Ramapo
Financial Corporation
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON APRIL 27, 1998
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NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the "Annual
Meeting") of Ramapo Financial Corporation (the "Corporation") will be held at
the Radisson Hotel, 690 Route 46 East, Fairfield, New Jersey at 4:00 p.m. on
Monday, April 27, 1998.
A Proxy Card and a Proxy Statement for the Annual Meeting are enclosed.
The Annual Meeting is for the purpose of considering and acting upon:
1. The election of two directors of the Corporation;
2. The transaction of such other matters as may properly come before the
Annual Meeting or any adjournments thereof.
Note: The Board of Directors is not aware of any other business to come
before the Annual Meeting.
Any action may be taken on any one of the foregoing proposals at the Annual
Meeting on the date specified above or on any date or dates to which, by
original or later adjournment, the Annual Meeting may be adjourned. Stockholders
of record at the close of business on March 13, 1998 are the stockholders
entitled to notice of and to vote at the Annual Meeting and any adjournments
thereof.
A complete list of stockholders entitled to vote at the Annual Meeting will
be open for examination by any stockholder for any purpose germane to the Annual
Meeting during ordinary business hours at the Corporation's main office during
the ten days prior to the Annual Meeting.
You are requested to fill in and sign the enclosed form of proxy which is
solicited by the Board of Directors and to mail it promptly in the enclosed
envelope. The proxy will not be used if you attend and vote at the Annual
Meeting in person.
BY ORDER OF THE BOARD OF DIRECTORS
MORTIMER J. O'SHEA
PRESIDENT AND CHIEF EXECUTIVE OFFICER
Wayne, New Jersey
March 20, 1998
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IMPORTANT: THE PROMPT RETURN OF PROXIES WILL SAVE YOUR CORPORATION THE EXPENSE
OF FURTHER REQUESTS FOR PROXIES IN ORDER TO INSURE A QUORUM. A SELF-ADDRESSED
ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE. NO POSTAGE IS REQUIRED IF MAILED IN
THE UNITED STATES.
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<PAGE>
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PROXY STATEMENT
OF
RAMAPO FINANCIAL CORPORATION
64 MOUNTAIN VIEW BOULEVARD
WAYNE, NEW JERSEY 07470
(973) 696-6100
ANNUAL MEETING OF STOCKHOLDERS
APRIL 27, 1998
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General
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This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Ramapo Financial Corporation (hereinafter
called the "Corporation") to be used at the 1998 Annual Meeting of Stockholders
of the Corporation (hereinafter called the "Annual Meeting"), which will be held
at the Radisson Hotel, 690 Route 46 East, Fairfield, New Jersey on Monday, April
27, 1998, at 4:00 p.m. The accompanying Notice of Annual Meeting and form of
proxy and this Proxy Statement are being first mailed to stockholders on or
about March 20, 1998.
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Voting and Revocability of Proxies
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Proxies solicited by the Board of Directors of the Corporation will be
voted in accordance with the directions given therein. Where no instructions are
indicated, proxies will be voted for the nominees for directors set forth below.
The proxy confers discretionary authority on the persons named therein to vote
with respect to the election of any person as a director where the nominee
becomes unavailable to serve and with respect to matters incident to the conduct
of the Annual Meeting. If any nominee becomes unavailable to serve, proxies will
be voted by those named therein for the election of such substitute as a
majority of the Board of Directors may recommend or the size of the Board of
Directors may be reduced to eliminate the vacancy. If any other business is
presented at the Annual Meeting, proxies will be voted by those named therein in
accordance with the determination of a majority of the Board of Directors.
Proxies marked as abstentions will not be counted as votes cast. In addition,
shares held in street name which have been designated by brokers on proxy cards
as not voted will not be counted as votes cast. Proxies marked as abstentions or
as broker no votes, however, will be treated as shares present for purposes of
determining whether a quorum is present.
Stockholders who execute proxies retain the right to revoke them at any
time. Unless so revoked, the shares represented by properly executed proxies
will be voted at the Annual Meeting and all adjournments thereof. Proxies may be
revoked by written notice to the Secretary of the Corporation at the address
above or by the filing of a later dated proxy prior to a vote being taken on a
particular proposal at the Annual Meeting. A proxy will not be voted if a
stockholder attends the Annual Meeting and votes in person. The presence of a
stockholder at the Annual Meeting will not revoke such stockholder's proxy.
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Voting Securities and Principal Holders Thereof
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The securities entitled to vote at the Annual Meeting consist of the
Corporation's common stock, $1.00 par value per share (the "Common Stock").
Stockholders of record as of the close of business on March 13, 1998 (the
"Record Date") are entitled to one vote for each share of Common Stock then
held. As of the Record Date, there were 8,128,324 shares of Common Stock issued
and outstanding. At March 13, 1998, the Corporation knew of no beneficial owner
of more than 5% of the outstanding Common Stock.
<PAGE>
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ITEM 1
ELECTION OF DIRECTORS
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The Corporation's Board of Directors is currently composed of seven
members. Under the Corporation's Certificate of Incorporation, directors of the
Corporation are divided into three classes and elected for terms of three years
and until their successors are elected and qualified. At the Annual Meeting, two
directors will be elected for a term expiring at the 2001 annual meeting of
stockholders. Under New Jersey law, directors are elected by a plurality of the
votes present in person or represented by proxy at the Annual Meeting and
entitled to vote on the election of directors.
Other nominations for directors may be made pursuant to the Corporation's
Bylaws, which require, among other things, that advance written notice of any
such nomination shall be delivered or mailed to the Chairman of the Board of the
Corporation. Any such written nominations shall be delivered or mailed not less
than 14 days prior to the meeting of stockholders, that is, on or before April
13, 1998, provided, that if less than 21 days' notice of the meeting is given to
stockholders, then such nominations shall be mailed or delivered to the Chairman
of the Board not later than the close of business on the seventh day following
the day on which the Notice of Meeting was mailed.
