, transfer taxes and soliciting dealers' fees)
paid by that Interested Shareholder for any shares of that class or
series of stock acquired by it (i) within the five-year period
immediately prior to the announcement date with respect to that
Business Combination, or (ii) within the five-year period immediately
prior to, or in, the transaction in which that Interested Shareholder
became an Interested Shareholder, whichever is higher; plus, in either
case, interest compounded annually from the earliest date on which the
highest per share acquisition price was paid through the consummation
date at the rate for one-year United States Treasury obligations from
time to time in effect; less the aggregate amount of any cash dividends
paid, and the market value of any dividends paid other than in cash,
per share of that class or series of stock since that earliest date, up
to the amount of that interest;
(y) the highest preferential amount per share to
which the holders of shares of that class or series of stock are
entitled in the event of any liquidation, dissolution or winding up of
the Company, plus the aggregate amount of any dividends declared or due
at to which those holders are entitled prior to payment of dividends on
some other class or series of stock (unless the aggregate amount of
those dividends is included in that preferential amount); and
(z) the market value per share of that class or
series of stock on the announcement date with respect to that Business
Combination or on that Interested Shareholder's Stock Acquisition Date,
whichever is higher; plus interest compounded annually from that date
through the consummation date at the rate for one-year United States
Treasury obligations from time to time in effect; less the aggregate
amount of any cash dividends paid, and the market value of any
dividends paid other than in cash, per share of that class or series of
stock since that date, up to the amount of that interest.
(4) The holders of all outstanding shares of stock of the
Company not beneficially owned by that Interested Shareholder
immediately prior to the consummation of that Business Combination are
entitled to receive in that Business Combination cash or other
consideration for those shares in compliance with paragraphs (1), (2)
and (3) above.
(5) Procedural Requirements. In order to avoid the requirement
of an 80 percent affirmative shareholder vote or approval by a majority
of the Board, after an Interested Shareholder's Stock Acquisition Date
and prior to the consummation of a Business Combination, that
Interested Shareholder has not become the Beneficial Owner of any
additional shares of stock of the Company except (i) as part of the
transaction which resulted in that Interested Shareholder becoming an
Interested Shareholder; (ii) pursuant to stock dividends, stock splits
or other distributions of stock not constituting a Business
Combination; (iii) through a Business Combination meeting certain
conditions; or (iv) through a purchase by that Interested Shareholder
at any price consistent with the fair price provisions discussed above.
Exceptions to Article XIII. The restrictions on Business Combinations
and shareholder vote requirements of Article XIII do not apply to (i) any
Business Combination with an Interested Shareholder who becomes such
inadvertently and divests a sufficient amount of voting stock so that he or she
does
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not own, directly or indirectly, more than 10% of the voting power of the
Company and has not been an Interested Shareholder during the past five years
other than such inadvertent acquisition or (ii) any Business Combination with an
Interested Shareholder who became such prior to the date the Company's Common
Stock was registered under Section 12 of the Exchange Act and has continued to
be an Interested Shareholder since his or her Stock Acquisition Date.
Other Provisions
Article XIV of the Restated Certificate ("Article XIV") generally
provides that in connection with the exercise of its judgment in determining
what is in the best interests of the Company and of the shareholders, when
evaluating a business combination or a tender or exchange offer, the Board of
Directors of the Company shall, in addition to considering the adequacy of the
amount to be paid in connection with any such transaction, consider all of the
following factors and any other factors which it deems relevant: (i) the
long-term as well as short-term interests of the Company and its shareholders;
(ii) the social and economic effects of entering into the transaction on the
Company and its subsidiaries, and its present and future employees, depositors,
loan and other customers, creditors and other elements of the communities in
which the Company and its subsidiaries operate or are located; (iii) the
business and financial condition and earnings prospects of the acquiring person
or entity, including, but not limited to, debt service and other existing
financial obligations, financial obligations to be incurred in connection with
the acquisition, and other likely financial obligations of the acquiring person
or entity, and the possible effect of such conditions upon the Company and its
subsidiaries and the other elements of the communities in which the Company and
its subsidiaries operate or are located; and (iv) the competence, experience,
and integrity of the acquiring person or entity and its or their management.
The purpose of the proposed Article is to specifically authorize the
Board to consider the interests of various constituencies of the Company and its
subsidiaries, in addition to the interests of shareholders, including their
long-term interests. This authorization applies to the entire range of Board
actions and decisions, including but not limited to takeover-related matters. In
deciding to include Article XIV in the Restated Certificate, the Company
considered that, under a number of circumstances, certain shareholder interests
may conflict with the interests of other constituencies of the Company and its
subsidiaries. However, the Company concluded that Article XIV is desirable to
emphasize the Board's authority to act to maintain and protect Company as an
enterprise. In addition, the New Jersey law specifically authorizes such
considerations.
Article XV of the Restated Certificate ("Article XV") expressly
authorizes the Board to take such action as it may determine to be reasonably
necessary or desirable to encourage any person or entity to enter into
negotiations with the Board of Directors and management of the Company
respecting any transaction which may result in a change of control of the
Company, and to contest or oppose any such transaction which the Board
determines to be unfair, abusive or otherwise undesirable to the Company, its
businesses or shareholders. In this connection, Article XV specifically permits
the Board to adopt plans or to issue securities of the Company (including Common
Stock or Preferred Stock, rights or debt securities), which securities may be
exchangeable or convertible into cash or other securities on such terms as the
Board determines and may provide for differential and unequal treatment of
different holders or classes of holders. Article XV of the Company provides that
such issuances may or may not be pro rata to shareholders. The existence of this
authority or the actions which may be taken by the Board pursuant thereto may
deter potential acquirors from proposing unsolicited transactions not approved
by the Board and might enable the Board to hinder or frustrate such a
transaction if proposed. Article XV is included in the Restated Certificate to
confirm and support the authority of the Board to take the various actions
authorized thereby, including but not limited to adoption of the preferred share
purchase
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<PAGE>
rights plans. It is also designed to enable the Board to utilize such other
tactics or mechanisms as are developed in the future to carry out the general
authorization set forth therein.
Amendment of the Company Articles and Bylaws
The Restated Certificate contains provisions requiring the affirmative
vote of the holders of at least 80 percent of the outstanding shares of capital
stock to amend certain provisions of the Restated Certificate (including the
provisions discussed above). The Restated Certificate also requires such an 80
percent vote for shareholders to amend any provision of the Company Bylaws.
These provisions will make it more difficult for shareholders to make changes in
the Restated Certificate and the Bylaws, including changes designed to
facilitate the exercise of control over the Company. In addition, the
requirement for approval by at least an 80 percent shareholder vote will enable
the holders of a minority of Company's capital stock to prevent holders of a
less-than-80-percent majority from amending such provisions of the Restated
Certificate and Bylaws.
Vote Required for Approval
The affirmative vote of a majority of the votes cast at the Meeting is
required for adoption of the Amended and Restated Certificate of Incorporation
without regard to proxies marked "ABSTAIN" and broker non-votes.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" ADOPTION
OF THE AMENDED AND RESTATED CERTIFICATE OF INCORPORATION WHICH IS ATTACHED
HERETO AS APPENDIX C. UNLESS MARKED TO THE CONTRARY, THE SHARES REPRESENTED BY
SIGNED PROXIES WILL BE VOTED FOR ADOPTION OF THE AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION.
- --------------------------------------------------------------------------------
OTHER MATTERS
- --------------------------------------------------------------------------------
The Board of Directors is not aware of any business to come before the
Meeting other than those matters described in this Proxy Statement. However, if
any other matters should properly come before the Meeting, it is intended that
proxies in the accompanying form will be voted in respect thereof in accordance
with the judgment of the persons named in the accompanying proxy.
- --------------------------------------------------------------------------------
INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
The Board of Directors has previously selected the accounting firm of
Deloitte & Touche, LLP, independent public accountants, to be the Company's
independent accountants for the fiscal year ending December 31, 1998. A
representative of Deloitte & Touche, LLP is expected to be present at the
Meeting, will have the opportunity to make a statement at the meeting if he or
she desires to do so, and will be available to respond to appropriate questions.
Under the Certificate and Bylaws, shareholders are not required to ratify or
confirm the selection of independent accountants made by the Board of Directors.
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MISCELLANEOUS
- --------------------------------------------------------------------------------
The cost of soliciting proxies will be borne by the Company. 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 Common Stock. In addition to solicitations by mail,
directors, officers, and regular employees of the Company may solicit proxies
personally or by telephone without additional compensation.
- --------------------------------------------------------------------------------
SHAREHOLDER PROPOSALS AND NOMINATIONS FOR THE 1999 ANNUAL MEETING
- --------------------------------------------------------------------------------
In order to be eligible for inclusion in the Company's proxy materials
for next year's Annual Meeting of Shareholders, any shareholder proposal to take
action at such meeting must be received at the Company's executive offices at
226 Landis Avenue, Vineland, New Jersey 08360, no later than December 11, 1998.
Any such proposals shall be subject to the requirements of the proxy rules
adopted under the Exchange Act.
The Company's Bylaws include provisions setting forth specific
conditions under which persons may be nominated as directors of the Company at
an annual meeting of shareholders. A copy of such provisions is available upon
request to: Sun Bancorp, Inc., 226 Landis Avenue, Vineland, New Jersey 08360,
Attention: Corporate Secretary.
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FORM 10-K
- --------------------------------------------------------------------------------
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED
DECEMBER 31, 1997, WILL BE FURNISHED WITHOUT CHARGE (WITHOUT EXHIBITS) TO
SHAREHOLDERS AS OF THE RECORD DATE UPON WRITTEN REQUEST TO THE SECRETARY, SUN
BANCORP, INC., 226 LANDIS AVENUE, VINELAND, NEW JERSEY 08360.
BY ORDER OF THE BOARD OF DIRECTORS
Sidney R. Brown
Secretary
Vineland, New Jersey
April 10, 1998
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<PAGE>
Appendix A
SUN BANCORP, INC.
1997 STOCK OPTION PLAN
----------------------
1. Purpose of Plan.
----------------
The purpose of the Sun Bancorp, Inc. 1997 Stock Option Plan (the
"Plan") contained herein is to provide additional incentive to employees,
officers, directors and advisory directors of Sun Bancorp, Inc. (the "Company")
and each present or future subsidiary corporation of the Company, by encouraging
them to invest in shares of the Company's common stock ("Common Stock"), and
thereby to acquire a proprietary interest in the business of the Company and
each present or future subsidiary corporation of the Company and an increased
personal interest in their continued success and progress, to the mutual benefit
of the stockholders and recipient of stock option awards.
2. Aggregate Number of Shares.
---------------------------
Two Hundred thousand (200,000) shares of Common Stock (par value $1.00
per share) shall be the aggregate number of shares which may be issued under
this Plan. Notwithstanding the foregoing, in the event of any change in the
outstanding shares of Common Stock by reason of a stock dividend, stock split,
combination of shares, recapitalization, merger, consolidation, transfer of
assets, reorganization, conversion, or other event that the Board of Directors
of the Company or the Executive Compensation Committee (the "Committee"), deems
in its sole discretion to be similar circumstances, the aggregate number and
kind of shares which may be issued under this Plan shall be approximately
adjusted in a manner determined in the sole discretion of the Committee.
