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 Rule 14a-11(c) or Rule 14a-12
Sussex Bancorp
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- ------------------------------------------------------------------------------
(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:
(2) Aggregate number of securities to which transaction applies:
(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):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] 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.
<PAGE>
(1) Amount Previously paid:
(2) Form, Schedule or Registration Statement no.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
SUSSEX BANCORP
399 State Highway 23
P.O. Box 353
Franklin, NJ 07416
April ___, 1997
To Our Stockholders:
You are cordially invited to attend the Annual Meeting of Stockholders
(the "Annual Meeting") of Sussex Bancorp (the "Company"), the holding company
for The Sussex County State Bank (the "Bank"), to be held on Wednesday, April
23, 1997 at 3:30 p.m. at the Bank's Newton branch, 15 Trinity Street, Newton,
New Jersey.
At the Annual Meeting stockholders will be asked to consider and vote
upon (1) the election of six directors; and (2) an amendment to the Company's
Certificate of Incorporation to classify the Board of Directors into three
classes.
The Board of Directors of the Company believes that the matters to be
considered at the Annual Meeting are in the best interests of the Company and
its stockholders. For the reasons set forth in the Proxy Statement, the Board
unanimously recommends that you vote "FOR" each matter to be considered.
Your cooperation is appreciated since a majority of the Common Stock
must be represented, either in person or by proxy, to constitute a quorum for
the conduct of business. Whether or not you expect to attend, please sign, date
and return the enclosed proxy card promptly in the postage-paid envelope
provided so that your shares will be represented.
Very truly yours,
William E. Kulsar
Secretary
<PAGE>
SUSSEX BANCORP
399 State Highway 23
P.O. Box 353
Franklin, NJ 07416
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL 23, 1997
Notice is hereby given that the Annual Meeting of Stockholders (the
"Annual Meeting") of Sussex Bancorp (the "Company") will be held at the Bank's
Newton branch, 15 Trinity Street, Newton, New Jersey, on April 23, 1997, at 3:30
p.m. for the purpose of considering and voting upon the following matters:
1. The election of six (6) persons named in the accompanying
Proxy Statement to serve as directors of the Company;
2. An Amendment to the Company's Certificate of Incorporation to
classify the Board of Directors into three classes; and
3. Such other business as shall properly come before the Annual
Meeting.
Stockholders of record at the close of business on February 28, 1997
are entitled to notice of and to vote at the Annual Meeting. Whether or not you
contemplate attending the Annual Meeting, it is suggested that the enclosed
proxy be executed and returned to the Company. You may revoke your proxy at any
time prior to the exercise of the proxy by delivering to the Company a later
proxy or by delivering a written notice of revocation to the Company.
By Order of the Board of Directors
William E. Kulsar
Secretary
Franklin, New Jersey
April __, 1997
IMPORTANT---PLEASE MAIL YOUR PROXY PROMPTLY
<PAGE>
SUSSEX BANCORP
399 State Highway 23
P.O. Box 353
Franklin, NJ 07416
------------------------------------
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
APRIL 23, 1997
-----------------------------------
Solicitation and Voting of Proxies
This Proxy Statement is being furnished to stockholders of Sussex
Bancorp (the "Company") in connection with the solicitation by the Board of
Directors of proxies to be used at the annual meeting of stockholders (the
"Annual Meeting"), to be held on April 23, 1997, at 3:30 p.m., at the Bank's
Newton branch, 15 Trinity Street, Newton, New Jersey and at any adjournments
thereof. The 1996 Annual Report to Stockholders, including consolidated
financial statements for the fiscal year ended December 31, 1996, and a proxy
card, accompanies this Proxy Statement, which is first being mailed to record
holders on or about April ___, 1997.
Regardless of the number of shares of common stock, no par value, of
the Company ("Common Stock") owned, it is important that you vote by completing
the enclosed proxy card and returning it signed and dated in the enclosed
postage-paid envelope. Stockholders are urged to indicate their vote in the
spaces provided on the proxy card. Proxies solicited by the Board of Directors
of the Company will be voted in accordance with the directions given therein.
Where no instructions are indicated, signed proxy cards will be voted "FOR" the
election of each of the nominees for director named in this Proxy Statement and
"FOR" the ratification of each of the other specific proposals presented in this
Proxy Statement.
Other than the matters set forth on the attached Notice of Annual
Meeting of Stockholders, the Board of Directors knows of no additional matters
that may be presented for consideration at the Annual Meeting. Execution of a
proxy, however, confers on the designated proxy holders discretionary authority
to vote the shares in accordance with their best judgment on such other
business, if any, that may properly come before the Annual Meeting and at any
adjournments thereof, including whether or not to adjourn the Annual Meeting.
