<PAGE>
PRESTIGE FINANCIAL CORP.
One Royal Road
P.O. Box 2480
Flemington, New Jersey 08822
March 20, 1998
Dear Fellow Shareholders of Prestige:
You are cordially invited to attend the Annual Meeting of
Shareholders of Prestige Financial Corp. (the "Company") to be held on the
21st day of April 1998 at 5:30 p.m., local time, at One Royal Road,
Flemington, New Jersey. Your Notice of Annual Meeting, Proxy Statement and
Proxy are enclosed, as is the Company's 1997 Annual Report, which includes
the Company's consolidated financial statements.
At the Annual Meeting, you will be asked to elect seven directors,
to amend the 1994 Stock Option Plan for Senior Management, to amend the 1994
Stock Option Plan for Outside Directors and to ratify the appointment of
KPMG Peat Marwick LLP as the Company's accountant for 1998. The Board of
Directors has approved the proposals described in the Proxy Statement and
recommends that you vote "FOR" each proposal.
Your vote is important. Whether or not you plan to attend the
Annual Meeting in person, we ask that you return your completed Proxy, using
the envelope provided, as soon as possible and in any case no later than 3:00
p.m. on Monday, April 20, 1998.
Thank you again for your continued support.
Very truly yours,
Louis R. DeFalco, Chairman
<PAGE>
PRESTIGE FINANCIAL CORP.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 21, 1998
TO OUR SHAREHOLDERS:
Notice is hereby given that pursuant to the call of its Board of
Directors, the Annual Meeting of Shareholders of Prestige Financial Corp., a
New Jersey corporation, will be held on Tuesday, April 21, 1998, at 5:30
p.m., local time, at One Royal Road, corner of Church Street and Royal Road,
Flemington, New Jersey.
The purposes of the meeting are:
(1) To elect seven (7) directors of the Company to hold office until
the next Annual Meeting of Shareholders or until their respective
successors shall be elected and qualified.
(2) To amend the 1994 Stock Option Plan for Senior Management to
increase by 35,000 (to 139,100) the number of shares which may
be optioned under the plan.
(3) To amend the 1994 Stock Option Plan for Outside Directors to
increase by 20,000 (to 125,600) the number of shares which may
be optioned under the plan.
(4) To ratify the selection of KPMG Peat Marwick LLP as the Company's
independent accountants for 1998.
(5) To transact such other business as may be properly presented at
the meeting.
The names of the Board of Directors' nominees to be directors of
the Company are set forth in the accompanying Proxy Statement.
Only shareholders of record at the close of business on March 10,
1998, will be entitled to vote at the meeting. To be sure that your shares
are represented at the meeting, you are urged to vote, sign, date and
promptly return the enclosed Proxy in the envelope provided. You may revoke
your Proxy at any time prior to the time it is voted.
By Order of the Board of Directors
J. Susan Berger, Secretary
March 20, 1998
Flemington, New Jersey
IMPORTANT--PLEASE MAIL YOUR PROXY PROMPTLY. IN ORDER THAT THERE
MAY BE PROPER REPRESENTATION AT THE MEETING, YOU ARE URGED TO SIGN AND RETURN
THE ENCLOSED PROXY IN THE ENVELOPE PROVIDED AS SOON AS POSSIBLE AND NO LATER
THAN 3:00 P.M., APRIL 20, 1998. SHARES OF COMPANY STOCK REPRESENTED BY
PROXIES WHICH ARE RETURNED UNMARKED WILL BE VOTED IN FAVOR OF THE NOMINEES,
THE AMENDMENTS TO THE STOCK OPTION PLANS, THE RATIFICATION OF ACCOUNTANTS
AND, IN THE DISCRETION OF MANAGEMENT, UPON SUCH OTHER BUSINESS AS MAY
PROPERLY BE PRESENTED AT THE MEETING.
<PAGE>
PRESTIGE FINANCIAL CORP.
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 21, 1998
GENERAL INFORMATION
This Proxy Statement is furnished in connection with the
solicitation of Proxies by management under the direction of the Board of
Directors of the Company for use at the Annual Meeting of Shareholders of the
Company to be held April 21, 1998. Only shareholders of record as of March
10, 1998, will be entitled to notice of, and to vote at, the Annual Meeting.
Each share is entitled to one vote on the matters to be voted on at the
Annual Meeting. As of March 10, 1998, 3,329,794 shares of the Company's
common stock were outstanding. This Proxy Statement and enclosed Proxy were
first mailed to the Company's shareholders on or about March 20, 1998.
The cost of soliciting Proxies will be borne by the Company. In
addition to use of the mails, Proxies may be solicited personally or by
telephone or telegraph by directors and officers who will not be specially
compensated for such solicitation. The Company has engaged Registrar and
Transfer Agent, the Company's transfer agent, to solicit Proxies held by
brokers and nominees. Brokerage firms and other custodians, nominees and
fiduciaries will be requested to forward these soliciting materials to their
principals and the Company will, upon request, reimburse them for the
reasonable expenses of doing so. The Company's transfer books will remain
open between the record date and meeting date.
Your Proxy is important in helping to achieve good representation
at the meeting. Any shareholder giving a Proxy has the right to revoke it at
any time before it is exercised; therefore, execution of the Proxy will not
in any way affect the shareholder's right to attend the meeting in person.
Revocation may be made prior to the meeting by written revocation or duly
executed Proxy bearing a later date sent to the Company, Attention: J. Susan
Berger, Secretary, One Royal Road, P.O. Box 2480, Flemington, New Jersey
08822; or a Proxy may be revoked personally at the Annual Meeting by written
notice to the Secretary at the Annual Meeting prior to the voting of the
Proxy. In the absence of specific instructions to the contrary, shares
represented by properly executed Proxies received by management, including
unmarked Proxies, will be voted to elect the nominees to the Board described
herein, to amend the 1994 Stock Option Plan for Senior Management (the
"SMP"), to amend the 1994 Stock Option Plan for Outside Directors (the "ODP")
and to ratify the selection of KPMG Peat Marwick LLP as the Company's
accountants for 1998. If a broker indicates on the Proxy that it does not
have discretionary authority as to certain shares to vote on a particular
matter, those shares will not be considered as present and entitled to vote
with respect to that matter.
The holders of a majority of the Company's outstanding shares of
common stock, present in person or by Proxy, are required for a quorum at the
meeting. The Company had 3,329,794 shares of common stock outstanding on
March 10, 1998. Each share has one vote on each matter voted on at the
meeting. Cumulative voting is not permitted. If a quorum is present at the
meeting, the simple majority vote of shares voting is required for election
of the seven directors, amendment of the SMP, amendment of the ODP and
ratification of the Company's accountants.
<PAGE>
SHARE OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
As of March 10, 1998, there were 3,329,794 shares of Company stock
outstanding, par value $0.01, held of record by 762 shareholders. Only
shareholders of record as of March 10, 1998, shall be entitled to vote at the
Annual Meeting and each share is entitled to one vote. The following table
sets forth information with respect to the beneficial ownership of Company
stock as of March 10, 1998, by (i) each person known by the Company to own
beneficially more than 5 percent of the Company's outstanding stock, (ii)
each current director and executive officer of the Company, and (iii) all
executive officers and directors of the Company as a group. Except as
otherwise indicated, each of the persons named below has sole voting and
investment power with respect to the Company stock owned by them.
