SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported)
August 12, 1998
LITTLE FALLS BANCORP, INC.
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(Exact name of Registrant as specified in its Charter)
New Jersey 0-27010 22-3402073
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(State or other jurisdiction (SEC File No.) (IRS Employer
of incorporation) Identification
Number)
86 Main Street, Little Falls, New Jersey 07424
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (973) 256-6100
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Not Applicable
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(Former name or former address, if changed since last Report)
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LITTLE FALLS BANCORP, INC.
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INFORMATION TO BE INCLUDED IN REPORT
Item 5. Other Events
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On August 12, 1998, Little Falls Bancorp, Inc., Little Falls, New
Jersey ("Bancorp"), and Skylands Community Bank, Hackettstown, New Jersey
("Skylands"), entered into an Agreement and Plan of Reorganizations and Merger
("Agreement"), pursuant to which, subject to the conditions and upon the terms
stated therein, Little Falls will merge with and into a new company
("Acquisition Corp.") organized to effect the reorganization, and Little Falls
Bank, the wholly owned subsidiary of Bancorp, will merge with and into Skylands
Bank. Skylands and Acquisition Corp. will be the surviving entities and operate
under the names of "Skylands Community Bank" and "Little Falls Bancorp, Inc.,"
respectively (the two mergers are collectively referred to herein as the
"Mergers").
In accordance with the Agreement, each share of the common stock, $.10
par value per share, of Bancorp ("Bancorp Common Stock") outstanding immediately
prior to the effective time of the Mergers (the "Effective Time") will at the
Effective Time be converted into one share of the common stock, $2.50 par value
per, share of Acquisition Corp. ("Acquisition Corp. Common Stock"), and each
share of the common stock, $2.50 par value per share, of Skylands ("Skylands
Common Stock") outstanding immediately prior to the Effective Time will at the
Effective Time be converted into the right to receive eight-tenths (.8) shares
of Acquisition Corp. Common Stock. Bancorp shareholders and Skylands
shareholders, upon completion of the Mergers, would own approximately 57% and
43% of Acquistion Corp., respectively. The Mergers will be accounted for as a
"pooling of interests."
Consummation of the transactions contemplated by the Agreement is
subject to the terms and conditions contained in the Agreement, including, among
other things, the receipt of approval of the Mergers by the respective
shareholders of Bancorp and Skylands and the receipt of certain regulatory
approvals. The Mergers and the transactions contemplated by the Agreement will
be submitted for approval at meetings of the shareholders of Bancorp and
Skylands in the fourth quarter of 1998. The forgoing is qualified in its
entirety by reference to the complete text of the Agreement, which is filed as
Exhibit 2.1 hereto and hereby incorporated herein by reference.
The Bancorp Common Stock is traded on the Nasdaq System under the
symbol "LFBI." Skylands Common Stock is traded on the Nasdaq System under the
symbol "SKCB."
Immediately following their execution and delivery of the
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Agreement, Bancorp and Skylands entered into stock option agreements (the "Stock
Option Agreements") pursuant to one of which Skylands granted Bancorp the right,
upon the terms and subject to the conditions set forth therein, to purchase up
to 468,530 shares of Skylands Common Stock at a price of $15.00 per share, and
pursuant to the other of which Bancorp granted Skylands the right, upon the
terms and subject to the conditions set forth therein, to purchase up to 493,027
shares of Bancorp Common Stock at price of $19.75 per share. The forgoing
description of the Stock Option Agreements is qualified in its entirety by
reference to the complete texts of the Stock Option Agreements, which are filed
as Exhibits 99.1 and 99.2 hereto and hereby incorporated herein by reference.
Furthermore, Skylands has reserved the right to terminate in Agreement under
certain market conditions.
A copy of the press release, dated August 13, 1998, jointly issued by
Bancorp and Skylands is attached as Exhibit 99.3 hereto and is hereby
incorporated herein by reference.
A copy of the press release, dated August 14, 1998, issued by Bancorp,
announcing a teleconference regarding the Mergers on Monday, August 17, 1998 at
1:00 p.m., Eastern Standard Time, is attached as Exhibit 99.4 hereto and is
hereby incorporated herein
by reference.
A copy of the presentation to investors, dated August 15, 1998,
relating to the Mergers and given by Bancorp is attached as Exhibit 99.5 hereto
and is hereby incorporated by reference.
CONTAINED WITHIN AND INCORPORATED BY REFERENCE IN THIS CURRENT REPORT
ON FORM 8-K, INCLUDING THE EXHIBITS HERETO, ARE CERTAIN FORWARD LOOKING
STATEMENTS WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995. THESE STATEMENTS INCLUDE CERTAIN ESTIMATES AND PROJECTIONS REGARDING
BANCORP, SKYLANDS AND THE COMBINED COMPANIES FOLLOWING THE MERGERS, INCLUDING
WITHOUT LIMITATION ESTIMATES AND PROJECTIONS RELATING TO THE PRO FORMA BUSINESS
AND ASSETS OF THE COMBINED COMPANIES, THE COST SAVINGS, REVENUE INCREASES AND
RESTRUCTURING CHARGES EXPECTED AS A RESULT OF THE MERGERS AND THE EXPECTED
IMPACT OF THE TRANSACTION ON EARNINGS PER SHARE OF THE CONSTITUENT COMPANIES.
SUCH STATEMENTS ARE NOT HISTORICAL FACTS AND INCLUDE EXPRESSIONS ABOUT
MANAGEMENT'S CONFIDENCE AND STRATEGIES AND MANAGEMENT'S EXPECTATIONS ABOUT THE
MERGER. THESE STATEMENTS MAY BE IDENTIFIED BY SUCH FORWARD-LOOKING TERMINOLOGY,
AS "EXPECT", "LOOK", "BELIEVE", "ANTICIPATE", "MAY", "WILL", OR SIMILAR
STATEMENTS OR VARIATIONS OF SUCH TERMS. SUCH FORWARD-LOOKING STATEMENTS INVOLVE
CERTAIN RISKS AND UNCERTAINTIES AND ACTUAL RESULTS MAY DIFFER MATERIALLY FROM
THE RESULTS DISCUSSED IN THESE FORWARD-LOOKING STATEMENTS. FACTORS THAT MIGHT
CAUSE SUCH A DIFFERENCE INCLUDE, BUT ARE NOT LIMITED TO, RISKS AND UNCERTAINTIES
RELATED TO THE CONSUMMATION AND EXECUTION OF THE MERGERS (INCLUDING INTEGRATION
ACTIVITIES), THE DIRECTION OF INTEREST RATES, CONTINUED LEVELS OF LOAN QUALITY
AND ORIGINATION VOLUME, CONTINUED
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RELATIONSHIPS WITH MAJOR CUSTOMERS INCLUDING SOURCES FOR LOANS, SUCCESSFUL
COMPLETION OF THE IMPLEMENTATION OF YEAR 2000 TECHNOLOGY CHANGES, AS WELL AS THE
EFFECTS OF ECONOMIC CONDITIONS AND LEGAL AND REGULATORY BARRIERS AND STRUCTURE.
ACTUAL RESULTS MAY DIFFER MATERIALLY FROM SUCH FORWARD-LOOKING STATEMENTS.
BANCORP ASSUMES NO OBLIGATION FOR UPDATING ANY SUCH FORWARD-LOOKING STATEMENTS
AT ANY TIME.
Item 7. Financial Statements, Pro Forma Financial
Information and Exhibits
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(c) Exhibits:
Exhibit 2.1 Agreement and Plan of Reorganization and Plans
of Merger, dated as of August 12, 1998, by and
among Little Falls Bancorp, Inc., Little Falls
Bank, Skylands Community Bank and Acquisition
Corp.
Exhibit 99.1 Stock Option Agreement, dated as of August 12,
1998 by and between Skylands Community Bank,
as issuer, and Little Falls Bancorp, Inc., as
grantee.
Exhibit 99.2 Stock Option Agreement, dated as of August 12,
1998 by and between Little Falls Bancorp,
Inc., as issuer, and Skylands Community Bank,
as grantee.
Exhibit 99.3 Joint Press Release, dated August 13, 1998.
Exhibit 99.4 Press Release, dated August 14, 1998.
Exhibit 99.5 Investor Presentation, dated August 15, 1998.
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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.
LITTLE FALLS BANCORP, INC.
Date: August 17, 1998 By: /s/Leonard G. Romaine
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Leonard G. Romaine
President
EXHIBIT 2.1
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AGREEMENT AND PLAN OF REORGANIZATION AND MERGERS, dated as of the 12th
day of August, 1998 (this "Plan"), by and among Little Falls Bancorp, Inc.
("Bancorp"), Little Falls Bank ("Little Falls"), a wholly owned subsidiary of
Bancorp, Skylands Community Bank ("Skylands") and Acquisition Corp.
("Acquisition Corp.").
RECITALS:
A. Bancorp
Bancorp is a corporation duly organized and existing in good standing
under the laws of the State of New Jersey, with its headquarters in Little
Falls, New Jersey, and its principal executive offices located in Hackettstown,
New Jersey. As of the date hereof, Bancorp has 10,000,000 authorized shares of
common stock, each of $0.10 par value ("Bancorp Common Stock"), and 5,000,000
authorized shares of preferred stock, $0.10 par value ("Bancorp Preferred
Stock") (no other class or series of capital stock being authorized), of which
2,477,525 shares of Bancorp Common Stock and no shares of Bancorp Preferred
Stock were issued and outstanding as of the date hereof.
B. Acquisition Corp.
Acquisition Corp. is a newly formed corporation under the laws of the
State of New Jersey, with its principal executive offices to be located in
Little Falls, New Jersey. As of the date hereof, Acquisition Corp. has
20,000,000 authorized shares of common stock, each of $.10 par value
("Acquisition Corp. Common Stock") and 5,000,000 authorized shares of preferred
stock, no par value ("Acquisition Corp. Preferred Stock") (no other class or
series of capital stock being authorized), of which two shares of Acquisition
Corp. Common Stock and no shares of Acquisition Corp. Preferred Stock were
issued and outstanding as of the date of this Plan.
C. Little Falls
Little Falls is a federally chartered savings bank, having its
principal place of business in Little Falls, New Jersey. As of June 30, 1998
(rounded to the nearest thousand dollars), Little Falls had total stockholders'
equity of $36,928,247. All of the issued and outstanding shares of capital stock
of Little Falls ("Little Falls Capital Stock") are owned by Bancorp.
D. Skylands
Skylands is a commercial bank organized under the laws of New Jersey
having its principal place of business in Hackettstown, New Jersey. As of June
30, 1998, Skylands had total stockholders' equity of $12,531,876. As of the date
hereof, Skylands has 10,000,000 authorized shares of common stock, each of $2.50
par value ("Skylands Common Stock") (no other class or series of capital stock
being authorized), of which 2,356,625 shares of Skylands Common Stock were
issued and outstanding as of June 30, 1998.
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E. Stock Option Agreements
1. As a condition and inducement to Bancorp's willingness to enter into
this Plan, concurrently with the execution and delivery of this Plan, Skylands
has executed and delivered a Stock Option Agreement with Bancorp (the "Skylands
Stock Option Agreement") in substantially the form attached hereto as EXHIBIT A,
pursuant to which Skylands is granting to Bancorp an option to purchase, under
certain circumstances, shares of Skylands Common Stock.
2. As a condition and inducement to Skylands' willingness to enter into
this Plan, concurrently with the execution and delivery of this Plan, Bancorp
has executed and delivered a Stock Option Agreement with Skylands (the "Bancorp
Stock Option Agreement") in substantially the form attached hereto as EXHIBIT B,
pursuant to which Bancorp is granting to Skylands an option to purchase, under
certain circumstances, shares of Bancorp Common Stock.
F. Intention of the Parties
It is the intention of the parties to this Plan that (i) the Mergers
(as defined in Section 1.02) shall be accounted for as a pooling of interests
under generally accepted accounting principles and (ii) the Mergers shall
qualify as reorganizations under Section 368(a) of the Internal Revenue Code of
1986, as amended (the "Code").
G. Approvals
The Board of Directors of each of the parties hereto (i) has determined
that this Plan and the transactions contemplated hereby are in their respective
best interests and in the best interests of their respective stockholders, (ii)
has determined that this Plan and the transactions contemplated hereby are
consistent with, and in furtherance of, its respective business strategies and
(iii) has approved, at meetings of each of such Boards of Directors, this Plan.
NOW, THEREFORE, in consideration of their mutual promises and
obligations, the parties hereto approve, adopt and make this Plan and prescribe
the terms and conditions hereof and the manner and basis of carrying it into
effect, which shall be as follows:
ARTICLE I
THE MERGERS; EFFECTS OF THE MERGERS
Section 1.01 The Corporate Merger
(A) The Continuing Corporation. At the Effective Time (as defined in
Section 1.03), pursuant to a Plan of Merger between Acquisition Corp. and
Bancorp, substantially in the form attached hereto as EXHIBIT C (subject to
regulatory review), Bancorp shall merge with and into Acquisition Corp. (the
"Corporate Merger"), the separate corporate existence of Bancorp shall
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cease and Acquisition Corp. shall survive and continue to exist as a corporation
(Acquisition Corp., as the surviving corporation in the Corporate Merger,
sometimes being referred to herein as the "Continuing Corporation"). With the
consent of Little Falls and Skylands, this Agreement may be amended, at any time
prior to the Effective Time, to change the method of effecting the Mergers
(including, without limitation, the provisions of this ARTICLE I) if and to the
extent it deems such change to be necessary, appropriate or desirable; provided,
however, that no such change shall (i) alter or change the amount or kind of
consideration to be issued to holders of Bancorp Common Stock and Skylands
Common Stock as provided for in this Plan, (ii) adversely affect the tax
treatment of Bancorp's or Skylands's stockholders as a result of the Mergers or
(iii) materially impede or delay consummation of the transactions contemplated
by this Plan.
(B) Effect of the Corporate Merger. Subject to the satisfaction or
waiver of the conditions set forth in ARTICLE VI, the Corporate Merger shall
become effective upon the occurrence of the filing in the office of the New
Jersey Department of Treasury, Division of Commercial Recording, of a
certificate of merger in accordance with Section 14A:10-4.1 of the New Jersey
Business Corporation Act (the "NJBCA") or such later date and time as may be set
forth in such certificate. The Corporate Merger shall have the effects
prescribed in the NJBCA.
(C) Certificate of Incorporation and By-laws. The certificate of
incorporation and bylaws of Acquisition Corp. immediately after the Corporate
Merger shall be those of Acquisition Corp. as in effect immediately prior to the
Effective Time.
(D) Directors and Officers of the Continuing Corporation. The directors
of Acquisition Corp. immediately after the Corporate Merger shall be the
directors of Acquisition Corp. immediately prior to the Effective Time as
Previously Disclosed (as defined in Section 8.08), together with such additional
directors as may thereafter be elected, who shall hold office until such time as
their successors shall be duly elected and qualified. The officers of
Acquisition Corp. immediately after the Corporate Merger shall be Albert J.
Weite, Chairman, Ed Seugling, Vice Chairman, Michael Halpin, President and Chief
Executive Officer, Leonard Romaine, Executive Vice President and Chief Operating
Officer, together with such additional officers as may thereafter be elected,
all of whom shall hold office until such time as their successors shall be duly
elected and qualified; provided, however, Messrs. Weite and Seugling shall
remain Chairman and Vice Chairman, respectively, for no less than three years
from the Effective Date.
(E) Rights, etc.. The Continuing Corporation shall thereupon and
thereafter possess all the rights, privileges, immunities and franchises, of a
public as well as of a private nature, of each of the corporations so merged as
provided in Section 14A:10-6 of the NJBCA.
(F) Liabilities, etc.. The Continuing Corporation shall thenceforth be
responsible and liable for all the liabilities, obligations and penalties of the
corporations so merged. All rights of creditors and obligors and all liens on
the property of each of Bancorp and Acquisition Corp. shall be preserved
unimpaired.
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(G) Name. The name of the Continuing Corporation shall be "Little Falls
Bancorp, Inc."
Section 1.02 The Bank Merger. Immediately following the Corporate
Merger on the
Effective Date or as soon as practicable thereafter:
(A) The Continuing Bank. Little Falls shall be merged (subject to
regulatory review), with and into Skylands (the "Bank Merger" and together with
the Corporate Merger, the "Mergers"), the separate existence of Little Falls
shall cease and Skylands (sometimes referred to herein as the "Continuing Bank")
shall survive; the name of the Continuing Bank shall be "Skylands Community
Bank"; and the Continuing Bank shall continue to conduct the business of a New
Jersey commercial banking association at Skylands's main office in Hackettstown,
New Jersey and at the legally established branches of Little Falls and Skylands
existing at the Effective Time. If necessary, Little Falls will convert its
charter to facilitate the Bank Merger.
(B) Rights, etc. The Continuing Bank shall thereupon and thereafter
possess all the rights, privileges, immunities and franchises, of a public as
well as of a private nature, of each of the banks so merged; and all property,
real, personal and mixed, and all debts due on whatever account, and all other
choices-in-action, and all and every other interest, of or belonging to or due
to each of the banks so merged, shall be taken and deemed to be transferred to
and vested in the Continuing Bank without further act or deed, including
appointments, designations and nominations and all other rights and interests in
any fiduciary capacity; and the title to any real estate or any interest
therein, vested in each of such banks, shall not revert or be in any way
impaired by reason of the Bank Merger.
(C) Liabilities, etc. The Continuing Bank shall thenceforth be
responsible and liable for all the liabilities, obligations and penalties of the
banks so merged (including liabilities arising out of the operation of any trust
departments). All rights of creditors and obligors and all liens on the property
of each of Little Falls and Skylands shall be preserved unimpaired.
(D) Charter; Bylaws; Directors; Officers. The charter and bylaws of the
Continuing Bank shall be substantially in the form set forth in EXHIBITS D and E
hereto. The directors of the Continuing Bank immediately after the Bank Merger
shall consist of the persons as Previously Disclosed, who shall hold office
until such time as their successors shall be duly elected and qualified. The
officers of the Continuing Bank immediately after the Bank Merger shall consist
of Denis H. O'Rourke, Chairman, Albert Weite, First Vice Chairman, J. William
Noeltner, Second Vice Chairman, Michael Halpin, President and Chief Executive
Officer, Leonard Romaine, Executive Vice President and Chief Operating Officer
together with such additional officers as may thereafter be elected, who shall
hold office until such time as their successors shall be duly elected and
qualified; provided, however, Messrs. O'Rourke, Weite and Noeltner shall remain
Chairman, First Vice Chairman and Second Vice Chairman, respectively, for no
less than three years from the Effective Date.
(E) Outstanding Stock of the Continuing Bank. Acquisition Corp. shall
own all of the
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issued and outstanding shares of the Continuing Bank immediately after the Bank
Merger.
(F) Outstanding Stock of Little Falls. As the result of the Bank
Merger, each share of Little Falls Stock issued and outstanding immediately
prior to the Bank Merger shall be converted into one (1) share of Skylands
Common Stock.
(G) Liquidation Account. The liquidation account established by Little
Falls pursuant to the plan of conversion adopted in connection with its
conversion from mutual to stock form shall, to the extent required by applicable
law, continue to be maintained by the Continuing Bank after the Effective Time
for the benefit of those persons and entities who were savings account holders
of Little Falls on the eligibility and supplemental eligibility record dates for
such conversion and who continue from time to time to have rights therein. If
required by the rules and regulations of the OTS, the Continuing Bank shall
amend its charter to specifically provide for the continuation of the
liquidation account previously established by Little Falls.
Section 1.03 Effective Date and Effective Time. Subject to the
conditions to the obligations of the parties to effect the Mergers as set forth
in ARTICLE VI, the effective date (the "Effective Date") of the Mergers shall be
such date as Bancorp and Skylands mutually agree upon; provided, however, that
such date shall not be more than 15 days after such conditions have been
satisfied or waived in writing (other than such conditions as by their terms are
to be satisfied at the Effective Time). The time on the Effective Date at which
the Mergers become effective is referred to as the "Effective Time".
ARTICLE II
CONSIDERATION
Section 2.01 Merger Consideration. Subject to the provisions of this
Plan, at the Effective Time, automatically by virtue of the Corporate Merger and
without any action on the part of any party or stockholder:
(A) Outstanding Acquisition Corp. Common Stock. Each share of
Acquisition Corp. Common Stock issued and outstanding immediately prior to the
Effective Time, if any, shall be unchanged and shall remain issued and
outstanding.
(B) Outstanding Bancorp Common Stock. Each share (excluding shares held
by Bancorp or any of its subsidiaries (as defined in Section 8.08) or by
Acquisition Corp. or any of its subsidiaries, or by Skylands or any of its
subsidiaries, in each case other than in a trust, fiduciary or nominee capacity
or as a result of debts previously contracted ("Bancorp Treasury Shares")) of
Bancorp Common Stock issued and outstanding immediately prior to the Effective
Time shall become and be converted into one share (subject to possible
adjustment as set forth in Sections 2.05 and 7.01(G), the "Bancorp Exchange
Ratio") of Acquisition Corp. Common Stock.
(C) Outstanding Skylands Common Stock. Each share (excluding shares
held by
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Skylands or any of its subsidiaries (as defined in Section 8.08) or by
Acquisition Corp. or any of its subsidiaries, or by Bancorp or any of its
subsidiaries, in each case other than in a trust, fiduciary or nominee capacity
or as a result of debts previously contracted ("Skylands Treasury Shares," and
together with Bancorp Treasury Shares, "Treasury Shares")) of Skylands Common
Stock issued and outstanding immediately prior to the Effective Time shall
become and be converted into eight-tenths (.8) shares (subject to possible
adjustment as set forth in Sections 2.05 and 7.01(G), the "Skylands Exchange
Ratio," and together with the Bancorp Exchange Ratio, the "Exchange Ratios") of
Acquisition Corp. Common Stock.
(D) Outstanding Little Falls Common Stock. Each share of Little Falls
Common Stock issued and outstanding immediately prior to the Effective Time
shall be converted into one (1) share of Skylands Common Stock at the Effective
Time.
(E) Treasury Shares. Each Treasury Share immediately prior to the
Effective Time shall be canceled and retired at the Effective Time and no
consideration shall be issued in exchange therefor.
Section 2.02 Stockholder Rights; Stock Transfers. At the Effective
Time, holders of Bancorp Common Stock and Skylands Common Stock shall cease to
be, and shall have no rights as, stockholders of Bancorp or Skylands,
respectively, other than to receive any dividend or other distribution with
respect to the Bancorp Common Stock or Skylands Common Stock, respectively, with
a record date occurring prior to the Effective Time and the consideration
provided under this ARTICLE II. After the Effective Time, there shall be no
transfers on the stock transfer books of (i) Bancorp or the Continuing
Corporation of shares of Bancorp Common Stock or (ii) Skylands or the Continuing
Bank of shares of Skylands Common Stock.
Section 2.03 Fractional Shares.
(A) Corporate Merger. Notwithstanding any other provision hereof, no
fractional shares of Acquisition Corp. Common Stock and no certificates or scrip
therefor, or other evidence of ownership thereof, will be issued in the
Corporate Merger; instead, Acquisition Corp. shall pay to each holder of Bancorp
Common Stock who would otherwise be entitled to a fractional share an amount in
cash determined by multiplying such fraction by the product of (i) the average
of the last sale prices of Bancorp Common Stock, as reported by the Nasdaq Stock
Market ("Nasdaq") for the five Nasdaq trading days immediately preceding the
Effective Date and (ii) the Bancorp Exchange Ratio.
(B) The Bank Merger. Notwithstanding any other provision hereof, no
fractional shares of Acquisition Corp. Common Stock and no certificates or scrip
therefor, or other evidence of ownership thereof, will be issued in the Bank
Merger; instead, Acquisition Corp. shall pay to each holder of Skylands Common
Stock who would otherwise be entitled to a fractional share an amount in cash
determined by multiplying such fraction by the product of (i) the average of the
last sale prices of Skylands Common Stock, as reported by Nasdaq for the five
Nasdaq trading days immediately preceding the Effective Date and (ii) the
Skylands Exchange Ratio.
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Section 2.04 Exchange Procedures. (A) As promptly as practicable after
the Effective Date, Acquisition Corp. shall send or cause to be sent to each
former holder of shares (other than Treasury Shares) of Bancorp Common Stock and
Skylands Common Stock of record immediately prior to the Effective Time
transmittal materials for use in exchanging such stockholder's certificates
formerly representing Bancorp Common Stock ("Old Bancorp Certificates") or
Skylands Common Stock ("Old Skylands Certificates", and together with Old
Bancorp Certificates, "Old Certificates") for the consideration set forth in
this ARTICLE II. The certificates representing the shares of Acquisition Corp.
Common Stock ("New Certificates") into which shares of such stockholder's
Bancorp Common Stock and Skylands Common Stock are converted at the Effective
Time and any checks in respect of a fractional share interest or dividends or
distributions which such person shall be entitled to receive will be delivered
to such stockholder only upon delivery to the exchange agent (the "Exchange
Agent") of Old Certificates representing all of such shares of Bancorp Common
Stock and Skylands Common Stock (or indemnity reasonably satisfactory to
Acquisition Corp. and the Exchange Agent, if any of such certificates are lost,
stolen or destroyed) owned by such stockholder. No interest will be paid on any
such cash to be paid in lieu of fractional share interests or dividends or
distributions which any such person shall be entitled to receive pursuant to
this ARTICLE II upon such delivery. Old Certificates surrendered for exchange by
any Bancorp Affiliate (as defined in Section 5.07(A)) or any Skylands Affiliate
(as defined in Section 5.07(A)) shall not be exchanged for New Certificates
until Acquisition Corp. has received a written agreement from such person as
specified in Section 5.07.
(B) Notwithstanding the foregoing, neither the Exchange Agent nor any
party hereto shall be liable to any former holder of Bancorp Common Stock or
Skylands Common Stock for any amount properly delivered to a public official
pursuant to applicable abandoned property, escheat or similar laws.
(C) At the election of Acquisition Corp., no dividends or other
distributions with a record date occurring after the Effective Time shall be
paid to the holder of any unsurrendered Old Certificates until such Old
Certificates have been surrendered for exchange for New Certificates. After
becoming so entitled in accordance with this Section 2.04, the record holder
thereof also shall be entitled to receive any such dividends or other
distributions, without any interest thereon, which theretofore had become
payable with respect to shares of Acquisition Corp. Common Stock such holder had
the right to receive upon surrender of the Old Certificate.
