================================================================================
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Schedule 14A Information
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the Appropriate Box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[ X ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
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PEAPACK-GLADSTONE FINANCIAL CORPORATION
(Name of Registrant as Specified in its Charter
and
Name of Person Filing Proxy Statement)
================================================================================
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
1) Title of each class of securities to which transaction
applies:
______________________________________________________
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 with 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.
Amount Previously Paid: _____________________________________
Form, Schedule or Registration Statement No.: _________________
Filing Party: ________________________________________________
Date Filed: __________________________________________________
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<PAGE>
PEAPACK-GLADSTONE FINANCIAL CORPORATION
158 Route 206 North
Gladstone, New Jersey 07934
------------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 28, 1998
---------------------------------
To Our Shareholders:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders (the
"Meeting") of Peapack-Gladstone Financial Corporation (the "Corporation") will
be held at the Corporation's Loan and Administration Building, 158 Route 206
North, Peapack-Gladstone, New Jersey, on April 28, 1998, at 2:00 p.m. local time
for the purpose of considering and voting upon the following matters:
1. Election of twelve directors to serve until the expiration of their
terms and thereafter until their successors shall have been duly elected and
qualified;
2. Approval of the Selection of the Corporation's Independent Public
Accountants for the year 1998;
3. Approval of the Corporation's 1998 Stock Option Plan;
4. Approval of the Corporation's 1998 Stock Option Plan for Outside
Directors;
5. Such other business as may properly come before the Meeting or any
adjournment thereof.
Only shareholders of record at the close of business on March 23, 1998,
are entitled to receive notice of, and to vote at, the Meeting.
You are urged to read carefully the attached Proxy Statement relating
to the Meeting.
Shareholders are cordially invited to attend the Meeting in person.
Whether or not you expect to do so, we urge you to date and sign the enclosed
proxy form and return it in the enclosed envelope as promptly as possible. You
may revoke your proxy by filing a later-dated proxy or a written revocation of
the proxy with the Secretary of the Corporation prior to the Meeting. If you
attend the Meeting, you may revoke your proxy by filing a later-dated proxy or
written revocation of the proxy with the Secretary of the Meeting prior to the
voting of such proxy.
By Order of the Board of Directors
CATHERINE A. McCATHARN,
Corporate Secretary
Gladstone, New Jersey
March 27, 1998
<PAGE>
PEAPACK-GLADSTONE FINANCIAL CORPORATION
158 Route 206 North
Gladstone, New Jersey 07934
-----------------------------------
PROXY STATEMENT
Dated March 27, 1998
------------------------------------
GENERAL PROXY STATEMENT INFORMATION
This Proxy Statement is furnished to the shareholders of
Peapack-Gladstone Financial Corporation (the "Corporation") in connection with
the solicitation by the Board of Directors (the "Board") of the Corporation of
proxies for use at the Annual Meeting of Shareholders (the "Meeting") to be held
at the Corporation's Loan and Administration Building, 158 Route 206 North,
Peapack-Gladstone, New Jersey on April 28, 1998 at 2:00 p.m. local time. This
Proxy Statement is first being mailed to shareholders on approximately March 27,
1998.
VOTING INFORMATION
Outstanding Securities and Voting Rights
The record date for determining shareholders entitled to notice of, and
to vote at, the Meeting is March 23, 1998 (the "Record Date"). Only shareholders
of record as of the Record Date will be entitled to notice of, and to vote at,
the Meeting.
On the Record Date, 2,327,898 shares of the Corporation's Common Stock,
no par value, were outstanding and eligible to be voted at the Meeting. Each
share of the Corporation's Common Stock is entitled to one vote.
At the Meeting, inspectors of election will tabulate both ballots cast
by shareholders present and voting in person, and votes cast by proxy. Under
applicable state law and the Corporation's certificate of incorporation and
by-laws, abstentions and broker non-votes are counted for purpose of
establishing a quorum but otherwise do not count. Generally, the approval of a
specified percentage of shares voted at a shareholders meeting is required to
approve a proposal and thus abstentions and broker non-votes have no effect on
the outcome of a vote.
All shares represented by valid proxies received pursuant to this
solicitation will be voted "FOR" the election of the twelve nominees for
director who are named in this Proxy Statement, "FOR" the approval of the
selection of the Corporation's independent public accountant for the year 1998,
"FOR" the approval of the 1998 Stock Option Plan (the "1998 Option Plan") and
"FOR" the approval of the 1998 Stock Option Plan for Outside Directors (the
"1998 Director Plan"), unless the shareholder specifies a different choice by
means of the proxy or revokes the proxy prior to the time it is exercised.
Should any other matter properly come before the Meeting, the persons named as
proxies will vote upon such matters according to their discretion unless the
shareholder otherwise specifies in the proxy.
The election of directors requires the affirmative vote of a plurality
of the Corporation's common stock voted at the Meeting, whether voted in person
or by proxy. The approval of (i) the selection of the Corporation's Independent
Public Accountants for the year 1998, (ii) the Corporation's 1998 Option Plan,
(iii) the Corporation's 1998 Director Plan and (iv) all other matters to
properly come before the Meeting will require the affirmative vote of a majority
of Corporation's Common Stock voted at the Meeting, whether in person or by
proxy.
<PAGE>
The Corporation's Board unanimously recommends a vote "FOR"
management's nominees for director, "FOR" the approval of the selection of the
Corporation's Independent Public Accountants for the Year 1998, "FOR" the
approval of the 1998 Option Plan and "FOR" the approval of the 1998 Director
Plan.
Revocability of Proxy
Any shareholder giving a proxy has the right to attend and to vote at
the Meeting in person. A proxy may be revoked prior to the Meeting by filing a
later-dated proxy or a written revocation if it is sent to the Secretary of the
Corporation, Catherine A. McCatharn, at 158 Route 206 North, Gladstone New
Jersey, 07934, and is received by the Corporation in advance of the Meeting. A
proxy may be revoked at the Meeting by filing a later-dated proxy or a written
revocation with the Secretary of the Meeting prior to the voting of such proxy.
Solicitation of Proxies
This proxy solicitation is being made by the Board of the Corporation
and the costs of the solicitation will be borne by the Corporation. In addition
to the use of the mails, proxies may be solicited personally or by telephone or
facsimile transmission by directors, officers and employees of the Corporation
and its subsidiaries who will not be specially compensated for such solicitation
activities. The Corporation will also make arrangements with brokers, dealers,
nominees, custodians and fiduciaries to forward proxy soliciting materials to
the beneficial owners of shares held of record by such persons, and the
Corporation may reimburse them for their reasonable expenses incurred in
forwarding the materials.
PROPOSAL 1 - ELECTION OF DIRECTORS
The Corporation's certificate of incorporation and by-laws authorize a
minimum of 5 and a maximum of 25 directors, but leave the exact number to be
fixed by resolution of the Corporation's Board of Directors. The Board is
presently comprised of 12 members. Directors are elected annually by the
shareholders for one-year terms. The Corporation's Nominating Committee has
nominated all twelve members of the current Board whose terms expire in 1998,
for reelection to serve for one-year terms expiring in 1999 and until their
successors shall have been duly elected and qualified.
Shareholders will elect twelve directors at the Meeting. Unless a
shareholder either indicates otherwise on the proxy, the proxy will be voted for
the persons named in the table below to serve until the expiration of their
terms, and thereafter until their successors have been duly elected and
qualified.
The table below sets forth the names and ages of the nominees for
election to director, the other positions and offices presently held by each
person with the Corporation, the period during which each person has served on
the Board of the Corporation (or, for the period prior to December 12, 1997, the
Board of Directors of Peapack-Gladstone Bank (the "Bank")), the expiration of
their respective terms, and the principal occupations and employment of each
such person during the past five years.