<TABLE>
Name and Address of Amount and Nature of Percentage of Outstanding
Shareholder Beneficial Ownership Company Stock(8)
- ------------------- -------------------- -------------------------
<S> <C> <C>
Roland D. Boehm, Sr. 79,035 (1) 2.17%
Louis R. DeFalco 178,578 (2) 4.89%
Arnold F. Horvath 179,662 (3) 4.92%
Robert J. Jablonski 176,464 (4) 4.83%
Gerald A. Lustig 220,126 (5) 6.03%
James W. MacDonald 49,258 (6) 1.35%
Arthur Stryker, Jr. 67,641 (7) 1.77%
Executive officers and directors
as a group (7 persons) 950,764 (1-7) 26.05%
Estate of V. M. Hellekson 301,016 8.25%
345 Saddleworth Place
Heathrow, FL 32746
</TABLE>
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(1) Includes 48,202 shares owned jointly by Mr. Boehm and his wife and 21,450
shares issuable pursuant to options exercisable within 60 days of
March 10, 1998.
(2) Includes 27,951 shares owned by DeFalco & Co. Employees Trust, of which
Mr. DeFalco is the trustee; 11,190 shares owned by Mr. DeFalco in trust
for the benefit of his children; 21,450 shares issuable pursuant to
options exercisable within 60 days of March 10, 1998; 39,888 shares owned
by Mr. DeFalco's wife; and 5,595 shares owned by his son over which he has
no voting rights.
(3) Includes 8,157 shares held in Mr. Horvath's self-directed IRA; 115,650
shares issuable pursuant to options exercisable within 60 days of
March 10, 1998; and 10,051 shares held for Mr. Horvath's account in the
Bank's 401K plan.
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<PAGE>
(4) Includes 14,040 shares held in Mr. Jablonski's self-directed IRA; 115,650
shares issuable pursuant to options exercisable within 60 days of
March 10, 1998; and 4,652 shares held for Mr. Jablonski's account in the
Bank's 401K plan.
(5) Includes 27,495 shares owned by Mr. Lustig's children over which he has no
voting rights; 147,143 shares owned jointly with his wife; 2,363 shares
owned by Saturn of Denville, of which Mr. Lustig is an owner and Vice
President; 9,823 shares owned by Autosport, Inc., of which Mr. Lustig is
the owner and President; and 21,450 shares issuable pursuant to options
exercisable within 60 days of March 10, 1998.
(6) Includes 21,450 shares issuable pursuant to options exercisable within
60 days of March 10, 1998; 704 shares owned by Mr. MacDonald in trust for
the benefit of his son; and 704 shares owned by Mr. MacDonald's wife.
(7) Includes 28,273 shares owned jointly by Mr. Stryker and his wife; 27,449
shares owned by Mr. Stryker in trust for the benefit of his children;
2,357 shares owned by Raritan Valley Disposal Service Co., Inc., of which
Mr. Stryker is President; and 3,300 shares issuable pursuant to options
exercisable within 60 days of March 10, 1998.
(8) Assumes the exercise of all stock options held by the named persons which
are exercisable within 60 days of March 10, 1998.
PROPOSAL 1 - ELECTION OF DIRECTORS
DIRECTORS AND EXECUTIVE OFFICERS
In accordance with the Company's Bylaws, seven directors will be
elected to the Board of Directors to serve until the 1999 Annual Meeting of
Shareholders or until their successors are duly elected and qualified. The
Proxies will be voted, unless authority to do so is withheld, in favor of the
seven nominees recommended by the Board. Each nominee is currently a member
of the Board of Directors of the Company. Management recommends voting in
favor of each person named below.
Following is a list of the nominees for the Board of Directors,
including age (as of December 31, 1997) and current positions held with the
Company and the Bank. Each person except Mr. Stryker has been a director of
the Company since its formation in February 1993. Mr. Stryker became a
director of the Company in May 1995.
<TABLE>
Name Age Positions
---- --- ---------
<S> <C> <C>
Roland D. Boehm, Sr. (1)(2) 60 Vice Chairman of the Board (Chairman of Bank)
Louis R. DeFalco (1)(2) 51 Chairman of the Board (Vice Chairman of Bank)
Arnold F. Horvath 48 President and Director (Company and Bank)
Robert J. Jablonski 47 Chief Executive Officer, Chief Accounting
Officer and Director (Company and Bank)
Gerald A. Lustig (1) 60 Director (Company and Bank)
James W. MacDonald (2) 47 Director (Company and Bank)
Arthur Stryker, Jr. (1) 53 Director (Company and Bank)
</TABLE>
- -------------------
(1) Member of the Audit Committee.
(2) Member of the Compensation and Budget Committee.
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<PAGE>
The business experience of each nominee for director during the
past five years is as follows:
ROLAND D. BOEHM, SR. has served as Chairman of the Board of the
Bank since its inception in 1989 and as Chairman of the Board of the Company
from February 1993 until April 1996, at which time he was elected Vice
Chairman of the Company. He currently serves as a member of the Compensation
and Budget Committee and the Audit Committee. Mr. Boehm is also Vice
Chairman and consultant for Mercer Mutual Insurance Company, Pennington, New
Jersey; an elected official of the Township of Raritan, New Jersey; and a
Commissioner for Raritan Township's Municipal Utilities Authority.
LOUIS R. DEFALCO is the founder and Managing Partner of DeFalco &
Co. Certified Public Accountants, located in Scotch Plains, New Jersey, and
is a part owner of several real estate companies. He is a graduate of
Rutgers University from which he holds a Bachelor of Science degree in
accounting and was granted his professional certification in February 1971.
He is a member of the New Jersey Society of Public Accountants and the
American Institute of Certified Public Accountants. Mr. DeFalco has been a
director of the Bank since 1989 and a director of the Company since February
1993. He served as Vice Chairman of the Company from October 1994 to April
1996 when he was elected Chairman of the Company. Also in April 1996 Mr.
DeFalco was elected Vice Chairman of the Bank. He currently serves as
Chairman of the Audit Committee and as a member of the Compensation and
Budget Committee.
ARNOLD F. HORVATH has served as the President of the Bank since
1989 and as a director since 1990. He has served as the President and a
director of the Company since February 1993. Prior to joining the Bank, Mr.
Horvath was Senior Vice President in charge of the lending division of the
Town and Country Bank, a former Summit Bank subsidiary, in Raritan Township.
Mr. Horvath has been involved in bank lending in the Hunterdon County
community since 1971 when he graduated from Seton Hall University with a
Bachelor of Arts degree in economics.
ROBERT J. JABLONSKI has served as Chief Executive Officer and Chief
Accounting Officer of the Bank since 1989 and as a director since 1990. He
has served as Chief Executive Officer, Chief Accounting Officer and a
director of the Company since February 1993. Prior to joining the Bank, Mr.
Jablonski was a Senior Vice President and Treasurer of the former Summit Bank
subsidiary, Town and Country Bank in Raritan Township. Mr. Jablonski has
been involved in bank operations and management since 1972 when he graduated
from Rutgers University with a Bachelor of Arts degree in business
administration.
GERALD A. LUSTIG is owner and President of several automobile
dealerships in Hunterdon, Somerset and Morris Counties, including Clinton
Ford/Chrysler/Plymouth/Dodge/Jeep and Pro Chevrolet/Cadillac/Hyundai in
Clinton, New Jersey; Autosport Honda in Bridgewater, New Jersey; and Acura of
Denville, Denville, New Jersey. He graduated from Rensselaer Polytechnic
Institute and received a Master of Science degree from Stevens Institute of
Technology. Mr. Lustig has served as a director of the Bank since its
inception in 1989 and as a director of the Company since its inception in
February 1993. He currently serves as a member of the Audit Committee.