Section 2.05 Anti-Dilution Provisions. In the event Acquisition Corp.
changes (or establishes a record date for changing) the number of shares of
Acquisition Corp. Common Stock issued and outstanding prior to the Effective
Date as a result of a stock split, stock dividend, recapitalization or similar
transaction with respect to the outstanding Acquisition Corp. Common Stock and
the record date therefor shall be prior to the Effective Date, the Exchange
Ratios shall be proportionately adjusted.
Section 2.06 Options. (A) (1) From and after the Effective Time, all
employee
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and director stock options to purchase shares of Bancorp Common Stock
outstanding as of the date of the Agreement (each, a "Bancorp Option"), which
are then outstanding and unexercised, shall be converted into and become options
to purchase shares of Acquisition Corp. Common Stock, and Acquisition Corp.
shall assume each such Bancorp Option in accordance with the terms of the plan
and agreement by which it is evidenced, including but not limited to the
accelerated vesting of such Bancorp Options which shall occur in connection with
and by virtue of the Corporate Merger as and to the extent required by such
plans and agreements; provided, however, that from and after the Effective Time
(i) each such Bancorp Option assumed by Acquisition Corp. may be exercised
solely to purchase shares of Acquisition Corp. Common Stock, (ii) the number of
shares of Acquisition Corp. Common Stock purchasable upon exercise of such
Bancorp Option shall be equal to the number of shares of Bancorp Common Stock
that were purchasable under such Bancorp Option immediately prior to the
Effective Time multiplied by the Bancorp Exchange Ratio and rounding to the
nearest whole share, and (iii) the per share exercise price under each such
Bancorp Option shall be adjusted by dividing the per share exercise price of
each such Bancorp Option by the Bancorp Exchange Ratio, and rounding up to the
nearest cent. The terms of each Bancorp Option shall, in accordance with its
terms, be subject to further adjustment as appropriate to reflect any stock
split, stock dividend, recapitalization or other similar transaction with
respect to Acquisition Corp. Common Stock on or subsequent to the Effective
Date. Notwithstanding the foregoing, the number of shares and the per share
exercise price of each Bancorp Option which is intended to be an "incentive
stock option" (as defined in Section 422 of the Code) shall be adjusted in
accordance with the requirements of Section 424 of the Code. Accordingly, with
respect to any incentive stock options, fractional shares shall be rounded down
to the nearest whole number of shares and where necessary the per share exercise
price shall be rounded up to the nearest cent.
(2) From and after the Effective Time, all employee and
director stock options to purchase shares of Skylands Common Stock outstanding
as of the date of the Agreement (each, a "Skylands Option"), which are then
outstanding and unexercised, shall be converted into and become options to
purchase shares of Acquisition Corp. Common Stock, and Acquisition Corp. shall
assume each such Skylands Option in accordance with the terms of the plan and
agreement by which it is evidenced, including but not limited to the accelerated
vesting of such Skylands Options which shall occur in connection with and by
virtue of the Bank Merger as and to the extent, if any, required by such plans
and agreements; provided, however, that from and after the Effective Time (i)
each such Skylands Option assumed by Acquisition Corp. may be exercised solely
to purchase shares of Acquisition Corp. Common Stock, (ii) the number of shares
of Acquisition Corp. Common Stock purchasable upon exercise of such Skylands
Option shall be equal to the number of shares of Skylands Common Stock that were
purchasable under such Skylands Option immediately prior to the Effective Time
multiplied by the Skylands Exchange Ratio and rounding to the nearest whole
share, and (iii) the per share exercise price under each such Skylands Option
shall be adjusted by dividing the per share exercise price of each such Skylands
Option by the Skylands Exchange Ratio, and rounding up to the nearest cent. The
terms of each Skylands Option shall, in accordance with its terms, be subject to
further adjustment as appropriate to reflect any stock split, stock dividend,
recapitalization or other similar transaction with respect to Acquisition Corp.
Common Stock on or subsequent to the Effective Date.
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Notwithstanding the foregoing, the number of shares and the per share exercise
price of each Skylands Option which is intended to be an "incentive stock
option" (as defined in Section 422 of the Code) shall be adjusted in accordance
with the requirements of Section 424 of the Code. Accordingly, with respect to
any incentive stock options, fractional shares shall be rounded down to the
nearest whole number of shares and where necessary the per share exercise price
shall be rounded up to the nearest cent.
(B) Prior to the Effective Time, Acquisition Corp. shall reserve for
issuance the number of shares of Acquisition Corp. Common Stock necessary to
satisfy Acquisition Corp.'s obligations under Section 2.06(A). Promptly after
the Effective Time, Acquisition Corp. shall file with the SEC a registration
statement on an appropriate form under the Securities Act of 1933, as amended
(the "Securities Act") with respect to the shares of Acquisition Corp. Common
Stock subject to options to acquire Acquisition Corp. Common Stock issued
pursuant to Section 2.06(A) hereof, and shall use its reasonable best efforts to
maintain the current status of the prospectus contained therein, as well as
comply with any applicable state securities or "blue sky" laws, for so long as
such options remain outstanding.
ARTICLE III
ACTIONS PENDING MERGERS
From the date hereof until the Effective Time, except as expressly
contemplated in this Plan, (i) without the prior written consent of Acquisition
Corp. and Skylands (which consent shall not be unreasonably withheld or delayed)
Bancorp will not, and will cause each of its subsidiaries not to, and (ii)
without the prior written consent of Acquisition Corp. and Bancorp (which
consent shall not be unreasonably withheld or delayed) Skylands will not, and
will cause each of its subsidiaries not to:
Section 3.01 Ordinary Course. Conduct the business of it and its
subsidiaries other than in the ordinary and usual course or, to the extent
consistent therewith, fail to use reasonable efforts to preserve intact their
business organizations and assets and maintain their rights, franchises and
existing relations with customers, suppliers, employees and business associates,
or take any action that would (i) adversely affect the ability of any party to
obtain any necessary approvals of any Regulatory Authorities (as defined in
Section 4.03(I)) required for the transactions contemplated hereby without the
imposition of a condition or restriction of the type referred to in the proviso
to Section 6.02 or (ii) adversely affect its ability to perform any of its
material obligations under this Plan, provided that nothing in this Plan shall
be deemed to restrict the ability of Bancorp to exercise its rights under the
Skylands Stock Option Agreement, or the ability of Skylands to exercise its
rights under the Bancorp Stock Option Agreement.
Section 3.02 Capital Stock. Other than (i) as Previously Disclosed,
(ii) in connection with acquisitions of businesses permitted in Section 3.06 or
as permitted pursuant to Section 3.04, or (iii) upon the exercise of, in the
case of Bancorp, Bancorp Options and stock appreciation rights that were
outstanding on the date hereof, (A) issue, sell or otherwise permit to become
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outstanding any additional shares of capital stock, any stock appreciation
rights, or any Rights (as defined in Section 8.08), (B) enter into any agreement
with respect to the foregoing, or (C) permit any additional shares of capital
stock to become subject to new grants of employee stock options, stock
appreciation rights, or similar stock-based employee rights.
Section 3.03 Dividends, etc. (A) Make, declare or pay any dividend
(other than (i) in the case of Bancorp, quarterly cash dividends on Bancorp
Common Stock payable at a rate not to exceed $0.06 per share and dividends from
subsidiaries to Bancorp or another subsidiary of Bancorp, as applicable, and
(ii) in the case of Skylands, subject to Section 5.16, semi-annual cash
dividends on Skylands Common Stock payable at a rate not to exceed $0.05 per
share, and dividends from subsidiaries to Skylands or another subsidiary of
Skylands, as applicable) on or in respect of, or declare or make any
distribution on, any shares of its capital stock, or (B) except as Previously
Disclosed, directly or indirectly combine, redeem, reclassify, purchase or
otherwise acquire, any shares of its capital stock or divide, declare or pay any
dividend in shares of its capital stock.
Section 3.04 Compensation; Employment Agreements; etc. Enter into or
amend any written employment, severance or similar agreements or arrangements
with any of its directors, officers or employees, or grant any salary or wage
increase or increase any employee benefit (including incentive or bonus
payments), except for (i) normal individual increases in compensation to
employees in the ordinary course of business consistent with past practice (ii)
other changes as may be required by law or to satisfy contractual obligations
existing as of the date hereof or additional grants of awards (including, in the
case of Bancorp, Bancorp Options and other equity-based awards, not to exceed
5,000 shares of Bancorp Common Stock in the aggregate) to employees consistent
with past practice, which to the extent practicable have been Previously
Disclosed.
Section 3.05 Benefit Plans. Enter into or modify (except as may be
required by applicable law or to satisfy contractual obligations existing as of
the date hereof, which to the extent practicable have been Previously Disclosed,
and except as otherwise contemplated by this Plan) any pension, retirement,
stock option, stock purchase, savings, profit sharing, deferred compensation,
consulting, bonus, group insurance or other employee benefit, incentive or
welfare contract, plan or arrangement, or any trust agreement related thereto,
in respect of any of its directors, officers or other employees, including
without limitation taking any action (including discretionary action pursuant to
the terms of such contract, plan or arrangement) that accelerates the vesting or
exercise of any benefits payable thereunder.
Section 3.06 Acquisitions and Dispositions. Except as Previously
Disclosed and except for dispositions and acquisitions of assets, and
liabilities and obligations incurred, in the ordinary and usual course of
business consistent with past practice, incur any liability (other than
intercompany transactions) or dispose of or discontinue any portion of its
assets, deposits, business or properties, in excess of $100,000 in the
aggregate, or subject any of its properties or assets to any lien, claim, charge
option or encumbrance, except in the ordinary course of business, or merge or
consolidate with, or acquire (other than by way of foreclosures or
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acquisitions of control in a bona fide trust or fiduciary capacity or in
satisfaction of debts previously contracted in good faith, in each case in the
ordinary and usual course of business consistent with past practice) all or any
portion of, the business or property of any other entity which is material to it
and its subsidiaries taken as a whole (any of the foregoing, a "Business
Combination Transaction"); it being understood, for purposes of this Section
3.06, that (i) Business Combination Transactions in which the purchase price to
be paid or received consists solely of cash in an amount not exceeding, in the
case of Bancorp, $150,000 in any one case shall be considered not to be material
to Bancorp and its subsidiaries taken as a whole or, in the case of Skylands,
$100,000 in any one case shall be considered not to be material to Skylands and
its subsidiaries taken as a whole and (ii) no Business Combination Transaction
involving the issuance of shares of capital stock or other securities would be
permissible without Acquisition Corp.'s prior consent and, in the case of
Bancorp, Skylands's prior consent, and, in the case of Skylands, Bancorp's prior
consent.
Section 3.07 Amendments. Amend its certificate of incorporation,
charter or by-laws (or similar constitutive documents).
Section 3.08 Accounting Methods. Implement or adopt any material change
in its accounting principles, practices or methods, other than as may be
required by generally accepted accounting principles or applicable law or
regulation.
Section 3.09 Adverse Actions. (A) Take any action that would, or is
reasonably likely to, prevent or impede the Mergers from qualifying (1) for
pooling-of-interests accounting treatment or (2) as reorganizations within the
meaning of Section 368(a) of the Code; or
(B) knowingly take any action that is intended or is reasonably likely
to result in (i) any of its representations or warranties set forth in this Plan
being or becoming untrue in any material respect at any time prior to the
Effective Time, (ii) any of the conditions to the Mergers set forth in ARTICLE
VI not being satisfied or (iii) a material violation of any provision of this
Plan, the Skylands Stock Option Agreement or the Bancorp Stock Option Agreement,
except, in every case, as may be required by applicable law; provided, however,
that nothing contained herein shall limit the ability of Bancorp to exercise its
rights under the Skylands Stock Option Agreement or the ability of Skylands to
exercise its rights under the Bancorp Stock Option Agreement.
Section 3.10 Risk Management. Except as required by applicable law or
regulation, (a) implement or adopt any material change in its interest rate and
other risk management policies, procedures or practices; (b) fail to follow in
any material respect its existing policies or practices with respect to managing
its exposure to interest rate and other risk; or (c) fail to use commercially
reasonable means to avoid any material increase in its aggregate exposure to
interest rate risk.
Section 3.11 Indebtedness. Incur any indebtedness for borrowed money
other than in the ordinary course of business.
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Section 3.12 Agreements. Agree or commit to do anything prohibited by
Sections 3.01 through 3.11.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Section 4.01 Disclosure Schedule. On or prior to the date hereof,
Skylands has delivered to Bancorp, and Bancorp has delivered to Skylands a
schedule (as the case may be, its "Disclosure Schedule") setting forth, among
other things, items the disclosure of which is necessary or appropriate either
(i) in response to an express disclosure requirement contained in a provision
hereof or (ii) as an exception to one or more representations or warranties in
Section 4.03 or to one or more of its covenants contained in ARTICLE III;
provided, that (a) no such item is required to be set forth in a Disclosure
Schedule as an exception to a representation or warranty if its absence would
not be reasonably likely to result in the related representation or warranty
being deemed untrue or incorrect under the standards established by Section
4.02, and (b) the mere inclusion of an item in a Disclosure Schedule as an
exception to a representation or warranty shall not be deemed an admission by a
party that such item represents a material exception or fact, event or
circumstance or that such item is reasonably likely to result in a Material
Adverse Effect (as defined in Section 8.08).
Section 4.02 Standard. No representation or warranty of Skylands, on
the one hand, or Bancorp and Little Falls, on the other hand, contained in
Section 4.03 and Section 4.04 shall be deemed untrue or incorrect, and no party
hereto shall be deemed to have breached a representation or warranty, as a
consequence of the existence of any fact, circumstance or event if such fact,
circumstance or event, individually or taken together with all other facts,
circumstances or events inconsistent with any paragraph of Section 4.03 or
Section 4.04, is not reasonably likely to have a Material Adverse Effect on the
party making such representation or warranty.
Section 4.03 Representations and Warranties; Bancorp, Little Falls and
Skylands. Subject to Sections 4.01 and 4.02, Bancorp and Little Falls jointly
and severally represent and warrant to Skylands, and Skylands hereby represents
and warrants to Bancorp and Little Falls as follows:
(A) Recitals. In the case of the representations and warranties of
Bancorp and Little Falls, the facts set forth in Recitals A, C, E, F and G of
this Plan with respect to it are true and correct. In the case of the
representations and warranties of Skylands, the facts set forth in Recitals D,
E, F and G of this Plan with respect to it are true and correct.
(B) Organization, Standing, and Authority. It is duly qualified to do
business and is in good standing in the states of the United States and foreign
jurisdictions where its ownership or leasing of property or the conduct of its
business requires it to be so qualified. It has in effect all federal, state,
local, and foreign governmental authorizations necessary for it to own or lease
its properties and assets and to carry on its business as it is now conducted.
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(C) Shares. (1) The outstanding shares of its capital stock have been
duly authorized and are validly issued and outstanding, fully paid and
nonassessable, and subject to no preemptive rights (and were not issued in
violation of any preemptive rights). Except as Previously Disclosed, there are
no shares of its capital stock authorized and reserved for issuance, it does not
have any Rights issued or outstanding with respect to its capital stock, and it
does not have any commitment to authorize, issue, sell, repurchase or redeem any
such shares or Rights, except pursuant to this Plan or, in the case of Bancorp,
pursuant to outstanding Bancorp Options, or, in the case of Skylands, pursuant
to outstanding Skylands Options. Since June 30, 1998, it has issued no shares of
its capital stock except pursuant to plans or commitments Previously Disclosed.
As of the date of this Plan, there were 564,225 shares of Bancorp Common Stock
and no shares of Bancorp Preferred Stock held in Bancorp's treasury. As of
immediately prior to the Effective Time, there will be no shares of Bancorp
Common Stock held in Bancorp's treasury. As of the date of this Plan, there were
no shares of Skylands Common Stock held in Skylands's treasury.
(2) (i) The number of shares of Bancorp Common Stock which are issuable
upon exercise of Bancorp Options as of the date of this Plan has been Previously
Disclosed by Bancorp and (ii) the number of shares of Skylands Common Stock
which are issuable upon exercise of options to purchase shares of Skylands
Common Stock as of the date of this Plan has been Previously Disclosed by
Skylands.
(D) Subsidiaries. (1) It has Previously Disclosed a list of all its
significant subsidiaries together with state of incorporation for each such
significant subsidiary, (2) no equity securities of any of its significant
subsidiaries (as defined in Section 8.08) are or may become required to be
issued (other than to it or a subsidiary of it) by reason of any Rights, (3)
there are no contracts, commitments, understandings, or arrangements by which
any of such significant subsidiaries is or may be bound to sell or otherwise
transfer any shares of the capital stock of any such significant subsidiary
(other than to it or a subsidiary of it), (4) there are no contracts,
commitments, understandings, or arrangements relating to its rights to vote or
to dispose of such shares (other than to it or a subsidiary of it), (5) all of
the shares of capital stock of each such significant subsidiary held by it or
its subsidiaries are fully paid and (except pursuant to 12 U.S.C. Section 55 or
equivalent state statutes in the case of banking subsidiaries) nonassessable and
are owned by it or its subsidiaries free and clear of any charge, mortgage,
pledge, security interest, restriction, claim, lien, or encumbrance ("Liens"),
and (6) each of its significant subsidiaries has been duly organized and is
validly existing in good standing under the laws of the jurisdiction in which it
is incorporated or organized, and is duly qualified to do business and in good
standing in the jurisdictions where its ownership or leasing of property or the
conduct of its business requires it to be so qualified.
(E) Corporate Power. It and each of its significant subsidiaries has
the corporate power and authority to carry on its business as it is now being
conducted and to own all its material properties and assets; and it has the
corporate power and authority to execute, deliver and perform its obligations
under this Plan and in the case of Bancorp, the Bancorp Stock Option Agreement
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and, in the case of Skylands, the Skylands Stock Option Agreement.
(F) Corporate Authority. Subject, in the case of this Plan, to receipt
of the requisite approval of its stockholders referred to in Section 6.01, this
Plan and in the case of Bancorp, the Bancorp Stock Option Agreement, and, in the
case of Skylands, the Skylands Stock Option Agreement, and the transactions
contemplated hereby, and thereby, have been authorized by all necessary
corporate action of it and this Plan and, in the case of Bancorp, the Bancorp
Stock Option Agreement and, in the case of Skylands, the Skylands Stock Option
Agreement, have been duly executed and delivered by it, each is a valid and
binding agreement of it, and is enforceable in accordance with its terms (except
as may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium, fraudulent transfer and similar laws of general applicability
relating to or affecting creditors' rights or by general equity principles).
(G) Regulatory Approvals; No Defaults. (1) No consents or approvals of,
or filings or registrations with, any Regulatory Authority (as defined in
Section 4.03(I)) or with any third party are required to be made or obtained by
it or any of its subsidiaries in connection with the execution, delivery or
performance by it of this Plan or, in the case of Skylands, the Skylands Stock
Option Agreement, or in the case of Bancorp, the Bancorp Stock Option Agreement,
or to consummate the Mergers except for (a) filings of applications or notices
with federal and state banking authorities, (b) filings with the Securities and
Exchange Commission (the "SEC") and state securities authorities and the
approval of this Plan by the stockholders of it, and (c) in the case of the
Corporate Merger, the filing of a certificate of merger with the New Jersey
Department of Treasury, Division of Commercial Recording, pursuant to the NJBCA.
As of the date hereof, it is not aware of any reason why the approvals set forth
in Section 6.02 will not be received without the imposition of a condition,
restriction or requirement of the type described in Section 6.02.
(2) Subject to receipt of the regulatory approvals referred to in the
preceding paragraph, and expiration of related waiting periods, and the making
of required filings under federal and state securities laws, the execution,
delivery and performance of this Plan and, in the case of Bancorp, the Bancorp
Stock Option Agreement and, in the case of Skylands, the Skylands Stock Option
Agreement, and the consummation of the transactions contemplated hereby and
thereby, do not and will not (A) constitute a breach or violation of, or a
default under, or give rise to any Lien, any acceleration of remedies or any
right of termination under, any law, rule or regulation or any judgment, decree,
order, governmental permit or license, or agreement, indenture or instrument of
it or of any of its subsidiaries or to which it or any of its subsidiaries or
properties is subject or bound, (B) constitute a breach or violation of, or a
default under, its certificate of incorporation or by-laws, or (C) require any
consent or approval under any such law, rule, regulation, judgment, decree,
order, governmental permit or license, agreement, indenture or instrument.
(H) Financial Reports; SEC and FDIC Documents. Its Annual Reports on
Form 10-K or, in the case of Skylands, predecessor reports, for the fiscal years
ended December 31, 1995, 1996 and 1997, and all other reports, registration
statements, definitive proxy statements or
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information statements filed or to be filed by it or any of its subsidiaries
subsequent to December 31, 1995 under the Securities Act or under Sections
13(a), 13(c), 14 and 15(d) of the Securities Exchange Act of 1934, as amended
(together with the rules and regulations thereunder, the "Exchange Act"), in the
form filed, or to be filed, in the case of Bancorp, with the SEC (collectively,
its "SEC Documents") and, in the case of Skylands, with the Federal Deposit
Insurance Corporation (collectively, its "FDIC Documents") (i) complied or will
comply in all material respects as to form with the applicable requirements
under the Securities Act or the Exchange Act, as the case may be, and (ii) did
not and will not, at the time of such filing, contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements made therein, in light of the circumstances
under which they were made, not misleading; and each of the balance sheets in or
incorporated by reference into any such SEC Document, in the case of Bancorp, or
FDIC Document, in the case of Skylands (including the related notes and
schedules thereto) fairly presents and will fairly present the financial
position of the entity or entities to which it relates as of its date and each
of the statements of income and changes in stockholders' equity and cash flows
or equivalent statements in such report and documents (including any related
notes and schedules thereto) fairly presents and will fairly present the results
of operations, changes in stockholders' equity and changes in cash flows, as the
case may be, of the entity or entities to which it relates for the periods set
forth therein, in each case in accordance with generally accepted accounting
principles consistently applied during the periods involved, except in each case
as may be noted therein, subject to normal year-end audit adjustments in the
case of unaudited statements.
(I) Litigation; Regulatory Action. (1) Except as Previously Disclosed,
no litigation, proceeding or claim before any court or governmental agency is
pending against it or any of its subsidiaries and, to the best of its knowledge,
no such litigation, proceeding or claim has been threatened.
(2) Except as Previously Disclosed, neither it nor any of its
subsidiaries or properties is a party to or is subject to any order, decree,
agreement, memorandum of understanding or similar arrangement with, or a
commitment letter or similar submission to, any federal or state governmental
agency or authority charged with the supervision or regulation of financial
institutions or engaged in the insurance of deposits (including, without
limitation, the Office of Thrift Supervision, the New Jersey Department of
Banking and Insurance, the Board of Governors of the Federal Reserve System and
the Federal Deposit Insurance Corporation), or issuers of securities (including,
without limitation, the SEC and non-governmental self-regulatory bodies), or the
supervision or regulation of it or any of its subsidiaries (collectively, the
"Regulatory Authorities").
(3) Neither it nor any of its subsidiaries has been advised by any
Regulatory Authority that such Regulatory Authority is contemplating issuing or
requesting (or is considering the appropriateness of issuing or requesting) any
such order, decree, agreement, memorandum of understanding, commitment letter or
similar submission.
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(J) Compliance with Laws. Except as Previously Disclosed, it and each
of its subsidiaries:
(1) is in compliance, in the conduct of its business, with all
applicable federal, state, local and foreign statutes, laws, regulations,
ordinances, rules, judgments, orders or decrees applicable thereto or to the
employees conducting such businesses, including, without limitation, the Equal
Credit Opportunity Act, the Fair Housing Act, the Community Reinvestment Act,
the Home Mortgage Disclosure Act and all other applicable fair lending laws and
other laws relating to discriminatory business practices;
(2) has all permits, licenses, authorizations, orders and approvals of,
and has made all filings, applications and registrations with, all Regulatory
Authorities that are required in order to permit it to conduct its businesses
substantially as presently conducted; all such permits, licenses, certificates
of authority, orders and approvals are in full force and effect and, to the best
of its knowledge, no suspension or cancellation of any of them is threatened;
and
(3) has received, since December 31, 1996, no notification or
communication from any Regulatory Authority (i) asserting that it or any of its
subsidiaries is not in compliance with any of the statutes, regulations, or
ordinances which such Regulatory Authority enforces or (ii) threatening to
revoke any license, franchise, permit, or governmental authorization, (iii)
threatening or contemplating revocation or limitation of, or which would have
the effect of revoking or limiting, federal deposit insurance (nor, to its
knowledge, do any grounds for any of the foregoing exist) or (iv) failing to
approve any proposed acquisition, or stating its intention not to approve any
acquisition pending or proposed to be effected by it prior to the date hereof.
(K) Material Contracts; Defaults. Except for those agreements and other
documents filed as exhibits to, in the case of Bancorp, its SEC Documents, or,
in the case of Skylands, its FDIC Documents, or Previously Disclosed, neither it
nor any of its subsidiaries is a party to, bound by or subject to any agreement,
contract, arrangement, commitment or understanding (whether written or oral)
that is a "material contract" within the meaning of Item 601(b)(10) of the SEC's
Regulation S-K (without giving effect to the "ordinary course" exception set
forth therein). Neither it nor any of its subsidiaries is in default under any
contract, agreement, commitment, arrangement, lease, insurance policy or other
instrument to which it is a party, by which its respective assets, business, or
operations may be bound or affected, or under which it or its respective assets,
business, or operations receives benefits, and there has not occurred any event
that, with the lapse of time or the giving of notice or both, would constitute
such a default. Neither it nor any of its subsidiaries is subject to, or bound
by, any contract containing covenants which (i) limit the ability of it or any
subsidiary to compete in any material line of business or with any person, or
(ii) involve any material restriction of geographical area in which, or method
by which, it or any subsidiary may carry on its business (other than as may be
required by law or any applicable Regulatory Authority).
(L) No Brokers. All negotiations relative to this Plan and the
transactions contemplated hereby have been carried on by it directly with the
other party hereto and no action has been taken
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by it that would give rise to any valid claim against any party hereto for a
brokerage commission, finder's fee or other like payment, excluding, in the case
of Bancorp, fees to be paid to FinPro, Inc. and, in the case of Skylands, a fee
to be paid to Sandler O'Neill & Partners, L.P., which, in each case, has been
heretofore disclosed to the other party.
