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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the Quarter Ended March 31, 2003
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the transition period from to
Commission File No. 001-16197
PEAPACK-GLADSTONE FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
New Jersey 22-3537895
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
158 Route 206 North,
Gladstone, New Jersey 07934
(Address of principal executive offices, including zip code)
(908) 234-0700
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes |X| No |_|.
Indicate by check mark whether the Registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-d). Yes |X| No |_|.
Number of shares of Common stock outstanding as of May 1, 2003:
6,803,219
PEAPACK-GLADSTONE FINANCIAL CORPORATION
PART 1 FINANCIAL INFORMATION
Item 1 Financial Statements:
Consolidated Statements of Condition March 31, 2003 and December 31, 2002 Page 3
Consolidated Statements of Income for the three months ended March 31, 2003
and 2002 Page 4
Consolidated Statements of Changes in Shareholders' Equity for the three
months ended March 31, 2003 and 2002 Page 5
Consolidated Statements of Cash Flows for the three months ended March 31,
2003 and 2002 Page 6
Notes to the Consolidated Financial Statements Page 7
Item 2 Management Discussion and Analysis of Financial Condition and Results of
Operations Page 8
Item 3 Quantitative and Qualitative Disclosures about Market Risk Page 11
Item 4 Controls and Procedures Page 11
PART 2 OTHER INFORMATION
Item 6 Exhibits and Reports on Form 8-K Page 11
2
PEAPACK-GLADSTONE FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CONDITION
(Dollars in thousands)
(Unaudited)
March 31, December 31,
2003 2002
------------ ------------
ASSETS
Cash and due from banks $ 24,746 $ 17,920
Federal funds sold 13,928 20,400
------------ ------------
Total cash and cash equivalents 38,674 38,320
Interest-earning deposits 698 549
Investment Securities:(approximate market value
$165,967 in 2003 and $171,290 in 2002) 162,912 168,066
Securities Available for Sale 263,172 212,259
Loans:
Loans secured by real estate 369,775 379,150
Other loans 30,288 30,610
------------ ------------
Total loans 400,063 409,760
Less: Allowance for loan losses 4,983 4,798
------------ ------------
Net loans 395,080 404,962
Premises and equipment, net 14,613 14,371
Accrued interest receivable 4,901 4,606
Cash surrender value 15,948 15,747
Other assets 1,282 928
------------ ------------
TOTAL ASSETS $ 897,280 $ 859,808
============ ============
LIABILITIES
Deposits:
Noninterest-bearing demand deposits $ 134,059 $ 126,107
Interest-bearing deposits:
Checking 124,117 136,956
Savings 102,275 94,142
Money market accounts 199,838 173,973
Certificates of deposit over $100,000 61,883 59,607
Certificates of deposit less than $100,000 175,323 178,903
------------ ------------
Total deposits 797,495 769,688
Borrowed Funds 11,000 5,000
Accrued expenses and other liabilities 9,390 7,962
------------ ------------
TOTAL LIABILITIES 817,885 782,650
SHAREHOLDERS' EQUITY
Common stock (no par value; stated value $0.83
per share; authorized 20,000,000 shares; issued shares,
6,802,823 at March 31, 2003 and 6,800,041 at
December 31, 2002; outstanding shares, 6,704,984 at
March 31, 2003 and 6,702,523 at December 31, 2002) 5,664 5,661
Surplus 38,536 38,385
Treasury Stock at cost, 97,839 shares in 2003
and 97,518 shares in 2002 (2,031) (2,020)
Retained Earnings 32,946 30,290
Accumulated other comprehensive income,
net of income tax 4,280 4,842
------------ ------------
TOTAL SHAREHOLDERS' EQUITY 79,395 77,158
------------ ------------
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $ 897,280 $ 859,808
============ ============
See accompanying notes to consolidated financial statements.
3
PEAPACK-GLADSTONE FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except share data)
(Unaudited)
Three months ended
March 31,
2003 2002
---------- ----------
INTEREST INCOME
Interest and fees on loans $ 6,538 $ 7,320
Interest on investment securities:
Taxable 1,406 649
Tax-exempt 110 91
Interest on securities available for sale:
Taxable 2,430 2,389
Tax-exempt 89 80
Interest-earning deposits 1 132
Interest on federal funds sold 28 29
---------- ----------
Total interest income 10,602 10,690
INTEREST EXPENSE
Interest on savings account deposits 972 958
Interest on certificates of deposit over $100,000 430 556
Interest on other time deposits 1,226 1,409
Interest on borrowed funds 56 58
---------- ----------
Total interest expense 2,684 2,981
---------- ----------
NET INTEREST INCOME BEFORE
PROVISION FOR LOAN LOSSES 7,918 7,709
Provision for loan losses 150 199
---------- ----------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 7,768 7,510
---------- ----------
OTHER INCOME
Service charges and fees for other services 408 410
Trust department income 1,443 1,146
Securities gains 273 17
Bank owned life insurance 220 197
Other income 213 197
---------- ----------
Total other income 2,557 1,967
OTHER EXPENSES
Salaries and employee benefits 3,237 2,927
Premises and equipment 1,081 970
Other expense 1,165 1,235
---------- ----------
Total other expenses 5,483 5,132
---------- ----------
INCOME BEFORE INCOME TAX EXPENSE 4,842 4,345
Income tax expense 1,582 1,384
---------- ----------
NET INCOME $ 3,260 $ 2,961
========== ==========
EARNINGS PER SHARE
Basic $ 0.49 $ 0.44
Diluted $ 0.47 $ 0.44
Average basic shares outstanding 6,704,722 6,658,804
Average diluted shares outstanding 6,898,151 6,774,361
See accompanying notes to consolidated financial statements.
4
PEAPACK-GLADSTONE FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(Dollars in thousands)
(Unaudited)
Three Months Ended
March 31,
2003 2002
-------- --------
Balance, Beginning of Period $ 77,158 $ 63,085
Comprehensive income:
Net Income 3,260 2,961
-------- --------
Unrealized holding losses on securities
arising during the period, net of tax (385) (1,374)
Less: Reclassification adjustment for gains
included in net income, net of tax (177) (11)
-------- --------
(562) (1,385)
-------- --------
Total Comprehensive income 2,698 1,576
Common Stock Options Exercised 31 177
Purchase of Treasury Stock (11) (197)
Cash Dividends Declared (603) (499)
Tax Benefit on Disqualifying and Nonqualifying
Exercise of Stock Options 122 --
-------- --------
Balance, March 31, $ 79,395 $ 64,142
======== ========
See accompanying notes to consolidated financial statements.