JAMES W. MACDONALD is owner and President of Summit View Management
Company which engages in commercial property management, real estate
consulting services and commercial construction management. He is also the
Managing General Partner or an officer of various commercial and industrial
real estate companies, including the President of Prestige Realty Group, LLC
and the President of Prestige Clinton Realty, LLC which lease or are under
contract to lease property to the Company. (See "Certain Relationships and
Related Transactions.") He graduated in 1973 from Rutgers University with a
Bachelor of Arts degree in
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<PAGE>
economics. Mr. MacDonald has served as a director of the Bank since its
inception in 1989 and as a director of the Company since February 1993. He
currently serves as Chairman of the Compensation and Budget Committee.
ARTHUR STRYKER, JR. is President of several waste disposal and
recycling enterprises in Hunterdon County, New Jersey, including Raritan
Valley Disposal Service Co., Inc.; Raritan Valley Recycling, Inc.; and NJ
Refuse Equipment Co., Inc. Mr. Stryker has served as a director of the Bank
since November 1994 and a director of the Company since May 1995. He
currently serves as a member of the Audit Committee.
The officers of the Company hold office until their successors are
appointed by the Board of Directors. There are no arrangements or
understandings between any of the above-listed directors or officers, or any
other persons, pursuant to which any of the above directors have been
selected as directors, or officers have been selected as officers. In 1997
the Company provided Directors and Officers Liability Insurance in the
aggregate amount of $2,000,000.
COMMITTEES AND MEETINGS
In 1997 there were 12 meetings of the Board of Directors of the
Company. Each director of the Company is also a director of the Bank. All
directors attended 75 percent or more of the Company's Board meetings and
meetings of Board committees on which they served. The Board of the Company
has no standing nominating committee. Nominees for the Board of Directors
are determined by the entire Board.
The Company's Compensation and Budget Committee, consisting of
Messrs. MacDonald (Chairman), Boehm and DeFalco, met 3 times in 1997. Its
principal function is to review and make recommendations to the Board of
Directors regarding all executive compensation and benefit programs available
to officers and employees of the Company and the Bank, including the
adoption, amendment or termination of any such program. (See "Report by
Compensation and Budget Committee on Executive Compensation.") The
Compensation and Budget Committee also administers the Company's stock option
plans and determines the directors, senior management and key employees to
whom options will be granted, the number of shares for which options are
granted, the exercise price and other matters. (See "Executive
Compensation--Stock Option Plans.") Finally, the Committee prepares a yearly
budget and short- and long-term financial plans for the Company which are
then approved by the full Board of Directors. The budget is used to help
determine compensation levels for the year.
The Company's Audit Committee, consisting of Messrs. DeFalco
(Chairman), Boehm, Lustig and Stryker, met 4 times in 1997. The Audit
Committee meets quarterly with the Company's internal auditor to review the
Company's system of internal controls and compliance with policies regarding
business conduct, and to take related action. The committee also recommends
to the Board the independent auditors to be retained and meets with the
Company's independent auditors at least annually to review the results of the
annual audit and to discuss the financial statements.
EXECUTIVE COMPENSATION
The following table sets forth information concerning all
compensation received for services rendered in all capacities to the Company
and the Bank for the three years ended December 31, 1997, by Mr. Jablonski,
the Company's CEO, and Mr. Horvath, the Company's President. The Company has
no other executive officers. All grants of stock options and stock
appreciation rights ("SARs") have been adjusted to reflect stock
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<PAGE>
splits and stock dividends paid by the Company. No restricted stock awards
were granted to Mr. Jablonski or Mr. Horvath in such years.
<TABLE>
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION
----------------------------- SECURITIES
OTHER UNDERLYING ALL
ANNUAL OPTIONS/SARS OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMP. GRANTED(#) COMP.
- --------------------------- ---- -------- ---------- ------ ------------ ------
<S> <C> <C> <C> <C> <C> <C>
Arnold F. Horvath, 1997 $140,000 $80,000(1) (4) 23,200(5) 0
President 1996 $135,000 $52,500(2) (4) 63,900(6) 0
1995 $131,000 $35,000(3) (4) 24,900(7) 0
Robert J. Jablonski, 1997 $140,000 $80,000(1) (4) 23,200(5) 0
CEO and Treasurer 1996 $135,000 $52,500(2) (4) 63,900(6) 0
1995 $131,000 $35,000(3) (4) 24,900(7) 0
</TABLE>
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(1) Bonus declared in 1996 and paid in 1997.
(2) Bonus declared in 1995 and paid in 1996.
(3) Bonus declared in 1994 and paid in 1995.
(4) Perquisites, such as use of a company car, payment of fuel costs and
contributions to such person's 401(K) plan account did not exceed the
lessor of $50,000 or 10% of the total of the salary and bonus reported for
each named executive.
(5) Includes stock options for 10,800 shares issued pursuant to the 1994 Stock
Option Plan for Senior Management, stock options for 2,500 shares issued
pursuant to the 1994 Stock Option Plan for Key Employees (see "Stock
Option Plans") and 9,900 SARs granted pursuant to the long-term incentive
plan (see "Long-Term Incentive Plan").
(6) Includes stock options for 54,000 shares granted pursuant to the 1994
Stock Option Plan for Key Employees (see "Stock Option Plans") and 9,900
SARs granted pursuant to the long-term incentive plan (see "Long-Term
Incentive Plan").
(7) Includes stock options for 15,000 shares granted pursuant to the 1994
Stock Option Plan for Key Employees (see "Stock Option Plans") and 9,900
SARs granted pursuant to the long-term incentive plan (see "Long-Term
Incentive Plan").
EMPLOYMENT AGREEMENTS. The Company entered into employment agreements
with Mr. Jablonski and Mr. Horvath in May 1994, effective as of January 1, 1994.
The agreements, as amended, were extended until January 1, 2002. Each of the
two executives is guaranteed a base salary of $122,000 which will be increased
based upon performance. The agreements provide that each such executive shall
participate in the Annual Incentive Plan for Senior Management and the Long-Term
Incentive Plan for Senior Management, described below, and may receive special
recognition bonuses as the Board deems appropriate. The agreements provide that
lump-sum additions to the executives' retirement plans (see "Supplemental
Executive Retirement Plan") may be elected in the calendar year before a change
in control. Additional benefits are also provided to the executives, such as
disability payments, termination payments and other perquisites, as well as "Key
Man" life insurance which benefits both the Company and the executives' estates.
ANNUAL INCENTIVE PLAN. The Prestige Financial Corp. Annual
Incentive Plan for Senior Management provides the Company's two executive
officers the opportunity to earn annual incentive payments of zero percent to
40 percent of such executive's base salary with a target of 20 percent. Such
incentive payments are contingent upon the executives' satisfactory
performance as determined by the Board, the key elements of which are tied to
the Company achieving asset growth and certain income targets.
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<PAGE>
LONG-TERM INCENTIVE PLAN. The Company established a long-term
incentive plan in August 1995 which provides the Company's two executive
officers the opportunity to earn additional compensation in the form of SARs.
This plan provides that 6,000 SARs (adjusted for subsequent stock splits and
stock dividends) shall be granted to each executive on January 2 of each year
that the employment agreement described above is in effect. Each executive
becomes vested in the SARs four years after the date of grant, at which time
he shall be paid in cash an amount based upon the compounded annualized
growth rates of the book value of the Company's stock reaching certain target
levels.