The Corporation's Bylaws permit the Board of Directors to increase the
number of Directors by not more than three members, and to fill the vacancies
created by such increase, between annual meetings of the stockholders. In the
event of any such increase in the number of directors by the Board of Directors,
the terms of the directors filling such vacancies shall be fixed by the Board of
Directors in such manner as to result in each class consisting, as nearly as may
be, of one-third of the number of directors then constituting the whole Board of
Directors as so increased. A director elected by the Board of Directors to fill
a vacancy created in such manner will serve only until the next annual meeting
of stockholders, at which time the stockholders will elect such director's
successor for the succeeding term or, if applicable, for the remaining portion
of the full term previously fixed by the Board of Directors.
It is intended that the persons named in the proxies solicited by the Board
of Directors will vote for the election of the named nominees. If any nominee
becomes unavailable to serve, the shares represented by all properly executed
proxies which have not been revoked will be voted for the election of such
substitute as the Board of Directors may recommend or the size of the Board of
Directors may be reduced to eliminate the vacancy. At this time, the Board knows
of no reason why any nominee might be unavailable to serve.
The following table sets forth, for each nominee and each continuing
director, his name, age as of the Record Date and the year he first became a
director of the Corporation. The table also sets forth the names, ages and
positions of the Corporation's current executive officers and the year each was
first elected to his current position. Each director of the Corporation also is
a member of the Board of Directors of The Ramapo Bank (the "Bank"), the
Corporation's primary operating subsidiary, and each executive officer
(excluding Chairman Victor C. Otley, Jr.) also serves as an executive officer of
the Bank. There are no arrangements or understandings between the Corporation
and any director or executive officer pursuant to which such person has been
elected a director or executive officer of the Corporation other than the
agreements respectively between Messrs. O'Shea and Knauer and the Corporation
and the Bank (discussed under "--Certain Agreements"), and no director or
executive officer is related to any other director or executive officer by
blood, marriage or adoption. All executive officers other than Mr. O'Shea are
elected annually by the Board of Directors. Mr. O'Shea is serving pursuant to an
employment agreement dated March 14, 1996, which provides for a term of
employment of three years with the Corporation and one year with the Bank. See
- --"Certain Agreements".
2
<PAGE>
BOARD NOMINEES FOR TERMS TO EXPIRE
AT THE 2001 ANNUAL MEETING
Age as of Year First
the Record Elected as Current Term
Name Date Director to Expire
----- -------- --------- -----------
Donald W. Barney 57 1993 1998
Richard S. Miller 63 1974 1998
DIRECTORS CONTINUING IN OFFICE
James R. Kaplan 63 1993 1999
Erwin D. Knauer 52 1993 1999
Louis S. Miller 83 1974 2000
Mortimer J. O'Shea 52 1994 2000
Victor C. Otley, Jr 62 1974 2000
EXECUTIVE OFFICERS
Age as of Year First Elected
Name Office Record Date to Current Office
----- ---------------- ----------- ---------------
Mortimer J. President and Chief 52 1994
O'Shea Executive Officer
Erwin D. Knauer Senior Vice President 52 1992
Walter A. Wojcik, Treasurer 48 1985
Jr.
Presented below is certain information concerning the directors and the
executive officers of the Corporation. In addition to serving as Directors of
the Corporation and the Bank, all directors of the Corporation named below also
serve as Directors of one or more of the Corporation's nonbank subsidiaries.
Donald W. Barney became a director of the Corporation in 1993, having been
a member of the Bank's Board of Directors since 1989. He joined the Union Camp
Corporation, Wayne, New Jersey in 1969 and currently serves as Vice President
and Treasurer, and is also a certified public accountant. He is President and a
Trustee of the First Real Estate Investment Trust of New Jersey.
Richard S. Miller has served as a director of the Corporation since 1974
and has been a director of the Bank since 1970. Mr. Miller is a director and the
President of the law firm of Williams, Caliri, Miller & Otley, a professional
corporation, of Wayne, New Jersey ("Williams, Caliri, Miller & Otley"), which
acts as legal counsel to the Corporation and its subsidiaries. See "--Certain
Relationships and Related Transactions."
James R. Kaplan has been a director of the Corporation since 1993 and has
been a director of the Bank since 1991. He is currently Chairman, President and
Chief Executive Officer of Cornell Dubilier Electronics, Inc., located in Wayne,
New Jersey. He also serves on the Board of Governors of the Electronic
Industries Association.
Erwin D. Knauer has been a director of the Corporation since 1993 and a
director of the Bank since 1989. He has served as Vice President of the
Corporation from April 1984 to April 1992 and Senior Vice President of the
Corporation from that date to the present. Mr. Knauer has served as President of
the Bank since 1989, prior to which he served as Executive Vice President of the
Bank.
Louis S. Miller has served as a director of the Corporation since its
formation in 1974 and has been a director of the Bank since 1968. Mr. Miller is
a retired certified public accountant.
Mortimer J. O'Shea became Director, President and Chief Executive Officer
of the Corporation and Chairman and Chief Executive Officer of the Bank in March
1994. From 1985 to March 1994, he served in various capacities with The Summit
Bancorporation ("Summit") and its subsidiaries. From October 1993 until his
resignation, he served as Regional President of Summit Bank with responsibility
for its Western Region. He also served on Summit's Management Executive
Committee. From June 1990 to October 1993, he served as President and Chief
Executive Officer of Somerset
3
<PAGE>
Trust Company, which was a wholly owned subsidiary of Summit. Mr. O'Shea was
President and Chief Executive Officer of The Trust Company of Princeton, also a
wholly owned subsidiary of Summit, from its organization in December 1985
through June 1990. During his tenure, this start-up bank grew to $50 million in
assets. Prior to joining Summit, Mr. O'Shea held various lending and management
positions with First Fidelity Bancorporation and Irving Trust Corporation.