5
PEAPACK-GLADSTONE FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
Three Months Ended
March 31,
2003 2002
-------- --------
OPERATING ACTIVITIES:
Net Income: $ 3,260 $ 2,961
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 368 312
Amortization of premium and accretion of
discount on securities, net 706 143
Provision for loan losses 150 199
Gains on security sales (273) (17)
Increase in cash surrender value of life insurance (201) (181)
(Increase)/decrease in accrued interest receivable (295) 315
(Increase)/decrease in other assets (354) 2,182
Increase in other liabilities 1,963 3,780
-------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES 5,324 9,694
-------- --------
INVESTING ACTIVITIES:
Proceeds from maturities of investment securities 15,707 3,232
Proceeds from maturities of securities available
for sale 6,355 1,570
Proceeds from calls of investment securities 165 1,220
Proceeds from calls of securities available for sale 8,825 19,650
Proceeds from sales of securities available for sale 15,918 1,538
Purchase of investment securities (11,251) (15,783)
Purchase of securities available for sale (82,886) (67,089)
Net (increase)/decrease in short-term investments (149) 15,162
Net decrease/(increase) in loans 9,732 (9,118)
Purchases of premises and equipment (610) (272)
-------- --------
NET CASH USED IN INVESTING ACTIVITIES (38,194) (49,890)
-------- --------
FINANCING ACTIVITIES:
Net increase in deposits 27,807 45,653
Net increase in borrowed funds 6,000 --
Dividends paid (603) (499)
Exercise of stock options 31 177
Purchase of Treasury Stock (11) (197)
-------- --------
NET CASH PROVIDED BY FINANCING ACTIVITIES 33,224 45,134
-------- --------
Net increase in cash and cash equivalents 354 4,938
Cash and cash equivalents at beginning of period 38,320 19,983
-------- --------
Cash and cash equivalents at end of period $ 38,674 $ 24,921
======== ========
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest $ 3,149 $ 2,509
Income taxes -- --
See accompanying notes to consolidated financial statements.
6
PEAPACK-GLADSTONE FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Certain information and footnote disclosures normally included in the unaudited
consolidated financial statements prepared in accordance with accounting
principles generally accepted in the United States of America have been
condensed or omitted pursuant to the rules and regulations of the Securities and
Exchange Commission. These unaudited condensed consolidated financial statements
should be read in conjunction with the consolidated financial statements and
notes thereto included in the December 31, 2002 Annual Report on Form 10-K for
Peapack-Gladstone Financial Corporation (the "Corporation").
Principles of Consolidation: The Corporation considers that all adjustments (all
of which are normal recurring accruals) necessary for a fair presentation of the
statement of the financial position and results of operations in accordance with
accounting principals generally accepted in the United States for these periods
have been made. Results for such interim periods are not necessarily indicative
of results for a full year.
The consolidated financial statements of Peapack-Gladstone Financial Corporation
are prepared on the accrual basis and include the accounts of the Corporation
and its wholly owned subsidiary, the Peapack-Gladstone Bank. All significant
intercompany balances and transactions have been eliminated from the
accompanying consolidated financial statements.
Allowance for Loan Losses: The allowance for loan losses is maintained at a
level that management considers adequate to reflect the risk of future losses
inherent in the Corporation's loan portfolio. In its evaluation of the adequacy
of the allowance for loan losses, management considers past loan loss
experience, changes in the composition of non-performing loans, the condition of
borrowers facing financial pressure, the relationship of the current level of
the allowance to the credit portfolio and to non-performing loans and existing
economic conditions. The process of determining the adequacy of the allowance is
a critical accounting policy of the Corporation and is necessarily judgmental
and subject to changes in external conditions. The allowance is increased by
provisions charged to expense and reduced by net charge-offs.
Stock Option Plans: At March 31, 2003, the Corporation had stock-based employee
and non-employee director compensation plans. The Corporation accounts for those
plans under the recognition and measurement principles of APB Opinion No. 25,
Accounting for Stock Issued to Employees, and related Interpretations. No
stock-based employee compensation cost is reflected in net income as all options
granted under those plans had an exercise price equal to the market value of the
underlying common stock on the date of the grant.
The following table illustrates the effect on net income and earnings per share
for the periods indicated if the Corporation had applied the fair value
recognition provisions of FASB Statement No. 123, Accounting for Stock-Based
Compensation, to stock-based employee compensation:
Three Months Ended
March 31,
(In Thousands Except per Share Data) 2003 2002
-------- --------
Net Income:
As Reported $ 3,260 $ 2,961
Less: Total Stock-Based Employee Compensation
Expense Determined under the Fair Value Based
Method on all Stock Options, Net of Related Tax Effects 48 62
-------- --------
Pro Forma $ 3,212 $ 2,899
Earnings Per Share:
As Reported
Basic $ 0.49 $ 0.44
Diluted $ 0.47 $ 0.44
Pro Forma
Basic $ 0.48 $ 0.44
Diluted $ 0.47 $ 0.43
7
Earnings per Common Share - Basic and Diluted: Basic earnings per share is
computed by dividing income available to common shareholders by the weighted
average number of common shares outstanding. Diluted earnings per share includes
any additional common shares as if all potentially dilutive common shares were
issued (i.e., stock options). All share and per share amounts have been restated
to reflect all prior stock dividends and stock splits.
Comprehensive Income: The difference between the Corporation's net income and
total comprehensive income for the three months ended March 31, 2003 and 2002
relates to the change in the net unrealized gains and losses on securities
available for sale during the applicable period of time less adjustments for
realized gains.
MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
GENERAL: The foregoing contains forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995. Such statements are not
historical facts and include expressions about management's confidence and
strategies and management's expectations about new and existing programs and
products, relationships, opportunities and market conditions. These statements
may be identified by such forward-looking terminology as "expect", "believe", or
similar statements or variations of such terms. Actual results may differ
materially from such forward-looking statements. Factors that may cause actual
results to differ materially from those contemplated by such forward-looking
statements include, among others, the following possibilities:
o Competitive pressure in the banking industry causes unanticipated
adverse changes.
o A downturn in the economy of New Jersey causes customers to default
in the payment of their loans or causes loans to become impaired.
o Loss of key managers or employees.
o Loss of major customers or failure to develop new customers.
o A decrease in loan quality and loan origination volume.
o An increase in non-performing loans.
The Corporation assumes no responsibility to update such forward-looking
statements in the future.
RESULTS OF OPERATIONS: The Corporation realized earnings of $0.47 per diluted
share for the first quarter ended March 31, 2003, an increase of 6.8 percent
over the $0.44 per diluted share for the first quarter of 2002. Net income
increased 10.1 percent to $3.3 million for the quarter compared with $3.0
million for the first quarter of 2002. First quarter results produced an
annualized return on average assets of 1.51 percent and an annualized return on
average equity of 16.64 percent.