KEY MAN LIFE INSURANCE. The Company has purchased Key Man life
insurance policies which provide for $625,000 payable to each of Mr.
Horvath's wife and Mr. Jablonski's wife in the event of the executive's death.
THRIFT PLAN. As part of its effort to attract and maintain high
quality staff, the Bank adopted a 401(K) Thrift Plan (the "Thrift Plan") in
April 1991, pursuant to which participating employees may contribute up to a
maximum of 15 percent of their monthly salary. In 1997 the Bank fully
matched each participating employee's contribution up to a maximum of 7
percent of the employee's salary. All monies withheld from employees and the
Bank's matching contributions are paid to a trustee who invests for the
benefit of members of the Thrift Plan.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN. The Bank has adopted non-tax
qualified retirement plans for certain of its executives ("SERP") to supplement
the benefit such executives can receive under the Bank's Thrift Plan. The SERP
is designed to provide a benefit (less the benefits estimated to be provided
under the Thrift Plan) that is equal to 60 percent of the executive's final
salary. The benefit is payable over the greater of 180 months or the
executive's life. In the case of an executive's involuntary termination of
employment for any reason (other than for cause) or voluntary termination of
employment in connection with a change in control, the executive is entitled to
a benefit equal to the greater of the annuitized present value of the accrued
benefit or $75,000 per year, payable within 30 days of such termination. In the
event of the executive's death while employed, the SERP provides a survivor's
benefit equal to the benefit payable to the executive as if the executive
remained employed until his benefit age (as defined in the SERP). The
agreements provide that lump-sum additions to the executives' retirement plans
may be elected in the calendar year before a change in control. The SERP also
provides a $10,000 death benefit payable to the executive's beneficiary. The
Bank has established trusts which have purchased life insurance policies on the
lives of the executives in order to fund the benefit obligation under the SERP.
Currently, Messrs. Horvath and Jablonski are the only participants in the SERP.
Expenditures of $33,787 and $29,672 were made under the SERP for Messrs. Horvath
and Jablonski in 1997.
STOCK OPTION PLANS. In 1990 Bank shareholders approved the 1990
Long-Term Incentive Compensation Plan for Key Employees (the "1990 Plan")
which was adopted by the Company when the Company was formed. Pursuant to
the 1990 Plan, 3,960 shares of Company stock remain reserved for issuance to
eligible employees of the Company or any subsidiary upon the exercise of
options granted under the 1990 Plan. These options are non-qualified stock
options within the meaning of Section 422A of the Internal Revenue Code of
1986. The exercise price for all options granted under the 1990 Plan cannot
be less than 85 percent of the fair market value of the Company stock on the
date of grant. These Options expire 5 years after the date of grant and
cannot be assigned. As of March 10, 1998, options for all 3,960 shares of
Company stock granted under the 1990 Plan are currently exercisable.
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<PAGE>
On April 29, 1994, the Company's shareholders approved the 1994 Stock
Option Plan for Senior Management (the "SMP"), the 1994 Stock Option Plan for
Key Employees (the "KEP") and the 1994 Stock Option Plan for Outside Directors
(the "ODP"). (See "Amendment of Stock Option Plan for Senior Management" for a
description of the SMP and "Amendment of Stock Option Plan for Outside
Directors" for a description of the ODP.) The purpose of the stock option plans
is to strengthen the ability of the Company to attract and retain well-qualified
executive and managerial personnel, to furnish additional incentive to those
persons responsible for the successful management of the Company and thereby to
enhance shareholder value. The plans are administered by the Compensation and
Budget Committee of the Board of Directors which designates the optionees,
exercise prices, exercise periods and dates of grants. (See "Report by the
Compensation and Budget Committee on Executive Compensation.") The Board of
Directors has retained the right to amend or terminate the plans as it deems
advisable. However, no amendment may be made to increase the number of shares
of stock which may be optioned under the plans, permit the grant of any
incentive stock option at an option price less than fair market value, shorten
the period for exercise of an option or permit the granting of options which
expire beyond the set period, without submitting such amendments to shareholders
for approval. In addition, no amendments to, or termination of, the plans shall
impair the rights of any individual under options previously granted without
such individual's consent.
The KEP provides for the issuance of shares of Company stock upon the
exercise of stock options granted to key employees of the Company and the Bank
at prices not less than the fair market value as of the date of grant (for
incentive stock options) and not less than 85 percent of the fair market value
as of the date of grant (for non-qualified stock options). Options for the
purchase of 248,700 shares of Company stock may be granted under the KEP. As
of March 10, 1998, options for 247,888 shares have been granted under the KEP.
Vesting in the rights to exercise options is determined by the Committee,
provided, however, that all options must fully vest by the fifth anniversary of
the date of grant and options may not be exercised earlier than six months after
the date of grant. All options granted under the KEP expire ten years after the
date of grant and cannot be assigned. The KEP terminates on February 9, 2004.
The following table presents certain information concerning individual
grants of stock options and SARs made during 1997 to each of the named
executives under the Company's stock option plans and the long-term incentive
plan described above. The figures shown have been adjusted to reflect stock
splits and stock dividends paid by the Company. The table also sets forth the
potential realizable value for the stock options and SARs based on future
appreciation assumptions. There can be no assurance that the values shown in
this table will be achieved.
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<PAGE>
OPTION/SAR GRANTS IN 1997
<TABLE>
POTENTIAL REALIZABLE VALUE AT
NUMBER OF % OF TOTAL ASSUMED ANNUAL RATES OF STOCK
SECURITIES UNDER- OPTIONS/SARS PRICE APPRECIATION
LYING OPTIONS GRANTED TO EXERCISE EXPIRA- FOR OPTION TERM(1)
(O) OR SARS (S) EMPLOYEES OR BASE CURRENT TION ---------------------------
NAME GRANTED IN 1997 PRICE(2) VALUE(3) DATE 5%($) 10%($)
- ---- ------- ------- -------- -------- ---- ----- ------
<S> <C> <C> <C> <C> <C> <C> <C>
Arnold F. (O) 13,300 32% $11.39 $15.50 2/2007 $184,538 $382,442
Horvath (S) 9,900 50% 4.92 5.71 1/2001 N/A N/A
Robert J. (O) 13,300 32% 11.39 15.50 2/2007 184,538 382,442
Jablonski (S) 9,900 50% 4.92 5.71 1/2001 N/A N/A
All other (O) 14,700 36% 12.00 15.50 N/A 194,996 413,732
employees (S) 0 0% N/A N/A N/A N/A N/A
</TABLE>
- -------------------------------
(1) Assuming a ten-year option term, annual compounding results in total
appreciation of 63% (at 5% per year) and 159% (at 10% per year). Actual
gains realized, if any, on SARs are dependent upon improvement in the book
value of the Company stock over the four-year term following the date of
grant. SARs are payable in cash at the end of the four-year term with no
further appreciation possible (see "Long-Term Incentive Plan").
(2) Reflects the average exercise price for stock options and the base book
value for SARs.
(3) For stock options, represents the market value based upon the closing
price per share of Company stock as quoted on the NASDAQ National Market
on December 31, 1997. For SARs, represents the book value per share of
Company stock on December 31, 1997.
The following table sets forth certain information with respect to the
exercise of options to purchase Company stock in 1997 and the unexercised
options/SARs held at December 31, 1997, and the value thereof, by the named
executive officers. All figures have been adjusted to reflect stock splits
and stock dividends paid by the Company.