<PAGE>
<TABLE>
<CAPTION>
NOMINEES FOR ELECTION AS DIRECTORS
Director Principal Occupation or
Name Age Since Expiration Employment for Past Five Years
=========================== =========== ============= ============== ==================================================
<S> <C> <C> <C> <C>
Pamela Hill 60 1991 1999 President of Ferris Corp. since 1995; previously
Vice President of Ferris Corp.
T. Leonard Hill 86 1944 1999 Chairman of the Board of the Corporation and the
Bank since 1989; Chairman of Ferris Corp.
Frank A. Kissel 47 1989 1999 President and CEO of the Corporation and the
Bank since 1989.
John D. Kissel 45 1987 1999 Manager of Turpin Real Estate, Inc. since 1991.
James R. Lamb 55 1993 1999 Principal of James R. Lamb, P.C., Attorney at
Law since 1967.
George R. Layton 70 1966 1999 Director of Layton Funeral Home since 1953.
Edward A. Merton 54 1981 1999 President of Merton Excavating and Paving Co.
since 1961.
F. Duffield Meyercord 51 1991 1999 Managing Director, Meyercord Advisors, Inc.,
since 1985; Director of Programmer's Paradise,
Inc. since 1991.
John R. Mulcahy 59 1981 1999 Retired since 1994; previously President of
Mulcahy Realty and Construction.
Philip W. Smith III 42 1995 1999 President. Phillary Management, Inc. since
1994; previously Commercial Real Estate Broker,
C.B. Commercial Group, Inc.
Jack D. Stine 74 1976 1999 Chairman of Bridgewater Community Services since
1983.
William Turnbull 90 1958 1999 Retired since 1987.
=========================== =========== ============= ============== ==================================================
</TABLE>
<PAGE>
DIRECTORS' COMMITTEES - DIRECTORS' MEETINGS
Subsequent to the establishment of the Corporation as a registered bank
holding company and parent entity of the Bank on December 12, 1997, the
Corporation's Board held one meeting. During 1997, the Bank's Board of Directors
held twelve meetings.
The Corporation maintains a standing Executive/Nominating Committee, Audit
Committee and Compensation Committee (which were committees of the Bank's Board
of Directors prior to December 12, 1997). These Committees are described below:
Executive/Nominating Committee. The principal function of the Executive
Committee is to exercise the authority of the Corporation's Board in the
management and affairs of the Corporation, as required, between meetings of the
Board. The Executive Committee also serves as the Corporation's Nominating
Committee and as such makes recommendations with respect to nominees for
election to the Corporation's Board and nominees to fill vacancies in Board
membership between meetings. Shareholders may make recommendations to the
Committee, which has no established criteria. The members are Messrs. Frank A.
Kissel, Layton, Stine and Turnbull. There were eight (8) meetings of the
Executive Committee in 1997.
Audit Committee. The Audit Committee (which also serves as the audit
committee for the Bank) supervises internal audits of the Corporation and the
Bank, reviews reports of internal and external auditors engaged by the
Corporation and the Bank, makes recommendations for changes in relevant systems
and policies, and recommends the appointment of outside auditors. The Audit
department of the Bank reports directly to the Audit Committee. The members are
Ms. Pamela Hill and Messrs. John D. Kissel, Stine and Turnbull. There were four
(4) meeting of the Audit Committee in 1997.
Compensation Committee. The Compensation Committee is responsible for
overseeing the executive compensation practices at the Corporation and the Bank
and reviewing and evaluating the compensation of other officers and employees of
the Corporation and the Bank. The members are Messrs. Frank A. Kissel, T.
Leonard Hill, Meyercord, Merton and Stine. There were three (3) meetings of the
Compensation Committee to establish compensation levels for 1997.
During 1997, all directors of the Corporation (and the Bank prior to
December 12, 1997) attended no fewer than 75% of the total number of meetings of
the Corporation's (or the Bank's) Board and meetings of committees on which such
director served, except for John R. Mulcahy who attended 69% of such meetings.
DIRECTOR'S COMPENSATION
Directors of the Corporation were not compensated for the Corporation's
Board meeting they attended in 1997. Such Directors, in their capacity as
directors of the Bank, were compensated $400 for each regular Bank Board meeting
they attended, and $300 for each committee meeting they attended. Frank A.
Kissel, as a full-time employee, was not compensated for services rendered as a
director. A total of $103,000 in directors' fees was paid in 1997. The
Corporation intends to compensate its directors $400 for each regular Board
meeting they attend and $300 for each committee meeting they attend during 1998.
In April 1995, the shareholders of the Bank approved a non-qualified stock
option plan for non-employee directors of the Bank. The 1995 Stock Option Plan
for Outside Directors (the "1995 Directors Plan") provides for the award of
options to each outside director on a scheduled basis depending upon when an
outside director first is elected to the Board of the Bank. That schedule is:
1995 Annual Meeting or before - 5,250 shares; after the 1995 Annual Meeting
through the 1996 Annual Meeting - 4,200 shares; after the 1996 Annual Meeting
through the 1997 Annual Meeting - 3,150 shares; after the 1997 Annual Meeting
through the 1998 Annual Meeting - 2,100 shares; after the 1998 Annual Meeting
through the 1999 Annual Meeting - 1,050 shares. The Banks directors were awarded
the following stock options in 1995: Pamela Hill-5,250 shares; John D.
Kissel-5,250 shares; James R. Lamb-5,250 shares; George R. Layton-5,250 shares;
Edward A. Merton-5,250 shares; F. Duffield Meyercord-5,250 shares; John R.
Mulcahy-5,250 shares; Philip W. Smith III-4,200 shares; Jack D. Stine-5,250
shares; William Turnbull-5,250 shares. No stock options were awarded to
directors in 1997 or 1996. All options awarded directors were adjusted for the
five percent (5%) stock dividend paid by the Bank in November, 1996 and for the
2-for-1 stock split of the Corporation's Common Stock in December, 1997. The
exercise price for the option shares may not be less than the fair market value
of the common stock on the date of grant of the option. The options granted
under these plans are, in general, exercisable not earlier than one year after
the date of grant, at a price equal to the fair market value of the common stock
on the date of grant, and expire not more than ten years after the date of
grant. The stock options vest during a period of up to five years after the date
of grant. Of the stock options granted to directors in 1995, 20% vested on April
25, 1996 and 20% vested on April 25, 1997. Of the remaining options 20% will
vest on April 25, 1998, 20% on April 25, 1999, and 20% on April 25, 2000.
<PAGE>
STOCK OWNERSHIP OF MANAGEMENT AND PRINCIPAL SHAREHOLDERS
The following table sets forth as of February 28, 1998 the number of shares of
the Corporation's Common Stock that is beneficially owned by each of the
directors/nominees, the executive officers of the Corporation for whom
individual information is required to be set forth in this Proxy Statement (the
"Named Executives Officers") pursuant to the regulations of the Securities and
Exchange Commission (the "SEC"), and all directors and executive officers as a
group. Other than as set forth below, the Corporation knows of no person or
group which beneficially owns 5% or more of the Corporation's Common Stock.
<TABLE>
<CAPTION>
Number of Shares
Name of Beneficial Owner Beneficially Owned (1) Percent of Class (2)
====================================================== ===================================== =======================
<S> <C> <C>
Pamela Hill(3) 18,488(4) *
T. Leonard Hill(3) 51,312(5) 2.20%
Frank A. Kissel(6) 18,136(7) *
John D. Kissel(6) 12,640(8) *
James R. Lamb 4,620(9) *
George R. Layton 26,362(10) 1.12%
Edward A. Merton 5,118(11) *
F. Duffield Meyercord 3,486(12) *
John R. Mulcahy 5,910(13) *
Phillip W. Smith III 4,668(14) *
Jack D. Stine 6,366(15) *
William Turnbull 49,092(16) 2.11%
All directors and executive officers 212,977(17) 9.04%
as a group (15 persons)
====================================================== ===================================== =======================
</TABLE>
- ------------------------------------------
NOTES:
* Less than one percent
(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 or
beneficially by the named person.