Victor C. Otley, Jr. has served as a director of the Corporation since 1974
and has been a director of the Bank since 1970. From September 1993 to March
1994, Mr. Otley served as President and Chief Executive Officer of the
Corporation and Chairman of the Board and Chief Executive Officer of the Bank on
a temporary basis. In January 1994, Mr. Otley became Chairman of the Board of
the Corporation and continues to serve in that capacity. Prior to assuming
executive officer positions with the Corporation and the Bank in September 1993,
he was a Director and a Vice President of the law firm of Williams, Caliri,
Miller & Otley, which acts as legal counsel to the Corporation and its
subsidiaries. See "--Certain Relationships and Related Transactions." Mr. Otley
returned to that firm after stepping down as Chief Executive Officer of the
Corporation and the Bank in March 1994.
Walter A. Wojcik, Jr. has served as Treasurer of the Corporation since 1985
and Senior Vice President and Treasurer of the Bank from 1989 to the present.
Prior to that, he was Vice President and Treasurer of the Bank. He also served
as Treasurer of Pilgrim State Bank, which was then a subsidiary of the
Corporation, from 1988 to its sale in June 1993. He is a certified public
accountant.
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Meetings and Committees of the Board of Directors
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The Corporation's Board of Directors conducts its business through meetings
of the Board of Directors and of its committees. The Board of Directors of the
Corporation meets monthly and may have additional special meetings. During the
year ended December 31, 1997, the Board met 13 times. No director attended fewer
than 75% in the aggregate of the total number of Board meetings held during 1997
and the total number of meetings held by committees on which he served during
such year, except James R. Kaplan.
The Board of Directors has a standing Audit Committee. The Audit Committee,
consisting of Donald W. Barney, Louis S. Miller and Victor C. Otley, Jr.,
performs the following customary functions: (i) making recommendations to the
full Board of Directors as to the engagement of independent auditors; (ii)
directing and supervising investigations into matters relating to audit
functions; (iii) reviewing with the independent auditors the plan and results of
the audit engagement; (iv) reviewing the scope and results of the Corporation's
internal auditing procedures; (v) recommending to the full Board of Directors
each service to be performed by the independent auditors before such services
are performed; (vi) reviewing the degree of independence of the auditors; (vii)
considering the range of audit and non-audit fees; and (viii) reviewing the
adequacy of the Corporation's system of internal accounting controls. The Audit
Committee met four times during 1997.
The Board of Directors also has a standing Stock Option Committee
consisting of all directors other than Messrs. O'Shea and Knauer. This committee
administers the Corporation's 1995 Employee Stock Option Plan. The committee met
once in 1997.
In addition, various Board members serve on various committees of the
Bank's Board of Directors and through these committees facilitate communication
between the Corporation and the Bank.
4
<PAGE>
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Board of Directors Report on Executive Compensation
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Each executive officer of the Corporation, with the exception of Chairman
Victor C. Otley, Jr., also serves as an executive officer of the Bank. These
executive officers devote the great majority of their time to and receive their
salaries from the Bank. Neither the Bank nor the Corporation has a compensation
committee. Compensation decisions for the Bank are made by its Board of
Directors. The Corporation's Board reviews and approves the compensation
decisions of the Bank's Board for the two most highly compensated
executives--Messrs. O'Shea and Knauer.
The Corporation's policy with respect to executive compensation continues
to be one which seeks to compensate its executives fairly and adequately for
their responsibilities, taking into account (i) the profitability of the
operating unit for which the executive is responsible (except in the case of the
Corporation's Chief Executive Officer, who is responsible for the profitability
of the Corporation as a whole), (ii) the profitability of the Corporation as a
whole and (iii) prevailing levels of compensation for executives of other
institutions in New Jersey with comparable responsibilities and experience. The
policy recognizes that in order to recruit and retain quality executive talent,
the Corporation's total compensation package must be competitive in the
markeplace.
Within the foregoing general guidelines, the Boards' specific compensation
strategy is to attempt to arrive at appropriate individual levels of
compensation for each executive officer by looking at total compensation
including annual base salary, incentive bonus potential, and employee benefit
plans and stock option awards.
In an effort to link compensation directly to performance and enhanced
stockholder values, the Bank Board implemented a Management Incentive Bonus Plan
for the year 1996. The Board considered the Plan to have achieved its objectives
and renewed it for 1997. Bonuses under the Plan are awarded by the Bank's Board
based 50% upon overall earnings performance of the Corporation and 50% upon the
individual executive's performance. $180,089 was awarded in January 1998 based
upon 1997 performance. The Plan has been again renewed for the year 1998, and a
total bonus pool of $200,000 has been budgeted.
In an effort to further link compensation to performance, the Board's Stock
Option Committee granted additional options during 1997 in accordance with the
previously adopted 1995 Employee Stock Option Plan. Options to purchase a total
of 260,000 shares were granted to a total of 38 officers in 1997. (See "Option
Grants in Last Fiscal Year" below.) With the grant of these options and net of
forfeitures, options to purchase 725,750 of the 750,000 shares authorized under
the 1995 Plan have now been awarded.
When Mr. O'Shea joined the Corporation in March 1994 as President and CEO
of the Corporation and Chairman and CEO of the Bank, he entered into an
employment agreement with the Corporation and the Bank. In March 1996 that
agreement was modified and extended. The term of Mr. O'Shea's employment with
the Corporation was extended until March 1999, and the term of Mr. O'Shea's
employment with the Bank was extended until March 1998. In March of 1998 the
agreement with the Bank was extended until March 1999. Also in July 1996 Mr.
Knauer entered into a salary continuation agreement with the Corporation and the
Bank (See "- Certain Agreements" below).
This report and the performance graph which follows shall not be deemed
incorporated by reference by any general statement incorporating by reference
this proxy statement into any filing under the Securities Act of 1933 or the
Securities Exchange Act of 1934, except to the extent that the Corporation
specifically incorporates this information by reference, and shall not otherwise
be deemed filed under such Acts.
Respectfully submitted,
Donald W. Barney
James R. Kaplan
Erwin D. Knauer
Louis S. Miller
Richard S. Miller
Mortimer J. O'Shea
Victor C. Otley, Jr.
5
<PAGE>
Interlocks and Insider Participation Regarding Compensation Matters
The Board of Directors of the Bank reviews the compensation of employees of
the Bank. The Board of Directors of the Corporation reviews and approves the
compensation decisions of the Bank's Board for Messrs. O'Shea and Knauer.