AGGREGATED OPTION/SAR EXERCISES IN 1997
AND 12-31-97 OPTION/SAR VALUES
<TABLE>
NUMBER NUMBER OF
SECURITIES UNDERLYING UNEXERCISED IN-THE-
NUMBER UNEXERCISED OPTIONS/ MONEY OPTIONS/SARS
OF SHARES VALUE SARS AT 12-31-97(#) AT 12-31-97 ($)(1)
ACQUIRED ON REALIZED ------------------------- -------------------------
NAME EXERCISE ($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ---- ---------- -------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
Arnold F. Horvath 0 0 115,650 / 7,900 (2) 988,830 / 31,700
0 / 39,600 (3) 0 / 53,602
Robert J. Jablonski 0 0 115,650 / 7,900 (2) 988,830 / 31,700
0 / 39,600 (3) 0 / 53,602
</TABLE>
- ----------------------------
(1) For stock options, represents the market value based upon the closing
price per share of Company stock as quoted on the NASDAQ National Market
on December 31, 1997 ($15.50 per share), less the option exercise price.
For SARs, represents the actual book value per share of Company stock on
December 31, 1997 ($5.71), or the targeted book value, whichever is less,
minus the book value of each grant as of the effective date.
(2) Stock options granted pursuant to the SMP and KEP.
(3) SARs granted pursuant to the Long-Term Incentive Plan.
-9-
<PAGE>
DIRECTOR COMPENSATION
FEES. Directors of the Company who are not salaried officers or employees
received an annual retainer of $7,500 and a fee of $500 per Board meeting and
$150 per committee meeting attended in 1997. Company Chairman DeFalco and Bank
Chairman Boehm received an additional $10,000 annual retainer for their
responsibilities. (See "Committees and Meetings.")
RECOGNITION PLAN. On April 29, 1994, the shareholders of the Company
approved the Recognition and Retention Plan for Founding Outside Directors
("Recognition Plan"). Under the Recognition Plan, 56,100 shares of Company
stock were reserved for issuance as plan share awards to outside (non-employee)
directors of the Company with more than three years of service on the Boards of
the Bank or the Company. On February 9, 1994, all 56,100 shares were awarded
when the four outside directors of the Company at that time (Messrs. Boehm,
DeFalco, Lustig and MacDonald) were each granted plan share awards for 14,025
shares of Company stock. The recipient earns 20 percent of the shares awarded
(2,805 shares) annually commencing one year from the date of grant. The
Recognition Plan terminates on the earlier of (i) five years from the effective
date, (ii) termination by a majority of outstanding shares of Company stock
entitled to vote, or (iii) distribution of all assets of the trust which holds
the share awards. All share awards earned shall be distributed to the outside
director in the amount of one share of Company stock for each one plan share
award. The Recognition Plan also provides that an outside director will receive
cash in an amount attributable to any cash dividends paid and additional shares
of Company stock equal to any stock dividends paid on shares of Company stock
subsequent to the vesting of plan shares to an outside director.
RETIREMENT PLAN. The Bank adopted a non-tax qualified retirement plan for
directors (the "Directors' Plan") that provides directors who serve on the Board
for at least ten years (the "Initial Benefit Eligibility Date") with an annual
retirement benefit equal to a designated amount ("Level 1 Retirement Benefit").
In the event that a director continues to serve on the Board to an age specified
in his joinder agreement ("Benefit Age"), the director is entitled to a Level 2
Retirement Benefit (in lieu of the Level 1 Retirement Benefit). The Level 1
Retirement Benefit and the Level 2 Retirement Benefit are each paid over a set
payout period, with the Level 1 Payout Period being either 120 months or 180
months, as selected by the director, and the Level 2 Payout Period being 180
months. The Level 1 Retirement Benefit (assuming a 120-month payout period) for
directors Boehm, MacDonald, Lustig, Stryker and DeFalco is estimated to be
$29,134, $17,210, $14,061, $20,734 and $27,109, respectively. The Level 2
Retirement Benefit for directors Boehm, MacDonald, Lustig, Stryker and DeFalco
is estimated to be $65,000, $42,000, $25,000, $26,000 and $75,000, respectively.
In the event of a change in control of the Bank or the Company, a terminated
director will receive the Level 2 Retirement Benefit. In the event of an
eligible director's death prior to retirement, the director's beneficiary will
receive a survivor's benefit equal to the Level 2 Retirement Benefit. In the
event of a director's voluntary or involuntary termination of service prior to
the attainment of his Benefit Age, other than due to death or a change in
control, the director will receive his accrued benefit annuitized and paid over
the Level 1 Payout Period. The Directors' Plan also provides a $10,000 death
benefit payable to the director's beneficiary. The Bank has established trusts
which have purchased life insurance policies on the lives of the directors in
order to fund the benefit obligation under the Directors' Plan. The Bank is
required to make annual contributions to the trusts so that the cash surrender
value of the life insurance policies will be sufficient to provide the Level 2
benefits to participating directors at the directors' designated retirement age.
The plan calls for the trust contribution expenses to be offset by income
generated by Bank owned single premium life insurance policies insuring the
lives of each of the participating directors.
-10-
<PAGE>
STOCK OPTION PLAN. The outside directors may also receive stock options
under the 1994 Stock Option Plan for Outside Directors. (See "Amendment of
Stock Option Plans for Outside Directors").
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Bank has had, and expects to have in the future, banking transactions
in the ordinary course of business with directors, officers and shareholders of
the Company and the Bank, and associates of the foregoing, on substantially the
same terms, including interest rates and collateral on loans, as those
prevailing at the same time for comparable transactions with others. Loans to
directors, officers and shareholders of the Company and the Bank, and associates
of the foregoing, have not involved more than the normal risk of collectability
or presented other unfavorable features. All existing loans to officers,
directors and principal shareholders and associates of the foregoing have been,
and all future loans to such persons will be, approved by a majority of the
disinterested independent directors of the Company. On December 31, 1997, loans
to the directors and executive officers of the Company totaled $3,966,911.
Other than a maximum $5,000 individual line of credit, the Bank maintains
a policy of not lending to directors of the Company or the Bank except where
such loans are fully secured by cash or negotiable securities or where
sufficiently sized liens are placed on either their personal residences or
properties used in their primary trade or business. All loans to directors of
the Bank are subject to Regulation O of the Board of Governors of the Federal
Reserve System.
In May 1993, the Bank relocated much of its staff to a building within the
Flemington Trade Center at One Royal Road which is owned by Prestige Quarters
LP, a limited partnership whose corporate general partner is controlled by
director Louis DeFalco. Mr. Horvath and Mr. Jablonski each own a 1/3 non-voting
interest in the corporate general partner which owns 30 percent of Prestige
Quarters LP. Such ownership makes Messrs. DeFalco, Horvath and Jablonski each
personally liable for the building mortgage. The Bank obtained an independent
appraisal of its 20-year lease agreement for this property which concluded that
neither party is receiving benefits beyond a normal business relationship. In
addition, as part of the branch application process, this transaction was
reviewed and approved by appropriate banking regulatory agencies. In 1997, the
Company paid $356,000 to Prestige Quarters LP for approximately 17,754 square
feet of branch and headquarters office space. This amount included
approximately $84,000 for common area maintenance, tax and utilities charges.
In August 1995, the Bank began subleasing for its new mortgage division an
additional 850 square feet in the Prestige Quarters building at One Royal Road
from DeFalco & Co., a professional corporation owned by Mr. DeFalco, which
leases the space from Prestige Quarters LP. Rental payments in 1997 for this
space amounted to $10,500, including common area charges, furniture and
equipment. Having opened a larger residential mortgage facility in one of its
new locations, the Bank discontinued this rental in the summer of 1997.