Reacquired shares of Common Stock as well as unissued shares may be used for the
purpose of this Plan. Shares of Common Stock subject to options which have
terminated unexercised, either in whole or in part, shall be available for
future options granted under this Plan.
3. Class of Individuals Eligible to Receive Options.
-------------------------------------------------
(a) All officers and employees of the Company and of any present and
future subsidiary corporation of the Company are eligible to receive an option
or options under this Plan. The officers, employees and advisory directors who
shall, in fact, receive an option or options shall be selected by the Committee
in its sole discretion, except as otherwise specified in Section 4 hereof.
(b) All directors of the Company and of any present and future
subsidiary corporation of the Company are eligible to receive an option or
options under this Plan in accordance with Section 16 hereof.
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4. Administration of Plan.
-----------------------
(a) This Plan shall be administered by the Board of Directors of the
Company or the Committee, which will be appointed by the Board of Directors of
the Company. The Committee shall consist of a minimum of two and a maximum of
seven members of the Company's Board of Directors. All persons designated as
members of the Committee shall meet the requirements of a "Non-Employee
Director" within the meaning of Rule 16b-3 (17 CFR ss.240.16b-3) under the
Securities Exchange Act of 1934, as amended ("Exchange Act"). The Board of
Directors of the Company or the Committee shall, in addition to its other
authority and subject to the provisions of this Plan, have authority in its sole
discretion to determine who are the officers, employees and advisory directors
of the Company and each present and future subsidiary corporation of the Company
eligible to receive options under this Plan, which officers, employees and
advisory directors shall in fact be granted an option or options, whether the
option shall be an incentive stock option or a non-qualified stock option, the
time or times at which the options shall be granted, the rate of option
exercisability, and, subject to Section 5 hereof, the price at which each of the
options is exercisable and the duration of the option.
(b) The Committee shall adopt such rules for the conduct of its
business and administration of this Plan as it considers desirable. A majority
of the members of the Committee shall constitute a quorum for all purposes. The
vote or written consent of a majority of the members of the Committee on a
particular matter shall constitute the act of the Committee on such matter. The
Committee shall have the exclusive right to construe the Plan and the options
issued pursuant to it, correct defects, supply omissions and reconcile
inconsistencies to the extent necessary to effectuate the Plan and the options
issued pursuant to it, and such action shall be final, binding and conclusive
upon all parties concerned. No member of the Committee or the Board of Directors
shall be liable for any act or omission (whether or not negligent) taken or
omitted in good faith, or for the exercise of an authority or discretion granted
in connection with this Plan to the Committee or the Board of Directors, or for
the acts or omissions of any other members of the Committee or the Board of
Directors. Subject to the numerical limitations on Committee membership set
forth in Section 4(a) hereof, the Board of Directors may at any time appoint
additional members of the Committee and may at any time remove any member of the
Committee with or without cause. Vacancies in the Committee, however caused, may
be filled by the Board of Directors if it so desires.
5. Incentive Stock Options and Nonqualified Stock Options.
-------------------------------------------------------
(a) Options issued pursuant to this Plan may be either incentive stock
options granted pursuant to Section 5(b) hereof or nonqualified stock options
granted pursuant to Section 5(c) hereof, as determined by the Committee. An
"incentive stock option" is an option which satisfies all of the requirements of
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"), and
the regulations thereunder, and a nonqualified stock option is an option which
does not satisfy the requirements of Code Section 422. The Committee may grant
both an incentive stock option and a nonqualified stock option to the same
person, or more than one of each type of option to the same person. The option
price for both incentive stock options
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and nonqualified stock options issued under this Plan shall equal at least the
fair market value of the Common Stock as of the date of the grant of the option,
such fair market value being determined by the Committee in accordance with its
interpretation of the requirements of Section 422 of the Code and the
regulations thereunder.
(b) Incentive stock options shall expire not later than ten years from
the date of grant by action of the Committee, unless terminated earlier under
the option terms; provided that in the case of an Employee who owns stock
representing more than ten percent (10%) of the Common Stock outstanding at the
time the Incentive Stock Option is granted, the term of exercisability of the
Incentive Stock Option shall not exceed five (5) years. Notwithstanding other
provisions hereof, the aggregate fair market value (determined as of the time an
incentive stock option is granted) of the stock for which any employee may be
granted incentive stock options in any calendar year (under all incentive stock
option plans, as defined in Section 422 of the Code, of the Company or any
present or future parent or subsidiary of the Company) shall not exceed
$100,000. In the case of an Employee who owns Common Stock representing more
than ten percent (10%) of the outstanding Common Stock at the time the Incentive
Stock Option is granted, the Incentive Stock Option 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 that the Incentive Stock Option is granted. No
Incentive Stock Option may be exercised unless the Optionee shall have been in
the employ of the Company at all times during the period beginning with the date
of grant of any such Incentive Stock Option and ending on the date three (3)
months prior to the date of exercise of any such Incentive Stock Option. At the
time of granting an incentive stock option hereunder, the Committee shall
determine in its discretion, the terms and conditions of such option for any
person who receives an option pursuant to the Plan ("Optionee"), provided that
the option continues to be an incentive stock option. In the event that any
Optionee's employment with the Company shall terminate for any reason, other
than disability or death, all of any such Optionee's Incentive Stock Options,
and all of any such Optionee's rights to purchase or receive Shares of Common
Stock pursuant thereto, shall automatically terminate on (A) the earlier of (i)
or (ii): (i) the respective expiration dates of any such Incentive Stock
Options, or (ii) the expiration of not more than three (3) months after the date
of such termination of employment; or (B) at such later date as is determined by
the Committee at the time of the grant of such Option or at the time of
termination of employment, if the individual was entitled to exercise any such
Incentive Stock Options at the date of such termination of employment, and
further that such Option shall thereafter be deemed a Nonqualified Stock Option.
In the event that a Subsidiary ceases to be a Subsidiary of the Company, the
employment of all of its employees who are not immediately thereafter employees
of the Company shall be deemed to terminate upon the date such Subsidiary so
ceases to be a Subsidiary of the Company. Each of the options granted pursuant
to this Section 5(b) is intended, if possible, to be an "incentive stock option"
as that term is defined in Section 422 of the Code and the regulations
thereunder. In the event this Plan or any option granted pursuant to this
Section 5(b) is any way inconsistent with the applicable legal requirements of
the Code or the regulations thereunder for an incentive stock option, this Plan
and such option shall be deemed automatically amended as of the date hereof to
conform to such legal requirements, if such conformity may be achieved by
amendment.
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(c) Nonqualified stock options shall expire ten years and ten days
after the date they are granted, unless terminated earlier under the option
terms. At the time of granting a nonqualified stock option hereunder, the
Committee shall determine in its discretion, the terms and conditions of any
such options, provided that the option exercise price is not less than the fair
market value of the Common Stock as of the date of such grant.
(d) Neither the Company nor any present or future affiliated or
subsidiary corporation of the Company, nor their officers, directors,
stockholders, stock option plan committees, employees or agents shall have any
liability to any Optionee in the event an option granted pursuant to Section
5(b) hereof does not qualify as an "incentive stock option" as that term is used
in Section 422 of the Code and the regulations thereunder, or in the event any
Optionee does not obtain the tax benefits of such an incentive stock option, or
in the event any option granted pursuant to Section 5(c) hereof is an "incentive
stock option."
6. Six Month Holding Period.
-------------------------
With respect to options awarded to officers and employees who are
subject to the reporting requirements under Section 16(a) of the Exchange Act,
subject to vesting requirements, if applicable, except in the event of the death
or disability of the Optionee or a Change in Control of the Company, a minimum
of six months must elapse between the date of the grant of an option and the
date of the sale of the Common Stock received through the exercise of such
option.
7. Cashless Exercise.
------------------
Subject to vesting requirements, if applicable, an Optionee who has
held an option for at least six months may engage in the "cashless exercise" of
the option. Upon a cashless exercise, an Optionee gives the Company written
notice of the exercise of the option together with an order to a registered
broker-dealer or equivalent third party, to sell part or all of the Common Stock
under option ("Optioned Stock") and to deliver enough of the proceeds to the
Company to pay the option exercise price and any applicable withholding taxes.
If the Optionee does not sell the Optioned Stock through a registered
broker-dealer or equivalent third party, the Optionee can give the Company
written notice of the exercise of the option and the third party purchaser of
the Optioned Stock shall pay the option exercise price plus any applicable
withholding taxes to the Company.
8. Transferability.
----------------
An incentive stock option granted pursuant to the Plan shall be
exercised during an Optionee's lifetime only by the Optionee to whom it was
granted and shall not be assignable or transferable otherwise than by will or by
the laws of descent and distribution. A nonqualified stock option granted
pursuant to the Plan may, with the prior written consent of the Committee, be
assignable or transferable during the Optionee's lifetime. In determining
whether consent
A-4
<PAGE>
shall be given to an Optionee with regard to the assignment or transfer of a
nonqualified stock option, it shall be at the sole discretion of the Committee.
9. Modification, Amendment, Suspension and Termination.
----------------------------------------------------
Options shall not be granted pursuant to this Plan after the expiration
of ten years from and after the date of the adoption of the Plan by the
Company's Board of Directors. The Board of Directors reserves the right at any
time, and from time to time, to modify or amend this Plan in any way, or to
suspend or terminate it, effective as of such date, which date may be either
before or after the taking of such action, as may be specified by the Board of
Directors; provided, however, that such action shall not affect options granted
under the Plan prior to the actual date on which such action occurred. If a
modification or amendment of this Plan is required by the Code or the
regulations thereunder to be approved by the stockholders of the Company in
order to permit the granting of "incentive stock options" (as that term is
defined in Section 422 of the Code and regulations thereunder) pursuant to the
modified or amended Plan, such modification or amendment shall also be approved
by the stockholders of the Company in such manner as is prescribed by the Code
and the regulations thereunder. If the Board of Directors voluntarily submits a
proposed modification, amendment, suspension or termination for stockholder
approval, such submission shall not require any future modifications, amendments
(whether or not relating to the same provision or subject matter), suspensions
or terminations to be similarly submitted for shareholder approval.
Notwithstanding any other provision contained in this Plan, in the
event of a change in any federal or state law, rule or regulation which would
make the exercise of all or part of any previously granted option unlawful or
subject the Company to any penalty, the Committee may restrict any such exercise
without the consent of the Optionee or other holder thereof in order to comply
with any such law, rule or regulation or to avoid any such penalty.
10. Recapitalization, Merger, Consolidation, Change in Control and Other
Transactions.