A proxy may be revoked at any time prior to its exercise by sending a
written notice of revocation to the Company, 399 State Highway 23, P.O. Box 353,
Franklin, NJ 07416, Attn: Candace A. Leatham. A proxy filed prior to the Annual
Meeting may be revoked by delivering to the Company a duly executed proxy
bearing a later date, or by attending the Annual Meeting and voting in person.
However, if you are a stockholder whose shares are not registered in your
own name, you will need appropriate documentation from your record holder to
vote personally at the Annual Meeting.
<PAGE>
The cost of solicitation of proxies on behalf of the Board of Directors
will be borne by the Company. Proxies may also be solicited personally or by
mail or telephone by directors, officers and other employees of the Company and
The Sussex County State Bank (the "Bank"), its wholly-owned subsidiary, without
additional compensation therefor. The Company will also request persons, firms
and corporations holding shares in their names, or in the name of their
nominees, which are beneficially owned by others, to send proxy material to and
obtain proxies from such beneficial owners, and will reimburse such holders for
their reasonable expenses in doing so.
Voting Securities
The securities which may be voted at the Annual Meeting consist of
shares of the Company's Common Stock, with each share entitling its owner to one
vote on all matters to be voted on at the Annual Meeting, except as described
below. There is no cumulative voting for the election of directors.
The close of business on February 28, 1997, has been fixed by the Board
of Directors as the record date (the "Record Date") for the determination of
stockholders of record entitled to notice of and to vote at the Annual Meeting
and at any adjournments thereof. The total number of shares of Common Stock
outstanding on the Record Date was 675,797 shares.
The presence, in person or by proxy, of the holders of at least a
majority of the total number of shares of Common Stock entitled to vote is
necessary to constitute a quorum at the Annual Meeting. In the event that there
are not sufficient votes for a quorum, or to approve or ratify any matter being
presented at the time of the Annual Meeting, the Annual Meeting may be adjourned
in order to permit the further solicitation of proxies.
As to the election of directors, the proxy card being provided by the
Board of Directors enables a stockholder to vote "FOR" the election of the
nominees proposed by the Board of Directors, or to "WITHHOLD AUTHORITY" to vote
for one or more of the nominees being proposed. Under New Jersey law and the
Company's Bylaws, directors are elected by a plurality of votes cast, without
regard to either broker non-votes, or proxies as to which authority to vote for
one or more of the nominees being proposed is withheld.
As to the matters being proposed for stockholder action set forth in
Proposal 2, the proxy card being provided by the Board of Directors enables a
stockholder to check the appropriate box on the proxy card to (i) vote "FOR" the
item, (ii) vote "AGAINST" the item, or (iii) "ABSTAIN" from voting on such item.
Under New Jersey law, the affirmative vote of a majority of the votes cast at
the Annual Meeting, in person or by proxy, is required to approve Proposal 2.
Abstentions and broker non-votes do not count as votes cast under New Jersey
law, and so will have no effect.
<PAGE>
PROPOSALS TO BE VOTED ON AT THE MEETING
PROPOSAL 1. ELECTION OF DIRECTORS
The Company's Certificate of Incorporation and its Bylaws authorize a
minimum of five (5) and a maximum of twenty-five (25) directors but leave the
exact number to be fixed by resolution of the Board of Directors. The Board has
fixed the number of directors at six (6).
Directors will be elected to serve for a term of one year and until
their successors are duly elected and qualified; provided, however, that in the
event Proposal 2 is approved by the stockholders of the Company, the term for
each director shall become the term set forth under Proposal 2 and until their
successors are then duly elected and qualified.
If, for any reason, any of the nominees become unavailable for
election, the proxy solicited by the Board of Directors will be voted for a
substitute nominee selected by the Board of Directors. The Board has no reason
to believe that any of the named nominees is not available or will not serve if
elected. Unless authority to vote for the nominee is withheld, it is intended
that the shares represented by the enclosed proxy card, if executed and
returned, will be voted "FOR" the election of the nominees proposed by the Board
of Directors.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE ELECTION OF THE
NOMINEES NAMED IN THIS PROXY STATEMENT.
Information with respect to the Nominees
The following table sets forth the names of the nominees for election,
their ages, a brief description of their recent business experience, including
present occupations, and the year in which each became a director of the Company
or the Bank. No nominee is a director of another company registered pursuant to
Section 12 of the Securities Exchange Act of 1934 or subject to the requirements
of Section 15(d) of such Act or any company registered as an investment company
under the Investment Company Act of 1940.