EARNINGS ANALYSIS
NET INTEREST INCOME: Net interest income before the provision for loan losses
rose 2.7 percent to $7.9 million in the first quarter of 2003 as compared to
$7.7 million in the first quarter of 2002. Net interest margin, on a fully
tax-equivalent basis, decreased to 3.95 percent from 4.57 percent in the first
quarter of 2002.
Average interest earning assets increased $138.1 million or 20.4 percent for the
quarter ended March 31, 2003 as compared to the same period in 2002. This was
primarily due to an increase in average investment securities, which increased
$164.6 million, or 69.0 percent, as compared to March 31, 2002. Partially
offsetting this increase were lower average loans, which declined $17.7 million
or 4.2 percent from the year ago period. This decline was due to higher levels
of residential mortgage pay-offs resulting from falling interest rates. The
liquidity from strong deposit growth continued to be deployed into short and
intermediate term securities.
Average interest-bearing liabilities for the quarter ended March 31, 2003
increased $115.6 million or 21.5 percent from the same period in 2002. At March
31, 2003, total deposits grew to an average of $769.6 million from an average of
$642.1 million at March 31, 2002, an increase of $127.5 million or 19.9 percent.
Average balances in each category of interest-bearing deposits increased as
money market accounts, certificates of deposits, interest-bearing checking and
savings accounts increased by $69.8 million, $23.5 million, $12.0 million and
$10.0 million, respectively. Federal Home Loan Bank advances were $8.3 million
on average for the first quarter of 2003 as compared to $8.0 million in the same
quarter a year ago. Average demand deposits increased $12.2 million or 10.9
percent as compared to the first quarter of 2002.
Average interest rates earned on interest earning assets declined 112 basis
points to 5.27 percent in the first quarter 2003 from 6.39 percent earned in the
first quarter of 2002. The average interest rates earned on loans declined 48
basis points and average rates earned on investment securities declined 144
basis points in the first quarter of 2003
8
as compared with the same period in 2002. The average interest rate paid on
interest-bearing liabilities declined to 1.64 percent in the first quarter of
2003 as compared to 2.21 percent in the same period in 2002. The average rate
paid on certificates of deposits declined 89 basis points and average rates paid
on tiered money market accounts declined 63 basis points in the first quarter of
2003 as compared with the same period in 2002. The cost of funds fell to 1.38
percent in the first quarter of 2003 as compared to 1.83 percent in the first
quarter of 2002. This continuing lower interest rate environment is the result
of the Federal Reserve lowering interest rates on several occasions during the
past two years.
OTHER INCOME: Other income amounted to $2.6 million for the quarter ended March
31, 2003 while the comparable amount for the prior year period was $2.0 million.
PGB Trust and Investments, the Bank's trust division, generated gross fees of
$1.4 million for the first quarter of 2003 as compared to $1.1 million in the
first quarter of 2002, an increase of 25.9 percent. This increase was primarily
due to an increase in trust assets under management.
Service charges and fees remained constant at $408 thousand for the quarter
ended March 31, 2003 as compared to $410 thousand for the prior year quarter. In
the fourth quarter of 2002, the Corporation invested an additional $2.8 million
in Bank Owned Life Insurance (BOLI) to assist in offsetting the rising cost of
employee benefits. For the first quarter of 2003, income rose 11.7 percent over
the same period in 2002 to $220 thousand due to this additional investment.
The Corporation realized $273 thousand of securities gains during the first
quarter of 2003 as compared to $17 thousand for the first quarter of 2002.
The following table presents the components of other income for the three months
ended March 31, 2003 and 2002:
Three Months Ended
March 31,
(In Thousands) 2003 2002
-------- --------
Trust Department Fees $ 1,443 $ 1,146
Service Charges on Deposit Accounts 408 410
Other Fee Income 92 91
Bank Owned Life Insurance 220 197
Other Non-Interest Income 61 47
Safe Deposit Rental Fees 60 59
Securities Gains 273 17
-------- --------
Total Other Income $ 2,557 $ 1,967
======== ========
OTHER EXPENSES: Other expenses totaled $5.5 million for the quarter ended March
31, 2003, an increase of $351 thousand or 6.8 percent from the comparable 2002
period.
The largest component of other expense are salaries and employee benefits
expense which totaled $3.2 million for the quarter ended March 31, 2003 as
compared to $2.9 million in the first quarter of 2002. This 10.6 percent
increase can be attributed to additions to the professional staff, upward salary
adjustments to attract and retain highly qualified employees and the opening of
a new branch location, in addition to higher health insurance and pension costs.
Premises and equipment expense increased $111 thousand or 11.4 percent, from
$970 thousand for the quarter ended March 31, 2002 to $1.1 million for the
quarter ended March 31, 2003. This increase can be attributed to an overall
increase in the cost of operating bank facilities including the aforementioned
new branch location.
The significant components of other expense include professional fees, trust
department expense, advertising, telephone, postage and stationery expense which
totaled $697 thousand and $773 thousand for the quarters ended March 31, 2003
and 2002, respectively.
The following table presents the components of other expense for the three
months ended March 31, 2003 and 2002:
9
Three Months Ended
March 31,
(In Thousands) 2003 2002
-------- --------
Salaries and Benefits $ 3,237 $ 2,927
Premises and Equipment 1,081 970
Advertising 93 173
Stationery and Supplies 124 119
Professional Fees 151 238
Trust Department 136 106
Telephone 88 59
Postage 105 78
Other Expense 468 462
-------- --------
Total Other Expense $ 5,483 $ 5,132
======== ========
NON-PERFORMING ASSETS: Other real estate owned (OREO), loans past due in excess
of 90 days and still accruing, and non-accrual loans are considered
non-performing assets. These assets totaled $188 thousand and $433 thousand at
March 31, 2003 and 2002, respectively. Loans past due in excess of 90 days and
still accruing are in the process of collection and are well secured.
The following table sets forth non-performing assets on the dates indicated, in
conjunction with asset quality ratios:
March 31,
(In thousands) 2003 2002
--------------------
Loans past due in excess of 90
days and still accruing $ 15 $ 216
Non-accrual loans 173 217
-------- --------
Total non-performing assets $ 188 $ 433
======== ========
Non-performing loans as a % of total loans 0.05% 0.10%
Non-performing assets as a % of total
Loans plus other real estate owned 0.05% 0.10%
Allowance as a % of loans 1.25% 0.99%
PROVISION FOR LOAN LOSSES: For the three months ended March 31, 2003 and 2002,
the provision for loan losses was $150 thousand and $199 thousand, respectively.
The amount of the loan loss provision and the level of the allowance for loan
losses are based upon a number of factors including Management's evaluation of
potential losses in the portfolio, after consideration of appraised collateral
values, financial condition and past credit history of the borrowers as well as
prevailing and anticipated economic conditions. Net recoveries were $35 thousand
for the first quarter of 2003 as compared to net charge-offs of $22 thousand
during the same period of 2002.