- --------------------------------------------------------------------------------
(a) Subject to any required action by the stockholders of the Company,
within the sole discretion of the Committee, the aggregate number of shares of
Common Stock for which options may be granted hereunder, the number of shares of
Common Stock covered by each outstanding option, and the exercise price per
share of Common Stock of each option, shall all be proportionately adjusted for
any increase or decrease in the number of issued and outstanding shares of
Common Stock resulting from a subdivision or consolidation of shares (whether by
reason of merger, consolidation, recapitalization, reclassification, split-up,
combination of shares, or otherwise) or the payment of a stock dividend or any
other increase or decrease in the number of such shares of Common Stock effected
without the receipt or payment of consideration by the Company (other than
Common Stock held by dissenting stockholders).
(b) All outstanding options previously granted shall become immediately
exercisable in the event of a Change in Control of the Company, as determined by
the Committee. "Change in Control" shall mean: (i) the sale of all, or a
material portion, of the assets of the Company;
A-5
<PAGE>
(ii) the merger or recapitalization of the Company whereby the Company is not
the surviving entity; or (iii) the acquisition, directly or indirectly, of the
beneficial ownership (within the meaning of that term as it is used in Section
13(d) of the Exchange Act and the rules and regulations promulgated thereunder)
of twenty-five percent (25%) or more of the outstanding voting securities of the
Company by any person, trust, entity or group. This limitation shall not apply
to the purchase of shares by underwriters in connection with a public offering
of Common Stock, or the purchase of shares of up to 25% of any class of
securities of the Company by a tax-qualified employee stock benefit plan which
is exempt from the approval requirements, as now in effect or as may hereafter
be amended. The term "person" refers to an individual or a corporation,
partnership, trust, association, joint venture, pool, syndicate, sole
proprietorship, unincorporated organization or any other form of entity not
specifically listed herein. The decision of the Committee as to whether a Change
in Control has occurred shall be conclusive and binding.
In the event of such a Change in Control, the Committee and the Board
of Directors of the Company will take one or more of the following actions to be
effective as of the date of such Change in Control:
(i) provide that such options shall be assumed, or equivalent
options shall be substituted, ("Substitute Options") by the acquiring or
succeeding corporation (or an affiliate thereof), provided that: (A) any such
Substitute Options exchanged for incentive stock options shall meet the
requirements of Section 424(a) of the Code, and (B) the shares of stock issuable
upon the exercise of such Substitute Options shall constitute securities
registered in accordance with the Securities Act of 1933, as amended, ("1933
Act") or such securities shall be exempt from such registration in accordance
with Sections 3(a)(2) or 3(a)(5) of the 1933 Act, (collectively, "Registered
Securities"), or in the alternative, if the securities issuable upon the
exercise of such Substitute Options shall not constitute Registered Securities,
then the Optionee will receive upon consummation of the Change in Control
transaction a cash payment for each option surrendered equal to the difference
between (1) the fair market value of the consideration to be received for each
share of Common Stock in the Change in Control transaction times the number of
shares of Common Stock subject to such surrendered options, and (2) the
aggregate exercise price of all such surrendered options, or
(ii) in the event of a transaction under the terms of which
the holders of the Common Stock will receive upon consummation thereof a cash
payment (the "Merger Price") for each share of Common Stock exchanged in the
Change in Control transaction, to make or to provide for a cash payment to the
Optionees equal to the difference between (A) the Merger Price times the number
of shares of Common Stock subject to such options held by each Optionee (to the
extent then exercisable at prices not in excess of the Merger Price) and (B) the
aggregate exercise price of all such surrendered options in exchange for such
surrendered options.
(c) Notwithstanding any provisions of the Plan to the contrary, subject
to any required action by the stockholders of the Company, in the event of any
Change in Control,
A-6
<PAGE>
recapitalization, merger, consolidation, exchange of Shares, spin-off,
reorganization, tender offer, partial or complete liquidation or other
extraordinary corporate action or event, the Committee, in its sole discretion,
shall have the power, prior or subsequent to such action or event to:
(i) appropriately adjust the number of shares of Common Stock
subject to each option, the option exercise price per share of Common Stock, and
the consideration to be given or received by the Company upon the exercise of
any outstanding option;
(ii) cancel any or all previously granted options, provided
that appropriate consideration is paid to the Optionee in connection therewith;
and/or
(iii) make such other adjustments in connection with the Plan
as the Committee, in its sole discretion, deems necessary, desirable,
appropriate or advisable; provided, however, that no action shall be taken by
the Committee which would cause incentive stock options granted pursuant to the
Plan to fail to meet the requirements of Section 422 of the Code without the
consent of the Optionee.
Except as expressly provided in Sections 10(a), 10(b) and 10(e) hereof,
no Optionee shall have any rights by reason of the occurrence of any of the
events described in this Section 10.
(d) The Committee shall at all times have the power to accelerate the
exercise date of options previously granted under the Plan.
(e) Upon the payment of a special or non-recurring cash dividend that
has the effect of a return of capital to the stockholders, the option exercise
price per share shall be adjusted proportionately.
11. Conditions Upon Issuance of Common Stock; Limitations on Option Exercise;
Cancellation of Option Rights.
- --------------------------------------------------------------------------------
(a) Common Stock shall not be issued with respect to any option granted
under the Plan unless the issuance and delivery of such shares shall comply with
all relevant provisions of applicable law, including, without limitation, the
1933 Act, the rules and regulations promulgated thereunder, any applicable state
securities laws and the requirements of any stock exchange upon which the Common
Stock may then be listed.
(b) The inability of the Company to obtain any necessary
authorizations, approvals or letters of non-objection from any regulatory body
or authority deemed by the Company's legal counsel to be necessary to the lawful
issuance and sale of any Common Stock issuable hereunder shall relieve the
Company of any liability with respect to the non-issuance or sale of such
shares.
A-7
<PAGE>
(c) As a condition to the exercise of an option, the Company may
require the Optionee to make such representations and warranties as may be
necessary to assure the availability of an exemption from the registration
requirements of federal or state securities law.
(d) Notwithstanding anything herein to the contrary, upon the
termination of employment or service of an Optionee by the Company or its
subsidiaries for "cause" (as determined by the Board of Directors in good
faith), all options held by such Optionee shall cease to be exercisable as of
the date of such termination of employment or service.
(e) Upon the exercise of an option by an Optionee (or the Optionee's
personal representative), the Committee, in its sole and absolute discretion,
may make a cash payment to the Optionee, in whole or in part, in lieu of the
delivery of shares of Common Stock. Such cash payment to be paid in lieu of
delivery of Common Stock shall be equal to the difference between the fair
market value of the Common Stock on the date of exercise and the exercise price
per share of the option. Such cash payment shall be in exchange for the
cancellation of such option. Such cash payment shall not be made in the event
that such transaction would result in liability to the Optionee or the Company
under Section 16(b) of the Exchange Act, and regulations promulgated thereunder.
12. Withholding Tax.
----------------
The Company shall have the right to deduct from all amounts paid in
cash with respect to the cashless exercise of options under the Plan any taxes
required by law to be withheld with respect to such cash payments. Where an
Optionee or other person is entitled to receive shares of Common Stock pursuant
to the exercise of an option, the Company shall have the right to require the
Optionee or such other person to pay the Company the amount of any taxes which
the Company is required to withhold with respect to such Common Stock, or, in
lieu thereof, to retain, or to sell without notice, a number of such shares
sufficient to cover the amount required to be withheld.
13. Effectiveness of Plan; Stockholder Ratification.
------------------------------------------------
This Plan shall become effective on the date of its adoption
("Effective Date") by the Company's Board of Directors subject, however, to
ratification by the stockholders of the Company in such manner as is prescribed
by the Code and the regulations thereunder. Options may be granted under this
Plan prior to obtaining such stockholder ratification, provided such options
shall not be exercisable until such stockholder ratification, is obtained.
14. General Conditions.
-------------------
(a) Nothing contained in this Plan or any option granted pursuant to
this Plan shall confer upon any employee the right to continue in the employ of
the Company or any present or future affiliated and subsidiary corporation of
the Company, or interfere in any way with the
A-8
<PAGE>
rights of the Company and any affiliated or subsidiary corporation of the
Company to terminate his employment in any way.
(b) Corporate action constituting an offer of stock for sale to any
employee under the terms of the options to be granted hereunder shall be deemed
completed as of the date when the Committee authorizes the grant of the option
to the employee, regardless of when the option is actually delivered to the
employee or acknowledged or agreed to by him.
(c) The term "subsidiary corporation" as used throughout this Plan, and
the options granted pursuant to this Plan, shall (except as otherwise provided
in the option form) have the meaning that is ascribed to that term by
subsections 424(f) and (g) of the Code, and the Company shall be deemed to be
the grantor corporation for purposes of applying such meaning.
(d) References in this Plan to the Code shall be deemed to also refer
to the corresponding provisions of any amendments thereto and to any future
United States revenue law.
(e) The use of the masculine pronoun shall include the feminine gender
whenever appropriate.
(f) Notwithstanding anything herein to the contrary, in no event shall
shares of Common Stock subject to Options granted to any individual exceed more
than 80% of the total number of shares of Common Stock authorized for delivery
under the Plan.
15. Award of Options to Directors.
------------------------------
Nonqualified Stock Options to purchase 15,000 shares of Common Stock
will be granted to each Director who is not an employee of the Company or any
subsidiary as of the Effective Date, at an exercise price equal to the fair
market value of the Common Stock on such date of grant. Such options will be
first exercisable as of such date of grant, subject to ratification of the Plan
by the stockholders of the Company. Such Options shall continue to be
exercisable for a period of ten years and ten days following the date of grant
without regard to the continued services of such Director. In the event of the
Optionee's death, such Options may be exercised by the personal representative
of his estate or person or persons to whom his rights under such Option shall
have passed by will or by the laws of descent and distribution. Options may be
granted to newly appointed or elected non-employee Directors within the sole
discretion of the Committee. The exercise price per Share of such Options
granted shall be equal to the fair market value of the Common Stock at the time
such Options are granted. Unless otherwise inapplicable, or inconsistent with
the provisions of this paragraph, the Options to be granted to Directors
hereunder shall be subject to all other provisions of this Plan.
A-9
<PAGE>
Appendix B
SUN BANCORP, INC.
EMPLOYEE STOCK PURCHASE PLAN
----------------------------
1. Purpose and Plan Summary.
-------------------------
The Sun Bancorp, Inc. (the "Company") Employee Stock Purchase Plan (the
"Plan") offers a convenient and economical way for its employees to commence or
to increase their ownership of shares of the Common Stock of Sun Bancorp, Inc.
("Common Stock"). Once an employee is enrolled as a Participant in the Plan,
payroll deductions will be made and such funds will be used to purchase Common
Stock under the terms of the Plan. Participation in the Plan is strictly
voluntary by the employee, and the employee will pay 95% of the purchase price
of the Common Stock purchased under the Plan. The Participant pays no brokerage
commissions or service charges for purchases made under the Plan. Any such
charges will be paid by the Company.
