SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[_] Confidential, For Use of the Commission Only (as permitted by Rule
14(a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to ss.240.14a-12
SUSSEX BANCORP
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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SUSSEX BANCORP
399 State Highway 23
P.O. Box 353
Franklin, NJ 07416
March 22, 2004
To Our Stockholders:
You are cordially invited to attend the Annual Meeting of Stockholders
(the "Annual Meeting") of Sussex Bancorp (the "Company"), the holding company
for Sussex Bank (the "Bank"), to be held on April 28, 2004, at 10:30 a.m. at the
Bank's Augusta office, 100 Route 206, Augusta, New Jersey.
At the Annual Meeting stockholders will be asked to consider and vote upon
the election of Irvin Ackerson and Terry Thompson to the Company's Board of
Directors to each serve for a term of three years.
The Board of Directors of the Company believes that the election of its
nominees to the Board of Directors is in the best interests of the Company and
its stockholders and unanimously recommends that you vote "FOR" each of the
Board's nominees.
Your cooperation is appreciated since a majority of the Common Stock of
the Company must be represented, either in person or by proxy, to constitute a
quorum for the conduct of business. Whether or not you expect to attend, please
sign, date and return the enclosed proxy card promptly in the postage-paid
envelope provided so that your shares will be represented.
Very truly yours,
Chairman of the Board
SUSSEX BANCORP
399 State Highway 23
P.O. Box 353
Franklin, NJ 07416
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL 28, 2004
Notice is hereby given that the Annual Meeting of Stockholders (the
"Annual Meeting") of Sussex Bancorp (the "Company") will be held at Sussex
Bank's Augusta office, 100 Route 206, Augusta, New Jersey, on April 28, 2004, at
10:30 a.m. for the purpose of considering and voting upon the following matters:
1. The election of Irvin Ackerson and Terry Thompson to serve as
directors of the Company for a term of three years, and in each case
until his successor is elected and duly qualified;
2. Such other business as shall properly come before the Annual
Meeting.
Stockholders of record at the close of business on March 5, 2004 are
entitled to notice of and to vote at the Annual Meeting. Whether or not you
contemplate attending the Annual Meeting, it is suggested that the enclosed
proxy be executed and returned to the Company. You may revoke your proxy at any
time prior to the exercise of the proxy by delivering to the Company a later
proxy or by delivering a written notice of revocation to the Company.
By Order of the Board of Directors
Chairman of the Board
Franklin, New Jersey
March 22, 2004
IMPORTANT---PLEASE MAIL YOUR PROXY PROMPTLY
SUSSEX BANCORP
399 State Highway 23
P.O. Box 353
Franklin, NJ 07416
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PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
APRIL 28, 2004
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GENERAL PROXY STATEMENT INFORMATION
This Proxy Statement is being furnished to stockholders of Sussex Bancorp
(the "Company") in connection with the solicitation by the Board of Directors of
proxies to be used at the annual meeting of stockholders (the "Annual Meeting"),
to be held on April 28, 2004, at 10:30 a.m., at Sussex Bank's Augusta office,
100 Route 206, Augusta, New Jersey and at any adjournments thereof. The 2003
Annual Report to Stockholders, including consolidated financial statements for
the fiscal year ended December 31, 2003, and a proxy card, accompanies this
Proxy Statement, which is first being mailed to record holders on or about March
22, 2004.
Solicitation and Voting of Proxies
Regardless of the number of shares of common stock, no par value, of the
Company ("Common Stock") owned, it is important that you vote by completing the
enclosed proxy card and returning it signed and dated in the enclosed
postage-paid envelope. Stockholders are urged to indicate their vote in the
spaces provided on the proxy card. Proxies solicited by the Board of Directors
of the Company will be voted in accordance with the directions given therein.
Where no instructions are indicated, signed proxy cards will be voted "FOR" the
election of each of the nominees for director named in this Proxy Statement.
Other than the matters set forth on the attached Notice of Annual Meeting
of Stockholders, the Board of Directors knows of no additional matters that may
be presented for consideration at the Annual Meeting. Execution of a proxy,
however, confers on the designated proxy holders discretionary authority to vote
the shares in accordance with their best judgment on such other business, if
any, that may properly come before the Annual Meeting and at any adjournments
thereof, including whether or not to adjourn the Annual Meeting.
A proxy may be revoked at any time prior to its exercise by sending a
written notice of revocation to the Company, 399 State Highway 23, P.O. Box 353,
Franklin, New Jersey 07416, Attn: Candace A. Leatham. A proxy filed prior to the
Annual Meeting may be revoked by delivering to the Company a duly executed proxy
bearing a later date, or by attending the Annual Meeting and voting in person.
However, if you are a stockholder whose shares are not registered in your own
name, you will need appropriate documentation from your record holder to vote
personally at the Annual Meeting.
The cost of solicitation of proxies on behalf of the Board of Directors
will be borne by the Company. Proxies may also be solicited personally or by
mail or telephone by directors, officers and other employees of the Company and
Sussex Bank (the "Bank"), its wholly owned subsidiary, without additional
compensation therefor. The Company will also request persons, firms and
corporations holding shares in their names, or in the name of their nominees,
which are beneficially owned by others, to send proxy material to and obtain
proxies from such beneficial owners, and will reimburse such holders for their
reasonable expenses in doing so.
