SCHEDULE 14A
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted
by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
Broad National Bancorporation
(Name of Registrant as Specified In Its Charter)
________________________________________________________________
(Name of Person(s) Filing Proxy Statement, if other than the
Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction
applies:
_______________________________________________________________
2) Aggregate number of securities to which transaction
applies:
_________________________________________________________________
3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how it was
determined):
_________________________________________________________________
4) Proposed maximum aggregate value of transaction:
_________________________________________________________________
[ ] 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:
____________________________________________________________
2) Form, Schedule or Registration Statement No.:
____________________________________________________________
3) Filing Party:
____________________________________________________________
4) Date Filed:
____________________________________________________________
March 24, 1997
Dear Shareholder:
You are cordially invited to attend the Annual Meeting of
Shareholders of Broad National Bancorporation, to be held at the
principal executive offices of the Company, located at 905 Broad
Street, Newark, New Jersey, on Thursday, April 17, 1997,
commencing at 9:00 a.m., local time. The business to be
conducted at the meeting is described in the attached Notice of
Annual Meeting and Proxy Statement. In addition, there will be
an opportunity to meet with members of senior management and
review the business and operations of the Company and its
subsidiary, Broad National Bank.
Your Board of Directors joins with me in urging you to
attend the meeting. Whether or not you plan to attend the
meeting, however, please sign, date and return the enclosed proxy
card promptly. A prepaid return envelope is provided for this
purpose. You may revoke your proxy at any time before it is
exercised; and if you file written notice of revocation with the
Secretary of the Company before the proxy is exercised, it will
not be used if you attend the meeting and prefer to vote in
person.
Sincerely yours,
/s/ Donald M. Karp
Donald M. Karp
Chairman of the Board and
Chief Executive Officer
BROAD NATIONAL BANCORPORATION
905 Broad Street
Newark, New Jersey 07102
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 17, 1997
NOTICE IS HEREBY GIVEN that the Annual Meeting of
Shareholders of Broad National Bancorporation, a New Jersey
corporation ("Bancorporation" or the "Company"), will be held at
the principal executive offices of Bancorporation located at 905
Broad Street, Newark, New Jersey, on Thursday, April 17, 1997,
commencing at 9:00 a.m., local time, and thereafter as it may
from time to time be adjourned, for the following purposes:
1. To elect twelve directors to hold office for a term
expiring at the 1998 Annual Meeting of Shareholders of
Bancorporation and until their respective successors
are duly elected and qualified or until their
respective earlier resignation or removal;
2. To consider and act upon approval of a 1996 Broad
National Bancorporation Incentive Stock Option Plan;
3. To consider and act upon approval of a 1996 Broad
National Bancorporation Directors Non-Statutory Stock
Option Plan;
4. To consider and act upon approval of an amendment to
the Company's Certificate of Incorporation to increase
the number of authorized shares of the Company's
capital stock from 7,020,000 shares to 11,520,000
shares and to increase the number of authorized shares
of the Company's common stock, $1.00 par value, from
5,500,000 shares to 10,000,000 shares;
5. To consider and act upon approval of an amendment to
the Company's Certificate of Incorporation to establish
certain additional limitations with respect to the
preemptive rights of holders of the Company's capital
stock;
6. To consider and act upon ratification and approval of
the selection of the accounting firm of KPMG Peat
Marwick LLP as the Company's independent auditors for
the year ending December 31, 1997; and
7. To transact such other business as properly may come
before the meeting and any adjournment or adjournments
thereof.
The Board of Directors has fixed the close of business on
March 7, 1997 as the record date for determination of the
shareholders entitled to notice of, and to vote at, the Annual
Meeting and any adjournment or adjournments thereof.
All shareholders are cordially invited to attend the
meeting. Whether or not you intend to be present at the meeting,
the Board of Directors solicits you to sign, date, and return the
enclosed proxy card promptly. A prepaid return envelope is
provided for this purpose. You may revoke your proxy at any time
before it is exercised; and if you file written notice of
revocation with the Secretary of the Company before the proxy is
exercised, it will not be used if you attend the meeting and
prefer to vote in person. Your vote is important and all
shareholders are urged to be present in person or by proxy.
By Order of the Board of Directors
/s/ Donald M. Karp
Donald M. Karp
Chairman of the Board and
Chief Executive Officer
March 24, 1997
Newark, New Jersey
BROAD NATIONAL BANCORPORATION
905 Broad Street
Newark, New Jersey 07102
__________________
PROXY STATEMENT
__________________
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 17, 1997
__________________
INTRODUCTION
This Proxy Statement is being furnished to the shareholders
of Broad National Bancorporation, a New Jersey corporation
("Bancorporation" or the "Company"), in connection with the
solicitation of proxies by the Board of Directors of
Bancorporation for use at the Annual Meeting of Shareholders to
be held on Thursday, April 17, 1997, and at any adjournment or
adjournments thereof (the "Annual Meeting"). The Annual Meeting
will commence at 9:00 a.m., local time, and will be held at the
principal executive offices of the Company, located at 905 Broad
Street, Newark, New Jersey 07102. Bancorporation's business
activities are limited to ownership of the outstanding capital
stock of Broad National Bank, a national banking association (the
"Bank") and to performing certain services for the Bank.
This Proxy Statement and the enclosed form of proxy are
being first mailed to the Company's shareholders on or about
March 24, 1997.
PROXIES
You are requested to complete, date and sign the enclosed
form of proxy and return it promptly to the Company in the
enclosed postage prepaid envelope. Shares represented by
properly executed proxies will, unless such proxies previously
have been revoked, be voted in accordance with the shareholders'
instructions indicated in the proxies. If no instructions are
indicated, such shares will be voted in favor of the election of
the nominees for director named in this Proxy Statement, in favor
of approving a 1996 Broad National Bancorporation Incentive Stock
Option Plan, in favor of approving a 1996 Broad National
Bancorporation Directors Non-Statutory Stock Option Plan, in
favor of the proposed amendment to the Company's Certificate of
Incorporation described herein to increase the number of shares
of authorized capital stock, in favor of the proposed amendment
to the Company's Certificate of Incorporation described herein to
further limit the preemptive rights of holders of the Company's
capital stock, in favor of ratifying the selection of the
accounting firm of KPMG Peat Marwick LLP as Bancorporation's
independent auditors for the current year, and, as to any other
matter that properly may be brought before the Annual Meeting, in
accordance with the discretion and judgment of the appointed
proxies. Unless otherwise indicated by the shareholder on the
proxy, the appointed proxies may cumulate proxy votes as to
nominees for director named in this Proxy Statement with respect
to all shares of Common Stock that they are authorized to vote,
and, in accordance with their discretionary authority, allocate
such votes in the manner that they determine will result in the
election of the greatest number of such nominees as directors of
the Company. A shareholder who has given a proxy may revoke it
at any time before it is exercised at the Annual Meeting by
filing written notice of revocation with the Secretary of the
Company, or by executing and delivering to the Secretary of the
Company a proxy bearing a later date. A shareholder who has
given a proxy may appear at the Annual Meeting and vote in person
if the shareholder has filed written notice of revocation with
the Secretary of the Company at any time before the proxy is
exercised or the shareholder votes by written ballot.
VOTING AT THE MEETING
For purposes of voting on the proposals described herein,
the presence in person or by proxy of shareholders holding a
majority of the total outstanding shares of the Company's Common
Stock, $1.00 par value, shall constitute a quorum at the Annual
Meeting. Only holders of record of shares of the Company's
Common Stock as of the close of business on March 7, 1997 (the
"Record Date"), are entitled to notice of, and to vote at, the
Annual Meeting or any adjournment or adjournments thereof. As of
the Record Date, 4,654,688 shares of the Company's Common Stock
were outstanding and entitled to be voted at the Annual Meeting.
Each share of Common Stock is entitled to one vote on each matter
properly to come before the Annual Meeting, except that
cumulative voting rights may be exercised with respect to the
election of directors. Each shareholder voting in the election
of directors shall have the right to cumulate such shareholder's
votes and cast as many votes in the aggregate as shall equal the
number of shares of Common Stock held by such shareholder
multiplied by the number of directors to be elected. Each such
shareholder may cast the whole number of votes for one candidate
or may divide the votes in any manner the shareholder may
determine among as many candidates as the shareholder may select.
There are no conditions precedent to the exercise of such
cumulative voting rights. Discretionary authority to cumulate
the votes represented by the proxies in the election of directors
is solicited.
Directors are elected by a plurality (a number greater than
those cast for any other candidates) of the votes cast, in person
or by proxy, by the shareholders entitled to vote at the Annual
Meeting for that purpose. The affirmative vote of the holders of
a majority of the shares of the Company's Common Stock,
represented in person or by proxy and entitled to vote at the
Annual Meeting, is required for (i) the approval of a 1996 Broad
National Bancorporation Incentive Stock Option Plan, (ii) the
approval of a 1996 Broad National Bancorporation Directors Non-
Statutory Stock Option Plan, (iii) the ratification and approval
of the selection of KPMG Peat Marwick LLP as the Company's
independent auditors, and (iv) the approval of such other matters
as properly may come before the Annual Meeting or any adjournment
thereof. The affirmative vote of the holders of two-thirds of
the shares of the Company's Common Stock, represented in person
or by proxy and entitled to vote at the Annual Meeting, is
required for (i) the approval of the proposed amendment to the
Company's Certificate of Incorporation described herein to
increase the number of shares of authorized capital stock, and
(ii) the approval of the proposed amendment to the Company's
Certificate of Incorporation described herein to further limit
the preemptive rights of holders of the Company's capital stock.
A shareholder entitled to vote in the election of directors
can withhold authority to vote for all nominees for directors or
can withhold authority to vote for certain nominees for
directors. Abstentions from the proposal to approve a 1996 Broad
National Bancorporation Incentive Stock Option Plan, the proposal
to approve a 1996 Broad National Bancorporation Directors Non-
Statutory Stock Option Plan, the proposal to approve the
amendment to the Company's Certificate of Incorporation described
herein to increase the number of shares of authorized capital
stock, the proposal to approve the amendment to the Company's
Certificate of Incorporation described herein to further limit
the preemptive rights of holders of the Company's capital stock,
or the proposal to approve the ratification of the selection of
the Company's independent auditors are treated as votes against
the proposal. Broker non-votes on the election of directors, the
1996 Broad National Bancorporation Incentive Stock Option Plan,
the 1996 Broad National Bancorporation Directors Non-Statutory
Stock Option Plan, the proposed amendments to the Company's
Certificate of Incorporation or the Company's independent
auditors are treated as shares of Bancorporation capital stock as
to which voting power has been withheld by the respective
beneficial holders and, therefore, as shares not entitled to vote
on the proposal as to which there is the broker non-vote.
SOLICITATION OF PROXIES
This solicitation of proxies for the Annual Meeting is being
made by the Company's Board of Directors. The Company will bear
all costs of such solicitation, including the cost of preparing
and mailing this Proxy Statement and the enclosed form of proxy.
After the initial mailing of this Proxy Statement, proxies may be
solicited by mail, telephone, telegram, facsimile transmission or
personally by directors, officers, employees or agents of the
Company. Brokerage houses and other custodians, nominees and
fiduciaries will be requested to forward soliciting materials to
beneficial owners of shares held of record by them; and their
reasonable out-of-pocket expenses, together with those of
Bancorporation's transfer agent, will be paid by Bancorporation.
In accordance with the Company's bylaws, a list of
shareholders entitled to vote at the Annual Meeting will be
available for examination at least ten days prior to the date of
the Annual Meeting during normal business hours at the principal
executive offices of Bancorporation located at 905 Broad Street,
Newark, New Jersey. The list also will be available at the
Annual Meeting.
ITEM 1
ELECTION OF DIRECTORS
The size of the Company's Board of Directors was reduced by
one member in December 1996 and currently consists of twelve
directors. One of the purposes of this Annual Meeting is to
elect twelve directors to serve for a one-year term expiring at
the Annual Meeting of Shareholders in 1998 and until their
respective successors are duly elected and qualified or until
their respective earlier resignation or removal. The Board of
Directors has designated Licinio Cruz, John A. Dorman, Arthur
Fischman, John J. Iannuzzi, Donald M. Karp, James J. Lazarus,
Edward J. Lenihan, Stanley J. Lesnik, Catherine McFarland, Louis
J. Owen, A. Harold Schwartz and Hubert Williams as the twelve
nominees proposed for election at the Annual Meeting. Unless
authority to vote for the nominees or a particular nominee is
withheld, it is intended that the shares of Common Stock
represented by properly executed proxies in the form enclosed
will be voted for the election as directors of all twelve
nominees. In the event that one or more of the nominees should
become unavailable for election, it is intended that the shares
represented by the proxies will be voted for the election of such
substitute nominee or nominees as may be designated by the Board
of Directors, unless the authority to vote for all nominees or
for the particular nominee or nominees who have ceased to be
candidates has been withheld. Each of the nominees has indicated
his or her willingness to serve as a director if elected, and the
Board of Directors has no reason to believe that any nominee will
be unavailable for election. The Board of Directors does not
know if, and has no reason to believe that, anyone will nominate
another candidate for director at this Annual Meeting.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE
ELECTION OF LICINIO CRUZ, JOHN A. DORMAN, ARTHUR FISCHMAN, JOHN
J. IANNUZZI, DONALD M. KARP, JAMES J. LAZARUS, EDWARD J. LENIHAN,
STANLEY J. LESNIK, CATHERINE MCFARLAND, LOUIS J. OWEN, A. HAROLD
SCHWARTZ AND HUBERT WILLIAMS AS DIRECTORS OF THE COMPANY.
NOMINEES
The following table sets forth certain information with
respect to each person nominated by the Board of Directors for
election as directors of the Company at the Annual Meeting.
Position with
Bancorporation
and the Bank Principal
Name Age (Year First Elected) Occupation /1/
Licinio Cruz 54 Director (1977) Vice President and
Treasurer, Cruz
Construction Corp.
(general
construction)
John A. Dorman 58 President of Position with
Bancorporation (1992) Bancorporation
and the Bank (1992) and the Bank /2/
Director (1992)
Arthur Fischman 71 Director (1978) Consultant
John J. Iannuzzi 59 Director (1988) President, 187
Corporation T/A
Gateway East (real
estate management)
Donald M. Karp 60 Chairman of the Board Position with
of Bancorporation Bancorporation
(1985) and the Bank and the Bank /3/
(1985); Chief
Executive Officer of
Bancorporation (1991)
and the Bank (1991);
Vice Chairman of the
Board of Bancorporation
(1981-1985) and the
Bank (1978-1985);
Director (1972)
James J. Lazarus 59 Director (1980) President, L&R
Manufacturing
Company
(manufacturer of
ultrasonic
cleaning equipment
and chemicals)
Edward J. Lenihan 80 Director (1977) Consultant /4/
Stanley J. Lesnik 78 Director (1970); Consultant /3/
Chairman of the
Board (1974-1985);
Chairman of
Executive Committee
(1985-1995); Chairman
Emeritus of the Executive
Committee (1996)
Catherine
McFarland 56 Director (1993) Executive Officer
and Secretary,
Victoria
Foundation, Inc.
(private
charitable
foundation)/5/
Louis J. Owen 73 Director (1976); Consultant
Chairman of
Executive Committee
(1996)
A. Harold
Schwartz 72 Director (1980) President, New
Jersey Tanning Co.
Inc. (tanning
bovine leathers)
Hubert Williams 57 Director (1988) President, Police
Foundation
(private not-for-profit
organization)
_______________
/1/ Unless otherwise indicated, each of the persons listed has
been employed in the indicated principal occupation during
the last five years.
/2/ Prior to joining Bancorporation and the Bank, Mr. Dorman was
an executive vice president of Chemical Bank New Jersey
where he managed the Statewide Commercial Lending division.
For the two years prior to the merger in 1989 of Horizon
Bank Corp. and Chemical Bank, Mr. Dorman served as President
and Chief Executive Officer of Chemical New Jersey
Corporation, Chemical Banking Corporation's loan production
office in New Jersey.
/3/ Mrs. Donald M. Karp is the niece of Stanley J. Lesnik and
the daughter of Harriet M. Alpert, a principal shareholder
of Bancorporation.
/4/ Mr. Lenihan presently is a consultant to planning and
economic and development groups.
/5/ Ms. McFarland has served as executive officer and secretary
of Victoria Foundation, Inc. since 1989, and as its program
officer and assistant secretary from 1971 to 1989.
There is no arrangement or understanding between any
director and any other person pursuant to which such director was
selected as a director.
COMPENSATION OF DIRECTORS
No compensation is paid to members of the Board of Directors
of Bancorporation for service to the Company as such. All
directors of Bancorporation also are directors of the Bank,
however, and in that capacity receive compensation from the Bank
as described below.
During 1996, Messrs. Iannuzzi, Lazarus, Lenihan, Schwartz
and Williams and Ms. McFarland received $550 for each meeting of
the Bank's Board of Directors that they attended or for any
meeting of a committee of that Board that they attended, if such
meeting was not held on the same day as a regularly scheduled
Board of Directors meeting. For 1997, this fee per meeting is
being increased to $600. During 1996, all Bank directors
(excluding Messrs. Karp, Dorman and Lesnik) also were paid $300
per month. For 1997, this monthly payment to all Bank directors
(excluding Messrs. Karp, Dorman and Lesnik) is being increased to
$400.
During 1996, the rotating member of the Executive Committee
of the Bank's Board of Directors received a fee of $550 per
meeting attended. For 1997, this fee per meeting is being
increased to $600.
Certain Bank directors are paid annual compensation in lieu
of the fee per meeting and monthly fee described above. Pursuant
to this arrangement, Messrs. Cruz and Fischman each received
$19,000 and Mr. Owen received $23,500 during 1996. For 1997,
Messrs. Cruz and Fischman each will receive $20,000 and Mr. Owen
will receive $24,500.