(M) Employee Benefit Plans. (1) Bancorp has delivered to Skylands and
Skylands has delivered to Bancorp, copies of all of their respective
Compensation and Benefit Plans (as defined below). Compensation and Benefit
Plans means all existing bonus, incentive, paid-time-off, deferred compensation,
pension, retirement, profit-sharing, thrift, savings, employee stock ownership,
stock bonus, stock purchase, restricted stock and stock option plans, all
employment or severance contracts or other separation agreements, all medical,
dental, disability, health and life insurance plans, all other employee benefit
and fringe benefit plans, contracts or arrangements and any applicable "change
of control" or similar provisions in any plan, contract or arrangement
maintained or contributed to by it or any of its subsidiaries for the benefit of
officers, former officers, employees, former employees, directors, former
directors, or the beneficiaries of any of the foregoing.
(2) Except as Previously Disclosed, each of its Compensation and
Benefit Plans has been operated and administered by it in all material respects
in accordance with its terms and with applicable law, including, but not limited
to, ERISA, the Code, the Securities Act, the Exchange Act, the Age
Discrimination in Employment Act, or any regulations or rules promulgated
thereunder, and all filings, disclosures and notices required by ERISA, the
Code, the Securities Act, the Exchange Act, the Age Discrimination in Employment
Act and any other applicable law have been timely made. Except as Previously
Disclosed, to its knowledge, each of its Compensation and Benefit Plans which is
an "employee pension benefit plan" within the meaning of Section 3(2) of ERISA
(a "Pension Plan") and which is intended to be qualified under Section 401(a) of
the Code has received a favorable determination letter (including a
determination that the related trust under such Compensation and Benefit Plan is
exempt from tax under Section 501(a) of the Code) from the IRS for "TRA" (as
defined in Rev. Proc. 93-39), or will file for such determination letter prior
to the expiration of the remedial amendment period for such Compensation and
Benefit Plan, and it is not aware of any circumstances likely to result in
revocation of any such favorable determination letter. There is no pending or,
to its knowledge, threatened legal action, suit or claim relating to the
Compensation and Benefit Plans. Except as Previously Disclosed, neither it nor
any of its subsidiaries has engaged in a transaction, or omitted to take any
action, with respect to any Compensation and Benefit Plan that would reasonably
be expected to subject it or any of its subsidiaries to a tax or penalty imposed
by either Section 4975 of the Code or Section 502 of ERISA, assuming for
purposes of Section 4975 of the Code that the taxable period of any such
transaction expired as of the date hereof.
(3) Except as Previously Disclosed, no liability (other than for
payment of premiums to the Pension Benefit Guaranty Corporation ("PBGC") which
have been made or will be made on a timely basis) under Title IV of ERISA has
been or is reasonably expected to be incurred by it or any of its subsidiaries
with respect to any ongoing, frozen or terminated "single-employer plan", within
the meaning of Section 4001(A)(15) of ERISA, currently or formerly maintained by
any of
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them, or any single-employer plan of any entity (an "ERISA Affiliate") which is
considered one employer with it under Section 4001(A)(14) of ERISA or Section
414(b) or (c) of the Code (an "ERISA Affiliate Plan"). None of it, any of its
subsidiaries or any ERISA Affiliate has contributed, or has been obligated to
contribute, to a multi-employer plan under Subtitle E of Title IV of ERISA at
any time since September 26, 1980. No notice of a "reportable event", within the
meaning of Section 4043 of ERISA, for which the 30-day reporting requirement has
not been waived, has been required to be filed for any Compensation and Benefit
Plan or by any ERISA Affiliate Plan within the 12-month period ending on the
date hereof. The PBGC has not instituted proceedings to terminate any Pension
Plan or ERISA Affiliate Plan and no condition exists that presents a risk that
such proceedings will be instituted. There is no pending or, to its knowledge,
threatened investigation, examination, audit or enforcement action by the PBGC,
the Department of Labor (the "DOL") or IRS or any other governmental agency with
respect to any Compensation and Benefit Plan. Except as Previously Disclosed
under each Pension Plan and ERISA Affiliate Plan, as of the date of the most
recent actuarial valuation performed prior to the date of this Plan, the
actuarially determined present value of all "benefit liabilities", within the
meaning of Section 4001(A)(16) of ERISA (as determined on the basis of the
actuarial assumptions contained in such actuarial valuation of such Pension Plan
or ERISA Affiliate Plan), did not exceed the then current value of the assets of
such Pension Plan or ERISA Affiliate Plan and since such date there has been
neither an adverse change in the financial condition of such Pension Plan or
ERISA Affiliate Plan nor any amendment or other change to such Pension Plan or
ERISA Affiliate Plan that would increase the amount of benefits thereunder which
in either case reasonably could be expected to change such result.
(4) All contributions required to be made under the terms of any
Compensation and Benefit Plan or ERISA Affiliate Plan or any employee benefit
arrangements under any collective bargaining agreement to which it or any of its
subsidiaries is a party have been timely made or have been reflected on its
financial statements to the extent required by generally accepted accounting
principles. Neither any Pension Plan nor any ERISA Affiliate Plan has an
"accumulated funding deficiency" (whether or not waived) within the meaning of
Section 412 of the Code or Section 302 of ERISA and all required payments to the
PBGC with respect to each Pension Plan or ERISA Affiliate Plan have been made on
or before their due dates. None of it, any of its subsidiaries or any ERISA
Affiliate (x) has provided, or would reasonably be expected to be required to
provide, security to any Pension Plan or to any ERISA Affiliate Plan pursuant to
Section 401(a)(29) of the Code, or (y) has taken any action, or omitted to take
any action, that has resulted, or would reasonably be expected to result, in the
imposition of a lien under Section 412(n) of the Code or pursuant to ERISA.
(N) Labor Matters. Neither it nor any of its subsidiaries is a party
to, or is bound by, any collective bargaining agreement, contract or other
agreement or understanding with a labor union or labor organization, nor is it
or any of its subsidiaries the subject of a proceeding asserting that it or any
such subsidiary has committed an unfair labor practice (within the meaning of
the National Labor Relations Act) or seeking to compel it or such subsidiary to
bargain with any labor organization as to wages and conditions of employment,
nor is there any strike or other labor dispute involving it or any of its
subsidiaries, pending or, to the best of its knowledge,
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threatened, nor is it aware, as of the date of this Plan, of any activity
involving it or any of its subsidiaries' employees seeking to certify a
collective bargaining unit or engaging in any other organization activity.
(O) Insurance . It and its subsidiaries have taken all requisite action
(including without limitation the making of claims and the giving of notices)
pursuant to its directors' and officers' liability insurance policy or policies
in order to preserve all rights thereunder with respect to all matters (other
than matters arising in connection with this Plan and the transactions
contemplated hereby) that are known to it.
(P) Takeover Laws; Dissenters Rights. In the case of Bancorp, it has
taken all action required to be taken by it in order to exempt this Plan and the
transactions contemplated hereby and thereby, from, and this Plan and the
transactions contemplated hereby and thereby are exempt from, the requirements
of any "moratorium", "control share", "fair price", "affiliate transaction",
"control transaction", "business combination" or other antitakeover laws and
regulations (collectively, the "Takeover Laws") of the State of New Jersey
including, without limitation, Article 14A:10A of the NJBCA. Holders of Bancorp
Common Stock shall not, and holders of Skylands Common Stock shall have,
dissenters' or appraisal rights in connection with the execution of this Plan or
the consummation of any of the transactions contemplated hereby.
(Q) Environmental Matters. Except as Previously Disclosed, there are no
proceedings, claims, actions, or investigations of any kind, pending or
threatened, in any court, agency, or other government authority or in any
arbitral body, arising under any Environmental Law (as defined below); there is
no reasonable basis for any such proceeding, claim, action or investigation;
there are no agreements, orders, judgments or decrees by or with any court,
regulatory agency or other governmental authority, imposing liability or
obligation under or in respect of any Environmental Law; there are and have been
no Materials of Environmental Concern (as defined below) or other conditions at
any property (owned, operated, or otherwise used by, or the subject of a
security interest on behalf of, it or any of its subsidiaries); and there are no
reasonably anticipated future events, conditions, circumstances, practices,
plans, or legal requirements that could give rise to obligations under any
Environmental Law. "Environmental Laws" means the statutes, rules, regulations,
ordinances, codes, orders, decrees, and any other laws (including common law) of
any foreign, federal, state, local, and any other governmental authority,
regulating, relating to or imposing liability or standards of conduct concerning
pollution, or protection of human health and safety or of the environment, as in
effect on or prior to the date of this Plan. "Materials of Environmental
Concern" means any hazardous or toxic substances, materials, wastes, pollutants,
or contaminants, including without limitation those defined or regulated as such
under any Environmental Law, and any other substance the presence of which may
give rise to liability under any Environmental Law.
(R) Tax Reports. Except as Previously Disclosed, (1) All material
reports, declarations, estimates, statements and returns (including without
limitation information returns) with respect to Taxes (as defined below) that
are required to be filed by or with respect to it or its subsidiaries, including
without limitation consolidated United States federal income tax returns of it
and its
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subsidiaries (collectively, the "Tax Returns"), have been timely filed, or
requests for extensions have been timely filed and have not expired, and such
Tax Returns were true, complete and accurate in all material respects; (2) all
taxes (which shall include without limitation, all United States federal, state,
local or foreign income, gross receipts, windfall profits, severance, property,
production, sales, use, license, excise, franchise, employment, withholding or
similar taxes imposed on the income, properties or operations of it or its
subsidiaries, together with any interest, additions, or penalties with respect
thereto and any interest in respect of such additions or penalties, collectively
"Taxes") shown to be due on such Tax Returns have been paid in full or adequate
reserves have been established for the payment of such Taxes; (3) all Taxes due
with respect to completed and settled examinations have been paid in full or
adequate reserves have been established for the payment of such Taxes; (4) no
issues have been raised by the relevant taxing authority in connection with the
examination of any of such Tax Returns; and (5) no waivers of statutes of
limitations (excluding such statutes that relate to years currently under
examination by the Internal Revenue Service) have been given by or requested
with respect to any Taxes of it or any of its subsidiaries.
(S) Pooling; Reorganization. As of the date hereof, it is aware of no
reason why (i) the Mergers will fail to qualify for pooling-of-interests
accounting treatment or (ii) the Mergers will fail to qualify as reorganizations
under Section 368(a) of the Code.
(T) Regulatory Approvals. As of the date hereof, it is aware of no
reason why the regulatory approvals and consents referred to in Section 6.02
will not be received without the imposition of a condition or requirement
described in the proviso thereto.
(U) No Material Adverse Effect. Since December 31, 1997, except as
Previously Disclosed in its, in the case of Bancorp, SEC Documents filed with
the SEC, or, in the case of Skylands, its FDIC Documents filed with the FDIC on
or before the date hereof or in any Section of its Disclosure Schedule, (i) it
and its subsidiaries have conducted their respective businesses in the ordinary
and usual course (excluding the incurrence of expenses related to this Plan and
the transactions contemplated hereby) and (ii) no event has occurred or
circumstance arisen that, individually or taken together with all other facts,
circumstances and events (described in any paragraph of Section 4.03 or
otherwise), is reasonably likely to have a Material Adverse Effect with respect
to it.
(V) Required Vote. (1) In the case of the representations and
warranties of Bancorp, the affirmative vote of a majority of the votes cast by
the holders of shares of Bancorp Common Stock voting at the Bancorp Meeting (as
defined in Section 5.02) is the only vote of the holders of any class or series
of capital stock of Bancorp necessary to approve this Plan or the Corporate
Merger.
(2) In the case of the representations and warranties of Skylands, the
affirmative vote of the holders of two-thirds of the outstanding shares of
Skylands Common Stock is the only vote of the holders of any class or series of
capital stock of Skylands necessary to approve this Plan.
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(W) Year 2000 Compliance. It and its subsidiaries have taken all
reasonable steps necessary to address the software, accounting and record
keeping issues raised in order for the data processing systems used in the
business conducted by it and its subsidiaries to be substantially Year 2000
compliant on or before the Effective Date and it does not expect the future cost
of addressing such issues to be material. Neither it nor its subsidiary has
received a rating of less than satisfactory from any bank regulatory agency with
respect to Year 2000 compliance.
Section 4.04 Representations and Warranties; Acquisition Corp.. Subject
to Section 4.02, Acquisition Corp. hereby represents and warrants to Bancorp,
Little Falls and Skylands as follows:
(A) Recitals. The facts set forth in Recitals B, F and G of this Plan
with respect to it are true and correct.
(B) Organization and Standing. It is duly qualified to do business and
is in good standing in the State of New Jersey.
(C) Shares. The shares of Acquisition Corp. Common Stock to be issued
in exchange for (i) shares of Bancorp Common Stock in the Corporate Merger and
(ii) shares of Skylands Common Stock in the Bank Merger, when issued in
accordance with the terms of this Plan, will be duly authorized, validly issued,
fully paid and nonassessable, and subject to no preemptive rights.
(D) Corporate Power. It has the corporate power and authority to
execute, deliver and perform its obligations under this Plan.
(E) Required Vote. The affirmative vote of a majority of the votes cast
by the holders of shares of Acquisition Corp. Common Stock voting at an
Acquisition Corp. meeting of stockholders is the only vote of the holders of any
class or series of capital stock of Acquisition Corp. necessary to approve this
Plan or the Corporate Merger.
ARTICLE V
COVENANTS
Each of Bancorp and Skylands hereby covenants to and agrees with each
other that:
Section 5.01 Reasonable Best Efforts. Subject to the terms and
conditions of this Plan, it shall use its reasonable best efforts in good faith
to take, or cause to be taken, all actions, and to do, or cause to be done, all
things necessary, proper or desirable, or advisable under applicable laws, so as
to permit consummation of the Mergers as promptly as reasonably practicable and
to otherwise enable consummation of the transactions contemplated hereby,
including, without limitation, obtaining (and cooperating with the other parties
hereto in obtaining) any consent, authorization, order or approval of, or any
exemption by, any Regulatory Authority and any other
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third party that is required to be obtained by the parties hereto or any of
their respective subsidiaries in connection with the Mergers and the other
transactions contemplated by this Plan, and using reasonable efforts to lift or
rescind any injunction or restraining order or other order adversely affecting
the ability of the parties to consummate the transactions contemplated hereby,
and using reasonable efforts to defend any litigation seeking to enjoin, prevent
or delay the consummation of the transactions contemplated hereby or seeking
material damages, and each shall cooperate fully with the other parties hereto
to that end.
Section 5.02 Stockholder Approvals. Each of them shall take, in
accordance with applicable law, Nasdaq rules and its respective certificate of
incorporation, charters and by-laws, all action necessary to convene,
respectively, (A) an appropriate meeting of stockholders of Skylands to consider
and vote upon (i) the approval of this Plan, and (ii) any other stockholder
approval matters required for consummation of the Bank Merger and the
transactions contemplated hereby (the "Skylands Meeting"), (B) an appropriate
meeting of stockholders of Bancorp to consider and vote upon the approval of
this Plan and any other stockholder approval matters required for consummation
of the Corporate Merger and the transactions contemplated hereby (the "Bancorp
Meeting"; each of the Skylands Meeting and the Bancorp Meeting, a "Meeting"),
and (C) in the case of Bancorp, an appropriate consent in lieu of meeting of the
sole stockholder of Little Falls approving this Plan, respectively, as promptly
as practicable after the Registration Statement (as defined in Section 5.03) is
declared effective. The Board of Directors of each of Skylands and Bancorp will
recommend approval of such matters, and each of Skylands and Bancorp will take
all reasonable lawful action to solicit such approval by its respective
stockholders, provided that each of Skylands and Bancorp may withdraw, modify or
change in an adverse manner to the other parties its recommendations if the
Board of Directors of such party, after having consulted with and based upon the
advice of outside counsel, determines in good faith that the failure to so
withdraw, modify or change its recommendation could constitute a breach of the
fiduciary duties of such party's Board of Directors under applicable law. In
addition, nothing in this Section 5.02 or elsewhere in this Plan shall prohibit
accurate disclosure by either party of information that is required to be
disclosed in the Registration Statement or the Joint Proxy Statement or any
other document required to be filed with the SEC (including without limitation a
Solicitation/Recommendation Statement on Schedule 14D-9) or otherwise required
to be publicly disclosed by applicable law or regulation or the rules of Nasdaq.
Furthermore, Acquisition Corp. will take all action necessary to hold a special
meeting of stockholders to vote and approve the Plan and the Corporate Merger.
Section 5.03 Registration Statement. (A) Each of Acquisition Corp.,
Bancorp and Skylands agrees to cooperate, and to cause Acquisition Corp. to
cooperate, in the preparation of a registration statement on Form S-4 (the
"Registration Statement") to be filed by Acquisition Corp. with the SEC in
connection with the issuance of Acquisition Corp. Common Stock in the Mergers
(including the joint proxy statement and prospectus and other proxy solicitation
materials of Skylands and Bancorp constituting a part thereof, the "Joint Proxy
Statement"). Each of Bancorp and Skylands agrees to use all reasonable efforts
to cause the Registration Statement to be declared effective under the
Securities Act as promptly as reasonably practicable after filing thereof, and
agrees to use all reasonable efforts to obtain all necessary state securities
law or
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"Blue Sky" permits and approvals required to carry out the transactions
contemplated by this Plan. Bancorp and Skylands agree to furnish to Acquisition
Corp. all information concerning their respective subsidiaries, officers,
directors and stockholders as may be reasonably requested in connection with the
foregoing.
(B) Each of Bancorp and Skylands agrees, as to itself and its
subsidiaries, that none of the information supplied or to be supplied by it for
inclusion or incorporation by reference in (i) the Registration Statement will,
at the time the Registration Statement and each amendment or supplement thereto,
if any, becomes effective under the Securities Act, contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading, and (ii) the
Joint Proxy Statement and any amendment or supplement thereto will, at the date
of mailing to stockholders and at the times of the Skylands Meeting and the
Bancorp Meeting, contain any statement which, in the light of the circumstances
under which such statement is made, will be false or misleading with respect to
any material fact, or which will omit to state any material fact necessary in
order to make the statements therein not false or misleading or necessary to
correct any statement in any earlier statement in the Joint Proxy Statement or
any amendment or supplement thereto. Each of Bancorp and Skylands agrees that
the Joint Proxy Statement (except, in the case of Bancorp, with respect to
portions thereof prepared by Skylands, and except in the case of Skylands, with
respect to portions thereof proposed by Bancorp) will comply as to form in all
material respects with the requirements of the Exchange Act and the rules and
regulations of the SEC thereunder, and the Registration Statement (except, in
the case of Bancorp, with respect to portions thereof prepared by, and except in
the case of Skylands, with respect to portions thereof prepared by Bancorp) will
comply as to form in all material respects with the requirements of the
Securities Act and the rules and regulations of the SEC thereunder.
(C) In the case of Acquisition Corp., Acquisition Corp. will advise
Bancorp and Skylands, promptly after Acquisition Corp. receives notice thereof,
of the time when the Registration Statement has become effective or any
supplement or amendment has been filed, of the issuance of any stop order or the
suspension of the qualification of the Acquisition Corp. Common Stock for
offering or sale in any jurisdiction, of the initiation or threat of any
proceeding for any such purpose, or of any request by the SEC for the amendment
or supplement of the Registration Statement or for additional information.
Section 5.04 Press Releases. It will not, without the prior approval of
the other parties, issue any press release or written statement for general
circulation relating to the transactions contemplated hereby or the Skylands
Stock Option Agreement or the Bancorp Stock Option Agreement, except as
otherwise required by applicable law or the rules of Nasdaq.
Section 5.05 Access; Information. (A) Upon reasonable notice, it shall
afford the other parties and its officers, employees, counsel, accountants and
other authorized representatives, access, during normal business hours
throughout the period prior to the Effective Date, to all of its properties,
books, contracts, commitments and records and, during such period, it shall
furnish promptly to the other parties (i) a copy of each material report,
schedule and other document filed
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by it pursuant to the requirements of federal or state securities or banking
laws, and (ii) all other information concerning the business, properties and
personnel of it as the other may reasonably request. None of Acquisition Corp.,
Bancorp nor Skylands, nor any of their respective subsidiaries, shall be
required to provide access to or to disclose information where such access or
disclosure would violate or prejudice the rights of its customers, jeopardize
the attorney-client or similar privilege with respect to such information or
contravene any law, rule, regulation, order, judgment, decree, fiduciary duty or
agreement entered into prior to the date hereof. The parties will use their
reasonable best efforts to make appropriate substitute disclosure arrangements,
to the extent practicable, in circumstances in which the restrictions of the
preceding sentence apply.
(B) It will not use any information obtained pursuant to this Section
5.05 for any purpose unrelated to the consummation of the transactions
contemplated by this Plan and, if this Plan is terminated, will hold all
information and documents obtained pursuant to this paragraph in confidence (as
provided in Section 8.06) unless and until such time as such information or
documents become publicly available other than by reason of any action or
failure to act by it or as it is advised by counsel that any such information or
document is required by applicable law to be disclosed.
(C) No investigation by any party of the business and affairs of other
parties hereto shall affect or be deemed to modify or waive any representation,
warranty, covenant or agreement in this Plan, or the conditions to any party's
obligation to consummate the transactions contemplated by this Plan.
Section 5.06 Acquisition Proposals. Neither Bancorp nor Skylands shall,
and each of them shall cause its respective subsidiaries and its and its
subsidiaries' officers and directors not to, solicit or encourage inquiries with
respect to, or engage in negotiations concerning, or provide any confidential
information or assistance to, or have any discussions with, any person relating
to, any tender offer or exchange offer for, or any proposal for the acquisition
of a substantial equity interest in, or a substantial portion of the assets or
deposits of, such party or any of its significant subsidiaries (each an
"Acquisition Proposal"). Notwithstanding the foregoing, each of Bancorp and
Skylands may, and may authorize and permit its officers, directors, agents,
advisors, attorneys, accountants and affiliates (collectively,
"Representatives") to, provide third parties with confidential information, have
discussions or negotiations with or otherwise facilitate any effort or attempt
by such third party to make or implement an Acquisition Proposal not solicited
in violation of this Plan if such party's Board of Directors, after having
consulted with and based upon the advice of outside counsel, determines in good
faith that the failure to take such actions could constitute a breach of the
fiduciary duties of such party's Board of Directors under applicable law;
provided, that such party shall promptly advise the other party following the
receipt of any Acquisition Proposal and the material details thereof; and
provided, further, that prior to delivery of confidential information relating
to such party or providing access to such party's books, records or properties
in connection therewith, such party shall have entered into a confidentiality
agreement. Nothing contained in this Section 5.06 shall prohibit the Board of
Directors of either party from complying with Rule 14e-2 promulgated under the
Exchange Act with regard to a tender offer or exchange offer. It shall instruct
its and its subsidiaries'
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Representatives to refrain from any violation of this Section 5.06.
Section 5.07 Affiliate Agreements. (A) Not later than the 15th day
prior to the mailing of the Joint Proxy Statement, Bancorp and Skylands shall
deliver to Acquisition Corp. a schedule of each person that, to the best of its
knowledge, is or is reasonably likely to be (i) in the case of Bancorp, as of
the date of the Bancorp Meeting, deemed to be an "affiliate" of Bancorp (each, a
"Bancorp Affiliate") as that term is used in Rule 145 under the Securities Act
or SEC Accounting Series Releases 130 and 135 and (ii) in the case of Skylands,
as of the date of the Skylands Meeting, deemed to be an "affiliate" of Skylands
(each, a "Skylands Affiliate").
(B) Bancorp and Skylands shall use their reasonable best efforts to
cause each person who may be deemed to be, in the case of Bancorp, a Bancorp
Affiliate, and, in the case of Skylands, a Skylands Affiliate to execute and
deliver to Acquisition Corp. on or before the date of mailing of the Joint Proxy
Statement an agreement in the form attached hereto as EXHIBIT E. Such Bancorp
Affiliates and Skylands Affiliates will not receive new stock certificates until
such agreement is delivered to Acquisition Corp.
Section 5.08 Certain Modifications; Restructuring Charges. Bancorp and
Skylands shall consult with respect to their loan, litigation and real estate
valuation policies and practices (including loan classifications and levels of
reserves) and Bancorp shall make such modifications or changes to its policies
and practices, if any, and at such date prior to the Effective Time, as may be
mutually agreed upon. Bancorp and Skylands shall also consult with respect to
the character, amount and timing of restructuring charges to be taken by each of
them in connection with the transactions contemplated hereby and shall take such
charges in accordance with generally accepted accounting principles, as may be
mutually agreed upon. No party's representations, warranties and covenants
contained in this Plan shall be deemed to be untrue or breached in any respect
for any purpose as a consequence of any modifications or changes to such
policies and practices which may be undertaken on account of this Section 5.08.
Section 5.09 Takeover Laws. No party hereto shall take any action that
would cause the transactions contemplated by this Plan or the Skylands Stock
Option Agreement or the Bancorp Stock Option Agreement to be subject to
requirements imposed by any Takeover Law and each of them shall take all
necessary steps within its control to exempt (or ensure the continued exemption
of) the transactions contemplated by this Plan from, or if necessary challenge
the validity or applicability of, any applicable Takeover Law, as now or
hereafter in effect.
Section 5.10 No Rights Triggered. Each of Bancorp and Skylands shall
take all necessary steps to ensure that the entering into of this Plan, the
Skylands Stock Option Agreement and the Bancorp Stock Option Agreement and the
consummation of the transactions contemplated hereby and thereby and any other
action or combination of actions, or any other transactions contemplated hereby
or thereby, do not and will not result in the grant of any rights to any person
(A) under its certificate of incorporation, charter or by-laws, or (B) under any
material agreement to which it or any of its subsidiaries is a party.
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Section 5.11 Shares Listed. In the case of Acquisition Corp.,
Acquisition Corp. shall use its reasonable best efforts (and Bancorp and
Skylands shall cause Acquisition Corp. to use its reasonable best efforts) to
list, prior to the Effective Date, on Nasdaq, upon official notice of issuance,
the shares of Acquisition Corp. Common Stock to be issued to the holders of
Bancorp Common Stock in the Corporate Merger and to the holders of Skylands
Common Stock in the Bank Merger.
Section 5.12 Regulatory Applications. (A) Each party shall promptly (i)
cause Little Falls, in the case of Bancorp, to adopt and approve the
transactions contemplated by this Plan, (ii) prepare and submit applications to
the appropriate Regulatory Authorities and (iii) make all other appropriate
filings to secure all other approvals, consents and rulings, which are necessary
for it to consummate the Mergers.