Voting Securities
The securities which may be voted at the Annual Meeting consist of shares
of the Company's Common Stock, with each share entitling its owner to one vote
on all matters to be voted on at the Annual Meeting, except as described below.
There is no cumulative voting for the election of directors.
The close of business on March 5, 2004, has been fixed by the Board of
Directors as the record date (the "Record Date") for the determination of
stockholders of record entitled to notice of and to vote at the Annual Meeting
and at any adjournments thereof. The total number of shares of Common Stock
outstanding on the Record Date was 1,818,991 shares.
The presence, in person or by proxy, of the holders of at least a majority
of the total number of shares of Common Stock entitled to vote is necessary to
constitute a quorum at the Annual Meeting. In the event that there are not
sufficient votes for a quorum, or to approve or ratify any matter being
presented at the time of the Annual Meeting, the Annual Meeting may be adjourned
in order to permit the further solicitation of proxies.
The proxy card being provided by the Board of Directors enables a
stockholder to vote "FOR" the election of the nominees proposed by the Board of
Directors, or to "WITHHOLD AUTHORITY" to vote for one or more of the nominees
being proposed. Under New Jersey law and the Company's Bylaws, directors are
elected by a plurality of votes cast, without regard to broker non-votes or
abstentions.
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ELECTION OF DIRECTORS
The Company's Certificate of Incorporation and its Bylaws authorize a
minimum of five (5) and a maximum of twenty-five (25) directors but leave the
exact number to be fixed by resolution of the Board of Directors. The Board has
fixed the number of directors at eight (8).
Directors are elected to serve for staggered terms of three years each,
with the term of certain directors expiring each year. Directors serve until
their successors are duly elected and qualified.
For 2004, the Board elected to reduce the number of Directors to eight.
Because of this, Mr. William E. Kulsar is not on the ballot for re-election at
this Annual Meeting.
If, for any reason, any of the nominees become unavailable for election,
the proxy solicited by the Board of Directors will be voted for a substitute
nominee selected by the Board of Directors. The Board has no reason to believe
that any of the named nominees is not available or will not serve if elected.
Unless authority to vote for the nominee is withheld, it is intended that the
shares represented by the enclosed proxy card, if executed and returned, will be
voted "FOR" the election of the nominees proposed by the Board of Directors.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE ELECTION OF THE
NOMINEES NAMED IN THIS PROXY STATEMENT.
Information with respect to the Nominees
The following tables set forth, as of the Record Date, the names of the
nominees for election and those directors whose terms continue beyond the Annual
Meeting, their ages, a brief description of their recent business experience,
including present occupations, and the year in which each became a director of
the Company or the Bank. No nominee is a director of another company registered
pursuant to Section 12 of the Securities Exchange Act of 1934 or subject to the
requirements of Section 15(d) of such Act or any company registered as an
investment company under the Investment Company Act of 1940.
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Table I
Nominees for 2004 Annual Meeting
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Name, Age and Position Principal Occupations During Director Term
With the Company Past Five Years Since (1) Expires
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Irvin Ackerson, 81 Excavating Contractor
Director Ackerson Contracting Co. 1976 2007
Oak Ridge, New Jersey
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Terry Thompson, 57 President and Chief Operations Officer of the
Director Bank 2001 2007
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(1) Includes prior service on Board of Directors of the Bank prior to
formation of the Company.
Table II
Directors of the Company whose Terms Continue Beyond this Annual Meeting
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Name, Age and Position Principal Occupations During Director Term
With the Company Past Five Years Since (1) Expires
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Mark J. Hontz, 37 Partner 1998 2006
Director Hollander Hontz Hinkes & Pasculli, L.L.C.
Newton, New Jersey
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Donald L. Kovach, 68 Chairman, CEO and President of the Company 1976 2006
Chairman of the Board, CEO
and President
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Joel D. Marvil, 69 Chairman of Manufacturing Co. 1989 2006
Director Ames Rubber Corporation
Hamburg, New Jersey
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Edward J. Leppert, 43 Owner, E.J. Leppert & Co. (certified public
Director accountants); previously partner, Murphy,
Perry & Leppert. 2002 2005
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Richard Scott, 68 Dentist, Richard Scott, DDS
Director Franklin, New Jersey 1976 2005
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Joseph Zitone, 72 General Contractor, Zitone Construction
Director Montague, New Jersey 1984 2005
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(1) Includes prior service on Board of Directors of the Bank prior to
formation of the Company.
The Company encourages all directors to attend the Company's annual
meeting. Seven (7) of the Company's directors were able to attend the 2003
annual meeting.
Board of Directors' Meetings
Pursuant to the New Jersey Business Corporation Act and the Company's
by-laws, the Company's business and affairs are managed under the direction of
the Board of Directors. The Board of Directors of the Company held four (4)
meetings during 2003. The Board of Directors holds regularly scheduled meetings
each month and special meetings as circumstances require. All of the directors
of the Company attended at least 75% of the total number of Board meetings held
and committee meetings held during 2003. A majority of the board consists of
individuals who are "independent" under the American Stock Exchange listing
standards (the "AMEX listing standards").