A summary of the allowance for loan losses for the three-month period ended
March 31, follows:
(In thousands) 2003 2002
---- ----
Balance, January 1, $ 4,798 $ 4,023
Provision charged to expense 150 199
Loans charged off (3) (25)
Recoveries 38 3
-------- --------
Balance, March 31, $ 4,983 $ 4,200
======== ========
INCOME TAXES: Income tax expense as a percentage of pre-tax income was 33
percent for the three months ended March 31, 2003 and 32 percent for the three
months ended March 31, 2002. The increase in the effective tax rate is due to
changes in the state tax rates in New Jersey. Income taxes increased 14.3
percent from $1.38 million in 2002 to $1.58 million in 2003, reflecting higher
taxable income.
CAPITAL RESOURCES: The Corporation is committed to maintaining a strong capital
position. At March 31, 2003, total shareholders' equity, including net
unrealized gains, was $79.4 million, representing a 23.8 percent increase over
the same period in 2002. The Federal Reserve Board has adopted risk-based
capital guidelines for banks. The minimum guideline for the ratio of total
capital to risk-weighted assets is 8 percent. At least half of the total capital
is
10
to be comprised of common stock, retained earnings, minority interests in the
equity accounts of consolidated subsidiaries, non-cumulative preferred stock,
less goodwill and certain other intangibles ("Tier 1 Capital"). The remainder
may consist of other preferred stock, certain other instruments and a portion of
the loan loss allowance. At March 31, 2003, the Corporation's Tier 1 Capital and
Total Capital ratios were 20.04 percent and 21.38 percent, respectively.
In addition, the Federal Reserve Board has established minimum leverage ratio
guidelines. These guidelines provide for a minimum ratio of Tier 1 Capital to
average total assets of 3 percent for banks that meet certain specified
criteria, including having the highest regulatory rating. All other banks are
generally required to maintain a leverage ratio of at least 3 percent plus an
additional 100 to 200 basis points. The Corporation's leverage ratio at March
31, 2003, was 8.62 percent.
LIQUIDITY: Liquidity refers to an institution's ability to meet short-term
requirements in the form of loan requests, deposit withdrawals and maturing
obligations. Principal sources of liquidity include cash, temporary investments
and securities available for sale.
Management's opinion is that the Corporation's liquidity position is sufficient
to meet future needs. Cash and cash equivalents, interest-earning deposits and
federal funds sold totaled $39.4 million at March 31, 2003. In addition, the
Corporation has $263.2 million in securities designated as available for sale.
These securities can be sold in response to liquidity concerns. Book value as of
March 31, 2003, of investment securities and securities available for sale
maturing within one year amounted to $6.4 million and $5.9 million,
respectively.
The primary source of funds available to meet liquidity needs is the
Corporation's core deposit base, which excludes certificates of deposit greater
than $100 thousand. As of March 31, 2003, core deposits equaled $735.6 million.
Another source of liquidity is borrowing capacity. The Corporation has a variety
of sources of short-term liquidity available, including federal funds purchased
from correspondent banks, short-term and long-term borrowings from the Federal
Home Loan Bank of New York, access to the Federal Reserve Bank discount window
and loan participations or sales of loans. The Corporation also generates
liquidity from the regular principal payments made on its mortgage-backed
security and loan portfolios.
ITEM 3. Quantitative and Qualitative Disclosures about Market Risk
There have been no material changes to information required regarding
quantitative and qualitative disclosures about market risk from the end of the
preceding fiscal year to the date of the most recent interim financial
statements (March 31, 2003).
ITEM 4. Controls and Procedures
Based on their evaluation of the Corporation's disclosure controls and
procedures in the 90 days prior to the date hereof, the Corporation's principal
executive officer and principal financial officer have determined that such
controls and procedures are effective. No significant change has occurred in the
Corporation's internal controls since the date of the evaluation that could
significantly affect these controls subsequent to the date of the evaluation.
PART II. OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits
(3) (i) Articles of Incorporation
A. Restated Certificate of Incorporation of the Corporation, as in effect
on the date of this filing.
(ii) By-Laws
A. By-Laws of the Corporation, as in effect on the date of this filing
(incorporated by reference to the Corporation's Annual Report on Form 10-K for
the year ended December 31, 1997 filed with the Securities and Exchange
Commission on March 31, 1998 (Exhibit 3.2)).
(10) Material Contracts
A. Employment Agreement dated January 1, 2003 by and among
Peapack-Gladstone Financial Corporation, Peapack-Gladstone Bank, and Garrett P.
Bromley.
(b) Reports on Form 8-K
None
11
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PEAPACK-GLADSTONE FINANCIAL CORPORATION
(Registrant)
DATE: May 13, 2003 By:
-------------------------------------------------
FRANK A. KISSEL
Chairman of the Board and Chief Executive Officer
DATE: May 13, 2003 By:
-------------------------------------------------
ARTHUR F. BIRMINGHAM
Executive Vice President and Chief Financial Officer
12
CERTIFICATIONS
I, Frank A. Kissel, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Peapack-Gladstone
Financial Corporation;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our evaluation
as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: May 13, 2003
- ----------------------------
Frank A. Kissel
Chairman of the Board and Chief Executive Officer
13
I, Arthur F. Birmingham, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Peapack-Gladstone
Financial Corporation;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our evaluation
as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: May 13, 2003
- ----------------------------
Arthur F. Birmingham
Executive Vice President and Chief Financial Officer
14
RESTATED CERTIFICATE OF INCORPORATION
OF
PEAPACK-GLADSTONE FINANCIAL CORPORATION
The undersigned, being over the age of eighteen years, in order to
form a corporation pursuant to the provisions of the New Jersey Business
Corporation Act, does hereby execute this Certificate of Incorporation: ARTICLE
I CORPORATE NAME
The name of the corporation is Peapack-Gladstone Financial
Corporation.
ARTICLE II
CORPORATE PURPOSE
The purpose for which the corporation is organized is to engage in
any activity within the purposes for which corporations may be organized under
the New Jersey Business Corporation Act (the "Act").
ARTICLE III
CAPITAL STOCK
The aggregate number of shares which the corporation shall have
authority to issue is 20,000,000 shares of common stock, without nominal or par
value.
ARTICLE IV
REGISTERED AGENT AND REGISTERED ADDRESS
The address of the corporation's initial registered office is 158
Route 206 North, Gladstone, New Jersey 07934, and the name of the corporation's
initial registered agent at such address is Frank A. Kissel.