2. Administration.
---------------
The Company will serve as the Plan Administrator ("Plan Administrator")
to administer the Plan and make purchases of Common Stock as agent for the
Participants. The Board of Directors of the Company ("Board of Directors") has
the authority to make changes in the Plan and to appoint or to remove the Plan
Administrator, at any time. Until changed by further notice, any notices or
communications to the Plan should be directed to the Plan Administrator,
Employee Stock Purchase Plan, c/o Human Resources Department, Sun Bancorp, Inc.,
226 Landis Avenue, Vineland, New Jersey 08360.
If an employee decides to participate in the Plan, the Plan
Administrator will keep a continuous record of his/her participation and send
him/her a statement of his/her account under the Plan for each calendar month in
which a purchase of Common Stock under his/her Plan account occurs. The Plan
Administrator will also hold and act as custodian of shares purchased under the
Plan. Certificates for shares purchased under the Plan will be held by the Plan
Administrator. The number of shares credited to a Participant's account under
the Plan will be shown on his/her statement of account. However, certificates
for whole shares credited to a Participant's account under the Plan will be
issued to him/her upon his/her written request to the Plan Administrator, at the
address set forth above. Certificates for fractional share interests will not be
issued.
The Plan Administrator reserves the right to interpret the provisions
of the Plan. The Plan Administrator may establish such procedures and make such
other provisions for the administration and operation of the Plan as it deems
appropriate to give effect to the Plan's purpose. The Plan Administrator may
rely on the authority and correctness of written instructions received from the
Company and Participants in administering the Plan.
3. Eligibility.
------------
As of August 1, 1997, the effective date of the Plan, all employees of
the Company and its subsidiaries that, along with the Company, is a member of a
controlled group of corporations (as defined in section 1563 of the Internal
Revenue Code of 1986, as amended (the "Code")), are eligible to participate in
the Plan.
B-1
<PAGE>
4. Election to Participate.
------------------------
An eligible employee may join the Plan by completing the Authorization
Form provided by the Plan Administrator and returning it to the Plan
Administrator at the address noted at Section 2 herein. Authorization Forms will
be furnished to eligible employees at any time upon request to the Company. An
eligible employee may join the Plan at any time to become effective as of the
first full payroll period of any calendar quarter after the employee's request
is received by the Plan Administrator (the "Enrollment Date").
5. Payroll Deductions.
-------------------
The Authorization Form directs the Company to pay to the Plan
Administrator the amount withheld from the Participant's paycheck through
regular payroll deductions. The Authorization Form also directs the Plan
Administrator to use these payments for the purchase of shares of the Common
Stock. Participant contributions to the Plan may only be made through payroll
deduction.
After an Authorization Form has been received by the Plan Administrator
and the authority for the payroll deductions has been noted on the Company's
payroll records, the Company will withhold from a Participant's paycheck the
amount authorized by the Participant. Such withholding will be made from each
paycheck beginning with the first full pay period on or after the Enrollment
Date. The amounts withheld from all Participants' paychecks will be pooled and
forwarded to the Plan Administrator to purchase shares of Common Stock for the
accounts of all Participants under the Plan not less frequently than monthly
prior to the next "Investment Period". The "Investment Period" shall consist of
the calendar month following each receipt of funds by the Plan Administrator,
during which such funds are invested by the Plan Administrator in Common Stock
of the Company. To the extent administratively feasible, such funds shall be
invested on the first business day of each Investment Period, or as soon as
practical thereafter. No interest will be paid by the Company or the Plan
Administrator on amounts held on behalf of a Participant awaiting investment.
The payroll deduction authorizations are effective for an indefinite
period of time, until revoked by the Participant upon timely notice to the Plan
Administrator, until the total shares purchased under the Plan equals the total
shares of Common Stock authorized under the Plan or the Plan is terminated by
the Company, whichever is earlier. The Participant will specify on the
Authorization Form the amount to be withheld from each paycheck. Deductions may
be authorized in even multiples of $5.00 from a minimum of $10.00 to a maximum
of $985 for each Company payroll period (not to exceed $23,750 per calendar
year); provided further that such amounts are subject to reduction so that the
aggregate sum of such deductions for each Participant plus cash dividends
credited to each Participant's account shall not exceed the limitations at
Section 24(c) hereinafter. No interest will be paid on payroll deduction amounts
awaiting investment.
The amount of a Participant's payroll deductions can be revised,
changed or terminated by the Participant by timely written notice to the Plan
Administrator at the address noted at Section 2, herein. An Authorization Form
should be used for these purposes. Commencement, revision, or termination of
deductions will become effective as of the first full payroll cycle commencing
following each January 1, April 1, July 1 or October 1 after an employee's
request is received by the Plan Administrator.
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<PAGE>
6. Stock Purchase Price.
---------------------
A Participant shall be granted an option to purchase Common Stock as of
the last business day of each calendar month ("Option Grant Date") at an option
exercise price equal to 95% of the average purchase price of the Common Stock
purchased during the Investment Period immediately following the Option Grant
Date. Any fraction of a cent will be rounded to the nearest cent. Options
granted hereunder shall be nontransferable.
7. Number of Shares Purchased.
---------------------------
During each Investment Period, accumulated payroll deductions from all
Participants and cash dividends held under the Plan for all Participants will be
pooled and used to purchase shares of Common Stock in the open-market, or
otherwise, for the accounts of the Participants. The Company shall transmit
sufficient funds to the Plan Administrator in addition to accumulated payroll
deductions and cash dividends necessary to permit the Plan Administrator to
purchase Common Stock during each Investment Period without regard to any
purchase price discounts in accordance with the Plan. The maximum number of
whole shares will be purchased. Any payroll deductions and cash dividends
remaining after purchase of such maximum number of whole shares will be retained
and applied to the purchase of shares during the next Investment Period. Each
Participant's account will be credited with his/her pro rata share (computed to
four decimal places) of the shares purchased and any additional payroll
deductions and cash dividends which have been accumulated. The number of shares
credited to each Participant's account will depend upon the amount of the
Participant's payroll deductions and cash dividends and the option exercise
price as determined as provided under the heading "Stock Purchase Price."
8. Fees and Expenses.
------------------
Participants will incur no brokerage commissions or service charges for
purchases of Common Stock made under the Plan. Certain charges as described
under the heading "Withdrawal" may be incurred upon a Participant's withdrawal
from the Plan or upon termination of the Plan. The Plan Administrator may deduct
expenses from the Plan to the extent that such expenses have not been paid
directly by the Company; provided that not less than 15 days written notice of
such intent to make such deductions is furnished to the Company.
9. Withdrawal and Distribution of Stock Certificates.
--------------------------------------------------
A Participant may withdraw from the Plan at any time to be effective as
of the first full payroll period of any calendar quarter (January 1, April 1,
July 1 and October 1) following receipt of such notice. Upon termination of
employment with the Company, participation under the Plan shall immediately
cease and no unexercised options to purchase Common Stock under the Plan shall
be deemed exercisable. Termination of employment shall include termination as a
result of death or disability of the Participant.
To withdraw from the Plan, a Participant must notify the Plan
Administrator at the address noted at Section 2, herein, in writing of his/her
withdrawal. In the event a Participant withdraws, or in the event of the
termination of the Plan, certificates for whole shares credited to the account
of the withdrawing Participant, or all Participants in the case of a termination
of the Plan, will be delivered by the Plan Administrator and a cash payment will
be made for the sale price (less brokerage commission and transfer taxes, if
any) of any fractional share interests and any additional payroll deductions
credited
B-3
<PAGE>
to the account of the withdrawing Participant, or all Participants in the case
of a termination of the Plan. The Plan Administrator may establish such
equitable arrangements for the sale of fractional share interests as it shall
deem appropriate. As an alternative to receiving certificates for whole shares,
a Participant may request the Plan Administrator to sell such shares to be
distributed under the Plan. The proceeds from the sale of such shares, less any
brokerage commissions and any transfer taxes, will be remitted to the
Participant. The Plan Administrator may accumulate requests to sell Common Stock
under the Plan and sales transactions, if necessary, will occur in the
subsequent Investment Period from which they are received, as determined by the
Plan Administrator. Alternatively, Common Stock directed for sale during an
Investment Period in which there is also a request to purchase Common Stock
during such Investment Period may be matched by the Plan Administrator for the
benefit of Plan Participants (both sellers and purchasers) without the need to
execute such transaction on the national securities exchange in which such
Common Stock trades. The trade price on such matched transactions will be deemed
to equal the average purchase price paid by the Plan Administrator for all other
Common Stock purchased by the Plan Administrator under the Plan during that
Investment Period.
If a request by a Participant to withdraw from the Plan is received by
the Plan Administrator prior to the first day of any calendar quarter, the
amount of the payroll deductions scheduled to be invested during the next
Investment Period will not be so invested. In either event, no subsequent
payroll deductions will be made from the paychecks of the Participant, unless
he/she completes a new Authorization Form providing for such deductions.
Notwithstanding the foregoing, upon written request to the Plan
Administrator, a Participant may request the distribution of shares held under
the Plan in stock certificates of not less than 100 share increments at any
time. Alternatively, a Participant may request that such distribution be made in
the form of cash, in which case such distribution of cash will be made in
accordance with the procedures regarding the sale of shares as noted above in
Section 9 of the Plan. Such distribution of Plan shares or cash in accordance
with this paragraph shall not be deemed a "Withdrawal" under the Plan. Such
distributions whether in the form of stock certificates or cash may be requested
at any time to be effective as of the first full payroll period of any calendar
quarter (January 1, April 1, July 1 and October 1) following receipt of such
notice.
10. Voting of Shares.
-----------------
Each Participant will have the authority to direct the Plan
Administrator in the manner of voting the number of whole shares and fractional
shares of Common Stock held in his/her account. The Company will pay for or
reimburse the Plan Administrator for the expenses associated with solicitation
of voting proxies and distribution of related materials performed by the Plan
Administrator. The aggregate number of remaining shares representing shares for
which no Participant voting instructions are received in a timely manner shall
not be voted by the Plan Administrator.
11. Cash Dividends.
---------------
Cash dividends paid on shares credited to a Participant's account will
be retained in the Participant's account and invested in Common Stock as soon as
practicable following the dividend payment date. Such cash dividends (less
applicable tax withholding that may be required) will be aggregated with each
Participant's payroll deductions and invested in accordance with Section 6 and 7
herein. Dividend amounts payable to Participants will be rounded to the nearest
whole cent in the case of fractional share interests.
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<PAGE>
12. Stock Dividends, Stock Splits, or Rights Offering.
--------------------------------------------------
Any shares distributed by the Company as a stock dividend on shares
credited to a Participant's account under the Plan, or upon any split of such
shares, will be credited to his/her account. In a rights offering, the Plan
Administrator will sell the rights to which a Participant is entitled by virtue
of the shares of Common Stock allocated to his/her account under the Plan and
the proceeds will be credited to his/her account and applied to the purchase of
shares during the next Investment Period.