MEETINGS OF THE BOARD AND COMMITTEES
During 1996, the Boards of Directors of Bancorporation and
the Bank held seven meetings and twelve meetings, respectively.
All directors attended at least 75% of the meetings of such
Boards of Directors and the committees of such Boards of
Directors on which they served that were held during 1996, with
the exception of Mr. Lazarus, who attended 71% of such meetings
of Bancorporation and 62% of such meetings of the Bank; Mr.
Lesnik, who attended 57% of such meetings of the Bank, including
92% of the meetings of the Bank's Board of Directors but only 40%
of the meetings of the Bank's Executive Committee; and Mr. Owen,
who attended 81% of such meetings of the Bank, including 94% of
the meetings of the Bank's Board of Directors and Audit
Committee, but only 72% of the meetings of the Bank's Executive
Committee. It should be noted that the Company's directors
discharge their responsibilities throughout the year, not only at
such Board of Directors and committee meetings, but through
personal meetings and other communications with members of
management and others regarding matters of interest and concern
to the Company.
The only standing committee of Bancorporation's Board of
Directors is the Audit Committee. There currently are no
compensation, executive or nominating committees of
Bancorporation's Board of Directors, or committees performing
similar functions of the Board. The committees of the Bank's
Board of Directors consist of the Executive Committee,
Compensation Committee and Audit Committee as described below.
Bancorporation and the Bank each has an Audit Committee
which assists the Board of Directors in fulfilling its
responsibilities with respect to accounting and financial
reporting practices and the scope and expense of audit and
related services provided by external auditors, among others.
The Audit Committee is responsible for apprising the Board of
management's compliance with Board mandated policies, internal
procedures and applicable laws and regulations. This committee
works with the internal and external auditors and examiners and
supervises the internal audit function directly, reviews and
approves the hiring of audit personnel, reviews and provides
input regarding audit department compensation and evaluates the
performance of the internal audit department and the external
auditors. The members of both Bancorporation's and the Bank's
Audit Committee currently are Mr. Fischman, the Chairman of both
Audit Committees, Mr. Cruz, Mr. Iannuzzi and Mr. Owen.
Bancorporation's and the Bank's Audit Committees each met four
times during 1996.
The Bank's Executive Committee is authorized, subject to
certain limitations imposed by law and in the bylaws of the Bank,
to exercise all of the powers of the Board of Directors between
meetings of the Board. The committee currently is comprised of
seven members; six permanent members and one rotating member of
the Bank's Board of Directors. The members of the Executive
Committee currently are Mr. Owen, Mr. Cruz, Mr. Dorman, Mr.
Fischman, Mr. Karp and Mr. Lesnik, plus a rotating member. Mr.
Owen served as the Chairman of the Executive Committee during
1996. The Executive Committee met twenty-five times during 1996.
The Bank's Compensation Committee is responsible for
recommending changes in compensation for the Bank's Chairman of
the Board and Chief Executive Officer and the President and Chief
Operating Officer to the entire Board for their approval. The
members of the Compensation Committee currently are Mr. Schwartz,
the Chairman, Mr. Cruz, and Mr. Lazarus. The Compensation
Committee met one time during 1996.
EXECUTIVE COMPENSATION AND OTHER INFORMATION
COMPENSATION COMMITTEE AND BOARD OF DIRECTORS REPORT ON EXECUTIVE
COMPENSATION
This report has been prepared by the Compensation Committee
of the Bank's Board of Directors (the "Committee") and by the
Board of Directors of the Bank, which together have general
responsibility for the establishment, direction and
administration of all aspects of the compensation policies and
programs for Bancorporation's and the Bank's executive officers.
Under an agreement between Bancorporation and the Bank, all
employees of Bancorporation and of the Bank, including persons
who are employees of both Bancorporation and the Bank, are
compensated as such by the Bank. Bancorporation's executive
compensation program is therefore synonymous with that of the
Bank. The Bank's executive compensation program, insofar as it
pertains to the Chairman of the Board and Chief Executive Officer
(the "Chief Executive Officer") and the President and Chief
Operating Officer (the "President"), is administered by the
Committee. During 1996, the Committee was composed of four
independent outside directors, none of whom is an officer or
employee of Bancorporation or the Bank. All decisions by the
Committee relating to the compensation of the Chief Executive
Officer and President are reviewed by, and subject to the
approval of, the full Board of Directors of the Bank. The Bank's
executive compensation program, insofar as it pertains to
executive officers other than the Chief Executive Officer and the
President, is administered by the Chief Executive Officer and the
President. All decisions by the Chief Executive Officer and the
President relating to the compensation of the Bank's executive
officers are reviewed by, and subject to the approval of, the
full Board of Directors of the Bank. Mr. Karp, the Chief
Executive Officer, and certain other executive officers of the
Bancorporation and the Bank, may attend meetings of the Committee
and of the Bank's Board of Directors, but are not present during
discussions or deliberations regarding their own compensation.
COMPENSATION POLICY. The Bank's executive compensation
policy is premised upon three basic goals: (1) to attract and
retain qualified individuals who provide the skills and
leadership necessary to enable the Bank to achieve its earnings
growth, capital compliance and return on investment objectives,
while maintaining its commitment to Equal Employment Opportunity
and Affirmative Action guidelines and practices; (2) to create
incentives to achieve Bank and individual performance objectives
through the use of performance-based compensation programs; and
(3) to create a mutuality of interest between executive officers
and shareholders through compensation structures that create a
direct link between executive compensation and shareholder
return.
In determining the structure and levels of each of the
components of executive compensation needed to achieve these
goals, all elements of the compensation package are considered in
total, rather than any one component in isolation. As more fully
described below, the determination of such levels of executive
compensation is a subjective process in which many factors are
considered, including the Bank's performance (as measured by
earnings growth, efficiency ratio and return on investment, among
other factors) and the individual executive's specific
responsibilities, historical and anticipated personal
contribution to the Bank's business, and length of service with
the Bank.
COMPENSATION COMPONENTS. The Committee, as well as the
Chief Executive Officer and the President, reviews the Bank's
compensation program annually to ensure that compensation levels
and incentive opportunities are competitive and reflect the
performance of the Bank and the individual executive officer.
Recommendations are then submitted to the Bank's Board of
Directors for approval. The particular elements of the
compensation program for executive officers are base salary,
incentive compensation and periodic stock option grants. The
Committee believes that these compensation components together
advance both the short- and long-term interests of shareholders.
In this regard, the Committee believes that the long-term
interests of shareholders are advanced by designing a significant
portion of executive compensation to be at risk: the incentive
compensation (which permits individual performance to be
recognized on an annual and long term basis based, in part, on an
evaluation of the executive's contribution to the Bank's
performance) and the grant of stock options (which directly ties
a portion of the executive's long-term remuneration to stock
price appreciation realized by shareholders). Each of the
components of the compensation program is addressed separately
below.
Base Salary. The base salary for each executive officer is
reviewed from the previous year. In determining whether to
adjust base salary levels, management's recommendations and
subjective assessments of each executive's growth and
effectiveness in the performance of his or her duties are taken
into account. In addition, the performance of the Bank is
considered. The increases in the base salaries of the Bank's
executives for 1996 were based primarily upon a subjective
analysis of the Bank's performance during the period since the
last salary increase and the individual executive's role in
generating that performance. In this regard, the analysis of the
Bank's performance included a review of the Bank's earnings,
efficiency ratio and return on investment for the prior year. An
analysis of the role played by each individual executive in
generating the Bank's performance included a consideration of the
executive's specific responsibilities, contributions to the
Bank's business, and length of service. The determination in
December 1996 to increase Mr. Karp's base salary from $209,000 to
$218,500 was based on the same type of subjective analysis and
took into account the amount of time he spends on activities
directly and indirectly benefitting Bancorporation and the Bank.
In addition, the Committee considered the improvement in the
Company's earnings performance. The factors impacting base
salary levels are not independently assigned specific weights.
Rather, all of these factors are reviewed, and specific base pay
recommendations are made which reflect an analysis of the
aggregate impact of these factors. The Committee and the Chief
Executive Officer and the President believe that base pay levels
for the executive officers are maintained within a range that is
considered to be appropriate and necessary.
Incentive Compensation. The Bank's officers are eligible to
receive incentive bonus awards. Each of the participants in the
incentive bonus program are assigned to one of three bonus tiers,
which assignments are made primarily according to job category.
Tier one consists of the Chief Executive Officer and the
President. Tier two consists of six senior officers of the Bank,
and tier three consists of the remaining officers of the Bank.
In 1996, the Compensation Committee of the Board of
Directors engaged a consulting firm to assist the Committee in
the review and modification of the Bank's incentive compensation
program. After careful analysis of the Bank's needs and an
examination of the competitive practices among peer banks, the
Compensation Committee recommended, and the full Board of
Directors approved, the adoption of the Management Incentive Plan
and the Long-Term Capital Accumulation Plan for participants in
tiers one and two of the incentive bonus program. These plans
provide for a systematic approach to providing incentives to
executive and senior officers based on performance tied to the
success and growth of the Bank.
Annual Incentive Program. Officers in tiers one and two of
the Bank's incentive bonus program are eligible to participate in
the Broad National Bank Management Incentive Plan ("MIP").
Participants in this plan may earn annual awards only upon the
achievement of performance objectives which are established at
the beginning of the year. Threshold, target and maximum levels
of awards are established, and no awards are paid if the
threshold is not met. The performance objectives are weighted
based upon their relative importance to each individual. The
performance objectives for tier one participants are corporate
performance objectives and personal targeted objectives for
performance. The performance objectives for tier two
participants include functional or operating unit objectives, in
addition to the corporate performance and personal targeted
objectives for performance, as well as a small discretionary
factor based upon the President's subjective judgment of the
officer's performance. For 1996, the corporate performance
objectives were net income, return on average assets and the
efficiency ratio. Each participant's target bonus is expressed
as a percentage of his or her base salary, dependent on
responsibility and function. The target award is 45% of base
salary in the case of the Chief Executive Officer, and in the
case of the President and senior officers ranges from 25% to
37.5% of base pay. Earned awards may range from 0% to 150% of
the target award. For 1996, the Committee granted an incentive
bonus award of $96,400, or 46% of base pay, to Mr. Karp, the
Chief Executive Officer. In making this determination, the
Committee considered Mr. Karp's role in enabling the Bank to
achieve its corporate performance objectives, as well as
Mr. Karp's personal targeted objectives for performance.
Incentive bonus awards to tier three participants are
allocated based upon recommendation by the Chief Executive
Officer and the President. In allocating bonus awards among the
participants in tier three of the program, the Chief Executive
Officer and the President exercise their discretion and judgment
after considering the individual participant's performance,
responsibilities and contributions to the Bank, and subjectively
analyzing the basis of their aggregate impact on the success of
the Bank for the preceding year.
Long-Term Incentive Program. Officers in tiers one and two
of the Bank's incentive bonus program are eligible to participate
in the Bank's Long-Term Capital Accumulation Plan ("LCAP"). This
plan is designed to provide a balance between short-term and
long-range performance objectives and to serve as a strong
financial incentive for executive and senior management to
achieve long-term corporate objectives that relate to the Bank's
profitability and growth results and to increased shareholder
value. Awards are specified at the beginning of each three year
performance period and earned at the end of the period.
Performance is measured against pre-determined financial
indicators targeting increased shareholder value over a three-
year performance cycle. The financial indicators for the initial
three-year cycle are return on average shareholders' equity and
the Bank's efficiency ratio. Three year awards are equal to a
percentage of a participant's base salary at the beginning of the
performance period. The award for tier one participants, which
includes the Chief Executive Officer, is 100% of their base
salary at the beginning of the performance period. Tier two
participants may earn awards equal to 70% of their base salary at
the beginning of the performance period. If earned at the
conclusion of the performance cycle, awards will be paid in a
combination of Bancorporation Common Stock and cash, with the
stock price being equal to the average fair market value of the
stock at the beginning of the performance period.
The initial performance period commenced January 1, 1996 and
will conclude December 31, 1998. No awards were paid out under
the LCAP during 1996.
Stock Options. The Committee believes that in order to
enhance long-term shareholder value it must provide incentives
that provide motivation beyond short-term results. The objective
of stock option grants is to advance the longer term interests of
the Company and its shareholders and complement incentives tied
to annual performance by rewarding executives upon the creation
of incremental shareholder value. Stock options only produce
value to executives if the price of Bancorporation's Common Stock
appreciates, thereby directly linking the interests of executives
with those of shareholders. Therefore, in order to provide long-
term incentives to executive officers and other employees related
to long-term growth in the value of the Bancorporation's Common
Stock, stock options are granted to such persons under
Bancorporation's stock option plans. The selection of the
persons eligible to receive stock options and the designation of
the number of stock options to be granted to such persons are
made by the Committee in its discretion, insofar as they relate
to the Chief Executive Officer and the President, and by the full
Board insofar as they relate to other executive officers, and are
made after taking into account management's assessment of each
person's relative level of authority and responsibility with the
Bank, years of service and base salary, among other factors. As
disclosed elsewhere in this proxy statement, for 1996 Mr. Karp
was granted options exercisable with respect to 500 shares of
Common Stock at an exercise price of $10.88 per share, and 15,000
shares of Common Stock at an exercise price of $12.13 per share.
The award of the 500 stock options was made pursuant to the
formula contained in the 1993 Broad National Directors Non-
Statutory Stock Option Plan. The award of the 15,000 stock
options was made based on a subjective assessment of Mr. Karp's
specific responsibilities, effectiveness in the performance of
his duties, historical and anticipated personal contribution to
the Bank's business, and length of service with the Bank, which
assessment is comparable to that described above under "Base
Salary".
Compensation Committee Board of Directors:
of the Board of Directors:
Licinio Cruz Donald M. Karp Catherine McFarland
A. Harold
Schwartz John A. Dorman James J. Lazarus Louis J. Owen
Licinio Cruz Arthur Fischman Edward J. Lenihan A. Harold Schwartz
James J.
Lazarus John Iannuzzi Stanley J. Lesnik Hubert Williams
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 1996, the members of the Bank's Compensation
Committee were Mr. Schwartz, the Chairman, Mr. Cruz and
Mr. Lazarus. As discussed above under "Compensation Committee
and Board of Directors Report on Executive Compensation",
Mr. Karp, the Chief Executive Officer, and Mr. Dorman, the
President, administer the executive compensation program insofar
as it pertains to executive officers other than the Chief
Executive Officer and the President. All decisions relating to
the compensation of executive officers are reviewed by, and
subject to the approval of, the full Board of Directors of the
Bank. Among the members of the Bank's Board of Directors,
Messrs. Karp and Dorman are officers and employees of the Company
and the Bank, and Mr. Lesnik formerly served as Chairman of the
Board of the Company.
None of the members of the Bank's Compensation Committee
were an officer or employee of the Company or any of its
subsidiaries during 1996, and none were formerly an officer of
the Company or any of its subsidiaries. Messrs. Cruz, Lazarus
and Schwartz, and certain corporations and firms in which such
persons have interests, have obtained loans from the Bank. Each
of such loans are believed to have been made to such persons,
corporations or firms in the ordinary course of business, on
substantially the same terms, including interest rates and
collateral, as those prevailing at the time for comparable
transactions with other persons, and did not involve more than
the normal risk of collectibility or present other unfavorable
features.
EXECUTIVE COMPENSATION
The following table sets forth for the years ended December
31, 1996, 1995 and 1994, respectively, the compensation of the
Company's chief executive officer and of each of the Company's
four other most highly compensated executive officers for 1996
for services to the Company and its subsidiaries in all
capacities:
SUMMARY COMPENSATION TABLE
Long Term Compensation
Annual Compensation Awards Payouts
Other Securities
Annual Restricted Underlying All Other
Name and Compen- Stock Options/ LTIP Compen-
Principal Position Year Salary Bonus /1/ sation/2/ Award(s) SARs Payouts sation /3/
Donald M. Karp 1996 $209,000 $96,400 $37,687 $-- 15,500 $-- $14,805
Chairman of the Board, 1995 200,000 72,900 67,202 -- 15,500 -- 14,790
Chief Executive Officer 1994 186,000 70,000 0 -- 15,000 -- 14,505
and Director of
Bancorporation and
the Bank
John A. Dorman 1996 $162,500 $62,400 $14,251 $-- 10,500 $-- $15,885
President, Chief 1995 157,500 50,000 19,840 -- 10,500 -- 15,870
Operation Officer 1994 150,000 50,000 0 -- 10,500 -- 15,585
and Director of
Bancorporation and
the Bank
Fred Perry, Jr. /4/ 1996 $97,000 $37,800 $ 0 $-- 5,000 $-- $10,731
Senior Vice President 1995 94,500 20,000 0 -- 5,000 -- 10,683
of the Bank 1994 90,000 20,000 0 -- 5,000 -- 10,270
Peter Kenny /4/ 1996 $95,000 $34,200 $ 0 $-- 5,000 $-- $ 7,167
Senior Vice President 1995 92,000 20,000 0 -- 5,000 -- 7,112
of the Bank 1994 88,000 20,000 0 -- 5,000 -- 6,685
Fred S. Campo 1996 $89,000 $31,100 $ 0 $-- 5,000 $-- $ 5,764
Secretary of 1995 86,200 20,000 0 -- 5,000 -- 5,713
Bancorporation and 1994 82,000 20,000 0 -- 4,000 -- 5,296
the Bank, Senior
Vice President of
the Bank
_____________________
/1/ Reflects bonus earned for 1996, 1995 and 1994, respectively.
/2/ Excludes perquisites and other benefits, unless the aggregate amount of
such compensation is the lesser of either $50,000 or 10% of the total of
annual salary and bonus reported for the named executive officer.
Amounts reflected for Messrs. Karp and Dorman for 1996 and 1995
represent supplemental contributions of employee pension retirement
benefits contributed through the Bank's Non-Qualified Deferred
Compensation Plan.