(2) In calculating the percentage of the class beneficially owned by a specific
person or group, 2,329,255 shares of common stock which are outstanding as
of February 28, 1998 and common stock subject to options held by the
specific person or group exercisable or exercisable within 60 days are
deemed outstanding. Shares subject to options held by the specific person
or group exercisable or exercisable within 60 days are not deemed
outstanding for the purpose of computing the percentage of each other
person or group.
(3) T. Leonard Hill is the father of Pamela Hill
(4) This total includes 2,100 shares purchasable pursuant to options
exercisable within 60 days.
(5) This total includes 21,000 shares owned by the estate of Mr. Hill's wife
and 2,520 shares purchasable pursuant to options exercisable within 60
days.
(6) Frank A. Kissel and John D. Kissel are brothers
(7) This total includes 944 shares owned by Mr. Frank A. Kissel's wife, 1,400
shares owned by Mr. Kissel's children, 1,220 shares allocated to Mr. Kissel
under the Corporation's Profit Sharing Plan and 2,520 shares purchasable
pursuant to options exercisable within 60 days.
(8) This total includes 524 shares owned by Mr. John D. Kissel's wife, 1,806
shares owned by Mr. Kissel's children and 2,100 shares purchasable pursuant
to options exercisable within 60 days.
(9) This total includes 1,050 shares owned by Mr. Lamb's wife, 630 shares owned
by Mr. Lamb's children and 2,100 shares purchasable pursuant to options
exercisable within 60 days.
(10) This total includes 2,100 shares purchasable pursuant to options
exercisable within 60 days.
(11) This total includes 2,100 shares purchasable pursuant to options
exercisable within 60 days.
(12) This total includes 2,100 shares purchasable pursuant to options
exercisable within 60 days.
(13) This total includes 210 shares owned by Mr. Mulcahy's wife and 2,100 shares
purchasable pursuant to options exercisable within 60 days.
(14) This total includes 420 shares owned by Mr. Smith's wife, 60 shares owned
by Mr. Smith's children and 1,680 shares purchasable pursuant to options
exercisable within 60 days.
(15) This total includes 1,050 shares purchasable pursuant to options
exercisable within 60 days.
(16) This total includes 16,668 shares owned by Mr. Turnbull's wife and 2,100
shares purchasable pursuant to options exercisable within 60 days.
(17) This total includes 6,779 shares beneficially owned by 3 executive officers
who are not directors or Named Executive Officers which total includes
3,108 shares purchasable pursuant to options exercisable within 60 days.
<PAGE>
EXECUTIVE COMPENSATION
Executive Officers' Compensation
The following table sets forth compensation with respect to the years-ended
December 31, 1997, 1996 and 1995 for the services rendered in all capacities to
the Corporation by the Chief Executive Officer, who was the only Named Executive
Officer.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long Term Compensation
---------------------------------
Awards
---------------------------------
Annual Compensation
(g)
(a) (f) Securities (i)
Name and (b) (c) (d) Restricted Underlying All Other
Principal Position Year Salary ($) Bonus ($) Stock Award(s) Options/SARs(#) Compensation ($)
($)
- ------------------------ ------------ ------------- ------------ ---------------- ---------------- ------------------
<S> <C> <C> <C> <C> <C> <C>
Frank A. Kissel, 1997 $197,495 $40,000 -- 6,000 $10,784(1)
President and CEO 1996 $185,000 $13,000 -- -- $ 5,646(1)
of the Corporation 1995 $169,615 $17,000 -- 6,300 $ 5,896(1)
and the Bank
</TABLE>
- -------------------------
NOTES:
(1) Consists of contributions made on behalf of Mr. Frank A. Kissel to the
Bank's 401(k) and Savings Plan and use of an automobile provided to Mr.
Kissel by the Bank.
Option Grants in 1997
The following table shows the options granted to the Named Executive
Officer in 1997, and their potential value at the end of the option term,
assuming certain levels of appreciation of the Corporation's Common Stock. While
the SEC mandated column headings refer to stock appreciation rights ("SARs"),
the Corporation has not awarded any SARs to its executive officers.
<TABLE>
<CAPTION>
OPTION/SAR GRANTS IN LAST FISCAL YEAR (1)
Potential Realizable
Value At Assumed
Annual Rates of Stock
Price Appreciation
Individual Grants for Option Term (1)
----------------------------------------------- ---------------------------
Number of Percent of
Securities Total Options/
Underlying SARs Granted Exercise or
Options/ to Employees Base Price Expiration
SARs Granted in Fiscal Year ($/Sh) Date 10%($)
Name (#) 5%($)
- ------------------------- -------------- ---------------- -------------- -------------- ------------ ------------
(a) (b) (c) (d) (e) (f) (g)
<S> <C> <C> <C> <C> <C> <C>
Frank A. Kissel 6,000 (2) 15% $36.50 8/14/2007 109,500 219,000
</TABLE>
- -------------------------
NOTES:
(1) The dollar amounts under these columns are the result of calculations at
the 5% and the 10% rates set by the SEC and therefore are not intended to
forecast possible future appreciation, if any, of the Corporation's common
stock price.
(2) These options become exercisable at the rate of 20% per year beginning
August 14, 1998.
Aggregated Option Exercises in 1997 and Year-End Option Value
The following table shows options exercised during 1997, and the value
of unexercised options held at year-end 1997, by the Named Executive Officer.
The Corporation does not use SARs as compensation.
<TABLE>
<CAPTION>
AGGREGATED OPTIONS/SAR EXERCISES IN THE
LAST FISCAL YEAR AND FY-END OPTION/SAR VALUES
Number of Securities Value of Unexercised
Underlying In-the-Money
Unexercised Options/SARs At
Options/SARS at Fiscal Year-End
Fiscal Year-End ($)
---------------------- -----------------------
(#)
Shares Acquired On Exercisable/ Exercisable/
Name Exercise Unexercisable Unexercisable
(#) Value Realized ($)
- ------------------------ ------------------- -------------------- ----------------------- -----------------------
(a) (b) (c) (d) (e)
<S> <C> <C> <C> <C>
Frank A. Kissel -- -- 2,520/9,780 56,700/109,050
</TABLE>
Savings and Profit Sharing Plans
The Corporation has established a qualified defined contribution plan under
Section 401(k) (the "401(k) Plan") of the Internal Revenue Code of 1986, as
amended (the "Code"), covering substantially all salaried employees over the age
of twenty-one (21) with at least twelve (12) months' service and whose
participation is not prohibited by the 401(k) Plan. Under the savings portion of
the 401(k) Plan, employees may contribute up to fifteen percent (15%) of their
pay to their elective account via payroll withholding. The Corporation adds a
matching contribution equal to fifty percent (50%) up to a maximum of $250 of
the employee contribution. In addition, the Board may elect to make a
discretionary contribution to the profit sharing part of the 401(k) Plan. The
profit sharing portion is non-contributory and funds are invested in
Peapack-Gladstone Financial Corporation Common Stock.
Pension Plan
The Corporation sponsors a non-contributory defined benefit pension plan
that covers substantially all of the Corporation's salaried employees. The
benefits are based on an employee's compensation, age at retirement and years of
service. It is the policy of the Corporation to fund not less than the minimum
funding amount required by the Employee Retirement Income Security Act.
The following table sets forth the estimated annual benefits that an
eligible employee would receive under the Corporation's qualified defined
benefit pension plan, assuming retirement age at 65 in 1997 and a straight life
annuity benefit, for the remuneration levels and years of service shown.
