SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
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 S 240.14a-11(c) or S 240.14a-12
Sun Bancorp, Inc.
- --------------------------------------------------------------------------------
(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)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11. (set forth the amount on which the filing
fee is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing 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:
- --------------------------------------------------------------------------------
April 19, 1999
Dear Fellow Shareholder:
On behalf of the Board of Directors and management of Sun Bancorp, Inc.
(the "Company"), I cordially invite you to attend the Annual Meeting of
Shareholders to be held at 226 Landis Avenue, Vineland, New Jersey, on May 20,
1999, at 3:30 p.m. The attached Notice of Annual Meeting and Proxy Statement
describe the formal business to be transacted at the Annual Meeting. During the
Annual Meeting, I will also report on the operations of the Company. Directors
and officers of the Company, as well as a representative of Deloitte & Touche
LLP, certified public accountants, will be present to respond to any questions
shareholders may have.
The matters to be considered by shareholders at the Annual Meeting are
described in the accompanying Notice of Annual Meeting and Proxy Statement. The
Board of Directors of the Company has determined that the matters to be
considered at the Annual Meeting are in the best interests of the Company and
its shareholders. For the reasons set forth in the Proxy Statement, the Board of
Directors unanimously recommends a vote "FOR" each matter to be considered.
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, PLEASE SIGN AND DATE
THE ENCLOSED PROXY CARD AND RETURN IT IN THE ACCOMPANYING POSTAGE-PAID RETURN
ENVELOPE AS PROMPTLY AS POSSIBLE. THIS WILL NOT PREVENT YOU FROM VOTING IN
PERSON AT THE ANNUAL MEETING, BUT WILL ASSURE THAT YOUR VOTE IS COUNTED IF YOU
ARE UNABLE TO ATTEND THE ANNUAL MEETING. YOUR VOTE IS VERY IMPORTANT.
Sincerely,
/s/Bernard A. Brown
Bernard A. Brown
Chairman of the Board
- --------------------------------------------------------------------------------
SUN BANCORP, INC.
226 LANDIS AVENUE
VINELAND, NEW JERSEY 08360
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To be Held on May 20, 1999
- --------------------------------------------------------------------------------
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders (the "Meeting")
of Sun Bancorp, Inc. (the "Company"), will be held at 226 Landis Avenue,
Vineland, New Jersey on May 20, 1999, at 3:30 p.m.
The Meeting is for the purpose of considering and acting upon the following
matters:
1. The election of eight directors of the Company;
2. The ratification of the amendment to the Sun Bancorp, Inc. 1997 Stock
Option Plan; and
3. Such other matters as may properly come before the meeting or any
adjournments thereof.
The Board of Directors is not aware of any other business to come before the
Meeting. Any action may be taken on the foregoing proposals at the Meeting on
the date specified above or on any date or dates to which, by original or later
adjournment, the Meeting may be adjourned. Shareholders of record at the close
of business on April 12, 1999 are the shareholders entitled to vote at the
Meeting and any adjournments thereof.
EACH SHAREHOLDER, WHETHER OR NOT HE OR SHE PLANS TO ATTEND THE MEETING, IS
REQUESTED TO SIGN, DATE AND RETURN THE ENCLOSED PROXY WITHOUT DELAY IN THE
ENCLOSED POSTAGE-PAID ENVELOPE. ANY PROXY GIVEN BY THE SHAREHOLDER MAY BE
REVOKED BY FILING WITH THE SECRETARY OF THE COMPANY A WRITTEN REVOCATION OR A
DULY EXECUTED PROXY BEARING A LATER DATE. ANY SHAREHOLDER PRESENT AT THE MEETING
MAY REVOKE HIS OR HER PROXY AND VOTE IN PERSON ON EACH MATTER BROUGHT BEFORE THE
MEETING. HOWEVER, IF YOU ARE A SHAREHOLDER WHOSE SHARES ARE NOT REGISTERED IN
YOUR OWN NAME, YOU WILL NEED ADDITIONAL DOCUMENTATION FROM YOUR RECORD HOLDER TO
VOTE IN PERSON AT THE MEETING.
BY ORDER OF THE BOARD OF DIRECTORS
/s/Sidney R. Brown
Sidney R. Brown
Secretary
Vineland, New Jersey
April 19, 1999
- --------------------------------------------------------------------------------
IMPORTANT: THE PROMPT RETURN OF PROXIES WILL SAVE THE COMPANY THE EXPENSE OF
FURTHER REQUESTS FOR PROXIES IN ORDER TO ENSURE A QUORUM AT THE MEETING. A
SELF-ADDRESSED ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE. NO POSTAGE IS REQUIRED
IF MAILED IN THE UNITED STATES.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PROXY STATEMENT
OF
SUN BANCORP, INC.
226 LANDIS AVENUE
VINELAND, NEW JERSEY 08360
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ANNUAL MEETING OF SHAREHOLDERS
May 20, 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
GENERAL
- --------------------------------------------------------------------------------
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Sun Bancorp, Inc. (the "Company") to be
used at the Annual Meeting of Shareholders of the Company which will be held at
226 Landis Avenue, Vineland, New Jersey, on May 20, 1999, 3:30 p.m. local time
(the "Meeting"). The accompanying Notice of Annual Meeting of Shareholders, form
of proxy, Annual Report and this Proxy Statement are being first mailed to the
Company's shareholders entitled to notice of and to vote at the Meeting, on or
about April 19, 1999. The Annual Report does not constitute "soliciting
material" and is not to be deemed "filed" with the Securities and Exchange
Commission (the "Commission").
At the Meeting, shareholders will consider and vote upon (i) the election
of eight directors, (ii) the ratification of the amendment to the Sun Bancorp,
Inc. 1997 Stock Option Plan (the "1997 Stock Option Plan"), and (iii) such other
matters as may properly come before the Meeting or any adjournments thereof. The
Board of Directors of the Company (the "Board" or the "Board of Directors")
knows of no additional matters that will be presented for consideration at the
Meeting. Execution of a proxy, however, confers on the designated proxy holder
discretionary authority to vote the shares represented by such proxy in
accordance with their best judgment on such other business, if any, that may
properly come before the Meeting or any adjournment thereof.
- --------------------------------------------------------------------------------
VOTING AND REVOCABILITY OF PROXIES
- --------------------------------------------------------------------------------
Shareholders who execute proxies retain the right to revoke them at any
time. Unless so revoked, the shares represented by such proxies will be voted at
the Meeting and all adjournments thereof. Proxies may be revoked by written
notice to the Secretary of the Company at the address above or by the filing of
a later dated proxy prior to a vote being taken on a particular proposal at the
Meeting. A proxy will not be voted if a shareholder attends the Meeting and
votes in person. Proxies solicited by the Board of Directors will be voted in
accordance with the directions given therein. Where no instructions are
indicated, signed proxies will be voted "FOR" the nominees for directors set
forth below and "FOR" the other listed proposal. The proxy confers discretionary
authority on the persons named therein to vote with respect to the election of
any person as a director where the nominee is unable to serve, or for good cause
will not serve, and matters incident to the conduct of the Meeting.
- --------------------------------------------------------------------------------
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
- --------------------------------------------------------------------------------
Shareholders of record as of the close of business on April 12, 1999 (the
"Record Date") are entitled to one vote for each share of common stock of the
Company (the "Common Stock") then held. As of the Record Date, the Company had
7,229,717 shares of Common Stock issued and outstanding.
The presence in person or by proxy of at least a majority of the
outstanding shares of Common Stock entitled to vote is necessary to constitute a
quorum at the Meeting. For purposes of determining the votes cast with respect
to any matter presented for consideration at the Meeting only those votes cast
"FOR" or "AGAINST" are included. Abstentions and broker non-votes (i.e., shares
held by brokers on behalf of their customers, which may not be voted on certain
matters because the brokers have not received specific voting instructions from
their customers with respect to such matters) will be counted solely for the
purpose of determining whether a quorum is present, except as otherwise noted
below. In the event there are not sufficient votes for a quorum or to ratify or
adopt any proposals at the time of the Meeting, the Meeting may be adjourned in
order to permit the further solicitation of proxies.
As to the election of directors, the proxy card being provided by the Board
of Directors enables a shareholder to vote for the election of the nominees
proposed by the Board of Directors, or to withhold authority to vote for the
nominees being proposed. Under the Company's bylaws, directors are elected by a
plurality of votes cast, without respect to either (i) Broker Non-votes (shares
for which a broker indicates on the proxy that it does not have discretionary
authority to vote on a matter) or (ii) proxies as to which authority to vote for
the nominee being proposed is withheld.
Concerning all other matters that may properly come before the Meeting,
including the ratification of the amendment to the Sun Bancorp, Inc. 1997 Stock
Option Plan, by checking the appropriate box, a shareholder may; (i) vote "FOR"
the item, or (ii) vote "AGAINST" the item, or (iii) "ABSTAIN" with respect to
the item. Unless otherwise required by law, all other matters shall be
determined by a majority of votes cast affirmatively or negatively without
regard to (a) Broker Non-votes, or (b) proxies marked "ABSTAIN" as to that
matter.
Security Ownership of Certain Beneficial Owners
Persons and groups owning in excess of 5% of the outstanding shares of
Common Stock are required to file certain reports regarding such ownership
pursuant to the Securities Exchange Act of 1934, as amended (the "Exchange
Act"). Other than as noted below, management knows of no person or group that
owns more than 5% of the outstanding shares of Common Stock at the Record Date.
-2-
Percent of Shares of
Amount and Nature of Common Stock
Name and Address of Beneficial Owner Beneficial Ownership Outstanding
- ------------------------------------ -------------------- -----------
Bernard A. Brown
71 West Park Avenue
Vineland, New Jersey 08360 2,361,866(1) 30.04%
- --------------------
(1) Includes shares of Common Stock held directly as well as by spouse or
minor children, in trust and other indirect ownership, over which
shares the individual effectively exercise sole voting and investment
power, unless otherwise indicated. Includes 633,421 shares of Common
Stock that can be acquired pursuant to options that are exercisable
within 60 days of the Record Date. See "Director and Executive Officer
Compensation."