13. Purchases under the Plan.
-------------------------
The Plan Administrator shall use all funds received under the Plan for
the purchase of the Company's Common Stock in the open-market; or upon not less
than 10 days written notice from the Company, such funds shall be utilized for
the purchase of shares directly from the Company. The price, timing and other
matters related to the execution and processing of such purchases shall be
determined or directed by the Plan Administrator; provided that to the extent
administratively feasible, such purchases of Common Stock shall be made on the
first business day of each Investment Period, as provided at Section 5 herein.
14. Amendment and Termination.
--------------------------
Although the Company intends to continue the Plan until the total
number of shares authorized under the Plan shall have been purchased by
Participants, the Company reserves the right to suspend, modify or terminate the
Plan at any time. Any such suspension, modification or termination shall not
affect a Participant's right to receive shares of Common Stock already purchased
for him/her (except that the Company may take any action necessary to comply
with applicable law). Upon the termination of the Plan, the Company shall return
to Participants any uninvested accumulated payroll deductions as soon as
practicable.
15. Reports.
--------
Each Participant will receive a statement of his/her account not less
than four times per year. Upon written request, a Participant may receive an
account statement for each calendar month in which he/she purchases Common Stock
under the Plan. Participants will also receive communications sent by the
Company to other stockholders, including the Annual Report of the Company, and
its Notice of Annual Meeting and Proxy Statement. Participants will receive
information necessary for reporting income realized by them under the Plan to
the Internal Revenue Service.
16. Tax Withholding.
----------------
All taxes subject to withholding payable with respect to the amount of
each Participant's payroll deductions under the Plan will be deducted from the
Participant's salary and will not reduce the amounts paid to the Plan
Administrator. Taxes which may be required to be withheld with respect to cash
dividends received under the Plan will reduce the sums attributable to such
dividends available for investment under the Plan.
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<PAGE>
17. Related Matters.
----------------
The Company and the Plan Administrator in administering the Plan will
not be liable for any act done in good faith or for the good faith omission to
act, including, without limitation, any claim of liability arising out of
failure to terminate a Participant's account upon such Participant's death or
judicially declared incompetency prior to receipt by the Plan Administrator of
timely notice in writing of such death or incompetency or with respect to the
prices at which shares are purchased for the Participant's account, and the
times when such purchases are made, or with respect to any loss or fluctuation
in the market value after purchase of shares of Common Stock.
A Participant's investment in shares acquired under the Plan is not
different from direct investment in shares of Common Stock of the Company,
except to the extent that the purchase price of such Common Stock paid by the
Participant shall be equal to 95% of the actual purchase price of such Common
Stock by the Plan Administrator. The Participant bears the risk of loss and
realizes the benefits of any gain from market price changes with respect to all
such shares held by him/her in the Plan, or otherwise.
18. Participation by Executive Officers.
------------------------------------
Participants under the Plan who are deemed to be subject to the
reporting and liability provisions of Section 16 of the Securities and Exchange
Act of 1934 ("1934 Act") and the rules and regulations promulgated thereunder
("Executive Officers") shall be subject to the following additional provisions:
a. Common Stock purchased under the Plan shall be held for a
minimum of six-months following the date of such purchase
under the Plan.
b. Such Executive Officers who suspend payroll deductions under
the Plan may not commence future participation under the Plan
for at least six-months from the date of such cessation of
participation.
Such additional limitations related to participation by Executive
Officers shall not be effective with respect to distributions made in connection
with death, retirement, disability or termination of employment. Transactions of
Common Stock under the Plan shall be reportable by Executive Officers of the
Company on Form 3, 4 or 5.
19. Duties of the Company.
----------------------
a. The Company shall indemnify the Plan Administrator, including
reimbursement for reasonable attorneys fees and related
expenses, against any liability to any Participant or Plan
beneficiary for any actions taken by the Plan Administrator
pursuant to the Plan and/or the Custodial Agreement, absent a
finding of gross negligence by a court of competent
jurisdiction.
b. The Company shall make payroll deductions on behalf of
Participants as authorized from time to time. The Plan
Administrator shall assume no responsibility or authority for
such administrative processing of payroll deductions.
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c. The Plan Administrator shall be solely responsible for
distribution of all necessary regulatory reports and filings
related to administration of the Plan, including the timely
distribution of IRS Form 1099-Div, as may be required.
d. The Company shall be solely responsible for ensuring
compliance by the Plan related to matters involving Federal or
state securities laws and regulations. The Plan Administrator
may rely on the advice or instructions received from the
Company related to such matters.
20. Stockholder Ratification of Plan.
---------------------------------
It is the intention of the Company to submit the Plan for ratification
by the stockholders of the Company within 12 months of the date of adoption of
the Plan. Such stockholder ratification shall be sought to meet the requirements
provided at Section 423 of the Internal Revenue Code. In the event that
stockholders do not ratify the Plan, the Plan will nevertheless remain in
effect.
21. Transferability.
----------------
No Option may be transferred, assigned, pledged, or hypothecated
(whether by operation of law or otherwise), and no Option shall be subject to
execution, attachment or similar process. Any attempted assignment, transfer,
pledge, hypothecation or other disposition of an Option, or levy of attachment
or similar process upon the Option not specifically permitted herein shall be
null and void and without effect.
22. Adjustment Provisions.
----------------------
The aggregate number of shares of Common Stock with respect to which
Options may be granted, the aggregate number of shares of Common Stock subject
to each outstanding Option, and the Option Price per share of each Option may
all be appropriately adjusted as the Company may determine for any increase or
decrease in the number of shares of issued Common Stock resulting from a
subdivision or consolidation of shares, whether through reorganization,
recapitalization, stock split-up, stock distribution or combination of shares,
or the payment of a share dividend or other increase or decrease in the number
of such shares outstanding effected without receipt of consideration by the
Company. Adjustments under this Section shall be made according to the sole
discretion of the Board of Directors of the Company, and its decision shall be
binding and conclusive.
23. Dissolution, Merger and Consolidation.
--------------------------------------
Upon the dissolution or liquidation of the Company, or upon a merger or
consolidation of the Company in which the Company is not the surviving
corporation, each Option granted hereunder shall expire as of the effective date
of such transaction.
24. Limitation on Options.
----------------------
Notwithstanding any other provisions of the Plan:
(a) The Company intends that Options granted and Common Stock acquired
under the Plan shall be treated for all purposes as granted and
acquired under an employee stock purchase plan within the meaning of
Section 423 of the Code and regulations issued thereunder. Any
provisions
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required to be included in the Plan under said Section and regulations
issued thereunder are hereby included as fully as though set forth in
the Plan at length.
(b) No Participant shall be granted an Option under the Plan if,
immediately after the Option was granted, the Participant would own
stock possessing five percent or more of the total combined voting
power or value of all classes of stock of the Company or of any parent
or Subsidiary of the Company. For purposes of this Section, stock
ownership of an individual shall be determined under the rules of
Section 424(d) of the Code and stock which the Participant may purchase
under outstanding options shall be treated as stock owned by the
Participant.
(c) No Participant shall be granted an Option under the Plan which
permits his or her rights to purchase stock under all employee stock
purchase plans (as defined in Section 423 of the Code) of the Company
and any parent or subsidiary of the Company to accrue at a rate which
exceeds $25,000 of Fair Market Value of such stock (determined at the
time of the grant of such Option) for each calendar year in which such
Option is outstanding at any time. Any Option granted under the Plan
shall be deemed to be modified to the extent necessary to satisfy this
paragraph (c).
(d) All Participants shall have the same rights and privileges under
the Plan, except that the amount of Common Stock which may be purchased
under Options granted pursuant to Section 6 shall not exceed 100% of
net compensation paid by the Company to a Participant during any
payroll deduction period plus the sum of cash dividends paid to such
Participant's account during such Investment Period. All rules and
determinations of the Board in the administration of the Plan shall be
uniformly and consistently applied to all persons in similar
circumstances.
25. Miscellaneous.
--------------
(a) Legal and Other Requirements. The obligations of the Company to
sell and deliver Common Stock under the Plan shall be subject to all
applicable laws, regulations, rules and approvals, including but not by
way of limitation, the effectiveness of a registration statement under
the Securities Act of 1933 if deemed necessary or appropriate by the
Company.
(b) No Obligation to Exercise Options. The granting of an Option shall
impose no obligation upon a Participant to exercise such Option;
except, however, the decision by a Participant to withdraw from the
Plan and not exercise any Options granted must comply with Section 9,
herein.
(c) Right to Terminate Employment. Nothing in the Plan or any agreement
entered into pursuant to the Plan shall confer upon any Participant the
right to continue in the employment of the Company or any subsidiary or
affect any right which the Company or any subsidiary may have to
terminate the employment of such Participant.
(d) Rights as a Shareholder. No Participant shall have any right as a
shareholder unless and until certificates for shares of Common Stock
are issued to him or her or credited to his or her account maintained
by the Plan Administrator.
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(e) Applicable Law. All questions pertaining to the validity and
administration of the Plan and Options granted hereunder shall be
determined in conformity with the laws of the State of New Jersey, to
the extent not inconsistent with Section 423 of the Code and
regulations thereunder.
26. Maximum Plan Purchase Limitations.
----------------------------------
The aggregate number of shares of Common Stock available for grant as
Options pursuant to Section 6 shall not exceed 80,000 shares, subject to
adjustment pursuant to Section 22 hereof. Shares of Common Stock acquired
pursuant to the Plan may be authorized but unissued shares, shares now or
hereafter held in the treasury of the Company or shares purchased on the open
market. In the event that any Options granted under Section 6 expire
unexercised, or are terminated, surrendered or canceled without being exercised,
in whole or in part, for any reason, the number of shares of Common Stock
theretofore subject to such Option shall again be available for grant as an
Option and shall not reduce the aggregate number of shares of Common Stock
available for grant as such Options under the Plan.
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Appendix C
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
SUN BANCORP, INC.
(Originally incorporated on January 21, 1985 under the name of
Citizens Investments, Inc.)
ARTICLE I
Name
----
The name of the corporation is Sun Bancorp, Inc. (herein the "Corporation").
ARTICLE II
Registered Office
-----------------
The address of the Corporation's registered office in the State of New
Jersey is 226 Landis Avenue in the City of Vineland in the County of Cumberland.
The name of the Corporation's registered agent at such address is Bernard A.
Brown.
ARTICLE III
Powers
------
The purpose of the Corporation is to engage in any activity within the
purposes for which corporations may be organized under the New Jersey Business
Corporation Act.
ARTICLE IV
Term
----
The term for which the Corporation is to exist is perpetual.
ARTICLE V
Capital Stock
-------------
The aggregate number of shares of all classes of capital stock which
the Corporation has authority to issue is 11,000,000 of which 10,000,000 are to
be shares of common stock, $1.00 par value per share, and of which 1,000,000 are
to be shares of serial preferred stock, $1.00 par value per share. The shares
may be issued by the Corporation without the approval of stockholders except as
otherwise provided in this Article V or the rules of a national securities
exchange, if applicable. The consideration for the issuance of the shares shall
be paid to or received by the Corporation in full before their issuance and
shall not be less than the par value per share. The consideration for the
issuance of the shares shall be cash, services rendered, personal property
(tangible or intangible), real property, leases of real property or any
combination of the foregoing. In the absence of actual fraud in the transaction,
the judgment of the board of directors as to the value of such consideration,
shall be conclusive. Upon payment of such
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consideration, such shares shall be deemed to be fully paid and nonassessable.