<TABLE>
<CAPTION>
Name, Age and Position with Principal Occupations During Director
the Company Past Five Years Since (1)
- ----------- --------------- ---------
<S> <C> <C>
Irvin Ackerson, 74, Director Excavating Contractor Ackerson Contracting Co., 1976
Oak Ridge, New Jersey
Donald L. Kovach, 61, Chairman Donald L. Kovach, Attorney at Law Franklin, New 1976
of the Board, CEO Jersey
William E. Kulsar, 59, Secretary Certified Public Accountant, Caristia, Kulsar & 1976
and Director Wade, P.A., Sparta, New Jersey
<PAGE>
<CAPTION>
Joel D. Marvil, 62, Director President/CEO of Manufacturing Co. Ames Rubber 1989
Corporation Hamburg, New Jersey
Richard Scott, 60, Director Dentist, Richard Scott, DDS, Franklin, New Jersey 1976
Joseph Zitone, 65, Director General Contractor Zitone Construction Montague, 1984
New Jersey
- -----------------------------------------
(1) Includes prior service on Board of Directors of the Bank.
</TABLE>
Board of Directors' Meetings; Committees of the Board
The Board of Directors of the Company held twelve meetings during 1996.
The Board of Directors holds regularly scheduled meetings each month and special
meetings as circumstances require. All of the directors of the Company attended
at least 75% of the total number of Board meetings held and committee meetings
held during 1996.
Audit Committee. The Company and the Bank have a standing Audit
Committee of the Board of Directors. This committee arranges for the Bank's
directors' examinations through its independent certified public accountant,
reviews and evaluates the recommendations of the directors' examinations,
receives all reports of examination of the Company and the Bank by appropriate
regulatory agencies, analyzes such regulatory reports, and reports to the Board
the results of its analysis of the regulatory reports. This committee also
receives reports directly from the Company's internal auditing department and
recommends any action to be taken in connection therewith. The Audit Committee
met four times during 1996. The Audit Committee consisted during 1996 of
Directors Kulsar (Chairman), Scott and Marvil.
Compensation Committee. The Company maintains a Compensation Committee
which sets the compensation for the executive officers of the Company. In 1996,
the Compensation Committee consisted of Directors Marvil (Chairman), Ackerson
and Kulsar and met twice.
The Company does not maintain a separate Nominating Committee. The full
Board acts as a Nominating Committee.
Compensation of Directors
Directors of the Company are not compensated for their service of the
Company's Board of Directors. Directors of the Bank, other than full-time
employees of the Bank, receive an annual retainer of $1,000. In addition,
directors who are not full-time employees of the Bank receive a fee of $500 for
each regular monthly Board meeting or special Board meeting attended and $100
for each committee meeting attended. In addition, each director who undertakes a
special project at the request of management of the Bank and with Board of
Director approval is paid at an hourly rate of $100 per hour for their time
spent on the project.
<PAGE>
The Company maintains the 1995 Stock Option Plan for Non-Employee
Directors (the "Non-Employee Plan), the purpose of which is to assist the
Company in attracting and retaining qualified persons to serve as members of the
Board of Directors. Under the Non-Employee Plan, options to purchase up to a
total of 32,000 shares of Common Stock may be granted at exercise prices which
may not be less than the fair market value of the Common Stock on the date of
grant. Under the Non-Employee Plan, each non-employee director elected at the
1995 Annual Meeting was granted an option to purchase 3,000 shares at $11.25 per
share. In addition, each non-employee director who is elected or re-elected to
serve on the Board of Directors at succeeding annual meetings will be granted an
option to purchase 500 shares of Common Stock at the time of such re-election.
The exercise price for options granted in connection with the 1996 annual
meeting was $17.75.
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information concerning the beneficial
ownership of shares of Common Stock as of March 6, 1997, by (i) each person who
is know by the Company to own beneficially more than five percent (5%) of the
issued and outstanding Common Stock, (ii) each director and nominee for director
of the Company, (iii) each executive officer of the Company for described in
this Proxy Statement under the caption "Executive Compensation" and (iv) all
directors and executive officers of the Company as a group. Other than as set
forth in this table, the Company is not aware of any individual or group which
holds in excess of 5% of the outstanding Common Stock.
<TABLE>
<CAPTION>
Number of Shares Percent
Name of Beneficial Owner Beneficially Owned (1) of Class
------------------------ ---------------------- --------
<S> <C> <C>
Irvin Ackerson 10,309 (2) 1.53%
Donald L. Kovach 64,679 (3)(4) 9.57
William E. Kulsar 47,836 (4)(5) 7.07
Joel D. Marvil 15,710 2.32
Richard Scott 20,120 2.98
Joseph Zitone 33,714 (6) 5.00
Directors & Principal Officers as
a Group
(6 persons) 162,507 24.04
Beneficial Owners of more than 5% of Common Stock:
Ambrose Hamm
P.O. Box E
Branchville, NJ 07826 66,611 9.86
- ---------------------
</TABLE>
<PAGE>
(1) Beneficially owned shares include shares over which the named person
exercises either sole or shared voting power or sole or shared investment
power. It also includes shares owned (i) by a spouse, minor children or by
relatives sharing the same home, (ii) by entities owned or controlled by
the named person, and (iii) by other persons if the named person has the
right to acquire such shares within 60 days by the exercise of any right or
option. Unless otherwise noted, all shares are owned of record and
beneficially by the named person, either directly or through the dividend
reinvestment plan.