Shareholders Communications to the Board of Directors
Shareholders wishing to communicate with the independent members of the
Board of Directors may send correspondence to P.O. Box 965, Branchville, NJ
07826. All correspondence will go directly to the Chairman of our Audit
Committee.
Code of Conduct
The Board of Directors has adopted a Code of Conduct governing the
company's Chief Executive Officer and senior financial officers, as well as the
Board of Directors, officers and employees of the Company, as required by the
Sarbanes-Oxley Act, SEC regulations and the AMEX listing standards. The Code of
Conduct of conduct governs such matters as conflicts of interest, use of
corporate opportunity, confidentiality, compliance with law and the like. A copy
of the Code of Conduct has been filed as an exhibit to our annual report on Form
10-KSB.
Committees of the Board
During 2003, the Board of Directors maintained an Audit Committee and a
Compensation Committee. Although the Company plans to establish a Nominating
Committee meeting the requirements of the AMEX listing standards to select
nominees to the Board of Directors starting with the 2005 Annual Meeting, for
the 2004 Annual Meeting the full Board acted as a Nominating Committee. It is
expected that the Nominating Committee will consider qualified nominations for
directors recommended by shareholders. All shareholder recommendations will be
evaluated on the same basis as any recommendation from members of the Board or
management of the Company. Recommendations should be sent to P.O. Box 965,
Branchville, N.J. 07826. Any nomination for director should be received by the
Secretary on or before November 23, 2004.
Audit Committee
The Company's Audit Committee consisted during 2003 of Directors Edward J.
Leppert (Chairman), William E. Kulsar, Joel D. Marvil and Richard W. Scott. The
Audit Committee met five (5) times during 2003. For 2004, Mr. Edward J. Leppert
will continue as Chairman of the Audit Committee, and Messrs. Joel D. Marvil,
and Richard W. Scott will continue as members of
the Committee. All Directors who serve on the Audit Committee, both during 2003
and in 2004, are "independent" for purposes of the AMEX listing standards and,
as required under the Sarbanes-Oxley Act, no member of the Audit Committee
receives any form of compensation from the Company, apart from compensation for
Board and Committee service. The Board has determined that Mr. Leppert qualifies
as an "audit committee financial expert" as that term is defined in SEC
Regulation S-B Item 401(e).
The Audit Committee is also responsible for the pre-approval of all
non-audit services provided by its independent auditors. Non-audit services are
only provided by the Company's auditors to the extent permitted by law.
Audit Committee Report
The Audit Committee meets periodically, and in any event, no less than
once per quarter, to consider the adequacy of the Company's financial controls
and the objectivity of its financial reporting. The Audit Committee meets with
the Company's independent auditors and the Company's internal auditors, both
whom have unrestricted access to the Audit Committee.
The Board has adopted an amended written charter for the Audit Committee
setting forth the audit related functions the Audit Committee is to perform, its
structure and membership requirements. A copy of this amended Audit Committee
Charter is filed as Exhibit B to this proxy statement.
In connection with this year's financial statements, the Audit Committee
has reviewed and discussed the Company's 2003 audited financial statements with
the Company's officers and Beard Miller Company, LLP, its independent auditors.
We have discussed with Beard Miller Company, LLP the matters required to be
discussed by Statements on Auditing Standards 61, 89 and 90 (Communication with
Audit Committees), as amended or supplemented, which include, among other items,
matters related to the conduct of the audit of the Company's financial
statements. We also have received the written disclosures and letter from Beard
Miller Company, LLP as required by Independence Standards Board Standard No. 1
(Independence Discussions with Audit Committees), and have discussed with
representatives of Beard Miller Company, LLP their independence with regard to
all services provided.
Based on these reviews and discussions, the Audit Committee recommended to
the Board of Directors that the audited financial statements be included in the
Company's Annual Report on form 10-KSB for the fiscal year ended December 31,
2003 for filing with the U.S. Securities and Exchange Commission.
Edward J. Leppert (Chairman)
William E. Kulsar
Joel D. Marvil
Richard W. Scott
Compensation Committee
The Company maintains a Compensation Committee which sets the compensation
for the executive officers of the Company. In 2003, the Compensation Committee
consisted of Directors
Joel D. Marvil (Chairman), Irvin Ackerson, Edward Leppert and Mark J. Hontz, all
of whom are independent under the AMEX Listing Standards. In 2003, the
Compensation Committee met twice.
Compensation of Directors
During 2003, Directors of the Bank who were not full-time employees of the
Bank received a fee of $500 for each regular monthly Bank Board meeting or
special Bank Board meeting attended, and $100 for each committee meeting
attended. Each member of the Bank's loan committee will receive $500 per meeting
in 2004. During 2003, Directors of the Company received an annual retainer of
$5,000 each. In addition, members of the Audit Committee will receive in 2004 an
additional fee of $1,000 per Audit Committee meeting, and the Chairman will
receive $1,500 per meeting.