In May 1994, the Company entered into a ten-year lease agreement with
Prestige Realty Group, LLC for branch space in a former commercial bank building
at 34 Somerset Street in the borough of Raritan, Somerset County.
Messrs. MacDonald, Lustig, Horvath, Jablonski, DeFalco and Boehm, directors of
the Company, each own a one-sixth interest in Prestige Realty Group and
Mr. MacDonald serves as President. As with the Royal Road transaction, this
transaction was made part of the application to the bank regulators and included
an appraisal of the lease to document its fairness to all parties. Rental
payments in 1997
-11-
<PAGE>
amounted to $107,730 for approximately 5,300 square feet. This amount
included approximately $34,000 for common area maintenance, tax and utilities
charges.
In July 1995, the Bank entered into a ten-year lease agreement with
Prestige Clinton Realty, LLC for property located on Beaver Avenue in Clinton
Township, Hunterdon County. Messrs. MacDonald, Lustig, Stryker, Horvath and
Jablonski, directors of the Company, each own a one-fifth interest in Prestige
Clinton Realty. Mr. MacDonald serves as President. As with the Royal Road and
Raritan Borough transactions, this insider ownership was disclosed within the
application to the bank regulators and was accompanied by an appraisal of the
lease to document its fairness to all parties. Rental payments in 1997 amounted
to $79,602 for approximately 2,012 square feet. This included approximately
$25,000 for common area maintenance, tax and utilities charges.
All transactions between the Company and the Bank and their officers,
directors, principal shareholders and associates have been and will continue to
be on terms no less favorable to the Company or the Bank than those between the
Company or the Bank and third parties.
EMPLOYEES
The Company employed 87 full-time equivalent persons as of December 31,
1997. The Company employs far fewer, though more highly compensated, people
than is usual for its size, which management believes greatly aids the Company
in maintaining its overhead costs. One important aspect of the Company's
uniqueness is that the top position at the Company is shared by two officers.
Mr. Horvath holds the title of President and Mr. Jablonski holds the title of
Chief Executive Officer, with the former most responsible for lending and
business development while the latter concentrates mostly on the administrative,
personnel and operational areas of responsibility.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Company's Compensation and Budget Committee, Messrs.
Boehm, DeFalco and MacDonald, have no interlocking relationships as defined
by rules and regulations of the Securities and Exchange Commission.
REPORT BY THE COMPENSATION AND BUDGET COMMITTEE ON EXECUTIVE COMPENSATION
RESPONSIBILITIES AND OBJECTIVES. The Compensation and Budget Committee
(the "Committee"), consisting of Messrs. Boehm, DeFalco and MacDonald,
establishes and administers the general compensation policies and plans for the
Company and the specific compensation levels for the two executive officers and
other key employees. The Committee is responsible for conducting, at a minimum,
annual reviews of executive compensation and for taking certain actions
regarding the compensation of senior executives of the Company. The Committee
determines the salary levels for senior executives, and other key employees, and
the types and amounts of cash bonuses to be distributed to these individuals in
accordance with short- and long-term financial plans approved by the Board. The
Committee also determines grants of stock options to senior management and key
employees under the Company's stock option plans.
This report is submitted by members of the Committee summarizing their
involvement in the compensation decisions and policies adopted by the Company
for the Company's two executive officers, Robert J. Jablonski, the Chief
Executive Officer, and Arnold F. Horvath, the President.
-12-
<PAGE>
GENERAL POLICY. The Company's executive compensation practices are
designed to reward and provide an incentive for executives based on the
achievements of corporate and individual goals. Compensation levels for
executives are established after giving consideration to a variety of
quantitative measures including, but not limited to, financial performance, peer
group comparisons and labor market conditions. Furthermore, qualitative factors
such as commitment, leadership, teamwork and community involvement are included
in compensation deliberations. Before making decisions, the Committee elicits
the recommendations and advice of the CEO and the President regarding
appropriate or desired levels of compensation for them and management personnel
generally. The Committee has complete access to all necessary Company personnel
records, financial reports and other data, and may seek the advice of experts
and analysts.
The ultimate purpose of the Company's compensation structure is to attract
and retain executives of the highest caliber and to motivate these executives to
put forth maximum effort toward the achievement of Company goals identified
through the strategic planning process of the Board and management. Also, the
compensation design emphasizes long-term incentives that will encourage these
individuals to maintain their focus on the paramount importance of long-term
shareholder interests.
COMPONENTS OF COMPENSATION. In evaluating executive compensation, the
Committee focuses upon several fundamental components: salary, annual bonus and
long-term incentive compensation. The Committee's recommendations are offered
to the full Board of Directors and are ultimately ratified, changed or rejected
by the full Board.
Salary levels for senior executives and other officers are reviewed by the
Committee beginning in November for the following year. The Company entered
into four-year employment agreements with executive officers in May 1994,
effective as of January 1, 1994, as amended on December 29, 1997. (See
"Executive Compensation-Employment Agreements"). Salary levels are reflective
of an individual's responsibilities, experience and competitive marketplace
conditions.
The annual bonus component of executive compensation has historically been
provided, if and as appropriate, for profitable years. Bonuses have been used
to provide year-end cash distributions to Company executives depending upon a
variety of factors related to individual performance, Company performance and,
in selected cases, operational department achievements. The Committee typically
determines annual bonuses for executives during the time between the regular
November and December Board meetings. (See "Executive Compensation--Annual
Incentive Plan.")
The third component of the Company's executive compensation strategy is
long-term incentive compensation plans pursuant to which executives receive
stock options and stock appreciation rights ("SARs") which, although paid in
cash and not in shares of stock, are tied to the long-term appreciation of the
value of the Company stock. These plans offer executives the possibility of
future gains depending upon the executives' continued employment by, and
contributions to, the Company. The Committee believes that a substantial
portion of the total compensation of senior executives over a period of years
should consist of such long-term incentive awards. Until 1995, these awards
were granted through stock-based compensation plans and consisted solely of
stock options. (See "Executive Compensation-Stock Option Plans.") Beginning in
1995, the executives were granted SARs pursuant to a long-term incentive plan
which vest exactly four years from the date of grant. (See "Executive
Compensation-Long-Term Incentive Plan.")
BOARD REVIEW OF EXECUTIVE COMPENSATION. The Committee, in making its
recommendations and determinations at year-end 1997 regarding executive
compensation, was influenced by numerous positive
-13-
<PAGE>
considerations. The principal factor underlying the Committee's decisions was
that the significant accomplishments in the past year in maintaining the
Company's profitability and financial strength were primarily attributed to
the senior management team and other personnel acting at their direction. All
key measurements of financial performance reflected major improvement that
either met or exceeded previously established goals. Other accomplishments
not measurable in quantitative form, but of equal importance to the Company,
included valuable strategic planning input and maintenance of internal
controls. The Committee believes that as a result of management's efforts,
the Company is favorably positioned for future successful performance which
will benefit its shareholders.
In light of the positive results in 1997, discussed in more detail below,
the Committee determined that increases in executive compensation were
justifiable, both to reward management for accomplishments to date and to
encourage future achievement of both short- and long-term objectives.
Accordingly, the Committee approved salary increases and bonuses which it
believes reflected appropriate rewards for management's performance in 1997.
The Committee also granted stock options and SARs to the executive officers.