- --------------------------------------------------------------------------------
INTEREST OF CERTAIN PERSONS IN MATTERS TO BE ACTED UPON
- --------------------------------------------------------------------------------
Officers and employees of the Company have an interest in certain matters
being presented for shareholder ratification. Upon shareholder ratification of
Proposal II, employees, officers and directors of the Company may be granted
stock options or may exercise stock options already granted pursuant to the
amendment to the 1997 Stock Option Plan. The ratification of the amendment to
the 1997 Stock Option Plan is being presented as "Proposal II - Ratification of
the amendment to the 1997 Stock Option Plan." See "Proposal I - Election of
Directors" for information regarding the voting control of shares of Common
Stock held by executive officers and directors of the Company.
- --------------------------------------------------------------------------------
PROPOSAL I - ELECTION OF DIRECTORS
- --------------------------------------------------------------------------------
General Information and Nominees
The entire Board of Directors is to be elected at the Meeting, each to
serve until the next Annual Meeting of Shareholders and until his or her
successor has been duly elected and qualified.
Directors of the Company will be elected by a plurality of the votes cast.
It is intended that the persons named in the proxies solicited by the Board will
vote for the election of the named nominees. If any of the nominees are unable
to serve, the shares represented by all valid proxies will be voted for the
election of such substitute as the Board of Directors may recommend or the size
of the Board may be reduced to eliminate the vacancy. At this time, the Board
knows of no reason why the nominees might be unavailable to serve.
The following table sets forth information with respect to the nominees,
their name, age, the year they first became a director of the Company, and the
number and percentage of shares of the Common Stock beneficially owned as of the
Record Date.
-3-
Shares of
Stock Percent
Director/Nominee Director Beneficially of
Executive Officer Age (1) Position Since Owned (2) Class
----------------- ------- -------- ----- ---------------- -----
Bernard A. Brown (3) 74 Chairman of the Board 1985 2,361,866 (4) 30.04%
Ike Brown (3) 44 Director 1998 144,365 2.00
Jeffrey S. Brown (3) 39 Nominee N/A 125,895 1.74
Sidney R. Brown (3) 42 Vice Chairman, 1990 297,721 (5) 4.10
Treasurer, Secretary
Adolph F. Calovi 76 Director 1985 538 *
Peter Galetto, Jr. 45 Director 1990 150,321 2.08
Philip W. Koebig, III 56 Director, President and 1995 289,461 (6) 3.91
Chief Executive Officer
Anne E. Koons (3) 46 Director 1990 187,613 2.60
All directors, nominees and executive officers of the 3,647,251 (7) 44.78
Company as a group (12 persons)
- ---------------------------------
* Less than 1%.
(1) At December 31, 1998.
(2) Includes shares held directly by the individual as well as by such
individual's spouse, shares held in trust and in other forms of indirect
ownership over which shares the individual effectively exercises sole
voting and investment power.
(3) Ike Brown, Sidney R. Brown, Anne E. Koons and Jeffrey S. Brown are the
children of Bernard A. Brown.
(4) Includes 633,421 shares of Common Stock that may be acquired pursuant to
options that may be exercised within 60 days of the Record Date.
(5) Includes 29,531 shares of Common Stock that may be acquired pursuant to
options that may be exercised within 60 days of the Record Date.
(6) Includes 170,610 shares of Common Stock that may be acquired pursuant to
options that may be exercised within 60 days of the Record Date.
(7) Includes shares of Common Stock held directly as well as by spouses or
minor children, in trust and other indirect ownership, over which shares
the individuals effectively exercise sole voting and investment power,
unless otherwise indicated. Includes 915,005 options that may be exercised
within 60 days of the Record Date to purchase shares of Common Stock. See
"Director and Executive Officer Compensation."
Biographical Information
Directors and Executive Officers of the Company. The principal
occupation of each director, nominee and executive officer of the Company is set
forth below. All directors, nominees and executive officers have held their
present positions for five years unless otherwise stated.
-4-
Bernard A. Brown has been the Chairman of the Board of Directors of the
Company since its inception in January 1985. Mr. Brown is also the Chairman of
the Board of Directors of Sun National Bank ("Sun") and Sun National Bank,
Delaware ("Sun Delaware"), wholly owned subsidiaries of the Company. For many
years, Mr. Brown has been the Chairman of the Board of Directors and President
of NFI Industries, Inc., a trucking conglomerate headquartered in Vineland, New
Jersey.
Ike Brown has been a director of the Company since March 1998. He is also a
director of Sun Delaware. Mr. Brown is the President of National Freight, Inc. a
privately-held, nation-wide transportation company. He is Vice Chairman and
director of NFI Industries, Inc. and also one of the general partners of The
Four B's, a partnership which has extensive real estate holdings in the Eastern
United States. Its primary objective is investing in, and the consequent
development of, commercial real estate, leasing and/or sale. Mr. Brown is
currently an officer and director of several other corporations and partnerships
in the transportation, equipment leasing, insurance, warehousing and real estate
industries.
Jeffrey S. Brown has been nominated to serve as a director of the Company.
He is an officer and director of NFI Industries, Inc. and also one of the
general partners of The Four B's, a partnership which has extensive real estate
holdings in the Eastern United States. Its primary objective is investing in,
and the consequent development of, commercial real estate, leasing and/or sale.
Mr. Brown is currently an officer and director of several other corporations and
partnerships in the transportation, equipment leasing, insurance, warehousing
and real estate industries.
Sidney R. Brown has been the Treasurer and a director of the Company since
April 1990. In March 1997, Mr. Brown became secretary of the Company, and in
March 1998 he became the Vice Chairman of the Board of Directors of the Company.
Mr. Brown is also a director of Sun Delaware. Mr. Brown is the chief executive
officer of NFI Industries, Inc., and one of the general partners of The Four
B's, a partnership which has extensive real estate holdings in the Eastern
United States. Its primary objective is investing in and consequent development
of commercial real estate, leasing and/or sale. Mr. Brown is currently an
officer and director of several other corporations and partnerships in the
transportation, equipment leasing, insurance, warehousing and real estate
industries.
Adolph F. Calovi has been a director of the Company since its inception in
January 1985 and from 1985 to January 1999 was its President and Chief Executive
Officer. Mr. Calovi is a director of Sun and Sun Delaware. From 1985 to 1994, he
was President and Chief Executive Officer of Sun.
Peter Galetto, Jr. has been a director of the Company since April 1990. Mr.
Galetto also served as secretary of the Company from April 1990 to March 1997.
He is also a director of Sun Delaware. Mr. Galetto is the President/Sales for
Stanker & Galetto, Inc., an industrial and building contractor located in
Vineland, New Jersey. He is also the President of the Cumberland Technology
Enterprise Center, a small business incubator. Mr. Galetto has been the
Secretary/Treasurer of Trimark Building Contractors. He is also an officer and
director of several other corporations and organizations.
Philip W. Koebig III has been the President and Chief Executive Officer of
the Company since January 1999 and was the Executive Vice President of the
Company from 1994 to 1999. He has been a director of the Company since 1995. Mr.
Koebig has also been a director, President and Chief Executive Officer of Sun
since January 1995. He is also Vice Chairman of the Board of Directors of Sun
Delaware. From 1990 to 1994, Mr. Koebig had been President and Chief Executive
Officer of Covenant Bank for Savings, Haddonfield, New Jersey. He also serves on
the Board of Directors of numerous charitable organizations and corporations.
-5-
Anne E. Koons has been a director of the Company since April 1990. Ms.
Koons is a real estate agent with Prudential Fox & Roach. Ms. Koons is also a
Commissioner of the Camden County Improvement Authority and a member of the
Cooper Medical Center's Foundation Board. She is also a director of Sun
Delaware.
Robert F. Mack has been with the Company since 1992 and serves as its
Executive Vice President and Chief Financial Officer. Mr. Mack has twenty-six
years of extensive banking experience and has worked for several commercial
banks in New Jersey.
James S. Killough joined the Company in February 1997 and serves as
Executive Vice President of Administration, Operations and Retail Banking.
Before joining the Company, Mr. Killough was president and chief professional
officer for the United Way of Camden County, New Jersey for two years. Prior to
that, Mr. Killough was executive vice president for Central Jersey Bank and
Trust and Midlantic National Bank/South.
Additional Executive Officers of Sun. Set forth below is biographical
information of certain executive officers of Sun who are not also executive
officers of the Company.
Bart A. Speziali has been with Sun since 1992 and is the Executive Vice
President and Senior Lending Officer. Mr. Speziali has over twenty years of
banking experience in southern New Jersey.
Harry G. Miller joined Sun in December 1997 as its Executive Vice President
of Business Development. Prior to joining the Company, Mr. Miller was Executive
Vice President for Collective Bank with an extensive background in marketing,
advertising, investor relations and cash management. Mr. Miller has over 30
years experience in the banking and financial services industries.
Meetings and Committees of the Board of Directors
The Company is governed by a Board of Directors and various committees of
the Board which meet regularly throughout the year. During the fiscal year ended
December 31, 1998, the Board of Directors held seven regular meetings and seven
special meetings. No director attended fewer than 75% of the total meetings of
the Board of Directors and committees during the time such director served
during the year ended December 31, 1998.
The Nominating Committee is a committee and consists of the board of
directors of the Company. The Committee met once during the year ended December
31, 1998. The Nominating Committee is not required to consider nominees
recommended by shareholders.
The Audit Committee is a committee and consists of Directors Calovi,
Galetto, and Koons. The Audit Committee is responsible for recommending the
appointment of the Company's independent public accountants and meeting with
such accountants with respect to the scope and review of the annual audit.
Additional responsibilities of the Audit Committee are to ensure that the Board
of Directors receives objective information regarding policies, procedures and
activities of the Company with respect to auditing, accounting, internal
accounting controls, financial reporting, regulatory matters and such other
activities of the Company as may be directed by the Board of Directors. The
Audit Committee met once during the year ended December 31, 1998.