Options under the Corporation's 1995 Employee Stock Option Plan are awarded by
the Corporation's Stock Option Committee, which is comprised of all of the
directors of the Corporation other than Messrs. O'Shea and Knauer. The
Corporation does not have any employees of its own.
During 1997, Victor C. Otley, Jr. served as Chairman of the Board of
Directors of the Corporation and as a Director of the Bank. Mortimer J. O'Shea
served as a Director, Chief Executive Officer and President of the Corporation
and Chairman of the Board of Directors and Chief Executive Officer of the Bank.
Erwin D. Knauer, Senior Vice President of the Corporation and President of the
Bank, is also a member of the Corporation's Board of Directors. Messrs. O'Shea
and Knauer each absented himself from all discussions, and abstained from all
voting, with respect to his own compensation.
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Comparative Stock Performance Graph
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The following graph compares the cumulative total shareholder return on a
hypothetical $100 investment made on December 31, 1992, assuming reinvestment of
dividends, in (1) the Corporation's Common Stock, (2) the NASDAQ Stock Market
(U.S.) Index, and (3) the NASDAQ Bank Stock Index.
[GRAPH OMITTED]
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE CHART IN THE PRINTED MATERIAL.]
Ramapo NASDAQ NASDAQ
Date Financial Corp. (US) Bank Stock
- ---- --------------- ------ ----------
12/31/92 100.00 100.00 100.00
12/31/93 53.13 114.80 114.04
12/30/94 67.98 112.21 113.63
12/29/95 100.00 158.70 169.22
12/31/96 125.50 195.19 223.41
12/31/97 220.31 239.53 377.44
6
<PAGE>
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Executive Compensation and Other Benefits
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Summary Compensation Table
The following table summarizes compensation earned or awarded during the
years ended December 31, 1997, 1996 and 1995 to the Corporation's Chief
Executive Officer, and its other executive officers whose total salary and bonus
in 1997 exceeded $100,000.
<TABLE>
<CAPTION>
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Annual Compensation Long-Term Compensation
------------------------------- ------------------------------------
Awards Payouts
Other ------------------------------------
Annual Restricted All Other
Name and Compen- Stock Options LTIP Compen-
Principal Position Year Salary Bonus sation(1) Awards($) (shares)(2) Payouts sation
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Mortimer J. O'Shea 1997 $219,808 $ 35,000 $ -- 10,000 $ -- $ 10,787(4)
Chief Executive 1996 210,000 -- -- -- 30,000 -- 8,787
Officer(3) 1995 195,000 -- -- -- 30,000 -- 6,383
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- ------------------------------------------------------------------------------------------------------------------------------------
Erwin D. Knauer 1997 149,692 27,500 -- -- 30,000 -- 17,895(6)
Senior Vice 1996 142,000 -- -- -- 30,000 -- 17,437
President(5) 1995 137,338 -- -- -- 30,000 -- 13,662
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</TABLE>
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(1) The Corporation provides certain perquisites and other benefits to
executive officers. The aggregate amount of such compensation did not
exceed the lesser of $50,000 or 10% of the total of annual salary and bonus
reported for each of the named executive officers during any of the years
reported.
(2) Incentive stock options and non-qualified stock options granted pursuant to
the Corporation's 1995 Employee Stock Option Plan. See "--Option Grants"
below.
(3) In March 1994, Mortimer J. O'Shea was appointed President and Chief
Executive Officer of the Corporation and Chairman of the Board and Chief
Executive Officer of the Bank. At that time, Mr. O'Shea entered into an
employment agreement and a non-statutory stock option agreement with the
Corporation and the Bank. See "--Certain Agreements."
(4) Consists of $1,287 in life insurance premiums and $9,500 in employer 401(k)
matching contributions.
(5) In July 1996 Mr. Knauer entered into a salary continuation agreement with
the Corporation and the Bank. See "--Certain Agreements."
(6) Consists of $960 in life insurance premiums, $7,935 in employer 401(k)
matching contributions, and $9,000 in automobile allowance.
Option Grants in Last Fiscal Year
The following table sets forth information concerning options granted in
1997 to individuals listed in the Summary Compensation Table.
<TABLE>
<CAPTION>
Individual Grants
--------------------------------------------------------------------------------------------------------------------
Potential
Realizable
Value at
Assumed
Annual Rates of
Stock Price
% of Total Appreciation for
Number of Securities Options Granted Exercise Option Term
Underlying Options to Employees Price Expiration ----------------------
Name Granted(1) in Fiscal Year ($/share) Date 5% 10%
- ------ ------------------- ------------ -------- ------------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Mortimer J. O'Shea 10,000 3.8% $6.00 June 12, 2007 $ 37,734 $ 95,625
Erwin D. Knauer 30,000 11.5% $6.00 June 12, 2007 113,201 286,874
</TABLE>
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(1) Incentive stock options and non-qualified stock options were granted to
certain officers of the Bank pursuant to the Ramapo Financial Corporation
1995 Employee Stock Option Plan. In accordance with that plan the exercise
price was set equal to the last sale price of the Corporation's stock on
the date of grant. Options granted become exercisable in 25% increments at
one year intervals commencing 6 months from the date of grant.
7
<PAGE>
Aggregate Option Exercises in Last Fiscal Year and Year-End Option Values
The following table sets forth information concerning the value of options
held by the individuals listed in the Summary Compensation Table at December 31,
1997.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
Number of
Securities Value of
Underlying Unexercised
Number of Unexercised In-the-Money
Shares Options at Fiscal Options at Fiscal
Acquired Value Year-End(#) Year-End($)
on Exercise Realized Exercisable/ Exercisable/
Name (#) ($) Unexercisable Unexercisable
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Mortimer J. O'Shea(1) -0- $-0- 155,044 / 133,890 $913,036 / $760,268
- --------------------------------------------------------------------------------------------------------------------
Erwin D. Knauer(2) -0- $-0- 45,000 / 45,000 $185,156 / $152,344
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
- ----------
(1) Mr. O'Shea's options consist of non-statutory stock options to purchase
218,934 shares which he received concurrent with his employment with the
Corporation (see "--Certain Agreements," below) and incentive stock options
to purchase 70,000 shares which were granted to him pursuant to the
Corporation's 1995 Employee Stock Option Plan (see "--Option Grants in Last
Fiscal Year," above).