<TABLE>
<CAPTION>
Years of Credited Service
Remuneration 10 15 20 25 30
------------------------------------- ------------ ------------ ------------ --------- ---------
<S> <C> <C> <C> <C> <C>
$ 50,000 $12,452 $18,460 $24,468 $30,476 $31,528
100,000 27,267 40,975 54,683 68,391 69,878
150,000 42,082 63,490 84,898 106,306 108,228
200,000 44,153 73,261 102,369 117,000 117,000
</TABLE>
Frank A. Kissel has approximately nine (9) years of credited service under
the Pension Plan as of December 31, 1997, and, at age 65, would have 27 years of
credited service. In 1997, Mr. Frank A. Kissel received $197,495 in compensation
for purposes of determining his retirement benefits under the Pension Plan.
Employment, Termination of Employment and Change of Control Arrangements
The Corporation and the Bank entered into a Change-in-Control Agreement
with Frank A. Kissel (and other officers) as of January 1, 1998 which provides
for termination benefits to Mr. Kissel in the event of a change in control of
the Corporation (as defined in the Agreement). Pursuant to the agreement, under
certain circumstances, the Corporation and the Bank would be required to pay
aggregate amounts equal to three times the highest salary and bonuses paid to
Mr. Kissel per year during any calendar year during the three years prior to the
change in control plus continue certain health benefits. The agreement has a
cut-back provision such that the payment would be reduced to avoid exceeding
amounts set forth in Section 280G of the Internal Revenue Code. That provision
limits payments generally to three times the last five year average W-2
compensation. Assuming such a change of control occurred as of February 28,
1998, Mr. Kissel could receive approximately $712,485 under the Corporation's
agreement with him, which may be reduced by the cut-back provision.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange
Act") requires that the Corporation's executive officers, directors and persons
who own more than ten percent of a registered class of the Corporation's common
stock, file reports of ownership and changes in ownership with the SEC.
Due to an oversight, all of the directors and executive officers of the
Corporation filed their annual beneficial ownership report on Form 5 on an
untimely basis. The directors and executive officers of the Corporation filed
their respective Form 5 for the year-ended December 31, 1997 on March 16, 1998.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Board of Directors established a Compensation Committee which has
been charged with overseeing executive compensation practices at the
Corporation. Members of the Compensation Committee are F. Duffield Meyercord,
Edward A. Merton, Jack D. Stine, T. Leonard Hill and Frank A. Kissel. Decisions
on compensation of executive officers have been made by the full Board of
Directors based upon the recommendations of the Compensation Committee. T.
Leonard Hill, Chairman of the Board, and Frank A. Kissel, President & Chief
Executive Officer, have no input regarding their own compensation which is
determined by the remaining Directors.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Directors and officers of the Corporation and their associates were
customers of and had transactions with the Corporation during the year ended
December 31, 1997, and it is expected that such persons will continue to have
such transactions in the future. All deposit accounts, loans, and commitments
comprising such transactions were made in the ordinary course of business of the
Bank on substantially the same terms, including interest rates and collateral,
as those prevailing at the time for comparable transactions with other persons,
and, in the opinion of management of the Corporation, did not involve more than
normal risks of collectibility or present other unfavorable features.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The following report was prepared by the compensation Committee of the
Corporation regarding executive compensation policy and its relation to the
Corporation's performance.
Compensation Review Process
The Compensation Committee of the Board of Directors is responsible for
establishing and overseeing policies governing annual and long-term compensation
programs for the officer named in the compensation tables shown above and other
executive officers of the Corporation.
In establishing compensation for executive officers, the Committee
considers many factors including, but not limited to, Corporation performance,
individual performance and peer group compensation practices. In considering
Corporation performance, the Compensation Committee reviews the actual
performance of the Corporation in light of its annual budget, which includes
expense items, deposit levels, loan growth, fee income and trust department
management. Annual performance reviews of each officer together with salary
studies prepared by the New Jersey Community Bankers Association, KPMG Peat
Marwick LLP, and Ben S. Cole Financial Incorporated are some of the sources of
compensation information which are utilized in determining executive
compensation. Base salaries approximate the average base salaries paid by
similar financial institutions for similar positions.
During 1997, Mr. Frank A. Kissel served as President and Chief Executive
Officer of the Bank and President and Chief Executive Officer of the
Corporation. Mr. Kissel's base salary for 1997 was set by the Board based on his
performance in executing his responsibilities in those positions in 1996 and the
performance anticipated from him in 1997 and future years. The Board also
considered the objectives set by the Committee for 1997, the overall performance
of the Corporation and Mr. Kissel's ability to develop and motivate employees to
meet the Corporation's short and long-term objectives. Mr. Kissel's 1997 bonus
was based on the achievement of projected budget, the completion of specified
corporate projects for 1997 within time and within budget results, the
achievement of specified minimum financial ratios and the achievement of
specified goals with respect to the Bank's financial performance and growth.
With respect to 1997 compensation for senior officers, the Compensation
Committee based its recommendations, and the full Board based its actions, on
the duties and responsibilities of the officer in question, the performance of
the Bank and of the particular officer in 1996, and the performance anticipated
from the officer in 1997 and future years. Bonuses for each senior officer were
set based on goals set for the senior officer and for the Bank as a whole. The
Chief Executive Officer set goals for each senior officer.
Another compensation tool which the Board uses to relate executive
compensation to the performance of the Corporation and the Bank as a whole is
the Corporation's 1995 Stock Option Plan. Recommendations for awards under this
plan are made to the full Board by the Compensation Committee. T. Leonard Hill
and Frank A. Kissel have no input regarding their own compensation which is
determined by the remaining directors.
Detailed information relating to the Chief Executive Officer is shown in
the compensation tables above.
F. DUFFIELD MEYERCORD
EDWARD A. MERTON
JACK D. STINE
T. LEONARD HILL
FRANK A. KISSEL
PERFORMANCE GRAPH
The following graph compares the cumulative total return on a hypothetical $100
investment made at the close of business December 31, 1992 in: (a) the
Corporation's Common Stock, (b) the CRSP Index for the NASDAQ Stock Market (U.S.
Companies) and (c) the Keefe, Bruyette & Woods ("KBW") Eastern Region Index of
banking organizations. The graph is calculated assuming that all dividends are
reinvested during the relevant periods. The graph shows how a $100 investment
would increase or decrease in value over time, based on dividends and increases
or decreases in the market price of the stock and each of the indexes. (The
Corporation became a public reporting company on December 31, 1993.)
[GRAPHIC OMITTED]
<TABLE>
<CAPTION>
Index
Symbol Description 12/31/92 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97
- ----------- ----------------------------- ------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Diamond Peapack-Gladstone $100.00 $110.30 $115.40 $152.40 $189.30 $272.70
Financial Corporation
Square CRSP Index for NASDAQ $100.00 $114.80 $112.20 $158.70 $195.20 $239.50
(U.S. Companies)
Triangle KBW Eastern Region $100.00 $104.30 $ 92.60 $157.20 $215.60 $344.90
</TABLE>
RECOMMENDATION AND VOTE REQUIRED ON PROPOSAL 1
The affirmative vote of a plurality of the Corporation's Common Stock voted
at the Meeting is required to elect directors. THE BOARD UNANIMOUSLY RECOMMENDS
A VOTE "FOR" MANAGEMENT'S NOMINEES FOR DIRECTOR INCLUDED IN PROPOSAL 1.
<PAGE>
PROPOSAL 2 - APPROVAL OF THE SELECTION OF THE CORPORATION'S
INDEPENDENT PUBLIC ACCOUNTANTS FOR THE YEAR 1998
General
The Board of Directors has appointed KPMG Peat Marwick LLP ("Peat Marwick")
as the Corporation's independent public accountants for the year ending December
31, 1998. Peat Marwick served as the Corporation's independent accountants for
the year ended December 31, 1997. Representatives of Peat Marwick will be
present at the Meeting, will have the opportunity to make a statement if they
desire to do so, and will be available to respond to appropriate questions.
Proposal
The Board of Directors will present to the Meeting a proposal that the
selection of Peat Marwick be approved and ratified.