(B) Each of Bancorp and Skylands agrees to cooperate with the other
(and to cause Acquisition Corp. to co-operate) and, subject to the terms and
conditions set forth in this Plan, use its reasonable best efforts (and cause
Acquisition Corp. to use its reasonable best efforts) to prepare and file all
necessary documentation, to effect all necessary applications, notices,
petitions, filings and other documents, and to obtain all necessary permits,
consents, orders, approvals and authorizations of, or any exemption by, all
third parties and Regulatory Authorities necessary or advisable to consummate
the transactions contemplated by this Plan, including without limitation the
regulatory approvals referred to in Section 6.02. Each of Bancorp and Skylands
shall have the right to review in advance, and to the extent practicable each
will consult with the other, in each case subject to applicable laws relating to
the exchange of information, with respect to all material written information
submitted to, any third party or any Regulatory Authorities in connection with
the transactions contemplated by this Plan. In exercising the foregoing right,
each of the parties hereto agrees to act reasonably and as promptly as
practicable. Each party hereto agrees that it will consult with the other
parties hereto with respect to the obtaining of all material permits, consents,
approvals and authorizations of all third parties and Regulatory Authorities
necessary or advisable to consummate the transactions contemplated by this Plan
and each party will keep the other parties apprised of the status of material
matters relating to completion of the transactions contemplated hereby.
(C) Each party agrees, upon request, to furnish the other parties with
all information concerning itself, its subsidiaries, directors, officers and
stockholders and such other matters as may be reasonably necessary or advisable
in connection with any filing, notice or application made by or on behalf of
such other party or any of its subsidiaries to any Regulatory Authority.
Section 5.13 Indemnification. (A) After the Effective Time, Acquisition
Corp. shall indemnify, defend and hold harmless the present and former
directors, officers and employees of Bancorp and Skylands and their respective
subsidiaries (each, an "Indemnified Party") against all costs or expenses
(including reasonable attorneys' fees), judgments, fines, losses, claims,
damages or liabilities (collectively, "Costs") incurred in connection with any
claim, action, suit, proceeding or investigation, whether civil, criminal,
administrative or investigative, arising out of actions or omissions occurring
at or prior to the Effective Time (including, without limitation, the
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transactions contemplated by this Plan) to the fullest extent that such persons
are permitted to be indemnified under the laws of the State of New Jersey and
Bancorp's and Skylands' (as the case may be) certificate of incorporation and
by-laws as in effect on the date hereof (and during such period Acquisition
Corp. shall also advance expenses (including expenses constituting Costs
described in Section 5.13(E)) as incurred to the fullest extent permitted under
applicable law, provided that the person to whom expenses are advanced provides
an undertaking to repay such advances if it is ultimately determined that such
person is not entitled to indemnification with no bond or security to be
required); provided that any determination required to be made with respect to
whether an officer's, director's or employee's conduct complies with the
standards set forth under New Jersey law and such certificate of incorporation
and by-laws shall be made by independent counsel (which shall not be counsel
that provides material services to Acquisition Corp.) selected by Acquisition
Corp. and reasonably acceptable to such officer, director or employee.
Acquisition Corp.'s obligations under this Section 5.13(A) shall continue in
full force and effect for a period of six years after the Effective Date;
provided that all rights to indemnification in respect of any claim, action,
suit, proceeding or investigation made, asserted or commenced within such six
year period shall continue until the final disposition of such claim, action,
suit, proceeding or investigation.
(B) Acquisition Corp. shall maintain Bancorp's and Skylands' existing
directors' and officers' liability insurance policy (or a policy providing
comparable coverage and amounts on terms no less favorable to the persons
currently covered by Bancorp's existing policy, including Acquisition Corp.'s
existing policy if it meets the foregoing standard) covering persons who are
currently covered by such insurance for a period of three years after the
Effective Date.
(C) Any Indemnified Party wishing to claim indemnification under
Section 5.13(A), upon learning of any claim, action, suit, proceeding or
investigation described above, shall promptly notify Acquisition Corp. thereof;
provided that the failure so to notify shall not affect the obligations of
Acquisition Corp. under Section 5.13(A) unless and to the extent such failure
materially increases Acquisition Corp.'s liability under such subsection (A).
(D) If Acquisition Corp. or any of its successors or assigns shall
consolidate with or merge into any other entity and shall not be the continuing
or surviving entity of such consolidation or merger or shall transfer all or
substantially all of its assets to any entity, then and in each case, proper
provision shall be made so that the successors and assigns of Acquisition Corp.
shall assume the obligations set forth in this Section 5.13.
(E) Acquisition Corp. shall pay all reasonable Costs, including
attorneys' fees, that may be incurred by any Indemnified Party in enforcing the
indemnity and other obligations provided for in this Section 5.13. The rights of
each Indemnified Party hereunder shall be in addition to any other rights such
Indemnified Party may have under applicable law.
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Section 5.14 Benefit Plans.
(A) Little Falls ESOP. As of the Effective Date, the Little Falls ESOP
shall be terminated in accordance with its provisions. Prior to the Effective
Date, Little Falls may make a final cash contribution to the ESOP in accordance
with the historic contribution rate. Notwithstanding the foregoing, Little Falls
shall make such amendments to the Little Falls ESOP as deemed appropriate to
effectuate the purposes of the Little Falls ESOP and this Section of this Plan.
(B) Restricted Stock Plans and Director Retirement Plan. As of the
Effective Date, the Bancorp Restricted Stock Plan, the Little Falls Restricted
Stock Plan and the Bancorp Director Retirement Plan will be accelerated and/or
terminated. The parties agree that the benefits under such plans will become
vested and payable to the participants, as Previously Disclosed, as of the
Effective Date.
(C) Little Falls Director Health Benefit Plan and Other Plans. The
Bancorp Director Health Benefit Plan shall continue in existence and the
obligations of such plan (including post-retirement benefits) shall be assumed
by Acquisition Corp. Except for the foregoing, before the Effective Date,
Bancorp will terminate all compensation and Benefit Plans maintained by Bancorp
or Little Falls.
(D) Other Benefit Plans. As of the Closing Date, the employees of
Bancorp, Little Falls and Skylands shall be entitled to participate in the
employee benefit plans of Skylands and Acquisition Corp. with such employees and
dependents eligible to participate or continue to participate in the medical
insurance plans of Skylands without regard to any pre-existing conditions or
exclusions and with no uninsured waiting periods, and the carry over of all
current plan year deductibles and annual out-of-pocket contribution. As of the
Closing Date, the employees of Bancorp and Little Falls shall participate in the
Continuing Bank's defined contribution plan and similar plans on the same terms
and conditions as employees of Skylands and giving effect to prior years of
service with the Bancorp and Little Falls as if such service were with Skylands,
for purposes of eligibility to participate and vesting, but not for benefit
accrual purposes. As of the Closing Date, all participants under the Little
Falls defined benefit plan and the defined contribution plan shall become 100%
vested in all accrued benefits and participant accounts. With respect to the
Skylands' welfare benefit plans (including by example, vacation, sick leave,
severance), as of the Closing Date the Little Falls employees shall have prior
service with Little Falls recognized for purposes of eligibility to participate,
vesting and benefits accrual purposes.
Section 5.15 Accountants' Letters. Each of Bancorp and Skylands shall
use its reasonable best efforts to cause to be delivered to Acquisition Corp.
and the other party and to Acquisition Corp.'s directors and officers who sign
the Registration Statement, a letter of Radics & Co., LLC and Arthur Andersen,
respectively, independent auditors, dated (i) the date on which the Registration
Statement shall become effective and (ii) the Effective Date, and addressed to
such other party, and such directors and officers, in form and substance
customary for "comfort"
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letters delivered by independent accountants in accordance with Statement on
Auditing Standards No. 72.
Section 5.16 Dividend Coordination. The Skylands Board shall cause its
regular semi- annual dividend record dates and payment dates for Skylands Common
Stock to be the same as Bancorp's regular quarterly dividend record dates and
payment dates for Bancorp Common Stock (beginning in the quarter following the
quarter in which this Plan is executed), and Skylands shall not thereafter
change its regular dividend payment dates and record dates.
Section 5.17 Notification of Certain Matters. Each of Bancorp, Skylands
and Acquisition Corp. shall give prompt notice to the other of any fact, event
or circumstance known to it that (i) is reasonably likely, individually or taken
together with all other facts, events and circumstances known to it, to result
in any Material Adverse Effect with respect to it or (ii) would cause or
constitute a material breach of any of its representations, warranties,
covenants or agreements contained herein.
Section 5.18. Employment Contracts/Retainers. Further, Acquisition
Corp. shall, or shall cause the appropriate Acquisition Corp. Subsidiary to,
perform after the Effective Time of the obligations of Bancorp, Skylands or the
appropriate Bancorp or Skylands Subsidiary under the terms of the employment
agreements existing as of the date hereof which are between Bancorp or a Bancorp
Subsidiary, on the one hand, and management employees of Bancorp or a Bancorp
Subsidiary, on the other hand, or between Skylands or a Skylands Subsidiary, on
the other hand, and management employees of Skylands or a Skylands Subsidiary,
on the other hand, which have been Previously Disclosed including Leonard
Romaine, Richard Capone, Denise Hopper, Anne Bracchitta, Michael Halpin, Bruce
Schott and Dan Marcmann and which by their terms survive the Effective Time,
provided, however, Bancorp or Little Falls shall make payments due as of or
prior to the Effective Time to individuals terminating employment as of the
Effective Time. Further, prior to the Effective Time, Little Falls and Skylands
may renew the term of such employment agreements for a period not to exceed 36
months from the Effective Time. The Chairmen of the Boards of Acquisition Corp.
and the Continuing Bank will initially receive an annual retainer equal to the
amount of the annual retainer received by the Chairman of the Board of Skylands
as of the date of this Agreement.
Section 5.19. Reissuance of Stock. Bancorp and Skylands shall take such
actions as are necessary to reissue an amount of Bancorp Common Stock as
necessary to qualify the Mergers as a pooling of interests transactions.
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<PAGE>
ARTICLE VI
CONDITIONS TO CONSUMMATION OF THE MERGERS
The obligations of each of the parties to consummate the Mergers is
conditioned upon the satisfaction at or prior to the Effective Time of each of
the following:
Section 6.01 Stockholder Vote. Approval of (i) this Plan by the
requisite vote of the stockholders of Bancorp, and (ii) this Plan by the
requisite vote of the stockholders of Skylands.
Section 6.02 Regulatory Approvals. Procurement by Acquisition Corp.,
Bancorp and Skylands of all requisite approvals and consents of Regulatory
Authorities and the expiration of the statutory waiting period or periods
relating thereto for the Mergers; provided, however, that no such approval or
consent shall have imposed any condition or requirement (other than conditions
or requirements Previously Disclosed) which would so materially and adversely
impact the economic or business benefits to Acquisition Corp., Bancorp or
Skylands of the transactions contemplated by this Plan that, had such condition
or requirement been known, such party would not, in its reasonable judgment,
have entered into this Plan.
Section 6.03 Third Party Consents. All consents or approvals of all
persons (other than Regulatory Authorities) required for the consummation of the
Mergers shall have been obtained and shall be in full force and effect, unless
the failure to obtain any such consent or approval is not reasonably likely to
have, individually or in the aggregate, a Material Adverse Effect on Bancorp,
Skylands or Acquisition Corp.
Section 6.04 No Injunction, Regulatory Action, etc.. No order, decree
or injunction of any court or agency of competent jurisdiction shall be in
effect, and no law, statute or regulation shall have been enacted or adopted,
that enjoins, prohibits or makes illegal consummation of the Mergers. No party
shall have received any "cease and desist" or similar order from any regulatory
agency (whether or not Previously Disclosed) that, in the reasonable opinion of
any party to this Agreement, could reasonably be expected to have a Material
Adverse Effect on Little Falls or Skylands, as the case may be.
Section 6.05 Representations, Warranties and Covenants of Acquisition
Corp. (i) Each of the representations and warranties contained herein of
Acquisition Corp. shall be true and correct as of the date of this Plan and upon
the Effective Date with the same effect as though all such representations and
warranties had been made on the Effective Date, except for any such
representations and warranties made as of a specified date, which shall be true
and correct as of such date, in any case subject to the standards established by
Section 4.02, (ii) each and all of the agreements and covenants of Acquisition
Corp. to be performed and complied with pursuant to this Plan on or prior to the
Effective Date shall have been duly performed and complied with in all material
respects, and (iii) Bancorp and Skylands shall have received a certificate
signed by the Chief Financial Officer of Acquisition Corp., dated the Effective
Date, to the effect set forth in clauses (i) and (ii).
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<PAGE>
Section 6.06 Representations, Warranties and Covenants of Bancorp. In
the case of Skylands (i) each of the representations and warranties contained
herein of Bancorp shall be true and correct as of the date of this Plan and upon
the Effective Date with the same effect as though all such representations and
warranties had been made on the Effective Date, except for any such
representations and warranties made as of a specified date, which shall be true
and correct as of such date, in any case subject to the standards established by
Section 4.02, (ii) each and all of the agreements and covenants of Bancorp to be
performed and complied with pursuant to this Plan on or prior to the Effective
Date shall have been duly performed and complied with in all material respects,
and (iii) Acquisition Corp. and Skylands shall have received a certificate
signed by the Chief Financial Officer of Bancorp, dated the Effective Date, to
the effect set forth in clauses (i) and (ii).
Section 6.07 Representations, Warranties and Covenants of Skylands. In
the case of Bancorp (i) each of the representations and warranties contained
herein of Skylands shall be true and correct as of the date of this Plan and
upon the Effective Date with the same effect as though all such representations
and warranties had been made on the Effective Date, except for any such
representations and warranties made as of a specified date, which shall be true
and correct as of such date, in any case subject to the standards established by
Section 4.02, (ii) each and all of the agreements and covenants of Skylands to
be performed and complied with pursuant to this Plan on or prior to the
Effective Date shall have been duly performed and complied with in all material
respects, and (iii) Bancorp and Skylands shall have received a certificate
signed by the Chief Executive Officer and Chief Financial Officer of Skylands
(with respect to Skylands) and Bancorp (with respect to Bancorp), dated the
Effective Date, to the effect set forth in clauses (i) and (ii).
Section 6.08 Effective Registration Statement. The Registration
Statement shall have become effective and no stop order suspending the
effectiveness of the Registration Statement shall have been issued and no
proceedings for that purpose shall have been initiated or threatened by the SEC
or any other Regulatory Authority.
Section 6.09 Regulatory Approvals. The parties shall have received the
necessary approvals, non-objections or waivers from the appropriate Regulatory
Authorities to complete the Mergers.
Section 6.10 Blue-Sky Laws. Acquisition Corp. shall have complied with
all applicable state securities laws and "blue sky" laws necessary to consummate
the Mergers.
Section 6.11 Tax Opinions. Acquisition Corp., Bancorp and Skylands
shall have received an opinion from Malizia, Spidi, Sloane & Fisch, P.C.,
special tax counsel to Acquisition Corp., to the effect that (a) the Mergers
constitute reorganizations under Section 368(a) of the Code, and (b) no gain or
loss will be recognized by stockholders of Bancorp and Skylands who receive
shares of Acquisition Corp. Common Stock solely in exchange for their shares of
Bancorp Common Stock and Skylands Common Stock, respectively, except that gain
or loss may be recognized as to cash received in lieu of fractional share
interests; in rendering its opinion, such
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<PAGE>
counsel may require and rely upon representations and agreements, including
those contained in certificates of officers of Acquisition Corp., Bancorp,
Skylands and others.
Section 6.12 Accounting Opinions. Bancorp and Skylands shall have
received a letter, in the form and substance reasonably satisfactory to Bancorp
and Skylands, from an independent accounting firm acceptable to Skylands and
Little Falls, dated the date of the Proxy Statement and confirmed in writing at
the Effective Time, stating that the Mergers will qualify as a pooling of
interests transaction under Opinion 16 of the Accounting Principles Board, the
interpretive releases issued pursuant thereto and the pronouncements of the SEC
thereon.
Section 6.13 Nasdaq Listing. The shares of Acquisition Corp. Common
Stock issuable pursuant to this Plan shall have been approved for listing on
Nasdaq, subject to official notice of issuance; provided, however, that a
failure to satisfy any of the conditions set forth in Section 6.07 shall only
constitute conditions if asserted by Acquisition Corp. or Bancorp, and a failure
to satisfy any of the conditions set forth in Section 6.06 shall only constitute
conditions if asserted by Acquisition Corp. or Skylands, and a failure to
satisfy any of the conditions set forth in Section 6.05 shall only constitute
conditions if asserted by Bancorp or Skylands.
Section 6.14 Affiliate Agreements. Each Person who may be at the
Effective Time or was on the date of this Agreement an "affiliate" of Bancorp
and Skylands for purposes of Rule 145 under the Securities Act or for
determining the qualification of the Mergers as a pooling of interest for
accounting and financial reporting purposes shall have executed and delivered to
Acquisition Corp., at least 45 days prior to the date of their respective
meetings to approve the Mergers, the written undertakings in the form attached
hereto as Exhibit E.
Section 6.15 Fairness Opinions. (a) The Board of Directors of Bancorp
shall have received an opinion at the time of the mailing of the Joint Proxy
Statement to the Bancorp shareholders from FinPro, Inc., to the effect that as
of the day of the mailing of the Joint Proxy Statement that the consideration to
be received by the holders of Bancorp Common Stock in the Corporate Merger is
fair to such holders from a financial point of view.
(b) The Board of Directors of Skylands shall have received an opinion
at the time of the mailing of the Joint Proxy Statement to the Skylands
shareholders from Sandler O'Neill & Partners, L.P., to the effect that as of the
day of the mailing of the Joint Proxy Statement that the consideration to be
received by the holders of Skylands Common Stock in the Corporate Merger is fair
to such holders from a financial point of view.
Section 6.16 Corporate Merger. In the case of the Bank Merger, the
Corporate Merger shall have become effective.
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ARTICLE VII
TERMINATION
Section 7.01 Termination. This Plan may be terminated, and the Mergers
may be abandoned:
(A) Mutual Consent. At any time prior to the Effective Time, by the
mutual consent of Acquisition Corp., Bancorp and Skylands, if the Board of
Directors of each so determines by vote of a majority of the members of its
entire Board.
(B) Breach. At any time prior to the Effective Time, by Bancorp or
Skylands, if its Board of Directors so determines by vote of a majority of the
members of its entire Board, in the event of either: (i) a breach by any other
party of any representation or warranty contained herein (subject to the
standards established by Section 4.02), which breach cannot be or has not been
cured within 30 days after the giving of written notice to the breaching party
of such breach; or (ii) a material breach by any other party of any of the
covenants or agreements contained herein, which breach cannot be or has not been
cured within 30 days after the giving of written notice to the breaching party
of such breach; provided that neither Bancorp nor Skylands may terminate this
Plan pursuant to this Section 7.01(B) at any time when such party is in material
breach of any representation, warranty, covenant or other agreement of such
party contained herein.
(C) Delay. At any time prior to the Effective Time, by Acquisition
Corp., Bancorp or Skylands, if its Board of Directors so determines by vote of a
majority of the members of its entire Board, in the event that the Mergers are
not consummated by June 30, 1999, except to the extent that the failure of the
Mergers then to be consummated arises out of or results from the knowing failure
of the party seeking to terminate pursuant to this Section 7.01(C) to perform or
observe the covenants and agreements of such party set forth herein.
(D) No Approval. By Bancorp or Skylands, if its Board of Directors so
determines by a vote of a majority of the members of its entire Board, in the
event (i) the consent of the Board of Governors of the Federal Reserve System
for consummation of the Mergers shall have been denied by final nonappealable
action of such Regulatory Authority or (ii) the consent of the New Jersey
Department of Banking and Insurance for consummation of the Mergers shall have
been denied by final nonappealable action of such Regulatory Authority or (iii)
the consent of the FDIC for consummation of the Mergers shall have been denied
by final nonappealable action of such Regulatory Authority or (iv) any
stockholder approval required by Section 6.01 herein is not obtained at the
Bancorp Meeting or the Skylands Meeting.
(E) Failure to Recommend, etc.. At any time prior to the Bancorp
Meeting, by Acquisition Corp. or Skylands if the Board of Directors of Bancorp
shall have failed to make its recommendation referred to in Section 5.02,
withdrawn such recommendation or modified or changed such recommendation in a
manner adverse to the interests of Acquisition Corp. and Skylands; or at any
time prior to the Skylands Meeting, by Acquisition Corp. or Bancorp if the
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<PAGE>
Board of Directors of Skylands shall have failed to make its recommendation
referred to in Section 5.02, withdrawn such recommendation or modified or
changed such recommendation in a manner adverse to the interests of Acquisition
Corp. and Bancorp.
(F) Acquisition Transactions. By Skylands if, without breaching Section
5.06, Skylands shall have entered into a definitive agreement with a third party
providing for an Acquisition Transaction (as defined in Section 8.08) on terms
determined by the Board of Directors of Skylands, in its sole discretion, after
consultation with and considering the advice of its legal and financial
advisors, to be more favorable to the stockholders of Skylands than the Mergers,
and by Bancorp if, without breaching Section 5.06, Bancorp shall have entered
into a definitive agreement with a third party providing for an Acquisition
Transaction on terms determined by the Board of Directors of Bancorp, in its
sole discretion, after consultation with and considering the advice of its legal
and financial advisors, to be more favorable to the stockholders of Bancorp than
the Mergers.
(G) Possible Termination. By Skylands, if its Board of Directors so
determines at any time during the ten-day period commencing two days after the
Determination Date, if both of the following conditions are satisfied:
(1) the Average Closing Price shall be less than the product
of .75 and the Starting Price; and
(2) (i) the number obtained by dividing the Average Closing
Price on such Determination Date by the Starting Price shall
be less than (ii) the Index Ratio.
Subject, however, to the following: If Skylands elects to exercise its
termination right pursuant to the immediately preceding sentence, it shall give
prompt written notice to Bancorp; provided that such notice of election to
terminate may be withdrawn at any time within the aforementioned ten-day period
and provided further that during such ten-day period the parties may mutually
agree on an adjustment to the Skylands Exchange Ratio, whereupon such election
to terminate shall be without force and effect. For purposes of this Section
7.01(G), the following terms shall have the meanings indicated:
"Average Closing Price" means the average of the daily last sale prices
of Bancorp Common Stock as reported on the Nasdaq for the fifteen consecutive
full trading days in which such shares are traded on Nasdaq ending at the close
of trading on the Determination Date.
"Average Index Price" means the arithmetic mean (carried to four
decimal places) of the Index Prices for fifteen (15) days ending on (and
including) the fifth trading day immediately preceding the Determination Date.
"Determination Date" means the date on which Acquisition Corp. receives
approval of the Federal Reserve Board required for consummation of the Corporate
Merger.
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"Index Group" means the group of each of the 16 companies listed below,
the common stock of all of which shall be publicly traded and as to which there
shall not have been, since the Starting Date and before the Determination Date,
an announcement of a proposal for such company to be acquired or for such
company to acquire another company or companies in transactions with a value
exceeding 25% of the acquiror's market capitalization as of the Starting Date.
In the event that the common stock of any such company ceases to be publicly
traded or any such announcement is made with respect to any such company, such
company will be removed from the Index Group, and the weights (which have been
determined based on the number of outstanding shares of common stock)
redistributed proportionately for purposes of determining the Index Price. The
16 companies and the weights attributed to them are as follows:
<TABLE>
<CAPTION>
Common Shares
Outstanding
(Actual)
as of June 30,
--------------
Ticker Short Name State 1998 Weight
- ------ ---------- ----- ---- ------
<S> <C> <C> <C> <C>
AVND Avondale Financial Corp. IL 3,059,566 4.61%
CASB Cascade Financial Corp. WA 4,265,624 6.87%
CASH First Midwest Financial IA 2,614,471 5.32%
Inc.
COOP Cooperative Bankshares NC 3,027,440 4.96%
Inc.
CVAL Chester Valley Bancorp PA 2,184,753 6.93%
Inc.
EFBI Enterprise Federal Bancorp OH 2,210,996 6.80%
FBER 1st Bergen Bancorp NJ 2,729,435 5.19%
FLAG FLAG Financial Corp. GA 4,573,911 8.16%
FMBD First Mutual Bancorp Inc. IL 3,530,570 6.30%
GFCO Glenway Financial Corp. OH 2,282,494 5.13%
HBFW Home Bancorp IN 2,351,021 7.02%
MBBC Monterey Bay Bancorp Inc. CA 3,957,768 6.87%
MSBK Mutual Savings Bank FSB MI 4,289,914 4.65%
PERM Permanent Bancorp Inc. IN 4,102,094 5.96%
PFNC Progress Financial Corp. PA 5,245,800 9.49%
WOFC Western Ohio Financial OH 2,352,236 5.75%
--------- ----
Corp.
52,778,093 100.00%
</TABLE>
"Index Price" on a given date means the weighted average (weighted in
accordance with the factors listed above) of the closing prices of the companies
composing the Index Group.
"Index Ratio" means the number equal to the product of (x) the quotient
(carried to four decimal places) obtained by dividing (A) the Average Index
Price by (B) the Index Price on the Starting Date, and (y) .90.
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"Starting Date" means the date prior to the date of this Agreement.
"Starting Price" shall mean the average closing price per share of
Bancorp Common Stock on the 60 trading days prior to the date of this Agreement,
as reported by Nasdaq.
If any company belonging to the Index Group or Bancorp declares or
effects a stock dividend, reclassification, recapitalization, split-up,
combination, exchange of shares or similar transaction between the Starting Date
and the Determination Date, the prices for the common stock of such company or
Bancorp shall be appropriately adjusted for the purposes of applying this
Section 7.01(G).
Section 7.02 Effect of Termination and Abandonment. In the event of
termination of this Plan and the abandonment of the Mergers pursuant to this
ARTICLE VII, no party to this Plan shall have any liability or further
obligation to any other party hereunder except (i) as set forth in Section 8.01,
(ii) that the Skylands Stock Option Agreement and the Bancorp Stock Option
Agreement shall be governed by their terms as to termination, and (iii) that
termination will not relieve a breaching party from liability for any willful
breach of this Plan giving rise to such termination.
ARTICLE VIII
OTHER MATTERS
Section 8.01 Survival. All representations, warranties, agreements and
covenants contained in this Plan shall not survive the Effective Time or
termination of this Plan if this Plan is terminated prior to the Effective Time;
provided, however, if the Effective Time occurs, the agreements of the parties
in Sections 5.13, 5.14, 8.01, 8.04 and 8.09 shall survive the Effective Time,
and if this Plan is terminated prior to the Effective Time, the agreements of
the parties in Sections 5.05(B), 7.02, 8.01, 8.02, 8.04, 8.05, 8.06, 8.07 and
8.09, shall survive such termination.