-6-
The Personnel Committee is a committee and consists of Directors Koons,
Sidney Brown and Koebig. The Personnel Committee met once during the year ended
December 31, 1998.
- --------------------------------------------------------------------------------
DIRECTOR AND EXECUTIVE OFFICER COMPENSATION
- --------------------------------------------------------------------------------
Directors' Compensation
Each member of the Board of Directors, except for the chairman and employee
directors, received a fee of $300 for each meeting attended for the year ended
December 31, 1998. Directors who are executive officers do not receive any fees
for their services as Directors. For the year ended December 31, 1998, directors
fees totaled $38,700, all of which was paid in shares of Common Stock.
Executive Compensation
At December 31, 1998, the Company had no full time employees, relying upon
employees of Sun for the limited services required by the Company. All
compensation paid to officers and employees was paid by Sun.
Personnel Committee Report on Executive Compensation
The Personnel Committee (the "Committee") has furnished the following
report on executive compensation:
Under the supervision of the Board of Directors, the Company has developed
and implemented compensation policies, plans and programs which seek to enhance
the profitability of the Company, and thus shareholder value, by aligning
closely the financial interests of the Company's employees, including its Chief
Executive officer ("CEO"), Chairman of the Board and the Company's other senior
management, with those of its shareholders. With regard to compensation actions
affecting the CEO, the Executive Committee of the Board of Directors, consisting
of the members of the Personnel Committee, as well as all of the non-employee
members of the Board of Directors, acted as the approving body.
The executive compensation program of the Company is designed to:
o Support a pay-for-performance policy that differentiates
compensation based on corporate and individual performance;
o Motivate employees to assume increased responsibility and reward
them for their achievement;
o Provide compensation opportunities that are comparable to those
offered by other leading companies, allowing the Company to
compete for and retain top quality, dedicated executives who are
critical to the Company's long-term success; and
o Align the interests of executives with the long-term interests of
shareholders through award opportunities that can result in
ownership of Common Stock.
At present, the executive compensation program is comprised of salary,
annual cash incentive opportunities, long-term incentive opportunities in the
form of stock options, and miscellaneous benefits
-7-
typically offered to executives in comparable corporations. The Committee
considers the total compensation (earned or potentially available) in
establishing each element of compensation so that total compensation paid is
competitive with the market place, based on an independent consultant's survey
of salary competitiveness of other financial institutions. The Committee intends
to be advised periodically by independent compensation consultants concerning
salary competitiveness.
As an executive's level of responsibility increases, a greater portion of
his or her potential total compensation opportunity is based on Company
performance incentives rather than on salary. Reliance on Company performance
causes greater variability in the individual's total compensation from year to
year. By varying annual and long-term compensation and basing both on corporate
performance, the Company believes executive officers are encouraged to continue
focusing on building profitability and shareholder value. The mix of annual and
long-term compensation was set subjectively. In determining the mix, the
Committee balanced rewards for past performance with incentives for future
performance, and took into account such factors as overall risk of the pay
package and award sizes in prior years.
Base Salary. Annual base salaries for all executive officers are generally
set somewhat below competitive levels so that the Company relies to a large
degree on annual and longer term incentive compensation to attract and retain
corporate officers and other employees and to motivate them to perform to the
full extent of their abilities. Effective January 1, 1999, the Board of
Directors, acting on the recommendation of the Committee, increased the base
salary paid to executive officers. The increase reflected consideration of
competitive data provided by an independent consulting firm, the Committee's and
the Board's assessment of the executive officer's performance, over the previous
year and recognition of the improvement in performance by the Company during
1998 as compared with the Company's goals included in its business plan.
Long-Term Incentive Compensation. The long-term incentive compensation
consists of stock option awards. The Committee believes that issuing stock
options to executives benefits the Company's shareholders by encouraging and
enabling executives to own stock of the Company, thus aligning executive pay
with shareholder interests.
1998 Compensation for the CEO. Mr. Calovi was President and Chief Executive
Officer of the Company from its inception in 1985 to January 1999, and he
continues to be a director of the Company. Mr. Calovi's salary for 1998 of
$131,000 was fixed in his employment agreement and was based upon his prior
years of service to the Bank and the Company. Mr. Calovi's actual compensation
for fiscal 1998 of $136,039 was due to the number of pay periods during 1998.
See "- Employment Agreement."
-8-
Stock Performance Graph
Set forth below is a stock performance graph comparing the cumulative total
shareholder return on the Common Stock with (a) the cumulative total shareholder
return on stocks included in the Nasdaq Stock Market index and (b) the
cumulative total shareholder return on stocks included in the Nasdaq Bank index,
as prepared for Nasdaq by the Center for Research in Securities Prices ("CRSP")
at the University of Chicago. All three investment comparisons assume the
investment of $100 as of August 29, 1996 (the date the Common Stock began
trading on the Nasdaq Stock Market). The cumulative total returns for the Nasdaq
Stock Market index and the Nasdaq Bank index are computed assuming the
reinvestment of dividends. In the graph below, the periods compared were August
29, 1996 and the Company's fiscal years ended December 31, 1996, 1997 and 1998.
There can be no assurance that the Company's future stock performance will
be the same or similar to the historical stock performance shown in the graph
below. The Company neither makes nor endorses any predictions as to stock
performance.
[GRAPHIC OMITTED]
================================================================================
8/29/96 12/31/96 12/31/97 12/31/98
------- -------- -------- --------
CRSP Nasdaq U.S. Index $100 $113 $138 $195
CRSP Nasdaq Bank Index 100 120 201 200
Sun Bancorp, Inc. 100 98 160 214
================================================================================
- --------------------
(1) The cumulative total return for Sun Bancorp, Inc. reflects 5% stock
dividends paid on October 30, 1996, June 25, 1997 and May 26, 1998 and
50% stock dividends paid in September 1997 and March 1998 and has been
calculated based on the historical closing prices of $22.50 on August
29, 1996 (the first day of trading on the Nasdaq Stock Market), $21.00
on December 31, 1996, $21.83 on December 31, 1997 and $18.50 on
December 31, 1998.
-9-
The information set forth above under the subheadings "Compensation
Committee Report on Executive Compensation" and "Stock Performance Graph" (i)
shall not be deemed to be "soliciting material" or to be "filed" with the
Commission or subject to Regulation 14A or the liabilities of Section 18 of the
Exchange Act, and (ii) notwithstanding anything to the contrary that may be
contained in any filing by the Company under such Act or the Securities Act of
1933, as amended ("Securities Act"), shall not be deemed to be incorporated by
reference in any such filing.
Summary Compensation Table. The following table sets forth compensation
awarded to the Chief Executive Officer and the four highest compensated
executive officers of the Company who, for the year ended December 31, 1998,
received total salary and bonus payments from the Company in excess of $100,000.
Long Term
Compensation
Annual Compensation Awards
------------------- ------
Securities
Name and Underlying All Other
Principal Position Year Salary Bonus Options(#) Compensation
------------------ ---- ------ ----- ---------- ------------
Adolph F. Calovi (1) 1998 $136,039 $ -- -- $ --
President and Chief 1997 131,000 -- -- --
Executive Officer 1996 131,000 -- -- --
Philip W. Koebig III 1998 257,692 60,000 5,040 13,286 (2)
Executive Vice 1997 199,039 -- 23,625 11,658
President 1996 174,044 22,500 26,047 10,583
James S. Killough 1998 144,808 15,000 -- --
Executive Vice President 1997 105,769 -- 29,532 --
of the Company
Harry G. Miller 1998 145,385 -- -- --
Executive Vice President 1997 105,769 -- 15,750 --
of Sun
Bart A. Speziali 1998 124,165 15,000 -- --
Executive Vice President 1997 106,704 -- 4,725 --
of Sun 1996 97,692 6,000 5,209 --
- --------------------
(1) Mr. Calovi retired as President and CEO on January 19, 1999. Mr. Calovi
remains as a director and employee of the Company. Mr. Calovi's employment
agreement was extended for one year in January 1999.
(2) For Mr. Koebig, all other compensation constitutes life and disability
insurance premiums of $9,226, and country club dues of $4,060 for 1998. Mr.
Koebig became President and CEO of the Company on January 19, 1999.
Stock Option Plans. The Company has adopted the 1985 Stock Option Plan, the
1995 Stock Option Plan and the 1997 Stock Option Plan (the "Option Plans").
Officers, directors and employees are eligible to receive, at no cost to them,
options under the Option Plans. Options granted under the Option Plans may be
either incentive stock options (options that afford favorable tax treatment to
recipients upon compliance with certain restrictions pursuant to Section 422 of
the Internal Revenue Code and that do not normally result in tax deductions to
the Company) or options that do not so qualify. The option price may not be less
than 100% of the fair market value of the shares on the date of the grant.
Option shares may
-10-
be paid in cash, shares of the common stock, or a combination of both. Incentive
options are exercisable for a period of ten years. Non-qualified stock options
are exercisable for a period of ten years and ten days.
The following tables set forth additional information concerning options
granted under the Option Plans.
Option Grants in Last Fiscal Year(1)
------------------------------------
Potential Realizable Value
at Assumed Annual Rates
of Stock Price
Appreciation for
Individual Grants Option Term
------------------------------------------------------------------ -----------------------
Percent of Total
Options Granted Exercise
Number of to Employees in Price Expiration
Name Options Granted Fiscal Year ($/Share) Date 5% ($) 10% ($)
---- --------------- ----------- --------- ---- ------ -------
Philip W. Koebig, III 5,040 1.71% $20.64 1/2/08 $169,447 $269,816
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year End Option Values
---------------------------------------------------------------------------------
Value of
Number of Options In-the-money Options
Shares Acquired Value at Fiscal Year-End(#) at Fiscal Year-End($)
Name on Exercise (#) Realized Exercisable/Unexercisable Exercisable/Unexercisable(1)
- ---- --------------- -------- ------------------------- ----------------------------
Philip W. Koebig III -- $ -- 170,610/14,333 $2,172,326/$106,081
James S. Killough -- -- 14,765/14,766 145,613/145,622
Harry G. Miller -- -- 7,875/7,875 20,633/20,633
Bart A. Speziali -- -- 20,838/2,363 272,510/21,220
- -------------------
(1) Based upon the difference between the option exercise price and the market
price of stock of $18.50 per share as of December 31, 1998.