(2) Mr. Knauer's options consist of incentive stock options to purchase 86,770
shares and non-qualified stock options to purchase 3,230 shares which were
granted pursuant to the Corporation's 1995 Employee Stock Option Plan (see
"--Option Grants in Last Fiscal Year," above).
Certain Agreements
On March 14, 1996, the Corporation and the Bank extended and modified the
original employment agreement with Mortimer J. O'Shea, President and Chief
Executive Officer of the Corporation and Chairman of the Board and Chief
Executive Officer of the Bank, that had been originally entered into March 17,
1994.
The extended and modified employment agreement (the "Employment Agreement")
provides for a term of employment of three years with the Corporation while his
term of employment with the Bank shall be for a period of one year. In February
1998, the term of Mr. O'Shea's employment with the Bank was extended until March
1999. The Employment Agreement provides for inclusion of Mr. O'Shea in all of
the employee benefit plans that the Corporation or the Bank maintain for the
benefit of their employees and which include any medical or other insurance
plans, the 401(k) plan and vacation policies. The Employment Agreement provides
for an annual base salary of $215,000, which will be paid by the Bank so long as
the Bank is an employer of Mr. O'Shea and by the Corporation for the remaining
term of the Employment Agreement. In December 1997 Mr. O'Shea's annual base
salary was increased to $225,000 effective in January 1998.
The Employment Agreement will terminate upon Mr. O'Shea's death or
disability, and is terminable by the Corporation or the Bank with or without
"just cause" (as such term is defined in the Employment Agreement). If Mr.
O'Shea is terminated without "just cause", he shall be entitled to his salary at
the annual rate then in effect for the remainder of the term of the Employment
Agreement (plus any renewal term). In the event of termination for "just cause",
Mr. O'Shea will not be entitled to any salary for any period after such
termination. If Mr. O'Shea's employment is terminated or suspended as a result
of an order or notice being served under Section 8 of the Federal Deposit
Insurance Act, all obligations of the Corporation and the Bank shall terminate
as of the effective date of the order or notice. If such an order or notice
suspends or temporarily prohibits Mr. O'Shea from participating in the conduct
of the Corporation's or the Bank's affairs, the Employment Agreement shall be
suspended as of the effective date of such order or notice. If the charges in
the order or notice are dismissed, the Bank shall pay Mr. O'Shea all or part of
the compensation withheld while the Employment Agreement was suspended and
reinstate any of its obligations thereunder.
If the Employment Agreement is terminated due to Mr. O'Shea's "disability"
(as defined in the Employment Agreement), he will be entitled to a continuation
of his compensation and benefits through the date of the establishment of his
disability and for a period of six months thereafter. In addition, he shall be
entitled to one-half of his base salary plus any other employee benefits in
effect at such time for an additional six month period. Any and all such
payments made as the result of disability shall be reduced by the amount he
receives under any disability insurance policy maintained by the Corporation or
the Bank.
8
<PAGE>
Mr. O'Shea may voluntarily terminate his Employment Agreement by providing
60 days written notice to the Boards of Directors of both the Corporation and
the Bank, in which case he will be entitled to receive only his compensation,
vested rights and employee benefits up to the date of his termination.
The Employment Agreement contains provisions stating that in the event of
Mr. O'Shea's involuntary termination in connection with, or within one year
after, any change in control of the Corporation or the Bank, other than for
"just cause", Mr. O'Shea will be paid within 10 days of such termination an
amount equal to two times his base annual compensation less that amount of base
compensation actually paid after the change of control, unless the Bank was
placed in conservatorship or receivership in connection with such change in
control and the Board of Directors of the Corporation or the Bank determines in
good faith that the change of control was directed by or otherwise required by
the Federal Deposit Insurance Corporation. In no event, however, may the
aggregate amount payable in the event of a change in control equal or exceed the
difference between (i) the product of 2.99 times Mr. O'Shea's "base amount" as
defined in Section 280G(b)(3) of the Code and regulations promulgated
thereunder, and (ii) the sum of any other parachute payments (as defined in
Section 280G(b)(2) of the Code) that he receives on account of the change in
control.
"Control" generally refers to the acquisition, by any person or entity, of
the ownership or power to vote more than 25% of the Corporation's voting stock,
the control of the election of a majority of the Corporation's or the Bank's
directors or the exercise of a controlling influence over the management or
policies of the Corporation or the Bank. In addition, under the Employment
Agreement, a change in control occurs when, during any consecutive two-year
period, directors of the Bank or the Corporation at the beginning of such period
cease to constitute two-thirds of the Board of Directors of the Bank or the
Corporation, unless the election of replacement directors was approved by a
two-thirds vote of the initial directors then in office. The Employment
Agreement also provides for a similar lump sum payment to be made in the event
of Mr. O'Shea's voluntary termination of employment within one year following a
change in control, upon the occurrence, or within 90 days thereafter, of certain
specified events following the change in control, which have not been consented
to in writing by Mr. O'Shea, including (i) requiring the Executive to move his
personal residence, (ii) the assignment of duties and responsibilities which are
substantially inconsistent with those normally associated with his position with
the Bank or the Corporation, and (iii) materially diminishing his authority and
responsibility. The aggregate payments that would be made to Mr. O'Shea assuming
his termination of employment under the foregoing circumstances would be
$450,000. This provision may have an anti-takeover effect by making it more
expensive for a potential acquiror to obtain control of the Corporation.