ARTICLE V
INITIAL BOARD OF DIRECTORS
The number of directors constituting the first board is twelve (12),
and the names and addresses of the persons who are to serve as such directors
are:
Name Address
---- -------
Pamela Hill 158 Route 206 North
Gladstone, NJ 07934
T. Leonard Hill 158 Route 206 North
Gladstone, NJ 07934
Frank A. Kissel 158 Route 206 North
Gladstone, NJ 07934
15
John D. Kissel 158 Route 206 North
Gladstone, NJ 07934
James R. Lamb 158 Route 206 North
Gladstone, NJ 07934
George R. Layton 158 Route 206 North
Gladstone, NJ 07934
Edward A. Merton 158 Route 206 North
Gladstone, NJ 07934
F. Duffield Meyercord 158 Route 206 North
Gladstone, NJ 07934
John R. Mulcahy 158 Route 206 North
Gladstone, NJ 07934
Philip W. Smith III 158 Route 206 North
Gladstone, NJ 07934
Jack D. Stine 158 Route 206 North
Gladstone, NJ 07934
William Turnbull 158 Route 206 North
Gladstone, NJ 07934
The number of directors shall be governed by the by-laws of the
corporation.
ARTICLE VI
EXCULPATION AND INDEMNIFICATION
No director or officer of the corporation, or of a subsidiary of the
corporation, shall be personally liable to the corporation or to its
shareholders for damages for breach of any duty owed to the corporation or its
shareholders unless such breach of duty is based on an act or omission (a) in
breach of such person's duty of loyalty to the corporation (and/or its
subsidiary) or its shareholders; (b) not in good faith or involving a knowing
violation of law; or (c) resulting in receipt by such person of an improper
benefit.
Unless expressly prohibited by law, the corporation shall indemnify
a director or officer of the corporation or of a subsidiary of the corporation
against his reasonable expenses and all liabilities in connection with any
proceeding involving that director or officer of the corporation or a
wholly-owned subsidiary of the corporation, including a proceeding by or in the
right of the corporation or its wholly-owned subsidiary, unless such breach of
duty is based on an act or omission (a) in breach of such person's duty of
loyalty to the corporation or its stockholders; (b) not in good faith or
involving a knowing violation of law; or (c) resulting in receipt by such person
of an improper
16
personal benefit. The corporation shall advance or pay those reasonable expenses
incurred by such director or officer in a proceeding as and when incurred,
provided, however, that the director or officer shall, as a condition to receipt
of such advances, undertake to repay all amounts advanced if it shall finally be
adjudicated that the breach of duty by the director or officer was based upon an
act or omission (a) in breach of such person's duty of loyalty to the
corporation (and/or its subsidiary) or its stockholders; (b) not in good faith
or involving a knowing violation of law; or (c) resulting in receipt by such
person of an improper personal benefit.
ARTICLE VIII
SHAREHOLDER VOTE ON CERTAIN TRANSACTIONS
In addition to any affirmative vote required by law or this
certificate of incorporation, and except as set forth below, the affirmative
vote of the holders of 80% of each class of stock of the corporation, entitled
to vote in elections of directors, shall be required for all of the following:
(i) any merger or consolidation of the corporation with or into any
other corporation, banking institution, person or entity; or
(ii) any sale, lease, exchange, mortgage, pledge, transfer or other
disposition (in one transaction or series of transactions) of assets or of the
deposit liabilities of the corporation which, in the case of either assets or of
deposit liabilities, total 10% or more of the value of the assets or of the
deposit liabilities of the corporation on a consolidated basis to any other
corporation, banking institution, person or entity; or
(iii) any sale, lease, exchange, mortgage pledge, transfer or other
disposition (in one transaction or a series of transactions) to the corporation
of any assets of any other corporation, banking institution, person or entity in
exchange for voting securities (or securities convertible into or exchangeable
for voting securities or any options, warrants or rights to purchase any of the
same) of the bank constituting (after giving effect to any conversion, exchange
or right) 5% or more of the outstanding voting securities of the corporation; or
(iv) any reclassification of securities, or recapitalization of the
corporation proposed by, on behalf of or pursuant to any arrangement with any
other corporation, banking institution, person or entity which has the effect,
directly or indirectly, of increasing the proportionate share of the outstanding
securities of the corporation of which that other corporation, banking
institution, person or entity is the beneficial owner; or
(v) the issuance (in one transaction or a series of transactions) to
any other corporation, banking institution, person or entity, of voting
securities (or securities convertible into or exchangeable for voting securities
or
17
any options, warrants or rights to purchase any of the same) of the corporation
constituting (after giving effect to any conversion, exchange or right) 5% or
more of the outstanding voting securities of the corporation; or
(vi) the adoption of any plan or proposal for the liquidation or
dissolution of the corporation proposed by, on behalf of or pursuant to any
arrangement with any other corporation, banking institution, person or entity;
if, in any such case, as of the record date for the determination of
stockholders entitled to notice thereof and to vote thereon or consent thereto,
such other corporation, banking institution, person or entity is: (a) the
beneficial owner, directly or indirectly, of more than 5% of the outstanding
shares of any class of stock of the corporation entitled to vote in the election
of directors or the assignee of, or otherwise the successor to, any shares of
such stock of the corporation from a corporation, banking institution, person or
entity which within the two-year period immediately prior to such record date
was a more than 5% beneficial owner (where any such assignment or succession
occurred in the course of a transaction or series of transactions not involving
a public offering within the meaning of that term under the Securities Act of
1933, as amended); or (b) is an affiliate (as defined subsequently in this
Article) of the corporation and at any time within the two-year period
immediately prior to such record date was the beneficial owner, directly or
indirectly, of more than 5% of the outstanding shares of any class of stock of
the corporation entitled to vote in the election of directors. Such affirmative
vote shall be required notwithstanding the fact that no vote may be required, or
that a lesser percentage may be specified, by law or in an agreement, if any,
with any national securities exchange or otherwise.
For the purpose, but only for the purpose of determining whether a
corporation, banking institution, person or other entity is "the beneficial
owner, directly or indirectly, of more than 5% of the outstanding shares of
stock of the corporation entitled to vote in elections of directors," within
this Article: (x) any corporation, banking institution, person or other entity
shall be deemed to be the beneficial owner of any shares of stock of the
corporation (i) which it has the right to acquire pursuant to any agreement, or
upon the exercise of conversion rights, warrants or options, or otherwise, or
(ii) which are beneficially owned, directly or indirectly (including shares
deemed owned through application of clause (i), above), by any other
corporation, person or entity with which it or its "affiliate" or "associate"
(as defined below) has any agreement, arrangement or understanding for the
purpose of acquiring, holding, voting or disposing of stock of the corporation,
or which is its "affiliate" or "associate" as those terms are defined in Rule
12b-2 of the General Rules and Regulations under the Securities Exchange Act of
1934 as in effect on the date of this Amendment; and (y) the outstanding shares
of any class of stock of the corporation shall include shares deemed owned
through application of clauses (i) and (ii) above.