(2) Includes 5,078 shares owned by Mr. Ackerson's wife.
(3) Includes 7,978 shares owned by Mr. Kovach's wife, 3,708 shares owned by the
Kovach, Fitzgibbons and Goovaerts Employee Profit Sharing Trust, and 309
shares registered in the name of Kovach, Fitzgibbons & Goovaerts Trust, FBO
Donald L. Kovach.
(4) Includes 29,861 shares over which Messrs. Kovach and Kulsar have shared
voting authority as administrators for The Sussex County State Bank
Employee Stock Ownership Plan.
(5) Includes 11,464 shares registered in the name of the Caristia, Kulsar &
Wade, P.A. Profit Sharing Plan and 6,574 shares registered in the name of
William E. Kulsar IRA, Newton Trust Company custodian.
(6) Includes 4,751 shares owned by the Zitone Construction & Supply Co., Inc.
Profit Sharing Plan Trust.
<PAGE>
Annual Executive Compensation and All Other Compensation
The following table sets forth a summary for the last three fiscal
years of the cash and non-cash compensation awarded to, earned by, or paid to,
the Chief Executive Officer of the Company and each of the four (4) most highly
compensated executive officers whose individual remuneration exceeded $100,000
for the last fiscal year.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Cash and Cash Equivalent Forms
of Remuneration
Annual Compensation
-----------------------------------
Award Payouts
-------------------------------------------
Securities
Other Underlying All Other
Annual Options/ LTIP Compen-
Salary Bonus Compensation SARs Payouts sation
Name and Principal Position Year ($) ($) ($) (#) ($) ($)(4)
- --------------------------- ---- --- --- --- --- --- ------
<S> <C> <C> <C> <C> <C> <C> <C>
Donald L. Kovach, Chairman of 1996 $ 85,700 0 (3) 0 None 0
the Board and CEO (1)
Larry C. Farmer, President/CEO(2) 1996 6,993 0 0 0 None 133,007(5)
1995 106,945 0 (3) 0 None 877
1994 105,567 0 (3) 0 None 1,217
- ------------------------------
(1) Mr. Kovach became Chief Executive Officer of the Company on January 17,
1996. His 1997 annual salary is $140,000.
(2) Mr. Farmer resigned as President and Chief Executive Officer of the Bank on
January 17, 1996.
(3) During the fiscal years presented, the Company provided additional life
insurance, automobile and private golf club membership for Messrs. Kovach
and Farmer. The use made thereof for personal purposes did not exceed 10%
of the total cash compensation to such persons which is the sum of base
salary and bonus and therefore is not included in the above table.
(4) The Bank maintains a trusteed non-contributory qualified employee stock
ownership plan (the "ESOP Plan") covering all officers and employees who
have been in the Bank's employ six months or more. The cost of the ESOP
Plan is charged to operations as incurred. The ESOP Plan provides that a
contribution not to exceed that allowed by the Internal Revenue Service
("IRS") may be made at the discretion of the Board of Directors. The monies
contributed to the ESOP Plan are used to purchase stock of the Bank which
is then allocated to eligible employees, each receiving a percentage equal
to the percent their salary bears to the total salary figure for the entire
group. The employees become vested in the shares allocated to them in
accordance with a schedule established in the ESOP Plan. Full vesting is
achieved after six or more full years of service with the Bank.
(5) In connection with Mr. Farmer's resignation, the Company agreed to continue
his salary for the remainder of 1997.