Recommendation and Vote Required for Approval of Proposal 2
The affirmative vote of a majority of the Corporation's common stock voted
at the Meeting, whether in person or by proxy, is required to approve the
selection of Peat Marwick as the Corporation's independent public accountants
for the year 1998. THE BOARD UNANIMOUSLY RECOMMENDS A VOTE "FOR" PROPOSAL 2.
PROPOSAL 3 - APPROVAL OF THE 1998 STOCK OPTION PLAN
The Board has approved for submission to the Corporation's shareholders the
Corporation's 1998 Stock Option Plan (the "1998 Option Plan") set forth as
Exhibit A to this Proxy Statement. The full text of the 1998 Option Plan is
attached to this Proxy Statement as Exhibit A and the following description of
the Plan is qualified in its entirety by reference to Exhibit A. The purposes of
the 1998 Option Plan is to advance the interests of the Corporation and its
shareholders by providing those key employees of the Corporation, upon whose
judgment, initiative and efforts the successful conduct of the business of the
Corporation largely depends, with additional incentive to perform in superior
manner and to attract people of experience and ability to the service of the
Corporation.
Types of Options
All options granted under the 1998 Option Plan will be options for shares
of the Corporation's Common Stock. The options may be either "Incentive Options"
- - options intended to constitute "incentive stock options" within the meaning of
Section 422 of the Code or "Non-qualified Options" - options which, when granted
or due to subsequent disqualification, do not qualify as incentive stock options
within the meaning of Section 422 of the Code.
Administration
The 1998 Option Plan will be administered by a committee designated by the
Board (the "Committee") from among the members of the Corporation's Compensation
Committee who are "outside directors," within the meaning of Section 162(m) of
the Code, and who are "disinterested directors," within the meaning of Rule
16b-3 under the Exchange Act. The Committee will identify each optionee (a
"Participant") and will determine the number of shares subject to each option,
the date of grant of each option and the terms and conditions governing the
options. The Committee will be charged with the responsibility of interpreting
the 1998 Option Plan and making all administrative determinations thereunder.
Eligibility
Officers and other employees of the Corporation shall be eligible to
receive Incentive Stock Options and Non-qualified Stock Options under the 1998
Option Plan. Directors who are not employees or officers of the Corporation will
not be eligible to receive options under the 1998 Option Plan.
Terms and Conditions of Stock Options
Term; 10% Shareholders
All options granted under the 1998 Option Plan will have terms of ten years
or less. The 1998 Option Plan provides that any options which are intended to be
Incentive Options and are granted to a Participant who owns more than 10% of the
Corporation's common stock (a "10% Shareholder") must have terms of five years
or less.
Limitations on Grant and Exercise
The 1998 Option Plan provides that, with respect to options granted which
are intended to be Incentive Options, the aggregate fair market value
(determined at the time the option is granted) of stock exercisable for the
first time by an employee during any calendar year may not exceed $100,000. For
example, the Committee could grant an Incentive Option covering $200,000 of
common stock to a Participant only if the Committee deferred the exercise of one
half of the options beyond the first year in which the other half of the options
first become exercisable.
Exercise Price
The 1998 Option Plan provides that options are to be granted at an exercise
price equal to or greater than the Fair Market Value (on the date of grant) of
the stock purchasable thereunder. Incentive Options granted to 10% Shareholders
must bear an exercise price of not less than 110% of the fair market value of
the stock purchasable thereunder on the date of grant. The 1998 Option Plan
defines "Fair Market Value" as the average of the high and low prices of known
trades of the Corporation's Common Stock on the relevant date, or if the Common
Stock was not traded on such date, on the next preceding day on which the Common
Stock was traded.
The 1998 Option Plan provides that the purchase price for shares acquired
pursuant to the exercise of any option is payable in full at the time of
exercise. The exercise price may be paid, in whole or in part, through the
surrender of shares of Common Stock of the Corporation at the Fair Market Value
of such shares on the date of surrender.
Exercise Period
The 1998 Option Plan provides that if a Participant's employment is
terminated for any reason other than Disability, Normal Retirement,
Change-in-Control, Termination for Cause (as such terms are defined in the 1998
Option Plan), or death, the Participant's options shall be exercisable only as
to those shares which were immediately purchasable by the Participant at the
date of termination and only for a period of three months following the
termination. In the event of a Termination for Cause (as such term is defined in
the 1998 Option Plan), all rights under the Participant's options shall expire
upon the termination. In the event of death or Disability all options granted
under the 1998 Option Plan, whether or not exercisable at such time, shall be
exercisable by the Participant, or the Participant's legal representatives or
beneficiaries for three years following the date of the Participant's death or
cessation of employment due to Disability. Upon termination of the Participant's
service due to a Change-in-Control or Normal Retirement: (i) all Non-qualified
Stock Options granted under the 1998 Option Plan, whether or not exercisable at
such time, shall be exercisable by the Participant, his legal representatives or
successors in interest for three years or such longer period as determined by
the Committee following the date of the termination; and (ii) all Incentive
Stock Options granted under the 1998 Option Plan, whether or not exercisable at
such time, shall be exercisable for a period of three months following the date
of the Participant's cessation of employment. In no event shall the exercise
period extend beyond the expiration of the option term.
Change in Control Provisions
Upon a "Change in Control" (as defined in the 1998 Option Plan) all
outstanding options under the Plan become immediately and fully exercisable.
The 1998 Option Plan defines Change in Control to mean any of the following
events: (1) any "person" (as the term is used in Sections 13(d) and 14(d) of the
Exchange Act) who is not now presently but becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Corporation representing 25% or more of the Corporation's
outstanding securities except for any securities purchased by any tax-qualified
employee benefit plan of the Corporation; or (2) individuals who constitute the
Board on the date hereof (the "Incumbent Board") cease for any reason to
constitute at least a majority thereof, provided that any person becoming a
director subsequent to the date hereof whose election was approved by a vote of
at least three-quarters of the directors comprising the Incumbent Board, or
whose nomination for election by the Corporation's stockholders was approved by
the same Nominating Committee serving under an Incumbent Board, shall be, for
purposes of this clause (2), considered as though he were a member of the
Incumbent Board; or (3) filing is made for regulatory approval to implement a
plan of reorganization, merger, consolidation, sale of all or substantially all
the assets of the Corporation or similar transaction in which the Corporation is
not the resulting entity or such plan, merger consolidation, sale or similar
transaction occurs; or (4) a proxy statement soliciting proxies from
shareholders of the Corporation, by someone other than the current management of
the Corporation, seeking stockholder approval of a plan of reorganization,
merger or consolidation of the Corporation or similar transaction with one or
more corporations as a result of which the outstanding shares of the class of
securities then subject to the plan or transaction are exchanged for or
converted into cash or property or securities not issued by the Corporation
shall be distributed; or (5) a tender offer is made for 25% or more of the
voting securities of the Corporation.
Shares Subject to the 1998 Option Plan
If adopted, the 1998 Option Plan will authorize the Corporation to issue up
to 65,000 shares of common stock pursuant to options and provides the maximum
number of shares with respect to which options may be granted to any one person
shall not exceed 6,500. In addition, the 1998 Option Plan provides that the
number and price of shares available for stock options and the number of shares
covered by outstanding stock options shall be adjusted equitably for stock
splits, stock dividends, recapitalizations, mergers and other changes in the
Corporation's capital stock. Comparable changes will be made to the per share
exercise price of each outstanding option, but no change shall be made in the
total price applicable to the unexercised portion of an unexercised option,
except for any change in the aggregate price resulting from rounding-off of
share quantities or prices.
Termination and Amendment
The 1998 Option Plan will terminate upon the earlier of ten years after the
date of approval by the Corporation's shareholders (which if approved at the
Meeting would be April 28, 1998) or the issuance of, or exercise of options
equivalent to, 65,000 shares of common stock. However, the Board has the right
to terminate the 1998 Option Plan at any time.