The Company maintains the 1995 Stock Option Plan for Non-Employee
Directors (the "Non-Employee Plan), the purpose of which is to assist the
Company in attracting and retaining qualified persons to serve as members of the
Board of Directors. Under the Non-Employee Plan, options may be granted at
exercise prices which may not be less than the fair market value of the Common
Stock on the date of grant. Under the Non-Employee Plan, each non-employee
director elected at the 1995 Annual Meeting was granted an option to purchase
3,000 shares at $11.25 per share (or 5,516 shares at $5.08 as adjusted for stock
dividends). In addition, each non-employee director who is elected or re-elected
to serve on the Board of Directors at succeeding annual meetings will be granted
an option to purchase 500 shares of Common Stock at the time of such
re-election. As of December 31, 2003, 44,732 options were outstanding under this
plan and 2,344 authorized shares were available for grant.
In addition, members of the Board of Directors are eligible to participate
in the 2001 Stock Option Plan, which was approved by the shareholders in 2000.
Under the 2001 Stock Option Plan, options to purchase up to a total of 165,000
shares of Common Stock may be granted. Pursuant to the terms of the 2001 Stock
Option Plan, options which qualify as incentive stock options under the Internal
Revenue Code of 1986 must be granted at an exercise price of no less than 100%
of the then current fair market value of the Common Stock, and options which are
nonstatutory options may be granted at an exercise price no less than 85% of the
then current fair market value of the Common Stock.
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information concerning the beneficial
ownership of shares of Common Stock as of February 27, 2004, by (i) each person
who is known by the Company to own beneficially more than five percent (5%) of
the issued and outstanding Common Stock, (ii) each director and nominee for
director of the Company, (iii) each executive officer of the Company described
in this Proxy Statement under the caption "Executive Compensation" and (iv) all
directors and executive officers of the Company as a group. Other than as set
forth in this table, the Company is not aware of any individual or group which
holds in excess of 5% of the outstanding Common Stock.
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Number of Shares Percent
Name of Beneficial Beneficially Owned (1) of Class
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Irvin Ackerson 37,051 (2) 2.02%
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Mark J. Hontz 6,294 (3) 0.35%
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Donald L. Kovach 132,755 (4)(5) 7.26%
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Edward J. Leppert 12,378 (6) 0.68%
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Joel D. Marvil 48,761 (7) 2.66%
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Richard Scott 57,319 (8) 3.13%
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Terry Thompson 32,000 (9) 1.75%
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Joseph Zitone 92,708 (10) 5.09%
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Directors & Principal Officers as a 490,728 25.75%
Group (11 persons)
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Name of Beneficial Owner of
More Than 5% of the Number of Shares Percent
Common Stock Beneficially Owned (1) of Class
------------ ---------------------- --------
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Ambrose Hamm
P.O. Box 955 132,229 7.27%
Branchville, NJ 07826
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Lakeland Bancorp, Inc.
250 Oak Ridge Road 162,956 8.96%
Oak Ridge, NJ 07438
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(1) Beneficially owned shares include shares over which the named person
exercises either sole or shared voting power or sole or shared investment
power. It also includes shares owned (i) by a spouse, minor children or by
relatives sharing the same home, (ii) by entities owned or controlled by
the named person, and (iii) by other persons if the named person has the
right to acquire such shares within 60 days by the exercise of any right
or option. Unless otherwise noted, all shares are owned of record and
beneficially by the named person, either directly or through the dividend
reinvestment plan.
(2) Includes 11,418 shares owned by Mr. Ackerson's wife. Also includes 13,138
shares purchasable upon the exercise of immediately exercisable stock
options.
(3) Also includes 3,977 purchasable upon the exercise of immediately
exercisable stock options.
(4) Includes 17,301 shares owned by Mr. Kovach's wife, 9,977 shares held by
IRA's for the benefit of Mr. Kovach and his spouse, 1,433 shares in the
name of ICBA Financial Services FBO Donald L. Kovach, 1,323 shares in the
name of ICBA Financial Services FBO Betty J. Kovach. Also includes 10,985
shares purchasable upon the exercise of stock options.
(5) Includes 41,771 shares over which Mr. Kovach has voting authority as
administrator for The Sussex County State Bank Employee Stock Ownership
Plan.
(6) Includes 992 shares in the name of Sun America FBO Cynthia Leppert, IRA
and 3,396 in the name of Salomon Smith Barney FBO Edward J. Leppert, IRA.
Also includes 3,150 shares purchasable upon the exercise of immediately
exercisable stock options.
(7) Also includes 13,429 shares purchasable upon the exercise of immediately
exercisable stock options.
(8) Also includes 13,307 shares purchasable upon the exercise of immediately
exercisable stock options.
(9) Includes 13,125 shares in the name of American Express Trust Co. FBO Terry
H. Thompson, IRA. Also includes 14,410 shares purchasable upon the
exercise of immediately exercisable stock options.
(10) Includes 12,309 shares owned by the Zitone Construction & Supply Co., Inc.
Profit Sharing Plan Trust, 22,509 shares owned by Zitone Family Limited
Partnership and 17,198 shares in the name of Smith Barney FBO Joseph
Zitone. Also includes 3,201 shares purchasable upon the exercise of
immediately exercisable stock options.