Section 8.02 Waiver; Amendment. Prior to the Effective Time, any
provision of this Plan may be (i) waived by the party benefited by the
provision, or (ii) amended or modified at any time, by an agreement in writing
among the parties hereto approved by their respective Boards of Directors and
executed in the same manner as this Plan, except that, after the Bancorp Meeting
the consideration to be received by the stockholders of Bancorp for each share
of Bancorp Common Stock shall not thereby be decreased and after the Skylands
Meeting the consideration to be received by the stockholders of Skylands for
each share of Skylands Common Stock shall not thereby be decreased.
Section 8.03 Counterparts. This Plan may be executed in one or more
counterparts, each of which shall be deemed to constitute an original.
Section 8.04 Governing Law. This Plan shall be governed by, and
interpreted in
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<PAGE>
accordance with, the laws of the State of New Jersey, without regard to the
conflict of law principles thereof.
Section 8.05 Expenses. Each party hereto will bear all expenses
incurred by it in connection with this Plan and the transactions contemplated
hereby, except that printing expenses and SEC filing fees shall be shared
equally between Bancorp, Skylands and Acquisition Corp..
Section 8.06 Confidentiality. Except as otherwise provided in Section
5.05(B), each of the parties hereto and their respective agents, attorneys and
accountants will maintain the confidentiality of all information provided in
connection herewith which has not been publicly disclosed (other than by any
party in violation of this Plan) unless and until it is advised by counsel that
any such information or document is required by applicable law to be disclosed.
Section 8.07 Notices. All notices, requests and other communications
hereunder to a party shall be in writing and shall be deemed given if personally
delivered, telecopied (with confirmation) or mailed by registered or certified
mail (return receipt requested) to such party at its address set forth below or
such other address as such party may specify by notice to the parties hereto.
If to Acquisition Corp., to:
Acquisition Corp.
86 Main Street
Little Falls, New Jersey 07424
Attention: Albert J. Weite, Chairman
Michael Halpin, President
Telecopier: (973) 256-6709
(908) 850-8525
With copies to:
Samuel J. Malizia, Esq.
Malizia, Spidi, Sloane & Fisch, P.C.
1301 K Street, N.W., Suite 700 East
Washington, D.C. 20005
Telecopier: (202) 434-4661
Todd M. Poland, Esq.
McCarter & English, LLP
100 Mulberry Street
Newark, New Jersey 07102
Telecopier: (973) 624-7070
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<PAGE>
If to Bancorp, to:
Little Falls Bancorp, Inc.
86 Main Street
Little Falls, New Jersey 07424
Attention: Albert J. Weite
Chairman
Telecopier: (973) 256-6709.
With a copy to:
Samuel J. Malizia, Esq.
Malizia, Spidi, Sloane & Fisch, P.C.
1301 K Street, N.W., Suite 700 East,
Washington, D.C. 20005
Telecopier: (202) 434-4661
If to Skylands, to:
Skylands Community Bank
24-26 Crossroads Center
P.O. Box 507
Hackettstown, New Jersey 07840
Attention: Michael Halpin
President and Chief Executive Officer
Telecopier: (908) 850-8525.
With a copy to:
Todd M. Poland, Esq.
McCarter & English, LLP
100 Mulberry Street
Newark, New Jersey 07102
Telecopier: (973) 624-7070.
Section 8.08 Definitions. Any term defined anywhere in this Plan shall
have the meaning ascribed to it for all purposes of this Plan (unless expressly
noted to the contrary). In addition:
(A) The term "Acquisition Transaction" shall mean (1) a merger or
consolidation, or similar transaction, involving Bancorp or Skylands or any of
their respective significant subsidiaries, (2) a purchase, lease or other
acquisition of all of the assets or deposits of Bancorp or Skylands or any of
their respective significant subsidiaries or (3) a purchase or other acquisition
(including by way of merger, consolidation, share exchange or otherwise) of
securities representing 25% or more of the voting power of Bancorp or Skylands
or any of their respective
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significant subsidiaries, in each case other than with or by Skylands (in the
case of an Acquisition Transaction to which Bancorp or a significant subsidiary
of Bancorp is a party) or Bancorp (in the case of an Acquisition Transaction to
which Skylands or a significant subsidiary of Skylands is a party).
(B) The term "Material Adverse Effect" shall mean, with respect to
Bancorp, Skylands, or Acquisition Corp., respectively, any effect that (i) is
material and adverse to the financial position, results of operations or
business of Bancorp and its subsidiaries taken as a whole, or Skylands and its
subsidiaries taken as a whole, or Acquisition Corp. and its subsidiaries taken
as a whole, respectively, or (ii) materially impairs the ability of Bancorp,
Skylands or Acquisition Corp., respectively, to perform its obligations under
this Plan or the consummation of the Mergers and the other transactions
contemplated by this Plan; provided, however, that Material Adverse Effect shall
not be deemed to include the impact of (a) changes in banking and similar laws
of general applicability or interpretations thereof by courts or governmental
authorities, (b) changes in generally accepted accounting principles or
regulatory accounting requirements applicable to banks and bank holding
companies generally, (c) actions or omissions of Bancorp, Skylands or
Acquisition Corp. taken with the prior consent of Bancorp, Skylands or
Acquisition Corp., as applicable, in contemplation of the transactions
contemplated hereby, and (d) the effects of the Mergers and of the actions
contemplated by Section 5.08, 5.14 or ARTICLE III;
(C) The term "person" shall mean any individual, bank, savings
association, corporation, partnership, association, joint-stock company,
business trust or unincorporated organization;
(D) The term "Previously Disclosed" by a party shall mean information
set forth in its Disclosure Schedule that is delivered by that party to the
other parties prior to the execution of this Plan and specifically designated as
information "Previously Disclosed" pursuant to this Plan or set forth in its, in
the case of Bancorp, SEC Documents filed with the SEC, or, in the case of
Skylands, its FDIC Documents filed with the FDIC, prior to the date hereof;
(E) The term "Rights" means, with respect to any person, securities or
obligations convertible into or exchangeable for, or giving any person any right
to subscribe for or acquire, or any options, calls or commitments relating to,
shares of capital stock of such person; and
(F) The terms "subsidiary" and "significant subsidiary" shall have the
meanings set forth in Rule 1-02 of Regulation S-X of the SEC.
Section 8.09 Entire Understandings; No Third Party Beneficiaries. This
Plan and the Skylands Stock Option Agreement and the Bancorp Stock Option
Agreement and the schedules attached hereto together represent the entire
understanding of the parties hereto with reference to the transactions
contemplated hereby and thereby and supersede any and all other oral or written
agreements heretofore made. Except for Sections 5.13 and 5.18, nothing in this
Plan, expressed or implied, is intended to confer upon any person, other than
the parties hereto or their respective successors, any rights, remedies,
obligations or liabilities under or by reason of this Plan. The provisions of
Section 5.13 are intended to be for the benefit of and shall be enforceable by
each
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Indemnified Party. The provisions of Section 5.18 are intended to be for the
benefit of and shall be enforceable by the persons named therein.
Section 8.10 Headings. The headings contained in this Plan are for
reference purposes only and are not part of this Plan.
40
EXHIBIT 99.1
<PAGE>
SKYLANDS STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated as of August 12, 1998, between Little
Falls Bancorp, Inc., a New Jersey corporation ("Grantee" or "Bancorp"), and
Skylands Community Bank, a New Jersey chartered commercial bank ("Issuer" or
"Skylands").
RECITALS
A. Grantee and Issuer have entered into an Agreement and Plan of
Reorganization and Mergers (the "Merger Agreement").
B. As an inducement to the willingness of Grantee to continue to pursue
the transactions contemplated by the Merger Agreement, Issuer has agreed to
grant Grantee the Option (as hereinafter defined).
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements set forth herein and in the Merger Agreement, the
parties hereto agree as follows:
1. Issuer hereby grants to Grantee an unconditional, irrevocable option
(the "Option") to purchase, subject to the terms hereof, up to an aggregate of
468,530 fully paid and nonassessable shares of the common stock, par value $2.50
per share, of Issuer ("Common Stock") at a price per share equal to $15.00 (such
price, as adjusted if applicable, the "Option Price"); provided, however, that
in no event shall the number of shares for which this Option is exercisable
exceed 19.9% of the issued and outstanding shares of Common Stock prior to the
exercise of the Option. The number of shares of Common Stock that may be
received upon the exercise of the Option and the Option Price are subject to
adjustment as herein set forth.
2. (a) The Holder (as hereinafter defined) may exercise the Option, in
whole or part, if, but only if, both an Initial Triggering Event (as hereinafter
defined) and a Subsequent Triggering Event (as hereinafter defined) shall have
occurred prior to the occurrence of an Exercise Termination Event (as
hereinafter defined), provided that the Holder shall have sent the written
notice of such exercise (as provided in subsection (e) of this Section 2) within
three (3) months following the first Subsequent Triggering Event to occur (or
such later period as provided in Section 10). Each of the following shall be an
Exercise Termination Event: (i) the Effective Time of the Mergers; (ii)
termination of the Merger Agreement in accordance with the provisions thereof if
such termination occurs prior to the occurrence of an Initial Triggering Event
except a termination by Grantee pursuant to Section 7.01(B) as a result of a
willful breach by Issuer of Section 7.01(D)(iv) or Section 7.01(E) of the Merger
Agreement (each, a "Listed Termination"); or (iii) the passage of eighteen (18)
months (or such longer period as provided in Section 10) after termination of
the Merger Agreement if such termination follows the occurrence of an Initial
Triggering Event or is a Listed Termination. The term "Holder" shall mean the
holder or holders of the Option.
(b) The term "Initial Triggering Event" shall mean any of the following
events or transactions occurring on or after the date hereof:
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(i) Issuer or its Significant Subsidiary (as defined in Rule
1-02 of Regulation S-X promulgated by the Securities and Exchange
Commission (the "SEC")) (the "Issuer Subsidiary"), without having
received Grantee's prior written consent, shall have entered into an
agreement to engage in an Acquisition Transaction (as hereinafter
defined) with any person (the term "person" for purposes of this
Agreement having the meaning assigned thereto in Sections 3(a)(9) and
13(d)(3) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and the rules and regulations thereunder) other than
Grantee or any of its Subsidiaries (each a "Grantee Subsidiary") or the
Board of Directors of Issuer (the "Issuer Board") shall have
recommended that the shareholders of Issuer approve or accept any
Acquisition Transaction other than the Mergers (as that term is defined
in the Merger Agreement). For purposes of this Agreement, "Acquisition
Transaction" shall mean (1) a merger or consolidation, or similar
transaction, involving Bancorp or Skylands or any of their respective
significant subsidiaries, (2) a purchase, lease or other acquisition of
all of the assets or deposits of Bancorp or Skylands or any of their
respective significant subsidiaries or (3) a purchase or other
acquisition (including by way of merger, consolidation, share exchange
or otherwise) of securities representing 25% or more of the voting
power of Bancorp or Skylands or any of their respective significant
subsidiaries, in each case other than with or by Skylands (in the case
of an Acquisition Transaction to which Bancorp or a significant
subsidiary of Bancorp is a party) or Bancorp (in the case of an
Acquisition Transaction to which Skylands or a significant subsidiary
of Skylands is a party). Notwithstanding the above, an Acquisition
Transaction shall not include the formation of a bank holding company
by Skylands whereby existing shareholders of Skylands will have the
same ownership rights in the bank holding company of Skylands.
(ii) Any person other than the Grantee or any Grantee
Subsidiary shall have acquired beneficial ownership or the right to
acquire beneficial ownership of 10% or more of the outstanding shares
of Common Stock (the term "beneficial ownership" for purposes of this
Agreement having the meaning assigned thereto in Section 13(d) of the
Exchange Act, and the rules and regulations thereunder);
(iii) The shareholders of Issuer shall have voted and failed
to approve the Merger Agreement and the Mergers at a meeting which has
been held for that purpose or any adjournment or postponement thereof,
or such meeting shall not have been held in violation of the Merger
Agreement or shall have been cancelled prior to termination of the
Merger Agreement if, prior to such meeting (or if such meeting shall
not have been held or shall have been cancelled, prior to such
termination), it shall have been publicly announced that any person
(other than Grantee or any Grantee Subsidiary) shall have made, or
disclosed an intention to make, a bona fide proposal to engage in an
Acquisition Transaction;
(iv) The Issuer Board shall have (x) withdrawn (or publicly
announced its intention to withdraw) or (y) modified (or publicly
announced its intention to modify) in any manner adverse to Grantee its
recommendation that the shareholders of Issuer approve the transactions
contemplated by the Merger Agreement, or Issuer or the Issuer
Subsidiary shall have authorized, recommended or proposed (or publicly
announced its intention to authorize, recommend or propose) an
agreement to engage in an Acquisition Transaction with any person other
than Grantee or a Grantee Subsidiary;
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(v) Any person other than Grantee or any Grantee Subsidiary
shall have made a bona fide proposal to Issuer or its shareholders to
engage in an Acquisition Transaction and such proposal shall have been
publicly announced;
(vi) Any person other than Grantee or any Grantee Subsidiary
shall have filed with the SEC a registration statement or tender offer
materials with respect to a potential exchange or tender offer that
would constitute an Acquisition Transaction;
(vii) Issuer shall have willfully breached any covenant or
obligation contained in the Merger Agreement in anticipation of
engaging in an Acquisition Transaction with any person other than
Grantee or a Grantee Subsidiary, and following such breach Grantee
would be entitled to terminate the Merger Agreement pursuant to Section
7.01(B) or Section 7.01(E) of the Merger Agreement; or
(viii) Any person other than Grantee or any Grantee Subsidiary
shall have filed an application or notice with the Board of Governors
of the Federal Reserve System (the "Federal Reserve Board"), Federal
Deposit Insurance Corporation ("FDIC") or other federal or state bank
regulatory or antitrust authority, which application or notice has been
accepted for processing, for approval to engage in an Acquisition
Transaction.
(c) The term "Subsequent Triggering Event" shall mean any of the
following events or transactions occurring after the date hereof:
(i) the occurrence of an Acquisition Transaction; or
(ii) the occurrence of an Initial Triggering Event described
in clause (ii) of subsection (b) of this Section 2.
(d) Issuer shall notify Grantee promptly in writing of the occurrence
of any Initial Triggering Event or Subsequent Triggering Event (together, a
"Triggering Event") promptly after becoming aware of the occurrence thereof, it
being understood that the giving of such notice by Issuer shall not be a
condition to the right of the Holder to exercise the Option.
(e) In the event the Holder is entitled to and wishes to exercise the
Option (or any portion thereof), it shall send to Issuer a written notice (the
date of which being herein referred to as the "Notice Date") specifying (i) the
total number of shares it will purchase pursuant to such exercise and (ii) a
place and date not earlier than three business days nor later than 60 business
days from the Notice Date for the closing of such purchase (the "Closing Date");
provided, that if prior notification to or approval of the Federal Reserve
Board, FDIC or any other regulatory or antitrust agency is required in
connection with such purchase, the Holder shall promptly file the required
notice or application for approval, shall promptly notify Issuer of such filing,
and shall expeditiously process the same and the period of time that otherwise
would run pursuant to this sentence shall run instead from the date on which any
required notification periods have expired or been terminated or such approvals
have been obtained and any requisite waiting period or periods shall have
passed. Any exercise of the Option shall be deemed to occur on the Notice Date
relating thereto.
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(f) At the closing referred to in subsection (e) of this Section 2, the
Holder shall (i) pay to Issuer the aggregate purchase price for the shares of
Common Stock purchased pursuant to the exercise of the Option in immediately
available funds by wire transfer to a bank account designated by Issuer and (ii)
present and surrender this Agreement to Issuer at its principal executive
offices, provided that the failure or refusal of the Issuer to designate such a
bank account or accept surrender of this Agreement shall not preclude the Holder
from exercising the Option.
(g) At such closing, simultaneously with the delivery of immediately
available funds as provided in subsection (f) of this Section 2, Issuer shall
deliver to the Holder a certificate or certificates representing the number of
shares of Common Stock purchased by the Holder and, if the Option shall have
been exercised in part only, a new Option evidencing the rights of the Holder
thereof to purchase the balance of the shares purchasable hereunder.
(h) Certificates for Common Stock delivered at a closing hereunder may
be endorsed with a restrictive legend that shall read substantially as follows:
"The transfer of the shares represented by this certificate is
subject to certain provisions of an agreement, dated as of ___________,
1998, between the registered holder hereof and Issuer and to resale
restrictions arising under the Securities Act of 1933, as amended. A
copy of such agreement is on file at the principal office of Issuer and
will be provided to the holder hereof without charge upon receipt by
Issuer of a written request therefore."
It is understood and agreed that: (i) the reference to the resale restrictions
of the Securities Act of 1933, as amended (the "Securities Act") in the above
legend shall be removed by delivery of substitute certificate(s) without such
reference if the Holder shall have delivered to Issuer a copy of a letter from
the staff of the SEC, or an opinion of counsel, in form and substance reasonably
satisfactory to Issuer, to the effect that such legend is not required for
purposes of the Securities Act; (ii) the reference to the provisions of this
Agreement in the above legend shall be removed by delivery of substitute
certificate(s) without such reference if the shares have been sold or
transferred in compliance with the provisions of this Agreement and under
circumstances that do not require the retention of such reference in the
reasonable opinion of counsel to the Holder; and (iii) the legend shall be
removed in its entirety if the conditions in the preceding clauses (i) and (ii)
are both satisfied. In addition, such certificates shall bear any other legend
as may be required by law.
(i) Upon the giving by the Holder to Issuer of the written notice of
exercise of the Option provided for under subsection (e) of this Section 2 and
the tender of the applicable purchase price in immediately available funds, the
Holder shall be deemed to be the holder of record of the shares of Common Stock
issuable upon such exercise, notwithstanding that the stock transfer books of
Issuer shall then be closed or that certificates representing such shares of
Common Stock shall not then be actually delivered to the Holder. Issuer shall
pay all expenses, and any and all United States federal, state and local taxes
and other charges that may be payable in connection with the initial
preparation, issue and delivery of stock certificates under this Section 2 in
the name of the Holder or its assignee, transferee or designee.
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<PAGE>
(j) In the event Issuer does not have sufficient authorized but
unissued shares of Common Stock to permit exercise of the Option, upon the
occurrence of a Subsequent Triggering Event, for the full number of shares of
Common Stock for which the Holder elects to exercise the Option, the Issuer
shall make a cash payment to the Holder, at the Closing Date specified in, and
in accordance with the other provisions of, this Section 2, in an amount equal
to the product of (x) the difference between the Fair Market Value (as defined
below) and the Option Price and (y) the number of shares of Common Stock subject
to the Option for which the Holder provides notice to Issuer, pursuant to
Section 2(e) of this Agreement, of its election to exercise that the Issuer is
unable to deliver due to insufficient authorized shares. For purposes of this
Section 2(j), Fair Market Value shall mean the average of the last reported sale
prices per share of Common Stock on the Nasdaq Stock Market ("Nasdaq") for the
ten trading days immediately preceding the Closing Date. Upon the payment of the
cash amount calculated pursuant to this Section 2(j), the number of Option
Shares subject to the Option shall be reduced by the number of shares of Common
Stock for which each cash payment is made.
3. Issuer agrees: (i) that it will not, by charter amendment or through
reorganization, consolidation, merger, dissolution or sale of assets, or by any
other voluntary act, avoid or seek to avoid the observance or performance of any
of the covenants, stipulations or conditions to be observed or performed
hereunder by Issuer (it being agreed that this clause (i) shall not be deemed to
prohibit or restrict Issuer from engaging in one or more transactions involving
the acquisition of unaffiliated institutions or one or more transactions
contemplated in Section 8(a) hereof if the provisions of Section 8 hereof shall
be complied with in connection with each such transaction); (ii) promptly to
take all action as may from time to time be required (including (x) complying
with all applicable premerger notification, reporting and waiting period
requirements specified in 15 U.S.C. Section 18a and regulations promulgated
thereunder and (y) in the event that, under the Bank Holding Company Act of
1956, as amended (the "BHCA"), or the Change in Bank Control Act of 1978, as
amended, or any state or other federal banking law, prior approval of or notice
to the Federal Reserve Board, FDIC or to any state or other federal regulatory
authority is necessary before the Option may be exercised, cooperating fully
with the Holder in preparing such applications or notices and providing such
information to the Federal Reserve Board, FDIC or such state or other federal
regulatory authority as they may require) in order to permit the Holder to
exercise the Option and Issuer duly and effectively to issue shares of Common
Stock pursuant hereto; and (iii) promptly to take all action provided in
Sections 5 and 8 as and when required pursuant to such Sections.
4. This Agreement (and the Option granted hereby) are exchangeable,
without expense, at the option of the Holder, upon presentation and surrender of
this Agreement at the principal office of Issuer, for other Agreements providing
for Options of different denominations entitling the Holder thereof to purchase,
on the same terms and subject to the same conditions as are set forth herein, in
the aggregate the same number of shares of Common Stock purchasable hereunder.
The terms "Agreement" and "Option" as used herein include any Agreements and
related Options for which this Agreement (and the Option granted hereby) may be
exchanged. Upon receipt by Issuer of evidence reasonably satisfactory to it of
the loss, theft, destruction or mutilation of this Agreement, and (in the case
of loss, theft or destruction) of reasonably satisfactory indemnification, and
upon surrender and cancellation of this Agreement, if mutilated, Issuer will
execute and deliver a new Agreement of like tenor and date in substitution for
the lost, stolen, destroyed or mutilated
5
<PAGE>
Agreement.
5. The number of shares of Common Stock purchasable upon the exercise
of the Option and the Option Price shall be subject to adjustment from time to
time as provided in this Section 5.
(a) In the event of any change in, or distributions in respect of, the
Common Stock by reason of stock dividends, split-ups, recapitalizations, share
combinations, subdivisions, conversions, exchanges of shares or the like, the
type and number of shares of Common Stock purchasable upon exercise hereof shall
be appropriately adjusted and proper provision shall be made so that, in the
event that any additional shares of Common Stock are to be issued or otherwise
become outstanding as a result of any such change (other than pursuant to an
exercise of the Option), the number of shares of Common Stock that remain
subject to the Option shall be increased so that, after such issuance and
together with shares of Common Stock previously issued pursuant to the exercise
of the Option (as adjusted on account of any of the foregoing changes in the
Common Stock), it equals 19.9% of the number of shares of Common Stock then
issued and outstanding.
(b) Whenever the number of shares of Common Stock purchasable upon
exercise hereof is adjusted as provided in this Section 5, the Option Price
shall be adjusted by multiplying the Option Price immediately prior to the
adjustment by a fraction, the numerator of which shall be equal to the number of
shares of Common Stock purchasable prior to the adjustment and the denominator
of which shall be equal to the number of shares of Common Stock purchasable
after the adjustment.
6. Upon the occurrence of the first Subsequent Triggering Event that
occurs prior to an Exercise Termination Event, Issuer shall, at the request of
Grantee delivered within six (6) months (or such later period as provided in
Section 10) of such Subsequent Triggering Event (whether on its own behalf or on
behalf of any subsequent Holder of this Option (or part thereof) or any of the
shares of Common Stock issued pursuant hereto), promptly prepare, file and keep
current a registration statement under the Securities Act covering any shares
issued and issuable pursuant to this Option and shall use its reasonable best
efforts to cause such registration statement to become effective and remain
current in order to permit the sale or other disposition of any shares of Common
Stock issued upon total or partial exercise of this Option ("Option Shares") in
accordance with any plan of disposition requested by Grantee. Issuer will use
its reasonable best efforts to cause such registration statement promptly to
become effective and then to remain effective for such period not in excess of
180 days from the day such registration statement first becomes effective or
such shorter time as may be reasonably necessary to effect such sales or other
dispositions. Grantee shall have the right to demand no more than two such
registrations. The Issuer shall bear the costs of such registrations (including,
but not limited to, Issuer's attorneys' fees, printing costs and filing fees),
except for underwriting discounts or commissions, brokers' fees and the fees and
disbursements of Grantee's counsel related thereto. The foregoing
notwithstanding, if, at the time of any request by Grantee for registration of
Option Shares as provided above, Issuer is in registration with respect to an
underwritten public offering by Issuer of shares of Common Stock, and if in the
good faith judgment of the managing underwriter or managing underwriters, or, if
none, the sole underwriter or underwriters, of such offering the offer and sale
of the Option Shares would interfere with the successful marketing of the shares
of Common Stock offered by Issuer, the number of Option Shares otherwise to be
covered in the registration statement contemplated hereby may be reduced;
provided, however, that after any such required reduction the number of Option
Shares to
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<PAGE>
be included in such offering for the account of the Holder shall constitute at
least 25% of the total number of shares to be sold by the Holder and Issuer in
the aggregate; and provided further, however, that if such reduction occurs,
then Issuer shall file a registration statement for the balance as promptly as
practicable thereafter as to which no reduction pursuant to this Section 6 shall
be permitted or occur and the Holder shall thereafter be entitled to one
additional registration and the twelve (12) month period referred to in the
first sentence of this section shall be increased to twenty-four (24) months.
Each such Holder shall provide all information reasonably requested by Issuer
for inclusion in any registration statement to be filed hereunder. If requested
by any such Holder in connection with such registration, Issuer shall become a
party to any underwriting agreement relating to the sale of such shares, but
only to the extent of obligating itself in respect of representations,
warranties, indemnities and other agreements customarily included in such
underwriting agreements for Issuer. Upon receiving any request under this
Section 6 from any Holder, Issuer agrees to send a copy thereof to any other
person known to Issuer to be entitled to registration rights under this Section
6, in each case by promptly mailing the same, postage prepaid, to the address of
record of the persons entitled to receive such copies. Notwithstanding anything
to the contrary contained herein, in no event shall the number of registrations
that Issuer is obligated to effect be increased by reason of the fact that there
shall be more than one Holder as a result of any assignment or division of this
Agreement. This Section 6 shall only apply in the event Skylands forms a bank
holding company as discussed in Section 2(b)(i).