/3/ All Other Compensation includes matching contributions made by the
Company for the accounts of Messrs. Karp, Dorman, Perry, Jr., Kenny and
Campo, respectively, under the Company's 401(k) Plan, and the premiums
on life insurance policies for such persons. Matching contributions
made by the Company under the Company's 401(k) Plan for 1996, 1995 and
1994 were $2,190, $2,175 and $1,890, respectively, for Mr. Karp; $2,190,
$2,175 and $1,890, respectively, for Mr. Dorman; $1,708, $1,660 and
$1,247, respectively, for Mr. Perry, Jr.; $1,679, $1,624 and $1,197,
respectively, for Mr. Kenny; and $1,591, $1,540 and $1,124,
respectively, for Mr. Campo. The premiums on life insurance policies
paid by the Company for 1996, 1995 and 1994 were $12,615, $12,615 and
$12,615, respectively, for Mr. Karp; $13,695, $13,695 and $13,695,
respectively, for Mr. Dorman; $9,023, $9,023 and $9,023, respectively,
for Mr. Perry Jr.; $5,488, $5,488 and $5,488, respectively, for
Mr. Kenny; and $4,173, $4,173 and $4,173, respectively, for Mr. Campo.
/4/ Messrs. Perry, Jr. and Kenny are not officers of Bancorporation, but are
included among the five most highly paid executive officers because each
is a key policy making member of management of the Bank.
OPTION/SAR GRANTS
The following table sets forth information with respect to
each officer named in the Summary Compensation Table under
"Executive Compensation" concerning grants of stock options and
stock appreciation rights ("SARs") during 1996.
OPTION/SAR GRANTS IN LAST FISCAL YEAR /1/
Number of % of Total
Securities Options/SARs
Underlying Granted to Grant
Options/ Employees Exercise or Date
SARs in Fiscal Base Price Expiration Present
Name Granted(#) Year ($/Share) Date /2/ Value ($)
Donald M.
Karp /3/ 15,000 21.1% $13.34 December 19, 2001 $66,450/4/
500 0.7% $10.88 April 18, 2006 $ 2,530/5/
John A.
Dorman /3/ 10,000 14.1% $12.13 December 19, 2006 $55,700/4/
500 0.7% $10.88 April 18, 2006 $ 2,530/5/
Fred
Perry, Jr. /3/ 5,000 7.0% $12.13 December 19, 2006 $27,850/4/
Peter
Kenny /3/ 5,000 7.0% $12.13 December 19, 2006 $27,850/4/
Fred S.
Campo /3/ 5,000 7.0% $12.13 December 19, 2006 $27,850/4/
___________________
/1/ No stock appreciation rights were granted by the Company during 1996.
The grants of stock options in the table were made on April 18, 1996 and
December 19, 1996.
/2/ The stock options are subject to early termination if the person to whom
they are granted dies, ceases to be employed by the Company or any of
its subsidiaries, or is unable to perform his duties for six months as
the result of such person's physical or mental incapacity.
/3/ The time at which the option may be exercised is prescribed at the time
such option is granted, and may be accelerated if the Company is not the
surviving corporation of any merger, consolidation, reorganization or
acquisition by another corporation or if a "change of control" occurs
with respect to the Company.
/4/ The dollar value of the stock options has been determined as of December
19, 1996 using the Black-Scholes option pricing model, based on the
assumptions that (a) the options were granted on that date, (b) the
closing price for the shares of Common Stock underlying the options on
the grant date was $12.13 per share, (c) the period during which the
options are exercisable is ten years from the grant date (five years in
the case of options for 15,000 shares granted to Mr. Karp), (d) the
option exercise price is $12.13 ($13.34 in the case of options for
15,000 shares granted to Mr. Karp), (e) the dividend yield for 1996 is
2.4%, (f) the expected lives of the options is eight years
(five years in the case of options for 15,000 shares granted to Mr. Karp),
(g) the "risk free" interest rate on U.S. Treasury Strips is a 6.36%
yield in eight years from the grant date (December 2004) (6.10% yield
in five years from the grant date (December 2001)), and (h) the price
volatility for the shares of Common Stock underlying the options is
45.00% (based on the fluctuation in weekly closing stock prices from
December 30 1991 to December 13, 1996).
/5/ The dollar value of the stock options has been determined as of April
18, 1996 using the Black-Scholes option pricing model, based on the
assumptions that (a) the options were granted on that date, (b) the
closing price for the shares of Common Stock underlying the options on
the grant date was $10.88 per share, (c) the period during which the
options are exercisable is ten years from the grant date, (d) the option
exercise price is $10.88, (e) the dividend yield for 1996 is 2.4%, (f)
the expected lives of the options is eight years, (g) the "risk free"
interest rate on U.S. Treasury Strips is a 6.72% yield in eight years
from the grant date (April 18, 2004), and (h) the price volatility for
the shares of Common Stock underlying the options is 45.0% (based on the
fluctuation in weekly closing stock prices from December 30, 1991 to
April 12, 1996).
OPTION/SAR EXERCISES AND HOLDINGS
The following table sets forth information with respect to
each officer named in the Summary Compensation Table under
"Executive Compensation" concerning the exercise of options and
stock appreciation rights ("SARs") during 1996 and unexercised
options and SARs held as of December 31, 1996.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND DECEMBER 31, 1996 OPTION/SAR
VALUES(1)
Number of
Securities Value of
Underlying Unexercised
Shares Unexercised In-the-Money
Acquired Options/SARs at Options/SARs at
on Value December 31, 1996(#)(3) December 31, 1996($)(4)
Name Exercise(#) Realized($)(2) Exercisable Unexercisable Exercisable Unexercisable
Donald M. Karp -- -- 40,739 53,720 $218,247 $149,742
John A. Dorman -- -- 15,371 35,631 88,754 115,674
Fred Perry, Jr. 3,248 $16,613 8,382 16,572 40,394 51,935
Peter Kenny -- -- 4,972 15,648 28,681 46,474
Fred S. Campo 3,248 $15,785 5,863 14,526 25,647 40,054
___________________
(1) No stock appreciation rights were granted by the Company
during 1996.
(2) Value is calculated by determining the difference between
the option exercise price and the last reported sale price
of the Company's Common Stock on the date of exercise.
(3) The shares of the Company's Common Stock underlying
unexercised options at December 31, 1996 includes shares
issuable upon the exercise of options granted on January 21,
1988, December 16, 1993, September 19, 1994, December 15,
1994, April 20, 1995, December 21, 1995, April 18, 1996 and
December 19, 1996.
(4) As of December 31, 1996, the last reported sale price of the
Company's Common Stock, which was reported on the NASDAQ
National Market System on December 31, 1996, was $11.75 per
share. Value is calculated by determining the difference
between the option exercise price and $11.75, multiplied by
the number of shares of Common Stock underlying the options.
EMPLOYMENT AGREEMENTS
Donald M. Karp. On December 31, 1996, Bancorporation
entered into an employment agreement with Donald M. Karp. The
agreement has an initial five-year term which expires on December
31, 2001, subject to automatic extensions of one additional
calendar month upon the expiration of each calendar month, so
that at all times the agreement shall have a term of sixty
months, until such time as the Board of Directors notifies Mr.
Karp that the term of employment shall expire not later than five
years from the date of such notice. The agreement provides for an
annualized base salary of $218,500, which base salary was
increased from the previous $209,000 level, effective January 1,
1997, by action of the Board of Directors as contemplated by the
agreement. During the period of this Agreement, Mr. Karp's base
salary may not be decreased below $218,500 without the written
consent of Mr. Karp. In addition to base salary, the agreement
also provides Mr. Karp with the use of a motor vehicle and such
bonuses or other incentive compensation plans, fringe benefits
and insurance benefits as are established for executive officers
of the Bank.
Mr. Karp's employment with Bancorporation is subject to
early termination in the event of Mr. Karp's death or physical or
mental disability. If Mr. Karp's employment is terminated
because of his physical or mental disability, he will be entitled
to receive one year's base salary, less amounts paid to him under
any other disability program or policy maintained by
Bancorporation, payable in twelve monthly installments. In
addition, Bancorporation will maintain life and health insurance
benefits for Mr. Karp at least equivalent to those he had at the
date of termination. If Mr. Karp's employment is terminated
because of his death, Mr. Karp's beneficiaries, or his estate,
will receive a payment equal to one year's base salary.
Bancorporation may terminate Mr. Karp's employment at any
time with or without cause, with "cause" being defined as
improper action by Mr. Karp which results in his removal from
office by direction of a regulatory agency for Bancorporation or
the Bank, willful misconduct by Mr. Karp which causes material
injury to Bancorporation, or conviction of a crime, habitual
drunkenness, drug abuse, or excessive absenteeism. If Mr. Karp's
employment is terminated by Bancorporation for reasons other than
for cause, Mr. Karp will be entitled to receive a severance
payment equal to the aggregate amount of future base salary and
bonus payments he would have received (calculated at the highest
rates payable at any time under this agreement or within the then
immediately preceding two year period) had he continued in the
employ of Bancorporation for the remainder of the then existing
term of the agreement. In addition, Bancorporation will maintain
life and health insurance benefits for Mr. Karp at least
equivalent to those he had at the date of termination, and Mr.
Karp's retirement benefits will be supplemented to provide him
with a total benefit approximating the benefits he would have
received under all qualified retirement plans in which he
participates if he had continued in the employ of Bancorporation
for the remaining term of this agreement (or until his
retirement) and been fully vested. Mr. Karp would also be given
the use (or corresponding value) of a motor vehicle for 24 months
following the date of termination. Mr. Karp will have no right
to receive further compensation or other benefits if his
employment is terminated for cause.
Mr. Karp may terminate his employment with Bancorporation
and remain entitled to receive specified benefits (i) in the
event of default or breach by Bancorporation, or (ii) for good
reason (as defined). If Mr. Karp terminates the agreement for
any of the above reasons, he will be entitled to receive a
severance payment equal to the aggregate amount of future base
salary and bonus payments he would have received (calculated at
the highest rates payable at any time under this agreement or
within the then immediately preceding two year period) had he
continued in the employ of Bancorporation for the then existing
term of the agreement. In addition, Bancorporation will maintain
life and health insurance benefits for Mr. Karp at least
equivalent to those he had at the date of termination, and Mr.
Karp's retirement benefits will be supplemented to provide him
with a total benefit approximating the benefits he would have
received under all qualified retirement plans in which he
participates if he had continued in the employ of Bancorporation
for the remaining term of this agreement (or until his
retirement) and been fully vested. Mr. Karp would also be given
the use (or corresponding value) of a motor vehicle for 24 months
following the date of termination. Mr. Karp will have no right
to receive further compensation or other benefits if Mr. Karp
voluntarily resigns his employment for reasons other than those
outlined above.
John A. Dorman. On December 31, 1996, Bancorporation
entered into an employment agreement with John A. Dorman. The
agreement has an initial 12-month term which expires on December
31, 1997. If there is a "change in control" (as defined below)
and Mr. Dorman does not choose to terminate the agreement, the
term automatically will be extended for an additional 24 months.
The agreement provides for an annualized base salary of $169,500,
which base salary was increased from the previous $162,500 level,
effective January 1, 1997, by action of the Board of Directors as
contemplated by the agreement. In addition to base salary, the
agreement also provides Mr. Dorman with the use of a motor
vehicle and such bonuses, fringe benefits and insurance benefits
as are established for executive officers of the Bank.
Mr. Dorman's employment with Bancorporation is subject to
early termination in the event of Mr. Dorman's death or physical
or mental disability. If Mr. Dorman's employment is terminated
because of his physical or mental disability, he will be entitled
to receive one year's base salary, less amounts paid to him under
any other disability program or policy maintained by
Bancorporation, payable in twelve monthly installments. In
addition, Bancorporation will maintain life and health insurance
benefits for Mr. Dorman at least equivalent to those he had at
the date of termination. If Mr. Dorman's employment is
terminated because of his death, Mr. Dorman's beneficiaries, or
his estate, will receive a payment equal to three month's base
salary.
Bancorporation may terminate Mr. Dorman's employment at any
time with or without cause, with "cause" being defined as the
failure by Mr. Dorman to perform his duties under the agreement,
willful misconduct by Mr. Dorman which causes material injury to
Bancorporation, or conviction of a crime, habitual drunkenness,
drug abuse, or excessive absenteeism. If Mr. Dorman's employment
is terminated by Bancorporation for reasons other than for cause,
Mr. Dorman will be entitled to receive a severance payment equal
to the aggregate amount of future base salary he would have
received (calculated at the highest rate of base salary and bonus
paid within the then immediately preceding two year period) had
he continued in the employ of Bancorporation for the remainder of
the then existing term of the agreement plus 24 months. In
addition, Bancorporation will maintain life and health insurance
benefits for Mr. Dorman at least equivalent to those he had at
the date of termination, and Mr. Dorman's retirement benefits
will be supplemented to provide him with a total benefit
approximating the benefits he would have received under all
qualified retirement plans in which he participates if he had
continued in the employ of Bancorporation for the remaining term
of this agreement (or until his retirement) and been fully
vested. Mr. Dorman would also be given the use (or corresponding
value) of a motor vehicle for 24 months following the date of
termination. Mr. Dorman will have no right to receive further
compensation or other benefits if his employment is terminated
for cause.
Mr. Dorman may terminate his employment with Bancorporation
and remain entitled to receive specified benefits (i) in the
event of default or breach by Bancorporation, (ii) for good
reason (as defined), or (iii) after a "change in control". A
"change in control" generally is defined to take place when (a) a
person or group (other than Bancorporation or Mr. Karp) acquires
more than 20% of the combined voting power (whether through stock
ownership, proxies or otherwise) of Bancorporation's voting
securities or the ability to control the election of a majority
of the Board of Directors, (b) the Karp/Lesnik family sells or
disposes to nonfamily members 50% or more of Bancorporation
voting securities owned by such family as of the date Mr. Dorman
first became employed by Bancorporation, (c) a merger involving
Bancorporation or the Bank occurs following which a majority of
the voting securities of the surviving corporation is held by
persons who were not previously shareholders of Bancorporation,
or (d) a sale or transfer of all or substantially all of the
assets of Bancorporation or the Bank occurs. If Mr. Dorman
terminates the agreement for any of the above reasons, he will be
entitled to receive a severance payment equal to the aggregate
amount of future base salary and bonus payments he would have
received (calculated at the highest rates payable within the then
immediately preceding two year period) had he continued in the
employ of Bancorporation for the remainder of the then existing
term of the agreement plus 24 months. In addition,
Bancorporation will maintain life and health insurance benefits
for Mr. Dorman at least equivalent to those he had at the date of
termination, and Mr. Dorman's retirement benefits will be
supplemented to provide him with a total benefit approximating
the benefits he would have received under all qualified
retirement plans in which he participates if he had continued in
the employ of Bancorporation for at least 60 months in the
absence of early retirement (or until his retirement) and been
fully vested. Mr. Dorman would also be given the use (or
corresponding value) of a motor vehicle for 24 months following
the date of termination. Mr. Dorman will have no right to
receive further compensation or other benefits if Mr. Dorman
voluntarily resigns his employment for reasons other than those
outlined above.
Stanley J. Lesnik. On November 16, 1995, Bancorporation
entered into a consultant agreement with Stanley J. Lesnik. The
agreement has an initial three-year term which expires on
December 31, 1998. The agreement is extended automatically for
one additional year on each December 31 during the term of the
agreement. If there is a "change in control", the term
automatically will be extended to a date ending three years from
the effective date of such change of control. A "change in
control" generally is defined to take place when a merger
involving Bancorporation or sale of substantially all of
Bancorporation occurs following which a majority of the voting
securities of the surviving or acquiring corporation is held by
persons other than those who held a majority of the voting
securities of Bancorporation. The agreement provided that Mr.
Lesnik was to be compensated for his services as a special
consultant at the rate of $86,000 a year and that if elected, Mr.
Lesnik would serve as a member of the Board of Directors and of
the Executive Committee at no additional compensation. On August
16, 1996, at the request of the Compensation Committee, Mr.
Lesnik's agreement was amended. This amendment adjusted Mr.
Lesnik's 1996 compensation to $100,000 from $86,000 and set Mr.
Lesnik's 1997 compensation at $105,000, effective January 1,
1997. In addition to compensation as a consultant, the agreement
also provides Mr. Lesnik with the use of a motor vehicle and such
medical and dental insurance benefits as are established for
other personnel of Bancorporation and the Bank.
Mr. Lesnik's agreement with Bancorporation is subject to
early termination in the event of Mr. Lesnik's death or physical
or mental disability. If the agreement is terminated because of
his physical or mental disability, or if Mr. Lesnik shall retire
from his position as a consultant, he will be entitled to receive
50% of the compensation that would otherwise be payable to him
for the remainder of the term of the agreement, less amounts paid
to him under any other disability program or policy maintained by
Bancorporation. In addition, Bancorporation will maintain
medical insurance benefits for Mr. Lesnik and his wife at least
equivalent to those in effect at the date of termination. If Mr.
Lesnik retires or becomes disabled following a change in control,
in lieu of the 50% of compensation that would otherwise be
payable during the remaining term of the agreement, Mr. Lesnik
will be entitled to receive 85% of such compensation. If Mr.
Lesnik's employment is terminated because of his death, Mr.
Lesnik's widow, or his legal representative, will receive the
compensation that would otherwise be payable to Mr. Lesnik for a
period of 90 days after his death.
If Mr. Lesnik should fail on a continuing basis to perform
consulting services in accordance with the agreement, the Board
of Directors may place Mr. Lesnik in retirement and thereafter he
shall receive only the compensation that would be payable under
the agreement upon his retirement. If Mr. Lesnik engages in
competition against the Bank, then Bancorporation will not be
required to make any further payments under the agreement.