Annual Executive Compensation and All Other Compensation
The following table sets forth a summary for the last three (3) fiscal
years of the cash and non-cash compensation awarded to, earned by, or paid to,
the Chief Executive Officer of the Company and each other executive officer
whose remuneration exceeded $100,000 for the last fiscal year.
SUMMARY COMPENSATION TABLE
Cash and Cash Equivalent Forms
of Remuneration
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Annual Compensation Award Payouts
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Securities
Underlying LTIP All Other
Other Annual Options/SARs Payouts Compensation
Name and Year Bonus ($) Compensation (#) ($) ($)
Principal ---- Salary ($) --------- ($) --- --- ---
Position ---------- ---
--------
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2003 $202,087 -0- (1) 9,975 None $143,049(5)
Donald L. -------------------------------------------------------------------------------------------------------------
Kovach,
Chairman of 2002 $188,143 -0- (1) 3,000 None $117,869 (5)
the -------------------------------------------------------------------------------------------------------------
Board and
CEO 2001 $177,234 -0- (1) 1,080 None $94,156 (5)
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George B. 2003 $50,000 $21,515 (3) $76,264 (4) 4,988 None -0-
Harper, -------------------------------------------------------------------------------------------------------------
President,
Tri-State 2002 $50,000 $5,660 (3) $71,570 (4) -- None -0-
Insurance -------------------------------------------------------------------------------------------------------------
Agency,
Inc. 2001 $12,500 (2) -0- $11,300 (4) -- None -0-
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George 2003 $120,000 $21,515 (3) $95,822 (4) 4,988 None -0-
Lista, Chief -------------------------------------------------------------------------------------------------------------
Operating
Officer, 2002 $120,000 $5,660 (3) $68,495 (4) -- None -0-
Tri-State -------------------------------------------------------------------------------------------------------------
Insurance
Agency, 2001 $30,000 (2) -0- $11,300 (4) -- None -0-
Inc.
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Terry 2003 $109,650 -0- $1,051 (1)(6) 7,481 None -0-
Thompson, -------------------------------------------------------------------------------------------------------------
President
and COO of 2002 $98,280 -0- (1) 3,780 None -0-
the Bank -------------------------------------------------------------------------------------------------------------
2001 $93,880 -0- (1) 735 None -0-
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(1) During the fiscal years presented, the Company provided additional life
insurance and an automobile and provided a match to the 401(k) plan
account for each of Messrs. Kovach and Thompson. The use made thereof for
personal purposes did not exceed 10% of the total cash compensation to
such persons' base salary and bonus and therefore is not included in the
above table.
(2) Messrs. Harper and Lista became executive officers of the Company on
October 1, 2001 with the acquisition of Tri-State Insurance Agency, Inc.
at annual salaries of $50,000 for Mr. Harper and $120,000 for Mr. Lista.
(3) Bonus is the fair market value of 1,516 shares of the Company's common
stock.
(4) Represents commissions earned on the sale of insurance products.
(5) Represents amount charged by the Company to expense in connection with the
Supplemental Executive Retirement Plan ("SERP") implemented for Mr. Kovach
in 2000.
(6) Includes the implied value realized upon the exercise of options to
purchase 189 shares representing the difference between the exercise price
and the fair market value on the date of exercise. Since Mr. Thompson did
not actually sell the underlying shares, he did not recognize this implied
value.
Employment Agreements
The Company and the Bank are parties to an Amended Employment Agreement
with Mr. Donald L. Kovach pursuant to which he serves as President and Chief
Executive Officer of the Company and Chief Executive Officer of the Bank (the
"Employment Agreement"). The Employment Agreement, as amended, provides for a
term ending on August 31, 2007, although it will be automatically extended on
each anniversary date for up to two additional one-year periods unless either
party provides notice of their intention not to extend the contract. The
Employment Agreement provides that Mr. Kovach will receive a base salary of
$223,300, subject to increase or decrease, and he may be granted a discretionary
bonus, in cash or equity, as determined by the Board of Directors. The
Employment Agreement permits the Company to terminate Mr. Kovach's employment
for cause at any time. The Employment Agreement defines cause to mean personal
dishonesty, willful misconduct, breach of fiduciary duty involving personal
profit, intentional failure to perform stated duties, willful violation of law,
rule or regulation, other than traffic violations or similar offenses, or
violation of a final cease and desist order, or a material breach of any
provision of the Agreement. In the event Mr. Kovach is terminated for any reason
other than cause, or in the event Mr. Kovach resigns his employment because he
is reassigned to a position of lesser rank or status than President and Chief
Executive Officer, his place of employment is relocated by more than 30 miles
from its location on the date of the Agreement, or his compensation or other
benefits are reduced, Mr. Kovach, or in the event of his death, his beneficiary,
will be entitled to receive his base salary at the time of such termination or
resignation for the remaining term of the Agreement. In addition, the Company
will continue to provide Mr. Kovach with certain insurance and other benefits
through the end of the term of the Agreement. Mr. Kovach's Employment Agreement
further provides that upon the occurrence of a change in control of the Company,
as defined in the Employment Agreement, and in the event Mr. Kovach is
terminated for reasons other than cause or in the event Mr. Kovach, within 18
months of the change in control, resigns his employment for the reasons
discussed above, he shall be entitled to receive a severance payment based upon
his then current base salary. Under the Agreement, in the event the change in
control occurs, Mr. Kovach is entitled to a severance payment equal to 2.99
times his then current base salary. The Employment Agreement also prohibits Mr.