Concurrently with entering into the Employment Agreement, the Corporation
also entered into a Nonstatutory Stock Option Agreement (the "Stock Option
Agreement") with Mr. O'Shea. Pursuant to the terms of the Stock Option
Agreement, the Corporation granted to Mr. O'Shea an option to purchase shares of
Common Stock having an aggregate exercise price of $500,000. Exercise of any
options granted to Mr. O'Shea pursuant to the Stock Option Agreement was
conditioned upon the successful completion by the Corporation of a public
offering of the Corporation's Common Stock (the "Offering") by December 31, 1994
resulting in gross proceeds of at least $10 million. This condition has been
satisfied. The options are granted in three separate tiers as follows: (1) Tier
1 Options for Common Stock having an aggregate exercise price of $170,000
exercisable at $2.00 per share, the price at which the Common Stock was sold in
the Offering (the "Offering Price"), (2) Tier 2 Options for Common Stock having
an aggregate exercise price of $165,000 exercisable at the Offering Price plus
50% of the difference between the Adjusted Book Value of the shares (as defined
in the Stock Option Agreement) and the Offering Price and (3) Tier 3 Options for
Common Stock having an aggregate exercise price of $165,000 exercisable at the
greater of the Offering Price or the Adjusted Book Value of the shares.
Twenty-five percent of Tier 1 Options became exercisable on each of the four
anniversaries of March 17, 1994 (the "Effective Date"). Twenty-five percent of
Tier 2 Options became exercisable on the second, third and fourth anniversaries
of the Effective Date with an additional 25% to vest on the fifth anniversary of
the Effective Date. Twenty-five percent of Tier 3 Options each became
exercisable on the third and fourth anniversary date of the Effective Date with
an additional 25% to vest on each of the two subsequent anniversaries of the
Effective Date. The Stock Option Agreement further provides that the vesting
schedule shall be accelerated and all options are to become immediately
exercisable upon a "change in control" as that term is defined in the Employment
Agreement. All unexercised options expire in seven years from the Effective
Date.
Exercise of the options granted pursuant to the Stock Option Agreement is
also subject to the Corporation's achieving certain annual performance standards
relating to the Corporation's profitability and return on equity. Based upon the
Corporation's performance relative to such performance standards during 1997,
100% of the options which
9
<PAGE>
would be otherwise exercisable during 1998 are exercisable. In addition, Mr.
O'Shea may not exercise options in any given taxable year of the Corporation to
the extent that such exercise would result in Mr. O'Shea having taxable
compensation that is not deductible to the Corporation. If such restriction
results in Mr. O'Shea being unable to exercise options that are otherwise
exercisable, then, notwithstanding any other provision of the Stock Option
Agreement, if the term of the option would have expired in such year, its term
shall be extended until December 31st of the next succeeding year. In the event
of such an extension of exercisability, the applicable performance standards
shall be those applicable in the first year in which exercise was denied.
In the event of Mr. O'Shea's termination for "just cause" as that term is
defined in the Employment Agreement or by resignation, the options granted shall
immediately become null and void. If employment is terminated without "just
cause", any options which are otherwise exercisable on such termination date may
be exercised for an additional 90 days following the termination date. In the
event of termination of employment due to disability, all outstanding options
will immediately become fully vested and may be exercised by Mr. O'Shea for a
period of 90 days following the date of his termination due to disability. All
outstanding options become fully vested upon the death of Mr. O'Shea and may be
exercised for a period of one year following his death by the personal
representative of his estate unless the Corporation elects to extend such
period.
The Corporation and the Bank have entered into a salary agreement ("Salary
Agreement"), dated as of July 31, 1996, with Erwin D. Knauer, Senior Vice
President of the Corporation and President of the Bank. The Salary Agreement
provides that Mr. Knauer shall be paid an amount equal to his annual salary in
the event he is terminated in connection with or within 12 months after a change
in control of the Corporation or the Bank, unless such termination is with Mr.
Knauer's prior written consent or is for one of a number of specified reasons
which are collectively defined in the Salary Agreement as "Just Cause." The
Salary Agreement may be terminated pursuant to a resolution of the Board of
Directors of the Corporation effective as of the date of the Corporation's 1998
annual meeting of shareholders or any subsequent annual meeting, provided that
no change of control of the Corporation or the Bank shall have occurred.
Supplemental Employee Benefits Plan
The Supplemental Employee Benefits Plan ("SEBP"), which the Corporation's
Board of Directors adopted in 1989, became fixed as to participants and benefits
January 1, 1994. The SEBP provides a combination of benefits for designated
salaried officers or other designated key employees of the Corporation and its
subsidiaries. Participants in the SEBP had been designated annually by the Board
of Directors of the Corporation on a prospective basis for each of the years
1990 through 1994. The Board also had designated the type and amount of benefits
to be granted to each SEBP participant.
Three types of benefits have been granted under the SEBP: (i) a
pre-retirement death benefit which is payable in 10 equal annual installments if
a participant dies while actively employed during the period for which benefits
have been granted; (ii) a severance benefit which is payable in a lump sum if a
participant's employment terminates during the period for which benefits have
been provided other than by reason of the participant's death, retirement,
permanent disability or termination by the employer for certain specified
causes; and (iii) a retirement benefit payable in 10 equal annual installments
following a participant's retirement after attaining age 65 or such other date
as may be approved by the Board of Directors, or after attaining age 65 or such
earlier date as may be approved by the Board of Directors if the participant's
employment was previously terminated due to total disability. Each participant
has been granted a Supplemental Benefits Agreement which specifies benefits to
which such participant will be entitled as long as he or she remains actively
employed by the Corporation or its subsidiaries.
10
<PAGE>
The following table sets forth benefits payable under SEBP in 10 equal
annual installments following retirement at age 65 to the only individual named
in the Summary Compensation Table above who was a participant in the SEBP.
Annual
Retirement
Name Benefit
---- ----------
Erwin D. Knauer $34,900
Director Compensation
Directors of the Corporation who are not members of management receive an
annual fee for serving as a director and a fee for attending each meeting of the
Corporation's Board and of the Bank's Board and, as applicable, each meeting of
the Corporation's Audit Committee, the Bank's Asset/Liability Management
Committee and the Bank's Executive Committee. The current fees are as follows:
The annual fee is $10,000; Board meeting fees are $300 per meeting; and
Committee meeting fees are $250 per meeting. Directors are not compensated for
attendance at any other Corporation or Bank committee meetings. If the Board of
Directors of the Corporation and the Board of Directors of the Bank meet on the
same day, the directors are only compensated for the Bank's Board meeting.