The Board may amend or modify the 1998 Option Plan at any time subject to
obtaining shareholder approval required by applicable law and for any
modification or amendment which: (i) increases the maximum number of shares for
which options may be granted; (ii) reduces the exercise price at which options
may be granted (except with respect to anti-dilution adjustments); (iii) extends
the period during which options may be granted or exercised beyond the times
originally prescribed; or (iv) changes the persons eligible to participate in
the 1998 Option Plan.
Federal Income Tax Consequences Under the 1998 Option Plan
The following is a summary of the Federal income tax consequences of
transactions under the 1998 Option Plan, based on Federal income tax laws in
effect on January 1, 1998. This summary is not intended to be comprehensive and
does not describe state or local income tax consequences.
Benefits which may be granted pursuant to the 1998 Option Plan include
incentive stock options and nonqualified stock options.
Incentive Options. No income is realized by a Participant upon the
grant or exercise of an Incentive Option. If shares of Common Stock are
transferred to a Participant upon the exercise of an incentive stock option, and
if no disqualifying disposition of such shares is made by such optionee within
two years after the date of grant of the option or within one year after the
transfer of such shares to such optionee, then (1) upon the sale or exchange of
such shares, any amount realized in excess of the option exercise price will be
taxed to such optionee as a long-term capital gain and any loss sustained will
be treated as a long-term capital loss, and (2) no deduction will be allowed to
the Corporation for Federal income tax purposes. The exercise of an Incentive
Option will give rise to an item of tax preference that may result in
alternative minimum tax liability for the Participant.
If Common Stock acquired upon the exercise of an Incentive Option is
disposed of prior to two years after the grant date or one year after the
exercise date, generally (1) the Participant will realize compensation (i.e.,
ordinary income) in the year of disposition in an amount equal to the excess (if
any) of the fair market value of such shares at exercise (or if less, the amount
realized on the disposition of such shares, if the shares are disposed of by
sale or exchange) over the option exercise price paid for such shares, and (2)
the Corporation will be entitled to deduct the amount of compensation income,
which was taxed to the Participant for Federal income tax purposes, if it
complies with applicable reporting requirements (the "Reporting Requirements")
and if the amount represents an ordinary and necessary business expense of the
Corporation (the "Ordinary and Necessary Test"). Any further gain (or loss)
realized by the Participant will be taxed as short-term or long-term capital
gain (or loss), as the case may be, and will not result in any deduction by the
Corporation. Different rules may apply if Common Stock is purchased by a
Participant who is also an executive officer, director or more than 10%
shareholder. See "Special Rules Applicable to Corporate Insiders," below.
If an Incentive Option is exercised more than three months following
the termination of employment, the exercise of the option will generally be
taxed in the same manner as the exercise of a Non-qualified Option, except if
the termination is due to the death or disability of the employee in which the
Incentive Option may be exercised only twelve months following the termination.
Non-qualified Options. Except as noted below, in the case of
Non-qualified Options: (1) no income is realized by the Participant at the time
the option is granted; (2) the Participant realizes ordinary income at exercise
in an amount equal to the difference between the option exercise price paid for
the shares and the fair market value of the shares on the date of exercise; (3)
the Corporation is entitled to a Federal income tax deduction equal to the
amount of income taxed to the Participant, subject to the Corporation's
satisfaction of the Reporting Requirements and the Ordinary and Necessary Test;
and (4) upon disposition of the Common Stock acquired by exercise of the option,
appreciation (or depreciation) occurring after the date of exercise is treated
as either short-term or long-term capital gain (or loss), depending on the
recipient's holding period of the shares. Different rules may apply if Common
Stock is purchased by a Participant who is also an executive officer, director
or more than 10% shareholder. See "Special Rules Applicable to Corporate
Insiders," below.
Special Rules Applicable to Corporate Insiders. Generally, executive
officers, directors and 10% shareholders who are subject to Section 16(b) of the
Exchange Act ("Insiders") are not taxed until six months after exercise of a
Non-qualified Option, with the excess of the fair market value of the shares of
Common Stock received upon exercise over the option purchase price, determined
as of the end of the six-month period, being taxed as ordinary income, and the
holding period for treating any gain (or loss) as long-term capital gain (or
loss) beginning at the end of such period. However, an Insider who elects to be
taxed under Section 83(b) of the Code should be taxed on the excess of the fair
market value of the shares at the time of exercise over the option purchase
price.
Stock Swaps. The 1998 Option Plan provides that, with the Corporation's
permission, a Participant may transfer previously owned shares to the
Corporation to satisfy the purchase price under an option (a "Stock Swap").
Generally, if a Participant utilizes previously owned shares to purchase shares
upon the exercise of an Incentive Option, the Participant will not realize any
gain upon the exchange of the old shares for the new shares and will carry over
into the same number of new shares the basis and holding period for the old
shares. If the Participant purchases more shares than the number of old shares
surrendered in the Stock Swap, the incremental number of shares received in the
Stock Swap will have a basis of zero and a holding period beginning on the date
of the exercise of the incentive stock option. If, however, shares acquired
through the exercise of an Incentive Option are used in a Stock Swap prior to
the end of the statutory holding period applicable to the old shares, the Stock
Swap will constitute a disqualifying disposition of the old shares, resulting in
the immediate recognition of ordinary income (see "Incentive Stock Options,"
above).
If a Stock Swap is used to exercise a Non-qualified Option, the use of
old shares to pay the purchase price of an equal number of new shares generally
will be tax-free to the Participant, and he will carry over into the new shares
the basis and holding period of the old shares. However, if more shares are
acquired than surrendered, the incremental shares received in the Stock Swap
will generally be taxed as compensation income in an amount equal to their fair
market value at the time of the Stock Swap. The Participant's basis in those
additional shares will be their fair market value taken into account in
quantifying the Participant's compensation income and the holding period for
such shares will begin on the date of the Stock Swap.
Capital Gains. Under current law, a taxpayer's net capital gain (i.e.,
the amount by which the taxpayer's net long-term capital gains exceed his net
short-term capital losses) from a sale of shares is subject to a maximum federal
income tax rate of 20% if the shares have been held for more than 18 months, and
a maximum federal income tax rate of 28% if the shares have been held for more
than one year but less than 18 months. Ordinary income is subject to tax at
rates as high as 39.6%. Capital losses are currently deductible against capital
gains without limitation, but are currently deductible against ordinary income
in any year only to the extent of $3,000 ($1,500 in the case of a married
individual filing a separate return). Capital losses which are not currently
deductible by reason of the foregoing limitation may be carried forward to
future years.
Payment in Respect of a Change in Control. The 1998 Option Plan
provides for the exercisability of some or all outstanding options in the event
of a "Change in Control," as defined in the 1998 Option Plan. The acceleration
of these benefits may be deemed to constitute a "parachute payment" under the
Code. "Excess parachute payments," as defined in the Code, will subject the
recipient thereof to an additional 20% excise tax and are not deductible by the
Corporation.
1998 Option Plan Benefits
No options have been awarded under the 1998 Option Plan. There were
approximately 47 officers and 105 other employees of the Corporation and its
subsidiaries as of February 28, 1998. Because the Committee has full discretion
to determine who is a "key employee," there is no way to predict how many
employees may ultimately receive awards under the 1998 Option Plan. Moreover,
there is no way to predict or determine ultimately the benefits or amounts that
will be received in the future by or allocated to specific officers or
employees, or groups thereof under the 1998 Option Plan.
Recommendation and Vote Required for Approval of Proposal 3
The affirmative vote of a majority of the Corporation's common stock voted
at the Meeting is required to approve the 1998 Option Plan. THE BOARD
UNANIMOUSLY RECOMMENDS A VOTE "FOR" PROPOSAL 3.