Employment Agreement. The Company had an employment agreement, dated
January 2, 1995, with Adolph F. Calovi, its former President and CEO. Under the
terms of the agreement, Mr. Calovi received an annual salary of $131,000 for
each of the four years of the agreement. In addition, he received all benefits
offered officers of the Company and had the use of a Company-owned automobile.
In January 1999, Mr. Calovi's agreement expired and was extended for a one-year
period. He no longer serves as the Company's President and CEO.
-11-
- --------------------------------------------------------------------------------
ADDITIONAL INFORMATION ABOUT DIRECTORS AND EXECUTIVE OFFICERS
- --------------------------------------------------------------------------------
Compensation Committee Interlocks and Insider Participation
The Personnel Committee of the Company during the year ended December 31,
1998 consisted of Anne E. Koons, Sidney R. Brown and Philip W. Koebig III. All
are members of the Board of Directors of the Company. Mr. Koebig is also a
Director and Officer of Sun and did not participate in matters involving his
personal compensation. No member of the Committee is, or was during 1998, an
executive officer of another company whose board of directors has a comparable
committee on which one of the Company's executive officers serves. None of the
executive officers of the Company is, or was during 1998, a member of a
comparable compensation committee of a company of which any of the directors of
the Company is an executive officer.
Certain Relationships and Related Transactions
Bernard A. Brown, the Chairman of the Board of Directors of the Company,
Sun and Sun Delaware, is an owner of Vineland Construction Company. The Company
and Sun lease office space in Vineland, New Jersey from Vineland Construction
Company. The Company believes that the transactions with Vineland Construction
Company are on terms substantially the same, or at least as favorable to Sun, as
those that would be provided by a non-affiliate. The Company paid $594,752 to
Vineland Construction during the year ended December 31, 1998. Sun is also party
to a lease agreement for an office building with a partnership comprised of
directors and shareholders of the Company and Sun. The Company believes that the
lease is on terms substantially the same, or at least as favorable to Sun, as
those that would be provided by a non-affiliate. The Company paid $96,000 in
annual rent under this lease agreement during the year ended December 31, 1998.
Sun and Sun Delaware have a policy of offering various types of loans to
officers, directors and employees of the Bank and of the Company. These loans
have been made in the ordinary course of business and on substantially the same
terms and conditions (including interest rates and collateral requirements) as,
and following credit underwriting procedures that are not less stringent than,
those prevailing at the time for comparable transactions by Sun and Sun Delaware
with its other unaffiliated customers and do not involve more than the normal
risk of collectibility, nor present other unfavorable features. None of these
loans are nonperforming.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires the Company's officers and
directors, and persons who own more than ten percent of the Common Stock, to
file reports of ownership and changes in ownership of the Common Stock with the
Commission and the Nasdaq National Market, and to provide copies of those
reports to the Company.
Based upon a review of the copies of the forms furnished to the Company, or
written representations from certain reporting persons, the Company believes
that all Section 16(a) filing requirements applicable to its executive officers
and directors were complied with during the year ended December 31, 1998.
-12-
- --------------------------------------------------------------------------------
PROPOSAL II - RATIFICATION OF THE AMENDMENT TO THE
1997 STOCK OPTION PLAN
- --------------------------------------------------------------------------------
Amendment Summary
The Company's Board of Directors has adopted an amendment to the 1997 Stock
Option Plan. In accordance with such amendment to the 1997 Stock Option Plan,
the total number of shares of Common Stock authorized for issuance under the
1997 Stock Option Plan has been increased from 315,000 shares to 605,115 shares.
In addition, the grant of "reload" options has been authorized by such amendment
to the 1997 Stock Option Plan. The award of a reload option allows the optionee
to receive the grant of an additional stock option in the event that such
optionee exercises all or part of an option (an "original option") by
surrendering already owned shares of Common Stock in full or partial payment of
the option price under such original option. The exercise of an additional
option issued in accordance with the "reload" feature will reduce the total
number of shares eligible for award under the 1997 Stock Option Plan.
General Plan Description
The purpose of the 1997 Stock Option Plan is to attract and retain
qualified personnel for positions of substantial responsibility and to provide
additional incentives to certain officers and key employees to promote the
success of the Company's business. The following summary of the material
features of the 1997 Stock Option Plan is qualified in its entirety by reference
to the complete provisions of the 1997 Stock Option Plan, attached hereto as
Exhibit A.
The 1997 Stock Option Plan will be administered by the Company's Board of
Directors or a committee of not less than two nor more than seven non-employee
directors appointed by the Board and serving at the pleasure of the Board (the
"Option Committee"). Members of the Option Committee shall be deemed
"Non-Employee Directors" within the meaning of Rule 16b-3 pursuant to the
Exchange Act. The Option Committee shall select those individuals to whom
options are to be granted, the number of options to be granted, whether the
option shall be an incentive stock option or a nonqualified stock option, etc. A
majority of the members of the Option Committee shall constitute a quorum and
the vote or written consent of a majority of the members of the Option Committee
shall constitute the action of the Option Committee.
Employees, officers, directors and advisory directors who are designated by
the Option Committee will be eligible to receive, at no cost to them, options
under the 1997 Stock Option Plan (the "Optionees"). Options granted under the
1997 Stock Option Plan will constitute either incentive stock options (options
that afford favorable tax treatment to recipients upon compliance with certain
restrictions pursuant to Section 422 of the Internal Revenue Code ("Code") and
that do not normally result in tax deductions to the Company) or nonqualified
stock options (options that do not afford recipients favorable tax treatment
under Code Section 422). Option shares may be paid for in cash, shares of Common
Stock, or a combination of both. The Company will receive no consideration other
than the option exercise price per share for Common Stock issued to Optionees
upon the exercise of those Options.
-13-
Shares issuable under the 1997 Stock Option Plan may be from authorized but
unissued shares or they may be reacquired shares. An Option which expires,
becomes unexercisable or is forfeited for any reason prior to its exercise will
again be available for issuance under the 1997 Stock Option Plan.
Transferability
An incentive stock option shall not be assignable or transferable otherwise
than by will or by the laws of descent and distribution. A nonqualified stock
option, on the other hand, may, with the prior written consent of the Option
Committee, be assigned or transferred during the Optionee's lifetime.
Stock Options
The Option Committee may grant both an incentive stock option and a
nonqualified stock option to the same person, or more than one of each type of
option to the same person. The option price for both incentive stock options and
nonqualified stock options issued under the 1997 Stock Option Plan shall equal
at least the fair market value of the Common Stock as of the date of the grant
of the option. Fair market value will be determined by the Option Committee in
accordance with its interpretation of the requirements of Section 422 of the
Code and the regulations thereunder.
If an Optionee ceases to serve as an employee of the Company for any reason
other than disability or death, an exercisable incentive stock option may
continue to be exercisable for three months but in no event after the expiration
date of the option, except as may otherwise be determined by the Option
Committee at the time of the award. Nonqualified stock options expire ten years
and ten days after the date they are granted, unless terminated earlier under
the option terms. These are determined by the Option Committee, in its sole
discretion at the time of grant.
If an officer or employee owns Common Stock representing more than ten
percent of the outstanding Common Stock at the time an incentive stock option is
granted, then the exercise price shall not be less than one hundred and ten
percent (110%) of the Fair Market Value of the Common Stock at the time the
incentive stock option is granted. No more than $100,000 of incentive stock
options can become exercisable for the first time in any one year for any one
person. The Option Committee may impose additional conditions upon the right of
an Optionee to exercise any Option granted hereunder which are not inconsistent
with the terms of the 1997 Stock Option Plan or the requirements for
qualification as an incentive stock option, if such Option is intended to
qualify as an incentive stock option.
Upon the exercise of an Option by an Optionee (or the Optionee's personal
representative), the Option Committee, in its sole and absolute discretion, may
make a cash payment to the Optionee, in whole or in part, in lieu of the
delivery of shares of Common Stock. Such cash payment to be paid in lieu of
delivery of Common Stock shall be equal to the difference between the Fair
Market Value of the Common Stock on the date of the Option exercise and the
exercise price per share of the Option. Such cash payment shall be in exchange
for the cancellation of such Option. Such cash payment shall not be made in the
event that such transaction would result in liability to the Optionee and the
Company under Section 16(b) of the Exchange Act, and regulations promulgated
thereunder.
-14-
Awards Under the 1997 Stock Option Plan
The Board or the Option Committee shall, from time to time and in its sole
discretion, determine who are the officers, employees, directors and advisory
directors of the Company and each present and future subsidiary corporation of
the Company eligible to receive options under the 1997 Stock Option Plan, which
of these individuals shall in fact be granted an option or options, whether the
option shall be an incentive stock option or a nonqualified stock option, the
time or times at which the options shall be granted, the rate of option
exercisability, and, pursuant to the 1997 Stock Option Plan, the price at which
each of the options is exercisable and the duration of the option.
The table below presents information related to stock option awards made
pursuant to the amendment to the 1997 Stock Option Plan to increase the
authorized shares under the 1997 Stock Option Plan to 605,115 from 315,000
shares and to include a "reload" feature, subject to shareholder ratification of
the amendment. The stock options granted as set forth in the table below vest
50% one year from the date of grant and are 100% vested two years from the date
of grant and were granted with a "reload" feature.
NEW PLAN BENEFITS
-----------------
Name and Position Dollar Value (1) No. of Options Granted
- ----------------- ---------------- ----------------------
Bernard A. Brown $ -- 10,000
Chairman of the Board(2)
Sidney Brown -- 10,000
Treasurer and Director(2)
Philip W. Koebig, III -- 10,000
President and Chief Executive Officer(2)
James S. Killough -- 2,500
Executive Vice President
Harry G. Miller -- 2,500
Executive Vice President of Sun
Bart A. Speziali -- 2,500
Executive Vice President of Sun
Executive Officer Group (6 persons) -- 22,500
Non-Executive Officer Employee Group (19 persons) -- 35,500
- ---------------------------
(1) Based upon an average exercise price ($19.02), which equals the fair
market value of the Common Stock on the date of grant and the last sale
price of the Common Stock at the close of the market as reported on the
Nasdaq National Market on April 12, 1999 ($18.00 per share).