18
The Board of Directors of the corporation shall have the power and
duty to determine for the purposes of this Article on the basis of information
known to the corporation, whether: (i) such other corporation, banking
institution, person or other entity beneficially owns more than 5% of the
outstanding shares of any class of stock of the corporation entitled to vote in
elections of directors, (ii) a corporation, banking institution, person or
entity is an "affiliate" or "associate" (as defined above) of another, and (iii)
the value of any assets or of deposit liabilities of the corporation proposed
sales, lease, exchange, mortgage, pledge, transfer or other disposition exceed
10% of the corporation's assets or deposit liabilities, as the case may be. Any
such determination shall be conclusive and binding for all purposes of this
Article.
The provisions of this Article shall not be applicable to: (i) any
merger or consolidation of the corporation with or into any other banking
institution or corporation, or any sale or lease of assets or deposit
liabilities of the corporation to, or any sale or lease to the corporation or
any subsidiary thereof in exchange for securities of the corporation of any
assets of, any other corporation, banking institution, person or entity, if at
least two-thirds of the members of the entire Board of Directors of the
corporation shall, by resolution, have approved such transaction prior to the
time that such other corporation, banking institution, person or entity shall
have become the beneficial owner, directly or indirectly, of more than 5% of the
outstanding shares of any class of stock of the corporation entitled to vote in
elections of directors; or (ii) any merger or consolidation of the corporation
or any subsidiary thereof into or with, or any sale, lease, exchange, mortgage,
pledge, transfer or other disposition of the assets of the corporation to, any
other banking institution or corporation of which a majority of the outstanding
shares of all classes of stock entitled to vote in elections of directors is
owned of record or beneficially by the corporation and its subsidiaries (if any)
and so long as, if the corporation is not the surviving banking institution,
each beneficial owner of shares of stock of the corporation receives the same
type of consideration in such transaction and the provisions of this Article are
continued in effect or adopted by such surviving banking institution as part of
its certificate of incorporation (and its certificate of incorporation have no
provisions inconsistent with this Article as continued or adopted) or (iii) any
transaction involving the corporation or its assets or deposit liabilities
required or ordered by any Federal or state regulatory agency; provided the
Board of Directors referred to in (i) of this paragraph passing upon such
transaction shall be comprised of a majority of continuing directors, i.e.,
members of such Board who were elected by the stockholders of the corporation
prior to that time, that any such stockholder became the beneficial owner,
directly or indirectly, of more than 5% of any class of the stock of the
corporation, entitled to vote in elections of directors, or who were appointed
to succeed a continuing director by a majority of continuing directors.
19
No amendment to the Certificate of Incorporation of the corporation
shall amend, alter, change or repeal any of the provisions of this Article
unless the amendment effecting such amendment, alteration, change or repeal
shall receive the affirmative vote of the holders of 80% of each class of stock
of the corporation entitled to vote in elections of directors.
ARTICLE IX
NAME AND ADDRESS OF THE INCORPORATOR
The name and address of the incorporator is Frank A. Kissel, 158
Route 206 North, Gladstone, New Jersey 07934.
IN WITNESS WHEREOF, the undersigned has executed this Certificate of
Incorporation this 14th day of August, 1997
--------------------------------
Frank A. Kissel, Incorporator
20
PEAPACK-GLADSTONE EMPLOYMENT AGREEMENT
OF GARRETT BROMLEY
This EMPLOYMENT AGREEMENT (this "Agreement") dated January 1, 2003,
by and between Peapack-Gladstone Financial Corporation ("PGFC") and
Peapack-Gladstone Bank (the "Bank") (PGFC and the Bank are collectively referred
to herein as the "Company"), and Garrett P. Bromley (the "Executive"), whose
home address is 54 Baptist Church Road, Hampton, New Jersey.
WITNESSETH:
WHEREAS, the Executive is willing to continue to serve as the
Executive Vice President and Chief Lending Officer of the Company and the
Company desires to retain the Executive in that capacity on the terms and
conditions herein set forth; and
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, the parties agree as follows:
Section 1. Term of Employment. This Agreement shall be effective as
of the date hereof and, subject to earlier termination as specified herein,
shall continue until December 31, 2005.
Section 2. Position and Duties. During the Term, the Executive shall
serve as the Executive Vice President and Chief Lending Officer of the Company.
The Executive shall have such powers and duties as are commensurate with such
position and as may be conferred upon him by the Board of Directors of the
Company (the "Board"). During the Term, the Executive shall devote all of his
business time, attention, skill and efforts exclusively to the business and
affairs of the Company and its subsidiaries. Notwithstanding the foregoing, the
Executive may engage in charitable, educational, religious, civic and similar
types of activities, speaking engagements, membership on the board of directors
of other organizations, and similar activities to the extent that such
activities do not inhibit the performance of his duties hereunder or conflict in
any material way with the business of the Company and its subsidiaries.
Section 3. Compensation. For all services rendered by the Executive
in any capacity required hereunder during the Term, including, without
limitation, services as an executive officer, director, or member of any
committee of the Company or any of its subsidiaries, the Executive shall be
compensated as follows:
(a) The Company shall pay the Executive a fixed salary at a rate per
annum equal to $135,000.00 ("Base Salary"). The Base Salary shall be increased
by 3% per year to $139,050.00 for the calendar year 2004 and $143,221.50 for the
calendar year 2005. Base Salary shall be payable bi-weekly.
(b) The Company shall pay the Executive a bonus with respect to each
calendar year for which he is employed under this Agreement determined as
follows: bonus equal to 10% of Base Salary if 90% of Company's budget is
achieved and 20% of Base Salary if 100% of Company's budget is achieved. The
bonus shall be paid when other employee bonuses are paid or such later date as
is mutually agreed to by the Company and the Executive.
(c) The Executive shall be entitled to five weeks of vacation in
each calendar year during the Term. The Executive shall not be entitled to
carryover vacation from one year to another or to any payment in respect of any
unused vacation.
(d) The Executive shall be entitled to participate in all
compensation and employee benefit plans for which any salaried employees of the
Company are eligible. Notwithstanding the foregoing, nothing in this Agreement
shall preclude the amendment or termination of any such plan or program.
Section 4. Business Expenses. The Company shall pay or reimburse the
Executive for all reasonable entertainment, travel or other expenses incurred by
the Executive in connection with the performance of his duties under this
Agreement, subject to the Executive's presentation of appropriate documentation
in accordance with such procedures as the Company may from time to time
establish.
Section 5. Termination of Employment.