COMPENSATION PURSUANT TO PLANS
RETIREMENT PLAN. All regular full-time employees and part-
time employees of Bancorporation and the Bank who have attained
the age of 20 years and six months and who have worked at least
1,000 hours during a 12-month period are eligible for membership
in the Bank's pension plan on the January 1st following the
completion of six months' service. The pension plan provides for
a specified annual pension payable upon retirement.
The basis of calculation of benefits under the Plan is the
average of the total compensation paid or accrued during the
highest ten consecutive calendar years of service prior to the
Normal Retirement Date (as defined below). The amount of annual
pension pursuant to the plan will be 65% of compensation up to
the Covered Compensation (as defined in the plan) plus 87.5% of
the excess, prorated for less than 35 years of credited service.
Normal Retirement Date is the date of the participant's 65th
birthday. Early retirement may be taken after the participant
reaches 50 years of age provided the participant has five years
of vested service.
The following table illustrates estimated annual benefits
payable to a participant upon reaching normal retirement age in
1997 for specified final average compensation and years of
benefit service classifications. These plan benefits are in
addition to Social Security benefits.
Estimated Annual Benefit for Representative
Final Average Years of Benefit Service
Compensation 15 20 25 30 35
$ 25,000 $ 6,964 $ 9,286 $11,607 $ 13,929 $ 16,250
50,000 15,924 21,232 26,540 31,849 37,157
75,000 25,299 33,732 42,165 50,599 59,032
100,000 34,674 46,232 57,790 69,349 80,907
125,000 44,049 58,732 73,415 88,099 102,782
150,000 53,424 71,232 89,040 106,849 124,657
160,000 57,174 76,232 95,290 114,349 125,000
Regulations of the Internal Revenue Service provide that the
maximum benefit permitted to be paid under a defined benefit plan
in 1997 is $125,000 to participants with ten or more years of
participation. The minimum annual pension for a participant
shall be the accrued retirement pension under the retirement plan
as of December 31, 1988. Benefits under the pension plan are
payable in a variety of ways, and in each case benefits are
computed by the actuarial method.
As of January 1, 1997, the estimated credited years of
service under the retirement plan for each of the individuals
named in the summary compensation table is as follows: Mr. Karp,
14 years; Mr. Dorman, 4 years; Mr. Perry, 22 years; Mr. Kenny, 5
years; and Mr. Campo, 17 years.
INCENTIVE COMPENSATION PLANS. The Bank provides short-term
and longer-term incentive bonus programs for its officers. Each
of the participants in the incentive bonus programs are assigned
to one of three bonus tiers, which assignments are made primarily
according to job category. Tier one consists of the Chief
Executive Officer and the President, tier two consists of six
senior officers of the Bank, and tier three consists of the
remaining officers of the Bank. For 1996, $469,340 was paid
under the Bank's incentive bonus programs. The following
information is provided regarding the Bank's incentive bonus
programs:
Management Incentive Plan. During 1996 the Bank implemented
a Management Incentive Plan (the "Incentive Plan") providing
annual awards to participants for the achievement of corporate,
functional area or departmental and individual performance
objectives. Participation in the Incentive Plan is limited to
officers in tiers one and two of the Bank's incentive bonus
programs. Threshold, target and maximum levels of awards are
established at the beginning of each year, and no awards are paid
if the threshold is not met. Each participant's target bonus is
expressed as a percentage of his or her base salary, dependent on
responsibility and function. The target award is 45% of base
salary in the case of the Chief Executive Officer, and ranges
from 25% to 37.5% of base pay in the case of the President and
senior officers. Earned awards may range from 0% to 150% of the
target award. All awards are paid in cash, and the participants
must be actively employed at the end of the plan year to be
eligible to receive an award. For 1996, a total of $332,800 was
paid among all participants in the Incentive Plan, including
$158,800 to tier one participants and $174,000 to tier two
participants. Bonuses paid to executive officers under the
Incentive Plan for 1996 are detailed in the Summary Compensation
Table under the heading "Executive Compensation" above.
Bonus Plan. Incentive bonus awards are allocated to tier
three participants based upon the recommendations of the Chief
Executive Officer and the President. In allocating bonus awards
among the participants in tier three of the program, the Chief
Executive Officer and the President exercise their discretion and
judgment after considering the individual participant's
performance, responsibilities and contributions to the Bank, and
subjectively analyzing the basis of their aggregate impact on the
success of the Bank for the preceding year.
The bonus program does not provide for a maximum limit on
either the total amount of bonuses or the amount of a bonus to be
awarded to a specific individual. For 1996, $136,540 was paid by
the Bank to approximately 75 officers in tier three of the
incentive bonus program.
Long-Term Capital Accumulation Plan. During 1996 the Bank
implemented a Long-Term Capital Accumulation Plan (the "Capital
Accumulation Plan") providing bonus awards to participants for
the achievement of corporate objectives relating to the Bank's
growth and profitability. Participation in the Capital
Accumulation Plan is limited to officers in tiers one and two of
the Bank's incentive bonus program. Awards under the plan are
specified at the beginning of each of three consecutive three-year
performance periods and earned at the end of each such
period if the performance objectives set by the Plan
Administrators at the beginning of the performance period are
achieved. The achievement of performance objectives is measured
against increases in shareholder value over each performance
period (as indicated by return on equity and the Bank's
efficiency ratio). The awards for each performance period that
tier one and tier two participants are eligible to receive will
be equal to 100% and 70%, respectively, of the participant's base
salary in effect at the beginning of the performance period.
Payment of any awards will be made 60% in Bancorporation common
stock and 40% in cash. The aggregate number of shares of the
Company that may be awarded under the Capital Accumulation Plan
is limited to 400,000 shares. The Company currently intends to
register these shares on Form S-8 under the Securities Act of
1933 and any applicable state securities laws. The initial
performance period commenced January 1, 1996 and will conclude
December 31, 1998. No awards were paid out under the Capital
Accumulation Plan during 1996.
STOCK OPTION PLANS. Bancorporation currently has six stock
option plans: (1) the Incentive Stock Option Plan (the "1987 ISO
Plan"); (2) the Non-Statutory Stock Option Plan; (3) the 1993
Broad National Incentive Stock Option Plan (the "1993 ISO Plan");
(4) the 1993 Broad National Directors Non-Statutory Stock Option
Plan (the "1993 Directors Plan); (5) the 1996 Broad National
Bancorporation Incentive Stock Option Plan (the "1996 ISO Plan");
and (6) the 1996 Broad National Bancorporation Directors Non-
Statutory Stock Option Plan (the "1996 Directors Plan). At the
1987 Annual Meeting of Shareholders, the shareholders approved,
and Bancorporation subsequently implemented, the 1987 ISO Plan
and the Non-Statutory Stock Option Plan. The 1993 ISO Plan and
the 1993 Directors Plan were approved by the shareholders at the
1994 Annual Meeting of Shareholders, and subsequently implemented
by Bancorporation. The 1996 ISO Plan and the 1996 Directors Plan
are being submitted for the approval of the shareholders at the
1997 Annual Meeting of Shareholders. See Items 2 and 3.
The 1987 ISO Plan expired April 16, 1996, although the
outstanding options under the Plan remain in effect. Options
exercisable with respect to 36,039 shares (subject to adjustment
for any change in the capital structure of Bancorporation) that
were granted prior to April 16, 1996 remain outstanding and
exercisable until their expiration dates. No additional options
may be granted under this Plan.
The Non-Statutory Stock Option Plan expired April 16, 1996.
There are no options outstanding under the Plan, and no
additional options may be granted under this Plan.
No options were granted under either the 1987 ISO Plan or
the Non-Statutory Stock Option Plan in 1996. During 1996, 9,526
options were exercised under the 1987 ISO Plan, and 8,572 options
were exercised under the Non-Statutory Stock Option Plan.
Under the 1996 ISO Plan and the 1993 ISO Plan, options may
be granted for a maximum of 200,000 shares and 231,000 shares,
respectively (subject to adjustment for any change in the capital
structure of Bancorporation), of Common Stock to employees of
Bancorporation or its subsidiaries. Grants of options under both
the 1996 ISO Plan and the 1993 ISO Plan may be made only to
employees who possess no more than 10% of the combined voting
power of all classes of stock of Bancorporation, unless the
option exercise price is at least 110% of the stock's market
value and the option expires five years from the date of grant.
The aggregate fair market value of shares of Common Stock for
which an employee may be granted options under the 1996 ISO Plan
and the 1993 ISO Plan in any calendar year has no limit.
However, the aggregate fair market value (determined at the time
the options are granted) of shares of Common Stock with respect
to which incentive stock options are exercisable for the first
time by such individual during any calendar year under either ISO
Plan (and under any other plan of the employer corporation, its
parent or its subsidiaries) cannot exceed $100,000. To the
extent such fair market value exceeds $100,000 during any
calendar year, amounts in excess of $100,000 are treated as
nonqualified stock options.
The 1996 ISO Plan and the 1993 ISO Plan are administered by
a committee of Bancorporation's Board of Directors composed of
non-employee directors who advise the Board in matters such as
selection of the individuals to whom options shall be granted,
determination of the number of shares and share price under each
option, and other similar questions of plan administration.
Options are granted to those participants who, in the sole
discretion of the committee, have made material contributions in
the past, or are expected to make material contributions in the
future, to the success of Bancorporation and its subsidiaries.
The option exercise period for options granted under the 1996 ISO
Plan and the 1993 ISO Plan is established by the committee, and
the maximum period during which an option is exercisable is ten
years from the date that it is granted. An option may be
exercised upon payment in full of the option exercise price in
cash or in other shares of Common Stock. The exercise price for
purchase of shares under an option granted under the 1996 ISO
Plan and the 1993 ISO Plan is determined by the committee, but
cannot be less than 100% of the fair market value of the shares
on the date the option is granted.
At the December 19, 1996 meeting of the Board of Directors,
the Board approved the grant of options under the 1996 ISO Plan
to individuals named in the summary compensation table as
follows: Mr. Karp, 5,000 options; Mr. Dorman, 3,000 options;
Mr. Perry, Jr., 3,000 options; Mr. Kenny, 3,000 options; and
Mr. Campo, 3,000 options. In addition, at that meeting the Board
approved the grant of options under the 1993 ISO Plan to such
individuals as follows: Mr. Karp, 10,000 options; Mr. Dorman,
7,000 options; Mr. Perry, Jr., 2,000 options; Mr. Kenny, 2,000
options; and Mr. Campo, 2,000 options. No options were exercised
under the 1996 ISO Plan or the 1993 ISO Plan in 1996.
Under the 1996 Directors Plan and the 1993 Directors Plan,
options may be granted for a maximum of 75,000 shares and 86,625
shares, respectively (subject to adjustment for any change in the
capital structure of Bancorporation), of Common Stock to
directors of Bancorporation. The 1996 Directors Plan provides
for the automatic grants of options to purchase shares of Common
Stock to directors of Bancorporation serving as such on the date
of each annual meeting of the Board held following the annual
meeting of shareholders. The 1993 Directors Plan provides for
the automatic grants of options to purchase shares of Common
Stock to directors of Bancorporation serving as such on the date
the 1993 Directors Plan was adopted by the Board of Directors and
for directors of Bancorporation serving as such on the date of
each annual meeting of the Board held following the annual
meeting of shareholders. The number of options granted to each
director of Bancorporation serving as such on the date the 1993
Directors Plan was adopted by the Board of Directors was
determined on the basis of the respective director's length of
service on Bancorporation's Board of Directors in accordance with
a schedule provided in the 1993 Directors Plan. Both the 1996
Directors Plan and the 1993 Directors Plan provides for the grant
of options to purchase 500 shares of Common Stock to each person
serving as a director of Bancorporation on the date of each
annual meeting of the Board of Directors held following the
annual meeting of Bancorporation's shareholders (regardless of
whether such person was also serving as a director of
Bancorporation on the date the respective Plan was adopted).
Neither Bancorporation's Board of Directors nor any committee
thereof had or will have any discretion under the 1996 Directors
Plan or the 1993 Directors Plan to determine the selection of the
directors to whom options were granted, the frequency of option
grants, the number of shares of Common Stock subject to an
option, or the terms and conditions of the options.
Each option granted under the 1996 Directors Plan and the
1993 Directors Plan will become exercisable upon the later of (i)
the expiration of two years from the date on which such option
was granted or (ii) the date on which Bancorporation shall have
paid a cash dividend with respect to its Common Stock in each of
two consecutive calendar years during the term of such option.
Subject to the conditions and limitations of the 1996
Directors Plan and the 1993 Directors Plan, the period during
which each option granted under these Plans may be exercised is
ten years from the date on which such option was granted.
The exercise price at which shares of Common Stock may be
purchased under an option granted pursuant to the 1996 Directors
Plan and the 1993 Directors Plan cannot be less than 100% of the
fair market value of such shares on the date that the option was
granted. The fair market value of shares of Common Stock for
purposes of the 1996 Directors Plan and the 1993 Directors Plan
is determined by a fixed formula established by the Plan.
Pursuant to the 1993 Directors Plan, Mr. Karp and Mr. Dorman
each received 550 (adjusted for the 10% stock dividend declared
September 20, 1996) options on April 18, 1996. No options were
exercised under the 1993 Directors Plan in 1996. No options have
been granted under the 1996 Directors Plan.
401(K) PLAN. During 1989 the Bank implemented a 401(k) Plan
providing several tax-deferred investment opportunities to
salaried employees of the Bank. Employees are eligible to enter
the plan on the January 1 following the date that they have
attained age 20 1/2 years and have completed six months of service.
Employees may contribute from 2% to 15% of their salary, subject
to the Internal Revenue Code of 1986, as amended, limits on
maximum annual contributions. The Bank will make a "matching"
contribution equal to 50% of the employee's 401(k) contribution,
subject to a maximum "match" of 2% of the employee's annual pay.
Matching contributions are made only for participants who are
still employed on December 31st and who completed 1,000 hours of
service during the plan year. The employee's contribution is
100% vested and is distributable at death, retirement, or
termination of employment. In addition, the plan also provides
for early hardship withdrawals and loans. The Bank's matching
contribution is 20% vested after one vesting year (a calendar
year during which the employee completes 1,000 hours of service),
plus 20% for each additional vesting year, and is 100% vested
after five vesting years. Employees are automatically 100%
vested if they have attained age 65. Employer matching
contributions for all participants for 1996 totaled $62,300.
Employer matching contributions for 1996 for each of the
individuals named in the Summary Compensation Table under
"Executive Compensation" are as follows: Mr. Karp, $2,190;
Mr. Dorman, $2,190; Mr. Perry, Jr., $1,708; Mr. Kenny, $1,679;
and Mr. Campo, $1,591.
DEFERRED COMPENSATION PLAN. During 1996 the Bank
implemented a Non-Qualified Deferred Compensation Plan (the
"Deferred Compensation Plan") to provide the Bank's board of
directors, the Chairman/Chief Executive Officer, the
President/Chief Operating Officer and six senior officers of the
Bank with a means to defer receipt of director fees, salary,
incentive bonuses, and/or other cash compensation to a future
date. A participant may elect in any plan year to defer all or a
portion of his/her compensation in one percent (1%) increments,
whole one thousand dollar amounts, or an amount over a specified
dollar amount. The length of the deferral period will be
specified by the participant and is irrevocable. A participant
also may elect either (i) to have interest accrued on deferred
funds at an interest rate equal to the 90-day treasury bill rate
or a similar type of financial instrument, or (ii) to have
deferred amounts applied to a Rabbi Trust that will invest such
deferred amounts under such investment policy or directive as the
Bank, the participant, and the plan trustee of such Rabbi Trust
shall approve. At the end of the specified deferral period, the
deferred funds will be paid to the participant, his/her estate or
beneficiary in the form of cash in ten annual installments,
unless a lump sum payment was selected on the original election
form. For 1996, the Bank made supplemental contributions of
$37,687 for Mr. Karp and $14,251 for Mr. Dorman pursuant to the
Deferred Compensation Plan. The Administrators of such Plan
determined that such amounts were equal to the amounts that would
have been contributed for the benefit of Messrs. Karp and Dorman
under the Bank's retirement and 40l(k) plans in the absence of
Internal Revenue Code provisions placing a ceiling on the amount
of contributions which may be made for the benefit of any one
participant.
COMPANY PERFORMANCE
The following performance graph shows a comparison of
cumulative total returns for the Company, the NASDAQ Stock Market
(U.S. Companies) and the NASDAQ Bank Stocks for the period from
December 31, 1991, through December 31, 1996. The cumulative
total return on investment for each of the periods for the
Company, the NASDAQ Stock Market (U.S. Companies) and the NASDAQ
Bank Stocks is based on the stock price or index at December 31,
1991. The performance graph assumes that the value of an
investment in the Company's Common Stock and each index was $100
at December 31, 1991 and that all dividends were reinvested. The
information presented in the performance graph is historical in
nature and is not intended to represent or guarantee future
returns.
COMPARISON OF CUMULATIVE TOTAL RETURNS
(Bancorporation, NASDAQ, NASDAQ Banks)
The comparison of cumulative total returns presented in the
above graph was plotted using the following index values and
Common Stock price values:
12/31/91 12/31/92 12/31/93 12/30/94 12/29/95 12/31/96
Broad National
Bancorporation $100.00 $143.75 $175.00 $168.54 $260.07 $365.54
NASDAQ Stock
Market $100.00 $116.38 $133.60 $130.59 $184.67 $227.16
(U.S. Companies)
NASDAQ Bank
Stocks $100.00 $145.55 $165.99 $165.39 $246.32 $325.60
TRANSACTIONS WITH MANAGEMENT AND OTHERS
During 1996, the Bank made loans to certain officers and
directors of Bancorporation and the Bank and to certain firms and
corporations in which various directors have interests. Each of
such loans are believed to have been made to such directors or
officers or to such firms or corporations in the ordinary course
of business, on substantially the same terms, including interest
rates and collateral, as those prevailing at the time for
comparable transactions with other persons, and did not involve
more than the normal risk of collectibility or present other
unfavorable features.