Kovach from competing with the Bank and the Company for a period of one year
following termination of his employment.
The Company and the Bank are parties to an employment agreement with Terry
Thompson. Under this agreement, Mr. Thompson will serve as President of the Bank
for a period ending on January 23, 2006. Mr. Thompson's agreement also provides
that its terms will automatically be extended for one additional year, until
January 23, 2007, unless the Company provides notice three (3) months prior to
the termination of the original term of the agreement. The agreement also
provides that it will also be extended for an additional one-year period unless
notice is given prior to the fourth anniversary of the agreement. Under the
agreement, Mr. Thompson is to receive a base salary of $110,000. Mr. Thompson
may also be entitled to receive a bonus, if granted in the discretion of the
Board of Directors, and he will receive customary fringe benefits, including an
automobile or cash allowance, consistent with his position as President of the
Bank. Mr. Thompson may be terminated for "cause", as defined in the agreement.
In the event he is terminated without "cause", he will entitled to receive his
then current base salary for the remaining term of the agreement, and the
Company will be obligated to continue his health benefits for such period. Mr.
Thompson's agreement contains a change in control provision substantially
similar to the one contained in Mr. Kovach's agreement described above. Mr.
Thompson's agreement also contains a covenant not to compete, whereby Mr.
Thompson is prohibited for a period of one year after termination of his
employment from affiliating with any enterprise which competes with the Company
in the counties which the Company is conducting business on the date of
termination.
In connection with the Company's acquisition of Tri-State Insurance
Agency, Inc. ("Tri-State") effective October 1, 2001, the Company entered into
employment agreements with each of Messrs George B. Harper and George Lista.
Under these agreements, each of Messrs. Harper and Lista is to be paid a base
salary ($50,000 for Mr. Harper and $120,000 for Mr. Lista) and commissions for
insurance products actually placed. In addition, each of Messrs Harper and Lista
is entitled to receive bonuses based upon the net before tax income of Tri-State
for each twelve-month period commencing on the effective date of the
acquisition. To the extent Tri-State's net before tax income exceeds certain
designated targets contained in each employment agreement, each of Messrs.
Harper and Lista will be entitled to receive a bonus equal to 25% of the amount
by which the net before tax income of Tri State exceeds the target. The bonus is
to be paid in shares of the Company's common stock. The amount of stock to be
issued will be determined by dividing the amount of the bonus by the fair market
value of the Company's common stock, determined by taking the average closing
price of the common stock for the fifteen trading days prior to issuance. For
the twelve-month period ended September 30, 2003, Tri-State exceeded its
targeted net before tax income, and each of Messrs. Harper and Lista received a
bonus of 1,516 shares of the Company's common stock. The employment agreements
with Messrs. Harper and Lista expire on September 30, 2006.
Retirement Plans
The Bank maintains a salary continuation plan for Mr. Kovach. Under this
plan, as recently amended, Mr. Kovach will receive a retirement benefit equal to
35% of his average final compensation determined by his last five years of
employment, provided that to the extent Mr. Kovach continues to work past age
70,his final compensation will be increased 4% per year for each year he works
past age 70 until his retirement. Mr. Kovach will receive this benefit in the
event that he works until retirement, or he is involuntarily discharged prior to
his retirement for any reason other than "cause". For purposes of the Salary
Continuation Agreement, cause is defined in the same manner as under Mr.
Kovach's Employment Agreement. Annual retirement payments are to be made for
fifteen years under the Salary Continuation Agreement to Mr. Kovach or, in the
event of his death, to his spouse.
1995 Incentive Stock Option Plan and 2001 Stock Option Plan
The Company maintains the 1995 Incentive Stock Option Plan which provides
for options to purchase shares of Common Stock to be issued to key employees of
the Company, the Bank and any other subsidiaries which the Company may acquire
or incorporate in the future. The Company
also maintains the 2001 Stock Option Plan, under which options to purchase
shares of Common Stock may be issued to employees, officers and directors of the
Company, the Bank and any other subsidiaries which the Company may acquire or
incorporate in the future. Recipients of options granted under the Plans are
selected by the Stock Option Committee of the Board of Directors. The Stock
Option Committee has the authority to determine the terms and conditions of
options granted under the Plans and the exercise price therefore. The exercise
price for options granted under the 1995 Incentive Stock Option Plan, and for
Incentive Stock Options under the 2001 Stock Option Plan may be no less than the
fair market value of the Common Stock. The exercise price for nonstatutory
options granted under the 2001 Stock Option Plan may be no less than 85% of the
fair market value of the Common Stock.