(a) The Company shall have the right, upon delivery of written
notice to the Executive, to terminate the Executive's employment hereunder prior
to the expiration of the Term:
(i) pursuant to a Termination for Cause, or
(ii) upon the Executive's Permanent Disability, or
(iii) pursuant to a Without Cause Termination.
21
(b) The Executive shall have the right, upon delivery of written
notice to the Company 30 days in advance of the proposed termination date, to
terminate the Executive's employment hereunder prior to the expiration of the
Term in the Executive's sole discretion.
(c) The Executive's employment hereunder shall terminate
automatically without action by any party hereto upon the Executive's death.
(d) For purposes of this Agreement, the following terms have the
following meanings:
"Termination for Cause" means a termination of the Executive's
employment by the Company because the Executive has (a) materially failed
to perform the duties assigned to him hereunder or imposed upon him by
applicable law, and such failure to perform constitutes self-dealing,
willful misconduct or recklessness, (b) committed an act of dishonesty in
the performance of his duties hereunder or engaged in conduct materially
detrimental to the business of the Company, (c) been convicted of a felony
or a misdemeanor involving moral turpitude, (d) materially failed to
perform his duties hereunder, which breach or failure the Executive shall
fail to remedy within 30 days after written demand from the Company, (e)
knowingly failed to follow lawful, written directives of the Board, or (f)
engaged in any material employment act or practice, including but not
limited to sexual harassment, forbidden by the Company in its employment
manual as revised from time to time.
"Without Cause Termination" means a termination of the
Executive's employment by the Company other than due to Permanent
Disability, retirement or expiration of the Term and other than a
Termination for Cause.
"Permanent Disability" means permanently disabled so as to
qualify for full benefits under the Company's then-existing disability
insurance policy. If the Company does not maintain any such policy on the
date of termination, "Permanent Disability" shall mean the inability of
the Executive to work for a period of four full calendar months during any
eight consecutive calendar months due to illness or injury of a physical
or mental nature, supported by the completion by the Executive's attending
physician of a medical certification form outlining the disability and
treatment.
Section 6. Benefits Upon Termination.
(a) In lieu of any severance that may otherwise be payable to the
Executive pursuant to any policies of the Company, whether existing on the date
hereof or in effect from time to time hereafter, in the event that the Company
terminates the Executive's employment pursuant to a Without Cause Termination,
the Company shall continue to pay the Executive's Base Salary for a period (the
"Severance Period") equal to the longer of (A) the remainder of the Term, or (B)
one year from the effective date of such termination. The Executive also shall
be entitled to any earned but unpaid Base Salary as of the effective date of
termination of employment. No other payments shall be made, or benefits
provided, by the Company under this Agreement except as otherwise required by
law or the Company's benefit plans.
(b) In the event that the Company terminates the Executive's
employment pursuant to a Permanent Disability, the Company shall pay the
Executive any earned but unpaid Base Salary as of the date of termination of
employment. No other payments shall be made, or benefits provided, by the
Company under this Agreement except as otherwise required by law or the
Company's benefit plans.
(c) In the event that the Company terminates the Executive's
employment pursuant to a Termination for Cause or the Executive terminates his
employment with the Company (including, without limitation, pursuant to any
retirement), the Company shall pay the Executive any earned but unpaid Base
Salary as of the date of termination of employment. No other payments shall be
made, or benefits provided, by the Company under this Agreement or otherwise
except to the extent required by law or the Company's benefit plans.
(d) In the event that the Executive's employment hereunder is
terminated due to the Executive's death, the Company shall pay the Executive's
executor or other legal representative (the "Representative") any earned but
unpaid Base Salary as of the date of termination of employment. No other
payments shall be made, or benefits provided, by the Company whether under this
Agreement or otherwise except to the extent required by law or the Company's
benefit plans.
(e) Any payments to be made or benefits to be provided by the
Company pursuant to this Section 6 (other than in the event of the Executive's
death or Permanent Disability) are subject to the receipt by the Company of an
effective general release and agreement not to sue, in a form reasonably
satisfactory to the Company and the Executive (the "Release") pursuant to which
the Executive agrees (i) to release all claims against the Company and certain
related parties (excluding claims for (x) indemnification under the Company's
Certificate of Incorporation or by-laws or (y) any severance benefits payable
hereunder), (ii) not to maintain any action, suit, claim or proceeding against
the Company, its subsidiaries and affiliates and certain related parties, and
(iii) to be bound by certain confidentiality and mutual non-disparagement
covenants specified therein. Notwithstanding the due date of any post-employment
payment, the Company shall not be obligated to make any payments under this
Section 6 until after the expiration of any revocation period applicable to the
Release.
(f) The Executive shall not be required to mitigate the severance
payments to be made to him hereunder and if the Executive obtains other
employment while receiving severance payments hereunder he shall continue to be
entitled to the benefits of this Agreement.
22
Section 7. Confidential Information. The Executive and the Company
agree that all information pertaining to the affairs, business, clients, or
customers of the Company or any of its subsidiaries, other than information that
the Company has previously made publicly available, is confidential information
belonging to the Company and is a unique and valuable asset of the Company. Both
during the Term hereof and thereafter, the Executive shall not, except to the
extent reasonably necessary in the performance of his duties for the Company
during the Term, disclose any information concerning the affairs, businesses,
clients, or customers of the Company or its subsidiaries, or make use of any
such information for his own purposes or for the benefit of any other person,
firm, or corporation. All records, memoranda, letters, books, papers, reports,
or other data, and other records and documents relating to the Company or its
subsidiaries, whether made by the Executive or otherwise coming into his
possession, shall remain the property of the Company, no copies thereof shall be
made which are not retained by the Company, and the Executive agrees, on
termination of his employment not to retain any copies and deliver all such
confidential information in his possession to the Company.
Section 8. Non-Compete; Non-Solicitation.
(a) During the period (the "Restricted Period") commencing on the
termination of his employment for any reason whatsoever during the Term and
ending two years thereafter, the Executive shall not, without express prior
written consent of the Company, directly or indirectly, own or hold any
proprietary interest in, or be employed by or receive remuneration from, any
corporation, partnership, sole proprietorship or other entity (collectively, an
"entity") "engaged in competition" (as defined below) with the Company or any of
its subsidiaries (a "Competitor"). For purposes of the preceding sentence, (i)
the term "proprietary interest" means direct or indirect ownership of an equity
interest in an entity other than ownership of less than 2 percent of any class
stock in a publicly-held entity, and (ii) an entity shall be considered to be
"engaged in competition" if such entity is, or is a holding company for or a
subsidiary of an entity which is engaged in the business of (A) providing
banking, trust services, asset management advice, or similar financial services
to consumers, businesses individuals or other entities, and (B) the entity,
holding company or subsidiary maintains any physical offices for the transaction
of such business located within 50 miles of the main office of the Company.