In the case of a stock dividend, the part of the surplus of the Corporation
which is transferred to stated capital upon the issuance of shares as a stock
dividend shall be deemed to be the consideration for their issuance.
A description of the different classes and series (if any) of the
Corporation's capital stock, and a statement of the relative powers,
designations, preferences and rights of the shares of each class and series (if
any) of capital stock, and the qualifications, limitations or restrictions
thereof, are as follows:
A. Common Stock. Except as provided in this Restated Certificate, the
holders of the common stock shall exclusively possess all voting power. Each
holder of shares of common stock shall be entitled to one vote for each share
held by such holders.
Whenever there shall have been paid, or declared and set aside for
payment, to the holders of the outstanding shares of any class of stock having
preference over the common stock as to the payment of dividends, the full amount
of dividends and sinking fund or retirement fund or other retirement payments,
if any, to which such holders are respectively entitled in preference to the
common stock, then dividends may be paid on the common stock, and on any class
or series of stock entitled to participate therewith as to dividends, out of any
assets legally available for the payment of dividends, but only when as declared
by the board of directors of the Corporation.
In the event of any liquidation, dissolution or winding up of the
Corporation, after there shall have been paid, or declared and set aside for
payment, to the holders of the outstanding shares of any class having preference
over the common stock, the full preferential amounts to which they are
respectively entitled, the holders of the common stock and of any class or
series of stock entitled to participate therewith, in whole or in part, as to
distribution of assets shall be entitled, after payment or provision for payment
of all debts and liabilities of the Corporation, to receive the remaining assets
of the Corporation available for distribution, in cash or in kind.
Each share of common stock shall have the same relative powers,
preferences and rights as, and shall be identical in all respects with, all the
other shares of common stock of the Corporation.
B. Serial Preferred Stock. Except as provided in this Restated
Certificate, the board of directors of the Corporation is authorized, by
resolution or resolutions from time to time adopted, to provide for the issuance
of serial preferred stock in series and to fix and state the powers,
designations, preferences and relative, participating, optional or other special
rights of the shares of such series, and the qualifications, limitations or
restrictions thereof, including, but not limited to determination of any of the
following:
1. the distinctive serial designation and the number of shares
constituting such series; and
2. the dividend rates or the amount of dividends to be paid on the
shares of such series, whether dividends shall be cumulative and, if so, from
which date or dates, the payment date or dates for dividends, and the
participating or other special rights, if any, with respect to dividends; and
3. the voting powers, full or limited, if any, of the shares of such
series; and
4. whether the shares of such series shall be redeemable and, if so,
the price or prices at which, and the terms and conditions upon which, such
shares may be redeemed; and
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5. the amount or amounts payable upon the shares of such series in the
event of voluntary or involuntary liquidation, dissolution or winding up of the
Corporation; and
6. whether the shares of such series shall be entitled to the benefits
of a sinking or retirement fund to be applied to the purchase or redemption of
such shares, and, if so entitled, the amount of such fund and the manner of its
application, including the price or prices at which such shares may be redeemed
or purchased through the application of such funds; and
7. whether the shares of such series shall be convertible into, or
exchangeable for, shares of any other class or classes or any other series of
the same or any other class or classes of stock of the Corporation and, if so
convertible or exchangeable, the conversion price or prices, or the rate or
rates of exchange, and the adjustments thereof, if any, at which such conversion
or exchange may be made, and any other terms and conditions of such conversion
or exchange; and
8. the subscription or purchase price and form of consideration for
which the shares of such series shall be issued; and
9. whether the shares of such series which are redeemed or converted
shall have the status of authorized but unissued shares of serial preferred
stock and whether such shares may be reissued as shares of the same or any other
series of serial preferred stock.
Each share of each series of serial preferred stock shall have the same
relative powers, preferences and rights as, and shall be identical in all
respects with, all the other shares of the Corporation of the same series.
ARTICLE VI
Elimination of Directors' and Officers' Liability
-------------------------------------------------
A director or officer of the Corporation shall not, to the fullest
extent permitted by law, be personally liable to the Corporation or to the
shareholders of the Corporation for damages for breach of any duty owed to the
Corporation or to the shareholders of the Corporation, except that this Article
VI shall not relieve a director or officer of the Corporation from personal
liability to the Corporation and to the shareholders of the Corporation for
damages for any breach of duty based upon an act or omission:
(a) in breach of such director's or officer's duty of loyalty to
the Corporation or to the shareholders of the Corporation, or
(b) not in good faith or involving a knowing violation of law, or
(c) resulting in the receipt by such director or officer of an improper
personal benefit.
Any repeal or modification of the foregoing Article VI by the
shareholders of the Corporation shall not adversely affect any right or
protection of a director or officer of the Corporation hereunder or otherwise
with respect to any act or omission occurring before such repeal or modification
is effective. If the New Jersey Business Corporation Act is amended to authorize
corporate action further eliminating or limiting the personal liability of
directors and officers, then such liability will be limited to the fullest
extent permitted under the law.
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ARTICLE VII
Preemptive Rights
-----------------
No holder of any of the shares of any class or series of capital stock
or of options, warrants or other rights to purchase shares of any class or
series of stock or of other securities of the Corporation shall have any
preemptive right to purchase or subscribe for any unissued stock of any class or
series, or any unissued bonds, certificates of indebtedness, debentures of other
securities convertible into or exchangeable for stock of any class or series or
carrying any right to purchase stock of any class or series; but any such
unissued stock, bonds, certificates or indebtedness, debentures or other
securities convertible into or exchangeable for stock or carrying any right to
purchase stock may be issued pursuant to resolution of the board of directors of
the Corporation to such persons, firms, corporations or associations, whether or
not holders thereof, and upon such terms as may be deemed advisable by the board
of directors in the exercise of its sole discretion.
ARTICLE VIII
Repurchase of Shares
--------------------
The Corporation may from time to time, pursuant to authorization by the
board of directors of the Corporation and without action by the shareholders,
purchase or otherwise acquire shares of capital stock of any class, bonds,
debentures, notes, script, warrants, obligations, evidences of indebtedness, or
other securities of the Corporation in such manner, upon such terms, and in such
amounts as the board of directors shall determine; subject, however, to such
limitations or restrictions, if any, as are contained in the express terms of
any class of shares of the Corporation outstanding at the time of the purchase
or acquisition or as are imposed by law or regulation.
ARTICLE IX
Meetings of Shareholders; Proxies; Cumulative Voting; Quorum
------------------------------------------------------------
A. Notwithstanding any other provision of this Certificate or the
Bylaws of the Corporation, any action required to be taken or which may be taken
at any annual or special meeting of shareholders of the Corporation may be taken
without a meeting, if all shareholders entitled to vote thereon consent thereto
in writing. In the case of a merger, consolidation, acquisition of all capital
shares of the Corporation or sale of assets, such action may be taken without a
meeting only if all shareholders consent in writing, or if all shareholders
entitled to vote consent in writing and all other shareholders are provided the
advance notification required by Section 14A: 5-6(2)(b) of the New Jersey
Business Corporation Act. Except as provided in this Article IX.A, the power of
shareholders to take action without a meeting is specifically denied.
B. Unless otherwise required by law, special meetings of the
shareholders of the Corporation for any purpose or purposes may be called at any
time by the board of directors of the Corporation.
C. Each shareholder entitled to vote at a meeting of stockholders or to
express consent or dissent to corporate action in writing without a meeting may
authorize another person or persons to act for him or her by proxy, but no such
proxy shall be voted or acted upon after eleven months from its
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date, unless the proxy provides for a longer period. To be valid, a proxy must
be executed and authorized as required or permitted by law.
D. There shall be no cumulative voting by shareholders of any class or
series in the election of directors of the Corporation.
E. Meetings of shareholders may be held within or outside the State of
New Jersey, as the Bylaws may provide.
F. The holders of shares of a majority of the outstanding shares of
voting stock shall constitute a quorum at a meeting of shareholders.
ARTICLE X
Notice for Nominations and Proposals
------------------------------------
Advance notice of shareholder nominations for the election of directors
and of business to be brought by shareholders before any meeting of the
shareholders of the Corporation shall be given in the manner provided in the
Bylaws of the Corporation.
ARTICLE XI
Directors
---------
A. Number; Vacancies. The number of directors of the Corporation shall
be such number as shall be provided from time to time in or in accordance with
the Bylaws, provided that a decrease in the number of directors shall not have
the effect of shortening the term of any incumbent director. Vacancies in the
board of directors of the Corporation, however caused, and newly-created
directorships shall be filled by the affirmative vote of a majority of the
directors then in office, whether or not a quorum, or by a sole remaining
director, and any director so chosen shall hold office for a term expiring at
the next annual meeting of shareholders.
B. Terms. At each annual meeting, shareholders shall elect directors to
hold office until the next succeeding annual meeting. Each director shall hold
office for the term for which he or she is elected and until his or her
successor shall have been elected and qualified.
Whenever the holders of any one or more series of preferred stock of
the Corporation shall have the right, voting separately as a class, to elect one
or more directors of the Corporation, the board of directors shall consist of
said directors so elected in addition to the number of directors fixed as
provided above in this Article XI. Notwithstanding the foregoing, and except as
otherwise may be required by law, whenever the holders of any one or more series
of preferred stock of the Corporation shall have the right, voting separately as
a class, to elect one or more directors of the Corporation, the terms of the
director or directors elected by such holders shall expire at the next
succeeding annual meeting of shareholders.
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ARTICLE XII
Removal of Directors
--------------------
Notwithstanding any other provision of this Restated Certificate or the
Bylaws of the Corporation, any director or the entire board of directors of the
Corporation may be removed for cause or without cause, at any time, by the
affirmative vote of the holders of at least a majority of the outstanding shares
of capital stock of the Corporation entitled to vote generally in the election
of directors (considered for this purpose as one class). In addition, the board
of directors shall have the power to remove directors for cause and to suspend
directors pending a final determination that cause exists for removal.
ARTICLE XIII
Approval of Business Combinations
---------------------------------
A. Definitions and Related Matters. For the purposes of this Article
XIII and as otherwise expressly referenced hereto in this Certificate of
Incorporation:
1. "Affiliate" means a person that directly, or indirectly
through one or more intermediaries, controls, or is controlled by, or is under
common control with, a specified person.
2. "Announcement date," when used in reference to any business
combination, means the date of the first public announcement of the final,
definitive proposal for that business combination.
3. "Associate," when used to indicate a relationship with any
person, means (1) any corporation or organization of which that person is an
officer or partner or is, directly or indirectly, the beneficial owner of 10% or
more of any class of voting stock, (2) any trust or other estate in which that
person has a substantial beneficial interest or as to which that person serves
as trustee or in a similar fiduciary capacity, or (3) any relative or spouse of
that person, or any relative of that spouse, who has the same home as that
person.