Effective September 14, 1994, Mr. Henry D. Hayman elected to
take early retirement from his position as Senior Vice President
with the Bank. In recognition of his years of service to the
Bank, the Bank has agreed to continue Mr. Hayman's medical/dental
coverage through 1997, subject to Mr. Hayman making his premium
contribution. The Bank also will continue to pay the annual
premium in the amount of $9,010 for Mr. Hayman's split-dollar
life insurance policy until it is paid in full.
OWNERSHIP OF BANCORPORATION CAPITAL STOCK
The following table sets forth certain information, as of
January 31, 1997, relating to the beneficial ownership of
Bancorporation's Common Stock by each person known to the Board
of Directors to own beneficially 5% or more of Bancorporation's
stock, by each director of Bancorporation, by each officer named
in the Summary Compensation Table under "Executive Compensation
and Other Information -- Executive Compensation" and by all
directors and officers of Bancorporation as a group. All
information with respect to beneficial ownership has been
furnished by the respective directors, officers or 5% or more
shareholders, as the case may be. Except as otherwise indicated,
each beneficial owner listed has sole voting and investment power
with respect to the shares of Common Stock reported.
Amount and Nature of Percentage of
Name Beneficial Ownership/1/ Shares Outstanding/1/
Harriet M. Alpert /2/ 629,899 13.5%
360 East 72nd Street
New York, New York
Fred S. Campo /3/ 11,478 *
Licinio Cruz /4//5/ 42,690 *
John A. Dorman /4//6/ 49,927 1.1
Arthur Fischman /4//7/ 22,945 *
John J. Iannuzzi /4/8/ 13,062 *
Donald M. Karp /4//9/ 1,095,569 23.3
18 Shawnee Road
Short Hills, New Jersey
Peter Kenny /10/ 8,372 *
James J. Lazarus /4//11/ 24,323 *
Edward J. Lenihan /4//12/ 25,963 *
Stanley J. Lesnik /4//13/ 32,979 *
Catherine McFarland /4//14/ 3,987 *
Louis J. Owen /4//15/ 15,671 *
Fred Perry, Jr. /16/ 15,257 *
A. Harold Schwartz /4//17/ 53,980 1.2
Hubert Williams /4//18/ 19,747 *
All directors and officers
as a group (30
persons)/19/ 1,454,944 30.2
___________
* Less than one percent
/1/ Beneficial ownership is determined in accordance with the
rules of the Securities and Exchange Commission which
generally attribute beneficial ownership of securities to
persons who possess sole or shared voting power and/or
investment power with respect to those securities. Unless
otherwise indicated, the persons or entities identified in
this table have sole voting and investment power with
respect to all shares shown as beneficially owned by them.
Percentage ownership calculations are based on 4,667,188
shares of Common Stock outstanding.
/2/ Includes 625,581 shares of Common Stock as to which
Ms. Alpert has shared voting and investment power with
Donald M. Karp; and 4,318 shares of Common Stock
beneficially owned by Ms. Alpert's husband and as to which
Ms. Alpert disclaims beneficial ownership.
/3/ Secretary of Bancorporation and the Bank and Senior Vice
President of the Bank. Shares beneficially owned by Mr.
Campo include 5,863 shares of Common Stock subject to
immediately exercisable options and 5,615 shares of Common
Stock held by Mr. Campo and his wife as custodian for his
children.
/4/ Director of Bancorporation and of Bank.
/5/ Includes 6,352 shares of Common Stock subject to an
immediately exercisable option; 4,670 shares of Common Stock
held by Mr. Cruz individually; 10,661 shares of Common Stock
held by him as custodian for his children; 13,648 shares of
Common Stock held for the benefit of Mr. Cruz by the Cruz
Construction Co., Inc. and 7,349 shares of Common Stock held
for the benefit of Mr. Cruz by the Cruz Construction Co.,
Inc. Profit Sharing Plan.
/6/ Includes 15,372 shares of Common Stock subject to an
immediately exercisable option, 29,001 shares of Common
Stock held by Mr. Dorman jointly with his wife and as to
which he has shared voting and investment power; 2,230
shares of Common Stock held by Mr. Dorman individually;
2,701 shares of Common Stock owned by Mr. Dorman's wife; and
623 shares of Common Stock owned by Mr. Dorman's son.
/7/ Includes 6,352 shares of Common Stock subject to an
immediately exercisable option; 14,253 shares of Common
Stock held by Mr. Fischman individually; and 2,340 shares of
Common Stock beneficially owned by Mr. Fischman's wife and
as to which Mr. Fischman disclaims beneficial ownership.
/8/ Includes 4,042 shares of Common Stock subject to an
immediately exercisable option; 3,389 shares of Common Stock
held by Mr. Iannuzzi jointly with his wife and as to which
Mr. Iannuzzi has shared voting and investment power; 3,368
shares of Common Stock held by Mr. Iannuzzi individually;
165 shares of Common Stock held by him as trustee of a trust
for the benefit of his grandsons; and 2,098 shares of Common
Stock held by Mr. Iannuzzi's wife.
/9/ Includes 40,739 shares of Common Stock subject to
immediately exercisable options. Also includes 264,406
shares of Common Stock held by Mr. Karp individually; 48,028
shares of Common Stock held by Mr. Karp for the benefit of
his children, and 2,865 shares of Common Stock held by
Mr. Karp as agent for Harriet M. Alpert. The number of
shares reported for Mr. Karp also includes 625,581 shares of
Common Stock held by Ms. Alpert, as to which Mr. Karp shares
voting and investment power. The number of shares reported
for Mr. Karp includes 113,950 shares of Common Stock owned
by Mr. Karp's wife, as to which Mr. Karp disclaims
beneficial ownership.
/10/ Senior Vice President of the Bank. Includes 4,972 shares of
Common Stock subject to an immediately exercisable option,
2,029 shares of Common Stock held by Mr. Kenny individually;
and 115 shares of Common Stock held by Mr. Kenny jointly
with his minor son and as to which he has shared voting and
investment power. Also includes 1,048 shares of Common
Stock held Mr. Kenny's wife and 208 shares of Common Stock
held by Mr. Kenny's wife jointly with his two minor
children, as to which 1,256 shares of Common Stock Mr. Kenny
disclaims beneficial ownership.
/11/ Includes 5,197 shares of Common Stock subject to an
immediately exercisable option, and 19,126 shares of Common
Stock.
/12/ Includes 6,352 shares of Common Stock subject to an
immediately exercisable option.
/13/ Includes 7,507 shares of Common Stock subject to an
immediately exercisable option; 21,410 shares of Common
Stock held individually by Mr. Lesnik; and 4,062 shares of
Common Stock beneficially owned by Mr. Lesnik's wife, as to
which Mr. Lesnik disclaims beneficial ownership.
/14/ Includes 1,155 shares of Common Stock subject to an
immediately exercisable option and 1,100 shares of Common
Stock held by Ms. McFarland's husband.
/15/ Includes 6,352 shares of Common Stock subject to an
immediately exercisable option. Mr. Owen has sole voting
and investment power with respect to 4,200 shares of Common
Stock held by him individually and shared voting and
investment power with respect to 5,119 shares of Common
Stock held jointly with his wife.
/16/ Senior Vice President of the Bank. Shares beneficially
owned by Mr. Perry, Jr. include 8,382 shares of Common Stock
subject to an immediately exercisable option and 6,875
shares of Common Stock held by Mr. Perry, Jr. jointly with
his wife and as to which he has shared voting and investment
power.
/17/ Includes 5,197 shares of Common Stock subject to an
immediately exercisable option.
/18/ Includes 4,042 shares of Common Stock subject to an
immediately exercisable option; 6,236 shares of Common Stock
held by Mr. Williams individually; 629 shares of Common
Stock held by him jointly with his wife and as to which he
has shared voting and investment power; 1,368 shares of
Common Stock held by him as trustee for the benefit of his
son; and 7,472 shares of Common Stock held by Mr. Williams
jointly with his brother and as to which he has shared
voting and investment power.
/19/ Includes 143,322 shares of Common Stock subject to
immediately exercisable options.
ITEM 2
APPROVAL OF 1996 BROAD NATIONAL BANCORPORATION
INCENTIVE STOCK OPTION PLAN
GENERAL
On December 19, 1996, the Board of Directors unanimously
adopted, and subsequently amended, the 1996 Broad National
Bancorporation Incentive Stock Option Plan (the "ISO Plan"),
subject to the approval of the Company's shareholders. The ISO
Plan is sponsored by the Company for key employees of the Company
and its subsidiaries, Broad National Bank, a national banking
association, Broad National Realty Corporation, a New Jersey
corporation, BNB Investment Corp., a New Jersey corporation,
and Bronatero, Inc., a New Jersey corporation. The aggregate number
of shares of common stock, $1.00 par value, of the Company that
may be issued pursuant to the exercise of options granted under
the ISO Plan is limited to 200,000 shares, subject to increase or
decrease in the event of any change in the Company's capital
structure. See "Dilution or Enlargement."
PURPOSE
The purpose of the ISO Plan is to encourage the key
employees of the Company and its subsidiaries to participate in
the ownership of the Company, and to provide additional incentive
for such key employees to promote the success of its business
through sharing in the future growth of such business.
ELIGIBLE PARTICIPANTS
Options to purchase shares of the Company's common stock may
be granted under the ISO Plan only to key employees of the
Company or of any of its subsidiary corporations. Key employees
to whom options may be granted under the ISO Plan will be those
employees selected from time to time by a committee selected by
the Company's Board of Directors (the "Committee") who, in the
sole discretion of the Committee, have made material
contributions in the past, or are expected to make material
contributions in the future, to the successful performance of the
Company.
No option may be granted under the ISO Plan to any employee
of the Company or of a subsidiary corporation who, immediately
before the option is granted, owns (either directly or by
application of the rules contained in section 424(d) of the
Internal Revenue Code of 1986 (the "Code")) stock possessing more
than ten percent of the total combined voting power of all
classes of stock of the Company or of any of its subsidiary
corporations. Such stock ownership limitation shall not apply,
however, if at the time the option is granted (i) the option
exercise price is at least 110 percent of the fair market value
of the shares of the common stock subject to the option, and (ii)
such option will expire by its terms no later than five years
from the date on which it is granted.
The aggregate fair market value of shares of common stock
for which an employee may be granted options under the ISO Plan
in any calendar year has no limit. However, the aggregate fair
market value (determined at the time the options are granted) of
shares of common stock with respect to which incentive stock
options are exercisable for the first time by such individual
during any calendar year under the ISO Plan (and under any other
plan of the employer corporation, its parent or its subsidiaries)
cannot exceed $100,000. To the extent such fair market value
exceeds $100,000 during any calendar year, amounts in excess of
$100,000 are treated as nonqualified stock options.
There currently are eight persons eligible to participate in
the ISO Plan. Subject to approval of the ISO Plan by the
Company's shareholders at the Annual Meeting, (a) Messrs. Karp,
Dorman, Perry, Jr., Kenny and Campo (the officers named in the
Summary Compensation Table under "Executive Compensation and
Other Information--Executive Compensation" in Item 1) have been
granted options to purchase 5,000, 3,000, 3,000, 3,000 and 3,000
shares of common stock, respectively, under the ISO Plan, (b) the
Company's current executive officers as a group, the Company's
current directors who are not executive officers as a group and
the Company's employees, including all current officers who are
not executive officers, as a group have been granted options to
purchase 26,000, 0 and 0 shares of common stock, respectively,
under the ISO Plan, and (c) Messrs. Cruz, Dorman, Fischman,
Iannuzzi, Karp, Lazarus, Lenihan, Lesnik, McFarland, Owen,
Schwartz and Williams (the nominees for election as directors)
have been granted options to purchase 0, 3,000, 0, 0, 5,000, 0,
0, 0, 0, 0, 0 and 0 shares of common stock, respectively, under
the ISO Plan.
ADMINISTRATION OF THE ISO PLAN
The ISO Plan is administered by the Committee, which
Committee will be composed of not less than two nor more than
five members of the Board of Directors who are not employees and
who qualify as "non-employee directors" within the meaning of
Securities Exchange Commission Rule 16b-3(b)(3). Currently,
Messrs. Lazarus, Cruz and Schwartz serve as members of the
Committee. None of the members of the Committee are eligible to
receive options under the ISO Plan. The members of the Committee
are chosen by, and serve at the pleasure of, the Board of
Directors. The Committee is authorized to construe, interpret
and administer the ISO Plan, and from time to time to adopt such
rules and regulations for carrying out the ISO Plan as it may
deem proper and in the best interests of the Company. Subject to
the terms, conditions and provisions of the ISO Plan, the
Committee has exclusive authority to (i) select the key employees
to whom options will be granted, (ii) determine the number of
shares subject to each option, (iii) determine the time or times
when options will be granted, (iv) determine the option price of
shares subject to each option, (v) determine the time when each
option may be exercised, (vi) fix such other provisions of each
incentive stock option agreement as the Committee may deem
necessary or desirable, consistent with the terms of the ISO
Plan, and (vii) determine all other questions relating to the
administration of the ISO Plan. The interpretation and
construction of the ISO Plan by the Committee is final,
conclusive and binding upon all persons.
TERMS OF OPTIONS
The Committee is authorized to establish the terms which
will govern each option granted under the ISO Plan, provided that
such terms are consistent with the terms, provisions and
conditions of the ISO Plan. The exact terms established with
respect to any grant of an option under the ISO Plan will be
contained within a written incentive stock option agreement.
There is no obligation to grant any two options on the same
terms, and options granted at the same time to different
individuals or at different times to the same individual may have
different terms.
Exercise Period. Subject to the conditions and limitations
of the ISO Plan, the period during which each option granted
under the ISO Plan may be exercised is fixed by the Committee at
the time such option is granted. The maximum period during which
an option is exercisable is ten years from the date that it is
granted (five years in the case of an option granted to an
individual who owns, directly or indirectly, more than ten
percent of the total combined voting power of all classes of
common stock of the employer corporation or of its parent or
subsidiaries as explained above), but the exercise period of any
option may be less than the maximum as specified by the Committee
in the applicable incentive stock option agreement.
In granting an option, the Committee may prescribe that an
option may be exercised as to all or part of the shares subject
to the option only after the occurrence of certain events or the
passage of specified periods of time, or both, after the date the
option is granted. In the event of a "Change of Control," the
Committee may accelerate the time at which any of the outstanding
options under the ISO Plan may be exercised by the optionee. A
"Change of Control" is generally defined to take place when
disclosure of such a change would be required by the proxy rules
promulgated by the Securities and Exchange Commission or when
either (i) a person (other than a current shareholder, or a
director nominated or selected by the Company's Board of
Directors or an officer elected by the Company's Board of
Directors) acquires beneficial ownership (as defined in
Securities and Exchange Commission Rule 13d-3) of 25% or more of
the combined voting power of the Company's voting securities, or
(ii) less than a majority of the directors are persons who were
either nominated or selected by the Company's Board of Directors.
In the event that the Company is not the surviving
corporation of any merger, consolidation, reorganization or
acquisition by another corporation, outstanding options under the
ISO Plan may be assumed, or replaced with new options of
comparable value, by the surviving corporation. The Committee
may provide that if the surviving corporation does not assume or
replace outstanding options, or in the event the Company is
liquidated or dissolved, then each holder of outstanding options
may exercise all or part of such options (even if the options
would not otherwise have been exercisable in full) during the
period beginning 30 days before the event triggering this
acceleration, and ending on the day before such event occurs.
Effect of Termination of Employment. Except as provided
below, options granted under the ISO Plan may be exercised only
by persons who are then employed by the Company or any of its
subsidiaries and who have been so employed at all times since the
date on which such options were granted. If a person to whom
options are granted under the ISO Plan ceases to be employed by
the Company or any of its subsidiaries for any reason other than
for cause, on account of voluntary termination, or on account of
death or disability, any option or unexercised portion thereof
granted to such person under the ISO Plan which is otherwise
exercisable will terminate unless it is exercised within 30 days
of the date on which such person ceased to be so employed (but in
no event later than the expiration date of such option specified
in the applicable incentive stock option agreement).
In the event a person to whom options are granted under the
ISO Plan is terminated for cause, or voluntarily terminates his
or her employment with the Company or any of its subsidiaries,
any option or the unexercised portion of any option granted to
such person under the ISO Plan not previously exercised will be
immediately terminated and forfeited without any payment being
due therefor from the Company. The term "cause" is defined in
the ISO Plan to mean cause as defined in an optionee's employment
agreement with the Company or a subsidiary thereof, or, if none,
the occurrence of any of the following events: (i) the willful
and continued failure by the optionee to substantially perform
such optionee's duties with the Company or any subsidiary thereof
on a full-time basis (other than any such failure resulting from
total or partial incapacity due to physical or mental illness)
after a written demand for substantial performance is delivered
to such optionee by the Board of Directors, which demand
identifies the manner in which the Board believes that such
optionee has not substantially performed such duties; (ii) the
willful engaging by such optionee in conduct which is
significantly injurious to the Company or to any subsidiary of
the Company, monetarily or otherwise, after a written demand for
cessation of such conduct is delivered to such optionee by the
Board of Directors, which demand specifically identifies the
manner in which the Board believes that such individual has
engaged in such conduct and the injury to the Company or to any
subsidiary of the Company resulting therefrom; (iii) the
commission by such optionee of an act or acts constituting a
crime involving moral turpitude; (iv) the breach by such optionee
of one or more covenants, if any, in any agreement to which the
optionee and the Company are parties; (v) such optionee's use of
illegal drugs, abuse of other controlled substances or habitual
intoxication; or (vi) the commission by such optionee of a
significant act of dishonesty, deceit or breach of fiduciary duty
in the performance of the optionee's duties with the Company or
with any subsidiary of the Company. For purposes of clauses (i)
and (ii) of this definition, no act, or failure to act, on the
part of an optionee shall be deemed to be willful unless
knowingly done, or omitted to be done, by such optionee not in
good faith and without a reasonable belief that such action or
omission was in the best interests of the Company or of a
subsidiary of the Company.