In addition, if it is approved by the shareholders, employees of the
Company, including executive officers, will be eligible to participate in the
2003 Equity Incentive Plan.
The following table sets forth information regarding stock option grants
to the individuals named in the table above:
OPTION/SAR GRANTS IN LAST FISCAL YEAR
=================================================================================================================================
INDIVIDUAL GRANTS
---------------------------------------------------------------------------------------------------------------------------------
Number of % of Total
Securities Option/SARs
Underlying Granted to Exercise or Present Value of
Options/SARs Employees in Base Price Expiration Option on Date of
Name Granted (#) Fiscal Year ($/SH) Date Grant($)(3)
---------------------------------------------------------------------------------------------------------------------------------
Donald L. Kovach 9,975(1) 16.3% $9.90 1/22/13 $1.16
---------------------------------------------------------------------------------------------------------------------------------
Terry Thompson 7,481(2) 12.2% $9.90 1/22/13 $1.16
---------------------------------------------------------------------------------------------------------------------------------
George B. Harper 4,988(4) 8.2% $10.05 4/23/13 $1.15
---------------------------------------------------------------------------------------------------------------------------------
George Lista 4,988(4) 8.2% $10.05 4/23/13 $1.15
=================================================================================================================================
----------
(1) As of December 31, 2003, 2,494 of these options were immediately
exercisable.
(2) As of December 31, 2003, 1,870 of these options were immediately
exercisable.
(3) The present value of each option grant is 1,1870estimated on the date of
grant using the Black-Scholes option pricing model with the following
weighted average assumptions: dividend yield of 2.44%, expected volatility
of 15.18%, risk free interest rate of 3.62%, and an expected life of seven
(7) years.
(4) As of December 21, 2003, 2,494 of these options were immediately
exercisable.
The following table sets forth information concerning the fiscal year-end
value of unexercised options held by the executive officers of the Company named
in the table above.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL
YEAR AND FY-END OPTION/SAR VALUES
====================================================================================================================================
Value of Unexercised
Number of Securities In-the-Money Options/SARs at
Underlying Unexercised FY-End ($) (based on $10.25 per
Options/SARs at FY-End (#) share)
Shares Acquired on Value Exercisable/ Exercisable/
Name Exercise (#) Realized ($) Unexercisable Unexercisable
------------------------------------------------------------------------------------------------------------------------------------
Donald L. Kovach -0- -0- 10,619/9,705 $72,259/$96,066
------------------------------------------------------------------------------------------------------------------------------------
Terry Thompson 189 $1,051 4,128/7,967 $40,999/$78,825
------------------------------------------------------------------------------------------------------------------------------------
George B. Harper -0- -0- 2,297/3,741 $22,780/$37,597
------------------------------------------------------------------------------------------------------------------------------------
George Lista -0- -0- 1,247/3,741 $12,532/$37,597
====================================================================================================================================
Interest of Management and Others in Certain Transactions
The Bank has made in the past and, assuming continued satisfaction of
generally applicable credit standards, expects to continue to make loans to
directors, executive officers and their associates (i.e. corporations or
organizations for which they serve as officers or directors or in which they
have beneficial ownership interests of ten percent or more). These loans have
all been made in the ordinary course of the Bank's business on substantially the
same terms, including interest rates and collateral, as those prevailing at the
time for comparable transactions with other persons and do not involve more than
the normal risk of collectibility or present other unfavorable features.
The Bank paid $15,770 to Irvin Ackerson for appraisal services rendered to
the Bank during fiscal 2003. Irvin Ackerson continues to render appraisal
services to the Bank.
The Bank leases its Montague branch office from Montague Mini Mall, Inc.
under a lease covering 1,200 square feet. The lease agreement was renewed as of
April 1, 2002. As renewed, the lease will terminate on March 31, 2007, and
provides for a monthly rent of $1,850. Mr. Joseph Zitone, a Director of the
Company, is a majority stockholder of Montague Mini Mall, Inc. The Company
considers the lease terms to be comparable to those which exist with
unaffiliated third parties.
Recommendation and Vote Required
Nominees will be elected by a plurality of the shares voting at the Annual
Meeting.
THE BOARD UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" ITS NOMINEES
FOR THE BOARD OF DIRECTORS.
INDEPENDENT AUDITORS
The Company's independent auditors for the fiscal year ended December 31,
2003 were Beard Miller Company, LLP. Beard Miller Company, LLP has advised the
Company that one or more of its representatives will be present at the Annual
Meeting to make a statement if they so desire and to respond to appropriate
questions. In 2003, Beard Miller Company, LLP performed audit and audit related
services for the company. In addition, Beard Miller Company, LLP rendered
certain tax related services to the company, the only non-audit related services
provided by Beard Miller Company, LLP. In connection with the retention of Beard
Miller Company, LLP to render tax related services, the audit committee
considered the possible effect on Beard Miller's independence before approving
their retention.