(2) Nominee for director.
-15-
Effect of Mergers, Change of Control and Other Adjustments
Subject to any required action by the shareholders of the Company, within
the sole discretion of the Option Committee, the aggregate number of shares of
Common Stock for which Options may be granted hereunder or the number of shares
of Common Stock represented by each outstanding Option will be proportionately
adjusted for any increase or decrease in the number of issued and outstanding
shares of Common Stock resulting from a subdivision or consolidation of shares
or the payment of a stock dividend or any other increase or decrease in the
number of shares of Common Stock effected without the receipt or payment of
consideration by the Company. Subject to any required action by the shareholders
of the Company, in the event of any change in control, recapitalization, merger,
consolidation, exchange of shares, spin-off, reorganization, tender offer,
partial or complete liquidation or other extraordinary corporate action or
event, the Option Committee, in its sole discretion, shall have the power, prior
to or subsequent to such action or events, to (i) appropriately adjust the
number of shares of Common Stock subject to each Option, the exercise price per
share of such Option, and the consideration to be given or received by the
Company upon the exercise of any outstanding Options; (ii) cancel any or all
previously granted Options, provided that appropriate consideration is paid to
the Optionee in connection therewith; and/or (iii) make such other adjustments
in connection with the 1997 Stock Option Plan as the Option Committee, in its
sole discretion, deems necessary, desirable, appropriate or advisable. However,
no action may be taken by the Option Committee which would cause incentive stock
options granted pursuant to the 1997 Stock Option Plan to fail to meet the
requirements of Section 422 of the Code without the consent of the Optionee.
Upon the payment of a special or non-recurring cash dividend that has the effect
of a return of capital to the shareholders, the Option exercise price per share
shall be adjusted proportionately.
The Option Committee will at all times have the power to accelerate the
exercise date of all Options granted under the 1997 Stock Option Plan. In the
case of a Change in Control of the Company as determined by the Option
Committee, all outstanding options shall become immediately exercisable. A
Change in Control is defined to include (i) the sale of all, or a material
portion, of the assets of the Company; (ii) the merger or recapitalization of
the Company whereby the Company is not the surviving entity; (iii) the
acquisition, directly or indirectly, of the beneficial ownership (within the
meaning of Section 13(d) of the Exchange Act and rules and regulations
promulgated thereunder) of 25% or more of the outstanding voting securities of
the Company by any person, trust, entity, or group. This limitation shall not
apply to the purchase of shares by underwriters in connection with a pubic
offering of Company stock or the purchase of shares of up to 25% of any class of
securities of the Company by a tax-qualified employee stock benefit plan which
is exempt from the approval requirements in effect, or as may hereafter be
amended.
In the event of such a Change in Control, the Option Committee and the
Board of Directors will take one or more of the following actions to be
effective as of the date of such Change in Control: (i) provide that such
Options shall be assumed, or equivalent options shall be substituted,
("Substitute Options") by the acquiring or succeeding corporation (or an
affiliate thereof), provided that: (A) any such Substitute Options exchanged for
incentive stock options shall meet the requirements of Section 424(a) of the
Code, and (B) the shares of stock issuable upon the exercise of such Substitute
Options shall constitute securities registered in accordance with the Securities
Act or such securities shall be exempt from such registration in accordance with
Sections 3(a)(2) or 3(a)(5) of the Securities Act, (collectively, "Registered
Securities"), or in the alternative, if the securities issuable upon the
exercise of such Substitute Options shall not constitute Registered Securities,
then the Optionee will receive upon consummation of the Change
-16-
in Control transaction a cash payment for each Option surrendered equal to the
difference between (1) the Fair Market Value of the consideration to be received
for each share of Common Stock in the Change in Control transaction times the
number of shares of Common Stock subject to such surrendered Options, and (2)
the aggregate exercise price of all such surrendered Options, or (ii) in the
event of a transaction under the terms of which the holders of the Common Stock
of the Company will receive upon consummation thereof a cash payment (the
"Merger Price") for each share of Common Stock exchanged in the Change in
Control transaction, to make or to provide for a cash payment to the Optionees
equal to the difference between (A) the Merger Price times the number of shares
of Common Stock subject to such Options held by each Optionee (to the extent
then exercisable at prices not in excess of the Merger Price) and (B) the
aggregate exercise price of all such surrendered Options in exchange for such
surrendered Options.
The power of the Option Committee to accelerate the exercise of Options and
the immediate exercisability of Options in the case of a Change in Control of
the Company could have an anti-takeover effect by making it more costly for a
potential acquiror to obtain control of the Company due to the higher number of
shares outstanding following such exercise of Options. The power of the Option
Committee to make adjustments in connection with the 1997 Stock Option Plan,
including adjusting the number of shares subject to Options and canceling
Options, prior to or after the occurrence of an extraordinary corporate action,
allows the Option Committee to adapt the 1997 Stock Option Plan to operate in
changed circumstances, to adjust the 1997 Stock Option Plan to fit a smaller or
larger company, and to permit the issuance of Options to new management
following such extraordinary corporate action. However, this power of the Option
Committee also has an anti-takeover effect, by allowing the Option Committee to
adjust the 1997 Stock Option Plan in a manner to allow the present management of
the Company to exercise more options and hold more shares of the Company's
Common Stock, and to possibly decrease the number of Options available to new
management of the Company.
Although the 1997 Stock Option Plan may have an anti-takeover effect, the
Company's Board of Directors did not adopt the 1997 Stock Option Plan
specifically for anti-takeover purposes. The 1997 Stock Option Plan could render
it more difficult to obtain support for shareholder proposals opposed by the
Company's Board and management in that recipients of Options could choose to
exercise such Options and thereby increase the number of shares for which they
hold voting power. In addition, the exercise of such Options could increase the
cost of an acquisition by a potential acquiror.
Amendment and Termination of the 1997 Stock Option Plan
The Board of Directors may at any time, and from time to time, modify or
amend the 1997 Stock Option Plan, or suspend or terminate it, effective as of
such date, which date may be either before or after the taking of the action,
provided that options granted prior to the actual date on which such action
occurred, will not be affected.
Possible Dilutive Effects of the 1997 Stock Option Plan
To the extent that the Company funds the 1997 Stock Option Plan, in whole
or in part, with authorized but unissued shares, the interests of current
shareholders will be diluted. If, upon the exercise of all of the additional
Options granted under the 1997 Stock Option Plan and the Company delivers newly
issued shares of Common Stock (e.g., 290,115 shares of Common Stock), then the
dilutive effect to current shareholders would be approximately 3.9%.
-17-
Federal Income Tax Consequences
Under present federal tax laws, awards under the 1997 Stock Option Plan
will have the following consequences:
1. The grant of an Option will not by itself result in the recognition of
taxable income to an Optionee nor entitle the Company to a tax
deduction at the time of such grant.
2. The exercise of an Option which is an "incentive stock option" within
the meaning of Section 422 of the Code generally will not, by itself,
result in the recognition of taxable income to an Optionee nor entitle
the Company to a deduction at the time of such exercise. However, the
difference between the Option exercise price and the Fair Market Value
of the Common Stock on the date of Option exercise is an item of tax
preference which may, in certain situations, trigger the alternative
minimum tax for an Optionee. An Optionee will recognize capital gain
or loss upon resale of the shares of Common Stock received pursuant to
the exercise of incentive stock options, provided that such shares are
held for at least one year after transfer of the shares or two years
after the grant of the Option, whichever is later. Generally, if the
shares are not held for that period, the Optionee will recognize
ordinary income upon disposition in an amount equal to the difference
between the Option exercise price and the Fair Market Value of the
Common Stock on the date of exercise, or, if less, the sales proceeds
of the shares acquired pursuant to the Option.
3. The exercise of a nonqualified stock option will result in the
recognition of ordinary income by the Optionee on the date of exercise
in an amount equal to the difference between the exercise price and
the Fair Market Value of the Common Stock acquired pursuant to the
Option.
4. The Company will be allowed a tax deduction for federal tax purposes
equal to the amount of ordinary income recognized by an Optionee at
the time the Optionee recognizes such ordinary income.
5. In accordance with Section 162(m) of the Code, the Company's tax
deductions for compensation paid to the most highly paid executives
named in the Company's Proxy Statement may be limited to no more than
$1 million per year, excluding certain "performance-based"
compensation. The Company intends for the award of Options under the
1997 Stock Option Plan to comply with the requirement for an exception
to Section 162(m) of the Code applicable to stock option plans so that
the Company's deduction for compensation related to the exercise of
Options would not be subject to the deduction limitation set forth in
Section 162(m) of the Code.
Accounting Treatment
The Company expects to use the "intrinsic value based method" as prescribed
by APB Opinion 25. Accordingly, neither the grant nor the exercise of an Option
under the 1997 Stock Option Plan currently requires any charge against earnings
under generally accepted accounting principles. Common Stock issuable pursuant
to outstanding Options which are exercisable under the 1997 Stock Option Plan
might
-18-
be considered outstanding for purposes of calculating earnings per share and
earnings per share on a fully diluted basis.
Shareholder Ratification
Shareholder ratification of the adoption of the amendment to the 1997 Stock
Option Plan is being sought by the Board in order to qualify the 1997 Stock
Option Plan for the granting of Incentive Stock Options in accordance with the
Code, to enable Optionees to qualify for certain exemptive treatment from the
short-swing profit recapture provisions of Section 16(b) of the Exchange Act, to
meet the requirements for the tax-deductibility of certain compensation items
under Section 162(m) of the Code, and to meet the requirements for continued
listing of the Common Stock under the Nasdaq National Market. An affirmative
vote of the holders of a majority of the shares present, in person or by proxy,
and entitled to vote at the Meeting is required to constitute shareholder
ratification of this Proposal II. Proxies marked "ABSTAIN" for purposes of
Proposal II will have the same effect as a vote against the proposal.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE RATIFICATION OF THE
AMENDMENT TO THE 1997 STOCK OPTION PLAN, WHICH IS ATTACHED HERETO AS APPENDIX A.