7. (a) At any time after the occurrence of a Repurchase Event (as
defined below) (i) at the request of the Holder, delivered prior to an Exercise
Termination Event (or such later period as provided in Section 10), Issuer (or
any successor thereto) shall repurchase the Option from the Holder at a price
(the "Option Repurchase Price") equal to the amount by which (A) the
market/offer price (as defined below) exceeds (B) the Option Price, multiplied
by the number of shares for which this Option may then be exercised and (ii) at
the request of the owner of Option Shares from time to time (the "Owner"),
delivered prior to an Exercise Termination Event (or such later period as
provided in Section 10), Issuer (or any successor thereto) shall repurchase such
number of the Option Shares from the Owner as the Owner shall designate at a
price (the "Option Share Repurchase Price") equal to the market/offer price
multiplied by the number of Option Shares so designated. The term "market/offer
price" shall mean the highest of (i) the highest price per share of Common Stock
paid by any person that acquires beneficial ownership of 50% or more of the then
outstanding Common Stock, (ii) the price per share of Common Stock to be paid by
any third party pursuant to an agreement with Issuer entered into after the date
hereof and prior to the date the Holder gives notice of the required repurchase
of this Option or the Owner gives notice of the required repurchase of Option
Shares, as the case may be, (iii) the highest closing price for shares of Common
Stock within the six-month period immediately preceding the date the Holder
gives notice of the required repurchase of this Option or the Owner gives notice
of the required repurchase of Option Shares, as the case may be, or (iv) in the
event of a sale of all or any substantial part of Issuer's or Issuer's
Subsidiary's assets or deposits, the sum of the net price paid in such sale for
such assets or deposits and the current market value of the remaining net assets
of Issuer or Issuer Subsidiary as determined by a nationally recognized
investment banking firm selected by the Holder or the Owner, as the case may be,
and reasonably acceptable to Issuer, divided by the number of shares of Common
Stock of Issuer outstanding at the time of such sale on a fully-diluted basis.
In determining the market/offer price, the value of consideration other than
cash shall be determined by a nationally recognized investment banking firm
selected by the Holder or Owner, as
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the case may be, and reasonably acceptable to Issuer.
(b) The Holder and the Owner, as the case may be, may exercise its
right to require Issuer to repurchase the Option and any Option Shares pursuant
to this Section 7 by surrendering for such purpose to Issuer, at its principal
office, a copy of this Agreement or certificates for Option Shares, as
applicable, accompanied by a written notice or notices stating that the Holder
or the Owner, as the case may be, elects to require Issuer to repurchase this
Option and/or the Option Shares in accordance with the provisions of this
Section 7. As promptly as practicable, and in any event within five business
days after the surrender of the Option and/or certificates representing Option
Shares and the receipt of such notice or notices relating thereto, Issuer shall
deliver or cause to be delivered to the Holder the Option Repurchase Price
and/or to the Owner the Option Share Repurchase Price therefor or the portion
thereof that Issuer is not then prohibited under applicable law, regulation and
administrative policy from so delivering.
(c) To the extent that Issuer is prohibited under applicable law or
regulation, or as a consequence of administrative policy, from repurchasing the
Option and/or the Option Shares in full, Issuer shall immediately so notify the
Holder and/or the Owner and thereafter deliver or cause to be delivered, from
time to time, to the Holder and/or the Owner, as appropriate, the portion of the
Option Repurchase Price and the Option Share Repurchase Price, respectively,
that it is no longer prohibited from delivering, within five business days after
the date on which Issuer is no longer so prohibited; provided, however, that if
Issuer at any time after delivery of a notice of repurchase pursuant to
paragraph (b) of this Section 7 is prohibited under applicable law or
regulation, or as a consequence of administrative policy, from delivering to the
Holder and/or the Owner, as appropriate, the Option Repurchase Price and the
Option Share Repurchase Price, respectively, in full (and Issuer hereby
undertakes to use its reasonable best efforts to obtain all required regulatory
and legal approvals and to file any required notices as promptly as practicable
in order to accomplish such repurchase), the Holder or Owner may revoke its
notice of repurchase of the Option and/or the Option Shares whether in whole or
to the extent of the prohibition, whereupon, in the latter case, Issuer shall
promptly (i) deliver to the Holder and/or the Owner, as appropriate, that
portion of the Option Repurchase Price and/or the Option Share Repurchase Price
that Issuer is not prohibited from delivering; and (ii) deliver, as appropriate,
either (A) to the Holder, a new Agreement evidencing the right of the Holder to
purchase that number of shares of Common Stock obtained by multiplying the
number of shares of Common Stock for which the surrendered Agreement was
exercisable at the time of delivery of the notice of repurchase by a fraction,
the numerator of which is the Option Repurchase Price less the portion thereof
theretofore delivered to the Holder and the denominator of which is the Option
Repurchase Price, and/or (B) to the Owner, a certificate for the Option Shares
it is then so prohibited from repurchasing. If an Exercise Termination Event
shall have occurred prior to the date of the notice by Issuer described in the
first sentence of this subsection (c), or shall be scheduled to occur at any
time before the expiration of a period ending on the thirtieth day after such
date, the Holder shall nonetheless have the right to exercise the Option until
the expiration of such 30-day period.
(d) For purposes of this Section 7, a "Repurchase Event" shall be
deemed to have occurred upon the occurrence of any of the following events or
transactions after the date hereof:
(i) the occurrence of an Acquisition Transaction; or
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(ii) the occurrence of an Initial Triggering Event described
in Section 2(b)(ii) hereof.
8. (a) In the event that prior to an Exercise Termination Event, Issuer
shall enter into an agreement (i) to consolidate with or merge into any person,
other than Grantee or a Grantee Subsidiary, or engage in a plan of exchange with
any person, other than Grantee or a Grantee Subsidiary and Issuer shall not be
the continuing or surviving corporation of such consolidation or merger or the
acquiror in such plan of exchange, (ii) to permit any person, other than Grantee
or a Grantee Subsidiary, to merge into Issuer or be acquired by Issuer in a plan
of exchange and Issuer shall be the continuing or surviving or acquiring
corporation, but, in connection with such merger or plan of exchange, the then
outstanding shares of Common Stock shall be changed into or exchanged for stock
or other securities of any other person or cash or any other property or the
then outstanding shares of Common Stock shall after such merger or plan of
exchange represent less than 50% of the outstanding shares and share equivalents
of the merged or acquiring company, or (iii) to sell or otherwise transfer all
or substantially all of its or the Issuer Subsidiary's assets or deposits to any
person, other than Grantee or a Grantee Subsidiary, then, and in each such case,
the agreement governing such transaction shall make proper provision so that the
Option shall, upon the consummation of any such transaction and upon the terms
and conditions set forth herein, be converted into, or exchanged for, an option
(the "Substitute Option"), at the election of the Holder, of either (x) the
Acquiring Corporation (as hereinafter defined) or (y) any person that controls
the Acquiring Corporation.
(b) The following terms have the meanings indicated:
(i) "Acquiring Corporation" shall mean (i) the continuing or
surviving person of a consolidation or merger with Issuer (if other
than Issuer), (ii) the acquiring person in a plan of exchange in which
Issuer is acquired, (iii) the Issuer in a merger or plan of exchange in
which Issuer is the continuing or surviving or acquiring person, and
(iv) the transferee of all or substantially all of Issuer's assets or
deposits (or the assets or deposits of the Issuer Subsidiary).
(ii) "Substitute Common Stock" shall mean the common stock
issued by the issuer of the Substitute Option upon exercise of the
Substitute Option.
(iii) "Assigned Value" shall mean the market/offer price, as
defined in Section 7.
(iv) "Average Price" shall mean the average closing price of a
share of the Substitute Common Stock for one year immediately preceding
the consolidation, merger or sale in question, but in no event higher
than the closing price of the shares of Substitute Common Stock on the
day preceding such consolidation, merger or sale; provided that if
Issuer is the issuer of the Substitute Option, the Average Price shall
be computed with respect to a share of common stock issued by the
person merging into
Issuer or by any company which controls or is controlled by such
person, as the Holder may elect.
(c) The Substitute Option shall have the same terms as the Option,
provided that if the terms
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of the Substitute Option cannot, for legal reasons, be the same as the Option,
such terms shall be as similar as possible and in no event less advantageous to
the Holder. The issuer of the Substitute Option shall also enter into an
agreement with the then Holder or Holders of the Substitute Option in
substantially the same form as this Agreement (after giving effect for such
purpose to the provisions of Section 9), which agreement shall be applicable to
the Substitute Option.
(d) The Substitute Option shall be exercisable for such number of
shares of Substitute Common Stock as is equal to the Assigned Value multiplied
by the number of shares of Common Stock for which the Option was exercisable
immediately prior to the event described in the first sentence of Section 8(a),
divided by the Average Price. The exercise price of the Substitute Option per
share of Substitute Common Stock shall then be equal to the Option Price
multiplied by a fraction, the numerator of which shall be the number of shares
of Common Stock for which the Option was exercisable immediately prior to the
event described in the first sentence of Section 8(a) and the denominator of
which shall be the number of shares of Substitute Common Stock for which the
Substitute Option is exercisable.
(e) In no event, pursuant to any of the foregoing paragraphs, shall the
Substitute Option be exercisable for more than 19.9% of the shares of Substitute
Common Stock outstanding prior to exercise of the Substitute Option. In the
event that the Substitute Option would be exercisable for more than 19.9% of the
shares of Substitute Common Stock outstanding prior to exercise but for this
clause (e), the issuer of the Substitute Option (the "Substitute Option Issuer")
shall make a cash payment to Holder equal to the excess of (i) the value of the
Substitute Option without giving effect to the limitation in this clause (e)
over (ii) the value of the Substitute Option after giving effect to the
limitation in this clause (e). This difference in value shall be determined by a
nationally recognized investment banking firm selected by the Holder and
reasonably acceptable to the Issuer.
(f) Issuer shall not enter into any transaction described in subsection
(a) of this Section 8 unless the Acquiring Corporation and any person that
controls the Acquiring Corporation assume in writing all the obligations of
Issuer hereunder.
9. (a) At the request of the holder of the Substitute Option (the
"Substitute Option Holder"), the Substitute Option Issuer shall repurchase the
Substitute Option from the Substitute Option Holder at a price (the "Substitute
Option Repurchase Price") equal to the amount by which (i) the Highest Closing
Price (as hereinafter defined) exceeds (ii) the exercise price of the Substitute
Option, multiplied by the number of shares of Substitute Common Stock for which
the Substitute Option may then be exercised, and at the request of the owner
(the "Substitute Share Owner") of shares of Substitute Common Stock (the
"Substitute Shares"), the Substitute Option Issuer shall repurchase the
Substitute Shares at a price (the "Substitute Share Repurchase Price") equal to
the Highest Closing Price multiplied by the number of Substitute Shares so
designated. The term "Highest Closing Price" shall mean the highest closing
price for shares of Substitute Common Stock within the six-month period
immediately preceding the date the Substitute Option Holder gives notice of the
required repurchase of the Substitute Option or the Substitute Share Owner gives
notice of the required repurchase of the Substitute Shares, as applicable.
(b) The Substitute Option Holder and the Substitute Share Owner, as the
case may be, may exercise its respective rights to require the Substitute
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Option Issuer to repurchase the Substitute Option and the Substitute Shares
pursuant to this Section 9 by surrendering for such purpose to the Substitute
Option Issuer, at its principal office, the agreement for such Substitute Option
(or, in the absence of such an agreement, a copy of this Agreement) and/or
certificates for Substitute Shares accompanied by a written notice or notices
stating that the Substitute Option Holder or the Substitute Share Owner, as the
case may be, elects to require the Substitute Option Issuer to repurchase the
Substitute Option and/or the Substitute Shares in accordance with the provisions
of this Section 9. As promptly as practicable and in any event within five
business days after the surrender of the Substitute Option and/or certificates
representing Substitute Shares and the receipt of such notice or notices
relating thereto, the Substitute Option Issuer shall deliver or cause to be
delivered to the Substitute Option Holder the Substitute Option Repurchase Price
and/or to the Substitute Share Owner the Substitute Share Repurchase Price
therefor or the portion thereof which the Substitute Option Issuer is not then
prohibited under applicable law, regulation and administrative policy from so
delivering.
(c) To the extent that the Substitute Option Issuer is prohibited under
applicable law or regulation, or as a consequence of administrative policy, from
repurchasing the Substitute Option and/or the Substitute Shares in part or in
full, the Substitute Option Issuer shall immediately so notify the Substitute
Option Holder and/or the Substitute Share Owner and thereafter deliver or cause
to be delivered, from time to time, to the Substitute Option Holder and/or the
Substitute Share Owner, as appropriate, the portion of the Substitute Option
Repurchase Price and/or the Substitute Share Repurchase Price, respectively,
which it is no longer prohibited from delivering, within five (5) business days
after the date on which the Substitute Option Issuer is no longer so prohibited;
provided, however, that if the Substitute Option Issuer is at any time after
delivery of a notice of repurchase pursuant to subsection (b) of this Section 9
prohibited under applicable law or regulation, or as a consequence of
administrative policy, from delivering to the Substitute Option Holder and/or
the Substitute Share Owner, as appropriate, the Substitute Option Repurchase
Price and the Substitute Share Repurchase Price, respectively, in full (and the
Substitute Option Issuer shall use its reasonable best efforts to receive all
required regulatory and legal approvals as promptly as practicable in order to
accomplish such repurchase), the Substitute Option Holder and/or Substitute
Share Owner may revoke its notice of repurchase of the Substitute Option or the
Substitute Shares either in whole or to the extent of prohibition, whereupon, in
the latter case, the Substitute Option Issuer shall promptly (i) deliver to the
Substitute Option Holder or Substitute Share Owner, as appropriate, that portion
of the Substitute Option Repurchase Price or the Substitute Share Repurchase
Price that the Substitute Option Issuer is not prohibited from delivering; and
(ii) deliver, as appropriate, either (A) to the Substitute Option Holder, a new
Substitute Option evidencing the right of the Substitute Option Holder to
purchase that number of shares of the Substitute Common Stock obtained by
multiplying the number of shares of the Substitute Common Stock for which the
surrendered Substitute Option was exercisable at the time of delivery of the
notice of repurchase by a fraction, the numerator of which is the Substitute
Option Repurchase Price less the portion thereof theretofore delivered to the
Substitute Option Holder and the denominator of which is the Substitute Option
Repurchase Price, and/or (B) to the Substitute Share Owner, a certificate for
the Substitute Option Shares it is then so prohibited from repurchasing. If an
Exercise Termination Event shall have occurred prior to the date of the notice
by the Substitute Option Issuer described in the first sentence of this
subsection (c), or shall be scheduled to occur at any time before the expiration
of a period ending on the thirtieth day after such date, the Substitute Option
Holder shall nevertheless have the right to exercise the Substitute
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Option until the expiration of such 30-day period.
10. The 30-day, 6-month, 12-month, 18-month or 24-month periods for
exercise of certain rights under Sections 2, 6, 7 and 9 shall be extended: (i)
to the extent necessary to obtain all regulatory approvals for the exercise of
such rights (for so long as the Holder, Owner, Substitute Option Holder or
Substitute Share Owner, as the case may be, is using commercially reasonable
efforts to obtain such regulatory approvals), and for the expiration of all
statutory waiting periods; (ii) during the pendency of any temporary restraining
order, injunction or other legal bar to exercise of such rights; and (iii) to
the extent necessary to avoid liability under Section 16(b) of the Exchange Act
by reason of such exercise.
11. Issuer hereby represents and warrants to Grantee as follows:
(a) Issuer has full corporate power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized by the
Issuer Board prior to the date hereof and no other corporate proceedings on the
part of Issuer are necessary to authorize this Agreement or to consummate the
transactions so contemplated. This Agreement has been duly and validly executed
and delivered by Issuer.
(b) Issuer has taken all necessary corporate action to authorize and to
permit it to issue, that number of shares of Common Stock equal to the maximum
number of shares of Common Stock issuable hereunder, and all such shares, upon
issuance pursuant thereto, will be duly authorized, validly issued, fully paid,
nonassessable, and will be delivered free and clear of all claims, liens,
encumbrance and security interests and not subject to any preemptive rights.
12. Neither of the parties hereto may assign any of its rights or
obligations under this Agreement or the Option created hereunder to any other
person, without the express written consent of the other party, except that in
the event a Subsequent Triggering Event shall have occurred prior to an Exercise
Termination Event, Grantee, subject to the express provisions hereof, may assign
in whole or in part its rights and obligations hereunder following the date of
such Subsequent Triggering Event; provided, however, that until the date 15 days
following the date on which the Federal Reserve Board and FDIC have approved an
application by Grantee to acquire the shares of Common Stock subject to the
Option, Grantee may not assign its rights under the Option except in (i) a
widely dispersed public distribution, (ii) a private placement in which no one
party acquires the right to purchase in excess of 2% of the voting shares of
Issuer, (iii) an assignment to a single party (e.g., a broker or investment
banker) for the sole purpose of conducting a widely dispersed public
distribution on Grantee's behalf or (iv) any other manner approved by the
Federal Reserve Board and FDIC.
13. Each of Grantee and Issuer will use its reasonable best efforts to
make all filings with, and to obtain consents of, all third parties and
governmental authorities necessary to the consummation of the transactions
contemplated by this Agreement, including, without limitation, applying to the
Federal Reserve Board under the BHCA and the FDIC for approval to acquire the
shares issuable hereunder.
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14. The parties hereto acknowledge that damages would be an inadequate
remedy for a breach of this Agreement by either party hereto and that the
obligations of the parties hereto shall be enforceable by either party hereto
through injunctive or other equitable relief. In connection therewith both
parties waive the posting of any bond or similar requirement.
15. If any term, provision, covenant or restriction contained in this
Agreement is held by a court or a federal or state regulatory agency of
competent jurisdiction to be invalid, void or unenforceable, the remainder of
the terms, provisions and covenants and restrictions contained in this Agreement
shall remain in full force and effect, and shall in no way be affected, impaired
or invalidated. If for any reason such court or regulatory agency determines
that the Holder is not permitted to acquire, or Issuer is not permitted to
repurchase pursuant to Section 7, the full number of shares of Common Stock
provided in Section 1 hereof (as adjusted pursuant to Section 5 hereof), it is
the express intention of Issuer to allow the Holder to acquire or to require
Issuer to repurchase such lesser number of shares as may be permissible, without
any amendment or modification hereof.
16. (a) Bancorp may, at any time following a Repurchase Event and prior
to the occurrence of an Exercise Termination Event (or such later period as
provided herein), relinquish the Option (together with any Option Shares issued
to and then owned by Bancorp) to Skylands in exchange for a cash fee payable by
Skylands equal to the Surrender Price; provided, however, that Bancorp may not
exercise it rights pursuant to this Section 16 if Skylands has repurchased the
Option (or any portion thereof) or any Option Shares pursuant to Section 7. The
"Surrender Price" shall be equal to $1,500,000 (i) plus, if applicable,
Bancorp's purchase price with respect to any Option Shares and (ii) minus, if
applicable, the excess of (a) the net cash amounts, if any, received by Bancorp
pursuant to the arms' length sale of Option Shares (or any other securities into
which such Option Shares were converted or exchanged) to any unaffiliated party,
over (b) Bancorp's purchase price of such Option Shares.
(b) Bancorp may exercise its right to relinquish the Option and any
Option Shares pursuant to this Section 16 by surrendering to Skylands, at its
principal office, a copy of this Agreement together with certificates for Option
Shares, if any, accompanied by a written notice stating (i) that Bancorp elects
to relinquish the Option and Option Shares, if any, in accordance with the
provisions of this Section 16 and (ii) the Surrender Price. The Surrender Price
shall be payable in immediately available funds on or before the second business
day following receipt of such notice by Skylands.
(c) To the extent that Skylands is prohibited under applicable law or
regulation, or as a consequence of administrative policy, from paying the
Surrender Price to Bancorp in full, Skylands shall immediately so notify Bancorp
and thereafter deliver or cause to be delivered from time to time, to Bancorp,
the portion of the Surrender Price that it is no longer prohibited from paying,
within five business days after the date on which Skylands is no longer so
prohibited; provided, however, that if Skylands at any time after delivery of a
notice of surrender pursuant to paragraph (b) of this Section 16 is prohibited
under applicable law or regulation, or as a consequence of administrative
policy, from paying to Bancorp the Surrender Price in full, (i) Skylands shall
(A) use its reasonable best efforts to obtain all required regulatory and legal
approvals and to file any required notices as promptly as practicable in order
to make such payments, (B) within five days of
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the submission or receipt of any documents relating to any such regulatory and
legal approvals, provide Bancorp with copies of the same, and (c) keep Bancorp
advised of both the status of any such request for regulatory and legal
approvals, as well as any discussions with any relevant regulatory or other
third party reasonably related to the same and (ii) Bancorp may revoke such
notice of surrender by delivery of a notice of revocation to Skylands and, upon
delivery of such notice revocation, the Exercise Termination Date shall be
extended to a date six months from the date on which the Exercise Termination
Date would have occurred if not for the provisions of this Section 16(c) (during
which period Bancorp may exercise any of its rights hereunder, including any and
all rights pursuant to this Section 16).
17. All notices, requests, claims, demands and other communications
hereunder shall be deemed to have been duly given when delivered in person, by
fax, telecopy, or by registered or certified mail (postage prepaid, return
receipt requested) at the respective addresses of the parties set forth in the
Merger Agreement.
18. This Agreement shall be governed by and construed in accordance
with the laws of the State of New Jersey, without regard to the conflict of law
principles thereof.
19. This Agreement may be executed in two or more counterparts, each of
which shall be deemed to be an original, but all of which shall constitute one
and the same agreement.
20. Except as otherwise expressly provided herein, each of the parties
hereto shall bear and pay all costs and expenses incurred by it or on its behalf
in connection with the transactions contemplated hereunder, including fees and
expenses of its own financial consultants, investment bankers, accountants and
counsel.
21. Except as otherwise expressly provided herein or in the Merger
Agreement, this Agreement contains the entire agreement between the parties with
respect to the transactions contemplated hereunder and supersedes all prior
arrangements or understandings in respect thereof, written or oral. The terms
and conditions of this Agreement shall inure to the benefit of and be binding
upon the parties hereto and their respective successors and permitted assignees.
Nothing in this Agreement, expressed or implied, is intended to confer upon any
party, other than the parties hereto, and their respective successors except as
assignees, any rights, remedies, obligations or liabilities under or by reason
of this Agreement, except as expressly provided herein.
22. Capitalized terms used in this Agreement and not defined herein
shall have the meanings assigned thereto in the Merger Agreement.
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EXHIBIT 99.2
<PAGE>
BANCORP STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated as of August 12, 1998, between Skylands
Community Bank, a New Jersey chartered commercial bank ("Grantee" or
"Skylands"), and Little Falls Bancorp, Inc., a New Jersey chartered corporation
("Issuer" or "Bancorp").
RECITALS
A. Grantee and Issuer have entered into an Agreement and Plan of
Reorganization and Mergers (the "Merger Agreement").
B. As an inducement to the willingness of Grantee to continue to pursue
the transactions contemplated by the Merger Agreement, Issuer has agreed to
grant Grantee the Option (as hereinafter defined).
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements set forth herein and in the Merger Agreement, the
parties hereto agree as follows:
1. Issuer hereby grants to Grantee an unconditional, irrevocable option
(the "Option") to purchase, subject to the terms hereof, up to an aggregate of
493,027 fully paid and nonassessable shares of the common stock, par value $0.10
per share, of Issuer ("Common Stock") at a price per share equal to $19.75 (such
price, as adjusted if applicable, the "Option Price"); provided, however, that
in no event shall the number of shares for which this Option is exercisable
exceed 19.9% of the issued and outstanding shares of Common Stock prior to the
exercise of the Option. The number of shares of Common Stock that may be
received upon the exercise of the Option and the Option Price are subject to
adjustment as herein set forth.
2. (a) The Holder (as hereinafter defined) may exercise the Option, in
whole or part, if, but only if, both an Initial Triggering Event (as hereinafter
defined) and a Subsequent Triggering Event (as hereinafter defined) shall have
occurred prior to the occurrence of an Exercise Termination Event (as
hereinafter defined), provided that the Holder shall have sent the written
notice of such exercise (as provided in subsection (e) of this Section 2) within
three (3) months following the first Subsequent Triggering Event to occur (or
such later period as provided in Section 10). Each of the following shall be an
Exercise Termination Event: (i) the Effective Time of the Mergers; (ii)
termination of the Merger Agreement in accordance with the provisions thereof if
such termination occurs prior to the occurrence of an Initial Triggering Event
except a termination by Grantee pursuant to Section 7.01(B) as a result of a
willful breach by Issuer of Section 7.01(D)(iv) or Section 7.01(E) of the Merger
Agreement (each, a "Listed Termination"); or (iii) the passage of eighteen (18)
months (or such longer period as provided in Section 10) after termination of
the Merger Agreement if such termination follows the occurrence of an Initial
Triggering Event or is a Listed Termination. The term "Holder" shall mean the
holder or holders of the Option.
(b) The term "Initial Triggering Event" shall mean any of the following
events or transactions occurring on or after the date hereof:
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(i) Issuer or its Significant Subsidiary (as defined in Rule
1-02 of Regulation S-X promulgated by the Securities and Exchange
Commission (the "SEC")) (the "Issuer Subsidiary"), without having
received Grantee's prior written consent, shall have entered into an
agreement to engage in an Acquisition Transaction (as hereinafter
defined) with any person (the term "person" for purposes of this
Agreement having the meaning assigned thereto in Sections 3(a)(9) and
13(d)(3) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and the rules and regulations thereunder) other than
Grantee or any of its Subsidiaries (each a "Grantee Subsidiary") or the
Board of Directors of Issuer (the "Issuer Board") shall have
recommended that the shareholders of Issuer approve or accept any
Acquisition Transaction other than the Mergers (as that term is defined
in the Merger Agreement). For purposes of this Agreement, "Acquisition
Transaction" shall mean (1) a merger or consolidation, or similar
transaction, involving Skylands or Bancorp or any of their respective
significant subsidiaries, (2) a purchase, lease or other acquisition of
all of the assets or deposits of Skylands or Bancorp or any of their
respective significant subsidiaries or (3) a purchase or other
acquisition (including by way of merger, consolidation, share exchange
or otherwise) of securities representing 25% or more of the voting
power of Skylands or Bancorp or any of their respective significant
subsidiaries, in each case other than with or by Bancorp (in the case
of an Acquisition Transaction to which Skylands or a significant
subsidiary of Skylands is a party) or Skylands (in the case of an
Acquisition Transaction to which Bancorp or a significant subsidiary of
Bancorp is a party). Notwithstanding the above, an Acquisition
Transaction shall not include the formation of a bank holding company
by Skylands whereby existing shareholders of Skylands will have the
same ownership rights in the bank holding company of Skylands.