PROPOSAL 4 - APPROVAL OF THE 1998 STOCK OPTION PLAN FOR OUTSIDE DIRECTORS
The Board has approved for submission to the Corporation's shareholders the
Corporation's 1998 Stock Option Plan for Outside Directors (the "1998 Director
Plan") set forth as Exhibit B to this Proxy Statement. The full text of the 1998
Directors Plan is attached to this Proxy Statement as Exhibit B and the
following description of the Plan is qualified in its entirety by reference to
Exhibit B. The purposes of the 1998 Director Plan is to promote the growth and
profitability of the Corporation by providing Outside Directors of the
Corporation with an incentive to achieve long-term objectives of the Corporation
and to attract and retain non-employee directors of outstanding competence by
providing such Outside Directors with an opportunity to acquire an equity
interest in the Corporation.
Types of Options
All options granted under the 1998 Director Plan will be options for shares
of the Corporation's Common Stock. The options will be Non-qualified Options.
Eligibility
An option under the 1998 Director Plan will be granted only to directors of
the Corporation who were not, at any previous time, an employee of the
Corporation eligible to receive options to purchase Common Stock under any other
plan of the Corporation (an "Outside Director").
Terms and Conditions of Stock Options
Grant of Options and Exercise
The 1998 Director Plan provides that each Outside Director will receive one
grant of options to purchase an amount of shares of Common Stock determined
based on when the Outside Director first became an Outside Director of the
Corporation as follows: (i) at or prior to the 1998 Annual Meeting - 2,500
options, (ii) after the 1998 Annual Meeting and at or prior to the 1999 Annual
Meeting - 2,000 options, (iii) after the 1999 Annual Meeting and at or prior to
the 2000 Annual Meeting - 1,500 options, (iv) after the 2000 Annual Meeting and
at or prior to the 2001 Annual Meeting - 1,000 options, and (v) after the 2001
Annual Meeting and at or prior to the 2002 Annual Meeting - 500 options. The
amount of options will be subject to certain adjustments set forth in the Plan.
The options granted under the 1998 Director Plan will be exercisable in five
annual installments of 20% beginning one year after the date of grant.
Exercise Price
The 1998 Director Plan provides that options are to be granted at an
exercise price equal to the Fair Market Value (on the date of grant) of the
stock purchasable thereunder. The 1998 Director Plan defines "Fair Market Value"
as the average of the high and low prices of known trades of the Corporation's
Common Stock on the relevant date, or if the Common Stock was not traded on such
date, on the next preceding day on which the Common Stock was traded.
The 1998 Director Plan provides that the purchase price for shares acquired
pursuant to the exercise of any option is payable in full at the time of
exercise. The exercise price may be paid, in whole or in part, through the
surrender of shares of Common Stock of the Corporation at the Fair Market Value
of such shares on the date of surrender.
Exercise Period
The 1998 Director Plan provides that if an Outside Director's employment is
terminated for any reason other than Disability, Change-in-Control, removal for
cause or death, the Outside Director's options shall be exercisable only as to
those shares which were immediately purchasable by the Participant at the date
of termination. In the event of a removal for cause, all rights under the
Outside Director's options shall expire upon the termination. In the event of
death or Disability (as such term is defined in the 1998 Director Plan), all
options granted under the 1998 Director Plan, whether or not exercisable at such
time, shall become immediately exercisable by the Outside Director, or the
Outside Director's legal representatives or beneficiaries.. Upon termination of
the Participant's service due to a Change-in-Control: all options granted under
the 1998 Director Plan, whether or not exercisable at such time, shall become
immediately exercisable by the Outside Director.
Change in Control Provisions
Upon a "Change in Control" (as defined in the 1998 Director Plan) all
outstanding options under the Plan become immediately and fully exercisable.
The 1998 Director Plan defines Change in Control to mean any of the
following events: (1) any "person" (as the term is used in Sections 13(d) and
14(d) of the Exchange Act) who is not now presently but becomes the "beneficial
owner" (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Corporation representing 25% or more of the
Corporation's outstanding securities except for any securities purchased by any
tax-qualified employee benefit plan of the Corporation; or (2) individuals who
constitute the Board on the date hereof (the "Incumbent Board") cease for any
reason to constitute at least a majority thereof, provided that any person
becoming a director subsequent to the date hereof whose election was approved by
a vote of at least three-quarters of the directors comprising the Incumbent
Board, or whose nomination for election by the Corporation's stockholders was
approved by the same Nominating Committee serving under an Incumbent Board,
shall be, for purposes of this clause (2), considered as though he were a member
of the Incumbent Board; or (3) filing is made for regulatory approval to
implement a plan of reorganization, merger, consolidation, sale of all or
substantially all the assets of the Corporation or similar transaction in which
the Corporation is not the resulting entity or such plan, merger consolidation,
sale or similar transaction occurs; or (4) a proxy statement soliciting proxies
from shareholders of the Corporation, by someone other than the current
management of the Corporation, seeking stockholder approval of a plan of
reorganization, merger or consolidation of the Corporation or similar
transaction with one or more corporations as a result of which the outstanding
shares of the class of securities then subject to the plan or transaction are
exchanged for or converted into cash or property or securities not issued by the
Corporation shall be distributed; or (5) a tender offer is made for 25% or more
of the voting securities of the Corporation.
Termination of Option
The 1998 Director Plan provides that each option shall expire upon the
earlier of (i) 120 months following the date of grant, or (ii) three years
following the date on which the Outside Director ceases to serve in such
capacity for any reason other than removal for cause. In the event of the death
of an Outside Director, the Outside Director's beneficiaries may exercise the
option at any time within the three year period following the Outside Director's
death; provided however, that in no event shall the option be exercisable more
than 120 months after the date of grant. If the Outside Director is removed for
cause, all options awarded to him shall expire upon such removal.
Shares Subject to the 1998 Director Plan
If adopted, the 1998 Director Plan will authorize the Corporation to issue
up to 35,000 shares of common stock pursuant to options. In addition, the 1998
Director Plan provides that the number and price of shares available for stock
options and the number of shares covered by outstanding stock options shall be
adjusted equitably for stock splits, stock dividends, recapitalizations, mergers
and other changes in the Corporation's capital stock. Comparable changes will be
made to the per share exercise price of each outstanding option, but no change
shall be made in the total price applicable to the unexercised portion of an
unexercised option, except for any change in the aggregate price resulting from
rounding-off of share quantities or prices.
Termination and Amendment
The 1998 Director Plan will terminate upon the earlier of five years after
the date of approval by the Corporation's shareholders (which if approved at the
Meeting would be April 28, 1998) or the issuance of, or exercise of options
equivalent to, 35,000 shares of common stock.
The Board may amend or modify the 1998 Director Plan from time to time
without shareholder approval, provided, however, that the rights and obligations
under any option granted prior to such amendment or modification shall not be
altered without the written consent of such optionee.
Federal Income Tax Consequences Under the 1998 Director Plan
The following is a summary of the Federal income tax consequences of
transactions under the 1998 Director Plan, based on Federal income tax laws in
effect on January 1, 1998. This summary is not intended to be comprehensive and
does not describe state or local income tax consequences.
Benefits which may be granted pursuant to the 1998 Director Plan are
nonqualified stock options.
Non-qualified Options. Except as noted below, in the case of
Non-qualified Options: (1) no income is realized by the Outside Director at the
time the option is granted; (2) the Outside Director realizes ordinary income at
exercise in an amount equal to the difference between the option exercise price
paid for the shares and the fair market value of the shares on the date of
exercise; (3) the Corporation is entitled to a Federal income tax deduction
equal to the amount of income taxed to the Outside Director, subject to the
Corporation's satisfaction of the Reporting Requirements and the Ordinary and
Necessary Test; and (4) upon disposition of the Common Stock acquired by
exercise of the option, appreciation (or depreciation) occurring after the date
of exercise is treated as either short-term or long-term capital gain (or loss),
depending on the recipient's holding period of the shares. Different rules may
apply if Common Stock is purchased by an Outside Director who is also an
officer, director or more than 10% shareholder at the time of exercise.
See "Special Rules Applicable to Corporate Insiders," below.