UNLESS MARKED TO THE CONTRARY, THE SHARES REPRESENTED BY SIGNED PROXIES WILL BE
VOTED FOR RATIFICATION OF THE AMENDMENT TO THE 1997 STOCK OPTION PLAN.
- --------------------------------------------------------------------------------
OTHER MATTERS
- --------------------------------------------------------------------------------
The Board of Directors is not aware of any business to come before the
Meeting other than those matters described in this Proxy Statement. However, if
any other matters should properly come before the Meeting, it is intended that
proxies in the accompanying form will be voted in respect thereof in accordance
with the judgment of the persons named in the accompanying proxy. If the Company
did not have notice of a matter by January 21, 1999, it is expected that the
persons named in the accompanying proxy will exercise discretionary authority
when voting on that matter.
- --------------------------------------------------------------------------------
INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
A representative of Deloitte & Touche, LLP, the Company's independent
accountants, is expected to be present at the Meeting, will have the opportunity
to make a statement at the meeting if he or she desires to do so, and will be
available to respond to appropriate questions.
- --------------------------------------------------------------------------------
MISCELLANEOUS
- --------------------------------------------------------------------------------
The cost of soliciting proxies will be borne by the Company. The
Company will reimburse brokerage firms and other custodians, nominees and
fiduciaries for reasonable expenses incurred by them in sending proxy materials
to the beneficial owners of Common Stock. In addition to solicitations by mail,
directors, officers, and regular employees of the Company may solicit proxies
personally or by telephone without additional compensation.
-19-
- --------------------------------------------------------------------------------
SHAREHOLDER PROPOSALS AND NOMINATIONS FOR THE 1999 ANNUAL MEETING
- --------------------------------------------------------------------------------
In order to be eligible for inclusion in the Company's proxy materials for
next year's Annual Meeting of Shareholders, any shareholder proposal to take
action at such meeting must be received at the Company's executive offices at
226 Landis Avenue, Vineland, New Jersey 08360, no later than December 20, 1999.
Any such proposals shall be subject to the requirements of the proxy rules
adopted under the Exchange Act.
In the event the Company receives notice of a shareholder proposal to take
action at next year's annual meeting of shareholders that is not submitted for
inclusion in the Company's proxy material, or is submitted for inclusion but is
properly excluded from the proxy material, the persons named in the proxy sent
by the Company to its shareholders intend to exercise their discretion to vote
on the shareholders proposal in accordance with their best judgment if notice of
the proposal is not received at the Company's main office by February 19, 2000.
The Company's Bylaws include provisions setting forth specific conditions
under which persons may be nominated as directors of the Company at an annual
meeting of shareholders. A copy of such provisions is available upon request to:
Sun Bancorp, Inc., 226 Landis Avenue, Vineland, New Jersey 08360, Attention:
Corporate Secretary.
- --------------------------------------------------------------------------------
FORM 10-K
- --------------------------------------------------------------------------------
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED
DECEMBER 31, 1998, WILL BE FURNISHED WITHOUT CHARGE (WITHOUT EXHIBITS) TO
SHAREHOLDERS AS OF THE RECORD DATE UPON WRITTEN REQUEST TO THE SECRETARY, SUN
BANCORP, INC., 226 LANDIS AVENUE, VINELAND, NEW JERSEY 08360.
BY ORDER OF THE BOARD OF DIRECTORS
/s/Sidney R. Brown
Sidney R. Brown
Secretary
Vineland, New Jersey
April 19, 1999
-20-
APPENDIX A
SUN BANCORP, INC.
AMENDED AND RESTATED
1997 STOCK OPTION PLAN
----------------------
1. Purpose of Plan.
----------------
The purpose of the Sun Bancorp, Inc. 1997 Stock Option Plan (the "Plan")
contained herein is to provide additional incentive to employees, officers,
directors and advisory directors of Sun Bancorp, Inc. (the "Company") and each
present or future subsidiary corporation of the Company, by encouraging them to
invest in shares of the Company's common stock ("Common Stock"), and thereby to
acquire a proprietary interest in the business of the Company and each present
or future subsidiary corporation of the Company and an increased personal
interest in their continued success and progress, to the mutual benefit of the
shareholders and recipient of stock option awards.
2. Aggregate Number of Shares.
---------------------------
605,115 shares of Common Stock (par value $1.00 per share) shall be the
aggregate number of shares which may be issued under this Plan. Notwithstanding
the foregoing, in the event of any change in the outstanding shares of Common
Stock by reason of a stock dividend, stock split, combination of shares,
recapitalization, merger, consolidation, transfer of assets, reorganization,
conversion, or other event that the Board of Directors of the Company or the
Executive Compensation Committee (the "Committee"), deems in its sole discretion
to be similar circumstances, the aggregate number and kind of shares which may
be issued under this Plan shall be approximately adjusted in a manner determined
in the sole discretion of the Committee. Reacquired shares of Common Stock as
well as unissued shares may be used for the purpose of this Plan. Shares of
Common Stock subject to options which have terminated unexercised, either in
whole or in part, shall be available for future options granted under this Plan.
3. Class of Individuals Eligible to Receive Options.
-------------------------------------------------
(a) All officers and employees of the Company and of any present and future
subsidiary corporation of the Company are eligible to receive an option or
options under this Plan. The officers, employees and advisory directors who
shall, in fact, receive an option or options shall be selected by the Committee
in its sole discretion, except as otherwise specified in Section 4 hereof.
(b) All directors of the Company and of any present and future subsidiary
corporation of the Company are eligible to receive an option or options under
this Plan in accordance with Section 16 hereof.
A-1
4. Administration of Plan.
-----------------------
(a) This Plan shall be administered by the Board of Directors of the
Company or the Committee, which will be appointed by the Board of Directors of
the Company. The Committee shall consist of a minimum of two and a maximum of
seven members of the Company's Board of Directors. All persons designated as
members of the Committee shall meet the requirements of a "Non-Employee
Director" within the meaning of Rule 16b-3 (17 CFR ss.240.16b-3) under the
Securities Exchange Act of 1934, as amended ("Exchange Act"). The Board of
Directors of the Company or the Committee shall, in addition to its other
authority and subject to the provisions of this Plan, have authority in its sole
discretion to determine who are the officers, employees and advisory directors
of the Company and each present and future subsidiary corporation of the Company
eligible to receive options under this Plan, which officers, employees and
advisory directors shall in fact be granted an option or options, whether the
option shall be an incentive stock option or a non-qualified stock option, the
time or times at which the options shall be granted, the rate of option
exercisability, and, subject to Section 5 hereof, the price at which each of the
options is exercisable and the duration of the option.
(b) The Committee shall adopt such rules for the conduct of its business
and administration of this Plan as it considers desirable. A majority of the
members of the Committee shall constitute a quorum for all purposes. The vote or
written consent of a majority of the members of the Committee on a particular
matter shall constitute the act of the Committee on such matter. The Committee
shall have the exclusive right to construe the Plan and the options issued
pursuant to it, correct defects, supply omissions and reconcile inconsistencies
to the extent necessary to effectuate the Plan and the options issued pursuant
to it, and such action shall be final, binding and conclusive upon all parties
concerned. No member of the Committee or the Board of Directors shall be liable
for any act or omission (whether or not negligent) taken or omitted in good
faith, or for the exercise of an authority or discretion granted in connection
with this Plan to the Committee or the Board of Directors, or for the acts or
omissions of any other members of the Committee or the Board of Directors.
Subject to the numerical limitations on Committee membership set forth in
Section 4(a) hereof, the Board of Directors may at any time appoint additional
members of the Committee and may at any time remove any member of the Committee
with or without cause. Vacancies in the Committee, however caused, may be filled
by the Board of Directors if it so desires.
5. Incentive Stock Options and Nonqualified Stock Options.
-------------------------------------------------------
(a) Options issued pursuant to this Plan may be either incentive stock
options granted pursuant to Section 5(b) hereof or nonqualified stock options
granted pursuant to Section 5(c) hereof, as determined by the Committee. An
"incentive stock option" is an option which satisfies all of the requirements of
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"), and
the regulations thereunder, and a nonqualified stock option is an option which
does not satisfy the requirements of Code Section 422. The Committee may grant
both an incentive stock option and a nonqualified stock option to the same
person, or more than one of each type of option to the same person. The option
price for both incentive stock options and nonqualified stock options issued
under this Plan shall equal at least the fair market value of the Common Stock
as of the date of the grant of the option, such fair market value being
determined by the Committee in accordance with its interpretation of the
requirements of Section 422 of the Code and the regulations thereunder.
(b) Incentive stock options shall expire not later than ten years from the
date of grant by action of the Committee, unless terminated earlier under the
option terms; provided that in the case of an
A-2
Employee who owns stock representing more than ten percent (10%) of the Common
Stock outstanding at the time the Incentive Stock Option is granted, the term of
exercisability of the Incentive Stock Option shall not exceed five (5) years.