Effect of Death or Disability. In the event a person to
whom options are granted under the ISO Plan dies or becomes
disabled while such person is an employee of the Company or any
of its subsidiaries (or within 30 days of the date on which such
person ceases to be so employed) any option or unexercised
portion thereof granted to such person under the ISO Plan which
is otherwise exercisable may be exercised, in the case of
disability of the optionee, by the optionee, and in the case of
death of the optionee, by the person or persons to whom the
optionee's rights under the option pass by operation of the
optionee's will or the laws of descent and distribution, at any
time within a period of one year following the optionee's
disability or death (but in no event later than the expiration
date of the option as specified in the applicable incentive stock
option agreement). For purposes of the ISO Plan, the term
"disability" means with respect to any optionee, physical or
mental incapacity resulting in such optionee being unable to
substantially perform his or her duties for more than six
consecutive months, or an aggregate of six months in any period
of twelve consecutive months, as determined in writing by a
qualified independent physician mutually acceptable to the
optionee and the Company.
No certificate for a fractional share of common stock will
be issued pursuant to the exercise of any option.
PRICE
No consideration is paid to the Company by any optionee in
exchange for the grant of an option. The exercise price at which
shares of common stock may be purchased under an option granted
pursuant to the ISO Plan shall be determined by the Committee,
but in no event will the exercise price be less than the greater
of (i) the par value thereof, or (ii) 100 percent of the fair
market value of such shares on the date that the option is
granted. The fair market value of shares of common stock for
purposes of the ISO Plan will be determined by the Committee, in
its sole discretion.
In the event of a change in the Company's capital structure,
the exercise price and number of shares subject to outstanding
options and the total number of shares subject to the ISO Plan
shall be adjusted as described below under "Dilution or
Enlargement."
PAYMENT FOR SHARES
The exercise of any option will be contingent upon receipt
by the Company of (i) written notice of the number of shares with
respect to which the optionee is exercising an option, (ii) the
full option exercise price for the shares of common stock and
(iii) such representations or agreements as are necessary in the
opinion of counsel for the Company to secure any necessary
exemptions from the registration requirements of the applicable
securities laws in the event that the shares underlying options
are not registered under applicable securities laws. The Company
currently intends to register those shares on Form S-8 under the
Securities Act of 1933 and any applicable state securities laws,
along with shares underlying options granted under the Company's
other stock option plans. Payment for the shares issued upon the
exercise of an option may be made either in cash or in other
shares of common stock.
No optionee and no legal representative, legatee or
distributee of any optionee shall be deemed to be a holder of any
shares of common stock subject to an option granted under the ISO
Plan unless and until certificates for such shares are issued to
any such person under the terms of the ISO Plan.
The Company does not intend to regularly furnish reports to
optionees regarding the amount and status of their options, but
such information will be readily available at the Company and
will be given to the optionee upon request.
SHARES AVAILABLE FOR OPTIONS
The aggregate number of shares of common stock of the
Company that may be issued pursuant to the exercise of options
granted under the ISO Plan is limited to 200,000 shares, subject
to increase or decrease in the event of any change in the
Company's capital structure. See "Dilution or Enlargement." The
shares of common stock to be delivered upon exercise of options
under the ISO Plan will be made available, at the discretion of
the Company's Board of Directors, from either the Company's
authorized but unissued shares of common stock or any shares of
common stock held by the Company as treasury shares. Shares of
common stock subject to options granted under the ISO Plan which
expire or terminate without being exercised in full become
available, to the extent unexercised, for future grants under the
ISO Plan. The per share market value of the common stock on
March 17, 1997, computed by reference to the closing sale
price of the common stock as reported on NASDAQ, was $16.00.
DILUTION OR ENLARGEMENT
In the event that there is any change in the capital
structure of the Company, including but not limited to a change
resulting from a stock dividend, stock split, reorganization,
merger, consolidation, liquidation or any combination or exchange
of shares of common stock, the number of shares of common stock
subject to an option under the ISO Plan which remains unexercised
and the number of shares of common stock subject to the ISO Plan,
will be subject to increase or decrease in order to prevent
dilution or enlargement. The option exercise price also will be
adjusted upon the occurrence of any of such events so that there
will be no change in the aggregate option exercise price payable
upon the exercise of the option.
RESTRICTIONS ON RESALE
Any person acquiring shares of common stock pursuant to the
exercise of an option under the ISO Plan may resell such shares
without restriction, unless such person is an "affiliate" of the
Company. "Affiliates" of the Company (i.e., persons who are
deemed to directly or indirectly control the Company, including
executive officers and directors of the Company) who acquire
shares pursuant to the exercise of an option granted under the
ISO Plan may resell such shares only if such shares are either
(i) registered under the Securities Act of 1933, as amended (the
"Act"), and any applicable state securities laws, or (ii)
exemptions from registration under the Act and applicable state
securities laws are available.
Rule 144 under the Act provides an exemption from
registration under the Act if all of its conditions are met.
Under Rule 144 an affiliate may sell within any three-month
period a number of shares of common stock equal to the greater of
(i) one percent of the total number of shares of common stock
then outstanding, or (ii) the average weekly trading volume of
the Company's common stock during the four calendar weeks
preceding such sale. Sales under Rule 144 also are subject to
certain limitations on the manner of sale, notice requirements
and availability of current public information about the Company.
The Company is subject to Section 16(b) of the Securities
Exchange Act of 1934 (the "Exchange Act"), which permits the
recovery by the Company of any profit realized by any officer,
director or beneficial owner of more than ten percent of the
outstanding shares of common stock from each purchase and sale,
or sale and purchase, of common stock within any period of less
than six months. Under Rule 16b-3 of the Exchange Act, such
persons are prohibited from selling shares of common stock
received upon the exercise of an option under the ISO Plan within
six months of the option grant unless the option grant was
approved by the shareholders or by the Board of Directors (or a
committee of two or more "non-employee directors"). It is
anticipated that all grants of options under the ISO Plan will be
approved by a committee comprised of two or more "non-employee
directors" and therefore the six-month restriction period under
Rule 16b-3 will not be applicable. If the six-month period were
to be applicable, however, sales of shares of common stock
received upon the exercise of an option by officers, directors
and ten percent shareholders within the six-month period would be
subject to the short-swing profit recovery provisions of Section
16(b). In addition, if sales of the shares received upon the
exercise of an option under the ISO Plan are made in such case
within such six-month period, sales of other shares of common
stock by officers, directors and ten percent shareholders within
such six-month period also become subject to the Section 16(b)
short-swing profit recovery provisions. Optionees who are
officers, directors, or beneficial owners of more than ten
percent of the outstanding shares of common stock will be urged
to consult their own legal advisors prior to disposing of any
shares of common stock acquired upon the exercise of an option
granted under the ISO Plan.
FEDERAL INCOME TAX CONSEQUENCES
Options granted under the ISO Plan are intended to qualify
as "incentive stock options" under section 422(b) of the Code.
Generally, an optionee incurs no Federal income tax consequences
at the time of a grant of an option under the ISO Plan or upon
exercise of an option granted under the ISO Plan; however, as
explained below, an optionee may incur alternative minimum tax
consequences upon the exercise of an incentive stock option.
Upon the sale of stock received pursuant to the exercise of
an option granted under the ISO Plan, other than a sale of stock
which is a "disqualifying disposition," as defined below, an
optionee will recognize either a taxable gain equal to the excess
of the amount realized from the sale over the optionee's basis in
the shares, or a taxable loss equal to the excess of the
optionee's basis in the shares over the amount realized from the
sale. The basis in shares received upon exercise of an option
granted under the ISO Plan will be the amount paid for those
shares, or, if the option was exercised by exchanging shares of
common stock for the new shares, the basis in the shares received
upon exercise is the same as the basis in the shares surrendered
in the exchange.
Gain or loss from the sale of stock received upon exercise
of an option granted under the ISO Plan, other than a sale of
stock which is a "disqualifying disposition," as defined below,
will be considered gain or loss from the sale of a capital asset
if the shares are held for investment purposes. Losses from
sales of capital assets are subject to limitations based upon the
amount and nature of the taxpayer's other income, deductions,
gains and losses.
A "disqualifying disposition" of shares received pursuant to
the exercise of an option granted under the ISO Plan occurs if
the optionee disposes of such shares within two years from the
date of the granting of the option or within one year after the
transfer of the shares to such optionee, unless such disposition
is (i) a transfer from a decedent to an estate or a transfer by
bequest or inheritance, (ii) an exchange to which section 354,
section 355, section 356 or section 1036 (or so much of section
1031 as relates to section 1036) of the Code applies, or (iii) a
mere pledge or hypothecation. In the event of a "disqualifying
disposition," the optionee generally will realize ordinary income
in the year of the "disqualifying disposition" in an amount equal
to the difference between the fair market value of the shares on
the date of exercise and the exercise price. If the disposition
is one in which a loss, if sustained, would be recognized by the
optionee, the amount recognized as taxable income in the
preceding sentence is limited to the amount by which the amount
realized on the sale of the shares in the "disqualifying
disposition" exceeds the adjusted basis of the shares sold. If
the amount realized from the sale exceeds the fair market value
of the shares on the date of exercise, the excess will be treated
as a gain which is taxed under the rules described in the
preceding paragraph.
If an optionee exercises an option granted under the ISO
Plan and pays the option exercise price for the shares by
exchanging shares of common stock already held by the optionee,
in general no gain or loss will be recognized upon the exchange
of shares pursuant to the exercise of an option. However, if an
optionee exercises an option granted under the ISO Plan by
exchanging shares previously acquired by such optionee pursuant
to the exercise of an option previously granted under the ISO
Plan, gain or loss will be recognized on the exchanges unless the
stock previously acquired has been held for at least two years
from the date the previously granted option was granted and at
least one year from the date the previously granted option was
exercised.
Upon expiration of any option, no taxable income will be
recognized by the optionee whose option has expired and was not
exercised.
The Company does not realize any Federal income tax
consequences on the issuance or exercise of options under the ISO
Plan. If the optionee makes a "disqualifying disposition,"
however, the Company may deduct an amount equal to the amount
included in the optionee's ordinary income, provided the Company
satisfies applicable information reporting and income and payroll
tax withholding requirements.
If the stock received pursuant to the exercise of an option
granted under the ISO Plan is freely transferable or not subject
to a substantial risk of forfeiture, then the excess, if any, of
the fair market value of such stock (determined without regard to
any restriction other than a restriction which by its term will
never lapse) over the amount paid for such stock is included in
the determination of the optionee's alternative minimum taxable
income in the year of exercise. If the stock received pursuant
to the exercise of an option granted under the ISO Plan is not
freely transferable and is subject to a substantial risk of
forfeiture, then the excess, if any, of the fair market value of
such stock (determined as above) at the time such stock becomes
freely transferable or no longer is subject to a substantial risk
of forfeiture, whichever of said two events occurs first, over
the amount paid for such stock is included in the determination
of the optionee's alternative minimum taxable income in the year
in which such stock becomes freely transferable or is no longer
subject to a substantial risk of forfeiture, whichever of said
two events occurs first. Special rules apply for purposes of
determining whether stock received pursuant to the exercise of an
option granted under the ISO Plan is freely transferable or
subject to a substantial risk of forfeiture. These rules may
impact the determination of alternative minimum taxable income
for optionees whose sale of such stock at a profit could subject
the optionee to suit under Section 16(b) of the Exchange Act and
in certain other circumstances.
For purposes of computing the alternative minimum income tax
in the year of sale, the basis in the shares sold is increased by
the amount included in the determination of alternative minimum
taxable income in the year the option was exercised. If stock
received pursuant to the exercise of an option granted under the
ISO Plan is sold in the same taxable year in which the option was
exercised, then the amount includible in the determination of the
optionee's alternative minimum taxable income cannot exceed the
excess (if any) of the amount realized on the sale less the
optionee's adjusted basis in such stock.
The ISO Plan is not one which can be qualified under section
401(a) of the Code.
THE FEDERAL INCOME TAX CONSEQUENCES DESCRIBED ABOVE ARE FOR
GENERAL INFORMATION ONLY. NO INFORMATION IS PROVIDED AS TO
STATE, LOCAL OR FOREIGN TAX CONSEQUENCES OF THE ACQUISITION OR
EXERCISE OF OPTIONS GRANTED UNDER THE ISO PLAN OR THE SALE OF
SHARES OF COMMON STOCK ACQUIRED UPON SUCH EXERCISE. EACH
OPTIONEE SHOULD CONSULT HIS OR HER OWN TAX ADVISOR AS TO THE
SPECIFIC FEDERAL INCOME TAX CONSEQUENCES AND AS TO THE SPECIFIC
CONSEQUENCES UNDER STATE, LOCAL AND FOREIGN TAX LAWS.
EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974
The ISO Plan is not subject to any provision of the Employee
Retirement Income Security Act of 1974.
AMENDMENT AND TERMINATION OF THE ISO PLAN
The ISO Plan will terminate on December 19, 2006, except as
to options then outstanding under the ISO Plan. Options which
are outstanding on the date of such termination shall remain in
effect until they have been exercised or have expired.
The Board of Directors has the right to amend, modify or
terminate the ISO Plan, except that it cannot, without approval
of the holders of a majority of the issued and outstanding shares
of common stock, (i) increase the aggregate number of shares of
common stock as to which options may be granted under the ISO
Plan, (ii) modify the requirements as to eligibility for
participation, (iii) extend the periods during which options may
be granted or exercised, or (iv) change the manner of determining
the exercise price (other than to change the manner of
determining the fair market value of shares of common stock). No
amendment, modification or termination of the ISO Plan may
adversely affect the rights of any optionee under any then
outstanding option granted under the ISO Plan without the consent
of that optionee.
ASSIGNMENT
An option granted pursuant to the ISO Plan shall not be
transferable or assignable by the optionee other than by will or
the laws of descent and distribution, and during the lifetime of
the optionee the option shall be exercisable only by the
optionee.
ISO PLAN BENEFITS
The following table sets forth the ISO Plan benefits that
will be received by or allocated to each officer named in the
Summary Compensation Table under "Executive Compensation and
Other Information--Executive Compensation" in Item 1, all
executive officers as a group, all directors who are not
executive officers as a group, and all employees, including
officers who are not executive officers, as a group under the ISO
Plan to be considered and voted upon at the Annual Meeting.
NEW PLAN BENEFITS
1996 Broad National
Incentive Stock Option Plan
Dollar Number
Name and Position Value ($)(1) of Units
Donald M. Karp, Chairman of the Board, $22,150 5,000
Chief Executive Officer and Director of
Bancorporation and the Bank
John A. Dorman, President, Chief $16,710 3,000
Operation Officer and Director of
Bancorporation and the Bank
Fred Perry, Jr., Senior Vice President $16,710 3,000
of the Bank
Peter Kenny, Senior Vice President $16,710 3,000
of the Bank
Fred Campo, Secretary of Bancorporation, $16,710 3,000
and the Bank, Senior Vice President
of the Bank
Executive Group $139,120 26,000
Non-Executive Director Group -- --
Non-Executive Officer Employee Group -- --
_______________
/1/ The dollar value of options to purchase shares of common
stock granted under the ISO Plan has been determined as of
December 19, 1996 using the Black-Scholes option pricing
model, based on the assumptions that (a) the options were
granted on that date, (b) the closing price for the shares
of common stock underlying the options on the grant date was
$ 12.13 per share, (c) the period during which the options
are exercisable is ten years from the grant date (five years
in the case of options granted to Mr. Karp), (d) the option
exercise price is $12.13 ($13.34 in the case of options
granted to Mr. Karp), (e) the dividend yield for 1996 is
2.4%, (f) the expected lives of the options is eight years
(five years in the case of options granted to Mr. Karp),
(g) the "risk free" interest rate on U.S. Treasury Strips is
a 6.36% yield in eight years from the grant date (December
2004) (6.10% yield in five years from the grant date
(December 2001)), and (g) the price volatility for the
shares of common stock underlying the options is 45.0%
(based on the fluctuation in weekly closing stock prices
from December 30, 1991 to December 13, 1996).
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF
THE ISO PLAN.
ITEM 3
APPROVAL OF 1996 BROAD NATIONAL BANCORPORATION
DIRECTORS NON-STATUTORY STOCK OPTION PLAN
GENERAL
On December 19, 1996, the Board of Directors unanimously
adopted the 1996 Broad National Bancorporation Directors Non-
Statutory Stock Option Plan (the "Directors Plan"), subject to
the approval of the Company's shareholders. The Directors Plan
is sponsored by the Company for directors of the Company serving
as such on the date of each annual meeting of the Board held
following the annual meeting of shareholders, beginning with the
first annual meeting of the Board occurring after December 31,
1996 (i.e., the 1997 Annual Meeting). The aggregate number of
shares of common stock, $1.00 par value, of the Company that may
be issued pursuant to the exercise of options granted under the
Directors Plan is limited to 75,000 shares, subject to increase
or decrease in the event of any change in the Company's capital
structure. See "Dilution or Enlargement."
PURPOSE
The purpose of the Directors Plan is to enable members of
the Company's Board of Directors to participate in the ownership
of the Company, and to provide additional incentive for such
directors to promote the success of the Company's business
through sharing in the future growth of such business.
ELIGIBLE PARTICIPANTS
Options to purchase shares of common stock are granted under
the Directors Plan to the directors of the Company serving as
such at each annual meeting of the Board of Directors held
following the annual meeting of the shareholders, beginning with
the first annual meeting of the Board of Directors occurring
after December 31, 1996 (i.e., the 1997 Annual Meeting). There
currently are 12 persons eligible to participate in the Directors
Plan.