(ii) Any person other than the Grantee or any Grantee
Subsidiary shall have acquired beneficial ownership or the right to
acquire beneficial ownership of 10% or more of the outstanding shares
of Common Stock (the term "beneficial ownership" for purposes of this
Agreement having the meaning assigned thereto in Section 13(d) of the
Exchange Act, and the rules and regulations thereunder), except in
connection with the reissuance of Bancorp Common Stock pursuant to
Section 5.19 of the Merger Agreement;
(iii) The shareholders of Issuer shall have voted and failed
to approve the Merger Agreement and the Mergers at a meeting which has
been held for that purpose or any adjournment or postponement thereof,
or such meeting shall not have been held in violation of the Merger
Agreement or shall have been cancelled prior to termination of the
Merger Agreement if, prior to such meeting (or if such meeting shall
not have been held or shall have been cancelled, prior to such
termination), it shall have been publicly announced that any person
(other than Grantee or any Grantee Subsidiary) shall have made, or
disclosed an intention to make, a bona fide proposal to engage in an
Acquisition Transaction;
(iv) The Issuer Board shall have (x) withdrawn (or publicly
announced its intention to withdraw) or (y) modified (or publicly
announced its intention to modify) in any manner adverse to Grantee its
recommendation that the shareholders of Issuer approve the transactions
contemplated by the Merger Agreement, or Issuer or the Issuer
Subsidiary shall have authorized, recommended or proposed (or publicly
announced its intention to authorize, recommend or propose) an
agreement to engage in an Acquisition Transaction
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with any person other than Grantee or a Grantee Subsidiary;
(v) Any person other than Grantee or any Grantee Subsidiary
shall have made a bona fide proposal to Issuer or its shareholders to
engage in an Acquisition Transaction and such proposal shall have been
publicly announced;
(vi) Any person other than Grantee or any Grantee Subsidiary
shall have filed with the SEC a registration statement or tender offer
materials with respect to a potential exchange or tender offer that
would constitute an Acquisition Transaction;
(vii) Issuer shall have willfully breached any covenant or
obligation contained in the Merger Agreement in anticipation of
engaging in an Acquisition Transaction with any person other than
Grantee or a Grantee Subsidiary, and following such breach Grantee
would be entitled to terminate the Merger Agreement pursuant to Section
7.01(B) or Section 7.01(E) of the Merger Agreement; or
(viii) Any person other than Grantee or any Grantee Subsidiary
shall have filed an application or notice with the Board of Governors
of the Federal Reserve System (the "Federal Reserve Board"), Federal
Deposit Insurance Corporation ("FDIC") or other federal or state bank
regulatory or antitrust authority, which application or notice has been
accepted for processing, for approval to engage in an Acquisition
Transaction.
(c) The term "Subsequent Triggering Event" shall mean any of the
following events or transactions occurring after the date hereof:
(i) the occurrence of an Acquisition Transaction; or
(ii) the occurrence of an Initial Triggering Event described
in clause (ii) of subsection (b) of this Section 2.
(d) Issuer shall notify Grantee promptly in writing of the occurrence
of any Initial Triggering Event or Subsequent Triggering Event (together, a
"Triggering Event") promptly after becoming aware of the occurrence thereof, it
being understood that the giving of such notice by Issuer shall not be a
condition to the right of the Holder to exercise the Option.
(e) In the event the Holder is entitled to and wishes to exercise the
Option (or any portion thereof), it shall send to Issuer a written notice (the
date of which being herein referred to as the "Notice Date") specifying (i) the
total number of shares it will purchase pursuant to such exercise and (ii) a
place and date not earlier than three business days nor later than 60 business
days from the Notice Date for the closing of such purchase (the "Closing Date");
provided, that if prior notification to or approval of the Federal Reserve
Board, FDIC or any other regulatory or antitrust agency is required in
connection with such purchase, the Holder shall promptly file the required
notice or application for approval, shall promptly notify Issuer of such filing,
and shall expeditiously process the same and the period of time that otherwise
would run pursuant to this sentence shall run instead from the date on which any
required notification periods have expired or been terminated or such approvals
have been obtained and any requisite waiting period or periods shall have
passed. Any
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<PAGE>
exercise of the Option shall be deemed to occur on the Notice Date relating
thereto.
(f) At the closing referred to in subsection (e) of this Section 2, the
Holder shall (i) pay to Issuer the aggregate purchase price for the shares of
Common Stock purchased pursuant to the exercise of the Option in immediately
available funds by wire transfer to a bank account designated by Issuer and (ii)
present and surrender this Agreement to Issuer at its principal executive
offices, provided that the failure or refusal of the Issuer to designate such a
bank account or accept surrender of this Agreement shall not preclude the Holder
from exercising the Option.
(g) At such closing, simultaneously with the delivery of immediately
available funds as provided in subsection (f) of this Section 2, Issuer shall
deliver to the Holder a certificate or certificates representing the number of
shares of Common Stock purchased by the Holder and, if the Option shall have
been exercised in part only, a new Option evidencing the rights of the Holder
thereof to purchase the balance of the shares purchasable hereunder.
(h) Certificates for Common Stock delivered at a closing hereunder may
be endorsed with a restrictive legend that shall read substantially as follows:
"The transfer of the shares represented by this certificate is
subject to certain provisions of an agreement, dated as of ___________,
1998, between the registered holder hereof and Issuer and to resale
restrictions arising under the Securities Act of 1933, as amended. A
copy of such agreement is on file at the principal office of Issuer and
will be provided to the holder hereof without charge upon receipt by
Issuer of a written request therefore."
It is understood and agreed that: (i) the reference to the resale restrictions
of the Securities Act of 1933, as amended (the "Securities Act") in the above
legend shall be removed by delivery of substitute certificate(s) without such
reference if the Holder shall have delivered to Issuer a copy of a letter from
the staff of the SEC, or an opinion of counsel, in form and substance reasonably
satisfactory to Issuer, to the effect that such legend is not required for
purposes of the Securities Act; (ii) the reference to the provisions of this
Agreement in the above legend shall be removed by delivery of substitute
certificate(s) without such reference if the shares have been sold or
transferred in compliance with the provisions of this Agreement and under
circumstances that do not require the retention of such reference in the
reasonable opinion of counsel to the Holder; and (iii) the legend shall be
removed in its entirety if the conditions in the preceding clauses (i) and (ii)
are both satisfied. In addition, such certificates shall bear any other legend
as may be required by law.
(i) Upon the giving by the Holder to Issuer of the written notice of
exercise of the Option provided for under subsection (e) of this Section 2 and
the tender of the applicable purchase price in immediately available funds, the
Holder shall be deemed to be the holder of record of the shares of Common Stock
issuable upon such exercise, notwithstanding that the stock transfer books of
Issuer shall then be closed or that certificates representing such shares of
Common Stock shall not then be actually delivered to the Holder. Issuer shall
pay all expenses, and any and all United States federal, state and local taxes
and other charges that may be payable in connection with the initial
preparation, issue and delivery of stock certificates under this Section 2 in
the name of the Holder or its assignee, transferee or designee.
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(j) In the event Issuer does not have sufficient authorized but
unissued shares of Common Stock to permit exercise of the Option, upon the
occurrence of a Subsequent Triggering Event, for the full number of shares of
Common Stock for which the Holder elects to exercise the Option, the Issuer
shall make a cash payment to the Holder, at the Closing Date specified in, and
in accordance with the other provisions of, this Section 2, in an amount equal
to the product of (x) the difference between the Fair Market Value (as defined
below) and the Option Price and (y) the number of shares of Common Stock subject
to the Option for which the Holder provides notice to Issuer, pursuant to
Section 2(e) of this Agreement, of its election to exercise that the Issuer is
unable to deliver due to insufficient authorized shares. For purposes of this
Section 2(j), Fair Market Value shall mean the average of the last reported sale
prices per share of Common Stock on the Nasdaq Stock Market ("Nasdaq") for the
ten trading days immediately preceding the Closing Date. Upon the payment of the
cash amount calculated pursuant to this Section 2(j), the number of Option
Shares subject to the Option shall be reduced by the number of shares of Common
Stock for which each cash payment is made.
3. Issuer agrees: (i) that it will not, by charter amendment or through
reorganization, consolidation, merger, dissolution or sale of assets, or by any
other voluntary act, avoid or seek to avoid the observance or performance of any
of the covenants, stipulations or conditions to be observed or performed
hereunder by Issuer (it being agreed that this clause (i) shall not be deemed to
prohibit or restrict Issuer from engaging in one or more transactions involving
the acquisition of unaffiliated institutions or one or more transactions
contemplated in Section 8(a) hereof if the provisions of Section 8 hereof shall
be complied with in connection with each such transaction); (ii) promptly to
take all action as may from time to time be required (including (x) complying
with all applicable premerger notification, reporting and waiting period
requirements specified in 15 U.S.C. Section 18a and regulations promulgated
thereunder and (y) in the event that, under the Bank Holding Company Act of
1956, as amended (the "BHCA"), or the Change in Bank Control Act of 1978, as
amended, or any state or other federal banking law, prior approval of or notice
to the Federal Reserve Board, FDIC or to any state or other federal regulatory
authority is necessary before the Option may be exercised, cooperating fully
with the Holder in preparing such applications or notices and providing such
information to the Federal Reserve Board, FDIC or such state or other federal
regulatory authority as they may require) in order to permit the Holder to
exercise the Option and Issuer duly and effectively to issue shares of Common
Stock pursuant hereto; and (iii) promptly to take all action provided in
Sections 5 and 8 as and when required pursuant to such Sections.
4. This Agreement (and the Option granted hereby) are exchangeable,
without expense, at the option of the Holder, upon presentation and surrender of
this Agreement at the principal office of Issuer, for other Agreements providing
for Options of different denominations entitling the Holder thereof to purchase,
on the same terms and subject to the same conditions as are set forth herein, in
the aggregate the same number of shares of Common Stock purchasable hereunder.
The terms "Agreement" and "Option" as used herein include any Agreements and
related Options for which this Agreement (and the Option granted hereby) may be
exchanged. Upon receipt by Issuer of evidence reasonably satisfactory to it of
the loss, theft, destruction or mutilation of this Agreement, and (in the case
of loss, theft or destruction) of reasonably satisfactory indemnification, and
upon surrender and cancellation of this Agreement, if mutilated, Issuer will
execute and deliver
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a new Agreement of like tenor and date in substitution for the lost, stolen,
destroyed or mutilated Agreement.
5. The number of shares of Common Stock purchasable upon the exercise
of the Option and the Option Price shall be subject to adjustment from time to
time as provided in this Section 5.
(a) In the event of any change in, or distributions in respect of, the
Common Stock by reason of stock dividends, split-ups, recapitalizations, share
combinations, subdivisions, conversions, exchanges of shares or the like, the
type and number of shares of Common Stock purchasable upon exercise hereof shall
be appropriately adjusted and proper provision shall be made so that, in the
event that any additional shares of Common Stock are to be issued or otherwise
become outstanding as a result of any such change (other than pursuant to an
exercise of the Option), the number of shares of Common Stock that remain
subject to the Option shall be increased so that, after such issuance and
together with shares of Common Stock previously issued pursuant to the exercise
of the Option (as adjusted on account of any of the foregoing changes in the
Common Stock), it equals 19.9% of the number of shares of Common Stock then
issued and outstanding.
(b) Whenever the number of shares of Common Stock purchasable upon
exercise hereof is adjusted as provided in this Section 5, the Option Price
shall be adjusted by multiplying the Option Price immediately prior to the
adjustment by a fraction, the numerator of which shall be equal to the number of
shares of Common Stock purchasable prior to the adjustment and the denominator
of which shall be equal to the number of shares of Common Stock purchasable
after the adjustment.
6. Upon the occurrence of the first Subsequent Triggering Event that
occurs prior to an Exercise Termination Event, Issuer shall, at the request of
Grantee delivered within six (6) months (or such later period as provided in
Section 10) of such Subsequent Triggering Event (whether on its own behalf or on
behalf of any subsequent Holder of this Option (or part thereof) or any of the
shares of Common Stock issued pursuant hereto), promptly prepare, file and keep
current a registration statement under the Securities Act covering any shares
issued and issuable pursuant to this Option and shall use its reasonable best
efforts to cause such registration statement to become effective and remain
current in order to permit the sale or other disposition of any shares of Common
Stock issued upon total or partial exercise of this Option ("Option Shares") in
accordance with any plan of disposition requested by Grantee. Issuer will use
its reasonable best efforts to cause such registration statement promptly to
become effective and then to remain effective for such period not in excess of
180 days from the day such registration statement first becomes effective or
such shorter time as may be reasonably necessary to effect such sales or other
dispositions. Grantee shall have the right to demand no more than two such
registrations. The Issuer shall bear the costs of such registrations (including,
but not limited to, Issuer's attorneys' fees, printing costs and filing fees),
except for underwriting discounts or commissions, brokers' fees and the fees and
disbursements of Grantee's counsel related thereto. The foregoing
notwithstanding, if, at the time of any request by Grantee for registration of
Option Shares as provided above, Issuer is in registration with respect to an
underwritten public offering by Issuer of shares of Common Stock, and if in the
good faith judgment of the managing underwriter or managing underwriters, or, if
none, the sole underwriter or underwriters, of such offering the offer and sale
of the Option Shares would interfere with the successful marketing of the shares
of Common Stock offered by Issuer, the number of Option Shares otherwise to be
covered in the registration statement contemplated hereby may be
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reduced; provided, however, that after any such required reduction the number of
Option Shares to be included in such offering for the account of the Holder
shall constitute at least 25% of the total number of shares to be sold by the
Holder and Issuer in the aggregate; and provided further, however, that if such
reduction occurs, then Issuer shall file a registration statement for the
balance as promptly as practicable thereafter as to which no reduction pursuant
to this Section 6 shall be permitted or occur and the Holder shall thereafter be
entitled to one additional registration and the twelve (12) month period
referred to in the first sentence of this section shall be increased to
twenty-four (24) months. Each such Holder shall provide all information
reasonably requested by Issuer for inclusion in any registration statement to be
filed hereunder. If requested by any such Holder in connection with such
registration, Issuer shall become a party to any underwriting agreement relating
to the sale of such shares, but only to the extent of obligating itself in
respect of representations, warranties, indemnities and other agreements
customarily included in such underwriting agreements for Issuer. Upon receiving
any request under this Section 6 from any Holder, Issuer agrees to send a copy
thereof to any other person known to Issuer to be entitled to registration
rights under this Section 6, in each case by promptly mailing the same, postage
prepaid, to the address of record of the persons entitled to receive such
copies. Notwithstanding anything to the contrary contained herein, in no event
shall the number of registrations that Issuer is obligated to effect be
increased by reason of the fact that there shall be more than one Holder as a
result of any assignment or division of this Agreement.
7. (a) At any time after the occurrence of a Repurchase Event (as
defined below) (i) at the request of the Holder, delivered prior to an Exercise
Termination Event (or such later period as provided in Section 10), Issuer (or
any successor thereto) shall repurchase the Option from the Holder at a price
(the "Option Repurchase Price") equal to the amount by which (A) the
market/offer price (as defined below) exceeds (B) the Option Price, multiplied
by the number of shares for which this Option may then be exercised and (ii) at
the request of the owner of Option Shares from time to time (the "Owner"),
delivered prior to an Exercise Termination Event (or such later period as
provided in Section 10), Issuer (or any successor thereto) shall repurchase such
number of the Option Shares from the Owner as the Owner shall designate at a
price (the "Option Share Repurchase Price") equal to the market/offer price
multiplied by the number of Option Shares so designated. The term "market/offer
price" shall mean the highest of (i) the highest price per share of Common Stock
paid by any person that acquires beneficial ownership of 50% or more of the then
outstanding Common Stock, (ii) the price per share of Common Stock to be paid by
any third party pursuant to an agreement with Issuer entered into after the date
hereof and prior to the date the Holder gives notice of the required repurchase
of this Option or the Owner gives notice of the required repurchase of Option
Shares, as the case may be, (iii) the highest closing price for shares of Common
Stock within the six-month period immediately preceding the date the Holder
gives notice of the required repurchase of this Option or the Owner gives notice
of the required repurchase of Option Shares, as the case may be, or (iv) in the
event of a sale of all or any substantial part of Issuer's or Issuer's
Subsidiary's assets or deposits, the sum of the net price paid in such sale for
such assets or deposits and the current market value of the remaining net assets
of Issuer or Issuer Subsidiary as determined by a nationally recognized
investment banking firm selected by the Holder or the Owner, as the case may be,
and reasonably acceptable to Issuer, divided by the number of shares of Common
Stock of Issuer outstanding at the time of such sale on a fully-diluted basis.
In determining the market/offer price, the value of consideration other than
cash shall be determined by a nationally recognized investment banking firm
selected by the Holder or Owner,
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as the case may be, and reasonably acceptable to Issuer.
(b) The Holder and the Owner, as the case may be, may exercise its
right to require Issuer to repurchase the Option and any Option Shares pursuant
to this Section 7 by surrendering for such purpose to Issuer, at its principal
office, a copy of this Agreement or certificates for Option Shares, as
applicable, accompanied by a written notice or notices stating that the Holder
or the Owner, as the case may be, elects to require Issuer to repurchase this
Option and/or the Option Shares in accordance with the provisions of this
Section 7. As promptly as practicable, and in any event within five business
days after the surrender of the Option and/or certificates representing Option
Shares and the receipt of such notice or notices relating thereto, Issuer shall
deliver or cause to be delivered to the Holder the Option Repurchase Price
and/or to the Owner the Option Share Repurchase Price therefor or the portion
thereof that Issuer is not then prohibited under applicable law, regulation and
administrative policy from so delivering.
(c) To the extent that Issuer is prohibited under applicable law or
regulation, or as a consequence of administrative policy, from repurchasing the
Option and/or the Option Shares in full, Issuer shall immediately so notify the
Holder and/or the Owner and thereafter deliver or cause to be delivered, from
time to time, to the Holder and/or the Owner, as appropriate, the portion of the
Option Repurchase Price and the Option Share Repurchase Price, respectively,
that it is no longer prohibited from delivering, within five business days after
the date on which Issuer is no longer so prohibited; provided, however, that if
Issuer at any time after delivery of a notice of repurchase pursuant to
paragraph (b) of this Section 7 is prohibited under applicable law or
regulation, or as a consequence of administrative policy, from delivering to the
Holder and/or the Owner, as appropriate, the Option Repurchase Price and the
Option Share Repurchase Price, respectively, in full (and Issuer hereby
undertakes to use its reasonable best efforts to obtain all required regulatory
and legal approvals and to file any required notices as promptly as practicable
in order to accomplish such repurchase), the Holder or Owner may revoke its
notice of repurchase of the Option and/or the Option Shares whether in whole or
to the extent of the prohibition, whereupon, in the latter case, Issuer shall
promptly (i) deliver to the Holder and/or the Owner, as appropriate, that
portion of the Option Repurchase Price and/or the Option Share Repurchase Price
that Issuer is not prohibited from delivering; and (ii) deliver, as appropriate,
either (A) to the Holder, a new Agreement evidencing the right of the Holder to
purchase that number of shares of Common Stock obtained by multiplying the
number of shares of Common Stock for which the surrendered Agreement was
exercisable at the time of delivery of the notice of repurchase by a fraction,
the numerator of which is the Option Repurchase Price less the portion thereof
theretofore delivered to the Holder and the denominator of which is the Option
Repurchase Price, and/or (B) to the Owner, a certificate for the Option Shares
it is then so prohibited from repurchasing. If an Exercise Termination Event
shall have occurred prior to the date of the notice by Issuer described in the
first sentence of this subsection (c), or shall be scheduled to occur at any
time before the expiration of a period ending on the thirtieth day after such
date, the Holder shall nonetheless have the right to exercise the Option until
the expiration of such 30-day period.
(d) For purposes of this Section 7, a "Repurchase Event" shall be
deemed to have occurred upon the occurrence of any of the following events or
transactions after the date hereof:
(i) the occurrence of an Acquisition Transaction; or
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(ii) the occurrence of an Initial Triggering Event described
in Section 2(b)(ii) hereof.
8. (a) In the event that prior to an Exercise Termination Event, Issuer
shall enter into an agreement (i) to consolidate with or merge into any person,
other than Grantee or a Grantee Subsidiary, or engage in a plan of exchange with
any person, other than Grantee or a Grantee Subsidiary and Issuer shall not be
the continuing or surviving corporation of such consolidation or merger or the
acquiror in such plan of exchange, (ii) to permit any person, other than Grantee
or a Grantee Subsidiary, to merge into Issuer or be acquired by Issuer in a plan
of exchange and Issuer shall be the continuing or surviving or acquiring
corporation, but, in connection with such merger or plan of exchange, the then
outstanding shares of Common Stock shall be changed into or exchanged for stock
or other securities of any other person or cash or any other property or the
then outstanding shares of Common Stock shall after such merger or plan of
exchange represent less than 50% of the outstanding shares and share equivalents
of the merged or acquiring company, or (iii) to sell or otherwise transfer all
or substantially all of its or the Issuer Subsidiary's assets or deposits to any
person, other than Grantee or a Grantee Subsidiary, then, and in each such case,
the agreement governing such transaction shall make proper provision so that the
Option shall, upon the consummation of any such transaction and upon the terms
and conditions set forth herein, be converted into, or exchanged for, an option
(the "Substitute Option"), at the election of the Holder, of either (x) the
Acquiring Corporation (as hereinafter defined) or (y) any person that controls
the Acquiring Corporation.
(b) The following terms have the meanings indicated:
(i) "Acquiring Corporation" shall mean (i) the continuing or
surviving person of a consolidation or merger with Issuer (if other
than Issuer), (ii) the acquiring person in a plan of exchange in which
Issuer is acquired, (iii) the Issuer in a merger or plan of exchange in
which Issuer is the continuing or surviving or acquiring person, and
(iv) the transferee of all or substantially all of Issuer's assets or
deposits (or the assets or deposits of the Issuer Subsidiary).
(ii) "Substitute Common Stock" shall mean the common stock
issued by the issuer of the Substitute Option upon exercise of the
Substitute Option.
(iii) "Assigned Value" shall mean the market/offer price, as
defined in Section 7.
(iv) "Average Price" shall mean the average closing price of a
share of the Substitute Common Stock for one year immediately
preceding the consolidation, merger or sale in question, but in no
event higher than the closing price of the shares of Substitute Common
Stock on the day preceding such consolidation, merger or sale;
provided that if Issuer is the issuer of the Substitute Option, the
Average Price shall be computed with respect to a share of common
stock issued by the person merging into Issuer or by any company which
controls or is controlled by such person, as the Holder may elect.
(c) The Substitute Option shall have the same terms as the Option,
provided that if the terms
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of the Substitute Option cannot, for legal reasons, be the same as the Option,
such terms shall be as similar as possible and in no event less advantageous to
the Holder. The issuer of the Substitute Option shall also enter into an
agreement with the then Holder or Holders of the Substitute Option in
substantially the same form as this Agreement (after giving effect for such
purpose to the provisions of Section 9), which agreement shall be applicable to
the Substitute Option.
(d) The Substitute Option shall be exercisable for such number of
shares of Substitute Common Stock as is equal to the Assigned Value multiplied
by the number of shares of Common Stock for which the Option was exercisable
immediately prior to the event described in the first sentence of Section 8(a),
divided by the Average Price. The exercise price of the Substitute Option per
share of Substitute Common Stock shall then be equal to the Option Price
multiplied by a fraction, the numerator of which shall be the number of shares
of Common Stock for which the Option was exercisable immediately prior to the
event described in the first sentence of Section 8(a) and the denominator of
which shall be the number of shares of Substitute Common Stock for which the
Substitute Option is exercisable.
(e) In no event, pursuant to any of the foregoing paragraphs, shall the
Substitute Option be exercisable for more than 19.9% of the shares of Substitute
Common Stock outstanding prior to exercise of the Substitute Option. In the
event that the Substitute Option would be exercisable for more than 19.9% of the
shares of Substitute Common Stock outstanding prior to exercise but for this
clause (e), the issuer of the Substitute Option (the "Substitute Option Issuer")
shall make a cash payment to Holder equal to the excess of (i) the value of the
Substitute Option without giving effect to the limitation in this clause (e)
over (ii) the value of the Substitute Option after giving effect to the
limitation in this clause (e). This difference in value shall be determined by a
nationally recognized investment banking firm selected by the Holder and
reasonably acceptable to the Issuer.
(f) Issuer shall not enter into any transaction described in subsection
(a) of this Section 8 unless the Acquiring Corporation and any person that
controls the Acquiring Corporation assume in writing all the obligations of
Issuer hereunder.
9. (a) At the request of the holder of the Substitute Option (the
"Substitute Option Holder"), the Substitute Option Issuer shall repurchase the
Substitute Option from the Substitute Option Holder at a price (the "Substitute
Option Repurchase Price") equal to the amount by which (i) the Highest Closing
Price (as hereinafter defined) exceeds (ii) the exercise price of the Substitute
Option, multiplied by the number of shares of Substitute Common Stock for which
the Substitute Option may then be exercised, and at the request of the owner
(the "Substitute Share Owner") of shares of Substitute Common Stock (the
"Substitute Shares"), the Substitute Option Issuer shall repurchase the
Substitute Shares at a price (the "Substitute Share Repurchase Price") equal to
the Highest Closing Price multiplied by the number of Substitute Shares so
designated. The term "Highest Closing Price" shall mean the highest closing
price for shares of Substitute Common Stock within the six-month period
immediately preceding the date the Substitute Option Holder gives notice of the
required repurchase of the Substitute Option or the Substitute Share Owner gives
notice of the required repurchase of the Substitute Shares, as applicable.
(b) The Substitute Option Holder and the Substitute Share Owner, as the
case may be, may exercise its respective rights to require the Substitute Option
Issuer to repurchase the Substitute
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Option and the Substitute Shares pursuant to this Section 9 by surrendering for
such purpose to the Substitute Option Issuer, at its principal office, the
agreement for such Substitute Option (or, in the absence of such an agreement, a
copy of this Agreement) and/or certificates for Substitute Shares accompanied by
a written notice or notices stating that the Substitute Option Holder or the
Substitute Share Owner, as the case may be, elects to require the Substitute
Option Issuer to repurchase the Substitute Option and/or the Substitute Shares
in accordance with the provisions of this Section 9. As promptly as practicable
and in any event within five business days after the surrender of the Substitute
Option and/or certificates representing Substitute Shares and the receipt of
such notice or notices relating thereto, the Substitute Option Issuer shall
deliver or cause to be delivered to the Substitute Option Holder the Substitute
Option Repurchase Price and/or to the Substitute Share Owner the Substitute
Share Repurchase Price therefor or the portion thereof which the Substitute
Option Issuer is not then prohibited under applicable law, regulation and
administrative policy from so delivering.