Notwithstanding other provisions hereof, the aggregate fair market value
(determined as of the time an incentive stock option is granted) of the stock
for which any employee may be granted incentive stock options in any calendar
year (under all incentive stock option plans, as defined in Section 422 of the
Code, of the Company or any present or future parent or subsidiary of the
Company) shall not exceed $100,000. In the case of an Employee who owns Common
Stock representing more than ten percent (10%) of the outstanding Common Stock
at the time the Incentive Stock Option is granted, the Incentive Stock Option
exercise price shall not be less than one hundred and ten percent (110%) of the
Fair Market Value of the Common Stock on the date that the Incentive Stock
Option is granted. No Incentive Stock Option may be exercised unless the
Optionee shall have been in the employ of the Company at all times during the
period beginning with the date of grant of any such Incentive Stock Option and
ending on the date three (3) months prior to the date of exercise of any such
Incentive Stock Option. At the time of granting an incentive stock option
hereunder, the Committee shall determine in its discretion, the terms and
conditions of such option for any person who receives an option pursuant to the
Plan ("Optionee"), provided that the option continues to be an incentive stock
option. In the event that any Optionee's employment with the Company shall
terminate for any reason, other than disability or death, all of any such
Optionee's Incentive Stock Options, and all of any such Optionee's rights to
purchase or receive Shares of Common Stock pursuant thereto, shall automatically
terminate on (A) the earlier of (i) or (ii): (i) the respective expiration dates
of any such Incentive Stock Options, or (ii) the expiration of not more than
three (3) months after the date of such termination of employment; or (B) at
such later date as is determined by the Committee at the time of the grant of
such Option or at the time of termination of employment, if the individual was
entitled to exercise any such Incentive Stock Options at the date of such
termination of employment, and further that such Option shall thereafter be
deemed a Nonqualified Stock Option. In the event that a Subsidiary ceases to be
a Subsidiary of the Company, the employment of all of its employees who are not
immediately thereafter employees of the Company shall be deemed to terminate
upon the date such Subsidiary so ceases to be a Subsidiary of the Company. Each
of the options granted pursuant to this Section 5(b) is intended, if possible,
to be an "incentive stock option" as that term is defined in Section 422 of the
Code and the regulations thereunder. In the event this Plan or any option
granted pursuant to this Section 5(b) is any way inconsistent with the
applicable legal requirements of the Code or the regulations thereunder for an
incentive stock option, this Plan and such option shall be deemed automatically
amended as of the date hereof to conform to such legal requirements, if such
conformity may be achieved by amendment.
(c) Nonqualified stock options shall expire ten years and ten days after
the date they are granted, unless terminated earlier under the option terms. At
the time of granting a nonqualified stock option hereunder, the Committee shall
determine in its discretion, the terms and conditions of any such options,
provided that the option exercise price is not less than the fair market value
of the Common Stock as of the date of such grant.
(d) Neither the Company nor any present or future affiliated or subsidiary
corporation of the Company, nor their officers, directors, shareholders, stock
option plan committees, employees or agents shall have any liability to any
Optionee in the event an option granted pursuant to Section 5(b) hereof does not
qualify as an "incentive stock option" as that term is used in Section 422 of
the Code and the regulations thereunder, or in the event any Optionee does not
obtain the tax benefits of such an incentive stock option, or in the event any
option granted pursuant to Section 5(c) hereof is an "incentive stock option."
A-3
6. Six Month Holding Period.
-------------------------
With respect to options awarded to officers and employees who are subject
to the reporting requirements under Section 16(a) of the Exchange Act, subject
to vesting requirements, if applicable, except in the event of the death or
disability of the Optionee or a Change in Control of the Company, a minimum of
six months must elapse between the date of the grant of an option and the date
of the sale of the Common Stock received through the exercise of such option.
7. Cashless Exercise.
------------------
Subject to vesting requirements, if applicable, an Optionee who has held an
option for at least six months may engage in the "cashless exercise" of the
option. Upon a cashless exercise, an Optionee gives the Company written notice
of the exercise of the option together with an order to a registered
broker-dealer or equivalent third party, to sell part or all of the Common Stock
under option ("Optioned Stock") and to deliver enough of the proceeds to the
Company to pay the option exercise price and any applicable withholding taxes.
If the Optionee does not sell the Optioned Stock through a registered
broker-dealer or equivalent third party, the Optionee can give the Company
written notice of the exercise of the option and the third party purchaser of
the Optioned Stock shall pay the option exercise price plus any applicable
withholding taxes to the Company.
8. Transferability.
----------------
An incentive stock option granted pursuant to the Plan shall be exercised
during an Optionee's lifetime only by the Optionee to whom it was granted and
shall not be assignable or transferable otherwise than by will or by the laws of
descent and distribution. A nonqualified stock option granted pursuant to the
Plan may, with the prior written consent of the Committee, be assignable or
transferable during the Optionee's lifetime. In determining whether consent
shall be given to an Optionee with regard to the assignment or transfer of a
nonqualified stock option, it shall be at the sole discretion of the Committee.
9. Modification, Amendment, Suspension and Termination.
----------------------------------------------------
Options shall not be granted pursuant to this Plan after the expiration of
ten years from and after the date of the adoption of the Plan by the Company's
Board of Directors. The Board of Directors reserves the right at any time, and
from time to time, to modify or amend this Plan in any way, or to suspend or
terminate it, effective as of such date, which date may be either before or
after the taking of such action, as may be specified by the Board of Directors;
provided, however, that such action shall not affect options granted under the
Plan prior to the actual date on which such action occurred. If a modification
or amendment of this Plan is required by the Code or the regulations thereunder
to be approved by the shareholders of the Company in order to permit the
granting of "incentive stock options" (as that term is defined in Section 422 of
the Code and regulations thereunder) pursuant to the modified or amended Plan,
such modification or amendment shall also be approved by the shareholders of the
Company in such manner as is prescribed by the Code and the regulations
thereunder. If the Board of Directors voluntarily submits a proposed
modification, amendment, suspension or termination for shareholder approval,
such submission shall not require any future modifications, amendments (whether
or not relating to the same provision or subject matter), suspensions or
terminations to be similarly submitted for shareholder approval.
A-4
Notwithstanding any other provision contained in this Plan, in the event of
a change in any federal or state law, rule or regulation which would make the
exercise of all or part of any previously granted option unlawful or subject the
Company to any penalty, the Committee may restrict any such exercise without the
consent of the Optionee or other holder thereof in order to comply with any such
law, rule or regulation or to avoid any such penalty.
10. Recapitalization, Merger, Consolidation, Change in Control and Other
---------------------------------------------------------------------------
Transactions.
------------
(a) Subject to any required action by the shareholders of the Company,
within the sole discretion of the Committee, the aggregate number of shares of
Common Stock for which options may be granted hereunder, the number of shares of
Common Stock covered by each outstanding option, and the exercise price per
share of Common Stock of each option, shall all be proportionately adjusted for
any increase or decrease in the number of issued and outstanding shares of
Common Stock resulting from a subdivision or consolidation of shares (whether by
reason of merger, consolidation, recapitalization, reclassification, split-up,
combination of shares, or otherwise) or the payment of a stock dividend or any
other increase or decrease in the number of such shares of Common Stock effected
without the receipt or payment of consideration by the Company (other than
Common Stock held by dissenting shareholders).
(b) All outstanding options previously granted shall become immediately
exercisable in the event of a Change in Control of the Company, as determined by
the Committee. "Change in Control" shall mean: (i) the sale of all, or a
material portion, of the assets of the Company; (ii) the merger or
recapitalization of the Company whereby the Company is not the surviving entity;
or (iii) the acquisition, directly or indirectly, of the beneficial ownership
(within the meaning of that term as it is used in Section 13(d) of the Exchange
Act and the rules and regulations promulgated thereunder) of twenty-five percent
(25%) or more of the outstanding voting securities of the Company by any person,
trust, entity or group. This limitation shall not apply to the purchase of
shares by underwriters in connection with a public offering of Common Stock, or
the purchase of shares of up to 25% of any class of securities of the Company by
a tax-qualified employee stock benefit plan which is exempt from the approval
requirements, as now in effect or as may hereafter be amended. The term "person"
refers to an individual or a corporation, partnership, trust, association, joint
venture, pool, syndicate, sole proprietorship, unincorporated organization or
any other form of entity not specifically listed herein. The decision of the
Committee as to whether a Change in Control has occurred shall be conclusive and
binding.
In the event of such a Change in Control, the Committee and the Board of
Directors of the Company will take one or more of the following actions to be
effective as of the date of such Change in Control:
(i) provide that such options shall be assumed, or equivalent options shall
be substituted, ("Substitute Options") by the acquiring or succeeding
corporation (or an affiliate thereof), provided that: (A) any such Substitute
Options exchanged for incentive stock options shall meet the requirements of
Section 424(a) of the Code, and (B) the shares of stock issuable upon the
exercise of such Substitute Options shall constitute securities registered in
accordance with the Securities Act of 1933, as amended, ("1933 Act") or such
securities shall be exempt from such registration in accordance with Sections
3(a)(2) or 3(a)(5) of the 1933 Act, (collectively, "Registered Securities"), or
in the alternative, if the securities issuable upon the exercise of such
Substitute Options shall not constitute Registered Securities, then the Optionee
will receive upon consummation of the Change in Control transaction a cash
payment for each option surrendered equal to the difference between (1) the fair
market value of the consideration to be
A-5
received for each share of Common Stock in the Change in Control transaction
times the number of shares of Common Stock subject to such surrendered options,
and (2) the aggregate exercise price of all such surrendered options, or
(ii) in the event of a transaction under the terms of which the holders of
the Common Stock will receive upon consummation thereof a cash payment (the
"Merger Price") for each share of Common Stock exchanged in the Change in
Control transaction, to make or to provide for a cash payment to the Optionees
equal to the difference between (A) the Merger Price times the number of shares
of Common Stock subject to such options held by each Optionee (to the extent
then exercisable at prices not in excess of the Merger Price) and (B) the
aggregate exercise price of all such surrendered options in exchange for such
surrendered options.
(c) Notwithstanding any provisions of the Plan to the contrary, subject to
any required action by the shareholders of the Company, in the event of any
Change in Control, recapitalization, merger, consolidation, exchange of Shares,
spin-off, reorganization, tender offer, partial or complete liquidation or other
extraordinary corporate action or event, the Committee, in its sole discretion,
shall have the power, prior or subsequent to such action or event to:
(i) appropriately adjust the number of shares of Common Stock subject to
each option, the option exercise price per share of Common Stock, and the
consideration to be given or received by the Company upon the exercise of any
outstanding option;
(ii) cancel any or all previously granted options, provided that
appropriate consideration is paid to the Optionee in connection therewith;
and/or
(iii) make such other adjustments in connection with the Plan as the
Committee, in its sole discretion, deems necessary, desirable, appropriate or
advisable; provided, however, that no action shall be taken by the Committee
which would cause incentive stock options granted pursuant to the Plan to fail
to meet the requirements of Section 422 of the Code without the consent of the
Optionee.