Directors who are members of management do not receive any fees for their
service as directors.
At the 1995 Annual Meeting of Shareholders the 1995 Stock Option Plan for
Nonemployee Directors was approved. This plan provides for the granting of
non-qualified stock options to nonemployee directors of the Corporation and its
subsidiaries. The maximum number of shares of Common Stock of the Corporation,
$1 par value, that may be made subject to options granted pursuant to this plan
is 200,000. Upon approval of this plan each director received a grant based upon
his years of service according to the following schedule:
Number of
Shares
Years of Service Subject to Option
---------------- -----------------
at least three, but less than ten 5,000
at least ten, but less than fifteen 10,000
at least fifteen 15,000
Options to purchase a total of 55,000 shares at $3.50 per share were
granted upon approval of the 1995 Stock Option Plan for Nonemployee Directors as
provided above. In addition, commencing in 1996 and thereafter until the
expiration date of the plan, the plan provides for automatic grants of options
to purchase 1,800 shares to each person who, on the date of the annual meeting
for such year, is then a Nonemployee Director of the Corporation and/or any
subsidiary of the Corporation regardless of the number of boards on which they
serve.
Certain Relationships and Related Transactions
Williams, Caliri, Miller & Otley, of which Director Richard S. Miller and
Chairman of the Board Victor C. Otley, Jr. are principals, serves as the
Corporation's general counsel. The Corporation and its subsidiaries paid
$181,304 in legal fees to such firm during 1997. In addition, borrower customers
of the Bank paid $128,807 to that firm in 1997 in connection with loans made by
the Bank. It is believed that the amounts paid to such firm are reasonable and
competitive. It is anticipated that during 1998, the Corporation will continue
to use the services of such firm, together with other law firms, to handle the
legal aspects of troubled loans, regulatory and corporate matters.
The Corporation provides a liability insurance policy for all its officers
and directors. Coverage is provided by a policy with a major insurance company
for $5 million per occurrence, with a standard deductible clause. The policy
also insures the Corporation against amounts paid by it to indemnify directors
and officers. The policy runs for a period of three years from July 1, 1996 to
June 30, 1999 at a cost to the Corporation of $83,100.
Directors and officers of the Corporation and their associates are
customers of and had transactions with the Bank during 1997, and it is expected
that they will continue such transactions in the future. All deposit accounts
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 and the
Bank, do not involve more than the normal risks of collectibility or present
other unfavorable features.
11
<PAGE>
Security Ownership of Management
The following table sets forth as of February 27, 1998 certain information
concerning the ownership of Common Stock by each director of the Corporation, by
the officers named in the Summary Compensation Table and by all directors and
executive officers as a group.
<TABLE>
<CAPTION>
Amount and Nature Percent of Outstanding
Name of Beneficial Owner Beneficial Ownership(1) Common Stock(2)
------------------------ ----------------------- ----------------------
<S> <C> <C>
Donald W. Barney 64,700(3) 0.80%
James R. Kaplan 22,771(4) 0.28
Erwin D. Knauer 51,584(5) 0.63
Louis S. Miller 21,700(6) 0.27
Richard S. Miller 101,065(7) 1.24
Mortimer J. O'Shea 183,117(8) 2.21
Victor C. Otley, Jr. 68,182(9) 0.84
All Directors and Executive
Officers as a Group (10 persons) 640,740 7.60%
</TABLE>
- ----------
(1) In accordance with Rule 13d-3 under the Securities Exchange Act of 1934, a
person is deemed to be the beneficial owner, for purposes of this table, of
any shares of Common Stock if he or she has or shares voting or investment
power with respect to such Common Stock or has a right to acquire
beneficial ownership at any time within 60 days from February 27, 1998. As
used herein, "voting power" is the power to vote or direct the voting of
shares and "investment power" is the power to dispose or direct the
disposition of shares. Except as otherwise noted, ownership is direct, and
the named individuals and group exercise sole voting and investment power
over the shares of the Common Stock.
(2) In calculating the percentage ownership of each named individual and the
group, the number of shares outstanding includes any shares of the Common
Stock which the individual or the group has the right to acquire within 60
days of February 27, 1998.
(3) Includes 7,700 shares Mr. Barney has the right to acquire pursuant to the
exercise of options.
(4) Includes 2,700 shares Mr. Kaplan has the right to acquire pursuant to the
exercise of options.
(5) Includes 45,000 shares Mr. Knauer has the right to acquire pursuant to the
exercise of options and 2,544 shares owned by Mr. Knauer's wife.
(6) Includes 17,700 shares Mr. Miller has the right to acquire pursuant to the
exercise of options.
(7) Includes 17,700 shares Mr. Miller has the right to acquire pursuant to the
exercise of options. Also includes 2,728 shares owned of record by
Williams, Caliri, Miller & Otley. Mr. Miller disclaims beneficial ownership
of all but 767 of the shares owned by Williams, Caliri, Miller & Otley.
Also includes 3,000 shares owned by Mr. Miller's wife directly. Mr. Miller
disclaims beneficial ownership of his wife's shares. Also includes 14,000
shares held by Mr. Miller as Trustee for himself and others; Mr. Miller
disclaims beneficial ownership of 7,000 of such shares in which others have
a beneficial interest.
(8) Includes 145,044 shares Mr. O'Shea has the right to acquire pursuant to the
exercise of options. Also includes 7,527 shares owned by Mr. O'Shea's wife.
Mr. O'Shea disclaims beneficial ownership of his wife's shares.
(9) Includes 17,700 shares Mr. Otley has the right to acquire pursuant to the
exercise of options. Also includes 34,714 shares owned by Mr. Otley's wife.
Mr. Otley disclaims beneficial ownership of his wife's shares. Also
includes 2,728 shares owned of record by Williams, Caliri, Miller & Otley.
Mr. Otley disclaims beneficial ownership of all but 767 of the shares owned
by Williams, Caliri, Miller & Otley.