TERMS OF OPTIONS
The Directors Plan provides for automatic grants of options
to purchase shares of common stock to directors of the Company
serving as such at each annual meeting of the Board of Directors
held following the annual meeting of the shareholders, beginning
with the first annual meeting of the Board of Directors occurring
after December 31, 1996 (i.e., the 1997 Annual Meeting).
Pursuant to the Directors Plan, the Company will grant an
option to purchase 500 shares of common stock under the Directors
Plan to each person serving as a director of the Company on the
date of each annual meeting of the Board of Directors held
following the annual meeting of the Company's shareholders,
commencing with the first annual meeting of the Board of
Directors occurring after December 31, 1996 (regardless of
whether such person was also serving as a director of the Company
on the date the Directors Plan was adopted).
Neither the Company's Board of Directors nor any committee
thereof had or will have any discretion to determine the
selection of the directors to whom options are granted, the
frequency of option grants, the number of shares of common stock
subject to an option, or the terms and conditions of the options.
Each option granted under the Directors Plan will be evidenced by
a directors non-statutory stock option agreement specifying the
exercise price, the number of shares of common stock that may be
issued pursuant to the exercise of such option and other terms.
Each person who is granted an option will be advised to refer to
such person's directors non-statutory stock option agreement to
determine the exact terms established with respect thereto.
Exercise Period. Each option granted under the Directors
Plan will become exercisable upon the later of (i) the expiration
of two years from the date on which such option was granted or
(ii) the date on which the Company shall have paid a cash
dividend with respect to its common stock in each of two
consecutive calendar years during the term of such option.
Subject to the conditions and limitations of the Directors
Plan, the period during which each option granted under the
Directors Plan may be exercised is ten years from the date on
which such option was granted.
An option may be exercised earlier than otherwise permitted
as to all or part of the shares subject to the option after the
occurrence of certain events after the date the option is granted
as described below. In the event of a "Change of Control," the
time at which any of the outstanding options under the Directors
Plan may be exercised by the optionee will be accelerated so as
to be immediately exercisable. A "Change of Control" is
generally defined to take place when disclosure of such a change
would be required by the proxy rules promulgated by the
Securities and Exchange Commission or when either (i) a person
(other than a current shareholder, or a director nominated or
selected by the Company's Board of Directors or an officer
elected by the Company's Board of Directors) acquires beneficial
ownership (as defined in Securities and Exchange Commission Rule
13d-3) of 25% or more of the combined voting power of the
Company's voting securities, or (ii) less than a majority of the
directors are persons who were either nominated or selected by
the Company's Board of Directors.
In the event that the Company is not the surviving
corporation of any merger, consolidation, reorganization or
acquisition by another corporation, outstanding options under the
Directors Plan may be assumed, or replaced with new options of
comparable value, by the surviving corporation. In the event
that the surviving corporation does not assume or replace
outstanding options, or in the event the Company is liquidated or
dissolved, then each holder of outstanding options may exercise
all or part of such options (even if the options would not
otherwise have been exercisable in full) during the period
beginning 30 days before the event triggering this acceleration,
and ending on the day before such event occurs.
Effect of Termination of Association. Except as provided
below, options granted under the Directors Plan may be exercised
only by persons who are directors of the Company at the time of
exercise. If a person to whom options are granted under the
Directors Plan ceases to be a director of the Company for any
reason other than death, any option or unexercised portion
thereof granted to such person under the Directors Plan which is
otherwise exercisable will terminate unless it is exercised
within 30 days of the date on which such person ceased to be a
director (but in no event later than the expiration date of such
option specified in the applicable directors non-statutory stock
option agreement).
Effect of Death. In the event a person to whom options are
granted under the Directors Plan dies while such person is a
director of the Company (or within 30 days of the date on which
such person ceases to be a director) any option or unexercised
portion thereof granted to such person under the Directors Plan
which is otherwise exercisable may be exercised by the person or
persons to whom the optionee's rights under the option pass by
operation of the optionee's will or the laws of descent and
distribution, at any time within a period of one year following
the optionee's death (but in no event later than the expiration
date of the option as specified in the applicable directors non-
statutory stock option agreement).
No certificate for a fractional share of common stock will
be issued pursuant to the exercise of any option.
PRICE
No consideration is paid to the Company by any optionee in
exchange for the grant of an option. The exercise price at which
shares of common stock may be purchased under an option granted
pursuant to the Directors Plan is equal to the greater of (i) the
par value of the common stock and (ii) 100 percent of the fair
market value of such shares on the date that the option was
granted. The fair market value of shares of common stock for
purposes of the Directors Plan is determined by a fixed formula
and generally is equal to the mean of the high and low sales
prices of the common stock on the date the options were granted
under the Directors Plan. In the event there were no sales of
common stock on the date the options were granted, the fair
market value shall be equal to the weighted average of the means
of the high and low sales prices of the common stock on the
nearest date before and the nearest date after such granting
date. In the event there are no sales of common stock within a
reasonable period of time (ten days) both before and after the
date the options were granted, the fair market value shall be
equal to the mean of the bona fide bid and asked prices of the
common stock on such granting date, and if there were no such bid
and asked prices, then fair market value shall be equal to the
weighted average of the means of the bona fide bid and asked
prices of the common stock on the nearest trading date before and
the nearest trading date after such granting date, provided both
such nearest dates are within a reasonable period of time (ten
days) from the date the options were granted.
In the event of a change in the Company's capital structure,
the exercise price and number of shares subject to outstanding
options and the total number of shares subject to the Directors
Plan shall be adjusted as described under "Dilution or
Enlargement."
PAYMENT FOR SHARES
The exercise of any option under the Directors Plan will be
contingent upon receipt by the Company of (i) written notice of
the number of shares with respect to which the optionee is
exercising an option, (ii) the full option exercise price for the
shares of common stock and (iii) such representations or
agreements as are necessary in the opinion of counsel for the
Company to secure any necessary exemptions from the registration
requirements of the applicable securities laws in the event that
the shares underlying options are not registered under applicable
securities laws. The Company currently intends to register those
shares on Form S-8 under the Act and any applicable state
securities laws, along with shares underlying options granted
under the Company's other stock option plans. Payment for the
shares issued upon the exercise of an option may be made either
in cash or in other shares of common stock.
No optionee and no legal representative, legatee or
distributee of any optionee shall be deemed to be a holder of any
shares of common stock subject to an option granted under the
Directors Plan unless and until certificates for such shares are
issued to any such person under the terms of the Directors Plan.
The Company does not intend to regularly furnish reports to
optionees regarding the amount and status of their options, but
such information will be readily available at the Company and
will be given to the optionee upon request.
SHARES AVAILABLE FOR OPTIONS
The aggregate number of shares of common stock that may be
issued pursuant to the exercise of options granted under the
Directors Plan is limited to 75,000 shares, subject to increase
or decrease in the event of any change in the Company's capital
structure. See "Dilution or Enlargement." The shares of common
stock to be delivered upon exercise of options under the
Directors Plan will be made available, at the discretion of the
Company's Board of Directors, from either the Company's
authorized but unissued shares of common stock or any shares of
common stock held by the Company as treasury shares. Shares of
common stock subject to options granted under the Directors Plan
which expire or terminate without being exercised in full become
available, to the extent unexercised, for future grants under the
Directors Plan. The per share market value of the common stock
on March 17, 1997, computed by reference to the closing sale
price of the common stock as reported on NASDAQ, was $16.00.
DILUTION OR ENLARGEMENT
In the event that there is any change in the capital
structure of the Company, including but not limited to a change
resulting from a stock dividend, stock split, reorganization,
merger, consolidation, liquidation or any combination or exchange
of shares of common stock, the number of shares of common stock
subject to an option under the Directors Plan which remains
unexercised and the number of shares of common stock subject to
the Directors Plan, will be correspondingly adjusted. The option
exercise price also will be adjusted upon the occurrence of any
of such events so that there will be no change in the aggregate
option exercise price payable upon the exercise of the option.
RESTRICTIONS ON RESALE
Any person acquiring shares of common stock pursuant to the
exercise of an option under the Directors Plan may resell such
shares without restriction, unless such person is an "affiliate"
of the Company. "Affiliates" of the Company (i.e., persons who
are deemed to directly or indirectly control the Company,
including directors and executive officers of the Company) who
acquire shares pursuant to the exercise of an option granted
under the Directors Plan may resell such shares only if such
shares are either (i) registered under the Act and any applicable
state securities laws, or (ii) exemptions from registration under
the Act and under applicable state security laws are available.
Rule 144 under the Act provides an exemption from
registration under the Act if all of its conditions are met.
Under Rule 144 an affiliate may sell within any three-month
period a number of shares of common stock equal to the greater of
(i) one percent of the total number of shares of common stock
then outstanding, or (ii) the average weekly trading volume of
the Company's common stock during the four calendar weeks
preceding such sale. Sales under Rule 144 also are subject to
certain limitations on the manner of sale, notice requirements
and availability of current public information about the Company.
FEDERAL INCOME TAX CONSEQUENCES
An optionee will not recognize any taxable income at the
time of a grant of an option under the Directors Plan.
Generally, under section 83 of the Code, an optionee will
recognize ordinary income on the exercise of an option granted
under the Directors Plan provided the stock received by the
optionee is freely transferable or is not subject to a
substantial risk of forfeiture. If the shares received pursuant
to the exercise of an option granted under the Directors Plan are
freely transferable or not subject to a substantial risk of
forfeiture, an optionee will recognize ordinary income on the
date of exercise of an option equal to the amount by which the
fair market value of the shares of common stock acquired pursuant
to the exercise of the option on the date of exercise exceeds the
exercise price. However, shares received upon exercise of an
option granted under the Directors Plan held by a person who
could be subject to suit under section 16(b) of the Exchange Act
if the stock were sold at a profit would be considered to be
"subject to a substantial risk of forfeiture" and "not
transferable" under section 83 of the Code until such time as the
optionee is no longer subject to suit under section 16(b) of the
Exchange Act. Persons who could be subject to suit under section
16(b) of the Exchange Act ("Insiders") include directors and
officers of the Company and any shareholder who is a beneficial
owner of more than 10% of any class of the Company's equity
securities. Under Rule 16b-3, such persons will not be subject
to suit under Section 16(b) with respect to option grants that
have been approved by the Board of Directors (or a committee of
two or more "non-employee directions") or by a majority of the
shareholders. Special rules apply for purposes of determining
the time at which income which must be recognized by Insiders
granted options under the Directors Plan that are not exempt
under Rule 16b-3 as described below.
The grant of an option to an Insider under the Directors
Plan that is not exempt under Rule 16b-3 will be treated as the
immediate purchase of the underlying shares for purposes of
section 16(b) of the Exchange Act, and, in general, the exercise
of an option is not considered a purchase matchable with a sale
under section 16(b). As a result, an Insider who exercises an
option under the Directors Plan when the option has been
outstanding for at least six months will recognize taxable income
on the date of exercise equal to the difference between the fair
market value of the shares subject to the option and the amount
paid for the shares. If an option is exercised by an Insider
within six months of the date of grant, the optionee generally
will recognize ordinary income on the expiration of six months
from the date of grant in an amount equal to the difference
between the fair market value of the option shares on the date
the six-month period expires and the amount paid for such shares
on exercise. If, however, at the time an option is exercised,
the exercise price exceeds the fair market value of the shares
subject to the option, then, regardless of the time of the
exercise, the acquisition of shares pursuant to the exercise of
the option is treated as a matchable purchase under section 16(b)
of the Exchange Act. Accordingly, an Insider who exercises an
option at a time when the exercise price exceeds the fair market
value of the shares subject to the option will generally
recognize ordinary income on the date which is six months from
the date of exercise equal to the amount by which the fair market
value of such shares on expiration of the six-month period
exceeds the exercise price.
An optionee who is an Insider and who exercises an option
prior to the expiration of the six-month period beginning on the
date the option is granted or an optionee who exercises an option
at any time when the exercise price of such option exceeds the
fair market value of the shares subject to option may, however,
elect to be taxed at the time of exercise on the difference
between the fair market value of the shares on the date of
exercise and the exercise price, even though such optionee could
be subject to suit under section 16(b), if the optionee elects,
in a timely manner, to be so treated under section 83(b) of the
Code and the regulations thereunder. Any optionee considering a
Code section 83(b) election should consult such optionee's tax
advisor as to the consequences of, and manner of making, the
election.
Upon expiration of any option, no taxable income will be
recognized by the optionee whose option has expired and was not
exercised.
Upon the sale of stock received pursuant to the exercise of
an option under the Directors Plan, an optionee will recognize
either a taxable gain equal to the excess of the amount realized
from the sale over the basis in the shares, or a taxable loss
equal to the excess of the basis in the shares over the amount
realized from the sale. The basis in shares received upon
exercise of an option under the Directors Plan generally will be
the fair market value of the shares at the time of exercise.
Gain or loss from the sale of such stock will be considered gain
or loss from the sale of a capital asset if the shares are held
for investment purposes. Losses from sales of capital assets are
subject to limitations based upon the amount and nature of the
taxpayer's other income, deductions, gains and losses.
The Company does not realize any Federal income tax
consequences on the issuance of options under the Directors Plan.
The Company, however, is entitled to a deduction with respect to
the exercise of such options equal to the amount included in the
ordinary income of the optionee at the time such amount is
included pursuant to section 83 of the Code as described above,
provided the Company satisfies applicable information reporting
and income and payroll tax withholding requirements.
The Directors Plan is not one which can be qualified under
section 401(a) of the Code.
THE FEDERAL INCOME TAX CONSEQUENCES DESCRIBED ABOVE ARE FOR
GENERAL INFORMATION ONLY. NO INFORMATION IS PROVIDED AS TO
STATE, LOCAL OR FOREIGN TAX CONSEQUENCES OF THE ACQUISITION OR
EXERCISE OF OPTIONS GRANTED UNDER THE DIRECTORS PLAN OR THE SALE
OF SHARES OF COMMON STOCK ACQUIRED UPON SUCH EXERCISE. EACH
OPTIONEE SHOULD CONSULT HIS OR HER OWN TAX ADVISOR AS TO THE
SPECIFIC FEDERAL INCOME TAX CONSEQUENCES AND AS TO THE SPECIFIC
CONSEQUENCES UNDER STATE, LOCAL AND FOREIGN TAX LAWS.
EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974
The Directors Plan is not subject to any provision of the
Employee Retirement Income Security Act of 1974.
AMENDMENT AND TERMINATION OF THE DIRECTORS PLAN
The Directors Plan will terminate on December 19, 2006,
except as to options then outstanding under the Directors Plan.
Options which are outstanding on the date of such termination
shall remain in effect until they have been exercised or have
expired.
A majority of the members of the Board of Directors may
amend, modify or terminate the Directors Plan at any time prior
to December 19, 2006, except that no such amendment, modification
or termination shall be effective without obtaining the approval
of the holders of a majority of the issued and outstanding shares
of common stock. In no event may the Directors Plan be amended
more than once every six months, other than to comport with
changes in the law. No amendment, modification or termination of
the Directors Plan may adversely affect the rights of any
optionee under any then outstanding option granted under the
Directors Plan without the consent of that optionee.
ASSIGNMENT
An option granted pursuant to the Directors Plan shall not
be transferable or assignable by the optionee other than by will
or the laws of descent and distribution, and during the lifetime
of the optionee the option shall be exercisable only by the
optionee.
DIRECTORS PLAN BENEFITS
The following table sets forth the Directors Plan benefits
that will be received by or allocated to each officer named in
the Summary Compensation Table under "Executive Compensation and
Other Information--Executive Compensation" in Item 1, all
executive officers as a group, all directors who are not
executive officers as a group, and all employees, including
officers who are not executive officers, as a group under the
Directors Plan to be considered and voted upon at the Annual
Meeting.
NEW PLAN BENEFITS
1996 Broad National Bancorporation Directors
Non-Statutory Stock Option Plan
Dollar Number
Name and Position Value ($)/1/ of Units
Donald M. Karp, Chairman of the Board, $ 2,785 500
Chief Executive Officer and Director of
Bancorporation and the Bank
John A. Dorman, President, Chief $ 2,785 500
Operation Officer and Director of
Bancorporation and the Bank
Fred Perry, Jr., Senior Vice President -- --
of the Bank
Peter Kenny, Senior Vice President -- --
of the Bank
Fred Campo, Secretary of Bancorporation, -- --
Senior Vice President of the Bank
Executive Group $ 5,570 1,000
Non-Executive Director Group $27,850 5,000
Non-Executive Officer Employee Group -- --
_______________
/1/ The dollar value of options to purchase shares of common
stock granted under the Directors Plan has been determined
as of December 19, 1996 using the Black-Scholes option
pricing model, based on the assumptions that (a) each
nominee for director identified in Item 1 is elected at the
1997 Annual Meeting and serves as a director at the annual
meeting of the Board of Directors held immediately
thereafter, (b) the options were granted on December 19,
1996 with respect to the 1997 annual meeting of the Board of
Directors, (c) the closing price for the shares of common
stock underlying the options on the grant date was $12.13
per share, (d) the period during which the options are
exercisable is ten years from the grant date, (e) the option
exercise price is $12.13, (f) the dividend yield for 1996 is
2.4%, (g) the expected lives of the options is eight years,
(h) the "risk free" interest rate on U.S. Treasury Strips is
a 6.36% yield in eight years from the grant date (December
2004), and (i) the price volatility for the shares of common
stock underlying the options is 45.0% (based on the
fluctuation in weekly closing stock prices from December 30,
1991 to December 13, 1996).
The Board of Directors recommends a vote "FOR" approval of
the Directors Plan.