</TABLE>
<PAGE>
The Company and the Bank have entered into an Employment Agreement with
Mr. Donald L. Kovach pursuant to which he will serve as President and Chief
Executive Officer of the Company and the Bank. The Employment Agreement provides
for a two year term, commencing January 1, 1997 and terminating on December 31,
1999. The Employment Agreement provides that Mr. Kovach will receive a base
salary of $140,000 and may be granted a discretionary bonus as determined by the
Board of Directors. The Employment Agreement permits the Company to terminate
Mr. Kovach's employment for cause at any time. The Employment Agreement defines
cause to mean personal dishonesty, willful misconduct, breach of fiduciary duty
involving personal profit, intentional failure to perform stated duties, willful
violation of law, rule or regulation, other than traffic violations or similar
offenses, or violation of a final cease and desist order, or a material breach
of any provision of the Agreement. In the event Mr. Kovach is terminated for any
reason other than cause, or in the event Mr. Kovach resigns his employment
because he is reassigned to a position of lesser rank or status than President
and Chief Executive Officer, his place of employment is relocated by more than
30 miles from its location on the date of the Agreement, or his compensation or
other benefits are reduced, Mr. Kovach, or in the event of his death, his
beneficiary, will be entitled to receive his base salary at the time of such
termination or resignation for the remaining term of the Agreement. In addition,
the Company will continue to provide Mr. Kovach with certain insurance and other
benefits through the end of the term of the Agreement. Mr. Kovach's Employment
Agreement further provides that upon the occurrence of a change in control of
the Company, as defined in the Employment Agreement, and in the event Mr. Kovach
is terminated for reasons other than cause or in the event Mr. Kovach, within 18
months of the change in control, resigns his employment for the reasons
discussed above, he shall be entitled to receive a severance payment based upon
his then current base salary. Under the Agreement, in the event the change in
control occurs during the first year of the Agreement, the severance payment
would equal Mr. Kovach's then current base salary, if a change in control occurs
during the second year of the Agreement, the severance payment would equal twice
Mr. Kovach's then current base salary, and if a change in control occurs during
the third year of the Agreement, the severance payment would equal 2.99 times
Mr. Kovach's then current base salary. The Employment Agreement also prohibits
Mr. Kovach from competing with the Bank and the Company for a period of one year
following termination of his employment.
Non-Qualified Bank Stock Option Plan
The Company maintains the 1988 Non-Qualified Stock Option Plan. As of
December 31, 1996, options to purchase [31,857] authorized shares of Common
Stock may be granted under the 1988 Non-Qualified Stock Option Plan. Options may
be granted to any officer of the Company, at a grant price not to be less than
85% of its fair market value at the grant date. Options are exercisable when
granted, with the term of the option determined by the Bank's Board of
Director's but not to exceed five years. As of December 31, 1996, no options
have been granted.
Incentive Stock Option Plan
The Company maintains the 1995 Incentive Stock Option Plan which
provides for options to purchase shares of Common Stock to be issued to key
employees of the Company, the Bank and any other subsidiaries which the Company
may acquire or incorporate in the future. Individual employees to whom options
will be granted under the Plan are selected by the Stock Option Committee of the
Board of Directors. The Stock Option Committee has the authority to determine
the terms and conditions of options granted under the Plan and the exercise
price therefor, which may be no less than the fair market value of the Common
Stock. No options were granted under this Plan in 1996.
<PAGE>
The following table sets forth information concerning the fiscal
year-end value of unexercised options held by the executive officers of the
Company named in the table above. No stock options were exercised by such
executive officers during 1996 [confirm]:
<TABLE>
<CAPTION>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL
YEAR AND FY-END OPTION/SAR VALUES
Value of Unexercised In-
Number of Securities the-Money Options/SARs
Underlying Unexercised at FY-End ($) (based on
Value Options/SARs at FY-End $18.00 per share)
Shares Acquired Realized (#) Exercisable/ Exercisable/
Name on Exercise (#) $ Unexercisable Unexercisable
---- --------------- - ------------- -------------
<S> <C> <C> <C> <C>
Donald L. Kovach 0 0 3,000 (E) $20,250 (E)
</TABLE>
Interest of Management and Others in Certain Transactions
The Bank has made in the past and, assuming continued satisfaction of
generally applicable credit standards, expects to continue to make loans to
directors, executive officers and their associates (i.e. corporations or
organizations for which they serve as officers or directors or in which they
have beneficial ownership interests of ten percent or more). These loans have
all been made in the ordinary course of the Bank's business on substantially the
same terms, including interest rates and collateral, as those prevailing at the
time for comparable transactions with other persons and do not involve more than
the normal risk of collectibility or present other unfavorable features.
The Bank paid $8,280 to Donald L. Kovach, Esq., Attorney at Law at
which Donald L. Kovach, Chairman of the Board and Chief Executive Officer, is a
member, for legal services rendered to the Bank during fiscal 1996. Said firm
renders legal services to the Bank on a continuing basis.
The Bank paid $12,866 during fiscal 1996 to Caristia, Kulsar & Wade,
P.A., Certified Public Accountants, at which William E. Kulsar, Secretary and a
Director of the Company and the Bank is a member, for accounting services
rendered to the Bank for IRS filing purposes and other accounting services
beyond those provided by the annually retained independent public accountants.
Caristia, Kulsar, & Wade, P.A. continues to render accounting services to the
Bank.
The Bank paid $18,325 to Irvin Ackerson for appraisal services rendered
to the Bank during fiscal 1996. Irvin Ackerson continues to render appraisal
services to the Bank.
<PAGE>
The Bank leases its Montague branch office from Montague Mini Mall,
Inc., for an aggregate annual rental of $18,000 for 1,200 square feet. Said
lease was initially entered into on April 1, 1982 and covered 500 square feet.