Principal Accounting Firm Fees
Aggregate fees billed to the company for the fiscal years ended December 31,
2002 and 2003 by the company's principal accounting firm, Beard Miller, are
shown in the following table:
--------------------------------------------------------------------------------
2003 2002
---- ----
--------------------------------------------------------------------------------
Audit Fees 1 $55,376 $48,918
--------------------------------------------------------------------------------
Audit-related fees 2 7,666 4,444
--------------------------------------------------------------------------------
Tax fees 3 2,842 0
--------------------------------------------------------------------------------
All other fees 0 0
------- -------
--------------------------------------------------------------------------------
$65,884 $53,362
======= =======
--------------------------------------------------------------------------------
1. Includes professional services rendered for the audit of the Company's annual
financial statements and review of financial statements included in Forms
10-QSB, or services normally provided in connection with statutory and
regulatory filings, including out-of-pocket expenses.
2. Assurance and related services reasonably related to the performance of the
audit or review of financial statements include the following: For 2003,
assistance with 2002 financial statements and 10-KSB disclosure and 2003 10-Q
disclosures, accounting consultations in regard to mortgage banking agreement
and proposed operation, OREO sales research, review of internal audit proposal,
research on FHLB mortgage sales accounting treatment, research on restructured
loans, and review of title insurance partnership agreement and related
accounting. For 2002, accounting consultations in regard to branch lease
settlement, goodwill impairment valuation issues, ALL calculation under FASH No.
114, review of insurance company accounting and payout, assistance with EPS
calculation, and trust preferred issues.
3. Tax fees include the following: tax planning meetings with tax accountant and
management and related research in regard to New Jersey income tax.
COMPLIANCE WITH SECTION 16(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers and directors, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange Commission.
Officers, directors and greater than ten percent stockholders are required by
regulation of the Securities and Exchange Commission to furnish the Company with
copies of all Section 16(a) forms they file.
The Securities and Exchange Commission rules governing the filing of
reports under Section 16(a) of the Securities Exchange Act of 1934 have been
revised to substantially to accelerate the filing deadlines for these reports,
and to require electronic filing. During the transition period to these new
requirements, a number of our insiders filed required reports after the required
deadlines. The following table provides a list of the individuals who filed
reports under Section 16 (a) after the required deadlines, the number of late
reports and the number of transactions involved:
-----------------------------------------------------------
Late Filers Reports/Transactions
----------- --------------------
-----------------------------------------------------------
-----------------------------------------------------------
Irving Ackerson 1
-----------------------------------------------------------
Katherine Caristia 1
-----------------------------------------------------------
George Harper 1
-----------------------------------------------------------
Mark Hontz 3
-----------------------------------------------------------
Donald Kovach 1
-----------------------------------------------------------
William Kulsar 1
-----------------------------------------------------------
Edward Leppert 2
-----------------------------------------------------------
George Lista 1
-----------------------------------------------------------
Timothy Marvil 1
-----------------------------------------------------------
Richard Scott 1
-----------------------------------------------------------
Joseph Zitone 1
-----------------------------------------------------------
STOCKHOLDER PROPOSALS
Proposals of stockholders to be included in the Company's 2005 proxy
material must be received by the Secretary of the Company no later than November
30, 2004.
OTHER MATTERS
The Board of Directors is not aware of any other matters which may come
before the Annual Meeting. However, in the event such other matters come before
the meeting, it is the intention of the persons named in the proxy to vote on
any such matters in accordance with the recommendation of the Board of
Directors.
SUSSEX BANCORP
REVOCABLE PROXY FOR
ANNUAL MEETING OF SHAREHOLDERS
APRIL 28, 2004
Solicited on Behalf of the Board of Directors
The undersigned hereby appoints Edward J. Leppert and Mark J. Hontz and
each of them, with full power of substitution, to vote all of the shares of
Sussex Bancorp (the "Company") standing in the undersigned's name at the Annual
Meeting of Shareholders of the Company, to be held at the Augusta office of
Sussex Bank (the "Bank"), 100 Route 206, Augusta, New Jersey, on Wednesday,
April 28, 2004, at 10:30 A.M., and at any adjournment thereof. The undersigned
hereby revokes any and all proxies heretofore given with respect to such
meeting.
This proxy will be voted as specified below. If no choice is specified,
the proxy will be voted "FOR" Management's nominees to the Board of Directors.
The Board of Directors recommends a vote for its nominees.
1. Election of the following two (2) nominees to each serve on the Board
of Directors for the term described below and until their successors are elected
and duly qualified: Irvin Ackerson and Terry H. Thompson for a term of three (3)
years.
|_| FOR ALL NOMINEES
TO WITHHOLD AUTHORITY FOR ANY OF THE ABOVE NAMED NOMINEES,
PRINT THE NOMINEE'S NAME ON THE LINE BELOW:
______________________________________________________
|_| WITHHOLD AUTHORITY FOR ALL NOMINEES
2. In their discretion, such other business as may properly come before
the meeting.
Dated: ___________________, 2004. ______________________________
Signature
______________________________
Signature
(Please sign exactly as your name appears. When signing as an executor,
administrator, guardian, trustee or attorney, please give your title as such. If
signer is a corporation, please sign the full corporate name and then an
authorized officer should sign his name and print his name and title below his
signature. If the shares are held in joint name, all joint owners should sign.)
PLEASE DATE, SIGN AND RETURN THIS PROXY IN THE ENCLOSED RETURN ENVELOPE.