(b) During the Restricted Period, the Executive shall not, without
express prior written consent of the Company, solicit or assist any other person
in soliciting for the account of any Competitor, any customer or client of the
Company or any of its subsidiaries.
(c) During the Restricted Period, the Executive shall not, without
the express prior written consent of the Company, directly or indirectly, (i)
solicit or assist any third party in soliciting for employment any person
employed by the Company or any of its subsidiaries at the time of the
termination of the Executive's employment (collectively, "Employees"), (ii)
employ, attempt to employ or materially assist any third party in employing or
attempting to employ any Employee, or (iii) otherwise act on behalf of any
Competitor to interfere with the relationship between the Company or any of its
subsidiaries and their respective Employees.
(d) The Executive acknowledges that the restrictions contained in
this Section 8 are reasonable and necessary to protect the legitimate interests
of the Company and that any breach by the Executive of any provision contained
in this Section 8 will result in irreparable injury to the Company for which a
remedy at law would be inadequate. Accordingly, the Executive acknowledges that
the Company shall be entitled to temporary, preliminary and permanent injunctive
relief against the Executive in the event of any breach or threatened breach by
the Executive of the provisions of this Section 8, in addition to any other
remedy that may be available to the Company whether at law or in equity. With
respect to any provision of this Section 8 finally determined by a court of
competent jurisdiction to be unenforceable, such court shall be authorized to
reform this Agreement or any provision hereof so that it is enforceable to the
maximum extent permitted by law. If the covenants of Section 8 are determined to
be wholly or partially unenforceable in any jurisdiction, such determination
shall not be a bar to or in any way diminish the Company's right to enforce such
covenants in any other jurisdiction and shall not bar or limit the
enforceability of any other provisions.
(e) The provisions of this Section 8 shall survive the termination
of the Executive's employment with the Company for any reason whatsoever so long
as the termination of employment occurs during the Term. If there is no
termination of Executive's employment during the Term, the provisions of this
Section 8 shall expire and be of no further force and effect after the Term. The
Company shall not be required to post any bond or other security in connection
with any proceeding to enforce the provisions of this Section 8.
Section 9. Withholdings. The Company may directly or indirectly
withhold from any payments made under this Agreement all Federal, State, City or
other taxes and all other deductions as shall be required pursuant to any law or
regulation or pursuant to any contributory benefit plan maintained by or on
behalf of the Company.
Section 10. Notices. All notices, requests, demands and other
communications required or permitted hereunder shall be given in writing and
shall be deemed to have been duly given if delivered or mailed, postage prepaid,
by same day or overnight mail (i) if to the Executive, at the address set forth
above, or (ii) if to the Company, as follows:
Frank A. Kissel, Chairman & CEO
Peapack-Gladstone Bank
158 Route 206 North
Gladstone, NJ 07934
23
or to such other address as either party shall have previously specified in
writing to the other.
Section 11. Binding Agreement; Assignment. This Agreement shall be
binding upon and shall inure to the benefit of, the Executive and the Company
and its successors and permitted assigns. This Agreement is personal to the
Executive and may not be assigned by him. The Company may assign its rights and
obligations under this Agreement in connection with a sale of all or
substantially all of the business of PGFC or the Bank. Any successor to the
Company by merger or consolidation shall be entitled to the benefits of this
Agreement.
Section 12. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the internal laws of the State of New Jersey,
without reference to the choice of law principles thereof.
Section 13. Dispute Resolution. At the option of either the Company
or the Executive, any dispute, controversy or question arising under, out of or
relating to this Agreement, the Executive's employment or termination of
employment, including but not limited to any and all statutory claims involving
workplace discrimination or wrongful discharge, but excluding claims pursuant to
Sections 7 or 8 hereof, shall be referred for decision by arbitration in the
State of New Jersey by a neutral arbitrator mutually selected by the parties
hereto. Any arbitration proceeding shall be governed by the Rules of the
American Arbitration Association then in effect or such last in effect (in the
event such Association is no longer in existence). If the parties are unable to
agree upon such a neutral arbitrator within 21 days after either party has given
the other written notice of the desire to submit the dispute, controversy or
question for decision as aforesaid, then either party may apply to the American
Arbitration Association for a final and binding appointment of a neutral
arbitrator; however, if such Association is not then in existence or does not
act in the matter within 45 days of any such application, either party may apply
to a judge of the local court where the Bank is headquartered for an appointment
of a neutral arbitrator to hear the parties and such judge is hereby authorized
to make such appointment. In the event that either party exercises the right to
submit a dispute, controversy or question arising hereunder to arbitration, the
decision of the neutral arbitrator shall be final, conclusive and binding on all
interested persons and no action at law or in equity shall be instituted or, if
instituted, further prosecuted by either party other than to enforce the award
of the neutral arbitrator. The award of the neutral arbitrator may be entered in
any court that has jurisdiction. The Executive and the Company shall each bear
all their own costs (including the fees and disbursements of counsel) incurred
in connection with any such arbitration and shall each pay one-half of the costs
of any arbitrator.
Section 14. Entire Agreement. This Agreement shall constitute the
entire agreement among the parties with respect to the matters covered hereby
and shall supersede all previous written, oral or implied understandings among
them with respect to such matters.
Section 15. Amendments. This Agreement may only be amended or
otherwise modified, and compliance with any provision hereof may only be waived,
by a writing executed by all of the parties hereto. The provisions of this
Section 15 may only be amended or otherwise modified by such a writing.
Section 16. Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be deemed to be an original, and all
of which shall together be deemed to constitute one and the same instrument.
Section 17. Effect on Change-in-Control Agreement. Notwithstanding
anything else to the contrary in this Agreement, if the Change-in-Control
Agreement between the Company and the Executive, dated as of January 1, 1998,
becomes effective under Section 13b thereof due to a Change-in-Control of the
Company (as defined therein), while the Executive remains employed by the
Company, this Agreement, including, without limitation, Sections 7 and 8 hereof,
shall no longer be effective in any respect but instead the relationship between
the Executive and the Company shall be governed by the Change-in-Control
Agreement. If the Executive is terminated prior to a Change-in-Control of the
Company, then Sections 7 and 8 hereof shall survive the Change-in-Control in
accordance with the terms of Sections 7 and 8 hereof.
IN WITNESS WHEREOF, PGFC and the Bank have caused this Agreement to
be duly executed by the undersigned, thereunto duly authorized, and the
Executive has signed this Agreement, all as of the date first written above.
WITNESS PEAPACK-GLADSTONE FINANCIAL CORPORATION
____________________________ By: ___________________________
Secretary
PEAPACK-GLADSTONE BANK
____________________________ By: ___________________________
Secretary
- ---------------------------- --------------------------------
EXECUTIVE
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