4. "Beneficial owner," when used with respect to any stock,
means a person:
(1) that, individually or with or through any of
its affiliates or associates, beneficially owns that stock, directly or
indirectly;
(2) that, individually or with or through any of
its affiliates or associates, has (a) the right to acquire that stock (whether
that right is exercisable immediately or only after the passage of time),
pursuant to any agreement, arrangement or understanding (whether or not in
writing), or upon the exercise of conversion rights, exchange rights, warrants
or options, or otherwise; provided, however, that a person shall not be deemed
the beneficial owner of stock tendered pursuant to a tender or exchange offer
made by that person or any of that person's affiliates or associates until that
tendered stock is accepted for purchase or exchange; or (b) the right to vote
that stock pursuant to any agreement, arrangement or understanding (whether or
not in writing); provided, however, that a person shall not be deemed the
beneficial owner of any stock under this subparagraph if the agreement,
arrangement or understanding to vote that stock (i) arises solely from a
revocable proxy or consent given in response to a proxy or consent solicitation
made in accordance with the applicable rules and regulations under the
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Exchange Act, and (ii) is not then reportable on a Schedule 13D under the
Exchange Act (or any comparable or successor report); or
(3) that has any agreement, arrangement or under
standing (whether or not in writing), for the purpose of acquiring, holding,
voting (except voting pursuant to a revocable proxy or consent as described in
subparagraph (b) of paragraph (2) of this subsection, or disposing of that stock
with any other person that beneficially owns, or whose affiliates or associates
beneficially own, directly or indirectly, that stock.
5. "Business combination," when used in reference to the
Corporation and any interested shareholder of the Corporation, means:
(1) any merger or consolidation of the Corporation or
any subsidiary of the Corporation with (a) that interested shareholder or (b)
any other corporation (whether or not it is an interested shareholder of the
Corporation) which is, or after a merger or consolidation would be, an affiliate
or associate of that interested shareholder;
(2) any sale, lease, exchange, mortgage, pledge,
transfer or other disposition
(in one transaction or a series of transactions) to or with that interested
shareholder or any affiliate or associate of that interested shareholder of
assets of the Corporation or any subsidiary of the Corporation (a) having an
aggregate market value equal to 10% or more of the aggregate market value of all
the assets, determined on a consolidated basis, of the Corporation, (b) having
an aggregate market value equal to 10% or more of the aggregate market value of
all the outstanding stock of the Corporation, or (c) representing 10% or more of
the earnings power or income, determined on a consolidated basis, of the
Corporation;
(3) the issuance or transfer by the Corporation or
any subsidiary of the Corporation (in one transaction or a series of
transactions) of any stock of the Corporation or any subsidiary of the
Corporation which has an aggregate market value equal to 5% or more of the
aggregate market value of all the outstanding stock of the Corporation to that
interested shareholder or any affiliate or associate of that interested
shareholder, except pursuant to the exercise of warrants or rights to purchase
stock offered, or a dividend or distribution paid or made, pro rata to all
shareholders of the Corporation;
(4) the adoption of any plan or proposal for the
liquidation or dissolution of the Corporation proposed by, on behalf of or
pursuant to any agreement, arrangement or understanding (whether or not in
writing) with that interested shareholder or any affiliate or associate of that
interested shareholder;
(5) any reclassification of securities (including,
without limitation, any stock split, stock dividend, or other distribution of
stock in respect of stock, or any reverse stock split), or recapitalization of
the Corporation, or any merger or consolidation of the Corporation with any
subsidiary of the Corporation, or any other transaction (whether or not with, or
into, or otherwise involving that interested shareholder), proposed by, on
behalf of or pursuant to any agreement, arrangement or understanding (whether or
not in writing) with that interested shareholder or any affiliate or associate
of that interested shareholder, which has the effect, directly or indirectly, of
increasing the proportionate share of the outstanding shares of any class or
series of stock or securities convertible into voting stock of the Corporation
or any subsidiary of the Corporation which is directly or indirectly owned by
that
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interested shareholder or any affiliate or associate of that interested
shareholder, except as a result of immaterial changes due to fractional share
adjustments; or
(6) any receipt by that interested shareholder or
any affiliate or associate of that interested shareholder of the benefit,
directly or indirectly (except proportionately as a shareholder of the
Corporation), of any loans, advances, guarantees, pledges or other financial
assistance or any tax credits or other tax advantages provided by or through the
Corporation; provided, however, that the term "business combination" shall not
be deemed to include the receipt of any of the foregoing benefits by the
Corporation or any of the Corporation's affiliates arising from transactions
(such as intercompany loans or tax sharing arrangements) between the Corporation
and its affiliates in the ordinary course of business.
6. "Common stock" means any stock other than preferred stock.
7. "Consummation date," with respect to any business
combination, means the date of consummation of that business combination.
8. "Control," including terms "controlling" "controlled by"
and "under common control with," means the possession, directly or indirectly,
of the power to direct or cause the direction of the management and policies of
a person, whether through the ownership of voting stock, by contract, or
otherwise. A person's beneficial ownership of 10% or more of the voting power of
the Corporation's voting stock shall create a presumption that person has
control of the Corporation. Notwithstanding the foregoing in this subsection, a
person shall not be deemed to have control of a corporation if that person holds
voting power, in good faith and not for the purpose of circumventing this
section, as an agent, bank, broker, nominee, custodian or trustee for one or
more beneficial owners who do not individually or as a group have control of the
Corporation.
9. "Exchange Act" means the "Securities Exchange Act of 1934,"
48 Stat. 881 (15 U.S.C. ss.78a et seq.) as the same has been or hereafter may be
amended from time to time.
10. "Interested shareholder," when used in reference to the
Corporation, means any person (other than the Corporation or any subsidiary of
the Corporation) that:
(1) is the beneficial owner, directly or indirectly,
of 10% or more of the voting power of the outstanding voting stock of the
Corporation; or
(2) is an affiliate or associate of the Corporation
and at any time within the five-year period immediately prior to the date in
question was the beneficial owner, directly or indirectly, of 10% or more of the
voting power of the then outstanding stock of the Corporation. For the purpose
of determining whether a person is an interested shareholder pursuant to this
subsection, the number of shares of voting stock of the Corporation deemed to be
outstanding shall include shares deemed to be beneficially owned by the person
through application of subsection A.4 of this Article but shall not include any
other unissued shares of voting stock of the Corporation which may be issuable
pursuant to any agreement, arrangement or understanding, or upon exercise of
conversion rights, warrants or options, or otherwise.
(3) is an assignee of or has otherwise succeeded to
any shares of voting stock which were at any time within the two-year period
immediately prior to the date in question beneficially
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owned by any Interested Shareholder, if such assignment or succession shall have
occurred in the course of a transaction or series of transactions not involving
a public offering within the meaning of the Securities Act of 1933.
11. "Market value," when used in reference to property of the
Corporation, means:
(1) in the case of stock, the highest closing sales
price of the stock during the 30 day period immediately preceding the date in
question, on the principal United States securities exchange registered under
the Exchange Act on which that stock is listed, or, if that stock is not listed
on any such exchange, the highest closing bid quotation with respect to a share
of that stock during the 30 day period preceding the date in question on the
National Association of Securities Dealers, Inc. Automated Quotation System, or
any system then in use, or if no such quotations are available, the fair market
value on the date in question of a share of the Corporation's stock as
determined by the board of directors of the Corporation in good faith; and
(2) in the case of property other than cash or stock,
the fair market value of
that property on the date in question as determined by the board of directors of
the Corporation in good faith.
12. "Stock" means:
(1) any stock or similar security, any certificate
of interest, any participation in any profit sharing agreement, any voting trust
certificate, or any certificate of deposit for stock; and
(2) any security convertible, with or without
consideration, into stock, or any warrant, call or other option or privilege of
buying stock without being bound to do so, or any other security carrying any
right to acquire, subscribe to or purchase stock.
13. "Stock acquisition date," with respect to any person and
the Corporation, means the date that that person first becomes an interested
shareholder of the Corporation.
14. "Subsidiary" of the Corporation means any other
corporation of which voting stock having a majority of the votes entitled to be
cast is owned, directly or indirectly, by the Corporation.
15. "Voting stock" means shares of capital stock of the
Corporation entitled to vote generally in the election of directors.
B. Approval of Business Combinations.
The Corporation shall not engage in a business combination with any
interested shareholder for a period of five years following that interested
shareholder's stock acquisition date unless the business combination is approved
by the board of directors prior to the interested shareholder's stock
acquisition date.
In addition, the Corporation shall not engage in any business
combination with any interested shareholder of the Corporation at any time
unless one of the following three conditions are met:
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1. the business combination is approved by the board of directors of
the Corporation prior to that interested shareholder's stock acquisition date
and thereafter approved by shareholders in accordance with applicable law.
2. the business combination is approved by the affirmative vote of the
holders of at least 80% of the voting stock not beneficially owned by that
interested shareholder at a meeting called for such purpose.