- --------------------------------------------------------------------------------
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
- --------------------------------------------------------------------------------
The principal accountant for the Corporation and its subsidiaries for 1997
was Arthur Andersen LLP, Roseland, New Jersey. The Corporation has not appointed
a principal accountant for 1998 at this time. In accordance with the
Corporation's prior practice, when the principal accountant's term of engagement
has expired, the Audit Committee will recommend the selection of principal
accountant to the Board of Directors. This will occur subsequent to the Annual
Meeting. Arthur Andersen LLP has served in that capacity since 1984. It is
expected that one or more representatives from Arthur Andersen LLP will be
present at the Annual Meeting with the opportunity to make a statement, if they
desire to do so, and will be available to respond to appropriate questions.
12
<PAGE>
- --------------------------------------------------------------------------------
OTHER MATTERS
- --------------------------------------------------------------------------------
The Board of Directors is not aware of any business to come before the
Annual Meeting other than those matters described above in this Proxy Statement
and matters incident to the conduct of the Annual Meeting. However, if any other
matters should properly come before the Annual Meeting, it is intended that
proxies in the accompanying form will be voted in respect thereof in accordance
with the determination of a majority of the Board of Directors.
- --------------------------------------------------------------------------------
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
- --------------------------------------------------------------------------------
In June 1997 certain officers of the Bank were granted stock option awards
pursuant to the Corporation's 1995 Stock Option Plan. Inadvertently Erwin D.
Knauer, Mortimer J. O'Shea and Walter Wojcik failed to timely file a report
regarding said options under Section 16(a) of the Securities and Exchange Act of
1934. The proper reports were filed one month later.
In October 1997 Victor C. Otley, Jr. executed a series of sale transactions
of Ramapo Financial Corporation common stock. Inadvertently, several of those
transactions were excluded from the report he filed under Section 16(a) of the
Securities and Exchange Act of 1934. An amended report was subsequently filed.
- --------------------------------------------------------------------------------
MISCELLANEOUS
- --------------------------------------------------------------------------------
The cost of soliciting proxies will be borne by the Corporation. The
Corporation will reimburse brokerage firms and other custodians, nominees and
fiduciaries for reasonable expenses incurred by them in sending proxy materials
to the beneficial owners of Common Stock. In addition to solicitations by mail,
directors, officers and regular employees of the Corporation may solicit proxies
personally or by telegraph or telephone without additional compensation.
The Corporation's 1997 Annual Report to Stockholders, including financial
statements, has been mailed to all stockholders of record as of the close of
business on the Record Date. Any stockholder who has not received a copy of such
Annual Report may obtain a copy by writing to the Secretary of the Corporation.
Such Annual Report is not to be treated as a part of the proxy solicitation
material or as having been incorporated herein by reference.
- --------------------------------------------------------------------------------
STOCKHOLDER PROPOSALS
- --------------------------------------------------------------------------------
In order to be eligible for inclusion in the Corporation's proxy materials
for next year's Annual Meeting of Stockholders, any stockholder proposal to take
action at such meeting must be received at the Corporation's executive office at
64 Mountain View Boulevard, Wayne, New Jersey 07470 no later than November 20,
1998. Any such proposals shall be subject to the requirements of the proxy rules
adopted under the Securities Exchange Act of 1934, as amended.
BY ORDER OF THE BOARD OF DIRECTORS
MORTIMER J. O'SHEA
PRESIDENT AND CHIEF EXECUTIVE OFFICER
Wayne, New Jersey
March 20, 1998
13
<PAGE>
- --------------------------------------------------------------------------------
ANNUAL REPORT ON FORM 10-K
- --------------------------------------------------------------------------------
A COPY OF THE CORPORATION'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED
DECEMBER 31, 1997 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION WILL BE
FURNISHED WITHOUT CHARGE TO STOCKHOLDERS AS OF THE RECORD DATE UPON WRITTEN
REQUEST TO: STOCKHOLDER RELATIONS, RAMAPO FINANCIAL CORPORATION, 64 MOUNTAIN
VIEW BOULEVARD, WAYNE, NEW JERSEY 07470.
- --------------------------------------------------------------------------------
14
<PAGE>
RAMAPO
FINANCIAL P.O. Box 221
CORPORATION Wayne, New Jersey 07470 Revocable Proxy
- --------------------------------------------------------------------------------
SOLICITED BY THE BOARD OF DIRECTORS for the Annual Meeting of Stockholders at:
Radisson Hotel
690 Route 46 East
Fairfield, New Jersey
Monday, April 27, 1998 4:00 P.M.
The undersigned hereby appoints Vincent R. D'Accardi and Solomon W. Masters each
with the power to appoint his substitute, and hereby authorized them to
represent and to vote, as designated on the reverse side, all shares of common
stock of Ramapo Financial Corporation held of record by the undersigned on March
13, 1998, at the annual meeting of stockholders or any adjournment thereof, and
to vote, in accordance with the determination of a majority of the Board of
Directors, upon such other business as may properly come before the meeting.
The shares represented by this proxy, when properly executed, will be voted as
directed by the stockholder. If no direction is given, such shares will be voted
"for" Proposal 1.
(Continued, and to be signed, on the other side)
<PAGE>
If no direction is give, this proxy will be voted FOR Proposal 1.
Please mark |X|
your votes as
indicated in
this example
PROPOSAL NO. 1: ELECTION OF DIRECTORS. The nominees of the Board of Directors
are:
FOR ALL WITHHOLD Donald W. Barney Richard S. Miller
NOMINEES AUTHORITY FOR
ALL NOMINEES (INSTRUCTION: To withhold authority to vote
for any individual nominee, write that
|_| |_| nominee's name on the space provided below.)
_____________________________________________
Please sign below exactly as name appears. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such. If a partnership or limited
liability company please sign by authorized officer. If a partnership or limited
liability company please sign by authorized person also indicating that
individual's capacity.
Signature
________________________________________________________________________________
Signature
________________________________________________________________________________
Date
________________________________________________________________________________
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