Special Rules Applicable to Corporate Insiders. Generally, individuals
subject to Section 16(b) of the Exchange Act ("Insiders") are not taxed until
six months after exercise of a Non-qualified Option, with the excess of the fair
market value of the shares of Common Stock received upon exercise over the
option purchase price, determined as of the end of the six-month period, being
taxed as ordinary income, and the holding period for treating any gain (or loss)
as long-term capital gain (or loss) beginning at the end of such period.
However, an Insider who elects to be taxed under Section 83(b) of the Code
should be taxed on the excess of the fair market value of the shares at the time
of exercise over the option purchase price.
Stock Swaps. The 1998 Director Plan provides that, with the
Corporation's permission, an Outside Director may transfer previously owned
shares to the Corporation to satisfy the purchase price under an option (a
"Stock Swap"). If a Stock Swap is used to exercise a Non-qualified Option, the
use of old shares to pay the purchase price of an equal number of new shares
generally will be tax-free to the Outside Directors, and he will carry over into
the new shares the basis and holding period of the old shares. However, if more
shares are acquired than surrendered, the incremental shares received in the
Stock Swap will generally be taxed as compensation income in an amount equal to
their fair market value at the time of the Stock Swap. The Outside Director's
basis in those additional shares will be their fair market value taken into
account in quantifying the Outside Director's compensation income and the
holding period for such shares will begin on the date of the Stock Swap.
Capital Gains. Under current law, a taxpayer's net capital gain (i.e.,
the amount by which the taxpayer's net long-term capital gains exceed his net
short-term capital losses) from a sale of shares is subject to a maximum federal
income tax rate of 20% if the shares have been held for more than 18 months, and
a maximum federal income tax rate of 28% if the shares have been held for more
than one year but less than 18 months. Ordinary income is subject to tax at
rates as high as 39.6%. Capital losses are currently deductible against capital
gains without limitation, but are currently deductible against ordinary income
in any year only to the extent of $3,000 ($1,500 in the case of a married
individual filing a separate return). Capital losses which are not currently
deductible by reason of the foregoing limitation may be carried forward to
future years.
1998 Director Plan Benefits
The following table presents information concerning the number of options
and the corresponding dollar value of such options to be received by or
allocated to the Outside Directors as a group upon the approval of the 1998
Option Plan.
<TABLE>
<CAPTION>
NEW BENEFIT TABLE
1998 Director Plan
Potential Realizable Value At Assumed
Annual Rates of Stock Price
Appreciation
for Option Term (1)
---------------------------------------
Name and position 5% ($) 10% ($) Number of Units
----------------- ------ ------- ---------------
<S> <C> <C> <C>
Current Non-Executive Director Group (2) 675,000 1,350,000 25,000
Future Non-Executive Director Group (3) 270,000 540,000 10,000
</TABLE>
- ------------------------
NOTES:
(1) The dollar amounts under these columns are the result of calculations at
the 5% and the 10% rates set by the SEC and therefore are not intended to
forecast possible future appreciation, if any, of the Corporation's Common
Stock price. The calculations assume an exercise price of $54.00 per share
(the market value as of the Record Date) for the Corporation's Common Stock
and an option term of ten years.
(2) This group consists of ten members of the Corporation's current Board, each
of whom became an Outside Director prior to the 1998 Annual Meeting and
will receive 2,500 options upon the approval of the 1998 Director Plan. The
ten members are Ms. Pamela Hill and Messrs. John D. Kissel, Lamb, Layton,
Merton, Meyercord, Mulcahy, Smith, Stine and Turnbull.
(3) The remaining 10,000 shares of common stock reserved for issuance under the
1998 Director Plan have been allocated for grant to any Outside Director
elected to the Corporation's Board after the 1998 Annual Meeting.
Recommendation and Vote Required for Approval of Proposal 4
The affirmative vote of a majority of the Corporation's common stock voted
at the Meeting is required to approve the 1998 Director Plan. THE BOARD
UNANIMOUSLY RECOMMENDS A VOTE "FOR" PROPOSAL 4.
SHAREHOLDER PROPOSALS
Any Shareholder who intends to present a proposal for action at the 1999
Annual Meeting of Shareholders and desires that such proposal be included in the
1999 proxy statement and proxy for such meeting must furnish the proposal in
writing addressed to Ms. Catherine A. McCatharn, Peapack-Gladstone Financial
Corporation, 158 Route 206 North, Gladstone, New Jersey 07934 not later than
December 29, 1998. This notice should be sent by certified mail with return
receipt requested.
OTHER MATTERS WHICH MAY PROPERLY COME BEFORE THE MEETING
The Board of Directors knows of no business that will be presented for
consideration at the Meeting other than that stated in this Proxy Statement.
Should any other matter properly come before the Meeting or any adjournment
thereof, it is intended that proxies in the enclosed form will be voted in
respect thereof in accordance with the judgment of the person or persons voting
the proxies.
Whether you intend to be present at the Meeting or not, you are urged to
return your signed proxy promptly.
By Order of the Board of Directors
T. LEONARD HILL,
Chairman
Gladstone, New Jersey
March 27, 1998
The Corporation's Annual Report for the year-ended December 31, 1997 filed with
the Securities and Exchange Commission as an exhibit to the Corporation's Form
10-K is being mailed to the shareholders with this Proxy Statement. However,
such Annual Report is not incorporated into this Proxy Statement and is not
deemed to be a part of the proxy soliciting material.
PEAPACK-GLADSTONE FINANCIAL CORPORATION
158 Route 206 North, Gladstone, New Jersey 07934
Proxy
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints John D. Kissel, George R. Layton and
Jack D. Stine, or any one of them, as Proxies, each with the power to appoint
his substitute and hereby authorizes them to represent and to vote, as
designated below and on the reverse side, all of the shares of common stock of
Peapack-Gladstone Financial Corporation (THE "CORPORATION") held of record by
the undersigned on March 23, 1998, at the Annual Meeting of Shareholders of the
Corporation to be held on April 28, 1998 or any adjournment thereof.
1. ELECTION OF TWELVE (12) DIRECTORS
For all nominees listed Withhold authority to
below (except as marked vote for all nominees
to the contrary below). [ ] listed below. [ ]
Instruction: To withhold authority to vote for any individual nominee, write
that nominee's name on the lines provided below.
<TABLE>
<CAPTION>
<S> <C> <C>
Pamela Hill T. Leonard Hill Frank A. Kissel
John D. Kissel James R. Lamb George R. Layton
Edward A. Merton F. Duffield Meyercord John R. Mulcahy
Philip W. Smith III Jack D. Stine William Turnbull
Withhold authority to vote for _______________________________
</TABLE>
2. PROPOSAL TO APPROVE THE SELECTION OF KPMG PEAT MARWICK LLP AS THE
CORPORATION'S INDEPENDENT PUBLIC ACCOUNTANTS FOR THE YEAR 1998.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. PROPOSAL TO APPROVE THE CORPORATION'S 1998 STOCK OPTION PLAN.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. PROPOSAL TO APPROVE THE CORPORATION'S 1998 STOCK OPTION PLAN FOR OUTSIDE
DIRECTORS.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
5. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the Meeting.
This Proxy above properly signed will be voted in the manner directed
herein by the undersigned shareholder.
IF NO DIRECTION is made, this Proxy will be voted "FOR" the election of
all twelve members for Director and "FOR" Proposals 2, 3 and 4.
Please sign exactly as names appear below. When shares are held by
joint tenants, both should sign. When signing as attorney, as executor,
administrator, trustee or guardian, please give full corporate names by
President or other authorized officer. If a partnership or limited liability
company, please sign in the entity name by an authorized person.
- --------------------------------------------------------------------------------
(Signature)
- --------------------------------------------------------------------------------
(Signature if held jointly)
DATED:_____________________________________________________________________,1998
MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY USING THE ENVELOPE PROVIDED.