(c) To the extent that the Substitute Option Issuer is prohibited under
applicable law or regulation, or as a consequence of administrative policy, from
repurchasing the Substitute Option and/or the Substitute Shares in part or in
full, the Substitute Option Issuer shall immediately so notify the Substitute
Option Holder and/or the Substitute Share Owner and thereafter deliver or cause
to be delivered, from time to time, to the Substitute Option Holder and/or the
Substitute Share Owner, as appropriate, the portion of the Substitute Option
Repurchase Price and/or the Substitute Share Repurchase Price, respectively,
which it is no longer prohibited from delivering, within five (5) business days
after the date on which the Substitute Option Issuer is no longer so prohibited;
provided, however, that if the Substitute Option Issuer is at any time after
delivery of a notice of repurchase pursuant to subsection (b) of this Section 9
prohibited under applicable law or regulation, or as a consequence of
administrative policy, from delivering to the Substitute Option Holder and/or
the Substitute Share Owner, as appropriate, the Substitute Option Repurchase
Price and the Substitute Share Repurchase Price, respectively, in full (and the
Substitute Option Issuer shall use its reasonable best efforts to receive all
required regulatory and legal approvals as promptly as practicable in order to
accomplish such repurchase), the Substitute Option Holder and/or Substitute
Share Owner may revoke its notice of repurchase of the Substitute Option or the
Substitute Shares either in whole or to the extent of prohibition, whereupon, in
the latter case, the Substitute Option Issuer shall promptly (i) deliver to the
Substitute Option Holder or Substitute Share Owner, as appropriate, that portion
of the Substitute Option Repurchase Price or the Substitute Share Repurchase
Price that the Substitute Option Issuer is not prohibited from delivering; and
(ii) deliver, as appropriate, either (A) to the Substitute Option Holder, a new
Substitute Option evidencing the right of the Substitute Option Holder to
purchase that number of shares of the Substitute Common Stock obtained by
multiplying the number of shares of the Substitute Common Stock for which the
surrendered Substitute Option was exercisable at the time of delivery of the
notice of repurchase by a fraction, the numerator of which is the Substitute
Option Repurchase Price less the portion thereof theretofore delivered to the
Substitute Option Holder and the denominator of which is the Substitute Option
Repurchase Price, and/or (B) to the Substitute Share Owner, a certificate for
the Substitute Option Shares it is then so prohibited from repurchasing. If an
Exercise Termination Event shall have occurred prior to the date of the notice
by the Substitute Option Issuer described in the first sentence of this
subsection (c), or shall be scheduled to occur at any time before the expiration
of a period ending on the thirtieth day after such date, the Substitute Option
Holder shall nevertheless have the right to exercise the Substitute
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Option until the expiration of such 30-day period.
10. The 30-day, 6-month, 12-month, 18-month or 24-month periods for
exercise of certain rights under Sections 2, 6, 7 and 9 shall be extended: (i)
to the extent necessary to obtain all regulatory approvals for the exercise of
such rights (for so long as the Holder, Owner, Substitute Option Holder or
Substitute Share Owner, as the case may be, is using commercially reasonable
efforts to obtain such regulatory approvals), and for the expiration of all
statutory waiting periods; (ii) during the pendency of any temporary restraining
order, injunction or other legal bar to exercise of such rights; and (iii) to
the extent necessary to avoid liability under Section 16(b) of the Exchange Act
by reason of such exercise.
11. Issuer hereby represents and warrants to Grantee as follows:
(a) Issuer has full corporate power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized by the
Issuer Board prior to the date hereof and no other corporate proceedings on the
part of Issuer are necessary to authorize this Agreement or to consummate the
transactions so contemplated. This Agreement has been duly and validly executed
and delivered by Issuer.
(b) Issuer has taken all necessary corporate action to authorize and to
permit it to issue, that number of shares of Common Stock equal to the maximum
number of shares of Common Stock issuable hereunder, and all such shares, upon
issuance pursuant thereto, will be duly authorized, validly issued, fully paid,
nonassessable, and will be delivered free and clear of all claims, liens,
encumbrance and security interests and not subject to any preemptive rights.
12. Neither of the parties hereto may assign any of its rights or
obligations under this Agreement or the Option created hereunder to any other
person, without the express written consent of the other party, except that in
the event a Subsequent Triggering Event shall have occurred prior to an Exercise
Termination Event, Grantee, subject to the express provisions hereof, may assign
in whole or in part its rights and obligations hereunder following the date of
such Subsequent Triggering Event; provided, however, that until the date 15 days
following the date on which the Federal Reserve Board and FDIC have approved an
application by Grantee to acquire the shares of Common Stock subject to the
Option, Grantee may not assign its rights under the Option except in (i) a
widely dispersed public distribution, (ii) a private placement in which no one
party acquires the right to purchase in excess of 2% of the voting shares of
Issuer, (iii) an assignment to a single party (e.g., a broker or investment
banker) for the sole purpose of conducting a widely dispersed public
distribution on Grantee's behalf or (iv) any other manner approved by the
Federal Reserve Board and FDIC.
13. Each of Grantee and Issuer will use its reasonable best efforts to
make all filings with, and to obtain consents of, all third parties and
governmental authorities necessary to the consummation of the transactions
contemplated by this Agreement, including, without limitation, applying to the
Federal Reserve Board under the BHCA and the FDIC for approval to acquire the
shares issuable hereunder.
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14. The parties hereto acknowledge that damages would be an inadequate
remedy for a breach of this Agreement by either party hereto and that the
obligations of the parties hereto shall be enforceable by either party hereto
through injunctive or other equitable relief. In connection therewith both
parties waive the posting of any bond or similar requirement.
15. If any term, provision, covenant or restriction contained in this
Agreement is held by a court or a federal or state regulatory agency of
competent jurisdiction to be invalid, void or unenforceable, the remainder of
the terms, provisions and covenants and restrictions contained in this Agreement
shall remain in full force and effect, and shall in no way be affected, impaired
or invalidated. If for any reason such court or regulatory agency determines
that the Holder is not permitted to acquire, or Issuer is not permitted to
repurchase pursuant to Section 7, the full number of shares of Common Stock
provided in Section 1 hereof (as adjusted pursuant to Section 5 hereof), it is
the express intention of Issuer to allow the Holder to acquire or to require
Issuer to repurchase such lesser number of shares as may be permissible, without
any amendment or modification hereof.
16. (a) Skylands may, at any time following a Repurchase Event and
prior to the occurrence of an Exercise Termination Event (or such later period
as provided herein), relinquish the Option (together with any Option Shares
issued to and then owned by Skylands) to Bancorp in exchange for a cash fee
payable by Bancorp equal to the Surrender Price; provided, however, that
Skylands may not exercise it rights pursuant to this Section 16 if Bancorp has
repurchased the Option (or any portion thereof) or any Option Shares pursuant to
Section 7. The "Surrender Price" shall be equal to $1,500,000 (i) plus, if
applicable, Skylands's purchase price with respect to any Option Shares and (ii)
minus, if applicable, the excess of (a) the net cash amounts, if any, received
by Skylands pursuant to the arms' length sale of Option Shares (or any other
securities into which such Option Shares were converted or exchanged) to any
unaffiliated party, over (b) Skylands's purchase price of such Option Shares.
(b) Skylands may exercise its right to relinquish the Option and any
Option Shares pursuant to this Section 16 by surrendering to Bancorp, at its
principal office, a copy of this Agreement together with certificates for Option
Shares, if any, accompanied by a written notice stating (i) that Skylands elects
to relinquish the Option and Option Shares, if any, in accordance with the
provisions of this Section 16 and (ii) the Surrender Price. The Surrender Price
shall be payable in immediately available funds on or before the second business
day following receipt of such notice by Bancorp.
(c) To the extent that Bancorp is prohibited under applicable law or
regulation, or as a consequence of administrative policy, from paying the
Surrender Price to Skylands in full, Bancorp shall immediately so notify
Skylands and thereafter deliver or cause to be delivered from time to time, to
Skylands, the portion of the Surrender Price that it is no longer prohibited
from paying, within five business days after the date on which Bancorp is no
longer so prohibited; provided, however, that if Bancorp at any time after
delivery of a notice of surrender pursuant to paragraph (b) of this Section 16
is prohibited under applicable law or regulation, or as a consequence of
administrative policy, from paying to Skylands the Surrender Price in full, (i)
Bancorp shall (A) use its reasonable best efforts to obtain all required
regulatory and legal approvals and to file any required notices as promptly as
practicable in order to make such payments, (B) within five days of
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the submission or receipt of any documents relating to any such regulatory and
legal approvals, provide Skylands with copies of the same, and (c) keep Skylands
advised of both the status of any such request for regulatory and legal
approvals, as well as any discussions with any relevant regulatory or other
third party reasonably related to the same and (ii) Skylands may revoke such
notice of surrender by delivery of a notice of revocation to Bancorp and, upon
delivery of such notice revocation, the Exercise Termination Date shall be
extended to a date six months from the date on which the Exercise Termination
Date would have occurred if not for the provisions of this Section 16(c) (during
which period Skylands may exercise any of its rights hereunder, including any
and all rights pursuant to this Section 16).
17. All notices, requests, claims, demands and other communications
hereunder shall be deemed to have been duly given when delivered in person, by
fax, telecopy, or by registered or certified mail (postage prepaid, return
receipt requested) at the respective addresses of the parties set forth in the
Merger Agreement.
18. This Agreement shall be governed by and construed in accordance
with the laws of the State of New Jersey, without regard to the conflict of law
principles thereof.
19. This Agreement may be executed in two or more counterparts, each of
which shall be deemed to be an original, but all of which shall constitute one
and the same agreement.
20. Except as otherwise expressly provided herein, each of the parties
hereto shall bear and pay all costs and expenses incurred by it or on its behalf
in connection with the transactions contemplated hereunder, including fees and
expenses of its own financial consultants, investment bankers, accountants and
counsel.
21. Except as otherwise expressly provided herein or in the Merger
Agreement, this Agreement contains the entire agreement between the parties with
respect to the transactions contemplated hereunder and supersedes all prior
arrangements or understandings in respect thereof, written or oral. The terms
and conditions of this Agreement shall inure to the benefit of and be binding
upon the parties hereto and their respective successors and permitted assignees.
Nothing in this Agreement, expressed or implied, is intended to confer upon any
party, other than the parties hereto, and their respective successors except as
assignees, any rights, remedies, obligations or liabilities under or by reason
of this Agreement, except as expressly provided herein.
22. Capitalized terms used in this Agreement and not defined herein
shall have the meanings assigned thereto in the Merger Agreement.
14
EXHIBIT 99.3
<PAGE>
Little Falls Bancorp, Inc. Contact: Leonard G. Romaine
Little Falls, New Jersey President
(973) 256-6100
Skylands Community Bank Contact: Michael Halpin
Hackettstown, New Jersey President
(908) 850-9010
For Immediate Release
LITTLE FALLS BANCORP AND SKYLANDS COMMUNITY BANK
AGREE TO MERGE
Combination Creates a Leading Financial Institution in New Jersey
With Over $513 Million in Assets
LITTLE FALLS and HACKETTSTOWN, New Jersey, August 12 -- Little Falls
Bancorp, Inc. (Nasdaq: LFBI) and Skylands Community Bank (Nasdaq: SKCB)
announced today that their Boards of Directors have unanimously approved a
definitive agreement for a merger of equals.
The transaction will create a twelve branch network covering five
counties in New Jersey, with total combined assets of over $513 million, over
$49 million of stockholders' equity and net loans receivable of over $254
million.
To effect the merger, the parties will form a new bank holding company
to be called "Little Falls Bancorp, Inc." and headquartered in Little Falls, New
Jersey. As part of the merger, Little Falls Bank, the wholly owned thrift
subsidiary of Little Falls Bancorp, Inc. will merge with and into Skylands
Community Bank, with Skylands Community Bank as the surviving commercial bank.
The surviving commercial bank will retain the name "Skylands Community Bank" and
maintain its main office in Hackettstown, New Jersey. Little Falls Bancorp,
Inc., a thrift holding company, will cease to exist as a corporate entity after
the merger is complete.
The merger will be accounted for as a "pooling of interests." Little
Falls Bancorp, Inc. shareholders will exchange their shares of Little Falls
Bancorp, Inc. common stock for shares of the common stock of the new bank
holding company on a one-for-one basis, thereby owning approximately fifty-seven
percent (57%) of the new bank holding company. Skylands Community Bank
shareholders will receive a fixed exchange of .80 shares of the common stock of
the new bank holding company for each share of Skylands Community Bank common
stock owned, thereby owning approximately forty-three percent (43%) of the new
bank holding company.
"This merger allows Little Falls to expand its market area and take
advantage of Skylands' commercial banking franchise to increase services to our
customers," said Albert J.Weite, Chairman of Little Falls Bancorp, Inc. Michael
Halpin, President and Chief Executive
<PAGE>
Officer of Skylands Community Bank, added "This transaction will add financial
strength to Skylands' business, and enable us to expand our customer base and
offer all of our customers expanded products and services throughout the
communities we serve."
The new company expects annual pre-tax cost savings of approximately
$1.2 million or approximately 11 percent of the combined company's projected pro
forma non-interest expense for 1998. A restructuring charge is anticipated at
the closing of the transaction for severance payments, facilities writedowns,
termination of certain stock plans and other merger-related costs. The
transaction is expected to be accretive to the earnings per share of both
companies in the first full year of combined operations, excluding potential
revenue enhancements.
The bank holding company's board of directors will include thirteen
members, eight representatives from Little Falls Bancorp, Inc. and five
representatives from Skylands Community Bank. The new bank's board of directors
will include nineteen members, eight representatives from Little Falls Bancorp,
Inc. and eleven representatives from Skylands Community Bank.
Albert J. Weite will become Chairman of the new holding company.
Michael Halpin will become President and Chief Executive Officer of the new
holding company and Skylands Community Bank. Leonard G. Romaine, current
President and Chief Executive Officer of Little Falls Bancorp, Inc., will become
Executive Vice President and Chief Operating Officer of the new holding company
and Skylands Community Bank. Denis H. O'Rourke will remain Chairman of Skylands
Community Bank.
Each company has granted the other a 19.9% stock option, and Skylands
Community Bank has retained a right to terminate the agreement under certain
conditions. The merger is subject to, among other things, normal regulatory
approvals and to the approval of the, shareholders of both companies.
Little Falls Bancorp, Inc. was advised by the firm of FinPro, Inc., and
the law firm of Malizia, Spidi, Sloane & Fisch, P.C. Skylands Community Bank was
advised by the investment banking firm of Sandler O'Neill & Partners, L.P., and
the law firm of McCarter & English, LLP.
Little Falls Bancorp, Inc., headquartered in Little Falls, New Jersey,
with its principal executive offices located in Little Falls, New Jersey, is a
savings and loan holding company and the parent of Little Falls Bank. Little
Falls Bank is a federally-chartered savings bank, having its principal place of
business in Little Falls, New Jersey. At June 30, 1998, Little Falls Bancorp,
Inc. had total assets of $351.3 million and total stockholders' equity of $36.9
million. Little Falls operates six banking offices, located in Little Falls,
West Paterson, Glen Gardner, Milford, Alexandria Township and Baptistown, New
Jersey.
Skylands Community Bank is a commercial bank organized under the laws
of the state of New Jersey, having its principal place of business in
Hackettstown, New Jersey. At June 30, 1998, Skylands Community Bank had total
assets of $162.2 million and total stockholders' equity of $12.5 million.
Skylands Community Bank operates six banking offices, located in Hackettstown,
Netcong, Succasunna, Oxford, Byram and Jefferson, New Jersey.
<PAGE>
Statements contained in this news release which are not historical
facts are forward- looking statements, as that term is defined in the Private
Securities Litigation Reform Act of 1995. Such forward-looking statements are
subject to risks and uncertainties which could cause actual results to differ
materially from those currently anticipated due to a number of factors, which
include, but are not limited to, factors discussed in documents filed by the
Company with the Securities and Exchange Commission from time to time.
EXHIBIT 99.4
<PAGE>
Little Falls Bancorp, Inc. Contact: Richard A. Capone
86 Main Street 973-256-6100
Little Falls, New Jersey 07424
Date: August 14, 1998
FOR IMMEDIATE RELEASE
- ---------------------
Little Falls, New Jersey -- Little Falls Bancorp, Inc. (the "Company"), the
parent holding company of Little Falls Bank, Little Falls, New Jersey (the
"Bank"), announced a telephone conference call will be held on Monday August 17,
1998 at 1:00 PM Eastern Standard Time. At that time, the management of Little
Falls Bancorp, Inc. will hold a question and answer session with interested
shareholders , regarding the announced merger with Skylands Community Bank. To
be connected with the conference call dial 1-800-230-1766 and ask to be
connected to the Little Falls Bancorp, Inc. conference call.
In addition, an investor presentation packet will be available Monday morning
via fax by calling Little Falls Bank at 973-256-6100 extension 604.
The Company will file a Current Report on Form 8-K regarding the merger as soon
as practicable.
EXHIBIT 99.5
<PAGE>
- --------------------------------------------------------------------------------
Little Falls Bancorp, Inc.
Merger with
Skylands Community Bank
Making the Transition to a Commercial Bank
- --------------------------------------------------------------------------------
These investor materials contain forward-looking statements that involve risk
and uncertainty. It should be noted that a variety of factors would cause the
combined company's actual results and experience to differ materially from the
anticipated results or other expectations expressed in the combined company's
forward-looking statements.
The risks and uncertainties that may affect the operations, performance,
development, growth projections and results of the combined company's business
include, but are not limited to, the growth of the economy, interest rate
movements, timely development by the combined company of technology enhancements
for its products and operating systems, the impact of competitive products,
services and pricing, customer based requirement, Congressional legislation,
acquisition cost savings and revenue enhancements and similar matters. Readers
of this report are cautioned not to place undue reliance on forward-looking
statements which are subject to influence by the named risk factors and
unanticipated future events. Actual results, accordingly, may differ materially
from management expectations.
August 15, 1998
1
<PAGE>
Deal Structure
- --------------------------------------------------------------------------------
o The entity will incorporate a state chartered bank holding company
("Acquisition Company").
o Little Falls Bancorp, Inc. will be merged into Acquisition Company. Little
Falls Bank will be merged into Skylands Community Bank, which will retain
its name. Skylands is a New Jersey-chartered commercial bank.
o Acquisition Company would be renamed Little Falls Bancorp, Inc.
o Fixed exchanged ratio, each share of Skylands will become 0.80 shares of
the resultant entity, while each share of Little Falls Bancorp will become
1.00 share of the resultant entity.
o The transaction will be accounted for using pooling of interests accounting
methodology. No goodwill will be created.
2
<PAGE>
Deal Structure
- --------------------------------------------------------------------------------
- ------------------- -----------------------------
| Little Falls | | Acquisition Company |
| Bancorp, Inc. |--------------------------------| to be re-named |
| | (Arrow pointed right) | Little Falls Bancorp, Inc.|
- ------------------- -----------------------------
| |
| (Arrow pointed up) (Arrow pointed up) |
| |
- -------------------- -----------------------------
| | | |
|Little Falls Bank |-------------------------------| Skylands Community |
| | (Arrow pointed right) | Bank |
- -------------------- -----------------------------
3
<PAGE>
Deal Structure (Continued)
- --------------------------------------------------------------------------------
o Michael Halpin will become President and CEO of both Skylands Community
Bank and Little Falls Bancorp, Inc. He is an experienced commercial banker,
having significantly enchnced shareholder value at Skylands Community Bank
and Lakeland First Financial Group while being President.
o Leonard Romaine will become Executive Vice President and COO of both
Skylands Community Bank and Little Falls Bancorp, Inc.
o Little Falls' Chairman, Albert Weite, will become Chairman of the new
holding company.
4
<PAGE>
Rationale Behind the Merger
- --------------------------------------------------------------------------------
The Board of Little Falls has set a number of goals for the institution. These
goals include:
1 Transformation into a community bank
2 Earnings enhancement and accretion
3 Enhancement of the branch franchise
4 Commercial banking management expertise
5 Creation of economies of scale
6 Achievement of critical mass
7 Improvement of the liquidity and trading of the stock
Management believes the merger with Skylands Community Bank accomplishes all of
these goals. Furthermore, management feels it is also a relatively quick and
inexpensive way to accomplish these goals.
5
<PAGE>
1 Transformation into a Community Bank
- --------------------------------------------------------------------------------
o Skylands will substantially shift Little Falls' focus to community banking
from its traditional thrift focus.
o Little Falls has strived toward this goal since the purchase of the
Hunterdon County Branches from Corestates.
o Skylands' staff will provide the commercial banking expertise necessary to
accomplish this goal.
o Skylands should provide a low cost of funds.
o The loan mix will be diversified with the addition of Skylands' loan
portfolio.
6
<PAGE>
2 Earnings enchancement and accretion
- --------------------------------------------------------------------------------
Based on LTM ended June 30, 1998
Unaudited Statements of Operations
($ in millions)
Estimated
Pro Forma
LFBI Net Income $1.9
SKCB Net Income 1.7
Total Estimated Net Income 3.5
After Tax Cost Savings ($1.2 Pre-Tax) 0.8
Revenue Enhancements 0.0
----
Pro Forma Net Income 4.3
LFBI Estimated FD Shares (1) 2.3
SKCB Estimated FD Shares (1) 2.5
----
(Exchange Ratio = 0.80)
Pro forma Estimated FD Share 4.3
LFBI Stand Alone EPS $0.77
LFBI Pro Forma EPS $1.01
Accretion
31.17%
(1) Weighted average diluted shares outstanding for the quarter ended June 30,
1998.
Note:Nonrecurring restructuring charges are not reflected. These charges are
expected to equal approximately $5.2 million pre-tax.
7
<PAGE>
3 Enhancement of the Branch Franchise
- --------------------------------------------------------------------------------
o Skylands will bridge the gap between Little Falls' Passaic and Hunterdon
branches.
o Skylands' branches are in growth markets.
Population
- ----------
<TABLE>
<CAPTION>
Hackettstown/
Jefferson Netcong Roxbury Byram Independence Oxford NJ
--------- ------- ------- ----- ------------- ------ --
<S> <C> <C> <C> <C> <C> <C> <C>
1990 Census 17,825 3,311 20,273 8,153 11,889 1,800 7.7M
1997 Est. 18,667 3,368 22,364 8,891 13,013 2,017 7.9M
2002 Proj. 19,352 3,442 23,715 9,365 13,771 2,153 8.1M
Growth 90-02 8.57% 3.96% 16.98% 14.86% 15.83% 19.58% 5.32%
</TABLE>
Source: Claritas - 1997 Release
o The majority of Skylands' branches are recent de-novos and/or recent
acquisitions, which have yet to reach their potential. Four of Skylands'
six branches opened after June 30, 1995.
Branch Deposits ($ in thousands)
- --------------------------------
<TABLE>
<CAPTION>
Jefferson Netcong Roxbury Byram Independence Oxford
--------- ------- ------- ----- ------------ ------
<S> <C> <C> <C> <C> <C> <C>
June 30, 1996 NA 25,230 10,465 NA 55,916 5,543
June 30, 1997 NA 30,005 16,215 NA 60,235 9,918
Growth 96-97 NA 18.93% 54.95% NA 7.72% 78.93%
</TABLE>
Source: Sheshunoff - 1997 Release
8
<PAGE>
3 Enhancement of the Branch Franchise (Continued)
- --------------------------------------------------------------------------------
[Map Omitted]
9
<PAGE>
4 Commercial Banking Management Expertise
- --------------------------------------------------------------------------------
Michael Halpin, the new CEO, is an experienced commercial banker. Prior to
joining Skylands Community Bank, Michael Halpin was the President and CEO of
Lakeland Financial Group. While at each institution, Michael has substantially
enhanced shareholder value. In short, Michael Halpin is a proven commodity.
While at Skylands Michael Halpin has:
o Increased earnings per share from $0.15 for year ended 1995 to
$0.61 for year ended 1997. EPS was $0.74 for the six months ended
June 30, 1998, annualized.
o Grown the balance sheet from $94 million at June 30, 1995 to $162
at June 30, 1998.
o Increased net loans from $33 million to $101 million.
Between 1990 and June 1995, Michael Halpin was the President and CEO of Lakeland
Financial Group. During his tenure, Michael:
o Effectively doubled the size of the bank from $313 million in
1990 to $675 at December 31, 1994.
o Increased earnings from $1.4 million in 1990 to $8.5 million as
of June 1994, and was on target to achieve $10 million for 1995.
o Introduced commercial services and grew outstanding loans from a
few million to $80 million in four years.
o Decreased non-performing loans and REO from 5.7% of assets to
under 1.0%.
o Even more noteworthy, during his tenure the stock price increased
from $4.39 per share during September 1990 to a buyout price of
$32.75, representing a 750% return to investors.
10
<PAGE>
5 Creation of Economies of Scale
- --------------------------------------------------------------------------------
The resulting entity expects to achieve approximately $1.2 million in
annual expense savings. These savings will occur in the following
areas:
- Accounting
- Legal
- Examination fees
- Systems
- Professional fees
- ESOP/MRP expense
- Provision for loan losses
11
<PAGE>
6 Achievement of Critical Mass
- --------------------------------------------------------------------------------
Based on June 30, 1998
Unaudited Statements of Condition
($ in millions)
Estimated
LFBI SKCB Pro Forma
---- ---- ---------
Assets $351 $162 $513
Loans, net 153 101 254
Investments 178 49 227
Deposits 229 145 374
Borrowings 84 4 88
Tangible Capital 34 11 45
Approximate
Market Capitalization 49 35 84
Loans/Assets 43.87% 63.58% 50.10%
Borrowings/Assets 23.88% 2.28% 17.06%
Tangible Capital/Assets 9.71% 6.83% 8.78%
ALLL/Loans 0.82% 1.51% 1.10%
12
<PAGE>
7 Improvement of the Liquidity and Trading of the Stock
- --------------------------------------------------------------------------------
o The resultant entity will have significantly higher outstanding shares,
providing buyers and sellers with a more liquid stock. Liquid stocks tend
to trade at better multiples.
o As the resultant entity continues its balance sheet shift toward commercial
lines of business, and begins to provide returns like a community bank,
although there can be no assurances it should trade at community bank
multiples.
Median Median
Price to Price to
LTM EPS* Book Value*
Banks less than $1B in Assets 18.82 X 204.80%
Thrifts less than $1B in Assets 18.04 X 128.27%
*Source: SNL Securities as of 8/12/98
13
<PAGE>
FUTURE DIRECTION
- --------------------------------------------------------------------------------
o Improve EPS and enhance shareholder value.
o Merge operations seamlessly and quickly.
o Implement expense reductions
o Change deposit mix to place a heavier emphasis on commercial deposits.
o Focus on selected commercial segments.
o Hire commercial lenders.
o Complete franchise with new branches where necessary.
14