An additional 700 square feet was obtained via a modification of the lease
agreement dated April 1, 1987. The lease agreement expires March 31, 1997, but
is being renewed as of April 1, 1997. As renewed, the lease will terminate on
March 31, 2002, and provides for a monthly rent of $1,650. Mr. Joseph Zitone, a
Director of the Company, is a majority stockholder of Montague Mini Mall, Inc.
Mr. Zitone was not a Director of the Bank or the Company at the time of the
initial lease agreement but was a Director at the time lease was modified and
the additional square footage obtained. The Company considers the lease terms to
be comparable to those which exist with unaffiliated third parties.
Recommendation and Vote Required
Nominees will be elected by a plurality of the shares voting at the
Annual Meeting. THE BOARD UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR
ITS NOMINEES "FOR" THE BOARD OF DIRECTORS.
<PAGE>
PROPOSAL 2. APPROVAL OF AMENDMENT TO CERTIFICATE OF
INCORPORATION ADOPTING A CLASSIFIED BOARD OF DIRECTORS
Overview of the Amendment
The Board of Directors has unanimously approved and recommended that
the stockholders of the Company approve a proposed amendment to the Company's
Certificate of Incorporation (the "Amendment"). The Amendment is discussed in
detail below. In general, the Amendment provides for a classified board of
directors which is intended to serve as an anti-takeover provision as discussed
more fully below.
In forming the Bank, the members of the Board of Directors envisioned a
community-based institution which would serve the local communities surrounding
its branches, while also providing a return to its stockholders. The Board of
Directors has viewed with increasing concern the accelerating pace of
consolidation in the banking industry, especially within New Jersey, as local,
community-based institutions are purchased by multi-state bank holding
companies, frequently headquartered outside of New Jersey. The Board believes
that this consolidation and geographic dislocation have caused a reduction in
the commitment of these institutions to their local community. The Board has
also noted certain tactics employed by certain investors, including the
accumulation of substantial holdings of common stock and proxy fights designed
to force the Board of Directors to sell an institution, regardless of its long
term business plan and prospects or service to its communities. The Board
considers these tactics to be highly disruptive to a company, and considers the
aim of these tactics to require a Board of Directors to satisfy short term
investment objectives of certain investors while ignoring the long term
prospects of the institution and the communities served by the institution. The
Amendment is being submitted for stockholder approval in response to these
activities.
A classified Board of Directors will, by making it more time-consuming
for a substantial stockholder or stockholders to gain control of the Board or
the Company without consent of the incumbent Board, ensure some continuity of
management of the business and affairs of the Company and provide the Board with
sufficient time to review any proposal regarding a potential transaction to
ensure that it best serves all of the Company's shareholders, not just those
seeking a short term return.
The Amendment is not being recommended in response to any specific
effort of which the Company is aware to obtain control of the Company or require
the Company to undertake a particular transaction but rather is being
recommended to assure fair treatment of the Company's stockholders. The Board
has no present intention of soliciting a stockholder vote on any other proposals
relating to a possible takeover of the Company.
The Amendment is being presented to stockholders of the Company for
their approval. As more fully described below, the Board of Directors believes
that the Amendment will effectively reduce the possibility that a third party
could effect a sudden change in the majority control of the Board of Directors
without the support of the incumbent directors. However, the Amendment may have
significant effects on the ability of stockholders of the Company to effect
immediate changes in the composition of the Board of Directors and otherwise to
exercise their voting power to affect the composition of the Board. Accordingly,
stockholders are urged to read carefully the following portions of this section
of the Proxy Statement and Exhibit A hereto, which sets forth the full text of
the Amendment, before voting on the Amendment.
<PAGE>
Purpose and Effect of the Amendment
The Amendment is designed to make it more time-consuming to change
majority control of the Board without its consent, and thus to reduce the
vulnerability of the Company to an unsolicited takeover proposal or to an
unsolicited proposal for the restructuring or sale of all or part of the
Company. The Board believes that the Amendment will serve to encourage any
person intending to attempt such a takeover to negotiate with the Board, and
that the Board will therefore be better able to protect the interests of the
stockholders and other communities served by the Company.
The Board believes that if a third party acquired a significant or
controlling interest in the Common Stock, the purchaser's ability to remove the
entire Board without its consent would severely curtail the Company's ability to
negotiate effectively with such a purchaser. The threat of removal would deprive
the Board of the time and information necessary to evaluate any takeover
proposal, to study alterative proposals, including whether the Company should
remain as an independent community orientated institution and to help ensure
that the best price would be obtained in any transaction involving the Company
which might ultimately be undertaken. If the real purpose of the purchases was
to enable the purchaser to make or threaten a takeover bid to force the Company
to repurchase the purchaser's accumulated stock interest at a premium price, the
Company would face the risk that if it did not do so its business and management
would be disrupted, perhaps irreparably. Conversely, such a repurchase would
divert valuable corporate resources to the benefit of a single stockholder.