ITEM 4
APPROVAL OF PROPOSED AMENDMENT TO
THE CERTIFICATE OF INCORPORATION
TO INCREASE AUTHORIZED CAPITAL
GENERAL
On December 19, 1996, the Board of Directors unanimously
adopted a resolution setting forth a proposed amendment to the
Company's Certificate of Incorporation. The proposed amendment
would increase the total number of authorized shares of the
Company's capital stock from 7,020,000 shares to 11,520,000
shares and increase the number of authorized shares of the
Company's common stock, $1.00 par value, from 5,500,000 shares to
10,000,000 shares.
The text of the proposed amendment to the Certificate of
Incorporation is set forth in Exhibit A hereto. If the proposed
amendment is adopted by the shareholders, the Company will cause
a Certificate of Amendment consistent with the text of the
amendment set forth in Exhibit A to be filed with the office of
the New Jersey Secretary of State as promptly as practicable
after the Annual Meeting. The description of the proposed
amendment contained herein is qualified in its entirety by
reference to Exhibit A.
DESCRIPTION OF THE AMENDMENT
The Company's Certificate of Incorporation, as currently in
effect, provides that the Company is authorized to issue
7,020,000 shares of capital stock, consisting of 5,500,000 shares
of common stock, $1.00 par value per share, 20,000 shares of
Preferred Stock 1985 Class, $10.00 par value per share, and
1,500,000 shares of Preferred Stock, $1.00 par value per share,
to be divided into one or more series or classes of series as the
Board of Directors may from time to time approve. In December of
1996, the Board of Directors authorized an amendment to the
Certificate of Incorporation to increase the authorized shares of
the Company's capital stock from 7,020,000 shares to 11,520,000
shares and increase the number of authorized shares of the
Company's common stock from 5,500,000 shares to 10,000,000
shares. The shareholders are being asked to approve such
amendment to the Certificate of Incorporation at the Annual
Meeting.
The Company currently has 7,020,000 authorized shares of
capital stock. As of January 31, 1997, 4,677,188 shares of the
Company's common stock were issued and 4,667,188 shares of the
Company's common stock were outstanding. In addition, as of such
date, 1,028,664 shares of common stock were reserved for future
grant or issuance pursuant to employee benefit plans of the
Company or the Bank or upon the exercise of outstanding options
under the Company's stock option plans. No other shares of the
Company's capital stock are issued and outstanding or reserved
for future grant or issuance.
PURPOSES AND EFFECTS OF THE PROPOSED AMENDMENT
Purposes and Effects. The principal purpose of the proposed
amendment to the Company's Certificate of Incorporation is to
authorize additional shares of common stock which will be
available in the event the Board of Directors determines that it
is necessary or appropriate to make future grants, awards or
issuances of common stock (or options exercisable with respect to
common stock) pursuant to existing or future employee benefit
plans of the Company or the Bank, to issue stock dividends, to
raise additional capital through the sale of securities, to
acquire another company or its business or assets, or to
establish a strategic relationship with a corporate partner. The
Board of Directors has no present plan, agreement, or arrangement
to issue any of the shares for which approval is sought, other
than to issue shares pursuant to existing or future employee
benefit plans of the Company or the Bank. If the amendment is
approved by the shareholders, the Board of Directors does not
intend to solicit further shareholder approval prior to the
issuance of any additional shares of common stock, except as may
be required by applicable law.
The increase in authorized common stock will not have any
immediate effect on the rights of existing shareholders. To the
extent that the additional authorized shares are issued in the
future, the existing shareholders' percentage equity ownership
will decrease and, depending on the price at which shares are
issued, could have the effect of diluting the earnings per share
and book value per share of outstanding shares of common stock.
The increase in the authorized number of shares of common stock
and the subsequent issuance of such shares could have the effect
of delaying or preventing a change in control of the Company
without further action by the shareholders by diluting the stock
ownership or voting rights of a person seeking to obtain control
of the Company.
Preemptive Rights. In the event that the Company issues
additional shares of common stock or securities convertible into
common stock, holders of the Company's capital stock have the
preemptive right to purchase that number of shares of common
stock or securities convertible into common stock which bears the
same proportion to the total number of shares proposed to be
issued as the number of shares of common stock or securities
convertible into common stock held by such person bears to the
total number of shares of common stock that would be outstanding
if all outstanding securities convertible into common stock were
converted. The foregoing preemptive right to purchase shares of
common stock or securities convertible into common stock does not
apply, however, to additional shares of common stock issued as
(a) dividends, (b) upon conversion of securities convertible into
common stock, (c) for the purpose of raising funds to be invested
in any banking subsidiary of the Company to provide it with
capital, (d) for the purpose of increasing the Company's equity
capital or retiring the Company's indebtedness, or (e) upon
exercise of options, warrants or other rights granted under any
stock option or other benefit plan of the Company which
heretofore has been, or hereafter is, approved by the Company's
shareholders. With respect to any issuance of common stock or
securities convertible into common stock for the purposes of (c)
or (d) above, in order for there to be no preemptive rights, at
least three-fourths of the directors of the Company then in
office must conclude that the issuance is necessary or
appropriate to satisfy any regulatory requirements then
applicable to the Company or any banking subsidiary of the
Company, or otherwise is, in the judgment of the Board of
Directors, desirable to permit the Company or any banking
subsidiary of the Company to favorably respond to concerns
expressed by any regulatory authority with regard to any
regulatory requirement. A "regulatory requirement" is defined
for this purpose as any current or proposed requirement of law,
regulation, order, consent order, supervisory agreement, written
directive or written request issued by any governmental
authority. A proposed further expansion of the limitations
applicable to the preemptive rights of the Company's shareholders
is being submitted for the consideration and approval of
shareholders at the Annual Meeting. See Item 5.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE PROPOSED
AMENDMENT TO THE COMPANY'S CERTIFICATE OF INCORPORATION TO
INCREASE THE NUMBER OF SHARES OF AUTHORIZED CAPITAL STOCK.
ITEM 5
APPROVAL OF PROPOSED AMENDMENT TO
THE CERTIFICATE OF INCORPORATION
TO LIMIT PREEMPTIVE RIGHTS
GENERAL
On January 16, 1997, the Board of Directors unanimously
adopted a resolution setting forth a proposed amendment to the
Company's Certificate of Incorporation. The proposed amendment
would expand the limitations with respect to the preemptive
rights of holders of the Company's capital stock.
The text of the proposed amendment to the Certificate of
Incorporation is set forth in Exhibit B hereto. If the proposed
amendment is adopted by the shareholders, the Company will cause
a Certificate of Amendment consistent with the text of the
amendment set forth in Exhibit B to be filed with the office of
the New Jersey Secretary of State as promptly as practicable
after the Annual Meeting. The description of the proposed
amendment contained herein is qualified in its entirety by
reference to Exhibit B.
DESCRIPTION OF THE AMENDMENT
The Company's Certificate of Incorporation, as currently in
effect, provides that in the event that the Company issues
additional shares of common stock or securities convertible into
common stock, holders of the Company's capital stock have certain
preemptive rights. See "Item 4. Approval of Proposed Amendment
to the Certificate of Incorporation to Increase Authorized
Capital --- Reasons for and Effects of the Proposed Amendment ---
Preemptive Rights." The foregoing preemptive rights currently do
not apply, however, to additional shares of common stock issued
upon the exercise of options granted under any stock option or
other benefit plan of the Company which heretofore has been, or
hereafter is, approved by the Company's shareholders.
If the proposed amendment to the Company's Certificate of
Incorporation is approved by the shareholders at the Annual
Meeting, the holders of the Company's capital stock would cease
to have any preemptive rights to purchase shares of common stock
in the situation where common stock is to be issued (i) under any
benefit plan of any banking subsidiary of the Company which
heretofore has been, or hereafter is, approved by the Board of
Directors of such banking subsidiary, or (ii) under any benefit
plan of the Company which heretofore has been, or hereafter is,
approved by the Company's shareholders, including shares of
common stock issued upon exercise of options granted under any
stock option or other benefit plan of the Company which
heretofore has been, or hereafter is, approved by the Company's
shareholders. The proposed amendment therefore would expand the
limitations applicable to the preemptive rights of the Company's
shareholders with respect to common stock issued pursuant to any
benefit plan of the Company or a banking subsidiary of the
Company. Under the Company's Certificate of Incorporation, as
currently in effect, the limitations on the preemptive rights of
the Company's shareholders with respect to common stock issued
pursuant to the Company's benefit plans are applicable only with
respect to the number of shares of common stock issuable under
stock options granted pursuant to shareholder approval. If the
proposed amendment is approved by the shareholders at the Annual
Meeting, the preemptive right to purchase shares of common stock
would not apply to shares issued under (i) any benefit plan of
the Company which receives the approval of the Company's
shareholders or (ii) any benefit plan of any banking subsidiary
of the Company which receives the approval of the Board of
Directors of such banking subsidiary. The situation identified
above in which the Company would not, under the proposed
amendment, be required to offer shares of common stock to its
shareholders under their preemptive rights is therefore an
expansion of the additional situations under the Company's
Certificate of Incorporation, as currently in effect, in which
issuances of common stock or securities convertible into common
stock do not give rise to preemptive rights.
REASONS FOR AND EFFECTS OF THE PROPOSED AMENDMENTS
The Board of Directors believes that the proposed expansion
of the limitations with respect to preemptive rights is desirable
and in the best interests of the Company in the context where the
issuance of common stock is made under (i) any benefit plan of
the Company which receives the approval of the Company's
shareholders or (ii) any benefit plan of any banking subsidiary
of the Company which receives the approval of the Board of
Directors of such banking subsidiary. The purpose in eliminating
preemptive rights of the Company's shareholders in this context
is to permit the Company to issue shares of common stock under
properly approved benefit plans without the necessity of
expending the time and expense of first determining whether, and
to what extent, any shareholders desire to exercise their
preemptive rights to purchase any portion of the shares to be
issued. If the proposed amendment is approved by the shareholders
at the Annual Meeting, the approval by the Company's shareholders
of any benefit plan that requires shareholder approval and
pursuant to which shares of common stock have been, or are to be,
issued would effectively also be a waiver by such shareholders of
any preemptive right to purchase shares of common stock issued
under any such benefit plan. With respect to a Company benefit
plan requiring shareholder approval that is not approved by the
Company's shareholders, the Company's shareholders will continue
to have the preemptive right to purchase shares of common stock
issued under any such benefit plan.
To the extent that additional shares of common stock are
issued under benefit plans of the Company or any banking
subsidiary of the Company or otherwise, the present ownership
position of current shareholders may be diluted. Through the
availability of preemptive rights, shareholders of a corporation
are assured the opportunity to maintain ownership of their
proportionate share of the corporation's assets and to protect
their proportionate voting power against possible dilution
through disproportionate sales of additional shares of voting
stock to other purchasers. This may be relevant in the case of
corporations having a small number of shareholders where
shareholders have no other means to maintain their proportionate
ownership interests and where voting power may be viewed as a
significant aspect of their ownership interest. The Company,
however, has over 900 holders of record of common stock and a
market for the common stock exists. Shareholders who wish to
maintain their proportionate ownership interest and voting power
in the Company's common stock may do so by making normal market
purchases without relying on any preemptive right, although such
market purchases may be at varying terms from those of original
issuance.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE PROPOSED
AMENDMENT TO THE COMPANY'S CERTIFICATE OF INCORPORATION TO
FURTHER LIMIT PREEMPTIVE RIGHTS.
ITEM 6
RATIFICATION OF SELECTION OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors, upon recommendation of the Board's
Audit Committee, has selected the independent certified public
accounting firm of KPMG Peat Marwick LLP as Bancorporation's
independent auditors to audit the books, records and accounts of
the Company for the year ending December 31, 1997. Shareholders
will have an opportunity to vote at the Annual Meeting on whether
to ratify the Board's decision in this regard.
A representative of KPMG Peat Marwick LLP is expected to be
present at the Annual Meeting. Such representative will have an
opportunity to make a statement if he or she desires to do so and
will be available to respond to appropriate questions.
Submission of the selection of the independent auditors to
the shareholders for ratification will not limit the authority of
the Board of Directors to appoint another independent certified
public accounting firm to serve as independent auditors if the
present auditors resign or their engagement otherwise is
terminated. If the shareholders do not ratify the selection of
KPMG Peat Marwick LLP at the Annual Meeting, the Company intends
to call a special meeting of shareholders to be held as soon as
practicable after the Annual Meeting to ratify the selection of
another independent certified public accounting firm as
independent auditors for the Company.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR APPROVAL
OF THE SELECTION OF KPMG PEAT MARWICK LLP
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires Bancorporation's
directors and executive officers, and persons who own more than
10% of a class of Bancorporation's equity securities, to file
with the Securities and Exchange Commission initial reports of
ownership and reports of changes in ownership in Bancorporation
common stock and other equity securities. In addition, under
Section 16(a), a director, executive officer or 10% shareholder
who is a trustee and has a pecuniary interest (such interest
includes situations where a member of the trustee's immediate
family is a beneficiary of the trust) in any holding or
transaction in the Company's securities held by the trust, must
report the holding or transaction on the trustee's individual
form. Securities and Exchange Commission regulations require
directors, executive officers, greater than 10% shareholders and
reporting trusts to furnish Bancorporation with copies of all
Section 16(a) reports they file.
To Bancorporation's knowledge, based solely on review of the
copies of such reports furnished to Bancorporation and written
representations that no other reports were required, during the
year ended December 31, 1996, all Section 16(a) filing
requirements applicable to its directors, executive officers,
greater than 10% shareholders and reporting trusts were complied
with, except that Messrs. Cruz, Dorman, Fischman, Iannuzzi, Karp,
Lazarus, Lenihan, Lesnik, Owen, Schwartz, and Williams, Ms.
McFarland, Messrs. Boyle, Campo, Kenny and Perry and Ms. Rogoff
each failed to timely file a statement of changes in beneficial
ownership on Form 4 with respect to one transaction in which
stock options were granted.
OTHER BUSINESS OF THE MEETING
The Board of Directors is not aware of, and does not intend
to present, any matter for action at the Annual Meeting other
than those referred to in this Proxy Statement. If, however, any
other matter properly comes before the Annual Meeting or any
adjournment, it is intended that the holders of the proxies
solicited by the Board of Directors will vote on such matters in
their discretion in accordance with their best judgment.
ANNUAL REPORT
Bancorporation's Annual Report to Shareholders, containing
financial statements for the year ended December 31, 1996, is
being mailed with this Proxy Statement to all shareholders
entitled to vote at the Annual Meeting. Such Annual Report is
not to be regarded as proxy solicitation material.
A COPY OF BANCORPORATION'S ANNUAL REPORT ON FORM 10-K FOR
THE YEAR ENDED DECEMBER 31, 1996 (THE "FORM 10-K"), EXCLUDING
EXHIBITS, WILL BE FURNISHED WITHOUT CHARGE TO ANY SHAREHOLDER OF
RECORD AS OF MARCH 7, 1997 AS SOON AS IT IS AVAILABLE, UPON
WRITTEN REQUEST TO JAMES BOYLE, BROAD NATIONAL BANCORPORATION,
905 BROAD STREET, NEWARK, NEW JERSEY 07102. Bancorporation will
provide a copy of any exhibit to the Form 10-K to any such person
upon written request and the payment of Bancorporation's
reasonable expenses in furnishing such exhibits.
SHAREHOLDER PROPOSALS FOR 1998 ANNUAL MEETING
It is presently anticipated that the 1998 Annual Meeting of
Shareholders will be held on April 16, 1998. Shareholder
proposals intended for inclusion in the proxy statement for the
1998 Annual Meeting of Shareholders must be received at the
Company's offices, located at 905 Broad Street, Newark, New
Jersey 07102, within a reasonable time before the solicitation
with respect to the meeting is made, but in no event later than
November 24, 1997. Such proposals must also comply with the other
requirements of the proxy solicitation rules of the Securities
and Exchange Commission. Shareholder proposals should be
addressed to the attention of the Secretary of Bancorporation.
By Order of the Board of Directors
/s/ Donald M. Karp
Donald M. Karp
Chairman of the Board and
Chief Executive Officer
March 24, 1997
Newark, New Jersey
Exhibit A
BROAD NATIONAL BANCORPORATION
PROPOSED AMENDMENT
TO THE
CERTIFICATE OF INCORPORATION
(Increase in Authorized Capital)
RESOLVED, that the Certificate of Incorporation of
Broad National Bancorporation, a New Jersey corporation (the
"Corporation"), be amended by deleting the first paragraph
of ARTICLE THIRD in its entirety and inserting in lieu
thereof the following new first paragraph to ARTICLE THIRD:
THIRD. The total number of shares of all classes
of stock which the corporation shall have authority to
issue is 11,520,000 shares, divided into:
10,000,000 shares of Common Stock, par value
$1.00 per share;
20,000 shares of Preferred Stock 1985 Class,
par value $10.00 per share; and
1,500,000 shares of Preferred Stock, par
value $1.00 per share, to be divided into one
or more series or classes of series as the
corporation's board of directors may from
time to time approve, as hereinafter set
forth.
# # #
Exhibit B
BROAD NATIONAL BANCORPORATION
PROPOSED AMENDMENT
TO THE
CERTIFICATE OF INCORPORATION
(Preemptive Rights Limitation)
RESOLVED, that the Certificate of Incorporation of
Broad National Bancorporation, a New Jersey corporation, be
amended by deleting the present clause (iii) of the second
paragraph of subsection C.8 of Article THIRD in its entirety
and inserting in lieu thereof the following new clause (iii)
of the second paragraph of subsection C.8 of Article THIRD:
(iii) shares of Common Stock issued (A) under any
benefit plan of any banking subsidiary of the
corporation heretofore or hereafter approved by the
Board of Directors of such banking subsidiary, or (B)
under any benefit plan of the corporation heretofore or
hereafter approved by the corporation's shareholders,
including shares of Common Stock issued as authorized
by options granted under any stock option or other
benefit plan of the corporation heretofore or hereafter
approved by the corporation's shareholders,
# # #