Except as expressly provided in Sections 10(a), 10(b) and 10(e) hereof, no
Optionee shall have any rights by reason of the occurrence of any of the events
described in this Section 10.
(d) The Committee shall at all times have the power to accelerate the
exercise date of options previously granted under the Plan.
(e) Upon the payment of a special or non-recurring cash dividend that has
the effect of a return of capital to the shareholders, the option exercise price
per share shall be adjusted proportionately.
11. Conditions Upon Issuance of Common Stock; Limitations on Option Exercise;
---------------------------------------------------------------------------
Cancellation of Option Rights.
------------------------------
(a) Common Stock shall not be issued with respect to any option granted
under the Plan unless the issuance and delivery of such shares shall comply with
all relevant provisions of applicable law, including, without limitation, the
1933 Act, the rules and regulations promulgated thereunder, any applicable state
securities laws and the requirements of any stock exchange upon which the Common
Stock may then be listed.
A-6
(b) The inability of the Company to obtain any necessary authorizations,
approvals or letters of non-objection from any regulatory body or authority
deemed by the Company's legal counsel to be necessary to the lawful issuance and
sale of any Common Stock issuable hereunder shall relieve the Company of any
liability with respect to the non-issuance or sale of such shares.
(c) As a condition to the exercise of an option, the Company may require
the Optionee to make such representations and warranties as may be necessary to
assure the availability of an exemption from the registration requirements of
federal or state securities law.
(d) Notwithstanding anything herein to the contrary, upon the termination
of employment or service of an Optionee by the Company or its subsidiaries for
"cause" (as determined by the Board of Directors in good faith), all options
held by such Optionee shall cease to be exercisable as of the date of such
termination of employment or service.
(e) Upon the exercise of an option by an Optionee (or the Optionee's
personal representative), the Committee, in its sole and absolute discretion,
may make a cash payment to the Optionee, in whole or in part, in lieu of the
delivery of shares of Common Stock. Such cash payment to be paid in lieu of
delivery of Common Stock shall be equal to the difference between the fair
market value of the Common Stock on the date of exercise and the exercise price
per share of the option. Such cash payment shall be in exchange for the
cancellation of such option. Such cash payment shall not be made in the event
that such transaction would result in liability to the Optionee or the Company
under Section 16(b) of the Exchange Act, and regulations promulgated thereunder.
12. Withholding Tax.
----------------
The Company shall have the right to deduct from all amounts paid in cash
with respect to the cashless exercise of options under the Plan any taxes
required by law to be withheld with respect to such cash payments. Where an
Optionee or other person is entitled to receive shares of Common Stock pursuant
to the exercise of an option, the Company shall have the right to require the
Optionee or such other person to pay the Company the amount of any taxes which
the Company is required to withhold with respect to such Common Stock, or, in
lieu thereof, to retain, or to sell without notice, a number of such shares
sufficient to cover the amount required to be withheld.
13. Effectiveness of Plan; Shareholder Ratification.
------------------------------------------------
This Plan shall become effective on the date of its adoption ("Effective
Date") by the Company's Board of Directors subject, however, to ratification by
the shareholders of the Company in such manner as is prescribed by the Code and
the regulations thereunder. Options may be granted under this Plan prior to
obtaining such shareholder ratification, provided such options shall not be
exercisable until such shareholder ratification, is obtained.
14. General Conditions.
-------------------
(a) Nothing contained in this Plan or any option granted pursuant to this
Plan shall confer upon any employee the right to continue in the employ of the
Company or any present or future affiliated and subsidiary corporation of the
Company, or interfere in any way with the rights of the Company and any
affiliated or subsidiary corporation of the Company to terminate his employment
in any way.
A-7
(b) Corporate action constituting an offer of stock for sale to any
employee under the terms of the options to be granted hereunder shall be deemed
completed as of the date when the Committee authorizes the grant of the option
to the employee, regardless of when the option is actually delivered to the
employee or acknowledged or agreed to by him.
(c) The term "subsidiary corporation" as used throughout this Plan, and the
options granted pursuant to this Plan, shall (except as otherwise provided in
the option form) have the meaning that is ascribed to that term by subsections
424(f) and (g) of the Code, and the Company shall be deemed to be the grantor
corporation for purposes of applying such meaning.
(d) References in this Plan to the Code shall be deemed to also refer to
the corresponding provisions of any amendments thereto and to any future United
States revenue law.
(e) The use of the masculine pronoun shall include the feminine gender
whenever appropriate.
(f) Notwithstanding anything herein to the contrary, in no event shall
shares of Common Stock subject to Options granted to any individual exceed more
than 80% of the total number of shares of Common Stock authorized for delivery
under the Plan.
15. Award of Options to Directors.
------------------------------
Nonqualified Stock Options to purchase 15,000 shares of Common Stock will
be granted to each Director who is not an employee of the Company or any
subsidiary as of the Effective Date, at an exercise price equal to the fair
market value of the Common Stock on such date of grant. Such options will be
first exercisable as of such date of grant, subject to ratification of the Plan
by the shareholders of the Company. Such Options shall continue to be
exercisable for a period of ten years and ten days following the date of grant
without regard to the continued services of such Director. In the event of the
Optionee's death, such Options may be exercised by the personal representative
of his estate or person or persons to whom his rights under such Option shall
have passed by will or by the laws of descent and distribution. Options may be
granted to newly appointed or elected non-employee Directors within the sole
discretion of the Committee. The exercise price per Share of such Options
granted shall be equal to the fair market value of the Common Stock at the time
such Options are granted. Unless otherwise inapplicable, or inconsistent with
the provisions of this paragraph, the Options to be granted to Directors
hereunder shall be subject to all other provisions of this Plan.
16. Reload Options.
---------------
The Committee shall have the authority to specify at the time of Grant of
an Option that an Optionee shall be granted the right to a further Option (a
"Reload Option") in the event such optionee exercises all or a part of an Option
(an "Original Option"), by surrendering already owned shares of Common Stock in
full or partial payment of the Option Price under such Original Option. Each
such Reload Option shall be granted on the date of exercise of the Original
Option, shall cover a number of shares of Common Stock not exceeding the whole
number of shares of Common Stock surrendered in payment of the Option Price
under such Original Option, and any shares of Common Stock used to satisfy any
taxes incident to the exercise of the Original Option, shall have an Option
Price equal to the Fair Market Value of the Common Stock on the date of Grant of
such Reload Option, shall expire on the stated expiration date of the Original
Option and shall be subject to such other terms and conditions as the Committee
may determine.
A-8
- --------------------------------------------------------------------------------
SUN BANCORP, INC.
226 LANDIS AVENUE
VINELAND, NEW JERSEY 08360
- --------------------------------------------------------------------------------
ANNUAL MEETING OF SHAREHOLDERS
May 20, 1999
- --------------------------------------------------------------------------------
The undersigned hereby appoints the Board of Directors of Sun Bancorp, Inc.
(the "Company"), or its designee, with full powers of substitution, to act as
attorneys and proxies for the undersigned, to vote all shares of Common Stock of
the Company which the undersigned is entitled to vote at the Annual Meeting of
Shareholders (the "Meeting"), to be held at 226 Landis Avenue, Vineland, New
Jersey, on May 20, 1999, at 3:30 p.m. and at any and all adjournments thereof,
in the following manner:
FOR WITHHELD
--- --------
1. The election as directors of the nominees
listed below (except as marked to the |_| |_|
contrary below):
Bernard A. Brown
Ike Brown
Jeffrey S. Brown
Sidney R. Brown
Adolph F. Calovi
Peter Galetto, Jr.
Philip W. Koebig, III
Anne E. Koons
(Instruction: To withhold authority to vote
for any individual nominee, write that nominee's name
on the line provided below)
- --------------------------------------------------------------------------------
FOR AGAINST ABSTAIN
--- ------- -------
2. Ratification of the amendment to
the Sun Bancorp, Inc. 1997 Stock
Option Plan |_| |_| |_|
In their discretion, such attorneys and proxies are authorized to vote on any
other business that may properly come before the meeting or any adjournments
thereof.
Note: Executing this proxy permits such attorneys and proxies to vote, in their
discretion, upon such other business as may properly come before the Meeting or
any adjournments thereof.
The Board of Directors recommends a vote "FOR" the above listed proposals.
- --------------------------------------------------------------------------------
THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS ARE SPECIFIED, THIS
SIGNED PROXY WILL BE VOTED FOR EACH OF THE PROPOSALS STATED. IF ANY OTHER
BUSINESS IS PRESENTED AT SUCH MEETING, THIS PROXY WILL BE VOTED BY THOSE NAMED
IN THIS PROXY IN THEIR BEST JUDGMENT. AT THE PRESENT TIME, THE BOARD OF
DIRECTORS KNOWS OF NO OTHER BUSINESS TO BE PRESENTED AT
THE MEETING.
- --------------------------------------------------------------------------------
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
The undersigned acknowledges receipt from the Company prior to the
execution of this proxy of a Notice of Annual Meeting of Shareholders, a Proxy
Statement dated April 19, 1999, and the 1998 Annual Report.
Dated: , 1999
----------------------------
- -------------------------------------- ----------------------------------
PRINT NAME OF SHAREHOLDER PRINT NAME OF SHAREHOLDER
- -------------------------------------- ----------------------------------
SIGNATURE OF SHAREHOLDER SIGNATURE OF SHAREHOLDER
Please sign exactly as your name appears on this proxy. When signing as
attorney, executor, administrator, trustee, or guardian, please give your full
title. If shares are held jointly, each holder should sign.
- --------------------------------------------------------------------------------
PLEASE COMPLETE, SIGN, DATE, AND MAIL THIS PROXY PROMPTLY IN THE ENCLOSED
POSTAGE-PREPAID ENVELOPE.
- --------------------------------------------------------------------------------