Takeovers or changes in the board of directors of a company which are
proposed and effected without prior consultation and negotiation with a company
are not necessarily detrimental to such company and its stockholders. However,
the Board feels that the benefits of seeking to protect the Company's ability to
negotiate with the proponent of an unfriendly or unsolicited proposal to effect
a partial takeover of, or restructure, the Company, through directors who have
been previously elected by the stockholders as a whole and are familiar with the
Company, outweigh the disadvantages of discouraging such proposals.
The Amendment will make it more difficult or will discourage a proxy
contest or the assumption of control by the holder of a substantial block of the
Common Stock or the removal of the incumbent Board, and could thus increase the
likelihood that incumbent directors will retain their positions. The
classification of the Board pursuant to the Amendment will result in an increase
in the number of annual meetings necessary to effect a change in a majority of
the Board of Directors, whether or not a change in control of the Company has
occurred.
The Amendment could have the effect of discouraging a third party from
attempting to obtain control of the Company, even though such an attempt might
be beneficial to the Company and its stockholders. In addition, the market
perception that the Company may not be a takeover candidate could affect the
market price of the Common Stock. Accordingly, stockholders could be deprived of
ceratin opportunities to sell their stock at a temporarily higher market price.
The Amendment may also discourage or make more difficult or expensive a proxy
contest or merger involving the Company or a tender offer, open market purchase
program or other purchases of Common Stock which a majority of stockholders may
deem to be in their best interests or which may give stockholders the
opportunity to realize a premium over the prevailing market price of their
Common Stock.
<PAGE>
Summary of the Amendment
The Company's Bylaws currently provide that directors are to be elected
at each annual meeting. Neither the Company's Bylaws nor its Certificate of
Incorporation specify the term of service of directors. New Jersey law provides
that a corporation may provide in its certificate of incorporation for the
classification of directors based upon the time for which each director shall
hold office. The terms of classified directors may not be shorter than one year
or longer than five years under New Jersey law.
The proposed amendment to Article III of the Certificate of
Incorporation provides that directors will be classified into three classes, as
nearly equal in number as possible, with the term of office of one class
expiring each year. One class of directors, consisting of Directors Ackerson and
Kulsar, would hold office initially for a term expiring at the 1998 annual
meeting; a second class of directors, consisting of Directors Scott and Zitone,
would hold office initially for a term expiring at the 1999 annual meeting; and
third class of directors, consisting of Directors Kovach and Marvil, would hold
office initially for a term expiring at the 2000 annual meeting. At each annual
meeting following this initial classification and election, the successors to
the class of directors whose terms expire at that meeting would be elected for a
term of office to expire at the third succeeding annual meeting after their
election and until their successors have been duly elected and qualified.
The proposed classified board amendment will significantly extend the
time required to effect a change in control of the Board of Directors and may
discourage hostile takeover bids for the Company. Currently, a change in control
of the Board of Directors can be made by stockholders holding a plurality of
votes cast at a single annual meeting. If the Company implements a classified
board of directors, it will take at least two annual meetings for a majority of
stockholders to make a change in control of the Board of Directors, because only
a minority of the directors will be elected at each meeting.
Recommendation and Vote Required
In order for the Amendment to be approved, the affirmative vote of a
majority of the shares of Common Stock entitled to be cast at the Annual Meeting
is required.
Unless marked to the contrary, the shares represented by the enclosed
proxy card, if executed and returned, will be voted "FOR" approval of the
Amendment.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR" THE
AMENDMENT.
<PAGE>
INDEPENDENT AUDITORS
The Company's independent auditors for the fiscal year ended December
31, 1996 were Arthur Andersen LLP and the Company's Board of Directors has
appointed Arthur Andersen LLP to continue as independent auditors for the Bank
and the Company for the year ending December 31, 1997. Arthur Andersen LLP has
advised the Company that one or more of its representatives will be present at
the Annual Meeting to make a statement if they so desire and to respond to
appropriate questions.
COMPLIANCE WITH SECTION 16(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers and directors, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange Commission.
Officers, directors and greater than ten percent stockholders are required by
regulation of the Securities and Exchange Commission to furnish the Company with
copies of all Section 16(a) forms they file.
Based solely on its review of the copies of such forms received by it,
or written representations from certain reporting persons that no Forms 5 were
required for those persons, the Company believes that, during the fiscal year
ended December 31, 1996, all filing requirements applicable to its officers,
directors and greater than ten percent beneficial owners were met.