COMPENSATION OF CHIEF EXECUTIVE OFFICER AND PRESIDENT. In assessing
appropriate types and amounts of compensation for the Chief Executive Officer
and the President, the Committee evaluates both corporate and individual
performance. Corporate factors included in the evaluation are return on
shareholders' equity, return on assets, levels and changes in nonperforming
assets, the market price of the Company stock and the Company's performance
compared to peer institutions. Individual factors include initiation and
implementation of successful business strategies, maintenance of an effective
management team and various personal qualities, including leadership, commitment
and professional and community standing.
After reviewing the following 1997 corporate results, the Committee
concluded that CEO Robert J. Jablonski and President Arnold F. Horvath, along
with other officers, staff and directors, contributed to the Company's following
1997 results of operations as compared with those in 1996:
-- Net income increased by 32 percent from $2,043,000 to $2,703,000.
-- Assets of the Company increased by 24 percent (from $229.5 million to
$283.6 million) while maintaining a substantial percentage of
noninterest-bearing demand accounts within the deposits.
-- Capital increased by $3.2 million despite having increased cash
dividends paid by $400,000.
-- Loans outstanding increased by 14 percent, or $19.5 million (net of
participations and sales), while past-due and non-accrual loans
remained below industry peers.
-- The Company again received the "gold award" for obtaining approval
for over 100 Small Business Administration loans totaling over $30
million for the SBA's fiscal year ended September 30, 1997.
-- Year-end market capitalization, determined by multiplying Company
shares outstanding times the price of the Company stock on the last
trading day of the year, improved by more than $13 million or 35
percent from December 31, 1996, to December 31, 1997.
-- The Company's percentage of the deposit market share within Hunterdon
County, New Jersey, improved from approximately 12 percent to
approximately 13 percent, keeping it third out of sixteen
institutions.
-14-
<PAGE>
-- The Bank opened three new branches and a larger residential mortgage
lending facility while the Company established a new financial
services subsidiary with separate office accommodations.
CONCLUSION. For these and other reasons, the Committee recommended an
increase in salary for Mr. Jablonski and for Mr. Horvath from $140,000 in 1997
to $145,000 in 1998. In addition, the Committee approved and recommended
payment of a $100,000 cash bonus to each of Mr. Jablonski and to Mr. Horvath,
the payment of which was deferred until 1998, pursuant to a special recognition
bonus and the annual incentive plan. (See "Executive Compensation--Annual
Incentive Plan"). The Committee also granted 10,800 stock options under the
SMP, 2,500 stock options under the KEP and 9,900 SARs under the long-term
incentive plan to each of Mr. Jablonski and Mr. Horvath in 1997. (See
"Executive Compensation.") The Committee believes that these compensation
amounts and awards reflect appropriate levels given the Company's performance in
1997 and the individual performance of management. The Committee also believes
that these awards evidence the Committee's philosophy to emphasize long-term
incentive rewards tied to the Company's performance.
Submitted by the Compensation
and Budget Committee: James W. MacDonald (Chairman)
Roland D. Boehm, Sr.
Louis R. DeFalco
-15-
<PAGE>
STOCK PRICE PERFORMANCE
The following line graph presents the cumulative total yearly shareholder
return (assuming reinvestment of dividends, if any) from investing $100 on
December 31, 1993, in each of (i) the Company stock; (ii) SNL Securities'
NASDAQ Stock Index; and (iii) SNL Securities' Middle-Atlantic Banks Index, an
index which compiles stock information on all publicly traded banks located in
the middle Atlantic states. The Company stock was listed on NASDAQ on November
30, 1993.
PRESTIGE FINANCIAL CORP.
[PERFORMANCE GRAPH]
<TABLE>
PERIOD ENDING
---------------------------------------------------
INDEX 12-31-93 12-31-94 12-31-95 12-31-96 12-31-97
- ----- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Prestige Financial Corp. $100.00 $86.48 $179.57 $232.68 $310.11
NASDAQ--Total US 100.00 97.75 138.23 170.04 208.65
SNL Banks (Middle Atlantic) Index 100.00 97.22 155.59 223.27 317.32
</TABLE>
-16-
<PAGE>
PROPOSAL 2 - AMENDMENT OF STOCK OPTION PLAN FOR SENIOR MANAGEMENT
The 1994 Stock Option Plan for Senior Management (the "SMP") was approved
by the Company's shareholders on April 29, 1994. The SMP provides for the
issuance of shares of Company stock upon the exercise of stock options
(incentive or non-qualified) granted to senior management of the Company at
prices not less than fair market value as of the date of grant. Options for the
purchase of 104,100 shares of Company stock may currently be granted under the
SMP. In general, vesting in the rights to exercise options granted under the
SMP will be determined by the Committee upon the grant of the options, provided,
however, that all options must fully vest by the fifth anniversary of the date
of grant and options may not be exercised earlier than six months after the date
of grant. All options granted under the SMP expire ten years after the date of
grant and cannot be assigned. Options were granted under the SMP for 41,250
shares of Company stock to each of the top two executives effective as of
February 9, 1994, and for 10,800 shares of Company stock to each of the top two
executives effective February 5, 1997. The exercise price for these options was
the fair market value of Company stock on the effective date of grants. These
options vest in two annual installments with the first installment vesting one
year from the date of grant. The SMP terminates on February 9, 2004. (See
"Executive Compensation--Stock Option Plans".)
Because no options remain to be granted under the SMP, the following
amendment to the SMP is being submitted for shareholder approval at the Annual
Meeting:
Section 4(a) shall be amended to provide for the issuance
of options for 139,100 shares of Company stock to executive
officers of the Company.
In all other respects the SMP will remain the same. Shareholders may
receive a copy of the 1994 Stock Option Plan for Senior Management without
charge upon written request directed to J. Susan Berger, Secretary, One Royal
Road, P.O. Box 2480, Flemington, New Jersey 08822.
Subject to shareholder approval of this amendment to the SMP, each of the
Company's top two executives were granted options for 17,500 shares to be
effective as of January 14, 1998. These options will vest in two equal annual
installments with the first installment vesting one year from the date of grant.
This amendment must be approved by the holders of a majority of the shares
of Company stock present at the Annual Meeting, in person or by Proxy, in order
to be effective. The Board of Directors believes the amendment to the SMP is in
the best interest of the Company and its shareholders and recommends that
shareholders vote for APPROVAL OF THE AMENDMENT TO THE 1994 STOCK OPTION PLAN
FOR SENIOR MANAGEMENT.
PROPOSAL 3 - AMENDMENT OF STOCK OPTION PLAN FOR OUTSIDE DIRECTORS
The 1994 Stock Option Plan for Outside Directors (the "ODP") currently
provides for the issuance of shares of Company stock upon the exercise of
non-qualified stock options granted to non-employee directors of the Company
and the Bank with at least two years of service at prices not less than fair
market value as of the date of grant. Options for the purchase of 105,600
shares of Company stock may currently be granted under the ODP. As of March
10, 1998, options for all 105,600 shares of Company stock had been granted
under the ODP. Vesting in the rights to exercise options granted under the ODP
occurs in two equal annual installments with the first installment vesting one
year from the date of grant. All options granted under the ODP expire on the
earlier of ten years following the date of grant or one year following the
date the optionee
-17-
<PAGE>
ceases to serve as a director. Options are granted under the ODP at no less
than the fair market value of the Company stock on the date of grant and cannot
be assigned. The ODP terminates on February 9, 2004.