3. the business combination meets all of the following conditions:
(1) the aggregate amount of the cash and the market value, as
of the consummation date, of consideration other than cash to be received per
share by holders of outstanding shares of common stock of the Corporation in
that business combination is at least equal to the higher of the following:
(a) the highest per share price (including any
brokerage commissions, transfer taxes and soliciting dealers' fees) paid by that
interested shareholder for any shares of common stock of the same class or
series acquired by it (i) within the five-year period immediately prior to the
announcement date with respect to that business combination, or (ii) within the
five-year period immediately prior to, or in, the transaction in which that
interested shareholder became an interested shareholder, whichever is higher;
plus, in either case, interest compounded annually from the earliest date on
which that highest per share acquisition price was paid through the consummation
date at the rate for one-year United States Treasury obligations from time to
time in effect; less the aggregate amount of any cash dividends paid, and the
market value of any dividends paid other than in cash, per share of common stock
since that earliest date, up to the amount of that interest; and
(b) the market value per share of common stock on
the announcement date with respect to that business combination or on that
interested shareholder's stock acquisition date, whichever is higher; plus
interest compounded annually from that date through the consummation date at the
rate for one-year United States Treasury obligations from time to time in
effect; less the aggregate amount of any cash dividends paid, and the market
value of any dividends paid other than in cash, per share of common stock since
that date, up to the amount of that interest;
(2) the aggregate amount of the cash and the market value as
of the consummation date of consideration other than cash to be received per
share by holders of outstanding shares of any class or series of stock, other
than common stock, of the Corporation is at least equal to the highest of the
following (whether or not that interested shareholder has previously acquired
any shares of that class or series of stock):
(a) the highest per share price (including any
brokerage commissions, transfer taxes and soliciting dealers' fees) paid by that
interested shareholder for any shares of that class or series of stock acquired
by it (i) within the five-year period immediately prior to the announcement date
with respect to that business combination, or (ii) within the five-year period
immediately prior to, or in, the transaction in which that interested
shareholder became an interested shareholder, whichever is higher; plus, in
either case, interest compounded annually from the earliest date on which the
highest per share acquisition price was paid through the consummation date at
the rate for one-year United States Treasury obligations from time to time in
effect; less the aggregate amount of any cash dividends paid, and the
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market value of any dividends paid other than in cash, per share of that class
or series of stock since that earliest date, up to the amount of that interest;
(b) the highest preferential amount per share to
which the holders of shares of that class or series of stock are entitled in the
event of any liquidation, dissolution or winding up of the Corporation, plus the
aggregate amount of any dividends declared or due at to which those holders are
entitled prior to payment of dividends on some other class or series of stock
(unless the aggregate amount of those dividends is included in that preferential
amount); and
(c) the market value per share of that class or
series of stock on the announcement date with respect to that business
combination or on that interested shareholder's stock acquisition date,
whichever is higher; plus interest compounded annually from that date through
the consummation date at the rate for one-year United States Treasury
obligations from time to time in effect; less the aggregate amount of any cash
dividends paid, and the market value of any dividends paid other than in cash,
per share of that class or series of stock since that date, up to the amount of
that interest;
(3) the consideration to be received by holders of a
particular class or series of outstanding stock (including common stock) of the
Corporation in that business combination is in cash or in the same form as the
interested shareholder has used to acquire the largest number of shares of that
class or series of stock previously acquired by it;
(4) the holders of all outstanding shares of stock of the
Corporation not beneficially owned by that interested shareholder immediately
prior to the consummation of that business combination are entitled to receive
in that business combination cash or other consideration for those shares in
compliance with paragraphs (1), (2) and (3) of this subsection; and
(5) after that interested shareholder's stock acquisition date
and prior to the consummation date with respect to that business combination,
that interested shareholder has not become the beneficial owner of any
additional shares of stock of the Corporation, except:
(a) as part of the transaction which resulted in
that interested shareholder becoming an interested shareholder;
(b) by virtue of proportionate stock splits, stock
dividends or other distributions of stock in respect of stock not constituting a
business combination as defined in Section A.5(5) of this Article;
(c) through a business combination meeting all of
the conditions of paragraph (3) and this paragraph; or
(d) through the purchase by that interested
shareholder at any price which, if that price had been paid in an otherwise
permissible business combination, the announcement date and consummation date of
which was the date of that purchase, would have satisfied the requirements of
paragraphs (1), (2) and (3) of this subsection.
(6) Exceptions. The provisions of this Article XIII shall not
apply to (i) any business combination of the Corporation with an interested
shareholder of the Corporation which became an interested shareholder
inadvertently, if such interested shareholder (A) as soon as practicable divests
itself,
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himself or herself of a sufficient amount of the voting stock of the Corporation
so that it, he or she no longer is the beneficial owner, directly or indirectly,
of 10% or more of the voting power of the outstanding voting stock of the
Corporation or a subsidiary corporation, and (B) would not at any time within
the five-year period preceding the announcement date with respect to that
business combination have been an interested shareholder but for that
inadvertent acquisition or (ii) any business combination with an interested
shareholder if the Corporation's common stock was not registered pursuant to
Section 12 of the Exchange Act on that interested shareholder's stock
acquisition date provided such interested shareholder has continued to be an
interested shareholder of the Corporation since such stock acquisition date.
Nothing contained in this Article XIII shall be construed to relieve any
interested shareholder from any fiduciary obligation imposed by law.
ARTICLE XIV
Evaluation of Business Combinations
-----------------------------------
In connection with the exercise of its judgment in determining what is
in the best interests of the Corporation and of the shareholders, when
evaluating a business combination or a tender or exchange offer, the board of
directors of the Corporation shall, in addition to considering the adequacy of
the amount to be paid in connection with any such transaction, consider all of
the following factors and any other factors which it deems relevant: (i) the
long-term as well as short-term interests of the Corporation and its
shareholders; (ii) the social and economic effects of entering into the
transaction on the Corporation and its subsidiaries, and its present and future
employees, depositors, loan and other customers, creditors and other elements of
the communities in which the Corporation and its subsidiaries operate or are
located; (iii) the business and financial condition and earnings prospects of
the acquiring person or entity, including, but not limited to, debt service and
other existing financial obligations, financial obligations to be incurred in
connection with the acquisition, and other likely financial obligations of the
acquiring person or entity, and the possible effect of such conditions upon the
Corporation and its subsidiaries and the other elements of the communities in
which the Corporation and its subsidiaries operate or are located; and (iv) the
competence, experience, and integrity of the acquiring person or entity and its
or their management.
ARTICLE XV
Response to Abusive Takeovers
-----------------------------
In furtherance and not in limitation of the powers conferred by law or
in this Restated Certificate, the Board of Directors (and any committee of the
Board of Directors) is expressly authorized, to the extent permitted by law, to
take such action or actions as the Board or such committee may determine to be
reasonably necessary or desirable to (A) encourage any person to enter into
negotiations with the Board of Directors and management of the Corporation with
respect to any transaction which may result in a change in control of the
Corporation which is proposed or initiated by such person or (B) contest or
oppose any such transaction which the Board of Directors or such committee
determines to be unfair, abusive or otherwise undesirable with respect to the
Corporation and its business, assets or properties or the shareholders of the
Corporation, including, without limitation, the adoption of such plans or the
issuance of such rights, options, capital stock, notes, debentures or other
evidences of indebtedness or other securities of the Corporation, which rights,
options, capital stock, notes, evidences of indebtedness and other securities
(i) may be exchangeable for or convertible into cash or other securities on such
terms and conditions as may be determined by the Board or such committee and
(ii) may provide for the
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treatment of any holder or class of holders thereof designated by the Board of
Directors or any such committee in respect of the terms, conditions, provisions
and rights of such securities which is different from, and unequal to, the
terms, conditions, provisions and rights applicable to all other holders
thereof.
ARTICLE XVI
Amendment of Bylaws
-------------------
In furtherance and not in limitation of the powers conferred by
statute, the board of directors of the Corporation is expressly authorized to
make, repeal, alter, amend and rescind the Bylaws of the Corporation by a
majority vote of members of the board of directors present at a legal meeting
held in accordance with the provisions of the Bylaws. Notwithstanding any other
provision of this Certificate or the Bylaws of the Corporation (and
notwithstanding the fact that some lesser percentage may be specified by law),
the Bylaws shall not be made, repealed, altered, amended or rescinded by the
shareholders of the Corporation except by the vote of the holders of not less
than 80% of the outstanding shares of the capital stock of the Corporation
entitled to vote generally in the election of directors (considered for this
purpose as one class) cast at a meeting of the shareholders called for that
purpose (provided that notice of such proposed adoption, repeal, alteration,
amendment or rescission is included in the notice of such meeting), or, as set
forth above, by the board of directors.
ARTICLE XVII
Amendment of Certificate of Incorporation
-----------------------------------------
The Corporation reserves the right to repeal, alter, amend or rescind
any provision contained in this Certificate in the manner now or hereafter
prescribed by law, and all rights conferred on shareholders herein are granted
subject to this reservation. Notwithstanding the foregoing, the provisions set
forth in Articles VI, VII, VIII, IX.A, IX.B, IX.D, IX.F, X, XIII, XIV, XV, XVI
and this Article XVII of this Certificate may not be repealed, altered, amended
or rescinded in any respect unless such action is approved by the affirmative
vote of the holders of not less than 80% of the outstanding shares of capital
stock of the Corporation entitled to vote generally in the election of directors
(considered for this purpose as a single class) cast at a meeting of the
shareholders called for that purpose (provided that notice of such proposed
adoption, repeal, alteration, amendment or rescission is properly included in
the notice of such meeting).
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SUN BANCORP, INC.
226 LANDIS AVENUE
VINELAND, NEW JERSEY 08360
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ANNUAL MEETING OF SHAREHOLDERS
April 21, 1998
- --------------------------------------------------------------------------------
The undersigned hereby appoints the Board of Directors of Sun Bancorp,
Inc. (the "Company"), or its designee, with full powers of substitution, to act
as attorneys and proxies for the undersigned, to vote all shares of Common Stock
of the Company which the undersigned is entitled to vote at the Annual Meeting
of Shareholders (the "Meeting"), to be held at 226 Landis Avenue, Vineland, New
Jersey, on April 21, 1998, at 3:30 p.m. and at any and all adjournments thereof,
in the following manner:
FOR WITHHELD
--- --------
1. The election as directors of the nominees
listed below (except as marked to the |_| |_|
contrary below):
Bernard A. Brown
Sidney R. Brown
Adolph F. Calovi
Peter Galetto, Jr.
Philip W. Koebig, III
Anne E. Koons
Ike Brown
(Instruction: To withhold authority to vote
for any individual nominee, write that nominee's name
on the space provided below)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FOR AGAINST ABSTAIN
--- ------- -------
2. Ratification of the adoption of the
1997 Stock Option Plan |_| |_| |_|
3. Ratification of the adoption of the
Employee Stock Purchase Plan |_| |_| |_|
4. Adoption of an Amended and Restated
Certificate of Incorporation |_| |_| |_|
In their discretion, such attorneys and proxies are authorized to vote on any
other business that may properly come before the meeting or any adjournments
thereof.
Note: Executing this proxy permits such attorneys and proxies to vote, in their
discretion, upon such other business as may properly come before the Meeting or
any adjournments thereof.
The Board of Directors recommends a vote "FOR" the above listed
proposals.
- --------------------------------------------------------------------------------
THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS ARE SPECIFIED, THIS
SIGNED PROXY WILL BE VOTED FOR EACH OF THE PROPOSALS STATED. IF ANY OTHER
BUSINESS IS PRESENTED AT SUCH MEETING, THIS PROXY WILL BE VOTED BY THOSE NAMED
IN THIS PROXY IN THEIR BEST JUDGMENT. AT THE PRESENT TIME, THE BOARD OF
DIRECTORS KNOWS OF NO OTHER BUSINESS TO BE PRESENTED AT THE MEETING.
- --------------------------------------------------------------------------------
<PAGE>
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
The undersigned acknowledges receipt from the Company prior to the
execution of this proxy of a Notice of Annual Meeting of Shareholders, a Proxy
Statement dated April 10, 1998, and the 1997 Annual Report.
Dated: , 1998
-----------------------------
- ------------------------------------ ------------------------------------
PRINT NAME OF SHAREHOLDER PRINT NAME OF SHAREHOLDER
- ------------------------------------ ------------------------------------
SIGNATURE OF SHAREHOLDER SIGNATURE OF SHAREHOLDER
Please sign exactly as your name appears on this proxy. When signing as
attorney, executor, administrator, trustee, or guardian, please give your full
title. If shares are held jointly, each holder should sign.
- --------------------------------------------------------------------------------
PLEASE COMPLETE, SIGN, DATE, AND MAIL THIS PROXY PROMPTLY IN THE ENCLOSED
POSTAGE-PREPAID ENVELOPE.
- --------------------------------------------------------------------------------