STOCKHOLDER PROPOSALS
Proposals of stockholders to be included in the Company's 1998 proxy
material must be received by the Secretary of the Company no later than December
31, 1997.
OTHER MATTERS
The Board of Directors is not aware of any other matters which may come
before the Annual Meeting. However, in the event such other matters come before
the meeting, it is the intention of the persons named in the proxy to vote on
any such matters in accordance with the recommendation of the Board of
Directors.
<PAGE>
EXHIBIT A
AMENDMENT TO
CERTIFICATE OF INCORPORATION
<PAGE>
Article III of Sussex Bancorp's Certificate of Incorporation, as
amended, will read as follows:
ARTICLE III
Initial Board of Directors and Number of Directors
(a) The number of directors shall be governed by the Bylaws of the
Corporation. The number of directors constituting the initial Board of Directors
shall be six (6). The names and addresses of the initial Board of Directors are
as follows:
Name Address
---- -------
Donald L. Kovach c/o Sussex Bancorp
399 Route 23
P.O. Box 353
Franklin, NJ 07416
William E. Kulsar c/o Sussex Bancorp
399 Route 23
P.O. Box 353
Franklin, NJ 07416
Irvin Ackerson c/o Sussex Bancorp
399 Route 23
P.O. Box 353
Franklin, NJ 07416
Joel D. Marvil c/o Sussex Bancorp
399 Route 23
P.O. Box 353
Franklin, NJ 07416
Richard Scott c/o Sussex Bancorp
399 Route 23
P.O. Box 353
Franklin, NJ 07416
Joseph Zitone c/o Sussex Bancorp
399 Route 23
P.O. Box 353
Franklin, NJ 07416
(b) The Board of Directors shall be divided into three (3) classes, as
nearly identical in number as the then total number of directors constituting
the entire board permits, with the term of office of one class expiring each
year. The term of each class of directors initially shall be the term approved
for each such class by the stockholders approving this amendment to the
Corporation's certificate of incorporation. Any vacancies in the Board of
Directors for any reason, and any directorships resulting from any increase in
the number of directors, may be filled by the Board of Directors, acting by a
majority of the directors then in office, although less than a quorum, and any
directors so chosen shall hold office until the next election of the class for
which such directors shall have been chosen and until their successors shall be
elected and qualified. At each annual meeting of stockholders the successors to
the class of directors whose term shall then expire shall be elected to hold
office for a term expiring at the third succeeding annual meeting.
<PAGE>
SUSSEX BANCORP
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS
Solicited on Behalf of the Board of Directors
The undersigned hereby appoints the Board of Directors or any
survivor thereof to vote all of the shares of SUSSEX BANCORP standing in the
undersigned's name at the Annual Meeting of Shareholders of Sussex, to be held
at the Newton office of The Sussex County State Bank, 15 Trinity Street, Newton,
New Jersey, on Wednesday, April 23, 1997, at 3:30 P.M., and at any adjournment
thereof. The undersigned hereby revokes any and all proxies heretofore given
with respect to such meeting.
This proxy will be voted as specified below. If no choice is
specified, the proxy will be voted FOR (i) Management's Nominees to The Board of
Directors and (ii) approval of the proposed amendment to Sussex Bancorp's
Certificate of Incorporation.
The Board of Directors recommends a vote FOR approval of (i)
management's nominees to the Board of Directors and (ii) proposed amendment to
Sussex Bancorp's Certificate of Incorporation.
1. Election of the following six (6) nominees to
serve as directors of Sussex Bancorp: Irvin
Ackerson, Donald L. Kovach, William E. Kulsar,
Joel D. Marvil, Richard Scott and Joseph Zitone.
[ ] FOR ALL NOMINEES
TO WITHHOLD AUTHORITY FOR ANY OF THE ABOVE NAMED
NOMINEES, PRINT THE NOMINEE'S NAME(s) ON THE LINE
BELOW:
______________________________________________
[ ] WITHHOLD AUTHORITY FOR ALL NOMINEES
2. Approval of Proposal 2, the proposed amendment to
the Sussex Bancorp Certificate of Incorporation,
as more fully described in the accompanying Proxy
Statement.
[ ] FOR
[ ] AGAINST
[ ] ABSTAIN
<PAGE>
3. In their discretion, such other business as may
properly come before the meeting.
Dated: _________, 1997. ______________________________
Signature
------------------------------
Signature
(Please sign exactly as your name appears. When signing as an executor,
administrator, guardian, trustee or attorney, please give your title as such. If
signer is a corporation, please sign the full corporate name and then an
authorized officer should sign his name and print his name and title below his
signature. If the shares are held in joint name, all joint owners should sign.)
PLEASE DATE, SIGN AND RETURN
THIS PROXY IN THE ENCLOSED
RETURN ENVELOPE.