Because no options for shares of Company Stock remain to be granted under
the ODP, the following amendment to the ODP is being submitted for shareholder
approval at the Annual Meeting:
Section 4 shall be amended to provide for the issuance of
options for 125,600 shares of Company stock to non-employee
directors of the Company and the Bank.
In all other respects, the ODP will remain the same. Shareholders may
receive a copy of the 1994 Stock Option Plan for Outside Directors without
charge upon written request directed to J. Susan Berger, Secretary, One Royal
Road, P.O. Box 2480, Flemington, New Jersey 08822.
Subject to shareholder approval of this amendment, each of the Company's
five non-employee directors (Messrs. Boehm, DeFalco, Lustig, MacDonald and
Stryker) were granted options for 4,000 shares of Company stock, to be effective
as of January 14, 1998.
This amendment must be approved by the holders of a majority of the shares
of Company stock present at the Annual Meeting, in person or by Proxy, in order
to be effective. The Board of Directors believes the amendment to the ODP is in
the best interest of the Company and its shareholders and recommends that
shareholders vote for APPROVAL OF THE AMENDMENT TO THE 1994 STOCK OPTION PLAN
FOR OUTSIDE DIRECTORS.
PROPOSAL 4 - RATIFICATION OF SELECTION OF INDEPENDENT ACCOUNTANTS
KPMG Peat Marwick LLP has served as the Company's accountant since its
formation in February 1993 for the years ended December 31, 1993, through
December 31, 1997. At the Annual Meeting, shareholders will be asked to ratify
the appointment of KPMG Peat Marwick LLP as the Company's accountant for the
fiscal year ending December 31, 1998. Management recommends voting in favor of
the appointment.
Representatives of KPMG Peat Marwick LLP will be present at the Annual
Meeting with the opportunity to make a statement and to respond to appropriate
questions.
The Board of Directors recommends that shareholders vote for RATIFICATION
OF THE SELECTION OF KPMG PEAT MARWICK LLP AS THE COMPANY'S ACCOUNTANTS FOR 1998.
COMPLIANCE WITH SECTION 16(A)
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
executive officers, directors and persons who beneficially own more than 10
percent of the common stock of the Company to file initial reports of ownership
and reports of changes in ownership with the Securities and Exchange Commission
("SEC"). Such persons are also required by SEC regulations to furnish the
Company with copies of these reports. Based solely on a review of the copies of
such reports furnished to the Company, to the best of the Company's knowledge,
the Company's executive officers, directors and greater than 10 percent
beneficial owners complied with all Section 16(a) filing requirements.
-18-
<PAGE>
FINANCIAL STATEMENTS
An annual report, including consolidated financial statements of the
Company and the Bank prepared in conformity with generally accepted accounting
principles, is being distributed to all Company shareholders of record and is
enclosed herewith. THE COMPANY'S ANNUAL REPORT TO THE SEC ON FORM 10-K MAY BE
OBTAINED WITHOUT CHARGE UPON WRITTEN REQUEST DIRECTED TO J. SUSAN BERGER,
SECRETARY, ONE ROYAL ROAD, P.O. BOX 2480, FLEMINGTON, NEW JERSEY 08822.
SHAREHOLDERS' PROPOSALS
It is expected that the 1999 Annual Meeting of Shareholders of the Company
will be held on or about April 20, 1999. Any proposals intended to be presented
at the 1999 Annual Meeting must be received at the Company's offices on or
before November 23, 1998, in order to be considered for inclusion in the
Company's Proxy Statement and form of Proxy relating to such meeting.
OTHER MATTERS
The Annual Meeting is called for the purposes set forth in this notice.
Management is not aware of any other matter that will come before the meeting.
However, if any other business should come before the meeting, your Proxy, if
signed and returned, will give to the persons designated in it discretionary
authority to vote according to their best judgment. It is the intention of the
persons named in the Proxy to vote pursuant to the Proxy in accordance with the
recommendations of management.
By Order of the Board of Directors
J. Susan Berger, Secretary
Flemington, New Jersey
March 20, 1998
-19-
<PAGE>
REVOCABLE PROXY
PRESTIGE FINANCIAL CORP.
SOLICITED BY THE BOARD OF DIRECTORS FOR
ANNUAL MEETING OF SHAREHOLDERS
APRIL 21, 1998
The undersigned holder of common stock of Prestige Financial Corp., a New
Jersey corporation (the "Company"), acknowledges receipt of a copy of the Notice
of Annual Meeting of Shareholders dated March 20, 1998, and, revoking any proxy
heretofore given, hereby appoints Greg Schneider and Annette M. Dalley, and each
of them, with full power to each of substitution as attorneys and proxies to
appear and vote all shares of common stock of the Company registered in the
name(s) of the undersigned and held by the undersigned of record as of March 10,
1998, at the Annual Meeting of Shareholders of the Company to be held at One
Royal Road, Flemington, New Jersey, on April 21, 1998, at 5:30 p.m., and at any
postponements and adjournments thereof, upon the following items as set forth in
the Notice of Annual Meeting and to vote according to their discretion on all
other matters which may be properly presented for action at the meeting. All
properly executed proxies will be voted as indicated.
UNLESS OTHERWISE SPECIFIED, THIS PROXY WILL BE VOTED "FOR" THE FOLLOWING ITEMS:
(1) To elect as directors the nominees listed below.
____ FOR ALL nominees listed below (except as marked to the contrary).
____ WITHHOLD AUTHORITY to vote for all nominees listed below.
Instruction: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, STRIKE
A LINE THROUGH THAT NOMINEE'S NAME IN THE LIST BELOW:
Roland D. Boehm, Sr. Gerald A. Lustig
Louis R. DeFalco James W. MacDonald
Arnold F. Horvath Arthur Stryker, Jr.
Robert J. Jablonski
(2) To approve an amendment to the 1994 Stock Option Plan for Senior
Management.
____ FOR ____ AGAINST ____ ABSTAIN
(3) To approve an amendment to the 1994 Stock Option Plan for Outside
Directors.
____ FOR ____ AGAINST ____ ABSTAIN
(4) To ratify the selection of KPMG Peat Marwick LLP as the Company's
public accountants for 1998.
____ FOR ____ AGAINST ____ ABSTAIN
(5) In their discretion, the proxy holders are authorized to vote upon
such other business as may be properly presented at the meeting or
matters incidental to the conduct of the meeting.
THIS PROXY IS SOLICITED BY AND ON BEHALF OF THE BOARD OF DIRECTORS AND MAY BE
REVOKED PRIOR TO ITS EXERCISE. THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR"
PROPOSALS 1, 2, 3 AND 4. THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS
DIRECTED. IF NO DIRECTION IS MADE IT WILL BE VOTED "FOR" PROPOSALS 1, 2, 3 and
4.
<PAGE>
WITNESS my hand this _________ day of ____________________, 1998.
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NAME AND ADDRESS OF (Please sign exactly as name appears
COMPANY SHAREHOLDER(s) hereon. When signing as attorney,
executor, administrator, trustee or
guardian, give full title as such.
If a corporation, please affix
corporate seal. If a partnership,
please sign in partnership name by
authorized persons. If joint tenants,
each joint tenant should sign.)
- -------------------------------------
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Signature of Shareholder(s)
WHETHER OR NOT YOU PLAN TO ATTEND THIS MEETING, PLEASE MARK, SIGN, DATE AND
RETURN THIS PROXY CARD PROMPTLY BY USING THE ENCLOSED POSTAGE-PAID ENVELOPE.
I/WE DO ____ DO NOT ___ EXPECT TO ATTEND THIS MEETING.
